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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Rule 14a-6(e)(2))
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Central Garden & Pet Company
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(Name of Registrant as Specified In Its Charter)
N/A
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Notes:
CENTRAL GARDEN & PET COMPANY
3697 Mt. Diablo Boulevard
Lafayette, California 94549
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Monday, February 22, 1999, 10:30 A.M.
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of Central
Garden & Pet Company will be held at the LAFAYETTE PARK HOTEL, 3287 Mt. Diablo
Boulevard, Lafayette, California, on Monday, February 22, 1999, at 10:30 A.M.
for the following purposes:
(1) To elect five directors.
(2) To approve the amendment of the 1993 Omnibus Equity Incentive Plan
to increase the number of shares authorized for issuance thereunder
by 800,000.
(3) To transact such other business as may properly come before the
meeting.
Only stockholders of record on the books of the Company as of 5:00 P.M.,
January 4, 1999, will be entitled to vote at the meeting and any adjournment
thereof.
Dated: January 20, 1999
By Order of the Board of Directors
Robert B. Jones, Secretary
STOCKHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE.
CENTRAL GARDEN & PET COMPANY
3697 Mt. Diablo Boulevard
Lafayette, California 94549
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Central Garden
& Pet Company (the "Company") to be used at the Annual Meeting of Stockholders
on February 22, 1999, for the purposes set forth in the foregoing notice. This
proxy statement and the enclosed form of proxy were first sent to stockholders
on or about January 28, 1999.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted as recommended by
the Board of Directors. Any stockholder signing a proxy in the form
accompanying this Proxy Statement has the power to revoke it prior to or at
the Annual Meeting. A proxy may be revoked by a writing delivered to the
Secretary of the Company stating that the proxy is revoked, by a subsequent
proxy signed by the person who signed the earlier proxy, or by attendance at
the Annual Meeting and voting in person.
VOTING SECURITIES
Only stockholders of record on the books of the Company as of 5:00 P.M.,
January 4, 1999, will be entitled to vote at the Annual Meeting.
As of the close of business on January 4, 1999, there were outstanding
26,712,967 shares of Common Stock of the Company, entitled to one vote per
share, and 1,660,919 shares of Class B Stock of the Company, entitled to the
lesser of ten votes per share or 49% of the total votes cast. Holders of
Common Stock and Class B Stock will vote together on all matters presented to
the stockholders for their vote or approval at the meeting, including the
election of directors. The holders of a majority of the outstanding shares of
the stock of the Company, present in person or by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting or any
adjournment thereof.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether
or not a quorum is present. The election inspectors will treat abstentions and
broker non-votes as shares that are present and entitled to vote for purposes
of determining the presence of a quorum but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. With regard to the election of directors, votes may be cast "For" or
"Withhold Authority" for each nominee; votes that are withheld will be
excluded entirely from the vote and will have no effect. The proposal to amend
the Company's 1993 Omnibus Equity Incentive Plan requires the affirmative vote
of a majority of shares present in person or by proxy and entitled to vote.
Accordingly, abstentions on the proposal to amend the 1993 Omnibus Equity
Incentive Plan will have the effect of a negative vote on this item. If a
broker indicates on the proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Therefore, a broker non-vote will have no effect on the proposal to amend the
1993 Omnibus Equity Incentive Plan, which requires the affirmative vote of a
majority of the shares represented at the Annual Meeting and entitled to vote
thereon.
ELECTION OF DIRECTORS
The persons named below are nominees for director to serve until the next
Annual Meeting of Stockholders and until their successors shall have been
elected. The nominees constitute the present Board of Directors. In the
absence of instructions to the contrary, shares represented by the proxy will
be voted and the proxies will vote
for the election of all such nominees to the Board of Directors. If any of
such persons is unable or unwilling to be a candidate for the office of
director at the date of the Annual Meeting, or any adjournment thereof, the
proxies will vote for such substitute nominee as shall be designated by the
proxies. The management has no reason to believe that any of such nominees
will be unable or unwilling to serve if elected a director. Set forth below is
certain information concerning the nominees which is based on data furnished
by them.
Served as
Business Experience During Past Director
Nominees for Director Age Five Years and Other Information Since
--------------------- --- -------------------------------- ---------
William E. Brown............... 57 Chairman of the Board and Chief Executive 1980
Officer since 1980.
Glenn W. Novotny............... 51 President since June 1990. Prior to June 1990
1990, Mr. Novotny was with Weyerhaeuser
Corporation in a variety of capacities.
Lee D. Hines, Jr............... 52 Self-employed consultant since June 1993. 1992
From April 1991 until June 1993, Mr. Hines
was Executive Vice President and Chief
Financial Officer of the Company.
Daniel P. Hogan, Jr............ 70 Self-employed consultant. Prior to his 1993
retirement in 1987, Mr. Hogan was a Vice
President of Chevron Chemical Company and
General Manager of its Ortho Consumer
Products Division.
Brooks M. Pennington III....... 44 Chief Executive Officer of Pennington Seed 1998
Inc., a business which was acquired by the
Company in February 1998, since June 1994.
Prior to June 1994, Mr. Pennington was
Senior Vice President, Legal, Finance and
Administration of Pennington.
In February 1998, the Company acquired Pennington Seed, Inc. ("PSI").
Pursuant to the acquisition agreement, Brooks M. Pennington III was appointed
to the Company's Board of Directors. William E. Brown, the Company's Chairman
and Chief Executive Officer, entered into a voting agreement with the former
stockholders of PSI whereby Mr. Brown agreed to vote his shares of the
Company's stock for the election to the Company's Board of Directors of the
nominee appointed by the former stockholders of PSI. The voting agreement will
terminate on the earlier of (i) February 27, 2002 and (ii) the date the former
stockholders of PSI own of record less than 33% of the shares of the Company's
Common Stock issued to them pursuant to the acquisition agreement.
FURTHER INFORMATION CONCERNING
THE BOARD OF DIRECTORS
Committees of the Board
During fiscal 1998, the Board of Directors held eight meetings and acted by
unanimous written consent on a number of occasions. In 1993, after
consummation of its initial public offering, the Company established an Audit
and Compensation Committee. The Company does not have a Nominating Committee.
The members of the Audit and Compensation Committee are Lee D. Hines, Jr.
and Daniel P. Hogan, Jr.. Among the functions performed by this committee in
its capacity as an Audit Committee are to make recommendations to the Board of
Directors with respect to the engagement or discharge of independent auditors,
to review with the independent auditors the plan and results of the auditing
engagement, to review the Company's internal auditing procedures and system of
internal accounting controls and to make inquiries into matters within the
scope of its functions. Among the functions performed by this committee in its
capacity as a
2
Compensation Committee are to review and make recommendations to the Board of
Directors concerning the compensation of the key management employees of the
Company and to administer the Company's equity incentive plan. The Audit and
Compensation Committee held five meetings during fiscal 1998.
Attendance at Meetings
During fiscal 1998, there were no members of the Board of Directors who
attended fewer than seventy-five percent of the meetings of the Board of
Directors and all committees of the Board on which they served.
Compensation of Directors
During fiscal 1998, Directors who were not employees of the Company were
paid directors fees consisting of $12,000 per year and $1,000 for each Board
meeting attended. Commencing in fiscal 1999, the annual fee will increase to
$20,000. Directors who attend meetings of the Audit and Compensation Committee
receive an additional $1,000 for each meeting not held on the same day as a
Board meeting. In addition, Lee D. Hines, Jr. performed certain consulting
services for the Company during fiscal 1998 for which he received compensation
of $11,000. Under the Non-Employee Director Stock Option Plan, Messrs. Hines
and Hogan will each be granted at the Annual Meeting and at each subsequent
annual meeting options to purchase the number of shares of Common Stock
determined by dividing $25,000 by the fair market value of a share of Common
Stock on the date of the Annual Meeting.
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The compensation paid to the Company's Chief Executive Officer and the only
other executive officers who received compensation in excess of $100,000 for
services in all capacities to the Company and its subsidiaries during fiscal
1996, 1997 and 1998 is set forth below.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
------------------------------- --------------------- All
Other Annual Restricted Securities Other
Compensation Stock Underlying Compen-
Name and Principal Position Year Salary($) Bonus($) ($)(1) Awards($) Options(#) sation($)(2)
- --------------------------- ---- --------- -------- ------------ ---------- ---------- ------------
William E. Brown 1998 400,000 -- -- -- -- --
Chairman and Chief 1997 300,000 -- -- -- 300,000 --
Executive Officer 1996 300,000 -- -- -- 30,000 --
Glenn W. Novotny 1998 347,846 -- -- -- 100,000(3) 2,375
President 1997 267,469 50,000 -- -- 30,000 2,700
1996 257,908 15,000 -- -- 30,000 2,250
Robert B. Jones 1998 173,766 -- -- -- 25,000 2,104
Vice President, Chief 1997 133,204 15,000 -- -- 15,000 2,102
Financial Officer 1996 118,165 -- -- -- 10,000 1,136
Brooks M. Pennington III 1998 300,000 -- -- -- 6,000 --
Chief Executive Officer
of 1997 -- -- -- -- -- --
Pennington Seed Inc. 1996 -- -- -- -- -- --
- --------
(1) While the named executive officers enjoy certain perquisites, for fiscal
years 1996, 1997 and 1998 these did not exceed the lesser of $50,000 or
10% of each officer's salary and bonus.
(2) Represents the matching contribution which the Company made on behalf of
each executive officer to the Company's 401(k) Plan.
(3) For information regarding Mr. Novotny's options, see footnote 1 to the
table titled "Option Grants in Last Fiscal Year."
3
The following table sets forth certain information regarding stock options
granted during fiscal 1998 to the executive officers named in the foregoing
Summary Compensation Table. None of such persons received awards of stock
appreciation rights during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term(3)
-------------------------------------------------- -----------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/Sh)(2) Date 5%($) 10%($)
- ---- ------------- ------------- ----------- ---------- ----------- -----------
William E. Brown........ -- -- -- -- -- --
Glenn W. Novotny........ 100,000 12.2 15.875 01/02/04 539,902 1,224,853
Robert B. Jones......... 25,000 3.1 26.500 01/02/02 142,773 307,466
Brooks M. Pennington
III.................... 6,000 0.7 30.000 05/06/04 61,217 138,881
- --------
(1) In January 1998, the Company granted Mr. Novotny options for 200,000
shares with an exercise price of $26.50 per share and vesting in five
equal annual installments beginning on January 2, 1999. In November 1998,
the Company cancelled Mr. Novotny's options granted in fiscal 1998 and
issued new options for 100,000 shares with an exercise price of $15.875
per share and identical vesting. Mr. Jones' options granted in fiscal 1998
vest in full on January 2, 1999. Mr. Pennington's options granted in
fiscal 1998 vest in full on May 6, 2003. Under the terms of the Company's
Stock Option Plan, the Audit and Compensation Committee retains
discretion, subject to plan limits, to modify the terms of outstanding
options.
(2) All options were granted at fair market value at date of grant.
(3) Realizable values are reported net of the option exercise price. The
dollar amounts under these columns are the result of calculations at the
5% and 10% rates (determined from the price at the date of grant, not the
stock's current market value) set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the Company's stock price. Actual gains, if any,
on stock option exercises are dependent on the future performance of the
common stock as well as the optionholder's continued employment through
the vesting period. The potential realizable value calculation assumes
that the optionholder waits until the end of the option term to exercise
the option.
The following table sets forth certain information with respect to option
exercises during fiscal 1998 and stock options held by each of the Company's
executive officers as of September 26, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End(#) at FY-End($)
Shares ---------------------- --------------------
Acquired Value Exercisable/ Exercisable/
Name on Exercise(#) Realized($) Unexercisable Unexercisable
- ---- -------------- ----------- ---------------------- --------------------
William E. Brown........ -- -- 60,000/270,000 0/0
Glenn W. Novotny........ 9,487 276,309 0/197,000(1) 0/797,188
Robert B. Jones......... 21,000 581,100 0/ 50,000 0/ 27,188
Brooks M. Pennington
III.................... -- -- 0/ 6,000 0/0
- --------
(1) For information regarding Mr. Novotny's options, see footnote 1 to the
table titled "Option Grants in Last Fiscal Year."
4
Employment Agreements
The Company entered into an employment agreement with Brooks M. Pennington
III in February 1998 in connection with the acquisition of Pennington Seed,
Inc. ("PSI"). The agreement provides that Mr. Pennington shall serve as
President and Chief Executive Officer of PSI at an annual salary of $300,000.
The agreement terminates in February 2003, unless terminated earlier for his
dismissal with cause, death or disability.
Compensation Committee Interlocks and Insider Participation
Lee D. Hines, Jr., a member of the Board of Directors and the Audit and
Compensation Committee, performed certain consulting services for the Company
during fiscal 1998 for which he received compensation of $11,000.
Transactions With The Company
The Company leases a warehouse facility and certain related equipment in
Visalia, California from Road 80 Investors, a California general partnership
controlled by William E. Brown. In fiscal 1998, the Company paid approximately
$155,688 to Road 80 Investors under this lease.
Pursuant to the Agreement and Plan of Reorganization between PSI, the
stockholders of PSI, the Company and PS Sub, Inc., a wholly owned subsidiary
of the Company, dated February 17, 1998, as amended on February 27, 1998 (as
amended, the "Merger Agreement"), PSI was merged with and into PS Sub, Inc.
Each issued and outstanding share of PSI was converted into $8,161.08 in cash
and other consideration and 213.2182 shares of the Company's Common Stock.
Brooks M. Pennington III, prior to the merger, was the beneficial owner of
7,830.24 shares of PSI common stock and following the merger became the
beneficial owner of 1,669,552 shares of the Company's Common Stock. In
addition, pursuant to the Merger Agreement, Mr. Pennington was appointed to
the Company's Board of Directors.
Brooks M. Pennington III is a minority shareholder and a director of Bio
Plus, Inc., a company that produces granular peanut hulls. During its fiscal
year ended July 31, 1998, Bio Plus, Inc.'s total revenues were approximately
$2,375,000 of which approximately $1,735,000 were sales to subsidiaries of the
Company.
5
PROPOSAL TO AMEND THE
1993 OMNIBUS EQUITY INCENTIVE PLAN
At the Annual Meeting held in May 1994 the stockholders of the Company
adopted the 1993 Omnibus Equity Incentive Plan (the "Plan") pursuant to which
an aggregate of 900,000 shares of the Company's Common Stock were originally
reserved for issuance to key employees and consultants of the Company and its
subsidiaries. At the Annual Meetings held in May 1995, February 1996 and
February 1998, the stockholders of the Company approved amendments to the Plan
to increase the number of shares authorized for issuance under the Plan by
300,000 shares, 800,000 shares and 2,000,000 shares, respectively. In January
1999, the Board of Directors of the Company conditionally amended the Plan,
subject to stockholder approval at the Annual Meeting, to increase the number
of shares authorized for issuance under the Plan by an additional 800,000
shares.
The reason for this increase is to ensure that a sufficient number of shares
of the Company's Common Stock is available under the Plan for awards to
attract, retain and motivate selected employees with outstanding experience
and ability. As of December 31, 1998, there were 1,460,571 shares remaining
for awards, which would increase to 2,260,571 if the proposal is approved. Set
forth below is a summary of certain of the principal features of the Plan.
General
The Plan provides for the granting of stock options, stock appreciation
rights ("SARs"), restricted stock awards, performance unit awards and
performance share awards (collectively, "Awards") to key employees and
consultants of the Company and its subsidiaries.
Purpose
The purpose of the Plans is to promote the success, and enhance the value,
of the Company by linking the personal interests of participating employees
and consultants to those of the Company's stockholders and by providing such
employees and consultants with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company in its ability
to motivate, attract and retain the services of participating employees and
consultants upon whose judgment, interest and special efforts the Company is
largely dependent for the successful conduct of its operations.
Administration
The Plan is administered by the Audit and Compensation Committee of the
Board of Directors of the Company (the "Committee").
Options
The price of the shares of the Company's Common Stock subject to each option
(the "option price") is set by the Committee but may not be less than 30% of
the fair market value on the date of grant in the case of an option that is
not an incentive stock option (a "nonqualified stock option"), and not less
than 100% of the fair market value in the case of an incentive stock option.
Options granted under the Plan are exercisable at the times and on the terms
established by the Committee, provided that options granted to officers who
are subject to section 16(b) of the Securities and Exchange Act of 1934 (the
"Exchange Act") may not be exercised until six months following the date of
grant. Subject to the forgoing limitation, the Committee may accelerate the
exercisability of any option.
The option price must be paid in full in cash or its equivalent at the time
of exercise. The Committee also may permit payment of the option price by the
tender of previously acquired shares of the Company's stock or such other
legal consideration which the Committee determines to be consistent with the
Plan's purpose and applicable law.
6
Stock Appreciation Rights
The Plan permits the grant of three types of SARs: Affiliated SARs,
Freestanding SARs, Tandem SARs, or any combination thereof. An Affiliated SAR
is an SAR that is granted in connection with a related option and which will
be deemed to automatically be exercised simultaneously with the exercise of
the related option. A Freestanding SAR is an SAR that is granted independently
of any options. A Tandem SAR is an SAR that is granted in connection with a
related option, the exercise of which requires a forfeiture of the right to
purchase a share under the related option (and when a share is purchased under
the option, the SAR is similarly cancelled).
The Committee has complete discretion to determine the number of SARs
granted to any optionee or recipient and the terms and conditions pertaining
to such SARs. However, the grant price must be at least equal to the fair
market value of a share of the Company's Common Stock on the date of grant in
the case of a Freestanding SAR and equal to the option price of the related
option in the case of an Affiliated or Tandem SAR. An SAR that is granted to
an officer who is subject to section 16(b) of the Exchange Act ("Section
16(b)") may not be exercised until at least six months following the date of
grant.
Restricted Stock Awards
The Plan permits the grant of restricted stock awards which are restricted
Common Stock bonuses that vest in accordance with terms established by the
Committee. Restricted Stock granted to an officer subject to Section 16(b) may
not vest prior to six months following the date of its grant. The Committee
may impose restrictions and conditions on the shares, including, without
limitation, restrictions based upon the achievement of specific performance
goals (Company-wide, divisional and/or individual), and/or restrictions under
applicable federal or state securities laws. The Committee may accelerate the
time at which any restrictions lapse, and/or remove any restrictions.
Performance Unit/Share Awards
The Plan permits the grant of performance unit and performance share awards
which are bonuses credited to an account established for the recipient and
payable in cash, Common Stock, or a combination thereof. Each performance unit
has an initial value that is established by the Committee at the time of its
grant. Each performance share has an initial value equal to the fair market
value of a share of the Company's Common Stock on the date of its grant. The
number and/or value of performance unit/shares that will be paid out to
recipients will depend upon the extent to which performance goals established
by the Committee are satisfied. The payment date for performance unit/share
awards granted to officers and directors subject to Section 16(b) may not be
less than six months from the date of grant.
After a performance unit/share award has vested, the recipient will be
entitled to receive a payout of the number of performance unit/shares earned
by the recipient, to be determined as a function of the extent to which the
corresponding performance goals have been achieved. The Committee also may
waive the achievement of any performance goals for such performance
unit/share.
Subject to the applicable award agreement, performance units/shares awarded
to recipients will be forfeited to the Company upon the earlier of the
recipient's termination of employment or the date set forth in the award
agreement.
Nontransferability of Awards
Awards granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
applicable laws of descent and distribution. However, an optionee or recipient
may designate one or more beneficiaries to receive any exercisable or vested
awards following his or her death.
7
New Plan Benefits
Regulations adopted by the Securities and Exchange Commission require
disclosure of benefits to the executive officers of the Company named in the
summary compensation table and to certain other categories of award recipient,
if such benefits are determinable. In addition to the grants of stock options
set forth below, it is likely that substantial additional grants will be made
to such persons and others during the life of the Plan, and it is impossible
to determine the amount and terms of such future grants.
The following table sets forth as of December 31, 1998 (a) the aggregate
number of shares of the Company's Common Stock subject to outstanding awards
granted under the Plan, and (b) the dollar value of such shares based on the
difference between $14.375 per share, the closing price for the shares of
Common Stock on December 31, 1998, and the exercise price at which such stock
options were granted.
Number of Dollar Value of
Name of Individual or Group Shares Granted Shares Granted
--------------------------- -------------- ---------------
William E. Brown, Chairman and Chief
Executive Officer.......................... 330,000 --
Glenn W. Novotny, President and Chief
Operating Officer.......................... 197,000 387,625
Robert B. Jones, Vice President Finance and
Secretary.................................. 90,000 --
Brooks M. Pennington III.................... 46,000 --
All executive officers, as a group.......... 663,000 387,625
All employees who are not executive
officers, as a group....................... 1,374,930 2,525,837
All directors who are not executive
officers, as a group....................... -- --
Required Vote
The affirmative vote of a majority of shares present in person or by proxy
at the Annual Meeting and entitled to vote is required to approve the proposed
amendment to the Plan.
The Board of Directors recommends that the stockholder vote "FOR" the
approval of the amendment to the Plan.
8
REPORT OF THE AUDIT AND COMPENSATION COMMITTEE
To the Board of Directors:
In July 1993, the Company consummated its initial public offering, and in
October 1993, the Board of Directors created the Audit and Compensation
Committee, consisting solely of independent directors.
As members of the Audit and Compensation Committee, it is our duty to
determine the compensation for officers and directors, to administer the
Company's 1993 Omnibus Equity Incentive Plan and to review the Company's
salary, bonus and compensation arrangements generally. In addition, we
evaluate the performance of management and related matters.
As a public company, we utilize three primary tools to assist in
compensating executives. They are base salary, bonus, and stock options.
Together they combine to provide an executive's total compensation package. We
view base salary as a primary indicator of the market value needed to attract
an executive with the skill and expertise to perform the position. We
periodically retain outside assistance to counsel us in determining market
value. We view bonus as a means of rewarding short-term performance which
exceeds established goals and we utilize stock options as a means of linking
our executive's long term benefits to that received by our shareholders.
As indicated in our 1997 proxy statement, we retained the services of a
compensation consulting firm to assist in determining the market value
compensation for the Chief Executive Officer, William E. Brown. Survey data,
coupled with performance based peer group evaluations, were utilized to
determine competitive short and long term awards for Mr. Brown. The data
developed indicated that an increase to Mr. Brown's base salary to $400,000
was warranted. Mr. Brown requested that the Committee not increase his base
pay during fiscal 1997. In fiscal 1998, the Committee increased Mr. Brown's
base salary to $400,000. The Committee also increased the base salary of Mr.
Novotny and Mr. Jones. These actions are reflected in the summary compensation
table.
Following the completion of the 1998 fiscal year, the Committee recommended
to the full Board that it approve a one-time stock option exchange program for
Mr. Brown and Mr. Novotny. The program, which was voluntary, was implemented
as of December 1, 1998. The program allowed participants to exchange two
underwater stock options for one at the then current stock price of $15.875.
The new stock options vest over the same period. Mr. Brown elected not to
participate in the program. Mr. Novotny elected to participate.
The Committee took this action as a means of promoting retention for the
Company's key executives, to provide a share price earnings incentive to
executives, to reduce options outstanding, and to remove the negative
motivational effect of underwater options.
As a matter of policy, the Company believes it is important to retain the
flexibility to maximize the Company's tax deductions. Amendments to Section
162(m) of the Internal Revenue Code have eliminated the deductibility of most
compensation over a million dollars in any given year. The Committee believes
that it is highly unlikely that any officer of the Company will receive
compensation in excess of a million dollars per year in the foreseeable
future. However, subject to the foregoing, it will be the policy of the
Committee to consider the impact, if any, of Section 162(m) on the Company and
to document as necessary specific performance goals in order to seek to
preserve the Company's tax deductions.
We continue to subscribe to the philosophy that the Company's overall
performance and its return to shareholders will be the primary area of
consideration when rewarding the Company's top executives. It is our goal to
ensure that our executives are paid competitively with the market and are
rewarded for performance that benefits the shareholders. In years when the
Company does well, we will reward using the tools described above; in years
when the performance does not meet expectations, the compensation of the top
executives of Central will be reflective of that fact.
Audit and Compensation Committee
Lee D. Hines, Jr.
Daniel P. Hogan, Jr.
9
PERFORMANCE GRAPH
The following graph compares the percentage change in the Company's
cumulative total stockholder return on its Common Stock for the period from
December 26, 1993 to September 26, 1998 with the cumulative total return of
the NASDAQ Composite (U.S.) Index and the Dow Jones Non-Durable Household
Products Index, a peer group index consisting of 30 manufacturers and
distributors of household products.
The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.
12/26/93 12/25/94 9/30/95 9/28/96 9/27/97 9/26/98
-------- -------- ------- ------- ------- -------
Central Garden & Pet
Co..................... 100.00 38.89 54.44 184.44 255.00 160.56
Dow Jones Household
Products............... 100.00 109.76 136.77 174.67 245.37 248.57
Nasdaq Composite (US)... 100.00 97.75 136.60 162.05 222.44 227.37
10
OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table indicates, as to each director, each named executive
officer and each holder known to the Company to be the beneficial owner of
more than five percent of any class of the Company's voting stock, the number
of shares and percentage of the Company's stock beneficially owned as of
December 31, 1998.
Shares Beneficially Owned
as of December 31, 1998
----------------------------------------
Number of Number of
Beneficial Owner Class B Shares Common Shares Percent(1)
---------------- -------------- ------------- ---------
William E. Brown (2)............. 1,606,159 120,000(3) 6.1
Putnam Investments, Inc. (4)..... -- 3,854,526(5) 13.6
Warburg, Pincus Counsellors, Inc.
(6)............................. -- 2,230,400(5) 7.9
The Kaufmann Fund, Inc. (7)...... -- 1,782,200(5) 6.3
Brooks M. Pennington III (8)..... -- 1,669,552 5.9
Alliance Capital Management L.P.
(9)............................. -- 1,544,500(5) 5.4
Glenn W. Novotny................. -- 116,278(10) *
Robert B. Jones.................. -- 27,274(11) *
Lee D. Hines, Jr................. -- 51,000 *
Daniel P. Hogan, Jr.............. -- 6,000 *
All directors and officers as a
group (seven persons)........... 1,606,159 1,990,104(12) 12.6
- --------
(*) Less than 1%.
(1) Represents the number of shares of Class B Stock and Common Stock
beneficially owned by each stockholder as a percentage of the total
number of shares of Class B Stock and Common Stock outstanding.
(2) The address of Mr. Brown is 3697 Mt. Diablo Boulevard, Lafayette,
California 94549. Mr. Brown may be deemed to be a "control person" of the
Company within the meaning of the rules and regulations of the Securities
and Exchange Commission by reason of his stock ownership and positions
with the Company.
(3) Includes 120,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1998.
(4) The address of Putnam Investments, Inc. is One Post Office Square, 12th
Floor, Boston, Massachusetts 02109.
(5) Based on a Schedule 13F filed reflecting beneficial ownership as of
September 30, 1998.
(6) The address of Warburg, Pincus Counsellors, Inc. is 466 Lexington Avenue,
New York, New York 10017.
(7) The address of The Kaufmann Fund, Inc. is 140 East 45th Street, 43rd
Floor, New York, New York 10017.
(8) The address of Mr. Pennington is 1280 Atlanta Highway, Madison, Georgia
30650.
(9) The address of Alliance Capital Management L.P. is 1345 Avenue of the
Americas, New York, New York 10105.
(10) Includes 20,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1998.
(11) Includes 25,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1998.
(12) Includes 165,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of December 31, 1998.
11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
September 27, 1997 to September 26, 1998 all filing requirements applicable to
its officers, directors, and greater than ten-percent beneficial owners were
complied with, except that Glenn W. Novotny filed a Form 5 with respect to the
acquisition of 9,487 shares in March 1998 pursuant to the exercise of stock
options which were not timely reported.
AUDITORS
Deloitte & Touche LLP, independent certified public accountants, serves as
the Company's principal accountants. Representatives of Deloitte & Touche LLP
will be present at the Annual Meeting with the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
OTHER MATTERS
As of the date of this Proxy Statement, there are no other matters which
management intends to present or has reason to believe others will present to
the meeting. If other matters properly come before the meeting, those who act
as proxies will vote in accordance with their judgment.
STOCKHOLDER PROPOSALS
If any stockholder intends to present a proposal for action at the Company's
annual meeting in 2000 and wishes to have such proposal set forth in
management's proxy statement, such stockholder must forward the proposal to
the Company so that it is received on or before September 22, 1999. Proposals
should be addressed to the Company at 3697 Mt. Diablo Boulevard, Lafayette,
California 94549, Attention: Corporate Secretary.
The attached proxy card grants the proxy holders discretionary authority to
vote on any matter raised at the Annual Meeting. If a stockholder intends to
submit a proposal at the Company's annual meeting in 2000, which proposal is
not intended to be included in the Company's proxy statement and form of proxy
relating to that meeting, the stockholder should give appropriate notice no
later than December 6, 1999. If such a stockholder fails to submit the
proposal by such date, the Company will not be required to provide any
information about the nature of the proposal in its proxy statement and the
proxy holders will be allowed to use their discretionary voting authority if
the proposal is raised at the Company's annual meeting in 2000.
COST OF SOLICITATION
All expenses in connection with the solicitation of this proxy, including
the charges of brokerage houses and other custodians, nominees or fiduciaries
for forwarding documents to stockholders, will be paid by the Company.
Dated: January 20, 1999.
By Order of the Board of Directors
Robert B. Jones, Secretary
12
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
CENTRAL GARDEN & PET COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS FEBRUARY 22, 1999
The undersigned hereby appoints William E. Brown, Glenn W. Novotny and Lee D.
Hines, Jr., or any of them, each with power of substitution, as proxies of the
undersigned, to attend the Annual Meeting of Stockholders of CENTRAL GARDEN &
PET COMPANY to be held at the LAFAYETTE PARK HOTEL, 3287 Mt. Diablo Boulevard,
Lafayette, California, on February 22, 1999, at 10:30 A.M., and any adjournment
thereof, and to vote the number of shares the undersigned would be entitled to
vote if personally present on the following:
(Continued, and to be marked, dated and signed, on the reverse side)
(Continued from other side)
This proxy will be voted as directed. In the absence of contrary
directions, this proxy will be voted FOR the election of the directors listed
below and FOR proposal 2.
(1) The election of five Directors.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below) nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
----------------------------------------------------------------
a line through the nominee's name in the list below.)
- ----------------------------------------------------
William E. Brown, Glenn W. Novotny, Brooks M. Pennington III, Lee D. Hines, Jr.
and Daniel P. Hogan, Jr.
(2) To approve the amendment of the 1993 Omnibus Equity Incentive Plan to
increase the number of shares authorized for issuance by 800,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) In their discretion, upon any and all such other matters as may properly
come before the meeting or any adjournment thereof.
Signature(s) Date
The signature should correspond exactly with the
name appearing on the certificate evidencing your
Common Stock. If more than one name appears, all
should sign. Joint owners should each sign
personally.
STOCKHOLDERS ARE URGED TO MARK, DATE, SIGN AND
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RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
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PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
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UNITED STATES.
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