<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 (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 sec. 240.14a-11(c) or sec. 240.14a-12
TRISTAR CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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
TRISTAR CORPORATION
12500 San Pedro Avenue, Suite 500
San Antonio, Texas 78216
January 6, 1998
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
the 1998 Annual Meeting of the Stockholders of TRISTAR CORPORATION. The Annual
Meeting will be held on Thursday, February 12, 1998 at 10:00 a.m., C.S.T., at
the Company's corporate office at 12500 San Pedro Avenue, Suite 500, San
Antonio, Texas. The formal Notice of the Annual Meeting is set forth in the
enclosed material.
The matters expected to be acted upon at the meeting are described in
the attached Proxy Statement. During the meeting, stockholders will have the
opportunity to ask questions and comment on TRISTAR CORPORATION's operation.
It is important that your views be represented whether or not you are
able to be present at the Annual Meeting. Please sign and return the enclosed
proxy card promptly.
We appreciate your investment in TRISTAR CORPORATION and urge you to
return your proxy card as soon as possible.
Sincerely,
Viren S. Sheth
President and Chief Executive Officer
<PAGE> 3
================================================================================
TRISTAR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of
TRISTAR CORPORATION (the "Company") will be held on Thursday, February 12,
1998, at 10:00 a.m., C.S.T., at the Company's corporate office at 12500 San
Pedro Avenue, Suite 500, San Antonio, Texas for the following purposes:
1. To elect a Board of six directors to serve for the ensuing
year and until their respective successors are duly elected
and qualified;
2. To consider and act upon a proposal that the stockholders
approve the Company's 1997 Long Term Incentive Plan;
3. To consider and act upon a proposal that the stockholders
approve the appointment of Coopers & Lybrand LLP as the
Company's independent accountants for fiscal year ending
August 29 1998; and
4. To transact such other and further business as may lawfully
come before the Annual Meeting or any adjournment or
adjournments thereof.
Information with respect to the above matters is set forth in the
Proxy Statement that accompanies this Notice.
The Board of Directors has fixed the close of business on January 2,
1998 as the record date for determining stockholders entitled to notice of and
to vote at the meeting. A complete list of the stockholders entitled to vote
at the meting will be maintained at the Company's principal executive offices
during ordinary business hours for a period of ten days prior to the meeting.
The list will be open to the examination of any stockholder for any purpose
germane to the meeting during this time. The list will also be produced at the
time and place of the meeting and will be open during the whole time thereof.
By Order of the Board of Directors,
PHILLIP M. RENFRO
Secretary
San Antonio, Texas
January 6, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
EVEN IF YOU PLAN TO BE PRESENT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY AT YOUR EARLIEST CONVENIENCE IN THE PROVIDED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY
VOTE EITHER IN PERSON OR BY YOUR PROXY.
================================================================================
<PAGE> 4
TRISTAR CORPORATION
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 12, 1998
GENERAL INFORMATION
This Proxy Statement is furnished to stockholders of TRISTAR
CORPORATION, a Delaware corporation (the "Company"), in connection with the
solicitation by the Board of Directors of proxies for use at the Annual Meeting
(the "Meeting or "Annual Meeting") of Stockholders to be held on Thursday,
February 12, 1998, at 10:00 a.m., C.S.T., at the Company's corporate office at
12500 San Pedro Avenue, Suite 500, San Antonio, Texas, and at any adjournment
or postponement thereof, for the purposes set forth in the foregoing Notice of
Annual Meeting of Stockholders. Properly executed proxies received in time for
the meeting will be voted.
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of Common Stock, $0.01 par value (the "Common Stock"), of the
Company. At the close of business on January 2, 1998 (the "Record Date"),
there were outstanding and entitled to vote ______________________ shares of
Common Stock. The holders of record of Common Stock on the Record Date will be
entitled to one vote per share. The Company's Certificate of Incorporation
does not permit cumulative voting in the election of directors.
The Annual Report to stockholders for the year ended August 30, 1997,
has been or is being furnished with this Proxy Statement, which is being mailed
on or about January 6, 1998, to the holders of record of Common Stock on the
Record Date. The Annual Report to Stockholders does not constitute a part of
the proxy materials.
VOTING AND PROXY PROCEDURES
Properly executed proxies received in time for the meeting will be
voted. Stockholders are urged to specify their choices on the proxy, but if no
choice is specified, eligible shares will be voted for the election of the six
nominees for director named herein, for the approval of the Company's 1997 Long
Term Incentive Plan, and for ratification of the appointment of Coopers &
Lybrand LLP as the Company's independent public accountants for fiscal year
ending August 29, 1998. At the date of this Proxy Statement, management of the
Company knows of no other matters which are likely to be brought before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting, the persons named in the enclosed proxy will have discretionary
authority to vote such proxy in accordance with their best judgment on such
matters.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked by a later-dated proxy or by written notice filed with
Robert M. Viola at the Company's executive offices at any time before the
enclosed proxy is exercised. Stockholders attending the Annual Meeting may
<PAGE> 5
revoke their proxies and vote in person. The Company's executive offices are
located at 12500 San Pedro Avenue, Suite 500, San Antonio, Texas 78216.
The holders of a majority of the total shares of Common Stock issued
and outstanding at the close of business on the Record Date, whether present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting. The affirmative vote of a plurality of the
total shares of Common Stock present in person or represented by proxy and
entitled to vote at the Annual Meeting is required for the election of
directors, and the affirmative vote of a majority of the total shares of Common
Stock present in person or represented by proxy and entitled to vote at the
Annual Meeting is required for the approval of the Company's 1997 Long Term
Incentive Plan, the ratification of the appointment of Coopers & Lybrand LLP as
the Company's independent public accountants for the fiscal year ending August
29, 1998 and for any other matters as may properly come before the Annual
Meeting or any adjournment thereof.
Abstentions are counted toward the calculation of a quorum but are not
treated as either a vote for or against a proposal. An abstention has the same
effect as a vote against the proposal. Any unvoted position in a brokerage
account will be considered as not voted and will not be counted toward
fulfillment of quorum requirements.
The cost of solicitation of proxies will be paid by the Company. In
addition to solicitation by mail, proxies may be solicited by the directors,
officers and employees of the Company, without additional compensation, by
personal interview, telephone, telegram or otherwise. Arrangements will also
be made with brokerage firms and other custodians, nominees and fiduciaries who
hold the voting securities of record for the forwarding of solicitation
materials to the beneficial owners thereof. The Company will reimburse such
brokers, custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in connection therewith. The Company has no present
plans to hire special employees or paid solicitors to assist in obtaining
proxies but reserves the option of doing so if it should appear that a quorum
otherwise might not be obtained.
2
<PAGE> 6
OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 19, 1997, certain
information with respect to Common Stock beneficially owned by persons who are
known to the Company to be the beneficial owners of more than five percent of
the issued and outstanding shares of Common Stock. For proposes of this Proxy
Statement, beneficial ownership is defined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") to mean generally the
power to vote or dispose of shares, regardless of any economic interest
therein. The persons listed have sole voting power and sole dispositive power
with respect to all shares set forth in the table unless otherwise specified in
the footnotes to the table.
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP PERCENT OF CLASS
Core Sheth Families (1) 16,440,273 81.5%
Post Office Box 5551
Dubai, United Arab Emirates
Transvit Manufacturing Corporation (2) 10,644,339 61.1%
1211 Geneva
25 Switzerland
Case Postale 69
Starion International Limited (3) 5,313,174 27.7%
Woodbourne Hall, P. O. Box 3162
Road Town, Tortola
British Virgin Islands
Ibrahim Ahmed Al-Musbahi 1,000,000 6.0%
c/o Al-Musbahi Establishment
P. O. Box 20002
Jeddah 21455
Saudi Arabia
_________________
(1) Shashikant S. Sheth, Jammadas Sheth, Kirit Sheth and Mahendra Sheth
comprise the Core Sheth Families. The Core Sheth Families owns and
controls Transvit Manufacturing Corporation ("Transvit"), Starion
International Limited ("Starion B.V.I.") and Nevell Investments S.A.
("Nevell"). The 16,440,273 shares includes 10,644,339 shares
beneficially owned by Transvit (which includes 666,529 shares
issuable upon the conversion of Series A Convertible Preferred Stock
held by Transvit); 5,313,174 shares beneficially owned by Starion
B.V.I. (which includes 2,400,000 shares issuable upon the exercise
of currently exercisable Common Stock warrants held by Starion
B.V.I.); 482,760 shares issuable upon the conversion of Series B
Convertible Preferred Stock held by Nevell and 107,000 shares
otherwise owned or controlled by the Core Sheth Families. The
members of the Core Sheth Families share voting and investment power
with respect to all of these shares.
(2) Transvit shares voting and investment power with the members of the
Core Sheth Families with respect to their cumulative shares. Includes
666,529 shares issuable upon conversion of Series A Convertible
Preferred Stock.
(3) Includes 2,400,000 shares issuable upon the exercise of currently
exercisable Common Stock warrants held by Starion B.V.I. shares
voting and investment power with the members of the Core Sheth
Families with respect to all of these shares.
3
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of December 19, 1997, certain
information with respect to the Company's Common Stock beneficially owned by
each of its directors and nominees for director, each executive officer named
in the Summary Compensation Table and by all its directors and officers as a
group. Such persons have sole voting power and sole dispositive power with
respect to all shares set forth in the table unless otherwise specified in the
footnotes to the table.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP PERCENT OF CLASS (1)
<S> <C> <C>
Viren S. Sheth (2) 160,032 *
12500 San Pedro Avenue, Suite 500
San Antonio, TX 78216
Richard P. Rifenburgh -0- *
133 N. Pompano Beach Boulevard
Pompano Beach, FL 33062
Robert R. Sparacino -0- *
Sparacino Associates, Inc.
175 Blackberry Drive
Stamford, CT 06903
Aaron Zutler 10,000 *
Marketing Congress, Inc.
80 Skyline Drive
Plainview, New York 11803
Jay J. Sheth(3) -0- *
Starion House, 319 Pinner Road
North Harrow, Middlesex
HA 1 4HF England
B. J. Harid -0- *
P. O. Box 5551
Dubai, United Arab Emirates
Peter C. Liman 35,000 *
12500 San Pedro Avenue, Suite 500
San Antonio, TX 78216
Loren M. Eltiste 58,706 *
12500 San Pedro Avenue, Suite 500
San Antonio, TX 78216
Joseph DeKama -0- *
250 W. 57th Street, Suite 2232
New York, NY 10107
All executive officers and directors as a 205,032 1.2%
group ten (10) persons, including the
executive officers and directors listed
above)
</TABLE>
* Represents less than 1%
(1) Based on 16,749,569 shares of Common Stock issued and outstanding as
of December 19, 1997.
(2) Viren S. Sheth, a director of the Company and its President and Chief
Executive Officer, although not a member of the Core Sheth Families,
is related by blood to certain members of the Core Sheth Families.
Viren S. Sheth disclaims beneficial ownership of shares
beneficially owned by the Core Sheth Families.
(3) Jay J. Sheth, a director of the Company, although not a member of the
Core Sheth Families, is related by blood to certain members of the
Core Sheth Families. Jay J. Sheth disclaims beneficial ownership of
shares beneficially owned by the Core Sheth Families.
4
<PAGE> 8
OWNERSHIP OF PREFERRED STOCK
The following table sets forth as of December 19, 1997, certain information
with respect to the Company's Preferred Stock beneficially owned by persons who
are known to the Company to be owners of more than five percent of the issued
and outstanding shares of Preferred Stock, each of its directors and nominees
for director, each executive officer named in the Summary Compensation Table and
by all its directors and officers as a group. Such persons have sole voting
power and sole dispositive power with respect to all shares set forth in the
table unless otherwise specified in the footnotes to the table.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OWNERSHIP CLASS(1)
Core Sheth Families (2) 787,219 100%
Post Office Box 5551
Dubai, United Arab Emirates
Transvit Manufacturing Corporation 666,529 84.7
1211 Geneva
25 Switzerland
Case Postale 69
Nevell Investments, S.A. 120,690 15.3
P. O. Box 7707
Dubai, United Arab Emirates
Viren S. Sheth (3) -0- 0%
12500 San Pedro Avenue, Suite 500
San Antonio, TX 78216
Richard P. Rifenburgh -0- 0%
133 N. Pompano Beach Boulevard
Pompano Beach, FL 33062
Robert R. Sparacino -0- 0%
Sparacino Associates, Inc.
175 Blackberry Drive
Stamford, CT 06903
Aaron Zutler -0- 0%
Marketing Congress, Inc.
80 Skyline Drive
Plainview, New York 11803
Jay J. Sheth(4) -0- 0%
Starion House
319 Pinner Road
North Harrow, Middlesex
HA 1 4HF England
B. J. Harid -0- 0%
P. O. Box 5551
Dubai, United Arab Emirates
5
<PAGE> 9
<TABLE>
<S> <C> <C>
Peter C. Liman -0- 0%
12500 San Pedro Avenue, Suite 500
San Antonio, TX 78216
Loren M. Eltiste -0- 0%
12500 San Pedro Avenue, Suite 500
San Antonio, TX 78216
Joseph DeKama -0- 0%
250 W. 57th Street, Suite 2232
New York, NY 10107
All executive officers and directors as a -0- 0%
group ten (10) persons, including the
executive officers and directors listed
above)
</TABLE>
__________________________
(1) Based on 787,219 shares of Preferred Stock issued and outstanding as
of December 19, 1997.
(2) Includes 666,529 shares of Series A Convertible Preferred Stock held
by Transvit and 120,690 shares of Series B Convertible Preferred
Stock held by Nevell. The Core Sheth Families owns and controls
each of Transvit and Nevell. Each share of Series A Convertible
Preferred Stock is convertible into one share of Common Stock. Each
share of Series B Convertible Preferred Stock is convertible into
four shares of Common Stock.
(3) Viren S. Sheth, a director of the Company and its President and Chief
Executive Officer, although not a member of the Core Sheth Families,
is related by blood to certain members of the Core Sheth Families.
Viren S. Sheth disclaims beneficial ownership of shares
beneficially owned by the Core Sheth Families.
(4) Jay J. Sheth, a director of the Company, although not a member of the
Core Sheth Families, is related by blood to certain members of the
Core Sheth Families. Jay J. Sheth disclaims beneficial ownership of
shares beneficially owned by the Core Sheth Families.
MATTERS TO COME BEFORE THE ANNUAL MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws provide that the
Board of Directors will consist of not less than three persons, the exact
number to be fixed from time to time by the Board of Directors. The Board of
Directors has fixed the authorized number of directors at six.
Six directors (constituting the entire Board) are to be elected at the
Annual Meeting to serve until the next Annual Meeting of Stockholders and until
their successors shall have been duly elected and qualified. All of the
persons named below are now directors of the Company.
The following table contains certain information as of December 19,
1997, with respect to the persons who have been nominated to serve as
directors:
<TABLE>
<CAPTION>
POSITION AND OFFICES WITH SERVED AS A
NAME AGE THE COMPANY DIRECTOR SINCE
<S> <C> <C> <C>
Richard P. Rifenburgh (1)(2)(3) 65 Chairman of the Board of 1992
Directors
Robert R. Sparacino(3)(4) 70 Vice-Chairman of the Board of 1992
Directors
Viren S. Sheth(2) 48 President and Chief Executive 1992
Officer and Director
Aaron Zutler 63 Director 1995
Jay J. Sheth(2) 41 Director 1996
B. J. Harid 41 Director 1997
</TABLE>
6
<PAGE> 10
(1) Mr. Rifenburgh became Chairman of the Board in August 1992. The
Chairman of the Board is not an officer of the Company.
(2) Member of Executive Committee.
(3) Member of Audit Committee.
(4) Dr. Sparacino became Vice-Chairman of the Board in August 1992. The
Vice-Chairman of the Board is not an officer of the Company.
Biographical information on these continuing directors is set forth
below under "Further Information--Board of Directors and Executive Officers".
Each of the persons set forth in the table above was not selected as a
director pursuant to any arrangement or understanding between him and any other
person (other than directors or officers of the Company acting solely in their
capacities as such) except for Jay J. Sheth and B. J. Harid, who agreed to
serve as directors of the Company pursuant to a consensus among the Core Sheth
Families. The Core Sheth Families is a group which is the beneficial owner of
81.5% of the Company's Common Stock as more particularly set forth below and in
the Core Sheth Schedule 13D and amendments thereto. Viren S. Sheth regularly
consults with the Core Sheth Families with respect to the operations of the
Company.
It is the intention of the persons named in the enclosed proxy to vote
such proxy for election of such nominees. Management of the Company does not
contemplate that any of such nominees will become unavailable for any reason,
but if that should occur before the meeting, proxies that do not withhold
authority to vote for directors will be voted for another nominee, or other
nominees, in accordance with the best judgment of the person or persons
appointed to vote the proxy.
The enclosed form of proxy provides a means for the holders of Common
Stock to vote for all of the nominees listed therein, to withhold authority to
vote for one or more of such nominees or to withhold authority to vote for all
such nominees. Each properly executed proxy received in time for the meeting
will be voted as specified therein, or if a stockholder does not specify in his
or her executed proxy how the shares represented by his or her proxy are to be
voted, such shares shall be voted for the nominees listed therein or for other
nominees as provided above. The director nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected as directors. Abstentions and
broker non-votes will not be treated as a vote for or against any particular
director nominee and will not affect the outcome of the election. Two
affiliates of the Core Sheth Families, Transvit Manufacturing Corporation
("Transvit") and Starion International Limited ("Starion B.V.I."), the record
holders of 59.6% and 17.4% of the Company's outstanding shares of Common Stock,
respectively, have indicated to the Company that they intend to vote in favor
of all of the nominees set forth above.
The Company's Certificate of Incorporation provides that nominations
for the election of directors may be made by the Board, a committee of the
Board or any stockholder entitled to vote for the election of directors.
Nominations by stockholders shall be made by notice, in writing, delivered or
mailed by first class mail, postage prepaid, to the Secretary of the Company
not less than 14 days nor more than 50 days prior to any meeting of the
stockholders called for the election of directors; provided, that if less than
21 days notice of the meeting is given to stockholders, such written notice
shall be delivered or mailed, as prescribed, to the Secretary of the Company
not later than the close of the seventh day following the day on which notice
of the meeting was mailed to stockholders. Each such notice shall set forth
the name, age and business address of each proposed nominee, the principal
occupation or employment of each such nominee and the number of shares of
Common Stock owned by such nominee.
7
<PAGE> 11
COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of its
Board of Directors. The Company's Board of Directors has established four
standing committees: Audit, Compensation, Nominating and Executive.
The Audit Committee is comprised of certain directors who are not
employees of the Company or any of its subsidiaries. Dr. Sparacino and Mr.
Rifenburgh are the current members of the Audit Committee. The Audit Committee
meets with the independent auditors, management representatives and internal
auditors; recommends to the Company's Board of Directors appointment of
independent auditors; approves the scope of audits and other services to be
performed by the independent and internal auditors; considers whether the
performance of any professional services by the auditors other than service
provided in connection with the audit function could impair the independence of
the outside auditors; and reviews the results of internal and external audits
and the accounting principles applied in financial reporting and financial and
operational controls. The independent auditors and internal auditors have
unrestricted access to the Audit Committee and vice versa.
The Executive Committee performs the functions of the Nominating
Committee and the Compensation Committee. From August 31, 1996 to April 24,
1997, the Executive Committee was composed of Mr. Rifenburgh, Dr. Sparacino and
Viren Sheth. On April 24, 1997, the Board of Directors elected a new Executive
Committee of Mr. Rifenburgh, Jay Sheth and Viren Sheth. When performing
Nominating Committee functions, the Executive Committee's duties include
developing a policy on the size and composition of the Board and criteria
relating to candidate selection; identifying candidates for Board membership
and establishing procedures whereby individuals may be recommended by
stockholders for consideration by the Executive Committee as possible
candidates for election to the Board. The Executive Committee's Compensation
Committee functions include reviewing the Company's compensation philosophy and
programs, including the payment of direct salaries and incentive compensation
to directors and officers; reviewing loans to, or guarantees of obligations of,
officers, directors and employees of the Company; and administering the
Company's stock option plans.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended August 30, 1997, the Board of Directors
met six (6) times, the Audit Committee met two (2) times, and the Executive
Committee met one (1) time. Each of the directors of the Company attended
at least 75 percent of the aggregate of the meetings of the Board of Directors
and committees of which he was a member.
COMPENSATION OF DIRECTORS
The Company provides reimbursement for travel and other expenses
incurred by all directors in connection with their service as directors of the
Company. The Company also provides compensation to Messrs. Rifenburgh and
Zutler and Dr. Sparacino for their services as directors and members of various
committees of the Board.
8
<PAGE> 12
Dr. Sparacino and Messrs. Rifenburgh and Zutler each receive $2,500
per day per Board or Committee meeting attended. In addition, each receives a
quarterly fee of $10,000 as compensation for services outside of Board and
committee meetings. During fiscal 1997 Messrs. Rifenburgh and Zutler and Dr.
Sparacino (through his company, Sparacino Associates, Inc.) received $77,672,
$90,176 and $76,881, respectively, in connection with their service as
directors and members of committees of the Board.
PROPOSAL 2: PROPOSAL TO APPROVE THE 1997 LONG TERM INCENTIVE PLAN
DESCRIPTION OF 1997 LONG TERM INCENTIVE PLAN
On April 25, 1997, the Board adopted the 1997 Long Term Incentive Plan
(the "Incentive Plan"), subject to the approval of the Company's stockholders.
A complete copy of the Incentive Plan is attached hereto as Exhibit A. The
following description of the Incentive Plan is qualified in its entirety by
reference to Exhibit A, which is hereby incorporated herein by reference as if
fully set forth herein. Upon stockholder approval of the Incentive Plan, the
existing stock option plans of the Company will terminate.
The Incentive Plan is intended to advance the best interests of the
Company, its subsidiaries and its stockholders by attracting, retaining and
motivating key employees. The Incentive Plan provides for the grant of stock
options (which may be non-qualified stock options or incentive stock options for
tax purposes), stock appreciation rights issued independent of or in tandem with
such options ("SARs"), restricted stock awards and performance awards to certain
key employees of the Company and its subsidiaries, thereby increasing the
personal stake of such key employees in the continued success and growth of the
Company. There are currently approximately 15 key employees of the Company and
its subsidiaries eligible to participate in the Incentive Plan.
The Incentive Plan will be administered by the Compensation Committee
or other designated committee of the Board (the "Committee"), which consists
solely of two or more non-employee directors of the Company who are
disinterested within the meaning of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended. The Committee will have broad authority to interpret and
administer the Incentive Plan, including the power to grant and modify awards
and the power to limit or eliminate its discretion as it may deem advisable to
comply with or obtain preferential treatment under any applicable tax or other
law, rule or regulation. The Committee will also have broad authority to
accelerate the vesting of an award or the time at which any award is exercisable
or to waive any condition or restriction on the vesting, exercise or receipt of
any award. The Board may at any time amend, suspend, discontinue or terminate
the Incentive Plan without stockholder approval or approval of participants,
subject to certain limitations.
Initially, 1,000,000 shares of Common Stock will be available for
issuance under the Incentive Plan. In addition, as of January 1 of each year
the Incentive Plan is in effect, if the total number of shares of Common Stock
issued and outstanding, not including any shares issued under the Incentive
Plan, exceeds the total number of shares of Common Stock issued and outstanding
as of January 1 of the preceding year (or, for 1998, as of the commencement of
the Incentive Plan), the number of shares
9
<PAGE> 13
available will be increased by an amount such that the total number of shares
available for issuance under the Incentive Plan equals 10% of the total number
of shares of Common Stock outstanding, not including any shares issued under
the Incentive Plan. Lapsed, forfeited or canceled awards will not count
against these limits. Cash exercises of SARs and cash settlement of other
awards will also not be counted against these limits but the total number of
SARs and other awards settled in cash shall not exceed the total number of
shares authorized for issuance under the Incentive Plan (without reduction for
issuances).
The aggregate number of shares of Common Stock subject to stock
options or SARs that may be granted to any one participant in any one year
under the Incentive Plan shall be 200,000 (subject to certain adjustment
provisions relating to changes in capitalization). The aggregate number of
shares of Common Stock that may be granted to any one participant in any one
year in respect of restricted stock shall be 200,000 (subject to certain
adjustment provisions relating to changes in capitalization). The aggregate
number of shares of Common Stock that may be received by any one participant in
any one year in respect of a performance award shall be 200,000 (subject to
certain adjustment provisions relating to changes in capitalization) and the
aggregate amount of cash that may be received by any one participant in any one
year in respect to a performance award shall be $500,000.
Stock Options
The Committee is authorized to determine the terms and conditions of
all option grants, which may be of incentive stock options subject to the
limits of Section 422 of the Internal Revenue Code of 1986, as amended, or
non-qualified stock options. The aggregate number of shares of Common Stock
that are available for incentive stock options granted under the Incentive Plan
is 1,000,000 (subject to certain adjustment provisions relating to changes in
capitalization). Stock options may be awarded subject to time, performance or
other vesting limitations imposed by the Committee. The term of an incentive
stock option shall not exceed ten years from date of grant. The exercise price
of an option shall be determined by the Committee upon the option grant,
provided that the exercise price of incentive stock options shall be no less
than the fair market value of the Common Stock on the date of grant. Payment
of the exercise price may be made in a manner specified by the Committee (which
may include payment in cash, Common Stock, a combination thereof, or by
"cashless exercise").
Stock Appreciation Rights
The Committee is authorized to grant SARs independent of or in tandem
with options under the Incentive Plan. The terms, conditions and exercise
price of SARs granted independent of options under the Incentive Plan will be
determined by the Committee on the date of grant. A tandem SAR can be
exercised only to the extent the option with respect to which it is granted is
then exercisable and is subject to the same terms and conditions as the option
to which it is related. An option related to a tandem SAR will terminate
automatically upon exercise of the tandem SAR. Similarly, when an option is
exercised, the tandem SARs relating to the shares covered by such option
exercise shall terminate. Any tandem SAR which is outstanding on the last day
of the term of the related option will be automatically exercised on such date
for cash.
10
<PAGE> 14
Upon exercise of an SAR, the holder will be entitled to receive, for
the number of shares referenced by the SAR, an amount per share (the
"appreciation") equal to the difference between the base price per share (which
shall be the exercise price per share of the related option in the case of a
tandem SAR) and the fair market value (as determined by the Committee) of a
share of Common Stock on the date of exercise of the SAR. The appreciation will
be payable in cash, Common Stock or a combination of both at the discretion of
the Committee.
Restricted Stock
The Committee is authorized to award restricted stock under the
Incentive Plan subject to such terms and conditions as the Committee may
determine consistent with the Incentive Plan. The Committee has the authority
to determine the number of shares of restricted stock to be awarded, the price,
if any, to be paid by the recipient of the restricted stock and the date or
dates on which the restricted stock will vest. The number of shares and
vesting of restricted stock may be conditioned upon the completion of a
specified period of service with the Company or its subsidiaries or upon the
attainment of specified performance objectives based on increases in share
prices, operating income, net income or cash flow thresholds, return on common
equity or any combination of the foregoing.
Stock certificates representing the restricted stock granted to an
eligible employee will be registered in the employee's name. The Committee
will determine whether an employee will have the right to vote and/or receive
dividends on the restricted stock before it vests. No share of restricted stock
may be sold, transferred, assigned or pledged by the employee until such share
has vested in accordance with the terms of the restricted stock award. Except
as otherwise specified in the grant of a restricted stock award, in the event
of an employee's termination of employment before all his or her restricted
stock has vested, or in the event other conditions to the vesting of restricted
stock have not been satisfied prior to any deadline for the satisfaction of
such conditions set forth in the award, the shares of restricted stock that
have not vested will be forfeited and any purchase price paid by the employee
will be returned to the employee. At the time the restricted stock vests, a
certificate for such vested shares will be delivered to the employee (or the
employee's estate, in the event of the employee's death), free of all
restrictions.
Performance Awards
The Committee is authorized to grant performance awards, which are
payable in stock, cash or a combination thereof, at the discretion of the
Committee. An employee to whom a performance award is granted will be given
achievement objectives to be reached over a specified period of time, the
"performance period." A minimum level of acceptable achievement will also be
established. Achievement objectives may be described either in terms of
Company-wide performance or in terms that are related to the performance of the
employee or of the division, subsidiary, department or function within the
Company in which the employee is employed. The Committee has the authority to
determine the size of the award, frequency of awards, the date or dates when
awards vest, the performance periods and the specific performance objectives to
be achieved in order to receive the award. Performance objectives, however,
will be
11
<PAGE> 15
based on increases in share prices, operating income, net income or cash flow
thresholds, return on common equity or any combination of the foregoing.
If at the end of the performance period the specified objectives have
been fully attained, the employee will be deemed to have fully earned the
performance award. If such objectives have been partially attained, the
employee will be deemed to have partly earned the performance award and will
become entitled to receive a portion of the total award, as determined by the
Committee. If the required minimum level of achievement has not been met, the
employee will not be entitled to any part of the performance award. If a
performance award is granted after the start of a performance period, the award
will be reduced to reflect the portion of the performance period during which
the award was in effect.
An employee (or the employee's estate, as the case may be) who, by
reason of death, disability or retirement, terminates employment before the end
of the performance period will be entitled to receive, to the extent earned, a
portion of the award which is proportional to the portion of the performance
period during which the employee was employed. An employee who terminates
employment for any other reason will not be entitled to any part of the award
unless the Committee determines otherwise; however, the Committee may in no
event pay the employee more than that portion of the award which is
proportional to his or her period of actual service.
Federal Income Tax Consequences
Incentive Stock Options. The grant of incentive stock options under
the Incentive Plan to an employee does not result in any income tax
consequences. The exercise of an incentive stock option does not result in any
income tax consequences to the employee if the incentive stock option is
exercised by the employee during his or her employment with the Company or a
subsidiary, or within a specified period after termination of employment.
However, the excess of the fair market value of the shares of stock as of the
date of exercise over the option price is a tax preference item for purposes of
determining an employee's alternative minimum tax. An employee who sells
shares acquired pursuant to the exercise of an incentive stock option after the
expiration of (i) two years from the date of grant of the incentive stock
option and (ii) one year after the transfer of the shares to him (the "Waiting
Period") will generally recognize long term capital gain or loss on the sale.
An employee who disposes of his or her incentive stock option shares
prior to the expiration of the Waiting Period (an "Early Disposition")
generally will recognize ordinary income in the year of sale in an amount equal
to the excess, if any, of (a) the lesser of (i) the fair market value of the
shares as of the date of exercise or (ii) the amount realized on the sale, over
(b) the option price. Any additional amount realized on an Early Disposition
should be treated as capital gain to the employee, short or long term,
depending on the employee's holding period for the shares. If the shares are
sold for less than the option price, the employee will not recognize any
ordinary income but will recognize a capital loss, short or long term,
depending on the holding period.
The Company will not be entitled to a deduction as a result of the
grant of an incentive stock option, the exercise of an incentive stock option
or the sale of incentive
12
<PAGE> 16
stock option shares after the Waiting Period. If an employee disposes of his
or her incentive stock option shares in an Early Disposition, the Company will
be entitled to deduct the amount of ordinary income recognized by the employee.
Non-Qualified Stock Options. The grant of non-qualified stock options
under the Incentive Plan will not result in the recognition of any taxable
income by the employee. An employee will recognize ordinary income on the date
of exercise of the non-qualified stock option equal to the difference between
(i) the fair market value on the date the shares were acquired and (ii) the
exercise price. The tax basis of these shares for the purpose of a subsequent
sale includes the option price paid and the ordinary income reported on
exercise of the option. The income reportable on exercise of the non-qualified
stock option is subject to federal and state income and employment tax
withholding. Generally, the Company will be entitled to a deduction in the
amount reportable as income by the employee on the exercise of a non-qualified
stock option.
Stock Appreciation Rights. Stock Appreciation Rights granted under
the Incentive Plan do not result in taxable income to the employee at that
time. The issuance of shares of Common Stock or the payment of cash, without
other payment by the recipient, will be treated as additional compensation for
services to the Company. The employee will recognize taxable income equal to
cash received or the fair market value of the shares on the date of receipt,
which becomes the tax basis in a subsequent sale. Generally, the Company will
be entitled to a corresponding deduction in an amount equal to the income
recognized by the employee.
Restricted Stock Grants. Restricted stock granted under the Incentive
Plan generally will not be taxed to the recipient, nor deductible by the
Company, at the time of grant. Restricted Stock Grants involve the issuance of
stock to an employee subject to specified restrictions as to sale or
transferability of the stock and/or subject to a substantial risk of
forfeiture. On the date the restrictions lapse, or the performance goals are
met, and the stock becomes transferable or not subject to a substantial risk of
forfeiture, whichever is applicable, the recipient recognizes ordinary income
equal to the excess of the fair market value of the stock on that date over the
purchase price paid for the stock, if any. The employee's tax basis for the
stock includes the amount paid for the stock, if any, and the income
recognized. Generally, the Company will be entitled to a corresponding tax
deduction in an amount equal to the income recognized by the employee.
Performance Awards. Performance awards involve the issuance of shares
of stock, cash or a combination of both, without any payment, as compensation
for services to the Company only after satisfaction of specified performance
goals established by the Committee and certification by the Committee, prior to
payment, that the goals have been satisfied. Generally, the Company will be
entitled to a corresponding tax deduction in an amount equal to and in the year
income is recognized by the employee. See following discussion of "performance
based" compensation.
This Proposal No. 2 will be approved if approved by the vote of a majority of
the shares of Common Stock present in person or by proxy at the meeting,
provided the total shares present at the meeting constitutes a quorum With
respect to Proposal No. 2, all such shares will be voted FOR or AGAINST or not
voted, as specified on each proxy. If no choice is indicated, a proxy will be
voted FOR THE PROPOSAL NO. 2. THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE
IN FAVOR OF THE PROPOSAL NO. 2.
13
<PAGE> 17
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On July 22, 1997, the Company advised KPMG Peat Marwick LLP ("Peat
Marwick") that the Company intended to retain a different independent
accounting firm for the audit of its financial statements for the year ending
August 30, 1997. Peat Marwick had been engaged as the principal independent
accountant to audit the Company's consolidated financial statements.
Peat Marwick's reports on the Company's consolidated financial
statements for the fiscal years ended August 31, 1996 and 1995 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles.
The Audit Committee of the Company's Board of Directors recommended
the action taken with respect to Peat Marwick.
There have been no disagreements with Peat Marwick on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure during the Company's fiscal years ended August 31, 1995 and
1996 or in the subsequent interim period through July 22, 1997 (the date of
termination), which disagreements, if not resolved to Peat Marwick's
satisfaction, would have caused Peat Marwick to make reference to the subject
matter of the disagreement(s) in connection with its report.
Coopers & Lybrand, LLP ("Coopers") was engaged by the Company as its
independent principal accountant to audit the Company's consolidated financial
statements. This engagement was effective as of July 22, 1997. Coopers was the
principal accountant for Tristar prior to the merger of Eurostar with and into
Tristar on August 31, 1995.
Prior to engaging Coopers, Tristar had not consulted with Coopers
during the Company's two most recent fiscal years or in the period since the
end of the most recent fiscal year.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee,
has appointed the firm of Coopers & Lybrand LLP to serve as independent public
accountants of the Company for the fiscal year ending August 29, 1998.
Although stockholder approval is not required, the Board of Directors has
directed that such appointment be submitted to the stockholders of the Company
for ratification at the Annual Meeting. Coopers & Lybrand LLP has served as
independent public accountants of the Company with respect to the Company's
consolidated financial statements for the fiscal year ending August 30, 1997
and is considered by management of the Company to be well qualified. If the
stockholders do not ratify the appointment of Coopers & Lybrand LLP, the Board
of Directors may reconsider the appointment.
Representatives of Coopers & Lybrand LLP will be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders.
14
<PAGE> 18
Ratification of the appointment of Coopers & Lybrand LLP requires the
affirmative vote of a majority of the shares of Common Stock present by proxy
or in person and entitled to vote at the Annual Meeting. Abstentions and
broker non-votes will not be considered as a vote for or against the proposal
and therefore will have no effect on the outcome of the proposal. Proxies will
be voted for or against such approval in accordance with specifications marked
thereon, and if no specification is made, the proxies will be voted for such
approval.
FURTHER INFORMATION
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information with respect to each director and
executive officer of the Company as of December 19, 1997. The executive
officers are elected by the Board of Directors and serve at the discretion of
the Board.
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
RICHARD P. RIFENBURGH has served as Chairman of the Board of Moval
Management Corporation since 1968. Moval Management Corporation is a
management consulting firm which specializes in restoring companies in
financial distress. From February 1989 until May 1991 Mr. Rifenburgh served as
Chairman of the Board and Chief Executive Officer of MiniScribe Corporation, a
publicly-held company and manufacturer of computer disc drives. From 1987 to
1990 he was a General Partner at Hambrecht and Quist Venture Partners, a
venture capital organization. From 1988 to 1990 he was Chairman of the Board
and Chief Executive Officer of Ironstone Group, Inc., a publicly-held holding
company. Mr. Rifenburgh currently serves as a director of Concurrent Computer
Corporation, which files reports with the Commissioner pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Mr.
Rifenburgh is also a member of the Board of Directors for St. George Crystal
Ltd., a major manufacturer of fine quality crystal products, and CyberGuard
Corporation, a provider of security software, a public company which files
reports with the Commission pursuant to the Exchange Act. None of the
companies set forth above with which Mr. Rifenburgh has been affiliated are,
or have been, affiliates of the Company.
ROBERT R. SPARACINO has served as president and director of Sparacino
Associates, Inc. since 1981, a management consulting firm specializing in
business consulting. Prior to forming Sparacino Associates, Inc., Dr.
Sparacino was a senior officer of Xerox Corporation. Dr. Sparacino has also
served, and currently serves, as a director of several privately-held
companies, principally in connection with services rendered by Sparacino
Associates, Inc. Dr. Sparacino currently serves as a director of Power
Designs, Inc., which files reports with the Commission pursuant to the Exchange
Act. Dr. Sparacino is also a member of the Board of Directors of St. George
Crystal Ltd., a major manufacturer of fine quality crystal products. None of
the companies with which Dr. Sparacino has been affiliated are, or have been,
affiliates of the Company.
15
<PAGE> 19
JAY J. SHETH was elected to the Board of Directors in January 1996.
Mr. Sheth became the Managing Director of Starion International Limited
("Starion U.K.") in 1984. Starion U.K. is a manufacturer and distributor of
fragrances and cosmetics based in the United Kingdom and is owned by the Core
Sheth Families. From 1979 to March 1993 Mr. Sheth was Managing Director of S&J
Perfume Company, Ltd., a supplier of fragrance products based in the United
Kingdom which sold principally to distributors in the Middle East and to the
Company. Mr. Sheth has been a Managing Director of Starion Cosmetics Limited
since 1991 and a Director of Star Group Services Limited, a services company,
since 1995. Since 1994 Mr. Sheth has been a Director of Plus One Design
Limited. S&J Perfume Company, Ltd., Starion Cosmetics Limited, Star Group
Services Limited and Plus One Design Limited are entities owned and controlled
by the Core Sheth Families.
VIREN S. SHETH became a director, as well as President and Chief
Executive Officer of the Company on December 3, 1992. Mr. Sheth served as
President, Chief Executive Officer and a director of Eurostar Perfumes, Inc.
("Eurostar") from August 1992 until the merger of Eurostar with and into the
Company (the "Merger") in August 1995. From 1983 to August 1992 Mr. Sheth was
a director of S&J Perfume Company, Ltd., a supplier of fragrance products based
in the United Kingdom which sold principally to distributors in the Middle East
and to the Company. For a discussion of the relationships among Viren S.
Sheth, Jay J. Sheth, B. J. Harid and entities controlled by the Core Sheth
Families, see "Certain Transactions".
AARON ZUTLER was elected to the Board of Directors in August 1995.
Mr. Zutler is president and founder of Marketing Congress, Inc., an
international marketing consulting and new product development firm. Mr.
Zutler is also a member of the Board of Directors for St. George Crystal Ltd.,
a major manufacturer of fine quality crystal products. He is also president of
MCI Advertising which creates advertising promotional campaigns for a diverse
group of marketers in the consumer products field. On July 1, 1995, Mr. Zutler
was appointed to the Board of Directors of Eurostar where he served until the
Merger on August 31, 1995.
B. J. HARID was elected to the Board of Directors on April 24, 1997.
Mr. Harid holds a masters degree in Business Management from the Asian
Institute of Management, Philippines. From 1990 and 1991 he held the post of
Regional Director - East Europe for Jumbo Electronics, Dubai (Sole distributor
for SONY in the Middle East). Mr. Harid held the position of Executive Officer
for Vinelec group of Companies, Dubai, United Arab Emirates from July 1991 to
October 1996. He is currently a director with Unistar International LLC, a
Core Sheth Families controlled company.
The following is a list of the executive officers of the Company as of
December 19, 1997, their ages, positions and offices with the Company, and
periods during which they have served in such positions and offices:
16
<PAGE> 20
POSITION OR OFFICES
NAME AGE WITH THE COMPANY OFFICER SINCE
- - --------------- --- -------------------------------- -------------
Viren S. Sheth 48 Director, President & December 1992
Chief Executive Officer (1)
Richard Howard 56 Executive Vice President, December 1997
Chief Operating Officer
Robert M. Viola 51 Vice President, December 1997
Chief Financial Officer,
Treasurer & Assistant Secretary.
Peter C. Liman 58 Vice President, Marketing August 1995
(1) Mr. Sheth served as President, Chief Executive Officer and a director
of Eurostar from August 1992 until the consummation of the Merger in
August 1995.
INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS
Viren S. Sheth's business background is set forth above under
"Information with Respect to Nominees for Director".
Richard R. Howard has served as the Company's Executive Vice President
and Chief Operating Officer since December 1997. From August 1995 to December
1997 Mr. Howard served as Director, Strategic Services Consulting for KPMG Peat
Marwick, and held a consultancy position as Chief Operating Officer with JABRA
Corporation, a high-technology startup company. Mr. Howard served as a Unilever
executive as Senior Vice President of Operations for Chesebrough Ponds USA Co.,
and also as Executive Vice President of world-wide operations for Elizabeth
Arden Inc. from March 1992 to May 1995. From September 1989 to March 1992 Mr.
Howard was Senior Vice President, Operations for Somerset Knitting Mills Inc., a
division of the Phillips-Van Heusen Corp.
Robert M. Viola has served as Vice President and Chief Financial
Officer since December 1997. From June 1995 to January 1997 Mr. Viola served
in the dual capacity of President and Chief Financial Officer of Zotos
Corporation, a manufacturer and distributor of professional hair and skin care
products and a wholly-owned subsidiary of Shisiedo Co., Ltd. (Tokyo, Japan).
From May 1990 to June 1995 Mr. Viola served as Senior Vice President and Chief
Financial Officer of Zotos Corporation.
Peter C. Liman has served as Vice President, Marketing since August
1995. From December 1982 to July 1995 Mr. Liman served as Vice President
Marketing for Del Pharmaceuticals Inc., a division of Del Laboratories, Inc., a
publicly-owned company located in Farmingdale, New York.
17
<PAGE> 21
FAMILY RELATIONSHIPS AMONG DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Viren S. Sheth, President, Chief Executive Officer and a director of
the Company and Jay J. Sheth, director, are unrelated. Both are related by
blood to certain members of the Core Sheth Families.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Committee of the Board of Directors of the Company (in
its role as Compensation Committee) has furnished the following report on the
Company's executive compensation policies.
The Executive Committee, in its role as the Compensation Committee,
because there were no formal compensation policies in place, determined the
compensation of newly-hired executive officers based generally on the
qualifications and prior experience of the executive officers. The
Compensation Committee sets the compensation packages based on the experience
and with a view to competitive compensation packages offered to each executive
officers peer group within the industry. The Following paragraphs set forth the
basis of the compensation paid in fiscal 1997 to Viren S. Sheth, Loren M.
Eltiste and Joseph DeKama.
On December 3, 1992, the Board elected Viren S. Sheth as President and
Chief Executive Officer. The Executive Committee established Mr. Sheth's
salary at $150,000 per annum in recognition of the same position, with
comparable compensation, Mr. Sheth held with the Company's major supplier,
Eurostar, at that time. Upon consummation of the Merger on August 31, 1995,
Mr. Sheth's salary was increased to $385,000, the aggregate of his salaries at
Eurostar and Tristar, in recognition of his increased responsibilities as a
result of the Merger. As a long-term incentive, on April 19, 1996 the Company
and Mr. Sheth entered into a Stock Option Agreement, which vests over a
three-year period whereby Mr. Sheth was granted an option to purchase up to
480,000 shares of Common Stock of the Company.
The compensation package of Joseph DeKama, Senior Vice President of
Sales, was established as part of a twenty-nine month employment agreement
under which Mr. DeKama received a base salary of $360,000 per annum and an
annual bonus opportunity of up to $60,000 per year based on performance against
key criteria. Mr. DeKama was granted an option to purchase 50,000 shares of
the Company's Common Stock which vested upon execution of the agreement. In
addition, Mr. DeKama had the opportunity to earn additional options for up to
200,000 shares if he met certain performance criteria. The Executive
Committee set Mr. DeKama's compensation package based on his experience in the
fragrance and cosmetics industry. Mr. DeKama resigned from his position with
the Company in February 1997 and forfeited the above described option.
The compensation package of Loren M. Eltiste, Vice President & Chief
Financial Officer, was initially established on October 6, 1992, as part of a
three-year employment agreement pursuant to which Mr. Eltiste received an
initial base salary of $125,000 per annum and an annual bonus opportunity of up
to 25 percent of his base salary. In October 1993 Mr. Eltiste's base salary
was increased to $131,250 per annum. On October 6, 1992, Mr. Eltiste also
received an option to purchase 66,206 shares of the Company's Common Stock
which vested over a three-year period.
18
<PAGE> 22
The Executive Committee set Mr. Eltiste's compensation package based on his
experience as a financial executive and in view of competitive compensation
packages offered to his peer group in the industry. The stock option was
granted to provide a long-term incentive to Mr. Eltiste. Mr. Eltiste resigned
his position with the Company effective October 31, 1997.
EXECUTIVE COMMITTEE
Richard P. Rifenburgh
Jay J. Sheth
Viren S. Sheth
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain
information concerning compensation for fiscal years ended August 31, 1995 and
1996 and August 30, 1997 of the Company's Chief Executive Officer, the
Company's other two executive officers whose compensation for fiscal 1997 was
in excess of $100,000 and who were employed by the Company as of August 30,
1997, and one other executive officer whose compensation for fiscal 1997 was in
excess of $100,000 but who was not employed by the company as of August 30,
1997.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION OTHER
FISCAL ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION(1) OPTIONS(#) COMPENSATION($)
--------------------------- ------ --------- -------- --------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
VIREN S. SHETH 1997 $385,000 -- -- -- $16,784 (3)
PRESIDENT AND CHIEF 1996 389,519 -- -- 480,000 15,499 (3)
EXECUTIVE OFFICER 1995 392,308 (2) -- -- -- 9,424 (3)
LOREN M. ELTISTE(4) 1997 $131,250 -- -- -- $16,045 (5)
VICE PRESIDENT AND 1996 131,250 -- -- -- 15,856 (5)
CHIEF FINANCIAL 1995 131,250 -- -- -- 12,376 (5)
OFFICER
JOSEPH DEKAMA (6) 1997 180,000 12,936 -- -- $4,119 (8)
SENIOR VICE PRESIDENT 1996 351,000 13,860 -- 50,000(7) 3,258 (8)
OF SALES 1995 -- -- -- -- --
PETER C. LIMAN 1997 105,769 -- -- 125,000 $9,476 (9)
VICE PRESIDENT, 1996 100,000 -- -- -- 1,820 (9)
MARKETING 1995 -- -- -- -- --
</TABLE>
__________________________
(1) Excludes perquisites and other benefits if the aggregate amount of
such compensation is less than the lesser of $50,000 or 10% of the
annual salary and bonus reported for the named executive officer.
(2) Includes amounts earned by Mr. Sheth as officer of Eurostar.
(3) The amounts are comprised of (i) contributions to the Company's 401(k)
Plan in the amounts of $9,500 in 1997, $4,426 in 1996 and $7,500
in 1995; and (ii) premiums paid by the Company for insurance not
generally available to all Company employees in the amounts of
$7,284 in 1997, $6,675 in 1996 and $7,999 in 1995.
(4) Mr. Eltiste resigned from the Company October 1997.
(5) The amounts are comprised of (i) contributions to the Company's 401(k)
Plan in the amounts of $6,663 in 1997, $4,178 in 1996, and $6,197
in 1995, and (ii) premiums paid by the Company for insurance not
generally available to all Company employees in the amounts of
$9,382 in 1997, $5,678 in 1996, and $6,179 in 1995.
19
<PAGE> 23
(6) Joseph DeKama joined the Company on April 1, 1996. Prior to that date
he served as an independent sales representative and earned commissions
of $201,000 which are included in his salary for fiscal 1996. In
February 1997 Mr. DeKama resigned from the Company and served as an
independent sales representative of the Company, on a commission only
basis, until July 1997.
(7) As part of his initial compensation package, Mr. DeKama received an
option to purchase 50,000 shares of Common Stock. Mr. DeKama forfeited
such options upon his resignation from the Company in February 1997.
(8) The amounts include premiums paid by the Company on behalf of Mr. DeKama
with respect to insurance not generally available to all Company
employees in the amounts of $1,120 in fiscal 1997 and $758 in fiscal
1996.
(9) The amounts are comprised of (i) contributions to the Company's 401(k)
Plan in the amounts of $7,656 in 1997 and (ii) premiums paid by the
Company for insurance not generally available to all Company employees
in the amounts of $1,820 in 1997 and $1,820 in 1996.
OPTION GRANTS IN 1997 FISCAL YEAR
The following table provides information concerning grants of stock
options by the Company to the named executive officers in fiscal 1997. The
Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF STOCK PRICE
INDIVIDUAL APPRECIATION FOR
GRANTS THE OPTION TERM
---------- ---------------------
PERCENTAGE OF
TOTAL
OPTIONS GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
----------- -------------- ------------------ -------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Viren Sheth -- -- -- -- -- --
Loren M. Eltiste -- -- -- -- -- --
Joseph DeKama -- -- -- -- -- --
Peter C. Liman(1) 75,000 11.19% $6.875 1/08/07 885,985 1,933,820
Peter C. Liman(1) 50,000 7.46% $9.375 4/25/07 414,000 1,112,651
</TABLE>
(1) Mr. Liman's options were granted on January 8, 1997 in the amount of
75,000 and on April 25, 1997 in the amount of 50,000. Mr. Liman received an
aggregate of 18.65% of total options granted to employees in fiscal 1997.
OPTION EXERCISES IN 1997 FISCAL YEAR AND YEAR-END OPTION VALUE
The following table provides information concerning option exercises in
fiscal 1997 by the named executive officers and the value of such officer's
exercised options at August 30, 1997.
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN THE MONEY OPTIONS AT
ON VALUE FISCAL YEAR END (#) FISCAL YEAR END ($) (1)
EXERCISE REALIZED -------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---------------- --------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Viren S. Sheth -- -- 160,032 319,968 290,058 579,942
Loren M. Eltiste 7,500 26,250 58,706 -- 146,765 --
Joseph DeKama (2) -- -- -- -- -- --
Peter C. Liman -- -- 25,000 100,000 62,500 125,000
</TABLE>
(1) The "value" of any option set forth in the table above is determined by
subtracting the amount which must be paid upon exercise of the options from the
market value of the underlying Common Stock as of August 30, 1997 (based on the
closing sales price as reported by the NASDAQ Stock Market).
(2) Mr. DeKama's options were forfeited upon his resignation from the Company
in February 1997.
20
<PAGE> 24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Core Sheth Families is the beneficial owner of approximately 81.5%
percent of the Company's Common Stock. Viren S. Sheth, and Jay J. Sheth,
although not members of the Core Sheth Families, are related by blood to
certain members of the Core Sheth Families. Viren S. Sheth and Jay J. Sheth
each disclaim beneficial ownership of shares beneficially owned by the Core
Sheth Families.
The Executive Committee performs the functions of the Compensation
Committee. From August 31, 1996 to April 24, 1997, the Executive Committee was
composed of Mr. Rifenburgh, Dr. Sparacino and Viren Sheth. On April 24, 1997,
the Board of Directors elected a new Executive committee of Mr. Rifenburgh, Jay
Sheth and Viren Sheth. Viren Sheth is the President and Chief Executive
Officer of the Company.
EMPLOYMENT AGREEMENTS
JOSEPH DEKAMA. Under Mr. DeKama's employment agreement, which was to
expire on August 31, 1998, Mr. DeKama received a base salary of $360,000 per
annum and an annual bonus opportunity of up to $60,000 per year based on
performance against key criteria. Mr. DeKama was granted an option to purchase
50,000 shares of the Company's Common Stock. In addition, Mr. DeKama had the
opportunity to earn additional options for up to 200,000 shares if he met
certain performance criteria. If terminated without cause, Mr. DeKama would be
entitled to receive his salary for the remaining term of his contract. Mr.
DeKama resigned from his position with the Company in February 1997 and
forfeited the above described option.
RICHARD R. HOWARD. The compensation package of Richard Howard,
Executive Vice President and Chief Operating Officer, was established as part
of a two-year employment agreement pursuant to which Mr. Howard will receive an
initial base salary of $200,000 per annum and an annual bonus opportunity of up
to 40 percent of his base salary. Mr. Howard also received an option to
purchase 200,000 shares of the Company's Common Stock which vests over a 10
year period. The Executive Committee set Mr. Howard's compensation package
based on his experience and in view of competitive compensation packages
offered to his peer group in the industry. The stock option was granted to
provide a long-term incentive to Mr. Howard.
Other than as set forth above, there are no compensatory plans or
arrangements with respect to any individual named in the Summary Compensation
table above or otherwise which would result from the resignation, retirement or
any other termination of such individual's employment with the Company or a
change in the individual's responsibilities following a change in control.
21
<PAGE> 25
PERFORMANCE GRAPH
The Company has utilized the Center for Research in Security Prices
("CRSP") Total Return Index for The NASDAQ Stock Market. The following
performance graph compares the performance of the Company's Common Stock to
CRSP Total Return Index for the NASDAQ Stock Market and to a Cosmetics/Sundries
Index (for the five-year period from August 31, 1992, through August 30, 1997).
The Cosmetics/Sundries Index is comprised of all NASDAQ-listed companies having
the three digit standard industry classification code 284, which relates to
perfumes, cosmetics and toilet preparations products. The graph assumes that
the value of the investment in the Company's Common Stock and each Index was
100 at August 31, 1992 and that all dividends were reinvested.
[ GRAPH ]
<TABLE>
<CAPTION>
CRSP Total Returns Index for: 08/31/92 08/31/93 08/31/94 08/31/95 08/30/96 08/29/97
- - ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
TRISTAR CORPORATION 100.0 80.0 57.2 80.0 105.4 150.9
Nasdaq Stock Market (US Companies) 100.0 131.9 137.3 184.9 208.5 290.9
NASDAQ Stocks
(SIC 2840-2849 US + Foreign) 100.0 94.6 106.4 142.2 210.0 175.5
Soap, Detergents, and Cleaning
Preparations: Perfumes, Cosmetics
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly internal, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all zones was set to $100.0 on 08/31/92.
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the Commission or subject to
Regulations 14A and 14C under the Exchange Act, as amended, or to the
liabilities of Section 18 under the Exchange Act.
22
<PAGE> 26
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock to file with the Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during fiscal 1997 and Forms 5 and amendments thereto
furnished to the Company with respect to fiscal 1997, the Company believes that
its officers, directors and holders of more than 10% of the Company's Common
Stock complied with Section 16(a) filing requirements except for the following:
Peter Liman filed one Form 4 late, which represented one transaction, and B. J.
Harid failed to file a Form 3.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
As previously disclosed, a federal grand jury in Greenville, South
Carolina had been examining the events relating to the previously undisclosed
ownership interest of the Core Sheth Families and other issues. In March 1994,
the Company entered into an agreement with federal authorities pursuant to
which the Company was not prosecuted in connection with the matters under
investigation by the grand jury.
The Company and the Core Sheth Families, which holds beneficial
ownership of 81.5% of the Company's Common Stock, principally through its
ownership of Transvit and Starion B.V.I., actively cooperated with the federal
inquiry. The Company's agreement with the federal authorities is contingent
upon continued cooperation by the Company and companies affiliated with the
Core Sheth Families.
Under the terms of the agreement, the Company's President, Viren S.
Sheth, pled guilty to a technical infraction in connection with causing the
disclosure violation. Jay J. Sheth, a Director of the Company and the managing
Director of Starion U.K., which is owned by the Core Sheth Families, pled
guilty to a technical infraction in connection with causing the disclosure
violation. The agreement with federal authorities acknowledges that these
individuals were unaware of the legal requirement that was violated. These
infractions are the lowest possible level of federal charge, and do not subject
them to any term of incarceration.
Starion B.V.I., an entity owned by the Core Sheth Families that holds
beneficial ownership of 27.7% of the Company's Common Stock, pled guilty to a
felony in connection with the failure to disclose its ownership interest.
In November 1994, Starion B.V.I. was sentenced to five years of
probation and required to pay to the U.S. Government $5.5 million in lieu of a
forfeiture of 2,013,174 of its holdings of shares of Common Stock of the
Company. Starion B.V.I. has made payments of $4.1 million to the Government on
a non-interest bearing promissory note. The balance of the promissory note is
to be paid according to the following schedule: (a) $700,000 by November 22,
1998; and (b) $700,000 by November 22, 1999. The promissory note also required
Starion B.V.I. to place in escrow one million shares of Common Stock to secure
these remaining payments, 400,000 shares of which remain in escrow. Starion
B.V.I. retains all rights to vote and dispose of the shares placed in escrow
and the right to receive dividends on those shares.
23
<PAGE> 27
In November 1994, Viren S. Sheth was sentenced to one year of
probation. The Sentence imposed was based on an infraction for violating
(without knowledge thereof) 17 C.F.R. Section 240.13d-1 and 15 U.S.C. Section
78ff by aiding, abetting and causing the Core Sheth Families' failure to
disclose, prior to September 1992, its ownership of more than 5% of the
outstanding Common Stock of the Company.
In November 1994, Jay J. Sheth was sentenced to one year of probation.
The sentence imposed was based on an infraction for violating (without
knowledge thereof) 17 C.F.R. Section 240.13d-1 and 15 U.S.C. Section 78ff by
aiding, abetting and causing the Core Sheth Families' failure to disclose,
prior to September 1992, its ownership of more than 5% of the outstanding
Common Stock of the Company.
The United States Attorney's information charging Viren S. Sheth and
Jay J. Sheth with these violations expressly alleged that they did not have
knowledge of either of these regulations. The court imposed the following
conditions of probation: (1) complying with all federal and state securities
laws; and (2) directing and insuring that Starion B.V.I. make all required
forfeiture payments under the promissory note and plea agreement.
The sentencing concluded all outstanding criminal proceedings with
respect to the above named persons.
In June 1992, the Company, Jay J. Sheth, Viren S. Sheth, Starion
B.V.I. and other Core Sheth Family affiliates, were advised that they were the
subject of an investigation by the staff of the Commission regarding the
non-disclosure of the share holdings of the Core Sheth Families, as well as
potential accounting irregularities and other matters. In September 1995, the
Company, Jay J. Sheth, Viren S. Sheth and other Core Sheth Family affiliates,
without admitting or denying the allegations of the Commission, consented to
the entry of an administrative order agreeing to cease and desist from future
violations of the federal securities laws.
Except for the matters discussed above, none of the Company's
directors, nominees, officers or affiliates, nor any beneficial owner of more
than 5% of the Company's Common Stock, nor any associate of any such directors,
nominees, officers, affiliates or 5% stockholders, is a party adverse to the
Company or has a material interest adverse to the Company in any material legal
proceeding.
FREITAS AND KENNER
In October 1994, a suit was filed in Florida state court against the
Company and two of its directors by Ross Freitas, Carolyn Kenner, Rose Freitas
and Melissa Freitas. The complaint alleged causes of action by two plaintiffs
for libel and seeks indemnification of legal costs allegedly incurred by those
plaintiffs in suits and proceedings arising from the facts which were the
subject of the investigation conducted by the Special Committee of the Board of
Directors in 1992. The complaint also alleged, on behalf of all four
plaintiffs, that the Company's disclosures relating to the Core Sheth Families'
holding of Company stock and other matters were fraudulent or negligently
misrepresented. In April 1995, the court dismissed the complaint without
prejudice, in part due to the plaintiffs' failure to state a claim for relief.
In May 1995 the plaintiffs refiled the complaint, asserting many of the same
claims and in June 1996, amended their complaint yet again, naming only the
company and one of the its directors as defendants. The company intends to
dispute these allegations vigorously and
24
<PAGE> 28
believes that ultimate disposition of the case will not have a material adverse
effect on its business, financial condition or results of operations.
CORE SHETH FAMILIES
At August 30, 1997, a majority of the Company's Common Stock (81.5%),
continued to be controlled by the Core Sheth Families, principally through its
ownership and control of Transvit, Nevell and Starion B.V.I.
TRANSACTIONS WITH CORE SHETH FAMILIES' AFFILIATES
During fiscal 1997 the Company purchased approximately $6,503,000 of
finished goods and fragrance product components from the Core Sheth Families'
affiliates. At August 30, 1997, the Company had outstanding payables to the
Core Sheth Families' affiliates in the amount of $4,880,000.
During fiscal 1997 the Company sold products to the Core Sheth
Families' affiliates in the amount of $3,866,000. At August 30, 1997, the
Company had a receivable outstanding from the Core Sheth Families' affiliates
of $2,267,000.
DIRECTOR FEES
For fiscal 1997 the Company incurred approximately $244,729 in fees to
current directors, Richard P. Rifenburgh, Robert R. Sparacino and Aaron
Zutler. These fees were paid directly to the directors, with the exception of
$76,887 which was paid to Dr. Sparacino through his company, Sparacino
Associates, Inc. These fees relate to the participation of Messrs. Rifenburgh
and Zutler and Dr. Sparacino in meetings of the Company's Board and committees.
As of August 30, 1997, $30,000 of these fees had not yet been paid.
FINANCING OF SETTLEMENT AGREEMENT
The Company is currently indebted to the Core Sheth Families in the
amount of $4.5 million in the form of subordinated long-term debt. The
proceeds of such debt was utilized by the Company in the settlement of the
previously disclosed (December 1993) stockholder class action litigation.
The loans from the Core Sheth Families mature in ten years, with
interest payable annually and principal payable 20% at the end of year eight,
20% at the end of year nine and the remaining 60% at the end of year ten.
These loans bear interest at 6.36% to 8.23% per annum and are subordinated to
indebtedness of the Company owned to its senior lenders.
Pursuant to an agreement entered into in connection with the
settlement agreement, the Core Sheth Families was granted warrants for the
right to purchase up to 2,000,000 shares of the Company's Common Stock within
ten years of the date of issuance. The initial per share price of the Common
Stock under the warrants is $5.34 and it increases by 10% per year after year
seven.
The Company also extended until August 31, 2003, the exercise date of
previously issued Common Stock warrants held by an affiliate of the Core Sheth
Families to purchase 400,000 shares of the Company's Common Stock.
25
<PAGE> 29
In 1993, Transvit, a Core Sheth Families' affiliate, entered into a
lending arrangement with Eurostar, (now merged into the Company) whereby
Eurostar could borrow up to $9 million at an interest rate of 4.5 percent per
annum. Effective December 11, 1996, the outstanding debt of $4.7 million was
exchanged for 666,529 shares of the Company's Series A Convertible Preferred
Stock ($0.05 par value). Such stock carries a preferred distribution in the
event of liquidation of $7.00 per share with a cumulative dividend of $0.315 per
share, convertible at $7.00 per share into the Company's Common Stock. The
conversion price approximated the closing bid price of the Company's Common
Stock as reported by NASDAQ on the date of this transaction. The Company can
redeem the shares of Series A Convertible Preferred Stock at any time for $7.00
per share, plus all accrued and unpaid dividends. At August 30, 1997,
cumulative dividends in arrears on the Series A Convertible Preferred Stock
approximated $134,000.
In a subsequent transaction effective February 21, 1997, Nevell, a Core
Sheth Families affiliate and the holder of a subordinated long-term promissory
note in the principal amount of $4,000,000, converted $3,500,000 of such note
into 120,690 shares of the Company's Series B Convertible Preferred Stock. The
Series B Convertible Preferred Stock has cumulative preferred dividends of $2.03
per share and a preferred liquidation distribution of $29.00 per share plus
accrued and unpaid dividends. Each share of the Series B Preferred Stock is
convertible, at the option of Nevell, into four shares of the Company's Common
Stock. The Company can redeem the shares of Series B Convertible Preferred
Stock at any time for $29.00 per share, plus all accrued and unpaid dividends.
At August 31, 1997, cumulative dividends in arrears on the Series B Convertible
Preferred Stock approximated $122,000.
On February 21, 1997, the closing bid of the Company's Common Stock as
reported by NASDAQ was $9 11/32. At that date, the Series B Convertible
Preferred Stock carried a beneficial conversion feature of $2 3/32, the
difference between the conversion price and the closing bid price. The value
of the beneficial conversion feature has been reflected in the financial
statements of the Company in a manner similar to that for a dividend to the
preferred shareholder. Accordingly, the Company has recorded a charge to
retained earnings and an increase in the value of the Series B Convertible
Preferred Stock in the amount of $1,011,000. Additionally, as a result of the
conversion, the Company wrote off $270,000 of warrant valuation costs
attributable to the converted debt. This charge has also been recorded to
retained earnings in a manner consistent with that for the beneficial
conversion feature described above.
LOANS MADE TO JOSEPH DEKAMA
During fiscal 1996, the Company loaned Joseph DeKama, who was at that
time Senior Vice President of Sales, an aggregate amount of $145,000, of which
$45,000 was evidenced in a promissory note executed jointly by Mr. DeKama and
Northside Development, a sole proprietorship owned by Mr. DeKama, on October 1,
1996. In a promissory note dated October 15, 1996, executed solely by Mr.
DeKama, the Company loaned him an additional $100,000. The interest rate on
both of the above described notes is 12.5% per annum, subject to change as the
Company's borrowing rate changes. Mr. DeKama resigned from his office with
the Company in February 1997 and served as an independent sales representative
of the Company until July 1997. As of December 19, 1997, the total amount of
outstanding indebtedness by Mr. DeKama to the Company, including accrued
interest, is approximately $114,000. Additionally, the Company has advanced
commissions to Mr. DeKama in the approximate amount of $51,500.
26
<PAGE> 30
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at
the Annual Meeting of Stockholders of the Company to be held in 1999 must be
received by the Company, addressed to Robert M. Viola, at 12500 San Pedro
Avenue, Suite 500, San Antonio, Texas 78216, no later than September 5, 1998,
to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
OTHER MATTERS
Management of the Company does not know of any matters to be brought
before the Annual Meeting other than the matters set forth in the Notice of
Annual Meeting of Stockholders and described herein. However, if any other
matters should properly come before the Annual Meeting, the persons named in
the enclosed form of proxy will have discretionary authority to vote all
proxies with respect thereto in accordance with their best judgment.
INSTRUCTIONS FOR SIGNING PROXY
The signature on the proxy should correspond with the name appearing
on the proxy. If a stockholder is a corporation or partnership, give the full
company name as appearing on the proxy and have it signed by a duly authorized
officer or partner, showing the officer's or partner's title. Where stock
stands in more than one name, all holders of record should sign. When signing
as executor, administrator, trustee or guardian, please provide the appropriate
title.
All stockholders are urged to mark, sign and promptly return the
enclosed proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
PHILLIP M. RENFRO
SECRETARY
DATED: JANUARY 6, 1998
<PAGE> 31
EXHIBIT A
TRISTAR CORPORATION
LONG-TERM INCENTIVE PLAN
ARTICLE I: GENERAL
SECTION 1.1 Purpose of the Plan. The Long-Term Incentive Plan (the
"Plan") of Tristar Corporation (the "Company") is intended to advance the best
interests of the Company, its subsidiaries and its shareholders in order to
attract, retain and motivate employees by providing them with additional
incentives through (i) the grant of options ("Options") to purchase shares of
Common Stock, par value $.01 per share, of the Company ("Common Stock"), (ii)
the grant of stock appreciation rights ("Stock Appreciation Rights"), (iii) the
award of shares of restricted Common Stock ("Restricted Stock") and (iv) the
award of units payable in cash or shares of Common Stock based on performance
("Performance Awards"), thereby increasing the personal stake of such employees
in the continued success and growth of the Company.
SECTION 1.2 Administration of the Plan. (a) The Plan shall be
administered by the Compensation Committee or other designated committee (the
"Committee") of the Board of Directors of the Company (the "Board of
Directors") which shall consist of at least two Outside Directors. The
Committee shall have authority to interpret conclusively the provisions of the
Plan, to adopt such rules and regulations for carrying out the Plan as it may
deem advisable, to decide conclusively all questions of fact arising in the
application of the Plan, to establish performance criteria in respect of Awards
(as defined herein) under the Plan, to certify that Plan requirements have been
met for any participant in the Plan, to submit such matters as it may deem
advisable to the Company's shareholders for their approval, and to make all
other determinations and take all other actions necessary or desirable for the
administration of the Plan. The Committee is expressly authorized to adopt
rules and regulations limiting or eliminating its discretion in respect of
certain matters as it may deem advisable to comply with or obtain preferential
treatment under any applicable tax or other law rule, or regulation. All
decisions and acts of the Committee shall be final and binding upon all
affected Plan participants.
For purposes of this Plan, "Outside Director" shall mean a
non-employee director of the Company who is "disinterested" within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) The Committee shall designate the eligible employees, if any, to
be granted Awards and the type and amount of such Awards and the time when
Awards will be granted. All Awards granted under the Plan shall be on the
terms and subject to the conditions determined by the Committee consistent with
the Plan.
SECTION 1.3 Eligible Participants. Employees, including officers, of
the Company and its subsidiaries (all such subsidiaries being referred to as
"Subsidiaries") shall be eligible for Awards under the Plan.
SECTION 1.4 Awards Under the Plan. Awards to employees may be in the
form of (i) Options, (ii) Stock Appreciation Rights, which may be issued
independent of or in tandem with Options, (iii) shares of Restricted Stock,
(iv) Performance Awards, or (v) any combination of the foregoing (collectively,
"Awards").
<PAGE> 32
SECTION 1.5 Shares Subject to the Plan. Initially, the aggregate
number of shares of Common Stock that may be issued under the Plan shall be
1,000,000. Shares distributed pursuant to the Plan may consist of authorized
but unissued shares or treasury shares of the Company, as shall be determined
from time to time by the Board of Directors.
If any Award under the Plan shall expire, terminate or be cancelled
(including cancellation upon an Option holder's exercise of a related Stock
Appreciation Right) for any reason without having been exercised in full, or if
any Award shall be forfeited to the Company, the unexercised or forfeited Award
shall not count against the above limits and shall again become available for
Awards under the Plan (unless the holder of such Award received dividends or
other economic benefits with respect to such Award, which dividends or other
economic benefits are not forfeited, in which case the Award shall count
against the above limits). Shares of Common Stock equal in number to the
shares surrendered in payment of the option price, and shares of Common Stock
which are withheld in order to satisfy Federal, state or local tax liability,
shall count against the above limits. Only the number of shares of Common
Stock actually issued upon exercise of a Stock Appreciation Right shall count
against the above limits, and any shares which were estimated to be used for
such purposes and were not in fact so used shall again become available for
Awards under the Plan. Cash exercises of Stock Appreciation Rights and cash
settlement of other Awards will not count against the above limits.
The aggregate number of shares of Common Stock subject to Options or
Stock Appreciation Rights that may be granted to any one participant in any one
year under the Plan shall be 200,000. The aggregate number of shares of Common
Stock that may be granted to any one participant in any one year in respect of
Restricted Stock shall be 200,000. The aggregate number of shares of Common
Stock that may be received by any one participant in any one year in respect of
a Performance Award shall be 200,000 and the aggregate amount of cash that may
be received by any one participant in any one year in respect to a Performance
Award shall be $500,000.
The total number of Awards (or portions thereof) settled in cash under
the Plan, based on the number of shares covered by such Awards (e.g., 100
shares for a Stock Appreciation Right with respect to 100 shares), shall not
exceed a number equal to (i) the number of shares initially available for
issuance under the Plan plus (ii) the number of shares that have become
available for issuance under the Plan pursuant to the first paragraph of this
Section 1.5.
The aggregate number of shares of Common Stock that are available
under the Plan for Options granted in accordance with Section 2.4(i) ('ISOs")
is 1,000,000, subject to adjustments as provided in Section 5.2 of the Plan.
SECTION 1.6 Other Compensation Programs. Nothing contained in the
Plan shall be construed to preempt or limit the authority of the Board of
Directors to exercise its corporate rights and powers, including, but not by
way of limitation, the right of the Board of Directors (i) to grant incentive
awards for proper corporate purposes otherwise than under the Plan to any
employee, officer, director or other person or entity or (ii) to grant
incentive awards to, or assume incentive awards of, any person or entity in
connection with the acquisition (whether by purchase, lease, merger,
consolidation or otherwise) of the business or assets (in whole or in part) of
any person or entity.
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<PAGE> 33
ARTICLE II: STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
SECTION 2.1 Terms and Conditions of Options. Subject to the following
provisions, all Options granted under the Plan to employees of the Company and
its Subsidiaries shall be in such form and shall have such terms and conditions
as the Committee, in its discretion, may from time to time determine consistent
with the Plan.
(a) Option Price. The option price per share shall be determined by
the Committee, except that in the case of an Option granted in accordance with
Section 2.4(i) the option price per share shall not be less than the fair
market value of a share of Common Stock (as determined by the Committee) on the
date the Option is granted (other than in the case of substitute or assumed
Options to the extent required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant).
(b) Term of Option. The term of an Option shall be determined by the
Committee, except that in the case of an ISO the term of the Option shall not
exceed ten years from the date of grant, and, notwithstanding any other
provision of this Plan, no Option shall be exercised after the expiration of
its term.
(c) Exercise of Options. Options shall be exercisable at such time
or times and subject to such terms and conditions as the Committee shall
specify in the Option grant. Unless the Option grant specifies otherwise, the
Committee shall have discretion at any time to accelerate such time or times
and otherwise waive or amend any conditions in respect of all or any portion of
the Options held by any optionee. An Option may be exercised in accordance
with its terms as to any or all shares purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for
shares as to which an Option is exercised to be made in cash, shares of Common
Stock, a combination thereof, by "cashless exercise" or in such other manner as
the Committee in its discretion may provide.
(e) Shareholder Rights. The holder of an Option shall, as such, have
none of the rights of a shareholder.
(f) Termination of Employment. The Committee shall have discretion
to specify in the Option grant, or, with the consent of the optionee, an
amendment thereof, provisions with respect to the period, not extending beyond
the term of the Option, during which the Option may be exercised following the
optionee's termination of employment.
SECTION 2.2 Stock Appreciation Rights in Tandem with Options. (a) The
Committee may, either at the time of grant of an Option or at any time during
the term of the Option, grant Stock Appreciation Rights ("Tandem SARs") with
respect to all or any portion of the shares of Common Stock covered by such
Option. A Tandem SAR may be exercised at any time the Option to which it
relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a Tandem SAR is exercised, the Option to which it relates
shall cease to be exercisable to the extent of the number of shares with
respect to which the Tandem SAR is exercised. Similarly, when an Option is
exercised, the Tandem SARs relating to the shares covered by such Option
exercise shall terminate. Any Tandem SAR which is outstanding on the last day
of the term of the related Option (as determined pursuant to Section 2.1(b))
shall be automatically exercised on such date for cash without any action by
the optionee.
-3-
<PAGE> 34
(b) Upon exercise of a Tandem SAR, the holder shall receive, for each
share with respect to which the Tandem SAR is exercised, an amount (the
"Appreciation") equal to the difference between the option price per share of
the Option to which the Tandem SAR relates and the fair market value (as
determined by the Committee) of a share of Common Stock on the date of exercise
of the Tandem SAR. The Appreciation shall be payable in cash, Common Stock, or
a combination of both, at the option of the Committee, and shall be paid within
30 days of the exercise of the Tandem SAR.
SECTION 2.3 Stock Appreciation Rights Independent of Options. Subject
to the following provisions, all Stock Appreciation Rights granted independent
of Options ("Independent SARs") under the Plan to employees of the Company and
its Subsidiaries shall be in such form and shall have such terms and conditions
as the Committee, in its discretion, may from time to time determine consistent
with the Plan.
(a) Exercise Price. The exercise price per share shall be determined
by the Committee on the date the Independent SAR is granted.
(b) Term of Independent SAR. The term of an Independent SAR shall be
determined by the Committee, and, notwithstanding any other provision of this
Plan, no Independent SAR shall be exercised after the expiration of its term.
(c) Exercise of Independent SARs. Independent SARs shall be
exercisable at such time or times and subject to such terms and conditions as
the Committee shall specify in the Independent SAR grant. Unless the
Independent SAR grant specifies otherwise, the Committee shall have discretion
at any time to accelerate such time or times and otherwise waive or amend any
conditions in respect of all or any portion of the Independent SARs held by any
participant. Upon exercise of an Independent SAR, the holder shall receive,
for each share specified in the Independent SAR grant, an amount (the
"Appreciation") equal to the difference between the exercise price per share
specified in the Independent SAR grant and the fair market value (as determined
by the Committee) of a share of Common Stock on the date of exercise of the
Independent SAR. The Appreciation shall be payable in cash, Common Stock, or a
combination of both, at the option of the Committee, and shall be paid within
30 days of the exercise of the Independent SAR.
(d) Shareholder Rights. The holder of an Independent SAR shall, as
such, have none of the rights of a shareholder.
(e) Termination of Employment. The Committee shall have discretion
to specify in the Independent SAR grant, or, with the consent of the holder, an
amendment thereof, provisions with respect to the period, not extending beyond
the term of the Independent SAR, during which the Independent SAR may be
exercised following the holder's termination of employment.
SECTION 2.4 Statutory Options. Subject to the limitations on Option
terms set forth in Section 2.1, the Committee shall have the authority to grant
(i) ISOs within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) Options containing such terms and
conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant, including, if
then applicable, limits with respect to minimum exercise price, duration and
amounts and special limitations applicable to any individual who, at the time
the Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of
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the Company or any affiliate. Options granted pursuant to this Section 2.4 may
contain such other terms and conditions permitted by Article II of this Plan
as the Committee, in its discretion, may from time to time determine
(including, without limitation, provision for Stock Appreciation Rights), to
the extent that such terms and conditions do not cause the Options to lose
their preferential tax treatment. If an Option intended to be an ISO ceases or
is otherwise not eligible to be an ISO, such Option (or portion thereof
necessary to maintain the status of the remaining portion of the Option as an
ISO) shall remain valid but be treated as an Option other than an ISO.
ARTICLE III: RESTRICTED STOCK
SECTION 3.1 Terms and Conditions of Restricted Stock Awards. Subject
to the following provisions, all Awards of Restricted Stock under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine consistent with the Plan.
(a) Restricted Stock Award. The Restricted Stock Award shall specify
the number of shares of Restricted Stock to be awarded, the price, if any, to
be paid by the recipient of the Restricted Stock, and the date or dates on
which the Restricted Stock will vest. The vesting and number of shares of
Restricted Stock may be conditioned upon the completion of a specified period
of service with the Company or its Subsidiaries, upon the attainment of
specified performance objectives, or upon such other criteria as the Committee
may determine in accordance with the provisions hereof. Performance objectives
will be based on increases in share prices, operating income, net income or
cash flow thresholds, sales results, return on common equity or any combination
of the foregoing.
(b) Restrictions on Transfer. Stock certificates representing the
Restricted Stock granted to an employee shall be registered in the employee's
name. Such certificates shall either be held by the Company on behalf of the
employee, or delivered to the employee bearing a legend to restrict transfer of
the certificate until the Restricted Stock has vested, as determined by the
Committee. The Committee shall determine whether the employee shall have the
right to vote and/or receive dividends on the Restricted Stock before it has
vested. No share of Restricted Stock may be sold, transferred, assigned, or
pledged by the employee until such share has vested in accordance with the
terms of the Restricted Stock Award. Unless the grant of a Restricted Stock
Award specifies otherwise, in the event of an employee's termination of
employment before all the employee's Restricted Stock has vested, or in the
event other conditions to the vesting of Restricted Stock have not been
satisfied prior to any deadline for the satisfaction of such conditions set
forth in the Award, the shares of Restricted Stock that have not vested shall
be forfeited and any purchase price paid by the employee shall be returned to
the employee. At the time Restricted Stock vests (and, if the employee has
been issued legended certificates of Restricted Stock, upon the return of such
certificates to the Company), a certificate for such vested shares shall be
delivered to the employee or the employee's estate, free of all restrictions.
(c) Accelerated Vesting. Notwithstanding the vesting conditions set
forth in the Restricted Stock Award, unless the Restricted Stock grant
specifies otherwise, the Committee may in its discretion at any time accelerate
the vesting of Restricted Stock or otherwise waive or amend any conditions of a
grant of Restricted Stock.
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<PAGE> 36
ARTICLE IV: PERFORMANCE AWARDS
SECTION 4.1 Terms and Conditions of Performance Awards. The Committee
shall be authorized to grant Performance Awards, which are payable in stock,
cash or a combination thereof, at the discretion of the Committee.
(a) Performance Period. The Committee shall establish with respect
to each Performance Award a performance period over which the performance goal
of such Performance Award shall be measured. The performance period for a
Performance Award shall be established prior to the time such Performance Award
is granted and may overlap with performance periods relating to other
Performance Awards granted hereunder to the same employee.
(b) Performance Objectives. The Committee shall establish a minimum
level of acceptable achievement for the holder at the time of each Award. Each
Performance Award shall be contingent upon future performances and achievement
of objectives described either in terms of Company-wide performance or in terms
that are related to performance of the employee or of the division, subsidiary,
department or function within the Company in which the employee is employed.
The Committee shall have the authority to establish the specific performance
objectives and measures applicable to such objectives. Such objectives,
however, shall be based on increases in share prices, operating income, net
income or cash flow thresholds, sales results, return on common equity or any
combination of the foregoing.
(c) Size, Frequency and Vesting. The Committee shall have the
authority to determine at the time of the Award the maximum value of a
Performance Award, the frequency of Awards and the date or dates when Awards
vest.
(d) Payment. Following the end of each performance period, the
holder of each Performance Award will be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Award, based on the
achievement of the performance measures for such performance period, as
determined by the Committee. If at the end of the performance period the
specified objectives have been attained, the employee shall be deemed to have
fully earned the Performance Award. If the employee exceeds the specified
minimum level of acceptable achievement but does not fully attain such
objectives, the employee shall be deemed to have partly earned the Performance
Award, and shall become entitled to receive a portion of the total Award, as
determined by the Committee. If a Performance Award is granted after the start
of a performance period, the Award shall be reduced to reflect the portion of
the performance period during which the Award was in effect. Unless the Award
specifies otherwise, including restrictions in order to satisfy the conditions
under Section 162(m) of the Code, the Committee may adjust the payment of
Awards or the performance objectives if events occur or circumstances arise
which would cause a particular payment or set of performance objectives to be
inappropriate, as determined by the Committee.
(e) Termination of Employment. A recipient of a Performance Award
who, by reason of death, disability or retirement, terminates employment before
the end of the applicable performance period shall be entitled to receive, to
the extent earned, a portion of the Award which is proportional to the portion
of the performance period during which the employee was employed. A recipient
of a Performance Award who terminates employment for any other reason shall not
be entitled to any part of the Award unless the Committee determines otherwise;
however, the Committee may in no event pay the employee more than that portion
of the Award which is proportional to his or her period of actual service.
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<PAGE> 37
(f) Accelerated Vesting. Notwithstanding the vesting conditions set
forth in a Performance Award, unless the Award specifies otherwise, the
Committee may in its discretion at any time accelerate vesting of the Award or
otherwise waive or amend any conditions (including but not limited to
performance objectives) in respect of a Performance Award.
(g) Shareholder Rights. The holder of a Performance Award shall, as
such, have none of the rights of a shareholder.
ARTICLE V: ADDITIONAL PROVISIONS
SECTION 5.1 General Restrictions. Each Award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that (i) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any
state or Federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an Award with
respect to the disposition of shares of Common Stock, is necessary or desirable
(in connection with any requirement or interpretation of any Federal or state
securities law, rule or regulation) as a condition of, or in connection with,
the granting of such Award or the issuance, purchase or delivery of shares of
Common Stock thereunder, such Award may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
SECTION 5.2 Adjustments for Changes in Capitalization. In the event
of any stock dividends, stock splits, recapitalizations, combinations,
exchanges of shares, mergers, consolidation, liquidations, split-ups,
split-offs, spin-offs, or other similar changes in capitalization, or any
distribution to shareholders, including a rights offering, other than regular
cash dividends, changes in the outstanding stock of the Company by reason of
any increase or decrease in the number of issued shares of Common Stock
resulting from a split-up or consolidation of shares or any similar capital
adjustment or the payment of any stock dividend, any share repurchase at a
price in excess of the market price of the Common Stock at the time such
repurchase is announced or other increase or decrease in the number of such
shares, the Committee shall make appropriate adjustment in the number and kind
of shares authorized by the Plan (including shares available for ISOs), in the
number, price or kind of shares covered by the Awards and in any outstanding
Awards under the Plan; provided, however, that no such adjustment shall
increase the aggregate value of any outstanding Award.
In the event of any adjustment in the number of shares covered by any
Award, any fractional shares resulting from such adjustment shall be
disregarded and each such Award shall cover only the number of full shares
resulting from such adjustment.
SECTION 5.3 Amendments. (a) The Board of Directors may at any time and
from time to time and in any respect amend or modify the Plan.
(b) The Committee shall have the authority to amend any Award to
include any provision which, at the time of such amendment, is authorized under
the terms of the Plan; however, no outstanding Award may be revoked or altered
in a manner unfavorable to the holder without the written consent of the
holder.
SECTION 5.4 Cancellation of Awards. Any Award granted under the Plan
may be cancelled at any time with the consent of the holder and a new Award may
be granted to such
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<PAGE> 38
holder in lieu thereof, which Award may, in the discretion of the Committee, be
on more favorable terms and conditions than the cancelled Award.
SECTION 5.5 Withholding. Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Company shall
have the right to require the holder to pay an amount in cash or to retain or
sell without notice, or demand surrender of, shares of Common Stock in value
sufficient to satisfy any Federal, state or local withholding tax liability
("Withholding Tax") prior to the delivery of any certificate for such shares
(or remainder of shares if Common Stock is retained to satisfy such tax
liability). Whenever under the Plan payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any federal, state or
local withholding tax liability.
Whenever Common Stock is so retained or surrendered to satisfy
Withholding Tax, the value of shares of Common Stock so retained or surrendered
shall be determined by the Committee, and the value of shares of Common Stock
so sold shall be the net proceeds (after deduction of commissions) received by
the Company from such sale, as determined by the Committee.
SECTION 5.6 Non-assignability. Except as expressly provided in the
Plan, no Award under the Plan shall be assignable or transferable by the holder
thereof except by will or by the laws of descent and distribution. During the
life of the holder, Awards under the Plan shall be exercisable only by such
holder or by the guardian or legal representative of such holder.
SECTION 5.7 Non-uniform Determinations. Determinations by the
Committee under the Plan (including, without limitation, determinations of the
persons to receive Awards; the form, amount and timing of such Awards; the
terms and provisions of such Awards and the agreements evidencing same; and
provisions with respect to termination of employment) need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, Awards under the Plan, whether or not such persons are similarly
situated.
SECTION 5.8 No Guarantee of Employment. The grant of an Award under
the Plan shall not constitute an assurance of continued employment for any
period or any obligation of the Board of Directors to nominate any director for
reelection by the Company's shareholders.
SECTION 5.9 Duration and Termination. (a) The Plan shall be of
unlimited duration. Notwithstanding the foregoing, no ISO (within the meaning
of Section 422 of the Code) shall be granted under the Plan ten (10) years
after the effective date of the Plan, but Awards granted prior to such date may
extend beyond such date, and the terms of this Plan shall continue to apply to
all Awards granted hereunder.
(b) The Board of Directors may suspend, discontinue or terminate the
Plan at any time. Such action shall not impair any of the rights of any holder
of any Award outstanding on the date of the Plan's suspension, discontinuance
or termination without the holder's written consent.
SECTION 5.10 Effective Date. The Plan shall be effective as of April
25, 1997, subject to approval of the Company's stockholders. This Plan and all
Awards granted under this Plan prior to shareholder approval, shall be void and
of no further force and effect unless this Plan shall have been approved by the
requisite vote of the shareholders entitled to vote at a meeting of the
shareholders held prior to April 24, 1998.
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<PAGE> 39
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TRISTAR CORPORATION
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- FEBRUARY 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark, sign, date and return in the enclosed envelope.
The undersigned stockholder of TRISTAR CORPORATION (the "Company") hereby
appoints Viren S. Sheth and Robert M. Viola, or either of them, proxies of the
undersigned with full power of substitution to vote at the Annual Meeting of
Stockholders of the Company to be held on February 12, 1998, at 10:00 a.m.,
Central Standard Time, at the Company's corporate office at 12500 San Pedro
Avenue, Suite 500, San Antonio, Texas, and at any adjournment thereof, the
number of votes which the undersigned would be entitled to cast if personally
present:
(1) ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked below) [ ] WITHHOLD
AUTHORITY
to vote
for all
nominees
listed
below
<TABLE>
<S> <C> <C>
Robert R. Sparacino Richard P. Rifenburgh Aaron Zutler
Jay J. Sheth Viren S. Sheth J. B. Harid
</TABLE>
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
DRAW A LINE THROUGH OR STRIKE OUT THAT NOMINEE'S NAME AS SET
FORTH ABOVE.
(2) PROPOSAL TO APPROVE THE COMPANY'S 1997 LONG TERM INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR
ANY ADJOURNMENT THEREOF; all as more particularly described in the Proxy
Statement dated January 6, 1998, relating to such meeting, receipt of which
is hereby acknowledged.
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<PAGE> 40
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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 nominees listed in Proposal 1, FOR Proposal 2 and FOR Proposal 3.
Date:
------------------------------
------------------------------
Signature
------------------------------
Signature if held jointly
Please sign your name exactly
as it appears hereon. Joint
owners must each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give your
full title as it appears
hereon.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE
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