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
Appliance Recycling Centers of America, 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)(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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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
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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 29, 1999
------------------------
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 29, 1999, 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 five directors of the Company for the coming year.
* To approve Amendments to the Restated 1997 Stock Option Plan
of the Company to authorize an additional 100,000 shares of
Common Stock subject to such plan and to make the changes to
such plan described in the accompanying proxy statement.
* To ratify the appointment of McGladrey & Pullen, LLP as
independent auditors for fiscal year 1999.
* 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 19, 1999 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 23, 1999
<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 29, 1999, 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 23, 1999.
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 19, 1999, the record date for the Annual Meeting, are entitled
to notice of and to vote at the meeting. On March 19, 1999, there were 2,266,744
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 Amendments to the Restated 1997 Stock Option Plan to
provide for an additional 100,000 shares of Common Stock subject to such plan
and to make the changes to such plan described herein, and (iii) FOR
ratification of the appointment of McGladrey & Pullen, LLP as independent
auditors for fiscal year 1999. 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
<PAGE>
proxy will be considered present at the meeting for purposes of determining a
quorum and for purposes of 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 six
directors. The bylaws of the Company provide that the number of directors shall
be determined by the Board of Directors. As Herbert Froemming, elected by the
Board in 1998, is not standing for re-election, the Board has reduced the number
of directors to five. Shareholders will be asked at the Annual Meeting to elect
five 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 (other than Mr.
Goldstein, who was elected by the Board in November 1998 to fill a newly created
vacancy), 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.
<TABLE>
<CAPTION>
DIRECTOR
NAME POSITION WITH THE COMPANY AGE SINCE
---- -------------------------- --- --------
<S> <C> <C>
Edward R. Cameron Chairman of the Board, Director, 58 1976
President and Chief Executive Officer
George B. Bonniwell Director 59 1993
Duane S. Carlson Director 63 1990
Marvin Goldstein Director 55 1998
Harry W. Spell Director 75 1991
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES NAMED ABOVE.
-2-
<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 Carleton Corporation) in various
capacities, most recently as chief financial officer and executive vice
president, and was also a member of the board of directors. Mr. Carlson also
currently serves as a director of Astrocom Corporation.
MARVIN GOLDSTEIN has been a director of the Company since November
1998. From April 1997 to August 1997, Mr. Goldstein served as Executive Vice
President and COO of Regis; from August 1995 to April 1997 as Chairman, CEO and
President of Pet Food Warehouse; and from February 1988 to September 1994 was
employed by Dayton Hudson, Department Store Division, in several executive
positions. Prior to that time, Mr. Goldstein was associated with R.H. Macy
(California) and Carter Hawley Hale. Mr. Goldstein also serves as a member of
the board of directors for Buffet's Inc., Greenspring Company, Paper Warehouse,
Inc., and Wilsons, The Leather Experts, Inc.
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.
-3-
<PAGE>
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 1998, the Board of Directors
met five times. The Board of Directors has two standing committees, the Audit
Committee and the Compensation and Benefits Committee. During 1998, the Audit
Committee met twice and the Compensation and Benefits Committee met twice. 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
nonemployee directors serve on the Audit Committee. For 1998, George B.
Bonniwell, Duane S. Carlson and Harry W. Spell served as such committee. During
1999, Marvin Goldstein will also be added to this 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 nonemployee directors serve on the Compensation
and Benefits Committee. For 1998, George B. Bonniwell, Duane S. Carlson and
Harry W. Spell served as such committee. During 1999, Marvin Goldstein will also
be added to this 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 will have five directors in 1999, 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 Restated 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, no additional grants under the 1989 Plan are to be made to nonemployee
directors. The Restated 1997 Stock Option Plan, as amended (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"). Certain amendments are being approved by the shareholders at the
April 29, 1999 Annual Meeting. Under the 1997 Plan, as
-4-
<PAGE>
being amended at the Annual Meeting, each nonemployee director will receive,
upon initial election to the Board, an automatic, nondiscretionary award of
options to purchase 5,000 shares of Common Stock pursuant to the 1997 Plan. In
addition, on the date of each annual meeting of shareholders, beginning with the
Annual Meeting being held in 1999, each nonemployee director will receive an
annual automatic, nondiscretionary grant of options to purchase 5,000 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.
SEE ALSO THE DISCUSSION OF THE PROPOSED AMENDMENTS TO THE 1997 PLAN
DESCRIBED BELOW IN PROPOSAL TWO.
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 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.
GLYNNIS A. JONES, 45, 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, 41, 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
-5-
<PAGE>
Technologies, Inc. (now known as Carleton Corporation, and 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WARRANTS. In addition to stock options granted to nonemployee directors
under the Company's 1997 Plan, Marvin Goldstein, a member of the Board of
Directors, received warrants in March 1999 to purchase 5,000 shares of Common
Stock, subject to customary antidilution adjustments. Mr. Goldstein was awarded
such warrants in consideration for certain general business consulting services
provided to the Company since his initial election to the Board in November 1998
and which he has agreed to continue to provide during his tenure on the Board.
The warrants are exercisable, beginning September 6, 1999, for a period of ten
years, at an exercise price of $0.625 per share. If Mr. Goldstein ceases to be a
director of the Company, the warrants terminate if they have not become
exercisable, and otherwise remain exercisable for the full ten year term.
In connection with a private placement in July 1998 by the Company of
12% subordinated promissory notes and warrants, in which certain employees of
the Company invested, Kent McCoy, Chief Financial Officer of the Company,
purchased notes and a warrant to purchase 1,250 shares of Common Stock. All
notes were repaid in September 1998. The warrants are currently exercisable at
$2.25 per share and expire July 20, 2001.
PRIVATE PLACEMENT OF STOCK. In February 1999, the Company completed a
private placement of 1,030,000 shares of Common Stock at $.50 per share. The
sale was made through a placement agent, Aethlon Capital, LLC, which received
certain cash fees and warrants in connection with the issuance. The investors in
the offering, as well as the placement agent, were granted registration rights
with respect to all such shares. As part of this offering, Marvin Goldstein, a
member of the Board of Directors of the Company, purchased 100,000 shares; a
client of Perkins Capital Management, Inc. (which currently controls
approximately 28% of the Common Stock of the Company) purchased 400,000 shares;
and Medallion Capital, Inc. ("Medallion"), one of the Company's current lenders
(which holds non-voting attendance rights at board meetings) and the holder of
warrants to purchase 700,000 shares of Common Stock, purchased 100,000 shares.
In addition, the February 1999 issuance of shares triggered an adjustment in the
exercise price under the warrant held by Medallion to $0.60 per share.
EXECUTIVE COMPENSATION
REPORT OF THE 1998 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
-6-
<PAGE>
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 1998 by
approximately 6% and the salary of another executive officer was increased for
1998 by approximately 5%. No executive officer received a bonus for 1998.
Mr. Cameron received no salary increase or bonus in 1998.
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 1998 to two executive officers to purchase an aggregate of 50,000
shares of Common Stock at exercise prices between $2.063 and $1.50 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.
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 5, 1999
The 1998 Compensation and Benefits Committee
George B. Bonniwell
Duane S. Carlson
Harry W. Spell
-7-
<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.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
-----------------------------------------------------------------
YEAR ENDING
-----------------------------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Appliance Recycling Centers of America, Inc. 100.00 29.31 33.64 4.55 4.09 1.36
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
NASDAQ Stock Market (U.S. Companies) 100.00 97.61 138.06 169.78 208.29 292.80
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
DOW Jones Industrial Average 100.00 103.18 115.88 124.53 134.21 145.64
- ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
Effective September 8, 1998, the Company was delisted from the Nasdaq
SmallCap Market for failure to meet continued listing requirements, specifically
the net worth requirement. The Company's Common Stock is currently traded on the
OTC Bulletin Board under the symbol ARCI. The Common Stock was traded on the
Nasdaq SmallCap Market from February 26, 1997 to September 7, 1998, and the
Nasdaq National Market System from January 8, 1993 to February 25, 1997, and the
Nasdaq SmallCap Market from November 7, 1991 until January 7, 1993. Prior to
November 7, 1991, the Common Stock traded on the local over-the-counter market.
The last reported sales price on March 12, 1999 was $0.625 per share.
-8-
<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
current executive officer of the Company received salary and bonus in 1998 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>
Edward R. Cameron 1998 $155,817 --- --- $ 0
Chairman of the Board, President 1997 150,046 --- --- 0
and Chief Executive Officer 1996 150,032 --- --- 650
Kent S. McCoy 1998 $100,978 --- 25,000 $ 505
Chief Financial Officer 1997 91,421 --- 2,500 457
1996 85,458 --- 2,500 427
</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 1998, 1997, or 1996 to Mr. Cameron.
(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 1998 by the
named executive officer and the value of such officer's unexercised options at
December 31, 1998.
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 --- --- --- --- --- ---
Kent S. McCoy --- --- 9,375 26,250 $0 $0
</TABLE>
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 19, 1999 (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>
POSITION NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER WITH COMPANY BENEFICIALLY OWNED (1) OUTSTANDING (2)
- ---------------- ------------ ---------------------- ---------------
<S> <C> <C> <C>
Edward R. Cameron Chairman of the Board,
7400 Excelsior Boulevard President and Chief
Minneapolis, MN 55426 Executive Officer............ 302,689 (3) 13.4%
George B. Bonniwell Director....................... 6,733 (4)(5) *
Duane S. Carlson Director....................... 8,125 (5) *
Marvin Goldstein Director....................... 105,000 (5) 4.6%
Harry W. Spell Director....................... 7,500 (5) *
Kent S. McCoy Chief Financial Officer........ 14,504 (5) *
All executive officers
and directors as a
group (7 persons)............................................... 469,227 (4)(5) 20.3%
Perkins Capital Mgmt., Inc......................................... 553,788 (6) 24.4%
The Perkins Opportunity Fund....................................... 87,500 (6) 3.9%
730 East Lake Street
Wayzata, MN 55391
</TABLE>
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* 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 2,266,744 shares of Common
Stock outstanding as of March 19, 1999, together with applicable options
for such shareholder.
(3) All shares are pledged to secure outstanding loans.
(4) Includes 8 shares beneficially owned by a child of Mr. Bonniwell.
(5) Includes shares which could be purchased within 60 days upon the exercise
of existing stock options or warrants, as follows: Mr. Bonniwell, 3,750
shares; Mr. Carlson, 3,750 shares; Mr. Spell, 3,750 shares; Mr.
Goldstein, 5,000 shares; Mr. McCoy, 13,125 shares; and all directors and
current executive officers as a group, 41,250 shares.
(6) According to a Schedule 13G dated February 28, 1999, Perkins Capital
Management, Inc. ("Perkins Capital") beneficially owned 553,788 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 641,288 shares and sole
voting power as to 632,575 shares.
-10-
<PAGE>
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. Except as follows, the Company believes that the filing
requirements for the last fiscal year were satisfied. Forms 3 for Marvin
Goldstein and Herbert Froemming, a prior director, were not timely filed;
Medallion Capital, Inc., holder of 100,000 shares of Common Stock and of
currently exercisable warrants to purchase 700,000 shares at a current exercise
price of $0.60 per share (approximately 24% of the outstanding stock if
exercised), has not made filings with the SEC to the Company's knowledge. 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.
PROPOSAL TWO
APPROVAL OF THE AMENDMENTS TO THE 1997 STOCK OPTION PLAN
In November 1998, the Board of Directors of the Company approved an
amendment to Section 6 of the Company's Restated 1997 Stock Option Plan ("1997
Plan"), with respect to automatic, nondiscretionary grants to nonemployee
directors. Section 6, as amended, now reads as set forth below (the "Section 6
Amendment"):
"6. GRANT OF INDEPENDENT DIRECTOR OPTIONS." Each Independent
Director, upon his or her initial election to a first term on the Board
of Directors, shall, on the date of such initial election,
automatically be granted an option to purchase 5,000 shares of Common
Stock. In addition, on the date of each annual meeting of shareholders
of the Company, beginning with the annual meeting to be held in 1999,
each Independent Director shall automatically be granted options to
purchase 5,000 shares of Common Stock upon the re-election of such
Independent Director to the Board by the shareholders of the Company."
In March 1999, the Board adopted an amendment to Section 2 of the 1997
Plan to authorize an additional 100,000 shares of Common Stock of the Company
subject to the 1997 Plan (the "Section 2 Amendment"), bringing the total number
of shares of Common Stock subject to the 1997 Plan to 200,000. The Section 2
Amendment and the Section 6 Amendment are referred to together as the
"Amendments."
Prior to the Section 6 Amendment, the 1997 Plan provided for only an
annual automatic grant to nonemployee directors of options to purchase 2,000
shares of Common Stock, beginning with the Annual Meeting in 1999. The Board of
Directors believes that in order to attract and retain qualified members on the
Board of Directors an initial grant of options should be awarded and that the
annual grant should be increased.
The Section 2 Amendment will bring the total shares subject to the 1997
Plan to 200,000. The Company currently has granted and outstanding options to
purchase 99,750 shares under the 1997 Plan (which number includes 20,000 options
which will be granted on April 29, 1999 to the nonemployee directors under
Section 6 of the 1997 Plan, as amended), and currently has (prior to the
Amendments) 250 shares available for future grants under the 1997 Plan. Upon
adoption of the Section 2 Amendment by the shareholders, there would be 100,250
shares currently available for future grant under the 1997 Plan.
-11-
<PAGE>
The 1989 Plan currently provides for options to purchase 150,000
shares, 82,138 of which are currently outstanding and 881 of which are currently
available for additional grants prior to August 31, 1999. After that date, no
further grants can be made under the 1989 Plan; however, all grants made as of
that date remain fully exercisable in accordance with the terms of their grant.
The 1989 Plan is not being amended.
Under each of the 1989 Plan or the 1997 Plan, shares issuable under
outstanding options which expire during the term of the respective plan may also
be available for future grants under the respective plan.
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 Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENTS TO THE
STOCK OPTION PLAN.
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
Pursuant to the rules of the Securities and Exchange Commission
("SEC"), any shareholder wishing to have a proposal considered for inclusion in
the Company's proxy solicitation material for the 2000 Annual Meeting of
Shareholders must set forth such proposal in writing and file it with the
Secretary of the Company no later than November 23, 1999. Any shareholder
wishing to have a proposal considered at the 2000 Annual Meeting of
Shareholders, but not submitted for inclusion in the Company proxy solicitation
material, must set forth such proposal in writing and file it with the Secretary
of the Company no later than February 9, 2000 and, pursuant to SEC Rule
14a-4(c)(1), failure to notify the Company by such date would allow the
Company's proxies to use their discretionary voting authority (to vote for or
against the proposal) when the proposal is raised at the Annual Meeting without
prior discussion of the matter in the proxy materials.
-12-
<PAGE>
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.
FINANCIAL INFORMATION;
ANNUAL REPORT ON FORM 10-K
The Company's 1998 Annual Report to Shareholders, including but not
limited to the consolidated balance sheets as of January 2, 1999 and January 3,
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for the three years ended January 2, 1999, accompanies
these materials. A copy of the 1998 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 1998 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 23, 1999
-13-
<PAGE>
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, APRIL 29, 1999
3:30 P.M.
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
7400 EXCELSIOR BLVD.
MINNEAPOLIS, MN 55426
APPLIANCE RECYCLING CENTERS OF AMERICA, INC.
7400 EXCELSIOR BLVD., MINNEAPOLIS, MN 55426 PROXY
- --------------------------------------------------------------------------------
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 19, 1999 at the Annual Meeting of Shareholders to
be held on April 29, 1999, or at any adjournment thereof.
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 23, 1999.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
VOTE BY MAIL
Please mark, sign and date your proxy card and return it in the postage-paid
envelope we've provided or return it to Appliance Recycling Centers of America,
Inc., c/o Shareowner Services(SM), P.O. Box 64873, St. Paul, MN 55164-0873.
PLEASE DETACH HERE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
<TABLE>
<S> <C>
1. Election of the following 01 Edward R. Cameron [ ] Vote FOR [ ] Vote WITHHELD
nominees as directors: 02 George B. Bonniwell all nominees from all nominees
03 Duane S. Carlson
04 Marvin Goldstein
05 Harry W. Spell
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY ________________________________________________
INDICATED NOMINEE, WRITE THE NUMBER(S) OF THE | |
NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) |________________________________________________|
2. Approval of the Amendments to the Restated
1997 Stock Option Plan of the Company to
authorize 100,000 additional shares of
Common Stock subject to such plan and to
make the changes to such plan described in
the accompanying proxy statement. [ ] For [ ] Against [ ] Abstain
3. Ratification of appointment of McGladrey &
Pullen, LLP as independent auditors for
fiscal year ending January 1, 2000. [ ] 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.
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.
Address Change? Mark Box [ ] Indicate changes below: Dated: _________________________, 1999.
________________________________________________
| |
|________________________________________________|
Signature(s) in Box
Please sign your name exactly as it appears at left.
In the case of shares owned in joint tenancy or as
tenants in common, all should sign. Fiduciaries
should indicate their title and authority.
</TABLE>
