<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE LAMAUR CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] 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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: (1)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
THE LAMAUR CORPORATION
, 1998
Dear Stockholder:
This year's annual meeting of stockholders will be held on ,
1998 at 10:00 a.m. local time, in the conference room at the Company's principal
offices located at One Lovell Avenue, Mill Valley, California 94941. You are
cordially invited to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement, which
describe the formal business to be conducted at the meeting, follow this letter.
As a result of the Company's economic difficulty, we have retained
investment bankers and, with their assistance, have been actively pursuing
strategic transactions in order to satisfy the needs of our creditors and to
rationalize our business going forward. The enclosed Proxy Statement provides a
summary of the status of such activities, and our current thinking about a
possible reorganization. The Company recently sold its Salon brands to a
subsidiary of Shiseido for $11 million. To further improve our financial
condition we are restructuring the manufacturing facility to reduce overhead
expenses and enhance its value should we decide to sell or retain the
manufacturing business.
After reading the Proxy Statement, please mark, sign and promptly return
the enclosed proxy card in the prepaid envelope to assure that your shares will
be represented. Your shares cannot be voted unless you date, sign, and return
the enclosed proxy card or attend the annual meeting in person. Regardless of
the number of shares you own, your careful consideration of, and vote on, the
matters before our stockholders is important.
A copy of the Company's Annual Report to Stockholders is also enclosed for
your information. At the annual meeting we will review the activities of The
Lamaur Corporation over the past year and our plans for the future. The Board of
Directors and Management look forward to seeing you at the annual meeting.
Very truly yours,
DON G. HOFF
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
THE LAMAUR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD , 1998
TO THE STOCKHOLDERS:
Please take notice that the Annual Meeting of the Stockholders of The
Lamaur Corporation, a Delaware corporation (the "Company"), will be held on
, 1998, at 10:00 a.m., local time, in the conference room at the
Company's principal offices located at One Lovell Avenue, Mill Valley,
California 94941, for the following purposes:
1. To elect five directors to hold office for a one year term and
until their respective successors are elected and qualified;
2. To ratify a reduction in the number of members of the board of
directors from seven to five;
3. To consider, approve and ratify the appointment of Deloitte &
Touche LLP as the Company's independent public auditors for the fiscal year
ending December 31, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on , 1998
are entitled to notice of, and to vote at, this meeting and any adjournment or
postponement thereof. For ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be available for examination
by any stockholder, for any purpose relating to the meeting, during ordinary
business hours at the Company's principal offices located at One Lovell Avenue,
Mill Valley, California 94941.
By order of the Board of Directors,
JOHN D. HELLMANN
Secretary
Mill Valley, California
, 1998
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD
IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE TO ASSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN
PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
<PAGE> 4
THE LAMAUR CORPORATION
------------------------
PROXY STATEMENT FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
The accompanying proxy is solicited by the Board of Directors (the "Board")
of The Lamaur Corporation, a Delaware corporation ("Lamaur" or the "Company"),
for use at its annual meeting of stockholders to be held on October 16, 1998, or
any adjournment or postponement thereof at 10:00 a.m., local time, in the
conference room at the Company's principal offices located at One Lovell Avenue,
Mill Valley, California 94941, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. The date of this Proxy Statement is
, 1998, the approximate date on which this Proxy Statement and the
accompanying form of proxy were first sent or given to stockholders.
SOLICITATION AND VOTING OF PROXIES
The cost of soliciting proxies will be borne by the Company. In addition to
soliciting stockholders by mail through its employees, the Company will request
banks and brokers, and other custodians, nominees and fiduciaries, to solicit
their customers who hold stock of the Company registered in the names of such
persons and will reimburse them for their reasonable, out-of-pocket costs. The
Company may use the services of its officers, directors and others to solicit
proxies, personally or by telephone, without additional compensation.
On , 1998 (the "Record Date"), the Company had outstanding
shares of its common stock (the "Common Stock"), all of which are
entitled to vote with respect to all matters to be acted upon at the annual
meeting. Each stockholder of record as of that date is entitled to one vote for
each share of Common Stock held by such stockholder. Also, as of the Record
Date, the Company had outstanding 1,000,000 shares of Series A Preferred Stock
and 763,500 shares of Series B Preferred Stock (the Series A Preferred Stock and
the Series B Preferred Stock together, the "Preferred Stock"). The Preferred
Stock is convertible into an aggregate of 1,163,910 shares of Common Stock at a
rate of 0.66 shares of Common Stock per share of Preferred Stock held. Each
holder of Preferred Stock is entitled to one vote for each share of Common Stock
into which such Preferred Stock held by such stockholder is convertible.
The Company's Bylaws provide that a majority of all of the shares of the
stock entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting. The
Preferred Stock votes with the Common Stock on an as-converted basis on all
matters, except as otherwise required by Delaware law or by the Company's
Certificate of Incorporation. Votes for and against, abstentions and "broker
non-votes" will each be counted as present for purposes of determining the
presence of a quorum.
All shares represented by a proxy will be voted, and where a stockholder
specifies by means of his or her proxy a choice with respect to any matter to be
acted upon, the shares will be voted in accordance with the specification so
made. If no choice is indicated on the proxy, the shares will be voted in favor
of the proposal. A stockholder giving a proxy has the power to revoke his or her
proxy at any time before the time it is exercised by delivering to the Secretary
of the Company a written instrument revoking the proxy or a duly executed proxy
with a later date, or by attending the meeting and voting in person.
INFORMATION ABOUT LAMAUR
RECENT EVENTS
In March 1998, the Company retained the investment banking firm of McCabe,
Mintz & Company, L.L.C. ("MMC") to explore strategic alternatives to maximize
stockholder value. While the Company was profitable in the first quarter of
1998, expected revenues for future periods are not expected to generate
sufficient cash to meet the Company's current operating needs and to satisfy its
extended obligations. To address the cash requirements, MMC, in conjunction with
management, has identified numerous potential acquirers of some or all of the
assets of the Company and has sought bids or other proposals from such parties.
<PAGE> 5
The Board has been meeting on a regular basis to review the status of these
proposals and to consider various alternatives available to the Company. In
June, based upon such review, management and the Board determined that a sale of
the assets of the Salon division was most likely to reach a definitive agreement
in the near future. Accordingly, the Board approved the sale of the brands,
inventory and certain intellectual property of such division to the third party
making the most favorable bid, subject to certain minimum bid requirements. On
July 15, 1998 the Company entered into a definitive agreement with Shiseido Co.
Ltd.'s subsidiary, Zotos International, Inc. ("Zotos"), to sell certain assets
of the Company's Professional Salon Brands, including inventory and other
related assets, for a purchase price of $11,000,000, subject to adjustment based
on inventory levels. The transaction closed on July 31, 1998. The proceeds of
the sale will be used to pay down a portion of the Company's bank debt, reduce
trade payables and for working capital.
The Company is considering plans to continue its retail business, which
generated approximately $67 million in revenue in the last twelve months from
branded products to traditional mass, food and drug retailers. The Company's
WILLOW LAKE(R) brand of shampoos, conditioners and styling aids, launched in
1997, presently accounts for approximately fifty percent of Retail division
revenues. The Company believes that the WILLOW LAKE(R) product line, properly
supported, can provide the foundation upon which additional products can be
added such as bath and body or skin care products. In addition to revenues from
the Company's other retail brands, future growth may come from acquisition or
licensing of other products in the niche segment of the personal care market.
The Company also is considering plans to continue its manufacturing operations
on a contract basis.
Management believes that the Company may be able to generate more cash to
pay creditors, through ongoing, reorganized operations than through a sale of
its retail assets, and that the sale of such assets would not be sufficient to
effect any distribution of proceeds to stockholders. Further, management
believes that there is an opportunity for a future return to stockholders
through such reorganized operations. However, the Company with MMC is actively
exploring additional asset sales and will consider offers to acquire all of the
Company's assets or outstanding shares of the Company's stock through a merger,
acquisition or tender offer. An important factor in any decision to pursue this
plan is the price that the Company might receive for its manufacturing facility
in Fridley, Minnesota and/or its Retail division assets.
No assurance can be given that management and the Board will determine to
carry out its plan for reorganized operations or that if the plan is pursued
that the Company will be successful in carrying out this plan or that the
Company will not determine based upon future offers that it is in the best
interests of the Company, its creditors and its stockholders to sell the retail
assets as well as the manufacturing facility.
If the Company determines that a sale of all of its assets (i.e., both the
plant and retail assets) would be in the best interests of the Company, its
creditors and its stockholders, a plan of liquidation would be proposed to
stockholders. The preferred stockholders are entitled in a liquidation to a
preference of approximately $15 million before any payment may be made to the
holders of Common Stock. Based upon current bids, there will be less than $15
million available for distribution to the preferred stockholder if all of the
assets are sold currently. Therefore, unless the preferred stockholder waives
this right or converts to common, no distribution would be available to common
stockholders. The availability of funds for distribution to the common
stockholders is one of the matters that the Board will consider in determining
whether it is in the interests of the Company, its creditors and/or its
stockholders to continue the operation of the business.
No assurance can be given that any such asset sales will occur at all or
will occur on terms favorable to the Company. The Company finances its ongoing
operations through its credit agreement with Norwest Bank , its primary lender
("Norwest") and by extended terms from its creditors. The Company is currently
in compliance with all covenants in its agreements with Norwest, but no
assurance can be given that the Company will continue to be in compliance with
such covenants. Norwest holds a security interest in substantially all of the
Company's assets, including cash.
2
<PAGE> 6
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership as of July 31, 1998 of the Company's Common Stock by (i) each
director, (ii) each of the executive officers listed in the Summary Compensation
Table below, (iii) all executive officers and directors as a group and (iv) each
person known by the Company to be the beneficial owner of five percent or more
of the outstanding Common Stock. The percentage owned is calculated based upon
5,884,468 shares of Common Stock outstanding as of July 31, 1998. Unless
otherwise indicated, each of the stockholders has sole voting investment power
with respect to the shares beneficially owned, subject to applicable community
property laws.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OWNED
------------------------ -------------------- ----------------
<S> <C> <C>
Don G. Hoff(1).............................................. 2,044,725 33.4%
One Lovell Avenue, Mill Valley, CA 94941
Perry D. Hoff(2)............................................ 1,841,485 31.2%
East 5058 Grapeview Loop, Allyn, WA 98524
Intertec Holdings, L.P.(3).................................. 1,810,425 30.8%
East 5058 Grapeview Loop, Allyn, WA 98524
DowBrands Inc.(4)........................................... 1,163,910 16.5%
9550 Zionsville Road, Indianapolis, IN 46268
Parsow Partnership, Ltd.(5)................................. 543,200 9.2%
P.O. Box 0449, Elkhorn, NE 68022
Futurtec, L.P.(6)........................................... 419,842 7.1%
111 Great Neck Road, Suite 301, Great Neck, NY 11021
Kennedy Capital Management, Inc............................. 340,350 5.8%
10829 Olive Boulevard, St. Louis, MO 63141
Dominic J. LaRosa(7)........................................ 338,733 5.8%
Ronald P. Williams(8)....................................... 75,270 1.3%
William M. Boswell(9)....................................... 65,634 1.1%
Michele L. Redmon(10)....................................... 44,807 *
Joseph F. Stiley, III(11)................................... 34,200 *
Harold M. Copperman(12)..................................... 13,900 *
All executive officers and directors of the Company as a
group (14 persons)(13).................................... 2,648,329 44.9%
</TABLE>
- - ---------------
* Represents less than one percent (1%)
(1) Includes 234,300 shares that may be acquired by Mr. Hoff upon the exercise
of options exercisable within 60 days of July 31, 1998. Includes 1,810,425
shares held by Intertec Holdings, L.P. See footnote 3. Mr. Hoff is the
father of Perry D. Hoff.
(2) Includes 10,560 shares held directly by Mr. Perry Hoff and 20,500 shares
that may be acquired by Perry D. Hoff upon the exercise of options
exercisable within 60 days of July 31, 1998. Includes 1,810,425 shares held
by Intertec Holdings, L.P. See footnote 3. Mr. Perry Hoff is the son of Don
G. Hoff. See footnote 1.
(3) 1,810,425 shares are by Intertec Holdings, L.P., an investment partnership
whose general partner is Intertec Holdings, Inc., a corporation of which
Don G. Hoff is a director, Perry D. Hoff is president and a director and
other members of the Hoffs' immediate family are the remaining officers and
directors and whose sole limited partner is Intertec Ltd., a limited
partnership in which Don G. Hoff, together with his wife, holds a 25%
limited partner interest, Perry D. Hoff holds a 25% limited partner
interest and members of the Hoffs' immediate family own the remainder of
limited partnership interest, and whose general partner is a corporation of
which Don G. Hoff is a director, Perry D. Hoff is an officer and a director
and other members of the Hoffs' immediate family are the remaining officers
and directors.
3
<PAGE> 7
(4) Consists of 1,163,910 shares that may be acquired upon the conversion of
Series A and Series B Convertible Preferred Stock. DowBrands Inc. owns 100%
of the outstanding Series A and Series B Preferred Stock.
(5) Includes 130,000 shares held by Elkhorn Partners Limited Partnership, an
affiliate of Parsow Partnership, Ltd., as to which Parsow Partnership, Ltd.
disclaims beneficial ownership.
(6) Futurtec Capital Corp., the general partner of Futurtec, L.P., exercises
sole voting and investment power over the shares held by Futurtec, L.P. Ido
Klear is the sole stockholder of Futurtec Capital Corp.
(7) Includes 20,000 shares held by members of Mr. LaRosa's immediate family, as
to which Mr. LaRosa disclaims beneficial ownership. Includes 232,000 shares
that may be acquired upon the exercise of options exercisable on or after
September 30, 1998. See "Compensation of Directors and Executive
Officers -- Compensation Committee Report -- Repricing of Options."
(8) Includes 69,800 shares that may be acquired upon the exercise of options
exercisable on or after September 30, 1998. See "Compensation of Directors
and Executive Officers -- Compensation Committee Report -- Repricing of
Options."
(9) Includes 59,600 shares that may be acquired upon the exercise of options
exercisable on or after September 30, 1998. See "Compensation of Directors
and Executive Officers -- Compensation Committee Report -- Repricing of
Options."
(10) Includes 39,800 shares that may be acquired upon the exercise of options on
or after September 30, 1998. See "Compensation of Directors and Executive
Officers -- Compensation Committee Report -- Repricing of Options."
(11) Includes 34,200 shares that may be acquired upon the exercise of options
exercisable within 60 days of July 31, 1998.
(12) Includes 13,900 shares that may be acquired upon the exercise of options
exercisable within 60 days of July 31, 1998.
(13) Includes shares that may be acquired upon the exercise of options
and warrants exercisable within 60 days of July 31, 1998. of
these options are not exercisable until September 30, 1998. See
"Compensation of Directors and Executive Officers -- Compensation Committee
Report -- Repricing of Options."
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
Set forth below for all directors are the names, ages, positions with the
Company and period of service. The term of office of each person elected as a
director will continue until the next annual meeting of stockholders or until a
successor has been elected and qualified or until resignation or removal.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGE POSITION(S)
---------------- --- -----------
<S> <C> <C>
Don G. Hoff............................. 62 Chairman of the Board and Chief Executive
Officer
Dominic J. LaRosa....................... 55 President and CEO -- Lamaur Division and
Director
Harold M. Copperman(1)(2)(3)............ 64 Director
Perry D. Hoff(4)........................ 39 Director
Joseph F. Stiley, III(5)................ 59 Director
</TABLE>
- - ---------------
(1) Chairman of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
(4) Chairman of the Nominating Committee.
(5) Member of the Compensation Committee.
4
<PAGE> 8
The Employment Agreement between the Company and Don G. Hoff (the "Hoff
Employment Agreement") provides that Mr. Hoff will continue to be nominated for
election as a director of the Company at each annual meeting of stockholders
through 1998 and be appointed as Chairman of the Board for so long as he serves
as the Company's Chief Executive Officer. See "Employment Agreements and Change
of Control Agreements -- Hoff Employment Agreement."
Don G. Hoff is the founder of the Company and has served as its Chairman of
the Board and Chief Executive Officer since its formation in 1993. Mr. Hoff has
also served as Chairman and Chief Executive Officer of Intertec Holdings, Inc.,
a private investment company specializing in technology, since 1975. Mr. Hoff
serves as a Director for a number of mutual funds with major financial
institutions. He is currently Chairman of Baring's Asia Pacific Fund and has
been a Director of the fund since 1991. He also serves as a Director of a
cluster of Prudential Mutual Funds, including since 1990 the Prudential Short
Term Global Income Fund. He also has been a Director of Baring's Greater China
Fund since 1992. Mr. Hoff spends the majority of his time on the business of the
Company.
Dominic J. LaRosa joined the Company as a director in September 1995, and
has been President and CEO of the Lamaur Division since November 1995. From 1993
to 1995, Mr. LaRosa was the founding President and Chief Executive Officer of
J.B. Williams Company, Inc., a personal care products company. From 1982 to
1992, he held senior management positions at Colgate Palmolive/The Mennen
Company, including President and CEO of the Aromatic Industries Division
(1989-1992), General Manager of the Personal Care Division (1987-1989) and Vice
President, Marketing (1982-1987).
Harold M. Copperman has been a Director of the Company since September
1995. Mr. Copperman is Vice Chairman of Impulse Telecommunications Corporation
("ITC"), a position he has held since 1990. ITC provides strategic management
and engineering consulting resources to enterprises and investors. Mr. Copperman
has held chief executive officer and other senior management, business
development and marketing positions with large multi-national organizations and
entrepreneurial start-up ventures.
Perry D. Hoff has been a Director of the Company since April 1993. He has
been the President and a Director of Intertec Holdings, Inc., since 1990, and a
Director and Vice President of Operations of Innovative Capital Management,
Inc., a private investment company affiliated with Intertec Holdings, L.P., a
major stockholder of the Company, since 1980. Perry D. Hoff is the son of Don G.
Hoff.
Joseph F. Stiley, III joined the Board in March 1994. From 1993 to 1994,
Mr. Stiley was Vice President of the Company, responsible for research and
development. From December 1987 to 1993, Mr. Stiley was a consultant to high
technology companies, including Intertec Ltd. Mr. Stiley has consulted to the
governments of Canada and France, other European and domestic corporations, and
has participated in the development of international standards for
communications.
Meetings of the Board of Directors. The Board of Directors of the Company
held a total of seven meetings during the fiscal year ended December 31, 1997.
The Audit Committee held four meetings and the Compensation Committee held four
meetings during the fiscal year ended December 31, 1997. Each director attended
at least 75% of Board and, where applicable, committee meetings held during
fiscal 1997.
The Audit Committee, established in April 1993, consisted of Messrs. Eppner
(Chairman), Dean and Copperman until the resignation of Messrs. Eppner and Dean
on July 27, 1998. The Board will reconsider the composition of the Audit
Committee at its next meeting. The functions of the Audit Committee are to
recommend annually to the Board of Directors the appointment of the independent
public accountants of the Company, review the scope of their annual audit and
other services they are asked to perform, review the report on the Company's
financial statements following the audit, review the accounting and financial
policies of the Company and review management's procedures and policies with
respect to the Company's internal accounting controls.
The Compensation Committee, also established in April 1993, currently
consists of Messrs. Copperman (Chairman) and Stiley. Mr. Dean was also a member
until his resignation. The functions of the Compensation Committee are to review
and approve salaries, benefits and bonuses for all executive officers of the
Company, and to review and recommend to the Board of Directors matters relating
to employee compensation
5
<PAGE> 9
and employee benefit plans. The Compensation Committee also administers the
Company's stock option plans.
The Nominating Committee, established in February 1997, currently consists
of Messrs. Perry Hoff (Chairman) and Copperman. Mr. Dean was also a member until
his resignation. The purpose of the Nominating Committee is to develop criteria
for nominating new members of the Board and to identify potential candidates for
such nomination. The Nominating Committee will consider stockholder
recommendations for new directors with the potential nominee's consent. However,
the final determination of whether a candidate will be nominated to become a
member of the Board is reserved for the Nominating Committee. Any suggestions
may be submitted in writing, attention "Nominating Committee of the Board of
Directors," at the Company's headquarters.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
License Agreement. In May 1993, the Company acquired from Intertec Ltd., a
Delaware limited partnership ("Intertec Ltd."), for a 30-year period, the
exclusive worldwide rights to use all technology owned by Intertec Ltd. relating
to cosmetic hair care applications. The 30-year exclusive license agreement (the
"License") gives the Company the right to develop, manufacture and sell products
for cosmetic hair care applications based on the technology. Intertec Ltd.,
which is entirely owned by Mr. Don Hoff and members of his immediate family, is
the sole limited partner in Intertec Holdings, L.P., the Company's principal
shareholder. The License is non-assignable, but the Company may sublicense the
rights granted to it provided the sublicense includes certain protective
provisions. The Company issued, as consideration for the grant of the license, a
promissory note in the principal amount of $1.0 million, and agreed to pay a
royalty as described below. The Company's promissory note, as amended effective
as of May 1993 (the "Intertec Note"), is payable to Intertec Holdings, L.P., as
agent for Intertec Ltd., in four equal annual installments of $250,000,
commencing May 29, 1997. The Intertec Note accrues interest in arrears at 5.5%
per annum, payable with each installment of principal. The Company has also
agreed to pay certain legal expenses, which have been incurred by Intertec Ltd.
in connection with preparing and prosecuting the patent application for the
patent covering the technology. The Company paid $5,064 of such expense during
fiscal 1997.
The Company will pay a royalty to Intertec Ltd. equal to (i) 1.0% of the
Company's proceeds from any direct sales made by the Company of products,
instruments or components using, or derived from, the technology, and (ii) 1.0%
of the "revenue base" of the Company's sub-licensees. The "revenue base" is the
proceeds received by the sub-licensees for their sales of products using the
technology. This royalty declines in steps as the revenue base increases,
ultimately declining to 0.4% when cumulative sales from all products using the
technology reach $10.0 billion. The Company has no sub-licenses as of the date
of this Proxy Statement, and there can be no assurance it will enter into any
sub-license on terms favorable to the Company. Upon expiration in 2012 of the
patent held by Intertec Ltd., the Company will be unable to deny competitors
access to the underlying technology.
The terms of the license agreement were not established by arm's length
negotiations or independent appraisal.
Common Stock Purchase Agreement. In March 1996, the Company and Intertec
Holdings, L.P. entered into a stock purchase agreement pursuant to which
Intertec Holdings, L.P. agreed to purchase from the Company, and the Company
agreed to sell to Intertec Holdings, L.P., shares of Common Stock at $8.00 per
share. Intertec Holdings, L.P. is required to purchase an aggregate of 146,107
shares. Intertec Holdings, L.P. is obligated, subject to there being no event of
default under the Company's loan agreements and certain other customary
conditions, to purchase and pay for the shares in four equal installments
commencing on May 29, 1997. The deferred purchase price under the stock purchase
agreement accrues interest from and after the closing of the Company's initial
public offering on May 22, 1996 at 5.5% per annum, payable with each
installment.
On May 29, 1997, Intertec Holdings, L.P. was issued 36,526 shares of the
Company's Common Stock in the first installment. On May 29, 1997, the Company
made the first scheduled payment on the Intertec Note.
6
<PAGE> 10
Intertec Holdings, L.P. may elect to accelerate one or more purchases under
the stock purchase agreement on 30 days prior notice to the Company. The Company
may, at any time or from time to time, terminate Intertec Holdings, L.P.'s
purchase rights with respect to one or more of the installments, on 10 days
prior notice to Intertec Holdings, L.P. On February 16, 1998, Intertec Holdings,
L.P. elected to accelerate all purchases under the stock purchase agreement, and
on March 18, 1998 Intertec Holdings L.P. was issued 109,581 shares of the
Company's Common Stock in consideration of which the balance of the Intertec
Note was cancelled.
Facilities and Equipment. Pursuant to a lease dated October 1, 1996 (the
"Sublease"), the Company subleased from Intertec, a division of Innovative
Capital Management Inc. ("Intertec"), an affiliate of Messrs. Don Hoff and Perry
Hoff, directors of the Company, for a 36-month term expiring in September 1999,
office space (6,008 square feet) in Mill Valley, CA, together with most of the
furniture and office equipment at that location. The space was leased for a rent
of $9,012 per month. Under the terms of the Sublease, the Company is responsible
for property taxes, insurance and maintenance. The furniture and office
equipment are leased for $1,774 per month. Total payments for the office space
to Intertec in 1997 were $128,801, comprised of $102,144 in building rent,
$6,882 in equipment rent, and $19,775 in taxes. Based upon research the Intertec
lease payments are 25% to 50% below market rates. Intertec uses a small office
and has provided and received office services from time to time. In addition, at
no charge to the Company, Intertec manages the headquarters office and has been
responsible for Lamaur's human resources functions there. The Company believes
the value of such office space is insignificant but that the provision of such
services by Intertec without charge has resulted in significant cost savings to
the Company. Except for the foregoing, Intertec and Company expenses incurred at
the facility are fully segregated and separately accounted for.
On December 4, 1997, the Company notified Intertec that it would like to
terminate the Sublease with respect to 1,784 square feet of the space, and as of
March 31, 1998 the Sublease was amended to terminate the sublease of that space
and to provide that the Company shall have no further obligations to Intertec
with respect to the terminated space. Intertec agreed to relieve the Company of
this obligation without any consideration to Intertec.
Travel Agent Services. The Company uses as a travel agent Diana Weeck, who
is the sister of Mr. Don Hoff. In addition to standard commissions, the Company
paid fees to Mrs. Weeck of $1,996 during 1997.
Manufacturing Agreement with DowBrands. In connection with the acquisition
by the Company of the Personal Care Division of DowBrands in November 1995, the
Company and DowBrands entered into a two-year agreement (with two additional
one-year extensions at DowBrand's election) pursuant to which the Company
continued to serve as DowBrands sole supplier of certain household cleaning
products, subject to the Company maintaining competitive pricing and delivery
schedules. Pursuant to the agreement, DowBrands agreed to accept $3.0 million of
credits to be applied towards purchases of finished products in eight equal
quarterly installments of $375,000 commencing February 1996. During 1997, net
sales to DowBrands were $16.4 million. On November 15, 1997, the Manufacturing
Agreement expired without extension by Dow.
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 executive 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 on Form 3 and changes in
ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
"SEC"). Such officers, directors and ten percent stockholders are also required
by SEC rules to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that Forms 5 have been
filed for such persons as required, the Company believes that, during the year
ended December 31, 1997, all reporting persons complied with Section 16(a)
filing requirements applicable to them, except as follows: Mr. LaRosa and
Michael G. Piff filed Form 5s for the fiscal year ended December 31, 1997
approximately one week late, for two and three transactions, respectively.
7
<PAGE> 11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended December
31, 1997, certain compensation information with respect to the Company's Chief
Executive Officer and each of the four most highly compensated executive
officers other than the Chief Executive Officer who were serving as executive
officers as of December 31, 1997 (collectively, the "Named Executive Officers"),
based upon salary and bonus earned by such executive officers and individuals in
fiscal 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1)(2) OPTIONS(3) (4)
--------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Don G. Hoff..................... 1997 $278,253 -- $3,229 -- --
Chairman and Chief Executive 1996 250,000 $195,000 2,808 -- --
Officer 1995 31,730 -- -- -- --
Dominic J. LaRosa............... 1997 246,086 -- 37,765 232,000 --
President and CEO -- Lamaur 1996 200,000 145,000 33,191 100,000 50,000
Division 1995 15,384 -- 4,371 132,000 52,750
William M. Boswell.............. 1997 177,796 -- 1,170 59,600 --
Vice President, Sales, Retail 1996 144,371 53,000 12,715 59,600 30,000
Group of Lamaur Division 1995 11,538 -- 4,371 39,600 19,750
Ronald P. Williams.............. 1997 151,005 -- 2,105 69,800 --
Executive Vice President 1996 102,540 36,000 55,935 69,800 15,000
Lamaur Division 1995 8,402 -- 7,796 19,800 16,275
Michele L. Redmon............... 1997 138,111 -- 153 39,800 --
Vice President, Marketing, 1996 119,165 50,000 4,304 39,800 15,000
Retail Group of Lamaur
Division 1995 9,230 -- 7,840 19,800 13,875
</TABLE>
- - ---------------
(1) For 1997, includes (i) $36,415 of reimbursed expenses for Mr. LaRosa
including $15,140 for rental of an apartment, and $12,806 cash to assist in
the payment of taxes due on the amount of such reimbursed expenses; (ii)
$1,500 for Mr. Williams for relocation expenses. Also includes imputed
income in 1997 resulting from life insurance premiums in the amount of
$3,229 for Mr. Hoff, $1,350 for Mr. LaRosa, $1,170 for Mr. Boswell, $605 for
Mr. Williams and $153 for Ms. Redmon.
(2) For 1996, includes (i) $31,700 for Mr. LaRosa for relocation expenses and
$11,555 cash to assist in the payment of taxes, $12,139 for Mr. Boswell and
$2,373 cash to assist in the payment of taxes, $55,589 for Mr. Williams and
$17,543 cash to assist in the payment of taxes, and $4,161 for Ms. Redmon
and $1,213 cash to assist in the payment of taxes, (ii) imputed income in
1996 resulting from life insurance premiums in the amount of $2,808 for Mr.
Hoff, $864 for Mr. LaRosa, $576 for Mr. Boswell, $346 for Mr. Williams and
$143 for Ms. Redmon and (iii) vehicle allowance of $627 paid to Mr. LaRosa
in 1996.
(3) Represents stock options granted in the years shown with exercise prices
equal to or not less than fair market value on the date of grant. No SARs
were granted in such years. For 1997, includes options granted with the
cancellation of a similar number of options in connection with the Company's
repricing program. Options repriced for Messrs. Hoff, LaRosa, Boswell,
Williams and Redmon were 0, 232,000, 59,600, 69,800 and 39,800,
respectively.
(4) Represents non-cash credits that can be used to exercise options.
8
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
granted to the Named Executive Officers during fiscal year 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(2)
OPTIONS IN FISCAL EXERCISE OR EXPIRATION -----------------------
NAME GRANTED(1) YEAR BASE PRICE DATE 5% 10%
---- ---------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Don G. Hoff.................... -- -- -- --
Dominic J. LaRosa.............. 132,000 20.1 $2.25 12/31/02 $84,876 $188,496
100,000 15.2 2.25 8/28/06 64,300 142,800
William M. Boswell............. 39,600 6.0 2.25 8/28/06 47,872 117,362
20,000 3.0 2.25 8/28/06 24,178 59,274
Ronald P. Williams............. 20,000 3.0 2.25 8/28/06 24,178 59,274
19,800 3.0 2.25 8/28/06 23,936 58,681
30,000 4.6 2.25 12/03/06 37,616 92,882
Michele L. Redmon.............. 20,000 3.0 2.25 8/28/06 24,178 59,274
19,800 3.0 2.25 8/28/06 23,936 58,681
</TABLE>
- - ---------------
(1) All options were granted on November 5, 1997 in connection with the
Company's option repricing which involved cancellation of a similar number
of options at higher exercise prices ranging from $3.03 to $4.25. These
options have the same vesting schedule as the cancelled options. See
"Compensation of Directors and Executive Officers -- Compensation Committee
Report -- Repricing of Options."
(2) Potential realizable value is based on the assumption that the price of the
Common Stock appreciates at the rate shown, compounded annually, from the
date of grant until the end of the option term. The values are calculated in
accordance with rules promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price
appreciation.
AGGREGATE OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding options to
purchase shares of the Company's Common Stock that were held by the Named
Executive Officers during fiscal 1997. No such options were exercised during
fiscal 1997.
<TABLE>
<CAPTION>
SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Don G. Hoff................................ 234,300 -- $0 $0
Dominic J. LaRosa.......................... 133,000 99,000 0 0
William M. Boswell......................... 36,500 23,100 0 0
Ronald P. Williams......................... 31,850 37,950 0 0
Michele L. Redmon.......................... 21,650 18,150 0 0
</TABLE>
COMPENSATION OF DIRECTORS
During fiscal 1997, the Company's non-employee Directors were paid $1,000
per quarter (plus reasonable out-of-pocket expenses), plus $500 per day for each
meeting beyond the four regularly scheduled meetings. The Directors held three
telephonic Board Meetings during 1997 in addition to the four regularly
scheduled meetings. The Directors received no additional compensation for
attendance at these meetings. In addition, non-employee Directors are entitled
to receive options to purchase shares of Common Stock under the
9
<PAGE> 13
Company's Stock Option Plan for Non-Employee Directors and Advisory Board
Members (the "Outside Director Option Plan").
On May 8, 1997, each of the non-employee Directors received an option to
purchase 3,300 shares under the Outside Director Option Plan, which had an
exercise price of $2.88 per share. These options vest one year from the date of
grant.
NON-CASH CREDITS
Prior to 1997 the Company granted non-cash credits ("Non-Cash Credits") to
its executive officers and other employees and consultants which can be used by
the recipient to exercise stock options. As of December 31, 1997 Non-Cash
Credits held by Messrs. Hoff, LaRosa, Boswell, Williams and Ms. Redmon were as
follows: $355,000, $102,750, $49,750, $31,275 and $28,875, respectively. As of
December 31, 1997 total Non-Cash Credits outstanding were $692,213.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board currently consists of Joseph F.
Stiley, III (Chairman) and Harold M. Copperman. None of these individuals were
at any time during fiscal 1997, or at any other time, an officer or employee of
the Company. No executive officer of the Company serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Board or the Compensation
Committee.
COMPENSATION COMMITTEE REPORT
The following is the report of the Compensation Committee of the Board
describing compensation policies and rationales applicable to the Company's
executive officers with respect to the compensation paid to such executive
officers for the fiscal year ended December 31, 1997. The information contained
in the performance graphs shall not be deemed to be "soliciting material" or to
be "filed" with the Securities and Exchange Commission, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing.
Compensation Philosophy. The philosophy of the Company's Compensation
Committee regarding executive compensation is to attract and retain highly
talented executives and to motivate them to high levels of performance,
recognizing the different impact that various executives have on the achievement
of corporate goals. To achieve these objectives the Company pays executives on a
total compensation approach that includes varying combinations of base salary,
annual bonus (dependent on corporate and individual performance), and stock
options. After evaluating management's performance, the Compensation Committee
approves compensation and pay levels. Stock option grants to executive officers
are approved by the Compensation Committee.
Base Salary. Salaries for executive officers are reviewed annually, and are
adjusted based upon performance contribution, management recommendation and
market conditions.
Bonus. The Compensation Committee determines the level of bonus
compensation for the entire corporate bonus program based upon corporate and
senior management performance, which are judged based on corporate earnings.
Bonuses within that pool are then allocated.
Stock. The Company believes that stock options granted to key employees,
including executive officers, provide such persons with compensation based on
overall Company performance as reflected by the stock price, create a valuable
retention device through three-year vesting schedules and help align employees'
and stockholders' interests. Stock options are typically granted at the time of
hire, at the time of promotion or at the time of achievement of a significant
corporate objective. Individual stock option award levels are determined
primarily by a matrix that allocates the available shares based on position
within the Company, with discretionary adjustments based on subjective
performance factors.
10
<PAGE> 14
Compensation of Chief Executive Officer. The compensation of Don G. Hoff in
fiscal 1997 was approved by the Compensation Committee. The Compensation
Committee determined the Chief Executive Officer's compensation after
considering the same factors used to determine the compensation of other
executive officers. For fiscal 1997, the Compensation Committee approved an
increase in Mr. Hoff's base salary from $250,000 to $280,000 per annum.
Repricing of Options. The Compensation Committee determined that the
purposes of the Company's stock option plan were not being adequately achieved
with respect to those employees holding options that were exercisable above
current market value and that it was essential to the best interest of the
Company and the Company's stockholders that the Company retain and motivate such
employees. The Compensation Committee further determined that it would be in the
best interest of the Company and the Company's stockholders to provide such
optionees the opportunity to exchange their above-market value options for
options exercisable at current market value. On November 5, 1997, upon approval
by the Compensation Committee, the Company offered holders of 587,000
outstanding options under the 1996 Stock Incentive Plan, at exercise prices
ranging from $3.03 to $4.25, the opportunity to exchange such options for new
options with the same vesting schedule as the cancelled options, at an exercise
price of $2.25 per share, the fair market value of the Company's Common Stock. A
total of 587,000 options at a weighted average exercise price of $3.91 were
exchanged. Pursuant to the terms of the Company's repricing offer, in February
1998 these options would have reverted to the exercise price set forth in the
cancelled option. However, the Compensation Committee adopted an Option
Amendment Program whereby certain optionees were offered the opportunity to have
certain options remain priced at $2.25 per share. The amended options are not
exercisable until September 30, 1998. A total of 516,000 options at a weighted
average exercise price of $3.90 were exchanged pursuant to the Option Amendment
Program. If an optionee's employment with the Company is terminated for any
reason or no reason prior to September 30, 1998 the optionee is not entitled to
exercise any portion of the amended option. However if an optionee's employment
with the Company is terminated as a result of the death or disability of such
optionee then the amended option may be exercised in accordance with its terms.
Messrs. Hoff, LaRosa, Boswell, Williams, and Ms. Redmon included 0, 232,000,
59,600, 69,800 and 39,800 options in the Option Amendment Program.
11
<PAGE> 15
The following table sets forth information with respect to the repricing of
those options held by executive officers of the Company at the time of the
repricing.
TEN-YEAR OPTION REPRICING
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL OPTION
NUMBER OF TERM IN YEARS
SECURITIES MARKET PRICE REMAINING AT
UNDERLYING OF STOCK AT EXERCISE PRICE NEW DATE OF
DATE OF OPTIONS TIME OF AT TIME OF EXERCISE REPRICING OR
NAME AND PRINCIPAL POSITION REPRICING REPRICED REPRICING REPRICING PRICE AMENDMENT
--------------------------- --------- ---------- ------------ -------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dominic J. LaRosa............... 11/5/97 132,000 $2.25 $3.03 $2.25 5.2
President and CEO 11/5/97 100,000 2.25 4.25 2.25 8.8
of Lamaur Division
William M. Boswell(1)........... 11/5/97 39,600 2.25 4.25 2.25 8.8
Vice President, 11/5/97 20,000 2.25 4.25 2.25 8.8
Sales -- Retail
Group of Lamaur Division 8/28/96 39,600 4.25 6.06 4.25 9.13
Richard T. Loda(1).............. 8/28/96 25,000 4.25 6.06 4.25 9.54
Vice President,
Science and Technology
Michele L. Redmon............... 11/5/97 19,800 2.25 4.25 2.25 8.8
Vice President, Marketing -- 11/5/97 20,000 2.25 4.25 2.25 8.8
Retail Group of Lamaur 8/28/96 19,800 4.25 6.06 4.25 9.13
Division
Ronald P. Williams.............. 11/5/97 19,800 2.25 4.25 2.25 8.8
Executive Vice President -- 11/5/97 20,000 2.25 4.25 2.25 8.8
Lamaur Division 11/5/97 30,000 2.25 4.00 2.25 9.1
8/28/96 19,800 4.26 6.06 4.25 9.13
John D. Hellmann................ 11/5/97 16,500 2.25 3.03 2.25 5.2
Vice President, 11/5/97 20,000 2.25 4.25 2.25 8.8
Chief Financial Officer
Donald E. Porter................ 11/5/97 20,000 2.25 4.25 2.25 8.8
Vice President,
Corporate Development
Michael G. Piff................. 11/5/97 8,000 2.25 4.00 2.25 9.1
Vice President, Sales -- 11/5/97 1,400 2.25 4.25 2.25 5.25
Retail Group, Lamaur Division 11/5/97 5,000 2.25 4.25 2.25 5.25
Jay T. Olson.................... 11/5/97 9,900 2.25 4.25 2.25 8.8
Vice President, Finance -- 11/5/97 15,000 2.25 4.25 2.25 8.8
Lamaur Division 11/5/97 10,000 2.25 4.25 2.25 9.1
John A. Anzur(1)................ 11/5/97 50,000 2.25 4.25 2.25 8.8
Vice President, General 11/5/97 20,000 2.25 4.25 2.25 8.8
Counsel
John G. Hewson(1)............... 8/28/96 13,200 4.25 6.06 4.25 9.17
Vice President, Business
Development Planning and
Administration -- Lamaur
Division
Patrick T. Parenty(1)........... 8/28/96 13,200 4.25 6.06 4.25 9.17
Vice President, Sales --
Lamaur Salon Division
</TABLE>
- - ---------------
(1) Such executive officer is no longer employed at the Company and these
options expired without being exercised.
Summary. It is the opinion of the Compensation Committee that the executive
compensation policies and programs in effect for the Company's executive
officers provide an appropriate level of total remuneration that properly aligns
the Company's performance and interests of the Company's stockholders with
competitive and equitable executive compensation in a balanced and reasonable
manner.
COMPENSATION COMMITTEE
Harold M. Copperman
Joseph F. Stiley, III
12
<PAGE> 16
STOCK PERFORMANCE GRAPH
In accordance with Exchange Act regulations, the following performance
graph compares the cumulative total stockholder return on the Company's Common
Stock to the cumulative total return on the Nasdaq Stock Market and a selected
group of peer issuers over the same period. The peer issuers consist of DEP
Corporation, BeautiControl Cosmetics, Inc., DEL Laboratories, Inc., and The
Stephan Co. The graph assumes that the value of the investment in the Company's
Common Stock and each index was $100 on May 23, 1996 (the date of the Company's
initial public offering) and that all dividends were reinvested. The information
contained in the performance graphs shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
<TABLE>
<CAPTION>
THE LAMAUR
CORPORATION NASDAQ PEER GROUP
<S> <C> <C> <C>
05/1996 100.00 100.00 100.00
12/1996 51.56 103.75 125.77
12/1997 18.75 127.34 154.41
</TABLE>
CONSULTING FEES TO JOSEPH F. STILEY, III AND HAROLD M. COPPERMAN
During 1997, Messrs. Copperman and Stiley performed Consulting Services for
the Company and were paid $13,000 and $13,500, respectively. These fees were in
addition to the fees paid to these individuals as directors.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Hoff Employment Agreement
In November 1995 the Board approved an employment agreement (the "Hoff
Employment Agreement") with Don G. Hoff, Chairman and Chief Executive Officer,
originally entered into as of June 1, 1994, and modified as of November 6, 1995,
and which took effect immediately following the closing of the Company's
acquisition of the Personal Care Division of DowBrands on November 16, 1995. The
Hoff Employment Agreement provides for Mr. Hoff's continued employment as Chief
Executive Officer of the Company for a term ending on December 31, 1998 (the
"term of employment"), reporting to the Board, and devoting so much of his
business time to the affairs of the Company as the Board requires. The Hoff
Employment Agreement provides that Mr. Hoff's salary as Chief Executive Officer
(which was increased from $250,000 to $280,000 per annum effective December 30,
1996) may not be decreased without his
13
<PAGE> 17
consent. In the event Mr. Hoff is unable to perform his duties as Chief
Executive Officer because of a disability, he shall be entitled to his full base
salary for a period of twelve months from the date of disability and 50% of such
base salary for twelve additional months. In addition, the Employment Agreement
provides that Mr. Hoff will continue to be nominated for election as a director
of the Company at each annual meeting of stockholders and be appointed as
Chairman of the Board so long as he serves as the Company's Chief Executive
Officer.
Under the Employment Agreement, Mr. Hoff shall be required during the term
of his employment and for one year thereafter not to engage in any activity
competitive with the Company or any of its subsidiaries or affiliates (except
that he may own up to 5% of the voting stock of any publicly held corporation).
Mr. Hoff is also required to assign to the Company all inventions, discoveries,
know-how or other proprietary technology relating to hair care which he
conceives, reduces to practice or otherwise creates during the term of
employment.
If, prior to the expiration of the term of employment, Mr. Hoff is
discharged by the Company with "cause" (defined in the Hoff Employment Agreement
to mean a discharge for any reason other than conviction of a felony, disability
or a discharge as a result of a material breach of any other provision of the
Hoff Employment Agreement by the Company which Mr. Hoff elects to treat as a
discharge with cause, including, but not limited to, certain events which would
constitute a "change of control" of the Company, as defined in the Hoff
Employment Agreement, without Mr. Hoff's written consent), Mr. Hoff will be
entitled to all benefits under the Hoff Employment Agreement as if he had
continued to be employed during the full term of employment. In addition, if
there is a discharge with cause (i) in lieu of further salary payments under the
Hoff Employment Agreement, Mr. Hoff will be entitled to receive within three
days after the date of discharge, an amount equal to the sum of the discounted
present value of the base salary to which he would have been entitled under the
Hoff Employment Agreement from the date of discharge through December 31, 1998
(assuming a 5% yearly increase in his base salary for each remaining calendar
year during the term of employment), and (ii) all options previously granted to
Mr. Hoff, to the extent not then vested or exercisable, shall become immediately
vested and exercisable in full.
As of December 29, 1997, Mr. Hoff had elected to defer 50% of his base
salary and was paid at the rate of $140,000 per annum. Effective April 30, 1998,
Mr. Hoff informed the Company he wished to return his salary to $280,000 per
annum retroactive to December 29, 1997.
Employee Severance Agreements
On May 6, 1997, the Board of Directors and the Compensation Committee
approved employee severance agreements (the "Severance Agreements") with ten
officers of the Company, including the following Named Executive Officers:
Dominic J. LaRosa, Ronald P. Williams, Michelle Redmon and William M. Boswell.
The Agreements were entered into as of July 1, 1997.
The Severance Agreements are intended to provide certain key employees with
certain protection from events that could occur in connection with certain
changes of control of the Company. In the event of an Involuntary Termination
(as defined in the Severance Agreements) of the employee within 24 months of
such Change of Control, then as of the date of such Involuntary Termination:
(i) the Company shall pay in cash on the date of the Involuntary
Termination one and one-half times the employee's most recent annual
full-time base compensation in effect prior to the Change of Control;
(ii) the Company shall provide medical, dental and basic life
insurance no less favorable than such insurance that was in effect for the
employee and his or her dependents during his or her most recent full time
period of employment prior to the Change of Control for a period equal to
the shorter of 18 months from the end of the month in which the Involuntary
Termination occurs or the date the employee becomes covered under another
insurance plan as a result of obtaining new employment;
(iii) the Company shall pay in cash to the employee an amount equal to
25% of the employee's most recent annual full-time base compensation in
effect prior to such Change of Control provided that such
14
<PAGE> 18
employee's principal place of residence at any time within 24 months from
the Involuntary Termination changes from the employee's principal place of
residence immediately prior to the Involuntary Termination and provided
further that the payment under this paragraph of the Agreement shall be
reduced by the amount of any moving expenses paid by a new employer of
employee;
(iv) at the option of the employee within six months from the
Involuntary Termination, the Employee may borrow from the Company the
principal sum equal to one and one-half times the employee's most recent
annual full-time base compensation in effect immediately prior to such
Change of Control at the lowest rate of interest permitted by the Internal
Revenue Service to avoid the imputation of income.
AUDIT COMMITTEE REVIEW
The Audit Committee of the Board is conducting a review of transactions
between the Company and its directors and officers and related parties of such
directors and officers. See "Proposal No. 2 -- Reduction in the Number of
Directors."
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
On July 14, 1998, the Board of Directors resolved to reduce the number of
directions of the Company from seven to five, and a board of five directors is
to be elected at the Annual Meeting of Stockholders. See "Proposal No.
2 -- Reduction in the Number of Directors." Unless otherwise instructed, the
proxy holders will vote the proxies received by them for the Company's nominees
named below. In the event that any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting of the Stockholders,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner as will assure the election
of as many of the nominees listed below as possible, and in such event the
specific nominees to be voted for will be determined by the proxy holders. The
term of office of each person elected as a director will continue until the next
Annual Meeting of the Stockholders or until a successor has been elected and
qualified or until resignation or removal.
The nominees are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) DIRECTOR SINCE
---- --- ----------- --------------
<S> <C> <C> <C>
Don G. Hoff................. 62 Chairman of the Board and Chief Executive Officer 1993
Dominic J. LaRosa........... 55 President and CEO -- Lamaur Division and Director 1995
Harold M. Copperman......... 64 Director 1995
Perry D. Hoff............... 39 Director 1993
Joseph F. Stiley, III....... 59 Director 1994
</TABLE>
Please see "Directors and Executive Officers -- Directors" above for
information concerning the nominees. If elected, the nominees will serve as
directors until the next Annual Meeting of Stockholders and until their
successors are elected and qualified. If any of the nominees declines to serve
or becomes unavailable for any reason, or if a vacancy occurs before the
election (although the Company knows of no reason to anticipate that this will
occur), the proxies may be voted for such substitute nominees as the Company may
designate.
If a quorum is present and voting, the nominees receiving the highest
number of votes will be elected as directors. Abstentions and broker non-votes
have no effect on the vote.
15
<PAGE> 19
The five directors nominated for election voted in favor of the proposal to
nominate such directors. Former directors Gerald A. Eppner and Paul E. Dean
abstained from the vote. See "Proposal No. 2 -- Reduction in the Number of
Directors."
A MAJORITY OF THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED
ABOVE.
PROPOSAL NO. 2
REDUCTION IN THE NUMBER OF DIRECTORS
The Company's Bylaws provide that the number of directors may be reduced by
a resolution of the Board. On July 14, 1998 the Board elected to reduce the
number of directors on the Board from seven to five. Mr. Eppner abstained from
voting on the proposal to reduce the number of directors to five and all other
directors voted in favor of the proposal. The Board also voted to nominate
Messrs. Don Hoff, Perry Hoff, Joseph Stiley, Harold Copperman and Dominic LaRosa
as nominees for such five Board seats. The purpose of the proposal was to reduce
the Board to a number of directors which management believes will be more
appropriate and effective in running the Company in the future, based upon the
Company's currently proposed plan for ongoing operations as described in this
Proxy Statement. See "Information About Lamaur -- Recent Events." On July 27,
1998 each of Messrs. Eppner and Dean submitted resignations from the Board,
effective as of such date.
There have been a number of disagreements among members of the Board in the
recent past, including disagreements regarding the closing of the Company's
headquarters office. Management believes that closing the headquarters would not
eliminate necessary corporate functions, and that relocation of the three
officers and one support person would be disruptive to the Company's business.
The Board has voted against proposals to close the headquarters office on May
18, 1998 and June 12, 1998 by votes of four to three and five to two,
respectively. The directors who will not be continuing as members of the Board
voted for the proposals in each case.
On April 30, 1998 the Audit Committee, of which Mr. Eppner was the
Chairman, and Mr. Dean a member, initiated a review of officers' and directors'
expenses and related party transactions, which review was to include internal
control practices involving relocation and headquarters-related expenses,
compensation, and legal fees. Prior to their resignations, Messrs. Eppner and
Dean expressed their concerns about such matters and about the committee's
review process. Management does not believe such concerns have merit.
Because the review includes payments made to all members of the Board and
the Audit Committee, the Board proposed that the Audit Committee engage
independent counsel to assist in completing the review. Six of seven directors,
including two of the three members of the Audit Committee, voted in favor of the
proposal. Mr. Eppner, the former Chairman of the Audit Committee, abstained;
however, at the time of his resignation, Mr. Eppner had also agreed with the
Board's recommendation to engage independent counsel. The Audit Committee has
engaged former United States District Court Judge Charles Renfrew to assist with
the timely completion of the independent review.
The reduction in the number of directors requires approval only of the
directors of the Company. However, stockholder approval of the matter is sought
to ensure that the vote of the directors on the measure will not be challenged
based upon the fact that the five directors voting in favor of the matter are
also the directors nominated to stand for election at the Annual Meeting. If the
reduction in the number of directors is not ratified by the stockholders, the
Board does not intend to reconsider the matter, and the Company will continue to
have a five member Board unless and until the Board reconsiders the number of
directors.
A MAJORITY OF THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED
ABOVE.
16
<PAGE> 20
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The Board has nominated Deloitte & Touche LLP as independent public
auditors to audit the consolidated financial statements of the Company for the
fiscal year ending December 31, 1998. Deloitte & Touche LLP has acted in such
capacity since its appointment in fiscal year 1995. A representative of Deloitte
& Touche LLP is expected to be present at the annual meeting, with the
opportunity to make a statement if the representative desires to do so, and is
expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT PUBLIC AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast affirmatively or
negatively at the annual meeting of stockholders at which a quorum representing
a majority of all outstanding shares of Common Stock of the Company is present
and voting, either in person or by proxy, is required for approval of this
proposal. Votes for and against, abstentions and broker non-votes will each be
counted as present for purposes of determining the presence of a quorum. Neither
abstentions nor broker non-votes will have any effect on the outcome of the
proposal.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Pursuant to new amendments to Rule 14a-4(c) of the Securities Exchange Act
of 1934, as amended, the Company's proxy for its 1999 Annual Meeting of
Stockholders may confer discretionary authority to vote on any proposal
submitted by a stockholder if written notice of such proposal is not received at
the Company's executive office on or before , 1998.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the Board knows of no other business
that will be conducted at the 1998 Annual Meeting of Stockholders of The Lamaur
Corporation other than as described in this Proxy Statement. If any other matter
or matters are properly brought before the meeting, or any adjournment or
postponement of the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote the proxy on such matters in accordance with
their best judgment.
By Order of the Board of Directors
--------------------------------------
JOHN D. HELLMANN
Secretary
, 1998
17
<PAGE> 21
THE LAMAUR CORPORATION
PROXY FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON __________________, 1998
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Don G. Hoff and _________________, and
each of them, with full power of substitution, to represent the undersigned and
to vote all of the shares of stock in The Lamaur Corporation, a Delaware
corporation (the "Company"), which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the Company's
principal executive offices, One Lovell Avenue, Mill Valley, California on
____________________, 1998, at 10:00 a.m. local time, and at any adjournment or
postponement thereof (1) as hereinafter specified upon the proposals listed on
the reverse side and as more particularly described in the proxy statement of
the Company dated ____________, 1998 (the "Proxy Statement"), receipt of which
is hereby acknowledged, and (2) in their discretion upon such other matters as
may properly come before the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 THROUGH 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE
SIDE
<PAGE> 22
Please mark
[ X ] votes as in
this example
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED
TO SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT
YOUR STOCK MAY BE REPRESENTED AT THE MEETING.
A vote FOR the following proposals is recommended by the Board of
Directors:
1. To elect the following persons as directors to hold office for a one
year term and until their respective successors are elected and qualified:
Don G. Hoff
Dominic J. LaRosa
Harold M. Copperman
Perry D. Hoff
Joseph F. Stiley, III
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to vote
above (except as marked for all nominees listed
to the contrary below.) above.
[ ] ________________________________
FOR all nominees except
as noted above.
2. To consider and approve a reduction in the number of members of the board of
directors from seven to five.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider, approve and ratify the appointment of Deloitte & Touche LLP as
independent public auditors for the Company for the fiscal year ending December
31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MARK HERE MARK HERE
FOR ADDRESS [ ] IF YOU PLAN [ ]
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
PLEASE SIGN HERE. If shares of Signature:_________________________
stock are held jointly, both or all
of such persons should sign. Date:______________________________
Corporate or partnership proxies
should be signed in full corporate
or partnership name by an Signature:_________________________
authorized person. Persons signing
in a fiduciary capacity should Date:______________________________
indicate their full titles in such
capacity.
