SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _______)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
1810 N.E. 144TH STREET
NORTH MIAMI, FLORIDA 33181
(305) 944-7710
----------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 29, 1998
-----------------------------------------------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
Advanced Electronic Support Products, Inc., a Florida corporation (the
"Company"), will be held on May 29, 1998 at 9:00 a.m., local time, at the
principal executive offices of the Company located at 1810 N.E. 144th Street,
North Miami, Florida 33181 for the following purposes, all of which are set
forth more completely in the accompanying Proxy Statement:
(1) To elect five persons to the Board of Directors to serve until the
next Annual Meeting of Shareholders or until the election and
qualification of their respective successors; and
(2) To transact such other business as may properly come before the
meeting.
Pursuant to the Company's By-laws, the Board of Directors has fixed the
close of business on April 16, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting.
A FORM OF PROXY AND THE ANNUAL REPORT OF THE COMPANY FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997 ARE ENCLOSED. IT IS IMPORTANT THAT PROXIES BE
RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT
THE ANNUAL MEETING, PLEASE SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
Roman Briskin, Corporate Secretary
North Miami, Florida
April 27, 1998
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
1810 N.E. 144TH STREET
NORTH MIAMI, FLORIDA 33181
(305) 944-7710
----------------------------
PROXY STATEMENT
----------------------------
The enclosed proxy is solicited by the Board of Directors (the "Board")
of Advanced Electronic Support Products, Inc., a Florida corporation (the
"Company"), for use at the 1998 Annual Meeting of Shareholders (the "Annual
Meeting") to be held on May 29, 1998 at 9:00 a.m., local time, at the principal
executive offices of the Company located at 1810 N.E. 144th Street, North Miami,
Florida 33181. The approximate date on which this statement and the enclosed
proxy will be sent to shareholders will be April 27, 1998. The form of proxy
provides a space for you to withhold your vote for any proposal. You are urged
to indicate your vote on each matter in the space provided. If signed but no
space is marked, it will be voted by the persons therein named at the meeting:
(i) for the election of five directors to serve until the next Annual Meeting of
Shareholders, or until their successors are elected and qualified; and (ii) in
their discretion, upon such other business as may properly come before the
meeting.
Whether or not you plan to attend the Annual Meeting, please fill in,
sign and return your proxy card to the transfer agent in the enclosed envelope,
which requires no postage if mailed in the United States. The cost of the
Board's proxy solicitation will be borne by the Company. In addition to
solicitation by mail, directors, officers and employees of the Company may
solicit proxies personally and by telephone and telegraph, all without extra
compensation.
At the close of business on April 16, 1998 (the "Record Date"), the
Company had outstanding 2,282,201 shares of $.001 par value common stock
("Common Stock"). Each share of Common Stock outstanding on the Record Date
entitles the holder thereof to one vote on each matter submitted to a vote of
shareholders at the Annual Meeting. Only shareholders of record at the close of
business on the Record Date are entitled to notice of and to vote at the Annual
Meeting. In the event that there are not sufficient votes for approval of any of
the matters to be voted upon at the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies. The quorum
necessary to conduct business at the Annual Meeting consists of a majority of
the outstanding shares of Common Stock.
Two of the Company's directors who collectively own an aggregate of
812,500 shares (35.6%) of the Company's outstanding Common Stock (assuming no
conversion of certain convertible subordinated promissory notes and no exercise
of stock options held by such directors), have advised the Company that they
intend to vote in favor of the proposals to be considered at the meeting.
Shares represented by proxies which are marked "abstain" or which are
marked to deny discretionary authority will only be counted for determining the
presence of a quorum. Votes withheld in connection with the election of one or
more of the nominees for director will not be counted as votes cast for such
individuals. In addition, where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will not
be included in the vote totals.
A list of the shareholders entitled to vote at the Annual Meeting will
be available at the Company's principal executive offices located at 1810 N.E.
144th Street, North Miami, Florida 33181 for a period of ten (10) days prior to
the Annual Meeting for examination by any shareholder.
A SHAREHOLDER WHO SUBMITS A PROXY ON THE ACCOMPANYING FORM HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS USE BY DELIVERING A WRITTEN NOTICE TO THE
CORPORATE SECRETARY OF THE COMPANY, BY EXECUTING A LATER-DATED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON. UNLESS AUTHORITY IS WITHHELD,
PROXIES WHICH ARE PROPERLY EXECUTED WILL BE VOTED FOR THE PURPOSES SET FORTH
THEREON.
1
<PAGE>
BOARD OF DIRECTORS
The Articles of Incorporation and By-laws of the Company provide for
one class of Board of Directors. At the date of this Proxy Statement, the
members of the Board and the length of service as Directors were as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITIONS SINCE
- ---- --- --------- --------
<S> <C> <C> <C>
Slav Stein(1) 53 President, Chief Executive Officer and 1983
Director
Roman Briskin(1) 48 Executive Vice President, Secretary and 1992
Director
William R. Daidone(1)(3) 38 Director 1997
William B. Coldrick(2)(3) 56 Director 1997
L. Phillips Reames(2) 54 Director 1997
</TABLE>
- --------------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
BUSINESS EXPERIENCE
The principal occupations for the past five years of each of the
Directors of the Company are as follows:
Mr. Stein is a founder of the Company and has been employed by the
Company in a senior executive capacity and has been a Director of the Company
since its formation in 1983. Mr. Stein has been the President, Chief Executive
Officer and a Director of the Company since the Company's initial public
offering in February 1997 (the "IPO"). Mr. Stein is also a principal shareholder
of the Company. See "Principal Shareholders" and "Certain Transactions".
Mr. Briskin has been a senior executive officer of the Company since
1984, a Director since 1992 and has served as Vice President, Secretary and a
Director of the Company since the IPO. Mr. Briskin is a principal shareholder of
the Company. See "Principal Shareholders" and "Certain Transactions".
Mr. Daidone has served as a Director of the Company since January 1997.
Mr. Daidone has been Vice President of Sales and Marketing of Fugate and
Associates, Inc./ERS Imaging Supplies, Inc., a private corporation engaged in
the collection and distribution of empty printer cartridges since January 1996.
From 1993 to 1996, Mr. Daidone served as Director of Mass Merchant Operations
with Nashua Corporation, a company engaged in the manufacturing of coated
products. Prior to 1993, Mr. Daidone served as President of Nashua Cartridge
Products, Inc., a company engaged in printer cartridge remanufacturing and a
subsidiary of Nashua Corporation.
2
<PAGE>
Mr. Coldrick has served as a Director of the Company since June 1997.
Mr. Coldrick is also a Director of Focus Enhancements, Inc., a Delaware
corporation, where he has served since 1993. See "Certain Transactions". Since
July 1996, Mr. Coldrick has served as Vice President of Worldwide Channel
Operations of Unisys Corporation.
Mr. Reames has served as a Director of the Company since June 1997. For
the last five years, Mr. Reames has served as Chairman of Argent Securities,
Inc., a full-service investment banking firm headquartered in Atlanta, Georgia.
See "Certain Transactions".
The Board of Directors of the Company held a total of 2 regular
meetings and 10 special meetings during the year ended December 31, 1997. Each
of the Directors attended at least 75 percent of the meetings of the Board of
Directors. The Company did not have standing committees of the Board of
Directors prior to July 1997, and no committee meetings were held by the Board
of Directors during the year ended December 31, 1997.
NOMINEES TO THE BOARD
At the Annual Meeting, five Directors will be elected to serve until
the next Annual Meeting of Shareholders or until their successors are elected
and qualified. The Board has nominated the following persons for election to the
Board: Slav Stein, Roman Briskin, Terrence R. Daidone, William B. Coldrick and
L. Phillips Reames. For information regarding the candidates for election, see
the biographical information set forth above.
The Company will consider director candidates for the next Annual
Meeting recommended by shareholders of the Company. Any shareholder working to
submit a recommendation to the Company with respect to the 1999 Annual Meeting
of Shareholders should send a signed letter of recommendation to Advanced
Electronic Support Products, Inc., 1810 N.E. 144th Street, North Miami, Florida
33181, Attention: Corporate Secretary. To be considered, recommendation letters
must be received prior to March 31, 1999, must state the reasons for the
recommendations and contain the full name and address of each proposed nominee,
as well as a brief biographical history setting forth past and present
directorships, employment and occupations. The recommendation letter must also
include a statement indicating that such nominee has consented to being named in
the proxy statement and to serve if elected.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has the responsibility for establishing broad corporate
policies and for the overall performance of the Company. In July 1997, the Board
established several committees to assist it in carrying out its duties. The
standing committees of the Board are an Executive Committee, an Audit Committee,
and a Compensation Committee.
The Executive Committee is authorized to meet between meetings of the
Board and to exercise the powers of the Board, subject to limitations imposed by
law.
The Audit Committee is responsible for maintaining communications
between the Board and the Company's independent auditors, monitoring performance
of the independent auditors, reviewing audit scope and results, reviewing the
organization and performance of the Company's internal systems of audit and
financial controls, and recommending the retention or, where appropriate, the
replacement of independent auditors.
3
<PAGE>
The Compensation Committee's responsibilities include reviewing and
approving compensation policies and practices for all executive officers and for
fixing the total compensation of the executive officers. The Compensation
Committee also administers the Company's 1996 Stock Option Plan.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are granted options
under the 1996 Stock Option Plan to acquire 12,000 shares of Common Stock when
they are appointed to the Board, at an option exercise price equal to the
closing price of the Common Stock on the date of their appointment to the Board.
Such options vest one-third upon the date of grant, and one-third each upon the
next two anniversary dates. Directors also receive $6,000 per year for service
on the Board of Directors and on committees of the Board of Directors. Directors
who are employees of the Company receive no additional compensation for their
service on the Board of Directors. All Directors are also reimbursed for
expenses incurred in attending Board meetings.
EXECUTIVE OFFICERS
The following list reflects the Company's executive officers, as of the
date of this Proxy Statement, the capacity in which they serve the Company, and
when they took office:
<TABLE>
<CAPTION>
EXECUTIVE
NAME AGE POSITION OFFICER SINCE
- ---- --- -------- -------------
<S> <C> <C> <C>
Slav Stein......................... 53 President and Chief Executive Officer 1983
Roman Briskin...................... 48 Executive Vice President and Secretary 1984
Randall N. Paulfus................. 52 Vice President, Chief Financial Officer and 1997
Treasurer
</TABLE>
BUSINESS EXPERIENCE
SLAV STEIN. See the biographical information contained in "Board of
Directors".
ROMAN BRISKIN. See the biographical information contained in "Board of
Directors".
RANDALL N. PAULFUS joined the Company in May 1997 and since that time
has served as Vice President, Chief Financial Officer and Treasurer of the
Company. Prior to May 1997, Mr. Paulfus served as a consultant with Lissner
Associates, Ltd., a management and financial consulting firm where Mr. Paulfus
consulted with numerous financially distressed companies since June 1992. During
such time, Mr. Paulfus was also a self-employed financial consultant to various
manufacturing and service companies both in the United States and the Middle
East. Prior to June 1992, Mr. Paulfus served as a Controller with Intel
Corporation.
OTHER KEY EMPLOYEES
MARTIN GERBER has served as Vice President of Marketing since joining
the Company in March 1997. Prior to March 1997, Mr. Gerber had served as
President and Chief Executive Officer of Cannon Telephone and Communication
Limited, a company engaged in sales, marketing and business consulting, which he
4
<PAGE>
founded in 1994. Prior thereto Mr. Gerber was a national sales manager for
Gemini Industries, Inc., a manufacturer and distributor of customer electronic
accessories.
TOM COLLENTINE has served as OEM Sales Manager since November 1996.
Prior to November 1996, Mr. Collentine worked for four years with America II
Electronics, Inc., a company engaged in independent distribution of
semi-conductors.
ADRIAN PESCHL has served as Director of Operations since June 1994.
Prior to June 1994, Mr. Peschl served as Engineering Manager for Casi Rusco,
Inc., a company engaged in the manufacturing and distribution of controlled
access systems.
FAMILY RELATIONSHIPS
There are no family relationships between or among any of the directors
and executive officers of the Company.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table shows remuneration paid or accrued by the Company
during the year ended December 31, 1997 and for each of the two preceding years,
to the Chief Executive Officer and to each of the other most highly compensated
executive officers of the Company whose total annual salary and bonus exceeded
$100,000:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------
AWARDS
---------------------
RESTRICTED ALL OTHER
NAME AND SALARY BONUS STOCK OPTION/ COMPEN-
PRINCIPAL POSITION YEAR ($) ($)(1) AWARDS SARS(#) PAYMENTS SATION (2)
------------------ ---- ------ ------ ---------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Slav Stein 1997 $149,723 $62,516 - 360,140(3)(4) 51,300(5)
1996 122,477 - - 100,000 - -
1995 90,000 - - - - -
Roman Briskin 1997 $149,723 $62,516 - 360,140(3)(4) - 51,300(5)
1996 122,477 - - 100,000 - -
1995 90,000 - - - - -
</TABLE>
- ------------------------------------
(1) Accrued but not yet paid. Bonus is based upon a percentage of the
Company's pre-tax net income pursuant to the terms of an employment
agreement between the executive and the Company. See "Employment
Agreements With Named Executive Officers".
(2) Does not include compensation paid to the executive to allow the
executive to pay taxes on the Company's income incurred while the
Company was an S corporation for federal income tax purposes.
(3) In connection with the IPO, in February 1997, Messrs. Stein and Briskin
were each granted options to purchase 180,250 shares of Common Stock,
which options are exercisable at $6.00 per share, subject to the
satisfaction of certain performance contingencies (the "Contingent
Options").
(4) In connection with the IPO, in February 1997, Messrs. Stein and Briskin
were each issued convertible subordinated promissory notes (the
"Principal Shareholders' Notes") from the Company in the amount of
$869,562 to reimburse them for lost tax benefits which would have
otherwise been available to them had the Company not converted for
federal income tax purposes from an S corporation to a C corporation.
The Company used $300,000 of the proceeds from the IPO to make payment
on the Principal Shareholders' Notes, reducing the outstanding balance
due under each Principal Shareholder Note to $719,562.50. This amount
is convertible at the option of the holder, at $4.00 per share over
seven years (into 179,890 shares of Common Stock). See "Certain
Transactions".
(5) Accrued but not yet paid interest on each Principal Shareholder Note.
Messrs. Stein and Briskin also each receive an automobile allowance of
$6,000 per year. See "Employment Agreements with Named Executive
Officers".
6
<PAGE>
OPTION GRANTS DURING LAST FISCAL YEAR
The following table sets forth information concerning options granted
during the fiscal year ended December 31, 1997 to the persons named in the
preceding summary compensation table under the caption "Executive Compensation."
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
(A) (B) (C) (D) (E)
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/ GRANTED TO EXERCISE
SARS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE ($/SH) DATE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Slav Stein 180,250 41.8 6.00 February 19, 2007
Roman Briskin 180,250 41.8 6.00 February 19, 2007
</TABLE>
AGGREGATED OPTIONS EXERCISED DURING LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
The following table also sets forth information concerning the value of
unexercised stock options at the end of the 1997 fiscal year for the persons
named in the preceding summary compensation table under the caption "Executive
Compensation."
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(A) (B) (C) (D) (E)
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END (#) AT FY-END ($)
SHARES ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE*
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Slav Stein 0 0 100,000/180,250 0/0
Roman Briskin 0 0 100,000/180,250 0/0
</TABLE>
- ----------------------
* Computed based upon the difference between the closing price of the
Common Stock at December 31, 1997 and the exercise price. No value has
been assigned to options which are not in the money.
7
<PAGE>
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
On February 19, 1997, Messrs. Stein and Briskin each entered into an
employment agreement with the Company. The term of such employment agreements
(subject to earlier termination for cause) are for an initial period of five
years and will thereafter continue for successive one-year terms unless canceled
by either party. During the term of such employment agreements, Messrs. Stein
and Briskin will each receive a salary of $150,000 per year, which salary will
increase annually by 10 percent of the prior year's salary plus the increase in
the consumer price index, which annual increase may not, in any event, exceed 20
percent of the prior year's salary. In addition, Messrs. Stein and Briskin will
each be entitled to receive an annual bonus equal to five percent of the
Company's pre-tax net income in each fiscal year. The Company provides each of
Messrs. Stein and Briskin with an automobile allowance of $500 per month and a
term life insurance policy in the amount of $1,000,000.
In the event that during the term of such employment agreements there
is a change of control of the Company which has not been approved by the
Company's Board of Directors, Messrs. Stein and Briskin will have the option to
terminate their employment with the Company within three months of the change of
control and receive a lump sum payment of $750,000 each. In such event, all
previously granted stock options would become automatically vested. If the Board
of Directors approves a change of control, Messrs. Stein and Briskin may
terminate their employment, but would only be entitled to receive a payment
equal to the prior year's annual salary and to become automatically vested in a
portion of their stock option equal to their percentage completion of the term
of their employment agreement. For purposes of the employment agreements, a
change in control is defined as an event that: (i) would be required to be
reported in response to Item 6(e) of Schedule 14(a) of Regulation 14A under the
Exchange Act; or (ii) causes a person other than Messrs. Stein and Briskin to
beneficially own more than 30 percent of the Company's outstanding securities.
As part of such employment agreements, each of Messrs. Stein and Briskin will
agree not to compete against the Company for a 12-month period following the
termination of his employment with the Company for any reason other than a
change in control without the approval of the Board of Directors.
STOCK OPTION PLAN
The Company has adopted the 1996 Stock Option Plan (the "1996 Plan").
Pursuant to the 1996 Plan, options to acquire a maximum of 265,000 shares of
Common Stock may be granted to directors, executive officers, employees
(including employees who are directors), independent contractors and consultants
of the Company. To date 106,200 options have been granted under the 1996 Plan,
at exercise prices ranging from $3.50 to $5.88.
The 1996 Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee determines which persons will
receive options and the number of options to be granted to such persons. The
Compensation Committee also interprets the provisions of the 1996 Plan and makes
all other determinations that it may deem necessary or advisable for the
administration of the 1996 Plan.
Pursuant to the 1996 Plan, the Company may grant both ISOs (Incentive
Stock Options) and NQSOs (Non-Qualified Stock Options). The price at which the
Company's Common Stock may be purchased upon the exercise of options granted
under the 1996 Plan are required to be at least equal to the per share fair
market value of the Common Stock on the date particular options are granted.
Options granted under the 1996 Plan may have maximum terms of not more than 10
years and are not transferable, except by will or the laws of descent and
distribution. None of the ISOs under the 1996 Plan may be granted to an
individual owning more than 10 percent of the total combined voting power of all
classes of stock issued by the Company unless the
8
<PAGE>
purchase price of the Common Stock under such option is at least 110 percent of
the fair market value of the shares issuable on exercise of the option
determined as of the date the option is granted, and such option is not
exercisable more than five years after the grant date.
Generally, options granted under the 1996 Plan may remain outstanding
and may be exercised at any time up to three months after the person to whom
such options were granted is no longer employed or retained by the Company or
serving on the Company's Board of Directors.
Pursuant to the 1996 Plan, unless otherwise determined by the
Compensation Committee, one-third of the options granted to an individual are
exercisable upon grant, one-third are exercisable on the first anniversary of
such grant and the final one-third are exercisable on the second anniversary of
such grant. However, options granted under the 1996 Plan shall become
immediately exercisable if the holder of such options is terminated by the
Company or is no longer a director of the Company, as the case may be,
subsequent to certain events which are deemed to be a "change in control" of the
Company. A "change in control" of the Company generally is deemed to occur when
(i) any person becomes the beneficial owner of or acquires voting control with
respect to more than 20 percent of the Common Stock (or 35 percent if such
person is a holder of Common Stock on the effective date of the IPO) (ii) a
change occurs in the composition of a majority of the Company's Board of
Directors during a two-year period, provided that a change with respect to a
member of the Company's Board of Directors shall be deemed not to have occurred
if the appointment of a member of the Company's Board of Directors is approved
by a vote of at least 75 percent of the individuals who constitute the then
existing Board of Directors; or (iii) the Company's shareholders approve the
sale of substantially all of the Company's assets.
ISOs granted under the 1996 Plan are subject to the restriction that
the aggregate fair market value (determined as of the date of grant) of options
which first become exercisable in any calendar year cannot exceed $100,000.
COMPLIANCE WITH SECTION 16(A)
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the Company's fiscal year
ended December 31, 1997 and any Forms 5 and amendments thereto furnished to the
Company with respect to such fiscal year, and any written representations
referred to in subparagraph (b)(2)(i) of Item 405 of Regulation S-B, except as
set forth below, no person who at any time during the fiscal year ended December
31, 1997 was a Director, officer or, to the knowledge of the Company, a
beneficial owner of more than 10% of any class of equity securities of the
Company registered pursuant to Section 12 of the Exchange Act, failed to file on
a timely basis, as disclosed in Forms 3, 4 and 5, reports required by Section
16(a) of the Exchange Act during the fiscal year ended December 31, 1997. L.
Phillips Reames, who became a Director of the Company in May 1997 and was
granted options to purchase 12,000 shares of the Company's Common Stock, has not
to date filed a Form 3 or a Form 5 to reflect his directorship or stock options.
9
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the Record Date, certain
information regarding the Common Stock, owned of record or beneficially by (i)
each person who owns beneficially more than 5% of the outstanding Common Stock;
(ii) each of the Company's directors and named executive officers; and (iii) all
directors and executive officers as a group.
BENEFICIAL OWNERSHIP
OF COMMON STOCK(1)
-------------------------
NAME OF BENEFICIAL OWNER(1) SHARES PERCENT
- --------------------------- ------ -------
Slav Stein(2)(5) 686,140 30.1%
Roman Briskin(2)(5) 686,140 30.1%
Randall N. Paulfus(3) 2,666 *
Terrence R. Daidone(4)(5) 8,000 *
William B. Coldrick(4) 8,000 *
L. Phillips Reames(4) 8,000 *
All directors and executive officers
as a group (6 persons) 1,398,946 61.3%
- -------------------
*Less than one percent
(1) Unless otherwise indicated, each person named in the table has the sole
voting and investment power with respect to the shares beneficially
owned. The address for each beneficial owner is c/o the Company, 1810
N.E. 144th Street, North Miami, Florida 33181.
(2) Includes (i) 406,250 shares of Common Stock owned of record by each of
Messrs. Stein and Briskin, (ii) 100,000 shares of Common Stock issuable
to each of Messrs. Stein and Briskin upon the exercise of certain stock
options granted to such principal shareholders exercisable at $6.00 per
share, and (iii) 179,890 shares of Common Stock issuable to each of
Messrs. Stein and Briskin upon the conversion of the Principal
Shareholders' Notes, which notes are convertible at $4.00 per share.
See "Certain Transactions". Excludes 180,250 shares of Common Stock
issuable to each of Messrs. Stein and Briskin upon the exercise of the
Contingent Options, which options are not presently vested.
(3) Reflects shares of Common Stock issuable upon the exercise of certain
stock options granted in 1997 pursuant to the Company's 1996 Stock
Option Plan, which stock options are exercisable at $3.50 per share.
Excludes 5,334 shares which are not presently vested.
(4) Reflects shares of Common Stock issuable upon the exercise of certain
stock options granted in 1997 pursuant to the Company's 1996 Stock
Option Plan, which stock options are exercisable at $5.88 per share.
Includes 4,000 shares for each shareholder which are exercisable on
June 2, 1997. Excludes 4,000 shares for each shareholder which are not
presently vested.
(5) The holders of these shares of Common Stock have agreed not to sell
until February 19, 1999 any of their shares (including those shares
underlying stock options) in the open market without the prior written
consent of the underwriters of the IPO.
10
<PAGE>
CERTAIN TRANSACTIONS
As of July 15, 1996, the Company entered into a five year lease with
RSB Holdings, Inc., a Florida corporation ("RSB Holdings"), pursuant to which
the Company leases its corporate headquarters and warehouse in North Miami,
Florida. The Company makes annual payments under such lease in the amount of
approximately $43,200. Messrs. Stein and Briskin each own 50 percent of the
issued and outstanding common stock of RSB Holdings, and are its sole officers
and directors.
Immediately prior to the effective date of the IPO (February 13, 1997),
Messrs. Stein and Briskin, who owned all of the outstanding stock of AESP
Computerzuberhor GmbH, a German company, and Advanced Electronic Support
Products Computertillbehor i Sweden Aktiebolag, a Swedish company, contributed
their interests in said corporations to the Company for no additional
consideration.
In February 1997, the Company issued two Principal Shareholders' Notes,
each in the amount of $869,562. The Principal Shareholders' Notes bear interest
at a rate of one percent over the prime rate, payable monthly. Principal and
accrued but unpaid interest will be due seven (7) years from February 19, 1997.
The Principal Shareholders' Notes are convertible into Common Stock of the
Company at a conversion price of $4.00 per share. The Principal Shareholders'
Notes are also subordinate to all institutional senior debt of the Company. In
February and March 1997, the Company paid Messrs. Stein and Briskin in aggregate
$300,000 ($150,000 each) as a prepayment of a portion of the Principal
Shareholders' Notes.
In July 1995, US Advantage Corporation, a Florida corporation ("US
Advantage") loaned the Company $120,000, pursuant to a Demand Promissory Note,
at an interest rate of 8.5 percent per annum. The loan amount may be prepaid at
any time prior to maturity without penalty. During 1997, the Company paid
$125,350 to US Advantage in satisfaction of all the principal and a portion of
the interest of the Demand Promissory Note. Messrs. Stein and Briskin each own
50 percent of the issued and outstanding capital stock of US Advantage.
Argent Securities, Inc. ("Argent"), acted as one of the managing
underwriters in the IPO. Pursuant to the Underwriting Agreement, dated February
13, 1997, between Argent and the Company, among other parties, Argent was
provided the right to designate a nominee for election to the Board. Mr. Reames,
who serves as Chairman of Argent, also serves on the Company's Board as Argent's
nominee Director.
In September 1997, the Company purchased the assets of the networking
division of Focus Enhancements, Inc. ("Focus") and entered into a Master
Purchase Agreement dated as of September 29, 1997, pursuant to which Focus
agreed to purchase a minimum of $2.5 million of the Company's products over a
two-year period at agreed upon margins. Mr. Coldrick, who serves as a Director
on the Board, also serves as a Director on the Board of Directors of Focus.
The Company believes that all the foregoing related-party transactions
were on terms, as a whole, no less favorable to the Company than could
reasonably be obtained from unaffiliated third parties. Since the IPO, all
transactions with affiliates have been approved by a majority of disinterested
directors of the Company and on terms no less favorable to the Company than
those that are generally available from unaffiliated third parties.
11
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
At the Annual Meeting, five directors will be elected to serve on the
Company's Board of Directors. The five directors will be elected to serve until
the next Annual Meeting of Shareholders (or until their successors are elected
and qualified).
It is intended that proxies will be voted for the following nominees:
Slav Stein, Roman Briskin, Terrence R. Daidone, William B. Coldrick and L.
Phillips Reames. Brief biographies of each of the nominees for director are set
forth under "Board of Directors".
The affirmative vote of shareholders holding a majority of the Company's
issued and outstanding Common Stock in attendance at the meeting, either in
person or by proxy, is required to approve this proposal. Messrs. Stein and
Briskin, who collectively own 35.6% of the Company's outstanding Common Stock
(assuming no conversion of certain convertible subordinated promissory notes and
no exercise of stock options held by such directors), have advised the Company
that they intend to vote in favor of Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
OTHER MATTERS
The Board of Directors is not aware of any other business that 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.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1999 Annual
Meeting of Shareholders of the Company must be received by the Company not later
than March 31, 1999 at its principal executive offices, 1810 N.E. 144th Street,
North Miami, Florida 33181, Attention: Corporate Secretary, for inclusion in the
proxy statement and proxy relating to the 1999 Annual Meeting of Shareholders.
ADDITIONAL INFORMATION
The Company will furnish without charge to any shareholder submitting a
written request, the Company's Form 10-KSB Annual Report for fiscal year ended
December 31, 1997 filed with the Securities and Exchange Commission, including
the financial statements and schedules thereto. Such written request should be
directed to the Company, attention: Corporate Secretary, at the address set
forth above.
BY ORDER OF THE BOARD OF DIRECTORS
Roman Briskin, Corporate Secretary
April 27, 1998
North Miami, Florida
12
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
1810 N.E. 144TH STREET
NORTH MIAMI, FLORIDA 33181
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Slav Stein and Roman Briskin, and each
of them, with full power of substitution, proxies of the undersigned, to attend
and vote all the shares of Common Stock, $0.001 par value, of Advanced
Electronic Support Products, Inc., a Florida corporation (the "Company") which
the undersigned would be entitled to vote at the 1998 Annual Meeting of
Shareholders to be held at the executive offices of the Company located at 1810
N.E. 144th Street, North Miami, Florida 33181 at 9:00 a.m., local time, on May
29, 1998, or any adjournment thereof, according to the number of votes the
undersigned would be entitled to cast if personally present upon the matters
referred to on this proxy and, in their discretion, upon any other business as
may come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS.
1. Proposal 1 - Election of Directors.
Election of the following persons as Directors of the Company:
Slav Stein Roman Briskin Terrence R. Daidone
William B. Coldrick L. Phillips Reames
[ ] FOR all nominees [ ] WITHHOLD authority to vote
except as indicated for all nominees
(INSTRUCTION: To withhold authority to vote for an individual nominee,
strike a line through that nominee's name in the list above.)
2. Proposal 2-To transact such other business as may properly come before the
meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the proposals as set forth herein.
The undersigned acknowledges receipt of Notice of Annual Meeting of
Shareholders and the accompanying Proxy Statement.
Date:______________________ , 1998.
_________________________________________
Signature
_________________________________________
Name(s) (typed or printed)
_________________________________________
Address(es)
Please sign exactly as name appears on this Proxy. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the 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. NO POSTAGE IS REQUIRED.
