<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
The Right Start, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
THE RIGHT START, INC.
5334 Sterling Center Drive
Westlake Village, California 91361
June 2, 1997
DEAR SHAREHOLDERS:
Our Annual Meeting of Shareholders will be held on July 22, 1997, at 8:30
a.m., at The Right Start retail store located in Topanga Plaza, 6600 Topanga
Canyon Boulevard, Canoga Park, 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, to show you a
Right Start Store 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 transition period ended February 1, 1997 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 materials.
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 July 22, 1997
Annual Meeting of Shareholders.
Very truly yours,
/s/ Jerry R. Welch
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 July 22, 1997
The Annual Meeting of The Right Start, Inc. (the "Company") will be held at
The Right Start retail store located in Topanga Plaza, 6600 Topanga Canyon
Boulevard, Canoga Park, California on July 22, 1997, at 8:30 a.m. for the
following purposes:
1. To elect seven (7) 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 January 31, 1998 (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 approve a proposed amendment to the Company's 1995 Non-Employee
Director Plan (the "1995 Plan") increasing the maximum aggregate number of
shares of the Company's common stock subject to the 1995 Plan (Proposal 3);
and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on June 2, 1997, 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
/s/ Gina M. Shauer
Gina M. Shauer
Secretary
Westlake Village, California
June 2, 1997
<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 22nd day of July, 1997 at 8:30 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 LLP as independent auditors for the Company, 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, and FOR Proposal 3 to approve a
proposed amendment to the Company's 1995 Non-Employee Director Stock Option Plan
(the "1995 Plan") increasing the maximum aggregate number of shares of the
Company's common stock subject to the 1995 Plan. "Broker non-votes" will be
counted for general quorum purposes but will not be considered as present and
entitled to vote with respect to that matter.
This Proxy Statement and the accompanying Proxy are being mailed to
shareholders on or about June 16, 1997. 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 facsimile, 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 June 2, 1997 will be entitled
to vote at the meeting or any adjournment or postponement thereof. As of June 2,
1997, there were 8,593,639 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
<PAGE>
accordance with their best judgment in order to assure the election of as many
of the nominees to the Board of Directors as possible.
The election of directors will require the affirmative vote of a plurality
of the shares of common stock voting in person or by proxy at the Annual
Meeting. The approval of Proposal 1, Proposal 2 and Proposal 3 will require the
affirmative vote of a majority of the shares of common stock present or
represented at the Annual Meeting and entitled to vote on such proposal.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information, as of June 2, 1997,
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>
Richard A. Kayne (2) 3,708,241 42.3%
Kayne Anderson Investment Management,
Inc.
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
KAIM Non-Traditional, L.P. (2) 3,681,424 41.9%
1800 Avenue of the Stars
Second Floor
Los Angeles, CA 90067
David L. Warnock (3) 908,333 9.6%
Cahill Warnock & Company, LLC
One South Street
Suite 2150
Baltimore, MD 21202
Cahill, Warnock Strategic Partners 908,333 9.6%
Fund, L.P. (3)
One South Street, Suite 2150
Baltimore, MD 21202
Primerica Life Insurance Company 682,176 7.9%
388 Greenwich Street
Commerce, CA 90040
Fred Kayne (4) 681,276 7.9%
Fortune Fashions
6501 Flotilla Street
Commerce, CA 90040
Albert O. Nicholas 625,000 7.3%
Nicholas Co., Inc.
700 North Water Street
Milwaukee, WI 53202
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
Howard Kaplan 610,000 7.1%
99 Chauncy Street
Boston, MA 02111
Gerald E. Mitchell (5) 29,593 *
5334 Sterling Center Drive
Westlake Village, CA 91361
Gina M. Shauer (6) 11,629 *
5334 Sterling Center Drive
Westlake Village, CA 91361
Andrew Feshbach (7) 10,317 *
Big Dog Sportswear
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
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
Ronald J. Blumenthal (9) 9,526 *
5334 Sterling Center Drive
Westlake Village, CA 91361
All executive officers and directors 5,402,342 55.0%
as a group (13 persons) (10)
</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"). The amount, nature of
beneficial ownership and percent of class of 3,697,924 shares are
taken from an Amendment No. 1 to Schedule 13D filed May 15, 1997 which
states that (i) KAIM and Mr. Kayne report beneficial ownership of
3,681,424 and 3,697,924 shares, respectively, (ii) KAIM and Mr. Kayne
have shared voting and dispositive power over 3,681,424 shares and
(iii) Mr. Kayne has sole voting and dispositive power over
-3-
<PAGE>
16,500 shares. The shares (which include currently exercisable
warrants to purchase 154,375 shares of common stock) are held by four
investment partnerships for which KAIM serves as general partner,
including 1,285,453 shares held by Kayne, Anderson Non-Traditional
Investments, L.P., 885,401 shares held by ARBCO Associates, L.P.,
866,491 shares held by Offense Group Associates, L.P., and 258,954
shares held by Opportunity Associates, L.P., as well as certain other
managed accounts which hold 385,125 shares. KAIM disclaims beneficial
ownership of the shares reported except those shares attributable to
it by virtue of its general partner interests in certain limited
partnerships holding such shares. Mr. Kayne disclaims beneficial
ownership of the shares reported except those shares held by him or
attributable to him by virtue of his limited and general partner
interest in such limited partnerships and by virtue of his indirect
interest in the interest of KAIM in such limited partnerships. The
shares reported as beneficially owned by Mr. Kayne also include
currently exercisable options to purchase 10,317 shares of common
shares.
(3) Mr. Warnock and Edward L. Cahill are each managing members of Cahill,
Warnock & Company, LLC ("CW") and general partners of Cahill, Warnock
Strategic Partners, L.P. ("CWSP"). CWSP and CW are the general
partners, respectively, of Cahill, Warnock Strategic Partners Fund,
L.P. ("SPF") and Strategic Associates, L.P. ("SA"). SPF owns
debentures currently convertible into 710,500 shares of common stock
and 150,100 currently exercisable warrants to purchase common stock.
SA owns debentures currently convertible into 39,500 shares of common
stock and 8,233 currently exercisable warrants to purchase common
stock. Each of Messrs. Warnock and Cahill, CW, CWSP, SPF and SA may be
deemed to beneficially own 908,333 shares of common stock. Messrs.
Warnock and Cahill, CW and CWSP disclaim beneficial ownership with
respect to the shares held by SPF and SA. SPF disclaims beneficial
ownership with respect to the shares underlying the debentures and the
warrants held by SA. SA disclaims beneficial ownership with respect to
the shares underlying the debentures and the warrants held by SPF.
(4) Includes 631,376 shares, 39,583 warrants and 10,317 currently
exercisable options to purchase common stock.
(5) Includes 8,577 shares, currently exercisable options to purchase
18,750 shares of common stock and 2,265 shares held by the Company's
Employee Stock Purchase Plan for the benefit of Mr. Mitchell.
(6) Includes currently exercisable options to purchase 8,333 shares of
common stock, 2,479 and 817 shares held by the Company's Employee
Stock Purchase Plan and Employee Stock Ownership Plan, respectively,
for the benefit of Ms. Shauer.
(7) All shares consist of currently exercisable options to purchase common
stock.
(8) Messrs. Welch and Zelikow are Managing Directors of Kayne Anderson
Investment Management, Inc.; however, they disclaim beneficial
ownership with respect to shares held by KAIM or any of its
affiliates.
(9) Includes currently exercisable stock options to purchase 8,333 shares
of common stock and 1,193 shares held by the Company's Employee Stock
Ownership Plan for the benefit of Mr. Blumenthal.
(10) Includes common stock beneficially owned by executive officers and
directors, including 10,002 with respect to Mr. Young, 1,772 with
respect to Ms. Iglesias and 673 with respect to Mr. Pollack.
-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
Michele Iglesias 30 Vice President-Human Resources 1996
Gerald E. Mitchell 42 Vice President-Merchandising 1996
Marilyn Platfoot 42 Vice President-Retail Operations 1996
Richard Pollock 45 Vice President-Logistics 1996
Jeff Young 30 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 Managing Director of
Kayne Anderson Investment Management, Inc. 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 LLP 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.
MICHELE IGLESIAS became Vice President - Human Resources of the Company in
December 1996 and served as Director of Human Resources from February 1994 to
December 1996. Ms. Iglesias' previous
-5-
<PAGE>
experience includes other human resources management positions.
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 seven (7) 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.
<TABLE>
<CAPTION>
DIRECTORS AND NOMINEES
Name Age Director Since Business Experience
---- --- -------------- -------------------
<S> <C> <C> <C>
Andrew Feshbach 36 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 59 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 52 1995 Mr. Kayne currently serves as President and Chief Executive Officer
of Kayne Anderson Investment Management, Inc., and its broker dealer
affiliate, K.A. Associates, Inc. Mr. Kayne has been with Kayne
Anderson Investment Management, Inc. 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.
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C> <C>
David L. Warnock 39 1996 Mr. Warnock has served as a director of the Company since November
1996. Mr. Warnock is a director of Children's Comprehensive Services
and Concorde Career Colleges, Inc., of SRB Corporation and of
ALLIANCE National Incorporated. He has been a partner with Cahill,
Warnock & Company since July 1995 and served as Vice President with
T. Rowe Price Associates, Inc. from 1983 to 1995.
Jerry R. Welch 46 1995 See "Business Experience of Executive Officers" above.
Howard M. Zelikow 63 1995 Mr. Zelikow has been a management and financial consultant doing
business at ZKA Associates since 1987 and has been a Managing
Director of Kayne Anderson Investment Management, Inc. since 1988.
Mr. Zelikow has been a director of Financial Security Assurance
Holdings Ltd. since 1996 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
Victoria 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 July 21, 1998. During the transition period ended February 1,
1997, the Company's Audit Committee consisted of Messrs. Feshbach, Hollman and
Zelikow and the Company's Compensation Committee consisted of Messrs. Richard
Kayne and Fred Kayne. The Board of Directors does not have a standing Nominating
Committee. The Audit Committee reviews and reports to the Board of Directors
with respect to various auditing and accounting matters, including the selection
of the Company's independent accountants. The Compensation Committee reviews the
Company's general compensation strategy and reviews and reports to the Board of
Directors with respect to compensation of officers and employee benefit
programs.
Your proxy cannot be voted for a greater number of persons than the number
of nominees named.
ATTENDANCE AT MEETINGS
During the transition period ended February 1, 1997, the Board of Directors
held a total of 5 meetings, the Compensation Committee held 2 meetings and the
Audit Committee held 2 meetings. No member of the Board of Directors,
Compensation Committee or Audit Committee attended fewer than 75% of the
meetings of the Board, Compensation Committee or Audit Committee.
-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 two fiscal years
ended June 1, 1996 and June 1, 1995 and the transition period ended February 1,
1997, to the Company's Chief Executive Officer and the other executive officers
who received compensation (on an annualized basis) of at least $100,000 during
the transition period.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Other Annual Securities Underlying
Name and Principal Position Year Salary Bonus Compensation (1) Options (#)
- - --------------------------- ---- ------ ----- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Jerry R. Welch (2) 1997 -0- -0- -0- 9,217
Chairman of the Board, President 1996 -0- -0- -0- 10,317(4)
and Chief Executive Officer
Ronald J. Blumenthal 1997 90,865 -0- -0- -0-
Senior Vice President 1996 110,161 29,000 4,058 50,000
1995 106,346 10,000 -0- -0-
Gerald E. Mitchell 1997 80,481 -0- 3,875 75,000
Vice President - Merchandising
Marilyn Platfoot 1997 72,981 -0- -0- -0-
Vice President Retail Operations 1996 6,365 -0- -0- 25,000
Gina M. Shauer 1997 66,635 -0- 750 -0-
Chief Financial Officer and 1996 94,138 -0- 1,300 20,000
Secretary 1995 79,692 -0- 1,000 -0-
Stanley M. Fridstein (3) 1997 45,769 -0- 68,961 -0-
President and Director 1996 140,000 -0- 12,522 -0-
1995 142,000 -0- 16,302 -0-
</TABLE>
(1) Amounts shown include Company contributions under the Company's Employee
Stock Ownership Plan and the Company's Employee Stock Purchase Plan, as
applicable for the listed executives. In addition, for Mr. Fridstein, the
amount also includes the cost of term life insurance under the Company's
split dollar life insurance policy for the calendar years ended during the
periods reported.
(2) Mr. Welch receives no compensation for serving as Chief Executive Officer
or President.
(3) Effective September 27, 1996, Mr. Fridstein resigned from his positions
with the Company. Pursuant to such resignation, Mr. Fridstein received all
base salary amounts to which he was entitled under his employment agreement
for the period ended February 1, 1997. Additionally, all of Mr. Fridstein's
stock options to purchase 388,000 shares of the Company's common stock
became fully vested and exercisable at any time through June 1, 2001,
subject to the terms and conditions of such stock options. Through June 2,
1997, Mr. Fridstein has exercised 345,000 options. Included in Other
Compensation are consulting fees and other amounts paid to Mr. Fridstein in
accordance with the terms of his Termination Agreement.
(4) Granted under the 1995 Plan prior to Mr. Welch becoming President and Chief
Executive Officer.
-9-
<PAGE>
DIRECTORS' FEES
All of the Company's non-employee directors receive directors' fees of
$3,000 per quarter. All of the members of the Board of Directors have elected,
in lieu of such compensation, to receive options to purchase common stock of the
Company at the fair market value on the date the options are granted.
OPTION GRANTS IN THE TRANSITION PERIOD ENDED FEBRUARY 1, 1997
The following table provides certain information regarding stock options
granted to the Named Executive Officers during the transition period ended
February 1, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO POTENTIAL REALIZABLE VALUE AT
OPTIONS EMPLOYEES EXERCISE OR ASSUMED ANNUAL RATES OF
GRANTED IN FISCAL BASE PRICE EXPIRATION STOCK PRICE APPRECIATION FOR
(#)(1) YEAR ($/SHARE) DATE OPTION TERM
------ ---- --------- ---- ---------------
NAME 5% ($) 10% ($)
---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Welch 6,217 7.4% 5.13 11/12/01 8,812 19,471
3,000 3.5% 5.13 11/12/06 9,679 24,528
Gerald E. Mitchell 75,000 89.1% 5.25 7/8/06 247,627 627,536
</TABLE>
- - ----------------------
(1) 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.
AGGREGATED OPTION EXERCISES IN THE TRANSITION ENDED FEBRUARY 1, 1997 AND OPTION
VALUES AT PERIOD END
The following table provides certain information regarding the exercise of
stock options held by the Named Executive Officers during the transition period
ended February 1, 1997 and the number and value of options held as of the end of
such fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
TRANSITION PERIOD END (#) AT TRANSITION PERIOD END ($)(2)
------------------------ -------------------------------
SHARES ACQUIRED
NAME ON EXERCISE (#) VALUE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry R. Welch - 0- -0- 10,317 9,217 9,698 553
Ronald J. Blumenthal - 0- -0- 8,333 66,667 18,319 64,501
Gerald E. Mitchell - 0- -0- 18,750 56,250 -0- -0-
Marilyn Platfoot - 0- -0- -0- 25,000 -0- 3,133
Gina M. Shauer - 0- -0- 8,333 36,667 18,249 47,701
Stanley M. Fridstein 100,000 228,125 288,000 -0- 630,720 -0-
</TABLE>
- - ----------------
(1) Mr. Fridstein exercised options to purchase 100,000 shares of the Company's
common stock on November 26, 1996. The closing sale price of the Company's
common stock on the Nasdaq National Market System on such date was $5 9/32.
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<PAGE>
(2) On January 31, 1997 (the last day the Company's common stock was traded in
the transition period ended February 1, 1997), the closing sale price of
the Company's common stock on the Nasdaq National Market System was $5
3/16. On May 28, 1997, the closing sale price of the Company's common stock
was $3.00.
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 450,000 shares of the Company's common stock, in October 1991.
Options granted vest over periods of up to five years (depending on the terms of
the individual grant) commencing on the grant date and expire 10 years
thereafter. Options for 341,717 shares were outstanding as of February 1, 1997,
38,308 of which were exercisable.
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 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. 117,204 options were issued under the plan,
61,902 of which were exercisable at February 1, 1997.
The Company matches employees' contributions to the Company Employee Stock
Purchase Plan at a rate of 50%. The Company's contributions amounted to $21,000,
$28,000 and $58,000 in the transition period ended February 1, 1997, fiscal 1996
and fiscal 1995, respectively.
The Company Employee Stock Ownership Plan 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 in
fiscal 1995. No contributions were authorized for the transition period ended
February 1, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for approving compensation
programs for the Company's management. During the transition period, the
Compensation Committee consisted of Messrs. Richard Kayne and Fred Kayne.
Mr. Welch receives a fee for serving as a director, but receives no
additional compensation for serving as Chief Executive Officer or President.
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
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<PAGE>
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.
-12-
<PAGE>
PERFORMANCE GRAPH
This graph compares the cumulative total return to shareholders of the
Company, the Nasdaq Market ("Broad Market") Index and a peer group of companies
("Industry Index")(1).
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period S&P
(Fiscal Year Covered) RIGHT START INC. 500 INDEX Peer Group
------------------- ---------------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 1992 $100 $100 $100
1993 $133.33 $123.34 $119.67
1994 $118.33 $145.74 $131.23
1995 $ 66.67 $110.71 $143.63
1996 $173.33 $157.68 $202.74
1997 $138.33 $134.14 $225.26
</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 thirty-eight companies in that category including the
Company.
Assumes $100 invested on May 27, 1992 and assumes dividends reinvested.
-13-
<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 the transition period
ended February 1, 1997.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
In October 1996, SPF and SA purchased an aggregate principal amount of
$3,000,000 of the Company's 8% Convertible Subordinated Debentures due May 31,
2002 (the "Debentures"). The Debentures, as amended in May 1997, are currently
convertible into 750,000 shares of the Company's common stock, subject to
adjustment under certain circumstances. David Warnock, an affiliate of SPF and
SA, was appointed to the Board of Directors of the Company in November 1996.
In May 1997, certain investors, including affiliates of David Warnock and
KAIM, purchased an aggregate principal amount of $3,000,000 of the Company's
11.5% Senior Subordinated Notes due 2,000 and warrants to purchase an aggregate
of 475,000 shares of the Company's common stock at an exercise price of $3.00
per share, subject to adjustment under certain circumstances. In connection
with the transaction, the Company obtained an opinion from an independent
investment banking firm that the transaction was fair, from a financial point of
view, to the shareholders of the Company.
Between June 2, 1996 and July 29, 1996, 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
revenues of $40,000 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.
During the transition period, Kayne, Anderson Investment Management, Inc.
has provided management, consulting and advisory services to the Company for
which it received a fee of $66,667.
PROPOSAL ONE
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of Price Waterhouse LLP, the Company's independent accountants for
the transition period ended February 1, 1997, 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 January 31, 1998. 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
-14-
<PAGE>
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.
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 450,000 to 575,000 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 575,000 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.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors has proposed to amend Section 12 of the Company's
1995 Plan to increase the maximum number of shares of the Company's common stock
subject to the 1995 Plan from 125,000 to 250,000 shares. The proposed amendment
to the 1995 Plan reads as follows:
"12. Common Shares Subject to Options
--------------------------------
The maximum aggregate number of shares of common stock with
respect to which Options may be granted from time to time under the
Plan is 250,000 shares, subject to adjustment as provided in Section 6
of the Plan."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PROPOSED
AMENDMENT TO THE 1995 EMPLOYEE STOCK OPTION PLAN.
-15-
<PAGE>
ANNUAL REPORT
The Annual Report of the Company including financial statements for the
transition period ended February 1, 1997, 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 February 16, 1998 for inclusion in the Proxy Statement for the Annual
Meeting of Shareholders scheduled to be held on or about July 21, 1998.
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: June 2, 1997
-16-
<PAGE>
AVAILABILITY
COPIES OF THE COMPANY'S TRANSITION 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 Transition Report on Form 10-K for
the transition period ended February 1, 1997, 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 July 22, 1997, and at any adjournments, to be held
at The Right Start retail store located in Topanga Plaza, 6600 Topanga Canyon
Boulevard, Canoga Park, California.
MANAGEMENT RECOMMENDS THAT YOU VOTE "FOR" AUTHORITY ON ELECTION OF DIRECTORS
AND FOR THE BOARD'S PROPOSALS ONE, TWO AND THREE.
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,
David Warnock 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 1998.
PROPOSAL 2. APPROVAL OF AMENDMENT TO EMPLOYEE OPTION PLAN
FOR [_] AGAINST [_] ABSTAIN [_] -- PROPOSAL 2 approval of proposed amendment
to The Right Start, Inc. 1991 Employee Stock Option Plan.
PROPOSAL 3. APPROVAL OF AMENDMENT TO DIRECTOR OPTION PLAN
FOR [_] AGAINST [_] ABSTAIN [_] -- PROPOSAL 3 approval of amendment to The
Right Start, Inc. 1995 Non-Employee Director 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 SEVEN DIRECTOR NOMINEES AND FOR PROPOSALS
1, 2 AND 3. 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: ________________, 1997
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
