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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
STYLING TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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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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(4) Date Filed:
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<PAGE> 2
STYLING TECHNOLOGY CORPORATION
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 2, 1997
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The Annual Meeting of Stockholders of Styling Technology Corporation, a
Delaware corporation (the "Company"), will be held at 10:00 a.m. (local time),
on Monday, June 2, 1997, at The Phoenician, 6000 East Camelback Road,
Scottsdale, Arizona 85251, for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders and until their successors are elected and qualified.
2. To ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 30, 1997 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person. To
assure your representation at the meeting, however, you are urged to mark, sign,
date, and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she previously has returned a
proxy.
Duncanville, Texas
April 30, 1997
<PAGE> 3
STYLING TECHNOLOGY CORPORATION
1146 SOUTH CEDAR RIDGE
DUNCANVILLE, TEXAS 75137
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PROXY STATEMENT
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VOTING AND OTHER MATTERS
GENERAL
The enclosed proxy is solicited on behalf of Styling Technology
Corporation, a Delaware corporation (the "Company"), by the Company's board of
directors (the "Board of Directors") for use at the Annual Meeting of
Stockholders to be held at 10:00 a.m. (local time), on Monday, June 2, 1997 (the
"Meeting"), or at any adjournment thereof, for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Stockholders. The Meeting will be held at The Phoenician, 6000 East Camelback
Road, Scottsdale, Arizona 85251.
These proxy solicitation materials were first mailed on or about May 1,
1997, to all stockholders entitled to vote at the Meeting.
VOTING SECURITIES AND VOTING RIGHTS
Stockholders of record at the close of business on April 30, 1997 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 3,948,703 shares of the Company's
Common Stock, $0.0001 par value per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of the
total number of shares of Common Stock outstanding constitutes a quorum for the
transaction of business at the Meeting. Each stockholder voting at the Meeting,
either in person or by proxy, may cast one vote per share of Common Stock held
on all matters to be voted on at the Meeting. Assuming that a quorum is present,
the affirmative vote of a majority of the shares of Common Stock of the Company
present in person or represented by proxy at the Meeting and entitled to vote is
required (i) to elect six directors and (ii) to ratify the appointment of Arthur
Andersen LLP as the independent auditors of the Company for the fiscal year
ending December 31, 1997.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum, but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
VOTING OF PROXIES
When a proxy is properly executed and returned, the shares it represents
will be voted at the Meeting as directed. If no specification is indicated, the
shares will be voted (i) "for" the election of the nominees set forth in this
Proxy Statement and (ii) "for" the ratification of the appointment of Arthur
Andersen LLP as the independent auditors of the Company for the fiscal year
ending December 31, 1997.
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REVOCABILITY OF PROXIES
Any person giving a proxy may revoke the proxy at any time before its use
by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
SOLICITATION
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies also may be solicited by certain of
the Company's directors and officers, personally or by telephone or telegram,
without additional compensation.
ANNUAL REPORT AND OTHER MATTERS
The 1997 Annual Report to Stockholders, which was mailed to stockholders
with or preceding this Proxy Statement, contains financial and other information
about the activities of the Company, but is not incorporated into this Proxy
Statement and is not to be considered a part of these proxy soliciting
materials. The information contained in the "Report of the Compensation
Committee of the Board of Directors" below and "Company Performance Graph" below
shall not be deemed "filed" with the Securities and Exchange Commission (the
"SEC") or subject to Regulations 14A or 14C or to the liabilities of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide, without charge to each stockholder of record as
of the Record Date, a copy of the Company's annual report on Form 10-K for the
year ended December 31, 1996 as filed with the SEC. Any exhibits listed in the
Form 10-K report also will be furnished upon request at the actual expense
incurred by the Company in furnishing such exhibit. Any such requests should be
directed to the Company's Secretary at the Company's executive offices set forth
in this Proxy Statement.
ELECTION OF DIRECTORS
NOMINEES
The Company's bylaws provide that the number of directors shall be fixed
from time to time by resolution of the Board of Directors. Presently the number
of directors is fixed at six. The Board of Directors has nominated SAM L.
LEOPOLD, THOMAS M. CLIFFORD, JAMES A. BROOKS, PETER W. BURG, DANIEL HOWELL, and
SYLVAN SCHEFLER for re-election as directors until the next annual meeting of
stockholders and until their respective successors are elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for each of the nominees named above. In the event that any of
the nominees is unable or declines to serve as a director at the time of the
Meeting, the proxies will be voted for a nominee, if any, designated by the
current Board of Directors to fill the vacancy. It is not expected that any of
the nominees will be unable or will decline to serve as a director.
The Board of Directors recommends a vote "For" the nominees named herein.
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The following table sets forth certain information regarding the directors
and nominees for directors of the Company:
NAME AGE POSITION
- ---------------------------- --- -----------------------------------------
Sam L. Leopold.............. 43 Chairman of the Board and Chief Executive
Officer(4)
Thomas M. Clifford.......... 43 President and Director
James A. Brooks............. 67 Director(1)
Peter W. Burg............... 41 Director(2)(3)
Daniel Howell............... 46 Director(2)(3)(4)
Sylvan Schefler............. 59 Director(1)
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Senior Committee.
(4) Member of the Employee Committee.
Sam L. Leopold, a founder of the Company, has served as its Chairman of
the Board and Chief Executive Officer of the Company since the Company's
incorporation in June 1995. Mr. Leopold is a party to a joint venture agreement
with Regis, a publicly held, mall-based retail chain of beauty supply salons,
pursuant to which he operates four mall-based Trade Secret retail salons in
California. Mr. Leopold also owns and previously served as President and
Chairman of Beauty Boutique International, which was founded in 1990 and
operates three retail salons in Arizona. Mr. Leopold is not involved with the
day-to-day operations of the joint venture with Regis or Beauty Boutique
International, although both purchase products from the Company in the ordinary
course of business. From 1986 to 1991, Mr. Leopold served as Executive Vice
President of Consumer Beauty Supply, Inc. (dba Beauty Express), a mall-based
retail chain of beauty supply salons. During that time, Mr. Leopold was
responsible for day-to-day operations and oversaw the growth and development of
Beauty Express from less than 20 retail salons to more than 50 retail salons and
from approximately $8 million in annual revenue to approximately $25 million in
annual revenue. From 1989 to 1991, Mr. Leopold served as president of Avanti
International, Inc. developing a line of hair care products. Mr. Leopold served
as in-house counsel to MDC Holdings, Inc., a publicly held national home
builder, from 1982 to 1984.
Thomas M. Clifford, a founder of the Company, has served as its President
and as a director since the Company's incorporation in June 1995. Mr. Clifford
served as Chief Operating Officer of JDS Manufacturing Co., Inc. ("JDS") from
October 1991 to November 1996 when it was acquired by the Company. Mr. Clifford
served as Senior Vice President of Sales of American International Industries
("AII"), a national multi-brand marketer of salon-quality products from
September 1986 to October 1991. During that time, Mr. Clifford was a member of
the management team that conducted AII's acquisition of brands, assets, and
trademarks from approximately 10 companies in the professional salon and
mass-market industries. While with AII, Mr. Clifford was responsible for
management of multiple brand names and product lines in both the professional
salon and mass-market industries. From August 1986 to September 1987, Mr.
Clifford served as Vice President of Marketing of Sterling Beauty Supplies, a
large beauty supply distributor in the western United States. Mr. Clifford
served as National Sales Manager of Helen of Troy Limited, a publicly held
personal care products company, from August 1985 to August 1986 and was
responsible for executing its national sales strategy. From April 1983 to August
1985, Mr. Clifford served first as National Sales Manager and subsequently as
Vice President of Sales and Marketing of Illinois Razor Strops, a manufacturer
of cutlery and sundries for the barber and beauty supply industry. During his
tenure with that company, Mr. Clifford successfully repositioned the company
into the professional salon market. Additionally, Mr. Clifford has served as a
director of the American Beauty Association since 1991 and currently is the
treasurer of that organization.
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James A. Brooks has served as a director of the Company since September
1996. Mr. Brooks has served as President of Signe Inc., a management consulting
firm for major consumer product companies and a variety of salon industry
companies, since founding the company in December 1984. Mr. Brooks served as
Senior Vice President of Sales and Marketing of Lamaur, Inc. from 1983 to 1984,
at that time a publicly traded company listed on the New York Stock Exchange and
a leading domestic producer and marketer of a broad range of hair care products
and as Senior Vice President of Sales and Marketing of Redken Laboratories, Inc.
from 1977 to 1983. Mr. Brooks is a director of Malibu 2000, a hair care
products company.
Peter W. Burg has served as director of the Company since February 1997.
Mr. Burg has been a director and shareholder in the law firm of Burg & Eldrege,
P.C. (and its predecessor Burg & Aspinwall, P.C.) since October 1984.
Daniel Howell has served as a director of the Company since September
1996. Mr. Howell has served as President of Nouvelle Methode, Inc., a business
consulting firm since founding it in March 1993. Mr. Howell founded and served
as President and Chief Executive Officer of Beauty Biz, Inc., an upscale
retailer of professional beauty supplies, from its inception in March 1986 to
March 1993. Mr. Howell has served as a director of Classic Restaurants
International, Inc., a publicly traded restaurant company, since February 1996.
In addition, Mr. Howell was a member of the board of directors of Helen of Troy
Limited, a publicly held professional hair care products company, from March
1988 to June 1993.
Sylvan Schefler has served as a director of the Company since November
1996. Mr. Schefler is Vice Chairman of Prime Charter Ltd., an investment banking
firm and one of the representatives of the underwriters of the Company's initial
public offering. Mr. Schefler has served as Chairman of the Investment Banking
Division and as a member of the Executive Committee of Prime Charter Ltd. since
September 1994. Mr. Schefler has been a partner of Crystal Asset Management
Group, Ltd., a merchant banking firm since 1990. Previously, Mr. Schefler was
Chief Executive Officer of Hampshire Securities Corporation, an investment
banking firm, from 1992 to 1994 and Co-Chairman of Dabney/Resnick and Wagner,
Inc., an investment banking firm, from 1990 to 1992. Mr. Schefler previously
served in various capacities with Drexel Burnham Lambert Incorporated for over
30 years, including as a member of its Executive Committee and Board of
Directors. Mr. Schefler has served as a director of GSE Systems, Inc., a
supplier of software systems for manufacturing industries, since August 1995.
The Company has agreed that, for a period of three years from its initial
public offering in November, 1996, the representatives of the underwriters of
the Company's initial public offering (the "Representatives") will have the
right to send a representative to observe each meeting of the Company's Board of
Directors, or in lieu of such observer, the Representatives may elect to require
the Company to use its best efforts to elect Sylvan Schefler, Vice Chairman of
Prime Charter Ltd., or another mutually acceptable designee, to the Company's
Board of Directors for such three-year period. The Company has agreed to
nominate Mr. Schefler to continue as a member of its Board of Directors.
Directors hold office until the next annual meeting of stockholders or
until their successors have been elected. Officers serve at the pleasure of the
Board of Directors. There are no family relationships among any of the directors
or officers of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's bylaws authorize the Board of Directors to appoint among its
members one or more committees composed of one or more directors. In February
1997, the Board of Directors appointed the following standing committees: a
Compensation Committee, a Senior Committee, an Executive Committee, and an Audit
Committee. The Compensation Committee reviews and acts on matters relating to
compensation levels and benefit plans for key executives of the Company. The
Senior Committee's function is to administer the 1996 Stock Option Plan with
respect to executive officers and directors. The 1996 Stock Option Plan requires
that the Senior
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Committee consist of two or more non-employee directors. The Employee
Committee's function is to administer the 1996 Stock Option Plan with respect to
employees. The Audit Committee reviews the annual financial statements and
significant accounting issues and the scope of the audit with the Company's
independent auditors and is available to discuss with the auditors any other
audit related matters that may arise during the year.
The Board of Directors of the Company held a total of three meetings
during the fiscal year ended December 31, 1996. No director attended fewer than
75% of the aggregate of (i) the total number of meetings of the Board of
Directors, and (ii) the total number of meetings held by all committees of the
Board on which such director was a member.
DIRECTOR COMPENSATION AND OTHER INFORMATION
The Company pays each independent director an annual retainer of $5,000
and $1,500 for each meeting of the Board of Directors attended. Directors also
receive $500 for each meeting of a committee of the Board of Directors attended.
In addition, independent directors receive stock options under the Company's
1996 Stock Option Plan. Under the terms of the Company's 1996 Stock Option Plan,
non-employee directors receive stock options to purchase 5,000 shares upon their
initial election to the Board of Directors and options to purchase 2,500 shares
at the meeting of the Board of Directors held immediately after the annual
meeting of stockholders. Under the Company's 1996 Stock Option Plan, Messrs.
Brooks, Howell, and Schefler each received options to purchase 5,000 shares of
Common Stock at an exercise price equal to $10.00 per share upon the completion
of the Company's initial public offering. Mr. Burg received options to purchase
5,000 shares of Common Stock at an exercise price of $11.88 per share upon his
appointment to the Board of Directors in February 1997. Mr. Howell was granted
options to purchase 25,000 shares of Common Stock at an exercise price of $10.50
per share in March 1997. Pursuant to the 1996 Stock Option Plan, each of Messrs.
Brooks, Burg, Howell, and Schefler will receive an automatic grant of options to
purchase 2,500 shares of Common Stock at the time of the Board of Directors
meeting immediately following the Meeting. Officers of the Company receive no
additional compensation for serving on the Board of Directors.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
None of the Company's executive officers received compensation in excess
of $100,000 during fiscal 1995 or 1996. However, the Company has entered into
employment agreements with certain of its executive officers pursuant to which
such executive officers will receive compensation in excess of $100,000 in
fiscal 1997. See "Executive Compensation - Employment Agreements."
The Company conducted no operations prior to its initial public offering
in November 1996. As a result, no salaries were paid or accrued by the Company
prior to such time. For the fiscal year ended December 31, 1996, Sam L. Leopold,
the Company's Chief Executive Officer, earned approximately $16,000, payment of
which was deferred to 1997.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Sam L. Leopold,
Thomas M. Clifford, and David E. Ziegler, the Company's Chief Executive Officer,
President, and Chief Financial Officer, respectively. The terms of these
agreements are described below.
The Company's employment agreements with Messrs. Leopold and Clifford
provide for Mr. Leopold to serve as Chairman of the Board and Chief Executive
Officer of the Company and for Mr. Clifford to serve as
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President of the Company, in each case through September 2001. Effective in
November 1996, each of Messrs. Leopold and Clifford will receive an initial base
salary of $150,000 for the first year, $200,000 for the second year, and
$250,000 per annum for the remainder of the term of his employment agreement.
The Company's employment agreement with Mr. Ziegler provides for Mr. Ziegler to
serve as Chief Financial Officer of the Company through September 2000.
Effective in November 1996, Mr. Ziegler will receive a base salary of $140,000
for the first year, $165,000 for the second year, and $190,000 for the third
year. Mr. Ziegler also received a one-time bonus of $20,000 upon the completion
of the Company's initial public offering. Messrs. Leopold, Clifford, and Ziegler
are eligible to receive an annual bonus out of the bonus pool, if any,
established at the discretion of the Board of Directors. The Company also
granted Mr. Ziegler options under the Company's 1996 Stock Option Plan to
acquire 72,707 shares of Common Stock at an exercise price equal to $10.00 per
share. One-fourth of Mr. Ziegler's options became exercisable upon the
consummation of the Company's initial public offering in November 1996, and his
remaining options vest ratably over the following three years.
1996 STOCK OPTION PLAN
In September 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"), which provides for the grant of incentive and nonqualified stock
options to acquire Common Stock of the Company, the direct grant of Common
Stock, the grant of stock appreciation rights ("SARs"), and the grant of other
cash awards to key personnel, directors, consultants, independent contractors,
and others providing valuable services to the Company and its subsidiaries. The
Company believes that the Plan represents an important factor in attracting and
retaining executive officers and other key employees and constitutes a
significant part of its compensation program, providing such individuals with an
opportunity to acquire a proprietary interest in the Company, and thereby align
their interests with the interests of the Company's other stockholders, and
giving them an additional incentive to use their best efforts for the long-term
success of the Company. The Plan also provides for the automatic grant of
options to independent members of the Company's Board of Directors, which the
Company believes promotes the interests of the Company by providing such
directors the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Company and thereby align their
interests with the interests of the Company's other stockholders in the
Company's success and progress.
A maximum of 400,000 shares of Common Stock of the Company may be issued
under the Plan. As of the date hereof, there were outstanding options to acquire
117,707 shares of the Common Stock under the Plan. The maximum number of shares
of stock with respect to which options or SARs may be granted to any employee
(including officers) during the term of the Plan may not exceed 50% of the
shares of Common Stock covered by the Plan.
The power to administer the Plan with respect to executive officers and
directors of the Company and all persons who own 10% or more of the Company's
issued and outstanding stock rests exclusively with the Board of Directors or a
committee consisting of two or more non-employee directors who are appointed by
the Board of Directors. The power to administer the Plan with respect to other
persons is vested with the Board of Directors.
The Plan terminates in August 2006, and options may be granted at any time
during the life of the Plan for terms of up to 10 years. Options become
exercisable at such time as may be determined by the Board of Directors or the
Plan administrator upon the grant of the options. However, the Board of
Directors or the Plan administrator has the discretion to provide for the
automatic acceleration of the vesting of any options or awards (except for the
automatic option grants described below) in the event of a "Change in Control,"
which includes the following events: (i) the acquisition of beneficial ownership
by certain persons, acting alone or in concert with others, of 30% or more of
the combined voting power of the Company's then outstanding voting securities;
(ii) during any two-year period, members of the Company's Board of Directors at
the beginning of such period cease to constitute at least a majority thereof
(except that any new director approved by at least two-thirds of the Board of
Directors then still in office, who were directors at the beginning of such
period, is considered to be a member
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of the current Board of Directors); or (iii) approval by the Company's
stockholders of certain reorganizations, mergers, consolidations, liquidations,
or sales of all or substantially all of the Company's assets.
The exercise prices of options will be determined by the Board of
Directors or the Plan administrator, but if an option is intended to be an
incentive stock option, the exercise price may not be less than 100% (110% if
the option is granted to a stockholder who at the time of the grant of the
option owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company) of the fair market value of the Common
Stock at the time of the grant.
AUTOMATIC OPTION GRANTS TO DIRECTORS
Each year at the meeting of the Board of Directors held immediately after
the Company's annual meeting of stockholders, each independent member of the
Board of Directors automatically will be granted an option to acquire 2,500
shares of Common Stock ("Annual Automatic Option"). New independent members of
the Board of Directors automatically will receive an option to acquire 5,000
shares of Common Stock ("Initial Automatic Option") on the date of their first
appointment or election to the Board of Directors. Each Automatic Option will
become exercisable and vest on the first anniversary of the applicable grant
date. An independent member of the Board of Directors is not eligible to receive
an Annual Automatic Option if the grant date is within 90 days of such
independent member receiving an Initial Automatic Option. The exercise price per
share of Common Stock subject to each Annual and Initial Automatic Option is
equal to 100% of the fair market value per share on the date of the grant of the
Annual or Initial Automatic Option, as the case may be. Cessation of service on
the Board of Directors terminates any Annual or Initial Automatic Options for
shares that were not vested at the time of such cessation.
The Plan is not intended to be the exclusive means by which the Company
may issue options or warrants to acquire its Common Stock, stock awards, or any
other type of award. To the extent permitted by applicable law and Nasdaq
requirements, the Company may issue any other options, warrants, or awards other
than pursuant to the Plan without stockholder approval.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Company did not have a Compensation Committee in 1996. In February
1997, the Company's Board of Directors appointed a Compensation Committee
consisting entirely of non-employee directors. Performance evaluation and
compensation decisions relating to 1996 were made in September 1996 by the full
Board of Directors, which consisted of two members including Mr. Leopold and an
individual who no longer is a member of the Board of Directors. Compensation
levels for 1995 also were discussed with the underwriters for the Company's
initial public offering.
In the future, decisions on compensation of the Company's executives
generally will be made by the Compensation Committee, consisting of non-employee
members of the Board of Directors. The Compensation Committee will make every
effort to ensure that the compensation plan is consistent with the Company's
values and is aligned with the Company's business strategy and goals.
The Company's compensation program for executive officers consists
primarily of base salary, bonus, and long-term incentives in the form of stock
options. Executives also participate in various other benefit plans, which
generally are available to all employees of the Company.
The Company's philosophy is to pay base salaries to executives at levels
that enable the Company to attract, motivate, and retain highly qualified
executives. The bonus program is designed to reward individuals for
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performance based on the Company's financial results as well as the achievement
of personal and corporate objectives that contribute to the long-term success
of the Company in building stockholder value. Stock option grants are intended
to result in minimal or no rewards if stock price does not appreciate, but may
provide substantial rewards to executives as stockholders benefit from stock
price appreciation.
The Company follows a subjective and flexible approach rather than an
objective or formula approach to compensation. Various factors (as discussed
herein) receive consideration without any particular weighting or emphasis on
any one factor. In establishing compensation for the year ended December 31,
1996, the Company took into account, among other things, compensation levels for
executive officers employed by companies of similar size in similar industries.
BASE SALARY AND ANNUAL INCENTIVES
Base salaries for executive positions are established relative to the
Company's financial performance and comparable positions in similarly sized
companies. From time to time, the Company may use competitive surveys and
outside consultants to help determine the relative competitive pay levels. The
Company targets base pay at the level required to attract and retain highly
qualified executives. In determining salaries, the Committee also will take into
account individual experience and performance, salary levels relative to other
positions with the Company, and specific needs particular to the Company.
Annual incentive awards are based on the Company's financial performance
and the efforts of its executives. Performance is measured based on
profitability and revenue and the successful achievement of functional and
personal goals. No annual bonuses were paid during the fiscal year ended
December 31, 1996.
STOCK OPTION GRANTS
The Company strongly believes in tying executive rewards directly to the
long-term success of the Company and increases in stockholder value through
grants of executive stock options. Stock option grants also will enable
executives to develop and maintain a significant stock ownership position in the
Company's Common Stock. The amount of options granted takes into account options
previously granted to an individual.
The Company granted Mr. Ziegler, the Company's Chief Financial Officer,
options to acquire 72,707 shares of Common Stock at an exercise price equal to
$10.00 per share. No other options were granted to the Company's executive
officers during fiscal 1996.
OTHER BENEFITS
Executive officers are eligible to participate in benefit programs
designed for all full-time employees of the Company.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT
The base salaries of Messrs. Leopold and Clifford were determined based
upon salaries paid by comparable companies, taking into account that Messrs.
Leopold and Clifford expended considerable time and efforts, without
compensation in developing the Company's business plan, engaging personnel,
negotiating the terms of the acquisition by the Company of four professional
salon companies, and preparing for the Company's initial public offering prior
to the Company commencing operations. Compensation levels for 1996 also were
discussed with the underwriters for the Company's initial public offering.
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DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Internal Revenue Code currently limits the deductibility for federal
income tax purposes of compensation paid to the Company's five most highly
compensated executive officers. The Company may deduct certain types of
compensation paid to any of these individuals only to the extent that such
compensation during any fiscal year does not exceed $1.0 million. The Company
does not believe that its compensation arrangements with any of its executive
officers will exceed the limits on deductibility during its current fiscal year.
This report has been furnished by the members of the Board of Directors of
the Company.
Sam L. Leopold
Thomas M. Clifford
James A. Brooks
Peter W. Burg
Daniel Howell
Sylvan Schefler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during 1996. Performance
evaluation and compensation decisions relating to 1996 were made by the full
Board of Directors, which at the time consisted of two members including Mr.
Leopold and an individual who no longer is a member of the Board of Directors.
In February 1997, the Board of Directors appointed a Compensation
Committee consisting of non-employee directors.
COMPLIANCE WITH SECTION 16 OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC. Officers, directors, and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by it during the fiscal year ended December 31, 1996, and written
representations that no other reports were required, the Company believes that
each person who, at any time during such fiscal year, was a director, officer,
or beneficial owner of more than 10% of the Company's Common Stock complied with
all Section 16(a) filing requirements during such fiscal year or prior fiscal
years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Leopold, the Company's Chairman of the Board and Chief Executive
Officer, advanced approximately $130,000 to fund certain expenses of the
Company, relating primarily to the earnest money deposits required in connection
with the Acquisitions. The Company has repaid such advances, which did not bear
interest.
The Company's initial public offering, which became effective in November
1996, was co-managed by Friedman, Billings, Ramsey & Co., Inc. and Prime Charter
Ltd. Sylvan Schefler, who is a director of the Company, is the Vice Chairman of
Prime Charter Ltd. Mr. Schefler was not a director of the Company at the time of
the Company's initial public offering.
9
<PAGE> 12
PERFORMANCE GRAPH
The following line graph compares cumulative total stockholder returns for
(i) the Company's Common Stock; (ii) The Standard & Poor's Small Cap 600 Index
(the "Index"); and (iii) a peer group consisting of the following four companies
in the personal care industry: Advanced Polymer Systems, Inc.; Carson, Inc.;
Regis Corporation; and The Stephan Co. (the "Peer Group"). The graph assumes an
investment of $100 in each of the Company's Common Stock and the Peer Group on
November 21, 1996, the date on which the Company's Common Stock became
registered under Section 12 of the Exchange Act as a result of the Company's
initial public offering, and an investment in the Index of $100 on October 31,
1996. The graph covers the period from November 21, 1996 through fiscal year
ended December 31, 1996, as well as the first three months of the Company's
fiscal year ended December 31, 1997.
The calculation of cumulative stockholder return on the Company's Common
Stock does not include reinvestment of dividends because the Company did not pay
dividends during the measurement period. The performance shown is not
necessarily indicative of future performance.
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------
11/21/96 11/96 12/96 1/97 2/97 3/97
<S> <C> <C> <C> <C> <C> <C>
Styling Technology Corporation 100 99 104 116 108 103
PEER GROUP 100 98 79 82 79 77
S & P SMALLCAP 600 100 105 106 108 106 101
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF
PRINCIPAL STOCKHOLDERS, DIRECTORS,
AND OFFICERS
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock on April 22, 1997 by (i) each director
and each nominee for director; (ii) each executive officer; (iii) all directors
and executive officers of the Company as a group; and (iv) each person known by
the Company to be the beneficial owner of more than five percent of the Common
Stock.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY
OWNED
NAME OF BENEFICIAL OWNER (1)(2) PERCENT
- --------------------------------------------------------------------------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
- ---------------------------------
Sam L. Leopold ............................... 857,851 21.7%
Thomas M. Clifford ........................... 500 *
James A. Brooks .............................. -- *
Peter W. Burg ................................ 6,158 *
Daniel Howell ................................ 20,000 *
Sylvan Schefler(3) ........................... 101,500 2.5%
David E. Ziegler(4) .......................... 18,177 *
Executive officers and directors as a group
(seven persons)(5) ......................... 1,004,186 24.7%
5% STOCKHOLDERS:
- ----------------
Lance Laifer(6) .............................. 604,400 15.3%
Hilltop Partners, L.P.(7) .................... 315,000 8.0%
Janus Venture Fund(8) ........................ 250,000 6.3%
Thomas H. Bailey(9) .......................... 250,000 6.3%
Morgan Grenfell Asset Management, Inc.(10) ... 250,000 6.3%
Thomson Horstmann & Bryant, Inc.(11) ......... 225,000 5.7%
</TABLE>
* Less than one percent
(1) Except as indicated, and subject to community property laws when
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Includes shares of Common Stock issuable to the identified person pursuant
to stock options that may be exercised within 60 days after April 22,
1997. In calculating the percentage of ownership, such shares are deemed
to be outstanding for the purpose of computing the percentage of shares of
Common Stock owned by such person, but are not deemed to be outstanding
for the purpose of computing the percentage of shares of Common Stock
owned by any other stockholders.
(3) Includes 101,500 shares of Common Stock issuable upon the exercise of
warrants issued to Prime Charter Ltd. Mr. Schefler is the Vice Chairman of
Prime Charter Ltd. and is deemed to have beneficial ownership of such
shares.
(4) Includes 18,177 shares of Common Stock issuable upon exercise of vested
stock options.
(5) Includes 18,177 shares of Common Stock issuable upon the exercise of
vested stock options and 101,500 shares of Common Stock issuable upon the
exercise of warrants.
11
<PAGE> 14
(6) Mr. Laifer, as the President, sole director, and principal stockholder of
Laifer Capital Management, Inc, may be deemed to be the beneficial owner
of 315,000 shares of Common Stock beneficially owned by Laifer Capital
Management, Inc. in its capacity as General Partner and Investment Advisor
to Hilltop Partners, L.P., and 289,400 shares of Common Stock beneficially
owned by Laifer Capital Management, Inc. in its capacity as Investment
Advisor to various other clients. These clients include (i) various
Wolfson family entities, and (ii) Hilltop Offshore Limited. Laifer Capital
Management, Inc. has sole voting and dispositive power with respect to the
315,000 shares of Common Stock beneficially owned by Hilltop Partners,
L.P. See footnote 7. Laifer Capital Management, Inc. also has sole voting
and dispositive power with respect to 96,300 shares of Common Stock owned
by Hilltop Offshore Limited and shared voting and dispositive power with
respect to 193,100 beneficially owned by the various Wolfson family
entities. Mr. Laifer's address is 45 West 45th Street, New York, NY 10036.
(7) The address of Hilltop Partners, L.P. is 45 West 45th Street, New York, NY
10036.
(8) The address of Janus Venture Fund is 100 Fillmore Street, Denver, Colorado
80206-4923.
(9) Mr. Bailey, as the President, Chairman of the Board, and a stockholder of
Janus Capital Corporation, may be deemed to be the beneficial owner of
250,000 shares of Common Stock beneficially owned by Janus Capital
Corporation, which serves as Investment Advisor or sub-advisor to Janus
Venture Fund. See footnote 8. Mr. Bailey's stock ownership and positions
with Janus Capital Corporation may be deemed to enable him to exercise
control over Janus Capital Corporation. As a result, Mr. Bailey may be
deemed to have the power to exercise or to direct the exercise of the
voting and dispositive power that Janus Capital Corporation may have with
respect to shares of Common Stock held by Janus Venture Fund. Mr. Bailey
disclaims beneficial ownership of such shares. Mr. Bailey's address is 100
Fillmore Street, Denver, Colorado 80206-4923.
(10) The address of Morgan Grenfell Asset Management, Inc. is 885 Third Avenue,
Suite 3200, New York, New York, 10022.
(11) The address of Thomson Horstmann & Bryant, Inc. is Park 80 West, Plaza
Two, Saddle Brook, NJ 07663.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Arthur Andersen LLP, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending December 31, 1997 and recommends that
stockholders vote in favor of the ratification of such appointment. In the event
of a negative vote on such ratification, the Board of Directors will reconsider
its selection. The Board of Directors anticipates that representatives of Arthur
Andersen LLP will be present at the Meeting, will have the opportunity to make a
statement if they desire, and will be available to respond to appropriate
questions.
DEADLINE FOR RECEIPT OF STOCKHOLDERS PROPOSALS
Stockholder proposals that are intended to be presented at the annual meeting of
stockholders of the Company for the fiscal year ending December 31, 1997 must be
received by the Company no later than December 31, 1997 in order to be included
in the proxy statement and form of proxy relating to such meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
Dated: April 30, 1997
12
<PAGE> 15
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
STYLING TECHNOLOGY CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of STYLING TECHNOLOGY CORPORATION, a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement of the Company, each dated April 30,
1997, and hereby appoints Sam L. Leopold and Thomas M. Clifford, and each of
them, proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1997 Annual Meeting of Stockholders of the Company, to be held on June 2, 1997,
at 10:00 a.m., local time, at The Phoenician, 6000 East Camelback Road,
Scottsdale, Arizona 85251, and at any adjournment or adjournments thereof, and
to vote all shares of Common Stock that the undersigned would be entitled to
vote if then and there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] FOR the six nominees listed below, except as indicated
[ ] WITHHOLD AUTHORITY to vote for the six nominees listed below
If you wish to withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list below:
SAM L. LEOPOLD, THOMAS M. CLIFFORD, JAMES A. BROOKS, PETER W. BURG, DANIEL
HOWELL, AND SYLVAN SCHEFLER
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
AUDITORS OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
and upon such other matters that may properly come before the meeting or any
adjournment or adjournments thereof.
(continued, and to be signed, on other side)
<PAGE> 16
(continued from other side)
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, FOR THE ELECTION OF DIRECTORS; FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY;
AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE
MEETING.
A majority of such attorneys or substitutes as shall be present and shall
act at said meeting or any adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
Dated: , 1997
-----------------------
-----------------------------------
Signature
-----------------------------------
Signature
(This Proxy should be dated, signed
by the stockholder(s) exactly as
his or her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so
indicate. If shares are held by
joint tenants or as community
property, both stockholders should
sign.)
