<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 14a-12
</TABLE>
Advanced Environmental Recycling Technologies, 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:
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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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<PAGE> 2
Advanced Environmental Recycling Technologies, Inc.
914 North Jefferson Street
Springdale, Arkansas 72764
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, JULY 28, 2000
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,
Springdale, Arkansas at 10:30 a.m., local time, Friday, July 28, 2000, 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. 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. To ratify the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal
year ending December 31, 2000.
3. 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 16, 2000
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,
/s/ MARJORIE S. BROOKS
Marjorie S. Brooks
Secretary
A proxy card and Annual Report of the Company for the year ended
December 31, 1999 are enclosed. It is important that your shares be represented
whether or not you attend the meeting. Registered stockholders can vote their
shares via the Internet or by using a toll-free telephone number. Instructions
for using these convenient services appear on the proxy card. You can also vote
your shares by marking your votes on the proxy card, signing and dating it and
mailing it promptly using the envelope provided, or by faxing it to the number
provided on the proxy card. Proxy votes are tabulated by an independent agent
and reported at the Annual Meeting. The tabulating agent maintains the
confidentiality of the proxies throughout the voting process. We hope that you
can attend this meeting in person, but if you cannot do so please vote your
proxy now.
YOUR VOTE IS IMPORTANT
<PAGE> 3
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
914 North Jefferson Street
Springdale, Arkansas 72764
(501) 756-7400
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 10:30 a.m. local time,
Friday, July 28, 2000, and at any adjournments thereof. The notice of meeting,
proxy statement and form of proxy are being mailed to stockholders on or about
July 3, 2000.
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 16, 2000, there were 24,168,312 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. There were also 2,000 shares of Series A and C
preferred stock issued and outstanding, but these shares are 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 16, 2000, 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 16% of the currently
outstanding shares of Class A common stock, 94% of the shares of Class B common
stock and approximately 89% of the currently outstanding shares of Series B
preferred stock, and collectively owned shares representing approximately 38% 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 23% of the votes entitled to be cast and may be in a position to
control the Company.
<PAGE> 4
The following table sets forth, as of December 31, 1999, certain information
with regard to the beneficial ownership of the Company's capital stock by each
holder of 5% or more 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) Voting Power (2)(17)
------------------- -------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Marjorie S. Brooks Class A 10,997,998(3) 23.6% 28.0%
P. O. Box 1237 Class B 837,588(4) 57.2%
Springdale, AR 72765 Preferred- 400(5) 13.8%
Series B
-------------------------------------------------------------------------------------------------------------------------------
Joe G. Brooks Class A 838,397(6) 1.8% 3.9%
HC 10, Box 116 Class B 284,396 19.4%
Junction, TX 76849
-------------------------------------------------------------------------------------------------------------------------------
J. Douglas Brooks Class A 831,573(7) 1.8% 2.6%
P. O. Box 1237 Class B 131,051 8.9%
Springdale, AR 72765
-------------------------------------------------------------------------------------------------------------------------------
Jerry B. Burkett Class A 165,000(8) * *
P. O. Box 1237 Class B 33,311 2.3%
Springdale, AR 72765
-------------------------------------------------------------------------------------------------------------------------------
Sal Miwa Class A 428,000(9) * *
P. O. Box 821
Short Hills, NJ 07078
-------------------------------------------------------------------------------------------------------------------------------
Stephen W. Brooks Class A 745,116(10) 1.6% 2.1%
P. O. Box 291 Class B 89,311 6.1%
Springdale, AR 72765
-------------------------------------------------------------------------------------------------------------------------------
James H. Culp, Ph.D. Class A 325,000(11) * *
P. O. Box 1237
Springdale, AR 72765
-------------------------------------------------------------------------------------------------------------------------------
Peter S. Lau Class A 104,715(12) * *
P. O. Box 1237
Springdale, AR 72765
-------------------------------------------------------------------------------------------------------------------------------
Michael M. Tull Class A 96,000(13) * 1.9%
c/o I. W. Tull Sales Co. Preferred- 400 13.8%
1475 Holcomb Bridge Rd. Series B
Suite 113
Roswell, GA 30076
-------------------------------------------------------------------------------------------------------------------------------
Robert A. Mackie, Jr. Class A 1,304,600(14) 2.8% 2.3%
P. O. Box 380 Preferred- 300 10.3%
Irvington, NY 10533 Series C
-------------------------------------------------------------------------------------------------------------------------------
Delbert & Pat Allen Class A 1,322,524(15) 2.8% 2.3%
3611 West Gulf Drive,
Sanibel Island, FL 33957
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</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
Officers and directors Class A 14,531,799 31.2% 40.5%
as a group (nine persons) Class B 1,375,657 93.9%
Preferred- 800 27.6%
Series B
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* Less than 1%
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</TABLE>
(1) The Class B common stock is substantially identical to the Class A common
stock, except that each 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 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 was determined in accordance with Rule
13d-3(d)(1) of the Exchange Act and included shares underlying outstanding
warrants and options which the named individual had the right to acquire
within sixty days of December 31, 1999.
(3) Includes 2,608,940 shares owned directly, 493,645 in trusts controlled by
Mrs. Brooks, 1,100,000 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 of 1994, 2,000,000 shares
issuable upon exercise of Class H Warrants, and 493,333 shares issuable
upon exercise of Series X and Series Y Warrants owned indirectly through
two corporations controlled by Mrs. Brooks.
(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 SMF 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 420,000 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.
3
<PAGE> 6
(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 and 25,000 shares issuable upon
exercise of stock options.
(14) Mr. Mackie directly owns 250,000 shares of Class A common stock, 75,000
Bonus Warrants, 250,000 Series X Warrants, 120,000 Series Y Warrants and
300,000 Series Z Warrants of the Company. Mr. Mackie indirectly owns
309,600 Bonus Warrants through R.A. Mackie & Co., L.P.
(15) Includes 338,624 shares owned directly, 789,526 shares owned indirectly,
160,000 shares issuable upon exercise of Bonus Warrants owned directly and
34,374 shares issuable upon exercise of Bonus Warrants owned indirectly.
(16) Class A common stock beneficial ownership is calculated based on 46,610,713
shares outstanding as of December 31, 1999, which includes 22,359,216
shares which any person has the right to acquire through the exercise of
options and warrants within 60 days of December 31, 1999. Class B common
stock beneficial ownership is calculated based on 1,465,530 shares
outstanding on December 31, 1999. preferred stock beneficial ownership is
calculated based on 2,900 shares outstanding on December 31, 1999.
(17) Calculated based on 57,855,029 shares outstanding on December 31, 1999,
which includes voting rights on all classes of stock, options and warrants
which can be acquired within 60 days of December 31, 1999.
At December 31, 1999, there were 24,251,497 shares of Class A common stock and
1,465,530 shares of Class B common stock issued and outstanding. The previous
table sets forth that directors, officers and 5% shareholders, as a group,
directly owned shares representing approximately 45.1% 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 28.0% 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:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Joe G. Brooks 45 Chairman of the Board of Directors, Co-Chief Executive Officer
and Interim President
Sal Miwa 43 Vice-Chairman of the Board of Directors
Stephen W. Brooks 43 Co-Chief Executive Officer and Director
J. Douglas Brooks 40 Executive Vice-President
Marjorie S. Brooks 64 Secretary, Treasurer and Director
Edward J. Lysen 62 Chief Financial Officer
Jerry B. Burkett 43 Director
James H. Culp 55 Director
Peter S. Lau 46 Director
Michael M. Tull 46 Director
Thomas J. Hairston 57 Director
</TABLE>
4
<PAGE> 7
The Company's Board of Directors elected JOE G. BROOKS as its Chairman and the
Company's Co-Chief Executive Officer on December 11, 1998. Mr. Brooks is serving
as the interim President. 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. He is a past President, director and
independent consultant of Juniper Products, Inc., from July 1985 until December
1988, which was an artificial firelog manufacturing entity in Junction, Texas.
Mr. Brooks has been past President of Southern Minerals and Fibers, Inc. (SMF),
a producer of drilling mud and fluid additives.
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. Mr.
Miwa recently became COO of RealRead, Inc. Prior to joining RealRead, Mr. Miwa
was President and CEO of Seiwa Optical Co., an importer of special camera
systems located in Woodcliff Lake, New Jersey. Since 1980, he has been engaged
in various international businesses located in the 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 and has been a director since January 1996. Mr. Brooks is 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.
J. DOUGLAS BROOKS is Executive Vice-President and a previous board member. Mr.
Brooks serves on the Executive Committee and is in charge of Technical Services,
which includes Quality Assurance, R&D, Raw Material Processing, Development and
Sourcing. Mr. Brooks was previously 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 has previously served as an independent consultant to Juniper Industries,
Inc. and as Vice President of SMF.
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.
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.
5
<PAGE> 8
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.
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 Assistance Professor at Texas A&M University
Chemical Oceanography 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 served as special board
assistant to the CEO in October 1996.
PETER S. LAU was appointed an outside director to the Board of Directors of the
Company in April 1997. Mr. Lau is currently a director and Chief Financial
Officer of Cathay Online, Inc. Mr. Lau is the former managing director of
corporate finance of American Fronteer Financial Corporation (AFFC), formerly
known as RAF Financial Corporation. Mr. Lau is a graduate of the University of
Hartford with a B.S. and M.S. in accounting.
MICHAEL M. TULL was appointed to the Board of Directors in December 1998. Mr.
Tull is the 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 Unites States.
Mr. Tull serves on boards of several closely held family businesses and is the
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 was elected to the Board of Directors of the Company in
July 1999. Dr. 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
from October 1994 until present has been a consultant in the chemical,
petrochemical and environmental areas. Dr. Hairston received his Ph.D. in
Chemistry from Texas A&M University.
SAMUEL L. MILBANK has worked with international private and public sector
institutions and is proposed for election to the Board of Directors. From 1997
to the present, Mr. Milbank has been the Managing Director of Zanett Securities
Corporation, a hedge fund invested in small and micro capitalization companies.
From 1992 to 1996, Mr. Milbank was a Senior Vice President and Sales Manager
with Lehman Brothers, Inc. in New York, and managed and coordinated global
sales coverage of central banks and official institutions. From 1973 to 1992,
Mr. Milbank worked with Salomon Brothers, Inc. as a Director of Fixed Income
Sales. He has an MBA in Finance from The Amos Tuck School of Business
Administration at Dartmouth College.
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 of Peter S. Lau
6
<PAGE> 9
(Chairman), Jerry Burkett, 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 Executive Committee consists of three board members with Sal Miwa
(Chairman), James H. Culp and Michael M. Tull and three executive management
members of Joe G. Brooks, Stephen W. Brooks, and J. Douglas Brooks. 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, 1999 to each executive officer
of the Company whose aggregate cash compensation earned exceeded $100,000, and
to the chief executive officer.
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>
Stephen W. Brooks 1999 0 0 0 0 0 0 0
Co-CEO 1998 0 0 0 0 0 0 0
1997 0 0 0 0 500,000 0 0
Joe G. Brooks 1999 $ 105,000(*) 0 0 0 0 0 0
Co-CEO 1998 75,000 0 0 0 0 0 0
1997 75,000 0 0 0 400,000 0 0
</TABLE>
* Accrued $30,000, which Mr. Brooks had not received as of December 31, 1999
AGGREGATED OPTION EXERCISES IN YEAR ENDED DECEMBER 31, 1999
AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
Number of Value of Unexercised
Number of Unexercised Options In-the-Money Options
Shares at December 31, 1999 at December 31, 1999
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
---- ----------- -------- -------------------- --------------------
<S> <C> <C> <C> <C>
Stephen W. Brooks 0 $0 375,000/150,000 $ 945,295/$370,350
Joe G. Brooks 0 0 400,000/100,000 $1,058,970/$253,150
</TABLE>
7
<PAGE> 10
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
believes that during the year ended December 31, 1999, 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.
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
8
<PAGE> 11
individual performance and prior year's grants. Based upon these factors, during
1999 there were 1,400,000 options issued to purchase Class A common stock. All
option grants were made at an exercise price equal to or greater than the fair
market value of the underlying stock on the date of grant.
During 1999, Stephen W. Brooks, the Company's Co-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
During 1999, the Company had an agreement with an affiliate whereby the Company
agreed to transfer certain of its trade receivables as collateral, which the
affiliate deemed acceptable, up to $2 million at any one time. In February 2000,
the Company's major shareholder increased the Company's factoring line to $2.5
million. The Company believes that the current terms for its factoring agreement
with its major shareholder is competitive with, if not better than, terms that
might be obtained from outside sources. Upon acceptance of a transfer of a
receivable, the affiliate remitted to the Company 85% of the receivable, as
defined in the agreement. Upon collection of the receivable the Company remitted
to the affiliate 1% of the receivable as a factoring charge, and the additional
14% of the receivable was remitted to the Company, less interest costs, which
were based on the time period over which the receivable was outstanding. 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 1999, the Company transferred an aggregate of approximately $20,500,000
in receivables under this agreement, of which $1,183,015 remained to be
collected as of December 31, 1999. During 1998 and 1997, the Company transferred
an aggregate of approximately $12,863,000 and $9,090,000, respectively, in
receivables under this agreement, none of which remains to be collected. Costs
of approximately $202,034, $113,189 and $73,718 associated with the factoring
agreement were included in selling and administrative costs at December 31,
1999, 1998 and 1997, respectively.
At December 31, 1999, accounts payable-related parties included the $1,183,015
discussed above and $352,982 relating to other items owed to related parties.
BOARD OF DIRECTORS PROPOSAL:
ELECTION OF DIRECTORS
(Item 1 on the proxy card)
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 nine directors and at the meeting nine directors
are to be elected by the holders of shares of 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, 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
9
<PAGE> 12
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 Samuel L. Milbank. All of the nominees except Samuel L. Milbank are
presently directors of the Company. Joe G. Brooks is Chairman, Co-Chief
Executive Officer and Interim President, 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 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.
BOARD OF DIRECTORS PROPOSAL:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2 on the proxy card)
The Board Audit Committee has appointed Arthur Andersen, LLP to audit our
financial statements for 2000. We are asking you to ratify that appointment.
10
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the five-year cumulative total shareholder return,
including reinvested dividends, on AERT common stock, with two other indexes:
[GRAPH]
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C>
Advanced Environmental $ 100 340.00 130.02 120.00 260.00 990.02
Materials and Construction $ 100 117.09 133.25 145.53 147.08 122.30
Nasdaq Market Index $ 100 129.71 161.18 197.16 278.08 490.46
</TABLE>
Assumes $100 invested on December 31, 1994, 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.
ADDITIONAL INFORMATION AVAILABLE
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, THE COMPANY WILL FURNISH, WITHOUT
CHARGE, A COPY OF THE COMPANY'S 1999 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 16, 2000, THE PERSON MAKING THE REQUEST WAS A BENEFICIAL OWNER
OF CAPITAL STOCK OF THE COMPANY.
11
<PAGE> 14
AUDITORS TO BE PRESENT
A representative of Arthur Andersen, LLP, the Company's auditors for 1999 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, and fax or in person.
STOCKHOLDER PROPOSALS
Stockholder proposals for the next Annual Meeting of Stockholders anticipated to
be held in July, 2001, must be received at the Company's corporate offices, 914
North Jefferson Street, Post Office Box 1237, Springdale, Arkansas 72765, on or
before December 31, 2000.
The foregoing Notice and Proxy Statement are sent by order of the Board of
Directors.
/s/ JOE G. BROOKS
Joe G. Brooks
Chairman
Dated: June 28, 2000
12
<PAGE> 15
[X] Please mark votes as in this example.
<TABLE>
<S> <C> <C>
FOR ALL nominees listed WITHHOLD authorization Nominees: Joe G. Brooks
at right (except as marked to vote for all nominees Sal Miwa
to the contrary below) listed at right Stephen W. Brooks
Marjorie S. Brooks
1. Election Jerry B. Burkett
of Dr. James H. Culp
Directors [ ] [ ] Peter S. Lau
Michael M. Tull
Samuel L. Milbank
</TABLE>
To withhold authority to vote for any individual nominee, strike a line through
the nominee's name in the list at right.
2. Ratification of Arthur Andersen, LLP, independent public accountants, as the
Company's auditor's.
[ ] For [ ] Against [ ] Abstain
ADVANCED ENVIRONMENTAL RECYCLING TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JULY 28, 2000.
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 16, 2000 at the Annual Meeting of Stockholders of the Company to be
held at the Northwest Arkansas Holiday Inn, Springdale, Arkansas on Friday, July
28, 2000 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 and 2.
The undersigned acknowledges receipt of the formal notice of such meeting and
the 1999 Annual Report of the Company.
PLEASE MARK, DATE, EXECUTE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
SIGNATURE(S) DATE: , 2000
----------------------------------- ------------------
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.
