<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<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>
Acorn Products, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
ACORN PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
DECEMBER 9, 1997
AND
PROXY STATEMENT
================================================================================
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE> 3
ACORN PRODUCTS, INC.
500 Dublin Avenue
Columbus, Ohio 43215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
November 6, 1997
To Our Stockholders:
The Annual Meeting of Stockholders of Acorn Products, Inc. will be held
at the Hyatt Regency, 350 North High Street, Columbus, Ohio, on Tuesday,
December 9, 1997, at 8:30 a.m., local time, for the following purposes:
(1) To elect six (6) Directors of the Company, each to serve for
one-year terms expiring at the 1998 Annual Meeting of
Stockholders;
(2) To ratify the appointment of Ernst & Young LLP as the
Company's independent certified public accountants for fiscal
1998; and
(3) To transact any other business which may properly come before
the meeting or any adjournment thereof.
You will be most welcome at the meeting, and we hope you can attend.
Directors and officers of the Company and representatives of its independent
certified public accountants will be present to answer your questions and to
discuss its business.
We urge you to execute and return the enclosed proxy as soon as
possible so that your shares may be voted in accordance with your wishes. If you
attend the meeting, you may vote in person and your proxy will not be used.
By Order of the Board of Directors,
J. Mitchell Dolloff
Secretary
-----------------------------------------------------------------
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
-----------------------------------------------------------------
<PAGE> 4
ACORN PRODUCTS, INC.
500 Dublin Avenue
Columbus, Ohio 43215
-----------------------------
PROXY STATEMENT
-----------------------------
ANNUAL MEETING OF STOCKHOLDERS
-----------------------------
This Proxy Statement is furnished to the stockholders of Acorn
Products, Inc. (the "Company") in connection with the solicitation of proxies to
be used in voting at the Annual Meeting of Stockholders to be held on December
9, 1997, and at any adjournment thereof. The enclosed proxy is solicited by the
Board of Directors of the Company. This Proxy Statement and the enclosed proxy
will be first sent or given to the Company's stockholders on approximately
November 6, 1997.
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. Representatives of the
Company may solicit proxies by mail, telegram, telephone or personal interview.
The shares represented by the accompanying proxy will be voted as
directed if the proxy is properly signed and received by the Company prior to
the meeting. If no directions are made to the contrary, the proxy will be voted
FOR the nominees for director named herein and FOR the ratification of Ernst &
Young LLP as independent certified public accountants for the current fiscal
year. Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by filing a written notice with the Secretary of the
Company prior to the meeting. Stockholders who attend the meeting may vote in
person and their proxies will not be used.
Holders of record of Common Stock of the Company at the close of
business on October 20, 1997 will be entitled to vote at the Annual Meeting. At
that time, the Company had 6,464,105 shares of Common Stock outstanding and
entitled to vote. Each share of Common Stock outstanding on the record date
entitles the holder to one vote on each matter submitted at the Annual Meeting.
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock of the Company is necessary to constitute a quorum for
the transaction of business at the Annual Meeting. Abstentions and broker non-
votes are counted for purposes of determining the presence or absence of a
quorum. Broker non-votes occur when brokers, who hold their customers' shares in
street name, sign and submit proxies for such shares and vote such shares on
some matters, but not others. Typically, this would occur when brokers have not
received any instructions from their customers, in which case the brokers, as
the holders of record, are permitted to vote on "routine" matters, which include
the election of directors.
The election of the director nominees requires the favorable vote of a
plurality of all votes cast by the holders of Common Stock at a meeting at which
a quorum is present. Proxies that are marked "Withhold Authority" and broker
non-votes will not be counted toward such nominee's achievement of a plurality
and thus will have no effect. Each other matter to be submitted to the
stockholders for approval or ratification at the Annual Meeting requires the
affirmative vote of the holders of a majority of the Common Stock present and
entitled to vote on the matter. For purposes of determining the number of shares
of Common Stock voting on the matter, abstentions will be counted and will have
the effect of a negative vote; broker non-votes will not be counted and thus
will have no effect.
<PAGE> 5
ELECTION OF DIRECTORS
The Company's Amended and Restated Bylaws provide that the number of
directors shall be fixed by the Board. The total number of authorized directors
currently is fixed at six. The Board of Directors proposes the election of six
(6) incumbent Directors at the 1997 Annual Meeting of Stockholders to continue
service as Directors. The nominees for Directors, if elected, will serve for
one-year terms expiring at the 1998 Annual Meeting of Stockholders.
Conor D. Reilly, Gabe Mihaly, William W. Abbott, Matthew S. Barrett,
Stephen A. Kaplan and John I. Leahy are currently Directors of the Company and
are being nominated by the Board of Directors for re-election as Directors.
It is intended that, unless otherwise directed, the shares represented
by the enclosed proxy will be voted FOR the election of Messrs. Reilly, Mihaly,
Abbott, Barrett, Kaplan, and Leahy as Directors. In the event that any nominee
for director should become unavailable, the number of directors of the Company
may be decreased pursuant to the By-Laws or the Board of Directors may designate
a substitute nominee, in which event the shares represented by the enclosed
proxy will be voted for such substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR.
The following table sets forth for each nominee for director of the
Company, such person's name, age, and his position with the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Conor D. Reilly 45 Chairman of the Board and Director of the Company
Gabe Mihaly 50 President, Chief Executive Officer, and Director of the Company
William W. Abbott 66 Director of the Company
Matthew S. Barrett 38 Director of the Company
Stephen A. Kaplan 39 Director of the Company
John I. Leahy 67 Director of the Company
</TABLE>
Conor D. Reilly became Chairman and a director of the Company and
UnionTools in August 1996. Mr. Reilly has been a partner at Gibson, Dunn &
Crutcher LLP since January 1988. Mr. Reilly served as Vice Chairman of
Memorex-Telex N.V. in 1992 and 1993 and has been a director of John Deere
Insurance Group, Inc. since August 1992.
Gabe Mihaly became President and Chief Executive Officer of the
Company's operating subsidiary, UnionTools, Inc. ("UnionTools"), in May 1991 and
President, Chief Executive Officer and a director of the Company in August 1996.
From October 1986 to May 1991, Mr. Mihaly was a partner at Ernst & Young LLP,
where he provided consulting services to senior executives in the areas of
strategy, cost and operations management, performance and competitive analysis
and turnaround management.
William W. Abbott became a director of the Company in January 1997. Mr.
Abbott currently is self-employed as a business consultant. From August 1989 to
January 1995, Mr. Abbott served as Senior Advisor to the United Nations
Development Programme. In 1989, Mr. Abbott retired from 35 years of service at
Proctor & Gamble as a Senior Vice President in charge of worldwide sales and
other operations. From April 1982 to April 1994, Mr. Abbot served as a member of
the Board of Directors of Armstrong World Industries. He currently serves as a
member of the Boards of Directors of Horace Mann Educators Corporation and Fifth
Third Bank of Naples, Florida, a member of the Advisory Board of Deloitte &
Touche LLP, a member of the Advisory Board of Manco, a member of the Board of
Overseers of the Duke Cancer Center and an Executive in Residence of Appalachian
State University.
2
<PAGE> 6
Matthew S. Barrett became a director of the Company in December 1993.
Mr. Barrett is a managing director of Oaktree Capital Management, LLC
("Oaktree"). Prior to joining Oaktree, from 1991 to April 1995, Mr. Barrett was
Senior Vice President of TCW Asset Management Company.
Stephen A. Kaplan became a director of the Company in December 1993.
Mr. Kaplan is a principal of Oaktree, where he runs the Principal Activities
Group. Prior to joining Oaktree, from November 1993 to April 1995, Mr. Kaplan
was a managing director of Trust Company of the West and was portfolio manager
of The Principal Fund. From January 1991 to October 1993, Mr. Kaplan was a
partner at Gibson, Dunn & Crutcher LLP. Mr. Kaplan currently serves as a member
of the Boards of Directors of Chief Auto Parts, Inc., Stratagene Holding
Corporation, Decorative Home Accents, Inc. and KinderCare Learning Centers, Inc.
John I. Leahy became a director of the Company in August 1994. Mr.
Leahy has been the President of Management & Marketing Associates, a management
consulting firm owned by Mr. Leahy, since 1987. In 1987, Mr. Leahy retired after
34 years of service at the Black & Decker Corporation, where he was President
and Group Executive, Western Hemisphere. Mr. Leahy currently serves as a
director of Allied Capital Corporation II, Motorvac Technologies, Inc. and
several privately held companies. Mr. Leahy is a Trustee of Loyola College of
Maryland and St. Mary's University.
INFORMATION CONCERNING THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL
STOCKHOLDERS
MEETINGS, COMMITTEES, AND COMPENSATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company had a total of five meetings
during the fiscal year ended August 1, 1997 ("Fiscal 1997"). During Fiscal 1997,
each of the directors attended 75% or more of the total number of meetings of
(i) the Board and (ii) the committees of the Board on which such director
served. Directors who are employees of the Company receive no compensation for
serving as directors. Non-employee directors currently receive annual
compensation of $30,000, plus reimbursement of reasonable out-of-pocket
expenses. Non-employee directors can elect to have all of such annual
compensation paid in shares of Common Stock pursuant to the Company's Deferred
Equity Compensation Plan for Directors (the "Director Stock Plan") or one-half
paid in cash and one-half paid in shares of Common Stock pursuant to the
Director Stock Plan. Beginning January 1, 1998, non-employee directors will
receive the following annual compensation: (i) $20,000 paid, at the director's
election, either in shares of Common Stock pursuant to the Director Stock Plan
or one-half in cash and one-half in shares of Common Stock pursuant to the
Director Stock Plan; (ii) stock options with an exercise price equal to the fair
market value of the Common Stock on the date of grant, a Black-Scholes valuation
of $25,000 and a ten year term; and (iii) reimbursement of reasonable
out-of-pocket expenses.
In March 1997, the Company created a Management Development and
Compensation Committee (the "Compensation Committee") and an Audit Committee
(the "Audit Committee"). The Compensation Committee has the authority to (i)
administer the Company's 1997 Stock Incentive Plan, including the selection of
optionees and the timing of option grants, and (ii) review and monitor key
employee compensation policies and administer the Company's management
compensation plans. The Audit Committee recommends the annual appointment of the
Company's independent public accountants with whom the Audit Committee reviews
the scope of audit and non-audit assignments and related fees, the accounting
principles used by the Company in financial reporting, internal financial
auditing procedures and the adequacy of the Company's internal control
procedures. Messrs. Abbott (Chairman), Kaplan and Reilly were appointed to the
Compensation Committee and Messrs. Leahy (Chairman) and Barrett were appointed
to the Audit Committee.
3
<PAGE> 7
OWNERSHIP OF COMMON STOCK BY PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth information regarding beneficial
ownership of the Company's Common Stock by each person known by the Company to
beneficially own more than 5% of the outstanding shares of Common Stock, each
director, each of the Company's executive officers, and the directors and
executive officers of the Company as a group as of October 20, 1997:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)(2)
--------------------------------------------
STOCKHOLDER NUMBER PERCENT
- ---------------------------------------------------------------------- --------------------- -----------------
<S> <C> <C>
The TCW Group, Inc.(3)................................................ 3,162,049 48.9%
Oaktree Capital Management, LLC(4).................................... 947,500 14.7
OCM Principal Opportunities Fund, L.P................................. 947,500 14.7
Gabe Mihaly(5)........................................................ 81,630 1.3
J. Mitchell Dolloff(6)................................................ 8,125 *
James B. Farland(7)................................................... 11,850 *
Thomas A. Hyrb(8)..................................................... 10,150 *
Stephen M. Kasprisin(9)............................................... 13,650 *
Conor D. Reilly(10)................................................... 26,100 *
William W. Abbott(11)................................................. 3,400 *
Matthew S. Barrett(12)................................................ 947,500 14.7
Stephen A. Kaplan(13)................................................. 947,500 14.7
John I. Leahy(14)..................................................... 14,460 *
All directors and executive officers as a group (10 persons) (15)..... 1,116,865 17.0%
- ----------------------
<FN>
* Represents beneficial ownership of less than 1% of the Company's
outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting
power and/or investment power with respect to those shares.
(2) The address of the TCW Group, Inc. is 865 South Figueroa Street, Los
Angeles, California 90017. The address of Oaktree, the OCM Principal
Opportunities Fund, L.P. (the "Oaktree Fund"), Mr. Barrett and Mr.
Kaplan is 550 South Hope Street, 22nd Floor, Los Angeles, California
90071. The address for Messrs. Mihaly, Dolloff, Farland, Hyrb, Kasprisin
and Reilly is c/o Acorn Products, Inc., 500 Dublin Avenue, Columbus,
Ohio 43215. The address of Mr. Abbott is 6923 Greentree Drive, Naples,
Florida 33963. The address of Mr. Leahy is c/o Management & Marketing
Associates, 30 East Padonia Road, Timonium, Maryland 21093.
(3) The TCW Group, Inc. is the parent corporation of TCW Asset Management
Company ("TAMCO"). TAMCO is the managing general partner of TCW Special
Credits, a general partnership among TAMCO and certain individual
general partners (the "Individual Partners"). TCW Special Credits is (i)
the general partner of four limited partnerships that hold shares of
Common Stock (the "TCW Limited Partnerships") and (ii) the
</TABLE>
4
<PAGE> 8
investment advisor for three third party accounts that hold shares of
Common Stock (the "TCW Accounts"). The TCW Limited Partnerships and the
TCW Accounts in the aggregate hold 2,148,576 shares of Common Stock. The
TCW Group, Inc. also is the parent corporation of Trust Company of the
West, which is the trustee of four trusts that hold shares of Common
Stock (the "TCW Trusts"). The TCW Trusts in the aggregate hold 1,013,473
shares of Common Stock. The following TCW Limited Partnerships and TCW
Trusts individually beneficially own more than 5% of the outstanding
shares of Common Stock: TCW Special Credits Fund III (660,036 shares or
10.2%); TCW Special Credits Fund IIIb (625,988 shares or 9.7%); and TCW
Special Credits Trust IIIb (447,124 shares or 6.9%). Certain of the
Individual Partners also are principals of Oaktree. The Individual
Partners, in their capacity as general partners of TCW Special Credits,
have been designated to manage the TCW Limited Partnerships, the TCW
Accounts and the TCW Trusts. Although Oaktree provides consulting,
research and other investment management support to the Individual
Partners, Oaktree does not have voting or dispositive power with respect
to the TCW Limited Partnerships, the TCW Accounts or the TCW Trusts.
(4) All of such shares of Common Stock are owned by the Oaktree Fund.
(5) Includes 17,925 shares of Common Stock which are owned jointly by Mr.
Mihaly and his spouse. Also includes 26,109 shares of Common Stock
issuable pursuant to currently exercisable options. Does not include
60,975 shares of Common Stock issuable pursuant to unvested options.
(6) Reflects shares of Common Stock issuable pursuant to currently
exercisable options. Does not include 24,375 shares of Common Stock
issuable pursuant to unvested options.
(7) Includes 10,150 shares of Common Stock issuable pursuant to currently
exercisable options. Does not include 30,450 shares of Common Stock
issuable pursuant to unvested options.
(8) Reflects shares of Common Stock issuable pursuant to currently
exercisable options. Does not include 30,450 shares of Common Stock
issuable pursuant to unvested options.
(9) Includes 3,500 shares of Common Stock which are owned jointly by Mr.
Kasprisin and his spouse. Also includes 10,150 shares of Common Stock
issuable pursuant to currently exercisable options. Does not include
30,450 shares of Common Stock issuable pursuant to unvested options.
(10) Includes 1,000 shares of Common Stock held by Mr. Reilly's minor
daughter. Mr. Reilly, as custodian, holds voting and dispositive power
over such shares. Also includes 8,125 shares of Common Stock issuable
pursuant to currently exercisable options. Does not include 24,375
shares of Common Stock issuable pursuant to unvested options and 996
shares of Common Stock issuable pursuant to the Director Stock Plan.
(11) Includes 1,000 shares of Common Stock held by Mr. Abbott's spouse. Mr.
Abbott disclaims beneficial ownership of such shares. Does not include
996 shares of Common Stock issuable pursuant to the Director Stock Plan.
(12) Reflects shares of Common Stock owned by the Oaktree Fund and also shown
as beneficially owned by Oaktree. To the extent that Mr. Barrett, as a
managing director of Oaktree, participates in the process to vote or
dispose of any such shares, he may be deemed under such circumstances
for the purpose of Section 13 of the Exchange Act to be the beneficial
owner of such shares of Common Stock. Mr. Barrett disclaims beneficial
ownership of such shares of Common Stock. Does not include 996 shares of
Common Stock issuable pursuant to the Director Stock Plan.
(13) Reflects shares of Common Stock owned by the Oaktree Fund and also shown
as beneficially owned by Oaktree. To the extent that Mr. Kaplan, as a
principal of Oaktree, participates in the process to vote or dispose of
any such shares, he may be deemed under such circumstances for the
purpose of Section 13 of the Exchange Act to be the beneficial owner of
such shares of Common Stock. Mr. Kaplan disclaims beneficial ownership
of such shares of Common Stock. Does not include 996 shares of Common
Stock issuable pursuant to the Director Stock Plan.
(14) Does not include 498 shares of Common Stock issuable pursuant to the
Director Stock Plan.
(15) See notes (5) through (14) above.
5
<PAGE> 9
EXECUTIVE OFFICERS
In addition to Mr. Reilly and Mr. Mihaly, the following persons are
executive officers of the Company:
J. Mitchell Dolloff became Vice President, General Counsel and Director
of Investor Relations of the Company and UnionTools in June 1997. From October
1991 to June 1997, Mr. Dolloff was an associate attorney at Gibson, Dunn &
Crutcher LLP.
James B. Farland became Vice President Sales and Marketing of
UnionTools in March 1992. From October 1990 to March 1992, Mr. Farland was Vice
President National Accounts of Poulan/Weedeater. From March 1988 to October
1990, Mr. Farland was Vice President Sales and Marketing of Allegratti Co. until
its acquisition by Poulan/Weedeater.
Thomas A. Hyrb became Vice President Operations of UnionTools in August
1991. From September 1982 to July 1991, Mr. Hyrb was Director of Quality
Assurance and Plant Manager of True Temper Hardware Company, Inc. From May 1966
to August 1982, Mr. Hyrb held various manufacturing and engineering management
positions with Clarke (a division of McGraw Edison), Roper Corporation and Allis
Chalmers.
Stephen M. Kasprisin became Chief Financial Officer and Vice President
of the Company in February 1989 and Chief Financial Officer and Vice President
of UnionTools in January 1994. From January 1981 to February 1989, Mr. Kasprisin
held various financial positions with certain private enterprises. From June
1976 to January 1981, Mr. Kasprisin was employed by Coopers & Lybrand, certified
public accountants.
Officers are elected annually by the Board of Directors and serve at
its discretion. There are no family relationships among directors and executive
officers of the Company.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information
concerning the annual and long-term compensation earned by the Company's chief
executive officer and each of the Company's other most highly compensated
executive officers whose annual salary and bonus during Fiscal 1997 exceeded
$100,000 (the "Named Executive Officers"). Mr. Mihaly's cash compensation was
paid by the Company. All other compensation was paid by UnionTools.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
AWARDS
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)(2)(3)
- --------------------------------- ----------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
GABE MIHALY 1997 $299,269 $198,890 20,325 $93,628
President and Chief Executive 1996 286,461 14,000 -- 22,706
Officer of the Company and
Union Tools
--- ---------------
JAMES B. FARLAND 1997 179,614 26,942 10,150 11,101
Vice President Sales and 1996 171,592 49,450 -- 19,360
Marketing of Union Tools
--- ---------------
THOMAS A. HYRB 1997 169,830 25,475 10,150 9,850
Vice President of Operations of 1996 151,335 46,500 -- 60,383
UnionTools
--- ---------------
STEPHEN M. KASPRISIN 1997 169,252 25,388 10,150 10,623
Chief Financial Officer and Vice 1996 154,530 46,359 -- 21,999
President of the Company and
Union Tools
- ----------------------
<FN>
(1) Amounts shown include matching benefits paid under the Company's
defined contribution 401(k) plan and other miscellaneous cash benefits,
but do not include retirement benefits under the Company's Salaried
Employee Pension Plan or Supplemental Pension Plan. See "Pension
Plans."
(2) Amounts shown for fiscal 1996 include the following: (a) $4,500 of
matching benefits paid under the Company's defined contribution 401(k)
plan for each of Messrs. Mihaly, Farland, Hyrb and Kasprisin; (b)
$9,720, $9,890, $8,631 and $10,122 paid by the Company to Messrs.
Mihaly, Farland, Hyrb and Kasprisin, respectively, for car allowances;
(c) $2,553 paid by the Company with respect to supplementary life
insurance for the benefit of Mr. Mihaly; and (d) $43,454 paid by the
Company to Mr. Hyrb with respect to relocation expenses.
(3) Amounts shown for fiscal 1997 include the following: (a) $6,210,
$5,683, $5,642 and $5,639 of matching benefits paid under the Company's
defined contribution 401(k) plan for Messrs. Mihaly, Farland, Hyrb and
Kasprisin, respectively; (b) $80,976 for Mr. Mihaly with respect to
accelerated vesting of in-the-money stock options; and (c) $2,553 paid
by the Company with respect to supplementary life insurance for the
benefit of Mr. Mihaly.
</TABLE>
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning the grant
of stock options to the Named Executive Officers during Fiscal 1997.
<TABLE>
<CAPTION>
Individual Grants (1)
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL POTENTIAL REALIZABLE VALUE AT
UNDERLYING OPTIONS GRANTED ASSUMED ANNUAL RATES OF
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION STOCK PRICE APPRECIATION FOR
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) DATE OPTION TERMS (2)(3)
---- ----------- ------------- ------------ ------ ------------------------------
5%($) 10%($)
----- ------
<S> <C> <C> <C> <C> <C> <C>
Gabe Mihaly................ 81,300 24.7% $14.00 6/24/2004 $231,705 $539,832
James B. Farland........... 40,600 12.3 14.00 6/24/2004 115,710 269,584
Thomas A. Hyrb............. 40,600 12.3 14.00 6/24/2004 115,710 269,584
Stephen M. Kasprisin....... 40,600 12.3 14.00 6/24/2004 115,710 269,584
- ----------------------
<FN>
(1) This table covers the period from August 3, 1996 to August 1, 1997.
(2) The dollar amounts in these columns are the product of (a) the
difference between (1) the product of the per share market price at the
date of grant and the sum of 1 plus the assumed rate of appreciation
(5% and 10%) compounded over the term of the option (seven years) and
(2) the per share exercise price and (b) the number of shares
underlying the grant.
(3) The appreciation rates stated are arbitrarily assumed and may or may
not reflect actual appreciation in the stock price over the life of the
option. Regardless of any theoretical value which may be placed on a
stock option, no increase in its value will occur without an increase
in the value of the underlying shares. Whether such an increase will be
realized will depend not only on the efforts of the recipient of the
option, but also upon conditions in the Company's industry and market
area, competition and economic conditions, over which the optionee may
have little or no control.
</TABLE>
8
<PAGE> 12
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain information regarding the number
and value of stock options held by the Company's Named Executive Officers at
August 1, 1997.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED LE
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL
ON VALUE OPTIONS AT FISCAL YEAR-END (#) YEAR-END ($)(2)
EXERCISE REALIZED ------------------------------- ---------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------ ----- ------- --------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gabe Mihaly 0 $ 0 43,461 60,975 $240,961 $ 0
James B. Farland 0 0 10,150 30,450 0 0
Thomas A. Hyrb 0 0 10,150 30,450 0 0
Stephen M. Kasprisin 0 0 10,150 30,450 0 0
- --------------------
<FN>
(1) Value realized represents the difference between the exercise price of the
option shares and the market price of the option shares on the date the
option was exercised. The value realized was determined without
consideration for any taxes or brokerage expenses which may have been
owed.
(2) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and the per share fair market value at year
end ($13.44 based on the average of the high and low sale prices on August
1, 1997). An option is in-the-money if the fair market value of the
underlying shares exceeds the exercise price of the option.
</TABLE>
PENSION PLANS
UnionTools maintains six noncontributory defined benefit pension plans
covering substantially all of the hourly employees of the Company. UnionTools
also maintains a noncontributory defined benefit pension plan covering salaried,
administrative and supervisory employees of the Company (the "Salaried Employee
Pension Plan") and a supplemental noncontributory defined benefit pension plan
covering certain senior executive officers of the Company (the "Supplemental
Pension Plan").
The following table sets forth the estimated annual benefits payable upon
retirement under the Salaried Employee Pension Plan based on retirement at age
65 and fiscal 1997 covered compensation.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------
REMUNERATION(1) 15 20 25 30 35
- --------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $42,187 $56,250 $70,313 $70,313 $70,313
150,000 and above 50,625 67,000 84,375 84,375 84,375
- ---------------------------
<FN>
(1) Based on final earnings.
</TABLE>
For each of the Company's Named Executive Officers, the Salaried
Employee Pension Plan covers total compensation as listed in the summary
compensation table, but limited to $150,000 as required by the Employee
Retirement Income Security Act of 1974. Messrs. Mihaly, Farland, Hyrb and
Kasprisin have credited service of approximately 6, 5, 5 and 8 years,
respectively, under the Salaried Employee Pension Plan. Benefits under the
Salaried Employee Pension Plan are based on years of credited service and final
earnings (the highest average monthly earnings over any 60 consecutive calendar
month period in the 120 calendar months preceding retirement or termination of
employment). Monthly benefits are paid under the Salaried Employee Pension Plan
in an amount equal to 2.25% of the employees' final earnings multiplied by the
lesser of 25 years or the total number of years of credited service. Benefits
under the Salaried Employee Pension Plan for credited years of service prior to
1993 were determined pursuant
9
<PAGE> 13
to a formula that yielded slightly lower benefits. Accordingly, actual benefits
for each of the Named Executive Officers are slightly lower than the amounts
indicated in the foregoing table. Benefits under the Salaried Employee Pension
Plan are not subject to any offset.
The following table sets forth the estimated annual benefits payable
upon retirement under the Supplemental Pension Plan based on retirement at age
65 and fiscal 1997 covered compensation.
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION(1) 15 20 25 30 35
- --------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$175,000 $ 8,437 $ 11,250 $ 14,063 $ 14,063 $ 14,063
200,000 16,875 22,500 28,125 28,125 28,125
225,000 25,313 33,750 42,188 42,188 42,188
250,000 33,750 45,000 56,250 56,250 56,250
300,000 50,625 67,500 84,375 84,375 84,375
400,000 84,375 112,500 140,625 140,625 140,625
- -----------------------
<FN>
(1) Based on final earnings.
</TABLE>
For Mr. Mihaly, the Supplemental Pension Plan covers compensation as
listed in the summary compensation table above $150,000. Mr. Mihaly has credited
service of approximately 6 years under the Supplemental Pension Plan. Benefits
under the Supplemental Pension Plan are based on years of credited service and
final earnings (the highest average monthly earnings over any 60 consecutive
calendar month period in the 120 calendar months preceding retirement or
termination of employment). Monthly benefits are paid under the Salaried
Employee Pension Plan in an amount equal to 2.25% of the employees' final
earnings (as described above) multiplied by the lesser of 25 years or the total
number of years of credited service. Benefits under the Supplemental Pension
Plan are not subject to any offset.
AGREEMENTS WITH KEY EMPLOYEES
In May 1997, the Company entered into an employment agreement with Mr.
Mihaly which provides for his employment as the President of the Company and the
President and Chief Executive Officer of UnionTools. The agreement has a five
year term and automatically is extended for successive one-year periods
thereafter unless notice is given at least 90 days, if by Mr. Mihaly, or one
year, if by the Company, prior to expiration of the then-current term. Mr.
Mihaly's employment agreement provides for a base salary of $296,181 per year, a
bonus of $260,000 if Mr. Mihaly is employed by the Company on January 5, 1998,
an annual cash bonus in an amount to be determined by the Board of Directors of
the Company and certain additional benefits, including participation in pension,
health and other employee benefits plans of the Company. Mr. Mihaly's employment
agreement provides that if the term of the agreement is not extended by the
Company, the Company is required to make a lump sum payment to Mr. Mihaly in an
amount equal to his then-current base salary. Mr. Mihaly's employment agreement
also provides that if Mr. Mihaly's employment is terminated by the Company
without cause (as defined in the agreement) or if Mr. Mihaly resigns due to a
material diminution in his responsibilities or a material breach by the Company
of its obligations under the agreement (collectively, "Termination"), the
Company is required to make a lump sum payment to Mr. Mihaly in an amount equal
to the full cash compensation due through the remaining term of the agreement
(the "Remaining Salary"). In addition, Mr. Mihaly will be treated for purposes
of pension and related plans as having been employed by the Company through the
end of the then-current term of the agreement. If such Termination occurs within
two years following a change in control of the Company (as defined in the
agreement), the Company also is required to pay to Mr. Mihaly an amount equal to
the difference between (i) three times the highest aggregate annual compensation
(including salary, bonuses and incentive payments) includable in gross income
paid to Mr. Mihaly during any one of the three taxable years preceding the date
of the Termination and (ii) the Remaining Salary.
In May 1997, the Company also entered into agreements with each of
Messrs. Farland, Hyrb and Kasprisin which provide that following the Termination
of such officers' employment with the Company, the Company will pay to such
employee an amount equal to the highest aggregate annual compensation (including
salary, bonuses and incentive payments) includable in gross income paid to such
employee during any one of the three taxable years preceding the date of his
Termination. If such Termination occurs within two years following a change in
control of
10
<PAGE> 14
the Company (as defined in such agreement), the Company also is required to pay
to such employee an amount equal to two times the amount described in the
preceding sentence. In June 1997, the Company entered into an agreement with Mr.
Dolloff on the same terms.
The following Compensation Committee Report and Performance Graph shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any of the Company's filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
REPORT OF THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Management Development and Compensation Committee of the Board of
Directors of the Company (the "Committee") was formed in March 1997. The
Committee consists entirely of non-employee directors. The Committee is
responsible for the development of the Company's executive compensation policies
and the application of such policies to the compensation of executive officers.
The Committee's compensation philosophy is that compensation must (a) be
competitive with similar companies in order to attract, motivate and retain the
managers necessary to lead and grow the Company's business and (b) provide
strong incentives for key managers to achieve the Company's goals.
FISCAL 1997 COMPENSATION
Many of the elements of the fiscal 1997 cash compensation of the
Company's executive officers were established prior to the formation of the
Committee. Cash compensation for executive officers of the Company for fiscal
1997 consisted of (i) base salaries, (ii) performance based incentive
compensation bonuses and (iii) discretionary bonuses.
The base salaries of Messrs. Mihaly, Farland, Hyrb and Kasprisin for
fiscal 1997 were established pursuant to pre-existing employment agreements
between such officers and the Company. In May 1997, each such employment
agreement was terminated and those employment agreements were replaced with the
agreements described under the caption "Agreements with Key Employees" above.
That change did not alter the base salary of any of Messrs. Mihaly, Farland,
Hyrb and Kasprisin.
In August 1996, the Board of Directors of the Company adopted certain
performance targets for fiscal 1997 for operating income and operating cash flow
which, if achieved, would have resulted in cash bonuses to Messrs. Farland, Hyrb
and Kasprisin in amounts up to 35% of their base salaries. Based on the
Company's actual fiscal 1997 operating income and operating cash flow, no such
bonuses were paid.
In January 1997, the Board of Directors awarded to Mr. Mihaly a
discretionary cash bonus of $140,000 in recognition of his historical
performance, including the development and execution of the Company's business
and growth strategies. Mr. Mihaly had not received a cash bonus in any of the
preceding three years.
In October 1997, the Committee awarded discretionary cash bonuses to
Messrs. Mihaly, Farland, Kasprisin and Hyrb in an amount equal to 15% of each
such executive officer's base salary. These bonuses were awarded in recognition
of the performance of the Company's executive officers during fiscal 1997,
particularly with regard to the Company's sales and marketing efforts and new
product development, the disposition of the Company's non-lawn and garden
businesses and the completion of the Company's initial public offering of common
stock. In calculating the discretionary bonuses, the Committee also considered
work performed for it by Ernst & Young LLP, which was employed to survey
comparable salaries and total cash compensation for executive officer positions
for similarly situated companies.
During fiscal 1997, upon the completion of the Company's initial public
offering of its common stock, the Committee awarded to the Company's executive
officers and other key employees equity-based incentive compensation in the form
of stock options. The Committee believes that equity-based compensation
encourages performance that
11
<PAGE> 15
enhances stockholder value. In the aggregate, options exercisable for
approximately five percent of the outstanding common stock of the Company were
awarded, with individual awards based on performance, responsibility level and
actual and potential contribution to the Company's business. The exercise price
for each option granted was equal to the fair market value of the common stock
on the date of grant (the public offering price of $14.00 per share). These
stock options utilize vesting periods to encourage the retention of executive
officers.
DEVELOPMENT OF FISCAL 1998 COMPENSATION PROGRAMS
The Committee is in the process of implementing a new compensation
program for fiscal 1998 and has retained Ernst & Young LLP to assist it in this
task. A primary goal of the new compensation program will be to link executive
officer compensation to performance which enhances stockholder value.
The Budget Reconciliation Act of 1993 amended the Internal Revenue Code
to add Section 162(m) ("Section 162(m)") which bars a deduction to any publicly
held corporation for compensation paid to a "covered employee" in excess of
$1,000,000 per year. Generally, the Committee intends that compensation paid to
covered employees shall be deductible to the fullest extent permitted by law.
MANAGEMENT DEVELOPMENT AND COMPENSATION
COMMITTEE
William W. Abbott, Chairman
Stephen A. Kaplan
Conor D. Reilly
12
<PAGE> 16
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE NASDAQ STOCK MARKET - US INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
The following Performance Graph compares the performance of the Company
with that of the Nasdaq Stock Market - US Index and the Nasdaq Non-Financial
Index, which is a published industry index. The comparison of the cumulative
total return to stockholders for each of the periods assumes that $100 was
invested on June 24, 1997 (the effective date the Company's Common Stock began
trading on the Nasdaq National Market), in the Common Stock of the Company, and
in the Nasdaq Stock Market - US Index and the Nasdaq Non-Financial Index and
that all dividends were reinvested.
COMPARISON OF 1 MONTH CUMULATIVE TOTAL RETURN*
AMONG ACORN PRODUCTS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ NON-FINANCIAL INDEX
[Graph]
<TABLE>
<CAPTION>
6/24/97 6/97 7/97
------- ---- ----
<S> <C> <C> <C>
ACORN PRODUCTS INC. 100 100 96
THE NASDAQ STOCK MARKET (U.S.) 100 99 110
THE NASDAQ NON-FINANCIAL 100 96 107
</TABLE>
* $100 INVESTED ON 6/24/97 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS FISCAL YEAR ENDING JULY 31.
Graph produced by research 27-October 97
7677UACR
13
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to March 1997, the Company did not have a compensation committee.
The full Board of Directors of the Company participated in deliberations
concerning compensation of executive officers of the Company prior to formation
of the Compensation Committee. None of the executive officers of the Company
served on the Board of Directors or on the Compensation Committee of any other
entity, any of whose officers served either on the Board of Directors or on the
Compensation Committee of the Company.
TRANSACTIONS BETWEEN DIRECTORS, EXECUTIVE OFFICERS AND THE COMPANY
In December 1993 and May 1994, the Company issued subordinated
promissory notes (the "Subordinated Notes") in the aggregate principal amount of
approximately $31.4 million to several investment funds and accounts (the "TCW
Funds") managed by affiliates of The TCW Group, Inc. In August 1996, the Company
issued 100 shares of Series A Preferred Stock to the TCW Funds as payment in
full of accrued interest on the Subordinated Notes for fiscal 1995 and fiscal
1996. In July 1997, the Company used $9.6 million of the proceeds from its
initial public offering to redeem the Series A Preferred Stock and pay
accumulated dividends thereon and $11.0 million of the proceeds from its initial
public offering to repay a portion of the Subordinated Notes and accrued
interest thereon. The remaining $24.0 million aggregated principal amount of the
Subordinated Notes was exchanged for 1,716,049 shares of Common Stock.
In December 1996, the Company issued a subordinated promissory note to
the TCW Funds in the aggregate principal amount of $6 million and bearing
interest at a rate of 13% per year as bridge financing. In December 1996, the
Company paid $6.3 million to the TCW Funds in prepayment of the subordinated
promissory note, accrued interest thereon and a $180,000 facility fee.
Conor D. Reilly, Chairman of the Board of the Company and a director of
the Company and UnionTools, is a partner in the law firm of Gibson, Dunn &
Crutcher LLP. The Company paid fees of approximately $1.7 million to Gibson,
Dunn & Crutcher LLP in Fiscal 1997.
In January 1994, Mr. Mihaly, the President, Chief Executive Officer and
a director of the Company and UnionTools, received a loan from UnionTools in the
aggregate principal amount of $245,000. The loan matures in January 1998, bears
interest at an annual rate of 5.34% and is secured by a pledge of Common Stock.
The principal of, and accrued interest on, the loan becomes due upon the
occurrence of certain events, including voluntary termination of Mr. Mihaly's
employment with the Company.
14
<PAGE> 18
RATIFICATION OF APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has appointed Ernst & Young LLP as independent
certified public accountants to examine and report on the Company's financial
statements for the current fiscal year and to perform other appropriate audit,
accounting and consulting services. Ernst & Young LLP also acted in this
capacity for the fiscal year ended August 1, 1997.
Although the Delaware General Corporation Law does not require the
selection of independent certified public accountants to be submitted to a vote
by stockholders, the Board believes it is appropriate as a matter of policy to
request that the stockholders ratify the appointment of Ernst & Young LLP as
independent accountants for the 1998 fiscal year.
It is expected that a representative of Ernst & Young LLP will be
present at the Annual Meeting, will have the opportunity to make a statement if
he desires to do so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the votes entitled to be cast by
the holders of the Company's Common Stock present in person or represented by
proxy is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and greater than 10% stockholders to file reports
of ownership and changes in ownership of the Company's securities with the
Securities and Exchange Commission ("SEC"). Copies of the reports are required
by SEC regulation to be furnished to the Company. Based on its review of such
reports, the Company believes that all reporting persons complied with all
filing requirements during the year ended August 1, 1997.
PROPOSALS BY STOCKHOLDERS FOR 1998 ANNUAL MEETING
If any stockholder of the Company wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting of
the Company to be held in 1998, the proposal must be received by the Secretary
of the Company at the principal executive offices of the Company, 500 Dublin
Avenue, Columbus, Ohio 43215 prior to the close of business on September 1,
1998. Any proposal submitted after that date may be omitted by the Company from
the Proxy Statement and form of proxy relating to that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no other
business that will come before the meeting. Should any other matter requiring a
vote of the stockholders arise, the proxy in the enclosed form confers upon the
persons designated to vote the shares discretionary authority to vote with
respect to such matter in accordance with their best judgment.
The Company's 1997 Annual Report to Stockholders, including financial
statements, was furnished to stockholders prior to or concurrently with the
mailing of this proxy material.
By Order of the Board of Directors,
J. Mitchell Dolloff
Secretary
15
<PAGE> 19
ACORN PRODUCTS, INC.
500 DUBLIN AVENUE
COLUMBUS, OHIO 43215
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 9, 1997
The undersigned hereby appoints J. Mitchell Dolloff and Stephen M.
Kasprisin, or either of them, my attorneys and proxies, with full power of
substitution, to vote at the annual meeting of stockholders of said
corporation to be held at the Hyatt Regency, 350 North Street, Columbus, Ohio
on Tuesday, December 9, 1997, and any adjournment thereof, with all of the
powers I would have if personally present for the following purposes:
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 20
A [X] Please mark your
votes as in this
example
FOR ALL NOMINEES WITHOUT AUTHORITY
LISTED A RIGHT TO VOTE FOR
(EXCEPT AS MARKED ALL NOMINEES
TO THE CONTRARY) LISTED AT RIGHT
1. THE ELECTION [ ] [ ] Nominees: William W. Abbott
OF DIRECTORS Matthew S. Barrett
Stephen A. Kaplan
John. I. Leahy
(INSTRUCTIONS: Do not check "WITHOUT AUTHORITY" Gabe Mihaly
to vote for only certain individual nominees. To Conor D. Reilly
withhold authority to vote for any (individual
nominee, strike a line through the nominee's name
at right and check "FOR")
FOR AGAINST ABSTAIN
2. RATIFICATION OF ERNST & YOUNG LLP [ ] [ ] [ ]
AS AUDITORS FOR THE 1998 FISCAL
YEAR.
3. TO TRANSCRIPT SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENT THEREOF.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, AND 3.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders elected November 6, 1997, the Proxy Statement furnished therewith,
and the Annual Report to Stockholders of the Company for the fiscal year ended
August 1, 1997. Any proxy heretofore given to vote said shares is hereby
revoked.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
(Signature) (Signature) Dated: 1997
---------------- ------------------ ------------
Note: Signature(s) must agree with the names(s) printed on this Proxy. If
shares are registered in two names, both stockholders should sign this Proxy.
If signing as an attorney, executor, administrator, trustee or guardian, please
give your full title as such.
