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 ss. 240.14a-11(c) or ss. 240.14a-12
Appliance Recycling Centers of America, Inc.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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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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<PAGE>
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
7400 Excelsior Boulevard
Minneapolis, Minnesota 55426
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
------------------------
TO THE SHAREHOLDERS OF
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Appliance Recycling Centers of America, Inc., a Minnesota corporation, will be
held on Thursday, April 30, 1998, at 3:30 p.m. at the Appliance Recycling
Centers of America, Inc. corporate offices located at 7400 Excelsior Boulevard,
Minneapolis, Minnesota, 55426 for the following purposes:
* To elect four directors of the Company for the coming year.
* To approve an Amendment to the Articles of Incorporation of
the Company to authorize two million shares of Preferred
Stock.
* To ratify the appointment of McGladrey & Pullen, LLP as
independent auditors for fiscal year 1998.
* To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Only holders of record of the Company's Common Stock at the close of
business on March 20, 1998, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
EACH OF YOU IS INVITED AND URGED TO ATTEND THE ANNUAL MEETING IN PERSON
IF POSSIBLE. WHETHER OR NOT YOU ARE ABLE TO ATTEND IN PERSON, YOU ARE REQUESTED
TO MARK, DATE AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENVELOPE
ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Directors
Denis E. Grande, Secretary
March 25, 1998
<PAGE>
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
7400 Excelsior Boulevard
Minneapolis, Minnesota 55426
--------------------
PROXY STATEMENT
--------------------
SOLICITATION OF PROXIES
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Appliance Recycling Centers of America, Inc. (the "Company") for
use at the Annual Meeting of Shareholders on April 30, 1998, and any adjournment
thereof. The approximate date on which this proxy statement and form of proxy
will first be sent or given to shareholders is March 25, 1998.
The expense of the solicitation of proxies for this Annual Meeting,
including the cost of mailing, has been or will be borne by the Company.
Arrangements will be made with brokerage houses and other custodian nominees and
fiduciaries to send proxies and proxy materials to their principals and the
Company will reimburse them for their expense in so doing. In addition to
solicitation by mail, proxies may be solicited by telephone, telegraph or
personally.
VOTING AND REVOCATION OF PROXY
Only holders of record of the Company's Common Stock at the close of
business on March 20, 1998, the record date for the Annual Meeting, are entitled
to notice of and to vote at the meeting. On March 20, 1998, there were
approximately 1,136,730 shares of Common Stock outstanding. Each share of Common
Stock entitles the holder to one vote upon each matter to be presented at the
Annual Meeting. A quorum, consisting of a majority of the outstanding shares of
Common Stock entitled to vote at the Annual Meeting, must be present in person
or represented by proxy before action may be taken at the Annual Meeting.
Each proxy returned to the Company will be voted in accordance with the
instructions indicated thereon. If no instructions are indicated, the proxy will
be voted (i) FOR the election of all nominees for director named in this proxy
statement, (ii) FOR the Amendment to the Articles of Incorporation to provide
for shares of Preferred Stock, and (iii) FOR ratification of the appointment of
McGladrey & Pullen, LLP as independent auditors for fiscal year 1998. While the
Board of Directors knows of no other matters to be presented at the Annual
Meeting, if any other matter properly comes before the meeting or any
adjournment thereof, all proxies returned to the Company will be voted on any
such matter in accordance with the judgment of the proxy holders.
Any proxy given pursuant to this solicitation may be revoked by the
person giving the proxy at any time before it is voted. Proxies may be revoked
by (i) giving written notice of such revocation to the Secretary of the Company,
(ii) giving another written proxy bearing a later date, or (iii) attending the
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not in and of itself constitute a revocation of a proxy).
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspectors of Election appointed for the meeting and will
determine if a quorum is present. If an executed proxy card is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of
<PAGE>
calculating the vote, but will not be considered to have been voted in favor of
such matter. If an executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such shares will
be considered present at the meeting for purposes of determining a quorum, but
will not be considered to be represented at the meeting for purposes of
calculating the vote with respect to such matter.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company at present consists of four
directors. The bylaws of the Company provide that the number of directors shall
be determined by the Board of Directors. Shareholders will be asked at the
Annual Meeting to elect four directors to serve until the next Annual Meeting of
Shareholders and until their respective successors are elected. Unless authority
is withheld, all proxies received in response to this solicitation will be voted
for the election of all nominees named below. Each of the nominees named below
is now a director of the Company, all have been elected by the shareholders, and
each has served continuously as a director of the Company since the year
indicated. All nominees have indicated a willingness to serve if elected. If any
nominee becomes unable to serve prior to the Annual Meeting, the proxies
received in response to this solicitation will be voted for a replacement
nominee selected in accordance with the best judgment of the proxy holders named
therein. If a quorum is present and voting, directors are elected by a majority
of the votes cast for the election of directors at the Annual Meeting.
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
----------------- ------------------------- --- -----
Edward R. Cameron Chairman of the Board, Director, 57 1976
President and Chief Executive
Officer
George B. Bonniwell Director 58 1993
Duane S. Carlson Director 62 1990
Harry W. Spell Director 74 1991
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES NAMED ABOVE.
<PAGE>
INFORMATION CONCERNING DIRECTORS,
NOMINEES AND EXECUTIVE OFFICERS
DIRECTORS AND NOMINEES
The following discussion sets forth certain information for at least
the last five years with respect to the directors and nominees of the Company.
The Company knows of no arrangements or understandings between a director or
nominee and any other person pursuant to which he has been selected as a
director or nominee. There is no family relationship between any of the
nominees, directors or executive officers of the Company.
EDWARD R. CAMERON is the founder and has been the President of the
Company since its inception in 1976. He has been a director and Chairman of the
Board of the Company since 1989 and prior to 1989 was a director of a
predecessor of the Company. Prior to founding the Company, Mr. Cameron served as
a district product manager and an account manager for Burroughs Corporation (a
predecessor of Unisys Corporation) and served in executive positions for several
small businesses. Mr. Cameron has a bachelor of science degree in business
administration from Montana State University.
GEORGE B. BONNIWELL has been a director of the Company since 1993. From
1969 to 1993 when he retired, Mr. Bonniwell was employed by Craig-Hallum, Inc.,
a regional investment banking and brokerage firm, most recently as senior vice
president/director of corporate finance. He was president and chief executive
officer of Craig-Hallum, Inc. from 1976 to 1985.
DUANE S. CARLSON has been a director of the Company since 1990. Mr.
Carlson is currently a self-employed business consultant, as he was from 1988 to
1991. From 1991 to 1997, Mr. Carlson was executive vice president and chief
financial officer of NetStar, Inc., a company engaged in the development,
manufacturing and marketing of high-speed computer communications equipment. He
was a founder of NetStar, Inc. and was a member of its board of directors.
NetStar, Inc. became a wholly-owned subsidiary of Ascend Communications, Inc. on
August 15, 1996 and is now operated as the High Performance Networking Division
of Ascend. He was a founder of Lee Data Corporation and from 1979 to 1988 was
employed by Lee Data Corporation (now Apertus Technologies) in various
capacities, most recently as chief financial officer and executive vice
president, and was also a member of the board of directors.
HARRY W. SPELL has been a director of the Company since 1991. Mr. Spell
has been retired since 1988. From 1949 to 1988, he was employed in various
capacities by Northern States Power Company, most recently as senior vice
president-finance and chief financial officer. Mr. Spell serves as chairman of
the board of directors and a member of the executive committee for Eagle Pacific
Industries, Inc. and Chairman of Spell Capital Partners, LLC, a private equity
and buyout firm.
ACTIONS AND COMMITTEES OF THE BOARD OF DIRECTORS
The property, affairs and business of the Company are managed by or
under the direction of the Board of Directors. In 1997, the Board of Directors
met six times. The Board of Directors has two standing committees, the Audit
Committee and the Compensation and Benefits Committee. During 1997, the Audit
Committee met two times and the Compensation and Benefits Committee met once.
All of the directors attended at least 75% of the total number of meetings of
the Board of Directors and of the committees on which the director served.
AUDIT COMMITTEE. The Audit Committee of the Board of Directors is
responsible for relations with the Company's independent auditors, for review of
internal auditing functions and controls and for review of financial reporting
policies to assure full disclosure of financial conditions. The Company's
<PAGE>
three nonemployee directors, George B. Bonniwell, Duane S. Carlson and Harry W.
Spell, serve on the Audit Committee.
COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits
Committee of the Board of Directors is responsible for review and approval of
officer salaries and other compensation and benefits programs and determination
of officer bonuses. The Compensation and Benefits Committee also administers and
makes grants under the Company's 1989 Stock Option Plan and the Company's 1997
Stock Option Plan. The Company's three nonemployee directors, George B.
Bonniwell, Duane S. Carlson and Harry W. Spell, serve on the Compensation and
Benefits Committee.
The Board of Directors does not have a separate nominating committee
and the entire Board serves in such capacity.
COMPENSATION OF DIRECTORS
The Company has four directors at present, one of whom (Mr. Cameron) is
an executive officer of the Company and does not receive any additional
compensation for serving as a director of the Company. Nonemployee directors of
the Company receive an annual fee of $5,000 for their service as directors.
STOCK OPTION PLANS
Pursuant to the November 1992 amendments to the Company's 1989 Stock
Option Plan (the "1989 Plan"), all nonemployee directors then holding office
were automatically granted nonqualified stock options to purchase 3,750 shares
at an exercise price equal to the fair market value of the Common Stock at the
date of grant, subject to adjustment. Each nonemployee director subsequently
elected to the Board of Directors was automatically granted a similar option on
the date of his or her election. The 1989 Plan provided that every third year
after the initial grant, each nonemployee director would automatically be
granted an additional option to purchase 3,750 shares upon reelection to the
Board of Directors by the shareholders. Each such option vests in monthly
installments over a 36-month period and is exercisable for a period of five
years from the date of grant.
Upon approval in 1997 by the shareholders of the 1997 Stock Option Plan
(the "1997 Plan"), no additional grants under the 1989 Plan will be made to
nonemployee directors. The 1997 Plan is administered by the Compensation and
Benefits Committee of the Board of Directors or the full Board of Directors
acting as the Committee (the "Committee"). Under the 1997 Plan, each nonemployee
director will receive an annual automatic, nondiscretionary award, beginning in
1999, of options to purchase 2,000 shares of Common Stock pursuant to the 1997
Plan. Each option becomes exercisable six months after the date of grant,
provides for the forfeiture of any nonexercisable portion if an optionee ceases
to be a director for certain reasons, provides that the exercisable portion may
be exercised for a period of 10 years from the date of grant, and expires on the
tenth anniversary of the date of grant. The exercise price of an option shall be
equal to the fair market value of the Common Stock on the date the option is
granted.
Employees of the Company are eligible to receive awards of options to
purchase Common Stock pursuant to the 1997 Plan and, to the extent shares are
available, the 1989 Plan. The Board of Directors or the Committee has the
discretion to select eligible employees to whom awards will be granted and
establish the type, price, amount, size and terms of awards, subject in all
cases to the provisions of the respective Plan and the applicable provisions of
the Internal Revenue Code.
The exercise price of an incentive stock option cannot be less than
100% of the fair market value of the Common Stock on the date the option is
granted, except that if the optionee owns 10% or more of the voting rights of
all of the Company's stock ("10% Holder"), the exercise price of an incentive
stock
<PAGE>
option cannot be less than 110% of the fair market value of the Common Stock on
the date the option is granted.
Options granted to employees cannot be exercised prior to a set period
after their date of grant, which cannot be less than one year during which time
the optionee must remain employed by the Company. Each option specifies the
expiration date, which may not exceed 10 years from the date the option is
granted, provided, however, that if the optionee is a 10% Holder, the exercise
period with respect to incentive stock options may not exceed five years.
Unless otherwise specifically provided in an optionee's agreement,
options cannot be exercised prior to the first anniversary of the date of grant
and provide for the forfeiture of any nonexercisable portion if an optionee
ceases to be an employee of the Company for any reason and that the exercisable
portion may be exercised for a period of three months after termination (or one
year in the case of death, disability or normal retirement).
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following discussion sets forth certain information for at least
the last five years with respect to current executive officers who are not
directors of the Company.
OFFICER
NAME POSITION WITH THE COMPANY AGE SINCE
---------------- ------------------------- --- -----
Glynnis A. Jones Vice President of 44 1989
Corporate Planning
Kent S. McCoy Chief Financial Officer 40 1991
Morgan J. Wolf Vice President of Operations 55 1997
GLYNNIS A. JONES has been Vice President of Corporate Planning for the
Company since 1989. From 1988 to the time she joined the Company, Ms. Jones was
a partner in The Point Environmental Consulting, Inc. From 1985 to 1988, Ms.
Jones was employed by the Metropolitan Council of the Twin Cities Area as grant
program administrator for the landfill abatement program.
KENT S. MCCOY was promoted to Chief Financial Officer of the Company in
January 1998. He had served as Vice President of Finance for the Company since
1995, Vice President since 1991 and Treasurer since November 1992. Prior to
joining the Company, Mr. McCoy was employed by Apertus Technologies, Inc.
(formerly known as Lee Data Corporation), a manufacturer of computer equipment,
from 1982 to 1991 at various positions of increasing responsibility including
accounting manager, division controller, director of internal audit and director
of financial analysis. Mr. McCoy became director of purchasing for Apertus
Technologies, Inc., in January 1990.
Mr. McCoy is a certified public accountant.
MORGAN J. WOLF has been Vice President of Operations for the Company
since December 1997. From 1996 to 1997, Mr. Wolf was General Manager of the
Company's Minnesota retail and recycling operations. Mr. Wolf joined the Company
in 1995 as National Quality Control Manager. Prior to joining the Company, from
1994 to 1995, Mr. Wolf was employed by Best Buy Co. as national parts manager.
From 1964 to 1994, Mr. Wolf was employed by Sears throughout the Midwest in
various positions, including retail appliance manager, central service manager,
sales promotion manager, district product services manager and retail store
manager. Mr. Wolf retired from Sears in 1994.
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND BENEFITS COMMITTEE
The Compensation and Benefits Committee of the Board of Directors (the
"Committee") is composed entirely of nonemployee directors. The Committee is
responsible for review and approval of officer salaries and other compensation
and benefit programs and determination of officer bonuses. The Committee also
administers and makes grants under the Company's 1989 Stock Option Plan and
either the Committee or the entire Board may administer and make grants under
the Company's 1997 Stock Option Plan.
Annual compensation for the Company's executive officers, other than
the President, is recommended by the President and approved by the Committee.
The individual salary recommendations may vary based on the President's
perception of the value of that position to the Company, the executive's
individual performance and the President's views as to comparative compensation
for like positions at other companies. The annual compensation for the President
is recommended by the Compensation and Benefits Committee and approved by the
Board of Directors.
The Company believes that compensation of the Company's key executives
should be sufficient to attract and retain highly-qualified personnel, and
should also provide meaningful incentives for superior performance. The Company
seeks to reward achievement of long-term and short-term performance goals
including the development of new customers, increasing sales volume, meeting or
exceeding financial targets and other factors.
Compensation of the Company's executives generally consists of a base
salary, a cash bonus and long-term incentive compensation in the form of stock
options. The Company does not utilize a formulaic approach to executive base
compensation. In principle, the Company's executive compensation approach is to
place each officer's salary compensation, excluding bonus, in the mid range of
executive compensation levels for companies of a similar size. The Company
currently provides no retirement benefits to its executive officers except for
the 401(k) Plan.
The amount of any bonus awarded under the Company's bonus plan for all
officers is based on the successful and timely achievement of Company goals,
including financial performance and positioning for future results.
The salary of one executive officer was increased for 1997 by
approximately 8% and the salary of a second executive officer was increased for
1997 by approximately 6%. No executive officer received a bonus for 1997. Mr.
Cameron received no salary increase or bonus in 1997.
Stock options are awarded to provide incentives to the officers to
promote improved long-term performance of the Company. Option grants for all
officers other than the President are recommended by the President. Options were
granted in 1997 to executive officers to purchase 15,000 shares of Common Stock
at exercise prices between $2.375 and $2.625 per share.
The compensation for Edward R. Cameron, the Company's President and
Chief Executive Officer, is determined by using a process and philosophy similar
to that used for all other officers. The Committee considers its members' views
as to comparative compensation for like positions at other companies together
with its own assessment of Mr. Cameron's performance and contributions to the
Company, recommending a salary, bonus and stock options for the Board of
Directors' approval. There is no specific formulaic tie between the Company's
goals and performance and the Committee's recommendation; instead, the
Committee's judgment and discretion is used in its recommendations to the Board
of Directors.
<PAGE>
The Committee has reviewed the provisions of Internal Revenue Code
Section 162(m) relating to the deductibility of annual executive compensation in
excess of $1,000,000. The Committee currently does not have a policy with
respect to Section 162(m) because it is unlikely that such limit will apply to
compensation paid by the Company to any of the Company's executive officers in
the near future.
March 23, 1998
The Compensation and Benefits Committee
George B. Bonniwell
Duane S. Carlson
Harry W. Spell
<PAGE>
PERFORMANCE GRAPH
The following graph compares cumulative total shareholder returns on
the Company's Common Stock over the last five fiscal years with the Nasdaq Stock
Market (U.S. Companies) Index and the Dow Jones Index for Industrial &
Commercial Services - Pollution Control and Waste Management Companies, assuming
an initial investment of $100 at the beginning of the period and the
reinvestment of all dividends. The following graph has been revised for all
periods to give effect to the Company's one-for-four reverse stock split,
effective February 21, 1997.
[Chart]
<TABLE>
<CAPTION>
-----------------------------------------------------
YEAR ENDING
-----------------------------------------------------
12/92 12/93 12/94 12/95 12/96 12/97
- ---------------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Appliance Recycling Centers of America, Inc. 100.00 93.22 27.32 31.36 4.24 3.81
- ---------------------------------------------- -------- -------- -------- -------- -------- --------
NASDAQ Stock Market (U.S. Companies) 100.00 114.80 112.21 158.70 195.20 239.53
- ---------------------------------------------- -------- -------- -------- -------- -------- --------
DOW Jones Industrial Average 100.00 74.00 76.35 85.74 92.15 99.31
- ---------------------------------------------- -------- -------- -------- -------- -------- --------
</TABLE>
The Company's Common Stock is currently traded on the Nasdaq SmallCap
Market under the symbol ARCI. The Common Stock was traded on the Nasdaq National
Market System from January 8, 1993 to February 25, 1997. Prior to that time, the
Common Stock was traded on the Nasdaq SmallCap Market from November 7, 1991
until January 7, 1993, and prior to November 7, 1991, on the local
over-the-counter market.
The last sales price on March 18, 1998 was $2.375.
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation earned
by the Chief Executive Officer for each of the last three fiscal years. No other
executive officer of the Company received salary and bonus in 1997 in excess of
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
------------------------------ ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(2) ($)(3)
- ------------------------------------- ---- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Edward R. Cameron 1997 $150,046 --- --- $ 0
Chairman of the Board, President 1996 150,032 --- --- 650
and Chief Executive Officer 1995 150,032 --- --- 289
</TABLE>
- ----------
(1) The Company has no Long-Term Incentive Plan as defined by Item
402(a)(7)(iii) of SEC Regulation S-K.
(2) No stock options were granted in 1997, 1996 or 1995 to the executive
officer listed.
(3) Matching contributions to Company's 401(k) plan.
STOCK OPTIONS
The following table provides certain information with respect to stock
options exercised under the Company's stock option Plans in fiscal 1997 by the
named executive officer and the value of such officer's unexercised options at
December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward R. Cameron --- --- --- --- --- ---
</TABLE>
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 20, 1998 (unless a different
date is specified) the number of shares of Common Stock beneficially owned by
each person who is the beneficial owner of more than five percent of the
outstanding shares of the Company's Common Stock, by each current executive
officer of the Company named in the Summary Compensation Table herein, by each
director and by all current executive officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNER POSITION NUMBER OF SHARES PERCENT OF
- ---------------- WITH COMPANY BENEFICIALLY OWNED(1) OUTSTANDING(2)
------------ --------------------- --------------
<S> <C> <C>
Edward R. Cameron Chairman of the Board,
7400 Excelsior Boulevard President and Chief
Minneapolis, MN 55426 Executive Officer............. 302,689 26.6%
George B. Bonniwell Director ......................... 9,233(3)(4) *
Duane S. Carlson Director ......................... 6,875(4) *
Harry W. Spell Director ......................... 2,500(4) *
All executive officers
and directors as a
group (7 persons) ............................................... 351,077(3)(4) 30.2%
Perkins Capital Mgmt., Inc. ........................................ 38,127(5) 3.4%
The Perkins Opportunity Fund ....................................... 87,500(5) 7.7%
730 East Lake Street
Wayzata, MN 55391
</TABLE>
- -----------------------
* Represents less than 1%
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares.
(2) Applicable percentage of ownership is based on approximately 1,136,730
shares of Common Stock outstanding as of March 20, 1998, together with
applicable options for such shareholder.
(3) Includes 8 shares beneficially owned by a child of Mr. Bonniwell.
(4) Includes shares which could be purchased within 60 days upon the
exercise of existing stock options, as follows: Mr. Bonniwell, 6,250
shares; Mr. Carlson, 2,500 shares; Mr. Spell, 2,500 shares; and all
directors and current executive officers as a group, 26,250 shares.
(5) According to a Schedule 13G dated January 30, 1998, Perkins Capital
Management, Inc. ("Perkins Capital") beneficially owned 38,127 shares
of Common Stock as a result of serving as investment advisor to various
clients, and The Perkins Opportunity Fund beneficially owned 87,500
shares (of which Perkins Capital disclaims beneficial interest).
Perkins Capital has sole dispositive power as to all 125,627 shares and
sole voting power as to 91,750 shares.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's directors, its executive officers and any persons holding
more than 10% of outstanding Common Stock are required to file reports
concerning their initial ownership of Common Stock and any subsequent changes in
that ownership. The Company believes that the filing requirements for the last
fiscal year were satisfied. In making this disclosure, the Company has relied
solely on written representations of its directors, executive officers and
beneficial owners of more than 10% of Common Stock and copies of the reports
that they have filed with the Securities and Exchange Commission.
<PAGE>
PROPOSAL TWO
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION
In March 1998, the Board of Directors of the Company adopted an
amendment to the Company's Articles of Incorporation authorizing up to two
million shares of Preferred Stock of the Company ("Preferred Stock"), which may
be issued from time to time in one or more series. The Board of Directors is
specifically authorized to establish the number of shares of Preferred Stock in
any series and to fix, state and express the powers, rights, designations,
preferences, qualifications, limitations and restrictions on each series of
Preferred Stock. Such Preferred Stock is commonly referred to as "blank check"
preferred stock.
The Board of Directors has adopted, subject to approval by the
shareholders of the Company, the Amendment to the Articles of Incorporation (the
"Amendment") to authorize the Preferred Stock in the form attached hereto as
Appendix I. No other provisions of the Articles of Incorporation are affected by
the Amendment.
Subject to any special voting rights provided for any series of
Preferred Stock, holders of Preferred Stock will generally have the right to
vote as a single class with the holders of Common Stock on all matters coming
before the Company's shareholders, except matters for which a class vote is
required by the terms of the Preferred Stock or by the Minnesota Business
Corporation Act.
The Company believes that the authority to issue shares of Preferred
Stock would give the Company needed flexibility to raise additional capital to
properly serve the best interests of its shareholders. The issuance of Preferred
Stock could provide funds for needed capital projects at a lower cost than
additional borrowings. The shares of Preferred Stock would be issuable in
series, each such series to have such terms and conditions, including voting
rights, dividend and other rights, as the Board of Directors determines.
Accordingly, with the approval by the shareholders of the Amendment, the Board
of Directors would be able to issue shares of Preferred Stock in various series
with such specific terms and conditions as they consider to be in the best
interest of the Company, without the delay and cost involved in calling a
special shareholders meeting to approve specific terms. The need to call such a
special meeting could effectively prevent the Company from taking advantage of
financing or investment opportunities where timing is crucial. The Board of
Directors believes that the creation of the Preferred Stock is in the best
interest of the Company.
VOTE REQUIRED
The affirmative vote of not less than a majority of the Common Stock
represented either in person or by proxy and entitled to vote at the Annual
Meeting will be required to approve the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE
ARTICLES OF INCORPORATION.
<PAGE>
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has selected the firm of McGladrey & Pullen, LLP
as independent auditors to audit the books, records and accounts of the Company
for the fiscal year ending January 2, 1999. If the shareholders do not ratify
the appointment of McGladrey & Pullen, LLP or for other appropriate reasons, the
appointment will be reconsidered by the Board of Directors. A representative of
McGladrey & Pullen, LLP will be present at the Annual Meeting, will have an
opportunity to make a statement if he desires to do so and will be available to
respond to appropriate questions by shareholders.
All proxies received in response to this solicitation will be voted in
favor of the ratification of the appointment of the independent auditors, unless
other instructions are indicated thereon. Ratification of the appointment of the
independent auditors requires the affirmative vote of a majority of the shares
represented in person or by proxy at the Annual Meeting and voting on the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF MCGLADREY & PULLEN, LLP AS INDEPENDENT AUDITORS.
PROPOSALS OF SHAREHOLDERS
Any shareholder wishing to have a proposal considered for inclusion in
the Company's proxy solicitation materials for the 1999 Annual Meeting of
Shareholders must set forth such proposal in writing and file it with the
Secretary of the Company no later than November 24, 1998.
OTHER BUSINESS
At the date of this proxy statement, management knows of no other
business that may properly come before the Annual Meeting. However, if any other
matters properly come before the meeting, the persons named in the enclosed form
of proxy will vote proxies received in response to this solicitation in
accordance with their best judgment on such matters.
<PAGE>
FINANCIAL INFORMATION;
ANNUAL REPORT ON FORM 10-K
The Company's 1997 Annual Report to Shareholders, including but not
limited to the consolidated balance sheets as of January 3, 1998 and December
28, 1996 and the related consolidated statements of operations, shareholders'
equity and cash flows for the three years ended January 3, 1998, accompanies
these materials. A copy of the 1997 Annual Report to Shareholders may be
obtained without charge upon request. In addition, the Company will provide
without charge to any shareholder solicited hereby, upon written request of such
shareholder, a copy of its 1997 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. Requests should be directed to the Chief
Financial Officer, Appliance Recycling Centers of America, Inc., 7400 Excelsior
Boulevard, Minneapolis, MN 55426.
By Order of the Board of Directors
Denis E. Grande, Secretary
March 25, 1998
<PAGE>
Appendix I
AMENDMENT TO THE ARTICLES OF INCORPORATION
Article 3, paragraph A, of the Articles of Incorporation is hereby
amended to read in its entirety as follows:
"ARTICLE 3. AUTHORIZED SHARES
The total number of shares of capital stock which the corporation shall
have authority to issue is twelve million (12,000,000) shares, of which ten
million (10,000,000) shares shall be Common Stock, without par value, and two
million (2,000,000) shares shall be Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is expressly authorized, in the resolution or
resolutions providing for the issuance of any wholly unissued series of
Preferred Stock to fix, state and express the powers, rights, designations,
preferences, qualifications, limitations and restrictions thereof, including
without limitation: the par value; the rate of dividends upon which and the
times at which dividends of shares of such series shall by payable and the
preference, if any, which such dividends shall have relative to dividends on
shares of any other class or classes or any other series of stock of the
corporation; whether such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which dividends on shares of such series
shall be cumulative; the voting rights, if any, to be provided for shares of
such series; the rights, if any, which the holders of shares of such series
shall have in the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the corporation; the rights, if any, which the
holders of shares of such series shall have to convert such shares into or
exchange such shares for shares of stock of the corporation, and the terms and
conditions, including price and rate of exchange of such conversion or exchange;
and the redemption rights (including sinking fund provisions), if any, for
shares of such series; and such other powers, rights, designations, preferences,
qualifications, limitations and restrictions as the Board of Directors may
desire to so fix. The Board of Directors is also expressly authorized to fix the
number of shares constituting such series and to increase or decrease the number
of shares of any series prior to the issuance of shares of that series and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not to decrease such number below the
number of shares outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series."
<PAGE>
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
For Annual Meeting of Shareholders
April 30, 1998
The undersigned, revoking all prior proxies, hereby appoints Edward R.
Cameron and Denis E. Grande, or either of them, as Proxy or Proxies, with full
power of substitution and revocation, to vote all shares of stock of Appliance
Recycling Centers of America, Inc. standing of record in the name of the
undersigned at the close of business on March 20, 1998 at the Annual Meeting of
Shareholders to be held on April 30, 1998, or at any adjournment thereof, upon
the following matters:
1. Election of the following nominees as directors: Edward R. Cameron, George
B. Bonniwell, Duane S. Carlson, Harry W. Spell.
(FOR ALL (WITHHELD FOR FOR ALL NOMINEES EXCEPT THE FOLLOWING:
NOMINEES) ALL NOMINEES) (MARK NO BOX AND WRITE THE NAME(S) OF
THE NOMINEE(S) WITHHELD IN THE SPACE
PROVIDED BELOW.)
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2. Approval of the Amendment to the Articles of Incorporation of the Company
to authorize two million shares of Preferred Stock.
FOR AGAINST ABSTAIN
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3. Ratification of appointment of McGladrey & Pullen, LLP as independent
auditors for fiscal year 1998.
FOR AGAINST ABSTAIN
|_| |_| |_|
In their discretion the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
(Please sign and date on reverse side.)
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(continued from other side)
Please mark, date, sign and mail this proxy promptly in the enclosed
envelope.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND
3.
The Board of Directors recommends a vote FOR Proposals 1, 2 and 3.
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders of Appliance Recycling Centers of America, Inc. and the
proxy statement furnished therewith dated March 25, 1998.
Please sign your name exactly as it appears below. In the case of shares
owned in joint tenancy or as tenants in common, all should sign. Fiduciaries
should indicate their title and authority.
Dated: , 1998.
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Signature
