SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES AND 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 under Rule 14a-12
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PALLET MANAGEMENT SYSTEMS, INC.
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of the 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
2855 UNIVERSITY DRIVE
CORAL SPRINGS, FLORIDA 33065
(954) 340-1290
-------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 29, 2001
-------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Pallet Management Systems, Inc., a Florida corporation (the "Company"), will be
held on Monday, January 29, 2001, at 11:00 A.M., Eastern Standard Time, at the
Company's regional office located at 2900 Highwoods Boulevard, Suite 200,
Raleigh, North Carolina 27604, for the following purposes, all of which are set
forth more completely in the accompanying proxy statement:
1. To elect a total of four persons to the Board of Directors for one-year
terms;
2. To ratify the selection of Kaufman, Rossin & Co. as the Company's
independent auditor for the fiscal year ending June 30, 2001; and
3. To transact such other business as may properly come before the
meeting.
Pursuant to the Company's Bylaws, the Board of Directors has fixed the
close of business on December 29, 2000, as the record date for the determination
of shareholders entitled to notice of and to vote at the Annual Meeting.
A FORM OF PROXY AND THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 24,
2000 IS ENCLOSED. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH
DOES NOT REQUIRE POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
David W. Sass, Chairman of the Board
Coral Springs, Florida
January 5, 2001
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
2855 UNIVERSITY DRIVE
CORAL SPRINGS, FLORIDA 33437
(954) 340-1290
-------------------------------
PROXY STATEMENT
-------------------------------
The enclosed proxy is solicited by the Board of Directors (the "Board")
of Pallet Management Systems, Inc., a Florida corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held on Monday, January 29,
2001, at 11:00 A.M., Eastern Standard Time, at the Company's regional office
located at 2900 Highwoods Boulevard, Suite 200, Raleigh, North Carolina 27604
(the "Meeting"). The approximate date on which this statement and the enclosed
proxy will first be sent to Shareholders is January 5, 2001. The form of proxy
provides a space for you to withhold your vote for any proposal. You are urged
to indicate your vote on each matter in the space provided. If no space is
marked, then the proxy will be voted by the persons therein named at the
meeting: (1) for the election of four Directors to serve one-year terms; (2) for
the ratification of the selection of Kaufman, Rossin & Co. as the Company's
independent auditors; and (3) in their discretion, upon such other business as
may properly come before the meeting. Whether or not you plan to attend the
meeting, please fill in, sign and return your proxy card in the enclosed
envelope. The cost of proxy solicitation by the Board will be borne by the
Company. In addition to solicitation by mail, directors, officers and employees
of the Company may solicit proxies personally and by telephone and telegraph,
all without extra compensation.
At the close of business on December 29, 2000, the record date for the
meeting (the "Record Date"), the Company had outstanding 4,065,612 shares of
common stock (the "Common Stock"). Each share of Common Stock entitles the
holder thereof on the record date to one vote on each matter submitted to a vote
of Shareholders. Only holders of the Common Stock of record at the close of
business on December 29, 2000, are entitled to notice of and to vote at the
Meeting. If there are not sufficient votes for approval of any of the matters to
be voted upon at the Meeting, then the Meeting may be adjourned in order to
permit further solicitation of proxies. The quorum necessary to conduct business
at the Meeting consists of a majority of the outstanding shares of Common Stock.
The election of Directors will be by a plurality of votes cast, either in person
or by proxy, at the Meeting. The approval of the proposals covered by this Proxy
Statement, other than the election of Directors, will require an affirmative
vote of the holders of a majority of the shares of Common Stock of the Company
voting in person or by proxy at the Meeting.
A STOCKHOLDER WHO SUBMITS A PROXY ON THE ACCOMPANYING FORM HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS USE BY DELIVERING A WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY, BY EXECUTING A LATER-DATED PROXY, OR BY ATTENDING THE
MEETING AND VOTING IN PERSON. UNLESS AUTHORITY IS WITHHELD, PROXIES THAT ARE
PROPERLY EXECUTED WILL BE VOTED FOR THE PURPOSES SET FORTH THEREON.
<PAGE>
MANAGEMENT
----------
DIRECTORS AND EXECUTIVE OFFICERS
The Company currently has five Directors serving on its Board. The
Directors and Executive Officers of the Company are as follows:
Name Age Position
------------------------ -------- ----------------------------------
David W. Sass (1) 64 Chairman of the Board
Philip D. Feltman 80 Director
Ronald Shindler 53 Director
Alan P. Sklar 61 Director
Robert L. Steiler 52 Director
Zachary M. Richardson 45 President
Marc Steinberg 38 Corporate Controller, Treasurer
and Secretary
John C. Lucy, III 42 Chief Executive Officer
(1) Mr. David W. Sass, the current Chairman of the Board, will not be standing
for re-election as a Director of the Company in fiscal 2001.
PHILIP D. FELTMAN was elected a Director of the Company in April 2000.
Mr. Feltman has over 50 years of management experience starting in 1947 when he
established a drug store chain in Manchester, Connecticut. He and several
friends later went on to found Ames Department Stores, which became a major
chain of discount department stores. He left Ames in 1978 to found K & F
Industries, Inc., a foreign auto parts importer. Mr. Feltman went on to
participate in the concept, construction, and development of Villas Tacul, a
resort in Cancun, Mexico, and was part of its management team. In addition, Mr.
Feltman was President of Feltman Enterprises Inc., an investment management
company which wholly owned New Nurses, a medical personnel pool; a director of
Royalpar Inc., a public company; and President of Pequot Spring Water Company.
Currently, Mr. Feltman is an active partner in FW Enterprises, which owns office
buildings and apartments; a principal in Travacon Inc., a full service travel
agency located in West Hartford, Connecticut; and a principal in F & R
Associates, Inc., a builder of high quality homes in the Westbrook area of
Connecticut. With a Bachelor of Science degree from the University of
Connecticut, College of Pharmacy, in 1943 he served in the European Theater of
Operations with the 4th Armored Division, Third Army.
2
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RONALD SHINDLER was elected as a Director of the Company in April 2000.
He has been a shareholder of Fowler, White, Burnett, Hurley, Banick &
Strickroot, a Miami, Florida law firm, since 1989. He also served as a Vice
President and Senior Counsel for Drexel Burnham Lambert Incorporated from 1979
to 1987, as well as managed a large brokerage office. Mr. Shindler's firm serves
as one of the Company's outside counsel. He received his B.A. degree from the
University of Pennsylvania, his law degree from Boston University and a Master
of Law in taxation from New York University. Mr. Shindler specializes in
securities law.
ALAN P. SKLAR was appointed a Director for the Company in August 2000.
Mr. Sklar has been a CPA for 39 years. Mr. Sklar founded the Chicago CPA and
management consulting firm, Gleeson, Sklar, Sawyers & Cumpata LLP in 1967, and
is presently a senior partner in the firm, where he primarily consults with
middle market manufacturers and distributors. Mr. Sklar serves as an advisor to
the board of many of his firm's clients. Mr. Sklar also serves on the board of
directors of several non-profit business related organizations, and is former
president of the International Group of Accounting Firms. Mr. Sklar is a
graduate of Northwestern University.
ROBERT L. STEILER was elected as a Director of the Company in April
2000. 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. Mr. Steiler's firm has
served as a manufacturing consultant to the Company since his election to the
Board. SEE "CERTAIN RELATIONSHIPS AND RELATED Transactions." Prior to founding
the Lewis Management Group, Mr. Steiler was associated with KPMG Peat Marwick
from 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. Mr. Steiler graduated
from St. John's University with an MBA in Management.
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 founder and President of PRTI and has
been involved in the pallet industry since 1991 with over 24 years of management
and sales experience as well as investment banking and financial management
experience. From 1994 until April 2000, Mr. Richardson also served the Company
as a Director. 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 has served on the association's Recyclers Council Executive
Committee, which deals with national issues related to pallet recycling.
MARC STEINBERG joined the Company in August 2000 as its Corporate
Controller. Mr. Steinberg was also appointed Treasurer and Secretary effective
August 2000. Mr. Steinberg has worked in the field of accounting for the past 17
years, and has extensive experience in the manufacturing industry. Prior to
joining the Company, Mr. Steinberg served as the controller of TFG Corporation
(for its transportation and education subsidiaries). Prior to that, Mr.
Steinberg
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served as the controller of RTP Corp. (an electronics equipment manufacturer),
controller for Mederer Corporation (a candy manufacturer), and cost accounting
manager for Sensormatic Electronics Corp. (an electronics equipment
manufacturer). Mr. Steinberg has a CPA license, a CMA license and is certified
in Production and Inventory Management. Mr. Steinberg graduated from the
University of Florida in 1984 with a Bachelors degree in Accounting.
JOHN C. LUCY, III has served as Chief Executive Officer of the Company
since 1995. In addition to being Chief Executive Officer of the Company, he is
President of Clary Lumber, a hardwood lumber sawmill located in Gaston, North
Carolina (SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"), and is also
Vice-President of Blacksburg Enterprises, Inc., which operates Baskin-Robbins
and Sub-Station II franchises in Blacksburg, Virginia. From 1995 through 1999,
Mr. Lucy served the Company as both Chief Executive Officer and Chairman of the
Board. Mr. Lucy has also been actively involved in the National Wooden Pallet
and Container Association ("NWPCA"), where he served for two years as Chairman
of the Military Packing Task Force, and for three years as Chairman of the
Research Steering Committee. Mr. Lucy graduated from Virginia Tech University
with a Bachelor of Science degree in business.
SIGNIFICANT EMPLOYEES
ELLEN M. CHAMBERS joined the Company in March 1999, as Director of
Information Technologies. Ms. Chambers previously acted as Information Systems
Coordinator for AIDS Community Services, Inc. She also served as Operations
Manager at Advanced Logic Technologies, Inc., a company specializing in custom
CAD/CAM design. Ms. Chambers has extensive experience in both accounting and
systems development, design and implementation, and has worked in the accounting
and information technology fields for over 12 years. Ms. Chambers graduated from
the University of Buffalo with a B.S. in Accounting, Finance and Management
Information Systems, as well as an MBA in Management Information Systems and
Management Science/Statistics.
SANDRA R. STOLLER joined the Company in August 2000, as Human Resources
Director. Ms. Stoller previously served as Human Resources Manager for the
Tri-County Commuter Rail Authority for six years. Prior to that, Ms. Stoller
held various Human Resources positions at the University of Miami, including
Director of Personnel, where she started the Human Resources operation of the
Sylvester Comprehensive Cancer Center. Ms. Stoller earned a B.S. in Human
Resources Management, and a Certification in Human Resources Administration,
from Florida International University.
MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended June 24, 2000, the Board held three
regular and two special Board meetings. The Board has a Compensation Committee
and an Audit Committee. The Board created its Compensation Committee during
fiscal 2001, and therefore no Compensation Committee meetings were held during
fiscal 2000. The Audit Committee met on two occasions during fiscal 2000. The
Board does not have a nominating or similar committee. During fiscal 2000, no
incumbent director attended or participated in fewer than 75% of the aggregate
of the
4
<PAGE>
total number of meetings held by the Board and the total number of
meetings held by any committee on which such director served.
The Compensation Committee reviews and sets the level for executive
compensation for the ensuing year; reviews and recommends the terms of the
employment agreements for the Company's executives; sets bonuses for the
Company's executives; and determines the number of stock options and the terms
of such options to be awarded to the Company's executives and eligible
employees. Philip D. Feltman, as Chairman, and Robert L. Steiler currently
comprise the Board's Compensation Committee.
The Audit Committee recommends to the Board of Directors the engagement
of independent auditors for the ensuing year; reviews the scope of the annual
audit; reviews with auditors the results of the audit engagement, including
review of the financial statements and the management letter; and reviews the
scope of and compliance with the Company's internal controls. The Audit
Committee has reviewed and discussed the audited financial statements with the
Company's management. In addition, the Audit Committee has discussed with, and
has received from, the Company's independent auditors all matters and written
disclosures contemplated by the rule on Audit Committee Reports implemented by
the Securities and Exchange Commission. Based on the foregoing, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the fiscal year 2000
for filing with the United States Securities and Exchange Commission. The Board
has adopted a Written Charter for the Audit Committee, a copy of which is
attached hereto.
For portions of fiscal 2000, Mr. Bruce Antenberg and Mr. Donald Radcliffe
comprised the Board's Audit Committee. Mr. Antenberg resigned as a Director in
November 1999, and Mr. Radcliffe resigned as a Director in April 2000.
Alan P. Sklar, as Chairman, and Ronald Shindler currently comprise the
Board's Audit Committee. Both Messrs. Sklar and Shindler are "independent"
members of the Audit Committee, as independence is defined under Rule
4200(a)(15) of NASD's Listing Standards.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Securities and Exchange Commission has implemented a rule that
requires companies to disclose in their proxy statements information with
respect to reports that are required to be filed pursuant to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), by directors,
officers and 10% shareholders of each company, if any of those reports are not
filed timely. To the Company's knowledge, based solely on a review of the copies
of the reports furnished to the Company and written representations that no
other reports were required during the fiscal year ended June 24, 2000, (i)
Philip D. Feltman, Ronald Shindler, Alan P. Sklar and Robert L. Steiler, all of
whom are Directors of the Company, and Marc Steinberg, an Officer of the
Company, each did not file a Form 3, Initial Statement of Beneficial Ownership
of Securities, on a timely basis, (ii) John C. Lucy, III and Zachary M.
Richardson, both of whom are Officers of the Company, each did not file a Form
4, Statement of Changes of
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Beneficial Ownership of Securities, on a timely basis, and (iii) all other
required filings, if any, were made in a timely manner.
DIRECTOR AND EXECUTIVE OFFICER 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 $100,000.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
Name and ---------------------------------------------------- ---------------
Principal Position Year Salary($)(1) Bonus($) Other($)(2) Options
---------------------------- -------- -------------------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Zachary M. Richardson, 2000 161,114 0 59,900(3) 40,626
President 1999 119,000 0 13,200 79,890
1998 58,104 0 0 69,000
John C. Lucy, III 2000 161,451 0 16,800(4) 40,626
Chief Executive Officer 1999 119,000 0 25,200 79,890
1998 58,546 0 0 69,000
David Shumate(5) 2000 162,030 0 12,000 0
Executive Vice President 1999 67,725 0 6,000 0
of Sales
</TABLE>
--------------
(1) Includes medical insurance reimbursements.
(2) Includes car allowances and other miscellaneous benefits.
(3) Includes $13,200 for car allowances and $16,800 for reimbursement of
income taxes paid. Also, at the request of the Company, Mr. Richardson
sold his home and incurred expenses in connection with this sale. In
fiscal year 2000, the Company reimbursed Mr. Richardson for closing
costs in connection with this sale, which totaled $29,900.
(4) Includes $13,200 for car allowances and other miscellaneous benefits,
and $3,600 for reimbursement of closing costs incurred in connection
with the sale of Mr. Lucy's home.
(5) Mr. Shumate served the Company as an Executive Vice President of Sales
from February 1999 through September 2000. Mr. Shumate is no longer
employed with the Company.
The following table sets forth information concerning individual grants
of stock options made during the fiscal year ended June 24, 2000 to each of the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE
---- ------------- ---------------- --------- ----
<S> <C> <C> <C> <C> <C>
Zachary M. Richardson 40,626 31% 5.25 6/26/09
John C. Lucy, III 40,626 31% 5.25 6/26/09
</TABLE>
(1) Options to purchase 8,125 shares vest each year, beginning July 1, 2000 and
continuing through July 1, 2004.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of
Securities Value Of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Options Options
On Value at FY-End (#) at FY-End ($)
Exercise Realized Exercusabke/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --- --- ------------- -------------
<S> <C> <C> <C> <C> <C>
John C. Lucy, III 69,000 0 463,240/76,626 $602,934/$0
Zachary M. Richardson 69,000 0 463,240/76,626 $602,934/$0
</TABLE>
COMPENSATION OF DIRECTORS
Starting in fiscal year 2000, directors are paid a monthly retainer of
$500, a payment of $1,000 per board meeting day and $500 per teleconference
meeting plus all related business expenses. All audit committee members are paid
$250 per quarter. All directors are granted 30,000 three-year options when they
are appointed or elected to the board and 5,000 options for each additional year
they are on the board at the then market value. These options vest in one year
and when services are terminated, all unexercised options are forfeited. SEE
ALSO "STOCK OPTION PLANS."
EMPLOYMENT AGREEMENTS
In November 1998, the Company entered into five-year employment
agreements (the "Employment Agreements") with John C. Lucy, III and Zachary M.
Richardson. Pursuant to the terms of these Employment Agreements, each executive
is entitled to receive (i) annual base compensation of $156,000, with 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 Employment Agreements also provide for annual
grants of common stock options commencing in fiscal 2000 equal to 1% of the then
outstanding number of common shares at an exercise price of fair market value at
date of grant, and the granting of 150,000 stock appreciation rights that vest
only upon a "Change of Control" as defined in the Employment Agreements.
During the term of the Employment Agreements, should there be a Change
of Control of the Company as that term is defined therein, the Company, at its
sole option, may terminate the Employment Agreements upon 30 days prior written
notice and thereafter will be obligated to pay the executives the balance of the
compensation payable under the Employment Agreements, had they not been
terminated prior to their expiration, together with an additional sum equal to
299% of Executives' annual base compensation. The Employment Agreements also
contain non-competition and confidentiality provisions.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Company created its Compensation Committee during fiscal 2001, and
therefore the Board of Directors acted on compensation issues and set
compensation levels for its executive management during fiscal 2000. SEE
"MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES." Mr. Robert L. Steiler
is a Director of the Company and currently serves on the Compensation Committee.
Mr. Steiler is also the sole owner of a company that provides consulting
services to the Company for compensation. SEE "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS." Mr. Steiler abstains from voting on issues concerning such
compensation.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company created its Compensation Committee during fiscal 2001, and
therefore the Board of Directors acted on compensation issues and set
compensation levels for its executive management during fiscal 2000. SEE
"MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES."
GENERAL COMPENSATION POLICY. The three principal components of the
Company's executive compensation are salary, bonus and stock options. The
components are designed to facilitate fulfillment of the compensation objectives
of the Company's Board of Directors, which objectives include (i) attracting and
retaining competent management, (ii) recognizing individual initiative and
achievement, (iii) rewarding management for short and long term accomplishments
and (iv) aligning management compensation with the achievement of the Company's
goals and performance.
The Board endorses the position that equity ownership by management is
beneficial in aligning management's and shareholders' interest in the
enhancement of shareholder value. Base salaries for new management employees are
determined initially by evaluating the responsibilities of the position held and
the experience of the individual, and by reference to the competitive
marketplace for managerial talent, including a comparison of base salaries for
comparable position at similar companies of comparable sales and capitalization.
Annual salary adjustments are determined by evaluating (i) the performance of
and responsibilities assumed by the executive, (ii) the competitive marketplace
and (iii) the performance of the Company. The Board does not utilize any
specific formula to determine compensation based on Company performance.
The Board periodically reviews the Company's existing management
compensation programs on an ongoing basis, including (i) meetings with the
President to consider and set mutually agreeable performance standards and goals
for members of senior management and/or the Company, as appropriate or as
otherwise required pursuant to any such officer's employment agreement and (ii)
modifications to such compensation programs as appropriate, to ensure alignment
with the philosophy and established standards and goals of the Compensation
Committee.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT. The Company has
entered into employment agreements with both Mr. John C. Lucy, III, its Chief
Executive Officer, and Mr. Zachary M. Richardson, its President. Each of their
employment agreements provide for bonuses of up to 100% of base salary based on
the increase in pretax earnings per share over the
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prior year. SEE "EMPLOYMENT AGREEMENTS." Aside from Company performance, other
factors which influence the compensation paid to Messrs. Lucy and Richardson
include executive responsibilities and performance, and compensation levels at
comparable companies.
David W. Sass, Chairman
Philip D. Feltman
Ronald Shindler
Alan P. Sklar
Robert L. Steiler
PERFORMANCE GRAPH
COMPARE CUMULATIVE TOTAL RETURN
AMONG PALLET MANAGEMENT SYSTEMS, INC.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
PALLET MANAGEMENT SYSTEMS, INC. 100.00 9.09 6.36 39.09 19.09 11.36
SIC CODE INDEX 100.00 154.75 223.59 234.97 177.01 132.28
NASDAQ MARKET INDEX 100.00 125.88 151.64 201.01 281.68 423.84
ASSUMES $100 INVESTED ON JULY 1, 1995
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JUNE 24, 2000
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Lewis Management Group ("LMG"), a firm that provides manufacturing
consulting services to the Company, is solely owned by Robert L. Steiler, a
Director of the Company. Under a consulting agreement between LMG and the
Company, the Company pays LMG $1,000 per man day, with a maximum of 25 man days,
or a maximum of $25,000, per month. The total amount paid by the Company to LMG
did not exceed $60,000 during fiscal year 2000, but the Company anticipates that
it will pay LMG in excess of $60,000 during fiscal year 2001.
Clary Lumber Company, Inc., a North Carolina corporation ("Clary"),
which is owned by the family of John C. Lucy, Jr., a principal shareholder and
former Director of Pallet Management, and his son, John C. Lucy, III, who is
Pallet Management's Chief Executive Officer, sold $2,633,000 of pallets and
lumber and $2,359,000 of pallets and lumber to the Company during the fiscal
years 2000 and 1999, respectively. Lumber purchases from Clary amounted to 5.6%
and 8% of the Company's lumber purchases for fiscal years 2000 and 1999,
respectively. After procedures were performed by the Company's auditors at the
request of the Company, the Company believes that these transactions were made
at prices comparable to vendors other than Clary in the ordinary course of
business.
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
----------------------------------------
The following table sets forth, as of December 29, 2000, the beneficial
ownership of the voting securities of the Company, all of which voting
securities consist of shares of common stock, by each person beneficially owning
more than 5% of such securities, by each of the directors and executive officers
of the Company, and by the directors and executive officers of the Company as a
group.
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<PAGE>
NAME AND PERCENT OF
ADDRESS OF AMOUNT OF BENEFICIAL CLASS
BENEFICIAL OWNER(1) OWNERSHIP OF STOCK OUTSTANDING
------------------------------- ------------------------- --------------
Philip D. Feltman 11,000(2) *
John C. Lucy, III 642,905(3) 14.2%
Zachary M. Richardson 644,043(4) 14.2%
David W. Sass 10,000(2) *
Ronald Shindler 0(2) 0
Alan P. Sklar 5,000(2) *
Robert L. Steiler 1,000(5) *
Marc S. Steinberg 10,000(6) *
All Officers and Directors 1,323,948(7) 26.5%
as a Group (eight persons)
John C. Lucy, Jr. 647,696(8) 15.3%
* Less than 1%
(1) The address of all persons listed above is 2855 University Drive, Coral
Springs, Florida 33065.
(2) This figure excludes options to acquire 30,000 shares, which options are
not exercisable within 60 days from the date hereof.
(3) This figure includes 182,097 shares owned of record by Mr. Lucy and his
children and options to acquire 460,808 shares, which options are
exercisable within 60 days from the date hereof. This figure excludes
options to acquire 94,932 shares, which options are not exercisable within
60 days from the date hereof. This figure also excludes beneficial
ownership of Mr. Lucy, Jr., the father of Mr. Lucy, III. Together, Mr.
Lucy, III and Mr. Lucy Jr. (including Clary, see footnote 8 below)
beneficially own 654,793 shares of record and options and warrants to
acquire 635,808 shares, which options and warrants are exercisable within
60 days from the date hereof, or 27.5% of the Company.
(4) This figure includes 177,203 shares owned of record by Mr. Richardson and
options to acquire 466,840 shares, which options are exercisable within 60
days from the date hereof. It excludes options to acquire 94,932 shares,
which options are not exercisable within 60 days from the date hereof.
(5) This figure excludes options to acquire 50,000 shares, which options are
not exercisable within 60 days from the date hereof.
(6) This figure includes 0 shares owned of record by Mr. Steinberg and options
to acquire 10,000 shares, which options are exercisable within 60 days
from the date hereof. This figure excludes options to acquire 7,500
shares, which options are not exercisable within 60 days from the date
hereof.
(7) This figure includes 386,300 shares owned of record by the Company's
directors and executive officers as a group, and options to acquire
937,648 shares as a group, which options are exercisable within 60 days
from the date hereof. This figure excludes options to acquire
10
<PAGE>
367,364 shares as a group, which options are not exercisable within 60
days from the date hereof.
(8) This figure includes 422,696 shares owned of record by Mr. Lucy, Jr., the
father of Mr. Lucy, III, and options to acquire 125,000 shares, which
options are exercisable within 60 days from the date hereof. This figure
also includes 50,000 shares owned of record by Clary Lumber Company, Inc.,
a North Carolina corporation ("Clary"), and warrants to acquire 50,000
shares, which warrants are exercisable within 60 days from the date
hereof. Mr. Lucy, Jr. owns two-thirds of Clary, with the other one-third
ownership shared between Mr. Lucy, III and his sister. This figure does
not include beneficial ownership of Mr. Lucy, III. Together, Mr. Lucy, III
and Mr. Lucy, Jr. (including Clary) beneficially own 654,793 shares of
record and options and warrants to acquire 635,808 shares, which options
and warrants are exercisable within 60 days from the date hereof, or 27.5%
of the Company.
PROPOSALS TO THE SHAREHOLDERS
-----------------------------
The Board on December 14, 2000, unanimously approved the following
proposals for presentation to the Company's Shareholders:
1. ELECTION OF DIRECTORS
The Board has nominated the following individuals to serve as Directors
of the Company until the Company's 2002 Annual Meeting of Shareholders and until
their respective successors have been elected and qualified: Philip D. Feltman,
Ronald Shindler, Alan P. Sklar and Robert L. Steiler. For biographical
information regarding these nominees, please see "MANAGEMENT - Directors and
Executive Officers."
It is intended that the votes will be cast pursuant to the accompanying
proxy for the four nominees named above, unless otherwise directed. The Board
has no reason to believe that any of the nominees will become unavailable to
serve if elected. However, if any nominee should be unavailable, then proxies
solicited by the Board will be voted for the election of a substitute nominee
designated by the Board.
Proxies cannot be voted for a greater number of persons than the four
nominees named above. The Directors will be elected by a plurality of the votes
cast, either in person or by proxy, at the Meeting. Votes cast as abstentions
will not be counted as votes for or against the election of the Director and
therefore will have no effect on the number of votes necessary to elect the
Directors. So-called "broker non-votes" (brokers failing to vote by proxy shares
of the Company's Common Stock held in nominee name for customers) will not be
counted at the Meeting and also will have no effect on the number of votes
necessary to elect a Director.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE PROPOSED NOMINEES FOR ELECTION TO
THE BOARD.
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
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<PAGE>
It is intended that the votes will be cast pursuant to the accompanying
proxy for the ratification of Kaufman, Rossin & Co. ("KR&C"), as the Company's
independent auditor, unless otherwise directed. KR&C's service as the Company's
independent auditor began with the audited financial statements for 1999.
No member of KR&C or any associate thereof has any financial interest
in the Company or its subsidiaries. By mutual agreement, a member of that firm
will not attend the Meeting and therefore will not have the opportunity to make
a statement or be available to respond to questions.
Shareholder approval of the Company's auditor is not required under
Florida law. The Board is submitting its selection of KR&C to its Shareholders
for ratification in order to determine whether the Shareholders generally
approve of the Company's auditor. If the selection of KR&C is not approved by
the Shareholders, the Board will reconsider its selection.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
3. OTHER MATTERS
The Board is not aware of any other business that may come before the
meeting. However, if additional matters properly come before the meeting, then
proxies will be voted at the discretion of the proxy-holders.
12
<PAGE>
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at, and included in the
Company's proxy statement and proxy relating to, the fiscal 2002 Annual Meeting
of Shareholders of the Company must be received by the Company no later than
September 5, 2001, at its principal executive offices, located at 2855
University Drive, Coral Springs, Florida 33437. Shareholder proposals intended
to be presented at, but not included in the Company's proxy statement and proxy
for, that meeting must be received by the Company no later than November 21,
2001, at the foregoing address; otherwise, such proposals will be subject to the
grant of discretionary authority contained in the Company's form of proxy to
vote on them.
ADDITIONAL INFORMATION
A copy of the Company's Form 10-KSB for the fiscal year ended June 24,
2000 is being provided to Shareholders with this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
David W. Sass, Chairman of the Board
January 5, 2001
Coral Springs, Florida
13
<PAGE>
PALLET MANAGEMENT SYSTEMS, INC.
Audit Committee Charter
There shall be a committee of the Board of Directors known as the Audit
Committee. Only independent directors may serve on the Audit Committee. At least
one member of the Committee shall have an accounting background or related
financial expertise. The primary function of the Committee shall be to assist
the Board of Directors in fulfilling its oversight role regarding the Company's
financial reporting process, its system of internal control and its compliance
with applicable laws, regulations and company policies. Activities of the Audit
Committee are as follows:
Continuous Activities - General
1. Provide an open avenue of communication between the independent
auditors, internal auditors and the Board of Directors.
2. Meet at least four times per year or more frequently as circumstances
require; the Committee may ask members of management or others to
attend meetings and provide pertinent information as necessary.
3. Confirm and ensure the independence of the independent auditors and the
objectivity of the internal auditors.
4. Inquire of management, the independent auditors and the Chief Financial
Officer (the "CFO") about significant risks or exposures, and assess
the steps management has taken to minimize such risks to the Company.
5. Meet periodically with the independent auditors, the CFO, the internal
Auditor and management in separate executive sessions to discuss any
matters that the Committee or these groups believe should be discussed
privately with the Committee.
6. Report periodically to the Board of Directors on significant results of
the foregoing activities.
7. Instruct the independent auditors that the Board of Directors, as the
stockholders' representative, is the auditors' client.
Continuous Activities - Reporting Specific Policies
1. Advise financial management and the independent auditors that they are
expected to provide a timely analysis of significant current financial
reporting issues and practices.
<PAGE>
2. Provide a medium for financial management and the independent auditors
to discuss with the audit committee their qualitative judgments about
the appropriateness, not just the acceptability, of accounting
principles and financial disclosure practices used or proposed to be
adopted by the Company and, particularly, about the degree of
aggressiveness or conservatism of its accounting principles and
underlying estimates.
3. Determine, as it relates to new transactions or events, the auditors'
reasoning for the appropriateness of the accounting principles and
disclosure practices adopted by management.
4. Assure that the independent auditors' reasoning is described in
determining the appropriateness of changes in accounting principles and
disclosure practices.
5. Assure that the independent auditors' reasoning is described in
accepting or questioning significant estimates by management.
Scheduled Activities
1. Recommend the selection of the independent auditors for approval by the
Board of Directors, and approve the compensation of the independent
auditors.
2. Consider, in consultation with the independent auditors and the CFO,
the audit scope and plan of the independent auditors and the internal
auditors to assure completeness of coverage, reduction of redundant
efforts and the effective use of audit resources.
3. Review with management and the independent auditors the results of
annual audits and related comments in consultation with other
committees as deemed appropriate, including:
(1) The annual financial statements, accompanying footnotes and
the independent auditors' report thereon.
(2) Any significant changes required in the independent auditors'
audit plans.
(3) Any difficulties or disputes with management encountered
during the course of the audit.
(4) Other matters related to the conduct of the audit, which are
to be communicated to the Committee under generally accepted
auditing standards.
4. Consider and review with management and the CFO:
(1) Significant internal audit findings during the year and
management's responses to them.
<PAGE>
(2) Any difficulties encountered in the course of internal audit
work, including any restrictions on the scope of activities or
access to required information.
(3) Any changes required in the planned scope of the Internal
Audit plan.
(4) The Internal Audit Department Charter, budget and staffing.
5. Review the interim financial reports with management, the independent
auditors and the CFO before those interim reports are released to the
public or filed with the SEC.
6. Review the results of the annual audits of directors' and officers'
expense accounts, and management perquisites prepared by the Internal
Audit Department and the independent auditors, respectively.
7. Consider and review with the independent auditors and the CFO:
(1) The adequacy of the Company's internal controls, including
computerized information system controls and security.
(2) Related findings and recommendations of the independent
auditors and Internal Audit Department, together with
management's responses.
8. Review annually with the independent auditors and the CFO the results
of the monitoring of compliance with the Company's code of conduct.
9. Describe in the Company's annual report the Committee's composition and
responsibilities, and how they were discharged.
10. Arrange for the independent auditors to be available to the full Board
of Directors at least annually.
11. Review and update the Committee's Charter annually.
<PAGE>
When Necessary Activities
1. Review and concur with the appointment of the CFO.
2. Review and approve requests for any management consulting engagement to
be performed by the independent auditors, and be advised of any other
study undertaken at the request of management that is beyond the scope
of the audit engagement letter.
3. Review periodically with legal counsel any regulatory matters that may
have a material impact on the Company's financial statements,
compliance policies and programs.
4. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities; the Committee shall be empowered
to retain independent counsel and other professionals to assist in
conducting any investigation.
<PAGE>
FORM OF PROXY
PROXY FOR ANNUAL MEETING OF
PALLET MANAGEMENT SYSTEMS, INC.
2855 UNIVERSITY DRIVE, CORAL SPRINGS, FLORIDA 33437
(954) 340-1290
SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS OF
PALLET MANAGEMENT SYSTEMS, INC.
THE UNDERSIGNED hereby appoint(s) Zachary M. Richardson and Ronald
Shindler, or either of them, with full power of substitution, to vote at the
Annual Meeting of Shareholders of Pallet Management Systems, Inc., a Florida
corporation (the "Company"), to be held on January 29, 2001, at 11:00 A.M.
Eastern Standard Time, at the Company's regional office located at 2900
Highwoods Boulevard, Suite 200, Raleigh, North Carolina 27604, or any
adjournment thereof, all shares of the common stock which the undersigned
possess(es) and with the same effect as if the undersigned was personally
present, as follows:
PROPOSAL (1): ELECT DIRECTORS: PHILIP D. FELTMAN, RONALD SHINDLER,
ALAN P. SKLAR AND ROBERT L. STEILER.
( ) For All Nominees Listed Above ( ) Withhold Authority to Vote
(except as marked to the contrary below) for All Nominees Listed Above
-------------------------------------------------------------------------------
(To withhold vote for any nominee or nominees, print the name(s) above.)
PROPOSAL (2): RATIFY SELECTION OF KAUFMAN, ROSSIN & CO. AS THE
COMPANY'S INDEPENDENT AUDITOR.
( ) For ( ) Against ( ) Abstain
PROPOSAL (3): TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
( ) In their discretion, the proxy-holders are ( ) Withhold Authority
authorized to vote upon such other business
as may properly come before the meeting or
any adjournment thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND IN THE DISCRETION OF
THE PROXIES NOMINATED HEREBY ON ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
<PAGE>
(Please sign exactly as name appears hereon. If the stock is registered in the
names of two or more persons, then each should sign. Executors, administrators,
trustees, guardians, attorneys and corporate officers should include their
capacity or title.)
Please sign, date and promptly return
this Proxy in the enclosed envelope.
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Signature Date
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Signature Date
