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:
[x] Preliminary Proxy Statement
[x] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
ALL AMERICAN SEMICONDUCTOR, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
PRELIMINARY COPY
ALL AMERICAN SEMICONDUCTOR, INC.
____________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON _____________, 1999
____________________
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 __________, ___________,
1999, at 10:00 A.M., Miami, Florida local time, at Don Shula's Hotel, 15255 Bull
Run Road, Miami Lakes, Florida, for the following purposes:
1. to elect two directors to serve on the Board of Directors until the
2002 annual meeting of shareholders or until election and qualification
of their respective successors;
2. to approve an amendment to the Company's Certificate of Incorporation
to effect a one-for-five reverse stock split of the Company's
outstanding common stock (the "Reverse Stock Split");
3. to approve the increase in the number of shares of common stock
reserved for issuance under the Company's Employees', Officers',
Directors' Stock Option Plan as previously amended and restated (the
"Option Plan");
4. to approve the extension of the term and expiration date of the Option
Plan to April 18, 2009;
5. to ratify the selection of Lazar Levine & Felix LLP as the Company's
independent public accountants for the year ending December 31, 1999;
and
6. 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, April 26, 1999,
will be entitled to notice of and to vote at the meeting or at any adjournments
or postponements thereof.
By Order of the Board of Directors,
-----------------------------------
Howard L. Flanders,
Corporate Secretary
______________, 1999
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>
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
PRELIMINARY COPY
ALL AMERICAN SEMICONDUCTOR, INC.
16115 N.W. 52ND AVENUE
MIAMI, FLORIDA 33014
--------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON ______________, 1999
--------------------
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
_________, ______________, 1999, 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 _________,
1999.
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 sent to Howard
L. Flanders, Corporate Secretary, All American Semiconductor, Inc., 16115 N.W.
52nd Avenue, Miami, Florida 33014. Revocations will not be effective unless
received in writing by the Corporate Secretary of the Company prior to the
Meeting.
The expense of this solicitation will be borne by the Company. In addition to
solicitation by mail, arrangements may be made with brokers and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and the Company will, upon request, reimburse them for reasonable expenses in
doing so. The Company has made arrangements with Shareholder Communications
Corporation, a proxy solicitation firm, to assist the Company in soliciting
proxies from shareholders. The cost to the Company with respect to such
arrangement is estimated to be approximately $____________. Solicitation of
proxies from some shareholders may also be made by the Company's officers and
regular employees by telephone, telecopy, the Internet, 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,
1998 (which has included therein audited consolidated financial statements for
the Company) is being mailed to the Company's shareholders together with this
Proxy Statement.
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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,
April 26, 1999 (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 1998 (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)........................ 3,010,991 15.3%
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).............. 3,551,500 18.0%
</TABLE>
---------------
* Less than 1%
(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.
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(2) Excludes outstanding stock options to purchase 3,026,103 shares of the
Company's Common Stock, of which 2,908,552 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, 15.3%, 11.9%, 1.2%, 1.2%, .3%, .2%, .2% and 22.0%,
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) 264,726 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 199,272 shares of Common Stock providing for an annual
annuity to Paul Goldberg through 2002 and with the other GRAT holding
65,454 shares of Common Stock providing for an annual annuity to Paul
Goldberg's wife, Lola Goldberg, through 2002; 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 96,039 shares of
the Company's Common Stock held of record by an unrelated third party
as trustee for Matthew Goldberg (48,432 shares) and Alec Goldberg
(47,607 shares). Bruce M. Goldberg disclaims beneficial ownership over
all such securities.
(5) Includes 223,764 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. in connection with the Company's June
1995 public offering of Common Stock (the "1995 Public Offering").
3
<PAGE>
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:
NAME CLASS AGE POSITION
- ---- ----- --- --------
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
Chief Financial Officer and
Corporate Secretary
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 64 Director
- ------------------
(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
The Company's Certificate of Incorporation provides for a staggered Board,
consisting of three classes. The terms of office of Class I, II and III
directors expire in 2001, 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.
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
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<PAGE>
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 no longer in business, was 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.
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.
The Board formally met 15 times (including on nine days between the period
September 12 and 25, 1998) during the fiscal year ended December 31, 1998, in
addition to acting one time during the year by unanimous written consent. All
Board members attended the meetings, except for one meeting in which one member
was absent, and executed the unanimous written consents.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1998, 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.
In 1998, the Company made a loan to Bruce M. Goldberg, the President and CEO of
the Company, in the amount of $125,000 in connection with his relocation to San
Jose. This loan is evidenced by a promissory note, which bears interest at 5%
per annum and is payable interest only for the first five years and four months
and principal and interest annually thereafter until maturity based on a
twenty-year self-amortization schedule, with any unpaid principal and accrued
interest payable in full in August 2013.
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, 1998, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were satisfied.
5
<PAGE>
BOARD COMMITTEES
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Paul Goldberg and Bruce M. Goldberg.
During 1998, the Executive Committee did not meet formally, however, its members
spoke 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, 1998, the Audit Committee did not meet
formally, but Audit Committee matters were discussed at Board meetings. In March
1999, the Audit Committee met. The Audit Committee is responsible for
recommending the selection of the independent auditors, reviewing the
arrangements and scope of the independent audit, reviewing internal accounting
procedures and controls and reviewing the reports and recommendations of the
independent auditors with respect to internal controls.
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, 1998, the Compensation
Committee did not meet formally, but acted one time 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, as of the date of this Proxy Statement Paul
Goldberg and Bruce M. Goldberg 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:
NAME AGE POSITION
- ---- --- --------
Paul Goldberg 70 Chairman of the Board
Bruce M. Goldberg 43 President and Chief Executive Officer
Howard L. Flanders 41 Executive Vice President, Chief
Financial Officer and Corporate
Secretary
Rick Gordon 45 Senior Vice President of Sales
John Jablansky 41 Senior Vice President of Product
Management
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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."
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation earned
during each of the fiscal years ended December 31, 1998, 1997, and 1996, by the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company whose total annual salary and bonus exceeded
$100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ---------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) ($)(2)
- --------------------------- ----- --------- -------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Paul Goldberg................... 1998 251,000 116,000 - - 8,600
Chairman of the Board 1997 254,000 152,000 - 200,000(3) 10,000
1996 243,000 - - - 9,000
Bruce M. Goldberg............... 1998 319,000 116,000 64,000(4) - 26,000
President and Chief 1997 321,000 167,000 - 175,000(3) 25,000
Executive Officer 1996 253,000 - - - 26,000
Howard L. Flanders.............. 1998 182,000 77,000 - - 18,000
Executive Vice President and 1997 182,000 101,000 - 13,000(3) 17,000
Chief Financial Officer 1996 157,000 - - - 17,000
Rick Gordon..................... 1998 189,000 77,000 - - 16,000
Senior Vice President of Sales 1997 188,000 101,000 - 123,000(3) 15,000
1996 163,000 - - - 16,000
John Jablansky.................. 1998 155,000 - - - 24,000
Senior Vice President of 1997 162,000 - - 25,000(3) 23,000
Product Management (5) 1996 153,000 - - - 6,000
</TABLE>
- ---------------
(1) Except for Bruce M. Goldberg, other annual compensation for each of the
named executive officers in 1996, 1997 and 1998 did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus
reported for such named executive officer.
(2) 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. See
hereinbelow and "Deferred Compensation Plans for Executive Officers and
Key Employees" and "401(k) Plan."
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(3) 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.
(4) Includes payments made in connection with Bruce M. Goldberg's
relocation to San Jose to be based where the sales and marketing
functions of the Company are headquartered. See "Employment Agreements
- The Goldberg Agreements" hereinbelow.
(5) 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
1998 of $7,700. Pursuant to the terms of an employment agreement with Bruce M.
Goldberg, the Company makes annual advances, currently in the amount of $21,995,
to Bruce M. Goldberg to cover the annual premium on a $1,000,000 whole life
insurance policy (the "Whole Life Policy") on the life of Bruce M. Goldberg. On
May 31, 1997, as a result of Bruce M. Goldberg's completion of a previously
agreed to vesting period, all advances previously made to pay premiums on the
Whole Life Policy were canceled and any security was released. 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 advanced, and
intends to continue to advance, 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 $11,500. The Company's obligations to make premium payments in
connection with Howard L. Flanders' and Rick Gordon's policies are expected to
last for a maximum of ten years. Howard L. Flanders and Rick Gordon have been
with the Company for a period of five years from the year in which the policy
was acquired (1993) and provided they each remain in the employ of the Company
or they have become disabled or a change in control has occurred during the term
of their employment, the advances will be deemed canceled and the security
released thereafter ratably over a five-year vesting period until such time as
all advances are deemed canceled.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options during its fiscal year ended
December 31, 1998 to any named executive officer of the Company. The Company
does not have a plan whereby tandem stock appreciation rights ("SARS") are
granted.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-ENDED OPTION
VALUES
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 1998, and the value of
unexercised stock options as of December 31, 1998, for the individual executive
officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES FY-END(#) FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Paul Goldberg................ - - 105,000(E) -
- - 345,000(U) -
Bruce M. Goldberg............ - - 85,000(E) -
- - 540,000(U) -
Howard L. Flanders........... - - 108,750(E) -
- - 154,250(U) -
Rick Gordon.................. - - 96,750(E) -
- - 176,250(U) -
John Jablansky............... - - 13,125(E) -
- - 11,875(U) -
</TABLE>
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(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, 1998 (the Company's fiscal year
end).
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 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
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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 pre-tax 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. With regard
to two of such employment agreements with Howard L. Flanders and Rick Gordon,
such 1995 employment agreements expired on December 31, 1998. The Company is
discussing with such executive officers the terms upon which the employment
agreements will be extended. The Compensation Committee will utilize similar
criteria as it did in authorizing the 1995 employment agreements in approving
the terms of such extended employment agreements. See "Employment Agreements"
and "Employees', Officers', Directors' Stock Option Plan" hereinbelow.
SHELDON LIEBERBAUM, member
S. CYE MANDEL, member
EMPLOYEES', OFFICERS', DIRECTORS' STOCK OPTION PLAN
In 1987, the Company established an Employees', Officers', Directors' Stock
Option Plan (as previously amended and restated the "Option Plan"). Subsequent
thereto certain amendments to and a restatement of the Option Plan have been
adopted by the Board and approved by the shareholders of the Company. The Option
Plan may be further modified or amended by the Board, but certain modifications
and amendments must be approved by the Company's shareholders to continue in
effect. On April 19, 1999, the Board authorized and adopted, subject to
shareholder approval, an increase in the number of shares reserved for issuance
under the Option Plan to 4,500,000 (prior to and without giving effect to the
proposed Reverse Stock Split, which if approved by the shareholders and
effectuated by the Company would reduce the number of shares reserved for
issuance under the Option Plan to one-fifth of the number reserved for issuance
under the Option Plan prior to effectuating the Reverse Stock Split) and to
extend the term and expiration date of the Option Plan to April 18, 2009. Such
amendments require the approval of the shareholders of the Company at the
Meeting to continue in effect and are described in "ITEM 3. AUTHORIZATION OF
ADDITIONAL SHARES UNDER OPTION PLAN" and "ITEM 4. EXTENSION OF TERM AND
EXPIRATION DATE OF OPTION PLAN" in "PROPOSALS." The Board is recommending
approval of such amendments by the Company's shareholders at the Meeting.
The Option Plan provides for the granting to key employees of both "incentive
stock options," within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and "non-qualified stock options"
("non-qualified stock options" are options which do not comply with Section 422
of the Code) and for the granting to non-employee directors and independent
contractors associated with the Company of non-qualified stock options.
A general description of the Option Plan, as previously in effect and as
amended, is presented below. Reference is also made to ITEM 3 and ITEM 4 in
"PROPOSALS" for a detailed description of the amendments for which shareholder
approval is being sought at the Meeting. A copy of the Option Plan may be
obtained without charge upon written request to Howard L. Flanders, the
Corporate Secretary, at the Company's principal executive offices, 16115 N.W.
52nd Avenue, Miami, Florida 33014.
PURPOSE. The purpose of the Option Plan is to secure for the Company and its
subsidiaries the benefits of the additional incentive to selected key employees
and non-employee directors of and independent contractors associated with the
Company inherent in the ownership of Common Stock, to promote the success and
profitability of the Company's business and to help the Company attract, secure
and retain the services of such key employees, non-employee directors and
independent contractors.
TERM OF THE OPTION PLAN. Prior to the adoption by the Board of the amendment
described in ITEM 4 in "PROPOSALS," unless earlier terminated, the Option Plan
would have continued in effect through May 28, 2004, after
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which it would expire and no further options could thereafter be granted under
the Option Plan. Subject to the approval of the shareholders at the Meeting, the
term and expiration date of the Option Plan has been extended to April 18,
2009. The expiration of the Option Plan, or its termination by the Board, will
not affect any options previously granted and then outstanding under the Option
Plan. Such outstanding options shall remain in effect until they have been
exercised, terminated or have expired.
NUMBER OF SHARES. Prior to the adoption by the Board of the amendment described
in ITEM 3 in "PROPOSALS," a maximum of 3,250,000 shares of the Company's Common
Stock was reserved for issuance upon the exercise of options granted under the
Option Plan, subject to any adjustments required upon changes in capitalization
to prevent dilution or enlargement of the shares issuable pursuant to the Option
Plan by reason of any stock split, stock dividend, combination of shares,
recapitalization or other change in the capital structure of the Company.
Subject to the approval of the shareholders of the Company at the Meeting, the
number of shares of the Company's Common Stock reserved for issuance under the
Option Plan has been authorized by the Board to be increased to 4,500,000 shares
prior to and without giving effect to the proposed Reverse Stock Split. If the
Reverse Stock Split is approved by the shareholders and effectuated by the
Company, the number of shares reserved for issuance under the Option Plan would
be reduced to one-fifth of the number reserved for issuance under the Option
Plan prior to effectuating the Reverse Stock Split. For example, if the proposal
in ITEM 3 in "PROPOSALS" is approved and the number of shares reserved for
issuance under the Option Plan is increased to 4,500,000 shares and the Reverse
Stock Split is approved and effectuated by the Company, the number of shares of
the Company's Common Stock reserved for issuance under the Option Plan would be
adjusted to 900,000 shares. Any common stock subject to an option which expires
or is canceled or terminated without having been exercised will again be
available for issuance under the Option Plan, subject, however, to any
adjustment required as a result of the Reverse Stock Split being effectuated.
See "Recapitalization, Consolidation and Similar Transactions" hereinbelow.
ADMINISTRATION. 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.
ELIGIBILITY TO PARTICIPATE IN OPTION PLAN. Options may be currently granted
under the Option Plan to any key employee or non-employee director or
prospective key employee or non-employee director (conditioned upon, and
effective not earlier than, his or her becoming an employee or director) of or
independent contractor 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. As of the Record
Date, the Compensation Committee has not adopted formal eligibility limitation
criteria. Therefore, quantification of the current number of employees,
non-employee directors and independent contractors that would technically be
eligible for participation is not currently readily determinable. As of the
Record Date, approximately 86 employees held outstanding options.
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EXERCISE PRICE. 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). For purposes of 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 shall be (i) if the Common Stock is listed on a securities exchange
(including The Nasdaq Stock Market), the closing sales price on such exchange on
such day or, in the absence of reported sales on such day, the mean between the
reported closing bid and asked prices on such exchange on such day, or (ii) if
the Common Stock is not listed on a securities exchange (including The Nasdaq
Stock Market), the mean between the closing bid and asked prices as quoted by
the National Association of Securities Dealers, Inc. through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") for such
day; provided, however, that, if there are no such quotations or if it is
determined that the fair market value is not properly reflected by such NASDAQ
quotations or the Common Stock is not traded on an exchange or over the counter,
fair market value shall be determined by such other method as the Compensation
Committee determines to be reasonable. Notwithstanding the foregoing, if on, or
within ten (10) days prior to, the date of grant of any options a registration
statement filed by the Company with the SEC in connection with a public offering
of Common Stock becomes effective, the fair market value of a share of such
Common Stock shall be the public offering price per share of Common Stock being
offered pursuant to such offering.
LIMITATIONS ON GRANT OF OPTIONS. Except as may be specifically limited by the
terms of the Option Plan, the granting of options is made at the sole discretion
of the Compensation Committee. Further, the aggregate fair market value of the
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.
OPTION PERIOD. The term of and any vesting schedule (whether the option will be
exercisable immediately, in stages or otherwise, or the vesting will be based
upon any condition such as the operating performance of the Company) for an
option granted under the Option Plan is established by the Compensation
Committee, but the term may not be more than ten years from the date of grant of
the option, except that, in the case of a person receiving an incentive stock
option who at such time owns 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 ten-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.
NONTRANSFERABILITY. No option granted under the Option Plan is transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order and, subject to any transfer pursuant to a
qualified domestic relations order, each option will be exercisable, during the
lifetime of an optionee, only by such optionee.
MANNER OF EXERCISE AND PAYMENT FOR OPTIONS. Options granted under the Option
Plan shall be exercised by an optionee (or upon his or her death by his or her
personal representative, executor or administrator), as to all or part of the
Common Stock covered by the options which have vested (subject to any minimum
numbers of shares that must be purchased at any time under the terms of a
particular stock option agreement), by giving written notice of exercise to the
Company specifying the number of shares to be purchased and accompanied by
payment of the full purchase price for the shares being purchased. Payment in
full of such purchase price is to be made (a) by check payable to the Company or
(b) with the prior consent of the Compensation Committee or to the extent
provided in the applicable option agreement, by tendering to the Company
previously acquired shares of Common Stock having a fair market value
(determined as of the date such options are exercised) equal to the entire
purchase price, or (c) with the prior consent of the Compensation Committee or
to the extent provided in the applicable option agreement, by a combination of
(a) and (b) above. No shares of Common Stock can be issued until full payment
therefore has been received by the
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Company, and no optionee has any of the rights of a shareholder of the Company
until the certificates for such shares of Common Stock are issued to the
optionee following the exercise of his or her options.
RECAPITALIZATION, CONSOLIDATION AND SIMILAR TRANSACTIONS. In the event of any
stock split, stock dividend, combination of shares, reclassification or
recapitalization which changes the character or amount of the Company's
outstanding Common Stock while any portion of any options theretofore granted
under the Option Plan are outstanding but unexercised, the Compensation
Committee shall make such adjustments in the character and number of shares
subject to such options and in the option price, as shall be equitable and
appropriate in order to make such options, as nearly as may be practicable,
equivalent to such options immediately prior to such change, subject to
complying with any requirements of the Code in the event that incentive stock
options are involved. In the event that the Reverse Stock Split is approved by
the shareholders and effectuated by the Company, the outstanding options under
the Option Plan at the effective date of the Reverse Stock Split shall be
adjusted as to their number and option price as described in "Effect of the
Reverse Stock Split Proposal" in "ITEM 2. AMENDMENT TO CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT" in "PROPOSALS."
EFFECT OF ACQUISITION OF COMPANY. In the event of any sale of assets, merger,
consolidation, combination or other corporate reorganization of the Company with
or into another entity which results in the outstanding Common Stock of the
Company being converted into or exchanged for different securities, cash or
other property, each outstanding option, subject to the other provisions of the
Option Plan and any limitations applicable to a particular option, may be
assumed by the successor entity (or a parent or subsidiary of such successor
entity) or the optionee may receive from such successor entity (or a parent or
subsidiary of such successor entity) a new option for such outstanding option,
which new option shall be, as nearly as may be practicable, equivalent to the
outstanding option and in conformity with Section 424(a) of the Code and the
regulations thereunder, if applicable.
AMENDMENT AND TERMINATION OF OPTION PLAN. The Board may at any time amend,
modify or terminate the Option Plan except with respect to outstanding options,
but may not make any amendment to the Option Plan which increases the maximum
number of shares which may be subject to awards of options (except in connection
with recapitalizations or similar transactions, see "Recapitalization,
Consolidation and Similar Transactions"), which materially increases the
benefits accruing to participants under the Option Plan or which changes the
class or persons eligible for the grant of options or otherwise materially
modifies the requirements for eligibility for participation in the Option Plan,
unless such action of the Board shall be approved or ratified by the
shareholders of the Company. The Board may also terminate the Option Plan prior
to its expiration date, after which no further options may be granted under the
Option Plan.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of the
applicable Federal income tax consequences of options granted under the Option
Plan based on U.S. Federal income tax laws in effect on the date of this Proxy
Statement.
INCENTIVE STOCK OPTIONS. No taxable income is recognized by a holder of an
option (an "optionee") upon the grant or exercise of an incentive stock option
("ISO"). No taxable ordinary income is recognized by an optionee upon the
disposition of an ISO by an optionee (except to the extent the ISO affects the
determination of the optionee's alternative minimum taxable income under Section
56 of the Code, as discussed in the paragraph below entitled "Alternative
Minimum Taxable Income Adjustment"), provided (i) no disposition of any share of
Common Stock issued pursuant to the exercise of the ISO is made by the optionee
within two (2) years from the date of the grant of the ISO nor within one (1)
year after the transfer of such share to him or her (a disposition within either
of such periods is hereinafter referred to as a "disqualifying disposition");
and (ii) the optionee was an employee of the Company at all times from the date
of the grant of the ISO to the date, generally, three (3) months before the date
of such exercise (the optionee is "continuously employed") (that is, the
optionee may exercise the ISO within three (3) months following his or her
termination of employment without the recognition of taxable income on such
exercise).
If any share of Common Stock is transferred to an optionee pursuant to his or
her exercise of an ISO, and if no disqualifying disposition of such share is
made by the optionee and the optionee is continuously employed by the Company,
then upon the subsequent disposition of such share by the optionee, (i) any
amount realized in excess of the option exercise price is treated as long-term
capital gain (subject to various tax rates depending on how long such share
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is held); (ii) any loss sustained is a long-term capital loss; and (iii) no
deduction under Section 162 of the Code (relating to trade or business expenses)
("employer tax deduction") is allowed to the Company for federal income tax
purposes.
If any share of Common Stock transferred to an optionee pursuant to his or her
exercise of an ISO is disposed of by the optionee in a disqualifying
disposition, then for the taxable year of such disposition (i) the optionee
recognizes ordinary compensation income in an amount equal to the lesser of (a)
the excess, if any, of the fair market value of such share at the time of the
exercise of the option over the option exercise price and (b) the amount
realized on such disposition over the option exercise price; (ii) the basis of
such share is then increased by the amount of any income recognized, and any
additional gain or loss recognized by the optionee with respect to such share is
treated as short-term or long-term capital gain or loss (as the case may be);
and (iii) the Company is allowed an employer tax deduction in an amount equal to
the optionee's ordinary compensation income described in (i) above.
NONQUALIFIED STOCK OPTIONS. With respect to non-qualified stock options
("NSOs"): (i) no income is recognized by the optionee at the time the option is
granted; (ii) generally, at exercise, ordinary income is recognized by the
optionee in an amount equal to the difference between the option exercise price
paid for the shares and the fair market value of the shares on the date of
exercise, and the Company is entitled to an employer tax deduction in the same
amount; and (iii) upon disposition of the shares, any gain or loss is treated as
capital gain or loss. In the case of an optionee who is also an employee at the
time of grant, any income recognized upon exercise of an NSO will constitute
wages for which federal income tax withholding will be required.
ALTERNATIVE MINIMUM TAXABLE INCOME ADJUSTMENT. The exercise by an optionee of an
ISO granted under the Option Plan may subject the optionee to alternative
minimum tax ("AMT") under Section 56 of the Code. Under Section 56(b)(3) of the
Code, for purposes of computing the amount of the alternative minimum taxable
income ("AMTI") of an individual for any taxable year, (i) Section 83 (relating
to NSOs) as opposed to Section 421 (relating to ISOs) of the Code applies to the
transfer of a share of Common Stock pursuant to the exercise of an ISO (that is,
the ISO is treated as an NSO) and (ii) the optionee must treat the difference,
if any, between the fair market value of the ISO and the option exercise price
as an adjustment in determining AMTI under Section 56(b)(3) of the Code in the
first taxable year in which the optionee's rights in such share are either
transferable or are not subject to a substantial risk of forfeiture under
Section 83(a) of the Code. An optionee may alter the timing and amount of such
an AMTI adjustment, if any, by filing with the Internal Revenue Service an
election under Section 83(b) of the Code within thirty (30) days after the date
of the exercise of an ISO. Such an AMTI adjustment, if any, is also added to the
basis of such share for purposes of determining adjusted gain or loss under the
AMT upon disposition of such share. No such AMTI adjustment is required if the
exercise of an ISO and the subsequent disposition of such share occur within the
same taxable year.
REGISTRATION OF UNDERLYING COMMON STOCK. On February 11, 1994, the Company filed
a registration statement on Form S-8 with the Commission in order to register
1,687,914 shares of Common Stock then issuable under the Option Plan. So long as
such registration statement remains effective under the Act, the first 1,687,914
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 (including the increased number of shares reserved if the
Company's shareholders approve an increase in the number of shares of Common
Stock issuable pursuant to the Option Plan from 3,250,000 to 4,500,000 shares)
of Common Stock reserved for issuance under the Option Plan. See "ITEM 3.
AUTHORIZATION OF ADDITIONAL SHARES UNDER OPTION PLAN" in "PROPOSALS."
OUTSTANDING OPTIONS. As of the Record Date, a total of 3,103,190 options were
granted and had not expired or been forfeited, of which 194,638 were exercised
and 2,908,552 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
417,625 options are presently exercisable). These options, which are held by 86
persons, are exercisable at prices ranging from $.897 per share to $2.53 per
share and are exercisable through various expiration dates from 1999 to 2005.
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RECENT PRICE OF COMMON STOCK. On April __, 1999, the last reported sales price
of the Common Stock of the Company on The Nasdaq Stock Market was $____ per
share.
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 1998, 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 1998
the Company contributed $192,000 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 $10,000 in 1998. The Company makes matching contributions and in 1998
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 Goldberg and Bruce M. Goldberg
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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 temporary 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 pro rata
basis through June 1998 immediately with any additional amounts of bonus to be
paid on the same pro rata 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 was 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. In March 1999, Bruce M.
Goldberg's house in Miami was sold and the second mortgage securing the $125,000
loan was released.
The Goldberg Agreements, as amended, together with the employment agreements
then in existence 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 ten-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 $1.875 per share. The 1995 Options granted to each of the
executive officers will vest in no event later than nine years from the date of
grant, subject to earlier vesting in the following percentage increments based
upon the Company attaining net earnings per share on a primary ("basic") basis
in any year from 1995 through 2000, inclusive, in at least the following
amounts:
PERCENTAGE OF NET EARNINGS
OPTIONS VESTED (%) PER SHARE ($)
------------------ -------------
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
16
<PAGE>
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.
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 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 then in existence 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, Chief Financial Officer and Corporate
Secretary (as amended, the "Flanders 1995 Agreement"), and Rick Gordon, its
Senior Vice President of Sales (as amended, the "Gordon 1995 Agreement" and
collectively with the Flanders Agreement, the "Flanders/Gordon 1995
Agreements"). The Flanders/Gordon 1995 Agreements each expired on December 31,
1998, and provided 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 1995 Agreements, Messrs.
Gordon and Flanders were 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
was limited in any year to an amount no greater than such executive's base
salary for the applicable year. Pursuant to the Flanders/Gordon 1995 Agreements,
each of Messrs. Gordon and Flanders were granted 150,000 of the 1995 Options.
The Flanders/Gordon 1995
17
<PAGE>
Agreements also provided 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 was 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 1995 Agreement. Additionally, under the
Flanders/Gordon 1995 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 1995 Agreements also
provided that, in the event of a change in control (as defined) of the Company,
each of Mr. Gordon and Mr. Flanders would have the option in his sole discretion
to terminate the applicable Flanders/Gordon 1995 Agreement. In such event, Mr.
Gordon or Mr. Flanders, at his option would have been 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 1995 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 1995 Agreement. As
noted above, the Flanders/Gordon 1995 Agreements expired on December 31, 1998
and, accordingly, the Company is currently discussing with each of Messrs.
Gordon and Flanders the terms upon which the Flanders/Gordon 1995 Agreements
will be extended.
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, 1998 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.
<TABLE>
<CAPTION>
STOCK PRICE PERFORMANCE CHART
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE ELECTRONIC PARTS AND EQUIPMENT
PEER GROUP INDEX AND NASDAQ MARKET INDEX*
(GRAPHICAL REPRESENTATION OF DATA BELOW)
FISCAL YEAR ENDED DECEMBER 31
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
COMPANY 100.00 71.43 88.10 38.10 54.76 30.95
THE ELECTRONIC PARTS AND
EQUIPMENT PEER GROUP INDEX 100.00 92.95 111.25 128.69 132.52 100.20
NASDAQ MARKET INDEX 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
- -----------------------
*Assumes the investment of $100 on January 1, 1994 and reinvestment of dividends
(no dividends were declared on the Company's Common Stock during the period).
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.
18
<PAGE>
Bruce M. Goldberg has been a member of the Board since 1987 and Howard L.
Flanders has been a member of the Board since 1992. The names of the nominees
and the terms and class are set forth below. For biographical and other
information regarding such nominees, see "BOARD OF DIRECTORS."
NOMINEE TERM CLASS
------- ---- -----
Bruce M. Goldberg 3 years II
Howard L. Flanders 3 years II
Proxies cannot be voted for a greater number of persons than the two nominees
named above.
The nominees for directors who receive a plurality of the votes cast by the
holders of the Shares will be elected. Abstention (withheld authority) and
broker or nominee non-votes are not counted in determining the number of shares
voted for or against any nominee for director.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE NOMINEES FOR ELECTION TO THE BOARD.
ITEM 2. AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK
SPLIT
GENERAL
It is intended that the votes will be cast pursuant to the accompanying proxy
for the approval of the amendment to the Certificate of Incorporation to effect
the Reverse Stock Split, unless otherwise directed.
The Board has approved the proposal for the Reverse Stock Split subject to
shareholder approval. The Reverse Stock Split proposal must be approved by the
holders of a majority of the Shares of the Company. The proposal for the Reverse
Stock Split is referred to hereinafter as the "Reverse Stock Split Proposal."
Except for an adjustment which may result from the rounding up of fractional
shares as described below, each shareholder will hold the same percentage of
Common Stock outstanding immediately following the Reverse Stock Split as each
shareholder did immediately prior to the Reverse Stock Split. The Reverse Stock
Split will be effected by an amendment to the Company's Certificate of
Incorporation in substantially the form attached to this Proxy Statement as
Appendix A (the "Reverse Stock Split Amendment") and will become effective upon
the filing of the Reverse Stock Split Amendment with the Secretary of State of
Delaware (the "Effective Date"). The following discussion is qualified in its
entirety by the full text of the Reverse Stock Split Amendment, which is hereby
incorporated by reference herein.
At the Effective Date, each five shares of Common Stock issued and outstanding
will automatically be reclassified and converted into one share of Common Stock.
Fractional shares of Common Stock will not be issued as a result of the Reverse
Stock Split, but instead, any fractional shares will be rounded up to the
nearest whole share. Each shareholder immediately prior to the Reverse Stock
Split will continue to be a shareholder immediately after the Reverse Stock
Split.
The Company expects that, after the Reverse Stock Split Proposal is approved by
the shareholders of the Company, the Reverse Stock Split Amendment will be filed
promptly. However, notwithstanding approval of the Reverse Stock Split Proposal
by the shareholders, the Board of the Company may elect not to file, or to delay
the filing of, the Reverse Stock Split Amendment, if the Board determines that
filing the Reverse Stock Split Amendment would not be in the best interest of
the Company and its shareholders. The actual timing of such filing (and whether
such filing is made) will be determined by the Board based upon their evaluation
as to when such action will be most advantageous to the Company and its
shareholders. In addition, the Board may make any and all changes to the Reverse
Stock Split Amendment that it deems necessary to give effect to the intents and
purposes of the Reverse Stock Split.
19
<PAGE>
REASONS FOR THE REVERSE STOCK SPLIT
The primary purpose of the Reverse Stock Split is to combine the outstanding
shares of Common Stock so that the Common Stock outstanding after giving effect
to the Reverse Stock Split trades at a significantly higher price per share than
the Common Stock outstanding before giving effect to the Reverse Stock Split.
The Company believes that the Reverse Stock Split will aid the Company in
remaining eligible for listing on The Nasdaq Stock Market, Inc. ("The Nasdaq
Stock Market").
In response to notice provided by the Nasdaq Listing Qualifications Department
of The Nasdaq Stock Market, the Company has proposed to effect the Reverse Stock
Split in order to comply with the minimum bid price requirement for continued
inclusion of the Common Stock on The Nasdaq Stock Market, pursuant to
Marketplace Rule 4450(a)(5) under Maintenance Standard 1. On March 17, 1999, the
Company was advised by the Nasdaq Listing Qualifications Department that, based
upon its review of the Company's closing stock price for the past thirty days,
the Company's Common Stock had failed to maintain a closing bid price of greater
than or equal to $1.00 for any trading day during such period as required under
The Nasdaq Stock Market maintenance standards (the "Nasdaq Maintenance
Standards") for a stock to be continued to be listed on The Nasdaq Stock Market.
Although no delisting action was initiated at that time, the Company was
provided ninety (90) calendar days in which to regain compliance with this
maintenance standard. In the event that during the period ending June 17, 1999
(or any extended period granted by The Nasdaq Stock Market in its sole
discretion upon application by the Company) the closing bid price of the
Company's Common Stock is not greater than or equal to $1.00 for a minimum of
ten (10) consecutive trading days, the Company's Common Stock would be delisted
at the opening of business on June 21, 1999. The Company believes, but cannot
assure, that the Reverse Stock Split will enable the Common Stock to trade above
the minimum bid price established by The Nasdaq Stock Market. If, as a result of
the Reverse Stock Split, the Company's Common Stock remains eligible for listing
on The Nasdaq Stock Market, there can be no assurance that the Common Stock will
continue to trade above the minimum bid price or that the Company will continue
to meet each of the other Nasdaq Maintenance Standards. See "Other Nasdaq
Requirements."
The Company believes that maintaining the listing of the Common Stock on The
Nasdaq Stock Market is in the best interests of the Company and its
shareholders. Inclusion in The Nasdaq Stock Market increases liquidity and may
potentially minimize the spread between the "bid" and "asked" prices quoted by
market makers. Further, a listing on The Nasdaq Stock Market may enhance the
Company's access to capital and increase the Company's flexibility in responding
to anticipated capital requirements. The Company believes that prospective
investors will view an investment in the Company more favorably if its shares
qualify for listing on The Nasdaq Stock Market.
The Company also believes that the current per share price level of the
Company's Common Stock has reduced the effective marketability of the Company's
shares of Common Stock because of the reluctance of many brokerage firms to
recommend low priced stock to their clients. Certain investors view low-priced
stock as unattractive, although certain other investors may be attracted to
low-priced stock because of the greater trading volatility sometimes associated
with such securities and the low cost to purchase such securities. In addition,
a variety of brokerage house policies and practices tend to discourage
individual brokers within those firms from dealing in low-priced stock. However,
the Board believes that the Reverse Stock Split will enhance the Company's
flexibility in the future for financing and capitalization needs. There can,
however, be no assurance that the Reverse Stock Split will have any of the
foregoing effects.
In the event that the Company's Common Stock is delisted from The Nasdaq Stock
Market, trading, if any, in the Company's Common Stock would likely only be
conducted in the non-Nasdaq over-the-counter market in the so-called "pink
sheets" or the NASD's "Electronic Bulletin Board." This may have a negative
impact on the liquidity and price of the Common Stock and investors may find it
more difficult to purchase or dispose of, or to obtain accurate quotations as to
the market value of, the Company's Common Stock.
In addition, if the Common Stock is not listed on the Nasdaq National Market and
the trading price of the Common Stock were to remain below $5.00 per share,
trading in the Company's Common Stock would also be subject to the requirements
of certain rules promulgated under the Securities Exchange Act of 1934, as
amended, which require additional disclosure by broker-dealers in connection
with any trades involving a stock defined as a penny stock
20
<PAGE>
(generally, any non-Nasdaq equity security that has a market price of less than
$5.00 per share, subject to certain exceptions). The additional burdens imposed
upon broker-dealers from effecting transactions in the Common Stock could limit
the market liquidity of the Common Stock and the ability of investors to trade
the Company's Common Stock.
For all the above reasons, the Company believes that the Reverse Stock Split is
in the best interests of the Company and its shareholders. However, there can be
no assurances that the Reverse Stock Split will have the desired consequences.
The Company anticipates that, following the consummation of the Reverse Stock
Split, the Common Stock will trade at a price per share that is significantly
higher than the current market price of the Common Stock. HOWEVER, THERE CAN BE
NO ASSURANCE THAT THE TOTAL MARKET CAPITALIZATION OF THE COMMON STOCK AFTER THE
REVERSE STOCK SPLIT WILL BE EQUAL TO THE TOTAL MARKET CAPITALIZATION BEFORE THE
REVERSE STOCK SPLIT OR THAT THE MARKET PRICE FOLLOWING THE REVERSE STOCK SPLIT
WILL EITHER EXCEED OR REMAIN IN EXCESS OF THE CURRENT MARKET PRICE. Furthermore,
since the Reverse Stock Split will decrease the number of shares outstanding
resulting in a substantially smaller public float, it could adversely affect
market liquidity, potentially making it more difficult to dispose of shares of
the Company's Common Stock.
EFFECT OF THE REVERSE STOCK SPLIT PROPOSAL
After the Reverse Stock Split, each shareholder will own one-fifth as many
shares (but the same percentage of the outstanding shares) as such shareholder
owned before the Reverse Stock Split; provided, however, that any fractional
share will be rounded upward to the nearest whole share. Each shareholder of the
Company immediately before the Reverse Stock Split will continue to be a
shareholder immediately after the Reverse Stock Split. The number of shares of
Common Stock that may be purchased upon the exercise of outstanding options,
warrants, and other securities convertible into, or exercisable or exchangeable
for, shares of Common Stock (collectively, "Convertible Securities") and the per
share exercise or conversion prices thereof will be adjusted appropriately as of
the Effective Date, so that the aggregate number of shares of Common Stock
issuable in respect of Convertible Securities immediately following the
Effective Date will be one-fifth (without taking into account the effect of
rounding up) of the number issuable in respect thereof immediately prior to the
Effective Date and the total exercise or conversion prices for all of such
shares issuable in respect of Convertible Securities will remain unchanged. For
example, a holder of a stock option to purchase 1,000 shares of Common Stock at
an exercise price of $1.00 per share prior to the Effective Date would be the
holder of a stock option to purchase 200 shares of Common Stock at an exercise
price of $5.00 per share at the Effective Date. The number of shares of Common
Stock reserved for issuance under the Option Plan would also be reduced after
the Effective Date to one-fifth of the number reserved for issuance under the
Option Plan prior to the Effective Date. See ITEM 3 below.
The Reverse Stock Split will also result in some shareholders owning "odd lots"
of less than 100 shares of Common Stock received as a result of the Reverse
Stock Split. Brokerage commissions and other costs of transactions in odd lots
may be higher, particularly on a per-share basis, than the cost of transactions
in even multiples of 100 shares.
The par value of the Common Stock will remain at $0.01 per share following the
Reverse Stock Split, and the number of shares of the Common Stock outstanding
will be reduced. As a consequence, the aggregate par value of the outstanding
Common Stock will be reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and accounting
purposes will be correspondingly increased. The Reverse Stock Split will not
affect the Company's total shareholders' equity. If the Reverse Stock Split is
effected, all share and per share information would be retroactively adjusted
following the Effective Date to reflect the Reverse Stock Split for all periods
presented in future filings by the Company with the Securities and Exchange
Commission.
The Board considered reducing the number of shares of authorized Common Stock in
connection with the Reverse Stock Split but determined that the availability of
additional shares may be beneficial to the Company in the future. The
availability of additional authorized shares will allow the Board to issue
shares for corporate purposes, if appropriate opportunities should arise,
without further action by shareholders or the time delay involved in obtaining
shareholder approval (unless approval is required by law or regulation or the
rules of The Nasdaq Stock Market). Such purposes
21
<PAGE>
could include effecting future acquisitions of other businesses or meeting
requirements for working capital or capital expenditures through the issuance of
shares. To the extent that any additional shares (or securities convertible into
Common Stock) may be issued on other than a pro rata basis to current
shareholders, the present ownership position of current shareholders may be
diluted. The Common Stock has no preemptive rights. In addition, if another
party should seek to acquire or take over control of the Company, and the Board
does not believe such transaction is in the best interest of the Company and its
shareholders, some or all of the authorized shares could be issued to another
party to try to block such transaction.
EXCHANGE OF STOCK CERTIFICATES; NO FRACTIONAL SHARES
The combination and reclassification of shares of Common Stock pursuant to the
Reverse Stock Split will occur automatically on the Effective Date without any
action on the part of shareholders of the Company and without regard to the date
certificates representing shares of Common Stock prior to the Reverse Stock
Split are physically surrendered for new certificates. Every five (5) shares of
issued Common Stock would be converted and reclassified into one (1) share of
post-Reverse Stock Split Common Stock, and any fractional interests resulting
from such reclassification would be rounded upward to the nearest whole share.
For example, a holder of one hundred (100) shares prior to the Effective Date
would be the holder of twenty (20) shares at the Effective Date, and the holder
of one thousand one (1001) shares prior to the Effective Date would be the
holder of two hundred and one (201) shares at the Effective Date.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates for shares of Common Stock to be
used in forwarding such certificates for surrender and exchange for certificates
representing the number of shares of Common Stock such shareholder is entitled
to receive as a consequence of the Reverse Stock Split. The transmittal forms
will be accompanied by instructions specifying other details of the exchange.
Upon receipt of such transmittal form, each shareholder should surrender the
certificates representing shares of Common Stock prior to the Reverse Stock
Split in accordance with the applicable instructions. Each holder who surrenders
certificates will receive new certificates representing the whole number of
shares of Common Stock that such shareholder holds as a result of the Reverse
Stock Split, including shares resulting from the rounding up of any fractional
shares. Shareholders will not be required to pay any transfer fee or other fee
in connection with the exchange of certificates. SHAREHOLDERS SHOULD NOT SEND
THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
As of the Effective Date, each certificate representing shares of Common Stock
outstanding prior to the Effective Date will be deemed canceled and, for all
corporate purposes, will be deemed only to evidence ownership of the number of
shares of Common Stock into which the shares of Common Stock evidenced by such
certificate have been converted by the Reverse Stock Split.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of material federal income tax consequences of the
Reverse Stock Split is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations thereunder, judicial decisions, and current
administrative rulings and practices, all as in effect on the date hereof and
all of which could be repealed, overruled, or modified at any time, possibly
with retroactive effect. No ruling from the Internal Revenue Service (the "IRS")
with respect to the matters discussed herein has been requested, and there is no
assurance that the IRS would agree with the conclusions set forth in this
discussion.
This discussion is for general information only and does not address certain
federal income tax consequences that may be relevant to particular shareholders
in light of their personal circumstances or to certain types of shareholders
(such as dealers in securities, insurance companies, foreign individuals and
entities, financial institutions, and tax-exempt entities) who may be subject to
special treatment under the federal income tax laws. This discussion also does
not address any tax consequences under state, local, or foreign laws.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT.
22
<PAGE>
Except as discussed below, no gain or loss should be recognized by a shareholder
who receives only Common Stock upon the Reverse Stock Split. The aggregate tax
basis of the shares of Common Stock held by a shareholder following the Reverse
Stock Split will equal the shareholder's aggregate basis in the Common Stock
held immediately prior to the Reverse Stock Split and generally will be
allocated among the shares of Common Stock held following the Reverse Stock
Split on a pro-rata basis. Shareholders who have used the specific
identification method to identify their basis in shares of Common Stock combined
in the Reverse Stock Split should consult their own tax advisors to determine
their basis in the post-Reverse Stock Split shares of Common Stock received in
exchange therefor. Shares of Common Stock received should have the same holding
period as the Common Stock surrendered. Although not free from doubt, the
results described above should apply to a shareholder who receives a portion of
his or her Common Stock as a result of the rounding up of a fractional share to
a whole share. However, it is possible that the receipt of additional Common
Stock due to rounding could be wholly or partly taxable.
OTHER NASDAQ REQUIREMENTS
In addition to the minimum bid price per share requirement described above, the
Common Stock's continued listing on The Nasdaq Stock Market is subject to the
maintenance of other quantitative and non-quantitative requirements, as set
forth in the Nasdaq Maintenance Standards. Although the Company believes that it
will meet all such requirements on the first full trading day after the Reverse
Stock Split has become effective, there can be no assurances that such will be
the case, or that other factors will not cause the Company to fail to meet such
requirements. The Goldberg Group has indicated that they intend to vote in favor
of the Reverse Stock Split Proposal.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
ITEM 3. AUTHORIZATION OF ADDITIONAL SHARES UNDER OPTION PLAN
The Company proposes to increase the number of shares of Common Stock reserved
for issuance upon the exercise of options granted under the Option Plan to
4,500,000 shares (the "Reserved Share Increase") prior and without giving effect
to the proposed Reverse Stock Split. If the Reverse Stock Split is approved by
the Company's shareholders and effectuated by the Company, the number of shares
reserved for issuance under the Option Plan would be reduced after the Effective
Date to one-fifth of the number reserved for issuance under the Option Plan
prior to the Effective Date. Assuming the Reserve Share Increase and the Reverse
Stock Split Proposal are approved, the number of shares of the Company's Common
Stock reserved for issuance under the Option Plan would be adjusted to 900,000
shares. Prior to the Board's authorization and adoption of the Reserve Share
Increase subject to shareholder approval, 3,250,000 shares were reserved for
issuance upon the exercise of options granted under the Option Plan. The Company
believes that increasing the number of reserved shares will permit greater
employee, officer and director participation in the Option Plan and, as a
result, will foster initiative, increased performance and greater employee
loyalty. In addition, as discussed in ITEM 4 below, it will enable the Company
to continue in the future to be able to grant options as incentives to existing
employees as well as in order to attract and retain the best qualified
personnel.
As of this date, the Company has no commitment to issue any other specific
options under the Option Plan other than those previously issued and disclosed
herein. However, the Compensation Committee has the authority to issue options,
at any time, in its sole discretion. See "EXECUTIVE COMPENSATION - Employees',
Officers', Directors' Stock Option Plan" for a discussion of the material
features of the Option Plan and "ITEM 4. EXTENSION OF TERM AND EXPIRATION DATE
OF OPTION PLAN" for a discussion of the other proposed amendment to the Option
Plan made by the Board requiring the approval of the Company's shareholders.
The affirmative vote of a majority of the Shares represented at the Meeting
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 Goldberg Group has indicated that they intend
to vote in favor of this proposal.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
23
<PAGE>
ITEM 4. EXTENSION OF TERM AND EXPIRATION DATE OF OPTION PLAN
The Company proposes that the term of the Option Plan be extended until and the
Option Plan be continued in effect through April 18 , 2009, ten years from the
date of the approval by the Board of the amendment to extend the term of the
Option Plan. Prior to the Board's authorization and adoption of the extension of
the term and expiration date of the Option Plan subject to shareholder approval,
the Option Plan would have expired on May 28, 2004, after which no further
options could be granted under the Option Plan. This proposal is being made in
conjunction with the Reserve Share Increase proposal in order to ensure that the
Company will continue in the future to be able to grant options as incentives to
those individuals upon whose efforts the Company relies for the continued
success and development of its business and to attract and retain the best
qualified personnel. The Company believes it is important to demonstrate to its
current and future employees the Company's commitment to continue into the
future its ability to be able to issue options as one of the available forms of
compensation. See "EXECUTIVE COMPENSATION - Employees', Officers', Directors'
Stock Option Plan" for a discussion of the material features of the Option Plan
and "ITEM 3. AUTHORIZATION OF ADDITIONAL SHARES UNDER OPTION PLAN" for a
discussion of the other proposed amendment to the Option Plan made by the Board
requiring the approval of the Company's shareholders.
The affirmative vote of a majority of the shares represented at the Meeting
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 for or
against this proposal. The Goldberg Group has indicated that they intend to vote
in favor of this proposal.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
ITEM 5. 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, 1999, 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.
SHAREHOLDER'S PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2000 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 ________, 2000. Any such
shareholder proposal must comply with the requirements of Rule 14a-8 promulgated
under the Securities Exchange Act of 1934.
The persons named as proxies for the 2000 annual meeting of shareholders will
generally have discretionary authority to vote on any matter presented by a
shareholder for action at the meeting. In the event that the Company receives
notice
24
<PAGE>
of any shareholder proposal no later than forty-five (45) days before the date
on which the Company first mailed this Proxy Statement, then, so long as the
Company includes in its proxy statement for the 2000 annual meeting of
shareholders advice on the nature of the matter and how the named proxies intend
to vote the shares for which they have received discretionary authority, such
proxies may exercise discretionary authority with respect to such matter, except
to the extent limited by the rules of the Securities and Exchange Commission
governing shareholder proposals.
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, 1998 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, 1998, 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,
-----------------------------------
Howard L. Flanders,
Corporate Secretary
___________, 1999
Miami, Florida
25
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ALL AMERICAN SEMICONDUCTOR, INC.
_____________________
The undersigned, President and Corporate Secretary of All American
Semiconductor, Inc., a Delaware corporation (the "Corporation"), do hereby
certify:
FIRST: That at a special meeting of the Board of Directors the
following resolution was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware and the
By-laws of the Corporation, setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation, as previously amended,
declaring said amendment to be advisable and directing that said amendment be
submitted at the next annual meeting of the shareholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that, subject to obtaining the approval of
shareholders of the Corporation holding a majority of the
outstanding shares of common stock of the Corporation,
Article 4 of the Certificate of Incorporation of the
Corporation, as previously amended (the "Certificate"), be,
and it hereby is authorized and deemed advisable to be,
further amended by adding, at the end thereof, the following
additional paragraphs (the "Reverse Stock Split Amendment"):
"Simultaneously with the effective
date of this Certificate of Amendment (the
"Effective Date"), all issued and outstanding
shares of common stock ("Existing Common
Stock") shall be and hereby are automatically
combined and reclassified as follows: each five
(5) shares of Existing Common Stock shall be
combined and reclassified (the "Reverse Stock
Split") as one share of issued and outstanding
common stock ("New Common Stock"), provided,
that there shall be no fractional shares of New
Common Stock. In the case of any holder of
fewer than five (5) shares of Existing Common
Stock or any number of shares of Existing
Common Stock which, when divided by five (5),
does not result in a whole number (a
"Fractional Shareholder"), the fractional share
interest of New Common Stock held by any
Fractional Shareholder as a result of the
Reverse Stock Split shall be rounded up to the
nearest whole share of New Common Stock.
<PAGE>
The Corporation shall, through its
transfer agent, provide certificates
representing New Common Stock to holders of
Existing Common Stock in exchange for
certificates representing Existing Common
Stock. From and after the Effective Date,
certificates representing shares of Existing
Common Stock are hereby canceled and shall
represent only the right of the holders thereof
to receive New Common Stock.
From and after the Effective Date, the
term "New Common Stock" as used in this Article
4 shall mean common stock as provided in this
Certificate of Incorporation. The par value of
the common stock shall remain as otherwise
provided in Article 4 of this Certificate of
Incorporation."
SECOND: That thereafter, pursuant to the resolution of the Board of
Directors, an annual meeting of the shareholders of the Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the Reverse Stock Split
Amendment.
THIRD: That said amendment to the Certificate of Incorporation was
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware and, accordingly, Article 4 of the
Certificate of Incorporation is amended as provided herein.
FOURTH: That said amendment shall be effective on the date this
Certificate of Amendment is filed and accepted by the Secretary of State of the
State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Bruce M. Goldberg, its President, and Howard L. Flanders, its
Corporate Secretary, this _____ day of _________, 1999.
-----------------------------------
Bruce M. Goldberg, President
2
<PAGE>
----------------------------------------------
Howard L. Flanders, Corporate Secretary
STATE OF FLORIDA )
) SS:
COUNTY OF MIAMI-DADE )
The foregoing instrument was acknowledged before me this ___ day of
_____________, 1999, by Bruce M. Goldberg, as President of All American
Semiconductor, Inc., a Delaware corporation, on behalf and as the act and deed
of said corporation. He is personally known to me or has produced identification
and he swore that the facts stated therein are true and correct.
Sign Name:________________________
Print Name:_______________________
My Commission Expires: NOTARY PUBLIC
Serial No (none, if blank):_______
[NOTARIAL SEAL]
STATE OF FLORIDA )
) SS:
COUNTY OF MIAMI-DADE )
The foregoing instrument was acknowledged before me this ___ day of
_____________, 1999, by Howard L. Flanders, as Corporate Secretary of All
American Semiconductor, Inc., a Delaware corporation, on behalf and as the act
and deed of said corporation. He is personally known to me or has produced
identification and he swore that the facts stated therein are true and correct.
Sign Name:________________________
Print Name:_______________________
My Commission Expires: NOTARY PUBLIC
Serial No(none, if blank):_______
[NOTARIAL SEAL]
3
<PAGE>
PRELIMINARY COPY
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-__________, 1999
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 __________, _________, 1999, 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, 2, 3, 4 and 5 on reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. WHERE A VOTE IS NOT SPECIFIED, THE PROXIES WILL
VOTE THE SHARES REPRESENTED BY THE PROXY "FOR" EACH OF PROPOSALS 1, 2, 3, 4 AND
5 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 1998 Annual Report and the Notice of Annual
Meeting of Shareholders and Proxy Statement relating thereto is hereby
acknowledged.
--------------
SEE REVERSE
SIDE
--------------
<PAGE>
<TABLE>
<CAPTION>
- ----------
PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE
- ----------
FOR WITHHELD FOR AGAINST ABSTAIN
<S> <C>
1. Election of ------ ------ 2. Amend Company's Certificate of ----- ----- -----
Directors Nominees: Bruce M. Goldberg Incorporation to effect a
------ ------ Howard L. Flanders one-for-five reverse stock ----- ----- -----
split.
Instructions: To withhold 3. Increase the number of shares of ----- ----- -----
authority to vote for any common stock reserved for
individual nominee, write that issuance under the Company's ----- ----- -----
nominee's name in the space Employees', Officers',
provided below. Directors' Stock Option Plan
For, except vote withheld from (the "Option Plan").
the following nominee(s):
4. Extend the term and expiration ----- ----- -----
____________________________________ date of the Option Plan to April
18, 2009. ----- ----- -----
5. Ratification of the selection of ----- ----- -----
Lazar Levine & Felix LLP as the
Company's independent public ----- ----- -----
accountants for the year ending
December 31, 1999.
6. Upon such other matters as may
properly come before the annual
meeting or any and all
postponements or adjournments
thereof.
SIGNATURE(s)_________________________________________________________ DATED:____________________________________________ , 1999
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.)
</TABLE>
