THE STEPHAN CO.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held August 27, 1999
To the Stockholders:
The Annual Meeting of the Stockholders of The Stephan
Co. (the "Company") will be held on August 27, 1999, at 10:00
A.M., local time, at the Marriott North, 6650 North Andrews
Avenue, Fort Lauderdale, Florida, 33309, for the following
purposes:
I. To elect two Class I members of the Company's Board
of Directors; and
II. To transact such other business as may properly
come before the meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business
on July 8, 1999 as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Company's
1999 Annual Meeting of Stockholders (the "Meeting"). Only
stockholders of record at the close of business on this date will
be entitled to notice of, and to vote at, the Meeting or any
adjournment(s) thereof.
By Order of the Board of Directors
PETER FEROLA
Secretary
July 19, 1999
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE POSTAGE PREPAID ENVELOPE WHICH HAS
BEEN PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON. THE PROXY MAY BE REVOKED BY YOU AT ANY TIME PRIOR TO
EXERCISE, AND IF YOU ARE PRESENT AT THE MEETING YOU MAY, IF YOU
WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE YOUR RIGHT TO
VOTE YOUR SHARES PERSONALLY.
PROXY STATEMENT
THE STEPHAN CO.
Annual Meeting of Stockholders
To Be Held on August 27, 1999
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The Stephan
Co. (the "Company"), a Florida corporation, for use at the 1999
Annual Meeting of Stockholders to be held on August 27, 1999 and
at any adjournment(s) thereof (the "Meeting"), for the purposes
set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Meeting is to be held at the Marriott North,
6650 North Andrews Avenue, Fort Lauderdale, Florida, 33309, at
10:00 A.M., local time.
The principal executive offices of the Company are located
at 1850 West McNab Road, Fort Lauderdale, Florida (telephone no.
954-971-0600). The enclosed proxy and this proxy statement are
being first sent to stockholders of the Company on or about July
19, 1999.
Quorum; Received Votes; Solicitation and Revocation.
Proxies in the form enclosed are solicited by, or on behalf
of, the Company's Board of Directors. The persons named in the
proxy have been designated as proxies by the Board of Directors.
If a quorum, consisting of the presence (in person or by proxy)
of holders of a majority of the outstanding shares of common
stock, $.01 par value, of the Company (the "Common Stock"),
exists at the Meeting, (i) the directors shall be elected by the
affirmative vote of a plurality of the shares of Common Stock
cast at the Meeting; and (ii) approval of any other matters which
may properly come before the Meeting shall, subject to applicable
law, be approved if the number of votes cast in favor of the
matter at the Meeting exceeds the number of votes cast opposing
such matter at the Meeting. Abstentions and shares of record
held by a broker or nominee ("Broker Shares") that are voted on
any proposal will be included in determining the existence of a
quorum. Broker Shares that are not voted on any matter will be
treated as shares as to which voting power has been withheld by
the beneficial owner of such shares and, therefore, as shares not
entitled to vote on the proposal, and will not be included in
determining the existence of a quorum. Because only a plurality
of shares is required, abstentions and non-voted Broker Shares
will not have an effect on the outcome of the election of the two
nominees for directors. A "withheld" vote will be treated
equivalent to an abstention.
Shares represented by properly executed proxies received by
the Company will be voted at the Meeting in the manner specified
therein or, if no specification is made, will be voted "FOR" the
election of the two nominees for directors named herein in the
class as set forth herein. Proxies solicited by the Board of
Directors will be voted for the election of the two nominees
named herein, each to serve until the expiration of his term, or
until respective successors have been duly elected and qualified.
In the event that any other matters are properly presented
at the Meeting for action, the persons named in the enclosed
proxy will vote the proxies (which confer authority upon them to
vote on any such matters) in accordance with their judgment. Any
proxy given pursuant to this solicitation may be revoked by the
stockholder at any time before it is exercised by written
notification delivered to the Secretary of the Company, by voting
in person at the Meeting, or by duly executing and delivering
another proxy bearing a later date. Attendance by a stockholder
at the Meeting does not alone serve to revoke his or her proxy.
The solicitation of proxies will be made primarily by mail
but, in addition, may be made by directors, officers and
employees of the Company personally or by telephone or telegraph,
without extra compensation. Brokers, nominees and fiduciaries
will be reimbursed for their out-of-pocket and clerical expenses
in transmitting proxies and related material to beneficial
owners. The costs of soliciting proxies will be borne by the
Company. It is estimated that these costs will be nominal.
The Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1998, which contains audited financial
statements, is being mailed with this Proxy Statement to all
persons who were stockholders of record as of the close of
business on July 8, 1999. Additional copies of the Annual Report
will be provided free of charge upon written request to the
Company, at 1850 West McNab Road, Fort Lauderdale, Florida 33309,
Attn.: Secretary.
Record Date; Voting
The Company's Board of Directors has fixed the close of
business on July 8, 1999 as the record date (the "Record Date")
for the determination of stockholders of the Company who are
entitled to receive notice of, and vote at, the Meeting. At the
close of business on the Record Date, an aggregate of 4,694,958
shares of Common Stock were issued and outstanding, each of which
is entitled to one vote on each matter to be voted upon at the
Meeting. The Company's stockholders do not have cumulative
voting rights. The Company has no other class of voting
securities entitled to vote at the Meeting.
SECURITY OWNERSHIP
Security Ownership by Certain Beneficial Owners
The following table sets forth, as of the Record Date,
certain information as to the stockholders (other than directors,
nominees and executive officers of the Company) which are known
by the Company to beneficially own more than 5% of the Common
Stock (based solely upon filings by said holders with the
Securities and Exchange Commission on Schedule 13G pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")):
Number of Shares
Name and Address Beneficially Percent
of Beneficial Owner Owned (1) of Class
FMR Corp.(2) 413,200 9%
82 Devonshire St.
Boston, Mass. 02109-7614
Dalton, Greiner, Hartman, 275,300 6%
Maher & Company
1100 Fifth Avenue South,
Ste. 301
Naples, FL 34102
(1) Beneficial ownership, as reported in the above table, has
been determined in accordance with Rule 13d-3 under the Exchange
Act.
(2) Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp., is a beneficial owner of
the shares reflected above as a result of acting as a registered
investment adviser to various registered investment companies.
One such company, Fidelity Low-Priced Stock Fund, owns the shares
reflected above. FMR Corp., through its control of Fidelity, has
sole voting power with respect to none of the above indicated
shares and sole power to dispose of all the above indicated
shares.
Ownership by Management
The following table sets forth, as of the Record Date,
certain information concerning beneficial ownership of Common
Stock by each nominee for election as a director of the Company
(both of whom are currently directors of the Company), each other
director, the Named Executives, as defined below, and all current
directors of the Company and executive officers of the Company as
a group (based solely upon information furnished by such
persons):
Number of Shares
Name and Address Beneficially Percent
of Beneficial Owner (1) Owned(1)(2) of Class
Thomas M. D'Ambrosio . . . . . 226,714 4.82%
John DePinto. . . . . . . . . 138,514 2.93%
Frank F. Ferola . .. . . . . . 661,435 (4)(5) 13.71%
Curtis Carlson . . . . . . . . 15,186 (3)
Leonard Genovese. . . . . . . 11,124 (3)
Shouky Shaheen. . . . . . . . 312,120 6.64%
Peter Ferola . . . . . . . . . 55,000 1.16%
David Spiegel. . . . . . . . . 5,000 (3)
Franc Ferolam. . . . . . . . . 55,000 1.16%
Sam Lazar. . . . . . . . . . . (3) (3)
Lucille Murphy . . . . . . . . 37,500 (3)
John Incitti . . . . . . . . . 3,000 (3)
Gerald Kotch . . . . . . . . . 0 (3)
All executive officers and directors
as a group (13 persons) . . 1,520,593 30%
(1) Beneficial ownership, as reported in the above table,
has been determined in accordance with Rule 13d-3 under
the Exchange Act. Unless otherwise indicated,
beneficial ownership includes both sole voting and sole
dispositive power. The business address of each
person, for purposes hereof, is c/o The Stephan Co.,
1850 West McNab Road, Fort Lauderdale, Florida 33309.
(2) Includes the following shares that may be acquired upon
the exercise of options by the specified person(s)
within 60 days of the Record Date: Mr. Thomas
D'Ambrosio - 10,000; Mr. John DePinto - 25,310; Mr.
Frank Ferola - 130,000; Mr. Curtis Carlson - 15,186;
Mr. Leonard Genovese - 10,124; Mr. Peter Ferola -
55,000; Mr. David Spiegel - 5,000; Mr. Franc Ferola -
55,000; Ms. Lucille Murphy - 37,500; Mr. Shouky Shaheen
- - 5,062; and all executive officers and directors as a
group - 348,182.
(3) Represents less than 1%.
(4) Does not include 79,195 shares covered by options
granted to Mr. Ferola, whose exercise is contingent on
certain increases in the Company's Common Stock price,
as more fully set forth in "Executive Compensation"
below.
(5) Includes 13,805 shares owned by Mr. Frank Ferola's
personal charitable foundation, of which Mr. Ferola is
a co-trustee.
PROPOSAL I: ELECTION OF DIRECTORS
The Company's directors are elected on a staggered basis,
with each class of director consisting of one third of the entire
Board of Directors, and, commencing this year and for each year
hereafter, standing for re-election for a three-year period. The
Company's By-Laws provide that the number of directors shall be
set from time to time by resolution of the Board of Directors and
must be a minimum of one. The Board of Directors has, by
resolution, set the size of the Board at six members. Only Class
I directors are being elected at the Meeting. Each of the two
Class I nominees listed below has consented to being named in
this Proxy Statement and to serving as a Class I director if
elected. In the unexpected event that either of such nominees
should become unable to or for good cause will not serve, it is
intended that proxies will be voted for substitute Class I
nominee(s) designated by the current Board of Directors. The
Board has no reason to believe that either of the named Class I
nominees will be unable or unwilling to stand for election. Each
of the two Class I nominees for director were elected at last
year's annual meeting, at which meeting the Company's
stockholders approved a staggered board.
Class II and Class III directors are not being elected at
the Meeting.
At the Meeting, the shares represented by the proxies in the
accompanying form, unless otherwise specified, will be voted in
favor of the election of each of the two Class I nominees listed
on the accompanying form of proxy. Proxies cannot be voted for a
greater number of persons than the number of Class I nominees
named thereon. Directors will be elected by a plurality of the
affirmative votes cast by the holders of shares of Common Stock
at the Meeting (assuming a quorum exists).
Set forth below is certain information with respect to the
Class I nominees for election as directors of the Company at the
Meeting and the Class II and Class III directors of the Company
(based solely on information furnished by such persons):
Year of Principal
Age First Occupation(s) During
(as of Election as Past Five Years;
Name 7-1-99) a Director Other Directorships
Class I
John DePinto 81 1980 Retired executive
(1)(2) for more than the
last five years.
Shouky A. 67 1998 For more than the past
Shaheen (2) five years,President of
Shaheen and Co. Mr.
Shaheen was also the
former owner
of Morris Flamingo,
L.P., which was
acquired by the Company
in March 1998.
Class II
Leonard 64 1997 For more than the past
Genovese (1)(2) five years,Chairman &
Chief Executive Officer
of Genovese Drug, Inc.,
an American Stock
Exchange listed
company. Mr. Genovese
is a director of two
other publicly traded
companies: Kellwood
Company and Roslyn
Bancorp.
Curtis Carlson 46 1996 For more than the past
(1) five years, partner in
the law firm of Carlson
& Associates, PA, a
Miami-based law firm,
and recently became a
partner at Payton &
Carlson, PA.
The Class II directors are subject to election at the annual
meeting to be held in the year 2000.
Class III
Frank F. Ferola 56 1980 For more than the past
five years, Chairman of
the Board, President and
Chief Executive Officer
of the Company.
Thomas M. 70 1980 For more than the past
D'Ambrosio(3) five years, Vice
President and, since
March 1989, Treasurer of
the Company; practicing
attorney.
The Class III directors are subject to election at the annual
meeting to be held in the year 2001.
(1) Member of the Audit Committee.
(2) Member of the Stock Option and Compensation Committee.
(3) Mr. D'Ambrosio has stated that he intends to devote
approximately 30% of his business time to the affairs
of the Company.
The Board of Directors unanimously recommends a vote "FOR"
the election of the two Class I nominees named above as directors
of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal year 1998, the Company paid to Carlson &
Associates, P.A., a law firm of which Curtis Carlson was a
partner, approximately $224,000 for legal services rendered by
such firm to the Company. The Company also paid $4,500 per month
as a retainer to Thomas D'Ambrosio, a director of the Company,
for legal services rendered.
Board of Directors; Committees of the Board
The Board of Directors met four times during fiscal year
1998. During fiscal year 1998, no director attended fewer than
75% of the total number of meetings of the Board and of the
committees of the Board on which he served. The Board has
established two standing committees, consisting of an Audit
Committee, and a Stock Option and Compensation Committee. The
current functions of such committees are as follows:
The Audit Committee, which held one meeting during fiscal
1998, reviews the internal and external audit functions of the
Company and makes recommendations to the Board of Directors with
respect thereto. It also has primary responsibility for the
formulation and development of the auditing policies and
procedures of the Company, and for making recommendations to the
Board of Directors with respect to the selection of the Company's
independent auditing firm. The Chairman of this Committee is
Curtis Carlson.
The Stock Option and Compensation Committee, which held
various informal meetings, has primary responsibility for the
administration of the Company's 1990 Key Employee Stock Incentive
Plan, including primary responsibility for the granting of
options thereunder. The Committee is also responsible for
establishing the overall philosophy of the Company's executive
compensation program and overseeing the executive compensation
plan developed to execute the Company's compensation strategy.
The Chairman of this Committee is Shouky Shaheen.
Compensation of Directors
All directors of the Company are compensated for their
services by payment of $300 for each Board Meeting attended.
During fiscal 1998, options to purchase an aggregate of
20,248 shares of Common Stock, at exercise prices of $13.69 per
share for 15,186 shares and $11.75 for 5,062 shares,
respectively, were granted by the Company to directors of the
Company who were not employees or regularly retained consultants
of the Company (each, an "Outside Director") pursuant to the
Company's 1990 Outside Directors' Stock Option Plan.
Under such Plan, each Outside Director is automatically
granted, upon such person's election or re-election to serve as a
director of the Company, an option exercisable over five years,
to purchase shares of Common Stock. Upon initial election to the
Board of Directors, an Outside Director is granted an option to
purchase 5,062 shares of Common Stock at an exercise price equal
to the fair market value of the Common Stock on the date of
grant. An option to purchase an additional 5,062 shares of
Common Stock (at an exercise price equal to the fair market value
of such Common Stock on the date of such grant) is granted to
each incumbent Outside Director during each fiscal year of the
Company thereafter on the earlier of (i) June 30, or (ii) the
date on which the stockholders of the Company elect directors at
an Annual Meeting of such stockholders or any adjournment
thereof. The aggregate number of shares of Common Stock reserved
for grant under the Outside Directors' Stock Option Plan (as
adjusted for stock splits) is 202,500, of which options covering
48,058 shares have been granted.
Executive Officers
The executive officers of the Company consist of Mr. Frank
F. Ferola, President, Chairman of the Board and Chief Executive
Officer; Thomas M. D'Ambrosio, Vice President and Treasurer;
David A. Spiegel, Chief Financial Officer; Peter Ferola, Vice
President/Administration and Secretary; Lucille Murphy,
President/Old 97 Company, a wholly-owned subsidiary of the
Company; Franc Ferola, Vice President/Operations; Gerald Kotch,
President/Trevor Sorbie of America, Inc., a wholly-owned
subsidiary of the Company; Mr. John Incitti,
President/Williamsport Barber and Beauty Supply Corporation, a
wholly-owned subsidiary of the Company; and Samuel Lazar,
President/Scientific Research Products, Inc. of Delaware, a
wholly-owned subsidiary of the Company.
The following sets forth certain information with respect to
the executive officers of the Company who are not also directors
(based solely on information furnished by such persons):
Mr. David A. Spiegel, 51, was appointed as Chief Financial
Officer in January 1994. For more than the five years prior to
1994, Mr. Spiegel was the independent public accountant for the
Company.
Mr. Peter Ferola, 30, was appointed as Vice
President/Administration in January 1996. For more than the past
five years, Mr. Ferola has been employed by the Company in
various capacities. In February 1997, Mr. Ferola was selected as
Secretary of the Company to fill the vacancy caused by the death
of Mr. Stephen Letizia. Mr. Ferola had previously been the
Company's Assistant Secretary.
Ms. Lucille Murphy, 51, was appointed as President of Old 97
Company in January 1996. For more than the past five years Ms.
Murphy has been employed by Old 97 Company, a wholly-owned
subsidiary of the Company.
Mr. Sam Lazar, 53, was appointed as President of Scientific
Research Products, Inc. of Delaware, a wholly-owned subsidiary
of the Company, in April 1994, when such company was acquired by
the Company, a position which he had held for over five years
prior to the acquisition.
Mr. John Incitti, 54, was appointed as President of
Williamsport Barber and Beauty Corporation, a wholly-owned
subsidiary of the Company, in August 1997. For more than the
past five years, Mr. Incitti has been employed by the Company.
Mr. Franc Ferola, 33, was appointed as Vice
President/Operations in January 1996. For more than the past
five years, Mr. Ferola has been employed by the Company in
various capacities.
Mr. Gerald Kotch, 63, was appointed as President of Trevor
Sorbie of America, Inc., a wholly-owned subsidiary of the
Company, in March 1998, to fill the vacancy caused by the
resignation of Charles V. Hall. For more than five years prior
thereto, Mr. Kotch was Vice President of Styling Research
Corporation.
Peter Ferola and Franc Ferola are brothers and are the sons of
Frank F. Ferola.
EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal
years ended December 31, 1998, December 31, 1997 and December 31,
1996, with respect to compensation earned by the Company's Chief
Executive Officer and the seven other executive officers of the
Company serving at the end of fiscal year 1998 (the "Named
Executives").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
Name and Other Securities
Principal Fiscal Annual Underlying All Other
Position(s) Year Salary Bonus Compensation Options(#) Compensation
Frank F. 1998 $467,500 $0 $0 80,000 $0
Ferola, 1997 $425,000 $0 $0 59,195 (1) $0
President, 1996 $173,353 $677,030 $0 70,000 (1) $0
Chairman of
the Board
and Chief
Executive Officer
David 1998 $108,272 $0 $0 -0- $0
Spiegel, 1997 $100,000 $15,000 $0 -0- $0
Chief 1996 $90,000 $15,000 $0 5,000 $0
Financial Officer
Franc 1998 $125,000 $0 $0 35,000 $0
Ferola, 1997 $ 85,542 $25,000 $0 10,000 (2) $0
Vice 1996 $ 77,765 $0 $0 10,000 $0
President/
Operations
Sam Lazar, 1998 $141,259 $0 $0 -0- $0
President, 1997 $134,456 $0 $0 -0- $0
Scientific 1996 $130,800 $21,976 $0 -0- $0
Research
Products, Inc.
of Delaware
Lucille 1998 $125,000 $0 $0 -0- $0
Murphy 1997 $79,310 $25,000 $0 -0- $0
President/ 1996 $72,100 $15,000 $0 7,500 $0
Old 97 Company
John 1998 $92,400 $20,130 $0 -0- $0
Incitti 1997 $85,891 $18,310 $0 -0- $0
President/
Williamsport B&B
Peter 1998 $125,000 $0 $0 35,000 $0
Ferola, Vice 1997 $ 85,542 $25,000 $0 10,000 (2) $0
President/ 1996 $ 77,765 $0 $0 10,000 $0
Administration
Gerald L. 1998 $95,963 $0 $0 -0- (3) $0
Kotch
President/
Trevor Sorbie
of America (3)
(1) Includes the grant of options covering an aggregate of
79,195 shares of Common Stock, whose exercise is contingent on
certain increases in the Company's Common Stock trading price.
See - "Employment and Termination Arrangements."
(2) Reflects options granted pursuant to employment
agreements.
(3) Employed by the Company for less than one year.
Stock Option Grants in the Last Fiscal Year
The following table sets forth certain information concerning
stock options granted to the Chief Executive Officer and those
other Named Executives who received stock options in fiscal year
1998.
Potential Realizable
Value At Assumed Annual
Number of Percentage of Rates of Stock Appreciation
Securities Total Options for Option Term (1)
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted (#) Fiscal Year(%) Share($) Date 5% 10%
Frank F. 50,000 45% 13.31 1/01/2008 $1,084,000 $1,726,000
Ferola 30,000 13.69 1/28/2003 524,100 661,500
Peter 10,000 20% 13.31 1/01/2008 216,800 345,200
Ferola 25,000 13.69 1/28/2003 436,750 551,250
Lucille
Murphy 15,000 8% 13.69 1/28/2003 262,050 330,750
Thomas M.
D'Ambrosio 10,000 6% 13.69 1/28/2003 174,700 220,500
Franc 10,000 20% 13.31 1/01/2008 216,800 345,200
Ferola 25,000 13.69 1/28/2003 436,750 551,250
(1) Potential realizable value is based on the assumption that
the Common Stock appreciates at the annual rates shown
(compounded annually) from the date of grant until the expiration
of the option term. These numbers are calculated based on the
requirements promulgated by the Securities and Exchange
Commission and do not reflect any estimate or prediction by the
Company of future Common Stock price increases.
Options Exercised in Last Fiscal Year and Year-End Option Values
The following table sets forth certain information at
December 31, 1998, respecting exercisable and non-exercisable
stock options held by the Chief Executive Officer and the other
Named Executives. The Chief Executive Officer and other Named
Executives did not exercise any stock options in fiscal year
1998. The table also includes the value of the "in-the-money"
unexercised stock options which reflects the spread between the
exercise price of the existing stock options and the year-end
price of the Common Stock.
Value of
Number of Unexercised In-the-
Unexercised Options Money Options at
Held at December 31, 1998 at December 31, 1998(1)
Non- Non-
Name Exercisable Exercisable Exercisable Exercisable
Frank F.
Ferola 50,000 159,195 (2) $0 $0
Peter
Ferola 50,000 30,000 $0 $0
David A.
Spiegel 9,000 $0
Thomas
D'Ambrosio 10,000 $0
Franc
Ferola 50,000 30,000 $0 $0
Lucille
Murphy 22,500 15,000 $0 $0
(1)Based on the closing price of the Common Stock on
December 31, 1998 ($10.25)
(2)Includes options covering 79,195 shares of Common Stock
whose exercise is contingent on certain increases in the trading
price of the Company's Common Stock, and includes options for
80,000 shares of Common Stock which did not vest until January
1999. See - "Employment and Termination Arrangements."
Employment and Termination Arrangements
In 1996, Mr. Frank Ferola conditionally relinquished
$335,000 (approximately 50%) of the 1995 annual bonus to which he
was otherwise entitled. In consideration thereof, the
Compensation Committee awarded him a five-year option to purchase
70,000 shares of the Company's Common Stock, whose exercise is
contingent on the Company's Common Stock trading for 20
consecutive business days at $19.175, a 30% increase over its
price on the date of grant ($14.75). If this condition were met,
Mr. Ferola would also receive a cash payment of $335,000, as a
result of the increased stock price.
In 1997, Mr. Ferola conditionally relinquished $100,000 of
the 1996 annual bonus to which he was otherwise entitled. In
consideration thereof, the Compensation Committee awarded him a
five-year option to purchase 9,195 shares of the Company's Common
Stock, whose exercise is contingent on the Company's Common Stock
trading for 20 consecutive business days at $14.138, a 30%
increase over its price on the date of grant ($10.875). If this
condition were met, Mr. Ferola would also receive a cash payment
of $100,000, as a result of the increased stock price.
In January 1997, the Company entered into an employment
agreement with Mr. Ferola. The term of the agreement is three
years, expiring in January 2000. Under such agreement, Mr.
Ferola is to receive compensation in the amount of $425,000 per
annum, subject to an annual increase of 10%, and an annual stock
option grant of 50,000 shares of the Company's Common Stock at an
exercise price equal to the fair market value of the Company's
Common Stock on the date of grant. In addition, Mr. Ferola is
entitled to receive an annual performance bonus based on
increases of at least 10% in the Company's earnings per share, as
determined, by comparison to a base year of 1996, by a formula
set forth in the employment agreement.
In the event of a change in control (as defined in the
employment agreement) of the Company, Mr. Ferola is entitled to
receive an amount equal to his base salary for the remaining term
of the contract plus an additional twenty-four months' salary.
In addition, upon such an event, Mr. Ferola will receive from the
Company, by a lump sum payment, an amount equal to the most
recent annual bonus paid multiplied by the sum of the number of
years (including fractions thereof) remaining in the term of his
agreement plus two.
In January 1996, the Company entered into an employment
agreement with Mr. Peter Ferola, effective for three years until
January 1999. Pursuant to such agreement, Peter Ferola received
compensation of $77,765 per annum subject to an annual increase
of 10% and an annual stock option grant of 10,000 shares of the
Company's Common Stock at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant.
In addition, Peter Ferola was entitled to receive an annual
performance bonus based on increases of at least 10% in the
Company's earnings per share calculated by comparison to a base
year of 1995, as determined by a formula set forth in his
employment agreement. In 1998 Peter Ferola unconditionally
relinquished $20,000 of his 1997 annual bonus to which he was
otherwise entitled.
In the event of a change in control (as defined in the
employment agreement) of the Company, Peter Ferola is entitled to
receive an amount equal to his base salary for the remaining term
of the contract plus an additional twelve months' salary. In
addition, upon such an event, Peter Ferola is entitled to receive
from the Company, by a lump sum payment, an amount equal to the
most recent annual bonus paid multiplied by the sum of the number
of years (including fractions thereof) remaining in the term of
his agreement plus one.
In July 1998, the Company entered into an amended employment
agreement with Peter Ferola. Such amendment extended the term of
the agreement to January 2001 and increased Peter Ferola's base
salary to $125,000 per annum. In addition, for the remaining
term of the agreement, Mr. Ferola's performance bonus is to be
calculated using a base year of 1997.
In January 1996, the Company entered into an employment
agreement with Ms. Lucille Murphy, effective for three years
until January 1999. Pursuant to such agreement, Ms. Murphy
received compensation of $72,100 per annum subject to an annual
increase of 10%. Under the terms of the contract, Ms. Murphy was
also entitled to an annual bonus, the amount of which was to be
determined each year by the stock Option and Compensation
Committee.
In the event of a change in control (as defined in the
employment agreement) of the Company, Ms. Murphy is entitled to
receive an amount equal to her base salary for the remaining term
of the contract plus an additional twelve months' salary. In
addition, upon such an event, Ms. Murphy will receive from the
Company, by a lump sum payment, an amount equal to the most
recent annual bonus paid multiplied by the sum of the number of
years (including fractions thereof) remaining in the term of her
agreement plus one.
In July 1998, the Company entered into an amended employment
agreement with Ms. Murphy. Such amendment extended the term of
the agreement to January 2001 and increased Ms. Murphy's base
salary to $125,000 per annum.
In January 1996, the Company entered into an employment
agreement with Mr. Franc Ferola, effective for three years until
January 1999. Pursuant to such agreement, Franc Ferola received
compensation of $77,765 per annum subject to an annual increase
of 10% and an annual stock option grant of 10,000 shares of the
Company's Common Stock at an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant.
In addition, Franc Ferola was entitled to receive an annual
performance bonus based on increases of at least 10% in the
Company's earnings per share, as determined by a formula set
forth in his employment agreement calculated by comparison to a
base year of 1995. In 1998 Franc Ferola unconditionally
relinquished $20,000 of his 1997 annual bonus to which he was
otherwise entitled.
In the event of a change in control (as defined in the
employment agreement) of the Company, Franc Ferola is entitled to
receive an amount equal to his base salary for the remaining term
of the contract plus an additional twelve months' salary. In
addition, upon such an event, Franc Ferola is entitled to receive
from the Company, by a lump sum payment, an amount equal to the
most recent annual bonus paid multiplied by the sum of the number
of years (including fractions thereof) remaining in the term of
his agreement plus one.
In July 1998, the Company entered into an amended employment
agreement with Franc Ferola. Such amendment extended the term of
the agreement to January 2001 and increased Franc Ferola's base
salary to $125,000 per annum. In addition, for the remaining
term of the agreement, Franc Ferola's performance bonus is to be
calculated using a base year of 1997.
In July 1998, the Company entered into a two-year employment
agreement, commencing on April 1, 1998, with David Spiegel.
Under the terms of the agreement, Mr. Spiegel is entitled to
receive a base salary of $125,000 per annum with annual increases
of 10%. Additionally, in the event of a change of control, Mr.
Spiegel is entitled to receive the lesser of his salary for the
remaining term of his contract or six months' salary paid by a
lump sum. Further, Mr. Spiegel shall receive an amount equal to
the most recent bonus paid to him divided by twelve and
multiplied by the number of months remaining in his contract.
STOCK OPTION AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee of the Board of
Directors (the "Committee") is composed entirely of non-employee
directors. The Committee is responsible for reviewing and
approving policies and programs pursuant to which compensation is
paid or awarded to the Company's executive officers and key
employees and for administration of the Company's 1990 Key
Employee Stock Option Incentive Plan (the "Incentive Plan").
Compensation Strategy
The Company's executive compensation program has been
designed to (i) align executive compensation with shareholder
interests, (ii) attract, retain and motivate a highly competent
executive team, (iii) link compensation to individual and Company
performance and (iv) achieve a balance between incentives for
short-term and long-term results. The Company's executive
compensation package consists of the payment of base salary,
annual bonus, and stock options awarded through participation in
the Incentive Plan. The Committee reviews annually the
compensation to be paid to the Company's executive officers. In
making such review, the Committee evaluates information supplied
by management. The Committee also participates in the
negotiation of employment contracts, including provisions for
salary and bonuses, with the Company's executive officers.
Currently, pursuant to the Company's employment agreements with
its executive officers, each executive officer receives a fixed
annual base salary and certain executive officers, including the
Chief Executive Officer, are entitled to receive a bonus amount
determined by a formula based on the Company's net earnings per
share for each fiscal year during the term of the agreement.
Base Salary
Base salary for executive officers is generally determined
by reference to written employment agreements between the Company
and such executives. The Committee's policy is to negotiate
salaries in relation to industry norms, the principal job duties
and responsibilities undertaken by such executives, individual
performance and other relevant criteria. A base salary
comparison for the Company's Chief Executive Officers was made to
a group of public companies which the Committee believes provides
a meaningful comparison to the Company. Several of these
companies are included in the custom composite of companies in
the Standard & Poor's Midcap Consumer Products Index. See "Stock
Performance Chart" below. The base salary paid to the Company's
Chief Executive Officer for fiscal year 1998 was in the middle of
the range of base salary paid by such companies.
Annual Bonus
Annual bonus for the Chief Executive Officer and two other
Named Executives (Peter Ferola and Franc Ferola) is determined by
reference to specific bonus formulae set forth in written
employment agreements between the Company and such executives.
If the Company's net earnings per share increases by more than
10% compared to the executives' base years (i.e. 1996 for the
Chief Executive Officer and 1997 for the two other Named
Executives), the Chief Executive Officer is entitled to receive
$20,000 and the two other Named Executives are each entitled to
receive $5,000 for each 1% increase in net earnings per share
above the 10% threshold. In addition, the Chief Executive
Officer is entitled to receive a $100,000 bonus and the two other
Named Executives are entitled to each receive a $25,000 bonus for
reaching the 10% increase in net earnings per share. The Chief
Executive Officer is also entitled to receive a $150,000 bonus
payment and the two other Named Executives are entitled to each
receive an additional $25,000 bonus payment upon the Company's
attaining a 15% increase in net earnings per share compared to
the base year. Annual bonus for other executives is at the
discretion of the Committee.
Stock Options
Long-term incentive compensation of executives is granted
through participation in the Incentive Plan. The Incentive Plan
permits the Company to grant stock options to executives at a
price no less than 100% of the fair market value of the Common
Stock on the date of the grant. Notwithstanding contractual
obligations, stock options are granted in the Committee's
discretion to executive officers based upon its perception of the
ability of such executive officers to influence the long-term
growth and profitability of the Company. The Committee believes
that providing a portion of the executive's annual incentive
compensation in the form of stock options encourages the
executive to share with outside shareholders the goals of
increasing the value of the Company's stock and contributing to
the success of the Company.
Committee's Actions for Fiscal Year 1998
In determining the amount and form of executive officer
compensation to be paid or awarded for fiscal year 1998, the
Committee considered the criteria discussed above. After various
informal meetings on this criteria, the Committee also voted, at
the recommendation of the Chief Executive Officer, to amend the
employment agreements for Peter Ferola, Lucille Murphy and Franc
Ferola, as described in the "Employment and Termination
Arrangement" section of this proxy statement. In addition, the
Committee approved a new employment agreement with David Spiegel,
the details of which are also contained in such section as well
as granted stock options to certain Named Executives as contained
herein.
The Chief Executive Officer Compensation
The Committee approved an employment agreement in 1997 for
Mr. Frank F. Ferola. In approving such agreement, the Committee
authorized a base annual salary of $425,000, an annual 10%
increase in such salary, and an annual grant of options to
purchase 50,000 shares of the Common Stock at an exercise price
equal to the fair market value of the Common Stock on the date of
grant for Mr. Ferola. Based on the earnings formula described
above, Mr. Ferola was not entitled to receive a bonus in fiscal
1998. In January 1998 the Chief Executive Officer was granted an
option to purchase an additional 30,000 shares of Common Stock
pursuant to the Company's 1990 Key Employee Stock Incentive Plan.
Section 162(m) Compliance
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") generally disallows a tax deduction to a
public company for compensation over $1 million annually paid to
its chief executive officer and four other most highly
compensated executive officers. Qualifying performance based
compensation will not be subject to the deduction limitation if
certain requirements are met. The Committee's current policy is
to structure the performance-based portion of the compensation of
the Company's executive officers (currently consisting of stock
option grants and cash bonuses) in a manner that complies with
Section 162(m) of the Code whenever possible and appropriate, in
the judgment of the Committee.
Members of the Stock Option and Compensation Committee:
Shouky Shaheen, Chairman
John DePinto
Leonard Genovese
Compensation Committee Interlocks and Insider Participation
The Compensation Committee conducted deliberations through
various informal meetings concerning executive compensation
during the last completed fiscal year. None of the Compensation
Committee members are or ever were officers or employees of the
Company. During the last fiscal year, none of the executive
officers of the Company has served on the board of directors or
on the compensation committee of any other entity, any of whose
executive officers served on the Board of Directors of the
Company.
Section 16(a) Beneficial Ownership Reporting Compliance
As a public company, the Company's directors, executive
officers and more than 10% beneficial owners are subject to
reporting requirements under Section 16(a) of the Securities and
Exchange Act of 1934, as amended. None of the Company's
directors, executive officers or such 10% beneficial owners
delinquently filed, to the Company's knowledge, any reports
required under Section 16(a) of such Act during fiscal year 1998.
STOCK PERFORMANCE CHART
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
The Stephan Co. $100 $63 $77 $64 $67 $52
S&P 500 $100 $101 $139 $171 $229 $294
Custom Composite $100 $71 $81 $85 $101 $101
Index (10 stocks)
The 10 Stock Custom Composite is made up of the companies that
comprised the S&P MidCap Consumer Products Index upon its
termination in July, 1996. The ten stocks are Carter-Wallace,
Church & Dwight, A.T. Cross Co., Enesco Group Inc. (The Stanhome
Inc.), First Brands Corp., Gibson Greetings Lancaster Colony,
National Presto, Perrigo Co., and Tambrands Inc. (thru 2Q97; Co.
acquired).
INDEPENDENT AUDITORS
Pursuant to a recommendation of the Audit Committee, the
Board of Directors has selected and retained the firm of Deloitte
& Touche to act as independent certified public accountants for
the Company for the 1999 fiscal year. Representatives of
Deloitte & Touche are expected to be present at the Meeting, to
have the opportunity to make a statement, if they so desire, and
to be available to respond to appropriate questions.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors
has no knowledge of any business which will be presented for
consideration at the Meeting, other than as described above. If
any other matter or matters are properly brought before the
Meeting or any adjournment(s) thereof, it is the intention of the
persons named in the accompanying form of proxy to vote all
proxies on such matter(s) in accordance with their judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
In accordance with Rules 14a-4(c) and 14a-5(e) promulgated
under the Exchange Act, the Company hereby notifies its
shareholders that it did not receive by May 26, 1999 notice of
any proposed matter to be submitted for stockholder vote at the
Meeting, and therefore any proxies received in respect of the
meeting will be voted in the discretion of the Company's
management on other matters which may properly come before the
Meeting.
The Company further notifies its shareholders that if the
Company does not receive notice by January 20, 2000 of a proposed
matter to be submitted for stockholders vote at the 2000 Annual
Meeting of Stockholders, then any proxies held by members of the
Company's management in respect of such meeting may be voted at
the discretion of such management members on such matter if it
shall properly come before such meeting, without any discussion
of such proposed matter in the proxy statement to be distributed
in respect of such meeting.
Any proposal which is intended to be presented by any stockholder
for action at the 2000 Annual Meeting of Stockholders must be
received in writing by the Secretary of the Company at 1850 West
McNab Road, Fort Lauderdale, Florida 33309, not later than
September 2, 2000, in order for such proposal to be considered
for inclusion in the Company's Proxy Statement and form of proxy
relating to the 2000 Annual Meeting of Stockholders.
By Order of the Board of Directors
Peter Ferola
Secretary
Dated: July 19, 1999
1
20
