<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE RIGHT START, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] 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:
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Notes:
<PAGE>
THE RIGHT START, INC.
5334 Sterling Center Drive
Westlake Village, California 91361
September 30, 1996
DEAR SHAREHOLDERS:
Our Annual Meeting of Shareholders will be held on November 12, 1996, at
10:00 a.m., at the Radisson Hotel, 30100 Agoura Road, Agoura Hills, California.
We urge you to attend this meeting to give us an opportunity to meet you
personally, to allow us to introduce to you the key personnel responsible for
management of your Company and to cover any questions you may have.
The formal Notice of Meeting, the Proxy Statement and the proxy card are
enclosed. A copy of the Annual Report to Shareholders describing the Company's
operations during the fiscal year ended June 1, 1996 is enclosed.
We hope that you will be able to attend the meeting in person. Whether or
not you plan to attend the meeting, please sign and return the enclosed proxy
card promptly. A prepaid return envelope is provided for this purpose. Your
shares will be voted at the meeting in accordance with your proxy.
If you have shares in more than one name or if your stock is registered in
more than one way, you may receive more than one copy of the proxy material. If
so, please sign and return each of the proxy cards you receive so that all of
your shares may be voted. We look forward to meeting you at the November 12,
1996 Annual Meeting of Shareholders.
Very truly yours,
Jerry R. Welch
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
THE RIGHT START, INC.
5334 Sterling Center Drive
Westlake Village, California 91361
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________
TO BE HELD NOVEMBER 12, 1996
The Annual Meeting of The Right Start, Inc. (the "Company") will be held at
the Radisson Hotel, 30100 Agoura Road, Agoura Hills, California on November 12,
1996, at 10:00 a.m. for the following purposes:
1. To elect six (6) directors to hold office until the next annual
meeting and until their successors are elected; and
2. To ratify the appointment of Price Waterhouse LLP as independent
auditors for the fiscal year ending May 31, 1997 (Proposal 1); and
3. To approve a proposed amendment to the Company's 1991 Employee
Stock Option Plan (the "1991 Plan") increasing the maximum aggregate number
of shares of the Company's common stock subject to the 1991 Plan (Proposal
2); and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on September 25, 1996, is the date of record for the
determination of shareholders entitled to notice of and to vote at the Annual
Meeting.
All shareholders are urged to attend the meeting in person or by proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED PREPAID RETURN ENVELOPE.
The Proxy is revocable and will not affect your right to vote in person in the
event you attend the meeting.
By Order of The Board of Directors
Gina M. Shauer
Secretary
Westlake Village, California
September 30, 1996
<PAGE>
THE RIGHT START, INC.
_____________
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
SOLICITATION AND REVOCATION OF PROXIES
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of The Right Start, Inc. (the "Company") for use in connection with the Annual
Meeting of Shareholders to be held on the 12th day of November, 1996 at 10:00
a.m. and at any and all adjournments thereof.
The persons named as proxies were designated by the Board of Directors and
are officers or directors of the Company. Any Proxy may be revoked or
superseded by executing a proxy bearing a later date or by giving notice of
revocation in writing prior to, or at, the Annual Meeting, or by attending the
Annual Meeting and voting in person. All proxies which are properly completed,
signed and returned to the Company prior to the meeting, and not revoked, will
be voted in accordance with the instructions given in the Proxy. If a choice is
not specified in the Proxy, the Proxy will be voted FOR the election of the
director nominees listed below, FOR Proposal 1 to ratify the appointment of
Price Waterhouse as independent auditors for the Company and FOR Proposal 2 to
approve a proposed amendment to the Company's 1991 Employee Stock Option Plan
(the "1991 Plan") increasing the maximum aggregate number of shares of the
Company's common stock subject to the 1991 Plan.
This Proxy Statement and the accompanying Proxy are being mailed to
shareholders on or about September 30, 1996. The entire cost of the
solicitation of proxies will be borne by the Company. Expenses will also
include reimbursements paid to brokerage firms and others for their expenses
incurred in forwarding solicitation material regarding the meeting to beneficial
owners of the Company's common stock. It is contemplated that this solicitation
will be primarily by mail. In addition, some of the officers, directors and
employees of the Company may solicit proxies personally or by telephone,
telegraph or cable.
VOTING AT THE MEETING
The shares of common stock constitute the only class of securities of the
Company entitled to notice of, and to vote at, the Annual Meeting. Only
shareholders of record at the close of business on September 25, 1996 will be
entitled to vote at the meeting or any adjournment or postponement thereof. As
of September 25, 1996, there were 7,949,306 shares of common stock issued and
outstanding, each share being entitled to one vote on each matter to be voted
upon, except that voting for directors may be cumulative. A shareholder
intending to cumulate votes for directors must notify the Company of such
intention at the meeting prior to commencement of the voting for directors. If
any shareholder has given such notice, every shareholder may cumulate votes for
candidates in nomination and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute the shareholder's votes on the
same principle among two or more candidates.
Discretionary authority to cumulate votes represented by proxies is
solicited by the Board of Directors because, in the event nominations are made
in opposition to the nominees of the Board of Directors, it is the intention of
the persons named in the enclosed Proxy to cumulate votes represented by proxies
for individual nominees in accordance with their best judgment in order to
assure the election of as many of the nominees to the Board of Directors as
possible.
<PAGE>
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information, as of September
25, 1996, with respect to all those known by the Company to be the beneficial
owners of more than 5% of its outstanding common stock, each director who owns
shares of common stock, each executive officer named in the Summary Compensation
Table (the "Named Executive Officers"), and all directors and executive officers
of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------------------------ ------------------------ -----------------
<S> <C> <C>
KAIM Non-Traditional, L.P. (2) 3,077,709 38.7%
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
Fred Kayne (3) 641,693 8.0%
Fortune Fashions
6501 Flotilla Street
Commerce, CA 90040
Primerica Life Insurance Company 631,376 7.9%
388 Greenwich Street
Commerce, CA 90040
Albert O. Nicholas 625,000 7.9%
Nicholas Co., Inc.
700 North Water Street
Milwaukee, WI 53202
Howard Kaplan 610,000 7.7%
99 Chauncy Street
Boston, MA 02111
Stanley M. Fridstein (4) 427,009 5.3%
5334 Sterling Center Drive
Westlake Village, CA 91361
Lenny M. Targon (5) 362,300 4.6%
5334 Sterling Center Drive
Westlake Village, CA 91361
Ronald J. Blumenthal (6) 76,193 *
5334 Sterling Center Drive
Westlake Village, CA 91361
Andrew Feshbach (7) 10,317 *
Big Dogs
121 Gray Avenue, Suite 300
Santa Barbara, CA 93101
Robert R. Hollman (7) 10,317 *
Topa Management
1800 Avenue of the Stars
Suite 1400
Los Angeles, CA 90067
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
Richard A. Kayne (7) 10,317 *
Kayne Anderson Investment Management, Inc.
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
Jerry R. Welch (7)(8) 10,317 *
Kayne Anderson Investment Management, Inc.
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
Howard M. Zelikow (7)(8) 10,317 *
Kayne Anderson Investment Management, Inc.
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
All executive officers and directors 4,058,101 51%
as a group (14 persons) (9)
</TABLE>
- --------------------------------
* Less than one percent.
(1) Except as otherwise noted below, the persons named in the table have
sole voting power and investment power with respect to all shares of
common stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2) Richard A. Kayne is the President, Chief Executive Officer and a
Director of Kayne Anderson Investment Management, Inc., the general
partner of KAIM Non-Traditional, L.P. ("KAIM"). Mr. Kayne has shared
dispositive and voting power with KAIM with respect to the shares.
The shares are held by four investment partnerships for which KAIM
serves as general partner, including 1,261,703 shares held by Kayne,
Anderson Non-Traditional Investments, L.P., 861,651 shares held by
ARBCO Associates, L.P., 738,558 shares held by Offense Group
Associates, L.P. and 215,412 shares held by Opportunity Associates,
L.P.
(3) Shares include currently exercisable stock options to purchase 10,317
shares of common stock.
(4) Shares include (i) currently exercisable stock options to purchase
388,000 shares held by Mr. Fridstein, (ii) 14,939 shares held by the
Company's employee stock ownership plan for the benefit of Mr.
Fridstein and (iii) 24,070 shares which vest over time which are held
by the Company's ESPP for the benefit of Mr. Fridstein.
(5) Shares include (i) currently exercisable stock options to purchase
333,000 shares held by Mr. Targon, (ii) 1,204 shares held by the
Company's employee stock ownership plan for the benefit of Mr. Targon,
(iii) 2,620 shares held by the Company's employee stock ownership plan
for the benefit of Mr. Targon's spouse, (iv) 3,991 vested shares held
by the Company's ESPP for the benefit of Mr. Targon, (v) 695 vested
shares held by the Company's ESPP for the benefit of Mr. Targon's
spouse, (vi) 19,020 shares which vest over time which are held by the
Company's ESPP for the benefit of Mr. Targon and (vii) 2,961 shares
which vest over time which are held by the Company's ESPP for the
benefit of Mr. Targon's spouse. Mr. Targon disclaims beneficial
interest in his spouse's stock in the employee stock ownership plan
and ESPP.
(6) Shares include stock options to purchase 75,000 shares of common stock
and 1,193 shares held by the Company's employee stock ownership plan
for the benefit of Mr. Blumenthal.
(7) All shares consist of currently exercisable options to purchase common
stock.
(8) Messrs. Welch and Zelikow are a Senior Vice President and a member of
Kayne Anderson Investment Management, Inc., respectively; however,
they disclaim beneficial ownership with respect to shares held by KAIM
or any of its affiliates.
(9) Shares include options to purchase common stock beneficially owned by
executive officers and directors, including 75,000 with respect to Mr.
Blumenthal, 75,000 with respect to Mr. Mitchell, 45,000 with respect
to Ms. Shauer, 25,000 with respect to Ms. Platfoot, 20,000 with
respect to Ms. Mickey, 20,000
-3-
<PAGE>
with respect to Mr. Young, 10,317 with respect to each of Messrs.
Feshbach, Hollman, Fred Kayne, Richard Kayne, Welch and Zelikow and
5,000 with respect to Mr. Pollock. Shares also include 3,077,709
shares beneficially owned by KAIM for which Mr. Richard A. Kayne
shares dispositive and voting power.
-4-
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Executive
Name Age Position Officer Since
---- --- -------- -------------
<S> <C> <C> <C>
Jerry R. Welch 46 Chairman of the Board, 1996
President and Chief
Executive Officer
Gina M. Shauer 33 Chief Financial Officer and 1994
Secretary
Ronald J. Blumenthal 51 Senior Vice President 1994
Ursula Mickey 30 Vice President-Catalog Operations 1996
Gerald E. Mitchell 41 Vice President-Merchandising 1996
Marilyn Platfoot 41 Vice President-Retail Operations 1996
Richard Pollock 44 Vice President-Logistics 1996
Jeff Young 29 Vice President-Information Systems 1996
</TABLE>
All officers serve at the discretion of the Board of Directors.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS
JERRY R. WELCH became Chief Executive Officer of the Company in March 1996,
assumed the position of President in September 1996 and has served as Chairman
of the Board since August 1995. Mr. Welch also serves as a Senior Vice President
of Kayne Anderson Investment Management and has served in such capacity since
January 1993. Mr. Welch is also the Chairman and Chief Executive Officer of
Glacier Water Services, Inc. and has served in such capacities since April 1993
and September 1994, respectively. From October 1991 until his resignation in
September 1992, Mr. Welch served as the Chief Executive Officer of Glacier Water
Services, Inc.
GINA M. SHAUER became Chief Financial Officer of the Company in May 1994
and Secretary in August 1995. Ms. Shauer is a Certified Public Accountant, and
served as a Senior Manager with Price Waterhouse in Woodland Hills, California
from January 1986 until April 1994.
RONALD J. BLUMENTHAL became Senior Vice President of the Company in
September 1996 and served as Vice President-Retail Operations from December 1993
to September 1996. Prior to joining the Company, Mr. Blumenthal served as Vice
President of Store Operations for Cost Plus Imports, from 1990 until 1993, and
for Jos. A. Bank Clothiers from 1985 until 1990, where he also served as Vice
President, Real Estate.
URSULA MICKEY became Vice President-Catalog Operations of the Company in
April, 1996. Ms. Mickey's previous experience includes operations management
positions for Sports Endeavors, Inc., Suarez Corporation, Graphik Dimensions,
and G.E. Capital.
-5-
<PAGE>
GERALD E. MITCHELL became Vice President-Merchandising of the Company in
July, 1996. Mr. Mitchell previously served as Vice President-Merchandising for
Discovery Channel Stores in Dallas, Texas.
MARILYN PLATFOOT became Vice President-Retail Operations of the Company in
April, 1996. Ms. Platfoot previously served as Western Regional Manager for
Brookstone Stores from 1992 to 1996. Prior to that, Ms. Platfoot spent 13 years
with the Foxmoor Casual chain, ultimately serving as West Coast Regional
Manager.
RICHARD POLLOCK became Vice President-Logistics of the Company in September
1996 and served as Director of Logistics from June to September 1996. Prior to
joining the Company, Mr. Pollock served as Regional Operations Manager with USCO
Distribution Services and has held several senior level distribution positions.
JEFF YOUNG was appointed to Vice President-Information Systems of the
Company in September 1996. Prior to his appointment, Mr. Young served as the
Company's Director of Information Systems since July 1990.
-6-
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors proposes the election of six (6) directors, each to
hold office until the next annual meeting and until their successors are elected
and qualified. Unless authority to vote for directors has been withheld in the
Proxy, the persons named in the enclosed Proxy intend to vote at the meeting for
the election of the nominees presented below. All nominees have consented to
serve as a director for the ensuing year. Although the Board of Directors does
not contemplate that any of the nominees will be unable to serve, if any nominee
withdraws or otherwise becomes unavailable to serve, the persons named in the
enclosed Proxy will vote for any substitute nominee designated by the Board of
Directors.
The candidates in the election of directors receiving the highest number of
affirmative votes of the shares entitled to vote, up to the number of directors
to be elected by such shares, will be elected. Votes against a candidate and
votes withheld, including broker non-votes, have no legal effect on the
election, however all such votes count as a part of the quorum. The names and
certain information concerning the persons to be nominated as directors at the
Annual Meeting are set forth below.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION
OF EACH OF THE NOMINEES NAMED BELOW.
DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
Name Age Director Since Business Experience
---- --- -------------- -------------------
<S> <C> <C> <C>
Andrew Feshbach 35 1995 Mr. Feshbach is a Vice President of Fortune Financial, President of Big Dog
Sportswear and an Executive Vice President of Fortune Fashions. Previously, Mr.
Feshbach was a partner in Maiden Lane, a merchant bank, and a Vice President in the
Mergers and Acquisitions Group of Bear Stearns.
Robert R. Hollman 53 1995 Mr. Hollman has been President and Chief Executive Officer of Topa Management
Company since 1971 and President and Chief Executive Officer of Topa Savings Bank
since 1989. He has also been a Director and Officer of Topa Equities, Ltd., the
parent company of Topa Savings Bank, since 1969.
Fred Kayne 58 1995 Mr. Kayne is President and Chairman of Fortune Financial, where he is responsible
for directing all of its investment activities. Mr. Kayne is also President of
Fortune Fashions and Chairman of Big Dog Sportswear. Mr. Kayne was a partner of
Bear, Stearns & Co. Inc. until its initial public offering in 1985 after which he
was a Managing Director and a member of the Board of Directors until he resigned in
1986. Fred Kayne and Richard A. Kayne are brothers.
Richard A. Kayne 51 1995 Mr. Kayne currently serves as President and Chief Executive Officer of Kayne
Anderson, and its broker dealer affiliate, K.A. Associates, Inc. Mr. Kayne has been
with Kayne Anderson since 1985 when it was founded by Mr. Kayne and John E.
Anderson. He is also a Director of Foremost Corporation of America and Glacier
Water Services, Inc. Richard A. Kayne and Fred Kayne are brothers.
Jerry R. Welch 46 1995 See "Business Experience of Executive Officers" above.
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Howard M. Zelikow 62 1995 Mr. Zelikow has been a management and financial consultant doing business at ZKA
Associates since 1987 and has been a member of Kayne Anderson since 1988. Mr.
Zelikow has been a director of Financial Security Assurance Holdings Ltd. since
1995 and has served as a director of Queensway Financial Holdings Limited since
1993. Mr. Zelikow was Executive Vice President and Chief Financial Officer of The
Progressive Corporation from 1976 through 1987. Mr. Zelikow was a director of
Victor Financial Corporation from 1991 to 1995, a director of Capital Guaranty
Corporation from 1994 to 1995, and a director of Nobel Insurance Limited from 1989
to 1993.
</TABLE>
The Directors of the Company serve until their successors are elected and
duly qualified at next year's Annual Meeting of Shareholders, which is to be
held on or about November 5, 1997. During fiscal year 1996, the Company's Audit
Committee consisted of Messrs. Feshbach, Hollman and Zelikow. During fiscal
year 1996, the Company's Compensation Committee consisted of Messrs. Welch,
Richard Kayne and Fred Kayne. In February 1996, Mr. Welch resigned from the
Compensation Committee. The Board of Directors does not have a standing
Nominating Committee.
Your proxy cannot be voted for a greater number of persons than the number
of nominees named.
ATTENDANCE AT MEETINGS
During fiscal year 1996, the Board of Directors held a total of 5 meetings
and the Compensation Committee held 2 meetings. No member of the Board of
Directors or Compensation Committee attended fewer than 75% of the meetings of
the Board or Compensation Committee. There were no Audit Committee meetings in
fiscal year 1996.
-8-
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
paid or accrued by the Company for services rendered during the three fiscal
years ended June 1, 1996, to the Company's Chief Executive Officer and the other
executive officers who received at least $100,000 of compensation during the
latest fiscal year.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Other
Name and Principal Position Year Salary Bonus Compensation (1)
- --------------------------- ---- ------ ----- ----------------
<S> <C> <C> <C> <C>
Jerry R. Welch (2) 1996 -0- -0- -0-
Chairman of the Board, President
and Chief Executive Officer
Stanley M. Fridstein (3) 1996 140,000 -0- 12,522
President and Director 1995 142,000 -0- 16,302
1994 134,000 139,400 25,002
Ronald J. Blumenthal 1996 110,161 29,000 4,058
Senior Vice President 1995 106,346 10,000 -0-
1994 37,692 -0- -0-
Lenny M. Targon (4) 1996 105,000 -0- 45,161
Chief Executive Officer, 1995 142,000 -0- 16,655
Co-Vice Chairman and Director 1994 134,000 139,596 25,339
</TABLE>
(1) Amounts shown represent Company contributions under the Company's Employee
Stock Ownership Plan and, with the exception of Mr. Blumenthal, the
Company's Employee Stock Purchase Plan for the listed executives and, with
the exception of Mr. Blumenthal, the cost of term life insurance for the
listed executives under the Company's split dollar life insurance policies
for the calendar years ended during the fiscal year.
(2) Mr. Welch receives a fee for serving as a director (see Directors' Fees
below), but receives no additional compensation for serving as Chief
Executive Officer or President.
(3) Effective September 27, 1996, Mr. Fridstein resigned from his positions
with the Company.
(4) Effective March 8, 1996, Mr. Targon resigned from his positions with the
Company. Pursuant to such resignation, Mr. Targon received all base salary
amounts to which he was entitled under his employment agreement for the
fiscal year ended June 1, 1996. Additionally, all of Mr. Targon's stock
options to purchase 388,000 shares of the Company's common stock became
fully vested and may be exercised at any time through June 1, 2001, subject
to the terms and conditions of such stock options. Included in Other
Compensation are consulting fees and other amounts paid to Mr. Targon in
accordance with the terms of his Termination Agreement.
DIRECTORS' FEES
All of the Company's directors receive directors' fees of $3,000 per
quarter. All of the members of the Board of Directors have elected, in lieu of
such compensation, to receive options to purchase common stock of the Company at
the fair market value on the date the options are granted.
-9-
<PAGE>
OPTION GRANTED IN FISCAL 1996
The following table provides certain information regarding stock options
granted to the Named Executive Officers during the fiscal year ended June 1,
1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF
UNDERLYING GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
OPTIONS EMPLOYEES OR OPTION TERM
IN FISCAL BASE PRICE EXPIRATION -----------
NAME GRANTED YEAR(3) ($/SHARE) DATE 5% ($) 10% ($)
---- ------- ------- --------- ---------- ------ -------
(#)(1)(2)
---------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Welch......... 7,317 0.7% 4.25 10/17/00 6,702 14,432
3,000 0.3% 4.25 10/17/05 7,029 17,314
Stanley Fridstein...... 388,000 38% 3.00 6/01/01 321,592 710,634
Ronald J. Blumenthal... 50,000 4.8% 4.63 4/15/06 145,589 368,951
25,000 2.4% 3.00 8/03/05 41,350 101,846
Lenny M. Targon........ 388,000 38% 3.00 6/01/01 321,592 710,634
</TABLE>
- --------------------
(1) Messrs. Fridstein and Targon each had 450,000 option shares repriced and
cancelled for 388,000 new option shares with an exercise price of $3.00 per
share. Mr. Blumenthal had 25,000 option shares repriced and cancelled for
25,000 new options with an exercise price of $3.00. These repricings were
approved by the Company's Compensation Committee of the Board of Directors
(see Repricing of Stock Options below).
(2) Named Executive Officers receive options pursuant to the Company's stock
compensation plans described elsewhere in this Proxy Statement. The
material terms of that program related to recipients, grant timing, number
of options, option price and duration are determined by the Board of
Directors, subject to certain limitations.
(3) Including options of all employees that were granted in the repricing during
the fiscal year (see Repricing of Stock Options below).
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR END OPTION
VALUES
The following table provides certain information regarding the exercise of
stock options held by the Named Executive Officers during the fiscal year ended
June 1, 1996 and the number and value of options held as of the end of such
fiscal year.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options At In-The-Money Options
Fiscal Year End (#) At Fiscal Year End ($)(2)
--------------------------- ---------------------------
Shares Acquired
Name on Exercise Value Realized($)(1) Execisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Welch -0- -0- 10,317 -0- 25,148 -0-
Stanley Fridstein -0- -0- 388,000 -0- 1,430,750 -0-
Ronald J. Blumenthal -0- -0- 8,333 66,667 21,673 173,390
Lenny M. Targon 45,000 157,500 343,000 -0- 1,264,813 -0-
</TABLE>
- -------------------
(1) Mr. Targon exercised options to purchase 25,000 shares of the Company's
common stock on May 22, 1996 and 20,000 shares on May 24, 1996. The closing
sale price of the Company's common stock on the Nasdaq National Market
System on both such dates was $6 1/2.
(2) On May 31, 1996 (the last day the Company's common stock was traded in
fiscal year 1996), the closing sale price of the Company's common stock
on the Nasdaq National Market System was $6 11/16.
-10-
<PAGE>
REPRICING OF STOCK OPTIONS
In August 1995, the Compensation Committee authorized the repricing of
options held by Messrs. Fridstein and Targon. Pursuant to the repricing, options
to purchase an aggregate of 900,000 shares of the Company's common stock at an
exercise price of $3.33 were cancelled and options ("replacement options") to
purchase an aggregate of 776,000 shares of the Company's common stock at an
exercise price of $3.00 per share were issued in lieu thereof. Except for the
reduced number of option shares and exercise price, the vesting periods and
other terms of the options were not changed. Additionally, in August, 1995, the
Compensation Committee authorized the repricing of 25,000 options held by Mr.
Blumenthal. Pursuant to the repricing, options to purchase an aggregate of
25,000 shares at an exercise price of $4.38 were cancelled and options to
purchase an aggregate of 25,000 shares with an exercise price of $3.00 were
issued in lieu thereof.
TEN YEAR OPTION REPRICING
<TABLE>
<CAPTION>
MARKET LENGTH OF
NUMBER OF NUMBER OF PRICE OF EXERCISE ORIGINAL OPTION
SECURITIES SECURITIES STOCK AT PRICE AT NEW TERM REMAINING
DATE OF UNDERLYING UNDERLYING TIME OF TIME OF EXERCISE AT DATE OF
NAME REPRICING OPTIONS CANCELLED REPRICED OPTIONS REPRICING REPRICING PRICE REPRICING
---- --------- ----------------- ---------------- --------- --------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stanley Fridstein 8/03/95 450,000 388,000 $3.00 $3.33 $3.00 Six Years
Lenny M. Targon 8/03/95 450,000 388,000 $3.00 $3.33 $3.00 Six Years
Ronald J. Blumenthal 8/03/95 25,000 25,000 $3.00 $4.38 $3.00 Ten Years
</TABLE>
EMPLOYMENT AGREEMENTS
No employment agreements are currently in effect between the Company and any
of its employees.
STOCK COMPENSATION PROGRAMS
The Company adopted the 1991 Employee Stock Option Plan, covering an
aggregate of 300,000 shares of the Company's common stock, in October 1991.
Options granted vest either 20% or 33% (depending on the terms of the individual
grant) each year commencing on the grant date and expire 10 years thereafter. In
August 1995, individuals holding options under the 1991 Plan were given the
right to cancel their options (the "existing options") and have an equal number
of options (the "new options") reissued to them at the fair market value of
$3.00 per share. The vesting period on the existing options is 20% each year and
the new options vest 33% each year, both from the date of grant. Options for
254,000 shares were outstanding as of June 1, 1996, 5,200 of which were
exercisable.
On January 13, 1992, the Company adopted the 1992 Stock Option Plan for Non-
Employee Directors covering an aggregate of 50,000 shares of common stock. This
plan provides that all non-employee directors will automatically receive options
to purchase 5,000 shares exercisable at the fair market value at the date of
grant. The Company granted options to purchase 10,000 shares at $4.25 per share
on April 22, 1992 and 5,000 shares at $3.25 per share on September 14, 1992.
These options vest 20% at the grant date and an additional 20% each year
thereafter. Upon resignation of non-employee directors from the Company's Board
of Directors, all unvested options expire. Of the 15,000 options granted under
this plan, 8,000 were exercised in January 1996 and the remaining options
expired.
In October 1995, the Company adopted the 1995 Non-Employee Directors Option
Plan covering an aggregate of 125,000 shares of common stock. This Plan provides
for the annual issuance, to each non-employee director, of options to purchase
3,000 shares of common stock. In addition, each director is entitled to make an
election to receive, in lieu of directors' fees, additional options to purchase
common stock. The amount of additional options is determined based on an
independent valuation such that the value of the options issued is
-11-
<PAGE>
equivalent to the fees that the director would be otherwise entitled to receive.
Options issued under this plan vest on the anniversary date of their grant and
upon termination of Board membership. 61,902 options were issued under the plan,
none of which were exercisable at June 1, 1996.
Prior to fiscal 1993, the employees of the Company participated in the ARC
Employee Stock Ownership Plan (the "ARC ESOP") and the ARC Employee Stock
Purchase Plan (the "ARC ESPP"). In fiscal 1993, the Company adopted a separate
employee stock ownership plan (the "Company ESOP") and the employee stock
purchase plan (the "Company ESPP") for the benefit of its employees. The
employee balances in the ARC ESOP were transferred to the Company ESOP. The
employee balances in the ARC ESPP remain in that plan.
The Company matches employees' contributions to the Company ESPP at a rate
of 50%. The Company's contributions amounted to $28,000, $58,000 and $56,000 in
fiscal 1996, 1995 and 1994, respectively.
The Company ESOP is funded exclusively by discretionary contributions
determined by the Board of Directors. The Board of Directors authorized
contributions of $70,000 in fiscal 1996 and $50,000 for both fiscal 1995 and
1994.
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<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for approving compensation
programs for the Company's management. During fiscal year 1996, the
Compensation Committee consisted of Messrs. Welch, Richard Kayne and Fred Kayne.
Mr. Welch resigned from the Compensation Committee in February 1996.
Mr. Welch receives a fee for serving as a director, but receives no
additional compensation for serving as Chief Executive Officer or President. Mr.
Targon, who served as Chief Executive Officer through February 1996, received
salary and other compensation in accordance with his employment agreement. In
February 1996, Mr. Targon resigned and entered into a Termination Agreement with
the Company. This agreement entitles Mr. Targon to receive the cash surrender
value of his life insurance policy and salary and benefits pursuant to his
employment agreement through May 1997. For fiscal year 1996, Mr. Fridstein
received salary and other compensation in accordance with the terms of his
employment agreement. In September 1996, Mr. Fridstein resigned and entered into
a Termination Agreement with the Company. This agreement entitles Mr. Fridstein
to receive the cash surrender value of his life insurance policy and salary and
benefits pursuant to his employment agreement through May 1997.
The Compensation Committee believes that the compensation provided to
employees of the Company must be competitive for the Company to attract or
obtain highly qualified and experienced key employees. Based upon a preliminary
review, the Compensation Committee believes that, overall, the Company's
compensation programs are competitive with those of comparable companies.
COMPENSATION COMMITTEE
Richard A. Kayne Fred Kayne
Notwithstanding anything to the contrary set forth in the Company's previous
filings under the Securities Act of 1933, as amended, or the Securities and
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report, and
the performance graph immediately following, shall not be incorporated by
reference into any such filings.
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<PAGE>
PERFORMANCE GRAPH
This graph compares the Company's cumulative total return to shareholders
during the period since the Company first had a publicly traded security,
October 11, 1991, with that of the Nasdaq Market ("Broad Market") Index and a
peer group of companies ("Industry Index")(1).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE RIGHT START INC., INDUSTRY INDEX AND BROAD MARKET
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period RIGHT START INDUSTRY BROAD
(Fiscal Year Covered) INC INDEX MARKET
- ------------------- ---------- --------- ------
<S> <C> <C> <C>
Measurement Pt- 1991 $100.00 $100.00 $100.00
FYE 1992 $ 58.82 $109.05 $101.52
FYE 1993 $ 78.43 $134.51 $121.48
FYE 1994 $ 69.61 $158.93 $133.23
FYE 1995 $ 39.22 $120.73 $145.81
FYE 1996 $101.96 $171.96 $205.82
</TABLE>
(1) The Industry Index chosen includes all the companies with publicly
traded securities with the same four digit SIC code, 5961 - Catalog and Mail-
Order Houses. There are twenty-three companies in that category including the
Company.
Assumes $100 invested on October 11, 1991, the date the Company first went
public and assumes dividends reinvested.
-14-
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers, directors and persons
who own more than 10% of the Company's common stock to file reports of ownership
on Forms 3, 4 and 5 with the Commission. Executive officers, directors and 10%
stockholders are required by the Commission to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its executive officers, directors and
greater than 10% beneficial owners complied with all the filing requirements
applicable to them with respect to transactions during fiscal 1996.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Since May 30, 1995, the Company provided telemarketing services to
K.A.Industries, Inc., a corporation of which Richard Kayne is a majority owner.
Pursuant to a telemarketing agreement, the Company received an initial program
development fee of $5,000 and is paid additional amounts based upon usage. On
July 29, 1996, the Company assigned this agreement, together with substantially
all of the other assets relating to its telemarketing services business, to an
unrelated third party, Blasiar, Inc., for cash and a promissory note. In
connection with this transaction, the Company separately contracted to receive
telemarketing services from Blasiar, Inc.
Since August 5, 1995, Kayne, Anderson has provided management, consulting
and advisory services to the Company for which it is entitled to receive a fee
of $100,000 per year.
PROPOSAL ONE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP, the Company's independent accountants for
the fiscal year ended June 1, 1996, was selected by the Board of Directors, upon
recommendation of the Audit Committee of the Board of Directors, to act in the
same capacity for the fiscal year ending May 31, 1997. Neither the firm nor any
of its members has any relationship with the Company or any of its affiliates
except in the firm's capacity as the Company's auditor. The Board of Directors
is asking for ratification of such appointment of the auditors by the Company's
shareholders.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting and will have the opportunity to make statements if they so
desire and respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE.
-15-
<PAGE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO 1991 EMPLOYEE STOCK OPTION PLAN
The Board of Directors has proposed to amend Article 3 of the Company's 1991
Plan to increase the maximum number of shares of the Company's common stock
subject to the 1991 Plan from 300,000 to 450,000 shares. The proposed amendment
to the 1991 Plan reads as follows:
"3. Shares Subject to the Plan.
--------------------------
The stock issuable under this Plan shall be shares of the
Company's authorized but unissued or reacquired Common Stock ("Common
Stock"). The total number of shares of Common Stock that may be
issued under this Plan shall not exceed 450,000 shares in the
aggregate, subject to adjustment as provided in Section 8 below."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE 1991 EMPLOYEE STOCK OPTION PLAN.
ANNUAL REPORT
The Annual Report of the Company including financial statements for the fiscal
year ending June 1, 1996, is being forwarded to each shareholder with this Proxy
Statement.
OTHER MATTERS
The Board of Directors has no knowledge of any other matters which may come
before the Annual Meeting. If any other matters shall properly come before the
meeting, the persons named in the Proxies will have discretionary authority to
vote the shares thereby represented in accordance with their best judgment.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the Company's next
Annual Meeting of Shareholders must be received by the Secretary of the Company
prior to July 4, 1997 for inclusion in the Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held on or about November 5, 1997.
Please return your proxy as soon as possible. Unless a quorum consisting of
a majority of the outstanding shares entitled to vote is represented at the
Meeting, no business can be transacted. Therefore, please be sure to date and
sign your proxy exactly as your name appears on your stock certificate and
return it in the enclosed postage prepaid return envelope. Please act promptly
to insure that you will be represented at this important meeting.
Gina M. Shauer
Secretary
Dated: September 30, 1996
-16-
<PAGE>
AVAILABILITY
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE PROVIDED TO SHAREHOLDERS WITHOUT
CHARGE UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY, THE RIGHT START, INC.,
5334 STERLING CENTER DRIVE, WESTLAKE VILLAGE, CALIFORNIA 91361.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended. The forward-looking
statements in this Proxy Statement are intended to be subject to the safe harbor
protection provided by Sections 27A and 21E. All forward-looking statements
involve risks and uncertainties. Although the Company believes that its
expectations are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not materially differ from its expectations. For factors that may
cause actual results to materially differ from expectations and underlying
assumptions, see the Company's Registration Statement on Form S-3 (File No. 333-
08175) and periodic reports, including the Annual Report on Form 10-K for the
year ended March 31, 1996, filed by the Company with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on any forward-
looking statements, which speak only as of the date thereof. The Company
undertakes no obligation to publicly release any revisions to such forward-
looking statements to reflect events or circumstances after the date hereof.
-17-
<PAGE>
PROXY
THE RIGHT START, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
JERRY R. WELCH, with full power of substitution, is hereby appointed proxy to
vote the stock of the undersigned in The Right Start, Inc. at the Annual
Meeting of Shareholders on November 12, 1996, and at any adjournments, to be
held at the Radisson Hotel, 30100 Agoura Road, Agoura Hills, California.
MANAGEMENT RECOMMENDS THAT YOU VOTE "FOR" AUTHORITY ON ELECTION OF DIRECTORS
AND FOR THE BOARD'S PROPOSALS ONE AND TWO.
ELECTION OF DIRECTORS
[_] FOR all Nominees listed below
(except as indicated to the [_] WITHHOLD AUTHORITY to vote
contrary below) for all Nominees listed below
Jerry Welch, Richard Kayne, Fred Kayne, Andrew Feshbach, Robert Hollman and
Howard Zelikow.
INSTRUCTION: To withhold authority to vote for any individual Nominee, write
that Nominee's name in the space provided below.
- --------------------------------------------------------------------------------
PROPOSAL 1. RATIFICATION OF AUDITORS
FOR [_] AGAINST [_] ABSTAIN [_] -- PROPOSAL 1 appointment of Price Waterhouse
LLP as auditors for fiscal 1997.
PROPOSAL 2. APPROVAL OF AMENDMENT TO OPTION PLAN
FOR [_]AGAINST [_]ABSTAIN [_] -- PROPOSAL 2 approval of proposed amendment
to The Right Start, Inc. 1991 Employee Stock Option Plan.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof,
including procedural and other matters relating to the conduct of the meeting.
THIS PROXY WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE DIRECTED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE SIX DIRECTOR NOMINEES AND FOR PROPOSALS 1
AND 2. THIS PROXY CONFERS DISCRETIONARY AUTHORITY TO CUMULATE VOTES FOR ANY OR
ALL OF THE NOMINEES FOR WHICH THE AUTHORITY TO VOTE HAS NOT BEEN WITHHELD.
Please sign exactly as name
appears hereon.
-----------------------------
-----------------------------
Dated: ________________, 1996
When shares are held by
joint tenants, both should
sign. When signing as
attorney, as executor,
administrator, trustee or
guardian, please indicate as
such. If a corporation,
please sign in full
corporate name by President
or other authorized officer.
If a partnership, please
sign in partnership name by
authorized person.
PLEASE DATE, SIGN AND RETURN THIS CARD IN THE ENCLOSED ENVELOPE
