1
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 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
GENERAL HOST CORPORATION
- - --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(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:
- - --------------------------------------------------------------------------------
2
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
GENERAL HOST LOGO
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
AND
PROXY STATEMENT
MAY 16, 1996
9:00 A.M. LOCAL TIME
AT
THE SOUTH BEND MARRIOTT HOTEL
123 NORTH ST. JOSEPH STREET
SOUTH BEND, INDIANA 46601
3
GENERAL HOST LOGO
METRO CENTER, ONE STATION PLACE, STAMFORD, CONNECTICUT
------------------------
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
MAY 16, 1996
TO THE SHAREHOLDERS OF GENERAL HOST CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of GENERAL HOST
CORPORATION, a New York corporation (the "Company"), will be held at the South
Bend Marriott Hotel, 123 North St. Joseph Street, South Bend, Indiana 46601, on
Thursday, May 16, 1996, at 9:00 A.M., local time, for the following purposes:
(1) To elect three directors to hold office until the 1999 Annual
Meeting of Shareholders;
(2) To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending January 26, 1997;
(3) To consider and act upon the adoption by the Company of the General
Host Corporation 1996 Stock Incentive Plan; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 1, 1996 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
By order of the Board of Directors,
J. THEODORE EVERINGHAM,
Secretary
Stamford, Connecticut
April 11, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. ANY PERSON GIVING A
PROXY HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE AND, IF
PRESENT AT THE MEETING, MAY WITHDRAW IT AND VOTE IN PERSON.
4
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 1996
This Proxy Statement is furnished to the shareholders of General Host
Corporation, a New York corporation (the "Company" or "General Host") in
connection with the solicitation of proxies by or on behalf of the Board of
Directors (the "Board") to be voted at the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held on Thursday, May 16, 1996 for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders
(the "Notice") and any adjournment(s) thereof.
The mailing address of the principal executive office of the Company is
Metro Center, One Station Place, P.O. Box 10045, Stamford, Connecticut 06904.
This Proxy Statement, accompanying proxy card and the Company's 1995 Annual
Report to Shareholders are first being sent or given to shareholders on or about
April 11, 1996.
PROXIES
The proxies named on the enclosed proxy card were appointed by the Board to
vote the shares represented by the proxy card. All properly executed proxies
timely delivered pursuant to this solicitation, unless previously revoked, will
be voted in accordance with the instructions given. If no direction is
indicated, the shares represented by the proxy card will be voted for the
election of directors and in favor of the other proposals set forth in the
Notice. If a shareholder does not return a signed proxy card, those shares so
represented cannot be voted by proxy. Proxies delivered pursuant to this
solicitation are revocable at the option of the persons who have executed them
at any time prior to the exercise thereof.
INFORMATION CONCERNING GENERAL HOST SECURITIES
VOTING RIGHTS
Only shareholders of record at the close of business on April 1, 1996 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof. The holders of a majority of the shares entitled to
vote at the Annual Meeting must be present, in person or by proxy, in order to
constitute a quorum for all matters to come before the meeting.
On the Record Date, there were outstanding 22,140,337 shares of Common
Stock of the Company, which are the only voting securities outstanding. Except
with respect to the election of directors discussed below, each of these shares
will be entitled to one vote at the Annual Meeting.
The Company's directors are divided into three classes. Shareholders have
cumulative voting rights in electing directors, and each shareholder has the
number of votes equal to the number of shares owned by such shareholder
multiplied by the number of directors to be elected in each class. Shareholders
may cast all of their votes for a single nominee within a class or distribute
them among nominees in such class in any manner they desire. Proxies solicited
may be cumulatively voted to the extent that discretionary authority granted to
proxy holders permits them to do so.
Only votes cast with respect to the election of directors and the other
proposals will be counted in determining whether a nominee for director has been
elected and whether any of the other proposals at the Annual Meeting have been
approved. Under New York law, abstentions, broker non-votes and votes withheld
2
5
are not treated as votes cast at the Annual Meeting and, therefore, will have no
effect on the outcome of the matters to be voted on at the Annual Meeting. Votes
will be tabulated at the Annual Meeting by one or more inspectors of election
appointed by the Board.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the best knowledge of the Company,
certain information as to the beneficial ownership of the Company's Common Stock
as of the Record Date by (i) owners of more than 5% of the outstanding Common
Stock of the Company; (ii) each director and nominee for director of the
Company; (iii) the executive officers (other than directors) named in the
Summary Compensation Table; and (iv) all directors and executive officers, as a
group. Except as indicated by footnote, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them.
SHARES OF
GENERAL HOST
COMMON STOCK
-------------------------------
AMOUNT PERCENT
BENEFICIALLY OF
BENEFICIAL OWNERS OWNED(1)(2)(3) CLASS(%)
-------------------------------------------- -------------- --------
(i) Holders Other Than Directors
Fisher Investments, Inc.
13100 Skyline Blvd.
Woodside, CA 94062.......................... 1,177,899(4) 5.3
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434.......................... 3,263,040(5) 13.9
Pier 1 Imports, Inc.
301 Commerce Street, Ste 600
Fort Worth, TX 76102........................ 2,138,850(6) 9.7
(ii) Directors
Harris J. Ashton
One Station Place
P.O. Box 10045
Stamford, CT 06904....................... 2,065,369(7) 9.1
C. Whitcomb Alden, Jr....................... 426,110(8) 1.9
Christopher A. Forster...................... 20,799 *
S. Joseph Fortunato......................... 32,498 *
Philip B. Harley............................ 145,950 *
Richard W. Haskel........................... 13,318 *
Edward H. Hoornstra......................... 320,841(9) 1.5
Charles B. Johnson.......................... 40,250(10) *
Kelly Ashton Sant Albano.................... 90,671(11) *
(iii) Executive Officers Other Than Directors
Robert M. Lovejoy, Jr....................... 56,911 *
James R. Simpson............................ 39,398 *
Scott A. Hessler............................ 82,576(12) *
William C. Boyd............................. 37,747 *
(iv) All Directors And Executive Officers As a
Group (14 persons).......................... 3,373,438 14.7
3
6
- - -------------------------
* Represents holdings of less than one percent.
(1) Includes the following numbers of shares of Common Stock held as of
December 31, 1995 by the trustee of the General Host Profit Sharing and
Savings Plan for the benefit of the following persons: Mr. Ashton, 42,261;
Mr. Lovejoy, 3,682; Mr. Simpson, 1,853; Mr. Boyd, 3,673; and all directors
and executive officers as a group, 51,469.
(2) Includes the following shares of Common Stock subject to options
outstanding and exercisable on or within 60 days after April 1, 1996: Mr.
Ashton, 540,000; Mr. Alden, 5,250; Mr. Forster, 5,250; Mr. Fortunato,
21,788; Mr. Harley, 5,250; Mr. Haskel, 5,250; Mr. Hoornstra, 5,250; Mr.
Johnson, 5,250; Ms. Sant Albano, 5,250; Mr. Hessler, 52,000; Mr. Lovejoy,
32,100; Mr. Simpson, 20,100; Mr. Boyd, 22,000; and all directors and
executive officers as a group, 725,738.
(3) Number of shares does not include the 5% stock dividend payable April 5,
1996 to shareholders of record at the close of business on March 15, 1996.
(4) Number of shares based on Amendment No. 1 to the Schedule 13G dated
February 13, 1996, filed with the Securities and Exchange Commission (the
"Commission") by Fisher Investments, Inc.
(5) Number of shares based on Amendment No. 10 to the Schedule 13D dated
December 26, 1995, filed with the Commission by Gabelli Funds, Inc. and
GAMCO Investors, Inc. Of these shares, 1,409,029 are receivable by the
holders upon conversion of the Company's convertible debentures held by
them.
(6) Number of shares based on Amendment No. 2 to the Schedule 13D dated January
4, 1995, filed with the Commission by Pier 1 Imports, Inc. ("Pier 1"), as
adjusted to reflect the 5% stock dividend paid by the Company on April 7,
1995 to shareholders of record on March 17, 1995. These shares are held in
escrow for delivery upon the exchange of Pier 1's 8 1/2% exchangeable
debentures held by Forest Investment Management L.P., 53 Forest Avenue, Old
Greenwich, CT 06870. The debentures may be exchanged for the General Host
shares at any time. Pier 1 retains the power to vote the shares.
(7) Includes 22,496 shares of Common Stock directly owned and 10,627 shares
beneficially owned by Mr. Ashton's wife and 33,416 shares of Common Stock
owned by a foundation of which Mr. Ashton is an officer. With respect to
the foregoing, Mr. Ashton disclaims any beneficial ownership. Also includes
37,728 shares receivable upon conversion of the Company's convertible
debentures.
(8) Includes 387,597 shares of Common Stock, as of January 31, 1996, owned by a
pension trust of which Mr. Alden is trustee, which is maintained by the
Company and one of its subsidiaries.
(9) Includes 315,591 shares held under an Intervivos Trust Agreement dated
March 29, 1995, pursuant to which Mr. Hoornstra is grantor and trustee with
the sole right to revoke the trust.
(10) Includes 10,627 shares receivable upon conversion of the Company's
convertible debentures.
(11) Includes 10,627 shares receivable upon conversion of the Company's
convertible debentures and 3,780 shares held as custodian for her son.
(12) Includes 1,063 shares receivable upon conversion of the Company's
convertible debentures.
1. ELECTION OF DIRECTORS
Under the Company's Restated Certificate of Incorporation and By-Laws, its
directors are divided into three classes, each class to be elected at successive
annual meetings of shareholders for terms of three years. The three directors
whose terms will expire at the Annual Meeting are Harris J. Ashton, Christopher
A. Forster and S. Joseph Fortunato. Each of these individuals has been nominated
by the Board to stand for re-election as director at the Annual Meeting to hold
office until the 1999 Annual Meeting and until his successor is duly elected and
qualified or until his earlier resignation or removal.
4
7
All of the nominees have indicated a willingness to serve as directors, but
in the event any nominee should become unavailable to serve as a director at the
time of the Annual Meeting, an event which the Board does not expect, the Board
will nominate a different person, and the proxies named on the enclosed proxy
card will vote for the election of such nominee.
Section 13 of the Company's By-Laws requires that advance notification of
nominations of directors by shareholders be given to the Secretary of the
Company not less than 30 days nor more than 60 days prior to the date of any
meeting of shareholders held for the purpose of electing directors, unless
shareholders are given less than 35 days notice of such meeting in which case
shareholder nominations would be permissible up to 7 days after notice of the
meeting is mailed by the Company. In addition, the notice of nomination must set
forth certain information regarding any nominee who is not an incumbent
director, including his or her name, address and principal occupation, the
number of shares of stock of the Company beneficially owned by such nominee and
the nominating shareholder and any other information required to be disclosed
about nominees in proxy solicitations pursuant to Schedule 14A under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule, and
the notice must be accompanied by the written consent of the proposed nominee to
serve as director. Nominations which are determined by the chairman of the
meeting of shareholders not to have been made in accordance with the procedure
established by Section 13 will be disregarded. The foregoing summary of Section
13 is qualified in its entirety by reference to the complete text of Section 13.
Based on this provision and the dates of mailing of this Notice and the
Annual Meeting, any nominations by shareholders for directors, together with the
other required information and consents, should be delivered to the Secretary of
the Company by April 16, 1996.
If a quorum is present at the Annual Meeting, the election of directors
will require the affirmative vote of a plurality of the votes cast at the Annual
Meeting in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR SUCH
NOMINEES.
INFORMATION ON NOMINEES AND INCUMBENT DIRECTORS
The following information relates to the nominees named above and to the
other directors of the Company whose terms will continue after the Annual
Meeting.
SERVED AS
NAME DIRECTOR SINCE AGE
- - ----------------------------------------------------------------------- -------------- ---
Nominees for Term Expiring 1999
Harris J. Ashton....................................................... May 1965 63
Christopher A. Forster................................................. March 1974 63
S. Joseph Fortunato.................................................... April 1993 63
Incumbent Directors -- Term Expiring 1997
Edward H. Hoornstra.................................................... June 1970 74
Charles B. Johnson..................................................... September 1969 63
Kelly Ashton Sant Albano............................................... December 1994 31
Incumbent Directors -- Term Expiring 1998
C. Whitcomb Alden, Jr.................................................. May 1965 80
Philip B. Harley....................................................... March 1973 77
Richard W. Haskel...................................................... February 1981 62
5
8
Mr. Ashton has been principally employed for more than the past five years
as Chairman of the Board, President and Chief Executive Officer of the Company.
Mr. Ashton is a director or trustee of numerous Franklin/Templeton mutual funds.
He is also a director of RBC Holdings (USA) Inc., a wholly-owned subsidiary of
The Royal Bank of Canada. Mr. Ashton is the father of Ms. Sant Albano.
Mr. Forster retired as a Managing Director of Marsh & McLennan,
Incorporated, an insurance broker, on July 1, 1993, a position he held for more
than the past five years.
Mr. Fortunato has been a partner of the law firm of Pitney, Hardin, Kipp &
Szuch for more than the past five years. He is also a director or trustee of
numerous Franklin/Templeton mutual funds.
Mr. Harley, a private investor, retired from the boards of numerous mutual
funds of the Keystone Group, Inc. on December 31, 1994, positions he held for
more than the past five years.
Mr. Haskel has been President of Haskel Enterprises, Inc. (d/b/a the
Delphos Group), a consulting company involved in management consulting and
acquisitions, for more than the past five years. Prior to June 1, 1995, Mr.
Haskel had been affiliated with the business brokerage firm of Country Business,
Inc. for more than the past five years.
Mr. Hoornstra has been President of Del-Tem Investment Corporation, a
closely held investment and real estate management company, for more than the
past five years. Mr. Hoornstra was Vice Chairman of the Board of the Company and
President of its Specialty Retailing Group for more than five years prior to his
retirement in December 1986.
Mr. Johnson has been President and a director of Franklin Resources, Inc.,
a financial holding company, and President of Franklin Distributors, Inc., a
mutual fund management company, for more than the past five years. He is also
President and a trustee of Franklin Tax-Free Trust, and a director or trustee of
numerous Franklin/Templeton mutual funds.
Ms. Sant Albano received a B.A. degree from Yale University and an M.B.A.
degree from Harvard Business School. She completed the Macy's executive training
program and worked in both store-line and management positions at Macy's prior
to 1990 and at Bloomingdale's from June 1992 to June 1993. Since 1993, Ms. Sant
Albano has been a private investor.
BOARD COMMITTEES AND MEETINGS
Executive Committee -- This Committee, which exercises, to the extent
permitted by New York law, all of the powers of the Board during the intervals
between Board meetings, consists of Harris J. Ashton (Chair), Richard W. Haskel
and Charles B. Johnson. During fiscal 1995, the Executive Committee held no
meetings.
Audit Committee -- This Committee, which monitors the activities of the
Company's auditors and reports on such activities to the Board, consists of
Charles B. Johnson (Chair), Richard W. Haskel and Kelly Ashton Sant Albano.
During fiscal 1995, the Audit Committee held two meetings.
Compensation Committee -- This Committee, which evaluates and approves the
compensation of executive officers and members of management of the Company and
has overall responsibility for the Company's compensation policies, consists of
Philip B. Harley (Chair), C. Whitcomb Alden, Jr. and Christopher A. Forster.
During fiscal 1995, the Compensation Committee held three meetings.
The Board has no nominating committee.
6
9
The Board held six meetings during fiscal 1995. Each incumbent director
attended at least 75% of the aggregate number of meetings of the Board and the
committees of the Board on which the director served, except for Mr. Hoornstra
who attended 66.7% of the aggregate number of meetings.
COMPENSATION OF DIRECTORS
Each of the non-management directors of the Company receives fees of
$30,000 per annum and $750 for each Board and committee meeting attended. During
fiscal 1995, there were six meetings of the Board and a total of five meetings
of its committees. The directors also participate in benefit programs generally
available to Company employees.
Upon reaching age seventy-five or after ten years of service as a director,
whichever occurs earlier, each nonmanagement director becomes eligible to retire
from the Board and, at the discretion of the Board, receive an annual retainer
fee equal to the then annual director's fee being paid on his or her retirement
date for a number of years equal to the number of years served as a director. In
order to be eligible for this retainer, each director must agree to be available
to provide services to the Company on a basis to be mutually determined by the
director and the Executive Committee. Payment of the retainer is suspended for
any director who continues to be affiliated with the Company in any capacity and
receives payment for services performed for the Company.
In fiscal year 1994, under the Company's 1994 Non-Employee Directors Stock
Option Plan (the "Director's Plan"), adopted in 1994 and approved by the
shareholders in 1995, the Company granted an option to each of the non-employee
directors to purchase 25,000 shares of Common Stock, subject to certain
adjustments contemplated under the Director's Plan. Upon initial appointment or
election to the Board, each non-employee director shall receive and be granted
an option to purchase 25,000 such shares, 20% of which will be exercisable on
the date of grant and an additional 20% of which will be become exercisable on
each grant anniversary date. The Director's Plan contemplates a single grant to
each non-employee director. No options were granted under the Director's Plan in
fiscal year 1995.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE POLICY
The Company maintains $17.5 million of insurance providing payment either
to the Company for indemnification given its directors or officers, or directly
to its directors and officers, for certain liabilities which the Company's
directors and officers may incur in their respective capacities. The insurance
policy which expired April 1, 1996 was issued by National Union Fire Insurance
Company. The premium paid under that policy in fiscal 1995 was $280,000. The
insurance policy extending from April 1, 1996 to April 1, 1997 was issued by
National Union Fire Insurance Company and covers all directors and officers of
the Company and its subsidiaries. The premium for the 1996 policy year is
$275,000. No claims have been paid under either policy.
7
10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation for
services rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended January 30, 1994 (fiscal year 1993) January 29, 1995 (fiscal
year 1994) and January 28, 1996 (fiscal year 1995) for those persons who were,
at January 28, 1996, (i) the Chief Executive Officer ("CEO") and (ii) the other
four most highly compensated executive officers of the Company (the CEO and the
four most highly compensated officers will be referred to collectively as the
"Named Officers").
SUMMARY COMPENSATION TABLE
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------------------------------- --------------------------
AWARDS
--------------------------
NAME SECURITIES
AND OTHER RESTRICTED UNDERLYING ALL
PRINCIPAL FISCAL ANNUAL STOCK OPTIONS/ OTHER
POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($) AWARDS($)(2) SARS(#) COMPENSATION($)(3)(4)
- - -------------------- ------ --------- ----------- --------------- ------------ ---------- ---------------------
Harris J. Ashton, 1995 824,787 -0- -- -0- 540,000 109,218(5)
Chairman of the
Board, 1994 754,890 260,000 -- -0- -0- 97,403
President and CEO 1993 754,890 -0- -- -0- -0- 147,900
Robert M. Lovejoy,
Jr., 1995 182,774 -0- -- -0- 3,000 423
Vice President and 1994 182,774 50,000 -- 6,375 -0- 1,933
Treasurer 1993 182,774 -0- -- -0- 7,500 514
James R. Simpson, 1995 166,774 -0- -- -0- 3,000 384
Vice President and 1994 166,774 50,000 -- 6,375 -0- 1,899
Controller 1993 164,370 -0- -- -0- 7,500 455
Scott A. Hessler,(6) 1995 310,014 -0- -- -0- 10,000 734
President and COO
-- 1994 211,933 80,000 160,187(7) -0- 100,000 459
Frank's Nursery &
Crafts, Inc.
William C. Boyd, 1995 163,000 -0- -- -0- -0- 399
Executive Vice
President -- 1994 163,000 10,000 -- 6,375 -0- 1,906
Frank's Nursery & 1993 161,096 -0- -- -0- 10,000 473
Crafts, Inc.
- - -------------------------
(1) Amounts earned under the Executive Compensation Plan of the Company or
Frank's Nursery & Crafts, Inc., the wholly-owned subsidiary of the Company
("Frank's"), for services rendered in the respective fiscal years.
(2) The shares awarded vested on January 28, 1996.
(3) Includes the Company's contribution for fiscal year 1994 of 215 shares of
Common Stock to each of Mr. Ashton, Mr. Lovejoy, Mr. Simpson and Mr. Boyd
under the General Host Profit Sharing and Savings Plan with an approximate
value of $1,461.
(4) Includes the portion of the insurance premiums paid by the Company on behalf
of the Named Officers for term life insurance in the following amounts in
fiscal years 1995, 1994 and 1993, respectively: Mr. Ashton, $16,585, $2,061,
$2,242; Mr. Lovejoy, $423, $472, $514; Mr. Simpson, $384, $438, $455; Mr.
Hessler, $734 (1995), $459 (1994); and Mr. Boyd, $399, $445, $473.
(5) Of this amount, $3,459 represents the portion of the premiums paid by the
Company during fiscal year 1995 on the life insurance policies described on
page 18 of this Proxy Statement that was deemed to purchase term protection
and $89,174 represents the value of the benefit to Mr. Ashton, projected on
an actuarial basis based on the life expectancy of Mr. and Mrs. Ashton, of
the remainder of such premiums.
(6) Mr. Hessler became President and Chief Operating Officer of Frank's on May
23, 1994.
(7) Of this amount, $160,090 represents relocation expenses paid to or on behalf
of Mr. Hessler.
8
11
OPTION GRANTS
The table below sets forth certain information regarding grants of stock
options pursuant to the Company's Amended and Restated 1986 Stock Incentive Plan
(the "1986 Plan") during the fiscal year ended January 28, 1996 to the Named
Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- - ---------------------------------------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE OR OPTION TERM($)(5)
OPTIONS/SARS FISCAL 1995 BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) (%)(3) ($/SH) DATE 5% 10%
- - ---------------------- ------------ ------------ ----------- ---------- -------- --------
Harris J. Ashton...... 540,000 87.1 3.75 4/23/02(4) $306,086 $694,405(6)
Robert M. Lovejoy,
Jr.................. 3,000(2) 0.5 7.25 6/8/00 $ 6,009 $ 13,279
James R. Simpson...... 3,000(2) 0.5 7.25 6/8/00 $ 6,009 $ 13,279
Scott A. Hessler...... 10,000(2) 1.6 7.25 6/8/00 $ 20,030 $ 44,262
William C Boyd........ -0- -- -- -- -- --
- - -------------------------
(1) The relevant Stock Option Agreements provide that shares may be paid for by
delivery of a promissory note bearing interest at a rate determined by the
Compensation Committee and repayable on such terms as the Compensation
Committee may from time to time determine. Upon receipt of notice of
exercise of an option, the Compensation Committee may, in lieu of
delivering shares, make an appreciation distribution in cash equal to the
difference between the option price and the fair market value of the stock
on the date notice of exercise is received multiplied by the number of
shares for which the option is exercised. The Compensation Committee may
authorize a tax loan in an amount equal to the federal, state and local
taxes that may be due as a result of the option or SAR exercise. If a
change of control (as defined in the 1986 Plan) occurs prior to the date
the options become exercisable, the options become exercisable thirty days
after such event unless otherwise directed by a majority of the Board.
(2) The option was granted at an option price per share equal to the mean
between the high and low sales prices of the Company's Common Stock on the
New York Stock Exchange -- Composite Transactions Index on the date of
grant, was immediately exercisable as to 20% of the shares, will become
exercisable as to an additional 20% of the shares on each anniversary of
the date of grant and has a five-year term.
(3) The Company granted options representing a total of 620,250 shares to
employees in fiscal year 1995.
(4) The option shall expire as to 300,000 shares on December 2, 1996.
(5) The dollar amounts are the result of calculations at the 5% and 10% rates
set by the Commission, and are not intended to forecast any possible future
appreciation, if any, of the Company's stock price.
(6) The potential realizable values reflected are calculated with respect to
the option to purchase 240,000 shares expiring April 23, 2002. The
potential realizable values for the option to purchase 300,000 shares
expiring December 2, 1996 are $56,250 at 5% and $112,500 at 10%.
9
12
OPTION EXERCISES/YEAR-END VALUES
The following table sets forth information with respect to the unexercised
options and/or SARs to purchase the Company's Common Stock granted in fiscal
1995 and prior years to the Named Officers and held by them as of January 28,
1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF
OPTIONS/SARS AT UNEXERCISED
SHARES FISCAL YEAR-END IN-THE-MONEY
ACQUIRED VALUE (#) OPTIONS/SARS AT
ON EXERCISE REALIZED ------------------------------- FISCAL YEAR-END
NAME (#) ($)(1) EXERCISABLE(2) UNEXERCISABLE ($)(3)
- - ---------------------------------- ----------- -------- -------------- ------------- ---------------
Harris J. Ashton.................. -0- -0- 540,000 -0- -0-
Robert M. Lovejoy, Jr............. -0- -0- 32,100 2,400 -0-
James R. Simpson.................. -0- -0- 20,100 2,400 -0-
Scott A. Hessler.................. 10,000 14,125 32,000 68,000 -0-
William C. Boyd................... -0- -0- 22,000 -0- -0-
- - -------------------------
(1) The value realized is based upon the difference between the exercise price
and the average of the high and low prices on the New York Stock Exchange --
Composite Transactions Index of the Company's Common Stock on the date of
exercise.
(2) All of these options are deemed exercisable. However, Mr. Lovejoy and Mr.
Simpson each hold options for 7,500 shares and Mr. Boyd holds options for
10,000 shares, which options may be exercised only after the closing price
of the Company's Common Stock reaches $12.635 per share, as adjusted for the
1994 and 1995 stock dividends, and such closing price remains at or above
$12.635 per share for ten consecutive business days.
(3) The average of the high and low prices on the New York Stock Exchange --
Composite Transactions Index of the Company's Common Stock on January 26,
1996 ($3.75/share) was less than or equal to the exercise prices of the
options and SARs.
10
13
REPRICED OPTIONS
The following table provides information concerning repricing of options
and SARs held by the Named Officers during the last ten completed fiscal years.
TEN-YEAR OPTION/SAR REPRICINGS
NUMBER OF LENGTH OF
SECURITIES MARKET EXERCISE ORIGINAL
UNDERLYING PRICE OF PRICE AT OPTION TERM
OPTIONS/SARS STOCK AT TIME OF NEW REMAINING AT
REPRICED OR REPRICING OR REPRICING OR EXERCISE DATE
AMENDED AMENDMENT AMENDMENT PRICE OF REPRICING OR
NAME DATE (#) ($) ($) ($) AMENDMENT
- - ------------------------ ------- ------------ ------------ ------------ -------- ----------------
Harris J. Ashton........ 3/1/89 300,000 8.563 13.6875 8.563 7 yrs., 9 mos.
Chairman of the Board, 1/25/96 300,000(1) 3.75 7.73(2) 3.75 11 mos.
President and CEO 1/25/96 240,000(1) 3.75 7.45(3) 3.75 6 yrs., 3 mos.
- - -------------------------
(1) On January 25, 1996, the Compensation Committee voted to cancel Mr. Ashton's
options to purchase 300,000 shares and 240,000 shares and to concurrently
grant to Mr. Ashton a new non-qualified option to purchase 540,000 shares of
the Company's Common Stock.
(2) The option to purchase 300,000 shares had an original exercise price of
$8.563 per share, which was adjusted to $7.73 in April, 1995 to account for
the 5% stock dividends paid by the Company in 1994 and 1995.
(3) The option to purchase 240,000 shares had an original exercise price of
$8.25 per share, which was adjusted to $7.45 in April, 1995 to account for
the 5% stock dividends paid by the Company in 1994 and 1995.
CEO RETIREMENT BENEFIT
Under the terms of his employment contract, Mr. Ashton is entitled to a
retirement benefit as of January 1, 1998, when he will be 65, or, if earlier,
upon his termination of employment with the Company for any reason in an amount
equal to (i) the then-discounted present value, determined by using a discount
rate of 6% per year and the 1971 Group Annuity Table, of a monthly benefit
(payable for life) equal to 3% of his average monthly cash salary during the
last 36 months of his employment multiplied by the number of years of his
service to the Company, less (ii) $3,442,302, representing amounts previously
paid to Mr. Ashton on account of such retirement benefit, plus imputed after-tax
earnings thereon. Mr. Ashton has been employed by the Company for thirty years
and ten months and his average monthly cash salary during the last three fiscal
years was $64,849.
11
14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION AND
REPRICING OF CERTAIN OPTIONS
COMPENSATION POLICIES
The Compensation Committee (the "Committee"), which is comprised of three
non-employee directors, is responsible for guiding the Company and Frank's
Nursery & Crafts, Inc., the Company's wholly-owned operating subsidiary
("Frank's"), in the development and implementation of the Company's compensation
policies, plans and programs. The Company's policies, plans and programs are
designed to align levels of compensation with the Company's performance, reward
achievement of individual goals, and attract, motivate and retain high
performing executives.
In connection with its responsibility to guide the Company's policies,
plans and programs, the Committee approves the annual compensation of the
Company's executive officers and other members of management, which consists
primarily of base salary, bonus, stock options, restricted stock grants and
SARs. The Committee also approves, on an annual basis, the terms of the General
Host Executive Compensation Program (the "Program") and the terms of the Frank's
Executive Compensation Program (the "Frank's Program").
The Committee also has the authority to award stock options, restricted
stock and SARs to certain officers and key employees of the Company and Frank's
pursuant to the terms of the Amended and Restated General Host Corporation 1986
Stock Incentive Plan (the "1986 Plan") and the General Host Corporation 1996
Stock Incentive Plan (the "1996 Plan"), subject to approval by the shareholders
of the 1996 Plan at the Annual Meeting (the 1986 Plan and the 1996 Plan together
are referred to herein as the "Plan").
The intended purposes of the Program, the Frank's Program and the Plan are
to: (a) promote the interests of the Company and its shareholders by attracting
and retaining officers and other key employees of exceptional ability; (b)
maximize the Company's long-term success and investment return to shareholders;
(c) provide officers and key employees important to the Company's sustained
growth with a proprietary interest and greater incentive to contribute to the
success of the Company through ownership of Company shares; and (d) provide
long-term incentive opportunities for officers and other key employees which are
competitive with those offered by other corporations in the business and
geographic areas the Company operates.
In order to further align the interests of the Company's officers with the
interests of the Company's other shareholders, the Committee adopted and
implemented the General Host Executive Stock Ownership Policy in January, 1994.
The policy requires officers of the Company and Frank's who serve in the
capacity of Vice President or above to achieve a minimum ownership target of the
Company's Common Stock within five years from the date of initial participation.
The target for the CEO and Mr. Hessler is three times salary, the target for Mr.
Boyd is two times salary, and the target for the others is one times salary.
ELEMENTS OF EXECUTIVE OFFICER COMPENSATION
Base Salaries
The Company maintains salary grades and ranges for its executive officers
based on the practices of other companies with revenues and operating
characteristics similar to those of the Company and Frank's, geographic criteria
and responsibility level. Using the salary grades and ranges as a guideline, the
Company establishes salaries at levels necessary to attract and retain talented
executive officers and other key employees.
12
15
The Committee's approval of salary increases for executive officers depends on
the Company's performance in the prior fiscal year, achievement of individual,
non-financial objectives, overall personal performance and placement in the
salary grade. The Committee gives no pre-determined weight to the achievement of
the non-financial objectives established by the executive officers annually, as
discussed below, when considering salary increases.
The executive officers received no salary increases in 1995. In February,
1996, the Company initiated a salary freeze pursuant to which the salaries of
executive officers will remain the same until profitability improves.
Bonuses
The Program provides that the executive officers of the Company are
eligible to receive bonus payments based on the achievement of corporate profit
objectives and specific individual objectives. The profit objectives contained
in the Program are based on net income per share of the Company for the fiscal
year, as established by the Committee at the beginning of each fiscal year. The
individual, non-financial objectives consist of four or five major goals that
are individually tailored to each function performed by the executive officers
and incorporate the contribution of that individual's department into the
overall objectives of the Company. In addition, if the Company achieves a
certain "corporate target result" established by the CEO and approved by the
Committee in the beginning of each fiscal year, bonuses otherwise earned are
increased. At the discretion of the Company, bonuses paid under the Program may
be paid in shares of Common Stock of the Company.
The total bonus payment for Mr. Hessler, as President of Frank's, may not
exceed 60% of his base salary, while the total bonus payments for each of the
other executive officers may not exceed 48% of their base salaries. Certain
restrictions on payments of bonuses exist if the Company does not pay dividends
(cash or stock) on its Common Stock or if the Company would report a loss for
the applicable fiscal year due to the payment of a bonus. If profit targets are
not attained, a reasonable and appropriate bonus may be awarded by the Committee
to an individual whose performance was otherwise outstanding.
Pursuant to the terms of the Frank's Program, certain executive officers of
Frank's and other selected management of Frank's are eligible to receive bonuses
ranging from 3% to 48% of their base salaries based on the achievement of
predetermined levels of operating income and on specific individual objectives
as predetermined by the individual's immediate superior and approved by the CEO.
The Committee approves the Frank's Program and the levels of operating income at
the beginning of each fiscal year. The Frank's Program contains the same general
restrictions and features as the Program. Furthermore, at the discretion of the
Company, bonuses paid under the Frank's Program may be paid in shares of Common
Stock of the Company.
Although the Committee has the authority to waive performance or
profitability criteria under the Program and Frank's Program when awarding
salary increases or when granting bonuses, it did not do so, and the executive
officers earned no bonuses for services rendered in fiscal 1995.
Options and Restricted Stock
The Committee grants options under the Plan to executive officers of the
Company's and Frank's based on the following considerations: (a) the position
and responsibilities of the person being considered; (b) the nature of the
services and the accomplishments of the individual; (c) the value to the Company
of the services; (d) the individual's present and potential contributions to the
success of the Company; and (e) such other factors as the Committee deems
relevant to accomplishing the purposes of the Plan, including the value
13
16
of options currently held by the individual. The purchase price of the Common
Stock underlying an option shall not be less than the fair market value of the
Common Stock on the day the option is granted. Options granted under the Plan
vest in varying percentages over five years from the date of grant. Payment for
option shares may be made in (a) cash; (b) Common Stock; (c) a combination of
both; or (d) at the discretion of the Committee, on a case by case basis, by
promissory notes. In fiscal 1995, the Committee awarded non-qualified stock
options to the following executive officers to purchase the following amounts of
the Company's Common Stock: Mr. Hessler, 10,000; Mr. Lovejoy, 3,000; Mr.
Simpson, 3,000; Mr. Everingham, 5,000 (in connection with the commencement of
his employment by the Company in July 1995).
In 1995, the Committee resolved to adjust the exercise prices of all
outstanding options under the 1986 Plan and its predecessor to reflect the
payment by the Company of 5% stock dividends on shares of its Common Stock in
fiscal years 1994 and 1995.
During fiscal year 1994, the Committee awarded each of the executive
officers who were affected by the December, 1993 salary freeze 1,000 shares of
restricted stock under the 1986 Plan, which restricted stock vested on January
28, 1996.
CEO COMPENSATION
The CEO is subject to an employment contract commencing January 1, 1992 and
expiring on December 31, 1997. The terms of the employment contract are set
forth beginning on page 16 of this Proxy Statement.
In 1995, upon the elimination of the salary freeze in 1994, the base salary
of the CEO was automatically increased to the 1995 base salary established by
the terms of his employment contract. Notwithstanding the fact that his contract
provides for a salary increase effective January 1, 1996, the CEO has agreed to
freeze his salary, except for purposes of computing his retirement benefit,
until profitability improves.
In January of each year for the following fiscal year, the Committee
develops and measures the CEO's non-financial objectives under the Program to
determine his eligibility for bonus payments. The CEO is eligible to receive a
bonus payment not to exceed 60% of salary based on the combination of Company
and individual objectives described above relative to the Program. The CEO was
not awarded a bonus under the Program for services rendered in fiscal year 1995.
Under the terms of his employment contract, the CEO is entitled to receive
a stock gain award as an additional incentive to the CEO to concentrate on
taking all necessary measures to enhance shareholder value. The CEO did not
receive a stock gain award for 1995.
The retirement benefit, which is discussed on page 11 of this Proxy
Statement, was granted to the CEO by the Company in recognition of what will be,
at the expiration of his current employment contract, 32 years in senior
management, including 28 years as Chief Executive Officer of the Company.
OPTION REPRICING
On January 25, 1996, the Committee granted to the CEO an option to purchase
540,000 shares of the Company's Common Stock at an exercise price of $3.75 per
share upon cancellation of his options to purchase (i) 300,000 shares at an
original exercise price of $8.563 per share, which was adjusted to $7.73 in
April, 1995 to account for the 5% stock dividends paid by the Company in 1994
and 1995, and (ii) 240,000 shares at an original exercise price of $8.25 per
share, which was adjusted to $7.45 in April, 1995 to account for such stock
dividends. The exercise price per share for the new option is equal to the
average of the highest and lowest
14
17
selling prices of one share of the Company's Common Stock on the New York Stock
Exchange -- Composite Transactions Index on the date of grant. The Committee
intended that the repricing of these options would provide the CEO with an
incentive to exercise the options for at least the 300,000 shares which expire
before the end of 1996, thereby increasing his stake in the Company and its
future.
INTERNAL REVENUE CODE SECTION 162(M)
The Board intends to generally ensure that compensation expenses are
deductible under Section 162(m) of the Internal Revenue Code. Section 162(m)
generally limits the corporate tax deduction for compensation, other than
qualifying performance-based compensation, paid to certain executive officers to
$1 million. Based on the Company's compensation history, it is probable that the
restrictions contained in Section 162(m) will only affect the deductibility of
the CEO's compensation. According to Section 162(m), compensation payable
pursuant to a written contract in effect prior to February 17, 1993, which has
not been materially modified after that date, is exempt from the $1 million
deduction limit. The CEO's employment contract was entered into prior to that
date and, therefore, compensation payable pursuant to the employment contract
will be exempt from Section 162(m) until termination of the contract in 1997 or
until the contract is materially modified.
Philip B. Harley (Chair)
C. Whitcomb Alden, Jr.
Christopher A. Forster
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the Company's 1995 fiscal year, Mr. Harley (Chair), Mr. Alden and Mr.
Forster were the members of the Company's Compensation Committee.
During fiscal year 1992, Mr. Alden exercised an option for 15,000 shares
and elected to defer the purchase price of the option, as provided by the terms
of the Company's Directors' Stock Option Plan then in effect. Mr. Alden executed
a promissory note in the amount of $109,650 due five years from the date of
execution with interest at the rate of 6% per annum. Mr. Alden also elected to
borrow from the Company, on the same terms as noted above, an amount equal to
his tax liability as a result of the exercise, as provided by such plan. The
largest aggregate amount outstanding with regard to Mr. Alden's indebtedness to
the Company during fiscal year 1995 was $123,650. As of April 1, 1996, the
amount of indebtedness outstanding under Mr. Alden's notes was $123,650.
During fiscal year 1995, Mr. Alden served as trustee of a pension trust
maintained by the Company and one of its subsidiaries. Mr. Alden received a
total of $27,000 in 1995 in compensation from this trust for serving in this
capacity.
15
18
PERFORMANCE GRAPH
The following graph and table compare the yearly percentage change in the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return of the Standard and Poor's Retail Stores Composite Index
("S&P Retail") and the Standard and Poor's 500 Stock Index ("S&P 500") for the
period of five fiscal years ending January 28, 1996 assuming the reinvestment of
dividends. The shareholder return shown on the graph below is not necessarily
indicative of future performance.
COMPARISON OF FIVE YEAR TOTAL RETURNS
GENERAL HOST, S&P RETAIL, S&P 500
S&P RETAIL
MEASUREMENT PERIOD GENERAL HOST STORES COM- S&P 500 IN-
(FISCAL YEAR COVERED) CORPORATION POSITE DEX
1990 100.00 100.00 100.00
1991 142.43 152.11 127.57
1992 176.13 178.30 138.78
1993 128.73 172.22 155.62
1994 102.01 160.10 157.42
1995 77.65 170.67 206.34
* Source: Standard & Poor's Compustat Services, Inc. 1/27/91=100
** Source: Standard & Poor's Corporation. Years ended January.
EMPLOYMENT CONTRACT AND OTHER ARRANGEMENTS
CEO EMPLOYMENT CONTRACT
The Company entered into an employment contract with Mr. Ashton, commencing
January 1, 1992 and continuing until December 31, 1997, pursuant to which Mr.
Ashton will be employed as Chairman and Chief Executive Officer of the Company.
The employment contract provides that Mr. Ashton receive a minimum base
salary of $832,266 for calendar year 1995, with increases of five percent per
year thereafter during the term of the contract. If Mr. Ashton becomes
permanently disabled, dies or his employment is terminated by the Company during
the
16
19
term of the contract, the Company shall pay him or his estate his base salary
through the date of termination or, in the event of death or disability, through
the end of the month in which the death or disability occurs. He also will
receive a lump sum payment in cash equal to the discounted present value of 50%
(100% in the event of termination without cause) of the base salary he would
have received through the end of the contract, or if greater, for the
twenty-four months following his termination, death or disability (in which case
Mr. Ashton's final base salary under the contract would be continued for any
part of the twenty-four month period occurring after December 31, 1997). Under
the contract, Mr. Ashton may elect to deem his employment terminated without
cause in the event of a change in control (as defined in the contract) of the
Company or a change in any of the material terms and conditions of his
employment.
In the event of voluntary termination by Mr. Ashton, he will be entitled to
receive his base salary through the date of termination plus a lump sum payment
in cash equal to the base salary he would have received under the contract for a
period of 12 months following the date of his termination, but not beyond the
expiration date of the contract.
Upon expiration of the contract or cessation of Mr. Ashton's employment for
any reason, he will be entitled to receive a retirement benefit as described on
page 11 of this Proxy Statement.
Under the contract, Mr. Ashton is entitled to participate in the Company's
incentive compensation plans and programs generally available to the Company's
senior executives, and upon execution of the contract was granted an option to
purchase 300,000 shares of the Company's Common Stock. Mr. Ashton is also
entitled to receive a stock gain award determined at the end of each calendar
year based on the excess of the average of the weekly closing prices for the
Company's Common Stock for the year over the greater of (i) $7.50 (representing
the average of the weekly closing price for 1991) increased by 4% each year and
(ii) the average of the weekly closing prices for the last year for which a
stock gain award was paid. The excess, if any, is then multiplied by the product
of 2% and the average number of shares outstanding for the applicable year.
During the term of the contract, Mr. Ashton is entitled to participate in
all employee benefit programs and shall be reimbursed for any medical or dental
expenses incurred by him or any members of his immediate family under the age of
26 or living at home, to the extent not otherwise paid under Company sponsored
plans or programs. Mr. Ashton and his wife are also entitled to fully paid
medical benefits, consistent with those paid under the contract, for the rest of
their lives.
Mr. Ashton is entitled under the contract to indemnification consistent
with Section 26 of the By-Laws as in effect on the date of execution of the
contract.
If any payments to be made to Mr. Ashton under this contract are subject to
an excise tax, the Company shall pay Mr. Ashton an additional amount which,
after income taxes, equals such excise tax.
OTHER ARRANGEMENTS
In the event the Company terminates Mr. Hessler's employment without cause,
Mr. Hessler will be entitled to a severance payment equal to one year's salary
and the continuation of certain of his benefits.
In the event of a change in control of the Company (as defined in the
applicable plans), unless otherwise directed by resolution of the Board, (1)
within 30 days after such event, all of the outstanding options and SARs under
the Plan shall become exercisable and any restrictions on outstanding shares of
restricted stock under the Plan shall lapse, and (2) all of the outstanding
options under the Director's Plan shall become exercisable.
17
20
In November, 1989, the Company and a trust established for the benefit of
Mr. and Mrs. Ashton's beneficiaries entered into an agreement pursuant to which
the Company will pay the premiums for two survivorship life insurance policies
on the lives of Mr. and Mrs. Ashton. Benefits become payable when both have
died, and the Company will have an interest in the death benefits equal to the
amount it has paid for these policy premiums. The Company will continue to make
annual premium payments until the earliest of: (1) the deaths of both Mr. and
Mrs. Ashton; (2) the Company shall have made 12 payments of the full annual cash
premiums; (3) the Company shall have paid an aggregate of $1,500,000 for
premiums; or (4) the premium payment next due after the year in which premiums
may be paid in full from the sum available from dividends or other sums
generated by the policies. The premium payment for these policies for fiscal
1995 was $113,472.
CERTAIN RELATED TRANSACTIONS
The Company and Frank's have loaned money to certain key employees of the
Company for the purpose of enabling them to purchase shares of the Company's
Common Stock or, in certain cases, debentures. These loans, approved by the
Compensation Committee, are evidenced by interest-only promissory notes payable
in lump sum payments five years from the dates made and bearing interest at the
rate of 6% per annum. The executive officers, other than Mr. Ashton, who is
discussed below, have such loans outstanding as of April 1, 1996 in the
following principal amounts, which are also the largest aggregate amounts
outstanding during fiscal 1995: Robert M. Lovejoy, Jr., $151,614; James R.
Simpson, $90,351; Scott A. Hessler, $55,629 and William C. Boyd, $44,744. In
August, 1995, the Compensation Committee extended by five years the terms of a
loan to Mr. Boyd in the principal amount of $24,137 originally due October 8,
1995, and a loan to Mr. Simpson in the principal amount of $19,089 originally
due September 25, 1995.
Under the Plan, at the discretion of the Compensation Committee, optionees
may pay for shares purchased upon exercise of an option by delivery of a
promissory note made payable to the Company. In fiscal 1995, for the purpose of
exercising an option to purchase shares of the Company's Common Stock, Mr.
Hessler delivered to the Company five-year promissory notes bearing interest at
the rate of 6% per annum in the principal amounts of $54,625, for the purchase
price of such shares, and $4,990, for the payment of taxes due upon exercise of
the option.
On August 22, 1990, Mr. Ashton had outstanding deferred payments on options
totalling $831,250, which were then due the Company. On that date, Frank's made
a loan to Mr. Ashton in the amount of $831,250, the proceeds of which were used
to pay the outstanding deferred payments due the Company. The loan from Frank's
was evidenced by a promissory note bearing interest at the rate of 6% and
payable in full on August 22, 1995 (the "Old Note"). Mr. Ashton elected to
prepay $177,294 of the Old Note in March, 1991 and $25,000 in February, 1992. On
August 22, 1995, Frank's authorized the cancellation of the Old Note and the
issuance of a new loan to Mr. Ashton due August 22, 2000 in the principal amount
of $628,956, bearing interest at 6% per annum, subject to Mr. Ashton's payment
of interest on the Old Note in the amount of $8,479.
18
21
On March 7, 1991, Mr. Ashton elected to defer the payment of the purchase
price from the exercise of options for 225,000 shares of Common Stock in the
amount of $1,381,253, which was due March 6, 1996. Mr. Ashton elected to prepay
$25,000 of this loan in March, 1993. On March 6, 1996, Frank's made a loan to
Mr. Ashton in the amount of $1,356,253, the proceeds of which were used to pay
the outstanding deferred payments due the Company. The loan from Frank's is
evidenced by a promissory note bearing interest at the rate of 6% and payable in
full on March 6, 2001.
On December 30, 1992, Mr. Ashton elected to defer the payment of the
purchase price from the exercise of options for 60,000 shares of Common Stock in
the amount of $495,000 which is due December 29, 1997.
See page 15 of this Proxy Statement for a description of certain
transactions involving the Company and Mr. Alden, a member of the Board of
Directors and Compensation Committee.
2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board has appointed the firm of Price Waterhouse LLP as its independent
accountants for the fiscal year ending January 26, 1997, subject to ratification
of its appointment by the Company's shareholders. Price Waterhouse LLP has been
serving the Company and its subsidiaries for over 80 years, and the Company has
been advised by that firm that neither it nor any member thereof has any
financial interest, direct or indirect, in the Company or any of its
subsidiaries in any capacity. A representative of Price Waterhouse LLP is
expected to be present at the Annual Meeting, at which time he or she will be
given an opportunity to make a statement and respond to appropriate questions
from shareholders.
Ratification of the appointment of the independent accountants requires the
affirmative vote of a majority of the votes cast at the Annual Meeting in person
or by proxy. If the shareholders should not ratify the appointment of Price
Waterhouse LLP, the Board will reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF APPOINTMENT OF THE INDEPENDENT ACCOUNTANTS.
3. PROPOSAL TO ADOPT AND APPROVE THE 1996 STOCK INCENTIVE PLAN
The Board of Directors believes that it is important for the Company and
its subsidiaries to attract and retain the services of officers and other key
employees of exceptional competence, and to encourage those persons to continue
to use their best efforts on behalf of the Company. In the judgment of the
Board, these objectives are best met by providing those key persons who are
important to the Company's sustained growth with a proprietary interest and
incentive to contribute to the success of the Company through ownership of
shares of the Company's Common Stock. The Company's Amended and Restated 1986
Stock Incentive Plan (the "1986 Plan") expired by its terms on March 19, 1996.
On February 28, 1996, the Board adopted the 1996 Stock Incentive Plan (the "1996
Plan") to take effect on March 1, 1996, subject to shareholder approval at the
Annual Meeting. The affirmative vote of a majority of the votes cast at the
Annual Meeting in person or by proxy is required for approval of the 1996 Plan.
THE 1996 PLAN
The principal features of the 1996 Plan, which is set forth in full in
Exhibit A to this Proxy Statement, are summarized below. Such summary is
qualified in its entirety by reference to the full text of the 1996 Plan.
19
22
ADMINISTRATION
The 1996 Plan provides that it shall be administered and interpreted by a
committee of the Board (the "Committee"). The Committee shall serve at the
pleasure of the Board, and shall consist of two or more directors who are
disinterested persons. The Board has appointed the Compensation Committee as the
Committee. Except as expressed in the 1996 Plan, the number of shares covered by
the awards, and the other terms and the timing of the grants are to be
determined by the Committee in its discretion.
SHARES SUBJECT TO THE 1996 PLAN
The stock to be offered under the 1996 Plan consists of shares of the
Company's Common Stock, $1.00 par value. The average of the high and low sales
prices of the Common Stock on the New York Stock Exchange -- Composite
Transactions Index on April 1, 1996 was $3.8125 per share. The aggregate number
of shares of the Company's Common Stock which may be issued under the 1996 Plan
is 2,500,000 (subject to certain adjustments for stock splits, stock dividends,
recapitalizations and the like). The shares may be authorized and unissued
shares or previously issued shares held in the Company's treasury, or both. If
an option or, in some cases, a stock appreciation right ("SAR") expires or
terminates for any reason prior to the termination of the 1996 Plan without
having been exercised in full, the unpurchased shares subject thereto shall
become available for subsequent awards under the 1996 Plan.
GRANTS TO PARTICIPANTS
The 1996 Plan authorizes the Committee to grant the following: (a)
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code,
as amended (the "Code"); (b) nonqualified stock options, which do not provide
the optionee with tax benefits of incentive stock options; (c) shares of Common
Stock subject to restrictions which may result in forfeiture of the Common Stock
("Restricted Stock"); and (d) SARs to those individuals eligible to receive
options, either separately or in conjunction with specific options granted under
the 1996 Plan. Any unexercised nonqualified stock option granted originally
without an SAR under the 1996 Plan may be subsequently amended by the Committee
to attach an SAR.
ELIGIBILITY; AMOUNTS AWARDED
Only officers and other key employees of the Company (including directors
who are employees of the Company) are eligible for grants under the 1996 Plan.
The selection of such officers and key employees for grants under the 1996 Plan
is within the discretion of the Committee. In addition, at no time can the
aggregate (without duplication) of the number of:
(a) shares of Common Stock (including Restricted Stock) issued under
the 1996 Plan,
(b) shares of Common Stock subject to options or SARs deemed exercised
because cash settlement has been paid,
(c) shares of Common Stock for which exercised SARs were granted,
(d) shares of Common Stock reserved for outstanding but unexercised
options granted under the 1996 Plan, and
(e) shares of Common Stock reserved for outstanding SARs granted under
the 1996 Plan not in conjunction with options
exceed 2,500,000 in total, or 625,000 for any one person, subject to certain
adjustments.
20
23
The Committee's designation of a participant in any year does not require
the Committee to designate such person to receive an award in any other year.
The Committee has made no determination regarding the selection of particular
participants to receive awards or the nature of any awards to be granted under
the 1996 Plan, and it is not determinable what, if any, awards the Committee may
have granted under the 1996 Plan had it been in effect in fiscal 1995.
ADJUSTMENTS OR CHANGES IN CAPITALIZATION
Outstanding options, shares of Restricted Stock, SARs and the number of
shares reserved for the 1996 Plan may be adjusted, in the Committee's
discretion, to reflect changes in the corporate or capital structure of the
Company (as described in the 1996 Plan). Such adjustments are to be pro-rata
providing equivalent treatment to all holders of Common Stock, options and SARs.
STOCK OPTIONS
Stock options granted under the 1996 Plan may be in the form of incentive
stock options or non-qualified stock options. The option exercise price will be
determined by the Committee, but shall be not less than the fair market value of
the Common Stock at the time the option is granted.
Common Stock purchased upon the exercise of an option must be paid for in
cash, Common Stock, a combination of cash and Common Stock or, at the discretion
of the Committee, by promissory notes, unless the Committee provides for some
other manner of payment. In the discretion of the Committee, any option granted
under the 1996 Plan may be deemed exercised by delivery to the Company of a
properly executed notice of exercise together with irrevocable instructions to
the optionee's broker to deliver to the Company sufficient cash on the date of
exercise to pay the exercise price and any applicable taxes in accordance with a
written agreement between the Company and the broker.
Options may be exercised at such time or times, not more than ten years
after the grant, as the Committee may prescribe in the stock option agreement
entered into in connection with the granting of stock options. The Committee may
determine an appropriate time period during which an optionee may exercise his
or her option after the optionee's employment is terminated. To qualify for the
favorable tax benefits described hereinafter, an incentive stock option must be
exercised by the optionee (except in the case of the optionee's death) only (a)
while the optionee is employed by the Company, (b) within the three months
following the optionee's termination of employment or retirement, or (c) within
the twelve months following the optionee's disability (as defined in the Code).
ASSIGNABILITY OF OPTIONS
Options under the 1996 Plan and all rights thereunder are non-assignable
and non-transferable by the optionee except by will or by the laws of descent
and distribution. During the life of the optionee, the option may be exercised
only by the optionee.
APPRECIATION DISTRIBUTION IN LIEU OF COMMON STOCK
Under the 1996 Plan, the Committee may, at its discretion, require that,
upon the exercise of an option, an optionee receive, in lieu of Common Stock,
cash in an amount equal to the difference between the fair market value of the
underlying shares on the date of exercise and the option price. In the event of
such a cash payment to the optionee, the unpurchased shares subject to such
options shall be deemed to have been exercised.
21
24
FEDERAL INCOME TAX CONSEQUENCES: NONQUALIFIED STOCK OPTIONS
An employee receiving a nonqualified stock option under the 1996 Plan does
not realize taxable income upon the grant of the option but realizes ordinary
income upon its exercise to the extent that the fair market value on the date of
exercise exceeds the option price. The Company may concurrently deduct for tax
purposes an amount equal to the ordinary income realized by the optionee,
subject to certain Code requirements and limitations. If payment of the option
price is made in cash, the optionee's basis in the stock acquired will equal the
cash paid plus the amount of ordinary income realized by reason of the exercise.
If payment is made in Common Stock, the optionee will retain the optionee's
basis for the shares delivered as to an equal number of shares received; the
basis of the remaining shares received will be equal to the fair market value of
those shares on the date of exercise. Upon a subsequent disposition of the
shares acquired pursuant to a nonqualified option, the optionee will recognize
capital gain or loss to the extent of the difference between the optionee's
basis in the Common Stock and the amount received upon its disposition.
FEDERAL INCOME TAX CONSEQUENCES: INCENTIVE STOCK OPTIONS
Neither the grant nor the exercise of an incentive stock option results in
taxable income to an optionee; provided, however, that the difference between
the exercise price and the fair market value of the shares on the date of
exercise is a tax preference item that may subject the optionee to the
alternative minimum tax in the year of exercise. If the optionee does not
dispose of the stock acquired upon exercise of an incentive stock option during
the statutory holding period, any gain or loss upon subsequent sale of the stock
will be long-term capital gain or loss. The statutory holding period is one year
from the date the stock is transferred to the optionee pursuant to the exercise
of the option, but in no event less than two years from the date the option is
granted. The foregoing statutory holding period is waived for exercises and
sales after the optionee's death. Generally, if payment is made in cash, the
optionee will have a basis in the shares purchased equal to the cash paid, i.e.,
the option price. If payment is made in Common Stock, the optionee will retain
the optionee's basis for the shares delivered as the optionee's basis for an
equal number of shares received; the basis for the remaining shares received
will be zero. The Company may not claim any federal income tax deduction upon
either the exercise of the incentive stock option or the subsequent sale of the
Common Stock received upon exercise if the optionee's sale results in long-term
capital gain or loss.
SARS
SARs provide the holder with an alternative to purchasing Common Stock upon
exercise of options. If SARs are granted in conjunction with options, the SARs
will be exercisable only to the extent, and with respect to, the number of
shares that the options to which they relate are exercisable. Upon the exercise
of such tandem SARs, the options to which they relate will be deemed to have
been exercised.
Upon the exercise of an SAR, the holder will receive an amount equal to the
amount by which the fair market value of a share of Common Stock on the exercise
date exceeds the per share exercise price of the SAR. (If an SAR is granted in
connection with an option, the SAR exercise price will be the option price of
that option.) This amount will be paid in cash, in Common Stock or in a
combination of cash and Common Stock, as the Committee deems appropriate. The
number of shares for which an exercised SAR was granted shall not be available
under the 1996 Plan for future awards of SARs, options or Restricted Stock.
Upon the exercise of an SAR, the holder will generally realize ordinary
income for federal income tax purposes to the extent of the value of the shares
or cash or both which the holder receives, and the Company will be entitled to
claim a deduction in the same amount.
22
25
RESTRICTED STOCK
The 1996 Plan also authorizes the Committee to award Restricted Stock
subject to such limitations, restrictions and other terms and conditions
(including conditions under which there may be a substantial risk of forfeiture)
as it may deem appropriate at the time of issuance of such shares. Shares of
Restricted Stock that are returned to the Company because of forfeiture
conditions shall be available for subsequent awards provided the recipient never
acquired benefits of ownership, including the payment of a stock dividend (but
excluding the right to vote).
For federal income tax purposes, the receipt of Restricted Stock by the
employee generally will not result in the realization of taxable income unless
the employee files an election to pay income tax on the Restricted Stock
currently. In the absence of such an election, the Restricted Stock generally
will become taxable as ordinary income to the extent of the market value of the
Common Stock at the time the restrictions lapse. Any appreciation that occurs in
the value of Common Stock after the lapse of the restrictions will be taxed at
long-term capital gains rates if such Common Stock is held for more than one
year following either the lapse of restrictions or the date the Restricted Stock
was transferred to an employee who made an election to pay income tax on a
current basis, whichever is applicable.
FINANCIAL ASSISTANCE TO PARTICIPANTS
The Committee may authorize loans to purchase Common Stock upon the
exercise of an option granted under the 1996 Plan and/or to pay taxes incurred
in connection with the exercise of options or SARs or by reason of an award of
Restricted Stock or the lapse of restrictions thereon. Such loans will bear
interest at rates, and will contain such other terms, as the Committee may
determine in its discretion.
CHANGE IN CONTROL
In the event of a change in control of the Company (as defined in the 1996
Plan), unless otherwise directed by a resolution of the Board adopted by the
affirmative vote of a majority of directors who were directors prior to such
change in control, all outstanding options and SARs shall become exercisable,
and all restrictions on Restricted Stock shall lapse, 30 days after the event.
TERMINATION AND AMENDMENT OF THE 1996 PLAN
The 1996 Plan will terminate on February 28, 2006, unless terminated by the
Board prior to such date. Any such termination shall not affect any options,
SARs or Restricted Stock then outstanding under the 1996 Plan. The Committee or
the Board generally may amend, modify or discontinue the 1996 Plan but may not,
without shareholder approval, (i) materially increase the benefits accruing to
participants under the 1996 Plan, (ii) materially increase the number of
securities which may be issued under the 1996 Plan, (iii) materially modify the
requirements for eligibility for participation in the 1996 Plan, or (iv) effect
other changes for which shareholder approval would be required under Rule
16b-3(b) under the Exchange Act. No amendment to or discontinuance or
termination of the 1996 Plan shall adversely affect any then-outstanding awards
under the 1996 Plan without the holder's consent.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE GENERAL HOST CORPORATION 1996 STOCK INCENTIVE PLAN.
23
26
SHAREHOLDER PROPOSALS FOR 1997
Shareholder proposals intended to be presented at the 1997 Annual Meeting
of Shareholders must be received by the Company for inclusion in its proxy
statement and form of proxy relating to that meeting by December 12, 1996.
Reference is also made to Section 13 of the Company's By-Laws regarding
nomination of directors as discussed on page 5 of this Proxy Statement.
COST OF SOLICITATION
All expenses in connection with the solicitation of proxies will be borne
by the Company. The Company has retained Kissel-Blake Inc. to assist in the
solicitation of proxies, for which such firm will receive aggregate fees of
approximately $10,500, plus reasonable out-of-pocket expenses. In addition, the
Company intends to request brokerage houses, custodians, nominees and others who
hold stock in their names to solicit proxies from the beneficial owners of such
stock, pursuant to the rules of the New York Stock Exchange and the Pacific
Stock Exchange, upon which the Company's Common Stock is listed. The Company
will reimburse such brokerage houses, custodians, nominees and others for their
out-of-pocket expenses, including reasonable clerical expenses, if any. Proxies
may also be solicited by mail, personal solicitation, telephone or telegraph by
employees of the Company.
OTHER MATTERS
While the Board knows of no other business to be presented at the Annual
Meeting, it is intended that the shares represented by the proxies solicited
will be voted on any other matters that may properly come before the meeting, or
any adjournment thereof, in accordance with the discretion of the proxy holders.
By order of the Board of Directors,
J. THEODORE EVERINGHAM,
Secretary
Stamford, Connecticut
April 11, 1996
----------------------
The Annual Report to Shareholders for the fiscal year ended January 28,
1996, which includes financial statements, has been mailed to shareholders
together with this Proxy Statement. The Annual Report does not form any part of
the material for the solicitation of proxies.
24
27
EXHIBIT A
GENERAL HOST CORPORATION
1996 STOCK INCENTIVE PLAN
SECTION 1. PURPOSES, EFFECTIVE DATE AND ELIGIBILITY.
1.1 The purposes of the General Host Corporation 1996 Stock Incentive Plan
(the "Plan") are to promote the interests of General Host Corporation and its
subsidiaries (the "Company", which term shall also refer only to General Host
Corporation when the context so requires) and its shareholders by attracting and
retaining officers and other key employees of exceptional ability; to maximize
the Company's long-term success and return to shareholders; to provide officers
and other key employees important to the Company's sustained growth with a
proprietary interest and greater incentive to contribute to the success of the
Company through ownership of Company shares; and to provide long-term incentive
opportunities for officers and other key employees which are competitive with
those offered by other corporations in the businesses and geographic areas in
which the Company operates. Under the Plan, the Committee (as defined in Section
3.1) may make awards ("Awards") of stock options ("options"), Restricted Stock
(as defined in Section 10) and SARs (as defined in Section 7).
1.2 Subject to adjustment as provided in Section 8, the aggregate number of
shares of common stock (par value $1.00 per share) of the Company ("Common
Stock") available for Awards under the Plan (including the number of SARs not
issued in connection with options pursuant to Section 7) shall not exceed
2,500,000. The Plan shall be effective on March 1, 1996, subject to approval by
the shareholders of the Company at the 1996 Annual Meeting of Shareholders. Any
Award granted under the Plan prior to such shareholder approval shall be
conditioned on such approval, and no such option or SAR may be exercised and no
such Restricted Stock may be issued or transferred prior to such approval.
1.3 Any officer or other key employee of the Company is eligible to receive
an Award.
SECTION 2. AWARDS.
Awards under the Plan may be in the form of options, Restricted Stock or
SARs. Options under the Plan may be incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, as amended and as may be
amended from time to time (the "Code") ("Incentive Stock Options"), or options
which are not Incentive Stock Options ("Nonqualified Stock Options"). The shares
of Common Stock subject to option or to be issued as Restricted Stock under the
Plan may be authorized but unissued stock, previously issued stock held in the
Company's treasury, or both. There shall be reserved at all times under the Plan
a number of shares equal to the maximum number of shares which may be issued
under the Plan including, for this purpose, as reserved that number of shares
related to outstanding SARs not issued in conjunction with options. If an option
or SAR shall expire or be terminated for any reason prior to the termination of
the Plan without having been exercised in full, the unexercised shares subject
thereto shall become available for other Awards under the Plan. SARs may be
granted under the Plan, either separately or in conjunction with options,
subject to the provisions of Section 7.
SECTION 3. ADMINISTRATION OF THE PLAN.
3.1 The Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company (the "Board of Directors" or the "Board")
which the Board shall appoint. The Committee shall
A-1
28
consist of not less than two Directors serving at the pleasure of the Board.
Each member of the Committee shall be a "disinterested person" as such term is
used in Rule 16b-3(c)(2)(i) promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any successor definition adopted by the SEC.
3.2 Subject to the provisions of Section 15.3, the Committee shall have
full power and authority to construe, interpret and modify the Plan and may, in
its absolute discretion, waive or make appropriate adjustments with respect to
the terms of the Plan (and any agreements entered into pursuant to the Plan) and
their applicability to any or all persons eligible to participate in the Plan
whenever in its opinion circumstances warrant, including the determination of
the number of shares and purchase price of stock covered by each Award; the
individuals to whom Awards shall be granted and the time or times when Awards
shall be exercisable; whether an option shall be an Incentive Stock Option or a
Nonqualified Stock Option; the terms and provisions of the respective option
agreements, SAR agreements and Restricted Stock agreements, which need not be
identical; and all such other determinations and actions deemed necessary or
advisable for the administration of the Plan. All determinations by the
Committee as to the interpretation and application of the Plan shall be
conclusive and binding upon all employees.
3.3 All costs and expenses involved in administering the Plan as provided
for herein, or incident thereto, shall be paid by the Company.
3.4 It is intended that the Plan satisfy the conditions set forth in Rule
16b-3 promulgated under the Exchange Act. Each provision of the Plan shall be
construed so as to satisfy such conditions. In the event that any provision of
the Plan cannot be so construed, such provision shall be disregarded and of no
force or effect.
SECTION 4. ELIGIBILITY FACTORS TO BE CONSIDERED IN GRANTING AWARDS.
4.1 Options may be granted under the Plan only to officers and key
employees (who also may be directors) of the Company. In selecting the
individuals to whom Awards are to be granted, as well as in determining the
number of shares subject to each Award, the Committee shall consider the
positions and responsibilities of the individuals being considered, the nature
of the services and the accomplishments of each, the value to the Company of
their services, their present and potential contributions to the success to the
Company and such other factors as the Committee shall deem relevant to
accomplishing the purposes of the Plan. More than one Award may be granted to a
single individual; provided, however, that in the case of a grant of an
Incentive Stock Option, the aggregate fair market value of Common Stock
(determined as of the grant dates) with respect to which Incentive Stock Options
are exercisable for the first time by an individual during any calendar year
shall not exceed $100,000 (or such greater amount as may be permitted by the
Code). If the limitation imposed in the preceding sentence (the "$100,000 ISO
Limitation") is exceeded inadvertently, any shares with respect to which an
Incentive Stock Option first becomes exercisable in any one calendar year in
excess of the $100,000 ISO Limitation shall be treated as shares subject to a
Nonqualified Stock Option.
4.2 At no time can the aggregate (without duplication) of the number of:
(a) shares of Common Stock (including Restricted Stock) issued under
the Plan,
(b) shares of Common Stock subject to options or SARs deemed exercised
pursuant to Section 5.5 or Section 7.2,
(c) shares of Common Stock for which exercised SARs were granted,
A-2
29
(d) shares of Common Stock reserved for outstanding but unexercised
options granted under the Plan and
(e) shares of Common Stock reserved for outstanding SARs granted under
the Plan not in conjunction with options
exceed 2,500,000 in total or 625,000 for any one person, subject to adjustment
as set forth in Section 8 below.
SECTION 5. TERMS OF THE OPTIONS.
5.1 The purchase price of Common Stock covered by each option shall be
determined by the Committee, but in no event shall the purchase price be less
than the Fair Market Value of the Common Stock on the date the option is
granted. The "Fair Market Value" of Common Stock shall be the average of the
highest and lowest selling prices for one share of Common stock on the New York
Stock Exchange -- Composite Transactions Index on the applicable date or, if the
Common Stock does not trade on the New York Stock Exchange on that date, on the
next preceding day on which it did so trade.
5.2 The term of each option granted hereunder shall be for such period as
the Committee shall determine not exceeding ten years and shall be subject to
earlier termination as hereinafter provided. Except as hereinafter provided,
each option shall be exercisable in whole or in part at such time or times and
subject to such conditions, if any, as the Committee may provide in the option
agreement.
5.3 An option granted under the Plan shall by its terms be non-transferable
otherwise than by will or the laws of descent and distribution, and an option
may be exercised during the life of the optionee only by the optionee.
5.4 Except as otherwise specifically permitted by the Committee pursuant to
Section 9, no option shall be exercisable at any time unless the holder thereof
shall then be employed by the Company. The holder of an option shall not have
any rights as a shareholder with respect to the shares covered by his or her
option until such shares shall be issued to him or her upon the due exercise of
the option.
5.5 The Committee may, in its discretion, determine that upon exercise of
an option, the optionee shall receive in lieu of Common Stock, in whole or in
part, cash equal to the amount by which the Fair Market Value of the Common
Stock for which the option is being exercised exceeds the option price, and no
payment shall be required from the optionee except as provided pursuant to
Section 16. For purposes of administering the Plan, options for which cash has
been paid pursuant to this Section 5.5 shall be deemed to have been exercised.
SECTION 6. PAYMENT FOR OPTION SHARES.
6.1 Payment for all shares purchased must be made in full at the time of
the exercise of the option in (a) cash, (b) Common Stock, (c) a combination of
cash and Common Stock, or (d) at the discretion of the Committee on a
case-by-case basis, promissory notes. The Committee in its discretion also may
provide for another manner of payment.
6.2 In the discretion of the Committee as set forth in an option agreement,
any option granted under the Plan may be deemed exercised by delivery to the
Company of a properly executed notice of exercise together with irrevocable
instructions to the optionee's broker (in form and substance satisfactory to the
Company) to deliver to the Company sufficient cash on the date of exercise to
pay the exercise price and any applicable
A-3
30
income and employment withholding taxes in accordance with a written agreement
between the Company and the broker.
SECTION 7. STOCK APPRECIATION RIGHTS.
7.1 The Committee, in its discretion, may grant Stock Appreciation Rights
("SARs") to those individuals eligible to receive options under the Plan, either
separately or in conjunction with, and in direct relation to, specified options
or portions of options granted pursuant to the Plan. Any unexercised
Nonqualified Stock Option granted originally without SARs under the Plan may be
subsequently amended to attach SARs to such Nonqualified Stock Option.
7.2 If an SAR is granted in connection with an option, the SAR will be
exercisable only to the extent that the option to which it relates is
exercisable, and for purposes of Section 4.2 hereof, the exercise of such option
shall cause the related SAR to be deemed also to have been exercised.
Conversely, for purposes of Section 4.2 hereof, the exercise of an SAR issued in
connection with an option shall cause such related option to be deemed also to
have been exercised. The exercise price of an SAR granted in connection with an
option shall be the option price under the related option. The exercise price of
an SAR not granted in connection with an option shall be determined by the
Committee, but in no event shall the exercise price be less than the Fair Market
Value of a share of the Company's Common Stock on the date such SAR is granted.
7.3 Upon the exercise of an SAR, the holder will receive an amount equal to
the amount by which the Fair Market Value of a share of Common Stock on the
exercise date exceeds the per share exercise price of the SAR or, if an SAR is
granted in connection with an option, the option price per share of that option.
Such amount will be paid in cash, in Common Stock or in a combination of cash
and Common Stock, as the Committee deems appropriate. The number of shares of
Common Stock for which the exercised SAR was granted shall not be available
under the Plan for future Awards regardless of the number of shares, if any,
actually issued upon the exercise of an SAR.
7.4 No SAR shall be exercisable for complete or partial settlement in cash
unless both of the following conditions are met: (i) Six months have elapsed
following the date such SAR was granted, and (ii) such exercise satisfies the
conditions (with respect to the timing of the election to so exercise) of Rule
16b-3(e)(3) under the Exchange Act.
7.5 If an SAR not granted in connection with an option shall expire or be
terminated for any reason prior to the termination of the Plan without having
been exercised in full, the shares covered by the unexercised SAR shall become
available for other Awards under the Plan.
7.6 At the request of the Committee, each recipient of an SAR shall enter
into an agreement with the Company which shall contain such provisions,
consistent with the provisions of this Plan, as may be established from time to
time by the Committee or which may be advisable to comply with applicable laws.
7.7 The term of each SAR granted hereunder shall be for such period as the
Committee shall determine not exceeding ten years and shall be subject to
earlier termination as hereinafter provided.
7.8 An SAR granted under the Plan shall by its terms be non-transferrable
otherwise than by will or the laws of descent and distribution, and an SAR may
be exercised during the life of the holder only by the holder.
7.9 Except as otherwise specifically permitted by the Committee pursuant to
Section 9, no SAR shall be exercisable at any time unless the holder thereof
shall then be employed by the Company.
A-4
31
SECTION 8. STOCK ADJUSTMENT AND NUMBER OF SHARES.
8. In the event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, exchange of shares, merger, consolidation,
rights offering or any other change in the corporate structure or shares of the
Company, the Committee shall, at the time of such event or at a subsequent time,
make such adjustment or adjustments as it may in its discretion deem appropriate
in the number and kind of shares authorized by the Plan and covered by
outstanding Awards; provided, however, that such adjustments must be in the
nature of pro rata anti-dilution adjustments which provide for the equivalent
treatment of all holders of the Company's Common Stock, options and SARs.
Without limiting the preceding sentences in any respect, in the event of any
merger, consolidation or combination of the Company with or into another
corporation (other than a merger, consolidation or combination in which the
Company is the surviving corporation and which does not result in any
reclassification or change of outstanding Common Stock), the Committee prior
thereto in its discretion may provide that holders of options and SARs granted
pursuant to the Plan shall have the right thereafter and during the term of each
such option and SAR to receive upon exercise of such option and SAR, or any
portion thereof (subject to the provisions of the applicable option and SAR
agreement), for each share of Common Stock as to which the option and SAR shall
be exercised, the kind and amount of shares of the surviving or new corporation,
cash, securities, evidences of indebtedness, other property or any combination
thereof, which would have been received upon such merger, consolidation or
combination by a party holding one share of Common Stock immediately prior to
such merger, consolidation or combination. In the event of a merger,
consolidation or combination in which the consideration issued with respect to
shares of Common Stock is a combination of different types of property, the
Committee may designate the property or combination of property to be received
upon the exercise of an option and SAR outstanding under the Plan.
SECTION 9. TERMINATION OF EMPLOYMENT.
The Committee, in its sole discretion, may determine an appropriate time
period during which an individual may exercise an option or SAR after the
individual terminates employment with the Company. Notwithstanding the
foregoing, in no event may an option or SAR be exercised after the expiration of
its term. Nothing in the Plan or in any agreement entered into with any officer
or employee pursuant to the Plan shall confer upon such officer or employee any
right to continue in the employ of the Company or shall interfere in any way
with the right of the Company to terminate his or her employment at any time.
SECTION 10. RESTRICTED STOCK AWARDS.
10.1 The Committee from time to time may make an incentive award in Common
Stock (the "Restricted Stock") to those persons described in Section 4 in
accordance with such procedures as the Committee may adopt, which award shall be
subject to such limitations, restrictions and other terms and conditions
(including conditions under which there may be a substantial risk of forfeiture)
as the Committee from time to time may prescribe.
10.2 Certificates for Restricted Stock so awarded shall be registered in
the name of the recipient who shall have all of the rights of a shareholder with
respect thereto, including without limitation the right to vote and receive all
dividends or other distributions made or paid with respect thereto. All such
Restricted Stock and any new, additional or different securities the recipient
may become entitled to receive with respect to such stock by virtue of a
transaction described in Section 8 or any other change in corporate or capital
structure of the Company shall be subject to the restrictions imposed by the
Committee pursuant to this Section.
A-5
32
10.3 Restricted Stock may not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of by the holder until the restrictions
thereon lapse, except by gift to a member of the holder's family or other person
permitted under the Committee's rules. In the event of such gifts, the shares so
given shall remain subject to the same restrictions.
10.4 At the request of the Committee, each recipient of Restricted Stock
shall enter into an agreement with the Company which shall contain such
provisions, consistent with the provisions of the Plan, as may be established
from time to time by the Committee or which may be advisable in the judgment of
the Committee to comply with applicable laws.
10.5 Certificates issued in respect of Restricted Stock may bear a legend
referring to the foregoing restrictions, including restrictions as to
substantial risk of forfeiture and to transferability.
10.6 Shares of Restricted Stock that are returned to the Company because of
forfeiture conditions in the Committee's rules or in an Award of Restricted
Stock shall again be available for the Awards under the Plan provided that the
recipient never acquired benefits of ownership, including the payment of a stock
dividend (but excluding the right to vote).
SECTION 11. LISTING AND REGISTRATION.
If at any time the Committee shall determine, in its discretion, that the
listing, registration or qualification of any shares covered by the Plan upon
any national securities exchange or under any federal, state, local or foreign
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the issuance of
shares under the Plan, then, notwithstanding any other provision of the Plan to
the contrary, no shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Committee.
SECTION 12. FINANCING.
The Committee at its discretion may authorize loans to individuals,
including directors of the Company, to finance the exercise of options under the
Plan and the payment by the individual of any income taxes incurred by reason of
his or her exercise of options or SARs or by reason of an award of Restricted
Stock or the lapse of restrictions thereon. The Committee shall cause each such
loan to be evidenced by a promissory note executed by the such individual and
bearing interest at rates prescribed by the Committee from time to time and
repayable on such terms, and with such collateral, or without collateral, as the
Committee determines.
SECTION 13. CHANGE IN CONTROL OF THE COMPANY.
In the event of a change in control of the Company, unless directed
otherwise by a resolution of the Board of Directors adopted by the affirmative
votes of a majority consisting entirely of directors who were directors before
such change in control occurred, all of an individual's outstanding options and
SARs shall become exercisable, and any restrictions remaining on a holder's
shares of Restricted Stock shall lapse, thirty (30) days after such event. For
purposes of this Plan, "change in control" means that:
(a) 20% or more of the Company's voting stock has been acquired by any
person (as defined by Section 3(a)(9) of the Exchange Act) other than
directly from the Company;
A-6
33
(b) There has been a merger or equivalent combination in which 49% or
more of the voting stock of the surviving corporation is issued for reasons
other than that the recipients were shareholders of the Company; or
(c) 20% or more of the directors elected by shareholders to the Board
of Directors of the Company are persons who were not nominated by
management in the most recent proxy statement of the Company.
SECTION 14. QUALIFICATION AS INCENTIVE STOCK OPTIONS.
The Company intends that the provisions of the Plan and each option
agreement applicable to Incentive Stock Options shall conform to, and that
Incentive Stock Options granted under the Plan shall qualify as Incentive Stock
Options under, the Code. Any provisions of this Plan or any option agreement
with respect to Incentive Stock Options that cannot be so conformed shall be
disregarded or modified to the extent necessary to so conform. In the event of
amendment of the provisions of the Code applicable to Incentive Stock Options,
the Board of Directors or the Committee may amend the Plan to conform to any
such amendment.
SECTION 15. AMENDMENTS, DISCONTINUANCE AND TERMINATION.
15.1 Subject to the provisions of Section 15.2 and 15.3, either the
Committee or the Board from time to time may amend, modify or discontinue the
Plan or any provision thereof and, with the consent of an optionee or a holder
of an SAR or Restricted Stock, modify the terms and conditions of his or her
Award in such manner as may be deemed advisable. In addition, either the
Committee or the Board shall have the right, in its discretion, to cancel by
mutual agreement with holder of the Award any outstanding Awards and to issue
new Awards replacing them on such terms and conditions as the Committee deems
appropriate, including terms providing for an increase or decrease in the
exercise price or number of shares subject to the Award or any other variation
in terms and conditions of the Award previously in effect.
15.2 No amendment to or discontinuance or termination of the Plan shall,
without the written consent of the optionee or the holder of and SAR or
Restricted Stock, adversely affect any options, SARs or Restricted Stock then
outstanding under the Plan. The Board of Directors, if it so elects, may
withdraw administration of the Plan from the Committee; provided, however, that
such withdrawal does not cause the Plan to lose its exempt status under Rule
16b-3 under the Exchange Act. The Plan shall continue until February 28, 2006,
unless terminated earlier by the Board of Directors.
15.3 Notwithstanding Section 3.2, no modifications or amendments shall be
made to the Plan without approval of the security holders of the Company as
required by Rule 16b-3(b) under the Exchange Act if such modification or
amendment would (i) materially increase the benefits accruing to participants
under the Plan, (ii) materially increase the number of securities which may be
issued under the Plan, (iii) materially modify the requirements for eligibility
for participation in the Plan or (iv) effect other changes for which shareholder
approval would be required under Rule 16b-3(b) under the Exchange Act.
SECTION 16. WITHHOLDING TAXES.
The Company shall have the right (a) to require the holder of an option to
make payments in cash or Common Stock to the Company upon the exercise of an
option granted under the Plan in connection with any obligation of the Company
to withhold taxes upon such exercise, and such payments shall be a condition
precedent to the delivery to the optionee of a certificate of Common Stock
pursuant to the exercise of the option, and (b) to make such provisions and take
such steps as it may deem necessary or appropriate for the
A-7
34
withholding of any taxes in connection with any grants of SARs or awards of
Restricted Stock made pursuant to the Plan.
SECTION 17. APPLICABLE LAW.
This Plan and all actions taken hereunder shall be governed by the laws of
the State of New York.
A-8
35
- - --------------------------------------------------------------------------------
PROXY
GENERAL HOST CORPORATION--1996 ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints HARRIS J. ASHTON, J. THEODORE
EVERINGHAM and JAMES R. SIMPSON and each of them, jointly and
severally, proxies, with full power of substitution, to vote with the
same force and effect as the undersigned, including the right to
cumulate votes in the election of directors for such of the nominees
as the proxies in their discretion may deem appropriate (subject to
any limitations on such authority as may be indicated on the reverse
side hereof), at the Annual Meeting of Shareholders of General Host
Corporation, to be held at the South Bend Marriott Hotel, 123 North
St. Joseph Street, South Bend, Indiana 46601 on May 16, 1996, at 9:00
A.M., and any adjournment thereof, upon the matters set forth on the
reverse side hereof and upon such other matters as may properly come
before, or incident to the conduct of, the meeting, all in accordance
with the accompanying notice and proxy statement for said meeting,
receipt of which is hereby acknowledged.
------------------------------
This proxy will be voted "FOR" Proposals 1, 2 and 3 unless
instructions to the contrary are indicated. In addition, this proxy
will be voted in accordance with the judgment of the proxy holders
upon such other matters as may properly come before, or incident to,
the conduct of the meeting, or any adjournment thereof.
Should any management nominee become unable to accept nomination or
election, this proxy will be voted for a substitute nominated by the
Board of Directors.
(CONTINUED, AND TO BE SIGNED, ON THE REVERSE SIDE.)
- - --------------------------------------------------------------------------------
/ /
------------ ------------
ACCOUNT NUMBER COMMON
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE FOLLOWING PROPOSALS:
- - ------------------------------------------------------------------------------------------------------------------------------------
1. Election of the following three Directors to hold office until 1999: 2. Ratification of appointment of Price Waterhouse
Harris J. Ashton, Christopher A. Forster and S. Joseph Fortunato. LLP as independent accountants for 1996.
FOR WITHHELD FOR AGAINST ABSTAIN
0 0 0 0 0
(To withhold 3. Adoption by the Company of the 1996
authority to Stock Incentive Plan.
vote for any
individual
nominee write
that nominee's
name on the
space below.)
FOR AGAINST ABSTAIN
--------------- 0 0 0
- - ------------------------------------------------------------------------------------------------------------------------------------
Dated , 1996
----------------------------------------------
--------------------------------------------------------------
(Signature)
--------------------------------------------------------------
(Signature)
The signature on this proxy should correspond exactly with
the name stenciled hereon. For joint accounts, each joint
owner should sign. Persons signing as attorney, executor,
administrator, trustee or guardian and corporate officers
PLEASE MARK YOUR CHOICE LIKE THIS / / IN BLUE OR BLACK INK. should give their full titles.
- - ------------------------------------------------------------------------------------------------------------------------------------
36
PROXY
GENERAL HOST CORPORATION--1996 ANNUAL MEETING
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints HARRIS J. ASHTON, J. THEODORE EVERINGHAM and
JAMES R. SIMPSON and each of them, jointly and severally, proxies, with full
power of substitution, to vote with the same force and effect as the
undersigned, including the right to cumulate votes in the election of directors
for such of the nominees as the proxies in their discretion may deem appropriate
(subject to any limitations on such authority as may be indicated on the reverse
side hereof), at the Annual Meeting of Shareholders of General Host Corporation,
to be held at the South Bend Marriott Hotel, 123 North St. Joseph Street, South
Bend, Indiana 46601 on May 16, 1996, at 9:00 A.M., and any adjournment thereof,
upon the matters set forth on the reverse side hereof and upon such other
matters as may properly come before, or incident to the conduct of, the meeting,
all in accordance with the accompanying notice and proxy statement for said
meeting, receipt of which is hereby acknowledged.
(CONTINUED, AND TO BE SIGNED, ON THE REVERSE SIDE)
- FOLD AND DETACH HERE -
Please mark
your votes
as this /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE FOLLOWING PROPOSALS:
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of the / / / / 2. Ratification of / / / / / /
following three appointment
Directors to of Price Waterhouse
hold office LLP as independent
until 1999: Harris accountants for 1996.
J. Ashton,
Christopher A. 3. Adoption by the / / / / / /
Forster and S. Company of the 1996
Joseph Fortunato. Stock Incentive Plan.
(To withhold authority to vote This proxy will be voted "FOR" Proposals 1,
for any individual nominee 2 and 3 unless instructions to the contrary
write that nominee's name on are indicated. In addition, this proxy will
the space below.) be voted in accordance with the judgment of
the proxy holders upon such other matters as
______________________________ may properly come before, or incident to,
the conduct of the meeting, or any
adjournment thereof. Should any management
nominee become unable to accept nomination
or election, this proxy will be voted for a
substitute nominated by the Board of
Directors.
Dated ____________________________, 1996
________________________________________
(Signature)
________________________________________
(Signature)
The signature on this proxy should
correspond exactly with the name
stenciled hereon. For joint accounts,
each joint owner should sign. Persons
signing as attorney, executor,
administrator, trustee or guardian and
corporate officers should give their
full titles.
37
CG TRUST COMPANY-TRUSTEE
GENERAL HOST CORPORATION PROFIT SHARING AND SAVINGS PLAN
GENERAL HOST CORPORATION-1996 ANNUAL MEETING
THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby instructs CG Trust Company to vote all the shares of
General Host Corporation Common Stock held on my behalf in the General Host
Corporation Profit Sharing and Savings Plan, at the Annual Meeting of
Shareholders of General Host Corporation, to be held at the South Bend Marriott
Hotel, 123 North St. Joseph Street, South Bend, Indiana 46601 on May 16, 1996,
at 9:00 A.M., and any adjournment thereof, upon the matters set forth on the
reverse side hereof and upon such other matters as may properly come before, or
incident to the conduct of, the meeting, all in accordance with the
accompanying notice and proxy statement for said meeting, receipt of which is
hereby acknowledged.
(CONTINUED, AND TO BE SIGNED, ON THE REVERSE SIDE)
- FOLD AND DETACH HERE -
PLEASE MARK
YOUR VOTES /X/
AS THIS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL OF THE FOLLOWING PROPOSALS:
FOR WITHHELD
1. Election of the following three Directors to hold / / / /
office until 1999: Harris J. Ashton, Christopher A.
Forster and S. Joseph Fortunato.
(To withhold authority to vote for any individual nominee
write that nominee's name on the space below.)
_________________________________________________________
FOR AGAINST ABSTAIN
2. Ratification of appointment of Price Waterhouse LLP / / / / / /
as independent accountants for 1996.
3. Adoption by the Company of the 1996 Stock Incentive Plan. / / / / / /
I hereby instruct the Trustee to vote by proxy upon such other matters as may properly come
before, or incident to, the conduct of the meeting, or any adjournment thereof.
Should any management nominee become unable to accept nomination or election, the Trustee is
instructed to vote by proxy for a substitute nominated by the Board of Directors.
Signature(s) _____________________________________________________________________ Date _______________
The signature on this card should correspond exactly with the name stenciled hereon.
Persons signing as attorney, director, administrator, trustee or guardian and
corporate officers should give their full titles.