SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HIREL HOLDINGS, INC.
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(Name of Registrant as Specified in Its Charter)
HIREL HOLDINGS, INC.
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6j(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(45)
and 0-11
(1) Title of each class of securities to which transaction applies
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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<PAGE>
[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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HIREL HOLDINGS, INC.
650 S.W. 16TH TERRACE
POMPANO BEACH, FL 33069
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 22, 1997
----------------
To the Stockholders of
HIREL HOLDINGS, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders
(the "Annual Meeting") of Hirel Holdings, Inc., a Delaware corporation (the
"Company"), will be held at 10:00 a.m., local time, on Friday, August 22, 1997,
at the Company's principal offices located at Hirel Holdings, Inc., 650 S.W.
16th Terrace, Pompano Beach, FL 33069, for the following purposes:
(1) To elect three members to the Company's Board of Directors to
hold office until the Company's 1998 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified;
(2) To ratify the appointment of Moore Stephens, P.C., independent
certified public accountants, as the Company's auditors; and
(3) To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
All stockholders are cordially invited to attend; however, only
stockholders of record at the close of business on June 25, 1997 are entitled to
vote at the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
VINCENT MONTELIONE
Chairman of the Board
Fort Lauderdale, Florida
July 11, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED RETURN
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. STOCKHOLDERS
WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY
AND VOTE THEIR SHARES IN PERSON.
<PAGE>
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
HIREL HOLDINGS, INC.
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Hirel Holdings, Inc., a Delaware corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.001 per share (the "Common Stock"), for use at the 1997 Annual Meeting of
Stockholders of the Company to be held at 10:00 a.m., local time, on Friday,
August 22, 1997, or at any adjournment(s) or postponement(s) thereof (the
"Annual Meeting"), pursuant to the foregoing Notice of Annual Meeting of
Stockholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to stockholders is July 11, 1997. Stockholders should
review the information provided herein in conjunction with the Company's 1996
Annual Report on Form 10-KSB, which accompanies this Proxy Statement. The
Company's principal executive offices are located at 650 S.W. 16th Terrace,
Pompano Beach, FL 33069, and its telephone number is (954) 942-5390.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any stockholder giving the proxy so desire. Stockholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Stockholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will consider and
vote upon the following matters:
(1) The election of three members to the Company's Board of
Directors to serve until the Company's 1998 Annual Meeting of
Stockholders or until their successors are duly elected and
qualified;
(2) To ratify the appointment of Moore Stephens, P.C., independent
certified public accountants, as the Company's auditors; and
(3) Such other business as may properly come before the Annual
Meeting, including any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) FOR the election of the three
<PAGE>
nominees for director named below, and (b) FOR the proposal to ratify the
appointment of Moore Stephens, P.C., independent public accountants, as the
Company's auditors. In the event a stockholder specifies a different choice by
means of the enclosed proxy, his shares will be voted in accordance with the
specification so made. The Board of Directors does not know of any other matters
that may be brought before the Annual Meeting nor does it foresee or have reason
to believe that proxy holders will have to vote for substitute or alternate
nominees. In the event that any other matter should come before the Annual
Meeting or any nominee is not available for election, the persons named in the
enclosed proxy will have discretionary authority to vote all proxies not marked
to the contrary with respect to such matters in accordance with their best
judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on June 25, 1997
as the record date (the "Record Date") for determining stockholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 5,208,750 shares of Common Stock issued and outstanding,
all of which are entitled to be voted at the Annual Meeting. Each share of
Common Stock is entitled to one vote on each matter submitted to stockholders
for approval at the Annual Meeting. Stockholders do not have the right to
cumulate their votes for directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. If less than a majority of outstanding shares entitled to
vote are represented at the Annual Meeting, a majority of the shares so
represented may adjourn the Annual Meeting to another date, time or place, and
notice need not be given of the new date, time or place if the new date, time or
place is announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof.
Pursuant to Delaware law, abstentions and broker non-votes are counted
as present for purposes of determining the presence of a quorum. However,
abstentions are treated as present and entitled to vote and will be counted as
votes cast at the Annual Meeting, but will not be counted as votes cast for or
against any given matter. A broker non-vote on a matter is considered not
entitled to vote on that matter and thus is not counted in determining whether a
matter requiring approval of a majority of the shares present and entitled to
vote has been approved or whether a plurality of the shares present and entitled
to vote has been voted.
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 650 S.W. 16th Terrace, Pompano Beach, FL
33069, for a period of ten days prior to the Annual Meeting and at the Annual
Meeting itself for examination by any stockholder.
SECURITY OWNERSHIP
The following table sets forth, as of June 25, 1997, the number of
shares of Common Stock which were owned beneficially by (i) each person who is
known by the Company to own beneficially more than 5% of its Common Stock, (ii)
each director, (iii) each executive officer and
2
<PAGE>
(iv) all directors and executive officers as a group. The Company had 5,208,750
shares issued and outstanding as of June 25, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
NAME AND ADDRESS OF COMMON STOCK PERCENT OF
BENEFICIAL OWNER(1) BENEFICIALLY OWNED CLASS
- ------------------- ------------------- ----------
<S> <C> <C>
Vincent Montelione(2) 2,000,000 38.4%
Vincent Montelione, as Trustee(3) 600,000 11.5%
Herbert D. Katz, as Trustee(4) 300,000 5.8%
SCV, Ltd.(5) 100,000 1.9%
Gregory S. Fenech(3) - 0 - --
Vincent P. Fagnani, Jr. - 0 - --
William H. Aden - 0 - --
All directors and officers as a group(2) 2,000,000 38.4%
</TABLE>
(1) Unless otherwise noted, c/o Hirel Holdings, Inc., 650 S.W. 16th Tr.,
Pompano Beach, Florida 33069
(2) Includes (i) 600,000 shares of Common Stock held by Vincent Montelione,
as Trustee, under a Trust Agreement, Vincent Montelione (90%) and
Gregory S. Fenech (10%), as beneficiaries and (ii) 100,000 shares of
Common Stock held by SCV, Ltd., a limited partnership beneficially
owned by Vincent Montelione (90%) and Gregory S. Fenech (10%).
(3) Includes 600,000 shares of Common Stock held by Vincent Montelione, as
Trustee, under a Trust Agreement, Vincent Montelione (90%) and Gregory
S. Fenech (10%), as beneficiaries, which shares are also included in
the amount of shares owned by Vincent Montelione, as reflected herein,
as Vincent Montelione is a beneficial owner of these shares.
(4) Represents shares of Common Stock held by Herbert D. Katz, as Trustee,
under a Letter Agreement dated April 23, 1996, with Katz Investment II,
a Florida general partnership, and Thomas O. Katz, as beneficiary.
(5) Vincent Montelione, president of SCV Holdings, Inc., the general
partner of SCV, Ltd., beneficially owns 90% of and has the sole voting
rights to the 100,000 shares of Common Stock held by SCV, Ltd. which
shares are also included in the number of shares owned by Vincent
Montelione, as reflected herein, as Vincent Montelione is a beneficial
owner of these shares.
ELECTION OF DIRECTORS; NOMINEES
The Company's Bylaws provide that the number of directors shall be
fixed from time to time by resolution of the Board of Directors within the units
specified by the Company's
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Certificate of Incorporation. The Board of Directors has fixed at three the
number of directors that will constitute the Board of Directors for the ensuing
year. Each director elected at the Annual Meeting will serve for a term expiring
at the Company's 1998 Annual Meeting of Stockholders or when his successor has
been duly elected and qualified.
The Company has nominated each of Vincent Montelione, Gregory S. Fenech
and Vincent P. Fagnani, Jr. to be elected as a director at the Annual Meeting.
The Board of Directors has no reason to believe that any nominee will refuse or
be unable to accept election; however, in the event that one or more nominees
are unable to accept election or if any other unforeseen contingencies should
arise, each Proxy that does not direct otherwise will be voted for the remaining
nominees, if any, and for such other persons as may be designated by the Board
of Directors.
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES
The executive officers, directors and significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Vincent Montelione 40 President, Chief Executive Officer, and Chairman
Gregory S. Fenech 42 President of HTI, and Director
Michael S. Duggan 49 President of HMI
Vincent P. Fagnani, Jr. 31 Vice President, Sales and Marketing of HMI, and Director
William H. Aden 50 Vice President and Chief Financial Officer
</TABLE>
VINCENT MONTELIONE has been President, Chief Executive Officer and
Chairman of the Board of the Company since May, 1996. Prior to that time, he
held the same positions with HMI and HTI (including CIS) since August, 1989, and
February, 1992, respectively. Mr. Montelione maintains a business interest in
SCV Holdings, Inc., the general partner of SCV, Ltd. (the general partner of
HTL, predecessor to HTI) as president and director.
GREGORY S. FENECH has been President of HTI since July, 1996 and a
Director of the Company since May, 1996 and has held similar positions with CIS
(predecessor to HTI) since July, 1994. Prior to joining HTI, Mr. Fenech was Vice
President and General Manager for Spectrum Engineering and Technologies, Inc.,
an engineering firm which designs tools and dies, since 1989.
MICHAEL S. DUGGAN has been President of HMI since January, 1997. Prior
thereto, he held various management positions from 1987 through 1996 with
Vanstar Corporation (and its predecessor companies), a publicly traded,
international computer network integrator. Mr. Duggan has a B.S. degree in
business administration from North Texas State University and worked for Xerox
Corporation for 10 years before joining Vanstar Corporation.
4
<PAGE>
VINCENT P. FAGNANI, JR. has been Vice President of Sales and Marketing
of HMI since July, 1991, and a Director of the Company since May, 1996. Prior
thereto, Mr. Fagnani was Assistant Sales Manager of Graham Companies, Miami,
Florida, a 400 single family home community. Mr. Fagnani has a B.S. in economics
and finance from Barry University, Miami Shores, Florida. Mr. Fagnani is the
brother-in-law of Vincent Montelione.
WILLIAM H. ADEN has been Vice President and Chief Financial Officer of
the Company since September, 1996. From June, 1994 to September, 1996, Mr. Aden,
who is a certified public accountant, held the same position with Prime
Management Group, Inc., Boca Raton, Florida, a full service property management
company, and from January, 1993 to May, 1994, served as Chief Operating Officer
of 21st Century Power and Light Corporation, Lantana, Florida, a research and
development company. From January, 1980 to December, 1992, Mr. Aden served as
Chief Financial and Administrative Officer for Gator Culver Company, Lanatan,
Florida, a manufacturer of metal storm drainage piping.
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board of Directors. The Company's directors
hold office until the next annual meeting of stockholders and until their
successors have been duly elected and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has three committees, the Audit Committee, Compensation
Committee and Option Committee. The members of the Audit Committee consist of
Vincent Montelione and Gregory S. Fenech. The principal functions of the Audit
Committee are to recommend the annual appointment of the Company's independent
auditors, to consult and review with the Company's auditors concerning the scope
of the audit and the results of their examination, to review and approve any
material accounting policy changes affecting the Company's operating results and
to review the Company's internal control procedures.
The Compensation Committee, whose members consist of Vincent Montelione
and Vincent P. Fagnani, Jr., reviews and recommends compensation and benefits
for the executives of the Company. The Option Committee has the sole and
exclusive authority to grant stock options to employees and to directors who are
also employees or consultants of the Company, respectively. The only member of
the Option Committee is Vincent Montelione.
During the fiscal year ended December 31, 1996, the Company's Board of
Directors held meetings and took action by unanimous written consent a total of
five (5) times.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the outstanding Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of beneficial ownership on Form
3 and reports of changes in beneficial ownership of Common Stock on Forms 4 or
5. Such persons are required by SEC regulation to furnish the Company with
copies of all such reports they file.
For the year ended December 31, 1996, Mr. Montelione has not filed Form
4 covering certain transactions.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the two fiscal years
ended December 31, 1995 and 1996, the cash and certain other compensation paid
by the Company to Vincent Montelione, the Company's President and Chief
Executive Officer, and the Company's only other executive officer whose
compensation exceeded $100,000 (collectively, the "Named Executive Officers").
No other executive officer had an annual salary and bonus in excess of $100,000
during such years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- OTHER ANNUAL -----------------
SALARY BONUS COMPENSATION OPTIONS/SARS
NAME AND
PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Vincent Montelione
Chairman of the Board 1995 $ 16,200 - (2) -
Chief Executive Officer 1996 $117,900 - (2) -
and President
Gregory S. Fenech 1995 $ 70,000 - (2) -
President of HTI and 1996 $ 75,000 - $60,000 (3)(2) -
Director
</TABLE>
- ----------
(1) Does not include Subchapter S distributions from HMI made to Vincent
Montelione during 1996 and 1995 in the amount of $260,857 and $543,123,
respectively.
(2) Represents certain perquisites, the value of which did not exceed the
lesser of $50,000 or ten percent of the Named Executive Officer's cash
compensation.
(3) Consulting fee paid to Mr. Fenech in 1996.
EMPLOYMENT AGREEMENTS
On May 2, 1996, the Company entered into an Employment Agreement (the
"Agreement") with Vincent Montelione which commenced on July 22, 1996, the
effective date of the Company's initial public offering, and expires on the
fifth anniversary thereof. The annual salary under the Agreement is $150,000
which amount will be increased by 10% each. The term of employment provides for
two three-year renewals at the mutual agreement of the parties. Mr. Montelione
is also eligible to receive an annual bonus equal to 5% of the Company's
consolidated pre-tax earnings in excess of $1,000,000, payable within 30 days
after the determination of such pre-tax earnings. The Agreement also provides
for the issuance of options to purchase up to an aggregate amount of 2,050,000
shares of the Company's Common Stock at $6.00 per share which options shall be
earned as follows: (i) 500,000 options if HMI has earnings before income taxes,
depreciation and amortization ("EBITDA") in excess of $1,000,0000 in any fiscal
year, (ii) an additional 250,000 options if HMI has EBITDA in excess of
$1,500,000 in any fiscal year, (iii) an additional 250,000 options if HMI has
EBITDA of at least $2,000,000 in any fiscal year, (iv)
6
<PAGE>
an additional 250,000 options if HMI has EBITDA of at least $2,500,000 in any
fiscal year, (v) an additional 500,000 options if HMI has EBITDA of at least
$3,000,000 in any fiscal year, and (vi) an additional 300,000 options if HMI has
EBITDA of at least $4,000,000 in any fiscal year. Options issued in any given
year pursuant to the Agreement will be deducted from the aggregate amount
available for issuance pursuant to the Agreement until an aggregate amount not
to exceed 2,050,000 options have been issued.
The Agreement provides, among other things, for participation in an
equitable manner in any profit-sharing or retirement plan for employees or
executives and for participation in other employee benefits applicable to
employees and executive of the Company, except for the 1996 Stock Option Plan.
The Agreement further provides for the use of an automobile and other fringe
benefits commensurate with his duties and responsibilities. The Agreement also
provides for benefits in the event of disability.
Pursuant to the Agreement, employment may be terminated by the Company
with cause or by the executive with or without good reason. Termination by the
Company without cause, or by the executive for good reason, would subject the
Company to liability for liquidated damages in an amount equal to the terminated
executive's current salary and an amount equal to his prior year's bonus
annually, for the remaining term of the Agreement, payable in equal monthly
installments, without any set-off for compensation received from any new
employment. In addition, the terminated executive would be entitled to receive
all options entitled to be earned under the Agreement and continue to
participate in and accrue benefits under all employee benefit plans and to
receive supplemental retirement benefits to replace benefits under any qualified
plan for the remaining term of the Agreement to the extent permitted by law.
OPTIONS GRANTS TABLE
The following table sets forth information concerning the grant of stock
options to the Named Executive Officers during the year ended December 31, 1996.
No stock appreciation rights were granted.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN THE YEAR ENDED DECEMBER 31, 1996
- ---------------------------------------------------------------------------------------
% OF TOTAL OPTIONS
NUMBER OF GRANTED TO EMPLOYEES EXERCISE
OPTIONS IN THE YEAR ENDED PRICE PER EXPIRATION
NAME GRANTED (1) DECEMBER 31, 1996 SHARE (2) DATE
- ------------------- ------------- -------------------- ---------- ----------
<S> <C> <C> <C> <C>
Vincent Montelione -- -- -- --
Gregory S. Fenech 20,000 17.2% $6.00 7/22/2002
</TABLE>
- ------------------------
(1) Total number of options granted during the year ended December 31, 1996
was 116,000, each issued pursuant to the Company's Stock Option Plan
and exercisable at a price of $6.00 per share.
7
<PAGE>
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or pension plans.
CERTAIN TRANSACTIONS
The Company periodically advances funds to its principal stockholder on
a very short term basis. These loans are non interest bearing with no formal
repayment terms. As of December 31, 1996 and 1995, the balance due on these
loans was $21,025 and $ 0, respectively. Subsequent to year end, $17,950 of the
balance due at December 31, 1996 was repaid. The Company also makes advances to
enterprises controlled by its principal stockholder. As of December 31, 1996 and
1995, the balance due from related parties including interest was $362,773 and
$223,104, respectively. The related party loans are due on December 31, 1997,
and bear interest at prime. Interest receivable of $34,063 and $3,264 and
interest income of $30,942 and $3,264 on those loans as of December 31, 1996 and
1995, respectively, is reflected in the financial statements of the Company. The
Company also acquired receivables from related parties in the amount of $162,044
in conjunction with the MPI acquisition.
During the year ended December 31, 1995, HMI had sales of approximately
$2,500,000 to a company in which Vincent Montelione was the sole stockholder.
During the six months ended June 30, 1996 and the year ended December
31, 1995, Vincent Montelione received Subchapter S distributions from HMI of
approximately $260,857 and $543,123, respectively.
During the six months ended June 30, 1996, HTL made distributions of
$123,460 to its general partner, SCV, Ltd., which in turn made a distribution to
Vincent Montelione, a limited partner of SCV, Ltd., in the amount of $80,000.
HMI and HTI sublease from CIS approximately 5,000 square feet of office
space and 11,000 square feet of warehouse space in two adjacent buildings in
North Miami Beach, Florida. While it is believed that the sublease is fair and
reasonable, such lease was not entered into at arms length. CIS leases the
office and warehouse space from an unaffiliated landlord which lease was
determined by arms length negotiations. HMI pays approximately $3,100 per month
for the office and warehouse space it occupies. HTI pays approximately $6,000
per month on the space it occupies. The lease expires in April, 1997.
During the year ended December 31, 1996, HTI paid Fenco Tool & Die,
Ltd., a Florida limited partnership controlled by Vincent Montelione and Gregory
S. Fenech through their ownership of the stock in the corporate general partner,
approximately $160,000 for the machining of certain components of its products.
During the year ended December 31, 1996, HTI paid its president $60,000
in consulting fees.
During the year ended December 31, 1996, the Company paid royalties of
an aggregate $14,935 under a royalty agreement on certain patents covering six
components of its products to SCV, Ltd. and Herbet T. Katz, as Trustee,
principal stockholders of the Company. Under the agreement, royalties are
calculated as a percentage, ranging between 5% and 10%, of net
8
<PAGE>
selling price as defined in the agreement. Royalty payments are due quarterly
under the agreement which runs for 50 years.
Immediately prior to the effective date, substantially all the
operating assets of Hirel Technologies Ltd. ("HTL"), a Florida limited
partnership, the partners of which are SCV, Ltd. (90%) and Herbert D. Katz, as
Trustee (10%), were contributed to Hirel Technologies, Inc. ("HTI"), and
following distribution of such shares in HTI to the partners of HTL, the
outstanding shares of HTI were exchanged for shares of the Company. SCV
Holdings, Inc., Vincent Montelione and Gregory Fenech own 1%, 89.1% and 9.9%,
respectively, of SCV, Ltd. Vincent Montelione and Gregory Fenech, director and
Vice President of the Company, own 90% and 10%, respectively, of SCV Holdings,
Inc. As part of the acquisition of the assets of HTI, the Company has agreed to
issue to the former partners of the predecessor of HTI performance options (the
"HTI Options"), exercisable at $5.25 per share, in the aggregate amount of
3,000,000 options, as follows: (i) 1,000,000 options if HTI has pre-tax earnings
of $1,000,000 in any fiscal year, (ii) an additional 1,000,000 options if HTI
has pre-tax earnings of $2,000,000 in any fiscal year, and (iii) an additional
1,000,000 options if HTI has pre-tax earnings of $3,000,000 in any fiscal year.
In addition, as part of the acquisition of the assets of HTI, the former
partners of HTL entered into a Technology Assignment and Royalty Agreement
("Royalty Agreement") and pursuant thereto will receive an aggregate amount of
the following royalties on the gross revenues of four (4) devices sold by the
Company or HTI (i) Manifold/Throttle Body (5%), (ii) Electronic Control Unit
(10%), (iii) Single Point Metering (7-1/2%), and (iv) Fuel Chiller (condenser)
(7-1/2%). In the event the aggregate amount of the 3,000,000 HTI Options are
issued, Vincent Montelione, as Trustee, will receive 60% thereof, Herbert D.
Katz, as Trustee, will receive 10%, and SCV, Ltd. will receive 30% thereof. In
the event any of the royalties are paid pursuant to the Royalty Agreement, SCV,
Ltd. will receive 90% and Herbert D. Katz, as Trustee, will receive 10%.
RATIFICATION OF APPOINTMENT OF THE COMPANY'S AUDITORS
The appointment of Moore Stephens, P.C. as independent auditors of the
Company for the fiscal year ended December 31, 1997, will be ratified.
Although the Board of Directors of the Company is submitting the
appointment of Moore Stephens, P.C. for stockholder approval, it reserves the
right to change the selection of Moore Stephens, P.C. as auditors, at any time
during the fiscal year, if it deems such change to be in the best interest of
the Company, even after stockholder approval. Representatives of Moore Stephens,
P.C. are not expected to be present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF MOORE STEPHENS, P.C. AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
THE FISCAL YEAR ENDING DECEMBER 31, 1997.
INTEREST OF CERTAIN PERSONS IN
OPPOSITION TO MATTERS TO BE ACTED UPON
The Company is not aware of any substantial interest, direct or
indirect, by securities holdings or otherwise of any officer, director, or
associate of the foregoing persons in any matter to be acted on, as described
herein, other than elections to offices.
OTHER MATTERS
Management is not aware of any other business which may come before the
meeting. However, if additional matters properly come before the meeting,
proxies will be voted at the discretion of the proxy holders.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE
COMPANY'S NEXT ANNUAL MEETING OF STOCKHOLDERS
Stockholder proposals intended to be presented at the Company's 1998
Annual Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the
Securities and Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, must be received by the Company at its executive offices by
March 30, 1998, for inclusion in the Company's proxy statement and form of proxy
relating to such meeting.
AVAILABILITY OF FORM 10-KSB ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996, including related exhibits as filed with the Securities and
Exchange Commission, is available without charge to stockholders upon request to
Vincent Montelione, President, 650 S.W. 16th Terrace, Pompano Beach, FL 33069.
By Order Of The Board of Directors
VINCENT MONTELIONE
Chairman of the Board
Fort Lauderdale, Florida
July 11, 1997
9
<PAGE>
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS
HIREL HOLDINGS, INC.
PROXY -- ANNUAL MEETING OF STOCKHOLDERS -- AUGUST 22, 1997
The undersigned, revoking all previous proxies, hereby appoint(s)
Vincent Montelione as Proxy, with full power of substitution, to represent and
to vote all Common Stock of Hirel Holdings, Inc. owned by the undersigned at the
Annual Meeting of Stockholders to be held in Pompano Beach, Florida on Friday,
August 22, 1997, including any original or subsequent adjournment thereof, with
respect to the proposals set forth in the Notice of Annual Meeting and Proxy
Statement. No business other than matters described below is expected to come
before the meeting, but should any other matter requiring a vote of stockholders
arise, the person named herein will vote thereon in accordance with his best
judgment. All powers may be exercised by said Proxy. Receipt of the Notice of
Annual Meeting and Proxy Statement is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING.
1. ELECTION OF DIRECTORS. Nominees: Vincent Montelione, Gregory S.
Fenech and Vincent P. Fagnani, Jr.
[ ] FOR ALL NOMINEES LISTED (Except as specified
here:______________)
OR
[ ] WITHHOLDING AUTHORITY to vote for all nominees listed
above
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to Ratify the Appointment of Independent Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The shares represented by this proxy will be voted as directed. IF NO
SPECIFIC DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
Dated ____________________, 1997
- ----------------------------- -------------------------------
(Print Name) (Signature)
- ----------------------------- -------------------------------
(Print Name) (Signature)
Where there is more than one owner, each should sign. When signing as an
attorney, administrator, executor, guardian or trustee, please add your full
title as such. If executed by a corporation or partnership, the proxy should be
signed in the corporate or partnership name by a duly authorized officer or
other duly authorized person, indicating such officer's or other person's title.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
