SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Q.E.P. CO., INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
[ ] Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date
<PAGE>
Q.E.P. CO., INC.
1081 Holland Drive
Boca Raton, Florida 33487
June 20, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of Q.E.P. Co., Inc. (the "Company"), which will be held at Embassy Suites, 661
N.W. 53rd Street, Boca Raton, Florida 33487, on July 14, 2000, at 10:00 a.m.,
local time.
The notice of the meeting and proxy statement on the following pages
cover the formal business of the meeting. Please give these proxy materials your
careful attention. It is important that your shares be represented and voted at
the Annual Meeting regardless of the size of your holdings. Accordingly, whether
or not you plan to attend the Annual Meeting, please complete, sign, and return
the accompanying proxy card in the enclosed envelope in order to make sure your
shares will be represented at the Annual Meeting. If you decide to attend the
Annual Meeting and vote in person, you will, of course, have that opportunity.
The continuing interest of the stockholders in the business of the
Company is gratefully acknowledged. We hope many will attend the meeting.
Sincerely,
/s/ Lewis Gould
Lewis Gould
Chairman and Chief Executive Officer
<PAGE>
Q.E.P. CO., INC.
1081 Holland Drive
Boca Raton, Florida 33487
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 14, 2000
The Annual Meeting of Stockholders of Q.E.P. Co., Inc. will be held at
Embassy Suites, 661 N.W. 53rd Street, Boca Raton, Florida 33487, on July 14,
2000 at 10:00 a.m., local time, for the following purposes:
1. To elect seven directors; and
2. To approve an amendment to the Company's Certificate of
Incorporation to increase the number of shares of Common Stock that
the Company is authorized to issue from 10 million to 20 million;
and
3. To ratify the appointment of Grant Thornton LLP as the Company's
independent certified public accountants for fiscal year 2001; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 5, 2000
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting.
Stockholders are requested to vote, date, sign and promptly return the
enclosed proxy in the envelope provided for that purpose, WHETHER OR NOT THEY
INTEND TO BE PRESENT AT THE MEETING.
By Order of the Board of Directors
/s/ Susan J. Gould
Susan J. Gould, Secretary
Boca Raton, Florida
June 20, 2000
<PAGE>
Q.E.P. CO., INC.
1081 Holland Drive
Boca Raton, Florida 33487
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
This proxy statement is first being sent to stockholders on or about
June 20, 2000, in connection with the solicitation of proxies by the Board of
Directors of Q.E.P. Co., Inc. (the "Company"), to be voted at the Annual Meeting
of Stockholders to be held on July 14, 2000, and at any adjournment thereof (the
"Meeting"). The close of business on June 5, 2000, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting. At the close of business on the record date, the Company had
outstanding 2,687,294 shares of $0.001 par value Common Stock ("Common Stock"),
entitled to one vote per share.
Shares represented by duly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting. If
stockholders specify in the proxy a choice with respect to any matter to be
acted upon, the shares represented by such proxies will be voted as specified.
If a proxy card is signed and returned without specifying a vote or an
abstention on any proposal, it will be voted according to the recommendation of
the Board of Directors on that proposal. The Board of Directors recommends a
vote FOR the election of directors, FOR the amendment to the Certificate of
Incorporation and FOR the ratification of the appointment of the independent
certified public accountants. The Board of Directors knows of no other matters
that may be brought before the Meeting. However, if any other matters are
properly presented for action, it is the intention of the named proxies to vote
on them according to their best judgment.
Stockholders who hold their shares through an intermediary must provide
instructions on voting as requested by their bank or broker. A stockholder who
signs and returns a proxy may revoke it at any time before it is voted by taking
one of the following three actions: (i) giving written notice of the revocation
to the Secretary of the Company; (ii) executing and delivering a proxy with a
later date; or (iii) voting in person at the Meeting.
A majority of the outstanding shares of Common Stock, represented in
person or by proxy, constitutes a quorum for the transaction of business at the
Meeting. The affirmative vote of at least a majority of the outstanding shares
of Common Stock entitled to vote at the Meeting is required to approve the
amendment to the Certificate of Incorporation. The affirmative vote of at least
a majority of the votes of the shares of Common Stock present in person or
represented by proxy at the Meeting is required to approve all other matters to
be voted upon at the Meeting. Votes cast by proxy or in person at the Meeting
will be tabulated by one or more inspectors of election appointed at the
Meeting, who will also determine whether a quorum is present for the transaction
of business. Abstentions and broker non-votes will be counted as shares present
in the determination of whether shares of the Company's Common Stock represented
at the Meeting constitute a quorum. With respect to approval of the amendment to
the Certificate of Incorporation, abstentions and broker non-votes will be
treated as votes AGAINST. With respect to all other matters to be voted upon at
the meeting, abstentions will be treated as votes AGAINST and broker non-votes
will not be counted for the purpose of determining whether a proposal has been
approved.
The expense of preparing, printing, and mailing proxy materials to
stockholders of the Company will be borne by the Company. The Company will also
reimburse brokerage houses and other nominees for their expenses in forwarding
proxy material to beneficial owners of the Company's stock.
The executive office of the Company is located at 1081 Holland Drive,
Boca Raton, Florida 33487 and the telephone number is (561) 994-5550.
1
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the Company's Common
Stock beneficially owned on June 5, 2000, by (i) each director and director
nominee, (ii) each executive officer named in the Summary Compensation Table,
(iii) all directors and executive officers of the Company as a group, and (iv)
any person who is known by the Company to be the beneficial owner of more than
five percent of the Common Stock outstanding. Beneficial ownership means sole or
shared voting power or investment power with respect to a security. The Company
has been informed that all shares shown are held of record with sole voting and
investment power, except as otherwise indicated.
Shares Beneficially Owned
Name and Address ----------------------------
of Beneficial Owner(1) Number Percent
---------------------- --------- -------
Lewis Gould(2) 1,326,220 49.9%
Susan J. Gould(3) 401,472 15.1%
Private Management Group
200 Corporate Drive, Suite 2100 223,962 8.4%
Irving, CA 92606
Marc P. Applebaum(4) 17,640 *
Leonard Gould(5) 14,430 *
Mervyn Fogel(6) 11,320 *
87 Cadogan Gardens, Appt. 6
Chelsea, London, England SW3 2RD
Christian Nast(7) 11,980 *
2917 S. Ocean Blvd., PH 1103
Highland Beach, Florida 33487
Emil Vogel(7) 11,980 *
649 Hyslip Avenue
Westfield, New Jersey 07090
Robert Feuerzeig(8) 660 *
33B Southport Lane
Boynton Beach, Florida 33436
David Malizia --- ---
1615 Culbreath Isle Drive
Tampa, Florida 33629
Pierre Simard --- ---
26 Spruce Street
Riverside, CT 06878
All directors and executive officers
as a group (10 persons) 1,411,550 53.1%
------------
* Less than 1%.
(1) Unless otherwise specified, the address of each person in this table is c/o
Q.E.P. Co., Inc., 1081 Holland Drive, Boca Raton, Florida 33487.
2
<PAGE>
(2) Includes 384,152 shares of Common Stock owned by Susan J. Gould. Mr. Gould
has the right to vote such shares until August 2006 pursuant to the terms of
a voting trust agreement. Includes 40,750 shares which may be acquired
within 60 days through the exercise of stock options granted under the
Company's Omnibus Stock Plan of 1996.
(3) Lewis Gould has the right to vote 384,152 of such shares until August 2006
pursuant to the terms of a voting trust agreement and has a right of first
refusal to acquire any shares of Common Stock subject to the voting trust at
a price equal to the then prevailing market price of the Common Stock.
Excludes 2,000 shares of Common Stock gifted by Lewis Gould and Susan J.
Gould to two adult children as to which Lewis Gould and Susan J. Gould
disclaim beneficial ownership. Includes 17,320 shares which may be acquired
within 60 days through the exercise of stock options granted under the
Company's Omnibus Stock Plan of 1996. In May 1998, the Board of Directors
authorized the Company to repurchase from Ms. Gould, from time to time, up
to 1,000 shares of Common Stock per month at a price per share equal to $.50
less than the closing price of the Common Stock on the date of repurchase.
Ms. Gould is not obligated to sell any shares of Common Stock to the
Company. Does not include 30,000 shares which have been redeemed by the
Company, in accordance with a resolution passed by the Board of Directors on
May 9, 2000 allowing the Company to repurchase up to $275,000 of Ms. Gould's
stock at 10% below market.
(4) Includes 15,940 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Omnibus Stock Plan of
1996.
(5) Includes 11,630 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Omnibus Stock Plan of
1996.
(6) Includes 11,320 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Omnibus Stock Plan of
1996.
(7) Includes 11,980 shares which may be acquired by each individual within 60
days through the exercise of stock options granted under the Company's
Omnibus Stock Plan of 1996.
(8) Includes 660 shares which may be acquired within 60 days through the
exercise of stock options granted under the Company's Omnibus Stock Plan of
1996.
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Meeting seven directors are to be elected to hold office until
the 2001 Annual Meeting of Stockholders and until their successors have been
elected and qualified. The seven nominees for election as directors are Robert
Feuerzeig, Leonard Gould, Lewis Gould, David Malizia, Christian Nast, Pierre
Simard and Emil Vogel. Each nominee, except Pierre Simard, is currently a member
of the Board. Information concerning each of the nominees is set forth below.
The persons named in the enclosed proxy card have advised that, unless otherwise
directed on the proxy card, they intend to vote FOR the election of the
nominees, and that should any nominee become unable or unwilling to accept
nomination or election for any reason, votes will be cast for a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe the nominees named will be unable or unwilling to serve if
elected.
<TABLE>
<CAPTION>
Nominees for Director
Nominee Age Position, Principal Occupation, Business Experience and Directorships Director Since
------- --- --------------------------------------------------------------------- --------------
<S> <C> <C> <C>
Lewis Gould 57 Chairman of the Board and Chief Executive Officer of the Company since 1979
1979 (inception).
Emil Vogel 57 President, Tarnow Associates, an executive search firm, since 1982. 1997
Christian Nast 68 Vice Chairman, Rexall Sundown, Inc. ("Rexall") (NASD: RXSD) since 1998
February 1999. Mr. Nast served as Chief Executive Officer of Rexall
from 1997-1999 and has been a Director since 1993. From 1989 to 1995,
he was Executive Vice President, North America at Colgate Palmolive
Company.
Leonard Gould 31 Vice President, Home Center Sales of the Company, since 1998. Management 1999
positions in the Company since 1995. Mr. Gould is the son of Lewis Gould
and Susan Gould.
Robert Feuerzeig 66 Consultant to various companies in the areas of Corporate Development, 1999
mergers and acquisitions and finance since 1993.
David Malizia 33 General partner in FCP Investors, VLP, Florida Capital Partners since 2000
1988.
Pierre Simard 35 Investment banker with Champlain Capital Partners, LB, since 1999.
From 1995 to 1999 he was an investment banker with Lazard Freres and
Co., LLC and from 1993 to 1995 with Donaldson Lufkin and Jenrette, Inc.
</TABLE>
3
<PAGE>
Other Executive Officers
<TABLE>
<CAPTION>
Executive Officer Age Position, Principal Occupation, Business Experience and Directorships
----------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Susan J. Gould 54 Vice President and Corporate Secretary of the Company since 1979 (inception),
responsible for billing, collection, customer service and related functions.
Marc P. Applebaum 44 Senior Vice President, Chief Financial Officer and Treasurer of the Company
since March 1997. Senior Vice President of Finance and Control and Assistant
Treasurer from December 1993 to March 1997 of Pueblo-Xtra International, Inc.,
a food retailer based in Florida and Puerto Rico. Audit partner with the
international accounting firm of Coopers & Lybrand, from 1991 to 1993.
</TABLE>
The Board of Directors and its Committees
During the fiscal year ended February 29, 2000, the Company's Board of
Directors held three meetings. Except as otherwise stated below, each of the
Company's directors attended at least 75% of the total number of Board meetings
and meetings of committees of which he is a member that were held during fiscal
year 2000. Mervyn Fogel attended only one of the three Board meetings held
during fiscal 2000. David Malizia was not a Director of the Company at any time
during fiscal 2000 and as such attended no meetings during fiscal 2000. During
the period of fiscal 2000 that Mr. Feuerzeig served as a director of the
Company, the Board of Directors held one meeting, which he attended.
The Compensation Committee consisted of Christian Nast and Emil Vogel.
The purpose of the Compensation Committee is to recommend to the Board both base
salary levels and bonuses for the Chief Executive Officer and the other officers
of the Company. The Compensation Committee also reviews and makes
recommendations with respect to the Company's existing and proposed compensation
plans, and serves as the committee responsible for administering the Company's
Omnibus Stock Plan of 1996. During fiscal 2000, the Compensation Committee met
once but it did not participate in the determination of the salaries and bonuses
paid to the Company's executive officers other than the Company's Chief
Executive Officer. See "Board Compensation Committee Report on Executive
Compensation."
The Audit Committee consists of Christian Nast, Robert Feuerzeig and
Emil Vogel. The duties of the Audit Committee are to recommend to the Board of
Directors the selection of independent certified public accountants, to meet
with the Company's independent certified public accountants to review the scope
of audit procedures employed by the Company's independent auditors, to review
and approve the audit reports rendered by the Company's independent auditors and
to approve the audit fee charged by the independent auditors. During fiscal
2000, the Audit Committee met twice.
Compensation of Directors
During fiscal 2000, the fee paid to all non-employee Directors was
$2,000 for each meeting of the Board of Directors and $500 for each committee
meeting attended. They are also granted 2,000 options at fair market value.
These amounts were paid to the Directors for three meetings during fiscal 2000.
The Directors also received reimbursement for reasonable travel or other
out-of-pocket expenses incurred in connection with attending such meetings. No
employee of the Company received any additional compensation for his service as
a Director.
4
<PAGE>
Transactions Involving Directors and Executive Officers
During fiscal 2000, the Company engaged Mervyn Fogel, a director who is
not seeking reelection, to provide international sales and marketing consulting
in connection with the Company's international activities. In connection with
these services, he received $19,800 during fiscal 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than ten
percent of the Common Stock of the Company to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission.
Directors, executive officers and ten percent stockholders are required to
furnish the Company with copies of all Section 16(a) reports they file. Based on
its review of the copies of such reports received by it, the Company believes
that during fiscal 2000, its directors, executive officers and ten percent
beneficial owners complied with all applicable filing requirements.
Executive Compensation
The following table presents certain information concerning the
compensation received or accrued for services rendered during the fiscal years
ended February 29, 2000, February 28, 1999, and February 28, 1998 for the
Company's Chief Executive Officer and each other executive officer of the
Company whose total annual salary and bonus exceeded $100,000 in fiscal year
2000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
-------------------------------------- ------------------
Number of
Name and Principal Fiscal Other Annual Securities
Position Year Salary Bonus Compensation Underlying Options
------------------ ------ -------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Lewis Gould 2000 $371,923 $260,346 $18,100(1) 15,000
Chairman and Chief 1999 333,462 206,000 17,267(1) 20,000
Executive Officer 1998 334,138 45,000 23,747(1) 16,000
Susan J. Gould 2000 $121,362 $12,136 $2,500(1) 2,000
Vice President and 1999 120,765 7,500 2,500(1) 1,000
Secretary 1998 118,045 12,500 7,549(1) -0-
Marc P. Applebaum 2000 $187,539 $68,789 $1,879(1) 10,000
Chief Financial Officer 1999 172,529 30,637 1,737(1) 3,000
and Treasurer 1998 144,229 20,000 --- 11,000
</TABLE>
------------
(1) Represents contributions made by the Company under its 401(K) and profit
sharing plans, and in the case of Mr. Gould, an automobile allowance in the
amount of $15,600, $14,764 and $8,728 in 2000, 1999 and 1998, respectively.
5
<PAGE>
Option Grants in Fiscal 2000
The following table sets forth certain information relating to option
grants pursuant to the Company's Omnibus Stock Plan of 1996 in the fiscal year
ended February 29, 2000 to the individuals named in the Summary Compensation
Table above.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Shares Potential Realizable Values at
of Common Stock % of Total Options Exercise Assumed Annual Rates of Stock
Underlying Options Granted to Employees Price Per Expiration Price Appreciation for Option
Name Granted in Fiscal Year Share Date Term (1)
-------------------------------------------------------------------------------------------------------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lewis Gould 15,000 17.5% $8.00 7/16/09 35,550 78,450
Marc P. Applebaum 10,000 11.7% $8.00 7/16/09 23,700 52,300
Susan Gould 2,000 2.3% $8.00 7/16/09 4,740 10,460
</TABLE>
------------
(1) Potential realizable value is based on the assumed growth rates for the
option term. The actual value, if any, an executive may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised; therefore, there is no assurance the value realized by
an executive will be at or near the amounts reflected in this table.
Option Values as of February 29, 2000
The following table sets forth certain information with respect to the
unexercised options to purchase Common Stock granted under the Omnibus Stock
Plan of 1996 to the individuals named in the Summary Compensation Table above.
None of the individuals named in the Summary Compensation Table exercised any
options to purchase Common Stock during the fiscal year ended February 29, 2000.
February 29, 2000 Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Name February 29, 2000 at February 29, 2000 (1)
---- -------------------------------- ------------------------------
Exercisable Nonexercisable Exercisable Nonexercisable
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Lewis Gould 40,750 20,250 $ 8,666 3,959
Susan Gould 17,320 1,680 2,883 168
Marc P. Applebaum 15,940 8,060 15,762 1,108
</TABLE>
------------
(1) Based on the public trading price of the Common Stock of $8.125 on February
29, 2000.
401(K) Plan
Effective March 1, 1995, the Company merged, amended and restated its
prior defined contribution profit sharing plan and its prior 401(k) plan into a
revised plan (the "401(k) Plan") to provide retirement income to employees of
the Company. The prior plans were, and the 401(k) Plan is intended to remain,
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended.
The 401(k) Plan covers all employees who are at least age 21 and have completed
one year of service. It is funded each year by the following contributions: (i)
voluntary pre-tax ("salary reduction") contributions from employees up to a
maximum dollar limit set by law (and increased for cost of living changes), (ii)
discretionary matching contributions by the Company equal to a percentage of the
amount of the employee's salary reduction contribution, which percentage is to
be determined each year by the Company (and may be zero), and (iii) a profit
sharing contribution, the amount of which, if any, is determined by the Company
in its sole discretion. Upon leaving the Company, each participant is 100%
vested with respect to the participant's contributions and is vested based on
years of service with respect to the Company's matching contributions.
Contributions are invested as directed by the participant in investment funds
available under the 401(k) Plan. Full retirement benefits are payable to each
participant in a single cash payment upon the participant's retirement,
termination of employment, death or disability.
6
<PAGE>
Employment Agreement
Effective June 1996, the Company entered into an employment agreement
with Lewis Gould. The agreement provides that Mr. Gould shall devote his full
business time to the Company, may be terminated by the Company for "cause" (as
defined in the agreement) and will receive an annual base salary of $275,000,
subject to adjustment for cost of living increases and other factors. The
agreement provides that Mr. Gould may receive an annual bonus at the discretion
of the Board of Directors and will receive lump sum compensation equal to 2.9
times his annual salary and bonus in the event of a non-negotiated change in
control of the Company. The Company also provides Mr. Gould with an automobile
allowance. The employment agreement extends for a three-year term and is subject
to successive one-year renewals thereafter. Effective June 2000, the Employment
Agreement was extended for one year.
Compensation Committee Interlocks and Insider Participation
During fiscal 2000, the members of the Compensation Committee were
Christian Nast and Emil Vogel, each of whom are non-employee directors of the
Company. Lewis Gould, the Company's Chairman and Chief Executive Officer
participated in deliberations concerning executive compensation (other than the
compensation of the Chief Executive Officer) during the Company's fiscal year
ended February 29, 2000. See "Board Compensation Committee Report on Executive
Compensation."
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the following Board Compensation Committee Report on
Executive Compensation and the Performance Graph shall not be incorporated by
reference into any such filings.
Board Compensation Committee Report On Executive Compensation
All executive officer compensation for fiscal 2000 (other than the
compensation of the Chief Executive Officer) was established by Lewis Gould, the
Company's Chairman of the Board and Chief Executive Officer. In determining
executive officer compensation, Mr. Gould took into consideration all factors he
deemed relevant, including business conditions in general and in the Company's
line of business, the Company's performance, and the performance of the specific
executive officer under consideration. While the Board of Directors was advised
of Mr. Gould's determinations and Mr. Gould acted after receiving the advice and
recommendations of other executive officers, his decisions were not brought to
the Board of Directors or the Compensation Committee for formal action. In
addition to salaries and retirement plan contributions, the compensation program
for executive officers in fiscal 2000 also included awards of stock options
under the Company's Omnibus Stock Plan of 1996 and bonuses. The awards granted
to executive officers during fiscal 2000 under this plan and bonuses were
approved by the Compensation Committee and the Board of Directors. The Board of
Directors believes that stock options provide additional incentive to executive
officers to continue in the service of the Company and align the interests of
executive officers with those of the Company's stockholders.
The compensation for Mr. Gould is governed by the terms of an
employment agreement entered into in June 1996. In July of 1999, Mr. Gould
received an increase in annual base salary from $360,000 to $380,000. The
agreement provides that Mr. Gould may receive, as discretionary, an annual
bonus. During fiscal 2000, the Compensation Committee awarded Mr. Gould a bonus
of $260,346. In determining the bonus and the adjustment in base salary to be
paid to Mr. Gould, the Compensation Committee took into consideration a number
of factors, including the growth in the Company's net sales and net profit in
fiscal 2000, the acquisitions completed during fiscal 2000, the expansion of the
Company's customer base and overall performance of the Company, much of which
was attributable to Mr. Gould's efforts. In addition, during fiscal 2000, the
Compensation Committee awarded Mr. Gould options to purchase 15,000 shares of
Common Stock under the Omnibus Stock Plan of 1996.
As described in this report, Lewis Gould, individually, and the other
members of the Compensation Committee determined portions of executive officer
compensation for fiscal 2000, respectively. Accordingly, this report is provided
by each member of the Compensation Committee who participated in determining
2000 executive officer compensation, and who currently serves as a member of the
Company's Board of Directors.
Lewis Gould
Emil Vogel
Christian Nast
7
<PAGE>
PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns for
the Company's Common Stock as compared with the cumulative total return for the
NASDAQ Stock Market (U.S.) Index and the Russell 2000 Index. The Securities and
Exchange Commission rules provide that the Company may compare its returns to
those of issuers with similar market capitalization if the Company does not use
a published industry or line-of-business index as a comparison and does not
believe it can reasonably identify a peer group. After reasonable inquiry, the
Company determined that no existing published industry or line-of-business
indexes were applicable to the Company's business. In addition, the Company was
unable to identify a peer group of publicly traded companies to which it
believed a reasonable and meaningful comparison could be made. Therefore, the
Company determined to compare its returns to those of the Russell 2000 Index, an
index which the Company believes includes companies with market capitalizations
similar to its own. The graph assumes that $100 was invested in the Company's
Common Stock on September 18, 1996 (the date the Company's Common Stock
commenced trading on the NASDAQ National Market System) and in each of the
indexes on August 31, 1996, and that all dividends were reinvested.
<TABLE>
<CAPTION>
=================================================================================================================
8-31-96 9-18-96 2-28-97 2-28-98 2-28-99 2-29-00
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Q.E.P. Co., Inc. $100 $ 94 $ 99 $100 $ 96
-----------------------------------------------------------------------------------------------------------------
NASDAQ Stock Market (U.S.) $100 $100 $108 $148 $192 $391
-----------------------------------------------------------------------------------------------------------------
Russell 2000 $100 $100 $114 $152 $125 $139
=================================================================================================================
</TABLE>
The Company cautions that the stock price performance shown in the
graph above should not be considered indicative of potential future stock price
performance.
8
<PAGE>
PROPOSAL 2 -AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
10 MILLION TO 20 MILLION
The Board of Directors proposes to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
10,000,000 shares to 20,000,000 shares.
If the proposed amendment is approved the first paragraph of Article
FOURTH of the Certificate of Incorporation would be revised to read as follows:
"FOURTH: Authorized Shares.
A. The aggregate number of shares which the Corporation shall have the
authority to issue is 22,500,000 million; of which 2,500,000 shares of the par
value of $1.00 shall be designated Preferred Stock and 20,000,000 shares of the
par value of $.001 shall be designated Common Stock."
Of the 10,000,000 shares of Common Stock currently authorized for
issuance, 2,687,294 shares were outstanding as of June 5, 2000, 320,000 are
reserved for issuance under warrants granted and 400,000 shares are reserved for
issuance under the Company's existing stock option plans. Based upon the
foregoing number of outstanding and reserved shares of Common Stock, the Company
currently has approximately 6,592,706 shares of Common Stack available for other
purposes.
Purpose and Effect of the Proposed Amendment
The Board of Directors believes that the availability of additional
authorized but unissued shares will provide the Company with the flexibility to
issue Common Stock for a variety of corporate purposes, including, without
limitation, to effect future stock splits and stock dividends, to make
acquisitions through the use of stock, to raise equity capital, to adopt
additional employee benefit plans or to reserve additional shares for issuance
under such plans and under plans of acquired companies.
On June 6, 2000 the Board of Directors authorized a split of the
Company's Common Stock. The stock split will be effected as a dividend of .25
additional shares of Common Stock for each share of Common Stock issued, so that
the resulting post-dividend number of shares held by each stockholder will be
1.25 times the pre-split number of shares. The dividend will be paid on August
1, 2000 to the Company's stockholders of record on July 17, 2000. The Company
has sufficient authorized capital to issue the stock dividend, therefore,
approval of the proposed amendment to the Company's Certificate of Incorporation
is not necessary for the Company to undertake the stock split. The dividend was
declared in order to increase the Company's public float, which the Company
believes may facilitate increased trading activity in the Common Stock and
thereby provide greater liquidity for stockholders. There can be no assurance,
however, that the dividend will have this effect. Numerous factors, including
the extent of future demand for the Common Stock, could cause the dividend to
not have this effect.
If the proposed amendment is approved, the additional authorized
shares, when and if properly issued, would have the same voting and other rights
as the presently issued and outstanding shares of Common Stock.
Under the Company's Certificate of Incorporation, the Company's
stockholders do not have preemptive rights with respect to Common Stock. Thus,
should the Board of Directors elect to issue additional shares of Common Stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board of Directors elects to issue additional shares
of Common Stock, such issuance could have a dilutive effect on the earnings per
share, voting power and holdings of current stockholders.
The proposed amendment to increase the authorized number of shares of
Common Stock could, under certain circumstances, have an anti-takeover effect,
although this is not the intention of the proposal. For example, in the event of
a hostile attempt to take over control of the Company, it may be possible for
the Company to endeavor to impede the attempt by issuing shares of Common Stock,
thereby diluting the voting power of the other outstanding shares and increasing
the potential cost to acquire control of the Company. The amendment therefore
9
<PAGE>
may have the effect of discouraging unsolicited takeover attempts, thereby
potentially limiting the opportunity for the Company's stockholders to dispose
of their shares at the higher price generally available in takeover attempts or
that may be available under a merger proposal. The proposed amendment may have
the effect of permitting the Company's current management, including the current
Board of Directors, to retain its position, and place it in a better position to
resist changes that stockholders may wish to make if they are dissatisfied with
the conduct of the Company's business. However, the Board of Directors is not
aware of any attempt to take control of the Company, and the Board of Directors
has not presented this proposal with the intent that it be utilized as a type of
anti-takeover device.
If the proposed amendment is adopted, it will become effective upon
filing of a Certificate of Amendment to the Company's Certificate of
Incorporation with the Delaware Secretary of State. However, if the Company's
stockholders approve the proposed amendment to the Company's Certificate of
Amendment, the Board retains discretion under Delaware law not to implement the
proposed amendment. If the Board of Directors exercised such discretion, the
number of authorized shares of Common Stock would remain at current levels.
The Board of Directors recommends a vote for the amendment to the
Certificate of Incorporation, increasing the number of authorized shares of
Common Stock from 10,000,000 shares to 20,000,000 shares.
PROPOSAL 3 - RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed Grant Thornton LLP,
Miami, Florida, as independent accountants to audit the consolidated financial
statements of the Company for the year ending February 28, 2001. Representatives
of Grant Thornton LLP are expected to be present at the Annual Meeting of
Stockholders with the opportunity to make a statement if they desire to do so
and to respond to appropriate questions posed by stockholders. The Company has
not had any changes in or disagreements with its independent accountants on
accounting or financial disclosure issues. If the stockholders do not ratify the
appointment of Grant Thornton LLP, the Company will select other independent
accountants. The Board of Directors recommends a vote FOR the ratification of
the appointment of Grant Thornton LLP as the Company's independent certified
public accountants for the year ending February 28, 2001.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended for presentation at the 2001 Annual
Meeting of Stockholders must be received by the Company on or before February
25, 2001 in order to be included in the Company's proxy statement and form of
proxy for that meeting.
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before
the Meeting. However, if any other matters properly come before the Meeting, it
is the intention of the persons named in the enclosed form of proxy to vote said
proxy in accordance with their judgment in such matters.
10
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Q.E.P. CO., INC.
1081 Holland Drive
Boca Raton, Florida 33487
PROXY
This Proxy Is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Lewis Gould and Marc P. Applebaum, or either of
them, as Proxies, each with the power to appoint his substitute, and hereby
authorizes them or their substitutes to represent and to vote, as designated
below, all the shares of stock of Q.E.P. Co., Inc. held of record by the
undersigned on June 5, 2000, at the annual meeting of stockholders to be held on
July 14, 2000 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below)
ROBERT FEUERZEIG LEONARD GOULD LEWIS GOULD DAVID MALIZIA
CHRISTIAN NAST PIERRE SIMARD EMIL VOGEL
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION INCREASING THE NUMBER OF SHARES OF COMMON STOCK, THAT THE
COMPANY IS AUTHORIZED TO ISSUE, FROM 10 MILLION SHARES TO 20 MILLION
SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued on reverse side)
<PAGE>
(Continued from other side)
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1, 2 AND 3.
DATED:____________________________, 2000
________________________________________
Signature
________________________________________
Signature if held jointly
Please sign exactly as name appears on
this proxy. When shares are held by
joint tenants, both should sign. When
signing as attorney, as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
