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
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
PALLET MANAGEMENT SYSTEMS, INC.
(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 the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
One South Ocean Boulevard
Suite 305
Boca Raton, Florida 33434
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 2000
---------------------
To the Shareholders of Pallet Management Systems, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Pallet Management Systems, Inc., a Florida corporation (the
"Company"), will be held at the Company's principal executive offices at 2900
Highwoods Blvd, Suite 200, Raleigh, North Carolina, 27629 at 4:00 P.M. on April
27, 2000 for the following purposes:
1. To elect seven directors of the Company to serve until our
next annual meeting or until their successors have been
qualified;
2. To consider and vote upon a proposal to approve an amendment
to the Company's 1998 Omnibus Stock Incentive Plan to increase
the number of shares of the Company's common stock, $.01 par
value per share reserved for issuance thereunder from an
aggregate of 500,000 shares to an aggregate of 1,000,000
shares;
3. To consider and vote upon a proposal to ratify the appointment
of PricewaterhouseCoopers LLP as the Company's independent
public accountants for the fiscal year ending June 24, 2000;
and
4. To transact such other business as may properly come before
the Annual Meeting and any adjournment or postponements
thereof.
The Board of Directors has fixed the close of business on March 27,
2000 as the record date for determining those shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournments or postponements
thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the pre-addressed envelope provided for that purpose
as promptly as possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
David Shumate,
Secretary
Boca Raton, Florida
March 28, 2000
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. THOSE
SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE
A PROXY CARD MAY NEVERTHELESS ATTEND THE ANNUAL MEETING, REVOKE THEIR PROXY AND
VOTE THEIR SHARES IN PERSON.
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 2000
------------------------
PROXY STATEMENT
------------------------
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Pallet Management Systems, Inc., a Florida
corporation (the "Company"), of proxies from the holders of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), for use at the Annual
Meeting of Shareholders of the Company to be held at 2900 Highwoods Blvd, Suite
200, Raleigh North Carolina, 27513 at 9:00 A.M. on April 27, 2000, and at any
adjournments or postponements thereof (the "Annual Meeting") pursuant to the
enclosed Notice of Annual Meeting.
The approximate date this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is March 28, 2000. Shareholders
should review the information provided herein in conjunction with the Company's
Annual Report on Form 10-KSB which accompanies this Proxy Statement. The
Company's principal executive offices are located at One South Ocean Boulevard,
Suite 305, Boca Raton, Florida 33432, and its telephone number is (561)
338-7763.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting and the enclosed proxy is to be borne by the Company.
In addition to the use of mail, employees of the Company may solicit proxies
personally and by telephone. The Company's employees will receive no
compensation for soliciting proxies other than their regular salaries. The
Company may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy material to their principals and to
request authority for the execution of proxies. The Company may reimburse such
persons for their expenses in so doing.
<PAGE>
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's shareholders will
consider and vote upon the following matters:
1. To elect seven directors of the Company to serve until our next annual
meeting or until their successors have been qualified;
2. To consider and vote upon a proposal to approve an amendment to the
Company's 1998 Stock Incentive Plan (the "Plan") to increase the number
of shares of the Company's common stock, $.01 par value per share (the
"Common Stock") reserved for issuance thereunder from an aggregate of
500,000 shares to an aggregate of 1,000,000 shares;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the fiscal year ending
June 24, 2000; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted (a) for the election of the respective nominees for director named
below and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event a shareholder specifies a different choice by means of the
enclosed proxy, his shares will be voted in accordance with the specification so
made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on March 27, 2000
as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, there were 4,056,612 shares of Common Stock issued and outstanding,
all of which are entitled to be voted at the Annual Meeting. Each share of
Common Stock is entitled to one vote on each matter submitted to shareholders
for approval at the Annual Meeting.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by plurality of the
votes cast by the shares of Common Stock represented in person or by proxy at
the Annual Meeting. The affirmative votes of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
will be required for approval of the other proposals covered by this Proxy
Statement. If less than a majority of the outstanding shares entitled to vote
are represented at the Annual Meeting, a majority of the shares so represented
may adjourn the Annual Meeting to another date, time or place, and notice need
not be given of the new date, time or place if the new date, time or place is
announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting and
will be counted as votes cast at the Annual Meeting, but will not be counted as
votes cast for or against any given matter.
A broker or nominee holding shares registered in its name, or in the
name of its nominee, which are beneficially owned by another person and for
which it has not received instructions as to voting from the beneficial owner,
may have discretion to vote the beneficial owner's shares with respect to the
election of
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directors and other matters addressed at the Annual Meeting. Any such shares
which are not represented at the Annual Meeting either in person or by proxy
will not be considered to have cast votes on any matters addressed at the Annual
Meeting.
Recent Developments
The Company originally scheduled its Annual Meeting for December 16,
1999. Prior to the meeting, the Company was informed by D.L. Cromwell
Investments, Inc. an investment banking firm, claiming that its clients owned a
substantial number of shares of Common Stock and that many of these clients
indicated that they would not be voting for the proposed slate of directors and
in favor of the amendment of the Plan. The Board of Directors then postponed the
meeting in order to further negotiate with Cromwell to attempt to agree on an
acceptable slate of directors.
In January 2000, the Board of Directors elected Donald S. Radcliffe to
be Chairman of the Board. In addition to duties as Chairman, Mr. Radcliffe the
Company announced that Mr. Radcliffe would also be involved with daily
operational and management decisions. The Company's reporting structure was
altered so that CEO John Lucy, III, as well as President, Zachary M. Richardson,
would report directly to Mr. Radcliffe. Mr. Radcliffe was granted 50,000 options
at an exercise price of $2.375 and 50,000 options with an exercise price of
$3.375.
In February 2000, Cromwell proposed an alternate slate of directors,
which excluded certain existing directors, and threatened to call a special
meeting of shareholders to elect its own slate if a satisfactory slate was not
proposed. After further discussions, the Board of Directors proposed the seven
director nominees set forth below, a majority of which are outside nominees, and
Cromwell agreed to withdraw its threat to call a special meeting.
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<PAGE>
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of the close of business on March
27, 2000 (a) the name, address and number of shares of each person known by the
Company to be the beneficial owner of more than 5% of the Company's Common Stock
and (b) the number of shares of Common Stock owned by each director and all
officers and directors as a group, together with their respective percentage
holdings of such shares:
Amount of
Name and Beneficial
Address of Ownership of %
Beneficial Owner(1) Stock
- ------------------------------------------ ------------------------ -------
John C. Lucy, III 669,631(2) 14.5
Zachary M. Richardson 670,769(3) 14.5
John C. Lucy, Jr. 783,802(4) 18.0
Donald Radcliffe 125,250(6) *
David W. Sass 5,250(7) *
Philip D. Feltman 11,400 *
Robert L. Steiler 0
Ronald Shindler 0 *
All Officers and Directors 2,337,450 40.6
as a Group (seven persons)
* Less than 1%
(1) The address of all persons listed above is Suite 305, One Ocean Boulevard,
Boca Raton, Florida 33432.
(2) Includes 182,097 shares owned by Mr. Lucy and his children and options to
acquire 487,534 shares.
(3) Includes 176,204 shares and options to acquire 494,566 shares.
(4) Includes 450,696 shares owned by Mr. Lucy, 50,000 shares owned by Clary and
options to acquire 283,106 shares.
(5) Includes 135,000 shares of stock and 10,000 options to purchase stock.
(6) Includes 5,250 shares and options to acquire 120,000 shares.
(7) Includes options to acquire 5,250 shares.
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<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, seven directors will be elected by the
shareholders to serve until the Annual Meeting to be held in 2000 or until their
successors are duly elected and qualified. The accompanying form of proxy when
properly executed and returned to the Company, will be voted FOR the election as
directors of the two persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named in the Proxy Statement. Management has no reason to
believe that any of the nominees is unable or unwilling to serve if elected.
However, in the event that any of the nominees should become unable or unwilling
to serve as a director, the proxy will be voted for the election of such person
or persons as shall be designated by the Board of Directors.
Nominees
The persons nominated as directors are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------------ -------- ----------------------------------------
<S> <C> <C>
John C. Lucy, III 41 Chief Executive Officer and Director
Zachary M. Richardson 44 President and Director
Donald Radcliffe 54 Chairman of the Board
Philip D. Feltman 79 Director
David W. Sass 64 Director
Ronald Shindler 53 Director
Robert L. Steiler 52 Director
</TABLE>
John C. Lucy, III joined Abell on a full-time basis in 1980 after
graduating from Virginia Tech with BS in business. Mr. Lucy has served as
Chairman and CEO of the Pallet Management from 1995 to December 1999, when he
relinquished the Chairman position and remained a Director. In addition to being
CEO, he is President of Clary, a hardwood lumber sawmill located in Gaston,
North Carolina, and is Vice-President of Blacksburg Enterprises, Inc., which
operates Baskin-Robbins and Sub-Station II franchises in Blacksburg, Virginia.
Mr. Lucy has completed a two year term as Chair of the National Wooden Pallet
and Container Association ("NWPCA") Military Packing Task Force and three years
as Chair of its Research Steering Committee. He was elected Chairman and CEO of
the Company on June 30, 1995. See "Certain Transactions."
Zachary M. Richardson has been President of the Company since 1994,
when Pallet Recycling Technologies, Inc. (PRTI) acquired the company in a
reverse acquisition. Mr. Richardson was president and founder of PRTI and has
been involved in the pallet industry since 1991 with over 23 years of management
and sales experience. After graduating from Franklin and Marshall College in
1977, he was commissioned in the United States Navy and designated a Naval
Aviator. On active duty for eight years he maintained his reserve status in the
Navy until his retirement from the reserves in 1997. Mr. Richardson is an active
member of the NWPCA and serves on the association's Recyclers Council Executive
Committee, which deals with national issues, related to pallet recycling.
Donald Radcliffe has been a director of the Company since 1985 and
became the Chairman of the Board in December 1999. Since 1984, Mr. Radcliffe has
served as the Chief Operating Officer, Executive Vice President and Director of
WorldWide Business Centers, a company, which provides businesses with office
space and facilities. From 1970 through 1984, Mr. Radcliffe was a partner in the
accounting firm of Main Hurdman. In
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<PAGE>
addition, Mr. Radcliffe has served as President and Director of Radcliffe
Enterprises, Inc., a financial consulting company, since 1982. He is also a
director of SVI Systems, Inc, an American Stock Exchange company, and Complete
Wellness Centers, Inc., a Nasdaq company. Mr. Radcliffe is a certified public
accountant in the State of New York.
David W. Sass was appointed a director in July 1998. Mr. Sass has, for
the past 38 years, been a practicing attorney in New York City and is currently
a senior partner in the law firm of McLaughlin & Stern, LLP. Mr. Sass is a
director of BarPoint.com, Inc., a company that will operate a patent pending
search engine and software technology that allows consumers to use the standard
UPC barcode to search for products specific information on the internet; a
director of Genisys Reservation Systems, Inc., a company engaged in the internet
business travel; an officer of Westbury Metals Group, Inc., a company engaged in
the refining of precious metals; an officer of Pioneer Commercial Funding Corp.,
a company formerly engaged as a mortgage warehouse lender and a member and Vice
Chairman of the Board of Trustees of Ithaca College.
Philip D. Feltman is a director nominee. He has over 50 years of
business experience. Currently, he is an active partner in FW Enterprises, owner
of office buildings and apartments. He was President of Feltman Enterprises
Inc., an investment management company which wholly owned New Nurses, a medical
personnel pool. He is a principal in Travacon Inc., a full service travel agency
located in West Hartford, Connecticut and also a principal in F & R Associates,
Inc., a builder of high quality homes in the Westbrook, Connecticut area. He was
a director of Royalpar Inc., a public company, as well as a member of its
executive committee. In addition, he was President of Pequot Spring Water
Company. In 1957, together with friends, he founded Ames Department Stores, Inc.
As a principal of Ames Department Store, he was actively involved in creating a
major discount department store chain operation from a single unit. After
leaving active participation in Ames in 1973, he served as a consultant to the
company until 1978. Mr. Feltman has also been involved with many charitable
causes for many years.
Robert L. Steiler is a director nominee. He has been a principal of
Lewis Management Group, a consulting firm specializing in business strategy,
business development, manufacturing operations and logistics, since its founding
in 1990. Prior to founding the Lewis Management Group, Mr. Steiler was
associated with KPMG Peat Marwick rom 1988 to 1990. Earlier in his career he was
Vice President of Materials with Stone Management Corporation, a large consumer
goods company, where he directed the material management functions and a highly
sophisticated computer-controlled picking and storage system. He was also Vice
President of Materials for SmithKline Beecham, a Fortune 100 pharmaceutical
company.
Ronald Shindler is a director nominee. Mr. Shindler has been a partner
of Fowler, White, Burnett, Hurley, Banick & Strickroot, a Miami, Florida law
firm, since 1987. He also served as a Vice President and Senior Counsel for
Drexel Burnham Lambert Incorporated from 1979 to 1987. Mr. Shindler's firm
serves as one of the Company's outside counsel
The Board of Directors Recommends a Vote for Approval of All of the Nominees for
Election as Directors.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and on representations that no other
reports were required, there were no reports required under Section 16(a) of the
Securities Exchange Act of 1934, which were not timely filed during fiscal 1999.
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Meetings and Committees of the Board of Directors
During Fiscal 1999, the Board of Directors held five formal meetings.
During Fiscal 1999, no director attended fewer than 75% of the number of
meetings of the Board of Directors and each Committee of the Board of Directors
held during the period he served on the Board.
The committees of the Board of Directors are the Audit Committee and a
Special Committee. The Board does not have a nominating or similar committee.
The Audit Committee is presently comprised of Messrs. Radcliffe and
Sass. The duties and responsibilities of the Audit Committee include (a)
recommending to the Board of Directors the appointment of the Company's
independent public accountants and any termination of engagement, (b) reviewing
the plan and scope of independent audits, (c) reviewing the Company's
significant accounting policies and internal controls, (d) having general
responsibility for all related auditing matters, and (e) reporting its
recommendations and findings to the full Board of Directors. The Audit Committee
met on one occasion during Fiscal 1999.
In September 1999, a Special Committee of the Board of Directors was
appointed, consisting of Messrs, Radcliffe, Sass and Bruce Antenberg (who
subsequently resigned as a director) to assist management in analyzing and
identifying potential solutions to the Company's recent financial and operating
problems
EXECUTIVE COMPENSATION
The following table summarizes all compensation accrued by the Company
in each of the last three fiscal years for the Company's executive officers
serving as such whose annual compensation exceeded $100,000.
<TABLE>
<CAPTION>
Long Term
Name and Annual Compensation Compensation
Principal Position Year Salary($)(1)(2) Bonus Other(3) Options
<S> <C> <C> <C> <C> <C>
Zachary M. Richardson, 1999 119.000 0 13,200 79,890
President, and Director 1998 58,104 0 0 69,000
1997 57,480 0 0
John C. Lucy, III 1999 119,000 0 13,200 79,890
Chairman of the Board and 1998 58,546 0 0 69,000
Chief Executive Officer 1997 56,883 0 0
</TABLE>
- --------------
(1) Includes medical insurance reimbursements.
(2) Messrs. Lucy and Richardson annual salaries were reduced from $95,000
to $52,000 in June 1996. In July 1998, their salaries were restored to
their $95,000 contracted amount. This was not made retroactive. In
November, they entered into new employment agreement with a base salary
of $156,000.
(3) Includes car allowances and other miscellaneous benefits.
The following table sets forth information concerning individual grants
of stock options made during the fiscal year ended December 31, 1995 to each of
the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
Number of Shares % of Total Options Exercise or
Underlying Options Granted to Employees Base Price Expiration
Name Granted(#)(1) in Fiscal Year ($/Share) Date
- ---- ------------- -------------- --------- ----
<S> <C> <C> <C> <C>
John C. Lucy, III 79,890 26% 5.00 8/26/08
Zachary M. Richardson 79,890 26% 5.00 8/26/08
</TABLE>
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<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Number Of Value Of
Securities Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options Options
On Value At FY-End (#) At FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --- --- ------------- -------------
<S> <C> <C> <C> <C>
John C. Lucy, III - - 421,790/91,400 $1,441,275/$52,350
Zachary M. Richardson - - 421,790/91,400 $1,441,275/$52,350
</TABLE>
Employment Agreements
Effective November 1, 1998 the Company entered into new similar
employment agreements with John C. Lucy, III and Zachary M. Richardson. Pursuant
to the terms of these five-year agreements, each executive is entitled to
receive (i) annual base compensation of $156,000, which increases in future
years by the percentage increase of the Consumer Price Index and (ii) a bonus up
to 100% of base salary based on the increase in pretax earnings per share over
the prior year. The agreement also provides for annual grants of stock options
commencing in fiscal 2000 equal to 1% of the then outstanding number of shares
at the then fair market value and the granting of 150,000 stock appreciation
rights that vest only upon a "Change of Control" as defined in the Agreements.
During the term of the Agreements should there be a Change of Control
of the Company, as that term is defined in the Agreements, the Company at its
sole option may terminate the Agreements upon 30 days prior written notice and
thereafter will be obligated to pay the executive the balance of the
compensation payable under the Agreement had it not been terminated prior to its
expiration, together with an additional sum equal to 299% of Executive's annual
base compensation. The Agreement also contains noncompetition and
confidentiality provisions.
Compensation of Directors
No compensation was paid to any director for his services during fiscal
1998 or prior years. In July 1998 the board of directors authorized compensation
of $1,000 per Director for each board meeting and $500 for special conference
telephone meetings. Pallet Management also reimburses directors for travel
expenses for attendance at each meeting of the Board. Starting in fiscal year
2000, directors are paid a monthly retainer of $500, a payment of $1,000 per
board meeting and $500 per teleconference meeting. All directors are granted
5,000 three-year options on the first day of each fiscal year at 10% above the
then market value. These options vest immediately.
CERTAIN TRANSACTIONS
Clary Lumber Company, Inc., which is owned by the family of John C.
Lucy, Jr., a formerly a director and currently a principal shareholder of the
Company, sold $2,359,000 of pallets and lumber and $2,895,000 of lumber to the
Company during the fiscal years 1999 and 1998, respectively. Lumber purchases
from Clary amounted to 8% and 22% of the Company's lumber purchases for fiscal
years 1999 and 1998, respectively. Pallet Management believes that these
transactions were made at or below market prices in the ordinary course of
business. Clary had loaned the Company money for working capital during fiscal
1998, all of which has been repaid. Through 1998, Pallet Management paid Clary
approximately $76,000 in salary and related tax reimbursement for compensation
to John C. Lucy III, who performs services for both Clary and the Company. This
amount was in lieu of an equal amount of salary that Pallet would have otherwise
paid to Mr. Lucy.
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PROPOSAL TO AMEND 1998 OMNIBUS STOCK INCENTIVE PLAN
The Board of Directors of the Company has amended, subject to
shareholder approval, the Plan to increase the number of shares of Common Stock
authorized for issuance under the Plan by 500,000 shares from a total of 500,000
shares to 1,000,000 shares of Common Stock.
Plan Description
The Plan provides for the issuance of stock options and appreciation
rights to attract and to induce officers, directors and key employees of the
Company to remain with the Company. The Plan provides for options which will
qualify as incentive stock options under Section 422(a) of the Internal Revenue
Code of 1986, as amended, as well as for nonstatutory options. No more than
fifteen percent (15%) of the Common Stock outstanding will be reserved for
issuance upon exercise of options to be granted from time-to-time. The Plan
became effective on September 1, 1998. An aggregate of 500,000 shares are
currently reserved for issuance under the Plan.
As of October 31, 1999, an aggregate of 322,780 options were
outstanding under the Plan with exercise prices of $5.00 to $8.00. These options
vest over a four-year period and expire on the earlier of ten years or 13 weeks
after separation of service. 129,516 of the options granted were granted to each
of Mr. Lucy, III and Mr. Richardson.
Incentive Awards may be granted under the Plans in the form of Options,
Stock Appreciation Rights, Restricted Stock, and Performance Awards.
The Board may terminate the Plan or may amend the Plan in such respects
as it shall deem advisable. The Board may unilaterally amend the Plan and
Incentive Awards as it deems appropriate to ensure compliance with Rule 16b-3
and to cause Incentive Awards to meet the requirements of the Code, including
Code section 422, and regulations thereunder.
No more than 50,000 shares may be allocated to Incentive Awards and no
more than 300,000 shares may be allocated to Non-Incentive Awards granted to any
one Employee during a single calendar year.
All present and future employees of the Company or of any parent or
subsidiary of the Company ("Employee") and any person retained to provide
services to the Company (other than as an Employee, a member of the Board of
Directors or a member of the board of directors of any subsidiary or parent of
the Company), and who is selected by the committee to be eligible to receive
Incentive Awards under the Plan ("Selected Advisors").
All present and future Non-Employee Directors are eligible to receive
Non-Statutory Options under the Plan. Non-Employee Directors are not be entitled
to receive any other form of Incentive Award under the Plan.
The exercise price of shares of Company Stock covered by an Incentive
Stock Option cannot be less than 100% of the fair market value of such shares on
the date of grant; provided that if an Incentive Stock Option is granted to an
Employee who, at the time of the grant, is a 10% Shareholder, then the exercise
price of the shares covered by the Incentive Stock Option will not less than 110
% of the fair market value of such shares on the date of grant. The exercise
price of Non-Statutory Stock Options will not less than 85% of fair market value
of such shares on the date of grant.
Whenever the Committee deems it appropriate, Stock Appreciation Rights
may be granted in connection with all or any part of an Option, either
concurrently with the grant of the Option or, if the Option is a Non-Statutory
Stock Option, by an amendment to the Option at any time thereafter during the
term of the Option. Stock Appreciation Rights may be exercised in whole or in
part at such times and under such conditions as may be specified by the
Committee in the participant's stock option agreement.
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Federal Income Tax Effects
The Plan is not qualified under the provisions of Section 401(a) of the
Code, nor is it subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
Incentive Stock Options. Incentive Stock Options are "incentive stock
options" as defined in Section 422 of the Internal Revenue Code. Under the Code,
an Optionee generally is not subject to ordinary income tax upon the grant or
exercise of an Incentive Stock Option. However, an employee who exercises an
Incentive Stock Option by delivering shares of Common Stock previously acquired
pursuant to the exercise of an Incentive Stock Option is treated as making a
Disqualifying Disposition (defined below) of such shares if the employee
delivers such shares before the expiration of the holding period applicable to
such shares. The applicable holding period is the longer of two years from the
date of grant or one year from the date of exercise. The effect of this
provision is to prevent "pyramiding" the exercise of an Incentive Stock Option
(i.e., the exercise of the Incentive Stock Option for one share and the use of
that share to make successive exercise of the Incentive Stock Option until it is
completely exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the
time of exercise of an Incentive Stock Option exceeds the purchase price of the
shares under such Option will be treated as an item of adjustment included in
the Optionee's alternative minimum taxable income for purposes of the
alternative minimum tax. If, however, there is a Disqualifying Disposition in
the year in which the Option is exercised, the maximum amount of the item of
adjustment for such year is the gain on the disposition of the shares. If there
is Disqualifying Disposition in a year other than the year of exercise, the
dispositions will not result in an item of adjustment for such other year.
If, subsequent to the exercise of an Incentive Stock Option (whether
paid for in cash or in shares), the Optionee holds the shares received upon
exercise for a period that exceeds (a) two years from the date such Incentive
Stock Option was granted or, if later, (b) one year from the date of exercise
(the "Required Holding Period"), the difference (if any) between the amount
realized from the sale of such shares and their tax basis to the holder will be
taxed as long-term capital gain or loss. If the holder is subject to the
alternative minimum tax in the year of disposition, such holder's tax basis in
his or her shares will be increased for purposes of determining his alternative
minimum tax for such year, by the amount of the item of adjustment recognized
with respect to such shares in the year the Option was exercised.
In general, if, after exercising an Incentive Stock Option, an employee
disposes of the shares so acquired before the end of the Required Holding Period
(a "Disqualifying Disposition"), such Optionee would be deemed in receipt of
ordinary income in the year of the Disqualifying Disposition, in an amount equal
to the excess of the fair market value of the shares at the date the Incentive
Stock Option was exercised over the exercise price. If the Disqualifying
Disposition is a sale or exchange which would permit a loss to be recognized
under the Code (were a loss in fact to be sustained), and the sales proceeds are
less than the fair market value of the shares on the date of exercise, the
Optionee's ordinary income would be limited to the gain (if any) from the sale.
If the amount realized upon disposition exceeds the fair market value of the
shares on the date of exercise, the excess would be treated as short-term or
long-term capital gain, depending on whether the holding period for such shares
exceeded one year.
An income tax deduction is not allowed to the Company with respect to
the grant or exercise of an Incentive Stock Option or the disposition, after the
Required Holding Period, of shares acquired upon exercise. In the event of a
Disqualifying Disposition, a Federal income tax deduction will be allowed to the
Company in an amount equal to the ordinary income to be recognized by the
Optionee, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable, and the Company satisfies its
withholding obligation with respect to such income.
Nonqualified Stock Options. An Optionee granted a Nonqualified Stock
Option under the Plan will generally recognize, at the date of exercise of such
Nonqualified Stock Option, ordinary income equal to the
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difference between the exercise price and the fair market value of the shares of
Common Stock subject to the Nonqualified Stock Option. This taxable ordinary
income will be subject to Federal income tax withholding. A Federal income tax
deduction will be allowed to the Company in an amount equal to the ordinary
income to be recognized by the Optionee, provided that such amount constitutes
an ordinary and necessary business expense to the Company and is reasonable, and
the Company satisfies its withholding obligation with respect to such income.
If an Optionee exercises a Nonqualified Stock Option by delivering
other shares, the Optionee will not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market value is different from
the Optionee's tax basis. The Optionee, however, will be taxed as described
above with respect to the exercise of the Nonqualified Stock Option as if he had
paid the exercise price in cash, and the Company likewise generally will be
entitled to an equivalent tax deduction. Provided a separate identifiable stock
certificate is issued therefor, the Optionee's tax basis in that number of
shares received on such exercise which is equal to the number of shares
surrendered on such exercise will be equal to his tax basis in the shares
surrendered and his holding period for such number of shares received will
include his holding period for the shares surrendered. The Optionee's tax basis
and holding period for the additional shares received on exercise of a
Nonqualified Stock Option paid for, in whole or in part, with shares will be the
same as if the Optionee had exercised the Nonqualified Stock Option solely for
cash.
The discussion set forth above does not purport to be a complete
analysis of the potential tax consequences relevant to the Optionees or to the
Company, or to describe tax consequences based on particular circumstances. It
is based on Federal income tax law and interpretational authorities as of the
date of this Proxy Statement, which are subject to change at any time.
The Board of Directors Recommends a Vote in Favor of this Proposal.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP as the
Company's independent public accountants for the current fiscal year ending June
24, 2000. One or more representatives of PricewaterhouseCoopers LLP are expected
to be present at the Annual Meeting, will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions from shareholders.
The Board of Directors Recommends a Vote in Favor of this Proposal.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 2000 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than August 31, 2000.
By Order Of The Board of Directors
David Shumate,
Secretary
Boca Raton, Florida
March 28, 2000
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PALLET MANAGEMENT SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS - APRIL 27, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
PALLET MANAGEMENT SYSTEMS, INC.
The undersigned hereby appoints Donald Radcliffe as Proxy, each with
full power to appoint a substitute, to represent and to vote, with all the
powers the undersigned would have if personally present, all the shares of
Common Stock $.01 par value per share of Pallet Management Systems, Inc. (the
"Company") held of record by the undersigned on March 27, 2000 at the Annual
Meeting of Shareholders to be held on April 27, 2000 or any adjournment or
adjournments thereof.
Proposal 1.
[ ] TO VOTE FOR ALL THE NOMINEES LISTED BELOW
To vote for or against any or all nominees, please check below:
Proposal 2 John C. Lucy, III For______ Against_____
Proposal 3 Zachary M. Richardson For______ Against_____
Proposal 4 Donald Radcliffe For______ Against_____
Proposal 5 Philip D. Feltman For______ Against_____
Proposal 6 David Sass For______ Against_____
Proposal 7 Ronald Shindler For______ Against_____
Proposal 8 Robert L. Steiler For______ Against_____
Proposal 9. Approval of proposal to amend the Company's 1998 Omnibus
Stock Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal 10. Ratification of selection of PricewaterhouseCoopers LLP as
independent public accountants for the Company for the fiscal year ending June
24, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
In their discretion, the Proxies are authorized to vote upon other
business as may come before the meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made, the
Proxy will be voted FOR Proposals 1, 2 and 3.
Dated: _________________________ , 2000
--------------------------------------
(Signature)
--------------------------------------
(Signature)
PLEASE SIGN HERE
Please date this proxy and sign your name
exactly as it appears hereon.
Where there is more than one owner, each
should sign. When signing as an agent,
attorney, administrator, executor,
guardian, or trustee, please add your
title as such. If executed by a
corporation, the proxy should be signed by
a duly authorized officer who should
indicate his office.
PLEASE DATE, SIGN, AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
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