<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SIGNATURE BRANDS USA, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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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<PAGE> 2
SIGNATURE BRANDS USA, INC.
January 23, 1998
To the Stockholders of Signature Brands USA, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Signature Brands USA, Inc. (the "Company") to be held at 10:00 a.m. (EST), on
Thursday, March 5, 1998, at the Company's headquarters located at 7005 Cochran
Road, Glenwillow, Ohio.
In addition to the election of Directors, at this year's Annual Meeting
stockholders will be asked to ratify the appointment of the Company's
independent auditors.
Regardless of the number of shares you own, it is important that you vote.
Whether or not you plan to attend the Annual Meeting, please sign, date and mail
your proxy in the enclosed postage-paid envelope. We hope that you plan to
attend the Annual Meeting and we look forward to seeing you. If you do attend
the Annual Meeting you may, of course, withdraw your proxy should you wish to
vote in person.
Very truly yours,
/s/ Thomas R. Shepherd
THOMAS R. SHEPHERD
Chairman
/s/ Meeta R. Vyas
MEETA R. VYAS
Vice Chairman and Chief Executive Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 5, 1998
Notice Is Hereby Given that the Annual Meeting of Stockholders of Signature
Brands USA, Inc. (the "Company") will be held at the Company's headquarters
located at 7005 Cochran Road, Glenwillow, Ohio on Thursday, March 5, 1998 at
10:00 a.m. (EST) for the following purposes:
1. To elect three Directors in the class whose terms will expire at
the Annual Meeting of Stockholders to be held in 2001;
2. To act upon a proposal to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP to serve as the Company's independent
auditors for the 1998 fiscal year; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business on January 16,
1998 are entitled to receive notice of and to vote at the Annual Meeting. In
order to assure that your shares are represented at the Annual Meeting, we ask
that you promptly sign, date and mail the enclosed proxy card in the return
envelope provided. Stockholders who attend the Annual Meeting may revoke their
proxies and vote in person.
By Order of the Board of Directors,
THOMAS F. MCKEE
Secretary
Glenwillow, Ohio
January 23, 1998
<PAGE> 4
SIGNATURE BRANDS USA, INC.
------------------------
PROXY STATEMENT
------------------------
MAILED ON OR ABOUT JANUARY 23, 1998
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 5, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Signature Brands USA, Inc., formerly Health
o meter Products, Inc. (the "Company"), for the Annual Meeting of Stockholders
to be held on Thursday, March 5, 1998 at 10:00 a.m. at the Company's
headquarters located at 7005 Cochran Road, Glenwillow, Ohio or any adjournment
thereof for the purposes set forth in the accompanying Notice of Annual Meeting
of Stockholders.
The accompanying proxy is solicited by the Board of Directors of the
Company and will be voted in accordance with the instructions contained therein,
if it is returned duly executed and is not revoked. If no choice is specified in
the proxy, it will be voted "FOR" the election of each of the nominees for
Director named herein, and "FOR" the proposal to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP to serve as the Company's independent
auditors. Any stockholder may revoke a proxy at any time before its exercise by
delivery of written notice to the Secretary of the Company or by a duly executed
proxy bearing a later date.
The record date for determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting was the close of business on January
16, 1998. On that date, there were outstanding and entitled to vote an aggregate
of 9,174,261 shares of Common Stock, $.01 par value (the "Common Stock"). Each
share of Common Stock is entitled to one vote. Stockholders do not have the
right to vote cumulatively in the election of Directors. At the Annual Meeting,
the inspectors of election appointed for the Annual Meeting by the Board of
Directors will determine the presence of a quorum and will tabulate the results
of the vote of the stockholders.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name for beneficial owners have the authority to vote on certain matters
when they have not received instructions from the beneficial owners. Under
applicable Delaware law, if a broker returns a proxy and has not voted on a
certain proposal, such broker non-votes will count for purposes of determining
whether a quorum is present. Pursuant to the Company's By-Laws, all matters
brought before a meeting of stockholders (other than the election of Directors)
will be decided by the holders of a majority of the outstanding shares entitled
to vote thereon present in person or by proxy at the meeting, unless otherwise
provided by law or by the Certificate of Incorporation. In voting on matters
other than the election of Directors, votes may be cast in favor, against or
abstained. Abstentions will count as present for purposes of the proposal on
which the abstention is noted and will have the effect of a vote against the
proposal. Broker non-votes, however, are not counted as present and entitled to
vote for purposes of determining whether a proposal has been approved and will
have no effect on the outcome of any proposal requiring the affirmative vote of
the holders of a majority of the outstanding shares present and entitled to
vote.
The cost of soliciting proxies will be borne by the Company. Brokers,
custodians and fiduciaries will be requested to forward proxy soliciting
materials to the owners of stock held in their name and the Company will
reimburse them for their out-of-pocket expenses in connection therewith.
Directors, officers and management employees of the Company may, without
additional compensation, solicit proxies by telephone, mail and personal
interview. In addition, the Company has retained Regan & Associates, Inc. to
assist in the solicitation of proxies for a fee estimated to be $3,000 plus
reasonable out-of-pocket expenses.
As used in this Proxy Statement, the "Company" refers, unless the context
otherwise requires, to Signature Brands USA, Inc. and its subsidiaries.
<PAGE> 5
STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of January 16, 1998 by (i)
each person or group who is known to the Company to own beneficially more than
5% of the outstanding Common Stock, (ii) each of the Company's Directors and the
nominee for election as a Director, (iii) each of the named executive officers
of the Company named in the Summary Compensation Table included elsewhere
herein, and (iv) all Directors and executive officers of the Company as a group.
All information with respect to beneficial ownership has been furnished by the
respective Director, nominee for election as a Director, executive officer, or
5% beneficial owner, as the case may be. Unless otherwise indicated below, the
persons named below have sole voting and investment power with respect to the
number of shares set forth opposite their names.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF SHARES OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(1)
- --------------------------------------------------- --------------------- ---------------------
<S> <C> <C>
Thomas H. Lee Equity Partners, L.P.(2)............. 1,818,203 19.8%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
ML-Lee Acquisition Fund, L.P.(3)................... 1,563,053 17.0%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Meeta R. Vyas...................................... 91,727 1.0%
Peter C. McC. Howell............................... 362,353(4) 3.8%
S. Donald McCullough............................... 200,500(5) 2.1%
Thomas H. Lee(6)(7)................................ 1,025,566 11.2%
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
William P. Carmichael.............................. 16,000(8) *
David A. Jones..................................... 5,000(4) *
Robert W. Miller................................... 191,052(9) 2.1%
Urbano Perez V. ................................... 0 *
Sandra E. Peterson................................. 0 *
Scott A. Schoen.................................... 28,826(10) *
Thomas R. Shepherd(7).............................. 54,607 *
Frank E. Vaughn.................................... 12,500(11) *
C. Wayne Morris.................................... 6,750(12) *
Timothy J. McGinnity............................... 29,250(13) *
Steven M. Billick.................................. 11,050(14) *
All Directors and executive officers as a group (12
persons)(7)(15).................................. 1,472,328 16.0%
</TABLE>
- ---------------
* Indicates an amount less than 1%.
(1) The number of shares of Common Stock shown as owned by the persons and
groups named in the foregoing table assumes the exercise of all outstanding
options held by such persons and groups that are exercisable within 60 days
after January 16, 1998, and the percentage shown assumes the exercise of
such options and assumes that no options held by others are exercised. For
purposes of the foregoing table, each person's "beneficial ownership" of
the Company's Common Stock has been determined in accordance with Section
13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule
13d-3 promulgated thereunder.
2
<PAGE> 6
(2) Each of THL Equity Advisors Limited Partnership ("Equity Advisors"), the
general partner of Thomas H. Lee Equity Partners, L.P. ("Equity Partners");
THL Equity Trust, the general partner of Equity Advisors; and Thomas H.
Lee, a Trustee of THL Equity Trust, also may be deemed to be beneficial
owners of the shares of Common Stock held by Equity Partners. Each of
Equity Advisors, THL Equity Trust, and Mr. Lee disclaims beneficial
ownership of such shares. Each of Equity Advisors and THL Equity Trust
maintains a principal business address c/o Thomas H. Lee Company, 75 State
Street, Boston, Massachusetts 02109.
(3) The ML-Lee Acquisition Fund, L.P. (the "ML-Lee Fund") has shared voting and
investment power with respect to these shares. This number does not include
the shares of Common Stock held beneficially by Thomas H. Lee, which may be
deemed to be beneficially owned by the ML-Lee Fund and Thomas H. Lee
Advisors I, L.P. ("Advisors") as a result of their relationship with Mr.
Lee. The ML-Lee Fund and Advisors disclaim beneficial ownership of such
shares.
(4) Reflects shares which may be acquired upon the exercise of stock options
exercisable within 60 days after January 16, 1998.
(5) Includes 10,000 shares owned directly by Mr. McCullough and 190,500 shares
which may be acquired upon the exercise of stock options exercisable within
60 days after January 16, 1998. Mr. McCullough's options shall terminate
pursuant to a Separation Agreement between Mr. McCullough and the Company
upon the receipt of certain compensation as described in note (10) to the
Summary Compensation Table included elsewhere herein.
(6) The shares are held of record by State Street Bank and Trust Company of
Connecticut, N.A., 750 Main Street, Hartford, Connecticut 06103, not
individually, but as successor Trustee for the 1989 Thomas H. Lee Nominee
Trust (the "THL Trust"). The Trustee of the THL Trust disclaims beneficial
ownership of such shares.
(7) Does not include shares of Common Stock held by the ML-Lee Fund which may
be deemed to be beneficially owned by Mr. Lee, Mr. Shepherd and Advisors as
a result of their relationship with the ML-Lee Fund. Messrs. Lee and
Shepherd and Advisors disclaim beneficial ownership of such shares.
(8) Consists of 11,000 shares held of record by William P. Carmichael as
Trustee of the William P. Carmichael Trust dated April 1, 1985 and 5,000
shares which may be acquired upon the exercise of stock options exercisable
within 60 days after January 16, 1998.
(9) Includes 101,052 shares owned directly by Mr. Miller and 90,000 shares held
of record by Trust Company of Illinois, 45 South Park Boulevard, Suite 315,
Glen Ellyn, Illinois 60137, as Trustee of the RW & JS Miller Irrevocable
Charitable Trust (the "Miller Trust"). The Trustee of the Miller Trust
disclaims beneficial ownership of such shares.
(10) Includes 9,690 shares which may be acquired from Thomas H. Lee upon the
exercise of stock options exercisable within 60 days after January 16,
1998.
(11) Consists of 10,000 shares held of record by Frank E. Vaughn as Trustee of
the Frank E. Vaughn Trust dated October 15, 1997 and an additional 2,500
shares which Mr. Vaughn has the right to acquire upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(12) Includes 3,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(13) Includes 26,750 shares which may be acquired upon the exercise of stock
options exercisable within 60 days after January 16, 1998.
(14) Includes 1,800 shares held jointly by Mr. Billick and his wife and 9,250
shares which may be acquired upon the exercise of stock options exercisable
within 60 days after January 16, 1998.
(15) Includes an aggregate of 52,250 shares of Common Stock, not including the
options held by Mr. Schoen to acquire 9,690 shares from Thomas H. Lee,
which may be acquired by the Directors and
3
<PAGE> 7
executive officers of the Company upon the exercise of stock options
exercisable within 60 days after January 16, 1998. Does not include options
exercisable by Messrs. Howell and McCullough who, as of January 16, 1998,
were no longer executive officers or Directors of the Company.
TERMS OF FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Messrs. Lee, Miller and Shepherd and others have certain demand and
piggyback registration rights pursuant to the First Amended and Restated
Stockholders Agreement dated as of March 16, 1992 (the "Stockholders'
Agreement"). Such rights provide that stockholders who are parties to the
agreement owning stated percentages of the unregistered Common Stock may require
the Company to file registration statements under the Securities Act of 1933, as
amended (the "Securities Act"), on up to three occasions, for the registration
of not less than 15% of the outstanding shares of Common Stock originally
subject to the agreement. Subject to certain conditions and limitations, the
other parties to the agreement have the right to request that their shares of
Common Stock be included in any such registrations. Also, subject to certain
conditions and limitations, all such stockholders have the right to require the
Company to include their shares of Common Stock in any registered offerings by
the Company. Under such agreement, the Company is required to bear all costs and
expenses of each such registration (other than underwriters' discounts or
commissions which are to be borne by the sellers), and the stockholders and the
Company have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
4
<PAGE> 8
ELECTION OF DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall
consist of such number of Directors as the Board determines from time to time.
The size of the Board is currently set at nine members. The Board is divided
into three classes, with one class being elected each year for a three-year
term. On January 20, 1998, in accordance with the Company's By-Laws and
Certificate of Incorporation, the Company's Board of Directors elected Urbano
Perez V. to fill the vacancy created by Mr. McCullough's resignation in the
class of Directors whose term of office will expire at the 2000 Annual Meeting.
At the Annual Meeting, three Directors are to be elected to serve until the
Annual Meeting of Stockholders to be held in 2001. All Directors elected will
serve until their successors are duly elected and qualified. The Board of
Directors' nominees for election as Directors are David A. Jones, Thomas H. Lee
and Sandra E. Peterson. Messrs. Jones and Lee currently serve as Directors of
the Company. Robert W. Miller, who currently serves as a Director in the class
to be elected at the Annual Meeting, is retiring from the Board of Directors as
of the date of the Annual Meeting. Ms. Peterson is nominated for the
directorship currently held by Mr. Miller.
Unless otherwise directed, the persons named in the accompanying proxy will
vote for the election of the three nominees set forth in the table below as
Directors of the Company for a three-year term. In the event of the death or
inability to act of any of the nominees, the proxies will be voted for the
election as a Director of such other person as the Board of Directors may
recommend. The Board of Directors has no reason to anticipate that this will
occur. In no event will the accompanying proxy be voted for more than three
nominees or for persons other than those named below and any such substitute
nominee for any of them.
Set forth below is certain information concerning the nominees for election
at the Annual Meeting and Directors who will continue in office subsequent to
the Annual Meeting.
NOMINEES FOR ELECTION AT 1998 ANNUAL MEETING
David A. Jones. Mr. Jones has been a Director of the Company and of
Signature Brands, Inc. ("Signature Brands") since July 1996. Mr. Jones has been
Chairman of the Board, President and Chief Executive Officer of Rayovac
Corporation, a manufacturer of batteries and battery-operated devices, since
September 1996. From 1994 until 1996, Mr. Jones was Chairman of the Board,
President and Chief Executive Officer of Thermoscan, Inc., a consumer healthcare
products manufacturer. From 1989 until 1994, he was President and Chief
Executive Officer of Regina Company, Inc., a manufacturer of household
appliances. Mr. Jones is 48 years of age.
Thomas H. Lee. Mr. Lee has been a Director of the Company and of Signature
Brands since February 1992. Since 1974, Mr. Lee has served as President of
Thomas H. Lee Company ("THL"). THL and the funds which it advises invest in
friendly leveraged acquisitions and recapitalizations. Mr. Lee is also Chairman
and a Trustee of Thomas H. Lee Advisors I and II, L.P., the investment advisor
to two public mezzanine investment funds, and is Individual General Partner of
Equity Advisors, L.P., the investment advisor to Thomas H. Lee Equity Partners,
L.P. which participates in equity or equity related investments of the companies
acquired. Mr. Lee serves as a Director of Autotote Corporation, Finlay
Enterprises, Inc., General Nutrition Companies, Inc., Playtex Family Products
Corp., Livent, Inc., and Vail Resorts, Inc. Hills Department Stores, Inc. filed
for protection under Chapter 11 of the Federal Bankruptcy Code in February 1991
and emerged from such protection in October 1993 as Hills Stores Company. Mr.
Lee was Chairman of the Board of Hills Stores Company at that time. Mr. Lee is
53 years of age.
Sandra E. Peterson. Ms. Peterson is a Director nominee of the Company. Ms.
Peterson has been the Executive Vice President, Research of Nabisco, Inc., a
consumer food manufacturer, from April 1996 to present. From 1993 to March 1996,
Ms. Peterson held various senior executive positions with Whirlpool Corporation,
a manufacturer and marketer of major home appliances, including: Vice President,
Advanced Product Concepts; and Vice President, Strategic Analysis and Support.
Prior to 1993, Ms.
5
<PAGE> 9
Peterson was a Senior Engagement Manager of McKinsey & Co., Inc., an
international consulting firm. Ms. Peterson is 38 years of age.
DIRECTORS CONTINUING IN OFFICE UNTIL 1999 ANNUAL MEETING
William P. Carmichael. Mr. Carmichael has been a Director of the Company
and of Signature Brands since April 1992. From January 1993 until October 1993
when he retired, Mr. Carmichael was the Senior Vice President and Chief
Accounting Officer of Sara Lee Corporation, an international manufacturer of
food and consumer packaged goods. From August 1991 to January 1993, he was the
Vice President and Controller of Sara Lee Corporation. Prior to his employment
with Sara Lee Corporation, he was the Senior Vice President and Chief Financial
Officer of Beatrice Companies, Inc., a diversified food and food products
company, from May 1987 until November 1990. Mr. Carmichael also serves as a
Director of Cobra Electronics Corporation and The Hain Food Group, Inc., and as
a trustee of the Time Horizon Funds and Pacific Innovations Fund. Mr. Carmichael
is 54 years of age.
Scott A. Schoen. Mr. Schoen has been a Director of the Company and of
Signature Brands since September 1994. He is a Managing Director of THL, which
he joined in 1986. Prior to that time, Mr. Schoen served as an Associate in the
Private Finance Department of Goldman, Sachs & Co., an investment banking firm.
Mr. Schoen also serves as a Director of First Alert, Inc., LaSalle Reinsurance
Ltd., and Rayovac Corporation, and as a trustee of the Insight Premier Funds.
Mr. Schoen is 39 years of age.
Meeta R. Vyas. Ms. Vyas has served as Vice Chairman of the Board of
Directors and Chief Executive Officer of the Company and of Signature Brands
since September 1997. Prior to her employment with the Company, Ms. Vyas was a
senior executive with General Electric Co. ("GE"), a diversified technology,
manufacturing and services company. Beginning in 1991, Ms. Vyas held several
senior positions with GE including General Manager, GE Corporate Business
Development; General Manager, GE Appliances; and Manager, GE Corporate Business
Development. Prior to 1991, Ms. Vyas was a consultant with McKinsey & Co., Inc.,
an international consulting firm. Ms. Vyas is 39 years of age.
DIRECTORS CONTINUING IN OFFICE UNTIL 2000 ANNUAL MEETING
Urbano Perez V. Mr. Perez has been a Director of the Company and of
Signature Brands since January 1998. Mr. Perez has held various positions with
Mabe, a Mexico-based manufacturer and distributor of major home appliances,
since 1977, including Director, Range Division since 1992. Mr. Perez is 42 years
of age.
Thomas R. Shepherd. Mr. Shepherd has been Chairman of the Board of
Directors of the Company and of Signature Brands since August 1997 and a
Director of the Company and of Signature Brands since April 1988. He has been
engaged as a consultant to THL since 1986 and is currently a Managing Director.
In addition, Mr. Shepherd is Executive Vice President of Thomas H. Lee Advisors
I, L.P. and an officer of various other THL affiliates. Previously, Mr. Shepherd
was President of GTE (Sylvania) Lighting Products from 1983 to 1986; President
of North American Phillips Commercial Electronics Corporation from 1981 to 1983;
and Senior Vice President and General Manager of GTE (Sylvania) Entertainment
Products Group from 1979 to 1981. He is also a Director of General Nutrition
Companies, Inc. and Rayovac Corporation. Mr. Shepherd is 68 years of age.
Frank E. Vaughn. Mr. Vaughn has been a Director of the Company and of
Signature Brands since August 1995. Mr. Vaughn is currently Special Assistant to
the Dean and Visiting Professor at the College of Business Administration and
Graduate School of Management at Kent State University. From 1988 to 1991, Mr.
Vaughn was an Executive Vice President at Maytag Corporation, a manufacturer of
household appliances, and President of its wholly-owned subsidiary, The Hoover
Company, from 1985 to 1991. Mr. Vaughn serves as a Director of ABC Dispensing
Technologies, Inc. Mr. Vaughn is 68 years of age.
6
<PAGE> 10
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation Committee.
Currently, Messrs. Carmichael, Miller and Schoen are members of the Audit
Committee and Messrs. Jones, Schoen and Shepherd are members of the Compensation
Committee.
The Audit Committee reviews the activities of the Company's independent
public accountants, various Company policies and practices as well as potential
conflict of interest situations. In addition, the Audit Committee recommends to
the Board of Directors an independent accounting firm to audit the Company's
financial statements. The Audit Committee did not meet during the fiscal year
ended September 28, 1997.
The Compensation Committee is responsible for making recommendations
concerning the salaries, bonuses and other compensation paid to the Company's
executive officers. It is also responsible for administering the Second Amended
and Restated 1992 Stock Incentive Plan, the 1995 Stock Option and Incentive
Plan, the 1997 Stock Option and Incentive Plan and the Chief Executive Officer
Stock Option Plan. The Compensation Committee met twice during the fiscal year
ended September 28, 1997.
The Company does not have a standing nominating committee or a committee
performing similar functions.
The Company's Board of Directors met five times during the last fiscal
year. No Director, with the exception of Mr. Lee, attended less than 75% of the
aggregate number of meetings of the Board of Directors and the committees on
which he served during the period for which he was a member of the Board.
7
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for each of
the three most recent fiscal years, of: (i) those persons who served as the
chief executive officer during the fiscal year ended September 28, 1997 and (ii)
the other four most highly compensated executive officers of the Company for the
fiscal year ended September 28, 1997 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------------------
ANNUAL COMPENSATION SECURITIES
------------------------------------------- UNDERLYING ALL OTHER
OTHER ANNUAL OPTION/SAR COMPEN-
NAME YEAR SALARY BONUS COMPENSATION AWARDS SATION(1)
- ---------------------------------------- ---- -------- ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Meeta R. Vyas........................... 1997 $ 38,462(2) $ -- $ 41,166(3) 591,727(4) $ 77
Vice Chairman and
Chief Executive Officer
Peter C. McC. Howell.................... 1997 302,918 68,028(5) -- -- 606,677(6)
Former Chairman and Chief 1996 295,600 73,900 -- -- 8,471
Executive Officer (7) 1995 286,000 28,600 -- -- 7,953
S. Donald McCullough.................... 1997 222,245 26,850(8) 100,485(9) -- 966,700(10)
Former President and Chief 1996 214,800 53,700 -- 90,500(11) 10,830
Operating Officer (12) 1995 201,196 21,500 75,303(13) 45,000(14) 10,830
C. Wayne Morris......................... 1997 176,020(15) 21,250 63,502(16) 30,000(17) 5,915
Senior Vice President-
Professional Products
Timothy J. McGinnity.................... 1997 163,157 25,000 -- -- 3,194
Senior Vice President- 1996 147,600 61,900 -- -- 5,632
National Account Sales 1995 141,115 65,000 -- 50,000(14) 5,632
Steven M. Billick....................... 1997 185,802 -- -- 10,000(18) 3,382
Senior Vice President, 1996 63,746(19) 15,405 -- 40,000(20) --
Treasurer and Chief
Financial Officer
</TABLE>
- ---------------
Except as indicated above, no Named Executive Officer received personal
benefits or perquisites during fiscal 1997 in excess of the lesser of $50,000 or
10% of his or her aggregate salary and bonus.
(1) Amounts reported for each Named Executive Officer for fiscal 1997, 1996 and
1995 include premiums paid by the Company for term life insurance policies
on behalf of each Named Executive Officer and matching contributions under
the Company's 401(k) Plan.
(2) Ms. Vyas joined the Company on September 2, 1997. Amounts reported as
salary for fiscal year 1997 represent payments received from that date
through the end of the Company's fiscal year.
(3) Represents reimbursement in the amount of $20,603 received from the Company
in connection with Ms. Vyas's relocation to the Cleveland, Ohio
metropolitan area and $20,563 in additional federal and state income taxes
payable with respect to such reimbursement.
(4) Represents options to purchase shares of Common Stock awarded to Ms. Vyas
under the terms of her Employment Agreement. Of the total amount of
options, 500,000 options were awarded under the Company's Chief Executive
Officer Stock Option Plan. Such options vest 50% on September 30, 1998 and
50% on September 30, 1999. The remaining 91,727 options in the form of
stock subscriptions were granted pursuant to a Stock Subscription Agreement
and were exercisable between September 2, 1997 and November 1, 1997.
(5) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Employment Agreement between Mr. Howell and the Company.
(6) Includes, in addition to the items referred to in note (1) above, a
severance payment of $593,053 payable over the twelve month period
beginning September 5, 1997, which Mr. Howell became entitled to during
fiscal 1997 pursuant to the termination provisions of an Employment
Agreement between Mr. Howell and the Company.
8
<PAGE> 12
(7) Mr. Howell joined the Company in August 1994 and became its Chairman and
Chief Executive Officer on September 2, 1994. He resigned from his offices
with the Company, effective as of August 12, 1997, and terminated his
employment with the Company, effective as of September 5, 1997.
(8) Bonus payable for fiscal 1997 pursuant to the termination provisions of an
Amended and Restated Employment Agreement and the terms of a Separation
Agreement between Mr. McCullough and the Company.
(9) Includes reimbursement in the amount of $39,451 received from the Company
for the loss of home equity in Mr. McCullough's prior residence and the
closing costs associated with the sale of such residence in connection with
his relocation to the Cleveland, Ohio metropolitan area and $34,083 in
additional federal and state income taxes payable on such reimbursement.
(10) Includes, in addition to the items referred to in note (1) above, severance
payments of (i) $419,850 payable over the eighteen month period beginning
on January 16, 1998, (ii) $524,426 payable within sixty days of January 16,
1998 upon receipt of which all stock options held by Mr. McCullough will
terminate and (iii) $11,250, which consists of an automobile allowance,
payable from May 8, 1998 through July 16, 1999. Mr. McCullough became
entitled to the items described in this note during fiscal 1997 pursuant to
the termination provisions of an Amended and Restated Employment Agreement
and the terms of a Separation Agreement between Mr. McCullough and the
Company.
(11) Represents options to purchase shares of Common Stock awarded to Mr.
McCullough under the terms of an Amended and Restated Employment Agreement
between the Company and Mr. McCullough. Mr. McCullough's options became
exercisable with respect to 22,625 shares on July 1, 1996 and an additional
22,625 shares on December 31, 1996. Pursuant to the Amended and Restated
Employment Agreement, options to purchase an additional 45,250 shares of
Common Stock automatically vested upon Mr. McCullough's resignation. Mr.
McCullough's options shall terminate pursuant to a Separation Agreement
between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) above.
(12) Mr. McCullough resigned from his position as President and Chief Operating
Officer, and as a Director, effective as of January 16, 1998. For purposes
of determining the Company's severance obligations to Mr. McCullough, the
terms of the Separation Agreement between Mr. McCullough and the Company
set the date of termination for Mr. McCullough at September 26, 1997. Mr.
McCullough continued as President and Chief Operating Officer of the
Company until January 16, 1998 pursuant to continuation of employment
provisions of such Separation Agreement.
(13) Includes club fees in the amount of $32,100 reimbursed by the Company and
$27,732 in additional federal and state income taxes payable on such dues
with respect to such reimbursement.
(14) Represents options to purchase shares of Common Stock awarded to the Named
Executive Officers under the Company's Second Amended and Restated 1992
Stock Incentive Plan (the "1992 Plan") or the 1995 Stock Option and
Incentive Plan (the "1995 Plan"). Options awarded under the 1992 Plan vest
in 25% increments on an annual basis commencing on the first anniversary of
the date of grant. Vesting of certain options awarded under the 1995 Plan
is conditioned upon the Company reaching certain earnings before interest,
taxes, depreciation and amortization ("EBITDA") objectives during the
period of the option. Options issued pursuant to these plans expire ten
years from the date of grant. Pursuant to an Amended and Restated
Employment Agreement between the Company and Mr. McCullough, all options
held by Mr. McCullough automatically vested upon Mr. McCullough's
resignation. Mr. McCullough's options shall terminate pursuant to a
Separation Agreement between Mr. McCullough and the Company upon the
receipt of certain compensation as described in note (10) above.
(15) Mr. Morris joined the Company in October 1996. Amounts reported as salary
for fiscal year 1997 represent payments received from that date through the
end of the Company's fiscal year.
(16) Represents reimbursement in the amount of $42,519 received from the Company
in connection with Mr. Morris's relocation to the Chicago, Illinois
metropolitan area and $20,983 in additional federal and state income taxes
payable on such reimbursement.
9
<PAGE> 13
(17) Represents options to purchase shares of Common Stock awarded to Mr. Morris
under the terms of an Employment Agreement between the Company and Mr.
Morris. Such options were awarded under the 1992 Plan and the 1995 Plan. Of
the total amount of options shown, 15,000 options vest in 25% increments on
an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives. The options expire ten years from the date of grant.
(18) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the 1997 Stock Option and Incentive Plan. The options vest in
20% increments on an annual basis beginning fiscal 1997, conditioned upon
the Company achieving certain EBITDA objectives. The options expire ten
years from the date of grant.
(19) Mr. Billick joined the Company in June 1996. Amounts reported as salary for
fiscal year 1996 represent payments received from that date through the end
of the Company's fiscal year.
(20) Represents options to purchase shares of Common Stock awarded to Mr.
Billick under the terms of an Employment Agreement. Such options were
awarded under the 1992 Plan and the 1995 Plan. Of the total amount of
options shown, 25,000 options vest in 25% increments on an annual basis
commencing on the first anniversary of the date of grant and 15,000 options
vest in 20% increments on an annual basis beginning in fiscal 1997,
conditioned upon the Company achieving certain EBITDA objectives. The
options expire ten years from the date of grant.
OPTION GRANTS
No options were exercised by the Named Executive Officers during fiscal
1997. Shown below is information on grants of stock options during the fiscal
year ended September 28, 1997 to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES /SARS STOCK PRICE
UNDERLYING GRANTED MARKET APPRECIATION FOR
OPTION/ IN EXERCISE PRICE ON OPTION TERM
SARS FISCAL OR BASE DATE OF EXPIRATION -----------------------
NAME GRANTED YEAR PRICE GRANT DATE 5% 10%
- ------------------------------ ---------- ------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Meeta R. Vyas................. 500,000(1) 65.7% $3.50 $3.50 8/11/07 $1,100,566 $2,789,049
91,727(2) 12.1% $1.75 $3.50 11/1/97 $ 362,425 $ 672,185
Peter C. McC. Howell.......... --
S. Donald McCullough.......... --
C. Wayne Morris............... 30,000(3) 3.9% $5.875 $5.875 10/7/06 $ 110,843 $ 280,897
Timothy J. McGinnity.......... --
Steven M. Billick............. 10,000(4) 1.3% $5.375 $4.125 3/6/07 $ 13,442 $ 53,242
</TABLE>
- ---------------
(1) Under Ms. Vyas's Employment Agreement, one-half of these options become
exercisable on September 30, 1998, and one-half become exercisable on
September 30, 1999.
(2) This option in the form of stock subscriptions had a per share exercise
price equal to 50% of the closing price of the Common Stock on August 11,
1997, and were exercisable between September 2, 1997 and November 1, 1997.
Ms. Vyas exercised these stock subscriptions on November 1, 1997, pursuant
to the terms of a Stock Subscription Agreement.
(3) Of the total amount of options shown, 15,000 options vest in 25% increments
on an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives.
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<PAGE> 14
(4) Of the total amount of options shown, 25,000 options vest in 25% increments
on an annual basis commencing on the first anniversary of the date of grant
and 15,000 options vest in 20% increments on an annual basis beginning in
fiscal 1997, conditioned upon the Company achieving certain EBITDA
objectives.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to the unexercised options to
purchase the Company's Common Stock for the Named Executive Officers as of the
fiscal year end, September 28, 1997.
OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED VALUE (#)EXERCISABLE/ ($)EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) UNEXERCISABLE(2)
- -------------------------------- ----------- -------- -------------------- ------------------
<S> <C> <C> <C> <C>
Meeta R. Vyas................... 0 0 91,727/500,000 $229,318/ $375,000
Peter C. McC. Howell............ 0 0 362,353/ 0 592,628/ 0
S. Donald McCullough............ 0 0 98,250/ 92,250(3) 0/ 0
C. Wayne Morris................. 0 0 0/ 30,000 0/ 0
Timothy J. McGinnity............ 0 0 20,500/ 29,500 10,531/ 406
Steven M. Billick............... 0 0 9,250/ 40,750 0/ 0
</TABLE>
- ---------------
(1) Vesting of certain of these options is conditioned upon the Company reaching
certain EBITDA objectives during the duration of the option.
(2) Year end value of options is calculated based upon the closing price ($4.25)
of a share of Common Stock on the Nasdaq National Market on September 26,
1997, the last trading date of the fiscal year.
(3) These options became exercisable on January 16, 1998 pursuant to the
termination provisions of an Amended and Restated Employment Agreement and
the terms of a Separation Agreement between Mr. McCullough and the Company.
All of Mr. McCullough's options shall terminate pursuant to a Separation
Agreement between Mr. McCullough and the Company upon the receipt of certain
compensation as described in note (10) to the Summary Compensation Table
included elsewhere herein.
EMPLOYMENT AGREEMENTS
The Company and Meeta R. Vyas entered into an Employment Agreement,
effective as of August 11, 1997, pursuant to which the Company employs Ms. Vyas
as its Vice Chairman and Chief Executive Officer at a minimum annual base salary
of $500,000, subject to increase (but not decrease), through September 30, 1999.
The term of Ms. Vyas's employment may be extended for an additional year if
agreed to by the Company and Ms. Vyas. Ms. Vyas's Employment Agreement provides
for payment to Ms. Vyas of an annual bonus of not less than 50% of her base
salary based upon the Company achieving certain EBITDA objectives and entitles
Ms. Vyas to certain benefits, automobile allowances and other fringe benefits.
Ms. Vyas also received an option to purchase 500,000 shares of Common Stock at a
per share exercise price equal to the closing price of the Common Stock on
August 11, 1997, which option vests 50% as of September 30, 1998 and 50% as of
September 30, 1999. Notwithstanding such vesting schedule, the option will
accelerate and become fully vested upon any Change in Control (as defined in
such agreement) that occurs before September 30, 1999. In addition, she received
an option in the form of stock subscriptions to purchase 91,727 shares of Common
Stock at a per share exercise price equal to 50% of the closing price of the
Common Stock on August 11, 1997 (the "1997 Option"), which option was
exercisable between September 2, 1997 and November 1, 1997. Ms. Vyas exercised
the 1997 Option on November 1, 1997, pursuant to the terms of a Stock
Subscription Agreement. In the event of termination
11
<PAGE> 15
of her employment other than for cause, Ms. Vyas will be entitled to continue to
receive payment of her salary and to participate in the Company's benefit plans
for a period ending on the later of (i) 12 months following the date of such
termination or (ii) September 30, 1999. Ms. Vyas will also be entitled to
receive a bonus equal to 50% of the aggregate salary amounts payable to Ms. Vyas
for that period. If Ms. Vyas elects to terminate her employment with the Company
upon a Change of Control, she will be entitled to receive the same compensation
as if she had been terminated other than for cause.
Under the terms of an Employment Agreement entered into in August 1994 with
Peter C. McC. Howell, the Company agreed to pay Mr. Howell a base salary of at
least $286,000 per annum, subject to increase (but not decrease), through
December 31, 1998. Mr. Howell resigned, effective as of August 12, 1997, from
each office of the Company that he held and terminated his employment with the
Company, effective as of September 5, 1997. Mr. Howell's resignation was deemed
to be a termination other than for cause under the Employment Agreement.
Pursuant to the termination provisions of an Employment Agreement between Mr.
Howell and the Company, Mr. Howell is entitled to the payment of (i) a cash
bonus for fiscal 1997 of $68,028 and (ii) a severance payment of $593,053
payable over the twelve month period beginning September 5, 1997, and is
entitled to continued benefits from the Company through August 31, 2000. In
addition, all stock options held by Mr. Howell were deemed fully vested as of
his date of termination.
The Company and S. Donald McCullough entered into an Amended and Restated
Employment Agreement, effective as of July 1, 1996, pursuant to which the
Company agreed to employ Mr. McCullough as its President and Chief Operating
Officer at a minimum annual base salary of $217,000, subject to increase by the
Company from time to time, through January 2, 1999. Mr. McCullough resigned from
his positions with the Company, effective as of January 16, 1998. Mr.
McCullough's resignation from the Company was deemed to be a termination without
cause under the Amended and Restated Employment Agreement. Pursuant to the
termination provisions of the Amended and Restated Employment Agreement and the
terms of a Separation Agreement between Mr. McCullough and the Company, Mr.
McCullough is entitled to the payment of (i) a cash bonus of $26,850, (ii) a
severance payment of $419,850 payable over the eighteen month period beginning
on January 16, 1998, (iii) $11,250, which consists of an automobile allowance,
payable from May 8, 1998 through July 16, 1999 and (iv) $524,426 payable within
sixty days of January 16, 1998 upon receipt of which all stock options held by
Mr. McCullough will terminate. In addition, Mr. McCullough is entitled to
continued benefits and certain perquisites from the Company for an eighteen
month period beginning on January 16, 1998.
The Company entered into an Employment Agreement with Timothy J. McGinnity
on March 31, 1995. Mr. McGinnity was formerly an executive of Mr. Coffee, inc.
("Mr. Coffee") and was party to a Salary Continuation Agreement with Mr. Coffee.
Under the terms of the Salary Continuation Agreement, Mr. McGinnity was entitled
to terminate his employment with the Company and receive continuation of salary
for a period of 18 months subsequent to the date of the Company's acquisition of
Mr. Coffee. The Salary Continuation Agreement also provided for continuation of
certain health and life insurance and other benefits for a specified period
subsequent to such termination. Effective March 31, 1995, the Salary
Continuation Agreement was terminated and Mr. McGinnity entered into an
Employment Agreement with the Company. This agreement provides Mr. McGinnity
with an initial base salary of $142,500, subject to increase or decrease at the
discretion of the Board of Directors. In addition, Mr. McGinnity is entitled to
receive certain health and life insurance benefits, automobile allowances and
other fringe benefits. The agreement provides that the employment of Mr.
McGinnity is at will, and may be terminated at any time. In the event of
termination of employment other than for cause, Mr. McGinnity will be entitled
to continue to receive payment of his salary for a period of 12 months after the
date of termination. Mr. McGinnity will also be entitled to receive a pro rata
share of any annual bonus that management employees would be eligible to receive
under the Company's incentive bonus plans, and continuation of health, life and
certain other benefits for a specified period. Upon execution of an Employment
Agreement, Mr. McGinnity received a bonus in the amount of $25,000 and options
to purchase 10,000 shares of Common Stock.
12
<PAGE> 16
The Company entered into an Employment Agreement with Steven M. Billick to
serve as Senior Vice President, Treasurer and Chief Financial Officer of the
Company on June 10, 1996. The agreement provides Mr. Billick with an initial
base salary of $175,000, subject to increase or decrease at the discretion of
the Compensation Committee, and entitles Mr. Billick to participate in any bonus
plan established by the Board of Directors. Upon entering into the Employment
Agreement, Mr. Billick received (1) a bonus of $7,500, (2) an option to purchase
25,000 shares of Common Stock, which vests in 25% increments on an annual basis
and has a per share exercise price equal to $5.8125 and (3) an option to
purchase 15,000 shares of Common Stock, which vests in 20% increments on an
annual basis, conditioned upon the Company reaching certain EBITDA objectives,
and has a per share exercise price equal to $5.8125. All options expire ten
years from the date of grant. The Employment Agreement provides further that Mr.
Billick's employment with the Company is at will, and may be terminated at any
time. In the event of termination of employment other than for cause, Mr.
Billick will be entitled to continue to receive payment of his salary and the
continuation of any benefits he received at the time of termination until the
earlier of (1) the date Mr. Billick obtains other employment that provides a
salary substantially equivalent to that provided by the Employment Agreement or
(2) the first anniversary of his date of termination.
The Company entered into an Employment Agreement with C. Wayne Morris to
serve as Senior Vice President, Professional Products of the Company on October
7, 1996. The agreement provides Mr. Morris with an initial base salary of
$170,000, subject to increase or decrease at the discretion of the Compensation
Committee, and entitles Mr. Morris to participate in any bonus plan established
by the Board of Directors. Upon entering into the Employment Agreement, Mr.
Morris received (1) a bonus of $21,250, (2) an option to purchase 15,000 shares
of Common Stock, which vests in 25% increments on an annual basis and has a per
share exercise price equal to $5.875 and (3) an option to purchase 15,000 shares
of Common Stock, which vests in 20% increments on an annual basis, conditioned
upon the Company reaching certain EBITDA objectives, and has a per share
exercise price equal to $5.875. All options expire ten years from the date of
grant. The agreement provides further that Mr. Morris's employment with the
Company is at will, and may be terminated at any time. In the event of
termination of employment other than for cause, Mr. Morris will be entitled to
continue to receive payment of his salary and the continuation of any benefits
he received at the time of termination until the earlier of (1) the date Mr.
Morris obtains other employment that provides a salary substantially equivalent
to that provided by the Employment Agreement or (2) the first anniversary of his
date of termination.
All of the employment agreements between the Company and its executive
officers contain customary noncompetition and non-disclosure provisions.
INDEBTEDNESS OF MANAGEMENT
The Company extended a non-interest bearing loan of $200,000 on November
22, 1994 to S. Donald McCullough, the former President and Chief Operating
Officer of the Company, for the purchase of suitable housing in the metropolitan
area of Cleveland, Ohio. Mr. McCullough paid this loan in full in November 1997.
Meeta R. Vyas, Vice Chairman and Chief Executive Officer of the Company,
was extended a loan by the Company in the amount of $160,522 to facilitate her
exercise of the previously described option, in the form of stock subscriptions,
to purchase 91,727 shares of Common Stock. Such loan was extended at a rate of
interest equal to the actual rate of interest paid by Signature Brands under its
revolving credit facility. Ms. Vyas paid the loan in full in January 1998.
COMPENSATION OF DIRECTORS
Non-employee Directors of the Company, other than Messrs. Lee, Shepherd and
Schoen, are paid an annual retainer at the rate of $20,000. In addition,
Directors of the Company are entitled to participate in the Company's 1992 Stock
Incentive Plan, the 1995 Stock Option and Incentive Plan and the 1997 Stock
Option and Incentive Plan.
13
<PAGE> 17
Mr. Jones was appointed to the Board of Directors effective May 8, 1996 and
was granted at that time, in addition to the $20,000 annual retainer, options to
purchase 20,000 shares of Common Stock. These option grants were at fair market
value and vest 25% per annum. The Company also entered into a consulting
agreement with Mr. Jones, pursuant to which Mr. Jones receives $2,500 per day
for consulting services provided on an "as-needed" basis. The maximum amount per
year that can be paid by the Company under this agreement is $30,000. Mr. Jones
was paid $7,500 under this agreement during the fiscal year ended September 28,
1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors reviews the Company's
existing and proposed executive compensation plans and makes recommendations to
the Board of Directors regarding such plans and the awards to be made
thereunder. The current members of the Compensation Committee are Messrs. Jones,
Shepherd and Schoen, all of whom are non-employee Directors of the Company.
Set forth below is a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Committee in
determining the compensation of the Company's Chief Executive Officer and the
other Named Executive Officers.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that compensation paid to
executive officers and other management personnel should consist of four
elements: (1) salary, (2) annual incentive bonus, (3) stock options and (4)
welfare, retirement and other benefits. The compensation package is designed to
attract and retain top quality management employees. In the opinion of the
Committee, it reflects competitive conditions. The Committee, however, does not
specifically focus on the compensation levels of executives in peer group
companies in making compensation decisions. To some extent, elements of
compensation are designed to vary as Company performance varies. In general, the
elements of compensation that most typically have a significant relationship to
Company performance are awards under its stock option and bonus plans. The
objective measurement used in determining performance for purposes of awards
under the bonus plans is the Company's actual earnings before interest, taxes,
depreciation and amortization ("EBITDA") in comparison to budgeted amounts. The
vesting of certain options granted during the year is tied to the achievement of
specified annual levels of EBITDA over the duration of the options. The
Committee's decisions concerning compensation are not the result of a highly
formalistic process and the Committee does not rely extensively on objective
criteria in measuring individual performance. Instead, decisions are primarily
based on subjective decisions concerning the appropriate levels of compensation.
Set forth below is a discussion of the various components of the
compensation arrangements provided to the executive officers, as well as a
discussion of the compensation arrangements provided to the Company's chief
executive officer.
1997 COMPENSATION DECISIONS
Base Salary and Benefits. Salary levels for executive officers reflect the
Committee's subjective judgments of appropriate salaries in light of the duties
and responsibilities inherent in the executives' respective positions. The
particular qualifications of an individual holding the position and his or her
level of experience are considered in establishing a salary level when the
individual is first appointed to a given position. The performance and
contribution of the individual to the Company, as well as Company performance,
are the primary criteria influencing salary administration. Salaries of
executive officers are generally reviewed each year. Since certain executives
are parties to employment agreements with the Company, their minimum base salary
levels are set by the terms of such agreements. The primary factor in setting
salary levels pursuant to these agreements was the Company's desire to
14
<PAGE> 18
provide compensation in amounts sufficient to induce these individuals to either
join or continue with the Company. Certain of these employment agreements were
executed after cancellation of salary continuation agreements with the former
Mr. Coffee, inc. executives. These agreements were entered into prior to the
time they joined the Company. The terms of these salary continuation agreements
were a significant factor in establishing compensation arrangements for
executives who were parties to such agreements. In the case of certain executive
officers who joined the Company during the 1997 fiscal year, base salary was
determined at their hire date on the basis of the Company's assessment of their
prior experience, the responsibilities associated with their positions and the
results of negotiations between the Company and the executives concerning their
compensation arrangements. In making adjustments to the salaries of existing
executive officers for fiscal 1997, consideration was given to the performance
of each of the individuals in question, the Company's results of operations for
fiscal 1996 and the terms of existing contractual arrangements with certain
executive officers.
Stock Options. The Company uses stock options as a long-term incentive
program for executives. Stock options are used because they directly relate the
amounts earned by executives to the amount of appreciation realized by the
Company's stockholders over comparable periods. Stock options also provide
executives with the opportunity to acquire and build a meaningful ownership
interest in the Company. The Committee considers stock options throughout the
year. In determining the number of options awarded to an individual executive,
the Committee generally establishes a level of award based upon the position of
the individual and his or her level of responsibility. In the case of certain
executive officers who executed employment agreements during the current fiscal
year, the number of options awarded to such executives was the result of
negotiations between the Company and the executives.
During the 1997 fiscal year, the Company awarded options to purchase an
aggregate of 40,000 shares of Common Stock to the executive officers of the
Company excluding the Chief Executive Officer. Certain of these options are
subject to vesting over a four-year period commencing on the first anniversary
of the date of grant and certain of these options are subject to vesting over a
five-year period commencing on the first anniversary of the date of grant, with
vesting for this later group further conditioned upon the achievement of
specified annual target thresholds for EBITDA over the duration of the options.
Bonuses. The Company maintains an annual incentive bonus program based on
Company and group performance. A target bonus level, stated as a percentage of
year end salary, is established for each executive officer based on his or her
level of responsibility. Target bonuses are measured by the Company's financial
performance against its annual performance plans. Target levels of performance
are established based upon EBITDA. At its December 1996 meeting, the
Compensation Committee established a bonus pool of $1,250,000 for all eligible
employees under the Company's annual incentive bonus program. Because the target
levels of performance were not achieved during fiscal 1997, no bonuses were paid
to executive officers out of this amount. All bonuses paid during the fiscal
year were paid pursuant to the terms of the Company's employment agreements with
the executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation arrangements for Mr. Howell with respect to the 1997
fiscal year were primarily based upon the terms of an Employment Agreement
between Mr. Howell and the Company, which was entered into in 1994. The
Compensation Committee increased Mr. Howell's base salary during 1997 by 4.2% to
$314,340. Mr. Howell was also entitled to receive a bonus of $68,028, which, in
accordance with the terms of an Employment Agreement, is an amount equal to his
prior year's bonus, pro rated for the number of days in fiscal 1997 during which
Mr. Howell was employed by the Company. The Committee did not award Mr. Howell
any stock options during 1997. In connection with his resignation from the
Company, Mr. Howell was entitled to receive as severance pay, under the terms of
an Employment Agreement, an amount equal to 1.5 times the sum of (i) his annual
salary at the date of termination ($314,340) plus (ii) the amount of his bonus
payable for fiscal 1997 ($68,028) plus (iii) his automobile allowance ($13,000).
15
<PAGE> 19
The compensation arrangements for Ms. Vyas, who joined the Company as Vice
Chairman and Chief Executive Officer following Mr. Howell's resignation, were
established through negotiations between the Committee and Ms. Vyas and are
provided for in an Employment Agreement between the Company and Ms. Vyas.
Factors considered by the Committee in establishing such arrangements included
the need to provide sufficient inducement to attract and retain a top key
executive; the duties and responsibilities of the position; and Ms. Vyas's
qualifications and experience. The Employment Agreement provides for Ms. Vyas to
receive an initial base salary of $500,000 and an annual bonus of not less than
50% of her base salary based upon the Company achieving certain EBITDA
objectives. Ms. Vyas was further granted an option to purchase 500,000 shares of
Common Stock at an exercise price equal to the closing price of the Common Stock
on the date of grant, which option vests 50% as of September 30, 1998 and 50% as
of September 30, 1999. She also received an option in the form of stock
subscriptions to purchase 91,727 shares of Common Stock at an exercise price
equal to 50% of the closing price of the Common Stock on August 11, 1997, which
option was exercisable only from September 2, 1997 through November 1, 1997.
This option was exercised by Ms. Vyas on November 1, 1997 at an exercise price
of $1.75 per share.
Compensation Committee of the Board of Directors
David A. Jones
Thomas R. Shepherd
Scott A. Schoen
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Schoen, a managing director of THL, and Mr. Shepherd, a consultant to
THL, served as members of the Company's Compensation Committee during fiscal
1997. Neither Mr. Schoen nor Mr. Shepherd was an employee of the Company during
fiscal 1997. Under a Management Agreement, the Company has engaged THL to
provide consulting and management advisory services. The fees payable to THL
under the Management Agreement are $240,000 per annum. The Company believes that
this Management Agreement is on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors and persons who own 10% or more of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission (the "Commission").
Officers, Directors and beneficial holders of more than 10% of the Company's
Common Stock are required by Commission regulations 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 officers, Directors and
beneficial holders of more than 10% of the Company's Common Stock complied with
all filing requirements applicable to them with respect to transactions during
the fiscal year ended September 28, 1997, except for the filing of a late Form 4
to report the inadvertent omission of one transaction involving the purchase of
3,000 shares of Common Stock by C. Wayne Morris.
16
<PAGE> 20
PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total stockholder return on the Company's Common Stock against the
cumulative total return of the S&P 500 Index and an index comprised of the 15
companies included in the Home Furnishings Daily housewares component of the HFD
stock index (the "Peer Group Index") for the period from September 30, 1992 to
September 30, 1997. The Company's most recent fiscal year ended on September 28,
1997. Total stockholder return data for each index are not readily available for
this date. Accordingly, to ensure the integrity of the comparison, all data
reflect the period ending September 30, 1997. The companies comprising the Peer
Group Index are: Catalina Lighting, Inc., General Housewares Corp., Signature
Brands USA, Inc., Lancaster Colony Corp., Newell Co., Rival Co., Rubbermaid,
Incorporated, Sunbeam Corp., Toastmaster Inc., Brown Forman Corp., Oneida Ltd.,
The Black & Decker Corporation, Helen of Troy, Inc., Nacco Industries, Inc. and
National Presto Industries, Inc. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at September
30, 1992 and that all dividends, if any, were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG SIGNATURE BRANDS USA, INC., THE S&P 500 INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SIGNATURE BRANDS USA,
(FISCAL YEAR COVERED) INC. PEER GROUP S & P 500
<S> <C> <C> <C>
9/92 100 100 100
9/93 135 110 113
9/94 101 114 117
9/95 81 128 152
9/96 110 143 183
9/97 75 184 257
</TABLE>
* $100 INVESTED ON 9/30/92 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
RATIFICATION OF AUDITORS
Stockholders will be asked to ratify the Board of Directors' appointment of
KPMG Peat Marwick LLP to serve as the Company's independent auditors for the
current fiscal year. KPMG Peat Marwick LLP has served as the Company's auditors
since September 1994. A representative of that firm will be present at the
Annual Meeting and will have an opportunity to make a statement, if he or she
should so desire. The representative will also be available to respond to
appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF ITS
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE 1998 FISCAL YEAR. If the stockholders fail to ratify the Board of Directors'
appointment of KPMG Peat Marwick LLP, the Board will consider that decision in
selecting an independent accounting firm for subsequent fiscal years.
17
<PAGE> 21
DATE TO SUBMIT STOCKHOLDER
PROPOSALS FOR 1999 ANNUAL MEETING
Any stockholder who wishes to submit a proposal for inclusion in the
Company's proxy materials to be distributed by the Company in connection with
its 1999 Annual Meeting of Stockholders must do so no later than September 25,
1998. To be eligible for inclusion in the 1999 proxy materials, such proposal
must conform to the requirements set forth in Regulation 14A promulgated under
the Exchange Act. Any such proposals should be directed to the Company at 7005
Cochran Road, Glenwillow, Ohio 44139, Attention: Corporate Secretary.
OTHER MATTERS
As of the date of the Proxy Statement, management is unaware of any matters
to come before the Annual Meeting other than as set forth in the Notice. If any
other matters are properly presented at the Annual Meeting, it is the intention
of the persons named in the accompanying proxy to vote in accordance with their
best judgment on such matters insofar as the proxies are not limited to the
contrary.
Upon the receipt of a written request from any stockholder, the Company
will mail, at no charge to the stockholder, a copy of the Company's Annual
Report on Form 10-K, including financial statements and schedules required to be
filed with the Commission pursuant to Rule 13a-1 under the Exchange Act, for the
Company's most recent year. Written requests for such report should be directed
to Signature Brands USA, Inc., 7005 Cochran Road, Glenwillow, Ohio 44139,
Attention: Chief Financial Officer.
You are urged to sign and return your proxy promptly in order to make
certain that your shares are voted at the Annual Meeting. For your convenience,
a postage paid return envelope to the Company's transfer agent is enclosed
herewith.
By Order of the Board of Directors,
THOMAS F. MCKEE
Secretary
Glenwillow, Ohio
January 23, 1998
18
<PAGE> 22
<TABLE>
SIGNATURE BRANDS USA, INC.
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
R THE COMPANY FOR THE ANNUAL MEETING ON MARCH 5, 1998.
O
X The undersigned hereby (i) constitutes and appoints Steven M.
Y Billick and Thomas F. McKee, and each of them, his true and lawful
agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Stockholders of
Signature Brands USA, Inc. to be held at 7005 Cochran Road,
Glenwillow, Ohio on Thursday, March 5, 1998, and at any
adjournments thereof, on all matters coming before said meeting
and (ii) authorizes and directs said proxy holders to vote all of
the shares of Common Stock of the Company represented by this
proxy as follows, WITH THE UNDERSTANDING THAT IF NO DIRECTIONS ARE
GIVEN ON REVERSE SIDE, SAID SHARES WILL BE VOTED "FOR" THE
ELECTION OF THE THREE NOMINEES FOR DIRECTOR NOMINATED BY THE BOARD
OF DIRECTORS AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS INDEPENDENT AUDITORS.
<S> <C>
Election of Directors, Nominees: (change of address)
David A. Jones, Thomas H. Lee and _____________________________________
Sandra E. Peterson _____________________________________
_____________________________________
_____________________________________
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this
card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN
AND RETURN THIS CARD.
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------------------------
DETACH CARD
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
<C> <S> <C>
/ X / PLEASE MARK YOUR 2015
VOTES AS IN THIS
EXAMPLE.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Ratification of / / / / / / 3. In their discretion, the
Directors appointment of proxies are authorized to
(see reverse) KPMG Peat vote upon such other
Marwick LLP as business as may properly
For, except vote withheld independent come before the meeting.
from the following nominee(s): auditors.
------------------------------
Change of Address / /
Please sign exactly as name
appears hereon. Joint owners
should each sign. When
signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such.
--------------------------------
--------------------------------
SIGNATURE(S) DATE
- ------------------------------------------------------------------------------------------------------------------------------
DETACH CARD
</TABLE>
