SCHEDULE 14-A 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
(X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
( ) Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
COLONIAL COMMERCIAL CORP.
(Name of Registrant as Specified In Its Charter)
James W. Stewart, Executive Vice President
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
(X ) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
..................................................................
<PAGE>
( ) 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>
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
JANUARY 13, 1998
To the holders of Common Stock and Convertible Preferred Stock:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Colonial Commercial Corp. (the "Company") will be held at the Company's offices,
3601 Hempstead Turnpike, Levittown, New York on January 13, 1998 at 10:00 A.M.
local time, for the following purposes:
1. To consider and vote upon a proposal to amend the Company's Certificate of
Incorporation to effect a one-for-five reverse stock split by changing the
number of authorized shares of Common Stock, par value $.01, from
40,000,000 shares to 8,000,000 shares, par value $.05; and
2. To consider and vote upon a proposal to amend the Company's Certificate of
Incorporation to effect a one-for-five reverse stock split by changing the
number of authorized shares of Convertible Preferred Stock, par value $.01,
from 12,344,300 shares to 2,468,860 shares, par value $.05; and
3. To consider and vote upon a proposal to amend the Company's Certificate of
Incorporation immediately following the amendment effecting the reverse
stock split to increase the amount of authorized Common Stock to 20,000,000
shares, with a par value of $.05 per share; and
4. To approve an increase in the number of shares of Common Stock for which
options can be issued pursuant to the 1996 Stock Option Plan by 1,000,000
shares from 200,000 shares to 1,200,000 shares on a post- reverse stock
split basis.
5. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Only holders of record of shares of Common Stock and Convertible
Preferred Stock at the close of business on November 14, 1997 are entitled to
notice, of and to vote at, the meeting.
<PAGE>
The current members of the Board of Directors presently hold Common
Stock and Convertible Preferred Stock representing an aggregate of approximately
1,589,937 votes, or approximately 10.27% of the total number of votes eligible
to be cast at the Special Meeting.
A PROXY STATEMENT, PROXY FORM AND POSTAGE PAID RETURN ENVELOPE ARE
ENCLOSED HEREWITH.
By Order of the Board of Directors,
Levittown, New York
November 14, 1997 James W. Stewart
Secretary
- -------------------------------------------------------------------------------
IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. WHETHER OR NOT YOU ARE
PLANNING TO ATTEND, PLEAS SIGN, DATE AND RETURN THE ACCOMPANYING PROXY AS SOON
AS POSSIBLE. A POSTAGE-PAID, SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
- -------------------------------------------------------------------------------
<PAGE>
NOTICE OF A SPECIAL MEETING
OF SHAREHOLDERS
JANUARY 13, 1998
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
Management of proxies to be voted at a Special Meeting of Shareholders of the
Company to be held at the Company's offices at 3601 Hempstead Turnpike, Suite
121-I, Levittown, New York on January 13, 1998 at 10:00 A.M. and at any
adjournments thereof. The matters proposed to be considered at the Meeting are
the approval of three amendments to the Company's Certificate of Incorporation
effecting a one-for-five reverse stock split of Common and Convertible Preferred
Stock and thereafter increasing the amount of authorized Common Stock (the
Capital Amendments") and an increase in the number of shares of Common Stock for
which options can be issued pursuant to the 1996 Stock Option Plan by 1,000,000
shares from 200,000 shares to 1,200,000 shares on a post-reverse stock split
basis.
The shares represented by proxies that are received in the enclosed form
and properly filled out will be voted in accordance with the specifications made
thereon. In the absence of specific instructions, proxies will be voted in
accordance with the recommendations made herein with respect to the proposals
described in this Proxy Statement. Proxies may be revoked by shareholders by
written notice received by the Secretary of the Company at the address set forth
above, at any time prior to the exercise thereof.
Shareholders of record at the close of business on November 14, 1997 are
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof. As of November 14, 1997, the Company's voting securities outstanding
totaled 7,147,051 shares of Common Stock and 8,339,334 shares of Convertible
Preferred Stock. Each share of Common Stock and Convertible Preferred Stock is
entitled to one vote. The affirmative vote of the holders of a majority of the
shares of Common Stock and Convertible Preferred Stock of the Company, voting
together in person or by proxy as one class, is required to effect the foregoing
proposals.
The cost of solicitation of proxies will be borne by the Company. Proxies
will be solicited personally by the officers, directors or regular employees of
the Company, who will not be compensated for such services.
<PAGE>
ITEM I. PROPOSAL CONCERNING REVERSE STOCK SPLITS
The Board of Directors of the Company has adopted a proposal declaring
advisable amendments to the Certificate of Incorporation of the Company to
effect a one-for-five reverse stock split of all of the authorized Common Stock
and Convertible Preferred Stock (the "Reverse Stock Split Amendment"). As of
November 14,1997, the Company had authorized 40,000,000 shares of Common Stock,
$.01 par value and 12,344,300 shares of Convertible Preferred Stock, $.01 par
value. As of that date, there were issued and outstanding 7,147,051 shares of
Common Stock and 8,339,334 shares of Convertible Preferred Stock. Except for the
receipt of cash in lieu of fractional interest, the proposed reverse stock split
will not affect any shareholder's proportionate equity interest in the Company.
The proposed form of the Certificate of Amendment to the Certificate of
Incorporation respecting the Reverse Stock Split Amendment is attached hereto as
Exhibit A.
The Reverse Stock Split Amendments will not have any material impact on the
aggregate capital represented by the shares of capital stock for financial
statement purposes. Adoption of the reverse stock split will reduce the
presently authorized and outstanding shares of Common Stock and Convertible
Preferred Stock as indicated in the table below. However, the proposed amendment
to increase the authorized shares of Common Stock to 20,000,000, with a par
value of $.05 per share, would result in increases in the proportionate amounts
of Common Stock which would be potentially issuable by the Company. See "Item
II. Proposal Concerning Increase in Number of Authorized Shares of Common
Stock."
In connection with the reverse stock splits, current Common and Convertible
Preferred shareholders would receive one share of Common Stock or Convertible
Preferred Stock, in exchange for five currently outstanding shares of Common
Stock or Convertible Preferred Stock or cash for any resulting fractional share.
Before Split After Split
------------ -----------
CLASS OF STOCK AUTHORIZED ISSUED AUTHORIZED ISSUED
- -------------- ---------- ------ ---------- ------
Common Stock 40,000,000 7,147,051 8,000,000 1,429,410
Convertible
Preferred
Stock 12,344,300 8,339,334 2,468,860 1,667,867
<PAGE>
The number of issued shares after the reverse stock split are approximate.
Except for changes resulting from the reverse stock split and the proposed
increase in the amount of authorized Common Stock and Convertible Preferred
Stock, the rights and privileges of holders of shares of Common Stock and
Convertible Preferred Stock will remain the same, both before and after the
filing of the Capital Amendments.
REASONS FOR THE REVERSE STOCK SPLIT
On August 25, 1997, the National Association of Securities Dealers, Inc.
Automated Quotation System Stock Market ("NASDAQ") wrote to the Company noting
that the U.S. Securities and Exchange Commission approved new NASDAQ Small Cap
Market Requirements as follows:
REQUIREMENTS FOR CONTINUED LISTING
Net Tangible Assets $2 million
or
Market Capitalization $35 million
or
Net Income (in latest fiscal
year or 2 of last 3 fiscal
years) $500,000
- -------------------------------------------------------------------------------
Public Float (shares) 500,000
- -------------------------------------------------------------------------------
MARKET VALUE OF PUBLIC FLOAT $1 MILLION
- -------------------------------------------------------------------------------
Minimum Bid Price $1
- -------------------------------------------------------------------------------
MARKET MAKERS 2
- -------------------------------------------------------------------------------
Shareholders (round lot
holders) 300
- -------------------------------------------------------------------------------
The Company presently complies with all the new continued listing
requirements except for the $1.00 minimum bid price.
The Company's management believes that maintaining the Company's NASDAQ
listing is very important to the Company and its shareholders. Pursuant to Rule
15c2-6 (the "Rule") adopted by the Securities and Exchange Commission
("Commission") under the Securities Exchange Act of 1934, broker-dealers are
required to implement certain supplemental sales practice requirements when
recommending and selling "designated securities" to customers in
<PAGE>
transactions not exempt under the Rule. The Rule was directed at the elimination
of certain practices in connection with the sale of certain low priced
securities. The Rule exempts from its requirements the securities of issuers
listed on national securities exchanges and the NASDAQ trading systems.
Management of the Company believes that the market for the Company's Common and
Convertible Preferred Stock will be improved by maintaining its listing on
NASDAQ, thereby maintaining the exemption of its Common and Convertible
Preferred Stock from the impact of the Rule.
The Board of Directors also believes that the current per share price level
of the Company's Common and Convertible Preferred Stock has reduced the
effective marketability of the shares because of the reluctance of many leading
brokerage firms to recommend low priced stock to their clients. In addition, a
variety of brokerage house policies and practices tend to discourage individual
brokers within those firms from dealing in low priced stock. Some of those
policies and practices pertain to the payment of brokers commissions and to time
consuming procedures that function to make the handling of low priced stocks
unattractive to brokers from an economic standpoint.
The decrease in the number of shares of Common and Convertible Preferred
Stock outstanding as a consequence of the proposed reverse stock splits should
increase the per share price of the Common and Convertible Preferred Stock,
which may encourage greater interest in the Common and Convertible Preferred
Stock and possibly promote greater liquidity for the Company's shareholders.
However, the increase in the per share price of the Common and Convertible
Preferred Stock as a consequence of the proposed reverse stock split may be
proportionately less than the decrease in the number of shares outstanding. In
addition, any increased liquidity due to any increased per share price could be
partially or entirely off-set by the reduced number of shares outstanding after
the proposed reverse stock splits. Nevertheless, the proposed reverse stock
split could result in per share prices that adequately compensate for the
adverse impact of the market factors noted above. There can, however, be no
assurance that the favorable effects described above will occur, or that any
increase in per share price of the Common and Convertible Preferred Stock
resulting from the proposed reverse stock split will be maintained for any
period of time. The management of the Company does not currently intend to
engage in any future transactions or business combinations which would qualify
the Company for deregistration of the Common and Convertible Preferred Stock
from the reporting and other requirements of federal securities laws.
<PAGE>
The Company may seek to secure additional equity capital through the public
or private sale of stock. The Company believes that prospective investors will
view an investment in the Company more favorably if its shares continue to be
listed on NASDAQ. Management of the Company believes that the one-for-five
reverse stock split may also result in a stock price with broader interest to
institutional investors. There can be no assurance that a reverse stock split in
this amount will have this desired consequence.
The actual timing of the filing of the amendment of the Certificate of
Incorporation effecting the reverse stock splits will be determined by the
management of the Company based upon their evaluation as to when such an action
will be most advantageous to the Company and its shareholders. Also, in the
event that the Company's Common Stock price exceeds $1.00, the Company's
management reserves the right to forego or postpone filing the Reverse Stock
Split Amendment. The proposed reverse stock split will become effective on the
effective date of that filing (the "Effective Date"). Commencing on the
Effective Date, each currently outstanding certificate will be deemed for all
corporate purposes to evidence ownership of the reduced number of shares
resulting from the reverse stock split. Currently outstanding certificates do
not have to be surrendered in exchange for new certificates in connection with
the reverse stock split. Rather, new stock certificates reflecting the number of
shares resulting from the reverse stock split will be issued only as currently
outstanding certificates are transferred. However, the Company will provide
shareholders with instructions as to how to exchange their certificates and
encourage them to do so. The Company will obtain new CUSIP numbers for its
shares of Common and Convertible Preferred Stock.
To the extent a shareholder holds a number of shares that would result in a
residual fractional interest, the Company will pay, as soon as is practicable
after the Effective Date, $.50 for each share of Common and Convertible
Preferred Stock outstanding prior to the reverse stock splits that comprises the
fractional interest. Shareholders will not have the opportunity on or after the
Effective Date to round off their shareholdings to avoid resulting fractional
interest. The $.50 price per share figure for the Common and Convertible
Preferred Stock purchased pursuant to the retirement of resulting fractional
interests is based on the closing bid price of the Common and Convertible
Preferred Stock of $.50 per share as reported by NASDAQ on November 13, 1997.
The management of the Company believes that the $.50 price per share figure is
fair to all
<PAGE>
of the shareholders whose fractional interests are retired, the other
shareholders of the Company and the Company. As of November 14, 1997, the
Company had approximately 1,203 Common shareholders and 7,824 Convertible
Preferred shareholders of record and believes that the approximate total number
of beneficial holders of the Common Stock of the Company to be approximately
1,053, and beneficial holders of the Convertible Preferred Stock to be
approximately 345, based on information received from the transfer agent
and those brokerage firms who hold the Company's securities in custodial or
"street" name. After the reverse stock split the Company estimates that, based
on the shareholdings as of November 14, 1997, it will continue to have
approximately the same number of shareholders.
There can be no assurance that the market price of the Common Stock and the
Convertible Preferred Stock after the proposed reverse stock split will be five
times the market price before the proposed reverse stock split, or that such
price will either exceed or remain in excess of the current market price.
OPTIONS
The Company currently has outstanding options, none of which are publicly
traded, to acquire an aggregate of 827,500 shares of Common Stock at $.25-$.50
per share (the "Options").
As with the Company's Common Stock, the options will be reverse split
one-for-five so that the total number of outstanding options shall become
165,500. Each Optionholder shall have one option for every five options held
previously. After the Common Stock reverse stock split, each option will remain
exercisable to purchase one share of Common Stock and the exercise price per
share will be increased five fold. The Company will have the right to pay cash
in lieu of issuing fractional options. To the extent an Optionholder holds a
number of options that would result in a residual fractional interest, the
Company will pay, as soon as is practicable after the Effective Date, $.50 for
each option outstanding prior to the Common Stock reverse stock split that
comprises the fractional interest. Optionholders will not have the opportunity
on or after the Effective Date to round off their holdings to avoid resulting
fractional interest. The $.50 price per option purchased pursuant to the
retirement of resulting interests is based on the closing bid price of the
Common Stock of $.50 as reported by NASDAQ on November 13, 1997, less the
exercise price of the options. The management of the Company believes that these
prices are fair to all of the Optionholders
<PAGE>
whose fractional interests are retired, the other shareholders of the Company
and the Company.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences of the proposed reverse stock splits
will be as set forth below. The following information is based upon existing law
which is subject to change by legislation, administrative action and judicial
decision and is therefore necessarily general in nature. Therefore, shareholders
are advised to consult with their own tax advisors for more detailed information
relating to their individual tax circumstances.
1. The proposed reverse stock splits will be a tax-free recapitalization
for the Company and its shareholders to the extent that currently outstanding
shares of stock are exchanged for other shares of stock after the split.
2. The new shares of each class of stock in the hands of a shareholder will
have an aggregate basis for computing gain or loss equal to the aggregate basis
of shares of each class of stock held by that shareholder immediately prior to
the proposed reverse stock split if no fractional shares are present. If
fractional shares are present as a result of the split, and the shareholder
realizes a gain on the exchange, the shareholder will recognize a taxable gain
equal to the lesser of the cash received or the gain realized. If fractional
shares are present and a loss is realized on the exchange, the loss is not
recognized, but rather the loss must be deferred until the shareholder disposes
of the new stock in a taxable transaction. The shareholder's basis in the new
stock is equal to the basis in the stock exchanged less any cash received plus
gain recognized, if any.
3. Shareholders who receive cash for fractional shares will be treated as
if they had received such fractional shares and then sold them to the Company.
Such shareholders will recognize gain or loss equal to the difference between
the amount of cash received and their basis in the stock exchanged.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE
REVERSE STOCK SPLIT AMENDMENTS.
<PAGE>
ITEM II. PROPOSAL CONCERNING INCREASE IN NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
At the Meeting, shareholders will be asked to adopt an amendment to the
Company's Certificate of Incorporation to be filed immediately following the
reverse stock split to increase the number of authorized shares of the Company
to 20,000,000 shares of Common Stock, with a par value of $.05 per share (the
"Proposed Stock Amendment"). The Company's Board of Directors has approved the
Proposed Stock Amendment subject to shareholder authorization.
At November 14, 1997, the authorized capital of the Company consisted of
40,000,000 shares of Common Stock and 12,344,300 shares of Preferred Stock, both
par value $.01 per share. Following the reverse stock splits, the authorized
capital of the Company will be 8,000,000 shares of Common Stock and 2,468,860
shares of Convertible Preferred Stock, both par value $.05 per share. As of
November 14, 1997, 7,147,051 shares of Common Stock and 8,339,334 shares of
Convertible Preferred Stock were outstanding. Following the one-for-five reverse
stock splits, the number of outstanding shares of Common Stock will be
approximately 1,429,410 shares. In addition, as of November 14, 1997, after
giving effect to the one-for-five reverse stock split, an aggregate of 1,883,367
shares of Common Stock were reserved for issuance upon: (i) exercise of options
granted or which may be granted under the Company's Stock Option Plans (165,500
shares) and (ii) conversion of the Company's outstanding Convertible Preferred
Stock (1,667,867 shares). Therefore, after the reverse stock split, the Company
will have only 4,737,223 more shares of Common Stock authorized than it has
reserved for issuance. The Company must increase the number of its authorized
shares of Common Stock in order to be able to have adequate Common Stock
available to meet its current obligations to issue Common Stock and in order to
utilize equity issuances in future financings and acquisitions. The Company may
also seek additional financing through the public or private sale of its
securities.
If the Proposed Stock Amendment is adopted by the Company's shareholders,
the additional shares of Common Stock would be issuable at any time and from
time to time, by action of the Board of Directors without further authorization
from the Company's shareholders, except as otherwise required by applicable law
or rules and regulations to which the Company may be subject, to such persons
and for such consideration (but not less than the par value thereof) as the
Board of Directors
<PAGE>
determines. Holders of Common Stock of the Company have no preemptive rights to
acquire or subscribe to any of the additional shares of Common Stock.
Issuance of additional Common Stock, directly or upon conversion of
Preferred Stock or exercise of warrants or options, would have a dilutive effect
on the voting power of the outstanding Common Stock and Convertible Preferred
Stock of the Company. Depending upon the number of shares of the Company's
Common Stock issued and the amount of conversion of any of the shares of
Convertible Preferred Stock into shares of Common Stock and the relationship
thereof to the book value of the Common Stock and Convertible Preferred Stock,
it is possible that issuance of any of the Common Stock, either directly or upon
conversion of any of the Preferred Stock, could have a dilutive effect on
stockholders' equity in the Company.
CONSIDERATIONS
If the Proposed Stock Amendment is not approved, the Company will have a
limited number of authorized shares of Common Stock available for future use by
the Company. The Company's management believes that the authorization of the
additional shares of Common Stock is in the best interests of the Company and
its shareholders so that sufficient shares will be readily available for use, if
feasible, in acquisitions, in raising additional capital and for grants as
incentives to employees, officers, directors and consultants of the Company.
From time to time the Company may consider acquisitions or other
transactions which may require the issuance of shares of Common Stock. The
Company may seek additional financing through the public or private sale of its
securities. The Company's management believes that the increase in the number of
authorized shares of Common Stock is in the best interests of the Company and
its shareholders since additional shares of Common Stock will be available for
use, if feasible, in acquisitions and in raising additional capital and will
provide the Company with the flexibility of having a broader choice in the type
and number of equity securities available to it for the above and other
corporate purposes.
Due to the Board of Directors' discretion in connection with the issuance
of additional shares of Common Stock, such as its ability to cause the Common
Stock to be issued in a private placement, it may, under certain circumstances,
possess timing and other advantages in responding to a tender offer or other
attempt to gain control of the Company, which may make such
<PAGE>
attempts more difficult and less attractive. For example, issuance of additional
shares would increase the number of shares outstanding and could necessitate the
acquisition of a greater number of shares by a person making a tender offer and
could make such acquisition more difficult since the recipient of such
additional shares may favor the incumbent management. Moreover, these advantages
give the Board of Directors the ability to provide any such holders with a veto
power over actions proposed to be taken by the holders of the Company's Common
Stock. This could have the effect of insulating existing management from removal
even if it is in the best interest of the common shareholders. Management of the
Company is not aware of any existing or threatened efforts to obtain control of
the Company.
The foregoing is only a summary of the Proposed Stock Amendment and is not
intended to be complete. Shareholders are urged to read carefully the provisions
of the Proposed Stock Amendment, the complete text of which is attached as part
of Exhibit B to this Proxy Statement. The foregoing summary is qualified in its
entirety by reference to such complete text.
ITEM III. INCREASE IN 1996 STOCK OPTION PLAN
The Board has determined that the Company should increase the number of
shares of Common Stock for which options can be issued pursuant to the 1996
Stock Option Plan by 1,000,000 shares on a post-reverse stock split basis so
that after the reverse stock split the total number of shares for which options
can be granted under the 1996 Plan will be 1,200,000 shares. The 1996 Stock
Option Plan (the "1996 Plan") was approved by the Company's shareholders at the
Annual Meeting on June 12, 1996 in order to make options available to employees,
officers, directors, consultants and others who render services to the Company.
To date, options to acquire 100,000 shares of Common Stock have been granted
under the 1996 Plan. After the reverse stock split, these outstanding options
will be reduced to 20,000 shares. In order to have adequate stock options
available to continue to fulfill the purposes of the 1996 Plan, the Board has
adopted an increase of 1,000,000 shares on a post-reverse stock split basis
available under the 1996 Plan and recommends to the Shareholders that this
increase be approved. A summary of the 1996 Plan is set forth below.
<PAGE>
SUMMARY OF THE 1996 PLAN
The Company may grant to its officers, key employees and others who render
services to the Company, options to purchase ("Options") up to 1,000,000 of the
Company's Common Shares at a price which may not be less than the fair market
value per share in the case of incentive stock options or 85% of fair market
value in the case of non-statutory options for such stock on the date of the
granting of the Option. Payment of this price shall be made in cash, with the
consent of the Board, in whole or in part, in Common Shares or with a full
recourse interest bearing promissory note of the Optionee secured by a pledge of
the shares received upon exercise of such option. (The market value of a Common
Share on November 13, 1997 was $.50). If an option granted under the 1996 Plan
shall expire, terminate or be canceled for any reason without being exercised in
full, the corresponding number of unpurchased shares shall again be available
for the purposes of the 1996 Plan. Options may be granted in the form of
incentive stock options or options which do not qualify for treatment as
incentive stock options.
The 1996 Plan will be administered by the Board of Directors ("Board"). The
Board determines the persons who are to be granted Options based upon the
contribution of such persons to the management and growth of the Company. No
option may be exercised after the expiration of ten years from the date of
grant. No option may be granted under the 1996 Plan after December 31, 2005.
Incentive stock options are also subject to the following limitations: (i)
the aggregate fair market value of Common Shares, with respect to which
incentive stock options are exercisable for the first time by the Optionee
during any fiscal year, may not exceed $100,000 and any excess shall be
considered a non-statutory option (ii) if the individual to whom the incentive
stock options were granted is considered as owning stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
then (A) the option price at the time of grant may not be less than 10% of the
fair market value per share for such stock and (B) the option period must be no
more than five years from the date of grant.
The Board, upon the granting of any Option, will determine how such Option
will be exercisable.
An individual whose employment terminates by reason other than death may
generally exercise an Option within a period determined by the Board (within 89
days of termination, if an incentive
<PAGE>
stock option), or if termination is by reason of death, within the twelve month
period after such termination, and only if, and to the extent that, such Option
was exercisable at the date of termination of employment.
The Board may, at any time, alter, suspend or terminate the 1996 Plan,
except that the Board may not, without further approval of the shareholders (1)
increase the maximum number of shares for which Options may be granted under the
1996 Plan or which may be acquired by the individual employee (2) decrease the
minimum purchase price for Common Shares to be issued upon exercise of Options
or (3) change the class of persons eligible to receive Options. Except in
limited circumstances, the Board may not make any change which would have a
material adverse effect upon any Option previously granted unless the consent of
the Optionee is obtained. However, no person may be divested of ownership of
shares already issued under the 1996 Plan.
TAX MATTERS
The following material is based on discussions with counsel. No opinion of
counsel has been obtained.
The grant or exercise of an incentive stock option will not generally cause
recognition of income by the Optionee; however, the amount by which the fair
market value of a share of Common Stock at the time of exercise of an incentive
stock option exceeds the option price, is a "tax preference item" for purposes
of the alternative minimum tax. In the event of a sale of the shares received
upon exercise of an incentive stock option more than two years from the date of
grant and more than one year from the date of exercise, any appreciation of the
shares received above the exercise price should qualify as long-term capital
gain. However, if shares of Common Stock acquired pursuant to the exercise of an
incentive stock option are sold by the Optionee before the completion of such
holding periods so much of the gain as does not exceed the difference between
the option price and the lesser of the fair market value of the shares at the
date of exercise or the fair market value at the date of disposition will be
taxable as ordinary income for the taxable year in which the sale occurs. Any
additional gain realized on the sale should qualify as capital gain.
<PAGE>
The grant of an Option that is not an incentive stock option (a
"non-qualified option") should not result in recognition of income by the
Optionee. Upon exercise of a non-qualified option, the excess of the fair market
value of the shares on the exercise date over the option price should be
considered compensation taxable as ordinary income to the employee. If the
Optionee is subject to the restrictions of Section 16(b), income will be
recognized at the time the restrictions lapse and should be measured by the
excess of the fair market value of the shares at such time over the option price
unless the Optionee elects to be taxes at the time of exercise. In the event of
a sale of the shares, any appreciation after the date of exercise or lapse of
the restriction of Section 16(b), as the case may be, should qualify the capital
gain.
In connection with incentive stock options and non-qualified options, the
Company will be entitled to a deduction for federal income tax purposes at the
same time and in the same amount as the ordinary income recognized by the
employee, provided that any Federal income tax withholding requirements are
satisfied. If applicable holding period requirements in connection with an
incentive stock option are not satisfied, no deduction will be available to the
Company.
BOARD OF DIRECTORS RECOMMENDATION
The increase in the number shares of Common Stock for which options may be
granted pursuant to the 1996 Plan is necessary because the Board of Directors
believes that by increasing the number of shares, which may be issued under the
1996 Plan, it will advance the interests of the Company by strengthening its
ability to attract and obtain key people in its employ and to furnish incentive
to eligible employees. The Board of Directors further believes that the
additional shares made available under the 1996 Plan will be necessary to
replace the shares effectively rendered unavailable under the 1996 Plan as a
result of the reverse stock split which will reduce the shares reserved under
the plan from 1,000,000 shares to only 200,000 shares on a post-reverse stock
split basis.
The Board of Directors recommends a vote for this proposal. In considering
the Board's recommendation, Shareholders should be aware that members of the
Board may benefit from approval of the proposal and, therefore, have an inherent
conflict of interest. The affirmative vote of a majority of the shares cast at
the Special Meeting will be required to authorize the proposal to increase the
number of options available under the 1996 Plan.
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Common
and Convertible Preferred Stock outstanding and entitled to vote at the Special
Meeting voting together is required to adopt the Capital Amendments. Abstentions
will not be counted as affirmative votes. The affirmative vote of the holders of
a majority of the shares of Common and Convertible Preferred Stock present at
the meeting is required to adapt the proposal to increase the number of shares
of Common Stock for which options can be issued pursuant to the 1996 Stock
Option Plan. The current members of the Board of Directors presently hold voting
authority for Common Stock representing an aggregate of approximately 1,589,937
votes, or approximately 10.27 % of the total number of votes eligible to be cast
at the Annual Meeting. The members of the Board of Directors have indicated
their intention to vote affirmatively on all of the proposals.
EXPENSE OF SOLICITATION
The cost of soliciting proxies, which also includes the preparation,
printing and mailing of this Proxy Statement, will be borne by the Company.
Solicitation will be made by the Company primarily through the mail, but regular
employees of the Company may solicit proxies personally, by telephone or
telegram. The Company will request brokers and nominees to obtain voting
instructions of beneficial owners of stock registered in their names and will
reimburse them for any expenses incurred in connection therewith.
OTHER MATTERS
Management of the Company knows of no matters to be presented at the
Special Meeting, other than the matters set forth in this proxy statement.
However, if any other matters properly come before the meeting, the persons
designated as proxies intend to vote such proxies in accordance with their best
judgment.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE
THE EXPENSE OF FURTHER MAILINGS.
Dated: Levittown, New York
November 14, 1997
By Order of the Board of Directors
James W. Stewart
Secretary
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
COLONIAL COMMERCIAL CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
********
WE, THE UNDERSIGNED, being the President and an Assistant Secretary of
Colonial Commercial hereby certify:
1. The name of the corporation is Colonial Commercial Corp.
2. The certificate of incorporation of said corporation was filed by
the Department of State on the 28th day of October, 1964.
3. a. The certificate of incorporation is amended to decrease the
number of shares authorized to be issued by the corporation to 10,468,860
shares.
b. To effect the foregoing, Article FOURTH (a) relating to the
authorized shares of the corporation is amended to read as follows:
FOURTH: (a) The aggregate number of shares which the
Corporation shall have the authority to issue is ten million four hundred
sixty eight thousand, eight hundred sixty divided into the following classes:
Number
of Par Value
SHARES CLASS PER SHARE
------ ----- ---------
8,000,000 Common Stock $.05
2,468,860 Convertible Preferred Stock $.05
4. The amendment was authorized by the vote of a majority of all the
outstanding shares entitled to vote at a meeting of the shareholders held on
, 1998.
IN WITNESS WHEREOF, said Colonial Commercial Corp., has caused this
certificate to be signed by its President, and its Secretary, this ___ day of
, 1998.
Colonial Commercial Corp.
BY: __________________________
, President
ATTEST: ______________________
, Secretary
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
COLONIAL COMMERCIAL CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
********
WE, THE UNDERSIGNED, being the President and an Assistant Secretary of
Colonial Commercial hereby certify:
1 The name of the corporation is Colonial Commercial Corp.
2. The certificate of incorporation of said corporation was filed by the
Department of State on the 28th day of October, 1964.
3. a. The certificate of incorporation is amended to increase the
number of shares authorized to be issued by the corporation to 22,468,860
shares.
b. To effect the foregoing, Article FOURTH (a) relating to the
authorized shares of the corporation is amended to read as follows:
FOURTH: (a) The aggregate number of shares which the Corporation
shall have the authority to issue is twenty two million four hundred sixty eight
thousand, eight hundred sixty divided into the following classes:
Number
of Par Value
SHARES CLASS PER SHARE
------ ----- ---------
20,000,000 Common Stock $.05
2,468,860 Convertible Preferred Stock $.05
4. The amendment was authorized by the vote of a majority of all the
outstanding shares entitled to vote at a meeting of the shareholders held on
, 1998.
IN WITNESS WHEREOF, said Colonial Commercial Corp., has caused this
certificate to be signed by its President, and its Secretary, this _____ day of
, 1998.
Colonial Commercial Corp.
BY: __________________________
, President
ATTEST: ______________________
, Secretary
<PAGE>
COLONIAL COMMERCIAL CORP.
COMMON STOCK
CONVERTIBLE PREFERRED STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Bernard Korn, James W. Stewart and Donald
K. MacNeill, and each of them, jointly and severally, proxies, with full power
of substitution and revocation, to vote on behalf of the undersigned all shares
of Common Stock and/or Convertible Preferred Stock of Colonial Commercial Corp.
which the undersigned is entitled to vote at the Special Meeting of Shareholders
to be held on January 13, 1998 or any adjournments thereof.
(To Be Signed on Reverse Side)
<PAGE>
Please date, sign and mail your proxy card back as soon as possible!
Special Meeting of Shareholders
COLONIAL COMMERCIAL CORP. COMMON STOCK AND/OR
CONVERTIBLE PREFERRED STOCK
January 13, 1998
Please Detach and Mail in the Envelope Provided
_______________________________________________________________________________
1. Proposal for the ratification to amend the Company's Certificate of
Incorporation to effect a one-for-five reverse stock split for the
Company's Common Stock and Convertible Preferred Stock.
FOR AGAINST ABSTAIN
____ ____ ____
/___/ /___/ /___/
2. Proposal for the ratification to amend the Company's Certificate of
Incorporation to increase the amount of authorized Common Stock.
FOR AGAINST ABSTAIN
____ ____ ____
/___/ /___/ /___/
3. Proposal for the ratification to increase the number of shares of
Common Stock for which options can be issued pursuant to the 1996 Stock
Option Plan.
FOR AGAINST ABSTAIN
____ ____ ____
/___/ /___/ /___/
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE RATIFICATION OF PROPOSALS NO. 1, NO. 2 AND NO. 3.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURES__________________DATE__________
SIGNATURES__________________DATE__________
Note: Please sign exactly as ownership appears on this proxy. 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 President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
