SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of
the Commission Only (as
permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ACORN HOLDING CORP.
- -----------------------------------------------------------------
(Name Of Registrant As Specified In Its Charter)
- -----------------------------------------------------------------
Name Of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which filing fee is calculated and state how it was
determined):
- -----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- -----------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
<PAGE>
(1) Amount Previously Paid:
- -----------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- -----------------------------------------------------------------
(3) Filing Party:
- -----------------------------------------------------------------
(4) Date Filed:
- -----------------------------------------------------------------
<PAGE>
ACORN HOLDING CORP.
1251 Avenue of the Americas
45th Floor
New York, New York 10020-1104
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 23, 1999
To the Stockholders:
The Annual Meeting of the Stockholders of ACORN HOLDING CORP. (the
"Company") will be held at 1251 Avenue of the Americas, 45th Floor, New York,
New York, on Thursday, December 23, 1999, at 11:00 A.M., local time, for the
following purposes:
1. To elect five directors to hold office until the next Annual Meeting
of Stockholders and until their respective successors have been duly elected and
qualified;
2. To ratify the selection of the firm of Grant Thornton LLP as the
independent public accountants of the Company for the 1999 fiscal year; and
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on November 19,
1999, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting of Stockholders (the "Meeting").
Only stockholders of record at the close of business on this date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
By Order of the Board of Directors
STEPHEN A. OLLENDORFF
Secretary
November 19, 1999
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE POSTAGE PREPAID ENVELOPE WHICH HAS BEEN PROVIDED, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED BY YOU AT
ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT THE MEETING YOU MAY, IF
YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND EXERCISE YOUR RIGHT TO VOTE YOUR
SHARES PERSONALLY.
<PAGE>
PROXY STATEMENT
ACORN HOLDING CORP.
1251 Avenue of the Americas
45th Floor
New York, New York 10020-1104
Annual Meeting of Stockholders
To Be Held December 23, 1999
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Acorn Holding Corp. (the "Company") for
use at the 1999 Annual Meeting of Stockholders (the "Meeting") to be held at
1251 Avenue of Americas, 45th Floor, New York, New York, on Thursday, December
23, 1999, at 11:00 A.M., local time, and at any adjournment(s) thereof for the
purposes set forth in the accompanying Notice of Meeting of Stockholders.
The principal executive offices of the Company are located at 1251
Avenue of the Americas, 45th Floor, New York, New York 10020-1104 (telephone no.
212-536-4089). The enclosed proxy and this proxy statement are being transmitted
to stockholders of the Company on or about November 22, 1999
Voting Securities; Solicitation and Revocation
The Company's Board of Directors has fixed the close of business on
November 19, 1999, as the record date for the determination of stockholders of
the Company who are entitled to receive notice of, and to vote at, the Meeting.
At the close of business on that date, 1,617,358 shares of Common Stock, par
value $.01 (the "Common Stock"), were issued and outstanding, each of which is
entitled to one vote on each matter to be voted upon at the Meeting. The Company
has no other class of securities entitled to vote at the Meeting.
Proxies in the form enclosed are being solicited by, or on behalf of,
the Board of Directors. The persons named in the proxy have been designated as
proxies in respect of the Meeting by the Company's Board of Directors (the
"Board"). Pursuant to Delaware corporate law and the Company's By-laws, the
holders of a majority of the outstanding shares of Common Stock must be present
in person or represented by proxy for a quorum to exist at the Meeting. If a
quorum is present at the Meeting, the nominees for director shall be elected by
a plurality of the votes present (in person or by proxy) at the Meeting and
entitled to vote thereon. The approval of all other matters to be properly
brought by the Board of Directors before the Meeting (assuming a quorum exists)
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present (in person or by proxy) at the Meeting and entitled to vote
thereon.
Abstentions and broker non-votes (i.e., shares of Common Stock
represented at the Meeting by proxies held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) with respect to any proposal will be
included in determining the existence of a quorum. Abstentions and broker
non-votes will not be counted in tabulations of the votes cast on proposals.
Thus, neither abstentions nor broker non-votes will have an effect on the
outcome of the election of the nominees for directors, which requires only a
plurality of the votes at the Meeting, or of the ratification of the selection
of the independent accountants, which requires only the affirmative vote of a
majority of the shares of Common Stock present (in person or by proxy) at the
Meeting in favor of such proposal.
<PAGE>
Shares represented by properly executed proxies received by the Company
will be voted at the Meeting in the manner specified therein or, if no
specification is made, will be voted "FOR" the election of all of the nominees
for directors named herein, and "FOR" the ratification of the selection of the
firm of Grant Thornton LLP as the Company's independent public accountants for
the 1999 fiscal year. In the unanticipated event that any other matters are
properly presented at the Meeting for action, the persons named in the proxy
will vote the proxies (which confer authority upon them to vote on any such
matters) in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by a
stockholder at any time before it is voted by written notification thereof
delivered to Messrs. Edward N. Epstein and/or Stephen A. Ollendorff (Company
Secretary), c/o of the Company at the address set forth hereinabove, by voting
in person at the Meeting, or by executing and delivering another proxy bearing a
later date. Attendance by a stockholder at the Meeting does not alone serve to
revoke his or her proxy.
The solicitation of proxies will be made principally by mail and, in
addition, may be made by directors and officers of the Company personally or by
telephone or telegraph, without special or extra compensation for such services.
Arrangements will be made with brokerage firms and other custodians, nominees
and fiduciaries to forward proxies and proxy material to their principals, and
the Company will, upon request, reimburse them for their out-of-pocket and
clerical expenses in transmitting proxies and related material to beneficial
owners. The costs of soliciting proxies will be borne by the Company. It is
estimated that said costs will be relatively nominal.
Annual Report
The Company's Annual Report for the fiscal year ended December 31,
1998, which contains audited financial statements, is being mailed with this
Proxy Statement to all Company stockholders of record as of the close of
business on November 19, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on November
1, 1999, information as to the stockholders (other than members of the Company's
management), which are known by the Company to beneficially own more than 5% of
its Common Stock.
No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner Owned(1)(2) of Class
- ------------------- ----------- --------
Estate of Herbert Berman(3) 113,440 7.0%
405 Lexington Avenue
New York, NY 10174
Allen Landers, M.D.
1385 York Avenue
New York, NY 10021 101,520 6.3%
2
<PAGE>
- ---------------
(1) Beneficial ownership, as reported in the above table, has been
determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934 (the "1934 Act"). Such beneficial ownership includes both
sole voting and sole dispositive power.
(2) Adjusted to reflect the two-for-five reverse stock split of the
Company's Common Stock, effective April 19, 1999 (the
"Reverse Split").
(3) Excludes shares of Common Stock owned by the adult children of the
late Herbert Berman.
Ownership by Management
The following table sets forth, as of November 15, 1999, the
beneficial ownership of the Common Stock of the Company by (i) each present
director and nominee for election as a director of the Company, (ii) the Named
Executives, as defined below, and (iii) all directors and executive officers of
the Company as a group (based upon information furnished by such persons). Under
the rules of the Commission, a person is deemed to be a beneficial owner of a
security if he has or shares the power to vote or direct the voting of such
security or the power to dispose or direct the disposition of such security.
Accordingly, more than one person may be deemed to be a beneficial owner of the
same securities. A person is also deemed to be a beneficial owner of any
securities of which that person has the right to acquire beneficial ownership
within 60 days.
No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2)(3) of Class
- ---------------------- ----------- --------
Bert Sager.............. 171,170(4)(5) 10.18%
Stephen A. Ollendorff... 592,880 34.13%
(5)(6)(7)
Edward N. Epstein....... 382,400(5)(6)(8) 22.96%
Paula Berliner.......... 67,320(5) 4.09%
Robert P. Freeman....... 56,000(5) 3.38%
Ronald J. Manganiello... 73,978(9) 4.57%
All directors and executive
officers as a group
(7 persons)........... 1,029,276(5) 52.70%
- -----------
* Less than 1%.
3
<PAGE>
(1) The business address, for purposes hereof, of all of the Company's
directors and executive officers is in care of the Company's principal
executive offices at 1251 Avenue of the Americas, 45th Floor, New York,
New York 10020-1104.
(2) Beneficial ownership, as reported in the above table, has been
determined in accordance with Rule 13d-3 under the 1934 Act. Unless
otherwise specifically noted herein, the Company believes that all
persons in the above table have sole voting and dispositive power with
respect to all shares of Common Stock shown to be beneficially owned by
them.
(3) Adjusted to reflect the Reverse Split.
(4) Does not include 80 shares of Common Stock owned by Marilyn Sager, his
wife, with respect to which Mr. Sager disclaims beneficial ownership.
(5) Includes the following shares that may be acquired upon the exercise of
options within 60 days of November 1, 1999: Mr. Sager - 64,000; Mr.
Ollendorff - 120,000; Mr. Epstein - 48,000; Ms. Berliner - 28,000; Mr.
Freeman - 40,000; and all directors and executive officers as a group
(7 persons) - 336,000.
(6) Stephen A. Ollendorff, the Company's Chief Executive Officer, has
entered into an Irrevocable Proxy and Voting Agreement With Respect to
Election of Directors, dated December 19, 1995, with Edward N. Epstein,
the Company's President, with respect to the 382,400 shares of Common
Stock beneficially owned by Mr. Epstein. This arrangement is described
in "Certain Relationships and Related Transactions." Accordingly, Mr.
Ollendorff's beneficial ownership includes such shares. Other than as
set forth above, Mr. Ollendorff disclaims beneficial ownership of such
shares.
(7) Includes 400 shares owned by Bjorg Ollendorff, Mr. Ollendorff's wife.
(8) Includes 3,000 shares owned by Mr. Epstein as trustee for his minor
child.
(9) Includes 13,178 shares owned of record by Lisa Manganiello, Mr.
Manganiello's wife, and 800 shares owned by Mr. Manganiello
as trustee for his children.
PROPOSAL I: ELECTION OF FIVE DIRECTORS
The entire Board of Directors is to be elected at the Meeting. The
Company's By-laws provide that the number of directors comprising the Board
shall be at least one, such number to be fixed by resolution of the Board. The
number of directors is presently set at five. The five persons listed below, all
4
<PAGE>
of whom have consented to being named in this Proxy Statement and to serving if
elected, have been nominated to serve as directors of the Company until the
Company's 2000 annual meeting of stockholders and until their respective
successors have been duly elected and qualified. All of the nominees are
currently directors of the Company, and each was elected by the Company's
stockholders at the last annual meeting of stockholders.
Proxies in the accompanying form will be voted at the Meeting in favor
of the election of each of the nominees listed below, unless authority to do so
is specifically withheld as to an individual nominee or nominees or all nominees
as a group. Proxies cannot be voted for a greater number of persons than the
number of nominees named. In the unexpected event that any of such nominees
should become unable to or for good cause will not serve, the persons named in
the accompanying proxy have discretionary authority to select and vote for the
election of substitute management nominees. Directors will be elected by a
plurality of the votes present at the Meeting in person or by proxy and entitled
to vote thereon.
Set forth below is certain information with respect to each nominee for
election as a director of the Company (based solely on information provided by
such nominees):
Year of Principal Occupations During
First Past Five Years;
Name and Age Election Other Directorships
Bert Sager(74) 1983 Co-Chairman of the Board of the from
(1) November 1995 to December 1998 and
Chairman from June 1989 to November 1995;
from inception until June 1989,
President; for more than the past five
years, a practicing attorney; director of
Artesyn Technologies, Inc. a manufacturer
of standardized electronic products.
Stephen A.
Ollendorff
(61)(1)(2) 1983 Chief Executive Officer since September
1992, and Chairman of the Board since
November 1995; President of the Company
from June 1989 until November 1995 and
Vice President from inception until his
election as President; Of Counsel to the
law firm of Hertzog, Calamari & Gleason
from December 1990 until January 1999;
since February 1999, Of Counsel to the
law firm of Kirkpatrick & Lockhart LLP.
Director of Artesyn Technologies, Inc.
and Pharmaceutical Resources, Inc., a
manufacturer of generic drugs.
5
<PAGE>
Edward N. 1995 President and Chief Operating Officer
Epstein* of the Company since November 1995. For
(59)(1) more than the past five years, a
principal of Edward N. Epstein & Assoc.,
a consulting firm specializing in
corporate structuring and management;
since January 1996, a principal in the
merchant banking firm of New Canaan
Capital LLC; since July 1996, a principal
of Sylhan LLC, an integrated contract
manufacturer specializing in the
precision machining of refractory metal
parts.
Paula Berliner 1992 Vice President of the Company since
(56)(1) June 1992 until December 1998; since May
1990, private investor; director of
Republic Security Financial Corp., a
holding company for Republic Securities
Bank.
Ronald J. 1995 Since January 1996, a principal in the
Manganiello* merchant banking firm of New Canaan
(50)(1)(2) Capital LLC; since July 1996, a principal
of Sylhan LLC; from 1986 to January 1996,
Mr. Manganiello was Chairman and Chief
Executive Officer of Hanger Orthopedic
Group, Inc., a publicly-traded provider
of patient care services and products for
orthotic and prosthetic rehabilitation.
- ----------
* Designees for directors of Edward N. Epstein. See "Certain
Relationships and Related Transactions."
(1) Member of the Stock Option and Compensation Committee.
(2) Member of the Audit Committee.
(3) Mr. Manganiello was a member of the Board from November 1995 until
January 1997 and was then elected to the Board in December 1997.
6
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE FIVE
NOMINEES NAMED ABOVE AS DIRECTORS OF THE COMPANY.
Board of Directors; Committees of the Board
The Board met twice during fiscal 1998. During fiscal 1998, no director
attended fewer than 75% of the total number of meetings of the Board and of the
committees of the Board on which he served.
The Board has established two standing committees, consisting of the
Audit Committee and the Stock Option and Compensation Committee. The current
functions of such committees are as follows:
The Audit Committee, which did not meet during fiscal 1998, reviews the
internal and external audit functions of the Company and makes recommendations
to the Board with respect thereto. It also has primary responsibility for the
formulation and development of the auditing policies and procedures of the
Company and for making recommendations to the Board with respect to the
selection of the Company's independent auditing firm. The Chairman of this
Committee is Ronald J. Manganiello.
The Stock Option and Compensation Committee held one meeting during
fiscal 1998. This Committee has primary responsibility for the administration of
the Company's 1991 Stock Option Plan, including responsibility for the granting
of options thereunder. The Committee is also responsible for establishing the
overall philosophy of the Company's executive compensation program and
overseeing the Company's compensation strategy. In fiscal 1998, the members of
this Committee consisted of the entire Board of Directors.
Section 16(a) Compliance
The Company is aware of the following late filing of reports required
by Section 16(a) of the 1934 Act in respect of fiscal 1998: Edward N. Epstein
failed to file, on a timely basis, a Statement of Changes in Beneficial
Ownership on Form 4. This filing was subsequently completed on the appropriate
form.
7
<PAGE>
Compensation of Directors
Effective December 1998, directors who are not executive officers of
the Company are compensated for their services by payment of an annual retainer
of $12,000, $1,000 per day for each Board meeting attended in person by such
director and $750 for each committee meeting attended in person by such
director.
Certain Relationships and Related Transactions
Mr. Ollendorff has entered into an Irrevocable Proxy and Voting
Agreement With Respect to Election of Directors (the "Proxy"), with Edward N.
Epstein, with respect to the shares of Common Stock beneficially owned by Mr.
Epstein (the "Stock"), commencing on December 19, 1995 and terminating on
December 31 of such year in which either party shall have given the other party
at least twelve (12) months' prior written notice thereof; provided, that the
Proxy shall remain in full force and effect until at least December 31, 1998. If
any shares of the Stock covered by the Proxy are sold to any other party, the
Proxy as it relates to such shares of Stock shall terminate immediately upon
such sale. Pursuant to the Proxy, Mr. Ollendorff undertakes to vote the Stock,
as well as use his best efforts (including voting shares of stock of the Company
owned by him) for the election of the greater of (i) two directors or (ii) a
number of directors equal to 22% (rounded up to the next highest number) of the
entire Board, acceptable to Mr. Epstein. Pursuant to the foregoing, Mr. Epstein
has designated himself and Ronald J. Manganiello to Mr. Ollendorff with respect
to the election of members of the Board as acceptable to him.
Executive Officers
The executive officers of the Company consist of Mr. Ollendorff as
Chairman of the Board, Chief Executive Officer and Secretary, Mr. Epstein, as
President and Chief Operating Officer, and Larry V. Unterbrink as Treasurer.
The following table sets forth certain information with respect to the
executive officer of the Company who is not a director or nominee for election
as a director:
Name Age
- ---- ---
Larry V. Unterbrink.......................... 65
Treasurer of the Company since February
1990; director from 1985 until February
1995. Private investor residing in Florida.
From May 1982 to December 1994, President
and Treasurer of Seahorse Ltd., a leasing
and publishing company. Since November
1996, a principal of Groupe Financier, a
publishing and consulting firm specializing
in international finance.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for the fiscal years ended
December 31, 1998, December 31, 1997 and December 31, 1996, respectively,
respecting compensation earned by the Chief Executive Officer of the Company and
the executive officers (whose salary and bonus earned in fiscal 1998 exceeded
$100,000) of the Company serving at the end of fiscal 1998 (the "Named
Executives").
Annual Compensation(1) Long-Term
Compensation
--------------------- ------------
Securities
Name and Underlying
Principal Position Year Salary($) Bonus($) Options(#)(2)
------------------ ---- --------- -------- -------------
Stephen A. Ollendorff 1998(3) $246,597 -0- --
Chairman and Chief 1997(3) $254,615(4) -0- 20,000 (5)
Executive Officer 1996(3) $264,042 -0 --
Edward N. Epstein 1998 $212,787 -0- --
President and Chief 1997 $182,090(4) -0- --
Operating Officer 1996 $150,000 -0- --
Robert P. Freeman 1998 $197,830 $ 50,000 --
President and Chief 1997 $215,920 $ 95,673 20,000 (5)
Executive Officer - 1996 $242,480 $150,000 --
Recticon Enterprises,
Inc.
(1) No officer received perquisites which, are in the aggregate,
greater than or equal to the lesser of $50,000 or 10% of annual
salary and bonus.
(2) Represents options awarded under the 1991 Stock Option Plan.
(3) Mr. Ollendorff has voluntarily assumed responsibility for rent and
secretarial expenses relating to the New York office. Mr. Ollendorff does
not receive any fringe benefits from the Company.
(4) As a result of an agreement between Messrs. Epstein and Ollendorff, Mr.
Ollendorff voluntarily reduced his annual compensation by $24,280,
effective July 1997, in order to increase Mr. Epstein's annual
compensation for 1997 by $24,280. See "Employment Arrangements" below.
(5) Adjusted to reflect Reverse Split.
The Company does not have any annuity, retirement, pension, deferred
or incentive compensation plan or arrangement under which any executive officers
are entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executives who qualify are permitted to participate in the Company's 1991 Stock
Option Plan.
9
<PAGE>
Stock Option Grants In Last Fiscal Year
During the fiscal year ended December 31, 1998, there were no stock
option grants or stock appreciation rights granted to the Named Executives or
any other stock appreciation rights.
On March 2, 1998 the Stock Option and Compensation Committee
authorized the further amendment to certain of the Company's outstanding stock
options (which had previously been amended on November 22, 1994). In exchange
for each optionee agreeing to an increase in the exercise price in the event of
a "change of control" from, after adjusting to reflect the reverse split, $1.406
to $3.125 (equal to the "fair market value" of the Company's Common Stock on
March 2, 1998), the Company would expand the definition of "change of control"
to include the merger, sale or liquidation of the business as set forth in (iv)
below. The amended and expanded definition of "change of control" would occur in
the following circumstances: (i) the first purchase of shares of equity
securities of the Company pursuant to a tender offer or exchange offer (other
than an offer by the Company) for 25% or more of the equity securities of the
Company, which offer has not been approved by the Board of the Company, (ii) a
single purchaser or a group of associated purchasers acquiring, without the
approval or consent of the Board of the Company, securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding securities in one or a related series of transactions, (iii) in
respect of an election of directors by the Company's stockholders, the election
of any or all of the management's slate of directors being contested or opposed,
whether through a solicitation of proxies, or otherwise, or (iv) on the day the
stockholders of the Company approve (A) a definitive agreement for the merger or
other business combination of the Company with or into another corporation
pursuant to which the stockholders of the Company do not own, immediately after
the transaction, more than 50% of the voting power of the corporation that
survives and is a publicly owned corporation and not a subsidiary of another
corporation, or (B) a definitive agreement for the sale, exchange, or other
disposition of all or substantially all of the assets of the Company, or (C) any
plan or proposal for the liquidation or dissolution of the Company. As of
November 19, 1999, no such "change of control" has occurred.
On November 7, 1996, the Board of Directors authorized the Company to
loan moneys to officers and employees of the Company in order to encourage them
to exercise their stock options. The term of such loans would be for the shorter
of ten years or 60 days after termination of employment of the officer or
employee, interest would accrue and be payable monthly on the principal, at the
prevailing rate applicable to 90-day treasury bills at the time the loan is
made, and the loan would be collateralized at all times, which collateral
(subject to applicable law) may include shares of the Company. The loans must be
collateralized so that the fair market value of the collateral would have to
equal or exceed the principal outstanding amount of the loan at all times. As of
November 19, 1999, no such loans to officers or employees have been made by the
Company.
10
<PAGE>
Year-End Option Values Table
The following table sets forth information at December 31, 1998
respecting exercisable and non-exercisable options held by the Named Executives.
During fiscal 1998, the Named Executives did not exercise any stock options. The
table also includes the value of "in-the-money" stock options which represents
the spread between the exercise prices of the existing stock options and the
year-end price of the Common Stock.
Number of Unexercised Value of Unexercised In-
Options Held the-Money Options
at December 31, 1998(1)(2) Held at December 31, 1998(1)
-------------------------- ----------------------------
Not Not
Name Exercisable Exercisable Exercisable Exercisable
- ---- ----------- ----------- ----------- -----------
Stephen A.
Ollendorff 120,000(3) -0- $-0- $-0-
Edward N.
Epstein 48,000(3) -0- $-0- $-0-
Robert P.
Freeman 40,000 -0- $-0- $-0-
- ----------------
(1) Based upon the closing sales price of the Common Stock on December 31, 1998
($.75).
(2) Adjusted to reflect the Reverse Split.
(3) On October 31, 1998, Messrs. Ollendorff and Epstein each surrendered
12,000 stock options previously granted in order to enable
the Company to grant options to employees of Recticon.
11
<PAGE>
Employment Arrangements
The Company has entered into an employment agreement, for a minimum
three-year period, which has been renewed by its terms, with Stephen A.
Ollendorff, pursuant to which Mr. Ollendorff receives annual compensation of
$250,000, subject to annual cost-of-living adjustments, from the Company. On
January 17, 1996, Mr. Ollendorff's employment agreement was amended in order to
clarify certain terms and conditions, including the geographic location in which
services are to be provided, events of termination and his obligations with
respect to confidential information, non-solicitation of employees and covenants
not to compete. Mr. Ollendorff agrees to devote such time to the business and
affairs of the Company as he believes is necessary for the operations of the
Company. In addition, Mr. Ollendorff has voluntarily assumed responsibility for
rent and secretarial expenses relating to the Company's New York office. Mr.
Ollendorff receives no fringe benefits from the Company.
Effective January 1, 1997, Mr. Ollendorff receives a salary of
$120,000 per year as Chairman of the Board of Recticon Enterprises, Inc.
("Recticon"), which amount is paid by the Company from the amounts paid by
Recticon to the Company each month. In addition, Recticon rents office space in
Mr. Ollendorff's New Jersey office and pays rent directly to Mr. Ollendorff
directly for such space in the amount of $500 per month. Any amounts received by
Mr. Ollendorff from Recticon as rent and/or salary are deducted from his salary
from the Company to the extent and as long as he receives such monies from
Recticon.
The Company entered into an employment agreement with Edward N.
Epstein, effective January 1, 1996, for a three year period, for an annual
compensation of $150,000, subject to cost-of-living adjustments. Mr. Epstein
agrees to devote such time to the business and affairs of the Company as he
believes is necessary for the operations of the Company.
As a result of an agreement between Messrs. Epstein and Ollendorff, Mr.
Ollendorff voluntarily reduced his annual compensation by $24,280, effective
July 1997, in order to increase Mr. Epstein's annual compensation for 1997 by
$24,280. Mr. Ollendorff has agreed not to accept any increased compensation
(other than cost-of-living increases) until Mr. Epstein's annual compensation
shall be equal to Mr. Ollendorff's.
Robert P. Freeman, President and Chief Executive Officer of Recticon,
entered into a letter agreement with Recticon as of February 15, 1995, which
provides that if, within one (1) year of a "change of control" (as defined in
the agreement) of Recticon, his employment is terminated without cause by
Recticon, or he resigns because of (i) assignment, without his written consent,
of any duties inconsistent with his position, duties, responsibilities and
status with Recticon, or change in his reported responsibilities, titles of
offices or any plan, act, scheme or design to constructively terminate him, or
(ii) reduction by Recticon of his annual base salary, he shall receive the
following benefits: (i) annual base salary through the date of termination; (ii)
in lieu of any further salary payments, severance pay on the tenth business day
following the date of termination, a lump sum equal to two times his annual base
salary; and (iii) if Mr. Freeman terminates his employment with Recticon between
the first and second year of a "change of control" for any reason other than for
cause, Recticon will pay him the amount he would have been paid if he had
remained employed through the end of the second year of a "change of control",
but in no event less than an amount equal to six months of base salary. In
addition, Recticon will maintain all medical, health and accident plans for a
period of the earlier of (i) 24 months or (ii) the date of which he is covered
by reason of his being employed by a new employer.
12
<PAGE>
PROPOSAL II: RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board has selected the firm of Grant Thornton LLP ("Grant
Thornton"), independent certified public accountants, to act as independent
public accountants and to audit the books, records and accounts for the Company
for the fiscal year ending December 31, 1999. In accordance with a resolution of
the Board, this selection is being presented to the stockholders for their
ratification at the Meeting. The firm of Grant Thornton acted in such capacity
for the Company for the fiscal year ended December 31, 1998. If the stockholders
do not ratify the selection of Grant Thornton, the selection of independent
accountants will be reconsidered by the Board. A representative of Grant
Thornton is not expected to be present at the Meeting.
During the Company's 1995 and 1996 fiscal years, the Company engaged
the accounting firm of Coopers & Lybrand L.L.P. ("C&L"), independent
accountants, to audit the books, records and accounts of the Company. Since the
Company withdrew its election to be treated as a business development company
under the Investment Company Act of 1940 in 1997, its financial statements are
prepared on a consolidated basis. Grant Thornton is presently the auditor for
the Company's principal subsidiary. The Company determined that it would be
appropriate to engage Grant Thornton as its auditor for the fiscal year ended
December 31, 1997. The Company notified C&L, on November 3, 1997, that it would
no longer utilize its services as independent accountants. On November 3, 1997,
the Company engaged the firm of Grant Thornton to act as its independent
accountants for the 1997 fiscal year. The Company's decision to change
independent accountants was approved by the Company's Board of Directors upon
recommendation of its Audit Committee. For the 1995 and 1996 fiscal years, C&L's
reports on the Company's financial statements for such fiscal years did not
contain an adverse opinion or a disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. However, there
was an explanatory paragraph in each report relating to the valuation of
investments being based on the best estimate of the Board in the absence of
readily ascertainable market values. In connection with the audits of the
Company's financial statements for each of the two fiscal years ended as of
December 31, 1996, and in the subsequent interim period, there were no
disagreements with C&L on any matters of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not
resolved to the satisfaction of C&L would have caused C&L to make reference to
the matter in their report on the Company's financial statements for such
periods. C&L has previously stated in connection with filings with the
Commission that it agrees with the statements contained in this paragraph.
The affirmative vote of the holders of a majority of the shares of
Common Stock present at the Meeting, in person or by proxy, is required for the
ratification of the selection of Grant Thornton.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF PROPOSAL
II.
13
<PAGE>
OTHER MATTERS
As of the date of this proxy statement, the Board has no knowledge of
any business which will be presented for consideration at the Meeting, other
than as described above. If any other matter or matters are properly brought
before the Meeting or any adjournment(s) thereof, pursuant to the Company's
By-laws, it is the intention of the persons named in the accompanying form of
proxy to vote proxies in accordance with their judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
In accordance with the Company's By-laws and Rules 14a-4(c) and
14a-5(e) promulgated under the Exchange Act, the Company hereby notifies its
stockholders that it did not receive notice by November 1, 1999, of any proposed
matter to be submitted for stockholder vote at the Meeting, and, therefore, any
proxies received in respect of the Meeting will be voted in the discretion of
the Company's management on other matters which may properly come before the
Meeting.
Any proposal which is intended to be presented by any stockholder for
action at the 2000 Annual Meeting of Stockholders must be received in writing by
the Secretary of the Company at 1251 Avenue of the Americas, 45th Floor, New
York, New York 10020-1104, not later than July 25, 2000 in order for such
proposal to be considered for inclusion in the Proxy Statement and form of proxy
relating to the 2000 Meeting of Stockholders.
The Company further notifies its stockholders that if the Company does
not receive notice by November 8, 2000 of a proposed matter to be submitted for
stockholders vote at the 2000 Annual Meeting of Stockholders, then any proxies
held by members of the Company's management in respect of such Meeting may be
voted at the discretion of such management members on such matter if it shall
properly come before such Meeting, without any discussion of such proposed
matter in the proxy statement to be distributed in respect of such Meeting.
By Order of the Board of Directors
STEPHEN A. OLLENDORFF
Secretary
Dated: November 22, 1999
14
<PAGE>
ACORN HOLDING CORP.
Proxy for Annual Meeting of Stockholders
to be Held December 23, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned stockholder(s) of ACORN HOLDING CORP., a Delaware
corporation (the "Company"), hereby constitutes and appoints EDWARD N. EPSTEIN
and STEPHEN A. OLLENDORFF, and each of them, with full power of substitution in
each, as the agent, attorneys and proxies of the undersigned, for and in the
name, place and stead of the undersigned, to vote at the 1999 Annual Meeting of
Stockholders of the Company to be held at 1251 Avenue of the Americas, 45th
Floor, New York, New York 10020-1104 on December 23, 1999, at 11:00 A.M. (local
time), and any adjournment(s) thereof, all of the shares of stock which the
undersigned would be entitled to vote if then personally present in the manner
specified and on any other business as may properly come before the meeting.
This Proxy will be voted in accordance with the instructions given. If no
instructions are given in respect of a Proposal, this Proxy will be voted "FOR"
such Proposal.
Please mark boxes __ or x in blue or black ink.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed
contrary below) /___/ below /___/
Paula Berliner, Edward N. Epstein,
Ronald J. Manganiello,
Stephen A. Ollendorff, Bert Sager
(Instruction: To withhold authority to vote for any individual nominee(s) write
the nominee's name in the space below):
- ------------------------------------------------------
(Continued and to be signed on the reverse side.)
<PAGE>
2. RATIFICATION OF THE SELECTION OF THE FIRM OF
GRANT THORNTON LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE 1999 FISCAL YEAR
FOR _____ AGAINST _____ ABSTAIN _____
In their discretion, the proxies are hereby authorized to vote upon
such other business as may properly come before the meeting or any adjournment
thereof and as set forth in Rule 14a-4(c) of the Securities Exchange Act of
1934.
Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated ________________________, 1999
------------------------------------
Signature
------------------------------------
Signature if held jointly
Title______________________________
