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] No fee required.
[ ] 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 DECEMBER 10, 1998
--------------------
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 Thursday, December 10, 1998,
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 three directors to serve on the Board of Directors until the 2001
annual meeting of shareholders or until election and qualification of their
respective successors;
2. to ratify the selection of Lazar Levine & Felix LLP as the Company's
independent public accountants for the year ending December 31, 1998; 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 Monday, November 9,
1998, 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
November 12, 1998
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 DECEMBER 10, 1998
--------------------
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 Thursday,
December 10, 1998, 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 November 12, 1998.
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.
A copy of the Company's annual report for the fiscal year ended December 31,
1997 (which has included therein audited consolidated financial statements for
the Company) is being mailed to the Company's shareholders together with this
Proxy Statement.
<PAGE>
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 Monday,
November 9, 1998 (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 19,866,906 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 10.3% 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 8.6% 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.
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 1997 (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.
<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)............................. 3,186,221 16.2%
Paul Goldberg (3)(5)................................. 2,363,982 12.0%
John Jablansky....................................... 56,250 *
S. Cye Mandel........................................ 40,625 *
Howard L. Flanders................................... 21,000 *
Daniel M. Robbin..................................... 10,000 *
Rick Gordon.......................................... 1,000 *
Sheldon Lieberbaum(6)................................ -- --
All executive officers and directors
as a group (8 persons)(3)(4)(5)(6)................. 3,585,214 18.2%
- ---------------
* Less than 1%
</TABLE>
2
<PAGE>
(1) The address of each of Paul Goldberg, Bruce M. Goldberg, Howard L.
Flanders, Rick Gordon and John Jablansky 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; Sheldon Lieberbaum is 220 East 72nd
Street, Apt. 28E, New York, New York 10021; and Daniel M. Robbin is 4697
Carlton Golf Drive, Lake Worth, Florida 33467.
(2) Excludes outstanding stock options to purchase 3,069,763 shares of the
Company's Common Stock, of which 2,854,052 options to purchase shares
(including the aggregate of 1,000,000 options issued to four of the
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, 1,671,000 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, 273,000 options (including 150,000 1995 Options) held
by Rick Gordon, 25,000 options held by John Jablansky and 35,000 options
held by Daniel M. Robbin. Further excludes currently outstanding warrants
to purchase 993,125 shares of the Company's Common Stock. 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 John Jablansky, Daniel M. Robbin, S. Cye Mandel and
all executive officers and directors of the Company as a group would
beneficially own as of the Record Date, 16.0%, 11.8%, 1.2%, 1.2%, .3%, .2%,
.2% and 22.1%, respectively, of the Company's Common Stock. For purposes of
calculating the Percent of Outstanding Shares, the shares of Common Stock
held by a wholly-owned subsidiary of the Company and treasury shares of the
Company totaling 180,295 are not deemed to be outstanding.
(3) Includes for each of Bruce M. Goldberg and Paul Goldberg and all executive
officers and directors as a group: (a) 406,242 shares of the Company's
Common Stock held by two grantor retained annuity trusts (the "GRATs") as
to which Bruce M. Goldberg, as the trustee under each of the GRATs, has
sole voting and dispositive duties, with one of the GRATs holding 306,242
shares of Common Stock providing for an annuity to Paul Goldberg for five
years with the remainder going 90% to Bruce M. Goldberg and 10% to Robin
Phelan (the daughter of Paul Goldberg) and with the other GRAT holding
100,000 shares of Common Stock providing for an annuity to Paul Goldberg's
wife, Lola Goldberg, for five years with the remainder going 90% to Bruce
M. Goldberg and 10% to Robin Phelan; and (b) the 1,687,622 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 69,496, 56,000, 79,496, 79,496 and 79,496 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 nephew, 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 62,325 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 (30,750 shares). Bruce M. Goldberg disclaims beneficial
ownership over all such securities.
3
<PAGE>
(5) Includes 189,218 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 179,698 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 & Co., Inc. (now known as First Asset Management) in connection
with the Company's June 1995 public offering of Common Stock (the "1995
Public Offering").
BOARD OF DIRECTORS
The Company currently has seven directors serving on its Board. The directors of
the Company and their ages and positions (if any) with the Company as of the
Record Date are as follows:
<TABLE>
<CAPTION>
NAME CLASS AGE Position
- ---- ----- --- --------
<S> <C> <C> <C>
Paul Goldberg (1) III 70 Chairman of the Board
Bruce M. Goldberg (1) II 43 Director, President and Chief Executive
Officer
Howard L. Flanders II 41 Director, Executive Vice President, Corporate
Secretary and Chief Financial Officer
Rick Gordon III 45 Director and Senior Vice President of Sales
S. Cye Mandel (2)(3) I 69 Director
Sheldon Lieberbaum (2)(3) I 63 Director
Daniel M. Robbin I 63 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,
consisting of three classes. The terms of office of Class I, II and III
directors expire in 1998, 1999 and 2000, 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
since 1978. Paul Goldberg was also Chief Executive Officer of the Company until
1997 and President of the Company until 1994.
4
<PAGE>
BRUCE M. GOLDBERG, the son of Paul Goldberg, joined the Company in 1988 as Vice
President, in 1990 became Executive Vice President and in 1994 became President
and Chief Operating Officer. In 1997, Bruce M. Goldberg was appointed Chief
Executive Officer of the Company. 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 1991 as its Vice President and Chief
Financial Officer, and in 1992 became a director of the Company and Corporate
Secretary. In 1997, Mr. Flanders was appointed Executive Vice President of the
Company. 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
PricewaterhouseCoopers LLP.
RICK GORDON has been employed by the Company since 1986. He was originally the
General Manager of the Company's Northern California office and Northwest
Regional Manager. In 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 was director of corporate finance and a director and
shareholder of Lew Lieberbaum & Co., Inc. ("Lew Lieberbaum") until retiring in
1997. Lew Lieberbaum, which is now known as First Asset Management, is 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. Mr. Lieberbaum was also an officer of the underwriter
which took the Company public in 1987. Mr. Lieberbaum had been in the brokerage
business for over 35 years. Mr. Lieberbaum became a director of the Company in
1992. 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.
DANIEL M. ROBBIN has been involved in electronics distribution for over 39
years. Mr. Robbin retired in 1994 from Avnet Corporation, one of the largest
distributors in the electronic components industry, where he spent 34 years,
most recently as Senior Vice President of Avnet, Inc.. and Executive Vice
President of its subsidiary, Time Electronics. Mr. Robbin became a director of
the Company in 1997. Mr. Robbin has been a consultant to the Company since 1995.
5
<PAGE>
The Board formally met two times during the fiscal year ended December 31, 1997,
in addition to acting two times during the year by unanimous written consent.
All Board members attended the meetings and executed the unanimous written
consents.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, Daniel M. Robbin, a director of the Company, performed consulting
services on behalf of the Company for which he received an aggregate of $26,000
and 10,000 stock options. These options are exercisable at $1.067 and vest over
five years. In addition, Mr. Robbin was regranted 25,000 stock options in
connection with the Company's stock option repricing during 1997. These repriced
options, which have an exercise price of $1.08 and vest over five years,
replaced options that were canceled and are no longer exercisable.
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.
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
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, 1997, 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 1997, 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, 1997, the Audit Committee did not meet
formally, but Audit Committee matters were discussed at Board Meetings. 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
6
<PAGE>
procedures and controls and reviewing the reports and recommendations of the
independent auditors with respect to internal controls.
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. See "BOARD OF
DIRECTORS." During the fiscal year ended December 31, 1997, the Compensation
Committee did not meet formally, but acted thirteen 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 five executive officers. Each officer serves at the
discretion of the Board; however, all of the executive officers other than John
Jablansky have employment agreements with the Company. See "EXECUTIVE
COMPENSATION-Employment Agreements." The executive officers of the Company and
their ages and positions as of the Record Date are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Paul Goldberg 70 Chairman of the Board
Bruce M. Goldberg 43 President and Chief Executive Officer
Howard L. Flanders 41 Executive Vice President, Corporate Secretary and Chief
Financial Officer
Rick Gordon 45 Senior Vice President of Sales
John Jablansky 41 Senior Vice President of Product Management
</TABLE>
JOHN JABLANSKY has been employed by the Company since 1981. He was originally in
sales and since 1982 has worked in various capacities within the product
management department. In 1997, Mr. Jablansky was appointed Senior Vice
President of Product Management of the Company. Prior to joining the Company,
Mr. Jablansky was employed by Milgray Electronics, another electronic components
distributor.
For a brief resume of the Company's executive officers other than John
Jablansky, see "BOARD OF DIRECTORS".
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation earned
during each of the fiscal years ended December 31, 1997, 1996, and 1995, 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
$100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES ALL OTHER
ANNUAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
--------------------------- ---- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
Paul Goldberg............................ 1997 254,000 152,000 200,000(2) 10,000
Chairman of the Board 1996 243,000 -- -- 9,000
1995 223,000 111,000 250,000 11,000
Bruce M. Goldberg........................ 1997 321,000 167,000 175,000(2) 25,000
President and Chief 1996 253,000 -- -- 26,000
Executive Officer 1995 225,000 141,000 450,000 27,000
Howard L. Flanders....................... 1997 182,000 101,000 13,000(2) 17,000
Executive Vice President and 1996 157,000 -- -- 17,000
Chief Financial Officer 1995 156,000 84,000 150,000 18,000
Rick Gordon.............................. 1997 188,000 101,000 123,000(2) 15,000
Senior Vice President of Sales 1996 163,000 -- -- 16,000
1995 162,000 89,000 150,000 16,000
John Jablansky........................... 1997 162,000 -- 25,000(2) 23,000
Senior Vice President of 1996 153,000 -- -- 6,000
Product Management (3) 1995 177,000 -- -- 3,000
</TABLE>
- --------------
(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."
(2) Represents stock options granted in connection with the Company's stock
option repricing during 1997. The repriced options replaced options that
were canceled and are no longer exercisable. See Tables in "Option Grants
in Last Fiscal Year" and "1997 Repricing of Options" hereinbelow.
(3) Mr. Jablansky was appointed Senior Vice President of Product Management in
1997.
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
1997 of $7,700. Pursuant to the terms of an employment agreement with Bruce M.
Goldberg, the Company makes annual advances to Bruce M. Goldberg to cover the
8
<PAGE>
annual premium of a $1,000,000 whole life insurance policy (the "Whole Life
Policy") on the life of Bruce M. Goldberg, currently in the amount of $21,995.
Such annual advances were secured by the cash surrender value of the Whole Life
Policy. Consistent with such employment agreement, fifty percent (50%) of the
advances through December 31, 1994, were canceled and the related security
released on January 1, 1995. On May 31, 1997, the remainder of the advances
previously made to pay premiums on the Whole Life Policy were cancelled and any
remaining security was released in accordance with a previously agreed to
vesting schedule. On and after June 1, 1997, the Company is obligated to
continue, for the duration of Bruce M. Goldberg's employment, to pay the annual
premium to Bruce M. Goldberg for the Whole Life Policy. 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 $11,500. The Company's
obligations to make premium payments in connection with Howard L. Flanders' and
Rick Gordon's policies are expected to last for a maximum of ten years. After
Howard L. Flanders and Rick Gordon have been with the Company for a period of
five years from the year in which the policy was acquired (1993) and provided
they each remain in the employ of the Company or they have become disabled or a
change in control has occurred during the term of their employment, the advances
will be deemed cancelled and the security released thereafter ratably over a
five year vesting period until such time as all advances are deemed cancelled.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the named executive officers
of the Company during the fiscal year ended December 31, 1997. Pursuant to SEC
rules, the table also shows the value of the options granted at the end of the
option terms (as indicated below) if the price of the Company's stock was to
appreciate annually by 0%, 5% and 10%, respectively. There is no assurance that
such stock price will appreciate at the rates shown in the table. All of the
options set forth in the table are stock options issued pursuant to the Option
Plan. The Company does not have a plan whereby tandem stock appreciation rights
("SARS") are granted. See "Employees', Officers', Directors' Stock Option Plan"
hereinbelow.
<TABLE>
<CAPTION>
Closing Potential Realizable
Number of % of Total Market Value at Assumed
Securities Options Price Annual Rates of Stock
Underlying Granted to Exercise on Date of Price Appreciation
Options Employees in Price Grant Expiration for Option Term
Name Granted (#) (1) Fiscal Year ($/Share) ($/Share)(2) Date 0%($)(2) 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul Goldberg 100,000 6.4% 1.08 1.19 7/10/02 11,000 43,878 83,651
100,000 6.4% 1.24 1.34 7/30/03 10,000 55,573 113,389
Bruce M. Goldberg 75,000 4.8% 1.08 1.19 7/10/02 8,250 32,908 62,738
100,000 6.4% 1.24 1.34 7/30/03 10,000 55,573 113,389
Howard L. Flanders 10,000 .6% 1.08 1.19 7/10/02 1,100 4,388 8,365
3,000 .2% 1.24 1.34 7/30/03 300 1,667 3,402
Rick Gordon 120,000 7.7% 1.08 1.19 7/10/02 13,200 52,653 100,381
3,000 .2% 1.24 1.34 7/30/03 300 1,667 3,402
John Jablansky 12,500 .8% 1.08 1.19 7/10/02 1,375 5,485 10,456
12,500 .8% 1.24 1.34 7/30/03 1,250 6,947 14,174
</TABLE>
- ---------------------
(1) Represents stock options granted in connection with the Company's stock
option repricing during 1997. The repriced options replaced options that
were canceled and are no longer exercisable. See "1997 Repricing of
Options" herein below.
9
<PAGE>
(2) For purposes of and as provided under the Option Plan, "fair market value"
on the date of grant of any option is the average of the market price of a
share of Common Stock for each of the seven (7) consecutive business days
preceding such day; the market price on each such day is the closing sales
price of a share of Common Stock on The Nasdaq Stock Market on such day.
The Compensation Committee of the Company believes this calculation more
accurately reflects "fair market value" of the Company's Common Stock on
any given day as compared to simply using the closing market price on the
date of grant. As a result, the closing market price on the date of grant
at times may be different than the exercise price per share.
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, 1997, and the value of
unexercised stock options as of December 31, 1997, 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............... -- -- 35,000(E) 11,700(E)
415,000(U) 43,800(U)
Bruce M. Goldberg........... -- -- 27,500(E) 9,000(E)
597,500(U) 37,500(U)
Howard L. Flanders.......... 20,000 (2) 10,000 (2) 103,150(E) 7,400(E)
159,850(U) 3,100(U)
Rick Gordon................. -- -- 36,150(E) 12,900(E)
236,850(U) 31,000(U)
John Jablansky.............. -- -- 4,375(E) 1,500(E)
20,625(U) 5,500(U)
</TABLE>
- --------------
(1) Value is based upon the difference between the exercise price of the
options and the last reported sale price of the Common Stock on the Nasdaq
Stock Market on December 31, 1997 (the Company's fiscal year end).
(2) Stock options covering 20,000 shares of Common Stock at an exercise price
of $.75 per share were exercised by Howard L. Flanders during the fiscal
year ended December 31, 1997. The value realized per share is based upon
the difference between the closing sale price of the Company's Common Stock
on the Nasdaq Stock Market on the date of exercise and the exercise price.
10
<PAGE>
1997 REPRICING OF OPTIONS
The following table provides information as to the repricing during the
1997 fiscal year by the Company of the exercise price of certain stock options
previously awarded to the named executive officers. The repricing as described
in the following table was authorized by the Compensation Committee as a result
of the trading price of the Company's Common Stock and, in part, as a result of
the expiration date of certain of the stock options being less than 90 days, and
in order to provide a meaningful incentive for future performance. The repricing
was done at "fair market value" as determined under the Option Plan. See
"Compensation Committee Report" hereinbelow.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL OPTION
SECURITIES EXERCISE PRICE TERM
UNDERLYING MARKET PRICE OF OF STOCK AT REMAINING AT
OPTIONS STOCK AT TIME OF TIME OF NEW EXERCISE DATE OF
NAME DATE REPRICED (#) REPRICING($)(1) REPRICING ($) PRICE ($) REPRICING
- ------------------- ---------- -------------- ---------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Paul Goldberg 07/10/97 100,000 1.19 1.03 1.08 84 days
07/30/97 100,000 1.34 2.00 1.24 2 yrs. 52 days
Bruce M. Goldberg 07/10/97 75,000 1.19 1.03 1.08 84 days
07/30/97 100,000 1.34 2.00 1.24 2 yrs. 52 days
Howard L. Flanders 07/10/97 10,000 1.19 .9375 1.08 84 days
07/30/97 3,000 1.34 2.03125 1.24 2 yrs. 20 days
Rick Gordon 07/10/97 120,000 1.19 .9375 1.08 84 days
07/30/97 3,000 1.34 2.03125 1.24 2 yrs. 20 days
John Jablansky 07/10/97 12,500 1.19 .9375 1.08 84 days
07/30/97 12,500 1.34 2.03125 1.24 2 yrs. 20 days
- -----------------
</TABLE>
(1) See footnote (2) to "Option Grants in last Fiscal Year" hereinabove.
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 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 Company's deferred compensation
plans 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 four of the five executive officers of
the Company, which employment agreements include a combination of annual
incentive cash bonuses and the issuance of the 1995 Options as part of the
incentive
11
<PAGE>
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 such executive officer 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.
As a result of a significant portion of the Company's stock options granted
prior to July 1, 1997, having an exercise price per share of Common Stock in
excess of the then market value of the Company's Common Stock and certain stock
options previously granted expiring in less than 90 days, and consistent with
the Compensation Committee's view that stock options should be an integral part
of the Company's compensation program and provide a meaningful incentive to
future performance, the Compensation Committee determined that it was
appropriate to reprice the exercise price of certain outstanding employee stock
options. On July 10, 1997 (the "Initial Repricing Date") the Company changed,
for certain employees holding outstanding stock options (11 employees in total
including the named executive officers and an aggregate of 445,000 stock
options), the exercise price, vesting period, and expiration date as of the
Initial Repricing Date with respect to certain of his or her respective
outstanding stock options. Under the terms of the repricing, certain of the
employee's previously granted stock options which were repriced, were canceled,
including any vested options, and such employee received the equivalent number
of new stock options at an exercise price equal to the fair market value of the
Company's Common Stock on the Initial Repricing Date ($1.08 per share). The new
stock options received by an employee have a vesting schedule that commenced
from the Initial Repricing Date, vesting 30% on the Initial Repricing Date, 50%
on the first anniversary of the Initial Repricing Date and 20% on the second
anniversary of the Initial Repricing Date, and expire five (5) years from
Initial Repricing Date. On July 30, 1997 (the "Second Repricing Date") the
Company changed, for certain employees holding outstanding stock options (52
employees in total including the named executive officers and an aggregate of
633,813 stock options), the exercise price, vesting period and expiration date
as of the Second Repricing Date with respect to certain of his or her respective
outstanding stock options. Under the terms of the repricing, certain of the
employee's previously granted stock options which were repriced, were canceled,
including any vested options, and such employee received the equivalent number
of new stock options at an exercise price equal to the fair market value of the
Company's Common Stock on the Second Repricing Date ($1.24 per share). The new
stock options received by an employee have a vesting schedule that commenced
from the Second Repricing Date, vesting 5% on the Second Repricing Date, 20% on
the first anniversary of the Second Repricing Date, 15% on each of the second
and third anniversaries of the Second Repricing Date, 20% on the fourth
anniversary of the Second Repricing Date and 25% on the fifth anniversary of the
Second Repricing Date, and expire six (6) years from the Second Repricing Date.
See "1997 Repricing of Options" hereinabove.
SHELDON LIEBERBAUM, member
S. CYE MANDEL, member
12
<PAGE>
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 of 1986, as
amended (the "Code") and "non-qualified stock options" ("non-qualified stock
options" are options which do not comply with Section 422 of the Code) and for
the granting to non-employee directors and independent contractors associated
with the Company of non-qualified stock options.
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 two of the 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.
13
<PAGE>
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.
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 additional registration statement on Form
S-8 in order to register the additional shares of Common Stock reserved for
issuance under the Option Plan.
As of the Record Date, a total of 3,048,690 options were granted and had not
expired or been forfeited, of which 194,638 were exercised and 2,854,052 options
were outstanding (of which 1,671,000 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 415,625 options are
presently exercisable). These options, which are held by 85 persons, are
exercisable at prices ranging from $1.00 per share to $2.53 per share and are
exercisable through various expiration dates from 1998 to 2005.
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
14
<PAGE>
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 1997, 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 $30,000 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 1997
the Company committed to contribute $160,000 under this plan. Participants in
the plan will vest in their plan benefits over a ten-year period. 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. One
executive officer of the Company has been 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 1997. The Company makes matching contributions and in 1997
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, then its Chief Executive Officer, and Bruce M. Goldberg, its
President and then Chief Operating Officer, to take effect on June 1, 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 reduction in his base salary of $25,000
per annum 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
15
<PAGE>
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 authorized at
such time 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. As
a result of the attainment of certain levels of pre-tax earnings, the Salary
Reductions were paid in full in 1997.
On May 27 and August 21, 1998 the Board of Directors of the Company held
meetings during which it approved a relocation package (the "Relocation
Package") pursuant to which the Company would pay certain costs and expenses
associated with Bruce M. Goldberg's relocation from Florida to California on
behalf and for the benefit of the Company, including, without limitation, moving
expenses, rental of living quarters, costs associated with house hunting trips,
a $20,000 non-accountable allowance for miscellaneous expenses and the closing
costs associated with the purchase and financing of a house in California by
Bruce M. Goldberg. The Relocation Package also provided, among other things,
that Bruce M. Goldberg would receive (i) a gross-up of compensation and other
amounts paid to him to cover federal, state and local tax liabilities incurred
by him as a result of his receiving certain payments with respect to the
Relocation Package and/or otherwise associated with his relocation; (ii) payment
of any bonus under his Goldberg Agreement on a prorata basis through June 1998
immediately with any additional amounts of bonus to be paid on the same prorata
basis for the second half of 1998; (iii) as of September 1, 1998, the Company
would pay all expenses related to Bruce M. Goldberg's house in Miami until such
house is sold (including, without limitation, payments of principal and interest
on the home's first mortgage), subject to his remitting any rental income he is
able to derive from such house, and reimburse Bruce M. Goldberg for any loss
suffered in connection with the sale of such house; and (iv) a loan from the
Company in the principal amount of $125,000 bearing interest at the rate of five
(5%) per annum, repayable interest only for five (5) years and four months, then
principal and interest amortized over twenty (20) years with a balloon payment
after fifteen (15) years and secured by a second mortgage on his home in Miami.
The Goldberg Agreements, as amended, together with the employment agreements
between the Company and each of Howard L. Flanders and Rick Gordon, as amended,
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"). Pursuant to their respective
employment agreements, Paul Goldberg and Bruce M. Goldberg were granted 1995
Options covering 250,000 and 450,000 shares of the Company's Common Stock,
respectively, and each of Messrs. Flanders and Gordon were granted 150,000
shares. 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 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 has an exercise
price of $1.875 per share. The 1995 Options granted to each of the executive
officers will vest in no event later than 9 years from the date of grant,
subject to earlier vesting in the following percentage increments based upon the
Company attaining net earnings per share on a primary ("basic") basis in any
year from 1995 through 2000, inclusive, in at least the following amounts:
16
<PAGE>
PERCENTAGE OF NET EARNINGS
OPTIONS VESTED (%) PER SHARE ($)
------------------ -------------
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, as well as all other unvested options,
held by each of the four executive officers shall become immediately 100% vested
and exercisable. 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, he is able to elect,
in his sole discretion, to retire at any time (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"
hereinabove.
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 and continuance in the event of disability of all their
respective compensation and other benefits in the case of Paul Goldberg until
January 1, 1999 (subject thereafter to providing the retirement and health
benefits described above) and in the case of Bruce M. Goldberg for two years. 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
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 his 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 his 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
17
<PAGE>
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 August 1998, the Goldberg Agreements, as amended, and the
employment agreements of each of Howard L. Flanders and Rick Gordon described
below, were amended to provide for reimbursement of, and a gross-up for, any
federal tax liability imposed pursuant to Section 4999 or Section 280G (or any
successor provisions) of the Internal Revenue Code of 1986, as amended, and any
similar state or local taxes, as a result of a change in control payment,
consideration and/or benefit made or provided by the Company pursuant to such
employment agreements.
THE FLANDERS/GORDON AGREEMENTS
In May 1995, the Company entered into an employment agreement with Howard L.
Flanders, then its Vice President, Corporate Secretary and Chief Financial
Officer (as amended, the "Flanders Agreement"), and Rick Gordon, its Senior Vice
President of Sales (as amended, the "Gordon Agreement" and collectively with the
Flanders Agreement, the "Flanders/Gordon Agreements"). The Flanders/Gordon
Agreements each will continue through December 31, 1998, and provides for a base
salary, effective as of March 1, 1995, of $157,500 per annum for Mr. Flanders
and $163,000 per annum for Mr. Gordon, 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 their respective Salary Reduction for 1996.
Under the Flanders/Gordon Agreements, Messrs. Gordon and Flanders are 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 is limited in any year to an
amount no greater than such executive's base salary for the applicable year.
Pursuant to the Flanders/Gordon Agreements, each of Messrs. Gordon and Flanders
were granted 150,000 of the 1995 Options. The Flanders/Gordon Agreements also
provide for certain additional benefits, including participation in the Company
benefit plans and continuance of all their respective compensation and other
benefits for two years in the event of disability. Further, if Mr. Gordon or 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 applicable Flanders/Gordon
Agreement. Additionally, under the Flanders/Gordon Agreements, the Company will
pay premiums under a life insurance policy for each of Messrs. Gordon and
Flanders with the beneficiary to be as designated by Mr. Gordon or Mr. Flanders,
respectively, as described under "Summary Compensation Table" above. The
Flanders/Gordon Agreements also provides that, in the event of a change in
control (as defined) of the Company, each of Mr. Gordon and Mr. Flanders will
have the option in his sole discretion to terminate the applicable
Flanders/Gordon Agreement. In such event, Mr. Gordon or Mr. Flanders, at his
option would be entitled to elect to receive a lump-sum payment equal to his
respective compensation due through the later of the end of the term of the
applicable Flanders/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
such Flanders/Gordon Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of Sheldon Lieberbaum and S.
Cye Mandel, both being independent, non-employee Directors of the Company. See
"BOARD COMMITTEES - Compensation Committee." Since January 1, 1997 to the date
hereof, neither member of the Compensation Committee had any relationship with
the Company requiring disclosure under Item 404 of Regulation S-K.
18
<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:
- -------------------------FISCAL YEARS ENDED DECEMBER 31-------------------------
INDEX DESCRIPTION 1992* 1993 1994 1995 1996 1997
(In Dollars)
The Company 100 175.00 125.00 154.17 66.67 95.83
Electronic Parts and 100 116.90 108.66 130.05 150.44 154.92
Equipment Peer Group
Index (SIC Code 5065)
NASDAQ Market Index 100 119.95 125.94 163.35 202.99 248.30
- -----------------------
*Assumes the investment of $100 on January 1, 1993 and reinvestment of dividends
(no dividends were declared on the Company's Common Stock during the period).
19
<PAGE>
PROPOSALS
ITEM 1. ELECTION OF DIRECTORS
It is intended that the votes will be cast pursuant to the accompanying proxy
for the nominees named below, unless otherwise directed. The Board has no reason
to believe that such nominees will become unavailable; however, in the event
that such nominees should be unavailable, proxies solicited by the Board will be
voted for the election of substitute nominees designated by the Board.
S. Cye Mandel has been a member of the Board since 1987, Sheldon Lieberbaum has
been a member of the Board since 1992 and Daniel M. Robbin became a director of
the Company in 1997. 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
------- ---- -----
Sheldon Lieberbaum 3 years I
S. Cye Mandel 3 years I
Daniel M. Robbin 3 years I
Proxies cannot be voted for a greater number of persons than the three nominees
named above.
The nominees for directors who receive a plurality of the votes cast by the
holders of the Shares will be elected. Abstention (withheld authority) and
broker or nominee non-votes are not counted in determining the number of shares
voted for or against any nominee for director.
The Board recommends a vote in favor of the nominees for election to the Board.
ITEM 2. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
It is intended that the votes will be cast pursuant to the accompanying proxy
for the ratification of Lazar Levine & Felix LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1998, unless
otherwise directed.
The firm of Lazar Levine & Felix 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 & Felix 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 & Felix 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.
20
<PAGE>
SHAREHOLDER'S PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 1999 annual meeting of shareholders and who wishes to have such proposal
receive consideration for inclusion in the Company's proxy statement for such
meeting must deliver such proposal in writing to the Company at 16115 N.W. 52nd
Avenue, Miami, Florida 33014, not later than March 31, 1999. 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, 1997 IS BEING PROVIDED TO SHAREHOLDERS WITH THIS PROXY STATEMENT.
THE COMPANY WILL FURNISH TO EACH PERSON SOLICITED HEREUNDER, WITHOUT CHARGE,
COPIES OF ITS ANNUAL REPORT ON FORM 10-K (INCLUDING EXHIBITS) FOR THE COMPANY'S
YEAR ENDED DECEMBER 31, 1997, 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, EXECUTIVE 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
November 12, 1998
Miami, Florida
21
<PAGE>
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-DECEMBER 10, 1998
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 Thursday, December 10, 1998, 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 UNDER SIGNED 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 POWER 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 1997 Annual Report and the Notice of Annual
Meeting of Shareholders and Proxy Statement relating thereto is hereby
acknowledged.
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
FOR WITHHELD
1. Election of [ ] [ ] NOMINEES: Sheldon Lieberbaum
Directors: S. Cye Mandel
Daniel M. Robbin
INSTRUCTIONS: To withhold
authority to vote for any
individual nominee, write that
nominee's name in the space
provided below.
FOR AGAINST ABSTAIN
2. Ratification of the selection [ ] [ ] [ ]
of Lazar Levine & Felix LLP
as the Company's
independent public
accountants for the year
ending December 31, 1998.
3. Upon such other matters as
may properly come before
the Annual Meeting or any
and all postponements or
adjournments thereof.
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------------
SIGNATURE(s)_______________________________________ DATED: _______________, 1998
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
(NOTE: Please complete, date and sign exactly as your name appears hereon. When
signing as attorney, executor, guardian, trustee or corporate official,
please add your title. If shares are held jointly, each holder should
sign.)
