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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission File Number: 0-16207
ALL AMERICAN SEMICONDUCTOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2814714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16115 N.W. 52ND AVENUE
MIAMI, FLORIDA 33014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (305) 621-8282
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities Registered pursuant to Section 12(g) of the Act: COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 24, 1997, 20,343,894 shares (including 160,703 held by a
wholly-owned subsidiary of the Registrant) of the common stock of ALL AMERICAN
SEMICONDUCTOR, INC. were outstanding, and the aggregate market value of the
common stock held by non-affiliates was $18,700,000.
Documents incorporated by reference: NONE
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<PAGE>
Items 10, 11, 12 and 13 of Part III of the Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, of All American Semiconductor, Inc. (the
"Company" or the "Registrant") previously filed with the Securities and Exchange
Commission ("SEC") are hereby amended and restated in their entirety as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages and positions
with the Registrant as of April 15, 1997, are as follows:
<TABLE>
<CAPTION>
NAME CLASS AGE POSITION
- ---- ----- --- --------
<S> <C> <C> <C>
Paul Goldberg(1)...................... III 68 Chairman of the Board of Directors and Chief
Executive Officer
Bruce M. Goldberg(1).................. II 41 President and Chief Operating Officer and
Director
Howard L. Flanders.................... II 39 Vice President, Secretary and Chief Financial
Officer and Director
Rick Gordon........................... III 43 Senior Vice President of Sales and Director
S. Cye Mandel(2)(3)................... I 67 Director
Sheldon Lieberbaum(2)(3).............. I 62 Director
</TABLE>
- ---------------
(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 of
Directors (the "Board"), consisting of three classes. The terms of office of
Class I, II and III directors expire in 1998, 1999 and 1997, respectively. The
Company's executive officers serve at the discretion of the Board; however, all
executive officers have employment agreements with the Company. See Item 11.
Executive Compensation -- Employment Agreements. The following is a brief resume
of the Company's executive officers and 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. Paul 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
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
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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 30 years. Mr. Mandel was a principal in the
entity which developed and acted from 1988 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 June 1995 public
offering of common stock (the "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 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 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.
BOARD COMMITTEES
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Paul Goldberg and Bruce M. Goldberg.
During 1996, 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. The
Audit Committee is responsible for recommending the selection of the independent
auditors, reviewing the arrangements and scope
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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
The Compensation Committee currently 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 Company's Option Plan (as hereinafter defined). 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 the 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 "Executive Officers and Directors" hereinabove.
NOMINATING COMMITTEE
The Board does not have a Nominating Committee, such function being performed by
the Board as a whole.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were satisfied.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The following table sets forth certain information regarding the compensation
earned during each of the fiscal years ended December 31, 1996, 1995 and 1994 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
$100,000:
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
LONG-TERM
COMPENSATION
AWARDS
SECURITIES ALL OTHER
ANNUAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Paul Goldberg.......................... 1996 243,000 -- -- 9,000
Chairman and Chief Executive 1995 223,000 111,000 250,000 11,000
Officer 1994 184,000 -- -- 10,000
Bruce M. Goldberg...................... 1996 253,000 -- -- 26,000
President and Chief Operating 1995 225,000 141,000 450,000 27,000
Officer 1994 150,000 -- -- 26,000
Rick Gordon............................ 1996 163,000 -- -- 16,000
Senior Vice President of Sales 1995 162,000 89,000 150,000 16,000
1994 155,000 20,000 -- 16,000
Howard L. Flanders..................... 1996 157,000 -- -- 17,000
Vice President and Chief Financial 1995 156,000 84,000 150,000 18,000
Officer 1994 130,000 -- -- 17,000
</TABLE>
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(1) All other compensation includes Company contributions to life insurance
policies, where the Company is not the beneficiary, to the Deferred
Compensation Plans 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 Plans
for Executive Officers and Key Employees" and "401(k) Plan."
The Company pays for a $550,000 universal life insurance policy on the life of
Paul Goldberg with benefits payable to his wife, which had an annual premium in
1996 of $7,700. 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
arrangement. The Company makes 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 canceled 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 canceled 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 are 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 $11,500. The Company's obligations to make premium payments in
connection with Howard L. Flanders' and Rick Gordon's policies are expected to
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last for a maximum of ten years. After Howard L. Flanders and Rick Gordon have
been with the Company for a period of five years from the year in which the
policy was acquired (1993) and provided they each remain in the employ of the
Company or they have become disabled or a change in control has occurred during
the term of their employment, the advances will be deemed canceled and the
security released thereafter ratably over a five year vesting period until such
time as all advances are deemed canceled.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options during its fiscal year ended
December 31, 1996 to any executive officer of the Company. The Company does not
have a plan whereby tandem stock appreciation rights ("SARS") are granted. See
"Employees', Officers', Directors' Stock Option Plan" hereinbelow.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-ENDED OPTION
VALUES
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 1996, and the value of
unexercised stock options as of December 31, 1996 for the individual executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END(#) FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C>
Paul Goldberg...................... -- -- 160,000(E) 0(E)
290,000(U) 0(U)
Bruce M. Goldberg.................. -- -- 135,000(E) 0(E)
490,000(U) 0(U)
Rick Gordon........................ -- -- 121,800(E) 7,500(E)
151,200(U) 0(U)
Howard L. Flanders................. -- -- 106,800(E) 5,625(E)
176,200(U) 0(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 the
Nasdaq Stock Market on December 31, 1996 (the Company's fiscal year
end).
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 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 Internal Revenue Code, 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)
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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 non-employee 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.
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 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.
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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 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 March 31, 1997, a total of 2,880,940 options were granted and had not
expired or been forfeited, of which 181,627 were exercised and 2,699,313 options
were outstanding (of which 1,611,000 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 503,600 options are
presently exercisable). These options, which are held by 74 persons, are
exercisable at prices ranging from $1.03 per share to $2.63 per share and are
exercisable through various expiration dates from 1997 to 2006.
DEFERRED COMPENSATION PLANS FOR EXECUTIVE OFFICERS AND KEY EMPLOYEES
Effective January 1, 1988, the Company established a deferred compensation plan
(the "1988 Deferred Compensation Plan") for executive officers and key employees
of the Company. The employees eligible to participate in the 1988 Deferred
Compensation Plan (the "Participants") are chosen at the sole discretion of the
Board, upon a recommendation from the Compensation Committee. Pursuant to the
1988 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 1988 Deferred Compensation Plan will be distributed monthly. The
Company paid benefits under this plan of approximately $16,000 during 1996, none
of which was paid to any executive officer. The maximum benefit payable to a
Participant (including each of the executive officers) under the 1988 Deferred
Compensation Plan is presently $22,500 per annum.
During 1996, the Company established a second deferred compensation plan (the
"1996 Deferred Compensation Plan") for executives of the Company. The executives
eligible to participate in the 1996 Deferred Compensation Plan are chosen at the
sole discretion of the Board upon a recommendation from the Compensation
Committee. The Company may make contributions each year in its sole discretion
and is under no obligation to make a contribution in any given year. For 1996
the Company committed to contribute $63,000 under this plan. Participants in the
plan will vest in their plan benefits over a ten-year period commencing January
1, 1996. If the participant's employment terminates due to death, disability or
a change in control of management, he or she will vest 100% in all benefits
under the plan. Retirement benefits will be paid, as selected by the
participant, based on the sum of the contributions made and any additions based
on investment gains. No executive officer of the Company has been (or currently
is intended to be) chosen as a participant in the 1996 Deferred Compensation
Plan.
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 $9,500 in 1996. The Company makes matching contributions and in 1996
its contributions were in the amount of 25% on the first 6% contributed of each
participating employee's salary.
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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. In December 1996, the Goldberg Agreement for Paul Goldberg was
amended resulting in, among other changes (see below), a $25,000 reduction in
his base salary for calendar year 1997 and each calendar year thereafter during
the term of his employment. 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, as amended in December 1996 as to Paul Goldberg, 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. Messrs. Goldberg, as well as the other executive officers
of the Company (Messrs. Flanders and Gordon) voluntarily took a reduction in
their respective base salaries for the second half of 1996 (the "Salary
Reductions"). The aggregate amount of the Salary Reductions for all four
executive officers was approximately $76,000. The Compensation Committee of the
Board has authorized that the Salary Reductions be paid as additional base
salary in 1997 and, if necessary, in 1998 out of available pre-tax earnings of
the Company.
The Goldberg Agreements, as amended, together with the 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,
as amended, 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 $1.875 public
offering price per share. The 1995 Options granted to each of the executive
officers will vest in no event later than 9 years from the date of grant,
subject to earlier vesting in the following percentage increments based upon the
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Company attaining net earnings per share on a primary basis in any year from
1995 through 2000, inclusive, in at least the following amounts:
PERCENTAGE OF NET EARNINGS
OPTIONS VESTED (%) PER SHARE ($)
------------------ -------------
25%........................................ $.18
50......................................... .22
75......................................... .28
100......................................... .38
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, as amended in December 1996, he
is able to elect, in his sole discretion, to retire at any time on or after
December 31, 1996 (the "Retirement Election"). Upon the earlier to occur of the
Retirement Election or at the expiration of the term of his Goldberg Agreement,
as amended, 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 policy insuring his life
as described under "Summary Compensation Table."
The Goldberg Agreements, as amended, also provide certain additional benefits to
each of Paul Goldberg and Bruce M. Goldberg, including participation in the
Company benefit plans, including the 1988 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, as amended, 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. In
connection with the amendment in 1996 to the Goldberg Agreement for Paul
Goldberg, the Company is no longer obligated to advance the annual premium for a
$1,000,000 face value insurance policy on Paul Goldberg's or his spouse's life
9
<PAGE>
nor the annual premium for a $1,000,000 face value second to die insurance
policy on the lives of Paul Goldberg and his spouse. Neither of these two
insurance policies had been obtained prior to the December 1996 amendment to his
Goldberg Agreement.
The Goldberg Agreements, as amended, 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, as amended) 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, as
amended, 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 his death, the
premiums on the life insurance policy insuring his life as described under
"Summary Compensation Table." 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 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 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, 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 and subject to Mr. Flander's Salary Reduction for 1996. 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 1995 Options. In addition,
the Flanders Agreement provides for certain additional benefits, including
participation in the Company benefit plans, including the 1988 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.
10
<PAGE>
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 and subject to Mr. Gordon's Salary
Reduction for 1996. 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. The
Gordon Agreement also provides for Mr. Gordon to be granted the 150,000 1995
Options. In addition, the Gordon Agreement provides for certain additional
benefits, including participation in the Company benefit plans, including the
1988 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.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of S. Cye Mandel and Sheldon
Lieberbaum, both being independent, non-employee Directors of the Company. See
Item 10. Directors and Executive Officers of the Registrant - Board Committees -
Compensation Committee. Since January 1, 1996 to the date of this report,
neither member of the Compensation Committee had any relationship with the
Company requiring disclosure under Item 404 of Regulation S-K.
ITEM 12. 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 March 31, 1997, by: (i) each
person known by the Company to be the beneficial owner of more than five percent
(5%) of the Company's Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company who was serving as an executive officer at
the end of fiscal year 1996 (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.
11
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) SHARES(2)
- --------------------------------------- ----------------------- ---------
<S> <C> <C>
Bruce M. Goldberg (3)(4).................................. 2,893,879 14.4%
Paul Goldberg(3)(5)....................................... 2,578,982 12.8%
S. Cye Mandel............................................. 25,625 *
Howard L. Flanders........................................ 21,000 *
Rick Gordon............................................... 1,000 *
Sheldon Lieberbaum(6)..................................... -- --
All executive officers and directors as a
group (6 persons)(3)(4)(5)(6)........................... 4,232,863 (7) 21.0%(7)
</TABLE>
- ---------------
* 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 2,915,024 shares of the
Company's Common Stock, of which 2,699,313 options to purchase shares
(including the 1995 Options) were issued pursuant to the Option Plan. Of
these outstanding options, 1,611,000 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, 263,000 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 to issue 1,000 shares of the Company's Common Stock and, upon the
happening of certain events and conditions, to issue incentive stock
options covering an additional 15,000 shares. If all options and warrants
outstanding as of March 31, 1997, 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
own as of March 31, 1997, 14.5%, 12.5%, 1.2%, 1.1% and 24.0%, respectively,
of the Company's Common Stock.
(3) Includes for each of Bruce M. Goldberg and Paul Goldberg and all executive
officers and directors as a group 1,837,622 shares of the Company's Common
Stock that Paul Goldberg and Bruce 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 the Added Value Companies who were issued such shares in
connection with the Added Value Acquisitions. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Acquisitions.
(4) Includes 69,496, 56,000, 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.
12
<PAGE>
(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 159,698 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 warrants to purchase 523,250 shares of the Company's
Common Stock at an exercise price per share of $2.625 issued to Lew
Lieberbaum in connection with the 1995 Public Offering.
(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. For 1996, the
certain level of pre-tax net income was not attained and none of the
489,999 shares were released from escrow. 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment No. 1 to Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
ALL AMERICAN SEMICONDUCTOR, INC.
(Registrant)
By: /s/ Paul Goldberg
--------------------------------
Paul Goldberg, Chairman of the Board,
Chief Executive Officer and Director
(Duly Authorized Officer)
By: /s/ Howard L. Flanders
--------------------------------
Howard L. Flanders, Vice President,
Chief Financial Officer and Director
(Principal Financial and Accounting
Officer)
Dated: April 22, 1997
13
