<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 Section240.14a-11(c) or
Section240.14a-12
EAGLE HARDWARE & GARDEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/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:
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(4) Date Filed:
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<PAGE>
EAGLE HARDWARE & GARDEN, INC.
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 29, 1997
------------------
Notice is hereby given that the Annual Meeting of Shareholders of EAGLE
HARDWARE & GARDEN, INC. (the "Company") will be held at 9:00 a.m. Pacific
Daylight Time on Thursday, May 29, 1997, at the SeaTac Marriott Hotel, 3201
South 176th Street, SeaTac, Washington 98188 for the following purposes:
(1)ELECTION OF DIRECTORS:
To elect two directors, each to serve a three-year term or until his
successor is elected and qualified.
(2)RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS:
To ratify the selection of Ernst & Young LLP as the Company's independent
public accountants for the fiscal year ending January 30, 1998.
(3)OTHER BUSINESS:
To transact such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on April 18, 1997, as
the Record Date for the determination of shareholders entitled to notice of and
to vote at the 1997 Annual Meeting and any adjournments thereof.
By Order of the Board of Directors
[SIG]
Richard T. Takata
PRESIDENT
Renton, Washington
April 28, 1997
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, WE URGE YOU TO SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY AT YOUR EARLIEST CONVENIENCE. THIS WILL
ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. PROMPTLY RETURNING A SIGNED AND
DATED PROXY WILL SAVE THE COMPANY THE EXTRA EXPENSE OF ADDITIONAL SOLICITATIONS.
AN ADDRESSED, POSTAGE PAID ENVELOPE IS PROVIDED FOR THAT PURPOSE. SENDING IN
YOUR PROXY WILL NOT PREVENT YOU FROM VOTING YOUR SHARES AT THE MEETING IF YOU
DESIRE TO DO SO, AS THE PROXY IS REVOCABLE AT YOUR OPTION IN THE MANNER STATED
IN THE ACCOMPANYING PROXY STATEMENT.
<PAGE>
EAGLE HARDWARE & GARDEN, INC.
981 POWELL AVE. S.W.
RENTON, WASHINGTON 98055
------------------------
PROXY STATEMENT
------------------
INFORMATION REGARDING PROXIES
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of Eagle
Hardware & Garden, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held at 9:00 a.m. Pacific Daylight Time on Thursday, May 29,
1997, at the SeaTac Marriott Hotel, 3201 South 176th Street, SeaTac, Washington
98188, and at any adjournment thereof (the "Annual Meeting"). Only shareholders
of record on the books of the Company at the close of business on April 18, 1997
(the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting.
It is anticipated that these proxy solicitation materials and a copy of the
Company's 1996 Annual Report to Shareholders will be first sent to shareholders
on or about April 28, 1997.
If the accompanying form of proxy is properly executed and returned, and not
revoked, the shares represented thereby will be voted in accordance with the
instructions specified thereon. In the absence of instructions to the contrary,
such shares will be voted for the proposals set forth therein. Any shareholder
executing a proxy has the power to revoke it at any time prior to the voting
thereof on any matter (without, however, affecting any vote taken prior to such
revocation) by delivering written notice to Steven M. Stenberg, Treasurer of the
Company, by executing and delivering to the Company another proxy dated as of a
later date or by voting in person at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The only outstanding voting securities of the Company are shares of common
stock (the "Common Stock"), each of which is entitled to one vote. As of the
Record Date, there were 28,902,106 shares of Common Stock issued and
outstanding. The presence in person or by proxy of holders of record of a
majority of the outstanding shares of Common Stock is required to constitute a
quorum for the transaction of business at the meeting.
Under Washington law and the Company's Bylaws, if a quorum is present, (a)
the two nominees for election to the Board of Directors who receive the greatest
number of affirmative votes cast for election of directors by shares present in
person or represented by proxy at the meeting and entitled to vote shall be
elected directors and (b) any other proposals, including the proposal to ratify
the independent public accountants, will be approved if the affirmative votes
cast in favor of the proposal exceed the votes cast opposing the action.
Abstentions and broker non-votes will be considered represented at the Annual
Meeting for the purpose of calculating a quorum and will have no effect on the
election of directors. However, abstentions and broker non-votes will have the
practical effect of votes "against" other proposals because each such abstention
or broker non-vote represents one less vote in favor of such proposal.
The Common Stock is traded on The Nasdaq National Market tier of the Nasdaq
Stock Market. The last sale price for the Common Stock as reported by Nasdaq on
April 18, 1997, was $19.8125 per share.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of April 1, 1997, with respect to
(i) each shareholder known by the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock; (ii) each director of the
Company; (iii) the Company's Chief Executive Officer and four other most highly
compensated executive officers; and (iv) all directors and executive officers as
a group. Except as
<PAGE>
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OF
NAME OF BENEFICIAL OWNER OWNED TOTAL
- -------------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
David J. Heerensperger ......................................................... 3,932,900 13.6%
c/o Eagle Hardware & Garden, Inc.
981 Powell Ave. S.W.
Renton, Washington 98055
Richard T. Takata............................................................... 367,100(1) 1.3%
John P. Foucrier................................................................ 60,000(2) *
Dale W. Craker.................................................................. 33,400(3) *
Ronald P. Maccarone............................................................. 10,000(4) *
Harlan D. Douglass.............................................................. 816,592(5) 2.8%
Theodore M. Wight............................................................... 29,357(6) *
Herman Sarkowsky................................................................ 446,865(7) 1.5%
Ronald D. Crockett.............................................................. 287,550(8) 1.0%
Chief Executive Officer and four other most highly compensated executive
officers....................................................................... 4,403,400(9) 15.1%
All directors and executive officers as a group (13 persons).................... 6,084,964(10) 20.8%
</TABLE>
- ------------------------
* Less than 1%
(1)Includes 11,900 shares held by Mr. Takata's two minor children. Also
includes outstanding options to purchase 45,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
(2)Represents outstanding options to purchase 60,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
(3)Includes outstanding options to purchase 30,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
(4)Represents outstanding options to purchase 10,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
(5)Includes 112,000 shares of Common Stock owned by Harlan D. and Maxine H.
Douglass and 6,000 shares of Common Stock owned by Stacey Douglass, Mr.
Douglass' daughter. Beneficial ownership of the 6,000 shares of Common Stock
owned of record by Stacey Douglass is disclaimed by Mr. Douglass. Also
includes outstanding options to purchase 45,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
(6)Includes outstanding options to purchase 15,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
(7)Includes 241,365 shares of Common Stock owned of record by the Sarkowsky
Family Limited Partnership, 4,000 shares held by Steven William Sarkowsky,
6,000 shares held by Faye Sarkowsky, 6,000 shares held by Cathy Ann
Sarkowsky, 3,000 shares held by Fred Sarkowsky and 1,500 shares held by Leo
Sarkowsky. Also includes outstanding options to purchase 45,000 shares of
Common Stock, which by their terms are exercisable within 60 days. Mr.
Sarkowsky disclaims beneficial ownership of the shares held by Steven
William, Faye, Cathy Ann, Fred and Leo Sarkowsky.
(8)Includes outstanding options to purchase 45,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
2
<PAGE>
(9)Includes shares owned by David J. Heerensperger, Richard T. Takata, John P.
Foucrier, Dale W. Craker and Ronald P. Maccarone. See footnotes (1)-(4).
(10)Includes outstanding options to purchase 416,000 shares of Common Stock,
which, by their terms, are exercisable within 60 days.
ELECTION OF DIRECTORS
The Company's Board of Directors is currently composed of six members. Two
directors will be elected at the Annual Meeting to serve for a three-year period
and until their respective successors are elected and qualified. The Board of
Directors has nominated to serve as directors Richard T. Takata and Theodore M.
Wight, both of whom are currently members of the Board of Directors. Unless
otherwise instructed, it is the intention of the persons named in the
accompanying form of proxy to vote shares represented by properly executed
proxies for the above-named nominees with the terms as set forth above. Although
the Board of Directors anticipates that each of the nominees will be available
to serve as directors of the Company, should either or both of them not accept
the nomination, or otherwise be unwilling or unable to serve, it is intended
that the proxies will be voted for the election of a substitute nominee or
nominees designated by the Board of Directors.
The directors of the Company are divided, as equally as possible, into three
classes, designated Class I, Class II and Class III. At each annual meeting of
shareholders, successors of the class of directors whose term expires at that
annual meeting are elected for a three-year term. If the number of directors is
changed, any increase or decrease is to be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible.
Information concerning each of the Company's directors is set forth below.
Nominees for director are marked with an asterisk (*). Beneficial ownership of
the Company's shares is detailed under the caption "Voting Securities and
Principal Holders."
David J. Heerensperger, 60, was appointed Chairman in January 1992 and has
been Chief Executive Officer of the Company since its inception. His term as
director expires in 1998. From November 1989 to January 1992, Mr. Heerensperger
also served as the Company's President. Mr. Heerensperger's retail hardware,
home and garden sales career began in 1954 with T&T Electric in Longview,
Washington. He founded Eagle Electric and Plumbing, Inc. in Spokane, Washington,
in 1959. In 1969, Eagle Electric and Plumbing merged with another chain to form
Pay 'N Pak, and, in 1970, Mr. Heerensperger became Pay 'N Pak's Chairman and
Chief Executive Officer. In 1987 and 1988, Mr. Heerensperger and other members
of management, together with Citicorp Venture Capital, participated in a
leveraged buyout of Pay 'N Pak in response to a hostile takeover attempt. At the
end of July 1989, Mr. Heerensperger retired from Pay 'N Pak, and in November
1989 he founded the Company.
Richard T. Takata,* 47, was appointed President, Chief Operating Officer and
a director of the Company in January 1992. From September 1991 to January 1992,
Mr. Takata was the President of Worldwide Consumer Products, Ltd., a sole
proprietorship engaged in marketing consulting and the sale of consumer
products. Mr. Takata was employed by Pay 'N Pak from 1986 to 1991, serving as
Executive Vice President from March 1988 to August 1991, and as Senior Vice
President -- Merchandising from July 1986 to March 1988.
Ronald D. Crockett, 57, has been a director of the Company since July 1991.
His term expires in 1999. Since October 1992, Mr. Crockett has been President
and the General Partner of Emerald Downs, a thoroughbred racetrack company which
commenced operations in June 1996. In 1970, Mr. Crockett founded Tramco, a
commercial aircraft overhaul company which was acquired by B.F. Goodrich
Corporation in 1988. From 1970 to March 1995, he served as the Board Chairman
and Chief Executive Officer of Tramco, and its successor entity, B.F.G.
Corporation.
Harlan D. Douglass, 60, has been a director of the Company since March 1990.
His term as director expires in 1998. Mr. Douglass is the President of Harlan D.
Douglass, Inc., a private building
3
<PAGE>
and real estate development company. Mr. Douglass has served as a director of
The Bank of Spokane, Spider Corporation, First American Title of Spokane and
currently serves on the board of directors of Inland Northwest Bank, a regional
bank.
Herman Sarkowsky, 71, has been a director of the Company since June 1990.
His term expires in 1999. Mr. Sarkowsky is President of Sarkowsky Investment
Corp., a private investment company, and is a real estate developer, private
investor and philanthropist. He served as a director of Egghead, Inc., a retail
software distributor, from June 1984 to September 1993 and Medco Containment
Services, Inc., a mail-order prescription business, until it was acquired by
Merck Drug Company in November 1993. Mr. Sarkowsky currently serves on the board
of directors of Synetic, Inc., a manufacturer of plastic products, Hollywood
Park Operating Company, an operator of a thoroughbred racetrack in Inglewood,
California, and Seattle First National Bank, a subsidiary of Bank of America.
Theodore M. Wight,* 54, has been a director of the Company since June 1990.
Since 1983, Mr. Wight has been a general partner of the general partner of
Walden Investors. He is also a general partner of the general partner of Pacific
Northwest Partners, SBIC, L.P. Both entities are venture capital partnerships.
Mr. Wight also serves as a director of RehabCare Corporation, an acute
rehabilitation services company and Interlinq Software Corporation, a developer
and marketer of residential mortgage loan software, and a number of private
companies.
The following provides information regarding executive officers that are not
directors of the Company.
Dale W. Craker, 49, was appointed Executive Vice President -- Operations in
January 1995. In this position, he is responsible for all store operations,
including personnel training. Mr. Craker had previously been Vice President --
Store Operations of the Company since May 1992. From October 1991 to May 1992,
Mr. Craker was employed in the corporate buying department and was involved in
the implementation of certain aspects of the Company's Management Information
System. Mr. Craker began his retail hardware career at Pay 'N Pak in 1970 and
served in positions of increasing responsibility with that company until August
1991, most recently as District Manager of its southwestern Washington and
Alaska stores.
Larry E. Elliott, 50, was appointed Executive Vice President --
Merchandising in January 1996. In this position, he is responsible for all of
the Company's buying and merchandising activities. Mr. Elliott had previously
been the Hardware Buyer of the Company since November 1993. Mr. Elliott joined
the Company as a Sales Manager in November 1992. Prior to working for the
Company, Mr. Elliott was employed for 20 years as a Buyer for Pay 'N Pak.
John P. Foucrier, 55, was appointed Executive Vice President --
Administration and Human Resources in January 1995. In this position, he is
responsible for the Company's training, loss prevention and human resources and
other administrative functions. Mr. Foucrier had previously been Executive Vice
President -- Operations of the Company since March 1992. Prior to joining the
Company, Mr. Foucrier was Senior Vice President -- Operations and Administration
at Pay 'N Pak from August 1991 to January 1992, and Senior Vice President --
Administration and Human Resources at that company from February 1990 to August
1991.
Ronald P. Maccarone, 48, was appointed Executive Vice President -- Finance
and Chief Financial Officer in August 1995. In this position, he is responsible
for all financial activity of the Company. Prior to joining the Company, Mr.
Maccarone was Senior Vice President -- Chief Financial Officer of KIDSource,
Inc. from December 1993 to January 1995. Mr. Maccarone began his retail hardware
career at Builders Emporium in 1970 and served in positions of increasing
responsibility with that company until January 1993, most recently as Senior
Vice President -- Chief Financial Officer.
4
<PAGE>
Robert M. Cleveland, 66, was appointed Vice President -- Marketing in August
1990. He had been the Company's Advertising Director since June 1990. Mr.
Cleveland is responsible for the Company's marketing department as well as its
public relations activities. He has owned and operated advertising agencies in
Spokane, Los Angeles and Seattle during the past 25 years.
Calvin E. Karbowski, 59, was appointed Vice President -- Distribution in
August 1991. Mr. Karbowski had been the Company's Warehouse Manager since August
1990. From 1980 to July 1990, Mr. Karbowski was Vice President -- Distribution
and Traffic of Pay 'N Pak.
George E. Smith, 61, was appointed Vice President -- Training in November
1991. Mr. Smith had been the Company's Training Director since January 1991.
From June 1983 to August 1990, Mr. Smith was Vice President -- Training of Pay
'N Pak.
Seven of the Company's nine executive officers were previously employed by
Pay 'N Pak. On September 21, 1991, Pay 'N Pak filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code. In June 1992, Pay
'N Pak requested a hearing before the United States Bankruptcy Court for
approval of an orderly liquidation of all its retail stores and other assets. In
addition, Pay 'N Pak requested the approval of a settlement with its major
secured lenders. Both requests were approved, and substantially all of the Pay
'N Pak assets have been sold at auction or otherwise.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended January 31, 1997, there were two meetings and
four actions by consent in lieu of a meeting of the Board of Directors. Each of
the incumbent directors attended at least 75% of the total number of meetings of
the Board of Directors and the total number of meetings held by all committees
of the Board of Directors on which they served. The Board of Directors does not
have a standing Nominating Committee, but does have a standing Audit Committee
and Compensation Committee.
The Audit Committee consists of Messrs. Crockett, Douglass and Wight. Under
the terms of its charter, the Audit Committee has been granted adequate
resources and authority to approve the Company's independent auditors, assess
audit scope, assess the risk of fraudulent financial reporting, oversee the
periodic financial reporting process, communicate with the Company's chief
accounting officer, review all second opinions on significant accounting issues
and oversee the Company's business ethics. The Audit Committee met four times
during the fiscal year ended January 31, 1997.
The Compensation Committee consists of Messrs. Sarkowsky and Wight. The
Compensation Committee determines the base salary of the Company's Chief
Executive Officer, reviews and approves the salaries of the Company's other
executive officers and administers certain of the Company's compensation plans.
The Compensation Committee met one time during the fiscal year ended January 31,
1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors, certain officers and greater-than-10%
shareholders ("Reporting Persons") of all publicly-held companies to file
certain reports ("Section 16 Reports") with respect to beneficial ownership of
such companies' equity securities.
Based solely on its review of the Section 16 Reports furnished to the
Company by its Reporting Persons and, where applicable, any written
representation by them that no Form 5 was required, all Section 16(a) filing
requirements applicable to the Company's Reporting Persons during and with
respect to fiscal 1996 have been complied with on a timely basis, except for
David J. Heerensperger, Paul B. Morris, Ronald D. Crockett, Harlan D. Douglass,
Herman Sarkowsky and Theodore M. Wight. A Form 5 was filed for Mr. Heerensperger
to report a gift transaction occurring in November 1996. A Form 5 was filed for
Mr. Morris concerning a stock option exercise occurring in January 1997. A Form
5 was filed for Messrs. Crockett, Douglass and Wight concerning stock option
grants in May
5
<PAGE>
1996. A Form 4 was filed in February 1997 for Mr. Sarkowsky's stock option grant
occurring in May 1996. Mr. Crockett's August 1996 Form 4 filing concerning
transactions in July 1996 was delinquent by three weeks.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services rendered during
fiscal years 1996, 1995 and 1994 for Eagle Hardware's Chief Executive Officer
and the four other most highly compensated executive officers of the Company
whose fiscal 1996 salary and bonus exceeded $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
---------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) OPTIONS COMPENSATION (2)
- -------------------------------------- --------- ----------- --------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David J. Heerensperger ............... 1996 $ 358,784 $ 98,305 $ 15,738 -- $ 3,500
Chairman and CEO 1995 $ 330,354 $ 51,177 $ 3,727 -- $ 3,500
1994 $ 324,820 $ 37,250 $ 3,139 -- --
Richard T. Takata .................... 1996 $ 225,644 $ 81,920 $ 3,013 100,000 $ 3,500
President and COO 1995 $ 206,118 $ 42,646 $ 4,505 -- $ 3,500
1994 $ 185,829 $ 31,062 $ 6,687 -- --
John P. Foucrier ..................... 1996 $ 135,374 $ 65,536 $ 2,311 -- $ 3,500
EVP -- Administration and Human 1995 $ 127,408 $ 34,154 $ 1,087 -- $ 3,500
Resources 1994 $ 123,023 $ 26,446 $ 7,072 -- --
Dale W. Craker ....................... 1996 $ 162,096 $ 65,536 $ 1,064 20,000 $ 3,500
EVP -- Operations 1995 $ 95,097 $ 33,907 $ 2,785 -- $ 3,500
1994 $ 91,869 $ 20,237 $ 1,227 -- --
Ronald P. Maccarone .................. 1996 $ 162,809 $ 65,536 $ 26,015 -- --
EVP -- Finance (3) 1995 $ 79,275 $ 12,782 $ 1,731 50,000 --
</TABLE>
- ------------------------
(1) These amounts include Company contributions to the Eagle Hardware & Garden,
Inc. Executive Insurance Plan. For Mr. Maccarone, this amount also includes
reimbursement for moving expenses.
(2) These amounts represent Company contributions to the Eagle Hardware &
Garden, Inc. Employee Stock Ownership Plan.
(3) Mr. Maccarone was appointed Executive Vice President -- Finance and Chief
Financial Officer in August 1995. The salary shown for fiscal 1995 is for a
partial year of employment.
The Company has a stock option plan pursuant to which options to purchase
Common Stock may be granted to officers and other employees of the Company.
Subject to compliance with certain Securities and Exchange Commission
requirements, the Company's stock option plan is administered by a committee of
the Board of Directors. Options generally vest over a five-year period, are
granted at fair market value and are exercisable for ten years. Vested options
may be exercised for a period of 90 days following termination of employment or
contractual relationship and for one year following death or disability.
6
<PAGE>
The following table shows stock option grants in fiscal 1996 to the named
executive officers of the Company:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------------- AT ASSUMED ANNUAL RATES OF
PERCENT OF TOTAL STOCK PRICE APPRECIATION FOR
NUMBER OF OPTIONS GRANTED EXERCISE BASE OPTION TERM (1)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION ----------------------------
NAME GRANTED (2) FISCAL YEAR SHARE DATE 5% 10%
- -------------------------------------- ----------- ----------------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David J. Heerensperger................ -- -- -- -- -- --
Richard T. Takata..................... 100,000 25% $ 17.25 8/14/06 $1,084,843 $2,749,206
John P. Foucrier...................... -- -- -- -- -- --
Dale W. Craker........................ 20,000 5% $ 17.25 8/14/06 $216,969 $549,841
Ronald P. Maccarone................... -- -- -- -- -- --
</TABLE>
- ------------------------
(1) Potential realizable value is based on the assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten-year option term.
These numbers are calculated based on the requirements of the Securities and
Exchange Commission (the "Commission") and do not reflect the Company's
estimate of future stock price performance.
(2) Subject to compliance with certain Commission requirements, the Company's
stock option plan is administered by a committee of the Board of Directors,
which determines to whom options are granted and the number of shares,
vesting schedule and exercise price of each option. Options generally vest
over a five-year period, are granted at fair market value and are
exercisable for ten years. Vested options may be exercised for a period of
90 days following termination of employment or contractual relationship and
for one year following death or disability.
The following table shows stock option exercises in fiscal 1996 by the named
executive officers of the Company, and the year-end value of unexercised
options:
OPTION EXERCISES AND FISCAL YEAR-END VALUE
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN- THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
------------------- ----------------------
NUMBER OF SHARES VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ACQUIRED ON EXERCISE (1) UNEXERCISABLE UNEXERCISABLE (2)
- --------------------------------- --------------------- ---------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
David J. Heerensperger........... -- $ -- 0/0 $0/$0
Richard T. Takata................ 5,000 $ 88,271 45,000/100,000 $ 710,626/$187,500
John P. Foucrier................. -- $ -- 45,000/15,000 $ 620,626/$206,875
Dale W. Craker................... -- $ -- 24,000/26,000 $ 298,999/$112,249
Ronald P. Maccarone.............. -- $ -- 10,000/40,000 $ 121,250/$485,000
</TABLE>
- ------------------------
(1) This amount equals the number of shares of Common Stock purchased multiplied
by the difference between the per share exercise price of the option and the
closing sale price per share of Common Stock on the date of exercise. The
amount shown is before deductions for income taxes.
(2) This amount is the aggregate number of the outstanding options multiplied by
the difference between the closing price of the Common Stock reported on The
Nasdaq National Market tier of the Nasdaq Stock Market on January 31, 1997
and the exercise price of such options.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive annual directors' fees of
$24,000 and are reimbursed for reasonable expenses incurred for travel to Board
of Directors and related committee
7
<PAGE>
meetings. All of the non-employee directors participate in the Directors'
Nonqualified Stock Option Plan. Under the terms of this plan, non-employee
directors of the Company receive annual grants of 5,000 options to purchase
Common Stock at a price equal to the fair market value on the date of grant.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (composed entirely of
non-employee directors) reviews and approves executive officer salaries and
administers certain of the Company's compensation plans. The Compensation
Committee believes that the compensation of executive officers should be
substantially related to the performance of the Company. Performance includes
objective considerations such as the number of new store openings, sales levels
of stores and the overall profitability of the Company, as well as subjective
considerations, including extenuating circumstances such as new competition and
the Company's market saturation strategy.
Because the Company has not had the resources of larger companies, salary
levels of executives, including that of the Chief Executive Officer, have been
set at lower than market levels. Salaries have been increased as the Company's
store base has expanded, which has increased the revenues available to cover
general and administrative costs. During fiscal 1996, the Company's sales
increased 24% and net income increased 92%, while executive salaries were
increased an average of 9%, at the recommendation of the Company's Chief
Executive Officer.
The Company's bonus plan was established by the Board of Directors. The
Compensation Committee has reviewed and discussed the plan, and believes it
continues to fulfill its original goals. The plan grants a specified percentage
of the Company's pretax earnings to a number of the Company's top and middle
level executives, including 0.30% to the Chief Executive Officer.
Stock options have been granted to the Company's executive officers, other
than its Chief Executive Officer, in order to provide stock performance
incentives and align the officers' interests with those of the Company's
shareholders. Because the Chief Executive Officer owns a significant number of
the Company's outstanding shares, he has not been granted any stock options to
date.
Theodore M. Wight Herman Sarkowsky
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Herman Sarkowsky and Theodore M. Wight currently comprise the Compensation
Committee of the Board of Directors. During fiscal 1996, however, the Company's
Chairman and Chief Executive Officer, David J. Heerensperger, made
recommendations to the Compensation Committee as to the compensation to be paid
to each executive officer other than himself. These recommendations were adopted
by the Compensation Committee. The Compensation Committee determined Mr.
Heerensperger's compensation.
A number of the Company's directors have engaged in certain transactions
with the Company which are described under the caption "Certain Relationships
and Related Transactions."
8
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases eight stores and a warehouse/distribution center from
directors or entities with whom directors are affiliated. Rental payments for
these stores are based on formulas derived from the final project costs and are
subject to adjustments based on predetermined multipliers or formulas derived
from the Consumer Price Index. The following table summarizes certain
information about the commitments and rental payments pertaining to these
leases.
<TABLE>
<CAPTION>
MINIMUM
FISCAL YEAR AGGREGATE PERCENTAGE FISCAL 1996
LOCATION LESSOR OPENED COMMITMENT RENT THRESHOLD RENTAL PAYMENTS
- -------------------- ---------------------------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Spokane, WA Harlan D. Douglass 1990 $ 26,900,000 $ 24,000,000 $ 1,191,000
Federal Way, WA R&B Development 1992 $ 26,800,000 $ 38,500,000 $ 1,087,000
Anchorage, AK RBH Ventures 1992 $ 35,100,000 $ 50,000,000 $ 1,428,000
Kennewick, WA Harlan D. Douglass 1993 $ 14,000,000 $ 24,000,000 $ 863,000
Puyallup, WA Harlan D. Douglass 1993 $ 21,600,000 $ 38,500,000 $ 1,095,000
Everett, WA RBH Ventures 1993 $ 32,300,000 $ 38,500,000 $ 1,466,000
Auburn, WA (1) West Valley 29 Partners 1993 $ 8,100,000 N/A $ 819,000
Medford, OR Harlan D. Douglass 1994 $ 16,900,000 $ 28,000,000 $ 862,000
Billings, MT Harlan D. Douglass 1994 $ 14,000,000 $ 24,000,000 $ 710,000
</TABLE>
- ------------------------
(1) Warehouse/distribution center
The Minimum Aggregate Commitment represents the dollar amount to be paid by
the Company over the initial term of the lease as of the commencement of the
lease. The Percentage Rent Threshold represents the level of sales above which
the Company is required to pay percentage rent. Percentage rent on the above
leases is paid at a rate of 2% of sales in excess of the threshold.
R&B Development is a corporation of which Ronald D. Crockett, a director and
shareholder of the Company, is a director and 50% shareholder. RBH Ventures is a
partnership in which Mr. Crockett and Herman Sarkowsky, also a director and
shareholder of the Company, each indirectly hold a one-third interest. West
Valley 29 Partners is an entity in which Mr. Crockett indirectly holds a 40%
interest.
The foregoing transactions have been approved by the disinterested members
of the Company's Board of Directors. Among other factors, the Board considered
the analyses of an independent appraiser retained by the Company to review the
fairness of the rental rates. The Company believes these transactions were on
terms no less favorable to the Company than could have been obtained from
unaffiliated third parties.
The Company will likely enter into transactions in the future with its
directors or shareholders for the construction of its stores and other
facilities. Any future transactions between the Company and its officers,
directors or affiliates will be on terms no less favorable to the Company than
could be obtained from unaffiliated third parties, and will be approved by a
majority of the disinterested directors or by a majority of the shareholders of
the Company.
Pace International, a corporation of which Herman Sarkowsky, a director and
shareholder of the Company, is the majority shareholder, sold inventory valued
at $2,383,000 to the Company in 1996. The Company believes these transactions
were on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties.
During fiscal 1996, the Company had an arrangement with David J.
Heerensperger pursuant to which his personal seven-passenger airplane (a Hawker
HS125-700) was rented by the Company for corporate purposes at a rate of $1,990
per hour, plus applicable taxes and expenses. The arrangement, which was on a
month-to-month basis with no minimum rental required, was approved by the
disinterested members of the Company's Board of Directors. The Company made
rental payments of approximately $797,000 under this arrangement during fiscal
1996.
9
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG EAGLE HARDWARE & GARDEN, INC.
S&P SMALLCAP 600 INDEX AND PEER GROUP INDEX (1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EAGLE HARDWARE & GARDEN, INC. PEER GROUP S&P SMALLCAP 600
<S> <C> <C> <C>
7/16/92 $100 $100 $100
1/29/93 215 135 125
1/28/94 140 125 148
1/27/95 80 148 135
1/26/96 84 134 179
1/31/97 191 150 220
</TABLE>
(1) The above comparison assumes $100 invested in the Company's Common Stock,
the S&P SmallCap 600 Index (the "S&P Index") and the STAR Services Peer
Group Index ("Peer Group Index") on July 16, 1992, which represents the
first day the Company's stock was publicly traded. The Peer Group Index
includes the Company, D.I.Y. Home Warehouse, Inc., Hechinger Company, The
Home Depot, Inc., Lowe's Companies, Inc., National Home Centers, Inc.,
Payless Cashways, Inc. and Waban Inc. (parent of HomeBase). Ernst Home
Center, Inc. was excluded from the Peer Group Index in the current year
because it filed for Chapter 7 bankruptcy and liquidated its remaining
stores during the Company's fiscal year. Orchard Supply Hardware Stores
Corporation was excluded from the Peer Group Index in the current year
because it was acquired by Sears, Roebuck and Co., during the Company's
fiscal year.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Ernst & Young LLP to continue as its independent
public accountants for the fiscal year ending January 30, 1998. Representatives
of Ernst & Young LLP are expected to be present at the annual meeting and have
the opportunity to make a statement if they so desire and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY.
OTHER BUSINESS
Management knows of no other business which will be presented for action at
the Annual Meeting. If any other business requiring a vote of the shareholders
should come before the meeting, the persons designated as your proxies will vote
or refrain from voting in accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR THE
1998 ANNUAL MEETING OF SHAREHOLDERS
In order to be eligible for inclusion in the proxy materials of the Company
for the 1998 Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received no
10
<PAGE>
later than January 1, 1998. Such proposals must be mailed to the Company's main
office at 981 Powell Ave. S.W., Renton, WA 98055, Attn.: Steven M. Stenberg,
Treasurer. Any such proposal shall be subject to the requirements of the proxy
rules under the Exchange Act.
SOLICITATION OF PROXIES
This solicitation is made on behalf of the Board of Directors of the
Company. Proxies may be solicited by officers, directors and employees of the
Company, none of whom will receive any additional compensation for their
services. In addition, the Company may engage an outside proxy solicitation firm
to render proxy solicitation services and, if so, will pay a fee for such
services. Solicitations of proxies may be made personally, or by mail,
telephone, telegraph or messenger.
The Company may pay persons holding shares of Common Stock in their names or
in the names of nominees, but not owning such shares beneficially, such as
brokerage houses, banks and other fiduciaries, for the expense of forwarding
soliciting materials to their principals. All of the costs of solicitation of
proxies will be paid by the Company.
By Order of the Board of Directors
[SIG]
Richard T. Takata
PRESIDENT
Renton, Washington
April 28, 1997
11
<PAGE>
PROXY CARD
EAGLE HARDWARE & GARDEN, INC.
ANNUAL MEETING OF SHAREHOLDERS - MAY 29, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard T. Takata and David J.
Heerensperger, and each of them, as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote as
designated below, all the shares of Common Stock of Eagle Hardware & Garden,
Inc. held of record by the undersigned on April 18, 1997, at the annual
meeting of shareholders to be held on May 29, 1997, or at any adjournment
thereof.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
Please mark / X /
your votes
as indicated in
this example
WITHHOLD
AUTHORITY
1. Election of Directors. to vote
FOR ALL FOR ALL
Nominees Nominees
listed listed
Richard T. Takata / / / /
Theodore M. Wight
(Instruction: To withhold authority to vote
for any individual nominees, write that
nominee's name in the space provided below.)
- -------------------------------------------
FOR AGAINST ABSTAIN
2. To ratify the selection of Ernst & Young, / / / / / /
LLP as the Company's independent
accountants for the fiscal year ending
January 30, 1998.
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NOT OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED IN
PROPOSAL 1 AND FOR PROPOSAL 2. THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE ANNUAL MEETING.
The undersigned hereby revokes any Proxy or Proxies heretofore given for such
shares and ratifies all that the above named Proxies or their substitutes may
lawfully do by virtue hereof.
Please sign your name below exactly how it appears on this mailing. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
If a corporation, please sign in corporate name by authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated , 1997
-----------------------------
- ---------------------------------------
Signature
- ---------------------------------------
Signature
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
