<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
[COMPANY NAME]
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
[COMPANY NAME]
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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
DESOTO, INC.
16750 SOUTH VINCENNES ROAD
SOUTH HOLLAND, ILLINOIS 60473
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 20, 1995
To the Stockholders
of DeSoto, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of DeSoto,
Inc. (the "Company") will be held in the 2nd floor conference room at the Bank
of New York, 51 West 51st Street, New York, New York, on December 20, 1995 at
10:00 A.M., New York time, for the following purpose:
1. To elect two directors to hold office until the 1998 annual meeting of
stockholders and until their respective successors are duly elected and
qualified.
2. To approve and ratify the appointment of Arthur Andersen LLP as
independent auditors of the Company for 1995.
3. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
The close of business on November 22, 1995 has been fixed as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the annual meeting and any adjournment thereof.
By Order of the Board of Directors
Irving Kagan
Secretary
South Holland, Illinois
November 27, 1995
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH
IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS
THEREON, AND RETURN IMMEDIATELY IN THE ENVELOPE PROVIDED.
<PAGE> 3
DESOTO, INC.
16750 SOUTH VINCENNES ROAD
SOUTH HOLLAND, ILLINOIS 60473
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 20, 1995
This Proxy Statement is being furnished to stockholders by the Board of
Directors (the "Board") of DeSoto, Inc., a Delaware corporation (the "Company"),
in connection with a solicitation of proxies by the Board for use at the annual
meeting of stockholders to be held on December 20, 1995 at 10:00 A.M., New York
time, in the 2nd floor conference room at the Bank of New York, 51 West 51st
Street, New York, New York, and all adjournments thereof (the "Annual Meeting").
The Notice of Annual Meeting of Stockholders, this Proxy Statement and
accompanying form of proxy are first being sent or given to stockholders on or
about November 27, 1995.
At the Annual Meeting, stockholders will be asked to elect two directors to
hold office until the 1998 annual meeting of stockholders and until their
respective successors are duly elected and qualified, and to approve and ratify
the appointment of Arthur Andersen LLP as the Company's independent auditors for
1995.
VOTING AND PROXY INFORMATION
RECORD DATE
Only stockholders of record at the close of business on November 22, 1995,
will be entitled to notice of, and to vote at, the Annual Meeting. On such date,
the Company had outstanding and eligible to vote 4,679,207 shares of Common
Stock, $1.00 par value (the "Common Stock"), each of which is entitled to one
vote, and 583,333 shares of Series B Senior Preferred Stock (the "Senior
Preferred Stock"), each of which is entitled to one vote. Shares of Common Stock
and Senior Preferred Stock vote together as one class on all matters submitted
to stockholders. (Shares of Senior Preferred Stock may be entitled to additional
voting rights under applicable law with respect to certain matters; but no such
additional rights arise in connection with the matters to be considered by
stockholders at the Annual Meeting.)
PROXIES
A proxy in the enclosed form, if properly executed, duly returned to the
Company and not revoked, will be voted in accordance with the instructions
contained therein. The shares represented by executed but unmarked proxies will
be voted FOR the two persons nominated for election as directors referred to
herein, and FOR the approval and ratification of the appointment of Arthur
Andersen LLP as the Company's independent auditors for 1995. If any other
matters are properly brought before the Annual Meeting, the persons named in the
enclosed form of proxy will vote the shares represented thereby on such matters
in accordance with their best judgment. Other than the election of directors,
and the approval and ratification of independent auditors, the Board has no
knowledge of any matters to be presented for action by the stockholders at the
Annual Meeting.
Execution of a proxy given in response to this solicitation will not affect
a stockholder's right to attend the Annual Meeting and to vote in person.
Presence at the Annual Meeting of a stockholder who has signed a proxy does not
in itself revoke the proxy. Any stockholder giving a proxy may revoke it at any
time before it is voted by giving notice thereof to the Company in writing or in
open meeting or by providing a proxy bearing a later date.
<PAGE> 4
The cost of soliciting proxies will be borne by the Company. The Company
expects to solicit proxies primarily by mail. Proxies may also be solicited
personally and by telephone by certain officers and regular employees of the
Company. In addition, the Company has retained Georgeson & Co., Inc. to assist
in the solicitation of proxies for a fee of approximately $5,000, plus expenses.
The Company may reimburse brokers and other nominees for their expenses in
communicating with the persons for whom they hold Common Stock.
VOTE TABULATION
An automated system administered by the Company's transfer agent tabulates
the votes. For purposes of determining the number of votes cast with respect to
any voting matter, only those cast "for" or "against" are included. Abstentions
and broker non-votes are counted only for purposes of determining whether a
quorum is presented at the meeting.
ELECTION OF DIRECTORS
The Board is currently composed of seven directors who are divided into
three classes of two, two and three directors each. At this Annual Meeting, the
stockholders will elect two directors to hold office until the 1998 annual
meeting of stockholders and until their successors are duly elected and
qualified. Unless stockholders otherwise specify, the shares represented by the
proxies received will be voted in favor of the election as directors of the two
persons named as nominees herein. The Board has no reason to believe that any of
the nominees will be unable or unwilling to serve as a director if elected.
However, in the event that any nominee should be unable to serve or for good
cause will not serve, the shares represented by proxies received will be voted
for other nominees selected by the Board.
In order to be elected, nominees for director must receive a plurality of
the votes of shares of Common Stock and Senior Preferred Stock, voting together
as a single class, so long as the holders of at least fifty percent of the
voting power of all shares of Common Stock and Senior Preferred Stock, voting
together as a single class, are present in person or represented by proxy at the
Annual Meeting (a "Quorum").
Set forth below is certain information, as of October 15, 1995, about each
of the Board's nominees for election at the Annual Meeting and each director of
the Company whose term will continue after the Annual Meeting. Unless otherwise
provided, each nominee or director has served in the capacity indicated (or in
comparable administrative or executive positions with the same corporation) for
at least the past five years.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Terms Expiring at the 1998 Annual Meeting (Class I)
<TABLE>
<S> <C>
ANDERS U. SCHROEDER Director since 1990
Vice Chairman of the Company from 1991 to present; Chief
Executive Officer of Asgard Ltd. (real estate investments Age: 45
and corporate investments) since 1990; Vice Chairman of
Jacob Holm & Sons A-S (a holding and management company
engaged in manufacturing and investing in real estate
entities) from 1986 to 1990; Executive Vice President of
Sutton Holding Corp. (a corporation formed for the
purpose of acquiring the Company) since 1989; partner in
law firm of O Bondo Svane from 1982 to 1992 and
associated with the law firm of Sullivan & Worcester from
1986 to 1990.
Director: Sutton Holding Corp.
</TABLE>
------------------
2
<PAGE> 5
<TABLE>
<S> <C>
DAVID M. TOBEY Director since 1990
Managing Director of Parkway M&A Capital Corporation (a
company engaged in investments) since 1988. Age: 57
Director: Sutton Holding Corp.; and Competitive Technologies, Inc.
</TABLE>
------------------
THE BOARD RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE NOMINEES
DIRECTORS CONTINUING IN OFFICE
Terms Expiring at the 1996 Annual Meeting (Class II)
<TABLE>
<S> <C>
ANNE E. EISELE Director since 1994
President of the Company since September 1995; Chief
Financial Officer of the Company since November 1992; Age: 40
served the Company in various executive or administrative
positions since March 1984.
</TABLE>
------------------
<TABLE>
<S> <C>
PAUL E. PRICE Director since 1988
Retired Senior Vice President of The Quaker Oats Company
(manufacturer of grocery products and pet foods) Age: 61
Director: Xytronyx, Inc.; and Eljex Industries, Inc.
</TABLE>
------------------
Terms Expiring at the 1997 Annual Meeting (Class III)
<TABLE>
<S> <C>
DANIEL T. CARROLL Director since 1991
Chairman and President of The Carroll Group, Inc. (a
management consulting firm). Age: 69
Director: Aon Corporation; Comshare, Inc.;
Diebold, Inc.; Wolverine World Wide, Inc.;
A. M. Castle & Co.; American Woodmark Corporation;
Oshkosh Truck Corp.; and Woodhead Industries, Inc.
</TABLE>
------------------
<TABLE>
<S> <C>
WILLIAM P. LYONS Director since 1991
Chairman of JVL Corp. (a manufacturer of generic and
over-the- counter pharmaceutical products) since 1992; Age: 54
President and Chief Executive Officer of William P. Lyons
and Co., Inc. (an investment firm) since 1975; Chairman
and Chief Executive Officer of Duro Test Corp. (a
manufacturer of specialty lighting products) from 1988 to
1991.
Director: Holmes Protection Group, Inc.; Lydall, Inc.; and
Video Lottery Technologies, Inc.
</TABLE>
------------------
3
<PAGE> 6
<TABLE>
<S> <C>
WILLIAM SPIER Director since 1990
Chairman of the Company from 1991 to present; Chief
Executive Officer of the Company from 1991 to January Age: 60
1994 and from September 1995 to present. President and
Chairman of Sutton Holding Corp. (a corporation
originally formed for the purpose of acquiring the
Company and now part of a group holding equity securities
of the Company) since 1989; and a private investor since
1982.
Director: Geotek Industries; Holmes Protection Group, Inc.;
and Video Lottery Technologies, Inc.
</TABLE>
--------------------------
The Board held six meetings during 1994. The Board has standing Audit and
Compensation Committees, but does not have a standing nominating committee. Each
director, with the exception of Mr. Lyons and Mr. Price, each of whom attended
four board meetings during 1994, attended at least 75% of the aggregate number
of all meetings held during 1994 of each of the Board and all committees on
which the director served during the period of his or her service.
The Audit Committee consists of Messrs. Carroll, Lyons and Price. The Audit
Committee considers and makes recommendations to the Board as to such accounting
and auditing matters concerning the Company as the Audit Committee deems
appropriate, including recommending the appointment by the Board of a firm of
independent public accountants engaged to audit the financial statements of the
Company, reviewing the scope and results of said audit, reviewing the scope and
adequacy of the Company's internal audit and control procedures, and approving
non-audit services. During 1994, the Audit Committee held two meetings.
The Compensation Committee consists of Messrs. Carroll, Price and Tobey.
The Compensation Committee considers and recommends to the Board the
compensation to be paid to the officers of the Company, determines the amount of
grants under the Company's stock option plan, makes recommendations to the Board
with respect to the Company's compensation policies, and performs such other
duties as the Board may prescribe from time to time. During 1994, the
Compensation Committee held two meetings.
Directors who are not employees of the Company are paid an annual retainer
fee of $6,000 and, in addition, receive $800 for each Board or committee meeting
attended and for each day such director is deposed for litigation concerning the
Company. In addition, in accordance with the terms of the DeSoto, Inc. 1992
Stock Plan (the "1992 Stock Plan"), which was approved by stockholders at the
1992 Annual Meeting of Stockholders on May 27, 1992, each non-employee director
of the Company receives an initial grant of options to purchase 3,000 shares of
Common Stock upon the date the individual becomes a non-employee director
(directors serving on May 27, 1992 received the grant 30 days subsequent to
stockholder approval) and, thereafter, annual grants of options to purchase 500
shares of Common Stock. Options granted to non-employee directors have an
exercise price equal to one hundred percent of the fair market value (as defined
in the Plan) of the Common Stock on the date the options are granted, have a
term of ten years, and are exercisable at any time after the date of grant.
Mr. John R. Phillips resigned as President and Chief Executive Officer and
as a director of the Company, effective August 31, 1995. The resignation of Mr.
Phillips was not the result of any disagreements relating to the Company's
operations, policies or practices.
4
<PAGE> 7
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth certain information as of October 15, 1995
(except as otherwise indicated) regarding the beneficial ownership of shares of
voting stock of the Company held by (i) directors, (ii) each person or entity
known to the Company who beneficially owns more than 5% of the outstanding
Common Stock or Senior Preferred Stock, (iii) each executive officer named in
the Summary Compensation Table appearing in "Compensation of Executive
Officers," and (iv) all directors (including nominees) and executive officers as
a group. Except as otherwise indicated, each person or entity has sole voting
and investment power of the shares listed. For purposes of this table, shares
which are not outstanding but which are subject to options or warrants are
deemed to be outstanding for purposes of computing the percentage of outstanding
shares of the class owned by the holder of the options or warrants, but are not
deemed to be outstanding for the purpose of computing the percentage of the
class owned by other persons.
<TABLE>
<CAPTION>
COMBINED
OWNERSHIP OF
AMOUNT AND APPROXIMATE COMMON AND
AMOUNT AND APPROXIMATE NATURE OF PERCENT OF SENIOR PREFERRED
NAME OF INDIVIDUAL NATURE OF PERCENT OF BENEFICIAL OUTSTANDING STOCK AS
OR ENTITY BENEFICIAL OUTSTANDING OWNERSHIP OF SENIOR APPROXIMATE
OR NUMBER OWNERSHIP OF COMMON COMMON SENIOR PREFERRED PREFERRED PERCENT OF ALL
IN GROUP STOCK (SHARES)(1) STOCK STOCK (SHARES) STOCK VOTING STOCK
- ---------------------------------- ------------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Sutton Holding Corp.(2) 1,797,089(3) 30.6% 583,333(4) 100.0% 36.8%(5)
The Gabelli Group(6) 617,800(6) 13.2% 0 0 11.7%
William Spier 799,840(7) 15.3% 259,259(8) 44.4% 18.2%
Anders U. Schroeder 638,970(9) 12.5% 194,444(10) 33.3% 14.7%
Pioneering Management Corp.(11) 459,400(11) 9.8% 0 0 8.7
LL Capital Partners, L.P.(12) 445,800(12) 9.5% 0 0 8.5%
John R. Phillips 105,000(13) 2.2% 0 0 2.0%
James L. Jackson 31,110(14) * 0 0 *
William P. Lyons 29,500(15) * 0 0 *
Anne E. Eisele 23,703(16) * 0 0 *
Daniel T. Carroll 8,000(17) * 0 0 *
David M. Tobey 7,500(18) * 0(19) 0(19) * (20)
Paul E. Price 4,700(21) * 0 0 *
N. Ron Bowen 5,679(22) * 0 0 *
All directors and executive
officers as a
group (12 persons) 2,080,638(23) 34.2% 583,333 100% 40.0%(23)
</TABLE>
- ---------------
* Denotes less than 1%
(1) The information under this caption is based on representations made to the
Company by individual directors or nominees and/or filings made with the
Securities and Exchange Commission.
(2) Sutton Holding Corp., a New York corporation, is part of a group filing a
joint Schedule 13D with respect to ownership of shares of Common Stock that
includes Anders U. Schroeder, an affiliate of William Spier, and parties
having a business relationship with David M. Tobey. Sutton is owned by,
Asgard Ltd. (an affiliate of Mr. Schroeder), Parkway M&A Capital
Corporation ("Parkway"), M&A Investment Pte Ltd. ("M&A") (entities having a
business relationship with Mr. Tobey), and an individual having no other
relationship with the Company. Messrs. Spier, Schroeder and Tobey are
directors and officers of Sutton. Sutton's address is 101 East 52nd Street,
11th Floor, New York, New York 10022.
(3) Sutton is the record owner of 100 shares of Common Stock. The stock
ownership reported in the table for Sutton also includes the stock
ownership of the other parties to the Schedule 13D referred to in Note 2 as
follows: Coatings Group, Inc. ("Coatings Group") beneficially owns 779,840
shares of Common Stock, of which 246,507 shares are currently outstanding
and 533,333 shares are issuable upon warrants beneficially owned by
Coatings Group; Anders U. Schroeder and an affiliated entity beneficially
own 618,970 shares of Common Stock, of which 218,970 shares are currently
outstanding and 400,000 are issuable upon warrants beneficially owned by
the affiliate of Mr. Schroeder (options granted to Mr. Schroeder pursuant
to the 1992 Stock Plan have not been included in the foregoing or in the
5
<PAGE> 8
ownership for Sutton reported in the table); Parkway beneficially owns
350,811 shares of Common Stock, of which 84,144 are currently outstanding
and 266,667 are issuable upon exercise of warrants beneficially owned by
Parkway; and M&A beneficially owns 47,368 shares of Common Stock, all of
which are currently outstanding. Consequently, Sutton and these related
parties currently beneficially own an aggregate of 597,089 currently
outstanding shares of Common Stock and 1,200,000 shares of Common Stock
issuable upon exercise warrants having an exercise price of $7.00 per
share, representing the 1,797,089 shares of Common Stock reported in the
table. (Options granted pursuant to the 1992 Stock Plan to affiliates of
any of these parties have not been included in these numbers.)
(4) Parties related to Sutton own all of the shares of Senior Preferred Stock
reported in the table. Coatings Group owns 259,259 of such shares, an
affiliate of Anders U. Schroeder owns 194,444 of such shares, and Parkway
owns 129,630 of such shares.
(5) Represents shares of Common Stock and Senior Preferred Stock currently
owned by parties referred to in Note 2 and 1,200,000 shares of Common Stock
issuable upon exercise of warrants owned by such parties as described in
Note 3.
(6) As reported by Mario J. Gabelli and various entities which he directly or
indirectly controls and for which he acts as chief investment officer (the
"Gabelli Group"), its members include the following: Gabelli Funds, Inc.
("GFI"), GAMCO Investors, Inc. ("GAMCO"), Gabelli Securities, Inc. ("GSI"),
Gabelli & Company, Inc. ("Gabelli & Company"), Gabelli Performance
Partnership ("GPP"), GLI, Inc. ("GLI"), The Gabelli Associates Fund
("Gabelli Associates"), Gabelli Associates Limited ("GAL"), The Gabelli &
Company, Inc. Profit Sharing Plan; Gabelli International Limited ("GIL"),
Gabelli International II Limited ("GIL II"), Mario J. Gabelli ("Mr.
Gabelli"), Lynch, Safety Railway and Western New Mexico. The address of
Mario J. Gabelli and the Gabelli Group is c/o J. Hamilton Crawford, Jr.,
Gabelli Funds, Inc., One Corporate Center, Rye, New York 10580-1434. Based
on information in Amendment No. 22 to Schedule 13D, dated July 14, 1995,
the Gabelli Group owns its shares of Common Stock as follows: Mario J.
Gabelli, 7,500 shares; GAMCO, 602,800 shares; GSI, 1,000 shares; and GIL
II, 6,500 shares. Each of the above persons or entities has sole voting and
dispositive power over its shares, except that GAMCO does not have
authority to vote 62,900 reported shares.
(7) Mr. Spier's stock ownership includes 246,507 currently outstanding shares
of Common Stock and 533,333 shares of Common Stock issuable upon exercise
of warrants owned by Coatings Group, a corporation of which Mr. Spier is
President and Chairman of the Board, and options to purchase 20,000 shares
of Common Stock which are currently exercisable and were granted pursuant
to the 1992 Stock Plan. (The Coatings Group stock ownership also has been
included in the stock ownership reported for Sutton. See Note 3.) The
listed shares do not include the 100 shares owned by Sutton or 100 shares
held by Mr. Spier's father-in-law, as to which Mr. Spier may be deemed the
beneficial owner.
(8) All such shares are owned by Coatings Group. See Note 3.
(9) Mr. Schroeder's stock ownership includes stock owned by Asgard Ltd.
("Asgard"). Asgard, a corporation affiliated with Mr. Schroeder, owns
218,970 currently outstanding shares of Common Stock, 194,444 shares of
Senior Preferred Stock and beneficially owns 400,000 shares of Common Stock
issuable upon exercise of warrants. (Asgard's stock ownership has been
included in the stock ownership reported for Sutton. See Note 3.) Also
includes options to purchase 20,000 shares of Common Stock, which are
currently exercisable and were granted pursuant to the 1992 Stock Plan.
(10) All such shares are owned by Asgard Ltd., a corporation affiliated with Mr.
Schroeder.
(11) Based on information in Schedule 13G, dated as of January 18, 1995. The
address of Pioneering Management Corporation is 60 State Street, Boston,
Massachusetts 02114.
(12) Based on information in Schedule 13D filed jointly by LL Capital Partners,
L.P. and its general partner Lance Lessman, dated as of October 6, 1995.
The address of LL Capital Partners, L.P. is 375 Park Avenue, New York, New
York 10152.
6
<PAGE> 9
(13) Includes options to purchase 70,000 shares of Common Stock which are
currently exercisable and were granted pursuant to the 1992 Stock Plan.
(14) Represents shares of Common Stock held in Mr. Jackson's account in the
DeSoto Stock Ownership Plus Plan and options to purchase 30,000 shares of
Common Stock, which are currently exercisable and were granted pursuant to
the 1992 Stock Plan. Also please refer to footnote (f) under "Compensation
of Executive Officers."
(15) Includes 25,000 shares of Common Stock owned by the William P. Lyons and
Co., Inc. Pension Trust, the only participant and beneficiary of which is
Mr. Lyons. Also includes options to purchase 4,500 shares of Common Stock,
which are currently exercisable and were granted pursuant to the 1992 Stock
Plan.
(16) Includes shares of Common Stock held in Ms. Eisele's account in the DeSoto
Stock Ownership Plus Plan and options to purchase 20,000 shares of Common
Stock which are currently exercisable and were granted pursuant to the 1992
Stock Plan.
(17) Includes options to purchase 4,000 shares of Common Stock, which are
currently exercisable and were granted pursuant to the 1992 Stock Plan.
(18) Includes options to purchase 4,500 shares of Common Stock, which are
currently exercisable and were granted pursuant to the 1992 Stock Plan.
Does not include the stock ownership of Parkway and M&A. See Note 3.
(19) Does not include the 129,630 shares owned by Parkway.
(20) Does not include stock ownership of Parkway and M&A. See Note 3.
(21) Includes options to purchase 4,500 shares of Common Stock which are
currently exercisable and were granted pursuant to the 1992 Stock Plan.
(22) Includes shares of Common Stock held in Mr. Bowen's account in the DeSoto
Stock Ownership Plus Plan.
(23) Includes 3,049 shares of Common Stock beneficially held in the DeSoto Stock
Ownership Plus Plan for the account of executive officers. Also includes
stock ownership of Sutton Holding Corp. to the extent not otherwise
included in the beneficial ownership of directors and officers, stock
options held by directors and officers if exercisable within 60 days and
shares issuable upon exercise of warrants. (Without inclusion of such
Sutton Holding Corp. stock ownership, directors and officers, as a group,
would own (i) 1,682,359 shares of Common Stock, representing approximately
28.9% of the outstanding shares of Common Stock, (ii) 453,703 shares of
Senior Preferred Stock, representing approximately 77.8% of all such
shares, and (iii) approximately 33.4% of all voting stock.)
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file by specific dates with the Securities and Exchange Commission (the
"SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company on Forms 3, 4 and 5.
Officers, directors and greater than ten-percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. The Company is required to report in this proxy statement any failure
to file by the relevant due date any of these reports based solely on the
Company's review of copies of such reports furnished to it and written
representations received by the Company that the filing of a Form 5 was not
required. Based upon this review, the Company is not aware of any person, except
as indicated below, who at any time during 1994, was a director, officer or a
beneficial owner of more than ten percent of any class of equity securities of
the Company registered pursuant to the Exchange Act that failed to file on a
timely basis reports required by Section 16(a) of the Exchange Act during 1994.
John R. Phillips, President and Chief Executive Officer of the Company, was
required to file a Form 3 within ten days of becoming an officer of the Company
reporting the grant of 15,000 shares to Mr. Phillips by the Company. This form
was filed late. Mr. Phillips also filed Form 4 reporting the purchase of 4,000
shares in April 1994 after the due date for filing such Form.
7
<PAGE> 10
INDEPENDENT AUDITORS
The Board, upon the recommendation of its Audit Committee, has appointed
Arthur Andersen LLP as independent auditors for 1995. Arthur Andersen LLP has
acted as the Company's independent auditors for the year ended December 31, 1991
and subsequent years. Although the selection and appointment of independent
auditors are not required to be submitted to a vote of the stockholders, the
Board has decided to ask stockholders to approve and ratify the appointment of
Arthur Andersen LLP. If stockholders do not approve and ratify such appointment,
the Board will reconsider the appointment.
Approval and ratification of the appointment of Arthur Andersen LLP as the
Company's independent auditors requires the affirmative vote of the holders of
shares of Common Stock and Senior Preferred Stock, voting together as a single
class, representing a majority of the votes entitled to be cast in person or
represented by proxy at the Annual Meeting so long as a Quorum is present.
It is expected that representatives of Arthur Andersen LLP will be present
at the Annual Meeting with the opportunity to make a statement if they so
desire. Such representatives are also expected to respond to appropriate
questions.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL AND RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information for the years ended
December 31, 1992, 1993, and 1994, concerning the compensation of each of the
executive officers of the Company who served as executive officers as of
December 31, 1994. The table also sets forth the compensation paid to one other
executive officer who left the Company during 1994 and who otherwise would have
been included in the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION(A) -------------------------------
------------------------ STOCK GRANTS STOCK
OTHER ANNUAL ------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION (VALUE) (SHARES) (SHARES) COMPENSATION
- ------------------------------ ---- -------- ------------ ------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William Spier(b) 1994 $ -- $ -- $ -- -- 10,000 $ --
Chairman of the Board 1993 123,750 -- -- -- 10,000 --
1992 165,000 -- -- -- -- --
John R. Phillips(c) 1994 275,301 -- 174,375 30,000 70,000 2,235
President and 1993 -- -- -- -- -- --
Chief Executive Officer
N. Ron Bowen(d) 1994 100,000 -- -- -- 20,000 1,490
Executive Vice President
Anne E. Eisele(e) 1994 130,000 -- -- -- -- 1,937
Senior Vice President 1993 115,000 -- -- -- -- --
and Chief Financial Officer 1992 95,837 -- -- -- 20,000 --
James L. Jackson(f) 1994 55,000 -- -- -- -- 185,000
Senior Vice President 1993 165,000 -- -- -- -- --
and Chief Operating Officer 1992 110,840 -- -- -- 30,000 --
</TABLE>
- ---------------
(a) Includes participants' before tax deposits to the DeSoto Stock Ownership
Plus Plan.
(b) Mr. Spier also served as Chief Executive Officer in 1992 and 1993. Effective
September 1, 1995, Mr. Spier was again appointed Chief Executive Officer.
(c) Mr. Phillips first became an employee of the Company as of December 13,
1993. Mr. Phillips' employment contract provided for the grant on January
3, 1994 of an award of 30,000 shares of restricted stock pursuant to the
1992 Stock Plan of which 15,000 vested on grant and the remaining 15,000
shares vested on December 13, 1994. The value of Mr. Phillips' 30,000
shares as presented in the table is based
8
<PAGE> 11
upon the stock price on the dates the shares vested. The value of Mr.
Phillips' 30,000 shares of stock at December 31, 1994 was $97,500. The
amount under "All Other Compensation" represents contributions by the
Company to Mr. Phillips' account in the DeSoto Stock Ownership Plus Plan.
Mr. Phillips resigned as President and Chief Executive Officer, effective
August 31, 1995. See "Employment Contracts."
(d) Mr. Bowen first became an employee of the Company as of May 2, 1994. The
amount under "All Other Compensation" represents contributions by the
Company to Mr. Bowen's account in the DeSoto Stock Ownership Plus Plan. Mr.
Bowen had been granted 10,000 shares of common stock under the 1992 Stock
Plan to be awarded in 5,000 share installments on each May 2 from 1995
through 1996. Mr. Bowen resigned as an employee of the Company, effective
May 31, 1995, and the second 5,000 share installment has been forfeited.
Additionally, the options grant for 20,000 shares has also been forfeited.
(e) During 1992, Ms. Eisele was Chief Accounting Officer and Secretary. As of
November 12, 1992, Ms. Eisele became Vice President--Finance, Chief
Financial Officer and Secretary; Ms. Eisele was named Senior Vice President
in October 1993. As of September 1, 1995, Ms. Eisele was appointed
President and continued as Chief Financial Officer. The amount under "All
Other Compensation" represents contributions by the Company to Ms. Eisele's
account in the DeSoto Stock Ownership Plus Plan. Ms. Eisele has been
granted 10,000 shares of common stock under the 1992 Stock Plan to be
awarded in 2,500 share installments on each May 2 from 1995 through 1998.
On November 8, 1995, Ms. Eisele was granted an option to purchase an
additional 10,000 shares of Common Stock. See "Compensation Committee
Report on Executive Compensation."
(f) During 1992, Mr. Jackson was Executive Vice President of the Company and,
as of November 12, 1992, was part of the Office of the President. Mr.
Jackson became President and Chief Operating Officer in April 1993.
Effective January 1994, Mr. Jackson was Senior Vice President and Chief
Operating Officer. As of April 27, 1994, Mr. Jackson became a consultant
to the Company. The amount under "All Other Compensation" includes
$150,000 of consulting fees and expenses paid to Mr. Jackson in 1994 and
$35,000 of consulting fees accrued as of December 31, 1994 for payment in
1995 to Mr. Jackson. See "Employment Contracts."
Shown below is information with respect to stock options granted during the
year ended December 31, 1994 under the 1992 Stock Plan, which provides, among
other things, for the grant of options to purchase shares of Common Stock.
OPTION GRANTS, EXERCISES AND YEAR-END VALUES-1994 OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
RATES OF STOCK
PERCENTAGE OF PRICE APPRECIATION
OPTIONS TOTAL FOR OPTION
GRANTED OPTIONS GRANTED TERM($)(B)
(IN COMMON TO EXERCISE PRICE --------------------
SHARES)(A) EMPLOYEES IN 1994 PER SHARE EXPIRATION DATE 5% 10%
---------- ----------------- -------------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
William Spier(c) 10,000 8.7% $6 (7/8) April 20, 2004 $ 43,237 $109,580
John R. Phillips(d) 70,000 60.9 7 March 31, 2004 308,160 780,990
N. Ron Bowen(e) 20,000 17.4 6 (5/8) May 2, 2004 83,329 211,200
Anne E. Eisele -- -- -- -- -- --
James L. Jackson -- -- -- -- -- --
</TABLE>
- ---------------
(a) Stock appreciation rights may not be granted under the 1992 Stock Plan.
(b) Under the rules and regulations of the SEC, the potential realizable value
of a grant is the product of (i) the difference between (x) the product of
the per share market price at the time of grant and the sum of 1 plus the
adjusted stock price appreciation rate (the assumed rate of appreciation
compounded
9
<PAGE> 12
annually over the term of the option) and (y) the per share exercise price
of the option and (ii) the number of securities underlying the grant at
year-end. Assumed annual rates of stock price appreciation of 5% and 10%
are specified by the SEC and are not intended to forecast possible future
appreciation, if any, of the price of the shares of Common Stock of the
Company. (For example, if the price of shares of Common Stock remained at
the exercise price of the options (i.e., a 0% appreciation rate), the
potential realized value of the grant would be $0.) The actual performance
of such shares may be significantly different from the rates specified by
the SEC.
(c) The grant was made as of April 20, 1994 with an exercise price equal to the
market price at that time. The options were immediately exercisable.
(d) The grant was made as of March 31, 1994 with an exercise price equal to the
market price at that time. 14,000 shares became exercisable on December 13,
1994, and 14,000 shares were to be exercisable on each December 13 from
1995 through 1998. All such options have become exercisable as of September
1995 through May 31, 1996, as a result of the termination of Mr. Phillips'
employment contract.
(e) The grant was made as of May 2, 1994 with an exercise price equal to the
market price at that time. 10,000 shares become exercisable on each May 2
in 1995 and 1996. All such options have been forfeited as of August 31,
1995, following Mr. Bowen's resignation in May 1995.
The following table provides certain information with respect to the number
and value of unexercised options outstanding as of December 31, 1994.
AGGREGATED 1994 OPTION EXERCISES AND DECEMBER 31, 1994 OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS (IN COMMON SHARES) OPTIONS AT
AT DECEMBER 31, 1994 DECEMBER 31, 1994(A)
SHARES ACQUIRED VALUE -------------------------- -------------------------
EXERCISED REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------- -------- -------------------------- -------------------------
<S> <C> <C> <C> <C>
William Spier -- -- 20,000/ 0 $--/$--
John R. Phillips -- -- 14,000/56,000 --/ --
N. Ron Bowen -- -- 0/20,000 --/ --
Anne E. Eisele -- -- 13,333/ 6,667 --/ --
James L. Jackson -- -- 30,000/ 0 --/ --
</TABLE>
- ---------------
(a) Calculated by determining the difference between the fair market value of
the Common Stock underlying the options on December 31, 1994 (3 1/4, the
closing price on the New York Stock Exchange--Composite Transactions) and
the exercise price of the options on that date.
10
<PAGE> 13
DEFINED BENEFIT PLAN
The following table presents the estimated annual benefits payable upon
retirement at age 65, after selected periods of continuous service, under the
DeSoto Employees' Retirement Plan (the "Pension Plan") and the Salaried
Employees' Pension Preservation Plan (the "Preservation Plan"):
ESTIMATED ANNUAL PENSION BENEFITS AT AGE 65
<TABLE>
<CAPTION>
YEARS OF SERVICE IN DESOTO
AVERAGE ANNUAL CASH EMPLOYEES' PENSION PLAN
COMPENSATION DURING ---------------------------------------------------------------------
FIVE CONSECUTIVE 10 YEARS 20 YEARS 30 YEARS 35 YEARS
YEARS OF HIGHEST PAY SERVICE SERVICE SERVICE SERVICE
- -------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
$ 100,000 $16,700 $ 33,300 $ 50,000 $ 58,500
125,000 20,850 41,650 62,500 73,000
150,000 25,000 50,000 75,000 87,500
175,000 29,150 58,350 87,500 102,000
200,000 33,300 66,700 100,000 116,500
225,000 37,500 75,000 112,500 131,250
250,000 41,650 83,350 125,000 145,850
275,000 45,850 91,650 137,500 160,400
300,000 50,000 100,000 150,000 175,000
325,000 54,150 108,350 162,500 189,600
</TABLE>
The compensation covered by the Pension Plan and the Preservation Plan is
substantially the same as that reported under the "Salary" and "Bonus" columns
of the Summary Compensation Table, limited, however, to $150,000 for 1994 (or
such other amount provided by Section 401(a)(17) of the Internal Revenue Code of
1986, as amended (the "Code")). As of December 31, 1994, the estimated credited
years of service of Messrs. Spier, Phillips, and Bowen, Ms. Eisele and Mr.
Jackson are approximately 4, 1, 1, 11, and 22, respectively. Benefits are
computed on the basis of a straight life annuity and are subject to offset for
Social Security benefits (although the calculation of the offset under the
Salaried Pension Plan differs from the offset under the Preservation Plan). To
the extent an employee's benefit as computed under the Salaried Pension Plan
exceeds the limitations provided under the Code or an employee's service exceeds
35 years, the benefit will be provided under the Preservation Plan.
In a settlement of litigation which became effective in 1992 related, among
other things, to the Company's pension plans, employees of the Company who were
participants in the pension plans on or after March 1, 1989 and prior to June
10, 1991, in essence, will receive a 3% increase in their accrued pension
benefits as of June 10, 1991 under the plans, and such participants who have
completed ten years of service with DeSoto but whose employment terminates or
terminated prior to their attaining age 55 will be entitled to receive unreduced
deferred vested benefits under the plans beginning at age 63 instead of age 65,
but if they commence receiving such benefits prior to age 63, they will continue
to receive reduced benefits on the same terms and conditions as previously.
(Messrs. Spier, Phillips and Bowen are not eligible for these increased
benefits; Ms. Eisele and Mr. Jackson are eligible.)
EMPLOYMENT CONTRACTS
In connection with the employment of John R. Phillips by the Company and as
an incentive for Mr. Phillips to join the Company, the Company entered into an
employment contract, dated as of December 13, 1993, with Mr. Phillips employing
him as President and Chief Executive Officer and appointing him as a member of
the Board of Directors effective as of January 3, 1994. The contract provided
for an annual base salary of $250,000, the provision of benefits including life
insurance and medical benefit plans and the use of a company car and, after
1994, participation in bonus plans generally on the same terms as other senior
officers of the Company, the provision of $12,000 per year as a housing
allowance, and reimbursement of business expenses and a club membership. In
addition, the contract provided for the grant on January 3, 1994 of an award of
30,000 shares of restricted Common Stock pursuant to the 1992 Stock Plan, of
which
11
<PAGE> 14
15,000 vested on grant and the remaining 15,000 shares vested on December 13,
1994; and the grant, pursuant to the 1992 Stock Plan, on March 31, 1994, of a
non-statutory option to purchase 70,000 shares of Common Stock with an exercise
price equal to the "Fair Market Value" on that date (as defined in the 1992
Stock Plan as the last sale price of shares on that date), of which 14,000
shares would vest on each December 13 from 1994 through 1998. The contract had
an initial term of two years and, unless notice not to extend is given by the
Company or Mr. Phillips, as of June 13, 1994, would be automatically extended so
that the unexpired term as of any day would always be eighteen months. Under the
contract, Mr. Phillips agreed to certain confidentiality and other similar
provisions and to restrictions on his ability to compete with the Company.
Following a reported restructuring of the Company in July 1995, Mr.
Phillips resigned, effective as of August 31, 1995, as President and Chief
Executive Officer and as a member of the Company's Board of Directors; and
entered into an agreement with the Company, dated as of September 1, 1995,
providing for the termination of his employment contract, effective as of August
31, 1995, and for his employment by the Company, for a six-month period from
September 1, 1995 through February 29, 1996, to assist the Company during the
transition following his resignation. Under the new agreement with Mr. Phillips,
Mr. Phillips will continue to receive, over the aforesaid six-month period, an
aggregate compensation of $62,500, payable in equal installments in accordance
with the Company's customary payroll practices, corresponding to the salary he
received under his original employment contract. For the thirty months next
following the expiration of said six-month period, Mr. Phillips will receive the
aggregate sum of $312,500, in equal installments, also in accordance with the
Company's customary payroll practices, corresponding to the balance of the
amount otherwise due to Mr. Phillips, under his original employment contract,
upon the termination of that contract, Mr. Phillips' having agreed to the
extension of the payout of his severance entitlement ($325,000), under his
original employment contract, from eighteen to thirty-six months. Additionally,
Mr. Phillips' options to purchase 70,000 shares of Common Stock were immediately
vested, under the terms of his original employment contract, upon the
termination of that contract; and Mr. Phillips has a period of nine months, from
September 1, 1995 through May 31, 1996, within which to exercise such options in
whole or in part. Under Mr. Phillips' new agreement, he will continue to receive
the same medical and other insurance benefits he had received under his original
employment contract, under the same conditions, until the earlier of August 31,
1996 or his obtaining alternative coverage elsewhere; the continued use of a
company car through May 1996; and continued club membership through 1996. Mr.
Phillips also agreed to continue to abide by the confidentiality and other
similar provisions, and to restrictions on his ability to compete with the
Company, as contained in his original employment contract.
In September 1993, the Company entered into an agreement with Anne E.
Eisele, then Senior Vice President and Chief Financial Officer, which provides
for certain payments to be made to her in the event of a change in control of
the Company, the amount of which depends on whether she remains in the Company's
employ.
As of April 27, 1994, James L. Jackson, who had been Senior Vice President
and Chief Operating Officer, became a consultant to the Company. Under his
consulting agreement, Mr. Jackson received $185,000 for consulting fees and
expenses during the period from May 1994 through April 1995. He also received
the use of a Company car and medical insurance coverage as available to other
officers of the Company through April 1995. This arrangement was continued for a
period up to November 1, 1995, with his compensation for this period being
$82,500. An indefinite extension of this arrangement has been agreed upon with
Mr. Jackson upon similar terms and conditions.
12
<PAGE> 15
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
cumulative total shareholder return on the Company's Common Stock with the
cumulative total return of the Standard & Poor's 500 Stock Index, the Russell
2000 Stock Index and the weighted average of nine selected peer issuers.
COMPARISON OF CUMULATIVE TOTAL RETURN OF $100 INVESTED ON DECEMBER 31, 1988 IN
DESOTO COMMON STOCK, S&P 500, AND A SELECTED GROUP OF PEER ISSUERS (1)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DESOTO S&P 500 PEER ISSUERS
<S> <C> <C> <C>
1989 100 100 100
1990 100 97 56
1991 76 126 98
1992 93 136 102
1993 94 150 98
1994 40 152 88
</TABLE>
(1) Total assumes reinvestment of dividends. The selected peer issuers include
nine companies with the same 3-digit Standard Industrial Classification
("SIC") code (284 -- Soaps, Detergents and Cleaning Preparations) as the
Company and market capitalization within 50% (plus or minus) of the
Company's. The peer issuers do not necessarily engage in the same business
as the Company despite the same SIC code and as such may not fairly
represent the cumulative return during the period indicated of the Company's
competitors. The Company believes that the private label detergent and
household product manufacturers most comparable to the Company's line of
business are privately held or not traded on stock markets in the United
States. In addition, publicly traded manufacturers of household cleaning
products are largely producers of retail, brand name products and are
substantially more diversified than the Company. The selected peer issuers
include Alcide, Corp.; CCA Industries, Inc.; Del Labs, Inc.; DEP Corp.
(Class B); Detrex Corp.; Medicis Pharmaceutical Corp.; Parlux Fragrances
Inc.; Scotts Liquid Gold Inc. and Specialty Chemical Resources Inc. In 1995,
U.S.A. Detergents, previously a privately held company, became a publicly
traded company. U.S.A. Detergents would have been included among the peer
issuers if historical trading data were available.
During the five-year period covered by the graph, the following events, among
others, may have had a particular effect on the trading activity in the
Company's Common Stock in addition to developments in the ordinary course of
business: on February 14, 1990, the Company announced it would explore
alternatives to maximize stockholder value, including the sale of all of its
business; on October 24, 1990, stockholders
13
<PAGE> 16
approved a plan pursuant to which the Company sold a substantial portion of its
business and assets and before the end of 1990 distributed a portion of the net
proceeds of such sales as $35.50 in special dividends (for purposes of the
graph, it has been assumed, the $35.50 was reinvested in Company Common Stock);
in December, 1990, the Company received a revised acquisition proposal; and in
mid-1991 the composition of the Company's Board of Directors and senior
management changed as a result of a proxy contest.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised entirely of non-employee directors.
It considers and recommends to the Board the compensation to be paid to the
officers of the Company, determines the amounts of grants under the Company's
stock option plan, makes recommendations to the Board with respect to the
Company's compensation policies, and performs duties as the Board may prescribe
from time to time.
The basic objective of the Compensation Committee is to formulate
compensation policies and programs intended to attract, retain and motivate
qualified employees, including executive officers, as well as special
consultants. In this regard, the Committee believes it is important to pay
reasonable and competitive base salaries and total compensation to executive
officers, and appropriate fees to consultants, that reflect their level of
experience and responsibility. However, the Committee believes it is important
that there be a strong identity of interest between executive officers, and/or
consultants, and stockholders. Accordingly, the Committee believes that an
essential portion of executive or consultant compensation should be dependent
upon the performance of the Company and that of its Common Stock.
When considering compensation arrangements applicable to any executive
officer, the Committee takes into account the overall performance of the Company
and the Common Stock, the nature of that individual's responsibilities at the
Company and his or her performance of those responsibilities. In addition to
these factors, the leadership, ability to formulate corporate strategy, and
effectiveness in dealing with major corporate problems and opportunities by
senior executive officers, including the Chief Executive Officer, are considered
by the Committee. In the past, the Committee has not hired consultants or
performed studies or analyses in connection with its deliberations. It relies
instead on the business judgment of its members and their considerable
experience in compensation matters.
The Committee believes that officers and other key employees and
consultants of the Company should have a meaningful stake in the performance of
the Common Stock of the Company. By sharing an equity position in the Company,
employees as well as consultants will more likely seek to pursue the long-term
interests of the Company and align their interests with those of the public
stockholders. Accordingly, the Committee uses the Company's 1992 Stock Plan as
an important tool to encourage key employees and others to focus on building
stockholder value. The Committee also employs awards under the Stock Plan as a
means of attracting new employees and creating a long-term commitment to the
success of the Company.
The Committee also considered the Company's current poor performance and
financial condition in establishing compensation for officers and others
providing services to the Company. The Compensation Committee shares the view of
the entire Board that all constituencies of the Company, including executive
officers, must bear a fair share of the sacrifices necessary to promote the
long-term health and profitability of the Company. This requires moderate levels
of cash compensation. Therefore, the Committee used awards of stock options
instead of cash compensation in a number of instances. This strategy minimized
the effect of this compensation on the Company's current financial performance
and liquidity while, at the same time, promoting an identity of interest between
stockholders and management.
The Committee awarded stock options to certain individuals who provided
significant services to the Company during 1993. These awards were made instead
of the payment of cash compensation. Mr. Anders Schroeder, Vice Chairman of the
Company, and Mr. Daniel Carroll, a director, received grants of options to
purchase 10,000 and 2,500 shares, respectively, of Common stock. Mr. Schroeder's
award was in compensation for his services relating to the assumption of
significant management responsibilities. Mr. Carroll was compensated for his
consulting services in connection with management of the Company and the search
for a new president. Similarly, Irving Kagan, who was the Company's Senior Vice
President and General Counsel, relinquished those positions in February 1994 and
now serves as legal consultant and special counsel to the Company. In September
1995, Mr. Kagan was appointed as Secretary of the Company. In place of his
14
<PAGE> 17
$100,000 salary, he now receives a fee of $50,000 per year, retains the options
previously granted him in November 1992 to purchase an aggregate of 20,000
shares of Common Stock, and was granted, in May 1994, an option to purchase an
additional 5,000 shares of Common Stock. On November 8, 1995, Mr. Kagan was
granted an option to purchase an additional 5,000 shares of Common Stock.
William Spier, Chairman of the Company, served as Chief Executive Officer
until the hiring of Mr. John Phillips as President and Chief Executive Officer
in January 1994. Effective September 1, 1995, Mr. Spier was again appointed
Chief Executive Officer. Pursuant to arrangements instituted in September 1991,
Mr. Spier had been paid an annual salary of $165,000. On October 1, 1993, Mr.
Spier and the Committee agreed that he would forego any cash compensation from
the Company and, instead, would receive options to purchase an aggregate of
10,000 shares of Common Stock for his services through March 31, 1994; and that
the Committee would, after March 31, 1994, grant Mr. Spier an option to purchase
an additional 10,000 shares of Common Stock in the event Mr. Spier continued to
forego any cash compensation from the Company after that date. On April 20,
1994, the Committee granted Mr. Spier an option to purchase an additional 10,000
shares of Common Stock in consideration of his continuing to forego any cash
compensation from the Company as Chairman. On November 8, 1995, following Mr.
Spier's reappointment as Chief Executive Officer of the Company in September
1995, and because of his continuing to forego any cash compensation from the
Company, the Committee granted him an option to purchase an additional 10,000
shares of Common Stock.
On November 8, 1995, the Committee also granted Anne E. Eisele, in
connection with her being appointed President of the Company on September 1,
1995, an option to purchase an additional 10,000 shares of Common Stock.
The Committee considers these arrangements to be in the Company's interest
because they minimize the cash cost to the Company of management and consulting
services, provide these individuals with reasonable compensation for their
services, and encourage these individuals to continue with the Company and focus
on the Company's long-term performance and stock value.
In January 1994, John Phillips was hired as President and Chief Executive
Officer of the Company. In connection with the Company's review of candidates
for this position, an independent executive search firm was hired. In order to
induce Mr. Phillips to accept employment with the Company and in recognition of
his considerable senior management experience, the Committee approved the
employment contract with Mr. Phillips described under "Employment Contracts."
Included in Mr. Phillips' arrangements was an award of stock and stock options.
The Committee believed these awards were necessary and appropriate to attract
Mr. Phillips to the Company and to provide him with a meaningful ownership
interest in the Company which could increase over time. This ownership interest
was intended to provide Mr. Phillips with further incentive to enhance
stockholder value, manage the Company with a long-term perspective, and to
continue with the Company in the future. As described under "Employment
Contracts," Mr. Phillips resigned as President and Chief Executive Officer
following the restructuring of the Company in July 1995, and a severance
arrangement was provided to Mr. Phillips consistent with the terms and
conditions of his original employment contract.
When the Company hired Mr. Phillips, it agreed to work with him to develop
a performance-based bonus plan for officers and key employees other than Mr.
Phillips, which would serve to motivate them to deal promptly and effectively
with the Company's poor financial condition. The terms of a bonus plan for 1994,
including performance targets and objectives and potential size of bonuses, were
adopted by the Committee. This plan provided an approach which would allow
management to both focus on key business objectives in the short-term and
support the long-term enhancement of stockholder value. Due to the Company's
performance in 1994, no bonuses were awarded for that year. The Committee, for
1995, decided not to adopt any bonus program until it could better assess the
Company's financial and operational prospects.
The Committee also will consider future compensation practices in light of
the factors already described as well as the performance of key personnel in
more successfully dealing with the intense competition in the industry and the
difficulties faced by the Company.
D. Carroll
P. Price
D. Tobey
15
<PAGE> 18
STOCKHOLDER PROPOSALS
Proposals which stockholders intend to present at the 1996 annual meeting
of stockholders and have included in the Company's proxy statement for that
meeting must be received by the Company by the close of business on the date
which is 120 calendar days in advance of the first anniversary of the date of
this proxy statement unless the date of the 1996 Annual Meeting changes by more
than 30 days from the date of the 1995 Annual Meeting, in which case proposals
must be received by the Company a reasonable time before the release of the
proxy statement. In addition, a stockholder who otherwise intends to present
business at the 1996 annual meeting must comply with the requirements set forth
in the Company's bylaws. Among other things, to bring business before an annual
meeting, a stockholder must give written notice complying with the bylaws to the
Secretary of the Company sixty (60) days in advance of the meeting if the
meeting is to be held on the first Friday of May or, if the meeting is to be
held on some other date, no later than seven days following the date on which
notice of the meeting is first given to stockholders.
By Order of the Board of Directors
DeSOTO, INC.
Irving Kagan
Secretary
November 27, 1995
16
<PAGE> 19
DESOTO STOCK OWNERSHIP PLAN
[logo] 16750 South Vincennes Road, South Holland, Illinois 60473
November 27, 1995
Dear Employee:
The undersigned are the trustees for the DeSoto Stock Ownership Plus Plan.
As a member of this Plan, you have an opportunity to give voting instructions to
the trustees with respect to the voting at the 1995 annual meeting of Company
common stock credited to your account.
Enclosed is a copy of the notice of the 1995 annual meeting of
stockholders, the Company's proxy statement relating to that meeting and a
voting instruction form for your use. The Company's annual report on Form 10-K
for 1994 has been delivered to you at your place of work.
The voting instruction form is being delivered to you with an addressed
postage prepaid envelope in which you may mail the form to Harris Trust and
Savings Bank for tabulation. The enclosed copy of the voting instruction form
shows the number of shares credited to your account at the close of business on
November 22, 1995, the record date for the determination of stockholders of
record entitled to notice of and to vote at the stockholders' meetings and also
the date selected for determining the number of shares with respect to which
each plan member may give voting instructions to the trustees.
Harris Trust and Savings Bank, Transfer Agent for the common stock of the
Company, will tabulate the voting instructions received from plan members and
will certify the results to the trustees in order that the latter may cause the
Company common stock held by the plan to be voted according to the instructions
received from plan members. In conformity with the rules of the plan, which
contemplate secrecy respecting each member's voting instructions, the voting
instructions of individual plan members will not be seen by the Company or the
trustees.
If you send in your form without a specification on Item 1 (relating to the
authority to vote on the election of directors), your shares will be voted for
the nominees named in the enclosed proxy statement. Likewise, if you send in
your form without a specification on Item 2 (relating to approval and
ratification of the appointment of auditors), your shares will be voted for the
approval and ratification of such appointment. Your shares will also be voted
for the aforementioned nominees for directors, and ratification of the
appointment of auditors if your voting instruction is not received by Harris
Trust and Savings Bank on or before December 14, 1995. On other matters which
may come before the meeting -- and the trustees know of none -- your Company
shares will be voted by the trustees, or their attorneys-in-fact, in accordance
with their best judgment.
Sincerely yours,
WILLIAM SPIER
ANDERS SCHROEDER
Trustees
<PAGE> 20
PROXY
DESOTO, INC.
The undersigned hereby appoints ANNE E. EISELE and IRVING KAGAN, and each of
them, as Proxies with the power of substitution and revocation (to act by a
majority present or if only one acts then by that one) and hereby authorizes
them to represent and to vote as designated below all of the shares of stock of
DeSoto, Inc. held of record by the undersigned on November 22, 1995, at the
annual meeting of stockholders to be held in New York, New York, on Wednesday,
December 20, 1995, at 10:00 A.M., New York time, or any adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DESOTO, INC.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE BOARD'S NOMINEES, AND FOR APPROVAL AND
RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN & CO. AS AUDITORS.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such shares at said meeting or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
<PAGE> 21
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<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. //
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
1. ELECTION OF DIRECTORS. FOR ALL 2. APPROVAL AND
Nominees: ANDERS U. EXCEPT AS RATIFICATION OF THE
SCHROEDER and DAVID FOR WITHHOLD LISTED BELOW APPOINTMENT OF ARTHUR ANDERSEN FOR AGAINST ABSTAIN
M. TOBEY // // // & CO. AS INDEPENDENT AUDITORS OF // // //
THE COMPANY FOR 1995.
INSTRUCTION: To withhold authority 3. IN THEIR DISCRETION, UPON SUCH OTHER
to vote for any individual nominee, BUSINESS AS MAY PROPERLY COME BEFORE
write that nominee's name on the THE MEETING OR ANY ADJOURNMENT
space provided below. THEREOF.
- -----------------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as
such. If a corporation, please sign
in full corporate name by the President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
Dated: ,1995
-------------------------
--------------------------------------
--------------------------------------
Signature(s) of Stockholder(s)
PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE.
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<PAGE> 22
DESOTO STOCK OWNERSHIP PLUS PLAN MEMBER VOTING INSTRUCTION FORM
The undersigned directs that at the annual meeting of stockholders of DeSoto,
Inc., to be held in New York, New York, on December 20, 1995, and at any
adjournment thereof, the shares of DeSoto stock to the credit of the
undersigned's account with the DeSoto Stock Ownership Plus Plan on November 22,
1995, shall be voted by the Trustees, or their attorneys-in-fact.
IF THIS VOTING INSTRUCTION FORM, REQUESTED BY THE TRUSTEES WITH RESPECT TO A
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY, SIGNED BY
THE MEMBER, IS RECEIVED BY HARRIS TRUST AND SAVINGS BANK ON OR BEFORE DECEMBER
14, 1995, THE SHARES INDICATED HEREON WILL BE VOTED FOR THE ELECTION OF
DIRECTORS UNLESS IT IS MARKED TO WITHHOLD AUTHORITY AND WILL BE VOTED ON
PROPOSAL 2 IN ACCORDANCE WITH THE INSTRUCTION SPECIFIED HEREON. IN THE
ABSENCE OF AN INSTRUCTION AS TO PROPOSAL 2, SAID SHARES WILL BE VOTED FOR SUCH
PROPOSAL. IF A SIGNED INSTRUCTION FORM IS NOT RECEIVED BY HARRIS TRUST AND
SAVINGS BANK ON OR BEFORE DECEMBER 14, 1995, SAID SHARES WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
PLEASE RETURN TO: DESOTO, INC., C/O HARRIS TRUST AND SAVINGS BANK, P.O. BOX
830, CHICAGO, ILLINOIS 60690-9972
(CONTINUED AND TO BE SIGNED ON OTHER SIDE.)
<PAGE> 23
DESOTO, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
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<S><C>
FOR all
except as
1. ELECTION OF DIRECTORS. For Withheld listed below 2. APPROVAL AND RATIFICATION OF THE For Against Abstain
Nominees: ANDERS U. SCHROEDER / / / / / / APPOINTMENT OF ARTHUR ANDERSEN & CO. / / / / / /
and DAVID M. TOBEY. AS INDEPENDENT AUDITORS OF THE COMPANY
FOR 1995.
INSTRUCTION: To withhold authority to vote for any 3. IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS
individual nominee, write that nominee's name on the MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
space provided below. THEREOF.
____________________________________________________
Please sign, date and return promptly in the
enclosed envelope. No postage need be affixed
if mailed in the United States.
_____________________________________________
_____________________________________________
Signature of Member
Dated: ________________________________, 1995
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS
VOTING INSTUCTION FORM.
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