Exhibit 99.3
[DEP CORPORATION LOGO]
2101 EAST VIA ARADO
RANCHO DOMINGUEZ, CALIFORNIA 90220-6189
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 5, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of DEP Corporation, a Delaware corporation (the "Company"),
of proxies for use at the Annual Meeting of Stockholders to be held on Friday,
December 5, 1997, at 10:00 a.m. (local time), at the Holiday Inn, 19800 South
Vermont Avenue, Torrance, California, and at any adjournment or postponement
thereof (the "Meeting").
Record holders of the Company's common stock, par value $.01 per share (the
"Common Stock"), as of the close of business on October 8, 1997 will be entitled
to receive notice of, and to vote at, the Meeting. As of October 8, 1997, there
were 6,876,140 shares of Common Stock outstanding. Presence at the Meeting, in
person or by proxy, of a majority of the outstanding Common Stock will
constitute a quorum for the transaction of business at the Meeting. Each share
of the Common Stock will be entitled to cast one vote on each matter presented
to the stockholders. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions (which are effective on all matters other than the
election of directors) will be considered as "against" votes for the purpose of
calculating whether the requisite percentage of votes cast has approved a
proposal, whereas broker non-votes will not be counted as cast.
Shares represented by duly executed proxies received prior to the Meeting
will be voted at the Meeting. Such shares will be voted in accordance with all
instructions validly given by a stockholder. When no such instruction is given,
the shares will be voted in accordance with the recommendation of the Board of
Directors of the Company (the "Board") indicated on the proxy.
THE COMPANY WILL PAY ALL EXPENSES OF SOLICITING PROXIES. In addition to the
solicitation being made hereby, solicitation may be made in person or by
telephone by Company officers, directors or employees who will not be specially
compensated therefor. Upon request, the Company will reimburse banks, brokerage
firms and other custodians, nominees and fiduciaries for their reasonable
expenses incurred in forwarding proxy materials to beneficial owners of the
Common Stock.
A proxy may be revoked at any time before it is voted by giving written
notice of revocation to the Secretary of the Company, by submission of a
subsequent proxy or by attending and voting in person at the Meeting.
This Proxy Statement and the enclosed form of proxy are being mailed to
holders of the Common Stock on or about October 31, 1997.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information is set forth as of October 1, 1997 with respect to
the Company's chief executive officer and four most highly compensated other
officers, each director and nominee, all directors and executive officers as a
group, and each other person or group known to the Company to be the beneficial
owner of more than 5% of the outstanding shares of the Common Stock:
COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OPTIONS PERCENT
OF BENEFICIAL OWNERS(1) OWNED(2) EXERCISABLE(2) OF CLASS
- -------------------------------------------------------------- --------------- -------------------- -------------
DIRECTORS, NOMINEES AND OFFICERS
Robert Berglass............................................... 1,914,693 153,233 27.2
Judith R. Berglass(3)......................................... 510,296 38,500 7.4
Grant W. Johnson.............................................. 78,994 73,500 1.1
Philip I. Wilber.............................................. 6,000 6,000 *
Michael Leiner................................................ 15,000 -- *
Alexander L. Kyman............................................ 1,000 -- *
Michael Nave.................................................. 1,087 -- *
Jerome P. Alpin............................................... 68,416 47,500 *
David Berglass................................................ 23,287 10,667 *
D. Lee Johnson................................................ 8,401 6,667 *
All Directors, Nominees and Officers (12 Persons)............. 2,642,408 349,301 36.6
OTHER 5% BENEFICIAL OWNERS None............................... -- -- --
- ------------------------
* Denotes less than 1%. Except as otherwise indicated, each person shown in
the above table has sole voting and dispositive power over the Common Stock
or options.
(1) The address for each director, nominee and officer is c/o DEP Corporation,
2101 East Via Arado, Rancho Dominguez, California 90220-6189.
(2) Includes options exercisable on October 1, 1997 or within 60 days
thereafter.
(3) Includes 400,000 shares of the Common Stock held in the Berglass 1995
Irrevocable Trust dated June 27, 1995 for which Mrs. Berglass is the
Trustee.
ELECTION OF DIRECTORS
The Company's Board currently consists of six directors who are divided into
three classes. The term of office of the Class I directors, Messrs. Kyman and
Leiner, expires at the Meeting and Messrs. Kyman and Nave have been nominated by
the Board to serve as Class I directors for a term of three years. The nominees
have indicated to the Company their availability and willingness to serve in
such capacity. However, if prior to the voting for directors, any of the
nominees become unavailable or unable to serve as a director, the proxy holders
will vote for a substitute nominee in accordance with their best judgment.
2
Information concerning the Class I director nominees and the continuing
directors, based on data furnished by them, is set forth below:
NAME AGE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- --------------------------------- ----- ------------------------------------------------------------------------
NOMINEES:
CLASS I DIRECTORS
(terms expire in 2000)
Alexander L. Kyman 67 Alexander L. Kyman has been a director of the Company since December
1994. Since January 1, 1994, Mr. Kyman has been the principal of Alex
Kyman & Associates, a business and financial consulting firm. For over
27 years prior thereto he was employed by City National Bank where he
served as Vice Chairman for one year and as President and Chief
Operating Officer for eight years prior thereto.
Michael Nave 60 Mr. Nave has been Publisher and President of BSB Communications, Inc.,
publishers of beauty store and professional trade magazines to the
professional beauty industry since 1994. Since June 1997 he has served
as Chairman of the Board of Mercury Distributing Company. For over 25
years prior thereto he served as President and Chief Executive of
Mercury Distributing Company, a beauty products distributorship.
CONTINUING DIRECTORS:
CLASS II DIRECTORS
(terms expire in 1998)
Judith R. Berglass 45 Judith R. Berglass is a Senior Vice President and has been employed by
the Company since 1983. She has served as the Company's Vice President,
Corporate Development since 1984, a director since 1985 and since 1986
has also served as Secretary. For the three years prior to joining the
Company, she was Vice President of CLF Associates, a management
consulting firm. Mrs. Berglass is the wife of the President.
Philip I. Wilber 70 Philip I. Wilber has been a director of the Company since October 1993.
Mr. Wilber founded Drug Emporium, Inc. in 1977 and served as its
President, Chief Executive Officer and Chairman of the Board until 1989,
and as its Chairman of the Board from 1989 until his retirement in
January 1992. He then served as a director until January 1993 and has
been a consultant since that time. Drug Emporium is a chain of 136
company-owned deep discount drug stores which also provides certain
services for 100 independently franchised stores operating under the
same name.
CONTINUING DIRECTORS:
CLASS III DIRECTORS
(terms to expire in 1999)
Robert Berglass 59 Robert Berglass has served as President of the Company since
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NAME AGE PRINCIPAL OCCUPATION AND POSITION WITH THE COMPANY
- --------------------------------- ----- ------------------------------------------------------------------------
1969 and has been Chairman of the Board of Directors since 1971.
Immediately prior to joining the Company, he was a Vice President of
Faberge, Inc. He has more than 35 years of experience in the personal
care products industry.
Grant W. Johnson 53 Grant W. Johnson is the Senior Vice President, Finance and Chief
Financial Officer and has been employed by the Company since 1985 and as
a director since 1986. For approximately eight years preceding his
joining the Company, he was Vice President, Finance of Vidal Sassoon,
Inc. Mr. Johnson, a certified public accountant, also has seven years of
experience with Deloitte & Touche LLP.
BOARD OF DIRECTORS AND COMMITTEES
The Board held seven meetings during fiscal 1997. Non-employee directors
receive an annual retainer of $6,000, plus $1,000 for each Board meeting
attended and $500 for each committee meeting attended on a date different from a
Board meeting. In addition, each non-employee director is entitled to receive
$2,000 for service as chairman of a committee of the Board. During fiscal year
1997, each director attended at least 75% of all meetings of the Board and any
committees of the Board on which such director served.
Under the Company's 1992 Stock Option Plan, each director of the Company
other than the Company's Chairman is entitled to receive an option grant
covering 1,000 shares of the Common Stock on the last business day of each
fiscal year, at an exercise price equal to the last reported sale price on such
day. In July 1997, each director, other than Mr. Berglass, automatically
received an option for 1,000 shares of Common Stock pursuant to the Company's
1992 Stock Option Plan. Pursuant to an amendment to such Plan that was approved
by the Company's stockholders on January 9, 1996, any person becoming a director
on or after August 1, 1994 will receive a one-time grant of an option to
purchase 5,000 shares of the Common Stock at an exercise price equal to the last
reported sale price on the date of grant. Pursuant to the foregoing amendment,
if elected, on December 5, 1997 Mr. Nave will be granted an option to purchase
5,000 shares of the Common Stock at an exercise price equal to the last reported
sale price on the date of grant.
The Board currently has an Audit Committee, a Compensation and Management
Stock Option Committee (the "Compensation Committee"), and an Employee Stock
Option Committee. The Board does not have a standing Nominating Committee.
During fiscal 1997, the Audit Committee's responsibilities included
selecting the Company's independent auditors, examining the results of the
annual audit and reviewing the Company's internal accounting controls and
estimated fees for services performed by the Company's independent auditors. In
addition, the Audit Committee advised the Board as to particular accounting or
financial matters which came to its attention during the course of its review.
Messrs. Kyman and Leiner are currently the members of the Audit Committee, which
held two meetings during fiscal 1997.
The Compensation Committee is responsible for determining compensation for
the President and stock option grants to all executive officers. Messrs. Wilber
and Leiner are currently the members of the Compensation Committee, which held
three meetings during fiscal 1997.
The Employee Stock Option Committee is responsible for determining stock
option grants to employees who are not executive officers. Mr. Berglass is
currently the sole member of the Employee Stock Option Committee, which met
twice during fiscal 1997.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act"), requires the Company's officers and directors and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and to furnish the Company with copies of
such reports. Based on the Company's review of the copies of those reports and
written representations which it has received, the Company believes that all
such filings have been made.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company for fiscal years 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------
FISCAL ------------------------ STOCK OPTIONS ALL OTHER
NAME YEAR SALARY(2) BONUS(3) NUMBER GRANTED COMPENSATION(4)
- --------------------------------- ----------- ----------- ----------- --------------------- ---------------------
Robert Berglass President and 1997 $ 567,967 $ 0 100,000 $ 1,750
Chief Executive Officer 1996 546,892 0 0 1,750
1995 523,651 0 0 1,750
Grant W. Johnson Senior Vice 1997 222,500 9,999 8,500 2,416
President and Chief Financial 1996 209,814 0 0 2,284
Officer 1995 204,990 0 26,000 1,210
Jerome P. Alpin Senior Vice 1997 212,300 9,999 7,500 4,579
President and General Manager, 1996 200,168 0 0 3,419
1995 195,594 17,970 25,000 2,060
International Sales and Marketing
Stephen R. Berry(5) Vice 1997 151,900 0 3,000 1,815
President, Sales 1996 151,900 0 0 1,815
1995 142,200 9,157 10,000 1,293
D. Lee Johnson Vice President, 1997 139,400 9,999 5,000 1,567
Administration 1996 134,750 0 0 1,560
1995 103,077 17,970 8,500 848
- ------------------------
(1) Mr. Berglass' base salary remained unchanged throughout the fiscal years
shown on the table. However, during the period March 1995 through October
1995 Messrs. Berglass, Grant Johnson and Alpin participated in voluntary
salary reductions which amounted to 15% for Mr. Berglass and 10% for Messrs.
Johnson and Alpin.
(2) Compensation deferred at the election of the executive pursuant to the DEP
Corporation Executive Deferred Compensation Plan (the "Deferred Compensation
Plan") is included as salary in the year earned. The Deferred Compensation
Plan was terminated in November 1995.
(3) Bonuses are included in the fiscal year earned, but are typically paid in
the following fiscal year. Bonuses paid are subject to the Company's 1993
Stock Target Ownership Plan (the "1993 Plan") pursuant to which executives
receive a portion of their bonus compensation in shares of Common Stock
based on the fair market value of such stock. Since the 1997 bonuses paid to
Messrs. Alpin,
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Grant Johnson and D. Lee Johnson were under $10,000, pursuant to the terms
of the 1993 Plan, no percentage of such bonus was allocable to Common Stock.
The fiscal 1995 bonuses paid to Mr. Alpin and Mr. D. Lee Johnson included
the fair market value of 1,734 and 1,734 shares of Common Stock,
respectively.
(4) Amounts paid in fiscal 1997 represent (i) the value of group and
supplemental term life insurance provided in excess of $50,000 basic
coverage of $1,350 for Mr. Berglass, $2,016 for Mr. Grant Johnson, $4,179
for Mr. Alpin, $1,415 for Mr. Berry and $1,167 for Mr. D. Lee Johnson; and
(ii) $400 for each of the named officers as matching contributions under the
Company's 401(k) plan. No contribution was made by the Company to its Profit
Sharing Plan for fiscal 1997, 1996 or 1995.
(5) Mr. Berry resigned from the Company effective July 23, 1997.
CHANGE IN CONTROL BENEFITS
The Company has entered into an Executive Severance Agreement (the
"Severance Agreement") and a Retention Bonus Agreement (the "Retention
Agreement") (collectively, the "Agreements") with each of the executive officers
named in the Summary Compensation Table above, and certain other executive
officers, with the exception of Messrs. Berglass and Berry, who are covered only
by a Severance Agreement. The Agreements provide for a severance payment and a
retention bonus payment should a change in control of the Company occur.
The Severance Agreement provides an executive with a lump sum payment based
on an executive's current annual base salary, as of the date of termination, as
follows: (1) the President and senior vice presidents would receive payments
equal to 18 months of their annual base salary, (2) certain other executive
officers would receive payments equal to 12 months of their annual base salary,
and (3) other vice presidents and key employees would receive payments equal to
six months of their annual base salary plus one month of such employee's annual
base salary multiplied by a number equal to the number of years such employee
has been employed by the Company, provided, however, that the maximum payment
would not exceed 18 months of such employee's annual base salary. In addition,
all such executives and key employees would receive life, disability, accident
and group health insurance benefits for a like period of time.
A change in control will be deemed to have occurred if: (i) Robert Berglass,
Judith R. Berglass and any controlled affiliate thereof no longer is the
beneficial owner of securities of the Company representing 26% or more of the
combined voting power of the Company's then outstanding securities; (ii) within
a two consecutive year period, members of the Board at the beginning of such
period and approved successors no longer constitute a majority of such Board, or
(iii) stockholders of the Company entitled to vote thereon approve a merger or
consolidation (with certain exceptions) or a plan of complete liquidation.
Neither an executive nor a key employee is entitled to receive any
compensation or benefits under the Severance Agreement subsequent to a change in
control if such employee's employment is terminated (i) due to the disability of
such employee, (ii) by the Company, for "just cause," as defined in the
Severance Agreement or (iii) by such employee other than for "good reason," as
defined in the Severance Agreement. Each Severance Agreement will terminate
three years from the date of execution (August 15, 1995) and will automatically
be extended for one year periods unless either party gives notice to the other
of its intent not to extend the term.
The Retention Agreement provides that in the event a change in control
occurs after such executive enters into such Retention Agreement and (i) the
executive remains in the employ of the Company for a period of six months after
such change in control or (ii) if such executive is terminated by the Company or
a successor, unless such termination is for "just cause," as defined in the
Retention Agreement or voluntarily by the executive other than for "good
reason," as defined in the Retention Agreement, then each executive listed on
the Summary Compensation Table above, with the exception of Messrs. Berglass
6
and Berry, will receive a lump sum payment equal to approximately six months of
the executive's annual base salary.
If payments and benefits under the Agreements pursuant to a change in
control would subject such employees to excise tax under Section 4999 of the
Internal Revenue Code or would result in the Company's loss of a federal income
tax deduction for such payments, then such payments and benefits shall
automatically be reduced to the extent necessary to avoid the imposition of such
tax penalty.
The Board believes that the Agreements, which were unanimously approved by
the independent, non-management directors, reinforce and encourage the continued
attention and dedication of members of the Company's management team to their
assigned duties. The Agreements protect the best interests of the stockholders
by assuring such executives and key employees a level of financial security and
inducing such executives to remain in the employ of the Company. The Board
believes that these advantages outweigh the cost of such benefits.
OPTION GRANTS
The following table shows information regarding grants of stock options
during the fiscal year ended July 31, 1997 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
----------------------
APPRECIATION
% OF TOTAL EXERCISE FOR OPTION TERM(3)
NUMBER OF OPTIONS OR BASE
OPTIONS GRANTED IN PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(1) DATE 5% 10%
- -------------------------------------- ------------- --------------------- ----------- ------------- ---------- ----------
Robert Berglass....................... 100,000 57% $ 1.63 11/8/01 $ 125,000 $ 200,000
Grant W. Johnson...................... 1,000 1% 1.31 7/31/02 360 800
7,500 4% 1.63 11/8/01 9,375 15,000
Jerome P. Alpin....................... 7,500 4% 1.63 11/8/01 9,375 15,000
Stephen R. Berry...................... 3,000 2% 1.63 11/8/01 3,750 6,000
D. Lee Johnson........................ 5,000 3% 1.63 11/8/01 6,250 10,000
- ------------------------
(1) All options are non-qualified stock options and have exercise prices equal
to the fair market value of the Common Stock as of June 8, 1996, except the
1,000 shares of incentive stock options automatically granted to Mr. Grant
Johnson for his services as a director on July 31, 1997, which have an
exercise price equal to the fair market value of the Common Stock at the
date of grant. All options granted in fiscal 1997 are exercisable in three
equal installments and exercisable in full three years from the date of
grant. However, all options would be immediately exercisable in certain
events as provided for in the Company's 1992 Stock Option Plan. The closing
price for the Common Stock on the NASDAQ SmallCap Market on July 31, 1997,
was $1.31.
(2) Options with respect to 174,000 shares of Common Stock were granted to
employees, executives, and directors during fiscal 1997.
(3) The assumed rates of appreciation are calculated from the date of grant,
based upon the fair market value of the Common Stock on such date, through
the last date the option may be exercised. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the future
7
performance of the Common Stock, including overall stock market conditions.
The Company does not represent that the values reflected in this table will
or will not be realized.
OPTION EXERCISES AND VALUES
The following table presents information regarding options exercised to
acquire shares of the Company's Common Stock during fiscal 1997 and the values
of unexercised options held at the end of fiscal 1997:
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND 1997 FISCAL YEAR-END OPTION
VALUES
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF OPTIONS
SHARES NUMBER OF UNEXERCISED AT FISCAL YEAR
ACQUIRED OPTIONS AT FISCAL YEAR END END(1)
EXERCISE VALUE ----------------------------------- -------------------
NAME ON REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE
- --------------------- ------------------- --------------- -------------- ------------------- -------------------
Robert Berglass...... 0 $ 0 153,233 76,767 $ 0
Grant W. Johnson..... 0 0 73,500 7,000 0
Jerome P. Alpin...... 0 0 47,500 5,000 0
Stephen R. Berry..... 0 0 9,000 21,000 0
D. Lee Johnson....... 0 0 6,667 6,833 0
NAME UNEXERCISABLE
- --------------------- -----------------------
Robert Berglass...... $ 0
Grant W. Johnson..... 0
Jerome P. Alpin...... 0
Stephen R. Berry..... 0
D. Lee Johnson....... 0
- ------------------------
(1) Based on the difference between the closing price on the NASDAQ SmallCap
Market of $1.31 for the Common Stock at July 31, 1997, and the exercise
price of options having an exercise price lower than such closing prices.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation policies are designed to develop a high
quality management team and to motivate this team to achieve the Company's
short-term and long-term goals. With this in mind, the Company seeks to develop
overall compensation programs which provide the competitive compensation levels
necessary to attract and retain experienced, innovative, and well-qualified
executives from the health and beauty care industry and the Company's own middle
management.
Within this framework, the Company's Compensation Committee is responsible
for determining all aspects of the compensation for its president and chief
executive officer (the "CEO"), as well as the stock options to be granted to the
Company's other executive officers. The CEO is responsible for establishing all
compensation for the other executive officers, apart from their stock options.
As one of the factors in its review of compensation matters, the
Compensation Committee considers the anticipated tax effect on the Company and
executives of various payments and benefits. Section 162(m) of the Internal
Revenue Code generally disallows the Company's deduction for compensation in
excess of $1,000,000 paid to the CEO or to any of the four other most highly
compensated executive officers, unless such excess compensation qualifies as
"performance-based compensation." The Compensation Committee will not
necessarily limit executive compensation to that which is deductible by the
Company under Section 162(m), but believes that Section 162(m) will not limit
the deductibility of any compensation granted to date.
The three key components of the Company's compensation programs are base
salary, performance bonuses and stock options.
8
BASE SALARY
Base salary levels for all executive officers are reviewed annually. As part
of this review, the Company takes into account the compensation packages offered
by other companies in the health and beauty care industry and focuses particular
attention on the compensation paid by a group of the Company's peers (the "Peer
Group"). The Company also gives consideration to the experience,
responsibilities, management and leadership abilities of its individual
executive officers and their actual performance on behalf of the Company.
PERFORMANCE BONUSES
At the commencement of each fiscal year, the Company seeks to provide such
executives with significant performance bonuses closely linked to their
achievement of objective financial goals, such as growth in net sales, earnings
before interest, income taxes, depreciation and amortization (EBITDA), and
operating income and to more subjective goals, such as organizational
development, team work and corporate efficiency which are based upon and exceed
the Company's achievements in the prior year. In addition, at the end of each
fiscal year, the Company may award bonuses to recognize special contributions
made by an executive or his department to long-term strategic goals not
specifically addressed in the individual incentive programs. In compliance with
the 1993 Stock Target Ownership Plan, a portion of the executive's performance
bonus may be paid in the form of Common Stock, with the remainder paid in cash.
STOCK OPTIONS
The Compensation Committee utilizes stock options as a key incentive because
they provide executives with the opportunity to become stockholders of the
Company and thereby share in the potential long-term appreciation in value of
the Company's Common Stock. The Compensation Committee believes that stock
options are beneficial to the Company and its stockholders because they directly
align the interests of the Company's executives with those of its other
stockholders.
The Compensation Committee determines the amount of stock options, if any,
to be granted from time-to-time to executive officers pursuant to the Company's
1992 Stock Option Plan. The majority of the options are incentive stock options
which are granted at no less than prevailing market value. In the case of CEO
incentive stock options, the exercise price is at least 110% of such prevailing
value. Accordingly, stock options will only benefit executives if the price of
the Company's Common Stock increases over the option term.
The number of shares of Common Stock subject to individual options is
usually based on the performance of the executive team as a group, as well as on
departmental and individual contributions. Options are granted as compensation
for performance and as an incentive to promote the future growth and
profitability of the Company. In determining the number of shares of Common
Stock subject to such options, the Committee considers the option and other
compensation policies of the industry, with particular attention to the Peer
Group. It also takes into account the outstanding options already held by each
individual executive officer, and the projected value of the options based on
historical and assumed appreciation rates of the Company's Common Stock.
CEO COMPENSATION
As is the case for the other executive officers, the CEO's compensation
package consists of base salary, performance bonuses and stock options.
The CEO's base compensation for fiscal 1997 was set by the Compensation
Committee in October 1996 and remained unchanged from the fiscal 1995 level. In
determining Mr. Berglass' compensation, the Compensation Committee considered
the Company's performance and its achievement of its financial
9
and business goals and evaluated Mr. Berglass' overall individual performance,
both in the prior fiscal year and in the prior five years. The Compensation
Committee does not assign relative weights or rankings to each of these factors,
but instead makes a subjective determination based on consideration of all such
factors.
The Compensation Committee met on September 16 and 17, 1997 to consider Mr.
Berglass' base salary and performance bonus for fiscal 1998. Based upon the
Company's financial results for fiscal 1997, and the two years prior thereto,
the Compensation Committee determined not to increase Mr. Berglass' base salary
for fiscal 1998. The Compensation Committee developed a three-year performance
bonus plan for the CEO. Under the terms of such Performance Bonus Plan, the CEO
would be entitled to be paid a bonus only if the Company exceeds the net income
levels projected for fiscal 1998, 1999 and 2000 pursuant to the Company's
Amended Plan of Reorganization dated August 23, 1996 (the Plan). A performance
bonus of five percent (5%) of net income would be payable for each of the fiscal
years covered by the bonus plan if net income, as defined in the Plan, is
exceeded by five percent (5%).
The Plan further provides that the CEO would be eligible to earn a maximum
performance bonus of seven and one-half percent (7 1/2%) of net income for the
fiscal years ending July 31, 1999 and 2000 if net income in such year, as
defined in the Plan, is exceeded by seven and one-half percent (7 1/2%) and net
income, as defined in the Plan, in the prior year is exceeded by five percent
(5%). Furthermore, if the maximum performance bonus is achieved in fiscal 1999,
then the CEO would be eligible to earn a maximum performance bonus of ten
percent (10%) of net income for the fiscal year ending July 31, 2000, if net
income in such year, as defined in the Plan, is exceeded by ten percent (10%).
COMPENSATION COMMITTEE
Philip I. Wilber, Chairman
Michael Leiner
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Wilber and Leiner served on the Compensation Committee during 1997.
COMPANY STOCK PRICE PERFORMANCE GRAPH
The following graph compares the Company's total return to stockholders over
a five-year period commencing August 1, 1992 against the NASDAQ Market index and
the Peer Group. The Peer Group currently consists of Chattem, Inc., Del
Laboratories, Inc. and The Lamaur Corporation. The Peer Group for fiscal 1996
(the "1996 Group") consisted of Chattem, Inc.; Del Laboratories, Inc. and Mem
Company, Inc. In October of 1996 the Mem Company, Inc. was acquired by
Renaissance Cosmetics, Inc. Renaissance Cosmetics, Inc. is a privately held
company and, as such, information regarding its results are not available.
Therefore, the Company added The Lamaur Corporation to the Peer Group for fiscal
1997, which the Company believes to be comparable to it and other members of
such Peer Group.
MEASUREMENT PERIOD DEP
(FISCAL YEAR COVERED) CORPORATION NASDAQ 1996 GROUP PEER GROUP
- --------------------- --------------- ------------- --------------- ---------------
1992........... 100 100 100 100
1993........... 57 122 125 130
1994........... 23 125 98 99
1995........... 17 176 132 138
1996........... 12 191 198 184
1997........... 12 282 373 323
ASSUMPTIONS:
Assumes $100 invested on August 1, 1992 with reinvestment of any dividends.
No dividends were paid on the Company's securities during the period.
10
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent auditors for the
fiscal year ended July 31, 1997 and has been selected by the Company's Audit
Committee to serve as the independent auditors for the fiscal year ending July
31, 1998. Representatives of such firm are expected to be present at the Meeting
and will have the opportunity to respond to appropriate questions and to make a
statement if they desire to do so.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder proposal intended for consideration at the 1998 Annual
Meeting of Stockholders must be received by July 25, 1998 and otherwise conform
to the applicable requirements of the Exchange Act to be included in the proxy
materials relating to that meeting. It is recommended that any such proposals be
sent to the Secretary of the Company by certified mail, return-receipt
requested.
ANNUAL REPORT
The Annual Report to Stockholders covering the Company's fiscal year ended
July 31, 1997 is being mailed to stockholders of record and beneficial
stockholders at the same time as this Proxy Statement. The fiscal 1997 Annual
Report to Stockholders includes the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission (not including exhibits).
The Company will provide without charge to any person, on written request of
such person, a copy of the Company's Annual Report to Stockholders. Written
request for such copies should be addressed to Investor Relations, DEP
Corporation, 2101 East Via Arado, Rancho Dominguez, California 90220.
OTHER MATTERS
The Board does not intend to bring any matter before the Meeting except as
specifically indicated in the notice, nor does the Board know of any matters
which anyone else proposes to present for action at the Meeting. If any other
matters properly come before the Meeting, the persons named in the enclosed
proxy, or their duly constituted substitutes acting at the Meeting, will be
authorized to vote or otherwise act thereon in accordance with their best
judgment.
The Compensation Committee Report and the Company Stock Price Performance
Graph that appear herein shall not be deemed to be soliciting material or to be
filed with the Securities and Exchange Commission under the Securities Act of
1933 or Exchange Act and, unless specifically incorporated by the Company, shall
not be deemed incorporated by reference in any document filed under such Acts.
ALL STOCKHOLDERS ARE URGED TO PROMPTLY VOTE, SIGN AND MAIL THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED.
/S/__JUDITH R. BERGLASS____________
Judith R. Berglass
Secretary
Rancho Dominguez, California
October 31, 1997
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