<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ACORN PRODUCTS, INC.
- --------------------------------------------------------------------------------
(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
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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>
ACORN PRODUCTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
JUNE 22, 1999
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
<PAGE>
ACORN PRODUCTS, INC.
500 Dublin Avenue
Columbus, Ohio 43215
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 20, 1999
To Our Stockholders:
The Annual Meeting of Stockholders of Acorn Products, Inc. will be held at
the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, 43rd Floor,
Los Angeles, California on Tuesday, June 22, 1999, at 10:00 a.m., local time,
for the following purposes:
(1) To elect six (6) Directors of the Company, each to serve for
terms expiring at the next Annual Meeting of Stockholders;
(2) To ratify the appointment of Ernst & Young LLP as the Company's
independent certified public accountants for fiscal 1999;
(3) To approve an amendment increasing the number of shares available for
issuance under the Company's Amended and Restated 1997 Non-Employee
Director Stock Option Plan from 25,000 to 200,000; and
(4) 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>
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 June 22, 1999, and
at any adjournment thereof (the "Annual Meeting"). 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 May 20, 1999.
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, FOR the ratification of Ernst & Young
LLP as independent certified public accountants for the current fiscal year and
FOR an amendment increasing the number of shares available for issuance under
the Company's Amended and Restated 1997 Non-Employee Director Stock Option Plan
("the Director Option Plan") from 25,000 to 200,000. 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 May 14, 1999, will be entitled to vote at the Annual Meeting. At that time,
the Company had 6,021,705 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>
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 Annual Meeting of Stockholders to continue
service as Directors. The nominees for Directors, if elected, will serve for
one-year terms expiring at the next Annual Meeting of Stockholders.
Conor D. Reilly, Gabe Mihaly, William W. Abbott, Matthew S. Barrett,
Stephen A. Kaplan and John I. Leahy currently are 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 47 Chairman of the Board and Director of the Company
Gabe Mihaly 51 President, Chief Executive Officer, and Director of the Company
William W. Abbott 67 Director of the Company
Matthew S. Barrett 39 Director of the Company
Stephen A. Kaplan 40 Director of the Company
John I. Leahy 68 Director of the Company
</TABLE>
CONOR D. REILLY became Chairman and a director of the Company and
UnionTools, Inc. ("UnionTools") in August 1996. Mr. Reilly has been a partner
at Gibson, Dunn & Crutcher LLP since January 1988. Mr. Reilly has been a
director of John Deere Insurance Group, Inc. since August 1992.
GABE MIHALY became President and Chief Executive Officer of UnionTools in
May 1991 and President, Chief Executive Officer and a director of the Company in
August 1996.
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 Procter & Gamble as a Senior Vice President in charge of worldwide sales
and other operations. He currently serves as a member of the Boards of
Directors of Horace Mann Educators Company and Fifth Third Bank of Naples,
Florida, a member of the Advisory Board of Manco, a member of the Board of
Overseers of the Duke Cancer Center and an Executive Professor of Florida
Gulf Coast University.
2
<PAGE>
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. Mr. Kaplan currently serves as a member of the Board of
Directors of KinderCare Learning Centers, Inc.
JOHN I. LEAHY became a director of the Company in August 1994. Mr. Leahy
has been the President of Management and 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 Company, where he was President
and Group Executive, Western Hemisphere. Mr. Leahy currently serves as a
director of Allied Capital Company and several privately held companies.
Mr. Leahy is a Trustee of The Sellinger School of Business and Management 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 four meetings during
fiscal 1998. During fiscal 1998, 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 receive
the following annual compensation: (i) $20,000 paid, at the director's election,
either in shares of Common Stock pursuant to the Company's Deferred Equity
Compensation Plan for Directors (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 issued under the Director Option Plan; 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, (ii) review and monitor key
employee compensation policies and administer the Company's management
compensation plans and (iii) monitor the performance of the Company's senior
officers and develop succession and career planning related thereto. 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.
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 May 14, 1999.
3
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)(2)
-----------------------------------
STOCKHOLDER NUMBER PERCENT
- ----------------------------------------------------------------------- -------------------- --------------
<S> <C> <C>
The TCW Group, Inc.(3)................................................ 3,162,049 52.5%
Oaktree Capital Management, LLC(4).................................... 1,107,500 18.4%
OCM Principal Opportunities Fund, L.P................................. 1,107,500 18.4%
J. & W. Seligman & Co. Incorporated(5)................................ 721,715 12.0%
Gabe Mihaly(6)........................................................ 102,036 1.7%
J. Mitchell Dolloff(7)................................................ 24,375 *
James B. Farland(8)................................................... 22,000 *
Thomas A. Hyrb(9)..................................................... 30,450 *
Stephen M. Kasprisin(10).............................................. 33,950 *
Conor D. Reilly(11)................................................... 51,886 *
William W. Abbott(12)................................................. 18,586 *
Matthew S. Barrett(13)................................................ 1,107,500 18.4%
Stephen A. Kaplan(14)................................................. 1,107,500 18.4%
John I. Leahy(15)..................................................... 23,946 *
All directors and executive officers as a group (10 persons) (16)..... 1,414,729 22.6%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 of J. & W. Seligman & Co. Incorporated ("JWS") is 100 Park Avenue,
New York, New York 10017. 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 34108. 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 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
4
<PAGE>
Common Stock: TCW Special Credits Fund III (660,036 shares or 11.0%); TCW
Special Credits Fund IIIb (625,988 shares or 10.4%); and TCW Special
Credits Trust IIIb (447,124 shares or 7.4%). 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) JWS directly owns 277,720 shares, or 4.6%, of the Common Stock. JWS, as an
investment adviser for Seligman Value Fund Series, Inc. - Seligman Small
Cap Value Fund (the "Fund"), may be deemed to beneficially own the shares
of the Fund. The Fund owns 430,000 shares, or 7.1%, of the Common Stock.
William C. Morris, as the owner of a majority of the outstanding voting
securities of JWS, may be deemed to beneficially own the shares reported by
JWS. The information in this note is taken from a Schedule 13G filed by
the persons named herein.
(6) Includes 17,925 shares of Common Stock which are owned jointly by Mr.
Mihaly and his spouse. Also includes 84,111 shares of Common Stock
issuable pursuant to options exercisable within 60 days. Excludes 52,889
shares of Common Stock issuable pursuant to options not exercisable within
60 days.
(7) Reflects 24,375 shares of Common Stock issuable pursuant to options
exercisable within 60 days. Excludes 23,717 shares of Common Stock issuable
pursuant to options not exercisable within 60 days.
(8) Mr. Farland's employment with UnionTools ended upon his death in August
1998. Includes 20,300 shares of Common Stock issuable pursuant to
currently exercisable options that may be exercised by Mr. Farland's heirs
and beneficiaries.
(9) Reflects 30,450 shares of Common Stock issuable pursuant to options
exercisable within 60 days. Excludes 24,790 shares of Common Stock issuable
pursuant to options not exercisable within 60 days.
(10) Includes 3,500 shares of Common Stock which are owned jointly by Mr.
Kasprisin and his spouse. Also includes 30,450 shares of Common Stock
issuable pursuant to options exercisable within 60 days. Excludes 10,150
shares of Common Stock issuable pursuant to options not exercisable within
60 days.
(11) Includes 1,050 shares of Common Stock held by Mr. Reilly's minor children.
Mr. Reilly, as custodian, holds voting and dispositive power over such
shares. Also includes 33,861 shares of Common Stock issuable pursuant to
options exercisable within 60 days (5,760 of which are subject to
stockholder approval of an increase in the number of shares of Company
Common Stock issuable pursuant to the Director Option Plan). Does not
include 5,079 shares of Common Stock issuable pursuant to the Director
Stock Plan. Excludes 8,125 shares of Common Stock issuable pursuant to
options not exercisable within 60 days.
(12) Includes 9,486 shares of Common Stock issuable pursuant to options
exercisable within 60 days (5,760 of which are subject to stockholder
approval of an increase in the number of shares of Company Common Stock
issuable pursuant to the Director Option Plan). Does not include 5,079
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. 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 9,486 shares of Common Stock
issuable pursuant to options exercisable within 60 days (5,760 of which are
subject to stockholder approval of an increase in the number of shares of
Company Common Stock issuable pursuant to the Director Option Plan) and
5,079 shares of Common Stock issuable pursuant to the Director Stock Plan.
Pursuant to TCW's policy, all compensation paid to Mr. Barrett is donated
to charity.
5
<PAGE>
(14) 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 9,486 shares of Common Stock issuable
pursuant to options exercisable within 60 days (5,760 of which are subject
to stockholder approval of an increase in the number of shares of Company
Common Stock issuable pursuant to Director Option Plan) and 5,079 shares of
Common Stock issuable pursuant to the Director Stock Plan. Pursuant to
Oaktree's policy, all compensation paid to Mr. Kaplan is contributed to the
Oaktree Fund.
(15) Includes 9,486 shares of Common Stock issuable pursuant to options
exercisable within 60 days (5,760 of which are subject to stockholder
approval of an increase in the number of shares of Company Common Stock
issuable pursuant to the Director Option Plan). Does not include 2,539
shares of Common Stock issuable pursuant to the Director Stock Plan.
(16) See notes (6) through (15) above.
EXECUTIVE OFFICERS
In addition to Mr. Reilly and Mr. Mihaly, the following persons are executive
officers of the Company:
J. MITCHELL DOLLOFF, age 33, was named Senior Vice President, Finance and
Administration of the Company and UnionTools in May 1999 and President of the
Company's watering products division in June 1998. Mr. Dolloff joined the
Company and UnionTools in June 1997 as Vice President, General Counsel and
Director of Investor Relations and in February 1998 was named Vice President
Corporate Development. From October 1991 to June 1997, Mr. Dolloff was an
attorney at Gibson, Dunn & Crutcher LLP.
THOMAS A. HYRB, age 55, became Senior Vice President of Operations of
UnionTools in May of 1999 and Vice President of Operations of UnionTools in
August 1991.
STEPHEN M. KASPRISIN, age 45, 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. Mr. Kasprisin has resigned his
employment with the Company and UnionTools effective June 1999.
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>
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 1998 exceeded $100,000 (the
"Named Executive Officers"). Mr. Mihaly's, Mr. Kasprisin's, and Mr. Dolloff's
cash compensation was paid by the Company. Mr. Farland's and Mr. Hyrb's cash
compensation was paid by UnionTools. Non-cash compensation, other than options
to purchase Common Stock, was paid by UnionTools.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)(2)(3)(4)
- ---------------------------------- ----------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
GABE MIHALY 1998 $309,145 -- 20,325 $11,284
President and Chief Executive 1997 299,269 $198,890 20,325 93,628
Officer of the Company and 1996 286,461 14,000 -- 22,706
UnionTools
J. MITCHELL DOLLOFF(5) 1998 155,000 -- 8,125 15,845
Senior Vice President, Finance 1997 14,307 20,000 8,125 --
and Administration of the
Company and UnionTools and
President of Watering Products
Division
JAMES B. FARLAND(6) 1998 183,681 -- 10,150 20,374
Vice President Sales and 1997 179,614 26,942 10,150 11,101
Marketing of UnionTools 1996 171,592 49,450 -- 19,360
THOMAS A. HYRB 1998 173,677 -- 10,150 9,943
Senior Vice President of 1997 169,830 25,475 10,150 9,850
Operations of UnionTools 1996 151,335 46,500 -- 60,383
STEPHEN M. KASPRISIN 1998 173,085 -- 10,150 9,924
Chief Financial Officer and Vice 1997 169,252 25,388 10,150 10,623
President of the Company and 1996 154,530 46,359 -- 21,999
UnionTools
- ----------------------
</TABLE>
(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.
7
<PAGE>
(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.
(4) Amounts shown for fiscal 1998 include the following: (a) $5,724, $3,130,
$5,736, $5,736 and $5,736 of matching benefits paid under the Company's
defined contribution 401(k) plan for Messrs. Mihaly, Dolloff, Farland,
Hyrb and Kasprisin, respectively; (b) $2,553 paid by the Company with
respect to supplementary life insurance for the benefit of Mr. Mihaly; (c)
$11,119 paid by the Company with respect to relocation expenses of Mr.
Dolloff; and (d) a one time extraordinary bonus of $10,778 paid to Mr.
Farland.
(5) Mr. Dolloff commenced employment with the Company and UnionTools in June
1997.
(6) Mr. Farland's employment with UnionTools ended upon his death in August
1998.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain information regarding the number and
value of stock options held by the Company's Named Executive Officers at July
31, 1998.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL
ON VALUE OPTIONS AT FISCAL YEAR-END (#) YEAR-END ($)(2)
EXERCISE REALIZED ------------------------------ ---------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gabe Mihaly 0 $ 0 63,786 40,650 $88,929 $ 0
J. Mitchell Dolloff 0 0 16,250 16,250 0 0
James B. Farland 0 0 20,300 20,300 0 0
Thomas A. Hyrb 0 0 20,300 20,300 0 0
Stephen M. Kasprisin 0 0 20,300 20,300 0 0
- --------------------
</TABLE>
(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
($5.125 based on the average of the high and low sale prices on July 31,
1998). An option is in-the-money if the fair market value of the
underlying shares exceeds the exercise price of the option.
PENSION PLANS
UnionTools maintains seven 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 1998 covered compensation.
8
<PAGE>
<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
160,000 and above 54,000 72,000 90,000 90,000 90,000
- ---------------------------
</TABLE>
(1) Based on final earnings.
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 $160,000 as required by the Employee Retirement Income
Security Act of 1974. Messrs. Mihaly, Dolloff, Farland, Hyrb and Kasprisin have
credited service of approximately 7, 1, 6, 6 and 9 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 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 1998 covered compensation.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------
REMUNERATION(1) 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$175,000 $ 5,062 $ 6,750 $ 8,437 $ 8,437 $ 8,437
200,000 13,500 18,000 22,500 22,500 22,500
225,000 21,938 29,250 36,563 36,563 36,563
250,000 30,375 40,500 50,625 50,625 50,625
300,000 47,250 63,000 78,750 78,750 78,750
400,000 81,000 108,000 135,000 135,000 135,000
- -----------------------
</TABLE>
(1) Based on final earnings.
For Mr. Mihaly, the Supplemental Pension Plan covers compensation as listed
in the summary compensation table above $160,000. Mr. Mihaly has credited
service of approximately 7 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.
9
<PAGE>
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, 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. The payment of Mr. Mihaly's one-time cash bonus was deferred to
October 1998. 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.
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 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 MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
The Management Development and Compensation Committee of the Board of
Directors of the Company (the "Compensation Committee") was formed in March 1997
and consists entirely of non-employee directors. The Compensation 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 Compensation Committee believes that compensation must (i) be competitive
with similar companies in order to attract, motivate and retain the managers
necessary to lead and grow the Company's business and (ii) provide strong
incentives for key managers to achieve the Company's goals. The Compensation
Committee retained Ernst & Young LLP to assist it in the process of implementing
a new compensation program beginning in fiscal 1998. A primary goal of the new
compensation program is to link executive officer compensation to performance
that enhances stockholder value. The components of compensation for the
Company's executive officers are base salary, annual cash incentives and long-
term incentives in the form of stock options and restricted stock grants. Each
of these components is discussed in more detail below.
10
<PAGE>
BASE SALARY
In determining the base salaries of the Company's executive officers, the
primary information considered by the Compensation Committee is data regarding
salaries paid to executives in similar positions at similar companies. The
Compensation Committee strives to set base salaries for the Company's executive
officers at, or slightly below, average levels indicated by the survey data,
while attempting to set total cash compensation at average market levels
indicated by the survey data. The Compensation Committee also considers the
possible need for an adjustment in targeted base salary to reflect a change in
an executive's position or responsibilities or to encourage a new executive to
join the Company.
The Compensation Committee reviews the base salaries of the executive
officers annually and otherwise when a change in circumstances so warrants. In
addition to salary survey data, the Compensation Committee's review is based
primarily on the following subjective factors: (i) the officer's performance
regarding planning, organizing and performing assigned tasks; (ii) the officer's
performance in contributing to the Company's profitability; (iii) the officer's
performance in managing personnel; and (iv) the executive's contribution to
defining and achieving the Company's strategic goals.
Pursuant to the Company's employment agreement with its President and Chief
Executive Officer, the Compensation Committee increased his fiscal 1998 base
salary by 3.3%, reflecting increases in the consumer price index. The
Compensation Committee increased the fiscal 1998 base salaries of three of the
Company's executive officers by 2.3% based on the subjective factors enumerated
above.
ANNUAL CASH INCENTIVE
The Company's annual cash incentive plan (the "Incentive Plan") is designed
to reward executive officers of the Company for achieving corporate performance
objectives and to align the interests of executives officers with the interests
of the Company and its stockholders. Targeted awards under the Incentive Plan
are based on a specified percentage of each executive's base salary, 40% for the
Company's President and Chief Executive Officer and 30% for each of the other
executive officers. Awards are capped at 200% of the targeted amount. Eighty
percent of each executive's available award is contingent upon achievement of
corporate economic value created ("EVC") targets, while the remaining 20% is
based on a discretionary assessment of personal or functional performance.
The Company did not achieve the fiscal 1998 EVC targets specified in the
Incentive Plan and the Compensation Committee did not make awards based on its
discretionary assessment of the performance of the Company's executive officers.
Accordingly, no awards were made to executives under the Incentive Plan with
regard to fiscal 1998.
LONG-TERM INCENTIVES
The Company's long-term incentive plan (the "LTIP") is designed to attract
and retain key executives, to allow executives to share in the ownership of the
Company and to motivate executives to achieve long-term goals that are essential
to the company's success. Targeted awards under the LTIP are based on a
specified percentage of each executive's base salary, 50% for the Company's
President and Chief Executive Officer and 40% for each of the other executive
officers. Awards are capped at 300% of the targeted amount. The Compensation
Committee strives to set targeted awards under the LTIP at the average level of
long-term incentive compensation paid to executives in similar positions at
similar companies. Of the total LTIP award, 75% is payable in stock options and
25% is payable in restricted stock.
The number of stock options granted under the LTIP is determined by the
Black-Scholes option pricing model. The stock options are granted at the
beginning of the fiscal year, have a ten-year term and vest over four years
beginning 12 months from the date of grant. Upon the completion of the
Company's initial public offering of its Common Stock in June 1997 (the end of
fiscal 1997) and prior to the adoption of the Company's current compensation
program, the Compensation Committee awarded incentive stock options to the
Company's executive officers. As a result of these stock option grants, no
additional stock option awards were made to the Company's executive officers
under the LTIP during fiscal 1998.
Awards of restricted stock under the LTIP are available to executives only
if the Company's cumulative total return to stockholders over the applicable
fiscal year exceeds the Company's weighted average cost of capital
11
<PAGE>
("WACC") at the end of the prior fiscal year. The number of shares of
restricted stock granted under the LTIP is based on a comparison of the
cumulative total return to stockholders during the applicable fiscal year to the
annual return by the S&P 500 index group for the prior twelve-month period.
Restricted stock awards have three-year cliff vesting. The cumulative total
return to stockholders during fiscal 1998 did not exceed the WACC target
specified under the LTIP. Accordingly, no restricted stock awards were made to
the Company's executive officers under the LTIP with regard to fiscal 1998.
INTERNAL REVENUE CODE SECTION 162(m)
The Budget Reconciliation Act of 1993 amended the Internal Revenue Code
(the "Code") to add Section 162(m) which bars a deduction to any publicly held
Company for compensation paid to a "covered employee" in excess of $1,000,000
per year. Generally, the Compensation 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>
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 13 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 7/97 7/98
------- ---- ----
<S> <C> <C> <C>
ACORN PRODUCTS, INC. $100.00 $ 95.58 $ 36.28
NASDAQ STOCK MARKET (U.S.) $100.00 $109.85 $129.64
NASDAQ NON-FINANCIAL $100.00 $106.70 $124.88
</TABLE>
* $100 INVESTED ON 6/24/97 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING JULY 31.
13
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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
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 $1.2 million to Gibson, Dunn
& Crutcher LLP in fiscal 1998.
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. Mr. Mihaly repaid the loan in full in
October 1998.
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 July 31, 1998.
Although the Delaware General Company 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 1999 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 July 31, 1998, except for late filings
of Form 5 for the fiscal year ended July 31, 1998 for Messrs. Reilly, Abbott,
Barrett, Kaplan, and Leahy.
14
<PAGE>
AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors has approved an amendment to the Director Option
Plan, subject to approval of the amendment by the stockholders at the Annual
Meeting, to increase the number of shares available for issuance under the
Director Option Plan from 25,000 to 200,000. Approval of this amendment
requires the affirmative vote of the holders of a majority of the shares of the
Company's common stock represented at the Annual Meeting. The following summary
does not purport to be complete and is qualified in its entirety by the terms of
the Director Option Plan which is attached hereto as Appendix A.
PURPOSE OF THE DIRECTOR OPTION PLAN
The Company's Board of Directors created the Director Option Plan to enable
the Company to attract and retain persons to serve as non-employee directors of
the Company. The Company's Board of Directors has approved an amendment to the
Director Option Plan to increase the number of shares of the Company's Common
Stock reserved for issuance upon the exercise of options granted under the
Director Option Plan from 25,000 shares to 200,000 shares.
The Director Option Plan was adopted by the Board of Directors as of
December 9, 1997. The amendment increasing the number of shares of the
Company's common stock issuable under the Director Option Plan was adopted by
the Company's Board of Directors on March 2, 1999. All options granted under
the Director Option Plan are non-qualified options. The Director Option Plan
also allows the Board of Directors to grant Stock Appreciation Rights and
Restricted Stock.
ADMINISTRATION OF THE DIRECTOR OPTION PLAN
The Director Option Plan is administered by the Board of Directors or a
Committee which, under the Director Option Plan, must consist of not less than
two members of the Board of Directors appointed by the Board who are "non-
employee directors" as defined by Rule 16b-3(b)(2)(i) under the Securities
Exchange Act of 1934, as amended.
With respect to all eligible persons, the Committee is authorized to
determine to whom and at what time options may be granted. The Committee
determines the number of shares subject to option, the duration of the option,
the per share exercise price, and the rate and manner of exercise.
The exercise price of the option may be paid (i) in cash, (ii) shares of
Common Stock, or (iii) a combination of cash and shares of Common Stock, or (iv)
in the sole discretion of the Committee, through a cashless exercise procedure
involving a broker, or (v) such other consideration as the Committee may deem
appropriate.
TERM OF THE DIRECTOR OPTION PLAN
The Director Option Plan terminates on December 9, 2007, unless earlier
terminated by the Board of Directors.
AMENDMENT
The Board of Directors may terminate, amend or modify the Director Option
Plan at any time provided any amendment which requires the approval of the
stockholders of the Company under the Code or Section 16 of the Securities
Exchange Act of 1934, as amended, or the regulations promulgated thereunder,
will be subject to such approval in accordance with the applicable law or
regulations. No amendment, modification or termination of the Director Option
Plan may in any manner adversely affect any option previously granted under the
Director Option Plan without the consent of the option holder or a permitted
transferee of such option holder.
15
<PAGE>
DIRECTOR OPTION PLAN TABLE
As of May 1, 1999, options to purchase an aggregate of 47,430 shares of the
Company's Common Stock had been granted pursuant to the Director Option Plan
(the grant of 28,800 shares under the Director Option Plan are subject to the
approval of the amendment to increase the number of shares authorized for
issuance under the Director Option Plan), no options had been exercised, options
to purchase 47,430 shares remained outstanding, and 152,570 shares remained
available for future grant (subject to the approval of the increase in the
number of authorized shares). As of May 14, 1999, the market value of all
shares of the Company's Common Stock subject to outstanding options under the
Director Option Plan was approximately $281,615 (based upon the closing sale
price per share of the Company's Common Stock as reported on the Nasdaq National
Market on May 14, 1999). During the 1998 fiscal year, options covering 18,630
shares of the Company's Common Stock were granted to non-employee directors of
the Company under the Director Option Plan. Shares underlying presently
exercisable, but unexercised, options will constitute outstanding shares of the
Company's Common Stock for purposes of calculating the Company's net income per
share. The market value of the 200,000 shares of the Company's Common Stock to
be subject to the Director Option Plan was approximately $1,187,500 as of May
14, 1999.
As of May 14, 1999, the following current directors named in the this Proxy
Statement had been granted options under the Director Option Plan as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AVERAGE EXERCISE PRICE
NAME GRANTED(1) PER SHARE
---- ---------- ---------
<S> <C> <C>
Conor D. Reilly 9,486 $8.09
William W. Abbott 9,486 $8.09
Matthew S. Barrett 9,486 $8.09
Stephen A. Kaplan 9,486 $8.09
John I. Leahy 9,486 $8.09
</TABLE>
(1) Each director named in the table was granted 5,760 shares under the
Director Option Plan on January 1, 1999. These grants are subject to the
approval of the increase of the number of shares that may be issued under
the Director Option Plan to which this Proxy statement relates.
FEDERAL INCOME TAX CONSEQUENCES
NONQUALIFIED STOCK OPTIONS. Generally, no income is recognized when a
nonqualified stock option is granted to the optionholder. Generally, upon the
exercise of a nonqualified stock option, the excess of the fair market value of
the shares on the date of exercise over the option price is ordinary income to
the optionholder at the time of the exercise. The tax basis for the shares
purchased is their fair market value on the date of exercise. Any gain or loss
realized upon a later sale of the shares for an amount in excess of or less than
their tax basis will be taxed as capital gain or loss, with the character of the
gain or loss (short-term or long-term) depending upon how long the shares were
held since exercise.
EXERCISE WITH PREVIOUSLY-OWNED SHARES. All options granted under the
Director Option Plan may be exercised with payment either in cash or, if
authorized in its sole discretion by the Company's Board of Directors, in
previously-owned shares of the Company Common Stock at their then fair market
value, or in a combination of both. When previously-owned shares ("Old Shares")
are used to purchase shares ("New Shares") upon the exercise of an option, no
gain or loss is recognized by the optionholder to the extent that the total
value of the Old Shares surrendered does not exceed the total value of all of
the New Shares received. If, as would almost always be the case, the value of
the New Shares exceeds the value of the Old Shares, the excess amount is taxable
as ordinary income.
THE COMPANY DEDUCTION. The Company is entitled to a tax deduction in
connection with the exercise of a Non-Statutory Stock Option equal to the
ordinary income recognized by the optionholder (conditioned upon proper
reporting and tax withholding and subject to possible deduction limitations).
16
<PAGE>
1997 TAX ACT. Under recently enacted legislation, capital gains recognized
by optionholders generally will be subject to a maximum federal income tax rate
of 20%, provided the shares sold or exchanged are held for more than eighteen
(18) months. If the shares are held for more than one year but less than
eighteen months, then the capital gains recognized by optionholders will be
taxed at a maximum federal income tax rate of 28%.
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
at the Annual Meeting is required to adopt the amendment to the Director Option
Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL
OF THE AMENDMENT TO THE DIRECTOR OPTION PLAN. UNLESS A CONTRARY CHOICE IS
SPECIFIED, PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
APPROVAL OF THE DIRECTOR OPTION PLAN.
PROPOSALS BY STOCKHOLDERS FOR THE NEXT 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 December 1999, 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, 1999. Any proposal submitted outside the processes of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, for presentation at the next Annual
Meeting of Stockholders will be considered untimely for purposes of Rules 14a-4
and 14a-5 if notice thereof is received by the Company after September 1, 1999.
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 1998 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
17
<PAGE>
APPENDIX A
ACORN PRODUCTS, INC.
AMENDED AND RESTATED
1997 NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
1. ESTABLISHMENT AND PURPOSE OF THE PLAN. This 1997 Nonemployee
Director Stock Incentive Plan (the "Plan") is established by Acorn Products,
Inc., a Delaware corporation (the "Company"), as of December 9, 1997. The
Plan is designed to enable the Company to attract and retain persons to serve
as nonemployee directors of the Company, UnionTools, Inc., a Delaware
corporation ("UnionTools"), or the Company's other direct and indirect
subsidiaries. The Plan provides for the grant of options ("Options") that do
not qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), for the grant of stock
appreciation rights ("Stock Appreciation Rights") and for the sale or grant
of restricted stock ("Restricted Stock").
2. STOCK SUBJECT TO THE PLAN. The maximum number of shares of
stock that may be subject to Options or Stock Appreciation Rights granted
hereunder and the number of shares of stock that may be sold as Restricted
Stock hereunder, shall not in the aggregate exceed 200,000 shares of common
stock, $0.001 par value (the "Shares," and individually, a "Share"), of the
Company, subject to adjustment under Section 11 hereof. Anything contained
herein to the contrary notwithstanding, the aggregate number of Shares with
respect to which Options or stock appreciation rights may be granted during
any calendar year to any individual shall be limited to 200,000. The Shares
that may be subject to Options granted under the Plan, and Restricted Stock
sold or granted under the Plan, may be authorized and unissued Shares or
Shares reacquired by the Company and held as treasury stock.
Shares that are subject to the unexercised portions of any Options
that expire, terminate or are canceled, and Shares that are not required to
satisfy the exercise of any Stock Appreciation Rights that expire, terminate
or are canceled, and Shares of Restricted Stock that are reacquired by the
Company pursuant to the restrictions thereon, may again become available for
the grant of Options or Stock Appreciation Rights and the sale or grant of
Restricted Stock under the Plan. If a Stock Appreciation Right is exercised,
any Option or portion thereof that is surrendered in connection with such
exercise shall terminate and the Shares theretofore subject to the Option or
portion thereof shall not be available for further use under the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Management Development and Compensation Committee (the "Committee")
consisting of not less than two members appointed by the Board of Directors
(the "Board") of the Company. If no persons are designated by the Board to
serve on the Committee, the Plan shall be administered by the Board and all
references herein to the Committee shall refer to the Board. From time to
time, the Board shall have the discretion to add, remove or replace members
of the Committee and shall have the sole authority to fill vacancies on the
Committee. All actions of the Committee shall comply with the provisions of
Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and Section 162(m) of the Code.
All actions of the Committee shall be authorized by a majority vote
thereof at a duly called meeting. The Committee shall have the sole
authority, in its absolute discretion, to adopt, amend, and rescind such
rules and regulations as, in its opinion, may be advisable in the
administration of the Plan, to construe and interpret the Plan, the rules and
regulations, and the agreements and other instruments evidencing Options and
Stock Appreciation Rights granted and Restricted Stock sold or granted under
the Plan and to make all other determinations deemed necessary or advisable
for the administration of the Plan. All decisions, determinations, and
interpretations of the Committee shall be final and conclusive upon the
Eligible Directors, as hereinafter defined. Notwithstanding the foregoing,
any dispute arising under any Agreement (as defined below) shall be resolved
pursuant to the dispute resolution mechanism (if any) set forth in such
Agreement.
Subject to the express provisions of the Plan, the Committee shall
determine the number of Shares subject to grants or sales and the terms
thereof, including the provisions relating to the exercisability of Options
and Stock Appreciation Rights, lapse and non-lapse restrictions upon the
Shares obtained or obtainable under the Plan and the termination and/or
forfeiture of Options and Stock Appreciation Rights and Restricted Stock
under the Plan.
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The terms upon which Options and Stock Appreciation Rights are granted and
Restricted Stock is sold or granted shall be evidenced by a written agreement
executed by the Company and the Participant (as defined below) to whom such
Options, Stock Acquisition Rights and Restricted Stock are sold or granted
(the "Agreement").
4. ELIGIBILITY. Persons who shall be eligible for grants of
Options or Stock Appreciation Rights or sales or grants of Restricted Stock
hereunder ("Eligible Directors") shall be directors of the Company who are
not employees of the Company, UnionTools or the Company's other direct or
indirect subsidiaries ("Participant").
5. TERMS AND CONDITIONS OF OPTIONS. No Option shall be granted
for a term of more than ten years and thirty days. Options may, in the
discretion of the Committee, be granted with associated Stock Appreciation
Rights or be amended so as to provide for associated Stock Appreciation
Rights. The Agreement may contain such other terms, provisions and conditions
as may be determined by the Committee as long as such terms, conditions and
provisions are not inconsistent with the Plan.
6. EXERCISE PRICE OF OPTIONS. The exercise price per share for
each Option granted hereunder shall be set forth in the Agreement.
Payment for Shares purchased upon exercise of any Option granted
hereunder shall be in cash at the time of exercise, except that, if either
the Agreement so provides or the Committee so permits, and if the Company is
not then prohibited from purchasing or acquiring Shares, such payment may be
made in whole or in part with Shares owned for more than six months. The
Committee also may on an individual basis permit payment or agree to permit
payment by such other alternative means as may be lawful, including by
delivery of an executed exercise notice together with irrevocable
instructions to a broker promptly to deliver to the Company the amount of
sale or loan proceeds required to pay the exercise price.
7. DETERMINATION OF FAIR MARKET VALUE. The Fair Market Value of a
Share for the purposes of the Plan shall mean the average of the high and low
sale prices of a Share on the date such determination is required herein, or
if there were no sales on such date, the average of the closing bid and asked
prices, as reported on the principal United States securities exchange on
which the Shares are listed or, in the absence of such listing, on the Nasdaq
National Market or, if Shares are not at the time listed on a national
securities exchange or traded on the Nasdaq National Market, the value of a
Share on such date as determined in good faith by the Committee.
8. NON-TRANSFERABILITY. Except to the extent provided otherwise
in the Agreement, any Option granted under the Plan shall by its terms be
nontransferable by the Participant other than by will or the laws of descent
and distribution (in which case such descendant or beneficiary shall be
subject to all terms of the Plan applicable to Participants) and is
exercisable during the Participant's lifetime only by the Participant or by
the Participant's guardian or legal representative.
9. STOCK APPRECIATION RIGHTS. The Committee may, under such terms
and conditions as it deems appropriate, grant to any Eligible Director
selected by the Committee, Stock Appreciation Rights, which may or may not be
associated with Options. Upon exercise of a Stock Appreciation Right, the
Participant shall be entitled to receive payment of an amount equal to the
excess of the Fair Market Value of the underlying Shares on the date of
exercise over the exercise price of the Stock Appreciation Rights. Such
payment may be made in additional Shares valued at their Fair Market Value on
the date of exercise or in cash, or partly in Shares and partly in cash, as
the Committee may designate. The Committee may require that any Stock
Appreciation Right shall be subject to the condition that the Committee may
at any time, in its absolute discretion, not allow the exercise of such Stock
Appreciation Right. The Committee may further impose such conditions on the
exercise of Stock Appreciation Rights as may be necessary or desirable to
comply with Rule 16b-3 under the Exchange Act.
10. RESTRICTED STOCK. The Committee may sell or grant Restricted
Stock under the Plan (either independently or in connection with the exercise
of options or Stock Appreciation Rights under the Plan) to Eligible Directors
selected by the Committee. The Committee shall in each case determine the
number of Shares of Restricted Stock to be sold or granted, the price at
which such Shares are to be sold, if applicable, and the terms or duration of
the restrictions to be imposed upon those Shares.
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11. ADJUSTMENTS. If at any time the class of Shares subject to the
Plan is changed into or exchanged for a different number or kind of shares or
securities, as the result of any one or more reorganizations,
recapitalizations, stock splits, reverse stock splits, stock dividends or
similar events, or in the event of a rights offering to purchase Shares at a
price substantially below Fair Market Value, an appropriate adjustment
consistent with such change, exchange or offering shall be made in the
number, exercise or sale price and/or type of shares or securities for which
Options or Stock Appreciation Rights may thereafter be granted and Restricted
Stock may thereafter be sold or granted under the Plan in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement
of the rights granted to, or available for, participants in the Plan. Any
such adjustment in outstanding Options or in outstanding rights to purchase
Restricted Stock shall be made without changing the aggregate exercise price
applicable to the unexercised portions of such Options or the aggregate
purchase price of such Restricted Stock, as the case may be.
12. CHANGE OF CONTROL. Notwithstanding any provision of this Plan
to the contrary, in the event of a Change of Control (as defined below), all
Options and Stock Appreciation Rights that have been granted by the Board as
of the date thereof shall vest and become exercisable, as the case may be,
immediately prior to the effective time of any Change of Control and all
conditions to exercise thereof shall be deemed to have been met.
For purposes of this Section 12, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of
the Exchange Act) shall mean (i) any other Person, directly or indirectly,
controlling or controlled by or under direct or indirect common control with
such specified Person or (ii) any Person who is a director or officer (a) of
such Person, (b) of any subsidiary of such Person or (c) of any Person
described in clause (i) above. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meaning correlative to the foregoing.
"Change of Control" shall mean: (i) the acquisition by any Person (as
defined in Section 13(d) of the Exchange Act) other than TCW or Oaktree, of
beneficial ownership (as defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act, except such Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time) of securities of the Company (a) having 25% or more of the total voting
power of the then outstanding voting securities of the Company and (b) having
more voting power than the securities of the Company beneficially owned by
Oaktree; (ii) during any twelve month period, a change in the Board occurs
such that Incumbent Members do not constitute a majority of the Board; (iii)
a sale of all or substantially all of the assets of the Company or
UnionTools; or (iv) the consummation of a merger or consolidation of the
Company with any other Person, provided, however, that no Change of Control
shall have occurred pursuant to this clause (iv) if (A) after such merger or
consolidation the voting securities of the Company prior to such merger or
consolidation continue to represent more than 50% of the combined voting
power of such Person or (B) if such merger or consolidation does not result
in a material change in the beneficial ownership of the Company's voting
securities.
"Incumbent Members" shall mean the members of the Board on the date
immediately preceding the commencement of a twelve-month period, provided
that any person becoming a Director during such twelve-month period whose
election or nomination for election was approved by a majority of the
Directors who, on the date of such election or nomination for election,
comprised the Incumbent Members shall be considered one of the Incumbent
Members in respect of such twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its
Affiliates, including any partnerships, separate accounts or other entities
managed by Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits
Fund III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW
Special Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits
Trust IV; TCW Special Credits Trust IVa; TCW Special Credits, as investment
manager of Delaware State Employees' Retirement Fund, Weyerhauser Company
Pension Trust and The Common Fund for Bond Investments; and any of their
respective Affiliates.
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13. INVESTMENT REPRESENTATION. Each Agreement may provide that,
upon demand by the Committee for such a representation, the Optionee shall
deliver to the Committee at the time of any exercise of an Option a written
representation that the Shares to be acquired upon such exercise are to be
acquired for investment and not for resale or with a view to the distribution
thereof. Upon such demand, delivery of such representation prior to the
delivery of any Shares issued upon exercise of an Option shall be a condition
precedent to the right of the Optionee or such other person to purchase any
Shares.
14. DURATION OF THE PLAN. Options and Stock Appreciation Rights
may not be granted and Restricted Stock may not be sold or granted under the
Plan after December 9, 2007.
15. AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any
time alter, amend, suspend or terminate the Plan. The Committee may amend the
Plan or any Agreement issued hereunder to the extent necessary for any Option
or Stock Appreciation Right granted or Restricted Stock sold or granted under
the Plan to comply with applicable tax or securities laws.
No Option or Stock Appreciation Right may be granted or Restricted
Stock sold or granted during any suspension or after the termination of the
Plan. No amendment, suspension or termination of the Plan or of any Agreement
issued hereunder shall, without the consent of the affected holder of such
Option or Stock Appreciation Right or Restricted Stock, alter or impair any
rights or obligations in any Option or Stock Appreciation Right or Restricted
Stock theretofore granted or sold to such holder under the Plan.
16. NATURE OF THE PLAN. The grant, exercise or sale of securities
under the Plan is intended to qualify for the exemption from short swing
profits liability under Section 16(b) of the Exchange Act, provided by Rule
16b-3 promulgated thereunder, as such Rule is now in effect or hereafter
amended.
17. CANCELLATION OF OPTIONS. Any Option granted under the Plan may
be canceled at any time with the consent of the holder and a new Option may
be granted to such holder in lieu thereof.
18. WITHHOLDING TAXES. Whenever Shares are to be issued with
respect to the exercise of Options or amounts are to be paid or income earned
with respect to Stock Appreciation Rights or Restricted Stock under the Plan,
the Committee in its discretion may require the Participant to remit to the
Company, prior to the delivery of any certificate or certificates for such
Shares or the payment of any such amounts, all or any part of the amount
determined in the Committee's discretion to be sufficient to satisfy federal,
state and local withholding tax obligations (the "Withholding Obligation")
that the Company or its counsel determines may arise with respect to such
exercise, issuance or payment. Pursuant to a procedure established by the
Committee, the Participant may (i) request the Company to withhold delivery
of a sufficient number of Shares or a sufficient amount of the Participant's
compensation or (ii) deliver a sufficient number of previously-issued Shares,
to satisfy the Withholding Obligation.
19. NO RIGHTS AS STOCKHOLDER. No Participant shall have any
rights as a Stockholder with respect to any Shares subject to his or her
Option or Stock Appreciation Right prior to the date of issuance to him or
her of a certificate or certificate for such Shares.
20. COMPLIANCE WITH GOVERNMENT LAW AND REGULATIONS. The Plan, the
grant and exercise of Options and Stock Appreciation Rights, and the grant
and sale of Restricted Stock thereunder, and the obligation of the Company to
sell and deliver Shares under such Options and Stock Appreciation Rights,
shall be subject to all applicable laws, rules and regulations and to such
approvals by any government or regulatory agency that may be required. The
Company shall not be required to issue or deliver any certificates for Shares
prior to (i) the listing of such Shares on any stock exchange on which Shares
may then be listed and (ii) the completion of any registration or
qualification of such Shares under any state or federal law, or any ruling or
regulation of any governmental body which the Company shall, in its sole
discretion, determine to be necessary or advisable.
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ACORN PRODUCTS, INC.
500 DUBLIN AVENUE, COLUMBUS, OHIO 43215
---------------------------------------------------------
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - JUNE 22, 1999
The undersigned stockholder of Acorn Products, Inc.(the "Company") hereby
appoints Conor D. Reilly, Gabe Mihaly and J. Mitchell Dolloff, or any one of
them, as attorneys and proxies with full power of substitution to each, to vote
all shares of Common Stock of the Company which the undersigned is entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, 43rd Floor, Los
Angeles, California on Tuesday, June 22, 1999 at 10:00 a.m. local time, and at
any adjournment or adjournments thereof, with all of the powers such undersigned
stockholder would have if personally present, for the following purposes:
1. ELECTION OF CONOR D. REILLY, GABE MIHALY, WILLIAM W. ABBOTT, MATTHEW S.
BARRETT, STEPHEN A. KAPLAN AND JOHN I. LEAHY AS DIRECTORS.
/ / FOR
/ / WITHHOLD AUTHORITY FOR EACH NOMINEE
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR A SPECIFIC NOMINEE, WRITE THAT
NOMINEE'S NAME HERE:______________________________________________________.
2. RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR FISCAL 1999.
/ / FOR
/ / AGAINST
3. APPROVE AND ADOPT THE AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED 1997
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN, AS DESCRIBED IN THE COMPANY'S
PROXY STATEMENT.
/ / FOR
/ / AGAINST
4. IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
(CONTINUED FROM OTHER SIDE.)
THIS PROXY, WHEN EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders, dated May 20, 1999, the Proxy Statement and the Annual
Report of the Company furnished therewith. Any proxy heretofore given to vote
said shares is hereby revoked.
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IN THE ENCLOSED ENVELOPE.
Dated: , 1999
-----------------------
----------------------------------
(Signature)
----------------------------------
(Signature)
SIGNATURE(S) SHALL AGREE WITH THE NAME(S) PRINTED ON THIS PROXY. IF SHARES
ARE REGISTERED IN TWO NAMES, BOTH STOCKHOLDERS SHOULD SIGN THIS PROXY. IF
SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE AS SUCH.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
