SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
ALL AMERICAN SEMICONDUCTOR, INC.
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
...........................................................................
(2) Aggregate number of securities to which transaction applies:
...........................................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
...........................................................................
(4) Proposed maximum aggregate value of transaction:
...........................................................................
(5) Total fee paid:
...........................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
...........................................................................
2) Form, Schedule or Registration Statement No.:
...........................................................................
3) Filing Party:
...........................................................................
4) Date Filed:
...........................................................................
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 6, 2000
--------------------------
To: The shareholders of All American Semiconductor, Inc.
The annual meeting of the shareholders of All American Semiconductor, Inc. (the
"Company"), a Delaware corporation, will be held on Tuesday, June 6, 2000, at 10
A.M., California local time, at the Embassy Suites, 2885 Lakeside Drive, Santa
Clara, California, for the following purposes:
1. to elect three directors to serve on the Board of Directors until the
2003 annual meeting of shareholders or until election and qualification
of their respective successors;
2. to approve the 2000 Nonemployee Director Stock Option Plan of the
Company;
3. to ratify the selection of Lazar Levine & Felix LLP as the Company's
independent public accountants for the year ending December 31, 2000;
and
4. 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 Thursday, April 27,
2000, will be entitled to notice of and to vote at the meeting or at any
adjournments or postponements thereof.
By Order of the Board of Directors,
/s/ HOWARD L. FLANDERS
-----------------------------------
Howard L. Flanders,
Corporate Secretary
May 1, 2000
Miami, Florida
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC.
16115 N.W. 52ND AVENUE
MIAMI, FLORIDA 33014
--------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 6, 2000
--------------------
INTRODUCTION
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of Directors
("Board") of All American Semiconductor, Inc. (the "Company") for use at the
Company's annual meeting of shareholders (the "Meeting") to be held on Tuesday,
June 6, 2000, at 10 A.M., California local time, at the Embassy Suites, 2885
Lakeside Drive, Santa Clara, California, 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 May 3, 2000.
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. 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,
1999 (which has included therein audited consolidated financial statements for
the Company) is being mailed to the Company's shareholders together with this
Proxy Statement.
VOTING SECURITIES
All voting rights are vested exclusively in the holders of the Company's common
stock, $.01 par value per share (the "Common Stock"), with each share entitled
to one vote. Only shareholders of record at the close of business on Thursday,
April 27, 2000 (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 3,996,131 shares of Common Stock outstanding,
1
<PAGE>
all of which (except 32,141 shares held by a wholly-owned subsidiary of the
Company and 174,646 treasury shares of the Company) are entitled to vote at the
Meeting. For purposes of this Proxy Statement, the "Shares" shall not include
the shares of Common Stock held by the wholly-owned subsidiary of the Company
nor treasury shares. 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 10.7% 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 7.3% 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 1999 (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) .................. 495,574 13.1%
Paul Goldberg (3)(5) ...................... 405,715 10.7%
John Jablansky ............................ 11,250 *
Howard L. Flanders ........................ 4,200 *
Daniel M. Robbin .......................... 2,000 *
Richard E. Siegel ......................... 1,100 *
Rick Gordon ............................... 200 *
Robin L. Crandell ......................... - -
S. Cye Mandel ............................. - -
All executive officers and directors
as a group (9 persons)(3)(4)(5) ........... 642,897 17.0%
</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; Daniel M. Robbin
is 4697 Carlton Golf Drive, Lake Worth, Florida 33467; Robin L.
Crandell is 2700 Augustine Drive, Suite 110, Santa Clara, California
95054; and Richard E. Siegel is 10 Long Spur Street, Portola Valley,
California 94028.
(2) Excludes outstanding stock options to purchase 714,848 shares of the
Company's Common Stock, issued pursuant to the Company's Employees',
Officers', Directors' Stock Option Plan (as previously amended and
restated the "Option Plan"). Of these outstanding options, 388,200
options are held by the executive officers and directors of the Company
as a group, including 140,000 options held by Bruce M. Goldberg,
105,000 options held by Paul Goldberg, 62,600 options held by Howard L.
Flanders, 64,600 options held by Rick Gordon, 9,000 options held by
John Jablansky and 7,000 options held by Daniel M. Robbin. Further
excludes currently outstanding warrants to purchase 113,650 shares of
the Company's Common Stock. If all options and warrants outstanding as
of the Record Date were exercised, Bruce M. Goldberg, Paul Goldberg,
Howard L. Flanders, Rick Gordon, John Jablansky and Daniel M. Robbin
and all executive officers and directors of the
2
<PAGE>
Company as a group would beneficially own as of the Record Date, 13.8%,
11.1%, 1.4%, 1.4%, .4%, .2% and 22.3%, 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 206,787 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 277,142 shares of the
Company's Common Stock that Paul Goldberg and Bruce M. Goldberg, as
trustees, have the right to vote through December 29, 2001 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 15,900, 15,900, 15,900, 15,900 and 15,900 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 1,500 shares of the Company's Common Stock held of record
by Jayne Goldberg, the wife of Bruce M. Goldberg, and 19,209 shares of
the Company's Common Stock held of record by an unrelated third party
as trustee for Matthew Goldberg (9,687 shares) and Alec Goldberg (9,522
shares). Bruce M. Goldberg disclaims beneficial ownership over all such
securities.
(5) Includes 57,844 shares of the Company's Common Stock owned of record by
Paul Goldberg's wife, Lola Goldberg, and 250 and 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 35,940 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.
BOARD OF DIRECTORS
The Company currently has eight 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 71 Chairman of the Board
Bruce M. Goldberg (1) II 44 Director, President
and Chief Executive
Officer
Howard L. Flanders II 42 Director, Executive
Vice President, Chief
Financial Officer and
Corporate Secretary
Rick Gordon III 46 Director, Senior Vice
President of Sales
S. Cye Mandel (2)(3) I 71 Director
Daniel M. Robbin(2)(3) I 64 Director
Robin L. Crandell III 50 Director
Richard E. Siegel II 54 Director
- ------------------
(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
3
<PAGE>
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, 2002 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 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 was 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.
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 was a consultant to the Company from 1995 to
June 1999.
ROBIN L. CRANDELL is the Vice President of Sales for Phase II Technical Sales, a
manufacturers sales representation firm. Prior to 1998, Mr. Crandell was Senior
Vice President of Sales and Marketing for Samsung Electronics, Storage System
Division, Vice President of North American Business Operations for VLSI
Technology and Vice President of North American Sales for Samsung Semiconductor.
Prior thereto he held various sales positions at Advanced Micro Devices and was
a senior engineer with Litton Data Systems. Mr. Crandell has a BSEE degree from
California State Polytechnic University. Mr. Crandell became a director of the
Company on November 29, 1999.
RICHARD E. SIEGEL is the Executive Vice President and a director of Supertex,
Inc., a manufacturer of complex proprietary and industry-standard integrated
circuits. Mr. Siegel has been with Supertex since 1981. Prior thereto, Mr.
Siegel worked at Signetics Corporation, Fairchild Semiconductor, Ford
Instrument, and Grumman Aircraft Corporation. Mr. Siegel has a B.S. degree in
Mechanical Engineering from the City College of New York. Mr. Siegel became a
director of the Company on November 29, 1999.
4
<PAGE>
The Board formally met four times during the fiscal year ended December 31,
1999, in addition to acting once during the year by unanimous written consent.
All Board members attended the meetings, except for two meetings in which one
member was absent, and executed the unanimous written consent.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999, Daniel M. Robbin, a director of the Company, performed consulting
services on behalf of the Company for which he received an aggregate of $13,000.
During 1999, the Company purchased product aggregating approximately $3.8
million from Supertex, Inc., a supplier of the Company where a board member of
the Company, Richard E. Siegel, is the Executive Vice President and a director.
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 other than the proposed 2000 Nonemployee Director Stock Option Plan (the
"Director Stock Option Plan"), which the shareholders of the Company are being
asked to consider and approve at the Meeting. In addition to the proposed
Director Option Stock Plan, the Company may decide in the future to further
compensate directors and/or to establish a standard cash compensation
arrangement for non-employee directors. See "ITEM 2.APPROVAL OF THE 2000
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN" in "PROPOSALS."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), 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, 1999, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were satisfied.
BOARD COMMITTEES
EXECUTIVE COMMITTEE
The Executive Committee is comprised of Paul Goldberg and Bruce M. Goldberg.
During 1999, 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 Daniel M. Robbin. During
the fiscal year ended December 31, 1999, the Audit Committee met one time. The
Audit Committee is responsible for recommending the selection of the independent
auditors, reviewing the arrangements and scope of the independent audit,
reviewing internal
5
<PAGE>
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 Daniel M. Robbin, 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, 1999, the Compensation
Committee did not meet formally, but acted twice 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, Bruce M. Goldberg, Howard L. Flanders and Rick Gordon 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 71 Chairman of the Board
Bruce M. Goldberg 44 President and Chief Executive Officer
Howard L. Flanders 42 Executive Vice President, Chief Financial
Officer and Corporate Secretary
Rick Gordon 46 Senior Vice President of Sales
John Jablansky 42 Senior Vice President of Product Management
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."
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation earned
during each of the fiscal years ended December 31, 1999, 1998, and 1997, by the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company whose total annual salary and bonus exceeded
$100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#) ($)(2)
- --------------------------- ---- --------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Paul Goldberg................... 1999 261,000 83,000 - 15,000 12,000
Chairman of the Board 1998 251,000 116,000 - - 8,600
1997 254,000 152,000 - 40,000(3) 10,000
Bruce M. Goldberg............... 1999 392,000 121,000 168,000(4) 15,000 27,000
President and Chief 1998 319,000 116,000 64,000(4) - 26,000
Executive Officer 1997 321,000 167,000 - 35,000(3) 25,000
Howard L. Flanders.............. 1999 191,000 55,000 - 30,000 18,000
Executive Vice President and 1998 182,000 77,000 - - 18,000
Chief Financial Officer 1997 182,000 101,000 - 2,600(3) 17,000
Rick Gordon..................... 1999 198,000 55,000 - 10,000 16,000
Senior Vice President of Sales 1998 189,000 77,000 - - 16,000
1997 188,000 101,000 - 24,600(3) 15,000
John Jablansky.................. 1999 165,000 - - 4,000 24,000
Senior Vice President of 1998 155,000 - - - 24,000
Product Management 1997 162,000 - - 5,000(3) 23,000
</TABLE>
- -------------------
(1) Except for Bruce M. Goldberg, other annual compensation for each of the
named executive officers in 1997, 1998 and 1999 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."
(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.
7
<PAGE>
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
1999 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 $11,500. The Company's obligations to make premium payments in
connection with Howard L. Flanders' and Rick Gordon's policies are expected to
last for a maximum of ten years. Howard L. Flanders and Rick Gordon have been
with the Company for a period of six years from the year in which the policy was
acquired (1993) and provided they each remain in the employ of the Company or
they have become disabled or a change in control has occurred during the term of
their employment, the advances will be deemed canceled and the security released
thereafter ratably over a five-year vesting period until such time as all
advances are deemed canceled.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows all grants of options to the named executive officers
of the Company during the fiscal year ended December 31, 1999. Pursuant to SEC
rules, the table also shows the value of the options granted at the end of the
option terms (as indicated below) if the price of the Company's stock was to
appreciate annually by 0%, 5% and 10%, respectively. There is no assurance that
such stock price will appreciate at the rates shown in the table. All of the
options set forth in the table are stock options issued pursuant to the Option
Plan. The Company does not have a plan whereby tandem stock appreciation rights
("SARS") are granted. See "Employees', Officers', Directors' Stock Option Plan"
hereinbelow.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
CLOSING VALUE AT ASSUMED
NUMBER OF % OF MARKET ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE ON PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE DATE OF FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION -------------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) ($/SHARE)(1) DATE 0% ($) 5% ($) 10%($)
- --------------------- ----------- ----------- --------- ------------ ---------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul Goldberg 15,000 7.3% 3.595 3.250 11/01/04 - 8,294 24,587
Bruce M. Goldberg 15,000 7.3% 3.268 3.250 11/01/05 - 16,310 37,344
Howard L. Flanders 30,000 14.7% 3.268 3.250 11/01/05 - 32,619 74,687
Rick Gordon 10,000 4.9% 3.268 3.250 11/01/05 - 10,873 24,896
John Jablansky 4,000 2.0% 3.268 3.250 11/01/05 - 4,349 9,958
</TABLE>
(1) For purposes of and as provided under the Option Plan, "fair market
value" on the date of grant of any option is the average of the market
price of a share of Common Stock for each of the seven (7) consecutive
business days preceding such date; the market price on each such day is
the closing sales price of a share of Common Stock on The Nasdaq Stock
Market on such day. The Compensation Committee of the Company believes
this calculation more accurately reflects "fair market value" of the
Company's Common Stock on any given day as compared to simply using the
closing market price on the date of grant. As a result, the closing
market price on the date of grant at times may be different than the
exercise price per share.
8
<PAGE>
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, 1999, and the value of
unexercised stock options as of December 31, 1999, 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 ........................................ - - 28,000 (E) -
- - 77,000 (U) -
Bruce M. Goldberg .................................... - - 23,000 (E) -
- - 117,000 (U) -
Howard L. Flanders ................................... - - 2,240 (E) -
- - 60,360 (U) -
Rick Gordon .......................................... - - 24,240 (E) -
- - 40,360 (U) -
John Jablansky ....................................... - - 3,500 (E) -
- - 5,500 (U) -
</TABLE>
- --------------
(1) Value is based upon the difference between the exercise price of the
options and the last reported sale price of the Common Stock on The
Nasdaq Stock Market on December 31, 1999 (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.
The Compensation Committee, in conjunction with the Board, authorized in March
and April, 2000, respectively, effective as of January 1, 2000 (and in certain
cases retroactively for 1999) certain modifications to the employment agreements
of Paul Goldberg, the Chairman of the Board, and Bruce M. Goldberg, Chief
Executive Officer and President of the Company, including the extension of the
term of their respective agreements until December 31, 2005, increases in their
respective base salaries, and, in the case of Bruce M. Goldberg, increases in
the percentage rate for his annual cash bonus. Increases in compensation for
Bruce M. Goldberg reflect the substantial increase in his cost of living
associated with his relocation to Silicon Valley, California. In addition, the
Compensation Committee, in conjunction with the Board, authorized new four-year
employment agreements commencing January 1, 2000 for each of Howard L.
9
<PAGE>
Flanders, Executive Vice President and Chief Financial Officer, and Rick Gordon,
Senior Vice President of Sales of the Company. The employment agreements (as
modified) continue to include an annual incentive cash bonus, which, together
with stock options previously issued to the executive officers, establishes an
incentive compensation program that the Compensation Committee believes
appropriate in order to establish a mechanism to tie the operating performance
of the Company and the return on investment made by the Company's shareholders
over the next several years to such executive officers' annual compensation
during such period. In particular, a potentially significant portion of each
executive officers' annual cash compensation is in the form of an annual bonus
arrangement based on a percentage of the pre-tax income of the Company and
certain 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 1999 and projected results for 2000 and thereafter, as well as,
in the case of Bruce M. Goldberg, his relocation to Silicon Valley, California
and the resulting increase in his cost of living. See "Employment Agreements"
and "Employees', Officers', Directors' Stock Option Plan" hereinbelow.
S. CYE MANDEL, member
DANIEL M. ROBBIN, 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. Unless earlier terminated, the Option Plan will continue in effect
through April 18, 2009, after which it will expire and no further options could
thereafter be granted under the Option Plan. The expiration of the Option Plan,
or its termination by the Board, will not affect any options previously granted
and then outstanding under the Option Plan. Such outstanding options would
remain in effect until they have been exercised, terminated or have expired. A
maximum of 900,000 shares of the Company's Common Stock has been reserved for
issuance upon the exercise of options granted under the Option Plan. The Option
Plan provides for the granting to key employees of both "incentive stock
options," within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") and "non-qualified stock options" ("non-qualified
stock options" are options which do not comply with Section 422 of the Code) and
for the granting to non-employee directors and independent contractors
associated with the Company of non-qualified stock options.
The Option Plan is administered by the Compensation Committee comprised of two
or more non-employee directors appointed by the Board from among its members.
Any member of the Compensation Committee may be removed at any time either with
or without cause by action of the Board and a vacancy on the Compensation
Committee due to any reason can be filled by the Board. The current members of
the Compensation Committee are two of the independent, non-employee directors of
the Company, S. Cye Mandel and Daniel M. Robbin. Subject to the express
limitations of the Option Plan, the Compensation Committee has authority, in its
discretion, to interpret the Option Plan, to adopt, prescribe, amend and rescind
rules and regulations as it deems appropriate concerning the holding of its
meetings and administration of the Option Plan, to determine and recommend
persons to whom options should be granted, the date of each option grant, the
number of shares of Common Stock to be included in each option, any vesting
schedule, the option price and term (which in no event will be for a period more
than ten years from the date of grant) and the form and content of agreements
evidencing options to be issued under the Option Plan.
Options may be currently granted under the Option Plan to any key employee or
non-employee director or prospective key employee or non-employee director
(conditioned upon, and effective not earlier than, his or her becoming an
employee or director) of or independent 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,
10
<PAGE>
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 and, subject to the approval of the Director Stock Option Plan by the
shareholders of the Company at the Meeting, it is currently contemplated that
nonemployee directors would be granted options under the Director Stock Option
Plan and not 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 116
employees held outstanding options.
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 date. 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.
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.
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 or other events such
as a change in control) 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.
To the extent incentive stock options are granted under the Option Plan, this
generally entitles an optionee who is an employee to defer recognition of income
or loss for federal tax purposes until the shares underlying the options are
sold.
11
<PAGE>
As of the Record Date, a total of 738,975 options were granted and had not
expired or been forfeited, of which 61,627 were exercised and 677,348 options
were outstanding (of which 388,200 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 206,130 options are
presently exercisable). These options, which are held by 116 persons, are
exercisable at prices ranging from $3.268 per share to $11.565 per share and are
exercisable through various expiration dates from 2000 to 2005.
DEFERRED COMPENSATION PLANS FOR EXECUTIVE OFFICERS AND KEY EMPLOYEES
Effective January 1, 1988, the Company established a deferred compensation plan
(the "1988 Deferred Compensation Plan") for executive officers and key employees
of the Company. The employees eligible to participate in the 1988 Deferred
Compensation Plan (the "Participants") are chosen at the sole discretion of 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 $15,600 during 1999, 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 1999
the Company contributed $115,000 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 1999. The Company makes matching contributions and in 1999
its contributions were in the amount of 25% on the first 6% contributed of each
participating employee's salary.
EMPLOYMENT AGREEMENTS
THE GOLDBERG AGREEMENTS
The Company has employment agreements with each of Paul Goldberg, its Chairman
of the Board, and Bruce M. Goldberg, its Chief Executive Officer and President
(collectively and as amended the "Goldberg Agreements"). Effective January 1,
2000, the term of each of the Goldberg Agreements was extended until December
31, 2005, with automatic additional successive one-year renewal periods
thereafter unless terminated in writing by the Company or the employee at least
60 days prior to the expiration of the then current term and subject, in the
case of Paul Goldberg, to earlier termination in the event that Paul Goldberg
elects to exercise his right to retire as hereinafter described. Each of the
Goldberg Agreements provides for a base salary, in the case of Paul Goldberg, of
$291,167 per annum effective January 1, 2000, and, in the case of Bruce M.
Goldberg, of $391,723 per annum effective January 1, 1999, subject to an annual
increase equal to the greater of 4% per annum or the increase in the cost of
living. Under the Goldberg Agreements, Paul Goldberg and Bruce M. Goldberg are
entitled to receive, in the case of Paul Goldberg, an annual cash bonus equal to
3% and, in the case of Bruce M. Goldberg, an annual cash bonus in 1999 equal to
4% and in 2000 and thereafter 5% of the Company's pre-tax income, before
nonrecurring and extraordinary charges, in excess of $1,000,000
12
<PAGE>
in any calendar year. Such annual bonus compensation for each of Paul Goldberg
and Bruce M. Goldberg is limited in any year to an amount no greater than two
times his respective base salary for the applicable year.
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) 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), and reimburse Bruce M. Goldberg for any loss suffered in
connection with the sale of such house; and (iii) 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.
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, certain options issued in 1995
covering 50,000 and 90,000 shares of the Company's Common Stock issued to Paul
Goldberg and Bruce M. Goldberg, respectively (and which vest in nine years from
the grant subject to earlier vesting if certain levels of net earnings are
attained in 2000), shall become immediately 100% vested. Furthermore, if there
is a change in control (as defined in the Goldberg Agreements) all unvested
options held by each of Messrs. Goldberg shall become immediately 100% vested
and exercisable.
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, 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, also provide certain additional benefits to each of
Paul Goldberg and Bruce M. Goldberg, including participation in the Company
benefit plans, use of a Company automobile and, in the case of Bruce M.
Goldberg, continuance in the event of disability of all his respective
compensation and other benefits for two years.
The Goldberg Agreements, also provide that, in the event of change in control
(as defined) of the Company, each of Paul Goldberg and Bruce M. Goldberg shall
have the option in his sole discretion to terminate his Goldberg Agreement. In
such event, Paul Goldberg would be entitled to elect (in lieu of electing to
continue to receive some or all of the compensation, payments and benefits as
and when due under his Goldberg Agreement) to receive a lump sum payment equal
to the sum of (i) Paul Goldberg's compensation due through the greater of the
end of the term of his Goldberg Agreement or three years after the change in
control, (ii) the present value (assuming a certain discount rate and life
expectancy) of the retirement payments payable to Paul Goldberg commencing from
the later of the end of the term or three years after the change in control
until his death, (iii) an amount sufficient to pay, until the later of his or
his spouse's death, the premium for at least the same level of health insurance
benefits as was provided before the change in control and (iv) an amount
sufficient to pay until 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
13
<PAGE>
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. The Goldberg
Agreements (as well as the employment agreements for each of Howard L. Flanders
and Rick Gordon discussed below) also 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
Effective as of January 1, 2000, the Company entered into a new employment
agreement with Howard L. Flanders, its Executive Vice President, Chief Financial
Officer and Corporate Secretary (the "Flanders Agreement"), and Rick Gordon, its
Senior Vice President of Sales (the "Gordon Agreement" and collectively with the
Flanders Agreement, the "Flanders/Gordon Agreements"). The Flanders/Gordon
Agreements each expire on December 31, 2003, with automatic additional
successive one-year renewal periods thereafter unless terminated in writing by
the Company or the employee at least 60 days prior to expiration of the then
current term. They provide for a base salary, effective as of January 1, 2000,
of $215,000 per annum for Mr. Flanders and $218,000 per annum for Mr. Gordon,
subject to an annual increase commencing January 1, 2001, equal to the greater
of 5% per annum or the increase in the cost of living. Under the Flanders/Gordon
Agreements, Messrs. Gordon and Flanders are entitled to receive an annual cash
bonus equal to 2% of the Company's pre-tax income, before nonrecurring and
extraordinary charges, in excess of $1,000,000 in any calendar year. Such annual
cash bonus compensation is limited in any year to an amount no greater than such
executive's base salary for the applicable year. The Flanders/Gordon Agreements
also provide for certain additional benefits, including participation in the
Company benefit plans, use of a Company automobile 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 (which includes requiring employee to perform duties not commensurate with
his offices or which differ materially from duties that presently exist or,
after a change in control, changing the location where employee is based), he is
entitled to receive severance benefits equal to the greater of two-years
compensation or the remainder of the compensation due under the applicable
Flanders/Gordon Agreement. Additionally, under the Flanders/Gordon Agreements,
the Company will pay premiums under a life insurance policy for each of Messrs.
Gordon and Flanders with the beneficiary to be as designated by Mr. Gordon or
Mr. Flanders, respectively, as described under "Summary Compensation Table"
above. The Flanders/Gordon Agreements also provide 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 Agreement. In such event, and subject to remaining an
employee of the Company (or its successor) for 180 days after the change in
control (other than as a result of his death, disability or termination without
cause), Mr. Gordon or Mr. Flanders, at his option, is entitled to elect to
receive a lump-sum payment equal to his respective compensation due through the
later of the end of the term of the applicable Flanders/Gordon Agreement or two
years after the change in control or for such period to continue to receive such
compensation as and when due under such Flanders/Gordon Agreement. In addition,
upon a change in control, all options granted by the Company to Messrs. Flanders
and Gordon automatically vest. The Flanders/Gordon Agreements also contain
covenants not to compete, nonsolicitation and nondisclosure provisions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of S. Cye Mandel and Daniel M.
Robbin, both being independent, non-employee Directors of the Company. See
"BOARD COMMITTEES - Compensation Committee." Since January 1, 1999 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.
14
<PAGE>
STOCK PRICE PERFORMANCE CHART
The following graph compares the five-year cumulative total returns* of the
Company's Common Stock with the NASDAQ Market Index and the Electronic Parts and
Equipment Peer Group Index (SIC Code 5065). The stock price performance shown
below is not necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE ELECTRONIC PARTS AND EQUIPMENT
PEER GROUP INDEX AND NASDAQ MARKET INDEX*
(GRAPHICAL REPRESENTATION OF DATA BELOW)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31
---------------------------------------------------
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
COMPANY 100.00 123.33 53.33 76.67 43.33 31.67
THE ELECTRONIC PARTS AND
EQUIPMENT PEER GROUP INDEX 100.00 119.69 138.45 142.57 107.80 129.14
NASDAQ MARKET INDEX 100.00 129.71 161.18 197.16 278.08 490.46
</TABLE>
- -----------------------
*Assumes the investment of $100 on January 1, 1995 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.
Paul Goldberg has been a member of the Board since 1987, Rick Gordon has been a
member of the Board since 1992 and Robin Crandell has been a member of the Board
since November 1999. 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
------- ---- -----
Paul Goldberg 3 years III
Rick Gordon 3 years III
Robin L. Crandell 3 years III
Proxies cannot be voted for a greater number of persons than the three nominees
named above.
15
<PAGE>
The nominees for directors who receive a plurality of the votes cast by the
holders of the Shares will be elected. Abstentions (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. APPROVAL OF THE 2000 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
PROPOSAL
The Board seeks the approval of the Company's shareholders for the
adoption of the 2000 Nonemployee Director Stock Option Plan (the "Director Stock
Option Plan") The Director Stock Option Plan provides for annual grants of
nonqualified stock options to each member of the Board who is not a salaried
officer or employee of the Company or any of its direct or indirect
subsidiaries. On April 26, 2000, the Board authorized and approved the Director
Stock Option Plan, subject to the approval of the shareholders of the Company.
A description of the Director Stock Option Plan is presented below. The
description of the Director Stock Option Plan is qualified in its entirety by
reference to the full text of such plan. A copy of the Director Stock Option
Plan is annexed hereto as Exhibit "A".
SUMMARY OF THE DIRECTOR STOCK OPTION PLAN
PURPOSE
The purpose of the Director Stock Option Plan is to provide incentives
which will attract and retain outstanding individuals to serve as members of the
Board, thereby strengthening the mutuality of interests between such persons and
the Company's shareholders.
NUMBER OF SHARES
The number of shares of the Company's Common Stock reserved for
issuance under the Director Stock Option Plan is 75,000 shares, subject to any
future anti-dilution adjustments.
ADMINISTRATION
Although the Board generally administers the Director Stock Option
Plan, the Director Stock Option Plan is substantively self-executing except that
the Board is given discretion to determine the number of shares (from 1,500 up
to 15,000 shares) included in the option granted to an individual upon his
initial election to the Board. See "Stock Options" below.
ELIGIBILITY
Participation in the Director Stock Option Plan is limited to members
of the Board who are not salaried officers or employees of the Company or any of
its direct or indirect subsidiaries (a "Nonemployee Director").
STOCK OPTIONS
As required by the Internal Revenue Code of 1986, as amended (the
"Code"), nonemployee directors of a company are only eligible to receive
nonqualified stock options (options that do not meet the requirements of Section
422 of the Code). Stock options consist of grants from the Company, in the form
of agreements, which enable the holder to purchase a specific number of shares
of Common Stock, at set terms and at a fixed purchase price, which terms and
price are hereinafter described. With respect to the four (4) existing
Nonemployee Directors (subject, however, in the case of Robin L. Crandell, to
his re-election to the Board at the Meeting), effective on and subject to the
approval
16
<PAGE>
of the Director Stock Option Plan by the shareholders at the Meeting, each of
the existing Nonemployee Directors will be automatically awarded a nonqualified
stock option to purchase 1,500 shares of Common Stock. With respect to the
election of any new Nonemployee Director, effective on the date of a Nonemployee
Director's initial election to the Board, each Nonemployee Director will be
awarded a nonqualified stock option to purchase between 1,500 shares and 15,000
shares of Common Stock (the "Initial Option") as determined in the sole
discretion of the Board. In addition, effective on the date of each annual
meeting of shareholders of the Company, commencing with the annual meeting to be
held in 2001, each Nonemployee Director will be automatically awarded an
additional nonqualified stock option to purchase 750 shares of Common Stock (the
"Additional Option"); provided, however, that a Nonemployee Director is not
granted such Additional Option upon such re-election if such Nonemployee
Director was granted an Initial Option in the immediately preceding 12 months
period upon his or her initial election to the Board.
EXERCISE PRICE
The exercise price for all options granted under the Director Stock Option Plan
is 100% of the Fair Market Value (as hereinafter defined) of Common Stock on the
date of the grant. The "Fair Market Value" on the date of the 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 date. 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 Board determines to be reasonable.
TERM AND VESTING OF EXERCISE RIGHTS
All options granted under the Director Stock Option Plan are subject to
a ten year term. The right to exercise such options, in whole or in part, from
time to time after the date granted, will vest in 50% annual increments on each
of the first two anniversary dates from the date of grant. Accordingly, no
option granted will be exercisable during the first year following the date such
option is granted.
Notwithstanding the above vesting schedule, any option granted under
the Director Stock Option Plan becomes fully vested and exercisable upon (i) the
death of a Nonemployee Director while serving on the Board, (ii) a Nonemployee
Director's "Retirement" (meaning a Nonemployee Director's termination of service
as a member of the Board after the age of 70 years or at any time with the
consent of the Board), (iii) the permanent disability (inability, due to mental,
emotional or physical injury or illness, to perform the essential functions of a
Board member) of a Nonemployee Director or (iv) any change in control (as
defined) of the Company.
If a Nonemployee Director's service is terminated for any reason, his or her
option may be exercised to the extent it has vested and is exercisable at the
date of such termination for a period of time pursuant to the terms of the
Director Stock Option Plan. In the case of a termination other than for death,
permanent disability or Retirement of a Nonemployee Director, the period for
exercise as to vested options following termination is 90 days. In the case of
Retirement or permanent disability, the period for exercise as to vested options
is 180 days. In the case of death, the period for exercise as to vested options
is 12 months. However, in no event may an option be exercised more than ten
years after the date the option is granted.
17
<PAGE>
MANNER OF EXERCISE AND PAYMENT OF EXERCISE PRICE
Options granted under the Director Stock Option Plan are exercised by a
Nonemployee Director (or upon his or her death by his or her personal
representative, executor or administrator or upon incapacity by his guardian),
as to all or part of the Common Stock covered by the options which have vested,
by giving written notice of exercise to the Secretary of the Company. Payment in
full of such purchase price is to be made (a) by check payable to the Company
for the purchase price of the shares to be purchased or (b) by tendering to the
Company previously acquired shares of Common Stock, held for at least 6 months,
having a Fair Market Value (determined as of the date such options are
exercised) equal to the entire purchase price of the shares to be purchased or
(c) by a combination of both methods. No shares of Common Stock may be issued
until full payment therefore has been received by the Company and no Nonemployee
Director has any of the rights of a shareholder of the Company until the
certificates for such shares of Common Stock are issued to the Nonemployee
Director following the exercise of his or her options.
NONTRANSFERABILITY
Any options granted under the Director Stock Option Plan are nontransferable by
the Nonemployee Director, other than as required by law or by will or the laws
of descent and distribution or to an immediate family member (a spouse or lineal
descendent) or a trust or family partnership or other entity for the benefit of
such persons (collectively "Permitted Transferees"). Options may be exercised
during the lifetime of the Nonemployee Director only by the Nonemployee Director
or the Nonemployee Director's guardian or legal representative, unless
transferred to a Permitted Transferee, in which case such options can be
exercised by the Permitted Transferee. In the event of the death of a
Nonemployee Director, options theretofore granted to him or her are exercisable
during the 12 month period after his or her death (but not beyond the ten-year
term of the grant) and then only (i) by the executor or administrator of the
estate of the deceased Nonemployee Director or the person or persons to whom the
deceased Nonemployee Director's rights under the option pass by will or the laws
of descent and distribution or, if previously transferred to a Permitted
Transferee, by the Permitted Transferee, and (ii) to the extent that the
deceased Nonemployee Director (or Permitted Transferee) was entitled to do so at
the date of the Nonemployee Director's death.
ADJUSTMENT ON CHANGES IN CAPITALIZATION
If the Company at any time changes the number of issued shares of
Common Stock without new consideration to the Company (such as by stock dividend
or stock split), the total number of shares available for stock option grants
under the Director Stock Option Plan will be appropriately adjusted and the
number of shares covered by and the exercise price for each outstanding option
shall be adjusted so that the aggregate consideration payable to the Company and
the value of such option shall not be changed. If, during the term of any option
granted, the Common Stock shall be changed into another kind of stock,
securities, cash or other property as a result of reorganization, sale, merger,
consolidation, or other similar transaction, adequate provision will be made
whereby the Nonemployee Directors shall thereafter be entitled to receive, upon
the due exercise of any outstanding options, the stock, securities, cash or
other property the Nonemployee Directors would have been entitled to receive
immediately prior to the effective date of any such transaction for Common Stock
which could have been acquired through the exercise of such options.
AMENDMENT AND DISCONTINUATION OF THE DIRECTOR STOCK OPTION PLAN
The Board may amend, suspend or discontinue the Director Stock Option
Plan at any time, but no such action may adversely affect any outstanding
option, provided, however, that any such amendment shall be adopted subject to
and conditioned upon obtaining the approval of the Company's shareholders if the
amendment without such subsequent approval of the Company's shareholders (a)
would result in the Director Stock Option Plan losing its status as a protected
plan under Rule 16b-3 (as then in effect) of the Exchange Act or (b) would
violate the Exchange Act or any other rules or regulations promulgated
thereunder or the rules of The Nasdaq Stock Market, Inc. or any other securities
exchange on which the Company's Common Stock is traded. The Director Stock
Option Plan is effective indefinitely until discontinued by action of the Board.
18
<PAGE>
REGISTRATION OF UNDERLYING COMMON STOCK
Subject to the shareholders approval of the Director Stock Option Plan, it is
currently contemplated that at the appropriate time the Company will file a
registration statement on Form S-8 in order to register the shares of Common
Stock reserved for issuance under the Director Stock Option Plan. To the extent
that the Registration Statement remains effective under the Securities Act of
1933 (the "Securities Act"), shares of Common Stock issued upon the exercise of
outstanding stock options will be immediately and freely tradable without
restriction under the Securities Act, subject to applicable volume limitations,
if any, under Rule 144 of the Securities Act and Section 16 of the Exchange Act.
RECENT PRICE OF COMMON STOCK
On the Record Date, the closing sale price of the Common Stock on The
Nasdaq National Market was $13.25 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the applicable Federal income tax
consequences of options granted under the Director Stock Option Plan based on
U.S. Federal income tax laws in effect on the date of this Proxy Statement.
With respect to nonqualified stock options: (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 the 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.
REQUIRED VOTE
The affirmative vote of a majority of the Shares represented in person
or by proxy at the Meeting which cast a vote on this proposal is necessary for
the approval of the Director Stock Option Plan. Abstentions (withheld authority)
and broker or nominee nonvotes are not counted in determining the number of
Shares voted for or against this proposal.
The Board recommends a vote FOR adoption of the Director Stock Option Plan.
ITEM 3. 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, 2000, 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 in person or by
proxy at the Meeting which cast a vote on this proposal is required to approve
this proposal. Abstentions (withheld authority) and 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.
19
<PAGE>
SHAREHOLDER'S PROPOSALS FOR 2001 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2001 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 December 31, 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 2001 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 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 2001 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, 1999 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, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, UPON RECEIPT BY THE COMPANY OF A WRITTEN REQUEST BY SUCH PERSON.
SUCH WRITTEN REQUEST SHOULD BE SENT TO THE COMPANY, ATTENTION: HOWARD L.
FLANDERS, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, AT THE COMPANY'S
ADDRESS STATED HEREINABOVE.
By Order of the Board of Directors,
/s/ HOWARD L. FLANDERS
-----------------------------------
Howard L. Flanders,
Corporate Secretary
May 1, 2000
Miami, Florida
20
<PAGE>
EXHIBIT A
ALL AMERICAN SEMICONDUCTOR, INC.
2000 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. ALL AMERICAN SEMICONDUCTOR, INC., a Delaware
corporation (the "Company"), hereby adopts the 2000 Nonemployee Director Stock
Option Plan (the "Plan"). The purpose of the Plan is to attract and retain
outstanding individuals to serve as members of the Board of Directors of the
Company by providing such persons opportunities to acquire common stock, $.01
par value, of the Company ("Common Shares"), thereby strengthening the mutuality
of interest between such persons and the Company's shareholders.
2. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for
issuance under the Plan an aggregate of Seventy-Five Thousand (75,000) Common
Shares, which may be authorized but unissued shares. Upon the lapse, expiration,
termination or cancellation of any option granted under the Plan, all unissued
shares subject to or reserved for such option may again be used for options
thereafter granted under the Plan.
3. PARTICIPATION. Participation in the Plan is limited to members
of the Board of Directors who are not salaried officers or employees of the
Company or any of its direct or indirect subsidiaries (hereinafter sometimes
referred to in the Plan as a "Nonemployee Director" or "Participant").
4. OPTIONS GRANTED UNDER THE PLAN.
A. EXISTING NONEMPLOYEE DIRECTORS
Effective on the date the Plan is approved by the
shareholders of the Company, each of the then existing Nonemployee Directors
(subject, however, as to any of them standing for re-election as a director at
the meeting at which the Company's shareholders approve the Plan, to his
re-election) shall automatically be awarded nonqualified stock options to
purchase One Thousand Five Hundred (1,500) Common Shares.
B. OTHER NONEMPLOYEE DIRECTORS
Effective on the date of the initial election of a
Nonemployee Director to the Board of Directors (other than the existing
Nonemployee Directors granted nonqualified stock options pursuant to paragraph
A. above), each such Nonemployee Director shall automatically be awarded
nonqualified stock options to purchase at least One Thousand Five Hundred
(1,500) Common Shares, but not to exceed a maximum of Fifteen Thousand (15,000)
Common Shares (the "Initial Option"). The actual number of Common Shares subject
to the nonqualified stock options comprising the Initial Option awarded to each
Nonemployee Director pursuant to this Section 4 shall be determined by the Board
of Directors as it shall deem necessary or advisable and in the best interests
of the Company in order to attract and obtain outstanding and highly qualified
candidates to serve on the Company's Board of Directors.
C. ANNUAL GRANTS
On the date of each annual meeting of the
shareholders of the Company (an "Annual Meeting") commencing with the annual
meeting of shareholders of the Company to be held in 2001 (subject, however, as
to any Nonemployee Director standing for re-election as a director at such
Annual Meeting, to his re-election), each then existing Nonemployee Director
shall automatically be awarded an additional nonqualified stock option (the
"Additional Option") to purchase Seven Hundred Fifty (750) Common Shares;
provided, however, that such Nonemployee Director shall not be awarded the
Additional Option if such Nonemployee Director was awarded an Initial Option in
the immediately preceding twelve (12) month period upon his or her initial
election to the Board of Directors in accordance with the provisions of this
Section 4.
D. STOCK OPTION AGREEMENT
The Company is authorized to provide the Participant
with a stock option agreement consistent with the terms and provisions of the
Plan.
<PAGE>
5. OPTION EXERCISE PRICE. Each option granted under the Plan
shall be exercisable at an option price equal to one hundred (100%) percent of
the Fair Market Value (as defined in Section 10 hereof) of the Common Shares on
the date of the grant of such option hereunder.
6. LIMITATIONS ON EXERCISE. Any option granted under the Plan may
be exercised (in accordance with the provisions of Section 7 hereof), in whole
or in part, from time to time after the date granted, subject to the following
limitations:
(a) No option granted hereunder may be exercised during
the first year following the date such option is granted. On or after the first
anniversary of the date the option is granted, such option may be exercised to
the maximum cumulative extent of fifty (50%) percent of the total number of
Common Shares subject to the option and, on or after the second anniversary of
the date the option is granted, such option may be exercised to the maximum
cumulative extent of one hundred (100%) percent of the total number of Common
Shares subject to the option.
(b) Notwithstanding the limitations of Section 6(a)
hereof, any option granted under the Plan shall become fully exercisable upon:
(i) the death or Permanent Disability (as
hereinafter defined) of a Nonemployee Director while serving on the Board of
Directors, or the Retirement (as hereinafter defined) of a Nonemployee Director;
provided, however, that such death, Permanent Disability, or Retirement shall
occur on or after the date such option is granted. For purposes of this Section
6, a Nonemployee Director shall be deemed to have a "Permanent Disability" if,
in the reasonable judgment of the Board of Directors, the Nonemployee Director
is unable, due to mental, emotional, or physical injury or illness, to perform
the essential functions of his or her position as a member of the Board of
Directors. For purposes of this Section 6, the term "Retirement" shall mean and
refer to a Nonemployee Director's termination of service as a member of the
Board of Directors after the age of seventy (70) years, or at any other time
with the consent of the Board of Directors; or
(ii) Any Change in Control (as hereinafter
defined) of the Company if such Change in Control occurs on or after the date
such option is issued. A "Change in Control" shall be deemed to have occurred
upon the happening of any of the following events: (A) the acquisition in one or
more transactions by any "person" (as the term "person" is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of "beneficial ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty-five (25%) percent or more of the
combined voting power of the Company's then outstanding voting securities (the
"Voting Securities"); provided, however, that for purposes hereof the Voting
Securities acquired (by sale, merger, consolidation or in any other manner) from
the Company by any person shall be excluded from the determination of such
person's beneficial ownership of Voting Securities (but such Voting Securities
shall be included in the calculation of the total number of Voting Securities
then outstanding); or (B) the individuals who, as of the date hereof, are
members of the Board of Directors of the Company (the "Incumbent Board") shall
cease for any reason to constitute more than one-half (1/2) of the members of
the Board; provided, however, that, if the election, or nomination for election
by the Company's shareholders of any new director is approved by a vote of more
than one-half (1/2) of the members of the Incumbent Board, such new director
shall, for purposes hereof, be considered as a member of the Incumbent Board; or
(C) approval by the shareholders of the Company of (i) a merger or consolidation
involving the Company if the shareholders of the Company immediately before such
merger or consolidation do not own, directly or indirectly immediately following
such merger or consolidation, more than one-half (1/2) of the combined voting
power of the outstanding voting securities of the corporation resulting from
such merger or consolidation in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger or
consolidation (unless, however, the event described in subparagraph (B) above
does not occur in connection therewith) or (ii) a complete liquidation or
dissolution of the Company or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company; provided, however, that,
notwithstanding the foregoing, (x) a Change in Control shall not be deemed to
occur solely because twenty-five (25%) percent or more of the then outstanding
Voting Securities is acquired by (1) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company or
any of its subsidiaries, (2) any corporation which, immediately prior to such
acquisition, is owned directly or indirectly by the shareholders of the Company
in the same proportion as their ownership of stock
2
<PAGE>
in the Company immediately prior to such acquisition or (3) Paul Goldberg and/or
Bruce M. Goldberg and/or any member of his respective Immediate Family (as
hereinafter defined) or any person or entity directly or indirectly controlled,
under common control with or controlled by any, some or all of them, and (y) a
Change in Control shall not be deemed to occur solely because any person or
entity (the "Subject Person") acquired beneficial ownership of more than the
permitted amount of the outstanding Voting Securities as a result of the
acquisition of Voting Securities by the Company which, by reducing the number of
Voting Securities outstanding, increases the proportional number of shares
beneficially owned by the Subject Person, provided that, if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company and, after such share
acquisition by the Company, the Subject Person becomes the beneficial owner of
any additional Voting Securities which increases the percentage of the then
outstanding Voting Securities beneficially owned by the Subject Person, then a
Change in Control shall occur. For purposes of this Section 6(b)(ii), the date
of the Change in Control (the "Change in Control Date") shall be the later to
occur of the closing date or the effective date (as the case may be) of the
transaction or event resulting in the Change in Control; provided, however,
that, notwithstanding the foregoing, the Change in Control Date solely for the
event set forth in item (A) of this Section 6(b)(ii) shall be the date which is
fifteen (15) business days after the occurrence of such event.
(c) Any option granted under the Plan may not be
exercised after the earliest to occur of any of the following events:
(i) more than ninety (90) days after the termination
of a Nonemployee Director's service as a member of the Board of
Directors for any reason other than Retirement, Permanent Disability or
death (and then only to the extent that such Nonemployee Director could
have exercised such option on such date of termination);
(ii) more than one hundred eighty (180) days after
the Retirement of a Nonemployee Director from the Board of Directors;
(iii) more than one hundred eighty (180) days after
the Permanent Disability of a Nonemployee Director;
(iv) more than twelve (12) months after the death of
a Nonemployee Director; or
(v) more than ten (10) years after the date the
option is granted.
7. METHOD AND TIME OF EXERCISE: DELIVERY OF CERTIFICATES. Any
option granted under the Plan shall be deemed to be exercised on the date on
which written notice of the exercise of such option is received by the Secretary
of the Company at the Company's corporate headquarters. Such notice shall be
accompanied by: (i) a check payable to the Company in the amount of the purchase
price of the Common Shares to be purchased pursuant to the exercise of such
option; (ii) the delivery of Common Shares which shall have been owned by the
Participant for at least six (6) months whose Fair Market Value on the date of
the exercise of such option equals the purchase price of the Common Shares to be
purchased pursuant to the exercise of such option; or (iii) any combination of
(i) and (ii) resulting in the amount of the purchase price of the Common Shares
to be purchased pursuant to the exercise of such option.
8. NONTRANSFERABILITY. Any option granted under the Plan shall
not be transferable other than as required by law, or by will or the laws of
descent and distribution, or to the Participant's Immediate Family (as
hereinafter defined), or to trusts, family partnerships, or other entities for
the benefit of such persons (hereinafter such persons being collectively
referred to in the Plan as "Permitted Transferees"), and shall be exercisable,
during the Participant's lifetime, only by the Participant or the Participant's
guardian or legal representative, unless transferred to a Permitted Transferee,
in which case such option may be exercised by the Permitted Transferee. On and
after the death of a Nonemployee Director, any outstanding option granted to
such Participant may be exercised by his or her estate or the person to whom the
option passes by will or the laws of descent and distribution or, if previously
transferred to a Permitted Transferee, by the Permitted Transferee, but only in
accordance with the provisions of Section 6 and Section 7 hereof. For purposes
of this Section 8, the term "Immediate Family" shall mean and refer to a
Participant's spouse and lineal descendants.
3
<PAGE>
9. OTHER PROVISIONS; SECURITIES REGISTRATION. The grant of any
option under the Plan may also be subject to such other provisions as counsel to
the Company shall deem appropriate, including, without limitation, such
provisions as may be necessary or appropriate to comply with federal or state
securities laws and stock listing requirements.
10. DEFINITION OF FAIR MARKET VALUE. The term "Fair Market Value",
as used in the Plan, shall mean, as of any date, the average of the "market
price" of a Common Share for each of the seven (7) consecutive business days
preceding such date. The "market price" on each such day shall be (i) if the
Common Share 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 Share 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
Share is not traded on an exchange or over the counter, fair market value shall
be determined by such other method as the Board of Directors determines to be
reasonable.
11. ADJUSTMENT PROVISIONS. If the Company shall at any time change
the number of issued Common Shares without new consideration to the Company
(such as by stock dividend or stock split), the total number of shares reserved
for issuance under the Plan and the number of shares covered by each outstanding
option and the exercise price thereunder shall be automatically adjusted so that
the aggregate consideration payable to the Company and the value of each option
shall not be changed. If, during the term of any option granted under the Plan,
the Common Shares shall be changed into another kind of stock, securities, cash
or other property whether as a result of reorganization, sale, merger,
consolidation, or other similar transaction, the Board of Directors shall cause
adequate provision to be made whereby the Participants shall thereafter be
entitled to receive, upon the due exercise of any outstanding options, the
stock, securities, cash or other property the Participants would have been
entitled to receive immediately prior to the effective date of any such
transaction for Common Shares which could have been acquired through the
exercise of such options.
12. AMENDMENT OR DISCONTINUATION OF PLAN. The Board of Directors
may amend, suspend or discontinue the Plan at any time, but no such action shall
adversely affect any outstanding option granted hereunder; provided, however,
that any such amendment shall be adopted subject to and conditioned upon
obtaining the approval of the Company's shareholders if the amendment, without
such subsequent approval of the Company's shareholders, (a) would result in the
Plan losing its status as a protected plan under Rule 16b-3 (as then in effect)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or (b)
would violate the Exchange Act, or any other rules or regulations promulgated
thereunder, or the rules of The Nasdaq Stock Market, Inc., or any other
securities exchange on which the Company's Common Shares are traded.
13. GOVERNING LAW. The Plan, and the options granted hereunder,
shall be governed by and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflicts of laws.
14. SHAREHOLDER APPROVAL. The 2000 Nonemployee Director Stock
Option Plan was adopted by the Board of Directors of the Company effective as of
April 26, 2000, and the Plan is subject to the approval of the Company's
shareholders within twelve (12) months of said adoption.
4
<PAGE>
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-JUNE 6, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Paul Goldberg and Bruce M.
Goldberg, and each of them, as proxies, with full power of substitution to each,
for and in the name, place and stead of the undersigned to vote all shares of
Common Stock of All American Semiconductor, Inc. (the "Company") which the
undersigned would be entitled to vote at the Annual Meeting of Shareholders of
the Company to be held on Tuesday, June 6, 2000, at 10:00 a.m., California local
time, at Embassy Suites, 2885 Lakeside Drive, Santa Clara, California, and at
any and all postponements and adjournments thereof. The Board of Directors
recommends a vote "FOR" Proposals 1, 2, and 3 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, AND 3 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 1999 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
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of 2. Approve the 2000 Nonemployee
Directors [ ] [ ] Nominees: Paul Goldberg Director Stock Option Plan of the [ ] [ ] [ ]
Rick Gordon Company.
Robin L. Crandell
Instructions: To withhold authority
to vote for any individual nominee, 3. Ratification of the selection of Lazar
write that nominee's name in the space Levine & Felix LLP as the Company's [ ] [ ] [ ]
provided below. independent public accountants for the
For, except vote withheld from the following year ending December 31, 2000.
nominee(s):
------------------------------------ 4. Upon such other matters as may properly
come before the Annual Meeting or any and
all postponements or adjournments thereof.
</TABLE>
SIGNATURE(s) DATED: , 2000
----------------------------------------- --------------
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.)
