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CUTCO INDUSTRIES, INC.
6900 Jericho Turnpike
Syosset, New York 11791
INFORMATION STATEMENT
We are providing this Information Statement to all persons who our records
indicate were shareholders of CutCo Industries, Inc. on July 15, 1999. We are
providing this information in accordance with Section 14(f) of the Securities
Exchange Act of 1934 and SEC Rule 14f-1.
We are not asking you to respond to this Information Statement nor are we
requesting your vote.
INTRODUCTION
Shera Corp., a Nevada corporation, has entered into an agreement to
purchase from Marvin Marcus and Don vonLiebermann 300,000 of their shares of
common stock of CutCo Industries. This represents 35.4% of the outstanding
shares of common stock of CutCo Industries. As part of the agreement, Mr. Marcus
and Mr. vonLiebermann, who are the only directors of CutCo Industries, will
resign and Ron Oren and Laura Ballegeer will be elected as directors to replace
them. The closing of the purchase and the change in directors will only take
place ten days after this Information Statement has been filed with the
Securities and Exchange Commission and mailed to you.
When the old directors resign and the new directors are elected there will
be a change in control of CutCo Industries.
As of July 15, 1999 there were a total of 847,125 outstanding shares of
common stock of CutCo Industries, our only class of voting securities entitled
to vote for directors at a shareholders' meeting if one were to be held. Each
share is entitled to one vote.
Please read this Information Statement carefully; it describes the terms of
the purchase agreement and also will give you information about Ron Oren and
Laura Ballegeer who will be the only directors and officers of CutCo Industries
after the closing of the purchase agreement.
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PURCHASE AGREEMENT
On July 15, 1999 Mr. Marcus and Mr. vonLiebermann entered into a purchase
agreement with Shera Corp. Under the terms of the purchase agreement they
agreed to sell to Shera Corp. a total of 300,000 of their shares of CutCo
Industries common stock at a price of $4.00 per share for a total of $1,200,000.
When the Purchase Agreement was signed, Shera Corp. paid $665,000 and $35,000
had previously been paid. Shera Corp. was recently incorporated in Nevada in
order to buy the shares of common stock and it does not conduct any other
business.
Under the terms of the purchase agreement at the closing, the following
things will take place:
1) The $500,000 balance of the purchase price not previously paid will be
paid.
2) Mr. Marcus and Mr. vonLiebermann will deliver to Shera Corp.
certificates representing 300,000 shares of common stock.
3) Mr. Marcus and Mr. vonLiebermann will elect Ron Oren and Laura
Ballegeer as new directors of the corporation effective upon their resignation
and then each of them will resign.
4) Our rights agreement will be amended so that Shera Corp.'s acquisition
of shares of common stock will not trigger certain stock purchase rights under
that agreement.
5) The employment agreements between Mr. Marcus and Mr. vonLiebermann and
us will be terminated and each of them will receive a $100,000 termination of
employment payment.
6) Mr. Marcus and Mr. vonLiebermann will each enter into a consulting
agreement with us for a period of two months which will provide them with
payments of $48,000 each.
7) Mr. vonLiebermann will enter into an agreement giving Shera Corp. for
a period of one year after the closing the right to buy an additional 25,000
shares of Common Stock from Mr. vonLiebermann at a price of $4.00 per share.
8) Mr. vonLiebermann will enter into a Voting Agreement with Shera Corp.
and, for a period of three years, will agree to vote the 25,000 shares referred
to above as Shera Corp. directs.
CHANGE OF CONTROL
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When the actions described above take place, CutCo Industries will be
controlled directly by Shera Corp. The sole shareholder of Shera Corp. is the
Oren Family Trust and the trustee of the Oren Family Trust is Ron Oren. He is
also a contingent beneficiary of the Oren Family Trust. Simcha Oren, the mother
of Ron Oren, is the sole beneficiary of the Oren Family Trust. Accordingly, Ron
Oren and Simcha Oren each will be considered to own beneficially 325,000 shares
of common stock of CutCo Industries or 38.4% of the outstanding shares of
common stock following the closing of the Purchase Agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information computed as of the date of this
Information Statement about stockholders who are beneficial owners of more than
5% of the common stock of CutCo Industries or who was an executive officer who
was paid more than $100,000 in the year ended June 30, 1998. This information
was given to us by the stockholders and the numbers used are based on the
definitions of the Securities and Exchange Commission found in Rule 13(d)-3
under the Securities Exchange Act of 1934. Except as indicated below the
shareholders listed have sole voting and investment power over their shares.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
- ------------------- -------------------------- --------
Sole Voting Shared Voting
and Investment and Investment
Power Power
-------------- --------------
Marvin W. Marcus - 0 - 339,513 40.1%
c/o CutCo Industries, Inc.
6900 Jericho Turnpike
Syosset, NY 11791
Don vonLiebermann - 0 - 339,513 40.1%
c/o CutCo Industries, Inc.
6900 Jericho Turnpike
Syosset, NY 11791
CutCo Acquisition Corp. - 0 - 106,200 12.5%
2401 PGA Boulevard
Palm Beach Gardens, FL
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Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class
- ------------------- ----------------------- --------
Sole Voting Shared Voting
and and
Investment Investment
Power Power
------------- --------------
Dr. George Crane 73,000 8.6%
3801 NE 207th Street
Apartment 2001
Aventura, FL 33318-3797
Ron Oren, Trustee of 325,000 38.4%
Oren Family Trust
P.O. Box 16001
Beverly Hills, CA 90209 325,000 38.4%
Simcha Oren
9461 Charleville Boulevard
Suite 546
Beverly Hills, CA 90210
Laura Ballegeer - 0 - - 0 -
806 North Alpine Drive
Beverly Hills, CA 90210
All current officers and 340,513 40.1%
directors as a group
(2 persons)
- --------
(1) We consider each person or group to be the beneficial owner of any shares
of CutCo Industries that may be acquired within 60 days of the date of this
Information Statement through the exercise of options, warrants and rights
and those shares are considered to be outstanding in calculating the
percentage of the class beneficially owned by that person or group. These
shares are not considered to be outstanding for the purpose of computing
the percentage of the class beneficially owned by any other person or
group. Accordingly, the indicated number of shares includes shares
acquirable upon exercise of options (including employee stock options) held
by the person or group).
(2) Messrs. Marcus and vonLibermann entered into an agreement under which they
agreed to vote all of the shares owned by either of them by mutual
agreement between them regarding any matter relating to an acquisition of
CutCo Industries. This number includes 186,666 shares owned by Mr.
vonLiebermann and his individual retirement account 119,241 shares owned by
Mr. Marcus and 33,000 shares owned by Marcus Associates, a partnership of
which Mr. Marcus and his wife are general partners. It also includes 606
shares held by Mr. vonLiebermann as custodian for his children. He can
vote or sell these shares but he has not present economic interest in them.
Mr. vonLiebermann disclaims beneficial ownership of these shares. It does
not include 21,134 shares owned by Mr.
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Marcus' adult children and other relatives of Mr. Marcus. Mr. Marcus does
not have a present economic interest in or voting power over these shares
and he disclaims any beneficial ownership in them.
DIRECTORS AND EXECUTIVE OFFICERS
We expect that as of the closing of the purchase agreement the make up of
our board will be changed but there will still be two directors. It is expected
that Mr. Marcus and Mr. vonLiebermann will resign as directors and that Ron Oren
and Laura Ballegeer will be appointed as new directors to fill the vacancies.
It is also expected that Mr. Marcus and Mr. vonLiebermann will resign their
positions as our chairman and treasurer and president and that Mr. Oren will be
elected president of CutCo Industries and that Ms. Ballegeer will be elected
secretary and treasurer.
Current Executive Officers and Directors
Name Age Positions
---- --- ----------
Marvin Marcus 74 Chairman of the Board, Chief
Executive Officer and Treasurer
Don vonLiebermann 61 President and Chief Operating
Officer
Proposed Executive Officers and Directors After the Closing
Name Age Positions
---- --- ---------
Ron Oren 41 Chairman, President and Director
Laura Ballegeer 28 Director
MARVIN W. MARCUS, age 74, has been Chairman of the Board of Directors of
CutCo Industries since October 1, 1986 and Vice President-Financial Planning
since May 1984. Mr. Marcus has also been a director of CutCo Industries since
1970. From 1970 until April 1984, he served as Secretary/Treasurer and Chief
Financial Officer of CutCo Industries. In May 1998, Mr. Marcus resumed his
duties as Treasurer and Chief Financial Officer, upon the resignation of Michael
P. Kramer from those positions. He is a certified public accountant and for more
than twenty years has been a principal in the accounting firm of Gettry, Marcus,
Stern & Lehrer, CPA, P.C., formerly known as Gettry, Marcus & Co.,
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located in New York, New York.
DON vonLIEBERMANN, age 61, has been President of CutCo Industries since
October 1, 1986, and a director since 1975. Mr. vonLiebermann had been Vice
President, and thereafter Executive Vice President, of CutCo Industries from
1970 until he became President of CutCo Industries. In May 1998, Mr.
vonLiebermann assumed certain of the operational duties previously handled by
Mr. Kramer, who resigned in May 1998.
RON OREN, age 41, for more than ten years has been a private investor
engaged in real estate transactions for his own account and the management of
real estate he holds. Mr. Oren has also been an investor in public companies for
his own account.
LAURA BALLEGEER, age 28, for more than five years has been a private
investor engaged in real estate transactions for her own account. Ms. Ballegeer
has also managed investments for a limited number of private investors. Ms.
Ballegeer is the wife of Mr. Oren.
During the year ended June 30, 1998, our board of directors held one
meeting. We do not have an audit committee charged with a review of the
activities of CutCo Industries' independent auditors. We do not have a
nominating committee charged with the selection for and recommendation to the
board of potential nominees for board positions. We do not have a compensation
committee charged with reviewing and recommending to the board compensation
programs for our officers. These functions are performed by the board as a
whole.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act requires our officers,
directors and persons who beneficially own more than ten percent of our common
stock to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. These reporting persons also are required to furnish us
with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms furnished to us and
representations that no other reports were required, we believe that all Section
16(a) reporting requirements were complied with by our officers and directors
during the year ended June 30, 1998.
Executive Compensation
The following table shows information regarding compensation for services
rendered in all capacities to us and our subsidiaries during the fiscal years
ended June 30, 1996, 1997 and 1998, to the three (3) highest paid persons who
are, or at some point during the fiscal year ended June 30, 1998 were, our
officers or directors (being the only such
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persons whose aggregate annual compensation exceeds $100,000). A fee of $500 per
meeting was paid to non-employee members of the board for attendance in person
at board meetings.
Summary Compensation Table
Securities
Underlying
Name and Salary($) Option Other
Principal Position Year (1)(2) Grant Compensation
- ------------------ ---- ----------- ---------- ------------
Don vonLiebermann, 1998 202,000 - (3)
President 1997 202,000 - (3)
1996 202,000 20,000 (3)
Marvin W. Marcus, 1998 184,500 - (3)
Chairman of the Board 1997 184,500 - (3)
and Treasurer 1996 184,5000 20,000 (3)
Michael P. Kramer, Vice 1998 143,573 - (3)
President - Finance 1997 143,573 - (3)
1996 143,573 20,000 (3)
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(1) The current annual salary for each of Messrs. Marcus and vonLiebermann is
$184,500 and $202,000, respectively. Mr. Kramer resigned as an officer,
director and employee effective April 30, 1998. Mr. Kramer and we entered
into a severance agreement in connection with his resignation. The
terms of the severance agreement obligate us to pay to Mr. Kramer his
salary for the months of May and June, 1998, as well as that portion of
fiscal 1999 that commences July 1, 1998 and ends December 31, 1998. The
amount of salary set forth above for Mr. Kramer for fiscal 1998 includes
that portion of the severance payments that were due and paid for periods
during fiscal 1998.
(2) Does not include $32,400, $32,400 or $32,400 paid to the accounting firm of
Gettry, Marcus, Stern & Lehrer, CPA, P.C. (formerly known as Gettry, Marcus
& Co.), in which Mr. Marcus is a principal, for services rendered by the
firm during the fiscal years ended June 30, 1998, 1997 and 1996,
respectively, in the preparation of federal, state and local tax returns
and performance of other accounting services for us and our subsidiaries,
inclusive of disbursements.
(3) We provided and maintained automobiles for use by Marvin W. Marcus, Don
vonLiebermann and Michael P. Kramer in connection with our business during
each of fiscal years 1996, 1997 and 1998. The aggregate annual cost to us
for these
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automobiles in each year was approximately $48,000. To the extent these
automobiles were used for other than our business, the cost of rental and
maintenance may be considered compensation to the above-named individuals.
No value for personal use of automobiles by such individuals has been
included in the aggregate remuneration table set forth above.
Employment Agreements
Each of Messrs. Marcus, vonLiebermann and Kramer entered into an employment
agreement with us dated April 24, 1991, each of which had been amended from time
to time. Mr. Kramer's employment agreement, which had most recently been amended
on June 16, 1997 by written agreement, terminated effective April 30, 1998. The
annual employment agreements of Messrs. Marcus and vonLiebermann were replaced
with new employment agreements entered into on October 15, 1998 and subsequently
amended on April 1, 1999 by written agreement. Each of the employment agreements
for Messrs. Marcus and vonLiebermann is now scheduled to expire on July 31,
2001. The Employment Agreements provide for initial annual salaries of $184,500
for Mr. Marcus and $202,000 for Mr. vonLiebermann.
The employment agreements contain customary provisions for
benefits(including retirement and severance payments), reimbursement of
expenses, disability, non-disclosure and non-competition. The employment
agreements contain change of control payment provisions, including the
acquisition of more than 15% of our common stock by a person who was not such a
holder on April 1, 1999. If the employment of either Mr. Marcus or Mr.
vonLiebermann were terminated by us following a change of control, each would be
entitled to receive an amount equal to the greater of one year's salary or the
balance of the remaining salary payments through the fixed termination date
(July 31, 2001) of the Employment Agreements. Neither Mr. Marcus nor Mr.
vonLiebermann is entitled to any vested pension benefits.
As part of the closing under the purchase agreement, each of Mr. Marcus and
Mr. vonLiebermann, in consideration of the termination of their employment
agreements and the rights to receive further compensation and change of control
termination of employment payments thereunder, will each receive a $100,000
termination payment.
Stock Option Plans
We had a stock option plan for our officers, directors and employees that
was adopted on October 16, 1987. Since September 30, 1997, options may no longer
be granted under the 1987 plan. We also had a stock option plan for our
officers, directors and employees and our subsidiaries that was adopted on
November 15, 1990.
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Options granted under the 1990 plan to employees may be either incentive
stock options or non-qualified stock options at the discretion of the board.
Options granted under the 1990 plan to non-employee directors must be non-
qualified stock options. Non-qualified stock options are not intended to qualify
for incentive stock option plan treatment.
The 1990 plan gives sole discretion to the board to grant options to
purchase shares of our common stock at not less than the market value of the
shares on the date of grant. Options granted under the 1990 plan must expire no
later than ten years (five years, if the grantee is a director or holder of 10%
of our voting stock), after the date of grant.
During fiscal 1998, no options were exercised under any of the plans.
During fiscal 1998, no options to acquire shares of common stock previously
granted under the plans expired. Furthermore, during fiscal 1998, no options to
purchase shares were granted under the plans.
As of June 30, 1998, there were 60,000 shares available as the subject of
options to purchase under the 1990 plan.
Certain Relationships and Related Transactions
See footnote (3) of the aggregate annual remuneration table under
"Aggregate Annual Remuneration," for a discussion of amounts paid by us during
fiscal 1998 to Gettry, Marcus, Stern & Lehrer, CPA, P.C., a New York City
accounting firm in which both Mr. Marcus, a shareholder, director and executive
officer of CutCo Industries, and a former director, are principals.
With respect to the fees paid by us for services, as described in the
preceding paragraph, Management believes that such fees are substantially
comparable to the fees that would have been paid to unaffiliated parties
providing such services to us.
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CUTCO INDUSTRIES, INC.
