SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TRISTAR CORPORATION
(Name of Registrant as Specified in its Charter)
TRISTAR CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: N/A
2) Aggregate number of securities to which transaction applies: N/A
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: N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Fee paid previously with preliminary materials: N/A
[ ] 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: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
5) Total fee paid: N/A
<PAGE>
TRISTAR CORPORATION
105 South St. Mary's Street, Suite 1800
San Antonio, Texas 78205
December 18, 2000
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2001 Annual Meeting of Stockholders of TRISTAR CORPORATION. The Annual Meeting
will be held on January 18, 2001, at 10:00 a.m., E.S.T., at the Company's global
marketing offices at 225 West 34th Street, Suite 800, New York, New York 10122.
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,
/s/ RICHARD R. HOWARD
Richard R. Howard
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
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 January 18, 2001, at 10:00 a.m.,
E.S.T., at the Company's global marketing offices at 225 West 34th Street, Suite
800, New York, New York 10122 for the following purposes:
(1) to elect a Board of five directors to serve for the ensuing year and
until their respective successors are duly elected and qualified;
(2) to ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending
August 25, 2001; and
(3) to transact such other 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 December 5, 2000
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
meeting 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.
So that we may be sure your shares will be voted at the Annual Meeting,
please date, sign and return the enclosed proxy promptly. For your convenience,
a postpaid return envelope is enclosed for your use in returning your proxy. If
you attend the meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors,
/s/ RICHARD R. HOWARD
RICHARD R. HOWARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
San Antonio, Texas
December 18, 2000
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>
TRISTAR CORPORATION
---------------------------
PROXY STATEMENT
---------------------------
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on January 18, 2001
GENERAL INFORMATION
The enclosed proxy is solicited by the Board of Directors of TRISTAR
CORPORATION, a Delaware corporation (the "Company"), for use at the Annual
Meeting (the "Meeting" or "Annual Meeting") of Stockholders to be held on
January 18, 2001, at 10:00 a.m., E.S.T., at the Company's global marketing
offices at 225 West 34th Street, Suite 800, New York, New York 10122, and at any
adjournment or adjournments thereof.
The securities of the Company entitled to vote at the Annual Meeting
consist of shares of common stock, $0.01 par value ("Common Stock"), and Series
C Senior Convertible Preferred Stock, $0.05 par value ("Series C Stock"), of the
Company. The Company has an additional 569,032 shares of preferred stock
outstanding and not entitled to vote. At the close of business on December 5,
2000 (the "Record Date"), there were outstanding and entitled to vote 16,786,756
shares of Common Stock and 100,000 shares of Series C Stock. The holders of
record of Common Stock on the Record Date will be entitled to one vote per
share, and the holders of record of Series C Stock on the Record Date will be
entitled to 11.034483 votes 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 26, 2000, has
been or is being furnished with this Proxy Statement, which is being mailed on
or about December 18, 2000, to the holders of record of Common Stock and
preferred stock, $0.05 par value ("Preferred Stock," which includes the Series C
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 five
nominees for director named herein and FOR ratification of the appointment of
PricewaterhouseCoopers LLP ("PWC") as the Company's independent public
accountants for the fiscal year ending August 25, 2001. At the date of the Proxy
Statement, management of the Company knows of no other matters which are likely
to be brought before the Annual Meeting.
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<PAGE>
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
the Chief Financial Officer of the Company at the Company's corporate office at
any time before the enclosed proxy is exercised. Stockholders attending the
Annual Meeting may revoke their proxies and vote in person. The Company's
corporate office is located at 105 South St. Mary's Street, Suite 1800, San
Antonio, Texas 78205.
The holders of a majority of the total shares of Common Stock and Series C
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 and Series C Stock, voting
together as a class, 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 and Series C
Stock, voting together as a class, present in person or represented by proxy and
entitled to vote at the Annual Meeting is required for the ratification of the
appointment of PWC as the Company's independent public accountants for the
fiscal year ending August 25, 2001, 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.
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OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
The following table sets forth as of November 28, 2000, 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 purposes 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(1)
---------------- -------------------- ----------------
Sheth Group
Post Office Box 5551
Dubai, United Arab Emirates 14,685,484 (2) 73.2%
Transvit Manufacturing Corporation
1211 Geneva
25 Switzerland
Case Postale 69 9,572,310 (3) 57.0%
Starion International Limited
Woodbourne Hall, P.O. Box 3162
Road Town, Tortola
British Virgin Islands 5,113,174 (4) 16.2%
Ibrahim Ahmed Al-Musbahi
C/o Al-Musbahi Establishment
P.O. Box 20002
Jeddah 21455
Saudi Arabia 1,700,000 10.1%
Pioneer Ventures Associates, LP
651 Day Hill Road
P.O. Box 40
Windsor, Connecticut 06095 1,280,948 (5) 6.6%
(1) Based on 16,786,756 shares of Common Stock issued and outstanding on
November 28, 2000.
(2) Shashikant S. Sheth, Kirit Sheth and Mahendra Sheth comprise the Sheth
Group. The Sheth Group owns and controls Transvit Manufacturing
Corporation ("Transvit"), Starion International Limited ("Starion B.V.I.")
and Nevell Investments S.A. ("Nevell"). Includes 9,572,310 shares
beneficially owned by Transvit; 5,113,174 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.).
The members of the Sheth Group share voting and investment power with
respect to all of these shares.
(3) Transvit shares voting and investment power with the members of the Sheth
Group with respect to their cumulative shares.
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(4) Includes 2,400,000 shares issuable upon the exercise of currently
exercisable Common Stock warrants held by Starion B.V.I. Starion B.V.I.
shares voting and investment power with the members of the Sheth Group
with respect to all of these shares.
(5) Includes 1,103,448 shares of Common Stock issuable upon conversion of
shares of Series C Senior Convertible Preferred Stock and 165,000 shares
of Common Stock issuable upon the exercise of currently exercisable
warrants.
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MANAGEMENT
The following table sets forth as of November 28, 2000, 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 of its directors and executive
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 PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP OF CLASS(1)
---------------- -------------------- -----------
Viren S. Sheth (2)
105 South St. Mary's, Street,
Suite 1800
San Antonio, Texas 78205 480,000 (3) 2.86%
Richard R. Howard
105 South St. Mary's Street,
Suite 1800
San Antonio, Texas 78205 195,000 (4) *
Robert M. Viola
105 South St. Mary's Street,
Suite 1800
San Antonio, Texas 78205 120,000 (5) *
Peter C. Liman
105 South St. Mary's Street,
Suite 1800
San Antonio, Texas 78205 101,000 (6) *
Richard P. Rifenburgh
133 N. Pompano Beach Boulevard
Pompano Beach, Florida 33062 75,000 (7) *
B.J. Harid
11 Black Hank Road
Scarsdale, NY 10583 -0- *
Robert A. Lerman (8)
651 Day Hill Road, P.O. Box 40
Windsor, Connecticut 06095 -0- *
All executive officers and
directors as a group, seven (7)
persons 971,000 (9) 5.78%
(1) Based on 16,786,756 shares of Common Stock issued and outstanding as of
November 28, 2000
(2) Viren S. Sheth, a director of the Company, although not a member, is a
brother of three members of the Sheth Group. Viren S. Sheth disclaims
beneficial ownership of shares beneficially owned by the Sheth Group.
(3) Represents 480,000 shares of Common Stock issuable upon exercise of
options held by Viren S. Sheth.
(4) Represents 195,000 shares of Common Stock issuable upon exercise of
options held by Richard R. Howard.
(5) Represents 120,000 shares of Common Stock issuable upon exercise of
options held by Robert M. Viola.
(6) Includes 100,000 Shares of Common Stock issuable upon exercise of options
held by Peter C. Liman.
(7) Represents 75,000 shares of Common Stock issuable upon exercise of options
held by Richard P. Rifenburgh.
(8) Robert A. Lerman, a director of the Company, is the president of the
managing member of Ventures Management Partners LLC ("VMP"), the general
partner of Pioneer Ventures Associates, LP ("PVA"). Robert A. Lerman
disclaims beneficial ownership of (i) Preferred Stock held by PVA and (ii)
warrants to purchase Common Stock and the
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<PAGE>
underlying shares of Common Stock thereto held by PVA and VMP, except as
to his pecuniary interest therein, which is currently less than 1%.
(9) Includes 970,000 shares of Common Stock issuable upon exercise of options
held by officers and directors.
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<PAGE>
OWNERSHIP OF PREFERRED STOCK
The following table sets forth as of November 28, 2000, 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 of the Company, each of its
directors and nominees for director, each executive officer named in the Summary
Compensation Table and by all its directors and executive 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
NAME AND ADDRESS BENEFICIAL OWNERSHIP PERCENT OF CLASS (1)
------------------ -------------------- --------------------
Sheth Group
Post Office Box 5551
Dubai, United Arab Emirates 569,032 (2) 85.1%
Transvit Manufacturing
Corporation
1211 Geneva, 25 Switzerland
Case Postale 69 537,142 80.3%
Pioneer Ventures Associates LP
651 Day Hill Road, P.O. Box 40
Windsor, Connecticut 06095 100,000 (3) 14.9%
Nevell Investments, S.A.
P.O. Box 7707
Dubai, United Arab Emirates 31,890 4.8%
Viren S. Sheth (4)
105 S. St. Mary's Street, Suite 1800
San Antonio, Texas 78205 -0- 0%
Richard R. Howard
105 S. St. Mary's Street, Suite 1800
San Antonio, Texas 78205 -0- 0%
Richard P. Rifenburgh
133 N. Pompano Beach Boulevard
Pompano Beach, Florida 33062 -0- 0%
B.J. Harid
11 Black Hank Road
Scarsdale, NY 10583 -0- 0%
Robert M. Viola
105 S. St. Mary's Street, Suite 1800
San Antonio, Texas 78205 -0- 0%
Peter C. Liman
105 S. St. Mary's Street, Suite 1800
San Antonio, Texas 78205 -0- 0%
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AMOUNT AND NATURE OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP PERCENT OF CLASS (1)
------------------ -------------------- --------------------
Robert A. Lerman (5)
651 Day Hill Road, P.O. Box 40
Windsor, Connecticut 06095 -0- 0%
All executive officers and
directors as a group, seven
(7) persons -0- 0%
(1) Based on 669,032 shares of Preferred Stock issued and outstanding as of
November 28, 2000.
(2) Includes 537,142 shares of Series A Convertible Preferred Stock held by
Transvit and 31,890 shares of Series B Convertible Preferred Stock held by
Nevell. The Sheth Group 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) PVA holds 100,000 shares of Series C Stock which are currently convertible
into an aggregate of 1,103,448 shares of Common Stock. Each share of
Series C Stock is convertible into 11.034483 shares of Common Stock.
(4) Viren S. Sheth, a Director of the Company, although not a member of the
Sheth Group, is the brother of three members of the Sheth Group. Viren S.
Sheth disclaims beneficial ownership of shares beneficially owned by the
Sheth Group.
(5) Robert A. Lerman, a director of the Company, is the president of the
managing member of the general partner of PVA. Mr. Lerman disclaims
beneficial ownership of the Preferred Stock held by PVA and the underlying
shares of Common Stock thereto, except as to his pecuniary interest
therein which is currently less than 1%.
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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, nor more than
nine persons with the exact number to be fixed from time to time by the Board of
Directors. The authorized number of directors is currently fixed at five.
Five directors (constituting the entire Board) are to be elected at the
Annual Meeting, each to hold office until the next annual meeting of
stockholders and until his successor has been duly elected and qualified. It is
the intention of the persons named in the accompanying proxy that proxies will
be voted for the election of the five nominees named in the following table
unless otherwise indicated thereon. Each of the nominees is now a Director of
the Company and, is standing for reelection. The Board has no reason to believe
that any of the nominees will be unable to serve if elected to office and, to
the knowledge of the Board, the nominees intend to serve the entire term for
which election is sought. Should any nominee for the office of director named
herein become unable or unwilling to accept nomination or election, the persons
named in the proxy will vote for such other person as the Board may recommend.
The following table contains certain information as of December 5, 2000
with respect to the persons who have been nominated to serve as directors:
<TABLE>
<CAPTION>
POSITION AND OFFICES SERVED AS A
NAME AGE WITH THE COMPANY DIRECTOR SINCE
---- --- -------------------- --------------
<S> <C> <C> <C>
Richard P. Rifenburgh (1)(2) 68 Chairman of the Board of 1992
Directors
Richard R. Howard 59 President, Chief Executive 1999
Officer and Director
Viren S. Sheth 51 Director 1992
Robert A. Lerman(2) 65 Director 1998
B.J. Harid (3) 44 Director 2000
</TABLE>
(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 Audit Committee.
(3) Mr. Harid was elected to the Board on September 21, 2000.
Biographical information on these continuing directors is set forth below
under "Further Information-Board of Directors."
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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: Robert A. Lerman, who became a director pursuant
to an Investment Agreement dated September 3, 1998, between PVA and the Company
and Viren S. Sheth, who is serving as a director of the Company pursuant to a
consensus among the Sheth Group. The Sheth Group is a group which is the
beneficial owner of 73.2% of the Company's Common Stock as more particularly set
forth below and in the Sheth Group Schedule 13D and amendments thereto filed
with the Securities and Exchange Commission.
The enclosed form of proxy provides a means for the holders of Common
Stock and Series C 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 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 Sheth Group, Transvit Manufacturing Corporation
("Transvit") and Starion International Limited ("Starion B.V.I."), the record
holders of 57.0% and 16.2% 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.
COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is managed under the direction of its Board of
Directors. The Company no longer has an Option Committee, a Compensation
Committee or an Executive Committee, and the duties previously conducted by such
committees are now conducted by the entire Board of Directors. The Company's
Board of Directors has established an Audit Committee. The Audit Committee has
primary responsibility to review accounting procedures and methods employed in
connection with audit programs and related management policies. The Audit
Committee meets with the independent public accountants and management
representatives; recommends to the Company's Board of Directors for the
independent public
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accountants appointment, approves the scope of audits and other services to be
performed by the independent public accountants; considers whether the
performance of any professional services by the independent public accountants
other than services provided in connection with the audit function could impair
the independence of the independent public accountants; and reviews the results
of external audits and the accounting principles applied in financial reporting
and financial and operational controls. The independent public accountants have
unrestricted access to the Audit Committee and vice versa. The Audit Committee
is composed of two non-employee directors: Mr. Rifenburgh and Mr. Lerman. All
members of the Company's Audit Committee are independent (as independence is
defined in Rule 4200(a)(14) of the NASD listing standards). The Board of
Directors has adopted a written charter for the Audit Committee, which is
included as Appendix A to this Proxy Statement. During the fiscal year ended
August 26, 2000, the Audit Committee conducted two meetings.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended August 26, 2000, the Board of Directors met
three times and the Audit Committee met two times. All directors attended at
least 75% of the aggregate number of meetings of the Board of Directors and
committees of which they are members except B.J. Harid who was elected to the
Board of Directors on September 21, 2000 and Viren S. Sheth.
AUDIT COMMITTEE REPORT TO STOCKHOLDERS
In connection with the August 26, 2000 financial statements, the Audit
Committee intends to: (1) review and discuss the audited financial statements
with management; (2) discuss with the auditors the matters required by Statement
on Auditing Standards No. 61; and (3) receive and discuss with the auditors the
matters required by Independence Standards Board Statement No. 1. Based upon
these reviews and discussions, the Audit Committee intends to recommend to the
Board of Directors that it approves of the decision to include the audited
financial statements in the Annual Report on Form 10-K for the fiscal year ended
August 26, 2000 filed with the Securities and Exchange Commission. (The material
in this "Audit Committee Report to Stockholders" is not "soliciting material,"
is not deemed "filed" with the SEC, and is not to be incorporated by reference
in any filing of the Company under the 1933 Act or the 1934 Act whether made
before or after the date hereof and irrespective of any general incorporation
language in any such filing.) None of such actions have as yet been taken.
THE AUDIT COMMITTEE
Richard P. Rifenburgh
Robert A. Lerman
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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.
In fiscal 2000, compensation was provided to Mr. Rifenburgh and former directors
Mr. Zutler and Dr. Sparacino for services as directors and members of various
committees of the Board through the Annual Meeting held on February 3, 2000. The
fee arrangement through this period provided for a fee of $2,500 per day for
time spent attending Board and Committee meetings. In addition, each received a
quarterly retainer for the first and second fiscal quarters of $10,000 as
compensation for participation as Board and Committee members. During fiscal
2000, Mr. Rifenburgh and former directors Mr. Zutler and Dr. Sparacino (through
their respective associated companies, Marketing Congress and Sparacino
Associates, Inc.) received $27,500, $28,000 and $30,000, respectively, in
connection with their service as directors and members of committees of the
Board.
The five nominees receiving the highest number of affirmative votes of the
shares of Common Stock and Series C Stock, voting together as a class, present
in person or represented by proxy and entitled to vote shall be elected as
directors. All shares to be voted by proxy will be voted, or not voted, as
specified on each proxy.
THE BOARD UNANIMOUSLY RECOMMENDS THE STOCKHOLDERS
VOTE FOR THE ELECTION OF THE NOMINEES PROPOSED.
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of PWC to serve as independent public accountants of the
Company for the fiscal year ending August 25, 2001. 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. PWC has served as independent public accountants of the
Company with respect to the Company's consolidated financial statements for the
fiscal year ending August 26, 2000 and is considered by management of the
Company to be well qualified. If the stockholders do not ratify the appointment
of PWC, the Board of Directors may reconsider the appointment.
Representatives of PWC 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.
Ratification of the appointment of PWC requires the affirmative vote of a
majority of the shares of Common Stock and Series C Preferred Stock, voting
together as a class, 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.
14
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS THE STOCKHOLDERS
VOTE FOR THE ADOPTION OF THIS PROPOSAL.
FURTHER INFORMATION
BOARD OF DIRECTORS
Set forth below is information with respect to the 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 holding
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 company. Mr. Rifenburgh
currently serves as a director of Concurrent Computer Corporation, which files
reports with the Commission pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Mr. Rifenburgh is also Chairman of the Board of
Directors of St. George Crystal Ltd., a major manufacturer of fine quality
crystal products, and CyberGuard Corporation, a provider of security software, a
publicly-held company which files reports with the Commission pursuant to the
Exchange Act. In 1997, Mr. Rifenburgh was elected to the Board of Directors of
Verance Corp. In June 1998, Mr. Rifenburgh was elected to the Board of Directors
of Verance Corporation ("Verance," formerly, Aris Technologies, Inc.), a private
company located in Cambridge, Massachusetts. Verance is an industry leader in
proprietary digital audio watermarking systems and solutions. None of the
companies set forth above with which Mr. Rifenburgh has been affiliated are, or
have been, affiliates of the Company.
VIREN S. SHETH served as Chief Executive Officer of the Company until
January 1999. He became a Director 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.
ROBERT A. LERMAN was elected to the Board of Directors in September 1998.
Since 1997, Mr. Lerman has been President and a Director of Pioneer Ventures
Corp., the managing member of the general partner of various related investment
company partnerships. Since 1993, Mr. Lerman has been President and a Director
of Pioneer Partners Corp., a privately-held corporation and the general partner
of an investment partnership. In 1988, he founded Pioneer Capital Corp., a
privately-held venture capital corporation, and has served as a Director,
Secretary and Treasurer since its inception. Mr. Lerman has served since 1978 as
Director and President of Thermodynetics, Inc., a publicly-held company engaged
in manufacturing and
15
<PAGE>
marketing heat exchanger components and energy saving devices. Since 1998, Mr.
Lerman has been a director of Initio, Inc. a public company, and of Energy
Brands, Inc., a closely held company engaged in marketing beverages.
RICHARD R. HOWARD joined the Company in December 1997 as Executive Vice
President and Chief Operating Officer. In July 1998, he was named President and
Chief Operating Officer. Mr. Howard became a Director and Chief Executive
Officer of the Company in January 1999. From August 1995 to December 1997 Mr.
Howard served as Director, Strategic Services Consulting for KPMG Peat Marwick
LLP, and held a consultancy position as Chief Operating Officer with JABRA
Corporation, a high-technology startup company. Mr. Howard served as a 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, both being divisions of Unilever PLC. 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.
B.J. HARID was re-elected to the Board of Directors in September 2000. He
had served on the Tristar Board from 1997 to 1999. Mr. Harid holds a masters
degree in Business Management from the Asian Institute of Management,
Philippines. Mr. Harid served as group Director of Unistar International LLC, a
Sheth Group-controlled company from November 1996 to August 2000. He held the
position of Chief Executive Officer for Vinelec Group of Companies, Dubai,
United Arab Emirates from July 1991 to October 1996.
INFORMATION WITH RESPECT TO EXECUTIVE OFFICERS
The following is a list of the executive officers of the Company as of
December 12, 2000, their ages, positions and offices with the Company, and
periods during which they have served in such positions and offices:
NAME AGE POSITION WITH THE COMPANY OFFICER SINCE
---- --- ------------------------- -------------
Richard R. Howard 59 President, Chief Executive December 1997
Officer and Director
Robert M. Viola 54 Executive Vice President and December 1997
Chief Financial Officer
Peter C. Liman 61 Senior Vice President, August 1995
Marketing
RICHARD R. HOWARD'S business background is set forth above under
"Information with Respect to Nominees for Director."
ROBERT M. VIOLA joined the Company in December 1997 as Vice President and
Chief Financial Officer. In September 1998, he was named Executive Vice
President and Chief Financial Officer. 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.
16
<PAGE>
(Tokyo, Japan). From May 1990 to June 1995 Mr. Viola served as Senior Vice
President and Chief Financial Officer of Zotos Corporation. From May 1983 to
February 1990, Mr. Viola served in the capacity of Corporate Controller of
Faberge USA, Inc. and Elizabeth Arden USA, Inc.
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-held company located in Farmingdale, New York. Prior to that he served
as Vice President Marketing of J.B. Williams, subsidiary of Nabisco from June
1979 to September 1982, as Vice President General Manager of Faberge, Inc. from
March 1977 to April 1979 and Director of Marketing of Shulton USA from October
1974 to February 1977.
FAMILY RELATIONSHIPS AMONG DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Viren S. Sheth is a director of the Company and a brother of three members
of the Sheth Group.
THE BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has furnished the following report on the Company's
executive compensation policies. This report describes the compensation policies
applicable to the Company's executive officers and provides specific information
regarding the compensation of the Company's Chief Executive Officer. (The
information contained in this "Board of Directors Report on Executive
Compensation" shall not be deemed to be "soliciting material" or to be "filed"
with the Commission, nor shall such information be incorporated by reference
into any future filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, except to the extent that the Company
specifically incorporates it by reference into such filing.)
The Board of Directors administers and oversees all aspects of the
Company's executive compensation policy. The Board of Directors' overall goal is
to develop executive compensation policies that are consistent with, and linked
to, strategic business objectives and Company values.
In fiscal 2000, the total compensation program for the Company's top
executives, approved by the Company's Board of Directors, consisted of a base
salary and bonus for each of such executives.
BASE SALARY PROGRAM
It is the Company's policy to establish salaries at a level approximating
the average of the competitive levels in comparable organizations and to provide
annual salary increases reflective of the executive's performance, level of
responsibility and position with the Company. Subsequent to Richard R. Howard's
appointment as Chief Executive Officer in January 1999, his annual base salary
was increased from $250,000 to $285,000 in recognition of his increased
17
<PAGE>
responsibilities. Mr. Howard's current annual salary is $313,500. The Board of
Directors is currently in the process of determining the incentive bonus for Mr.
Howard relating to fiscal year 2000 results, to be paid in fiscal year 2001.
ANNUAL INCENTIVE
Each year, the Board of Directors evaluates the performance of the Company
as a whole, as well as the performance of each individual executive. Factors
considered include revenue growth and cost control. The Board of Directors does
not utilize formalized mathematical formulae, nor does it assign weightings to
these factors. The Board of Directors, in its sole discretion, determines the
amount, if any, of incentive payments to each executive. The Board of Directors
believes that the Company's growth in revenue and cost control require
subjectivity on the part of the Board of Directors when determining incentive
payments. The Board of Directors believes that specific formulae restrict
flexibility.
BOARD OF DIRECTORS
Richard P. Rifenburgh
B.J. Harid
Richard R. Howard
Robert A. Lerman
Viren S. Sheth
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Sheth Group is the beneficial owner of approximately 73.2% of the
Company's Common Stock. Viren S. Sheth, although not a member of the Sheth
Group, is a brother of three members of the Sheth Group. Viren S. Sheth
disclaims beneficial ownership of shares beneficially owned by the Sheth Group.
Viren S. Sheth served as Chief Executive Officer of the Company until January
1999. Richard R. Howard has served as Chief Executive Officer of the Company
since January 1999. The following officer of the Company, including former
officers, during the last completed fiscal year, participated in deliberations
of the Company's Board of Directors concerning executive officer compensation:
Richard R. Howard.
18
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning compensation for fiscal years ended August 26, 2000, August 28, 1999
and August 29, 1998 of the Company's Chief Executive Officer and two other most
highly compensated executive officers (the "named executive officers").
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARD
----------------------------------------- -----------------------------
NAME AND FISCAL OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION (1) OPTIONS (#) COMPENSATION ($)
------------------ ------ --------- -------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Howard (2) 2000 $ 311,750 -0- (6) $ 52,778 25,000 $ 16,049 (3)
President & Chief 1999 $ 267,500 $100,000 $ 60,000 250,000 $ 7,505 (3)
Executive Officer 1998 $ 146,154 $ 60,000 $ 40,500 200,000 $ 3,935 (3)
Robert M. Viola (2)
Executive Vice 2000 $ 225,500 -0- (6) $ 46,684 20,000 $ 15,396 (4)
President & Chief 1999 $ 200,000 $ 65,000 $ 54,000 150,000 $ 6,934 (4)
Financial Officer 1998 $ 116,250 $ 35,000 $ 33,000 125,000 $ 3,935 (4)
Peter C. Liman 2000 $ 148,731 -0- (6) -0- -0- $ 5,286 (5)
Vice President 1999 $ 140,000 $ 15,000 -0- 50,000 $ 5,387 (5)
Marketing 1998 $ 120,000 $ 15,000 -0- -0- $ 6,234 (5)
--------------------------------------------------------------------------------------------------------
</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. Represents
compensation to reimburse the executive officers for temporary living
costs incurred.
(2) Mr. Howard and Mr. Viola each joined the Company in December 1997. Mr.
Howard replaced Viren S. Sheth as Chief Executive Officer in January 1999.
(3) The amounts are comprised of (i) contributions to the Company's 401(k)
Plan in the amounts of $5,924 in 2000, $2,380 in 1999 and $0 in 1998 and
(ii) premiums paid by the Company for insurance in the amounts of $10,125
in 2000, $5,125 in 1999 and $3,935 in 1998.
(4) The amounts are comprised of (i) contributions to the Company's 401(k)
Plan in the amounts of $5,859 in 2000, $1,809 in 1999 and $0 in 1998 and
(ii) premiums paid by the Company for insurance in the amounts of $9,537
in 2000, $5,125 in 1999 and $3,935 in 1998.
(5) The amounts are comprised of (i) contributions to the Company's 401(k)
Plan in the amounts of $4,552 in 2000, $4,836 in 1999 and $3,333 in 1998
and (ii) premiums paid by the Company for insurance in the amounts of $734
in 2000, $551 in 1999 and $2,901 in 1998.
(6) As of November 28, 2000, the incentive bonus for Mr. Howard, Mr. Viola and
Mr. Liman had not yet been determined.
19
<PAGE>
OPTION GRANTS IN 2000 FISCAL YEAR
The following table provides information concerning grants of stock
options by the Company to the named executive officers in fiscal 2000. The
Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS THE OPTION TERM
--------------------------------------------------------------------- ---------------------------
PERCENTAGE OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED TO
UNDERLYING OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- -------------------- ------------------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Howard(1) 25,000 6.2% $ 5.6875 9/01/09 $ 78,313 $ 193,063
Robert M. Viola(2) 20,000 4.9% $ 5.6875 9/01/09 $ 62,650 $ 154,450
</TABLE>
(1) Mr. Howard received an aggregate of 6.2% of all option grants to employees
in 2000.
(2) Mr. Viola received an aggregate of 4.9% of all option grants to employees
in 2000.
On February 3, 2000, the Board of Directors agreed to terminate and reissue a
non-qualified stock option agreement covering 480,000 options to an existing
board member. Among other things, the reissued agreement eliminates certain
conditions for early forfeiture. The option price and terms under the reissued
agreement remain consistent with the original agreement that was simultaneously
terminated. The market value of the Company's common stock was less than the
option price stated in the agreement on the amendment date.
There were no other grants to executive officers during 2000.
20
<PAGE>
OPTION EXERCISES IN 2000 FISCAL YEAR AND YEAR-END OPTION VALUE
The following table provides information concerning options exercised in
fiscal 2000 by the named executive officers and the value of such officer's
unexercised options at August 26, 2000.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN THE MONEY OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)(1)
-------------------------- --------------------------
SHARES
ACQUIRED
ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard R. Howard -0- -0- 155,000 120,000 $ 1,963 -0-
Robert M. Viola -0- -0- 95,000 75,000 $ 1,570 -0-
Peter C. Liman -0- -0- 100,000 25,000 -0- -0-
</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 25, 2000
(based on the closing sales price as reported by the NASDAQ Stock Market).
EMPLOYMENT AGREEMENTS
Richard R. Howard, President and Chief Executive Officer of the Company,
and the Company are parties to a three year employment agreement, dated
effective September 21, 2000, pursuant to which Mr. Howard receives a base
salary of $313,500 per annum, and an annual bonus opportunity of up to 50% of
his base salary. Mr. Howard's base salary will be increased by at least 5% on
each March 1st during the term of his employment agreement.
Robert M. Viola, Senior Executive Vice President and Chief Financial
Officer of the Company, and the Company are parties to a three year employment
agreement, dated effective September 21, 2000, pursuant to which Mr. Viola
receives a base salary of $231,000 per annum, and annual bonus opportunity of up
to 40% of his base salary. Mr. Viola's base salary will be increased by at least
5% on each March 1st during the term of his employment agreement.
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>
PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL
RETURN*
AMONG TRISTAR CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND PEER GROUP
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
* $100 INVESTED ON 8/31/95 IN STOCK OR INDEX- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING AUGUST 31.
The Company has utilized the Research Data Group, Inc. Total Return Index
for the NASDAQ Stock Market. The above performance graph compares the
performance of the Company's Common Stock to Research Data Group, Inc. Total
Return Index for the NASDAQ Stock Market and to a Cosmetics/Sundries Index for
the five-year period from August 31, 1995 through August 31, 2000. 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, 1995 and that all dividends were reinvested.
Legend
<TABLE>
<CAPTION>
TOTAL RETURNS INDEX FOR: 08/31/95 08/31/96 08/31/97 08/31/98 08/31/99 08/31/00
----------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Tristar Corporation 100.0 131.82 188.64 113.64 103.41 104.55
Nasdaq Stock Market (US Companies) 100.0 112.79 157.36 148.70 276.25 421.80
NASDAQ Stocks (SIC 2840-2849 US + Foreign) 100.0 89.36 98.18 58.12 54.52 51.06
Soap, Detergents, and Cleaning Preparations; Perfumes, Cosmetics
</TABLE>
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>
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, 4 and 5 and amendments thereto furnished
to the Company with respect to fiscal 2000, 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 Viren S. Sheth who
filed late a Form 5 reporting the repricing of an option that occurred in
December 1998, Richard R. Howard and Robert M. Viola who each filed a Form 5
late reporting options granted in fiscal year 2000 and Peter C. Liman who filed
a Form 4 late reporting sales of shares of the Company's Common Stock in
April 2000.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of the Company's directors, nominees, officers or affiliates, nor any
beneficial owner of more than 5% of the Company's Common or Preferred 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.
CERTAIN TRANSACTIONS
SHETH GROUP
At August 26, 2000, a majority of the Company's Common Stock (73.3%),
continued to be controlled by the Sheth Group, principally through its ownership
and control of Transvit, Nevell and Starion B.V.I.
TRANSACTIONS WITH SHETH GROUP AFFILIATES
During fiscal 2000 the Company purchased approximately $2,777,000 of
finished goods and fragrance product components from the Sheth Group affiliates.
At August 26, 2000, the Company had outstanding payables to the Sheth Group
affiliates in the amount of $4,512,000.
During fiscal 2000 the Company sold products to the Sheth Group affiliates
in the amount of $2,960,000. At August 26, 2000, the Company had receivables
outstanding from the Sheth Group affiliates of $5,013,000.
OTHER TRANSACTIONS
During fiscal 1999, the Company completed a private placement whereby it
sold 100,000 shares of Series C Stock to PVA for $60 per share. In connection
with this private placement, the Company issued PVA warrants to purchase the
aggregate of 165,000 shares of
23
<PAGE>
Common Stock at exercise prices ranging from $4.00 to $6.28 per share. In
addition, the Company issued Ventures Management Partners LLC, the general
partner of PVA ("VMP"), a warrant to purchase 20,000 shares of Common Stock at a
per share exercise price of $4.75. The Company received proceeds of
approximately $6,000,000 from this private placement. Robert A. Lerman, a
director of the Company, is the president of the managing member of VMP. Mr.
Lerman disclaims beneficial ownership of the Series C Stock held by PVA and the
underlying shares of Common Stock thereto, except as to his indirect pecuniary
interest therein which is currently less than one percent.
FINANCING OF STOCKHOLDER CLASS ACTION LITIGATION
The Company became indebted to the Sheth Group in the amount of $4.0
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. Such indebtedness was
subsequently extinguished.
The loans from the Sheth Group were bearing interest at 6.36% to 8.23% per
annum. In March 1998, the Company and the Sheth Group reached an agreement to
eliminate the future accrual of any interest on the remaining indebtedness.
Pursuant to an agreement entered into in connection with the settlement
agreement, the Sheth Group 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 Sheth Group
to purchase 400,000 shares of the Company's Common Stock.
In 1993, Transvit, a Sheth Group 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% 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. 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 S7.00 per share, plus all accrued and unpaid
dividends. At August 26, 2000, cumulative dividends in arrears on the Series A
Convertible Preferred Stock approximated $612,000.
In a subsequent transaction effective February 21, 1997, Nevell, a Sheth
Group 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
24
<PAGE>
accrued and unpaid dividends. At August 26, 2000, cumulative dividends in
arrears on the Series B Convertible Preferred Stock approximated $224,000.
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.
PREFERRED SHARE REDEMPTION TRANSACTION
Certain related party accounts receivable balances were determined not to
be settled in the normal course of business. Accordingly, outstanding balances
totaling $2,365,000 were reclassified to shareholder's equity at August 28,
1999. During fiscal 2000, the amount of these outstanding balances increased to
$2,740,000. As of August 26, 2000, the Sheth Group settled this outstanding
balance due to the Company. Payment was made by the redemption of 88,800 shares
of Series B Convertible Preferred Stock, $.05 par value ("Series B Preferred"),
issued to Nevell. The agreed to redemption value was determined to be $23.75 per
share of Series B Preferred based upon the closing price of $5.938 per share of
the Company's common stock on August 26, 2000. This amounted to $2,109,000 with
the remaining $631,000 representing dividends in arrears. The difference between
the stated redemption price of $29.00 and the agreed to price of $23.75 per
Series B Preferred share amounted to $1,229,000 and was recorded to additional
paid-in-capital. Federal withholding taxes on the dividends amounting to
$189,227 will be remitted to the Company by the Sheth Group in satisfaction of
this obligation and a related party receivable equal to such amount is reflected
in the August 26, 2000 Consolidated Balance Sheet. As part of this share
redemption transaction, the Sheth Group agreed to transfer 12,500 shares of
common stock owned by Transvit to the holder of the Company's Series C Preferred
Stock.
25
<PAGE>
PROPOSALS FOR NEXT ANNUAL MEETING
The deadline for submission of stockholder proposals pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended ("Rule 14a-8"), for
inclusion in the Company's proxy statement for its 2002 annual meeting of
stockholders is August 20, 2001. After November 5, 2001, notice to the Company
of a stockholder proposal submitted otherwise than pursuant to Rule 14a-8 will
be considered untimely, and the person named in proxies solicited by the Board
of Directors of the Company for its 2002 annual meeting of Stockholders may
exercise discretionary authority voting power with respect to any such proposal
as to which the Company does not receive timely notice.
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.
By Order of the Board of Directors
/s/ RICHARD R. HOWARD
RICHARD R. HOWARD
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DATED: DECEMBER 18, 2000
26
<PAGE>
Appendix A
TRISTAR CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The primary function of the Audit Committee (the "Committee") of Tristar
Corporation (the "Company") is to assist the Board of Directors (the "Board") in
fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Company to any governmental body
or the public; the Company's Systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established; and the Company's auditing, accounting and financial reporting
processes. Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the Company's
policies, procedures and practices at all levels. The Committee's primary duties
and responsibilities are to:
Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
Review and appraise the audit efforts of the Company's independent
accountants.
Provide an open avenue of communication among the independent accountants,
financial and senior management and the Board.
The Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors, and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her impartial judgment as a member of the Committee. Any of
the following would be considered to impair a director's independence:
o A director who is an employee or has been an employee during the
past three years.
o A director who accepts compensation in excess of $60,000 from the
Company or any of its affiliates during the previous fiscal year,
other than compensation for board service, benefits under a
tax-qualified retirement plan, or non-discretionary compensation.
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o A director who is a partner in, a controlling shareholder or
executive officer of any for-profit business organization to which
the Company made or received payments in any of the past three years
that exceed 5% of the Company's or business organization's
consolidated gross revenues for that year, or $200,000, whichever is
greater. Payments resulting solely from investments in the Company's
securities need not be considered for this purpose.
o A director who is employed as an executive of another company where
any of the Company's executives serve on that company's compensation
committee.
o A director who is an immediate family member of an individual who
has been an executive officer of the Company or its affiliates
during the past three years.
All members of the Committee shall be financially literate, and at least
one member of the Committee shall have accounting or related financial
management expertise. Committee members may enhance their familiarity with
finance and accounting by participating in educational programs conducted by the
Company or an outside consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chairman of the Committee ("Chair") is elected
by the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
The compensation of members of the Committee may be determined from time
to time by the Board.
III. MEETINGS
The Committee shall meet at least three times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its Chair should be available as requested
by the independent accountants or management to discuss any issues related to
the Company's quarterly financials prior to filing its Form 10-Q. The Committee
shall cause minutes of its meetings to be prepared and maintained in the files
of the Company.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
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2. Review the Company's annual and quarterly financial statements and any
reports or other financial information submitted to any governmental body, or
the public, including any certification, report, opinion, or review rendered by
the independent accountants.
INDEPENDENT ACCOUNTANTS
3. Recommend to the Board the selection of the independent accountants,
and review the scope of work to be performed by the independent accountants in
connection with both the annual audit and the quarterly reviews. On an annual
basis, the Committee should review and discuss with the accountants all
significant relationships the accountants have with the Company to determine the
accountants' independence. The committee should obtain, on an annual basis, a
formal, written confirmation statement delineating all relationships between the
auditor and the Company.
4. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.
5. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and accuracy of
the Company's financial statements, and SAS #61 communications.
FINANCIAL REPORTING PROCESSES
6. In consultation with the independent accountants, review the integrity
of the Company's financial reporting processes, both internal and external.
7. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
8. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the independent
accountants or management.
PROCESS IMPROVEMENT
9. Establish regular and separate systems of reporting to the Committee by
each of management and the independent accountants regarding any significant
judgments made in management's preparation of the financial statements and the
review of each as to the quality and acceptability of such judgments.
10. Following completion of the annual audit, review with each of
management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of work or access to required information.
11. Review any significant disagreement among management and the
independent accountants in connection with the preparation of the financial
statements.
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12. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as approved
by the Committee, have been implemented. (This review should be conducted at an
appropriate time subsequent to implementation of changes or improvements, as
decided by the Committee.)
ETHICAL AND LEGAL COMPLIANCE
13. Establish, review and update periodically a Code of Ethical Conduct
(the "Code") and ensure that management has established a system to enforce the
Code.
14. Review management's monitoring of the Company's compliance with the
Code, and ensure that management has the proper review system in place to ensure
that the Company's financial statements, reports and other financial information
disseminated to governmental organizations, and the public, satisfy legal
requirements.
15. Review, with the Company's counsel, legal compliance matters including
corporate securities trading policies.
16. Review with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.
17. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
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TRISTAR CORPORATION
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- JANUARY 18, 2001
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 Richard R. Howard and Robert M. Viola, or each of them,
P proxies of the undersigned with full power of substitution to vote at the
R Annual Meeting of Stockholders of the Company to be held on Thursday,
O January 18, 2001, at 10:00 a.m., Eastern Standard Time, at the Company's
X global marketing offices, located at 225 West 34th Street, Suite 800, New
Y York, New York 10122 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 [ ] WITHHOLD AUTHORITY
all nominees listed below to vote for all nominees listed below
(except as marked below)
Richard P. Rifenburgh Richard R. Howard Robert A. Lerman
Viren S. Sheth B.J. Harid
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) TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR
ENDING AUGUST 25, 2001
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) To such other business as may lawfully come before the Annual
Meeting or any adjournment or adjournments thereof;
all as more particularly described in the Proxy Statement dated
December 18, 2000, relating to such meeting, receipt of which is
hereby acknowledged.
<PAGE>
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made,
this proxy will be voted FOR the nominees listed in Proposal 1 and FOR
Proposal 2.
____________________________________________
____________________________________________
Signature of Stockholder(s)
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.
Dated __________________________, 2000.
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