<PAGE> 1
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:
<TABLE>
<S> <C>
/ / 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
</TABLE>
ALL AMERICAN SEMICODUCTOR, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ALL AMERICAN SEMICONDUCTOR, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
/X/ 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> 2
ALL AMERICAN SEMICONDUCTOR, INC.
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 15, 1995
____________________
To: The shareholders of All American Semiconductor, Inc.
The annual meeting of the shareholders of All American Semiconductor, Inc. (the
"Company"), a Delaware corporation, will be held on Tuesday, August 15, 1995,
at 10:00 AM, Miami, Florida local time, at Don Shula's Hotel, 15255 Bull Run
Road, Miami Lakes, Florida, for the following purposes:
1. to elect two directors to serve on the Board of Directors until the
1998 annual meeting of shareholders or until election and
qualification of their respective successors;
2. to ratify the selection of Lazar, Levine & Company LLP as the
Company's independent public accountants for the year ending December
31, 1995;
3. to approve an amendment to Article 4 of the Company s Certificate of
Incorporation, as amended (the "Certificate"), to increase the
authorized shares of common stock to 40,000,000 shares;
4. to approve an amendment to Article 4 of the Company's Certificate to
increase the authorized shares of preferred stock to 5,000,000 shares;
5. to approve the increase to 3,250,000 of the number of shares of common
stock reserved for issuance (the "Reserved Share Increase") under the
Company's Employees, Officers, Directors Stock Option Plan, as
amended (the "Option Plan");
6. to approve certain material amendments (other than the Reserve Share
Increase) to the Option Plan requiring the approval of shareholders of
the Company as part of the Option Plan being amended and restated in
its entirety; and
7. to consider and act upon such other matters as may properly come
before the meeting or any and all postponements or adjournments
thereof.
Only shareholders of record at the close of business on Friday, July 7, 1995,
will be entitled to notice of and to vote at the meeting or at any adjournments
or postponements thereof.
By Order of the Board of Directors,
Howard L. Flanders,
Corporate Secretary
July 10, 1995
Miami, Florida
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE> 3
ALL AMERICAN SEMICONDUCTOR, INC.
16115 N.W. 52ND AVENUE
MIAMI, FLORIDA 33014
____________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 15, 1995
____________________
INTRODUCTION
General
The enclosed proxy is solicited by and on behalf of the Board of Directors
("Board") of All American Semiconductor, Inc. (the "Company") for use at the
Company's annual meeting of shareholders (the "Meeting") to be held on Tuesday,
August 15, 1995, at 10:00 A.M., Miami, Florida local time, at Don Shula's
Hotel, 15255 Bull Run Road, Miami Lakes, Florida, and at any adjournments or
postponements thereof. The Company is first mailing this Proxy Statement and
the accompanying proxy to its shareholders on or about July 13, 1995.
Proxies in the form enclosed, if properly executed and received in time for
voting, and not revoked, will be voted as directed in accordance with the
instructions thereon. Any properly executed and timely received proxy, not so
directing to the contrary, will be voted "FOR" each of the items listed on the
proxy. Any person signing and mailing the enclosed proxy may revoke it at any
time before it is voted by giving written notice of revocation to Howard L.
Flanders, the Corporate Secretary of the Company, by submission of a duly
executed proxy bearing a later date or by voting in person at the Meeting.
Attendance at the Meeting will not in and of itself constitute a revocation of
a proxy. Any notice revoking a previously submitted proxy should be send to
Howard L. Flanders, Corporate Secretary, All American Semiconductor, Inc.,
16115 N.W. 52nd Avenue, Miami, Florida 33014. Revocations will not be
effective unless received in writing by the Corporate Secretary of the Company
prior to the Meeting.
The expense of this solicitation will be borne by the Company. In addition to
solicitation by mail, arrangements may be made with brokers and other
custodians, nominees and fiduciaries to send proxy materials to their
principals and the Company will, upon request, reimburse them for reasonable
expenses in doing so. The Company has made arrangements with Shareholder
Communications Corporation, a proxy solicitation firm, to assist the Company in
soliciting proxies from shareholders. The cost to the Company with respect to
such arrangement is estimated to be approximately $15,000. Solicitation of
proxies from some shareholders may also be made by the Company's officers and
regular employees by
<PAGE> 4
telephone, telegram, or in person after the initial solicitation, without
additional compensation or remuneration therefor.
A copy of the Company's annual report for the fiscal year ended December 31,
1994 (which has included therein audited consolidated financial statements for
the Company) is being mailed to the Company s shareholders together with this
Proxy Statement.
Voting Securities
All voting rights are vested exclusively in the holders of the Company's common
stock, $.01 par value per share (the "Common Stock"), with each share entitled
to one vote. Only shareholders of record at the close of business on Friday,
July 7, 1995, are entitled to notice of and to vote at the Meeting or any
adjournments or postponements thereof. Shareholders have no dissenters' rights
of appraisal in connection with any matter being presented at the Meeting. On
July 7, 1995, the Company had 16,996,791 shares of Common Stock outstanding
(the "Shares"), all of which are entitled to vote at the Meeting. The Shares
include the 4,550,000 shares of Common Stock (exclusive of the over-allotment
option of 682,500 additional shares, the "Over-Allotment Option") issued by the
Company on June 15, 1995, in connection with a firm commitment public offering
(the "Offering") by the Company covered by a registration statement filed with
the Securities and Exchange Commission ("SEC") which became effective on June
8, 1995. References to the Shares and certain other information relating to
the Company's Common Stock in this Proxy Statement do not include the
Over-Allotment Option, which on July 7, 1995, was exercised by the Underwriter.
The issuance by the Company of the 682,500 additional shares covered by the
Over-Allotment Option is scheduled to close on July 13, 1995.
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the Shares will constitute a quorum for the transaction of
business.
Approximately 12.1% of the Shares are (and were on July 7, 1995) owned by Paul
Goldberg and Bruce M. Goldberg and members of their families and certain
affiliated trusts (collectively the "Goldberg Group"). See "SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." The members of the Goldberg
Group have informed the Company that they intend to vote in favor of all
proposals made by the Board in this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 7, 1995, by (i) each person
known to be the beneficial owner of more than five percent (5%) of the Company
s Common Stock, (ii) each director or nominee for director, (iii) each
executive officer of the Company who was serving as an executive officer at the
end of fiscal year 1994 (including the Chief Executive Officer), and (iv) all
executive officers and directors of the Company as a group. Except as
indicated in the notes to the following table, the persons named in the table
have sole voting and investment power with respect to all Shares shown as
beneficially owned by them.
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) PERCENT OF CLASS (2)
- ----------------------- ------------------------ --------------------
<S> <C> <C>
Bruce M. Goldberg . . . . . . . . . 997,141 (3) 5.9%
Paul Goldberg . . . . . . . . . . . 817,476 (4) 4.8%
S. Cye Mandel . . . . . . . . . . . 5,625 *
Howard L. Flanders . . . . . . . . 1,000 *
Rick Gordon . . . . . . . . . . . . 1,000 *
Sheldon Lieberbaum . . . . . . . . - -
All executive officers and
directors as a group
(6 persons) . . . . . . . . . . . 1,822,242 10.7%
- ------------------
* Less than 1%.
</TABLE>
(1) The address of each of Paul Goldberg, Bruce M. Goldberg, Howard L.
Flanders and Rick Gordon is the Company, 16115 N.W. 52nd Avenue,
Miami, Florida 33014; S. Cye Mandel is 1800 Northeast 114th Street,
Apt. 2305, North Miami, Florida 33181; and Sheldon Lieberbaum is 600
Old Country Road, Suite 518, Garden City, New York 11530.
(2) Excludes outstanding stock options to purchase 2,386,274 shares, of
which 1,170,563 options to purchase shares were issued pursuant to the
Company's Employees', Officers', Directors', Stock Option Plan (the
"Option Plan") prior to its being amended and restated by the Board on
May 23, 1995, and 1,000,000 options were issued on June 8, 1995,
pursuant to the Option Plan after its being amended and restated to
the four executive officers of the Company (the "New Options"). The
New Options will become null and void if the amendments to the Option
Plan and the increase in the number of authorized shares of Common
Stock to be voted upon at the Meeting are not approved by the
shareholders at the Meeting. See ITEM 3, ITEM 5 and ITEM 6 in
"PROPOSALS." Of these outstanding options, 1,631,000 options
(including the New Options) are held by the executive officers and
directors of the Company as a group, including 625,000 options
(including 450,000 New Options) held by Bruce M. Goldberg, 450,000
options (including 250,000 New Options) held by Paul Goldberg, 283,000
options (including 150,000 New Options) held by Howard L. Flanders and
273,000 options (including 150,000 New Options) held by Rick Gordon.
Further excludes currently outstanding warrants to purchase 674,875
shares, and obligations of the Company upon the happening of certain
events and conditions to issue 1,000 shares of Common Stock and
incentive stock options covering an additional 130,000 shares. If all
options and warrants outstanding as of July 7, 1995, were exercised
(which includes the New Options, assuming the shareholders' approvals
described above are obtained), Bruce M. Goldberg, Paul Goldberg,
Howard L. Flanders, Rick Gordon and all executive officers and
directors of the Company as a group would own as of July 7, 1995,
8.1%, 6.3%, 1.4%, 1.4% and 17.2%, respectively, of the Company's
Common Stock.
3
<PAGE> 6
(3) Includes 53,380, 26,000, 69,496, 69,496 and 69,496 Shares held of
record by Bruce M. Goldberg as trustee for his sons, Matthew Goldberg
and Alec Goldberg, and for his nieces and nephews, Kimberly Phelan,
Tiffany Phelan and Patrick Phelan, respectively. For federal
securities law purposes only, Bruce M. Goldberg is deemed to be the
beneficial owner of these securities. Does not include 7,500 Shares
held of record by Jayne Goldberg, the wife of Bruce M. Goldberg, and
36,425 Shares held of record by an unrelated third party as trustee
for Matthew Goldberg (23,075 Shares) and Alec Goldberg (13,350
Shares). Bruce M. Goldberg disclaims beneficial ownership over all
such securities.
(4) Includes 319,218 Shares owned of record by Paul Goldberg's wife, Lola
Goldberg, and 1,250 and 1,250 Shares, respectively, held of record by
Paul Goldberg as custodian for Kimberly Phelan and Tiffany Phelan.
For federal securities law purposes only, Paul Goldberg is deemed to
be the beneficial owner of these securities. Does not include 192,898
Shares held of record by Robin Phelan, the daughter of Paul and Lola
Goldberg, over which securities Paul and Lola Goldberg disclaim
beneficial ownership.
BOARD OF DIRECTORS
The Company currently has six directors serving on its Board. The directors of
the Company are as follows:
<TABLE>
<CAPTION>
NAME CLASS AGE POSITION
- ---- ----- --- --------
<S> <C> <C>
Paul Goldberg (1) III 66 Chairman of the Board and Chief Executive Officer
Bruce M. Goldberg (1) II 40 Director, President and Chief Operating Officer
Howard L. Flanders II 37 Director, Vice President, Corporate Secretary and Chief Financial
Officer
Rick Gordon III 41 Director and Senior Vice President of Sales and Marketing
S. Cye Mandel (2)(3) I 66 Director
Sheldon Lieberbaum (2)(3) I 60 Director
</TABLE>
__________________
(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
4
<PAGE> 7
The Company's Certificate of Incorporation provides for a staggered Board,
consisting of three classes. The terms of office of Class I, II and III
directors expire in 1995, 1996 and 1997, respectively.
The following is a brief resume of the Company's directors:
PAUL GOLDBERG, one of the co-founders of the Company and the father of Bruce M.
Goldberg, has been employed by the Company in various executive capacities
since its predecessor's formation in 1964, and has served as Chairman of the
Board and Chief Executive Officer since 1978. Mr. Goldberg was also President
of the Company until July 1994.
BRUCE M. GOLDBERG, the son of Paul Goldberg, joined the Company in October 1988
as Vice President, in 1990 became Executive Vice President and in July 1994
became President and Chief Operating Officer. Bruce M. Goldberg has served as
a director of the Company since 1987. From 1981 until joining the Company,
Bruce M. Goldberg practiced law.
HOWARD L. FLANDERS joined the Company in February 1991 as its Vice President
and Chief Financial Officer, and in 1992 became a director of the Company and
Corporate Secretary. Prior to joining the Company, Mr. Flanders, who is a CPA,
was Controller of Reliance Capital Group, Inc., a subsidiary of Reliance Group
Holdings, Inc., where he held various positions since 1982. Prior thereto, Mr.
Flanders was an accountant with the public accounting firm of Coopers &
Lybrand.
RICK GORDON has been employed by the Company since January 1986. He was
originally the General Manager of the Company's Northern California office and
Northwest Regional Manager. In March 1990, Mr. Gordon became the Western
Regional Vice President and in 1992 Vice President of North American Sales and
a director of the Company. In 1994, Mr. Gordon was appointed Senior Vice
President of Sales and Marketing for the Company. Before working for the
Company, Mr. Gordon was Western Regional Vice President for Diplomat
Electronics, another electronic components distributor, from 1975 until 1986.
S. CYE MANDEL is a prominent South Florida businessman who has been an
executive in the food service industry for the past 20 years. Mr. Mandel has
been a principal in the entity which acted from 1989 to 1993 as the manager of
the Miccosukee Indian bingo enterprise located in Miami, Florida. Mr. Mandel
has served as director of the Company since 1987.
SHELDON LIEBERBAUM is director of corporate finance and a director and
shareholder of Lew Lieberbaum & Co., Inc. (the "Underwriter"), an investment
banking firm which was one of the underwriters of the Company's 1992 public
offering (the "1992 Public Offering") and is the underwriter for the Offering.
He was also an officer of the underwriter which took the Company public in
1987. Mr. Lieberbaum has been in the brokerage business for over 35 years and
serves as a director for Unapix Enterprises, Eastco Industrial Safety
Corporation and In-Home Health, Inc. Mr. Lieberbaum became a director of the
Company in 1992 in connection with an agreement of the Company with the
underwriters of the 1992 Public Offering that until June 18, 1997, the Company
would use its best efforts to cause one
5
<PAGE> 8
individual designated by such underwriters to be elected to the Board or to be
an advisor to the Board. In connection with the Offering, a similar agreement
regarding the designation of a director of the Company has been entered into
between the Company and the Underwriter which has a term of three years from
June 8, 1995, but is not operative until the expiration of the existing
agreement with the underwriters of the 1992 Public Offering so that only one
designee of either the Underwriter or the underwriters of the 1992 Public
Offering will serve on the Board at any time. The National Association of
Securities Dealers, Inc. ("NASD") recently alleged that the Underwriter and
others, including Mr. Lieberbaum, in 1991 engaged in market manipulation,
inaccurately maintained books and records and failed to adequately supervise
the activities of the Underwriter's personnel in connection with the trading
for the Underwriter's account of warrants which were part of a public offering
of units of convertible preferred stock and warrants of a company for which the
Underwriter had acted in 1991 as managing underwriter. In order to
expeditiously resolve this matter and without admitting or denying these
allegations, in January 1995 Mr. Lieberbaum and others voluntarily entered into
a Letter of Acceptance, Waiver and Consent with the NASD pursuant to which Mr.
Lieberbaum was censured and fined by the NASD, agreed to pay with the
Underwriter and others restitution to customers and was suspended from
association with any NASD member for a one month period.
The Board met four (4) times during the fiscal year ended December 31, 1994, in
addition to acting five (5) times during the year by unanimous written consent.
All Board members attended each of the meetings.
BOARD COMPENSATION
The members of the Board do not currently receive compensation from the Company
for acting in their capacity as directors of the Company nor has the Company
adopted any standard arrangement for compensating non-employee directors of the
Company. The Company may decide in the future to compensate directors and/or to
establish a standard compensation arrangement for non-employee directors.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company s directors and executive officers, and persons who own more than 10%
of a registered class of the Company s equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of common
stock, and other equity securities of the Company. Directors, executive
officers and greater than ten percent shareholders are also required by the SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, during the fiscal year ended December 31, 1994, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were satisfied, except that
a Form 4 was not filed (i) by Paul Goldberg in connection with his gift (the
"Gift") of 8,500 shares of Common Stock in trust for one of his grandchildren,
(ii) by Bruce M. Goldberg in connection with his acting as the trustee of
6
<PAGE> 9
the Gift and (iii) by Bruce M. Goldberg in connection with his exercise of
stock options covering 3,125 shares of Common Stock. Form 4s reporting such
transactions have since been filed.
BOARD COMMITTEES
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Paul Goldberg and Bruce M. Goldberg.
During 1994, the Executive Committee did not meet formally, however, its
members met on nearly a daily basis in connection with the operations of the
Company. The Executive Committee possesses substantially all of the powers of
the Board and acts as the Board between Board meetings.
AUDIT COMMITTEE
The Audit Committee is comprised of S. Cye Mandel and Sheldon Lieberbaum.
During the fiscal year ended December 31, 1994, the Audit Committee had one
formal meeting. The Audit Committee is responsible for recommending the
selection of the independent auditors (which was done during the last year by
the Board as a whole), reviewing the arrangements and scope of the independent
audit, reviewing internal accounting procedures and controls and reviewing the
reports and recommendations of the independent auditors with respect to
internal controls.
COMPENSATION COMMITTEE
Effective since March 27, 1993, the Compensation Committee has consisted of S.
Cye Mandel and Sheldon Lieberbaum, two independent non-employee directors of
the Company. See "Compensation Committee Report and Compensation Committee
Interlocks and Insider Participation" for a discussion of the responsibilities
of the Compensation Committee. During the fiscal year ended December 31, 1994,
the Compensation Committee had no formal meetings.
NOMINATING COMMITTEE
The Board does not have a Nominating Committee, such function being performed
by the Board as a whole.
7
<PAGE> 10
EXECUTIVE OFFICERS OF THE COMPANY
The Company currently has four executive officers. Each officer serves at the
discretion of the Board; however, all executive officers have employment
agreements with the Company. See "EXECUTIVE COMPENSATION-Employment
Agreements." The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Paul Goldberg 66 Chief Executive Officer
Bruce M. Goldberg 40 President and Chief Operating Officer
Howard L. Flanders 37 Vice President, Corporate Secretary and Chief Financial Officer
Rick Gordon 41 Senior Vice President of Sales and Marketing
</TABLE>
For a brief resume of the Company's executive officers, see "BOARD OF
DIRECTORS".
EXECUTIVE COMPENSATION
The following table sets forth information about the compensation earned during
each of the fiscal years ended December 31, 1994, 1993, and 1992, by the Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company whose total annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
LONG-TERM
COMPENSATION
AWARDS
------
ANNUAL COMPENSATION SECURITIES ALL OTHER
------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Paul Goldberg . . . . . . . . . . . 1994 184,000 -- -- 10,000
Chairman and Chief Executive 1993 178,000 113,000 100,000 8,000
Officer 1992 167,000 15,000 -- 5,000
Bruce M. Goldberg . . . . . . . . . 1994 150,000 -- -- 26,000
President and Chief 1993 135,000 98,000 100,000 14,000
Operating Officer 1992 114,000 15,000 -- 2,000
Rick Gordon . . . . . . . . . . . . 1994 155,000 20,000 -- 16,000
Senior Vice President of Sales 1993 135,000 11,000 3,000 12,000
and Marketing 1992 123,000 -- -- 2,000
Howard L. Flanders . . . . . . . . . 1994 130,000 -- -- 17,000
Vice President and Chief 1993 105,000 11,000 103,000 14,000
Financial Officer 1992 93,000 -- -- --
</TABLE>
8
<PAGE> 11
_______________
(1) All other compensation includes Company contributions to life
insurance policies, where the Company is not the beneficiary, to the
Deferred Compensation Plan and to the 401(k) Plan of the Company and
the cost to the Company of the nonbusiness use of Company automobiles
used by executive officers. See hereinbelow and "Deferred Compensation
Plan for Executive Officers and Key Employees" and "401(k) Plan."
The Company has a $1,000,000 key man term life insurance policy on the life of
Paul Goldberg with benefits payable to the Company. In addition, the Company
pays for a $550,000 universal life insurance policy on the life of Paul
Goldberg with benefits payable to his wife. The current annual premiums on the
foregoing policies insuring the life of Paul Goldberg are approximately $9,300
and $7,700 for the key man and universal life insurance policies, respectively.
The Company owns and is the beneficiary of a $1,000,000 term policy on the life
of Bruce M. Goldberg. The current annual premium on this policy is $1,580.
Moreover, during 1994 the Company transferred ownership of a $1,000,000 whole
life insurance policy (the "Whole Life Policy") on the life of Bruce M.
Goldberg to Bruce M. Goldberg to fulfill an obligation under his 1992
employment agreement. The Company intends to make annual advances to Bruce M.
Goldberg to cover the annual premium of the Whole Life Policy currently in the
amount of $22,995. Such annual advances are secured by the cash surrender value
of the Whole Life Policy. Since more than two and one-half years had passed
since the date of Bruce M. Goldberg's 1992 employment agreement, fifty percent
(50%) of the advances through December 31, 1994, were cancelled and the related
security released on January 1, 1995. The remainder of the existing advances
and any future advances made to pay premiums on the Whole Life Policy through
May 31, 1997, will be cancelled and any remaining security will be released in
accordance with a vesting schedule by May 31, 1997, provided Bruce M. Goldberg
continues employment with the Company through the end of such period.
Thereafter the Company will continue, for the duration of Bruce M. Goldberg's
employment, to pay the annual premium to Bruce M. Goldberg for the Whole Life
Policy. If Bruce M. Goldberg is terminated by the Company for cause prior to
May 31, 1997, he will be entitled to pay off the nonvested advances owed to the
Company and obtain a release of any collateral assignment. If Bruce M.
Goldberg is terminated without cause or upon a change in control, any nonvested
advances owed to the Company will become immediately vested and any remaining
security will be released. In addition, beginning in 1993 the Company has
funded, and intends to continue to fund, the premiums for $1,000,000 flexible
premium life insurance policies owned by each of Howard L. Flanders and Rick
Gordon. The Company's advances will be secured by a collateral assignment of
the cash value and death benefit of each of the policies. The current annual
premium on each of these policies is $11,500. The Company's obligations to make
premium payments in connection with Howard L. Flanders' and Rick Gordon's
policies are expected to last for a maximum of ten years. After Howard L.
Flanders and Rick Gordon have been with the Company for a period of five years
from the year in which the policy was acquired (1993) and provided they each
remain in the employ of the Company or they have become disabled or a change in
control has occurred during the term of their employment, the advances will be
deemed cancelled and the security released thereafter ratably over a five year
vesting period until such time as all advances are deemed cancelled.
9
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options during its fiscal year ended
December 31, 1994, to any executive officer of the Company. But see discussion
of the New Options granted in May 1995 in "Employee Agreements - The Goldberg
Agreements."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-ENDED OPTION
VALUES
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 1994, and the value of
unexercised stock options as of December 31, 1994, for the individual executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END(#) FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Paul Goldberg . . . . . . . . . . -- -- 120,000(E) 84,500(E)
80,000(U) -- (U)
Bruce M. Goldberg . . . . . . . . 3,125(2) 6,700(2) 95,000(E) 63,375(E)
80,000(U) -- (U)
Rick Gordon . . . . . . . . . . . -- -- 85,600(E) 79,688(E)
37,400(U) 32,813(U)
Howard L. Flanders . . . . . . . . -- -- 55,600(E) 44,375(E)
77,400(U) 37,500(U)
_______________
</TABLE>
(1) Value is based upon the difference between the exercise price of the
options and the last reported sale price of the Common Stock on
December 31, 1994.
(2) Stock options covering 3,125 shares of Common Stock at an exercise
price of $1.60 per share were exercised by Bruce M. Goldberg during
the fiscal year ended December 31, 1994. The value realized per share
is based upon the difference between the closing sale price of the
Company's Common Stock on The Nasdaq Stock Market on the date of
exercise and the exercise price.
COMPENSATION COMMITTEE REPORT AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Prior to March 1993, the Compensation Committee of the Board consisted of Paul
Goldberg, Chairman and Chief Executive Officer, and Bruce M. Goldberg, a
director and then Executive Vice President. At a meeting of the Board held on
March 27, 1993, Paul Goldberg and Bruce M. Goldberg resigned from the
Compensation Committee and the Board reconstituted the Compensation Committee
to consist of S. Cye Mandel and Sheldon Lieberbaum, both being independent,
non-employee directors of the Company. Prior to the changes effective in March
of 1993, the Compensation Committee reviewed, designed and
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approved the compensation of all employees of the Company, except for the
members of the Compensation Committee, whose compensation was determined by the
Board as a whole. Effective with the reconstitution of the Compensation
Committee in March 1993, the Board decided that management of the Company
should make decisions with respect to the compensation of all employees other
than the Chief Executive Officer and the other executive officers of the
Company.
The Compensation Committee is responsible for recommending to the Board the
compensation of the executive officers, including annual base salaries, cash
and non-cash bonuses, stock ownership plans, retirement plans and other
benefits. With respect to the compensation of the executive officers other
than the Chief Executive Officer, the Compensation Committee makes its
recommendations after consulting with the Chief Executive Officer. In
addition, the Compensation Committee administers the Option Plan and the
Deferred Comp. Plan (as defined hereinafter) and will administer all future
benefit plans of the Company. The policies of the Compensation Committee and
the Board with respect to the compensation of the executive officers is
intended to establish levels of annual compensation that are consistent with
the Company s annual and long-term goals and to reward individuals for
corporate performance as well as individual achievements. In part, the
Compensation Committee believes in using incentives such as annual incentive
cash bonuses and stock option grants and deferred compensation plans as a means
of motivating its executive officers to perform at the highest levels possible
and to tie directly the compensation of the Company's executive officers to the
operating performance of the Company. The Compensation Committee and the Board
also takes into consideration the compensation of executive officers at
companies similar in size to the Company and at other companies within the same
industry as the Company.
In May 1995, the Compensation Committee, in conjunction with the Board,
authorized new employment agreements for each of the Company's four executive
officers, which employment agreements include a combination of annual incentive
cash bonuses and the issuance of the New Options as part of the incentive
compensation program that the Compensation Committee believed appropriate in
order to establish a mechanism to tie the operating performance of the Company
and the return on investment made by the Company's shareholders over the next
several years to such executive officers' annual compensation during such
period. In particular, a potentially significant portion of each executive
officers' annual cash compensation is in the form of an annual bonus
arrangement based on a percentage of the pretax income of the Company and the
New Options granted to each of the executive officers vest based upon the
Company attaining certain levels of net earnings per share on a primary basis.
As part of determining the compensation packages set forth in such employment
agreements, the Compensation Committee considered the backgrounds, the tenure
and the experience of the executive officers as well as the results of
operations for 1993 and 1994 and projected results for 1995 and thereafter.
The Compensation Committee also took into consideration the fact that the
compensation levels of all executive officers were modest to low for such
executives at other companies similar in size to the Company and other
companies within the same industry as the Company. See "Employment Agreements"
and "Employees', Officers', Directors' Stock Option Plan" hereinbelow.
SHELDON LIEBERBAUM, member
S. CYE MANDEL, member
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EMPLOYEES, OFFICERS, DIRECTORS STOCK OPTION PLAN
In 1987, the Company established an Employees', Officers', Directors' Stock
Option Plan (the "Option Plan") which was approved by the shareholders of the
Company at such time. Subsequent thereto certain amendments to the Option Plan
relating to the number of shares of the Company's Common Stock reserved for
issuance under and the term of the Option Plan have been adopted by the Board
and approved by the shareholders of the Company. The Option Plan may be
further modified or amended by the Board, but certain modifications and
amendments must be thereafter approved by the Company's shareholders to
continue in effect. On May 23, 1995, the Board authorized and approved an
amended and restated Option Plan (the Option Plan as amended and restated is
sometimes referred to herein as the "Restated Plan"). The Restated Plan
included certain material amendments to the Option Plan which require the
approval of the shareholders of the Company within 12 months from their
adoption by the Board to continue in effect. Such material amendments are
described in this section and in ITEM 5 and ITEM 6 in "PROPOSALS." The Board
is recommending approval of such amendments by the Company's shareholders at
the Meeting.
The Option Plan provides for the granting to key employees of both "incentive
stock options," within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and "non-qualified stock options"
("non-qualified stock options" are options which do not comply with Section 422
of the Code) and for the granting to non-employee directors and independent
contractors associated with the Company of non-qualified stock options.
A general description of the Option Plan, as previously in effect and as
amended, is presented below. Reference is also made to ITEM 5 and ITEM 6 in
"PROPOSALS" for a more detailed description of the material changes to the
Option Plan for which shareholder approval is being sought at the Meeting. The
descriptions of the Option Plan prior to its amendment and restatement and the
Restated Plan are qualified in their entirety by reference to the full text of
such plans. A copy of the Restated Plan is annexed hereto as Exhibit "A". A
copy of the Option Plan in the form previously in effect may be obtained
without charge upon written request to Howard L. Flanders, the Corporate
Secretary, at the Company's principal executive officers, 16115 N.W. 52nd
Avenue, Miami, Florida 33014.
PURPOSE. The purpose of the Option Plan is to secure for the Company and its
subsidiaries the benefits of the additional incentive to selected key employees
and non-employee directors of and independent contractors associated with the
Company, inherent in the ownership of Common Stock, to promote the success and
profitability of the Company's business and to help the Company attract, secure
and retain the services of such key employees, non-employee directors and
independent contractors.
TERM OF THE OPTION PLAN. Unless earlier terminated, the Option Plan will
continue in effect through May 28, 2004, after which it would expire and no
further options could thereafter be granted under the Option Plan. The
expiration of the Option Plan, or its termination by the Board, will not affect
any options previously granted and then outstanding under the Option Plan.
Such outstanding options shall remain in effect until they have been exercised,
terminated or have expired.
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SECURITIES AVAILABLE. Prior to the adoption of the Restated Plan, a maximum of
2,250,000 shares of the Company's Common Stock had previously been reserved for
issuance upon the exercise of options granted under the Option Plan, subject to
certain adjustments for changes in the capital structure of the Company as
described below. See "Recapitalization, Consolidation and Similar
Transactions." In order to have a sufficient number of authorized and unissued
shares of Common Stock to undertake the Offering (assuming the Over-Allotment
Option would be exercised in full), the number of shares of the Company's
Common Stock reserved for issuance under the Option Plan was reduced by the
Board to no more than 1,575,250 shares; provided, however, that, in the event
that the Over-Allotment Option had not been exercised, there would not have
been a reduction in the number of reserved shares or, if the Over-Allotment
Option had not been exercised in full, a lesser reduction would have been made.
Notwithstanding the foregoing reduction, as part of the Restated Plan the Board
authorized an increase in the number of shares of the Company's Common Stock
reserved for issuance under the Option Plan to 3,250,000 shares, subject to
obtaining the approval of the shareholders of the Company to such increase (the
"Reserved Share Increase") and to an increase in the number of shares of Common
Stock authorized to be issued by the Company. Both such increases are
necessary in order to authorize the aggregate of the 1,000,000 New Options
granted to the four executive officers of the Company in connection with their
entering into new employment agreements with the Company. See "Employment
Agreements." If approved, such increases would also eliminate the reduction in
the reserved shares under the Option Plan necessitated by the Offering making
available options for future issuances. See ITEM 3, ITEM 5 and ITEM 6 in
"PROPOSALS." Any Common Stock subject to an option which expires or is
cancelled or terminated without having been exercised will again be available
for issuance under the Option Plan.
ADMINISTRATION. The Option Plan is administered by the Compensation Committee
comprised of two or more "disinterested" directors appointed by the Board from
among its members. Any member of the Compensation Committee may be removed at
any time either with or without cause by action of the Board and a vacancy on
the Compensation Committee due to any reason can be filled by the Board. The
current members of the Compensation Committee are the two independent,
non-employee directors of the Company, S. Cye Mandel and Sheldon Lieberbaum.
Subject to the express limitations of the Option Plan, the Compensation
Committee has authority, in its discretion, to interpret the Option Plan, to
adopt, prescribe, amend and rescind rules and regulations as it deems
appropriate concerning the holding of its meetings and administration of the
Option Plan, to determine and recommend persons to whom options should be
granted, the date of each option grant, the number of shares of Common Stock to
be included in each option, any vesting schedule, the option price and term
(which in no event will be for a period more than ten years from the date of
grant) and the form and content of agreements evidencing options to be issued
under the Option Plan.
Prior to the Board adopting the Restated Plan on May 23, 1995, the Option Plan
provided that unless the Compensation Committee was comprised of at least three
disinterested persons, meaning that none of such persons were eligible or had
within the previous year been eligible to participate in the Option Plan, any
option granted to a director had to satisfy all of the following requirements:
(i) the total number of options granted to directors under the Option Plan
could not exceed 35% of the shares reserved under the Option Plan (the "35%
Limitation"); (ii) no director could be granted options in excess of 30% of the
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shares issued under the Option Plan in any one particular issuance; (iii)
options granted to directors could not be exercisable for at least one year
after the date of grant; (iv) the exercise price of options granted to
directors could not be less than the fair market value of the Common Stock on
the date of grant, except that if a director beneficially owns 10% or more of
the combined voting power of the Company, the option price may not be less than
110% of the fair market value of the Common Stock on the date of grant. In
addition, options granted to directors were and continue to be subject to all
other restrictions set forth in the Option Plan. Since there were and are only
two "disinterested" directors on the Compensation Committee, the above
limitations relating to grants of options to directors were in effect prior to
the adoption by the Board of the Restated Plan and would again be in effect if
the approval of the shareholders at the Meeting to the material amendments (the
"Other Amendments") to the Option Plan (other than the Reserved Share Increase)
is not obtained. As a result of the number of shares of the Company's Common
Stock reserved for issuance under the Option Plan being required to be reduced
by the Board to permit the Company to undertake the Offering, Paul Goldberg and
Bruce M. Goldberg had agreed not to exercise stock options held by them for an
aggregate of up to 50,000 shares each of Common Stock to enable the Option Plan
to remain in compliance with the 35% Limitation. This agreement would terminate
upon the number of shares reserved for issuance being subsequently increased to
an amount sufficient to permit the Option Plan to be in compliance with the 35%
Limitation, which would occur if the Reserved Share Increase and the increase
in the number of shares of Common Stock authorized to be issued are approved by
the shareholders at the Meeting, or the 35% Limitation was otherwise
eliminated. As a result of the New Options granted to the four executive
officers of the Company in connection with their entering into new employment
agreements, on May 23, 1995, the Board authorized the elimination of all of the
above limitations as part of the Other Amendments requiring the approval of the
Company's shareholders. See "Employment Agreements" and ITEM 3, ITEM 5 and
ITEM 6 of the "PROPOSALS" to be voted upon at the Meeting.
ELIGIBILITY TO PARTICIPATE IN OPTION PLAN. Options may be currently granted
under the Option Plan to any key employee or non-employee director or
prospective key employee or non-employee director (conditioned upon, and
effective not earlier than, his or her becoming an employee or director) of or
independent contractors associated with the Company or its subsidiaries.
However, as required by the Code, non-employee directors and independent
contractors are only eligible to receive non-qualified stock options. In
determining key employees to whom options will be granted, the Compensation
Committee takes into consideration the key employee's present and potential
contribution to the success and growth of the Company's business and other such
factors as the Compensation Committee may deem proper or relevant in its
discretion including whether such person performs important job functions or
makes important decisions for the Company, as well as the judgment, initiative,
leadership and continued efforts of eligible participants. Employees who are
also officers or directors of the Company or its subsidiaries will not by
reason of such offices be ineligible to receive options. However, no member of
the Compensation Committee is eligible to receive options under the Option
Plan.
EXERCISE PRICE. The exercise price for all options granted under the Option
Plan shall not be less than the fair market value of the Common Stock on the
date of grant (or 110% of the fair market value if the beneficiary of the grant
beneficially owns 10% or more of the
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outstanding shares of Common Stock; provided, however, that, as part of the
Restated Plan and the Other Amendments requiring the approval of the Company's
shareholders at the Meeting, this 110% provision has been limited to incentive
stock options only). Fair market value on the date of grant of any Option is
the average of the "market price" of a share of Common Stock for each of the
seven (7) consecutive business days preceding such day. The "market price" on
each such day shall be (i) if the Common Stock is listed on a securities
exchange (including The Nasdaq Stock Market), the closing sales price on such
exchange on such day or, in the absence of reported sales on such day, the mean
between the reported closing bid and asked prices on such exchange on such day,
or (ii) if the Common Stock is not listed on a securities exchange (including
The Nasdaq Stock Market), the mean between the closing bid and asked prices as
quoted by the National Association of Securities Dealers, Inc. through the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") for such day; provided, however, that, if there are no such
quotations or if it is determined that the fair market value is not properly
reflected by such NASDAQ quotations or the Common Stock is not traded on an
exchange or over the counter, fair market value shall be determined by such
other method as the Compensation Committee determines to be reasonable.
Notwithstanding the foregoing, if on, or within ten (10) days prior to, the
date of grant of any options, a registration statement filed by the Company
with the SEC in connection with a public offering of Common Stock becomes
effective, the fair market value of a share of such Common Stock shall be the
public offering price per share of Common Stock being offered pursuant to such
offering.
LIMITATION ON GRANT OF OPTIONS. Except as may be specifically limited by the
terms of the Option Plan, the granting of Options is made at the sole
discretion of the Compensation Committee. Further, the aggregate fair market
value of the Common Stock (determined at the date of the option grant) for
which an employee may be granted options which become first exercisable in any
calendar year under the Option Plan may not exceed $100,000. Prior to the
Board's adoption of the Other Amendments, the foregoing $100,000 limitation
applied to all options (both incentive and non-qualified stock options) granted
under the Option Plan. One of the Other Amendments removed this limitation as
to non-qualified stock options. Accordingly, the Compensation Committee may
now grant options in excess of this $100,000 limitation provided said options
are clearly and specifically designated as not being incentive stock options,
unless the Other Amendments are not approved by the Company's shareholders.
See ITEM 6 in "PROPOSALS."
OPTION PERIOD. The term of and any vesting schedule (whether the option will
be exercisable immediately, in stages or otherwise, or the vesting will be
based upon any condition such as the operating performance of the Company) for
an option granted under the Option Plan is established by the Compensation
Committee, but the term may not be more than ten years from the date of grant
of the option, except that, in the case of a person receiving an incentive
stock option who at such time owns Common Stock representing more than 10% of
the Common Stock outstanding at the time the option is granted, the term of
such incentive stock option shall not exceed five years from the date of grant
of the option. In general, options will not be exercisable after the
expiration of their term. Prior to the Board's adoption of the Other
Amendments, (i) in the event that a person holding an option (an "optionee")
ceased to serve as an employee or director of the Company for any
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reason other than termination for retirement, disability, death or involuntary
termination, an exercisable option (whether an incentive stock option or
non-qualified stock option) would cease to be exercisable immediately; and (ii)
in the event of the retirement, disability, death or involuntary termination of
an optionee while an employee or director (or such optionee's death within the
three-month period following the date of termination of employment or
directorship), an exercisable option would generally continue to be exercisable
for the three months thereafter or in the case of death until the expiration
date of such option, whichever was later. One of the Other Amendments adopted
by the Board as part of the Restated Plan provides that the Option Plan permit
the Compensation Committee the authority and discretion to determine the time
frame in which an optionee has to exercise his options (subject to the 10 year
limitation from date of grant) in the event of his termination of employment
due to death, disability, termination without cause, retirement, voluntarily
leaving the Company and change in control. See ITEM 6 in "PROPOSALS." The
Compensation Committee exercised such authority and discretion in granting the
New Options which generally provide that an executive officer has 2 years from
the date of termination or cessation of his employment upon the happening of
certain events, such as death, disability, retirement and change in control of
the Company, to exercise his New Options which have vested. See "Employment
Agreements - The Goldberg Agreements."
NONTRANSFERABILITY. No option granted under the Option Plan is transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order and, subject to any transfer pursuant to a
qualified domestic relations order, each option will be exercisable, during the
lifetime of an optionee, only by such optionee.
MANNER OF EXERCISE AND PAYMENT FOR OPTIONS. Options granted under the Option
Plan shall be exercised by an optionee (or upon his death by his or her
personal representative, executor or administrator), as to all or part of the
Common Stock covered by the options which have vested (subject to any minimum
numbers of shares that must be purchased at any time under the terms of a
particular stock option agreement), by giving written notice of exercise to the
Company specifying the number of shares to be purchased and accompanied by
payment of the full purchase price for the shares being purchased. Payment in
full of such purchase price is to be made (a) by check payable to the Company
or (b) with the prior consent of the Compensation Committee or to the extent
provided in the applicable option agreement, by tendering to the Company
previously acquired shares of Common Stock having a fair market value
(determined as of the date such options are exercised) equal to the entire
purchase price, or (c) with the prior consent of the Compensation Committee or
to the extent provided in the applicable option agreement, by a combination of
(a) and (b) above. No shares of Common Stock can be issued until full payment
therefore has been received by the Company, and no optionee has any of the
rights of a shareholder of the Company until the certificates for such shares
of Common Stock are issued to the optionee following the exercise of his or her
options.
RECAPITALIZATION, CONSOLIDATION AND SIMILAR TRANSACTIONS. In the event of any
stock split, stock dividend, reclassification or recapitalization which changes
the character or amount of the Company's outstanding Common Stock while any
portion of any options theretofore granted under the Option Plan are
outstanding but unexercised, the Compensation
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Committee shall make such adjustments in the character and number of shares
subject to such options and in the option price, as shall be equitable and
appropriate in order to make such options, as nearly as may be practicable,
equivalent to such options immediately prior to such change, subject to
complying with any requirements of the Code in the event that incentive stock
options are involved.
AMENDMENT AND TERMINATION OF OPTION PLAN. The Board may at any time amend,
modify or terminate the Option Plan except with respect to outstanding options,
but may not make any amendment to the Option Plan which increases the maximum
number of shares which may be subject to awards of options (except in
connection with recapitalizations or similar transactions, see
"Recapitalization, Consolidation and Similar Transactions"), which materially
increases the benefits accruing to participants under the Option Plan within
the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended, or which changes the class of persons eligible for the grant
of options or otherwise materially modifies the requirements for eligibility
for participation in the Option Plan, unless such action of the Board shall be
approved or ratified by the shareholders of the Company. Unless terminated
earlier by the Board, the Option Plan shall continue in effect through May 28,
2004, after which no further options may be granted under the Option Plan. As
previously indicated, the Board is recommending certain amendments for approval
by the Company's shareholders. See ITEM 5 and ITEM 6 in "PROPOSALS."
FEDERAL INCOME TAX CONSEQUENCES. Under present federal income tax laws,
options granted under the Option Plan will have the following consequences:
(1) The grant of an option will not, by itself, result in the recognition
of taxable income to the optionee nor entitle the Company to a deduction at the
time of such grant.
(2) The exercise of an option which is an incentive stock option within
the meaning of Section 422 of the Code will generally not, by itself, result in
the recognition of taxable income to the optionee nor entitle the Company to a
deduction at the time of such exercise. However, the difference between the
exercise price and the fair market value of the option shares on the date of
exercise is an alternative minimum tax item of adjustment which may, in certain
situations, trigger the alternative minimum tax under the Code. The
alternative minimum tax is incurred only when it exceeds the regular income
tax. The optionee will recognize capital gain or loss upon resale of the
shares received upon such exercise, provided that such optionee held such
shares for at least one year after transfer of the shares to him or her or two
years after the grant of the option, whichever is later. If the shares are not
held for that period, the optionee will recognize taxable ordinary income as
compensation (and the Company will realize a compensation deduction) upon
disposition in an amount equal to the lesser of (a) the difference between the
exercise price and the fair market value on the date of exercise of the shares
or (b) the gain realized upon the sale and, in the event that the gain realized
upon the sale is greater than the difference between the exercise price and the
fair market value on the date of exercise of the shares, the balance of the
gain on the disposition of the shares will be long or short term capital gain
depending on the holding period of the shares.
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(3) The exercise of an option which is not an incentive stock option
within the meaning of Section 422 of the Code (i.e. a non-qualified stock
option) will result in the recognition of taxable ordinary income by the
optionee (and the Company will realize a compensation deduction) on the date of
exercise in an amount equal to the difference between the exercise price and
the fair market value on the date of exercise of the shares acquired pursuant
to the option. In that regard, the Company is entitled to require as a
condition to delivery that the optionee remit or, in the appropriate cases,
agree to remit when due an amount sufficient to satisfy all federal, state and
local withholding tax requirements relating thereto. The tax basis of the
shares of Common Stock received by the optionee upon exercise of a
non-qualified stock option will be equal to the amount paid as the exercise
price plus the amount, if any, includable in his or her gross income as
compensation income as described above. The holding period for such shares
will commence on the date of exercise. On the subsequent sale (or other
disposition) by the optionee of the shares of Common Stock received upon the
exercise of a non-qualified stock option, any gain realized on such sale or
disposition will be long or short term capital gain depending on the holding
period of the shares.
(4) Generally, the Company will be allowed a tax deductible expense for
federal income tax purposes equal to the amount of taxable ordinary income that
an optionee recognizes related to his or her options at the time of recognition
of such ordinary income upon the earlier of the exercise or sale of such
options.
REGISTRATION OF UNDERLYING COMMON STOCK. On February 11, 1994, the Company
filed a registration statement on Form S-8 with the Commission in order to
register 1,687,914 shares of Common Stock then issuable under the Option Plan
and 98,160 issuable to an employee of the Company upon the exercise of a stock
option granted outside of the Option Plan in connection with an acquisition by
the Company. So long as such registration statement remains effective under the
Securities Act of 1993, as amended (the "Act"), shares of Common Stock issued
upon the exercise of outstanding options under the Option Plan will be
immediately and freely tradable without restriction under the Act, subject to
applicable volume limitations, if any, under Rule 144 and, in the case of
executive officers and directors of the Company, Section 16 of the Securities
Exchange Act of 1934, as amended. It is contemplated that the Company will at
the appropriate time file an amendment to its registration statement on Form
S-8 in order to register any additional shares of Common Stock reserved for
issuance under the Option Plan. In addition, as permitted by one of the Other
Amendments which is part of the Restated Plan, the New Options granted to each
of Paul Goldberg and Bruce M. Goldberg provide that, upon the written request
of either such person, the Company shall use its best efforts at all times on
and after the time such requesting person's New Options become vested and
exercisable to effect and maintain the required registration, listing and/or
qualification under federal and state securities laws of the shares of Common
Stock covered by such New Options. See ITEM 6 in "PROPOSALS."
As of June 26, 1995, a total of 2,316,690 options were granted and had not
expired or been forfeited, of which 146,127 were exercised and 2,170,563
options were outstanding (of which 1,631,000 options (including the 1,000,000
New Options) were held by executive
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officers and directors of the Company as a group, see "Aggregated Option
Exercises in Last Fiscal Year and Fiscal Year-Ended Option Values" and
"Employment Agreements - The Goldberg Agreements", and 574,912 options are
presently exercisable). These options, which are held by 68 persons, are
exercisable at prices ranging from $.75 per share to $2.63 per share and are
exercisable through various expiration dates from 1995 to 2005. In addition,
certain options were issued to the selling stockholders in connection with the
Company's acquisitions in 1994. See footnote (2) to the table in "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" for the number of
incentive stock options currently held by executive officers and directors of
the Company and "Employment Agreements - The Goldberg Agreements" for a
discussion of the New Options granted to the Company's executive officers. On
July 7, 1995, the last reported sales price of the Common Stock of the Company
on The Nasdaq Stock Market was $2 5/8 per share.
DEFERRED COMPENSATION PLAN FOR EXECUTIVE OFFICERS AND KEY EMPLOYEES
Effective January 1, 1988, the Company established a deferred compensation plan
(the "Deferred Compensation Plan") for executive officers and key employees of
the Company. The employees eligible to participate in the Deferred Compensation
Plan (the "Participants") are chosen at the sole discretion of the Board, upon
a recommendation from the Compensation Committee. Pursuant to the Deferred
Compensation Plan, commencing on a Participant's retirement date, he or she
will receive an annuity for ten years. The amount of the annuity shall be
computed at 30% of the Participant's salary, as defined. Any Participant with
less than ten years of service to the Company as of his or her retirement date
will only receive a pro rata portion of the annuity. Retirement benefits paid
under the Deferred Compensation Plan will be distributed monthly. The Company
paid benefits under this plan of approximately $52,000 during 1994, none of
which was paid to any executive officer. The maximum benefit payable to a
Participant (including each of the executive officers) under the Deferred
Compensation Plan is presently $22,500 per annum.
401(k) PLAN
The Company maintains a 401(k) Plan (the "401(k) Plan"), which is intended to
qualify under Section 401(k) of the Code. All full-time employees of the
Company over the age of 21 are eligible to participate in the 401(k) Plan after
completing 90 days of employment. Each eligible employee may elect to
contribute to the 401(k) Plan, through payroll deductions, up to 15% of his or
her salary, limited to $9,240 in 1994. The Company makes matching contributions
and in 1994 its contributions were in the amount of 25% on the first 6%
contributed of each participating employee's salary.
EMPLOYMENT AGREEMENTS
THE GOLDBERG AGREEMENTS
Effective June 1, 1992, the Company entered into employment agreements with
Paul Goldberg, its Chief Executive Officer and Bruce M. Goldberg, its current
President and Chief Operating Officer (collectively, the "1992 Agreements").
The 1992 Agreements were for
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three-year terms expiring on May 31, 1995. Pursuant to their 1992 Agreements,
Paul Goldberg and Bruce M. Goldberg received a base salary of $186,000 and
$150,000 per annum, respectively. Under the 1992 Agreements, Paul Goldberg and
Bruce M. Goldberg were also each entitled to receive a bonus equal to 5% of the
Company's pre-tax income in excess of $1,000,000 in any calendar year. Such
bonus compensation payable under the 1992 Agreements to Paul Goldberg and Bruce
M. Goldberg was limited to $150,000 and $100,000 per annum, respectively. For
the calendar year 1994, Paul Goldberg and Bruce M. Goldberg did not earn a
bonus, although they were each paid $100,000 relating to bonuses earned for the
Company's 1993 fiscal year.
In addition, the 1992 Agreements provided for certain additional benefits,
including participation in Company benefit plans, including the Deferred
Compensation Plan, payments to the employee upon his disability, certain life
insurance benefits and the continued use of a Company automobile. See "Summary
Compensation Table." The agreements prohibited Paul Goldberg and Bruce M.
Goldberg from competing with the Company for two years after any voluntary
termination of employment or termination for cause. The agreements further
provided that, if there was a change in control (as defined) of the Company,
the Company would have the option to either extend the agreements for two
additional years or terminate the agreements upon making a lump sum severance
payment equal to two years compensation. Further, if Paul Goldberg or Bruce M.
Goldberg were to be terminated without cause, each of them would have been be
entitled to receive severance benefits equal to the greater of two years
compensation or the remainder of the compensation due them under their
respective employment agreements.
In May 1995, the Company entered into new employment agreements with each of
Paul Goldberg and Bruce M. Goldberg to take effect on June 1, 1995, as of the
expiration of the 1992 Agreements (collectively the "1995 Agreements"). The
1995 Agreement for Paul Goldberg extends the term of his employment until
December 31, 2000, subject to earlier termination as a result of his retirement
as hereinafter described, and provides for a base salary effective as of June
1, 1995, of $250,000 per annum, subject to an annual increase commencing as of
January 1, 1996 (which increase shall be prorated for the period between June
1, 1995 and December 31, 1995) equal to the greater of 4% per annum or the
increase in the cost of living. The 1995 Agreement for Bruce M. Goldberg
extends the term of his employment until December 31, 2000, and provides for a
base salary effective as of June 1, 1995, of $275,000 per annum, subject to the
same annual increase formula as for Paul Goldberg under his 1995 Agreement.
Under the 1995 Agreements, Paul Goldberg and Bruce M. Goldberg are each
entitled to receive an annual cash bonus equal to 3% of the Company's pre-tax
income, before nonrecurring and extraordinary charges, in excess of $1,000,000
in any calendar year. Such annual bonus compensation for each of Paul Goldberg
and Bruce M. Goldberg is limited in any year to an amount no greater than two
times his respective base salary for the applicable year. In addition, Bruce M.
Goldberg will also receive an additional one time bonus in the amount of
$30,000 by January 15, 1996, in the event that the Company's net sales for
calendar year 1995 exceed $135,000,000.
The 1995 Agreements, together with the new employment agreements between the
Company and each of Howard L. Flanders and Rick Gordon described below, provide
for
20
<PAGE> 23
the granting of an aggregate of 1,000,000 stock options pursuant to the Option
Plan as additional incentive compensation for such four executive officers
(collectively, the "New Options"). The 1995 Agreements provide for Paul
Goldberg and Bruce M. Goldberg to be granted New Options covering 250,000 and
450,000 shares of Common Stock, respectively, out of the aggregate of 1,000,000
New Options. Each of Messrs. Flanders and Gordon are entitled to be granted
New Options covering 150,000 shares of Common Stock under his respective
employment agreement. All of the New Options were to be granted on the earlier
to occur of the date that the registration statement for the Offering became
effective, or June 15, 1995. Since such registration statement became
effective June 8, 1995, the New Options were granted on such date. The New
Options are immediately exercisable over a 10 year period from the date of
grant (until June 7, 2005), subject to the vesting schedule set forth below
and, in the case of Messrs. Flanders and Gordon, subject to an exercise
installment schedule through 2002 (10% in 1996; up to 20% in the aggregate in
1997; up to 30% in the aggregate in 1998; up to 40% in the aggregate in 1999;
up to 50% in the aggregate in 2000; up to 75% in the aggregate in 2001; and
100% in the aggregate in 2002) and further subject to generally attempting to
maintain at least through 2002 as many of the New Options as possible as
incentive stock options. Each of the New Options have an exercise price equal
to 100% of the fair market value of a share of Common Stock on the date of
grant. The 1995 Agreements, as well as Messrs. Flanders' and Gordon's
respective employment agreements, contemplated that, if the date of grant was
the effective date of the registration statement for the Offering, the exercise
price would be the public offering price per share of the Common Stock offered
pursuant to the Offering. Since the date of grant was such effective date, the
exercise price per share of the New Options is equal to the $1.875 public
offering price per share. The New Options granted to each of the executive
officers will vest in no event later than 9 years from the date of grant,
subject to earlier vesting in the following percentage increments based upon
the Company attaining net earnings per share on a primary basis in any year
from 1995 through 2000, inclusive, in at least the following amounts:
<TABLE>
<CAPTION>
PERCENTAGE OF NET EARNINGS
OPTIONS VESTED (%) PER SHARE ($)
------------------ -------------
<S> <C>
25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $.18
50 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
100 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
</TABLE>
In addition, in the event that the employment of Paul Goldberg or Bruce M.
Goldberg with the Company is terminated without cause (as defined in each of
such executive officer's employment agreement) by the Company, the New Options
held by such terminated executive officer shall become immediately 100% vested.
Furthermore, if there is a change in control (as defined in the employment
agreement of each of the four executive officers, including Messrs. Flanders
and Gordon) of the Company, the New Options held by each of the four executive
officers shall become immediately 100% vested. Upon any of the four executive
officer's termination of employment due to certain events, to the extent any or
all of the New Options granted to him have vested or otherwise vest within the
time
21
<PAGE> 24
frames hereinafter described for exercise after termination, the vested New
Options are immediately exercisable within the permitted time frames described
below. Generally, an executive officer has at least two (2) years from the
date of termination or cessation of his employment with the Company as a result
of death, disability, voluntary resignation within 180 days after a change in
control or retirement (which, for purposes of exercisability of a New Option,
is resigning as an employee after reaching age 65) to exercise his vested New
Options. In the event of an executive officer's termination or cessation of
employment with the Company (i) as a result of his voluntary resignation (other
than within 180 days after a change in control or as a result of retirement),
he will have three months to exercise any of his vested New Options (provided,
that, if he shall die during such three month period, the time of termination
of the unexpired portion of his vested New Options will be 18 months following
issuance of letters testamentary or letters of administration for his estate,
but in no event later than two years after his death) and (ii) for cause, all
of the New Options terminate immediately. See also "Employees', Officers',
Directors' Stock Option Plan."
The granting of the New Options will be void and a nullity in the event that
the Company does not obtain the approval of the Company's shareholders to (i)
the Reserve Share Increase and the Other Amendments to the Option Plan, both of
which are being proposed to be voted upon at the Meeting and are necessary to
permit the granting of the New Options, and (ii) an increase in the number of
shares of Common Stock authorized to be issued by the Company to enable the
Company to have sufficient shares of Common Stock available for, among other
things, issuance upon the exercise of the New Options. See ITEM 3, ITEM 5 AND
ITEM 6 in "PROPOSALS." In the event that the shareholders of the Company do
not approve the Reserve Share Increase and Other Amendments or do not approve
the increase in the number of authorized shares of Common Stock resulting in
the New Options automatically terminating, the annual cash bonus of each of
Paul Goldberg and Bruce M. Goldberg described above would be increased from 3%
to 5% of the Company's pre-tax income before nonrecurring and extraordinary
charges and the annual cash bonus of each of Messrs. Flanders and Gordon
described below would be increased from 2% to 2.5% of the Company's pre-tax
income before nonrecurring and extraordinary charges. See "The Flanders
Agreement" and "The Gordon Agreement" hereinbelow.
Under Paul Goldberg's 1995 Agreement, he will be able to elect, in his sole
discretion, to retire at any time on or after January 1, 1999 (the "Retirement
Election"). Upon the earlier to occur of the Retirement Election or at the
expiration of the term of the 1995 Agreement, the Company will be obligated to
pay Paul Goldberg (in addition to any other compensation he may be entitled to
upon termination), and his spouse upon his death, a retirement benefit of
$100,000 per annum until the later of the death of Paul Goldberg or his spouse,
provide him and his spouse, without cost, until the later of their respective
deaths, at least the same level of medical and health insurance benefits as was
provided prior to his retirement and continue to pay the premiums on the life
insurance policies covering his and his spouse's lives as described hereinbelow
and under "Summary Compensation Table" above.
The 1995 Agreements also provide certain additional benefits to each of Paul
Goldberg and Bruce M. Goldberg, including participation in the Company benefit
plans, including the Deferred Compensation Plan and the 401(k) Plan, and the
continued use of a Company
22
<PAGE> 25
automobile. In addition, in the event of the disability of Paul Goldberg, the
Company will be obligated to continue all compensation and other benefits due
under his 1995 Agreement for the shorter of two years or until January 1, 1999,
and to thereafter provide the retirement and health benefits described above.
In the event of the disability of Bruce M. Goldberg, the Company will be
obligated to continue all compensation and other benefits due under his 1995
Agreement for two years thereafter. Furthermore, in addition to the life
insurance policies covering the life of Paul Goldberg and Bruce M. Goldberg
described under "Summary Compensation Table" being funded by the Company, the
Company has agreed to advance the Paul Goldberg Family Insurance Trust or such
other person designated by Paul Goldberg (i) each year until the insured's
death the amount of the annual premium for a new $1,000,000 face value
insurance policy on Paul Goldberg's or his spouse's life and (ii) each year
until the later to die of Paul Goldberg or his spouse the amount of the annual
premium for a $1,000,000 face value second to die insurance policy on the lives
of Paul Goldberg and his spouse. Such annual advances (together with interest
to accrue thereon at the rate of 5% per annum) for each policy will be secured
by the respective insurance policy and the higher of the advances (together
with the interest accrued thereon) for and the cash surrender value of the
respective policy will be repaid to the Company upon the death of Paul
Goldberg, the death of his spouse or the death of Paul Goldberg and his spouse
(as applicable) out of the proceeds thereof.
The 1995 Agreements also provide that, in the event of change in control (as
defined) of the Company, each of Paul Goldberg and Bruce M. Goldberg shall have
the option in his sole discretion to terminate his 1995 Agreement. In such
event, Paul Goldberg would be entitled to elect (in lieu of electing to
continue to receive some or all of the compensation, payments and benefits as
and when due under the 1995 Agreement) to receive a lump sum payment equal to
the sum of (i) Paul Goldberg's compensation due through the greater of the end
of the term of the 1995 Agreement or three years after the change in control,
(ii) the present value (assuming a certain discount rate and life expectancy)
of the retirement payments payable to Paul Goldberg commencing from the later
of the end of the term or three years after the change in control until his
death, (iii) an amount sufficient to pay, until the later of his or his
spouse's death, the premium for at least the same level of health insurance
benefits as was provided before the change in control and (iv) an amount
sufficient to pay, until the later of his or his spouse's death (as
applicable), the premiums on the life insurance policies insuring his or his
spouse's lives as described in the previous paragraph. Similarly, under Bruce
M. Goldberg's 1995 Agreement, in the event of a change in control and Bruce M.
Goldberg's election to terminate his 1995 Employment Agreement, Bruce M.
Goldberg at his option will be entitled to elect to receive a lump sum payment
equal to his compensation due through the later of the end of the term of his
1995 Agreement or three years after the change in control or for such period to
continue to receive such compensation as and when due under the 1995 Agreement.
In addition, in the event of a change in control, all unvested options held by
Paul Goldberg or Bruce M. Goldberg, as well as any other executive officer,
would vest and become immediately exercisable. These change in control
provisions replaced the change in control provisions of the 1992 Agreements as
of June 1, 1995.
23
<PAGE> 26
THE FLANDERS AGREEMENT
In May 1995, the Company entered into an employment agreement with Howard L.
Flanders, its Vice President, Corporate Secretary and Chief Financial Officer
(the "Flanders Agreement"). The Flanders Agreement will continue through
December 31, 1998, and provides for a base salary, effective as of March 1,
1995, of $157,500 per annum, subject to an annual increase commencing as of
January 1, 1996, equal to the greater of 5% per annum or the increase in the
cost of living. Under the Flanders Agreement, Mr. Flanders is entitled to
receive an annual cash bonus equal to 2% of the Company's pre-tax income,
before nonrecurring and extraordinary charges, in excess of $1,000,000 in any
calendar year. Such annual cash bonus compensation will be limited in any year
to an amount no greater than Mr. Flanders' base salary for the applicable year.
The Flanders Agreement also provides for Mr. Flanders to be granted the 150,000
New Options; provided, that, if the shareholders' approvals necessary in
connection with the granting of the New Options as described above is not
obtained, then Mr. Flanders' annual cash bonus percentage will be increased
from 2% to 2.5%. In addition, the Flanders Agreement provides for certain
additional benefits, including participation in the Company benefit plans,
including the Deferred Compensation Plan and the 401(k) Plan, payment to Mr.
Flanders upon his disability of his compensation and other benefits for two
years thereafter and the continued use of a Company automobile. The Flanders
Agreement prohibits Mr. Flanders from competing with the Company for two years
after any voluntary termination of employment or termination for cause.
Further, if Mr. Flanders were to be terminated without cause, he will be
entitled to receive severance benefits equal to the greater of two-years
compensation or the remainder of the compensation due under the Flanders
Agreement. Additionally, under the Flanders Agreement, the Company will pay
premiums under a life insurance policy with the beneficiary to be as designated
by Mr. Flanders as described under "Summary Compensation Table" above. The
Flanders Agreement also provides that, in the event of a change in control (as
defined) of the Company, Mr. Flanders will have the option in his sole
discretion to terminate the Flanders Agreement. In such event, Mr. Flanders at
his option would be entitled to elect to receive a lump-sum payment equal to
Mr. Flanders' compensation due through the later of the end of the term of the
Flanders Agreement or two years after the change in control or for such period
to continue to receive such compensation as and when due under the Flanders
Agreement.
THE GORDON AGREEMENT
In May 1995, the Company entered into an employment agreement with Rick Gordon,
its Senior Vice President of Sales and Marketing (the "Gordon Agreement"). The
Gordon Agreement will continue through December 31, 1998, and provides for a
base salary, effective as of March 1, 1995, of $163,000 per annum, subject to
an annual increase commencing as of January 1, 1996, equal to the greater of 5%
per annum or the increase in the cost of living. Under the Gordon Agreement,
Rick Gordon is entitled to receive an annual cash bonus equal to 2% of the
Company's pre-tax income, before nonrecurring and extraordinary charges, in
excess of $1,000,000 in any calendar year. Such annual cash bonus compensation
will be limited in any year to an amount no greater than Mr. Gordon's base
salary for the applicable year. With respect to fiscal 1995, Rick Gordon will
also
24
<PAGE> 27
receive an additional one time bonus in the amount of $15,000 by January 15,
1996, in the event that the Company's net sales for calendar year 1995 exceed
$135,000,000. The Gordon Agreement also provides for Mr. Gordon to be granted
the 150,000 New Options; provided, that, if the shareholders' approvals
necessary in connection with the granting of the New Options as described above
is not obtained, then Mr. Gordon's annual cash bonus percentage will be
increased from 2% to 2.5%. In addition, the Gordon Agreement provides for
certain additional benefits, including participation in the Company benefit
plans, including the Deferred Compensation Plan and the 401(k) Plan, payment to
Mr. Gordon upon his disability of his compensation and other benefits for two
years thereafter and the continued use of a Company automobile. The Gordon
Agreement prohibits Mr. Gordon from competing with the Company for two years
after any voluntary termination of employment or termination for cause.
Further, if Mr. Gordon were to be terminated without cause, he will be entitled
to receive severance benefits equal to the greater of two-years compensation or
the remainder of the compensation due under the Gordon Agreement. Additionally,
under the Gordon Agreement, the Company will pay premiums under a life
insurance policy with the beneficiary to be as designated by Mr. Gordon as
described under "Summary Compensation Table" above. The Gordon Agreement also
provides that, in the event of a change in control (as defined) of the Company,
Mr. Gordon will have the option in his sole discretion to terminate the Gordon
Agreement. In such event, Mr. Gordon at his option would be entitled to elect
to receive a lump-sum payment equal to Mr. Gordon's compensation due through
the later of the end of the term of the Gordon Agreement or two years after the
change in control or for such period to continue to receive such compensation
as and when due under the Gordon Agreement.
25
<PAGE> 28
STOCK PRICE PERFORMANCE CHART
The following graph compares the five-year cumulative total returns* of the
Company's Common Stock with the NASDAQ Market Index and the Electronic Parts
and Equipment Peer Group Index (SIC Code 5065). The stock price performance
shown below is not necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
THE COMPANY, NASDAQ MARKET INDEX AND
THE ELECTRONIC PARTS AND EQUIPMENT PEER GROUP INDEX
FISCAL YEARS ENDED DECEMBER 31
[PERFORMANCE GRAPH]
The following table presents in tabular form the data set forth in the
performance graph to be included in the Proxy Statement:
<TABLE>
<CAPTION>
Fiscal Years Ended December 31
INDEX DESCRIPTION 1989* 1990 1991 1992 1993 1994
- ----------------- ---- ---- ---- ---- ---- ----
(In Dollars)
<S> <C> <C> <C> <C> <C> <C>
The Company 100 37.50 75.00 75.00 131.25 93.75
Electronic Parts and 100 94.31 119.75 163.73 191.41 177.92
Equipment Peer Group Index
(SIC Code 5065)
NASDAQ Market Index 100 81.12 104.14 105.16 126.14 132.44
</TABLE>
____________________
* Assumes the investment of $100 on January 1, 1990 and reinvestment of
dividends (no dividends were declared on the Company's Common Stock during
the period).
26
<PAGE> 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Paul Goldberg, a director and executive officer of the Company, owns a
one-third interest in GBG of Maryland, Inc., a corporation that leased office
space to a wholly-owned subsidiary of the Company until December 1994. At such
time, the lease was terminated in connection with the sale to an unrelated
third party of the building in which the office space was located. The
Company's wholly-owned subsidiary currently leases the office space from such
unrelated third party. During fiscal year 1994, such wholly-owned subsidiary
paid approximately $31,000 in rent to lease such office space.
Sheldon Lieberbaum, a director of the Company, is director of corporate finance
and a director and shareholder of the Underwriter. In connection with the
Offering, the Underwriter received compensation, including a selling commission
and discount equal to 9% of the gross proceeds of the Offering ($767,813 in
connection with the sale of the 4,550,000 shares of Common Stock, which is
exclusive of the Over-Allotment Option which was exercised by the Underwriter
on July 7, 1995, but has not as yet closed), a non-accountable expense
allowance equal to 3% of the gross proceeds of the Offering ($255,938, without
giving effect to the exercise of the Over-Allotment Option), a consulting fee
equal to $66,000, reimbursement of certain accountable expenses aggregating
approximately $64,000 and warrants to purchase (collectively the "Underwriter's
Purchase Warrants") the number of shares of Common Stock of the Company equal
to 10% of the Common Stock sold in the Offering at an exercise price per share
of $2.625 per share (140% of the public offering price of the Common Stock sold
in the Offering). See "Amendments to Certificate" in ITEM 4 of "PROPOSALS."
PROPOSALS
ITEM 1. ELECTION OF DIRECTORS
It is intended that the votes will be cast pursuant to the accompanying proxy
for the nominees named below, unless otherwise directed. The Board has no
reason to believe that such nominees will become unavailable, however, in the
event that such nominees should be unavailable, proxies solicited by the Board
will be voted for the election of substitute nominees designated by the Board.
S. Cye Mandel has been a member of the Board since 1987 and Sheldon Lieberbaum
became a director of the Company in 1992. The names of the nominees and the
terms and class are set forth below. For biographical and other information
regarding such nominees, see "BOARD OF DIRECTORS."
<TABLE>
<CAPTION>
NOMINEE TERM CLASS
- ------- ---- -----
<S> <C> <C>
S. Cye Mandel 3 years I
Sheldon Lieberbaum 3 years I
</TABLE>
27
<PAGE> 30
Proxies cannot be voted for a greater number of persons than the two nominees
named above.
The nominees for directors who receive a plurality of the votes cast by the
holders of the Shares will be elected. Abstention (withheld authority) and
broker or nominee non-votes are not counted in determining the number of shares
voted for or against any nominee for director.
The Board recommends a vote in favor of the nominees for election to the Board.
ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
It is intended that the votes will be cast pursuant to the accompanying proxy
for the ratification of Lazar, Levine & Company LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1995,
unless otherwise directed.
The firm of Lazar, Levine & Company LLP certified the accounts of the Company
for the fiscal years ended December 31, 1988 and thereafter. No member of such
firm or any associate thereof has any financial interest in the Company or its
subsidiaries. A member of such firm is not expected to be present at the
Meeting.
Shareholder approval of the Company s auditors is not required under Delaware
law. Consistent with past practices, the Board is submitting its selection of
Lazar, Levine & Company LLP to its shareholders for ratification in order to
determine whether the shareholders generally approve of the Company's auditors.
If the selection of Lazar, Levine & Company LLP is not approved by the
shareholders, the Board will reconsider its selection.
The affirmative vote of a majority of the Shares represented at the Meeting is
required to approve this proposal.
The Board recommends a vote in favor of this proposal.
ITEM 3. PROPOSED AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE OF
INCORPORATION, AS AMENDED, TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK TO
40,000,000 SHARES ("ITEM 3")
The Board is recommending to the shareholders of the Company that they approve
the adoption of two amendments to Article 4 of the Company's Certificate of
Incorporation, as amended (the "Certificate"). The purpose of the first
proposed amendment to the Certificate is to increase from 20,000,000 to
40,000,000 the number of authorized shares of Common Stock (the "Common Stock
Amendment"). The Common Stock Amendment would revise the first paragraph of
Article 4 of the Certificate to read as follows:
"4. The total number of shares of common stock which the
Corporation shall have authority to issue is 40,000,000 shares
of $.01 par value common stock."
28
<PAGE> 31
See discussion under "Amendments to Certificate" in ITEM 4 below regarding the
Company's Common Stock and matters and information relating to this proposal.
ITEM 4. PROPOSED AMENDMENT TO ARTICLE 4 OF THE CERTIFICATE TO INCREASE THE
AUTHORIZED SHARES OF PREFERRED STOCK TO 5,000,000 SHARES ("ITEM 4")
The Board is recommending to the shareholders of the Company that they adopt a
second amendment to Article 4 of the Certificate. The purpose of the second
proposed amendment to the Certificate is to increase from 1,000,000 to
5,000,000 the number of authorized shares of preferred stock (the "Preferred
Stock Amendment"). The Preferred Stock Amendment would revise the second
paragraph of Article 4 of the Certificate to read as follows:
"The Corporation is also authorized to issue 5,000,000 shares of
preferred stock, $.01 par value each."
AMENDMENTS TO CERTIFICATE
The Company currently has 20,000,000 shares of Common Stock authorized, of
which 16,996,791 shares are issued and outstanding. In addition, the Company
currently has outstanding warrants, options and other rights to acquire shares
of Common Stock (exclusive of the Underwriter's Purchase Warrants and the New
Options) aggregating 2,192,149 shares and the Underwriter has on July 7, 1995,
exercised the Over-Allotment Option. Subject to the consummation of the
closing scheduled for July 13, 1995, an additional 682,500 shares of Common
Stock will be issued by the Company on such date pursuant to the Over-Allotment
Option. Accordingly, the Company only has 128,560 (0.6%) of the Company's
authorized shares of Common Stock available for issuance. See footnote (2) to
the table in "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
For this reason alone, the Company's officers and directors ("Management")
believes it is imperative that the Common Stock Amendment be approved by the
Company's shareholders.
The Company currently has 1,000,000 shares of preferred stock authorized, none
of which are issued and outstanding. All unissued shares of Common Stock and
preferred stock are and will be issuable by the Company upon authorization by
the Board without further action by the shareholders. In the case of the
preferred stock, it may be issued with such rights, features, privileges and
preferences as determined by the Board, including determinations as to
conversion privileges, redemption features, and dividend, voting and
liquidation rights and preferences.
There are no present commitments, arrangements or plans to issue any of the
additional Common Stock or preferred stock which would be authorized by either
of the proposed amendments to the Certificate except with respect to a portion
of the additional Common Stock as described below. In all events and
notwithstanding any potential issuance described below other than any issuance
in connection with the proposed acquisitions of the AVED Stock (as defined
below), it is the intention of the Company that any and all of
29
<PAGE> 32
such additional shares could be issued by the Board in its sole judgment and
discretion at any time and from time to time and without any further
consideration, approval or action required of the Company's shareholders
(except for the separate shareholders' vote contemplated in connection with the
acquisition of the AVED Stock) for any proper corporate purpose, including,
without limitation, acquisitions, raising of additional equity capital, stock
dividends, stockholder rights plans or upon the exercise of warrants, stock
options or other rights to acquire Common Stock. As a result of the
preliminary stage of the proposed acquisitions of the AVED Stock described
below, certain information (including, without limitation, audited financial
statements of the companies' to be acquired, as well as pro forma financial
information) required, pursuant to Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, to be provided to shareholders of
the Company in a proxy statement for the purpose of shareholders voting upon
the Common Stock Amendment, if such shareholders would not have a separate
opportunity to vote upon such acquisitions, is not yet available. Accordingly,
the Company has determined and undertaken, as a condition to proceeding with
the proposed acquisitions of the AVED Stock and in order to be able to proceed
with the Meeting as scheduled and notwithstanding that the Company's
shareholders would not otherwise be entitled to vote upon an acquisition by the
Company, to provide the Company's shareholders with a separate opportunity to
vote upon such proposed acquisitions at a subsequent meeting of the Company's
shareholders. Prior to such subsequent meeting, the Company's shareholders
will be provided with the information (including, without limitation, audited
and pro forma financial statements and information) required by such Schedule
14A with respect to a vote upon such proposed transaction. In any event, a
shareholder when considering and voting upon these proposed amendments to the
Certificate should not rely on or assume that any of the additional Common
Stock or preferred stock which would be authorized by such proposed amendments
will actually be issued for any purpose described herein.
The following are existing binding and non-binding commitments, arrangements or
plans relating to a portion of the additional shares of Common Stock that would
be authorized by the Common Stock Amendment:
(1) In connection with the Offering, the Company has issued to the
Underwriter the Underwriter's Purchase Warrants covering 455,000 shares of
Common Stock and has agreed to issue additional Underwriter's Purchase Warrants
covering 68,250 shares of Common Stock upon the closing of the Over-Allotment
Option which is scheduled for July 13, 1995. The Underwriter's Purchase
Warrants are exercisable at a price of $2.625 (140% of the per share public
offering price of the Common Stock) for a period (the "Warrant Exercise Term")
of four years commencing one year from June 8, 1995. However, notwithstanding
such issuance of the Underwriter's Purchase Warrants, the Underwriter has
acknowledged and agreed that (i) the Company does not have the authorized and
unissued shares of Common Stock to be able to issue any of the shares of Common
Stock underlying the Underwriter's Purchase Warrants upon the possible exercise
thereof and (ii) only in the event and when (if at all) the number of
authorized shares of the Company's Common Stock is increased to at least
35,000,000 shares will the holders of the Underwriter's Purchase Warrants have
the right to exercise, in whole or in part, the Underwriter's Purchase Warrants
during the Warrant Exercise Term. Accordingly, approval of the Common Stock
30
<PAGE> 33
Amendment would enable the holders of the Underwriter's Purchase Warrants to
have the right to exercise same. The Underwriter's Purchase Warrants provide
that for a period of four years commencing one year from the Effective Date, at
the request of the holders of a majority of the Underwriter's Purchase Warrants
and/or the shares of Common Stock underlying the Underwriter's Purchase
Warrants, the Company will register, in whole or in part, on up to two
occasions the Underwriter's Purchase Warrants and/or the shares of Common Stock
underlying the Underwriter's Purchase Warrants. The first such requested
registration will be at the expense of the Company and the second such
requested registration will be at the expense of the holders requesting
registration. In addition, the holders of the Underwriter's Purchase Warrants
have the right to "piggyback" all or any part of the Underwriter's Purchase
Warrants and/or shares of Common Stock underlying the Underwriter's Purchase
Warrants on any registration statement (other than a registration statement on
Form S-8, Form S-4 or other similar registration form) filed by the Company or
its principal shareholders at any time during the Warrant Exercise Term. The
Underwriter's Purchase Warrants contain anti-dilution provisions providing for
adjustment of the exercise price upon the occurrence of certain events,
including the issuance of Common Stock or other securities convertible into or
exercisable for Common Stock at a price per share less than the market price of
the Common Stock at the time of the applicable issuance, or in the event of any
recapitalization, reclassification, stock dividend, stock split, stock
combination or similar transaction. See also "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS."
(2) In connection with the granting of the New Options, the
Company has to obtain the approval of the Company's shareholders to an increase
in the number of shares of Common Stock authorized to be issued to enable it to
increase the number of shares of Common Stock reserved for issuance under the
Option Plan so that there will be a sufficient number of shares of Common Stock
available for issuance in the event of the exercise of the New Options.
Accordingly, the granting of the New Options will be void and a nullity in the
event that the Common Stock Amendment is not approved by the shareholders of
the Company, as well as if either the Reserve Share Increase or the Other
Amendments to the Option Plan are not approved by the shareholders at the
Meeting. See the discussion of the New Options in "EXECUTIVE COMPENSATION -
Employment Agreements - The Goldberg Agreements" and also in ITEM 5 and ITEM 6
below.
(3) As of June 28, 1995, the Company entered into a non-binding
letter of intent with two affiliated, privately held electronic component
distribution companies, Added Value Electronics Distribution, Inc.
headquartered in Tustin, California ("Added Value") and A.V.E.D.-Rocky
Mountain, Inc. headquartered in Denver, Colorado ("AVED-Rocky Mountain", and
together with Added Value collectively "AVED"), and the principal owners of
AVED which provides for the purchase all of the issued and outstanding capital
stock of AVED (the "AVED Stock"). Based upon unaudited financial statements of
AVED reviewed by KPMG Peat Marwick LLP which were provided to the Company, net
sales for Added Value and AVED-Rocky Mountain for the year ended December 31,
1994, were $27,813,825 and $10,261,311, respectively, as compared to
$19,820,811 and $10,798,680, respectively, for the year ended December 31,
1993. Earnings before income taxes for Added Value and AVED-Rocky Mountain for
the year ended December 31, 1994, were
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<PAGE> 34
$1,062,488 ($960,919 exclusive of the equity in earnings of AVED - Rocky
Mountain) and $487,315, respectively, as compared to $1,204,637 ($1,062,201
exclusive of the equity in earnings of AVED - Rocky Mountain) and $631,795,
respectively, for the year ended December 31, 1993. If consummated, these
acquisitions are expected to give the Company greater market penetration in
Southern California and Salt Lake City, Utah where the Company already has
sales offices and to provide the Company with a presence in Denver, Colorado
and Phoenix, Arizona where the Company currently has no sales office locations.
The principal terms of the acquisitions, as set forth in the non-binding letter
of intent, are as follows: The acquisition cost payable in the transaction
would be approximately $8,700,000, payable approximately $3,700,000 in cash
consideration at closing and $5,000,000 in Common Stock. The Common Stock
would be valued at the higher of its per share fair market value at closing and
$2.25 per share. The Company could become obligated to pay up to $3,000,000
(in Common Stock or a combination of cash and Common Stock) on the second
anniversary of closing if the public trading value of the Common Stock has not
appreciated to an agreed-upon price per share by such date. The Common Stock
acquired by the sellers would be subject to certain substantial restrictions on
sale during the first two years following closing, and certain minor
restrictions thereafter, and would be subject to certain voting trust
restrictions during the six (6) years following closing. In order to be able
to proceed further with the proposed acquisitions, it is necessary that the
Company obtain (i) the consent of its senior lender and (ii) the approval of
the Company's shareholders to the Common Stock Amendment, as well as to the
proposed acquisitions (which as discussed above will be voted upon separately
at a subsequent meeting of the Company's shareholders). If the proposed
acquisitions are consummated, up to 2,222,222 shares of Common Stock would be
issued to the sellers of the AVED Stock at closing. Although the ultimate
structure of the acquisitions has not yet been determined, or agreed upon by
the parties, the current intention is to qualify the acquisitions as a
reorganization within the meaning of Section 368(a) of the Code. The
consummation of the acquisitions is subject to a standard due-diligence period
and the information derived therefrom being satisfactory to the Company, the
parties being able to agree upon, and execute and deliver, a definitive
acquisition contract and related agreements approved by the Board, the
aforementioned consent of the Company's senior lender and approvals of the
Company's shareholders and the normal closing conditions which are anticipated
to be included in any definitive acquisition contract. There can be no
assurance that the parties will enter into a definitive acquisition contract or
such acquisitions will be consummated on the same or substantially same terms
set forth in the non-binding letter of intent, or at all. Accordingly, a
shareholder when considering and voting upon the Common Stock Amendment should
not rely on or assume that such acquisitions will be consummated. Furthermore,
as discussed above, the Company's shareholders will be given a separate
opportunity to vote upon the proposed acquisitions at a subsequent
shareholders' meeting.
Through the two proposed amendments to the Certificate, the Company seeks to
expand its authorized Common Stock and preferred stock to provide the
flexibility which Management believes it must have and will need in future
periods to continue its growth. Management believes these proposed increases
are necessary to provide the Company with the resources
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<PAGE> 35
to raise capital, negotiate acquisitions (such as the proposed acquisition of
the AVED Stock) and restructure debt and to meet other corporate needs that
might arise. Shareholders of the Company do not have preemptive rights to
subscribe for or purchase additional shares of the presently authorized Common
Stock and preferred stock, and shareholders will not have preemptive rights to
subscribe for or purchase any of the additional shares of Common Stock and
preferred stock to be authorized.
During the respective terms of the Underwriter's Purchase Warrants and the New
Options, the holders of the Underwriter's Purchase Warrants and the New Options
are given the opportunity to profit from a rise in the market price of the
Common Stock. To the extent that the Underwriter's Purchase Warrants and/or
the New Options are exercised, dilution of the interest of the Company's
shareholders will occur. Further, the terms upon which the Company will be
able to obtain additional equity capital may be adversely affected since the
holders of the Underwriter's Purchase Warrants and the New Options can be
expected to exercise them at a time when the Company would, in all likelihood,
be able to obtain any needed capital on terms more favorable to the Company
than those provided in the Underwriter's Purchase Warrants and the New Options.
Generally, the future issuance of additional shares of Common Stock and
preferred stock on other than a pro rata basis may dilute the ownership of the
current shareholders. Such additional shares could also be used to block
actions by potential acquirors through the creation of a shareholders rights
plan or issuing control blocks of stock to persons or entities considered
favorable by Management, which might be deemed to have an anti-takeover effect
(i.e., might impede the completion of a merger, tender offer or other takeover
attempt). In fact, the mere existence of such a block of authorized but
unissued shares, and the Board s ability to issue such shares without
shareholder approval, might well deter a bidder from seeking to acquire shares
of the Company on a hostile basis. Generally, the availability of authorized
and unissued shares of Common Stock or preferred stock could make any attempt
at gaining control of the Company or the Board or removing current management
more difficult or time-consuming.
Each of the Common Stock Amendment and Preferred Stock Amendment is being
submitted for the separate and distinct consideration and a separate and
distinct vote of the shareholders of the Company at the Meeting. A separate
affirmative vote at the Meeting of shareholders holding a majority of all of
the outstanding Shares is required to approve each of the Common Stock
Amendment and Preferred Stock Amendment. In the event that only one and not
both such proposed amendments to the Certificate receives the necessary
affirmative vote, then only that proposed amendment will be approved. The
Goldberg Group has indicated that they intend to vote in favor of each such
proposal to amend the Certificate.
The Board recommends a vote in favor of each proposal to amend the Certificate.
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<PAGE> 36
ITEM 5. AUTHORIZATION OF ADDITIONAL SHARES UNDER OPTION PLAN ("ITEM 5")
The Company proposes to increase the number of shares of Common Stock reserved
for issuance upon the exercise of options granted under the Option Plan to
3,250,000 shares (the "Reserved Share Increase"). At present, 1,575,250 Shares
are reserved for issuance upon the exercise of options granted under the Option
Plan; provided, however, that, in the event that the shares of Common Stock
covered by the Over-Allotment Option are not issued, there would be no
reduction in the number of reserved shares under the Option Plan from the
2,250,000 shares previously approved by the shareholders to be reserved for
issuance or, if less than all of the shares of Common Stock covered by the
Over-Allotment Option are issued, a lessor reduction from the previously
approved 2,250,000 reserved shares would be made. However, the closing of the
issuance of all of the shares of Common Stock covered by the Over-Allotment
Option is scheduled for July 13, 1995. See "EXECUTIVE COMPENSATION -
Employees', Officers', Directors' Stock Option Plan - Securities Available."
In the event that the Reserved Share Increase, as well as the Other Amendments
and the Common Stock Amendment, are not approved by the shareholders, the New
Options will automatically terminate and become null and void and the annual
cash bonuses of the executive officers (as provided in their respective
employment agreements) would be automatically increased by the aggregate of 5%
of the Company's pre-tax income before nonrecurring and extraordinary charges.
See "EXECUTIVE COMPENSATION - Employment Agreements." The Compensation
Committee of the Company believes that the inclusion of the New Options as part
of the compensation package of each of the executive officers of the Company,
in lieu of increasing the amount of additional cash compensation payable to
them, is a very effective means of linking the level of compensation of
executive officers to the return on the investment made in the Company by its
shareholders. See "EXECUTIVE COMPENSATION - Compensation Committee Report and
Compensation Committee Interlocks and Insider Participation." The Company also
believes that increasing the number of reserved shares will permit greater
participation in the Option Plan by employees other than executive officers
and, as a result, will foster initiative, increased performance and greater
employee loyalty.
As of this date, the Company has no commitment to issue any other specific
options under the Option Plan other than those previously issued and disclosed
herein. However, the Compensation Committee has the authority to issue
options, at any time, in its sole discretion. See "EXECUTIVE COMPENSATION -
Employees , Officers , Directors Stock Option Plan" for a discussion of the
material features of the Option Plan as amended and restated by the Board and
see also ITEM 6 below for a discussion of the Other Amendments to the Option
Plan made by the Board requiring the approval of the Company's shareholders.
The affirmative vote of a majority of the Shares represented at the Meeting is
required to approve this proposal. The Goldberg Group has indicated that they
intend to vote in favor of this proposal.
The Board recommends a vote in favor of this proposal.
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<PAGE> 37
ITEM 6. CERTAIN MATERIAL AMENDMENTS (OTHER THAN THE RESERVE SHARE
INCREASE) TO THE OPTION PLAN REQUIRING THE APPROVAL OF THE SHAREHOLDERS OF THE
COMPANY AS PART OF THE OPTION PLAN BEING AMENDED AND RESTATED IN ITS ENTIRETY
("ITEM 6")
In connection with the Company amending and restating the Option Plan, there
are certain material amendments to the Option Plan (in addition to the Reserve
Share Increase) that were adopted by the Board of Directors of the Company
which require approval by the Company's shareholders within 12 months of their
adoption on May 23, 1995, by the Board in order that the Restated Plan shall
continue to be effective and the New Options will not terminate and become null
and void. Such material amendments (in addition to the Reserve Share Increase)
are as follows (the "Other Amendments"):
(i) the removal of the limitation as to non-qualified stock
options and as to incentive stock options when they no longer qualify as such
under Section 422 of the Code that the aggregate fair market value (determined
at the time the option is granted) of the Common Stock with respect to which
the granted options are exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000 (under this and all similar plans
of the Company);
(ii) the option exercise price for a non-qualified stock option
granted to a shareholder beneficially owning within the meaning of Section 422
of the Code 10% or more of the combined voting power of the Company shall be
its fair market value on the date of grant and not 110% or more of such fair
market value;
(iii) the deletion of all of the limitations on the number,
exercise period and exercise price of options permitted to be granted to
directors under the Option Plan which are more restrictive than otherwise
provided in the Option Plan generally with respect to all other potential
participants;
(iv) the authorization of the Compensation Committee to determine
the time frame in which an optionee has to exercise his options (subject to the
10 year limitation from date of grant) in the event of his termination of
employment due to death, disability, termination without cause, retirement,
voluntarily leaving the Company and change in control; and
(v) the authorization of the Compensation Committee, in its
discretion, on behalf of the Company to agree in connection with the granting
of awards under the Option Plan to register and qualify under applicable
federal and state securities laws the Common Stock underlying such awards.
Each of the Other Amendments described above was required to permit the New
Options to be granted on the terms and conditions described in "EXECUTIVE
COMPENSATION -Employment Agreements - The Goldberg Agreements." Since the
Option Plan prior to the changes provided in the Other Amendments would not
have permitted the New Options
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<PAGE> 38
to be granted, in the event that the shareholders do not approve the Other
Amendments (even if the Reserve Share Increase and the Common Stock Amendment
are approved by the Company's shareholders), the New Options will automatically
terminate and become null and void and the annual cash bonus of the executive
officers of the Company (as provided in their respective employment agreements)
would be automatically increased by the aggregate of 5% of the Company's
pre-tax income before nonrecurring and extraordinary charges. See "EXECUTIVE
COMPENSATION - Employment Agreements." As discussed in ITEM 5 above, the
Compensation Committee believes that the New Options are a very effective means
of linking the level of compensation of the executive officers of the Company
to the return on investment made in the Company by its shareholders. See also
the discussion in "EXECUTIVE COMPENSATION - Compensation Committee Report and
Compensation Committee Interlocks and Insider Participation."
This proposal to approve the Other Amendments is also being made, in
conjunction with the Reserve Share Increase proposal, (i) to enable the
Compensation Committee to have the ability and flexibility to structure options
in a manner that the Compensation Committee believes will facilitate and help
the Company obtain, secure and/or retain highly competent and qualified persons
to serve as employees and directors of the Company, (ii) in order to add value
to such options and make them a more attractive and effective form of incentive
compensation and (iii) in order to ensure that the Company will continue in the
future to be able to grant options as incentives to those individuals upon
whose efforts the Company relies for the continued success and development of
its business. See "EXECUTIVE COMPENSATION - Employees, Officers, Directors
Stock Option Plan" for a discussion of the material features of the Option Plan
as amended and restated.
The affirmative vote of a majority of the Shares represented at the Meeting is
required to approve this proposal. The Goldberg Group has indicated that they
intend to vote in favor of this proposal.
The Board recommends a vote in favor of this proposal.
SHAREHOLDER S PROPOSALS FOR 1995 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be
considered at the 1995 annual meeting of shareholders and who wishes to have
such proposal receive consideration for inclusion in the Company s proxy
statement for such meeting must deliver such proposal in writing to the Company
at 16115 N.W. 52nd Avenue, Miami, Florida 33014, not later than March 11, 1996.
Any such shareholder proposal must comply with the requirements of Rule 14a-8
promulgated under the Securities Exchange Act of 1934.
OTHER MATTERS
The Board has no knowledge of any other matters which may come before the
Meeting and does not intend to present any other matters. However, if any
other matters shall properly come before the Meeting or any adjournment or
postponements thereof, the persons named
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<PAGE> 39
as proxies will have discretionary authority to vote the shares represented by
the accompanying proxy in accordance with their best judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1994 IS BEING PROVIDED TO SHAREHOLDERS WITH THIS PROXY STATEMENT.
THE COMPANY WILL FURNISH TO EACH PERSON SOLICITED HEREUNDER, WITHOUT CHARGE,
COPIES OF ITS ANNUAL REPORT ON FORM 10-K (INCLUDING EXHIBITS) FOR THE COMPANY'S
YEAR ENDED DECEMBER 31, 1994, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST BY SUCH PERSON.
SUCH WRITTEN REQUEST SHOULD BE SENT TO THE COMPANY, ATTENTION: HOWARD L.
FLANDERS, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, AT THE COMPANY'S ADDRESS
STATED HEREINABOVE.
By Order of the Board of Directors,
Howard L. Flanders,
Corporate Secretary
July 10, 1995
Miami, Florida
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<PAGE> 40
EXHIBIT "A"
AMENDED AND RESTATED
ALL AMERICAN SEMICONDUCTOR, INC.
EMPLOYEES', OFFICERS', DIRECTORS'
STOCK OPTION PLAN
1. Purpose. The purpose of the Amended and Restated All American
Semiconductor, Inc. Employees', Officers', Directors' Stock Option Plan (the
"Plan") is to secure for All American Semiconductor, Inc. and its subsidiaries,
if any (hereinafter collectively the "Company") and its stockholders the
benefits of the additional incentive, inherent in the ownership of the
Company's common stock (the "Common Stock"), by selected key employees and
non-employee directors and independent contractors of the Company who are
important to the success and growth of the business of the Company and to help
the Company secure and retain the services of such employees, non-employee
directors and independent contractors. Options granted under the Plan will be
either "incentive stock options", intended to qualify as such under the
provisions of Section 422 of the Internal Revenue Code of 1986, as from time to
time amended (the "Code"), or "non-qualified stock options. " For purposes of
the Plan, the terms "parent" and "subsidiary" shall mean "parent corporation"
and "subsidiary corporation", "respectively, as such terms are defined in
Sections 424(e) and (f) of the Code.
2. Stock Option Committee.
2.1. Administration. The Plan shall be administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee shall consist of not less than two members of the Board of Directors,
each of whom is a "disinterested person" as defined in Rule 16b-3 promulgated
under Section 16(b) of the Securities Exchange Act of 1934, as amended. Once
appointed, the Committee shall continue to serve until otherwise directed by
the Board of Directors. From time to time the Board of Directors may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause), and appoint new members in substitution
therefor, and fill vacancies however caused; provided, however, that at no time
shall a Committee of less than two members of the Board of Directors administer
the Plan, and provided, further, that all members of the Committee if it
consists of only two members must be "disinterested persons" as defined in Rule
16b-3.
2.2. Procedures. Subject to the provisions of this Plan, the
Committee shall adopt such rules and regulations as it shall deem appropriate
concerning the holding of its meetings and the administration of the Plan. All
determinations and actions of the Committee shall be made by not less than a
majority of its members.
2.3. Interpretation. The Committee shall have full power and
authority to interpret the provisions of the Plan, and
<PAGE> 41
its decisions shall be final and binding on all interested parties.
2.4. Liability. No member of the Board of Directors of the
Company or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any option granted under it.
3. Shares Subject to Options.
3.1. Number of Shares. Subject to the provisions of
Paragraph 12 and to any adjustments required upon changes in capitalization to
prevent dilution or enlargement of the shares issuable pursuant to the Plan by
reason of any stock split, stock dividend, combination of shares,
recapitalization, or other change in the capital structure of the Company, the
number of shares of Common Stock subject at any one time to options granted
under the Plan, plus the number of shares of Common Stock theretofore issued or
delivered pursuant to the exercise of options granted under the Plan, shall not
exceed 3,250,000 shares. If and to the extent that options granted under the
Plan terminate, expire or are cancelled without having been exercised, new
options may be granted under the Plan with respect to the shares of Common
Stock covered by such terminated, expired or cancelled options; provided that
the granting and terms of such new options shall in all respects comply with
the provisions of the Plan. In no event shall any options be granted under the
Plan after May 28, 2004.
3.2. Character of Shares. Shares of Common Stock delivered
upon the exercise of options granted under the Plan may be authorized and
unissued Common Stock, issued Common Stock held in the Company's treasury, or
both.
3.3. Reservation of Shares. Subject to timely shareholder
approval of certain amendments made to the Plan as part of it being amended and
restated (the material amendments are described in paragraph 14 hereof) and
shareholder approval of an increase in the number of shares of Common Stock
authorized to be issued by the Company to permit the increase in the number of
shares reserved for issuance hereunder, there shall be reserved at all times
for sale under the Plan a number of shares of Common Stock (authorized and
unissued Common Stock, issued Common Stock held in the Company's treasury, or
both) equal to the maximum number of shares which may be purchased pursuant to
options granted or that may be granted under the Plan.
4. Grant of Options. The Committee shall determine, within the
limitations of the Plan, the employees and non-employee directors of the
Company and independent contractors to whom options are to be granted, the
number of shares that may be purchased under each option, the option price, the
vesting and exercise schedule and any conditions or terms of vesting and
exercise of each option, including, but not limited to, vesting and
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<PAGE> 42
exercise upon a change in control of the Company, events that may permit
acceleration of vesting and exercise and the period after termination of
employment or directorship that an Option may be exercised, and shall designate
options at the time of grant as either "incentive stock options" or
"non-qualified options;" provided that the "Fair Market Value" (as hereinafter
defined) (determined as of the time the option is granted) of the Common Stock
with respect to which incentive stock options are exercisable for the first
time by any individual during any calendar year (under all plans of the
individual's employer corporation and its parent and subsidiary corporations)
shall not exceed $100,000; provided, further, that non-employee directors and
independent contractors may be granted only non-qualified stock options. In
determining the employees, non-employee directors and independent contractors
to whom options shall be granted, the Committee shall take into consideration
the employee's, non-employee director's and independent contractor's present
and potential contribution to the success of the Company and other such factors
as the Committee may deem proper and relevant. Each option granted under the
Plan shall be evidenced by a written agreement between the Company and the
Optionee (as defined in Paragraph 5) in such form, not inconsistent with the
provisions of the Plan, or with Section 422 of the Code for incentive stock
options, as the Committee shall provide. Options designated as incentive stock
options that fail to continue to meet the requirements of Section 422 of the
Code shall be redesignated non-qualified stock options automatically without
further action by the Committee on the date of such failure to continue to meet
the requirements of Section 422 of the Code.
"Fair Market Value" on any day shall be the average of the market
price of a share of Common Stock for each of the seven (7) consecutive business
days preceding such day; the market price on each such day shall be (i) if the
Common Stock is listed on a securities exchange (including for purposes hereof
The Nasdaq Stock Market), the closing sales price on such exchange on such day
or, in the absence of reported sales on such day, the mean between the reported
closing bid and asked prices on such exchange on such day, or (ii) if the
Common Stock is not listed on a securities exchange, the mean between the
closing bid and asked prices as quoted by the National Association of
Securities Dealers, Inc. through NASDAQ for such day; provided, however, that,
if there are no such quotations or if it is determined that the fair market
value is not properly reflected by such NASDAQ quotations or the Common Stock
is not traded on an exchange or over the counter, fair market value shall be
determined by such other method as the Committee determines to be reasonable,
provided, however, that in no event shall the fair market value be less than
the Common Stock's par value. Notwithstanding the foregoing, if on, or within
ten (10) days prior to, the date of grant of any options hereunder, a
registration statement filed by the Company with the Securities and Exchange
Commission in connection with a public offering of Common Stock becomes
effective, the fair market value of a share of such Common
3
<PAGE> 43
Stock for purposes hereof shall be the public offering price per share of
Common Stock being offered pursuant to such offering.
5. Persons Eligible. Options may be granted under the Plan to
any key employee or prospective key employee (conditioned upon, and effective
not earlier than, his or her becoming an employee) of the Company, including
without limitation by way of specification, the Chief Executive Officer, Chief
Operating Officer, President, Senior Vice Presidents, Chief Financial Officer
and other officers and non-employee directors or prospective non-employee
directors (conditioned upon, and effective not earlier than, an individual
becoming a director) and other employees of the Company as approved by the
Committee, or any person who is an independent contractor associated with and
rendering services to the Company and who, in the opinion of the Committee, is
in a position to materially contribute to the continued growth and development
of the Company and its future financial success. No incentive stock options
may be granted under the Plan to any person who owns, directly or indirectly
(within the meaning of Sections 422(b)(6) and 424(d) of the Code), at the time
the incentive stock option is granted, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or its
parent, if any, or its subsidiaries, if any, unless the option price is at
least 110% of the Fair Market Value of the shares subject to the option,
determined on the date of the grant, and the option by its terms is not
exercisable after the expiration of five years from the date such option is
granted.
An individual receiving any option under the Plan is
hereinafter referred to as an "Optionee. " Any reference herein to the
employment of an Optionee by the Company shall include his or her employment by
the Company or its subsidiaries, if any.
6. Option Price. Subject to Paragraph 12, the option price of
each share of Common Stock purchasable under any incentive stock option or
non-qualified stock option granted under the Plan shall be not less than the
Fair Market Value of such shares of Common Stock on the date the option is
granted. For purposes of this Paragraph, the time at which an option is
granted, in case of the grant of an option to a prospective key employee or
prospective non-employee director, shall be deemed to be the date of such
grant. The option price of any option issued in a transaction described in
Section 424(a) of the Code shall be an amount which conforms to the
requirements of that section and the regulations thereunder.
7. Expiration and Termination of the Plan.
7.1. General. Options may be granted under the Plan at any
time and from time to time on or prior to May 28, 2004 (the "Expiration Date"),
which is ten years from the effective date of the last amendment to the Plan
extending the term to such date and
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<PAGE> 44
on which date the Plan will expire except as to options then outstanding under
the Plan. Such outstanding options shall remain in effect until they have been
exercised, terminated or have expired. The Plan may be terminated, modified or
amended by the Board of Directors at any time on or prior to the Expiration
Date, except with respect to any options then outstanding under the Plan;
provided, however, that the approval of the Company's shareholders will be
required for any amendment which would (i) change the class of persons eligible
for the grant of options, as specified in Paragraph 5 or otherwise materially
modify the requirements as to eligibility for participation in the Plan, (ii)
increase the maximum number of shares subject to options, as specified in
Paragraph 3 (unless made pursuant to the provisions of Paragraph 12) or (iii)
materially increase the benefits accruing to participants under the Plan,
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended ("1934 Act"). With respect to persons subject to Section
16 of the 1934 Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated therein, such provision
(other than one relating to eligibility requirements, or the price and amount
of awards) shall be deemed automatically to be incorporated by reference into
the Plan insofar as participants subject to Section 16 are concerned.
7.2. Modifications. The Committee may make such
modifications, extensions, renewals or other changes in any option granted
under the Plan after the grant of such option, provided such modifications,
extensions, renewals or other changes are consistent with the provisions of the
Plan and do not disqualify an incentive stock option under the provisions of
Section 422 of the Code.
8. Exercisability and Duration of Options.
8.1. Determination of Committee; Acceleration. Each option
granted under the Plan shall vest and be exercisable at such time or times, or
upon the occurrence of such events or events, and in such amounts, as the
Committee may provide upon the granting thereof. Subsequent to the grant of an
option which is not immediately exercisable in full, the Committee, at any time
before complete termination of such option, may accelerate the time or times at
which such option may be exercised in whole or in part. Any option granted
under the Plan shall be exercisable upon the death of the Optionee or upon the
termination of the Optionee's employment by or Optionee's acting as a
non-employee director of the Company by reason of his illness or disability to
the extent such option was exercisable by the Optionee immediately prior to
5
<PAGE> 45
such event, unless otherwise expressly provided in the option at the time it is
granted. Each option granted under the Plan shall be for a term not in excess
of ten (10) years from the date of its grant.
9. Exercise of Options; Certain Legal and Other Restrictions.
9.1. Exercise. Subject to all of the provisions of the Plan
and the terms of the applicable option agreement, options granted under the
Plan shall be exercised by the Optionee (or by his or her personal
representatives, executors or administrators, as provided in Paragraph 10) as
to all or part of the shares covered thereby, by the giving of written notice
of exercise to the Company, specifying the number of shares to be purchased,
accompanied by payment of the full purchase price for the shares being
purchased. Payment of such purchase price shall be made (a) by check payable
to the Company, or (b) with the consent of the Committee or to the extent
provided in an applicable option agreement, by delivery of shares of Common
Stock having a Fair Market Value (determined as of the date such option is
exercised) equal to all or part of the purchase price, and, if applicable, of a
check payable to the Company for any remaining portion of the purchase price.
Such notice of exercise, accompanied by such payment, shall be delivered to the
Company at its principal business office or such other office as the Committee
may from time to time direct, and shall be in such form, containing such
further provisions consistent with the provisions of the Plan, as the Committee
may from time to time prescribe. The Company shall effect the transfer of the
shares so purchased to the Optionee (or such other person exercising the option
pursuant to Paragraph 10 hereof) as soon as practicable, and within a
reasonable time thereafter. Such transfer shall be evidenced on the books of
the Company. No Optionee or other person exercising an option shall have any
of the rights of a shareholder of the Company with respect to shares subject to
an option granted under the Plan until certificates for such shares shall have
been issued following the exercise of such option. No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date of such issuance. In no event may any option granted hereunder be
exercised for a fraction of a share.
9.2. Withholding Tax. Whenever under the Plan shares of
stock are to be delivered upon exercise of a non-qualified stock option, the
Company shall be entitled to require as a condition of delivery that the
Optionee remit or, in appropriate cases, agree to remit when due an amount
sufficient to satisfy all federal, state and local withholding tax requirements
relating thereto.
If an Optionee makes a "disposition" (within the meaning of
Section 424(c) of the Code) of shares of Common Stock issued upon exercise of
an incentive stock option within two years from
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<PAGE> 46
the date of grant or within one year from the date the shares of Common Stock
are transferred to the Optionee, the Optionee shall, within ten days of
disposition, notify the Committee and deliver to it any withholding and
employment taxes due. However, if the Optionee is a person subject to Section
16(b) of the 1934 Act, delivery of any withholding and employment taxes due may
be deferred until ten days after the date any income on the disposition is
recognized under Section 83 of the Code. The Company may cause a legend to be
affixed to certificates representing shares of Common Stock issued upon
exercise of incentive stock options to ensure that the Committee receives
notice of disqualifying dispositions.
9.3. Restrictions on Delivery of Shares. In and at the
discretion of the Committee, each award granted under the Plan may be subject
to the condition that, if at any time the listing, registration or
qualification of the shares covered by such award upon any securities exchange
or under any state or federal law is necessary as a condition of or in
connection with the granting of such option or the purchase or delivery of
shares thereunder, the delivery of any or all shares pursuant to exercise of
the option may be withheld unless and until such listing, registration or
qualification shall have been effected; provided, however, that the Committee,
in its discretion, may agree on behalf of the Company in connection with the
granting of an award under the Plan that the Company will use its best efforts
to effect and continuously maintain any and all such listings, registrations
and qualifications. The Committee may require, as a condition of exercise of
any option, that the Optionee represent, in writing, that the shares received
upon exercise of the option are being acquired for investment and not with a
view to distribution and agree that the shares will not be disposed of except
pursuant to an effective registration statement under the Securities Act of
1933, as amended, and only after any required qualification under applicable
state securities laws, unless the Company shall have received an opinion of
counsel satisfactory to the Company that such disposition is exempt from such
registration and qualification. The Committee may require that there be
affixed on certificates representing shares issued upon the exercise of an
option such legends referring to the foregoing representations or any
applicable restrictions on resale as the Committee, in its discretion, shall
deem reasonably appropriate as well as place such stop transfer orders with its
registrar and transfer agent as it deems reasonably appropriate.
10. Non-Transferability of Options. No option granted under the
Plan or any right evidenced thereby shall be transferable by the Optionee other
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employment Retirement Income Security Act, or the rules thereunder, and, except
with respect to a qualified domestic relations order as aforesaid, an option
may be
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<PAGE> 47
exercised, during the lifetime of an Optionee, only by such Optionee.
11. Right to Terminate Employment. Nothing in the Plan or in any
option granted under the Plan shall confer upon any Optionee the right to
continue in the employment or as a director of the Company or affect the right
of the Company to terminate the Optionee's employment or directorship at any
time, subject, however, to the provisions of any agreement of employment
between the Optionee and the Company.
12. Adjustment Upon Changes in Capitalization, etc. In the event
of any stock split, stock dividend, combination of shares, reclassification or
recapitalization which changes the character or amount of the Company's
outstanding Common Stock while any portion of any option theretofore granted
under the Plan is outstanding but unexercised, the Committee shall make such
adjustments in the character and number of shares subject to such options and
in the option price, as shall be equitable and appropriate in order to make
the option, as nearly as may be practicable, equivalent to such option
immediately prior to such change; provided, however, that no such adjustment
shall give any Optionee any additional benefits under his or her option; and
provided further, that, with respect to any outstanding incentive stock option,
if any such adjustment is made by reason of a transaction described in section
424(a) of the Code, it shall be made so as to conform to the requirements of
that section and the regulations thereunder.
If any transaction (other than a change specified in the preceding
paragraph) described in section 424(a) of the Code affects the Company's Common
Stock subject to any unexercised option theretofore granted under the Plan
(hereinafter for purposes of this Paragraph 12 referred to as the "old
option"), the Board of Directors of the Company or any surviving or acquiring
corporation may take such action as it deems appropriate, and in conformity
with the requirements of that section and the regulations thereunder, to
substitute a new option for the old option, in order to make the new option, as
nearly as may be practicable, equivalent to the old option, or to assume the
old option.
If any such change or transaction shall occur, the number and kind of
shares for which options may thereafter be granted under the Plan shall be
adjusted to give effect thereto.
13. Application of Funds. The proceeds received by the Company
from the sale of the Common Stock may be commingled with any other corporate
funds and used for any corporate purpose.
14. Effective Date of Amendments. The material amendments (the
"Amendments") being adopted by the Board of Directors of the Company as part of
the Plan being amended and restated which
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<PAGE> 48
require approval by the Company's shareholders within 12 months of their
adoption by the Board of Directors of the Company are as follows: (i) the
increase (the "Reserve Shares Increase Amendment") in the maximum number of
shares of Common Stock subject at any one time to options granted under the
Plan to 3,250,000 shares; (ii) the removal of the limitation as to
non-qualified stock options and as to incentive stock options when they no
longer qualify as such under Section 422 of the Code that the aggregate Fair
Market Value (determined at the time the option is granted) of the Common Stock
with respect to which the granted options are exercisable for the first time by
an Optionee during any calendar year shall not exceed $100,000 (under this and
all similar plans of the Company); (iii) that the option exercise price for a
non-qualified stock option granted to a shareholder beneficially owning within
the meaning of Section 422 of the Code 10% or more of the combined voting power
of the Company shall be its Fair Market Value on the date of grant and not 110%
or more of such Fair Market Value; (iv) the deletion of all of the limitations
on the number, exercise period and exercise price of options permitted to be
granted to directors under the Plan which are more restrictive than otherwise
provided in the Plan generally with respect to all other potential
participants; (v) the authorization of the Committee to determine the time
frame in which an Optionee has to exercise his options (subject to the 10 year
limitation from date of grant) in the event of his termination of employment
due to death, disability, termination without cause, retirement, voluntarily
leaving the Company and change in control; and (vi) the authorization of the
Committee, in its discretion, on behalf of the Company to agree in connection
with the granting of awards under the Plan to register and qualify under
applicable federal and state securities laws the Common Stock underlying such
awards. The Plan as amended and restated being adopted by the Board of
Directors of the Company as of May 23, 1995, shall become effective on such
date of adoption, subject, however, to the approval of the Amendments by the
Company's shareholders within 12 months of such date of adoption and, in the
case of the Reserve Share Increase Amendment only, subject further, however, to
the approval of the Company's shareholders within 12 months of such date of
adoption to an increase in the number of shares of Common Stock authorized to
be issued by the Company to permit the increase in the number of shares
reserved for issuance under the Plan (the "Authorized Share Increase").
Notwithstanding the foregoing, if the Company's shareholders do not approve the
Reserve Share Increase Amendment or do not approve the Authorized Share
Increase but do approve all other Amendments, the Plan as amended and restated
exclusive of the Reserve Share Increase Amendment shall continue to be
effective.
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<PAGE> 49
EXHIBIT B
PROXY ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 15, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Paul Goldberg and Bruce M.
Goldberg, and each of them, as proxies, with full power of substitution to
each, for and in the name, place and stead of the undersigned to vote all
shares of Common Stock of All American Semiconductor, Inc. (the "Company")
which the undersigned would be entitled to vote at the Annual Meeting of
Shareholders of the Company to be held on Tuesday, August 15, 1995, at 10:00
A.M., Miami, Florida local time, at Don Shula's Hotel, 15255 Bull Run Road,
Miami Lakes, Florida, and at any and all postponements and adjournments
thereof. The Board of Directors recommends a vote "FOR" all items below and
shares will be so voted unless you indicate otherwise.
PROPOSAL (1) Election of Directors: S. Cye Mandel and Sheldon Lieberbaum
[ ] FOR the group of [ ] WITHHOLD AUTHORITY [ ] WITHHOLD AUTHORITY
nominees listed as to group as to the following
above nominees:
- -----------------------------------------------------------------
PROPOSAL (2) Ratification of the selection of Lazar, Levine & Company LLP as
the Company's independent public accountants for the year ending December
31, 1995.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL (3) The approval of an amendment to Article 4 of the Company's
Certificate of Incorporation, as amended (the "Certificate"), to increase the
authorized shares of common stock to 40,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL (4) The approval of an amendment to Article 4 of the Company's
Certificate to increase the authorized shares of preferred stock to 5,000,000
shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued, and to be signed, on other side)
<PAGE> 50
(Continued from reverse side)
PROPOSAL (5) The approval of the increase to 3,250,000 of the number of shares
of common stock reserved for issuance (the "Reserved Share Increase") under the
Company's Employees', Officers', Directors' Stock Option Plan, as amended (the
"Option Plan").
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL (6) The approval of certain material amendments (other than the
Reserved Share Increase) to the Option Plan requiring the approval of the
shareholders of the Company as part of the Option Plan being amended and
restated in its entirety.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. WHERE A VOTE IS NOT SPECIFIED, THE PROXIES WILL VOTE
THE SHARES REPRESENTED BY THE PROXY "FOR" EACH OF THE ITEMS LISTED ABOVE.
A MAJORITY OF SAID PROXIES PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES
(OR IF ONLY ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL OF THE
POWERS CONFERRED HEREBY. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS TO
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. PLEASE
SIGN EXACTLY AS YOUR NAME APPEARS IN THE RECORDS OF THE COMPANY. IF THE SHARES
ARE HELD IN THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS, ATTORNEYS AND CORPORATE OFFICERS SHOULD
ADD THEIR TITLES.
Dated: ______________________________
_____________________________________
Signature
_____________________________________
Signature (if held jointly)
PLEASE MARK, DATE, SIGN AND MAIL THIS
PROXY IN THE ENCLOSED POSTAGE-PAID
RETURN ENVELOPE.
