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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SHERWOOD BRANDS, INC.
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(Name of Registrant as Specified in its Charter)
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(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:
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<PAGE>
SHERWOOD BRANDS, INC.
1803 Research Boulevard, Suite 201
Rockville, Maryland 20850
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on December 11, 2000
-----------------------
Dear Shareholder:
You are invited to attend our Annual Meeting of Shareholders, which
will be held at 10:00 a.m., local time, on Monday, December 11, 2000, at the
Best Western Hotel at 1251 West Montgomery Avenue, Rockville, Maryland, for the
following purposes:
(1) To elect five members to our Board of Directors to hold office
until our 2001 Annual Meeting of Shareholders or until their
successors are duly elected and qualified; and
(2) To transact such other business as may properly come before
the annual meeting and any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on October 23,
2000 as the record date for determining those shareholders entitled to notice
of, and to vote at, the annual meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
Uziel Frydman
Chairman of the Board
Rockville, Maryland
November 3, 2000
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
CARD AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE
MEETING. EVEN IF YOU EXECUTE A PROXY CARD, YOU MAY NEVERTHELESS ATTEND THE
MEETING, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON. PLEASE NOTE, HOWEVER,
THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE, AND
YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY
ISSUED IN YOUR NAME.
<PAGE>
2000 ANNUAL MEETING OF SHAREHOLDERS
OF
SHERWOOD BRANDS, INC.
-------------------------------
PROXY STATEMENT
--------------------------------
The Board of Directors of Sherwood Brands, Inc., a North Carolina
corporation, is furnishing this proxy statement in connection with the
solicitation of proxies from the holders of our Class A and Class B Common
Stock, each with a par value of $.01 per share, for use at our 2000 Annual
Meeting of Shareholders to be held at 10:00 a.m., local time, on Monday,
December 11, 2000, at the Best Western Hotel at 1251 West Montgomery Avenue,
Rockville, Maryland, or at any adjournment(s) or postponements(s) thereof,
pursuant to the foregoing Notice of Annual Meeting of Shareholders.
You should review the information provided in this proxy statement in
conjunction with our 2000 Annual Report to Shareholders, which accompanies this
proxy statement. Our principal executive offices are located at 1803 Research
Boulevard, Suite 201, Rockville, Maryland 20850 and our telephone number is
(301) 301-6161.
INFORMATION CONCERNING PROXY
Our Board of Directors is soliciting the enclosed proxy. By giving this
proxy, you are not precluded from voting in person should you so desire. You
have an unconditional right to revoke your proxy at any time prior to the
exercise thereof, either in person at the annual meeting or by filing with our
Corporate Secretary at our headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
we receive written notice of the revocation at or prior to the annual meeting.
We shall bear the cost of preparing, assembling and mailing this proxy
statement, the Notice of Annual Meeting of Shareholders and the enclosed proxy.
In addition to the use of mail, our employees may solicit proxies personally and
by telephone. Such employees will receive no compensation for soliciting proxies
other than their regular salaries. We 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. We may
also reimburse such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the annual meeting, you will consider and vote upon the following
matters:
(1) The election of five members to our Board of Directors to
serve until our 2001 Annual Meeting of Shareholders or until
their successors are duly elected and qualified;
(2) The transaction of 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 for the election of the nominees for director named below and in
favor of the other matters presented. In the event you specify a different
choice by means of the enclosed proxy, your shares will be voted in accordance
with those instructions.
<PAGE>
Outstanding Voting Securities and Voting Rights
The Board of Directors has set the close of business on October 23,
2000 as the record date for determining the shareholders entitled to notice of
and to vote at the annual meeting. As of the record date, there were 2,700,000
shares of Class A Common Stock outstanding and 1,000,000 shares of Class B
Common Stock outstanding. Each share of our Class A Common Stock entitles its
holder to one vote, and each share of our Class B Common Stock entitles its
holder to seven votes. By virtue of his holding 1,000,000 shares of each of
Class A and Class B Common Stock, Mr. Uziel Frydman, our Chairman, President and
Chief Executive Officer, maintains 82% of the voting control of Sherwood Brands.
Only the holders of issued and outstanding shares of common stock as of the
record date are entitled to vote at the annual meeting. You do not have the
right to cumulate your votes.
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 with respect to all matters presented.
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. Any other
matter that may be submitted to a vote of the shareholders will be approved if
the number of shares of common stock voted in favor of the matter exceeds the
number of shares voted in opposition to the matter, unless such matter is one
for which a greater vote is required by law or by our Articles of Incorporation
or bylaws. 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, we 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. Abstentions will be considered as
shares present and entitled to vote at the annual meeting 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 or nominee holding shares registered in its name, or in the
name of its nominee, which are beneficially owned by another person and for
which it has not received instructions as to voting from the beneficial owner,
may have discretion to vote the beneficial owner's shares with respect to the
election of directors and other matters addressed at the annual meeting. Any
such shares which are not represented at the annual meeting either in person or
by proxy will not be considered to have cast votes on any matters addressed at
the annual meeting.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of the record
date concerning the beneficial ownership of our common stock by: (i) each person
known by us to be the beneficial owner of more than 5% of our outstanding common
stock, (ii) each director, (iii) each of the named executive officers (as
defined below), and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner(1) Beneficially Owned (2) of Shares
---------------------------------------------------------- ---------------------- ---------
<S> <C> <C>
Uziel Frydman 2,023,333 (4) 54.3% (3)
Anat Schwartz 98,334 (4) 2.6
Amir Frydman 98,334 (4) 2.6
Douglas A. Cummins 7,833 (5) *
Jean E. Clary 1,833 (5) *
Jason Adelman 9,984 (5) *
All officers and directors as a group (6 persons) 2,237,652 60.1%
</TABLE>
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* Less than 1%
(1) The address for each of the executive officers and directors is 1803
Research Boulevard, Suite 201, Rockville, Maryland 20850.
(2) Unless otherwise indicated, we believe that all persons named in the
table have sole voting and investment power with respect to all shares
of common stock they beneficially own. A person is deemed to be the
beneficial owner of securities that can be acquired by such person
within 60 days from the record date upon the exercise of options,
warrants or convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that options, warrants or
convertible securities that are held by such person (but not those held
by any other person) and which are exercisable within 60 days of the
date of the record date have been exercised and converted. Unless
otherwise indicated all shares are Class A Common Stock.
(3) Includes 1,000,000 shares of Class A Common Stock and 1,000,000 shares
of Class B Common Stock. Since each share of Class B Common Stock
entitles the holder to seven votes per share on all matters submitted to
a vote of shareholders, Mr. Frydman maintains 82% of the voting control
of Sherwood Brands.
(4) Includes 23,333 shares of Class A Common Stock issuable upon exercise
of presently exercisable options.
(5) Includes 834 shares of Class A Common Stock issuable upon exercise of
presently exercisable options.
Compliance with Section 16(A) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than ten percent of
our outstanding common stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
common stock. Such persons are required by SEC regulation to furnish us with
copies of all such reports they file.
To our knowledge, based solely on a review of the copies of such
reports furnished to us and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to our officers,
directors and greater than ten percent beneficial owners have been met.
3
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
We have nominated five persons for election as directors to serve until
the next annual meeting of shareholders and until the director's successor is
duly elected and qualified. Although we anticipate that all of the nominees will
be able to serve, if any nominee is unable or unwilling to serve at the time of
the annual meeting, the proxy will be voted for a substitute nominee chosen by
our Board of Directors, or the number of directors to be elected may be reduced
in accordance with our bylaws.
The following table sets forth certain information as to the persons
nominated for election as directors at the annual meeting.
<TABLE>
<CAPTION>
Name Age Position
--------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Uziel Frydman 64 Chairman of the Board, President and Chief Executive Officer
Amir Frydman 38 Director, Treasurer and Vice President - Marketing and Product
Development
Douglas A. Cummins 58 Director
Jean E. Clary 57 Director
Jason Adelman 31 Director
</TABLE>
Uziel Frydman has been the President and Chief Executive Officer of the
Company and each of its subsidiaries since inception. Mr. Frydman has served as
the Chairman of the Board of Directors of the Company since December 1997. Mr.
Frydman served as Director of Marketing and Planning Sciences at R.J. Reynolds
Tobacco Company from 1977 to 1980, and prior to that, as Manager, Planning and
Operations Improvement at Lever Brothers Company from 1971 to 1977. He also
served as Projects Manager at Sperry & Hutchinson Company and as an independent
consultant to local governments in Turkey, Burma and Sierra Leone from 1962 to
1965. Mr. Frydman was an adjunct professor at the Graduate School of Business at
Rutgers University from 1970 to 1975. Mr. Frydman earned a Masters of Business
Administration, Management Science degree from Case Western Reserve University
in 1968 and a Bachelor of Science degree in Civil Engineering from Technion
Institute of Technology, Haifa, Israel in 1960. Mr. Frydman is the father of
Anat Schwartz and Amir Frydman.
Amir Frydman has been a director of the Company and has served as
Treasurer and Executive Vice President - Marketing and Product Development since
1985. Prior to joining the Company, Mr. Frydman was Commercial Branch Manager at
NCNB National Bank of Florida, from 1984 to 1985. Mr. Frydman earned a Bachelor
of Arts degree from the University of North Carolina in 1983. Mr. Frydman is the
son of Uziel Frydman and the brother of Anat Schwartz.
Douglas A. Cummins has been a director of the Company since December
1997. In 1996, Mr. Cummins served as President and Chief Executive Officer of
the Liggett Group, a manufacturer and distributor of cigarettes. From 1993 to
1996, Mr. Cummins served as President and Chief Executive Officer of North
Atlantic Trading Co, a cigarette paper manufacturer and distributor. From 1990
to 1993, Mr. Cummins served as the President and Chief Executive Officer of
Decision Marketing, an advertising and consulting firm. From 1984 to 1990, Mr.
Cummins served as the President and Chief Operating Officer of Salem Carpet
Mills, a carpet manufacturer, and from 1981 to 1984, served as President of
Stellar Group, a consulting firm. From 1973 to 1981, Mr. Cummins was Director of
Marketing - International and Vice President - Foods Marketing at R.J. Reynolds
Industries. Mr. Cummins currently sits on the Boards of Carolina Biological
Supply Company, Smokey Mountain Products, Inc. and the Fort Ticonderoga
Association. Mr. Cummins earned a Masters of Business Administration degree from
Columbia University in 1966 and a Bachelor of Arts degree from Harvard
University in 1964.
Jean E. Clary has been a director of the Company since May 1998. Ms.
Clary has been the Chief Executive Officer and President of Century 21 - Clary
and Associates, Inc. since January 1973. Ms. Clary is currently on the
4
<PAGE>
Board of Directors of Virginia Power, a wholly-owned subsidiary of Dominion
Resources Inc., a public company traded on the New York Stock Exchange.
Jason Adelman has been a director of the Company since August 1998. Mr.
Adelman is Senior Vice President of Investment Banking at H.C. Wainwright & Co.
From 1997 until his employment with H.C. Wainwright in 1999, Mr. Adelman was
Managing Director of Corporate Finance at Drake & Co., Inc. From 1996 to 1997,
Mr. Adelman was affiliated with Spencer Trask Securities, Inc., a New York based
venture capital investment bank. Before that he was with Coopers & Lybrand LLP,
where he worked in the financial services consulting practice from 1994 to 1996.
Mr. Adelman earned his J.D. from Cornell Law School and his B.A. in economics
from the University of Pennsylvania.
The term of office of each director ends at the next annual meeting of
shareholders or when his or her successor is elected and qualified. Our officers
serve at the discretion of the Board of Directors, subject to the terms of any
employment agreements.
All of our non-employee directors receive $1,000 for attendance at each
Board of Directors meeting ($500 if such meeting is attended telephonically) and
are reimbursed for travel expenses incurred to attend such meetings.
During fiscal year 2000, the Board of Directors held four meetings. No
director attended fewer than 75% of such meetings of the Board of Directors or
any committee thereof during the period of such director's service.
We have an Audit Committee and a Compensation Committee. The
Compensation Committee, composed of Messrs. Uziel Frydman, Amir Frydman and
Jason Adelman, is responsible for making recommendations to the Board of
Directors regarding compensation arrangements for senior management,
recommendations concerning the adoption of any compensation plans in which
management is eligible to participate and grants of stock options or other
benefits under such plans. The Compensation Committee met once during the fiscal
year. We do not have a Nominating Committee. The Audit Committee is responsible
for reviewing and making recommendations regarding our employment of independent
auditors, the annual audit of our financial statements and our internal
accounting practices and policies. For the fiscal year ended July 31, 2000, the
members of the Audit Committee were Mrs. Jean Clary and Mr. Douglas Cummins.
Jason Adelman has been added to the Audit Committee for the current fiscal year.
The Audit Committee met four times during the fiscal year. In accordance with a
recently issued American Stock Exchange requirement, the Company's Board of
Directors, on June 9, 2000, adopted a written charter for the Audit Committee. A
copy of the charter is attached as Exhibit A to this Proxy Statement. All
members of the Audit Committee are independent as defined by Section 121(A) of
the American Stock Exchange Guide. The Audit Committee held four meetings during
the last fiscal year at which representatives of the Company's independent
auditors, BDO Seidman, LLP were present.
5
<PAGE>
AUDIT COMMITTEE REPORT
In accordance with its written charter adopted June 9, 2000 by the
Board of Directors, the Audit Committee assists the Board of directors in
fulfilling its responsibility for the oversight of the quality and integrity of
the accounting, auditing and financial reporting practices of the Company.
During fiscal 2000, the Committee met four times, including meetings to review
with management and the independent auditor the Securities and Exchange
Commission Form 10-KSB for the fiscal year ending July 31, 2000, the first such
filing after charter adoption. The Committee also discussed with management and
the independent auditors the quality and adequacy of the Company's internal
controls. The Committee reviewed with the independent auditors their audit,
plan, audit scope and identification of audit risks. The Committee discussed and
reviewed with the independent auditors all communications required by generally
accepted auditing standards, including those described in Statement on Auditing
Standards No. 61, as amended, "Communications with Audit Committee." The
Committee reviewed with the independent auditors and management the confirmation
of auditors independence in accordance with Independence Standards Board
Standard No. 1 and the audited financial statements of the Company for the
fiscal year ended July 31, 2000. Management has the responsibility for the
preparation and content of those statements. Based on the above mentioned review
and discussions with management and the independent auditors, the Committee
recommended to the Board that the Company's audited financial statements be
included in its Annual Report on Form 10-KSB for the fiscal year ended July 31,
2000 for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors
Douglas A. Cummins Jean E. Clary
6
<PAGE>
MANAGEMENT
Executive Officers and Key Employees
Our executive officers, as well as certain key employees, and their
ages as of October 1, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
--------------------------- --- -------------------------------------------------------------
<S> <C> <C>
Uziel Frydman(1) 64 Chairman of the Board, President and Chief Executive Officer
Anat Schwartz 40 Executive Vice President - Finance and Secretary
Amir Frydman(1) 38 Director, Treasurer and Executive Vice President - Marketing
Eric A. Richman(2) 50 Vice President - Operations
Paul J. Splitek(2) 51 Vice President - Sales
Arthur Woldarski(2) 44 Vice President - Purchasing
</TABLE>
----------------------
(1) Reference is made to the description of the business experience of
Messrs. Uziel Frydman and Amir Frydman, who are also director nominees,
set forth above under "Election of Directors," which is incorporated
herein by reference.
(2) Messrs. Richman, Woldarski and Splitek are key employees, but not
executive officers of the company.
Anat Schwartz has been Executive Vice President - Finance and Secretary
of the Company since January 1996 and Sherwood Brands, LLC (and its
predecessors) since 1988, and has been a director of Sherwood Brands Overseas,
Inc. since 1993. Prior to joining the Company, Ms. Schwartz served as Manager -
Loan Syndications and Asset Sales for the Bank of Montreal in 1988 and as Team
Leader - Communications/Media Group and Account Officer for such bank's
Southeastern United States region from 1983 to 1988. Ms. Schwartz earned a
Masters of Business Administration, Finance/Health Care degree from Bernard
Baruch College in 1983 and a Bachelor of Arts degree from Wake Forest University
in 1981. Ms. Schwartz is the daughter of Uziel Frydman and the sister of Amir
Frydman.
Eric A. Richman has been Vice President of Operations of the Company
since September 1999. Mr. Richman has over 26 years of multi-disciplined
manufacturing experience. From 1998 until being hired by the Company, Mr.
Richman was Director of Manufacturing of E.Rosen, and prior to that, Plant
Manager of E. Rosen. From 1992 to 1996, he was Plant Manger of Richardson Brands
Company; from 1989 to 1992, Plant Manager of Conusa Corporation; and from 1973
to 1989, Plant Manager of Planters Lifesavers Company. Mr. Richman has extensive
experience in manufacturing, management, quality control and labor relations.
Paul J. Splitek has been Vice President of Sales of the Company since
September 1999. Mr. Splitek has over 28 years of sales, marketing and
manufacturing experience. From 1996 until being hired by the Company, Mr.
Splitek was Vice President and General Sales Manager of E. Rosen. Prior to
joining E. Rosen, from 1991 to 1996, Mr. Splitek was Vice President and General
Manager of Mille Lacs MP Company, a wholesale division of The Wisconsin
Cheeseman Inc. ("TWC"), and prior to that, Operations Manager of TWC.
Arthur Woldarski has been Vice President of Purchasing of the Company
since April 2000. Mr. Woldarski has over 20 years of purchasing experience. From
1985, Mr. Woldarski was Vice President of Purchasing of Houston Foods, a leading
gift basket packer, responsible for the international purchasing of components
and food items.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid during each of the
three years ended July 31, 2000 to our Chief Executive Officer and our other
executive officers whose total salary and bonus in our fiscal year ended July
31, 2000 exceeded $100,000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------
Fiscal Other Annual
Name and Principal Position Year Salary Bonus Compensation
------------------------------------------------- ------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Uziel Frydman, Chairman, President and Chief 2000 $ 314,500 $ - $ -
Executive Officer 1999 $ 225,000 $ - $ -
1998 $ 129,520 $ 51,000 $ 3,886
Amir Frydman, Executive Vice President - 2000 $ 271,171 $ - $ -
Marketing and Treasurer 1999 $ 194,000 $ - $ -
1998 $ 127,915 $ 43,500 $ 3,837
Anat Schwartz, Executive Vice President - 2000 $ 188,865 $ - $ -
Finance, Secretary 1999 $ 135,000 $ - $ -
1998 $ 80,800 $ 30,000 $ 2,424
Paul Splitek, Vice President of Sales 2000 $ 125,000
1999(1) $ 105,764
Eric Richman, Vice President of Operations 2000 $ 105,000
1999 $ 85,000
</TABLE>
-----------------------
(1) Mr. Splitek joined Sherwood Brands in September 1998. Mr. Splitek is
not an executive officer of Sherwood Brands.
We did not grant any options to our executive officers during the
fiscal year ended July 31, 2000.
Employment Agreements
We have entered into employment agreements with Uziel Frydman, Chairman
of the Board, President and Chief Executive Officer, Anat Schwartz, Vice
President -- Finance and Secretary, and Amir Frydman, Treasurer and Vice
President -- Marketing and Product Development. The terms of these agreements
are for three years commencing on May 12, 1998. They provide annual base
salaries of $315,000, $189,000 and $271,000 for Uziel Frydman, Anat Schwartz and
Amir Frydman, respectively, and are subject to annual increases. In addition,
such employment agreements entitle the executives to a portion of a bonus pool
as determined by the Board of Directors equal to 15% of our pre tax net income
in excess of certain incremental earnings targets. The base salary is subject to
annual increases of the greater of the percentage increase in sales for the last
year or 5% and may be reviewed for merit increases by the Compensation
Committee. If either Uziel Frydman, Amir Frydman or Anat Schwartz is terminated
without cause or upon a change in control of Sherwood Brands, each is entitled
to continue to receive his or her annual base salary for a period of three
years, any accrued incentive compensation through the date of termination and
certain other benefits. Each of the above listed executives is prohibited from
competing with us for the duration of his or her respective employment
agreement, and if terminated or upon voluntary resignation, for one year
thereafter.
8
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during fiscal 2000 were
Messrs. U. Frydman, A. Frydman and Adelman. Messrs. U. Frydman and A. Frydman
currently serve as executive officers.
Aggregated Option Exercises in 2000 and Year End Option Values
The following table sets forth information with respect to (i) the
number of unexercised options held by the named executive officers as of July
31, 2000 and (ii) the value as of July 31, 2000 of unexercised in-the-money
options. No options were exercised by any of the named executive officers in
fiscal 2000.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at July 31, 2000 at July 31, 2000(1)
-------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Uziel Frydman....................... 23,333 11,666 $0 $0
Amir Frydman........................ 23,333 11,666 $0 $0
Anat Schwartz....................... 23,333 11,666 $0 $0
</TABLE>
--------------------
(1) Market value of shares covered by in-the-money options on July 31,
2000, less option exercise price. Options are in-the-money if the
market value of the shares covered thereby is greater than the option
exercise price.
CERTAIN TRANSACTIONS
Uziel Frydman, Chairman, President and Chief Executive Officer, has
personally guaranteed the repayment of certain of our indebtedness.
GENERAL INFORMATION
Other Matters. The Board of Directors does not intend to present any
matter for action at the annual meeting other than the matters described in this
proxy statement. If any other matters properly come before the annual meeting,
it is intended that the holders of the proxies hereby solicited will act in
respect to such matters in accordance with their best judgment.
Information Concerning Shareholder Proposals and Director Nominations.
Any stockholder satisfying the Securities and Exchange Commission ("SEC")
requirements and wishing to submit a proposal to be included in the proxy
statement for the 2001 Annual Meeting of Shareholders should submit the proposal
in writing to the Corporate Secretary, Sherwood Brands, Inc., 1803 Research
Boulevard, Suite 201, Rockville, Maryland, 20850. We must receive a proposal by
July 5, 2001 in order to consider it for inclusion in the proxy statement for
the 2001 Annual Meeting of Shareholders.
Shareholders who wish to present director nominations or any other
business at the 2001 Annual Meeting of Shareholders are required to notify the
Corporate Secretary of their intent no later than September 5, 2001 and the
notice must provide information as required in our bylaws. A copy of these
bylaws requirements will be provided upon request in writing to the Corporate
Secretary. This requirement does not apply to the deadline for submitting
shareholder proposals for inclusion in the proxy statement, nor does it apply to
questions a shareholder may wish to ask at the meeting.
9
<PAGE>
We retain discretion to vote proxies we receive with respect to
proposals received after September 5, 2001, provided (i) we include in our proxy
statement advice on the nature of the proposal and how we intend to exercise our
voting discretion and (ii) the proponent does not issue a proxy statement.
By Order of the Board of Directors,
Uziel Frydman
Chairman of the Board
Rockville, Maryland
November 3, 2000
10
<PAGE>
EXHIBIT A
SHERWOOD BRANDS, INC. AUDIT COMMITTEE CHARTER
The audit committee of the board of directors of Sherwood Brands, Inc. (the
"Company") will have the oversight, responsibility, authority and duties as
described below.
The primary function of the audit committee is to assist the board of directors
in fulfilling its oversight responsibilities by reviewing (i) the financial
information that will be provided to the shareholders and others, (ii) the
systems of internal controls that management and the board of directors have
established and (iii) all audit processes.
Composition
The audit committee will consist of not less than two (2) directors, as
determined by the board of directors. The members of the audit committee will
meet the independence and experience requirements of the American Stock Exchange
("Amex"). One of the members shall be appointed committee chairperson by the
full board of directors.
General Responsibilities
1. The audit committee will provide open avenues of communication among
the internal auditors, the independent accountant and the board of
directors.
2. The audit committee must report committee actions to the full board of
directors and may make appropriate recommendations.
3. The audit committee has the power to conduct or authorize investigations
into matters within the audit committee's scope of responsibilities. The
audit committee is authorized to retain independent counsel, accountants or
others it needs to assist in an investigation.
4. The audit committee will meet at least two times each year, or more
frequently as appropriate. The audit committee chairperson has the power to
call a committee meeting whenever he or she thinks there is a need, which
meetings may be held in person or telephonically. An audit committee member
should not vote on any matter in which he or she is not independent. The
committee may ask members of management or others to attend the meeting and
is authorized to receive all pertinent information from management.
5. The committee will do whatever else the law, the Company's charter or
bylaws or the board of directors require of the committee.
Specific Duties
In carrying out its oversight responsibilities, the audit committee will:
1. Review and reassess the adequacy of this charter annually and recommend any
proposed changes to the board of directors for approval. This should be
done in compliance with applicable Amex audit committee requirements.
2. Review with the Company's management, internal audit personnel and
independent accountants the Company's accounting and financial reporting
controls. Obtain annually in writing from the independent accountants their
letter as to the adequacy of such controls.
3. Review with the Company's management, internal audit personnel and
independent accountants significant accounting and reporting principles,
practices and procedures applied by the Company in preparing its financial
statements. Discuss with the independent accountants their judgments about
the quality, not just the acceptability, of the Company's accounting
principles used in financial reporting.
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4. Review the scope of internal audit's work plan for the year and receive a
summary report of major findings by internal auditors and how management is
addressing the conditions reported.
5. Review the scope and general extent of the independent accountants' annual
audit. The audit committee's review should include an explanation from the
independent accountants of the factors considered by the accountants in
determining the audit scope, including the major risk factors. The
independent accountants should confirm to the audit committee that no
limitations have been placed on the scope or nature of their audit
procedures. The audit committee will review annually with management the
fee arrangement with the independent accountants.
6. Inquire as to the independence of the independent accountants and
obtain from the independent accountants, at least annually, a formal
written statement delineating all relationships between the independent
accountants and the Company as contemplated by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees.
7. Have a predetermined arrangement with the independent accountants that they
will advise the audit committee through its chairperson and management of
the Company of any matters identified through procedures followed for
interim quarterly financial statements, and that such notification is to be
made prior to the related press release or, if not practicable, prior to
filing the applicable Form 10-Q. Also receive a written confirmation
provided by the independent accountants at the end of each of the first
three quarters of the year that they have nothing to report to the audit
committee, if that is the case, or the written enumeration of required
reporting issues.
8. At the completion of the annual audit, review with management, internal
audit and the independent accountants the following:
- The annual financial statements and related footnotes and
financial information to be included in the Company's annual
report to shareholders and on Form 10-K.
- Results of the audit of the financial statements and the
related report thereon and, if applicable, a report on changes
during the year in accounting principles and their
application.
- Significant changes to the audit plan, if any, and any serious
disputes or difficulties with management encountered during
the audit. Inquire about the cooperation received by the
independent accountants during their audit, including access
to all requested records, data and information. Inquire of the
independent accountants whether there have been any
disagreements with management which, if not satisfactorily
resolved, would have caused them to issue a nonstandard report
on the Company's financial statements.
- Other communications as required to be communicated by the
independent accountants by Statement of Auditing Standards
(SAS) 61 as amended, modified or supplemented, relating to the
conduct of the audit. Further, receive a written communication
provided by the independent accountants concerning their
judgment about the quality of the Company's accounting
principles, as outlined in SAS 61 as amended, modified or
supplemented, and that they concur with management's
representation concerning audit adjustments.
If deemed appropriate after such review and discussion, recommend to the Board
that the financial statements be included in the Company's annual report on Form
10-K.
9. After preparation by management and review by internal audit personnel
and independent accountants, approve the report required under SEC
rules to be included in the Company's annual proxy statement. The audit
committee charter is to be published as an appendix to the proxy
statement every three years.
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10. Discuss with the independent accountants the quality of the Company's
financial and accounting personnel. Also, elicit the comments of
management regarding the responsiveness of the independent accountants
to the Company's needs.
11. Meet with management, internal audit personnel and the independent
accountants to discuss any relevant significant recommendations that the
independent accountants may have, particularly those characterized as
`material' or `serious'. Typically, such recommendations will be presented
by the independent accountants in the form of a Letter of Comments and
Recommendations to the audit committee. The audit committee should review
responses of management to the Letter of Comments and Recommendations from
the independent accountants and receive follow-up reports on action taken
concerning the aforementioned recommendations.
12. Recommend to the board of directors the selection, retention or termination
of the Company's independent accountants.
13. Review the appointment and replacement of the senior internal audit
executive.
14. Review with management, internal audit personnel and the independent
accountants the methods used to establish and monitor the Company's
policies with respect to unethical or illegal activities by Company
employees that may have a material impact on the financial statements.
15. As the Committee may deem appropriate, obtain, weigh and consider expert
advice as to Audit Committee related rules of the Amex, Statements on
Auditing Standards and other accounting, legal and regulatory provisions.
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<PAGE>
SHERWOOD BRANDS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 11, 2000
The undersigned hereby appoints Anat Schwartz and Amir Frydman, and each
of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Sherwood Brands, Inc. which
the undersigned may be entitled to vote at the Annual Meeting of Shareholders
of Sherwood Brands to be held at the Best Western Hotel, 1251 West Montgomery
Avenue, Rockville, Maryland, on December 11, 2000, at 10:00 a.m., (local time,
and at any and all postponements, continuations and adjournments thereof), with
all powers that the undersigned would possess if personally present, upon and
in respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED "FOR" THE
PROPOSALS SET FORTH BELOW, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY
STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN
ACCORDANCE THEREWITH. MANAGEMENT RECOMMENDS A VOTE "FOR" THE FOLLOWING
PROPOSAL.
PROPOSAL ONE: Election of Directors.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
for all nominees listed below
A VOTE FOR ALL NOMINEES IS RECOMMENDED BY THE BOARD OF DIRECTORS.
NOMINEES ARE: Uziel Frydman Amir Frydman Douglas A. Cummins
Jean E. Clary Jason Adelman
*To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below:
Exceptions:
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(Continued and to be signed on other side)
<PAGE>
Dated: _______________, 2000
----------------------------
Signature(s)
Please sign exactly as your
name appears hereon. If the
stock is registered in the
names of two or more
persons, each should sign.
Executors, administrators,
trustees, guardians and
attorneys-in-fact should
add their titles. If signer
is a corporation, please
give full corporate name
and have a duly authorized
officer sign, stating
title. If signer is a
partnership, please sign in
partnership name by
authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED
RETURN ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
