<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 Section 240.14a-11(c) or Section 240.14a-12
Advanced Environmental Recycling Technologies, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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Advanced Environmental Recycling Technologies, Inc.
801 North Jefferson Street
Springdale, Arkansas 72764
Notice of Annual Meeting of Stockholders
To be Held July 23, 1999
To the Stockholders:
The Annual Meeting of Stockholders (the "Annual Meeting") of A.E.R.T., Inc.
(the "Company") will be held at the Northwest Arkansas Holiday Inn located at
Springdale, Arkansas on the 23rd day of July, 1999, at 10:00 a.m., local time,
to consider and act upon the following matters, all as more fully described in
the accompanying Proxy Statement which is incorporated herein by this reference:
1. Proposal No. 1: To elect nine members to the Board of Directors to
serve until the next Annual Meeting of Stockholders and until their
respective successors shall be elected and qualify.
2. Proposal No. 2: To act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized
shares of the Company's Class A Common Stock from 50,000,000 to
75,000,000.
3. Proposal No. 3: To amend and increase the AERT, Inc. 1997 Securities
Plan by the addition of 2 million shares.
4. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending December 31,
1999.
5. To transact such other business and to consider and take action upon
any and all matters that may properly come before the Annual Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on June 22, 1999 as
the record date for the determination of the stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment thereof.
Sincerely,
Marjorie S. Brooks
Secretary
A proxy card and Annual Report of the Company for the year ended December
31, 1998 are enclosed. We hope that you can attend this meeting in person, but
if you cannot do so please mark, date, sign and return the enclosed proxy.
PLEASE MAIL OR FAX YOUR PROXY...NOW!
I M P O R T A N T
<PAGE>
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
801 North Jefferson Street
Springdale, Arkansas 72764
PROXY STATEMENT
---------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy is solicited on behalf of the Board of Directors of Advanced
Environmental Recycling Technologies, Inc., a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders to be held at the
Northwest Arkansas Holiday Inn, Springdale, Arkansas, at 10:00 a.m. local time,
Friday, July 23, 1999, and at any adjournments thereof. The notice of meeting,
proxy statement and form of proxy are being mailed to stockholders on or about
June 30, 1999.
A proxy may be revoked by delivering a written notice of revocation to the
principal office of the Company or in person at the meeting at any time prior to
the voting thereof.
VOTING SECURITES AND PRINCIPAL HOLDERS THEREOF
At June 22, 1999, there were 22,683,626 shares of Class A Common Stock,
1,465,530 shares of Class B Common Stock and 900 shares of Series B Preferred
Stock issued and outstanding. In November 1998, in order to provide necessary
expansion and working capital to finance the Company's operations, the Company
sold 900 shares of Series B Preferred Stock at $1,000 per share, in a private
placement to four investors, including Marjorie S. Brooks. The Company also
issued 2,000 shares of Series A and C Preferred Stock in November 1998, in a
private placement to finance the Company's operations. The Series A and C
Preferred Stock is non-voting except in those instances where Delaware law
expressly requires otherwise. The Series B Preferred Stock is convertible at a
price of $1.20 per share and is entitled to vote on all matters submitted to a
vote of shareholders on an as-converted basis resulting in voting rights of
2,500 per share of Series B Preferred Stock. The holders of record of the Class
A Common Stock, Class B Common Stock and Series B Preferred Stock outstanding on
June 22, 1999, the record date, will vote together as a single class on all
matters submitted to stockholders and such other matters as may properly come
before the Annual Meeting and any adjournments. Each outstanding share of Class
A Common Stock entitles the holder thereof to one vote on matters submitted to
the stockholders and each share of Class B Common Stock entitles the holder
thereof to five votes on matters submitted to the stockholders.
The enclosed form of proxy provides a method for stockholders to withhold
authority to vote for any one or more nominees (See "Proposal for Election of
Directors" for the method of withholding authority to vote for directors). By
withholding authority, shares will not be voted either for or against a
particular matter but will be counted for quorum purposes. Brokers "non-votes"
are not relevant to the determination of a quorum or whether the proposal to
elect directors has been approved.
The Company's officers and directors own approximately 32.8% of the currently
outstanding shares of Class A Common Stock (including 19,599,582 shares subject
to warrants and options which have not been exercised and as to which the
holders of such warrants and options accordingly have no current voting rights),
93.9% of the shares of Class B Common Stock and approximately 27.6% of the
currently outstanding shares of Series B Preferred Stock, and collectively owned
shares representing approximately 42.5% of the votes entitled to be cast upon
matters submitted at the Annual Meeting. Marjorie S. Brooks and corporations
controlled by her own shares representing approximately 28.5% of the votes
entitled to be cast and may be in a position to control the Company.
<PAGE>
The following table sets forth, as of June 22, 1999, certain information
with regard to the beneficial ownership of the Company's capital stock by each
holder of 5% or more of any class of the outstanding stock, by each director of
the Company, and by all officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address Title of Number of Shares of Percentage of Class Percentage of
of Beneficial Owner Class(1) Common Stock(2) Outstanding (2)(16) Total Voting Power
- ------------------- -------- ------------------- ------------------- ------------------
(2)(17)
-------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Marjorie S. Brooks Class A 10,054,665 (3) 23.8% 28.5%
P. O. Box 1237 Class B 837,588 (4) 57.2%
Springdale, AR 72764 Preferred-
Series B 400 (5) 13.8%
- ------------------------------------------------------------------------------------------------------------------------------
Joe G. Brooks Class A 838,442 (6) 2.0% 4.2%
HC 10, Box 116 Class B 284,396 19.4%
Junction, TX 76849
- ------------------------------------------------------------------------------------------------------------------------------
J. Douglas Brooks Class A 821,573 (7) 1.9% 1.9%
P. O. Box 1237 Class B 131,051 8.9%
Springdale, AR 72765
- ------------------------------------------------------------------------------------------------------------------------------
Jerry B. Burkett Class A 165,000 (8) * *
2110 Hemme Road Class B 33,311 *
Stuttgart, AR 72160
- ------------------------------------------------------------------------------------------------------------------------------
Sal Miwa Class A 428,000 (9) 1.0% *
c/o Seiwa Optical Co.
50 Tice Boulevard
Woodcliff Lake, NJ 07675
- ------------------------------------------------------------------------------------------------------------------------------
Stephen W. Brooks Class A 745,116 (10) 1.8% 2.2%
P. O. Box 291 Class B 89,311 6.1%
Springdale, AR 72765
- ------------------------------------------------------------------------------------------------------------------------------
J. Grant Martin Class A 250,000 (11) * *
P. O. Box 1237
Springdale, AR 72765
- ------------------------------------------------------------------------------------------------------------------------------
James H. Culp, Ph.D. Class A 375,000 (11) * *
120 Silver Lace Drive
Lake Jackson, TX 77566
- ------------------------------------------------------------------------------------------------------------------------------
Peter S. Lau Class A 104,715 (12) * *
30 Wall Street, 11th Floor
New York, NY 10005
- ------------------------------------------------------------------------------------------------------------------------------
Michael M. Tull Class A 71,000 (13) * 2.0%
c/o I. W. Tull Sales Co. Preferred-
1475 Holcomb Bridge Rd. Series B 400 13.8%
Suite 113
Roswell, GA 30076
- ------------------------------------------------------------------------------------------------------------------------------
R. A. Mackie & Co., L.P. Class A 934,600 (14) 2.2% 2.2%
and Robert A. Mackie, Jr. Preferred-
P. O. Box 380 Series C 300 10.3%
Irvington, NY 10533
- ------------------------------------------------------------------------------------------------------------------------------
Delbert & Pat Allen Class A 1,322,524 (15) 3.2% 2.5%
14128 Dawn Hill Road
Siloam Springs, AR 72761
- ------------------------------------------------------------------------------------------------------------------------------
All officers and directors Class A 13,853,511 32.8% 42.5%
as a group (ten persons) Class B 1,375,657 93.9%
Preferred-
Series B 800 27.6%
- ------------------------------------------------------------------------------------------------------------------------------
* Less than 1%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Class B Common Stock is substantially identical to the Class A Common
Stock, except that each
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share of Class B Common Stock has five votes per share and each share of Class A
Common Stock has one vote per share. Each share of Class B Common Stock is
convertible into one share of Class A Common Stock. Each share of Series B
Preferred Stock is convertible into 833-1/3 shares of Class A Common Stock. The
Series B Preferred Stock (900 shares) has voting rights of 2,500 votes per
share. No other Preferred Stock carries any voting rights.
(2) Beneficial ownership of shares determined in accordance with Rule 13d-
3(d)(1) of the Exchange Act and includes shares underlying outstanding warrants
and options which the named individual has the right to acquire within sixty
days of June 22, 1999.
(3) Includes 2,608,940 shares owned directly, 493,645 in trusts controlled by
Mrs. Brooks, 350,000 shares issuable upon exercise of stock options, 3,000
shares issuable upon exercise of Bonus Warrants, 325,000 shares issuable upon
exercise of Class C Warrants, 3,974,080 shares issuable upon exercise of Class F
and Class G Warrants issued in connection with a private placement of Class A
Common Stock in May 1994, 2,000,000 shares issuable upon exercise of Class H
Warrants, and 500,000 other Warrants.
(4) Includes 403,946 shares owned directly by Mrs. Brooks and 433,642 shares
owned by two corporations controlled by Mrs. Brooks. (Razorback Farms, Inc. is
the record owner of 312,320 shares and Southern Minerals and Fiber, Inc. is the
record owner of 121,322 shares, representing approximately 21.3% and 8.3%,
respectively, of the Class B Common Stock). Excludes additional shares owned by
adult children of Mrs. Brooks, including Joe G. Brooks and J. Douglas Brooks, as
to which she disclaims a beneficial interest.
(5) Includes Series B Convertible Preferred Stock owned indirectly by Mrs.
Brooks. Razorback Farms, Inc. is the record owner of 165 shares. Brooks
Investment Company is the record owner of 235 shares.
(6) Includes 354,067 shares owned directly, 4,500 shares owned as custodian for
Joe G. Brooks' minor child, 38,205 shares owned as custodian for Brooks'
Children's Trust, 1,500 shares issuable upon exercise of Bonus Warrants owned as
custodian for Mr. Brook's minor child, 38,250 shares issuable upon exercise of
Bonus Warrants owned as custodian for Brook's Children's Trust, 1,875 shares
issuable upon exercise of Bonus Warrants owned directly and 400,000 shares
issuable upon exercise of stock options.
(7) Includes 370,932 shares owned directly, 33,021 shares owned indirectly,
7,620 shares issuable upon exercise of Bonus Warrants and 410,000 shares
issuable upon exercise of stock options.
(8) Includes 13,000 shares owned directly, 2,000 shares owned by Mr. Burkett as
custodian for his minor child, 10,000 shares owned by a partnership controlled
by Mr. Burkett and 140,000 shares issuable upon exercise of stock options.
(9) Includes 3,000 shares owned directly and 425,000 shares issuable upon
exercise of stock options.
(10) Includes 370,116 shares owned directly and 375,000 shares issuable upon
exercise of stock options.
(11) Represents shares issuable upon exercise of stock options.
(12) Includes 75,000 shares issuable upon exercise of stock options and 29,715
shares issuable upon exercise of Class I Warrants.
(13) Includes 71,000 shares owned directly.
(14) Mr. Mackie is the beneficial and sole owner of 250,000 shares of Class A
Common Stock, 75,000 Bonus Warrants of the Company and 300,000 other warrants
of the Company. R. A. Mackie & Co., L.P. is the beneficial and sole owner of
309,600 Bonus Warrants of the Company.
3
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(15) Includes 777,214 shares owned directly, and 175,468 shares issuable upon
exercise of Class F Warrants and 175,468 shares issuable upon exercise of Class
G Warrants, and 194,374 shares issuable upon exercise of Bonus Warrants.
(16) Class A Common Stock beneficial ownership is calculated based on 42,283,208
shares outstanding as of June 22, 1999, which includes 19,599,582 shares
which may be acquired through the exercise of options and warrants within 60
days of June 22, 1999. Class B Common Stock beneficial ownership is calculated
based on 1,465,530 shares outstanding on June 22, 1999. Preferred stock
beneficial ownership is calculated based on 2,900 shares outstanding on June 22,
1999.
(17) Calculated based on 53,527,524 shares outstanding on June 22, 1999, which
includes voting rights on all classes of stock, options and warrants which
can be acquired within 60 days of June 22, 1999.
At June 22, 1999, there were 22,683,626 shares of Class A Common Stock and
1,465,530 shares of Class B Common Stock issued and outstanding. The previous
table sets forth, the directors, officers and 5% shareholders, as a group
directly owned shares representing approximately 42.5% of the votes entitled to
be cast upon matters submitted to a vote of the Company's stockholders, and
Marjorie S. Brooks and corporations controlled by her owned shares representing
approximately 28.5% of the votes entitled to be cast and may be in a position to
control the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Joe G. Brooks 44 Chairman and Co-Chief Executive Officer and
Director
Sal Miwa 42 Vice-Chairman of the Board and Director
Stephen W. Brooks 42 Co-Chief Executive Officer and Director
J. Grant Martin 52 President
J. Douglas Brooks 39 Executive Vice-President
Marjorie S. Brooks 63 Secretary, Treasurer and Director
Edward J. Lysen 61 Chief Financial Officer
Jerry B. Burkett 42 Director
Dr. James H. Culp 53 Director
Peter S. Lau 45 Director
Michael M. Tull 45 Director
The Company's Board of Directors elected Joe G. Brooks as its Chairman and Co-
Chief Executive Officer on December 11, 1998. Mr. Brooks has previously served
as President and has been a director since the Company's inception in December
1988. He was also previously Chairman and CEO from inception until August 1993.
Mr. Brooks is a director and Chairman of the Standing Committee of the Arkansas
Recycling Coalition for Buy Recycled Business Alliance for the State of Arkansas
and serves on their Executive Committee. He is a member of Clean Texas 2000,
appointed by Governor George Bush in 1995. Mr. Brooks received his B.S. and
Masters degree in Food Service and Technology from the University of Arkansas.
On December 11, 1998, the Company's Board of Directors elected Sal Miwa as its
Vice-Chairman. Mr. Miwa has served as its Chairman for 3 years before this
election. He has been an outside director of the Company since January 1994.
Since January 1991, Sal Miwa has served as President and CEO of Seiwa Optical
Co., an importer of special camera systems located in Woodcliff Lake, New
Jersey. For the past 20-years he has been engaged in various international
businesses located in U.S., Canada, Japan and Europe. He received his Masters
degree in Aerospace Engineering from the Massachusetts Institute of Technology.
The Company's Board of Directors elected Stephen W. Brooks as Co-Chief Executive
Officer on December 11, 1998. Mr. Brooks has served as its Chief Executive
Officer for the last three years and has
4
<PAGE>
been a director since January 1996. Mr. Brooks has served since January 1996, as
CEO and Chairman of the Board of Razorback Farms, Inc.; a Springdale, Arkansas
based firm that specializes in vegetables for processing. Mr. Brooks also serves
on the Board of the Ozark Food Processors Association. Mr. Brooks received his
B.S. degree in Agriculture from the University of Arkansas.
The Board of Directors elected J. Grant Martin as President in December 1998.
Mr. Martin joined the Company in February 1997 and served as Chief Operating
Officer. Mr. Martin has extensive technical and manufacturing experience with
companies in the United States and overseas. Mr. Martin was previously employed
from 1994 - 1997 as Vice-President of Operations of Mrs. Crockett's Kitchens, a
large Texas manufacturing facility and prior to that served from 1982 - 1994 as
a Vice-President for PSI, Inc., a national engineering testing company.
J. Douglas Brooks is Executive Vice-President and in charge of Technical
Services, which includes Quality Assurance, R&D, Raw Material Processing,
Development and Sourcing. Mr. Brooks was Project Manager for AERT's
polyethylene recycling program with The Dow Chemical Company and is joint
inventor on several of AERT's process patents for recycling polyethylene film
for composites. Mr. Brooks received his B.S. degree in Agriculture from the
University of Arkansas and his Master of Science degree from Texas A&M
University.
Marjorie S. Brooks has been Secretary, Treasurer, and a director since the
Company's inception in December 1988. Mrs. Brooks also serves as a director of
Juniper Industries, Inc. and Razorback Farms, Inc., and has served as Secretary
and Treasurer of Brooks Investment Co., a holding company for the Brooks' family
investments, for more than the past thirty years, and has served as President of
Haskell Foods, Inc. for over twenty years.
Edward J. Lysen joined AERT in April 1999 as Chief Financial Officer. Mr. Lysen
has over 30 years experience in financial management. Prior to entering the
private sector, Mr. Lysen was a consultant in the Management Consulting Group,
KPMG-Peat Marwick from 1966 to 1979. From 1979 to 1992, Mr. Lysen was Sr. V.P,
CFO and on the Board of Tuesday Morning, Inc., a publicly traded retailer. From
1993 to 1996, he served as Chairman of the Board and CFO of Distribution Data
Management Systems, a computer service provider in the office products industry.
In 1996, Mr. Lysen entered the financial planning industry with AAL, a leading
fraternal benefits society. In 1998 to 1999, he was the CFO of Hairston
Roberson, a leading designer and manufacturer of women's fashion apparel. He
has an MBA in Finance from Northwestern University and is a Certified Public
Accountant.
Jerry B. Burkett was appointed to the Board of Directors of the Company on May
17, 1993. Mr. Burkett has been a rice and grain farmer since 1979 and has been
a principal in other closely held businesses. He is the past President of the
Arkansas County Farm Bureau. Mr. Burkett received his B.S. degree in
Agriculture from the University of Arkansas.
Dr. James H. Culp received a B.S. Degree in Chemistry from the University of
Alabama and Ph.D. Degree in Analytical and Nuclear Chemistry from Texas A&M
University. Dr. Culp was an Assistant Professor of Chemical Oceanography at
Texas A&M University for two years before joining The Dow Chemical Company. Dr.
Culp worked at Dow in research, manufacturing, business development, and supply
chain for 24 years. His last responsibility at Dow was North American Supply
Chain Director for Engineering Thermoplastics and North American Recycle
Plastics Director. Dr. Culp retired from Dow in April 1996. He joined the AERT
Board as Director of Technology in July 1996 and also served as special board
assistant to the CEO from October 1996 until October 1997.
Peter S. Lau was appointed an outside director to the Board of Directors of the
Company in April 1997. Mr. Lau has served since February 1999 as managing
director of corporate finance of American Fronteer Financial Corporation (AFFC),
formerly known as RAF Financial Corporation, a regional securities broker/dealer
with 11 offices in 10 states, that is owned by Fronteer Financial Holdings, Ltd.
(OTC BB: FDIR). Mr. Lau is formerly an associate of Heng Fung Capital, Inc. and
Heng Fung Equities, Inc.
5
<PAGE>
(subsidiary of Heng Fung Holdings Company Limited, a Hong Kong public traded
company). Mr. Lau is a graduate of the University of Hartford with a B.S. and
M.S. in accounting.
Michael M. Tull was appointed an outside director to the Board of Directors of
the Company in December 1998. Since 1996, Mr. Tull has served as President and
majority owner of I. W. Tull Sales Company, a manufacturer's representative
company, which professionally represents nine manufacturing companies and is
responsible for sales and marketing of those companies' window and door related
components in the southeastern United States. Mr. Tull serves on boards of
several closely held family businesses and since February 1999, has served as
President and a Board of Director member of the National Wild Turkey Federation,
which is one of the largest North American conservation organizations with
membership of 200,000.
Dr. Thomas J. Hairston has twenty-seven years experience with Dow Chemical
Company as corporate Vice President, Director of Research and Development,
Business Manager, New Venture Manager and researcher with eighteen patents and
numerous publications and awards. He served as a past member of the Board of
Directors for Dow joint ventures Cynara(TM) and Generon(TM) and C. D. Medical
Co. Dr. Hairston from June 1996 through August 1998, was Director of
Biotechnology and Environmental Science at Stephen F. Austin University and
since October 1994 until present is a consultant in the chemical, petrochemical
and environmental areas for H & H Business Helpers, Inc. Dr. Hairston received
his Ph.D. in Chemistry from Texas A&M University.
Joe G. Brooks, Stephen W. Brooks and J. Douglas Brooks are brothers and are sons
of Marjorie S. Brooks. There are no other familial relationships between the
current directors and executive officers.
Each of the Company's directors is elected to serve until the next annual
meeting of stockholders or until their successors are elected and qualified.
Officers serve at the discretion of the Board of Directors.
The Audit Committee of the Board of Directors consists of three outside
directors: Peter S. Lau (Chairman), James H. Culp, and Sal Miwa. The Audit
Committee recommends engagement of the Company's independent accountants and is
primarily responsible for approving the services performed by the Company's
independent accountants and for reviewing and evaluating the Company's
accounting principles and its system of internal accounting controls.
The Compensation and Stock Option Committee consists of Jerry B. Burkett
(Chairman), Sal Miwa, Marjorie S. Brooks and Michael M. Tull. The Compensation
and Stock Option Committee establishes and administers the Company's
compensation and stock option plans on behalf of the Board of Directors and
approves stock options granted thereunder.
The Executive Committee consists of three outside board members with Sal Miwa
(Chairman), James H. Culp and Michael M. Tull and four executive management
members, consisting of Joe G. Brooks, Stephen W. Brooks, J. Douglas Brooks and
J. Grant Martin. The Executive Committee establishes corporate policies,
manpower, technology, cost accounting and day-to-day operations of the Company.
The Litigation Committee consists of Joe G. Brooks (Chairman), James H. Culp and
Sal Miwa. The Litigation Committee establishes and administers the Company's
litigation plans on behalf of the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid by the
Company during the three years ended December 31, 1998 to each executive officer
of the Company whose aggregate cash compensation exceeded $100,000 during the
1998 fiscal year, and to each person who served as the chief executive officer.
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Restricted Securities Long-term
Name and Other Annual Stock Underlying Incentive All Other
Principal Position Year Salary Bonus Compensation Awards Options Payouts Compensation
- ------------------ ---- ------ ----- ------------ ---------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joe G. Brooks 1998 $105,231 $0 $0 $0 0 $ 0 $ 0
Chairman & Co-CEO 1997 61,731 0 0 0 0 0 0
1996 55,392 0 0 0 0 0 0
Stephen W. Brooks 1998 0 0 0 0 0 0 0
Co-CEO 1997 0 0 0 0 250,000 0 0
1996 0 0 0 0 0 0 0
J. Grant Martin 1998 90,000 0 0 0 0 0 $45,500(1)
President 1997 74,423 0 0 0 0 0 0
</TABLE>
(1) relocation expense
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED DECEMBER 31, 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Number of Unexercised Options In-the-Money Options
Shares at December 31, 1998 at December 31, 1998
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen W. Brooks 0 $ 0 275,000/250,000 $64,850/$53,250
J. Grant Martin 150,000 112,203 150,000/200,000 56,300/50,100
Joe G. Brooks 0 0 300,000/200,000 121,500/50,100
</TABLE>
DIRECTOR COMPENSATION
Non-employee directors do not receive cash compensation for serving on the
Company's Board of Directors however; such persons are reimbursed for out-of-
pocket expenses in connection with their attendance at meetings. Directors are
paid long-term compensation in the form of stock option grants under the
Company's Non-Employee Director Stock Option Plan. Such plan provides for
annual grants of options to purchase 25,000 shares of Class A Common Stock at
the fair market value of said stock on the date of such grant.
SECTION 16 REPORTING
Section 16(a) of the Exchange Act requires the Company's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's securities to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and National Association of
Securities Dealers. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all forms filed pursuant to Section 16(a). Based on a review of the copies
of such forms received by it and written representations from certain reporting
persons that no Forms 4 or Forms 5 were required for those persons, the Company
7
<PAGE>
believes that during the year ended December 31, 1998, its executive officers,
directors and greater than ten-percent beneficial owners were in compliance with
applicable requirements of Section 16(a).
COMPENSATION AND OPTIONS COMMITTEE REPORT
The Compensation and Options Committee consists of Jerry B. Burkett, Sal Miwa,
Marjorie S. Brooks and Michael M. Tull. This committee establishes and
administers the Company's Compensation and stock option plans on behalf of the
Board of Directors and approves stock options granted thereunder.
The overall compensation policy of the Company is to maximize shareholder return
by combining annual and long-term compensation to executives based upon
corporate and individual performance. Annual compensation is paid in the form
of base salary, which is subjectively determined by the Board based upon senior
management's recommendation. Additionally, although no cash bonuses have been
paid to executives, the Board reserves the right to grant such bonuses if the
Company's performance so warrants. Long-term compensation to executives is
built around the Company's stock option programs.
Base salaries are reviewed and approved by the full Board at the time an officer
is hired and thereafter on a periodic basis as determined appropriate by the
Board and senior management. Base salaries are subjectively determined based
upon a number of factors, including level and scope of responsibility, salaries
paid for comparable positions at similarly situated companies and individual and
corporate performance. No base salary increases were effected for executives
during 1998, primarily as a result of the Company's performance and cash flow
position.
The Company effects stock option grants from time-to-time as a mechanism for
providing long-term, non-cash compensation to executives. The Board believes
that stock options are (especially in the context of an emerging growth company)
an effective incentive for executives and managers to create value for the
Company and its shareholders since the value of an option bears a direct
relationship to appreciation in the Company's stock price. By utilizing stock-
based compensation, the Company can focus much-needed cash flow, which would
otherwise be paid out as compensation, back into the daily operations of the
business. Individual stock option grants are subjectively determined based upon
a number of factors, including individual performance and prior year's grants.
Based upon these factors, during 1998 there were no options issued to purchase
Class A common stock. All option grants would be made at an exercise price
equal to the fair market value of the underlying stock on the date of grant.
During 1998, Stephen W. Brooks, the Company's Chief Executive Officer, did not
receive any base salary or long-term compensation awards. Mr. Brooks has chosen
to defer salaried compensation as to which time the Company has achieved
positive cash flow and profitability.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At March 31, 1998, the Company was obligated under a non-cancelable lease with
Marjorie S. Brooks, a principal stockholder, for land and building where a
production facility is located. The lease has an expiration date of April 30,
2001, and rental payments of $1,519 per month.
In April 1998, Robert A. Mackie, an affiliated accredited investor, loaned the
Company $300,000 on a 6 month basis. Said investor received 100,000 consulting
warrants and may convert said warrants into Class A Common and be able to sell
said shares, once a registration statement covering said transaction becomes
effective.
In 1997 and 1998, Joe G. Brooks, an officer of the Company, purchased two
pickups for the Company's sales force utilizing his personal credit, of which
the balance remaining for such transactions at December 31, 1998 was $4,178 and
$12,556. The officer realized no gain or compensation from this transaction.
During 1998, the Company had an agreement with Brooks Investment Co., an
affiliate which is owned by Marjorie S. Brooks, whereby the Company agreed to
transfer certain of its trade receivables as collateral, which the affiliate
deemed acceptable, up to $900,000 at any one time. Upon acceptance of a transfer
of a receivable, the affiliate would remit to the Company 100% of the
receivable, as defined in the agreement, and the Company
8
<PAGE>
would remit to the affiliate up to .88% as a factoring charge. The Company
indemnified the affiliate for any loss arising out of rejections or returns of
any merchandise, or any claims asserted by the Company's customers. During 1998,
the Company transferred an aggregate of approximately $12,863,000 in receivables
under this agreement, of which $695,447 remained to be collected as of December
31, 1998. During 1997 and 1996, the Company transferred an aggregate of
approximately $9,090,000 and $7,317,000, respectively, in receivables under this
agreement, none of which remains to be collected. Costs of approximately
$113,189, $73,718 and $61,555 associated with the factoring agreement are
included in selling and administrative costs at December 31, 1998, 1997 and
1996, respectively.
In March 1999, Marjorie S. Brooks, the Company's major shareholder, increased
the Company's factoring line to $2 million. The new terms allow the factor to
charge up to 2% per invoice, and the Company must guarantee the receivables. At
December 31, 1998, accounts payable-related parties included the $695,447
discussed above and $149,203 relating to factoring charges and other
miscellaneous items owed to related parties.
The Company has made various purchases from Razorback Farms, Inc., an
affiliated company owned by Marjorie S. Brooks, which is also primarily owned
by the majority shareholder, in the first quarter of 1999 totaling $8,685
(unaudited). In 1998, purchases from the affiliated company totaled $171,102.
The purchases were primarily composed of labor and transportation expenses,
which were at rates comparable to or below those in the market. Management
believes the goods and services obtained were on terms and conditions, which
could not have been obtained from outside sources.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors constituting the
Board of Directors shall be determined from time to time by resolution of the
Board of Directors. The Board of Directors has set the number of directors at
nine. The Company currently has eight directors and at the meeting nine
directors are to be elected by the holders of shares outstanding Class A and
Class B Common Stock and Series B Preferred Stock voting together as a single
class. To be elected, each director must receive a plurality of the votes cast
at the Annual Meeting. All directors serve for a term of one year and until
their successors are duly elected and qualified. Each outstanding share of
Class A Common Stock entitles the holder thereof to one vote with respect to the
election of each of the nine director positions to be filled and each
outstanding share of Class B Common Stock entitles the holder thereof to five
votes with respect to the election of each of the nine director positions to be
filled, and each outstanding share of Series B Preferred Stock (is entitled to
vote on an "as-converted" basis) resulting in 2,500 votes per share.
The enclosed form of proxy provides a method for stockholders to withhold
authority to vote for any one or more of the nominees for director while
granting authority to vote for the remaining nominees. If you wish to grant
authority to vote for all nominees, check the box marked "FOR". If you wish to
withhold authority to vote for all nominees, check the box marked "WITHHOLD".
If you wish your shares to be voted for some nominees and not for one or more of
the others, check the box marked "FOR" and indicate the names(s) of the
nominee(s) for whom you are withholding the authority to vote by drawing a line
through the name(s) of such nominee(s). If you withhold authority to vote your
shares, such vote will be treated as an abstention and accordingly your shares
will neither be voted for or against a director but will be counted for quorum
purposes.
The nine nominees for director are: Joe G. Brooks, Sal Miwa, Stephen W. Brooks,
Marjorie S. Brooks, Jerry B. Burkett, Dr. James H. Culp, Peter S. Lau, Michael
M. Tull and Dr. Tom Hairston. All of the nominees except Dr. Tom Hairston are
presently directors of the Company. Joe G. Brooks is Chairman and Co-Chief
Executive Officer, Sal Miwa is Vice-Chairman of the Board of the Company and
Stephen W. Brooks is currently Co-Chief Executive Officer.
The enclosed proxy if properly signed and returned, will be voted for the
election of the nine nominees named above, unless authority to vote is withheld.
Management recommends that the stockholders vote in favor of the nine nominees
named above. In the event, one or more nominees become unavailable for
9
<PAGE>
election, votes will be cast, pursuant to authority granted by the enclosed
proxy, for such substitute nominees as may be designated by the Board of
Directors. The Board of Directors has no reason to believe that any nominee
will be unable to serve, if elected.
PROPOSAL NO. 2:
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The current authorized capital stock of the Company consists of 5,000,000 shares
of preferred stock, $1.00 par value (the "Preferred Stock",) 50,000,000 shares
of Class A Common Stock, $.01 par value (the "Class A"), and 7,500,000 shares of
Class B Common Stock $.01 par value (the "Class B"), of which 22,683,626 shares
of Class A Common Stock, 1,465,530 shares of Class B Common Stock and 2,900
shares of Preferred Stock, were issued and outstanding at June 22, 1999. On June
11, 1999, the Board adopted a proposed amendment to Article Fourth of the
Company's Articles of Incorporation (the "Articles of Incorporation") increasing
the authorized number of shares of Class A Common Stock from 50,000,000 shares
to 75,000,000 shares for submission to the shareholders. In addition to the
22,683,626 shares of Class A Common Stock outstanding on June 22, 1999,
4,524,168 shares are reserved for issuance upon exercise of options which are
either currently outstanding or authorized to issue under Company stock options
plans, 19,817,285 shares are reserved for issuance upon exercise of currently
outstanding warrants, 2,416,666 shares are reserved for issuance upon conversion
of the Company's Preferred Stock, 3,383,333 shares are reserved for issuance of
Preferred Stock Interest shares, 75,908 shares are reserved for issuance of
Bridge Financing Interest shares, and 1,465,530 shares are reserved for issuance
upon conversion of Class B Common Stock, leaving no shares available for
issuance. Other than pursuant to the proposed amendment to increase the shares
reserved for issuance under the Company's 1997 Securities Plan by 2,000,000
shares (although no individual future awards have been determined at this time)
and other than a potential issuance of warrants for up to 300,000 shares of
Class A Common Stock in connection with a potential industrial development bond
financing, the Company's management has no present arrangements, agreements,
understandings or plans for the issuance or use of the additional shares
proposed to be authorized.
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of shareholders of the company and ratably to receive
dividends, if any, as may be declared from time to time by the Board from funds
legally available therefor, subject to the payment of any outstanding
preferential dividends declared with respect to the Preferred Stock that is
currently outstanding. Upon liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in any assets
available for distribution to shareholders after payment of all obligations of
the Company, subject to the rights to receive preferential distributions of the
holders of any Preferred Stock then outstanding.
If the proposed amendment is approved, all or any part of the authorized but
unissued shares of Common Stock may thereafter be issued without further
approval from the shareholders, except as may be required by law or the policies
of any stock exchange on which the shares of stock of the Company may be listed,
for such purposes and on such terms as the Board may determine. Holders of the
capital stock of the company do not have any preemptive rights to subscribe for
the purchase of any shares of Common Stock, which means that current
shareholders do not have a prior right to purchase any issue of Common Stock in
order to maintain their proportionate ownership.
The proposed amendment will not affect the rights of existing holders of Common
Stock except to the extent that future issuances of Common Stock will reduce
each existing shareholders' proportionate ownership.
If the proposed amendment is adopted, Section FOURTH, subsection (a), of the
Certificate of Incorporation would be amended to read as follows:
"FOURTH: (A) The aggregate number of shares which the Corporation shall
have the authority to issue is Eighty-Seven Million Five Hundred Thousand
(87,500,000) shares, consisting of Five Million (5,000,000) shares of
Preferred Stock having a par value of $1.00 per share, Seventy-Five Million
(75,000,000) shares of Class A Common Stock having a par value of $.01 per
share, and Seven Million Five Hundred Thousand (7,500,000) shares of Class
B Common Stock having a par value of $.01 per share."
The Board has determined that it would be appropriate for the Company to
increase the number of authorized shares of Common Stock in order to have
additional shares available for possible future
10
<PAGE>
acquisition or financing transactions, stock splits, stock dividends and other
issuances, or to satisfy requirements for additional reservations of shares by
reason of future transactions.
The affirmative vote of holders of at least 51% of the outstanding shares of
Common Stock entitled to vote at the Meeting is required in order to adopt the
proposed amendment. Unless indicated to the contrary, the enclosed proxy will
be voted for the proposed amendment. Unless indicated to the contrary, the
enclosed proxy will be voted for the proposed amendment. Votes "withheld" or
abstaining from voting will have the same effect as a negative vote or a vote
"against" the proposed amendment. Furthermore, if you do not attend the meeting
in person or return your properly completed and signed proxy card, you will
effectively be voting against the amendment. In addition, failure to obtain
shareholder approval may have an adverse affect on the Company's business
strategy.
The Board recommends that the shareholders vote "FOR" the proposed amendment.
PROPOSAL NO. 3:
AMENDMENT TO 1997 SECURITIES PLAN
OVERVIEW AND OBJECTIVES
- -----------------------
On June 11, 1999, the Board of Directors of the Company approved and recommends
a Vote "For" the proposed Amendment to Increase Advanced Environmental Recycling
Technologies, Inc. 1997 Securities Plan by 2 million shares. Effective this 23rd
day of July, 1999 (with prior approval July 23, 1997 the "Effective Date")
described herein, Advanced Environmental Recycling Technologies, Inc. (the
"Company") amends that the Advanced Environmental Recycling Technologies, Inc.
1997 Securities Plan (the "Plan") to benefit the Company's stockholders by
creating a flexible vehicle to provide a variety of medium and long-term
incentive compensation opportunities to management of the Company. In doing so,
the Plan provides an important link between the compensation of senior and
executive management, as well as mid-level management and/or hourly associates,
and Company performance. The Awards under the Plan will compensate management
and associates for the creation of shareholder value. In this way, the Plan is
intended to encourage and reward superior performance by individuals whose
performance is a key element in achieving the Company's continued financial and
operational success. In addition, the Plan will assist the Company's recruiting,
rewarding, retaining, and motivating management and associates to achieve the
Company's mission of being a top performer in its industry by rewarding the
creation of shareholder value.
ELIGIBILITY
- -----------
Awards may be granted only to Employees who are designated as Participants from
time to time by the Committee. The Committee shall consider an individual's
position, responsibilities, and importance to the Company among other factors in
determining which Employees shall be Participants. The types of Awards to be
made to Participants and the terms, conditions, and limitations applicable to
the Awards are left to the sole discretion of the Committee, subject to the
terms of the Plan. The Committee's decision as to eligibility and the nature and
timing of Awards under the Plan is final.
TYPES OF AWARDS
- ---------------
Awards shall be made in the form of Stock Options, Restricted Stock, Performance
Awards, and other types of Awards described below. Subject to the other
provisions of this Plan, Awards may also be granted individually, in
combination, or in tandem with, in replacement of, or as alternatives to, grants
or rights under this Plan and any other employee plan of the Company.
(1) A Stock Option is a right to purchase a specified number of Shares at a
specified price during such specified time, as the Committee shall
determine.
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<PAGE>
(a) Stock Options granted may be either of a type that complies with the
requirements of incentive stock options as defined in Section 422 of the
Code ("Incentive Stock Options") or of a type that does not comply with
such requirements ("Non Qualified Stock Options"); provided, however, that
the aggregate number of Shares which may be offered for purchase pursuant
to Incentive Stock Options under this Plan shall be amended to not exceed
four million (4,000,000), the aggregate number of Shares which may be
offered for purchase pursuant to Non-Qualified Stock Options under this
Plan shall not exceed one million (1,000,000) Shares and at any time after
a Qualified Public Offering that the aggregate number of Shares which may
be offered to any Employee during any calendar year shall not exceed three-
hundred fifty thousand (350,000) Shares.
(b) The exercise price per Share of any Stock Option shall be determined by
the Committee and set forth in the Award Agreement. However, a Stock Option
granted to a "covered employee" as defined in Section 162(m) of the Code
shall not have an exercise price less than the Fair Market Value of a Share
on the date the Stock Option is granted.
(c) A Stock Option may be exercised, in whole or in part, by the giving of
written notice of exercise to the Company specifying the number of Shares
to be purchased.
(d) The exercise price of the Shares subject to the Stock Option may be
paid in cash or may also be paid by the tender of Shares already owned by
the Participant (to the extent permitted by Rule 16b-3), or through a
combination of cash and Shares, or through such other means the Committee
determines are consistent with the Plan's purpose and applicable law. No
fractional Shares will be issued or accepted.
(e) If an Incentive Stock Option is granted to a Participant who owns or is
deemed to own (by reason of the attribution rules of Section 424 (d) of the
Code) more than ten percent (10%) of the combined voting power of all
classes of stock of the Company (or any parent or subsidiary), the exercise
price shall be at least one hundred ten percent (110%) of the Fair Market
Value per Share on the date such stock option is granted.
No portion of any Incentive Stock Option may be exercised after the
expiration of ten (10) years from the date such stock option is granted.
However, if a Participant owns or is deemed to own (by reason of the
attribution rules of Section 424 (d) of the Code) more than ten percent
(10%) of the combined voting power of all classes of stock of the Company
(or any parent or subsidiary) and an Incentive Stock Option is granted to
such Participant, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five (5)
years from the date such option is granted.
Upon termination of Participant's employment, the Participant may not
exercise any Incentive Stock Option later than three (3) months after his
termination of employment, except in the case of death or disability.
If Shares acquired upon exercise of an Incentive Stock Option are
disposed of by a Participant prior to the expiration of either two (2)
years form the date such Incentive Stock Option is granted or one (1) year
from the transfer of Shares to the Participant pursuant to the exercise of
such Incentive Stock Option or in any other disqualifying disposition
within the meaning of Section 422 of the Code, such Participant shall
notify the Company in writing of the date and terms of such disposition. A
disqualifying disposition by a Participant shall not affect the statutes
for any other Stock Option granted under the Plan as an Incentive Stock
Option within the meaning of Section 422 of the Code.
The Committee may not grant Incentive Stock Options under the Plan to
any Participant which would permit the aggregate Fair Market Value
(determined on the date such Stock Option is granted) of the Shares with
respect to which Incentive Stock Options under this and any other plan of
the Company and its subsidiaries) are exercisable for the first time by
such Participant during any calendar year to exceed two hundred and fifty
thousand dollars ($250,000).
12
<PAGE>
(2) Shares of Restricted Stock are Shares that are issued to a Participant and
are subject to such terms, conditions, and restrictions as the Committee
deems appropriate, which may include, but are not limited to, restrictions
upon the sale, assignment, transfer, or other disposition of the Restricted
Stock and the requirement of forfeiture of the Restricted Stock upon
termination of employment under certain specified conditions. As a
condition to any Award hereunder, the Committee may require a Participant
to pay to the Company an amount equal to, or in excess of, the par value of
the shares of Restricted Stock awarded to him or her. Any such Restricted
Stock Award shall automatically expire if not purchased in accordance with
the Committee's requirements, if any, within thirty (30) days after the
date of grant. The Committee may provide for the lapse of any such term or
condition or waive any term or condition based on such factors or criteria
as the Committee may determine. The Participant shall have, with respect to
awards of Restricted Stock for which the Participant is the holder of
record, all of the rights of a shareholder of the Company, including the
right to vote the Restricted Stock and the right to receive any cash or
stock dividends on such Restricted Stock. The Committee shall have the
discretionary authority to determine the total number of Shares available
for Awards under the Plan as Restricted Stock to be issued during the
duration of the Plan, however, the maximum number of Shares that may be
issued to any Participant or Participants as Restricted Stock under the
Plan shall be amended to not exceed one-million (1,000,000) Shares.
(3) Performance Awards may be granted under this Plan from time to time based
on the terms and conditions as the Committee deems appropriate provided
that such Awards shall not be inconsistent with the terms and purposes of
this Plan. Performance Awards may be in the form of performance units,
performance shares and such other forms of Performance Awards, which the
Committee shall determine. For this purpose, "performance shares" are
grants of Shares based on satisfying preestablished Company performance
criteria set by the Committee. "Performance Units" are cash allotments of
dollar-denominated units whose payment or value is contingent on
performance as measured against predetermined objectives over a multi-year
period of time. The Committee shall determine the performance measurements
and criteria for such Performance Awards.
(4) The Committee may from time to time grant (i) Shares, (ii) other stock-
based and nonstock-based Awards under the Plan including, without
limitation, those Awards pursuant to which Shares are or may in the future
be acquired, (iii) Awards denominated in Share units, (iv) securities
convertible into Shares, (v) phantom securities (whereby Participants can
take advantage in the appreciation of Share prices without actual ownership
of Shares), (vi) dividend equivalents (whereby a Participant becomes
entitled through the 17 use of a derivative security attached to an option
to dividends and other rights derived form the underlying Shares had the
Participant owned such Shares), and (vii) other forms or derivative related
to the Shares as it deems appropriate. The Committee shall determine the
terms and conditions of such other stock, stock-based, and non-stock based
Awards provided that such Awards shall not be consistent with the terms and
purposes of this Plan.
SHARES SUBJECT TO THE PLAN
- --------------------------
The number of Shares for which Awards may be granted under the Plan be amended
with the addition of two million shares to not exceed five million (5,000,000)
Shares. To the extent permitted by Section 16, any unexercised or undistributed
portion of any terminated, expired, exchanged, or forfeited Awards, or Awards
settled in cash in lieu of Shares, shall be available for further Awards.
Additional rules for determining the number of Shares granted under the Plan
maybe made by the Committee, as it deems necessary or appropriate.
The Shares or other stock which may be issued pursuant to an Award under the
Plan may be treasury or authorize, but unissued stock, or stock may be acquired,
subsequently or in anticipation of the transaction, in the open market or in
private transactions to satisfy the requirements of the Plan.
ADMINISTRATION
- --------------
13
<PAGE>
"Committee" means the Compensation Committee of the Board, which shall be
comprised solely of no less than two outside directors. For this purpose, the
term "outside director" means a director of the Board who (i) is not an Employee
or a former Employee of the Company, (ii) has never served as an officer of an
entity currently affiliated with the Company, and (iii) is not paid compensation
from the Company, directly or indirectly, in any capacity other than as a
director. Each member of the Committee at the time of his appointment to the
Committee and while he is a member thereof, must also be a "disinterested
person," as that term is defined in Rule 16b-3 promulgated under the Exchange
Act.
The Committee shall have the power to interpret and administer the Plan. All
questions of interpretation with respect to the Plan, the number of Shares or
other securities, or units granted, and the terms of any Award Agreements shall
be determined by the Committee and its determination shall be final and
conclusive upon all parties in interest. In the event of any conflict between an
Award Agreement and the Plan, the terms of the Plan shall govern.
The Committee may delegate to the officers or employees of the Company the
authority to execute and deliver such instruments and documents, to do all such
acts and things, and to take all such other steps deemed necessary, advisable or
convenient for the effective administration of the Plan in accordance with its
terms and purpose, except that the Committee may not delegate any discretionary
authority with respect to substantive decisions or functions regarding the Plan
or Awards thereunder as these relate to Insiders including but not limited to
decisions regarding the timing, eligibility, pricing, amount or other material
terms of such Awards.
A majority of the members of the Committee shall constitute a quorum. The vote
of a majority of a quorum shall constitute action by the committee. The
Committee will be responsible for declaring the material terms under which the
Performance Awards are to be paid, including performance goals. Prior to the
payment of a performance-based Award, the Committee shall certify that the
predetermined performance goals and any other material terms were in fact
satisfied. The Committee shall periodically determine the Participants in the
Plan and the nature, amount, pricing, timing, and other terms of Awards to be
made to such individuals. However, the committee must ratify all awards under
the program to the Company's chief executive officer.
CHANGES IN CAPITALIZATION
- -------------------------
If, while any Awards are outstanding, the outstanding Shares have increased,
decreased, changed into, or been exchanged for a different number or kind of
shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or similar transaction, appropriate and proportionate adjustments shall be
made by the Committee in the number and/or kind of shares which are subject to
purchase or award under outstanding Awards and in the purchase price or prices
applicable to such outstanding Awards in order to prevent the dilution or
enlargement of rights, to the end that the same proportion of the Company's
common stock in each instance shall remain subject to purchase at the same
aggregate purchase price. In addition, in any such event, the number and/or kind
of Shares which may be offered under the Plan shall also be proportionately
adjusted to the same end.
To the extent that the foregoing adjustments relate to Awards, Shares, or
securities of the Company, such adjustments shall be made by the committee and
its determination in that respect shall be final, binding, and conclusive. The
grant of an Award pursuant to this Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations, or
changes of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
CHANGE OF CONTROL
- -----------------
14
<PAGE>
The Committee shall determine the effect of Change of Control and specify such
effect in Award Agreements that are issued pursuant to the Plan. These effects
may include, but are not limited to:
(a) Offering to purchase any outstanding Award made pursuant to this Plan from
the holder for its Fair Market Value or such value established under the Award
Agreement, as determined by the Committee, as of the date of the Change of
Control; or
(b) Making adjustments or modifications to outstanding Awards as the Committee
deems appropriate to maintain and protect the rights and interests of
Participants following such Change of Control.
For the purposes of this Section, a "Change of Control" shall mean the earliest
date on which any of the following events shall occur:
(a) there shall be consummated any consolidation or merger of the
Company in which the stockholders own 70% or less of a newly-
merged entity;
(b) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company;
(c) The acquisition by a third party of twenty percent (20%) or more
of the Company's then outstanding securities having the right to
vote in the election of directors; or
(d) during any period of two consecutive years, individuals who, at
the beginning of such period constituted the entire Board, cease
of any reason(other than death) to constitute a majority of the
directors, unless the election, or the nomination for election,
by the Company's stockholders, of each new director was approved
by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
AMENDMENT AND TERMINATION
- -------------------------
The Board may at any time amend, suspend, or terminate the Plan. The Committee
may at any time alter or amend any or all Award Agreements under the Plan to
comply with any laws that govern such agreements. However, no such action may,
without further approval of the stockholders of the Company, be effective if
such approval is required in order that transactions in Company securities under
the Plan, as they relate to Insiders, be exempt form the operation of Section16
(b) of the Exchange Act, and the Board may not amend the Plan so as to:
(a) increase the number of Shares which may be issued under the Plan, except as
provided for in Article VIII;
(b) materially modify the requirements as to eligibility for participation in
the Plan;
(c) materially increase the benefits accruing to Participants under the Plan;
or
(d) extend the duration of the Plan beyond the date approved by the
stockholders of the Company.
TITLE NAME AWARD TYPE
- ---------------------
Although the program allows the Committee to grant market price options, the
Company intends to structure current and future plans to avoid deferred
compensation expense. It is the intention of the Company to make an initial
grant of options that will have a grant value calculated to deliver three years'
worth of competitive long-term compensation.
MISCELLANEOUS
- -------------
The Plan shall, subject to stockholder approval, continue from its Effective
Date until December 31, 2007, unless the Plan is terminated in accordance with
the provisions. The laws of the State of Delaware shall govern all matters
relating to this Plan except to the extent superseded by the laws of the United
States. The Plan shall be submitted to the stockholders of the Company for
their approval and adoption. The Plan
15
<PAGE>
shall not be effective and no Award shall be made hereunder, unless and until
the Plan has been so approved and adopted at a meeting of the Company's
stockholders. The Company may require that there be presented to and filed with
it by any Participant under the Plan, such evidence as it may deem necessary to
establish that the options granted or Shares to be purchased or transferred are
being acquired for investment and not with a view to their distribution.
The Board recommends that the shareholders vote "FOR" the proposed amendment.
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total shareholder return,
including reinvested dividends, on AERT common stock, with two other indexes:
FIVE-YEAR CUMULATIVE TOTAL RETURNS (1)
[GRAPH APPEARS HERE]
<TABLE>
Dollars/shares
<S> <C> <C> <C> <C> <C> <C> <C>
$350 $300 $250 $200 $150 $100 $50 $0
Fiscal Year Ending December 31
1993 1994 1995 1996 1997 1998
</TABLE>
-----------------------------------------------------------------------------
. Advanced Environmental . Materials and Construction . Nasdaq Market Index
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR ENDING DECEMBER 31
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Advanced Environmental $100 26.32 89.47 34.21 31.58 68.42
Materials and Construction $100 88.22 103.30 117.55 128.38 129.75
Nasdaq Market Index $100 104.99 136.18 169.23 207.00 291.96
</TABLE>
Assumes $100 invested on December 31, 1993, in AERT common stock, Materials and
Construction composite index, and the Nasdaq Market Index weighted by market
capitalization each year, of the Media General Industry Group 63 Materials and
Construction.
(1) Total return assumes reinvestment of dividends.
16
<PAGE>
ADDITIONAL INFORMATION AVAILABLE
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, THE COMPANY WILL FURNISH, WITHOUT
CHARGE, A COPY OF THE COMPANY'S 1998 ANNUAL REPORT ON FORM 10-K, AS FILED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO. THE WRITTEN REQUEST SHOULD BE SENT TO THE
SECRETARY, AT THE COMPANY'S EXECUTIVE OFFICE. THE WRITTEN REQUEST MUST STATE
THAT AS OF JUNE 22, 1999, THE PERSON MAKING THE REQUEST WAS A BENEFICIAL OWNER
OF CAPITAL STOCK OF THE COMPANY.
AUDITORS TO BE PRESENT
A representative of Arthur Andersen, L.L.P., the Company's auditors for 1998 and
the current year, is expected to be in attendance at the Annual Meeting and will
be afforded the opportunity to make a statement. The representative will also
be available to respond to questions.
OTHER MATTERS
The Board of Directors 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 should properly come before the meeting or any adjournments
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.
COST AND METHOD OF PROXY SOLICITATION
The Company will pay the cost of proxy solicitation. In addition to
solicitation by mail, arrangements will be made with brokers and other
custodians, nominees and fiduciaries to send proxies and proxy material to their
principals and the Company will, upon request, reimburse them for their
reasonable expenses in so doing. Officers and other regular employees of the
Company may, if necessary, request the return of proxies by telephone, telegram,
fax or in person.
STOCKHOLDER PROPOSALS
Stockholder proposals for the next Annual Meeting of Stockholders anticipated to
be held in July, 2000, must be received at the Company's corporate offices, 801
North Jefferson Street, Post Office Box 1237, Springdale, Arkansas 72765, on or
before December 31, 1999.
The foregoing Notice and Proxy Statement are sent by order of the Board of
Directors.
Joe G. Brooks
Chairman
Dated: June 29, 1999
17
<PAGE>
TO VOTE BY MAIL
- ---------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.
TO VOTE BY TELEPHONE (TOUCH-TONE PHONE ONLY)
- --------------------------------------------
Please call toll-free 1-800-PROXIES and follow the instructions. Have your
control number and the proxy card available when you call.
[X] Please mark your votes as in this example.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR all nominees listed WITHHOLD authorization Nominees: Joe G. Brooks
at right (except as to vote for all nominees Sal Miwa
marked to the contrary listed at right Stephen W. Brooks
below) Marjorie S. Brooks
1. Election Jerry B. Burkett
of Dr. James H. Culp
Directors [__] [__] Peter S. Lau
Michael M. Tull
Dr. Tom Hairston
</TABLE>
To withhold authority to vote for any individual nominee, strike a line through
the nominee's name in the list at right.
2. Proposed increase of authorized Class A Common Stock from 50,000,000 to
75,000,000 shares
3. Proposed Amendment to 1997 Securities Plan by addition of 2 million shares
4. Ratify appointment of Arthur Andersen LLP
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JULY 23, 1999.
The undersigned hereby appoints Joe G. Brooks as Proxy, with full power to
appoint his substitute, and hereby authorizes to represent and vote, as
designated on this proxy, all shares of common stock of Advanced Environmental
Recycling Technologies, Inc. held of record by the undersigned on the record
date June 22, 1999 at the Annual Meeting of Stockholders of the Company to be
held at the Northwest Arkansas Holiday Inn, Springdale, Arkansas on Friday, July
23, 1999 at 10:00 a.m., and at any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR Items 1, 2, 3 and 4.
The undersigned acknowledges receipt of the formal notice of such meeting and
the 1998 Annual Report of the Company.
PLEASE MARK, DATE, EXECUTE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
SIGNATURE (S) ___________________________________ DATE: _____________, 1999
Note: Please sign above exactly as name appears on the certificate. When shares
are held by joint tenants both should sign. If a corporation or partnership,
sign in corporate or partnership name by authorized person or partner.
