SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
ALL AMERICAN SEMICONDUCTOR, INC.
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $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:
.............................................................................
[ ] 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>
ALL AMERICAN SEMICONDUCTOR, INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 28, 1996
--------------------
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 Wednesday, August 28 1996,
at 10:00 A.M., 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
1999 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, 1996;
and
3. to consider and act upon such other matters as may properly come before
the annual meeting or any and all postponements or adjournments
thereof.
Only shareholders of record at the close of business on Wednesday, July 17,
1996, 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,
/s/ HOWARD L. FLANDERS
----------------------
Howard L. Flanders,
Corporate Secretary
August 2, 1996
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>
ALL AMERICAN SEMICONDUCTOR, INC.
16115 N.W. 52ND AVENUE
MIAMI, FLORIDA 33014
--------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 28, 1996
--------------------
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
Wednesday, August 28, 1996, 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 August 5,
1996.
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. Solicitation of proxies from some shareholders may also be made by the
Company's officers and regular employees by telephone, telegram, or in person
after the initial solicitation, without additional compensation or remuneration
therefor.
<PAGE>
A copy of the Company's annual report for the fiscal year ended December 31,
1995 (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 Wednesday,
July 17, 1996 (the "Record Date"), are entitled to notice of and to vote at the
Meeting or any adjournments or postponements thereof. On the Record Date, the
Company had 20,418,894 shares of Common Stock outstanding (the "Shares"), all of
which (except 160,703 shares held by a wholly-owned subsidiary of the Company
and 19,592 treasury shares of the Company) are entitled to vote at the Meeting.
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 10.0% of the Shares are (and were on the Record Date) owned by
Paul Goldberg and Bruce M. Goldberg and members of their families and certain
affiliated trusts (collectively the "Goldberg Group"), in addition to
approximately 9.9% of the Shares as to which Paul Goldberg and Bruce M. Goldberg
act as voting trustees with respect to the election of directors of the Company.
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. The Company
also has the right to direct the vote of approximately 2.7% of the Shares, which
Shares will be voted in favor of all proposals made by the Board in this Proxy
Statement. See Note (7) to the table in "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT."
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 the Record Date 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 1995 (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>
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS AMOUNT AND NATURE OF OUTSTANDING
OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) SHARES (2)
- ----------------------- ------------------------ ----------
<S> <C> <C>
Bruce M. Goldberg (3)(4)............................. 3,023,542 14.8%
Paul Goldberg (3)(5)................................. 2,800,877 13.7%
S. Cye Mandel........................................ 5,625 *
Howard L. Flanders................................... 1,000 *
Rick Gordon.......................................... 1,000 *
Sheldon Lieberbaum (6)............................... -- --
All executive officers and directors
as a group (6 persons)(3)(4)(5)(6)................... 4,368,642(7) 21.4%(7)
<FN>
- ---------------
* Less than 1%
(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 2,566,024 shares of the Company's
Common Stock, of which 2,350,313 options to purchase shares (including the
aggregate of 1,000,000 options issued to the four executive officers of the Company
on June 8, 1995 (the "1995 Options")) were issued pursuant to the Company's
Employees', Officers', Directors' Stock Option Plan (as previously amended and
restated the "Option Plan"). Of these outstanding options, 1,631,000 options
(including the 1995 Options) are held by the executive officers and directors of the
Company as a group, including 625,000 options (including 450,000 1995 Options)
held by Bruce M. Goldberg, 450,000 options (including 250,000 1995 Options) held
by Paul Goldberg, 283,000 options (including 150,000 1995 Options) held by Howard
L. Flanders and 273,000 options (including 150,000 1995 Options) held by Rick
Gordon. Further excludes currently outstanding warrants to purchase 1,243,125 shares
of the Company's Common Stock, and obligations of the Company upon the
happening of certain events and conditions to issue 1,000 shares of the Company's
Common Stock and incentive stock options covering an additional 95,000 shares. If
all options and warrants outstanding as of the Record Date were exercised (which
includes the 1995 Options), Bruce M. Goldberg, Paul Goldberg, Howard L. Flanders,
Rick Gordon and all executive officers and directors of the Company as a group would
beneficially own as of the Record Date 15.1%, 13.4%, 1.2%, 1.1% and 24.8%,
respectively, of the Company's Common Stock.
3
<PAGE>
(3) Includes for each of Bruce M. Goldberg and Paul Goldberg and all
executive officers and directors as a group the 2,013,401 shares of the
Company's Common Stock that Paul Goldberg and Bruce M. Goldberg, as
trustees, have the right to vote for up to a period of six years with
respect to the election of directors of the Company pursuant and
subject to a voting trust agreement, dated as of December 29, 1995,
among the trustees and the former stockholders of two affiliated,
privately held companies (Added Value Electronics Distribution, Inc.
and A.V.E.D.-Rocky Mountain, Inc.) acquired by the Company in December
1995, who were issued such shares in connection with such acquisitions.
(4) Includes 63,380, 36,000, 69,496, 69,496 and 69,496 shares of the
Company's Common Stock 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 of the Company's Common Stock held of record
by Jayne Goldberg, the wife of Bruce M. Goldberg, and 53,425 shares of
the Company's Common Stock held of record by an unrelated third party
as trustee for Matthew Goldberg (31,575 shares) and Alec Goldberg
(21,850 shares). Bruce M. Goldberg disclaims beneficial ownership over
all such securities.
(5) Includes 319,218 shares of the Company's Common Stock owned of record
by Paul Goldberg's wife, Lola Goldberg, and 1,250 and 1,250 shares of
the Company's Common Stock held of record by Paul Goldberg as custodian
for grandchildren, Kimberly Phelan and Tiffany Phelan, respectively.
For federal securities law purposes only, Paul Goldberg is deemed to be
the beneficial owner of these securities. Does not include 192,898
shares of the Company's Common Stock held of record by Robin Phelan,
the daughter of Paul and Lola Goldberg, over which securities Paul and
Lola Goldberg disclaim beneficial ownership.
(6) Does not include the 1995 Underwriter's Warrants (as hereinafter defined) issued to
Lew Lieberbaum & Co., Inc. in connection with the Company's June 1995 public
offering of Common Stock (the "1995 Public Offering"). See CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
(7) Includes 549,999 shares of the Company's Common Stock issued by the
Company to the shareholders of Programming Plus Incorporated ("PPI") in
connection with the acquisition from them of all of the capital stock
of PPI, 489,999 shares of which were retained in escrow by the Company,
as escrow agent, to be released annually if and based upon certain
levels of pre-tax net income being attained by PPI for the years 1996
through 2000. If, as of December 31, 2000, all of such 489,999 shares
have not been released, the balance held in escrow will be cancelled.
The PPI selling shareholders must vote all of the 549,999 shares as
directed by the Company with respect to all matters upon which
shareholders of the Company may vote or consent (including, without
limitation, the election of directors) until the escrow is terminated.
The Company will be directing the PPI selling shareholders to vote in
favor of all proposals made by the Board in this Proxy Statement.
</FN>
</TABLE>
4
<PAGE>
BOARD OF DIRECTORS
The Company currently has six directors serving on its Board. The directors of
the Company are as follows:
NAME CLASS AGE POSITION
- ---- ----- --- --------
Paul Goldberg (1) III 67 Chairman of the Board and Chief
Executive Officer
Bruce M. Goldberg (1) II 41 Director, President and Chief
Operating Officer
Howard L. Flanders II 38 Director, Vice President,
Corporate Secretary and Chief
Financial Officer
Rick Gordon III 42 Director and Senior Vice President
of Sales
S. Cye Mandel (2)(3) I 67 Director
Sheldon Lieberbaum (2)(3) I 61 Director
- ------------------
(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
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 1998, 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.
5
<PAGE>
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 LLP.
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 and currently holds the title of Senior
Vice President of Sales. 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. ("Lew Lieberbaum"), an investment
banking firm which was the underwriter of the Company's 1995 Public Offering and
was one of the underwriters of the Company's June 1992 public offering of common
stock (the "1992 Public 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. 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 individual designated by such underwriters to be elected to
the Board or to be an advisor to the Board. In connection with the 1995 Public
Offering, a similar agreement regarding the designation of a director of the
Company was entered into between the Company and Lew Lieberbaum 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 Lew Lieberbaum or the underwriters of the 1992
Public Offering will serve on the Board at any time. The National Association of
Securities Dealers, Inc. ("NASD") alleged that Lew Lieberbaum and others,
including Mr. Lieberbaum, in 1991 engaged in market manipulation, inaccurately
maintained books and records and failed to adequately supervise the activities
of Lew Lieberbaum's personnel in connection with the trading for Lew
Lieberbaum's account of warrants which were part of a public offering of units
of convertible preferred stock and warrants of a company for which Lew
Lieberbaum 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 Lew Lieberbaum and others
restitution to customers and was suspended from associating with any NASD member
for a one month period.
6
<PAGE>
The Board formally met one time during the fiscal year ended December 31, 1995,
in addition to acting eight times during the year by unanimous written consent.
All Board members attended the meeting and executed the unanimous written
consents.
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
Securities and Exchange Commission ("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, 1995, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were satisfied.
BOARD COMMITTEES
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Paul Goldberg and Bruce M. Goldberg.
During 1995, 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, 1995, the Audit Committee had one formal
meeting. The Audit Committee is responsible for recommending the selection of
the independent auditors, 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.
7
<PAGE>
COMPENSATION COMMITTEE
The Compensation Committee consists of S. Cye Mandel and Sheldon Lieberbaum, two
independent non-employee directors of the Company. The Compensation Committee is
responsible for determining the compensation of all executive officers of the
Company and acts as the stock option committee of the Board, administering the
Option Plan. The senior management of the Company makes all decisions with
respect to the compensation (other than the granting of stock options) of all
employees other than the executive officers of the Company. Furthermore, in
connection with the 1995 Public Offering, the Company agreed with Lew Lieberbaum
that the Company will not increase or authorize an increase in the compensation
of its executive officers without the approval of the Compensation Committee for
a period of three years from June 8, 1995. In addition, the Company has agreed
that for the same three year period from June 8, 1995, it will use its best
efforts to cause one individual designee of Lew Lieberbaum to be elected to the
Company's Board and that such designee will also serve as a member of the
Compensation Committee. Currently, Sheldon Lieberbaum, director of corporate
finance and a director and shareholder of Lew Lieberbaum, is a member of the
Board and the Compensation Committee. See "BOARD OF DIRECTORS" and "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." During the fiscal year ended December
31, 1995, the Compensation Committee had no formal meetings, but acted two times
during the year by unanimous written consent.
NOMINATING COMMITTEE
The Board does not have a Nominating Committee, such function being performed by
the Board as a whole.
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:
NAME AGE POSITION
- ---- --- --------
Paul Goldberg 67 Chief Executive Officer
Bruce M. Goldberg 41 President and Chief Operating Officer
Howard L. Flanders 38 Vice President, Corporate Secretary and Chief
Financial Officer
Rick Gordon 42 Senior Vice President of Sales
For a brief resume of the Company's executive officers, see "BOARD OF
DIRECTORS".
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation earned
during each of the fiscal years ended December 31, 1995, 1994, and 1993, 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............................ 1995 223,000 111,000 250,000 11,000
Chairman and Chief Executive 1994 184,000 -- -- 10,000
Officer 1993 178,000 113,000 100,000 8,000
Bruce M. Goldberg........................ 1995 225,000 141,000 450,000 27,000
President and Chief 1994 150,000 -- -- 26,000
Operating Officer 1993 135,000 98,000 100,000 14,000
Rick Gordon.............................. 1995 162,000 89,000 150,000 16,000
Senior Vice President of Sales 1994 155,000 20,000 -- 16,000
1993 135,000 11,000 3,000 12,000
Howard L. Flanders....................... 1995 156,000 84,000 150,000 18,000
Vice President and Chief 1994 130,000 -- -- 17,000
Financial Officer 1993 105,000 11,000 103,000 14,000
<FN>
- ---------------
(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."
</FN>
</TABLE>
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 $13,700 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
9
<PAGE>
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 $11,500. The Company's obligations to make premium payments in
connection with Howard L. Flanders' and Rick Gordon's policies are expected to
last for a maximum of ten years. After Howard L. Flanders and Rick Gordon have
been with the Company for a period of five years from the year in which the
policy was acquired (1993) and provided they each remain in the employ of the
Company or they have become disabled or a change in control has occurred during
the term of their employment, the advances will be deemed cancelled and the
security released thereafter ratably over a five year vesting period until such
time as all advances are deemed cancelled.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the named executive officers
of the Company during the fiscal year ended December 31, 1995. Pursuant to SEC
rules, the table also shows the value of the options granted at the end of the
option terms (ten years) if the price of the Company's stock was to appreciate
annually by 5% and 10%, respectively. There is no assurance that such stock
price will appreciate at the rates shown in the table. All of the options set
forth in the table are stock options issued pursuant to the Option Plan. The
Company does not have a plan whereby tandem stock appreciation rights ("SARS")
are granted. See "Employees', Officers', Directors' Stock Option Plan"
hereinbelow.
10
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
---------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ----------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($/SHARE) DATE 5% ($) 10% ($)
- ---- ----------- ------------------ --------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul Goldberg 250,000 23.7% 1.875 6/7/05 294,794 747,067
Bruce M. Goldberg 450,000 42.7% 1.875 6/7/05 530,630 1,344,720
Rick Gordon 150,000 14.2% 1.875 6/7/05 176,877 448,240
Howard L. Flanders 150,000 14.2% 1.875 6/7/05 176,877 448,240
<FN>
(1) See the discussion in "Employment Agreements - The Goldberg Agreements"
regarding the other material terms (including those related to vesting
and exercisability) of the aggregate of 1,000,000 stock options granted
to the named executive officers during the fiscal year ended December
31, 1995.
</FN>
</TABLE>
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, 1995, and the value of
unexercised stock options as of December 31, 1995, 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.......................... -- -- 140,000(E) 140,750(E)
310,000(U) 128,125(U)
Bruce M. Goldberg...................... -- -- 115,000(E) 108,688(E)
510,000(U) 215,625(U)
Rick Gordon............................ -- -- 121,200(E) 165,338(E)
151,800(U) 66,131(U)
Howard L. Flanders..................... -- -- 81,200(E) 92,213(E)
201,800(U) 113,006(U)
<FN>
- ---------------
(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 the
Nasdaq Stock Market on December 31, 1995 (the Company's fiscal year
end).
</FN>
</TABLE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for recommending to the Board the
compensation of the executive officers, including annual base salaries, cash and
non-cash
11
<PAGE>
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 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 1995 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 1995 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
EMPLOYEES', OFFICERS', DIRECTORS' STOCK OPTION PLAN
In 1987, the Company established an Employees', Officers', Directors' Stock
Option Plan (as previously amended and restated the "Option Plan"). Unless
earlier terminated, the Option Plan will continue in effect through May 28,
2004, after which it will expire and no further
12
<PAGE>
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 would remain in effect until they have been exercised, terminated or
have expired. A maximum of 3,250,000 shares of the Company's Common Stock has
been reserved for issuance upon the exercise of options granted under the Option
Plan. The Option Plan provides for the granting to key employees of both
"incentive stock options," within the meaning of Section 422 of 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.
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. 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.
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.
The exercise price for all options granted under the Option Plan shall not be
less than the fair market value of the Company's Common Stock on the date of
grant (or, in the case of incentive stock options, 110% of the fair market value
if the beneficiary of the grant beneficially owns 10% or more of the outstanding
shares of the Company's Common Stock). In addition, the aggregate fair market
value of the Company's Common Stock (determined at the date of the option grant)
for which an employee may be granted incentive stock options
13
<PAGE>
which first become exercisable in any calendar year under the Option Plan may
not exceed $100,000. Options granted pursuant to the Option Plan are not
transferable during an optionee's lifetime.
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 the Company's Common Stock representing more than 10% of the
Company's 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. Furthermore, the Compensation Committee has 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.
To the extent incentive stock options are granted under the Option Plan, this
generally entitles an optionee who is an employee to defer recognition of income
or loss for federal tax purposes until the shares underlying the options are
sold. Under the Option Plan the Company does not obtain any federal tax
deductions except in unusual circumstances.
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 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
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 Exchange Act. It is contemplated that the Company
will at the appropriate time file an amendment to its registration statement on
Form S-8 or an additional registration statement in order to register any
additional shares of Common Stock reserved for issuance under the Option Plan.
As of the Record Date, a total of 2,511,940 options were granted and had not
expired or been forfeited, of which 161,627 were exercised and 2,350,313 options
were outstanding (of which 1,631,000 options were held by executive officers and
directors of the Company as a group, see "Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-Ended Option Values" and 712,890 options are
presently exercisable). These options, which are held by 69 persons, are
exercisable at prices ranging from $.75 per share to $2.63 per share and are
exercisable through various expiration dates from 1996 to 2006.
14
<PAGE>
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 $16,000 during 1995, 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 Internal Revenue Code of 1986, as amended.
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 1995. The
Company makes matching contributions and in 1995 its contributions were in the
amount of 25% on the first 6% contributed of each participating employee's
salary.
EMPLOYMENT AGREEMENTS
THE GOLDBERG AGREEMENTS
In May 1995, the Company entered into new employment agreements with each of
Paul Goldberg, its Chief Executive Officer, and Bruce M. Goldberg, its President
and Chief Operating Officer, to take effect on June 1, 1995, as of the
expiration of their respective three-year employment agreements expiring on May
31, 1995 (collectively the "Goldberg Agreements"). The Goldberg 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 Goldberg 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 Goldberg Agreement. Under the Goldberg
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
15
<PAGE>
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
received, with respect to fiscal 1995, an additional one time bonus in the
amount of $30,000 in January 1996 as a result of the Company's net sales for
calendar year 1995 exceeding $135,000,000.
The Goldberg Agreements, together with the new employment agreements between the
Company and each of Howard L. Flanders and Rick Gordon described below, provided
for 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 "1995 Options"). The Goldberg Agreements provided
for Paul Goldberg and Bruce M. Goldberg to be granted 1995 Options covering
250,000 and 450,000 shares of the Company's Common Stock, respectively, out of
the aggregate of 1,000,000 1995 Options. Each of Messrs. Flanders and Gordon
were granted 1995 Options covering 150,000 shares of the Company's Common Stock
under his respective employment agreement. All of the 1995 Options were to be
granted on the earlier to occur of the date that the registration statement for
the 1995 Public Offering became effective, or June 15, 1995. Since such
registration statement became effective June 8, 1995, the 1995 Options were
granted on such date. The 1995 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 1995
Options as possible as incentive stock options. Each of the 1995 Options were to
have an exercise price equal to 100% of the fair market value of a share of the
Company's Common Stock on the date of grant. The Goldberg 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 1995 Public Offering, the exercise price would be the public offering
price per share of the Company's Common Stock offered pursuant to the offering.
Since the date of grant was such effective date, the exercise price per share of
the 1995 Options is equal to the $1.875 public offering price per share. The
1995 Options granted to each of the executive officers will vest in no event
later than 9 years from the date of grant, subject to earlier vesting in the
following percentage increments based upon the Company attaining net earnings
per share on a primary basis in any year from 1995 through 2000, inclusive, in
at least the following amounts:
PERCENTAGE OF NET EARNINGS
OPTIONS VESTED (%) PER SHARE ($)
------------------ -------------
25%................................... $.18
50.................................... .22
75.................................... .28
100.................................... .38
16
<PAGE>
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 1995 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 1995 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 1995 Options granted to him have vested or otherwise vest within the
time frames hereinafter described for exercise after termination, the vested
1995 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 1995
Option, is resigning as an employee after reaching age 65) to exercise his
vested 1995 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 1995
Options (provided, that, if he shall die during such three month period, the
time of termination of the unexpired portion of his vested 1995 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 1995 Options terminate immediately. No
early vesting has yet occurred as a result of the Company's net earnings per
share or otherwise.
Under the Goldberg Agreement for Paul Goldberg, 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 Goldberg 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 Goldberg 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 automobile. See "Summary Compensation Table." 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 Goldberg
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 Goldberg Agreement
for two years thereafter.
17
<PAGE>
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. As of this date, these two
additional insurance policies have not as yet been obtained.
The Goldberg 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 Goldberg 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 Goldberg 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 Goldberg 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 the Goldberg Agreement for Bruce M.
Goldberg, in the event of a change in control and Bruce M. Goldberg's election
to terminate his Goldberg 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 Goldberg 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 Goldberg 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.
THE FLANDERS AGREEMENT
In May 1995, the Company entered into an employment agreement with Howard L.
Flanders, its Vice President, 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
18
<PAGE>
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. With
respect to fiscal 1995, pursuant to an amendment to the Flanders Agreement,
Howard L. Flanders also received an additional one-time bonus in the amount of
$50,000 in January 1996; provided, however, that $40,000 of such one-time bonus
was applied as a credit against and reduced the annual cash bonus otherwise
payable to Mr. Flanders based upon the 1995 pre-tax income of the Company. The
Flanders Agreement also provides for Mr. Flanders to be granted 150,000 of the
1995 Options. 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 (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 also received an
additional one time bonus in the amount of $15,000 in January 1996 as a result
of the Company's net sales for calendar year 1995 exceeding $135,000,000. The
Gordon Agreement also provides for Mr. Gordon to be granted 150,000 of the 1995
Options. 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
19
<PAGE>
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Sheldon Lieberbaum is one of the two members of the Compensation Committee of
the Board. See "BOARD COMMITTEES - Compensation Committee." Mr. Lieberbaum is
the director of corporate finance and a director and shareholder of Lew
Lieberbaum, which acted as the underwriter of the 1995 Public Offering and
received the compensation in connection therewith described in "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
20
<PAGE>
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 1990* 1991 1992 1993 1994 1995
- ----------------- ---- ---- ---- ---- ---- ----
(In Dollars)
<S> <C> <C> <C> <C> <C> <C>
The Company 100 200.00 200.00 350.00 250.00 308.33
Electronic Parts and 100 126.97 173.61 202.96 188.65 225.79
Equipment Peer Group Index
(SIC Code 5065)
NASDAQ Market Index 100 128.38 129.64 155.50 163.26 211.77
<FN>
- ----------
* Assumes the investment of $100 on January 1, 1991 and reinvestment of
dividends (no dividends were declared on the Company's Common Stock during
the period).
</FN>
</TABLE>
21
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sheldon Lieberbaum, a director of the Company, is director of corporate finance
and a director and shareholder of Lew Lieberbaum. In connection with the 1995
Public Offering, Lew Lieberbaum received compensation, including a selling
commission and discount equal to 9% of the gross proceeds of the 1995 Public
Offering (approximately $883,000), a non-accountable expense allowance equal to
3% of the gross proceeds of the 1995 Public Offering (approximately $294,000), a
consulting fee equal to $66,000, reimbursement of certain accountable expenses
aggregating approximately $64,000 and warrants to purchase (collectively, the
"1995 Underwriter's Warrants") 523,250 shares of the Company's Common Stock (the
number of shares of the Company's Common Stock equal to 10% of the Company's
Common Stock sold in the 1995 Public Offering) at an exercise price per share of
$2.625 per share (140% of the public offering price of the Company's Common
Stock sold in the 1995 Public Offering). The 1995 Underwriter's Warrants are
exercisable for a period of four years commencing on June 8, 1996.
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.
Bruce M. Goldberg has been a member of the Board since 1987 and Howard L.
Flanders 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."
NOMINEE TERM CLASS
- ------- ---- -----
Bruce M. Goldberg 3 years II
Howard L. Flanders 3 years II
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.
22
<PAGE>
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, 1996, 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
which cast a vote on this proposal is required to approve this proposal. Broker
or nominee non-votes are not counted in determining the number of shares voted
for or against this proposal.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
SHAREHOLDER'S PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 1997 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 April 4, 1997. 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 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, 1995 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
23
<PAGE>
EXHIBITS) FOR THE COMPANY'S YEAR ENDED DECEMBER 31, 1995, 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,
/s/ HOWARD L. FLANDERS
----------------------
Howard L. Flanders,
Corporate Secretary
August 2, 1996
Miami, Florida
24
<PAGE>
PROXY ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 28, 1996
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 Wednesday, August 28, 1996, 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" Proposals 1 and 2 on reverse side.
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 PROPOSALS 1 AND 2 ON REVERSE
SIDE.
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.
Receipt of the Company's 1995 Annual Report and the Notice of Annual Meeting of
Shareholders and the Proxy Statement relating thereto is hereby acknowledged.
(SEE REVERSE SIDE)
<PAGE>
Please mark your
[X] votes as in this
example.
1. Election of FOR WITHHELD Nominees: Bruce M. Goldberg and
Directors: [_] [_] Howard L. Flanders.
Instructions: To withhold
authority to vote for any
individual nominee, write that
nominee's name in the space
provided below.
For, except vote withheld from the following nominee(s):
------------------------------------------------------------
2. Ratification of the selection of Lazar, Levine & Company LLP
as the Company's independent public accountants for the year
ending December 31, 1996.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Upon such other matters as may properly come before the Annual
Meeting or any and all postponements or adjournments thereof.
SIGNATURE(S)____________________________________ DATED:_______________, 1996
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
(NOTE: Please complete, date and sign exactly as your name appears hereon.
When signing as attorney, administrator, executor, guardian, trustee
or corporate official, please add your title. If shares are held
jointly, each holder should sign.)
