SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
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 Section 240.14a-11(c) or
Section 240.14a-12
GATEWAY INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Persons(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:
(4) Proposed maximum aggregate value of transaction:
<PAGE>
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
GATEWAY INDUSTRIES, INC.
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 29, 2000
--------------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of GATEWAY INDUSTRIES, INC., a Delaware corporation (the "Company"),
will be held at the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP,
located at 505 Park Avenue, New York, New York 10022, on August 29, 2000 at
10:00 A.M., local time, for the following purposes:
1. To elect three members of the board of directors of the
Company (the "Board of Directors" or the "Board") to serve until the
next annual meeting of stockholders and until their successors have
been duly elected and qualified;
2. To approve an amendment to the Company's 1990 Incentive
Stock Option Plan and 1990 Nonstatutory Stock Option Plan that would
increase from 400,000 to 850,000 the number of shares reserved for
issuance pursuant to the exercise of stock options granted or to be
granted thereunder;
3. To ratify the appointment of Grant Thornton LLP as the
Company's independent auditors for the year ending December 31, 2000;
and
4. To transact such other business as may properly be brought
before the Meeting or any adjournment thereof.
The Board has fixed the close of business on July 3, 2000 as the record
date for the Meeting. Only stockholders of record on the stock transfer books of
the Company at the close of business on that date are entitled to notice of, and
to vote at, the Meeting.
By Order of the Board of Directors
Glen M. Kassan
Secretary
Dated: July 12, 2000
New York, New York
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED
TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT IS
PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
GATEWAY INDUSTRIES, INC.
150 EAST 52ND STREET, 21st FLOOR
NEW YORK, NEW YORK 10022
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 29, 2000
----------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders by the Board of
Directors of GATEWAY INDUSTRIES, INC., a Delaware corporation (the "Company"),
in connection with the solicitation of the accompanying Proxy for use at the
2000 Annual Meeting of Stockholders of the Company (the "Meeting") to be held at
the offices of Olshan Grundman Frome Rosenzweig & Wolosky LLP, located at 505
Park Avenue, New York, New York 10022, on August 29, 2000, at 10:00 A.M., local
time, or at any adjournment thereof.
The approximate date on which this Proxy Statement and the accompanying
Proxy will first be sent or given to stockholders is July 12, 2000.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on July 3, 2000,
the record date (the "Record Date") for the Meeting, will be entitled to notice
of, and to vote at, the Meeting and any adjournment thereof. As of the close of
business on the Record Date, there were 4,142,026 outstanding shares of the
Company's common stock, $.001 par value (the "Common Stock").
VOTING OF PROXIES
Shares of Common Stock represented by Proxies that are properly
executed, duly returned and not revoked will be voted in accordance with the
instructions contained therein. If no specification is indicated on the Proxy,
all such shares will be voted (i) for the election as directors of the persons
who have been nominated by the Board, (ii) for the approval of an amendment to
the Company's 1990 Incentive Stock Option Plan and 1990 Nonstatutory Stock
Option Plan (the "Plans") increasing from 400,000 to 850,000 the number of
shares reserved for issuance pursuant to the exercise of stock options granted
or to be granted thereunder (the "Stock Option Plan Amendment"), (iii) for the
ratification of the appointment of Grant Thornton LLP as the Company's
independent auditors for the year ending December 31, 2000 and (iv) on any other
matter that may properly be brought before the Meeting in accordance with the
judgment of the person or persons voting the Proxies.
The execution of a Proxy will in no way affect a stockholder's right to
attend the Meeting and to vote in person. Any Proxy executed and returned by a
stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy that is presented to
the Meeting or if the stockholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant to the authority conferred by such Proxy prior to such revocation.
<PAGE>
The cost of solicitation of the Proxies being solicited on behalf of
the Board will be borne by the Company. In addition to the use of the mails,
proxy solicitation may be made by telephone, telegraph and personal interview by
officers, directors and employees of the Company. The Company will, upon
request, reimburse brokerage houses and persons holding Common Stock in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals.
The Company has retained Mackenzie Partners, Inc. ("Mackenzie") to
solicit proxies at a cost of approximately $5,000, plus certain out-of-pocket
expenses. If the Company requests Mackenzie to perform additional services,
Mackenzie will bill the Company at its usual rate.
VOTING RIGHTS
Holders of each share of Common Stock are entitled to one vote for each
share held on all matters. The holders of a majority of the outstanding shares
of Common Stock whether present in person or represented by proxy, will
constitute a quorum for the election of directors, the approval of the Stock
Option Amendment and the ratification of the appointment of Grant Thornton LLP,
and any other matters that may come before the meeting.
Broker "non-votes" and the shares as to which a stockholder abstains
from voting are included for purposes of determining whether a quorum of shares
is present at a meeting. A broker "non-vote" occurs when a nominee holding
shares for a beneficial owner does not vote on a particular proposal because the
nominee does not have discretionary voting power with respect to that item and
has not received instructions from the beneficial owner.
A plurality of the total votes cast by holders of Common Stock is
required for the election of directors. In tabulating the vote on the election
of directors, abstentions and broker "non-votes" will be disregarded and will
have no effect on the outcome of such vote.
The affirmative vote of a majority of the votes cast by holders of
Common Stock is required to approve the Stock Option Plan Amendment and the
proposal to ratify the appointment of Grant Thornton LLP. In tabulating the
votes on the proposals to approve the Stock Option Plan Amendment and ratify the
appointment of Grant Thornton LLP, shares as to which a stockholder abstains are
considered shares entitled to vote on the applicable proposal and therefore an
abstention would have the effect of a vote against such proposals. Broker
non-votes, however, are not considered shares entitled to vote on the applicable
proposals and are not included in determining whether the Stock Option Plan
Amendment and the proposal to ratify the appointment of Grant Thornton LLP are
approved.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Company's Common Stock, as of the Record Date, by each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
Common Stock, each director, each executive officer, each nominee for election
as a director and by all directors and executive officers of the Company as a
group. Unless otherwise indicated, the address for each 5% stockholder is 150
East 52nd Street, 21st Floor, New York, New York 10022.
-2-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Directors, Nominees, Executive Officers and 5% Beneficially Percent
Stockholders Owned(1) -age
------------ -------- ----
<S> <C> <C>
Warren G. Lichtenstein....................................... 1,865,760(2)(3) 43.5%
Ronald W. Hayes.............................................. 98,840(4) 2.4%
Jack L. Howard............................................... 162,700(5) 3.8%
Glen M. Kassan............................................... * *
Steel Partners II, L.P....................................... 1,674,208 40.0%
George Soros................................................. 827,716(6) 20.0%
Soros Fund Management LLC
888 Seventh Avenue
New York, New York 10022
All directors and executive 2,127,300(2) 49.7%
officers as a group (four persons)
</TABLE>
-------------------
* Less than 1%
(1) A person is deemed to be the beneficial owner of voting securities that
can be acquired by such person within 60 days after 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 that are currently
exercisable (i.e., that are exercisable within 60 days after the Record
Date) have been exercised. Unless otherwise noted, the Company believes
that all persons named in the table have sole voting and investment
power with respect to all shares beneficially owned by them.
(2) Consists of (i) 1,674,208 shares owned by Steel Partners II, L.P., an
entity controlled by Mr. Lichtenstein, (ii) 41,552 shares owned
directly by Mr. Lichtenstein, and (iii) 150,000 stock options held by
Mr. Lichtenstein, all of which are exercisable within sixty days of the
Record Date.
(3) More than one beneficial owner is listed above for the same securities,
since the shares owned beneficially by Steel Partners II, L.P. are
included in the shares beneficially owned by Mr. Lichtenstein. See note
(2) above.
(4) Includes 50,500 stock options, all of which are exercisable within
sixty days of the Record Date.
(5) Includes 107,500 stock options, all of which are exercisable within
sixty days of the Record Date.
(6) Such information is based on a joint filing of an amended Schedule 13D
filed on April 2, 1997.
-3-
<PAGE>
PROPOSAL I--ELECTION OF DIRECTORS
Nominees
Unless otherwise specified, all Proxies received will be voted in favor
of the election of the persons named below as directors of the Company, to serve
until the next Annual Meeting of Stockholders of the Company and until their
successors shall be duly elected and qualified. Each of the nominees currently
serve as directors of the Company. The terms of office of the current directors
expire at the Meeting and when their successors are duly elected and qualified.
Management has no reason to believe that any of the nominees will be unable or
unwilling to serve as a director, if elected. Should any of the nominees not
remain a candidate for election at the date of the Meeting, the Proxies will be
voted in favor of those nominees who remain candidates and may be voted for
substitute nominees selected by the Board. The names of the nominees and certain
information concerning them are set forth below:
First Year
Name Age Became Director
---------------------------------- ----- -------------------
Warren G. Lichtenstein 34 1994
Jack L. Howard 38 1994
Ronald W. Hayes 62 1993
---------------
Warren G. Lichtenstein, a nominee for director, was appointed a
director of the Company in May 1994 and became Chairman of the Board in October
1995. Mr. Lichtenstein has been the Chief Executive Officer of the Company since
September 1994. Mr. Lichtenstein has been the Chairman of the Board, Secretary
and the Managing Member of Steel Partners, L.L.C. ("Steel LLC"), the general
partner of Steel Partners II, L.P. since January 1, 1996. Prior to such time,
Mr. Lichtenstein was the Chairman and a director of Steel Partners, Ltd., the
general partner of Steel Partners Associates, L.P., which was the general
partner of Steel Partners II, L.P. since 1993 and prior to January 1, 1996. Mr.
Lichtenstein has also been President and Chief Executive Officer of WebFinancial
Corporation ("WEFN") since December 1997. Mr. Lichtenstein served as President
and director of Marsel Mirror and Glass Products, Inc. ("Marsel"), a subsidiary
of the Company, from its inception in July 1995 until shortly after the
acquisition of its business by the Company in November 1995, and continued as a
director until its disposition in December 1996. Marsel filed for protection
under Chapter 11 of the United States Bankruptcy Code shortly following the
Company's disposition of its interest in Marsel. Mr. Lichtenstein is a director
of the following publicly held companies: WebFinancial Corporation, PLM
International, Inc., Tech-Sym Corporation, CPX Corp., ECC International Corp.
and Puroflow Incorporated.
Jack L. Howard, a nominee for director, was appointed President of the
Company in June 2000 and was elected director of the Company in May 1994. Prior
to that, Mr. Howard was Acting President and Chief Financial Officer of the
Company since September 1994. Mr. Howard has been a registered principal of
Mutual Securities, Inc., a stock brokerage firm since prior to 1995. Mr. Howard
has also been the Vice President, Secretary, and Treasurer of WEFN since
December 1997. Mr. Howard is a director of the following publicly held
companies: WebFinancial Corporation and Pubco Corporation.
Ronald W. Hayes, a nominee for director, was appointed a director of
the Company in May 1993. Mr. Hayes has been the owner of Lincoln Consultors &
Investors, Inc., an investing and consulting firm, for over five years.
-4-
<PAGE>
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES.
Meetings
The Board held four meetings during the year ended December 31, 1999.
From time to time, the members of the Board act by unanimous written consent
pursuant to the laws of the State of Delaware.
The Company does not presently have an audit, compensation or
nominating committee, the customary functions of such committees being performed
by the entire Board.
MANAGEMENT
Executive Officers of the Company
The following table contains the names, positions and ages of the executive
officers of the Company who are not directors.
Principal Occupation for the
Past Five Years and Current
Name Public Directorships Age
---- -------------------- ---
Glen M. Kassan Vice President, Chief Financial 56
Officer and Secretary of the
Company since June 2000. Vice-
President of Steel Partners
Services, Ltd. since October
1999. From 1997 to 1998,
Chairman and Chief Executive
Officer of Long Term Care
Services, Inc., a privately owned
healthcare services company
which Mr. Kassan co-founded in
1994 and initially served as Vice
Chairman and Chief Financial
Officer.
-5-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company during the fiscal years ended December 31, 1999, 1998 and
1997 to the Company's Chief Executive Officer. The Company did not have any
executive officer whose salary and bonus exceeded $100,000 with respect to the
fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Securities
Underlying
Name and Principal Position Year Salary($)(1) Bonus($) Options(#)
--------------------------- ---- ------------ -------- ----------
<S> <C> <C> <C> <C>
Warren G. Lichtenstein, Chairman of 1999 0 - 50,000
the Board and Chief Executive Officer 1998 0 - -
1997 0 - -
</TABLE>
(1) For more information relating to the management functions performed by Steel
Partners Services, Ltd. ("SPS"), an entity controlled by Warren G. Lichtenstein,
please see "Certain Relationships and Related Transactions."
The following table sets forth certain information regarding stock
options granted to the Chief Executive Officer during the fiscal year ended
December 31, 1999. The Company has never granted any stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
Individual grants
<TABLE>
<CAPTION>
Number of
Securities % of Total Options
Underlying Granted to
Options Employees in Exercise or Base Expiration
Name Granted(#)(1) Fiscal Year(2) Price($/Sh) Date
---- ------------- -------------- ----------- ----
<S> <C> <C> <C> <C>
Warren G. Lichtenstein 50,000 31.85% $2.00 7/20/04
</TABLE>
(1) All of the options were granted in respect of Mr. Lichtenstein's
service as an executive officer of the Company.
(2) Based on an aggregate of 173,500 options granted to all employees,
non-employees, and consultants during 1999. Options vest in three
annual installments.
No options were exercised by the Chief Executive Officer during the
fiscal year ended December 31, 1999.
-6-
<PAGE>
The following table sets forth certain information regarding
unexercised stock options held by the Chief Executive Officer as of December 31,
1999.
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised In-the-Money
December 31, 1999 Options at December 31, 1998 (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable($)
-------------------------- --------------------------------- ------------------------------------
<S> <C> <C>
Warren G. Lichtenstein 116,667/33,333 33,334/66,666
</TABLE>
(1) Based on $2.00, the average high/low bid prices for the Common Stock on the
last date of 1999 for which trading was reported.
Compensation of Directors and Executive Officers
Prior to its acquisition of Oaktree Systems, Inc., the Company had no
employees. Day-to-day management functions have been and shall continue to be
performed by SPS. Please see the section titled "Certain Relationships and
Related Transactions" for a description of the contractual arrangement between
the Company and SPS.
The Company does not currently compensate directors who are also
employees of the Company for service on the Board. Directors are reimbursed for
their expenses incurred in attending meetings of the Board.
Board Compensation Committee Report on Executive Compensation
Securities and Exchange Commission regulations require the disclosure
of the compensation policies applicable to executive officers in the form of a
report by the compensation committee of the Board (or a report of the full Board
in the absence of a compensation committee). As noted above, the Company has no
employees and pays no compensation. As a result, the Board has not considered
compensation policy for employees and has not included a report with this proxy
statement.
Compensation Committee Interlocks and Insider Participation
None of the Directors serving on the Stock Option and Compensation
Committee were a party to any transaction which requires disclosure under Item
402(j) of Regulation S-KSB.
Transactions With Management and Others
See the section titled "Certain Relationships and Related Transactions"
with respect to transactions involving management and others.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with
the
-7-
<PAGE>
Securities and Exchange Commission ("SEC"). Such officers, directors and 10%
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 1999, that there was compliance
with all Section 16(a) filing requirements applicable to its officers, directors
and 10% stockholders.
Certain Relationships and Related Transactions
Pursuant to a Management Agreement approved by the Company's sole
disinterested director, SPS provides the Company with certain management,
consulting, advisory services and office space. In 1999, SPS received fees of
$275,000 from the Company. In 2000, the fee payable to SPS is expected to be
$280,000. The Management Agreement has a one year term and is renewable
automatically for successive one year periods, unless terminated by either party
upon 60 days' notice prior to the renewal date. The Company believes that the
cost of obtaining the type and quality of services rendered by SPS under the
Management Agreement is no less favorable than the cost at which the Company
could obtain from unaffiliated entities.
PROPOSAL II-- APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED 1990
INCENTIVE STOCK OPTION PLAN AND 1990 NONSTATUTORY STOCK OPTION PLAN
The Board of the Company has unanimously approved for submission to a
vote of the stockholders a proposal to amend the Plans to increase from 400,000
shares of Common Stock to 850,000 shares of Common Stock the number of shares
reserved for issuance pursuant to the exercise of options granted thereunder.
The purpose of the Plans is to promote the growth and profitability of the
Company by providing, through the granting of options, incentive to attract
highly talented persons to positions with the Company or any of its
subsidiaries, to retain such persons and to motivate them to use their best
efforts on behalf of the Company or its subsidiaries. No options can be granted
under the Plans after 2005. Each option granted pursuant to the Plans shall be
designated at the time of grant as either an "incentive stock option" or as a
"non-qualified option."
The Plans, as proposed to be amended, would authorize the issuance of a
maximum of 850,000 shares of Common Stock pursuant to the exercise of options
granted thereunder. At December 31, 1999, stock options to purchase 343,500
shares of Common Stock available under the Plans have been granted, including
options to purchase 60,000 shares to executive officers and Directors of the
Company. In addition, options to purchase 200,000 shares of Common Stock at an
exercise price of $4.00 per share have been granted to three stockholders of
Oaktree pursuant to the terms of the Company's acquisition of Oaktree, subject
to stockholder approval of the Stock Option Plan Amendment. Should such
stockholder approval not be obtained, then any stock options granted under the
Plans on the basis of the increase to 850,000 shares of Common Stock will
terminate without ever becoming exercisable for any of the shares of Common
Stock subject to those options, and no further options will be granted.
Administration of the Plans
The Plans shall be administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Committee"). The Committee
shall determine to whom, among those eligible, and the time or times at which
options, will be granted, the number of shares to be subject to options the
duration of options, any conditions to the exercise of options, and the manner
in a price at which options may be exercised.
The Board may amend, suspend, alter or terminate the Plans at any time.
To the extent necessary or desirable to comply with Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, the Internal
-8-
<PAGE>
Revenue Code or any other applicable law or regulation, the Company shall obtain
stockholder approval of any amendment to the Plans only in such a manner and to
such a degree as required.
Option Price
The exercise price of each option is determined by the Committee, but
may not be less than 100% of the fair market value of the shares of Common Stock
covered by the option on the date the option is granted, in the case of an
incentive stock option. If an incentive stock option is to be granted to an
employee who owns over 10% of the total combined voting power of all classes of
Company's stock, then the exercise price may not be less than 110% of the fair
market value of the Common Stock covered by the option on the date the option is
granted.
Terms of Options
The term of each option shall be determined by the Board, but in no
event shall an option terminate later than 10 years after the date of grant.
Incentive options granted to an employee who owns over 10% of the total combined
voting power of all classes of stock of the Company shall expire not more than
five years after the date of grant. The Plans provide for the earlier expiration
of options of a participant in the event of certain terminations of employment.
Registration of Shares
The Company has filed a registration statement under the Securities Act
with respect to 400,000 shares of Common Stock issuable pursuant to the Plans.
The Company intends to file an additional registration statement under the
Securities Act with respect to the additional 450,000 shares of Common Stock
issuable pursuant to the Stock Option Plan Amendment subsequent to the Stock
Option Plan Amendment's approval by the Company's stockholders.
New Plan Benefits
Grants under the Plans shall be generally made at the discretion of a
Compensation and Stock Option Committee and are therefore not determinable with
respect to dollar value or amount. The following table sets forth the total
number of Options granted under the Plans during the 1999 and 2000 fiscal years
and the dollar value of such Options as of the Record Date based on the closing
trading price of the Common Stock on such date.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
Number of Options
Granted in Fiscal
Name and Position Dollar Value ($) 1999 and 2000
----------------- ---------------- -------------
<S> <C> <C>
Warren G. Lichtenstein -0- 50,000
Chairman of the Board
and Chief Executive Officer
Jack L. Howard -0- 10,000
President
Glen M. Kassan $7,500 40,000
Vice President, Chief
Financial Officer and
Secretary
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Frank C. Mackay, Jr. -0- 135,280
President, Oaktree Systems, Inc.
Thomas Tomaszewski -0- 45,100
Senior Vice President, Oaktree
Systems, Inc.
Edward W. Testa, Jr. -0- 19,620
Senior Vice President, Oaktree
Systems, Inc.
Executive Group $7,500 100,000
Non-Executive Employees Group -0- 200,000
</TABLE>
Required Vote
The affirmative vote of a majority of the votes cast by holders of the
Common Stock is required to approve the Stock Option Plan Amendment. If the
Stock Option Plan Amendment is approved, Section 4.1 of the Plans will be
amended and restated in its entirety as follows:
"Subject to Section 8.1, the maximum number of Shares which may be
optioned and sold under the Plans is 850,000 in the aggregate."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSAL TO AMEND
THE AMENDED AND RESTATED 1990 INCENTIVE STOCK OPTION PLAN AND 1990 NONSTATUTORY
STOCK OPTION PLAN
-----------
PROPOSAL III--RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
On June 22, 1999, the Company was informed by Ernst & Young LLP, that
it had resigned as the Company's auditors. Ernst & Young's reports on the
financial statements for the past two years have not contained any adverse
opinion or disclaimer of opinion, nor was any opinion qualified or modified as
to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Company's consolidated financial
statements for each of the two fiscal years ended December 31, 1998 and 1997,
and in the interim period subsequent to December 31, 1998, preceding the date of
Ernst & Young's resignation, there were no "disagreements," as that term is
defined in the instructions to Form 8-K and the regulations applicable to Item 4
of Form 8-K, with Ernst & Young on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which
"disagreement", if not resolved to the satisfaction of Ernst & Young, would have
caused Ernst & Young to make reference to the subject matter of the
"disagreement" in their report.
On June 29, 1999, the Board of the Company engaged Grant Thornton LLP
as the Company's auditors. The Company has not consulted with Grant Thornton LLP
during the past two fiscal years concerning the application of accounting
principles or any issues relating to accounting, auditing or financial
reporting.
-10-
<PAGE>
Ernst & Young has furnished the Company with a letter addressed to the
SEC stating that it agrees with the above statements.
Although the selection of auditors does not require ratification, the
Board has directed that the appointment of Grant Thornton LLP be submitted to
stockholders for ratification due to the significance of such appointment to the
Company. If stockholders do not ratify the appointment of Grant Thornton LLP,
the Board will consider the appointment of other certified public accountants.
The approval of the proposal to ratify the appointment of Grant Thornton LLP
requires the affirmative vote of a majority of the votes cast by holders of the
Common Stock.
The Company's auditors for the fiscal year ended December 31, 1999 were
Ernst & Young LLP. The Company does not expect a representative of Ernst & Young
LLP or Grant Thornton LLP to be present at the Meeting.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 2000.
ANNUAL REPORT
All stockholders of record as of the Record Date, have been sent, or
are concurrently herewith being sent, a copy of the Company's 1999 Annual Report
for the year ended December 31, 1999, which contains certified financial
statements of the Company for the year ended December 31, 1999.
ANY STOCKHOLDER OF THE COMPANY MAY OBTAIN WITHOUT CHARGE A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1999
(WITHOUT EXHIBITS), AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BY
WRITING TO GLEN M. KASSAN, SECRETARY AT GATEWAY INDUSTRIES, INC., 150 EAST 52ND
STREET, 21st FLOOR, NEW YORK, NEW YORK 10022.
STOCKHOLDER PROPOSALS
Stockholder proposals made in accordance with Rule 14a-8 under the
Exchange Act and intended to be presented at the Company's 2001 Annual Meeting
of Stockholders must be received by the Company at its principal office in New
York, New York no later than February 5, 2001 for inclusion in the proxy
statement for that meeting.
On May 21, 1998 the Securities and Exchange adopted an amendment to
Rule 14a-4, as promulgated under the Securities and Exchange Act of 1934, as
amended. The amendment to Rule 14a-4(c)(1) governs the Company's use of its
discretionary proxy voting authority with respect to a stockholder proposal
which is not addressed in the Company's proxy statement. The new amendment
provides that if a proponent of a proposal fails to notify the Company at least
45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
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<PAGE>
With respect to the Company's 2001 Annual Meeting of Stockholders, if
the Company is not provided notice of a stockholder proposal, which the
stockholder has not previously sought to include in the Company's proxy
statement, by May 20, 2001, the company will be allowed to use its voting
authority as outlined above.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters
other than those set forth herein which will be presented for consideration at
the Meeting. If any other matter or matters are properly brought before the
Meeting or any adjournment thereof, the persons named in the accompanying Proxy
will have discretionary authority to vote, or otherwise act, with respect to
such matters in accordance with their judgment.
Glen M. Kassan
Secretary
July 12, 2000
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GATEWAY INDUSTRIES, INC.
Proxy -- Annual Meeting of Stockholders
August 29, 2000
The undersigned, a stockholder of Gateway Industries, Inc., a Delaware
corporation (the "Company"), does hereby appoint Warren G. Lichtenstein and Jack
L. Howard, and each of them, the true and lawful attorneys and proxies with full
power of substitution, for and in the name, place and stead of the undersigned,
to vote all of the shares of Common Stock of the Company which the undersigned
would be entitled to vote if personally present at the 2000 Annual Meeting of
Stockholders of the Company to be held at the offices of Olshan Grundman Frome
Rosenzweig & Wolosky LLP at 505 Park Avenue, New York, New York 10022, on August
29, 2000 at 10:00 A.M., local time, or at any adjournment or adjournments
thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS:
The election of Warren G. Lichtenstein, Jack L. Howard and Ronald W.
Hayes to the Board of Directors, to service until the 2001 Annual Meeting
of Stockholders and until their respective successors are elected and
shall qualify.
WITHHOLD AUTHORITY
FOR ALL TO VOTE FOR ALL ________________________
NOMINEES ___ NOMINEES ___ ________________________
To withhold authority to
vote for any individual
nominee(s), print name
above.
2. TO AMEND THE COMPANY'S AMENDED AND RESTATED 1990 INCENTIVE STOCK OPTION
PLAN AND 1990 NONSTATUTORY STOCK OPTION PLAN:
______ FOR _____ AGAINST _____ ABSTAIN
3. TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS:
______ FOR _____ AGAINST _____ ABSTAIN
4. DISCRETIONARY AUTHORITY:
In their discretion, the proxies are authorized to vote upon such other
and further business as may properly come before the Meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS
HEREINBEFORE GIVEN. UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO
ELECT DIRECTORS, APPROVE THE AMENDMENT TO THE AMENDED AND RESTATED 1990
INCENTIVE STOCK OPTION PLAN AND 1990 NONSTATUTORY STOCK OPTION PLAN AND TO
RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT
AUDITORS.
<PAGE>
The undersigned hereby revokes any proxy or proxies heretofore
given, and ratifies and confirms that all the proxies appointed hereby, or any
of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Dated _______________________, 2000
_____________________________ (L.S.)
_____________________________ (L.S.)
Signature(s)
NOTE: Please sign exactly as your name or names appear
hereon. When signing as attorney, executor, administrator,
trustee or guardian, please indicate the capacity in which
signing. When signing as joint tenants, all parties in the
joint tenancy must sign. When a proxy is given by a
corporation, it should be signed with full corporate name by
a duly authorized officer.
Please mark, date, sign and mail this proxy in the
envelope provided for this purpose. No postage is required
if mailed in the United States.
