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-6a-12)
[ x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
KRANTOR CORPORATION
-------------------
(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 Rule 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies
- ------------------------------------------------------------------------------
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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KRANTOR CORPORATION
120 East Industry Court
Deer Park, New York 11729
PROXY STATEMENT
This statement is furnished in connection with a solicitation of proxies by the
Board of Directors (the "Board of Directors" or the "Board") of Krantor
Corporation (the "Company") to be used at the Annual Meeting of Stockholders of
the Company (the "Meeting"), to be held on April 30, 1997 at 10:00 A.M. at the
offices of the Company at 120 East Industry Court, Deer Park, New York 11729.
VOTING PROCEDURE
Stockholders of record at the close of business on March 10, 1997 will be
entitled to vote at the Meeting. On the record date, there were 26,353,333
shares of Common Stock, par value $.001 per share ("Common Stock"), outstanding,
each of which being entitled to one vote at the Meeting, and 100,000 shares of
Class A Preferred Stock, par value $.001 per share ("Preferred Stock" and ,
together with the Common Stock, collectively the "Company Shares"), outstanding,
each of which being entitled to 13 votes at the Meeting. Holders of the Common
Stock and the Preferred Stock will vote as a single class as to all matters to
come before the Meeting. Of the Company Shares outstanding, Jemini Investments,
Inc. ("Jemini"), an investment holding company, owns 1,056,073 shares of Common
Stock and all of the shares of Preferred Stock. Mair Faibish, Executive Vice
President, Chief Financial Officer and a Director of the Company, is an officer,
director and 14% stockholder of Jemini and has sole voting and dispositive power
with respect to the shares of the Company owned by Jemini. Mr. Faibish also has
voting control over the number of shares currently owned by CYGNI S.A. Together
the aforesaid shares owned of record by CYGNI S.A. and Jemini represents 8.5% of
the votes entitled to be cast at the meeting. Jemini has advised the Company
that it intends to vote for the election of each director and for the approval
of the amendments to the Company's certificate of incorporation to authorize and
arrange for the reverse split of outstanding common stock and to vote in favor
of such reverse stock split. Mr. Faibish intends to vote the shares of CYGNI in
similar fashion.
The By-Laws of the Company (the "By-Laws") provide that the holders of a minimum
of one third of the Company Shares issued and outstanding and entitled to vote
at the Meeting, present in person or represented by proxy, shall constitute a
quorum at the Meeting. The ByLaws further provide that directors of the Company
shall be elected by a plurality vote and that, except as otherwise provided by
statute, the Certificate of Incorporation of the Company, or the By-Laws, all
other matters coming before the meeting shall be decided by the vote of a
majority of the number of Company Shares present in person or represented by
proxy at the Meeting and entitled to vote thereat.
Votes cast at the Meeting will be counted by the persons appointed by the
Company to act as inspectors of election for the Meeting. The inspectors of
election will treat Company Shares represented by a properly executed and
returned proxy as present at the Meeting for purpose of determining a quorum.
Abstentions and broker non-votes with respect to particular proposals will not
affect the determination of a quorum.
Five directors will be elected by a plurality vote of the Company Shares
present, in person or by proxy, and entitled to vote at the Meeting.
Accordingly, abstentions and broker non-votes
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as to the election of directors will have no effect thereon. All other matters
to come before the Meeting require the approval of a majority of the Company
Shares present entitled to vote thereat; therefore, abstentions as to particular
proposals will have the same effect as votes against such proposals. Broker
non-votes as to particular proposals will not, however, be deemed to be a part
of the voting power present with respect to such proposals and will not
therefore count as votes for or against such proposals and will not be included
in calculating the number of votes necessary for approval of such proposals.
Proxies in the enclosed form are solicited by the Board of Directors to provide
an opportunity to every stockholder to vote on all matters scheduled to come
before the Meeting, whether or not he or she attends in person. If proxies in
the enclosed form are properly executed and returned, the Company Shares
represented thereby will be voted at the Meeting in accordance with stockholder
direction. Proxies in the enclosed form will be voted FOR the election of each
director, and FOR the approval of the specified amendments to the Company's
Certificate of Incorporation arranging for reverse split of the Company's Common
Stock unless contrary specification is made. Any stockholder executing a proxy
may revoke that proxy or submit a revised one at any time before it is voted. A
stockholder may also attend the Meeting in person and vote by ballot, thereby
canceling any proxy previously given. Except for the election of directors, and
approval of the amendments to the Company's Certificate of Incorporation
arranging for the proposed reverse split of common stock , management expects no
other matters to be presented for action at the Meeting. If, however, any other
matters properly come before the Meeting, the persons named as proxies in the
enclosed form of proxy intend to vote in accordance with their judgment on the
matters presented unless otherwise specified in the Proxy.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
solicitations by mail, arrangements have been made for brokers and nominees to
send proxy material to their principals, and the Company will reimburse them for
their reasonable expenses in doing so. The Company's transfer agent, American
Stock Transfer and Trust Company, will assist it in the solicitation of proxies
from brokers and nominees. The fees for the services of the transfer agent are
included in the monthly fees paid by the Company; however, the Company will
reimburse the transfer agent for its reasonable out-of-pocket expenses incurred
in connection with providing solicitation services. Certain employees of the
Company, who will receive no compensation for their services other than their
regular remuneration, may also solicit proxies by telephone, telegram, telex,
telecopy, or personal interview.
PROPOSAL 1. ELECTION OF DIRECTORS
At the Meeting, five directors are to be elected to a one-year term and to hold
office until his successor is elected and qualified. The Board of Directors
consists of one class, which serves for a one-year term. The persons named in
the enclosed form of proxy intend to vote such proxy, unless otherwise directed,
FOR the election of each of the directors nominated to serve on the Board to
serve until the fiscal 1997 Annual Meeting of Stockholders or other dates for
proposed election on new directors. If, contrary to present expectation, any of
the nominees should become unavailable for any reason, votes may be cast
pursuant to the accompanying form of proxy for a substitute nominee designated
by the Board.
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INFORMATION CONCERNING DIRECTORS AND DIRECTOR NOMINEES.
Set forth below is certain information concerning directors and director
nominees.
<TABLE>
<CAPTION>
Year First Elected A
Name of Nominee Age Position Director
- --------------- --- -------- --------
<S> <C> <C>
Henry J. Platek, Jr. 51 President and Director 1989
Mair Faibish 37 Executive Vice President Chief Financial
Officer and Director 1989
Mitchell Gerstein 41 Vice President, Treasurer, Secretary
and Director 1991
Dominic Marsicovetere 48 Director 1993
Michael Ferrone 45 Director 1995
</TABLE>
HENRY J. PLATEK, Jr. Mr. Platek has been President and a Director of the
Company since December 1989.
MAIR FAIBISH. Mr. Faibish has been Executive Vice President, Chief
Financial Officer and a Director of the Company since May 1989. Mair Faibish has
served as President and a Director of Jemini since May 1989.
MITCHELL GERSTEIN. Mr. Gerstein has been Treasurer since March 1994, Vice
President and a Director of the Company since June 1991, Controller and
Treasurer of the Company since March 1992, and Secretary of the Company from
June 1991 to March 1994, a position he reassumed in January 1995. From May 1989
to August 1991, Mr. Gerstein served as Assistant Controller of Jemini.
DOMINIC A. MARSICOVETERE, CPA. Mr. Marsicovetere has been a Director of the
Company since April 1993. Since 1978, Mr. Marsicovetere has been an Accounting
Professor in the school of Business Administration at Hofstra University. Since
1978, Mr Marsicovetere had been in private practice as a certified public
accountant.
MICHAEL FERRONE. Mr. Ferrone has been an associate at Certified Financial
Services for 1 year. Mr. Ferrone has been a Vice President and has served on the
Executive Committee of Alliance Financial Group for the past eight years. Mr.
Ferrone has a BA degree from Rutgers University.
IRWIN SIMON, former director has resigned from the board for personal
reasons, but not of any disagreement with the Company on any matter relating to
the Company's operations, policies, or practices.
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CORPORATE GOVERNANCE
Directors are elected at the annual meeting of stockholders and hold office
until their successors have been duly elected and qualified, or until their
earlier death, resignation or removal.
The Board of Directors has primary responsibility for directing the
management of the business and affairs of the Company. The Board currently
consist of five members.
The Company has an Audit Committee, an Executive Committee, an Independent
Compensation Committee, and an Employee Compensation Committee.
The Audit Committee is comprised of Mair Faibish and Dominic A.
Marsicovetere and its functions include recommending to the Board of Directors
the engagement of the Company's independent certified public accountants,
reviewing with such accountants the plan and results of their examination of the
consolidated financial statements and determining the independence of such
accountants. The Audit Committee will also have primary responsibility for
reviewing all related party transactions. However, it is the Company's policy
that all related party transactions be approved by a majority of the
disinterested directors of the Company. Such directors will not be required to
make a determination that each related party transaction meets a fairness test,
but will decide whether the transaction is in the best interest of the Company.
The Executive Committee is comprised of Henry J. Platek, Jr. and Mair
Faibish and is responsible for establishing policies and procedures relating to
the administration and operation of the Company.
The Independent Compensation Committee, consisting of Dominic Marsicovetere
and Michael Ferrone, the Company's two independent non-employee directors, will
review and make recommendations with respect to compensation of officers and key
employees. They also administer the Company's 1994 Services and Consulting
Compensation Plan, as amended with respect to compensation of directors (except
non-employee directors) and officers and consultants of the Company.
The Employee Compensation Committee, consisting of Mair Faibish and Henry
J. Platek, will review and make recommendations with respect to compensation of
employees who are not officers or directors.
Executive officers serve at the discretion of the Board of Directors,
subject to any employment agreement between the executive officer and the
Company.
The Board of Directors and its Committees voted by unanimous or majority
(on notice to others not voting) written consent in lieu of formal meetings with
respect to all actions taken in the year ended December 31, 1995 and December
31, 1996, and thereafter in 1997 with the exception of one directors meeting
held January 6, 1997 wherein all directors were present.
None of the directors or respective officers of the Company have over the
last two fiscal years been involved in any material transactions with the
Company wherein the amount of money involved exceeded $60,000, although Mr.
Simon, former director has been involved in selling goods to or through the
Company as a customer through affiliated entities and the
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Company and its affiliates purchased insurance instruments through Mr. Ferrone.
No material transactions involving the officers and/or directors of the Company
and the Company are proposed. There are also no common affiliations between the
Company and officers and or directors in any other business or entity, to the
best knowledge of the Company.
No officer, director and/or former member or affiliate thereof is or in the
last two fiscal years has been in dept to the Company in excess of $60,000.
COMPENSATION OF DIRECTORS -- NON EMPLOYEE DIRECTOR PLAN
Directors and committee members who are part of management serve as such
without compensation but are reimbursed for their reasonable out-of-pocket
expenses in attending meetings of the Board and its committees. Pursuant to the
Option Plan, directors who are not employees of the Company are granted an
option to purchase 10,000 shares of Common Stock, at an exercise price equal to
fair market value on the date of grant immediately upon their election or
reelection on the Board of Directors.
RECOMMENDATION AND VOTE
The Board of Directors recommends the election of the nominees listed above
as directors of the Company to hold office until the next annual meeting or
until their successors are elected and qualified. The affirmative vote of a
plurality of the Company Shares represented at the Meeting is required for such
approval.
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PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 10, 1997 information regarding the
beneficial ownership of the Company's voting securities (i) by each person who
is known to the Company to be the owner of more then five percent of the
Company's voting securities, (ii) by each of the Company's directors, and (iii)
by all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership Percent of Class
-------------------- ----------------
Common Preferred Common Preferred
Stock Stock Stock Stock
----- ----- ----- -----
Name and Address of Beneficial Owner(1)
<S> <C> <C> <C> <C>
Henry J. Platek (2) . . . . . . . . . . 64,116 -0- .24% --
120 East Industry Court
Deer Park, NY 11729
Mair Faibish (3)(4) . . . . . . . . . . 1,174,573 100,000 4.46% 100.0%
120 East Industry Court
Deer Park, NY 11729
Mitchell Gerstein . . . . . . . . . . . 26,282 -0- .10% --
120 East Industry Court
Deer Park, NY 11729
Dominic A. Marsicovetere . . . . . . . -0- -0- -- --
120 East Industry Court
Deer Park, NY 11729
Michael Ferrone . . . . . . . . . . . -0- -0- -- --
120 East Industry Court
Deer Park, NY 11729
Jemini Investments, Inc (4). . . . . . 1,056,073 100,000 4.01% 100.0%
350 Jericho Turnpike
Jericho, NY 11753
All Officers and Directors
as a Group (4) . . . . . . . . . . . . 1,264,971 100,000 4.8% 100.0%
*Less than 1%
</TABLE>
(1) Unless otherwise indicated, each person named in the table exercises
sole voting and investment power with respect to all shares beneficially
owned.
(2) Includes 8,333 shares owned by Michaleen Platek, wife of Henry J.
Platek Jr. and 8,333 shares owned by MNP Corporation d/b/a Twin Cities
Wholesale Grocers,
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Incorporated ("MNP"), a corporation wholly-owned by Mrs. Platek. Henry J.
Platek, Jr. disclaims beneficial ownership of the shares held by Michaleen
Platek and MNP.
(3) Includes 1,056,073 shares of the Common Stock and 100,000 shares of
Preferred Stock beneficially owned by Jemini. Mr. Faibish is treasurer,
director and a 14% stockholder of the common stock of Jemini. Mr. Faibish
has sole voting and investment power with respect to the shares that Jemini
owns in the Company.
(4) Each share of Preferred Stock is entitled to 13 votes. Accordingly, the
percentage of overall voting power of the Company's voting securities
beneficially owned by Mr. Faibish, Jemini, and all officers and directors
as a group, (assuming, as to each stockholder, the exercise of currently
outstanding options) is as follows:
Name
- ----
Mair Faibish . . . . . . . . . . . . . . . . 9.0%
Jemini . . . . . . . . . . . . . . . . . . . 8.5%
All officers and directors as a group. . . . 9.3%
PROPOSAL 2. PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO ALLOW REVERSE SPLIT
GENERAL
At the annual Meeting, the stockholders of the Company will consider and
vote upon a proposal providing for a one-for-twenty five Reverse Split of the
common stock (the "Common Stock") of Krantor Corporation (the "Company"). The
Reverse Split will be effected by an amendment to the Company's Certificate of
Incorporation (the "Reverse Split Amendment") that is contained in Exhibit A to
this Proxy Statement, which is incorporated by reference herein. The Reverse
Split Amendment will become effective upon its filing with the Secretary of
State of Delaware (the "Effective Date"). Fractional shares of Common stock will
not be issued as a result of the Reverse Split. Stockholders entitled to receive
a fractional share of Common Stock as a consequence of the Reverse Split will,
instead, receive from the Company a cash payment in United States dollars equal
to such fraction multiplied by twenty five times the average closing price of
the Common Stock on the NASDAQ Small Cap Market for the five trading days
immediately preceding the Effective Date.
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Reverse Split Amendment will amend Article Four of the Certificate of
Incorporation to add a new section to the end thereof providing for the Reverse
Split. At the Effective Date, without further action on the part of the Company
or the stockholders, each share of Common Stock will be converted into
one-twenty-fifth of a share of Common Stock. The Reverse Split Amendment will
become effective upon its filing with the Secretary of State of the State of
Delaware.
A vote for the Reverse Split proposal will include authorization of the
Company's Board of Directors not to file or to delay the filing of the Reverse
Split Amendment in the event that the Board of Directors determines that filing
the Reverse Split Amendment would not be in the
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best interest of the Company's stockholders. Factors leading to such
determination could include, without limitation, any possible effect on NASDAQ
listing or future securities offerings (see "Reasons for the Reverse Split"
infra).
VOTE NEEDED FOR APPROVAL
The proposed Reverse Split and the related amendment to the Company's
Certificate of Incorporation must be approved by the holders of at least a
majority of the shares of Common Stock (and others having votes similar thereto)
present and voting at the annual Meeting of stockholders where quorum
requirements have been met, called for that purpose for which Proxies are hereby
being solicited. Quorum at the meeting shall require attendance in person or by
proxy by at least one-third amount of potential votes outstanding.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY ADOPTED A RESOLUTION
SETTING FORTH THE PROPOSED REVERSE SPLIT AMENDMENT, AND HEREBY
RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE FOR THE
PROPOSED AMENDMENT.
EFFECT OF THE PROPOSED REVERSE SPLIT
The proposed Reverse Split will be effected by means of an amendment to the
Certificate of Incorporation of the Company. Under Delaware law, no appraisal
rights are available to dissenting shareholders. Each stockholder who owns fewer
than twenty-five shares of Common Stock will have his fractional share of Common
Stock converted into the right to receive cash as set forth below in "Exchange
of Stock Certificates and Payment for Fractional Shares", infra. The interest of
such stockholder in the Company will thereby be terminated, and such stockholder
will have no right to share in the assets or future growth of the Company. Each
shareholder who owns twenty-five or more shares of Common Stock will continue to
own shares of Common Stock and will share in the assets and future growth of the
Company. Such interest will be represented by one-twenty-fifth as many shares as
such stockholder owned before the Reverse Split, except that no fractional
shares will be issued. The following schedule of stockholders' equity sets forth
as of September 30, 1996 (last filed 10Q Report for the Company), on a pro-forma
basis, the effect of the adoption of the Reverse Split proposal. Adoption of the
Reverse Split proposal will result in a one-for-twenty-five reverse split of the
Common Stock.
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Pro Forma Schedule of Stockholders' Equity
Assuming Adoption of Reverse Split Proposal
(Unaudited)
Pro Forma
Historical Adjusted Balance
September 30, 1996 September 30, 1996
------------------ ------------------
Stockholders' Equity:
Class A $2.20 Cumulative
Preferred Stock - $.001 par value;
100,000 shares authorized,
100,000 shares issued and
outstanding: 100 100
Common Stock - $.001 par value;
29,900,000 Shares authorized -
26,353,333 shares outstanding (1)
pre- split; 1,054,133 outstanding
post-split: 26,353 1,054
Additional Paid -in Capital: 12,159,642 12,184,941
Accumulated Deficit: (7,775,567) (7,775,567)
----------- -----------
4,410,428 4,410,428
Less treasury stock at cost: (167,500) 167,500
----------- ----------
Total Stockholders' Equity: 4,242,928 4,242,928
===============================
(1) Assumes outstanding Common Stock as of March 1, 1997
Adoption of the Reverse Split proposal as of January 1, 1996 would not have
had an effect on net income for the fiscal year ended December 31, 1996.
However, net loss per share would have been proportionately increased. No
adjustment has been made for the reduction in the number of shares of Common
Stock resulting from the payment of cash for fractional shares. The Company does
not believe that adoption of the Reverse Split will adversely affect the
continued listing of the Company's Common Stock on the NASDAQ Small Cap Market,
but, contrary, the Company believes that it may be necessary to achieve the
Reverse Split to maintain its listing thereon.
REASONS FOR THE REVERSE SPLIT
Management of the Company believes that it may be more difficult to attract
new investors to the Company because the Common Stock trades at a relatively low
price (the closing price on March 10,1997 was $.10 per share) and desires to
increase the per share market quoted price for the Common Stock of the Company
to attract new investment which the Company believes that the Reverse Split will
accomplish. The Company also believes that it must have more Common stock
available for issuance to accommodate new investment and have sufficient
reserves to accommodate prior convertible debt outstanding, whereas at present
the Company is close to exhausting its authorized but unissued stock. Most
importantly, the Company's listing on NASDAQ is jeopardized unless the market
quoted price for the Company's common Stock increases to $1 or more, which the
Company believes will be achievable as a result of the Reverse Split.
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It is anticipated that following the consummation of the Reverse Split, the
shares of Common Stock will trade at a price per share that is significantly
higher than the current market price. However, there can be no assurance that
after the consummation of the Reverse Split, the shares of Common stock will
trade at twenty five times the market price of the Common Stock prior to the
Reverse Split.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES
The exchange of shares of Common Stock will occur on the Effective Date
without any action on the part of stockholders of the Company and without regard
to the date certificates representing pre-split shares of Common Stock are
physically surrendered for certificates representing post-split shares of Common
Stock. The Company's Transfer Agent will exchange certificates. In the event
that the number of shares of post-split Common stock includes a fraction, the
Company will pay to the stockholder, in lieu of the issuance of fractional
shares of the Company, a cash amount in United States dollars which will be
equal to the same fraction multiplied by twenty-five times the average closing
price of the Common stock on the NASDAQ Small Cap Market for the five days
immediately preceding the Effective Date. A change in the closing price of the
Common Stock will affect the amount received for a fraction share by a
shareholder.
As soon as practicable after the Effective Date, transmittal forms will be
mailed to each holder of record of certificates for shares of Common Stock to be
used in forwarding their certificates for surrender and exchange for
certificates representing the number of shares of post- split Common Stock such
stockholders are entitled to receive as a consequence of the Reverse Split.
After receipt of such transmittal form, each holder should surrender the
certificates representing pre-split shares of Common Stock of the Company. Each
holder who surrenders certificates will receive new certificates representing
the whole number of shares of post-split Common Stock to which he is entitled
and any cash payable in lieu of a fractional share. The transmittal forms will
be accompanied by instructions specifying other details of the exchange.
STOCKHOLDERS SHOULD NOT SEND THEIR CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL
FORM.
After the Effective Date, each certificate representing pre-split shares of
Common Stock will, until surrendered and exchanged as described above, be
deemed, for all corporate purposes, to evidence ownership of the whole number of
post-split shares of Common Stock, and the right to receive from the Company the
amount of cash for any fractional shares, into which the shares evidenced by
such certificate have been converted, except that the holder of such unexchanged
certificates will not be entitled to receive any dividends or other
distributions payable by the Company after the Effective Date, until the
certificates representing pre-split shares of Common Stock have been
surrendered. Such dividends and distributions, if any, will be accumulated, and
at the time of the surrender of the certificates for pre-split shares of Common
Stock, all such unpaid dividends or distributions will be paid without interest.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes certain federal income tax consequences
of the Reverse Split. This discussion is based upon the Internal Revenue Code of
1986 (the "Code"), existing and proposed regulations thereunder, reports of
congressional committees, judicial decisions and current administrative rulings
and practices, all as amended and in effect on the date hereof. Any of these
authorities could be repealed, overruled or modified at any time. Any such
change could be retroactive and, accordingly, could cause the tax consequences
to vary substantially from the
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consequences described herein. No ruling from the Internal Revenue Service (the
"IRS") with respect to the matters discussed herein has been requested, and
there is no assurance that the IRS would agree with the conclusions set forth in
this discussion. All shareholders interested in such information should consult
with their own advisors.
This discussion is for general information only and does not address the
federal income tax consequences that may be relevant to particular shareholders
in light of their personal circumstances or to certain types of stockholders
(such as dealers in securities, insurance companies, foreign individuals and
entities, financial institutions and tax-exempt entities) who may be subject to
special treatment under the federal income tax laws. This discussion also does
not address any tax consequences under State, local or foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR
TAX CONSEQUENCES TO THEM OF PARTICIPATION IN THE REVERSE SPLIT, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX
LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any gain or loss as a result of the
Reverse Split. No gain or loss should be recognized by a stockholder who
receives only Common Stock upon the Reverse Split. The aggregate tax basis of
post-split Common Stock received by such a stockholder in connection with the
Reverse Split will equal the stockholder's aggregate basis in the pre-split
Common Stock exchanged therefor and generally will be allocated among post-split
Common Stock received on a pro-rate basis. Stockholders who have used the
specific identification method to identify their basis in pre-split Common Stock
surrendered in the Reverse Split should consult their own tax advisors to
determine their basis in the post-split Common Stock received in exchange
therefor. A stockholder who receives cash in lieu of a fractional share of
Common Stock that otherwise would be held as a capital asset generally should
recognize capital gain or loss on the receipt of such cash in an amount equal to
the difference between the cash received and his basis in such fractional share
of Common Stock. For this purpose, a stockholder's basis in such fractional
share of Common Stock will be determined as if the stockholder actually received
such fractional share.
OTHER BUSINESS
Belew, Averitt & Company are expected to be the independent auditors of the
financial statements of the Company and its subsidiaries for the fiscal year
ending December 31, 1997 and have acted as such during the last two fiscal years
of the Company. It is not expected however that any representatives of the
auditors to be available at the Meeting to respond to questions.
The financial statements of the Company as of and for the fiscal years
ended December 31, 1995 and December 31, 1994 were audited by audited by Belew,
Averitt & Company and such did not contain an adverse opinion or a disclaimer of
an opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
Management knows of no other business which is to be presented for action
at the meeting. Should any other matters properly come before the meeting, the
persons named in the accompanying proxy will have discretionary authority to
vote all proxies in accordance with their judgment.
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It is important that proxies be returned promptly. Therefore, stockholders
who do not expect to attend in person are urged to execute and return the
enclosed proxy to which no postage need be affixed if mailed in the United
States.
EXECUTIVE COMPENSATION
Set forth below are tables showing: (i) in summary form, the compensation
paid to Henry J. Platek and Mair Faibish, the only executive officers of the
Company who earned in excess of $100,000 during any of the fiscal years
presented; and (ii) the options and stock appreciation rights (SARs) granted to
such executives in 1996.
Restricted
Stock
Name and Principal Position Year Salary Bonus Awards
- -------- --------- -------- ---- ------ ----- ------
Henry J. Platek, President and 1996 105,867 -0- -0-
Chief Executive Officer 1995 121,000 6,063 -0-
1994 108,000 23,015 23,015
Mair Faibish, Executive 1996 112,440 -0- -0-
Vice President and 1995 104,900 11,719 -0-
CFO. 1994 77,298 90,865 -0-
Compensation Committee Interlocks and Insider Participation
All decisions with respect to the compensation of the Company's executive
officers and key employees are made by the Independent Compensation Committee,
which is comprised of Mr. Marsicovetere and Mr. Ferrone. Neither Mr.
Marsicovetere nor Mr. Ferrone are officers or employees of the Company nor were
they at any time.
All decisions with respect to the compensation of employees who are not
executive officers or key employees are made by the Employee Compensation
Committee, which is comprised of Mr. Platek and Mr. Faibish. Mr. Faibish is the
Executive Vice President and Chief Financial Officer of the Company.
In addition to his duties with the Company, Mr. Faibish is an officer,
director and stockholder of Jemini Investments, Inc., a New York corporation
which owns all 100,000 shares of the Company's Class A Preferred Stock (the
"Preferred Stock") and 1,056,073 shares of the Company's Common Stock.
REPORT OF THE BOARD OF DIRECTORS ON ANNUAL COMPENSATION
ADMINISTRATION OF COMPENSATION PROGRAM
The Independent Compensation Committee will be responsible for establishing
and administering the compensation policies applicable to the Company's
executive officers.
Prior to the establishment of the Committee, decisions with respect to the
compensation of the Company's executive officers have been made by the Board of
Directors.
14
<PAGE>
COMPENSATION POLICY
The goals of the Company's executive compensation policy are to (i) attract
and retain qualified executives and (ii) ensure that an appropriate relationship
exists between executive pay and the creation of shareholder value. To achieve
these goals, the Company's executive compensation policy will reward executives
for long term strategic management and the enhancement of stockholder value by
integrating annual base compensation with other forms of incentive compensation
based upon corporate results and individual performance. Measurement of
corporate performance will be primarily based on the level of achievement of
Company goals and upon Company performance levels compared with industry
performance levels.
The Committee will obtain compensation survey data where available for the
promotional wholesale distribution industry and similar industries to be used as
a guide to establish compensation levels to be competitive with and comparable
to other companies in its industry group.
FISCAL 1996 EXECUTIVE COMPENSATION PROGRAM
The Company's fiscal 1996 executive compensation program was comprised
exclusively of base salary and stock grants pursuant to the company's
compensation plan. During fiscal 1996, Mr. Faibish and Mr. Platek, the Company's
two executive officers, did not receive salary increases. The decisions not to
grant increases, were made by the Board of Directors based on the company
performance and financial condition. The compensation program described below
will be implemented by the Independent Compensation Committee on a going forward
basis.
BASE SALARY. The Independent Compensation Committee will review and approve
all salary changes and stock grants for executive officers. The Committee
will base its approval of such salary changes on: (i) performance of the
executive, (ii) Company performance, (iii) experience, and (iv) external
salary surveys.
ANNUAL INCENTIVE.The Company may use annual performance incentives to focus
management on achieving financial and operating results. The Company may
establish a bonus pool for executive officers for a particular year or
years, from which bonuses will be paid at the discretion of the President
and Executive Vice President upon approval of the Committee, except that
bonuses awarded to the President and Executive Vice President will be at
the discretion of the Committee, based on the financial performance of the
Company.
LONG TERM INCENTIVE. The primary purpose of the long term incentive
compensation plan is to link management pay with the long term interests of
stockholders. The Independent Compensation Committee will use stock options
to achieve this link. The grant of options at 100 percent of the fair
market value assures that executive officers will receive a benefit only
when stock price increases.
The amount of options granted is based on comparative data on the estimated
value of long term compensation for other industry executives. In
determining annual stock option grants, the Independent Compensation
Committee will base its decision on the individual's performance and
potential to improve stockholder value.
In March 1994, certain executive officers of the Company were awarded stock
options and stock grants pursuant to the Plan. These options and grants were
made at the direction of
15
<PAGE>
the President and Executive Vice President, and the options were granted at the
market price of the Common Stock on the date of grant ($3.00 per share). Such
options and stock grants were approved by the Board of Directors. In March,
1995, these options were cancelled by the holders. In March, 1995, the
Independent Compensation Committee issued new options to certain of the
Company's executive officers. These options were cancelled by the holders in
February, 1997. The Committee believes that options and other stock-based
performance compensation arrangements are effective incentive for managers to
create value for stockholders since the value of an option bears a direct
relationship to the Company's stock price.
CEO COMPENSATION DURING FISCAL 1996
Mr. Platek's base salary reflects a compensation level which decreased from
fiscal 1995. Mr. Platek's salary is intended to be competitive with salary
arrangements received by other chief executive officers in the promotional
wholesale distribution industry. Mr. Platek did not receive a bonus during
fiscal 1996 because bonuses were generally not paid to executive officers while
the Company was recording losses applicable to common stock. The Committee will
base future bonuses or awards to Mr. Platek on Company and individual
performance as compared to other promotional wholesale distribution companies,
and the criteria set forth above for executive officers generally.
COMPENSATION OF DIRECTORS
The Company's executive officers do not receive any compensation for their
service as Directors; however, such officers are reimbursed for their reasonable
out-of-pocket expenses in attending any meetings of the Board and/or its
committees. The Company's two non-employee Directors, on the other hand, each
receive compensation for their service in the form of an option to purchase
10,000 shares of the Company's Common Stock immediately upon their election or
re-election to the Board. These options, which are granted pursuant to the
Company's Stock Option Plan for Non-Employee Directors (the "Option Plan") , are
issued at their fair market value, are immediately exercisable and have a term
of ten years.
EMPLOYMENT CONTRACTS
The Company entered into employment agreements (the "Agreements") with each
of Messrs. Platek and Faibish on November 14, 1994, providing for their
continued employment in their current capacities until October 1997, subject to
termination for cause, at an annual base salary, effective November 14, 1994
with respect to Mr. Platek and effective April 1, 1995 with respect to Mr.
Faibish, of $108,000 (with automatic 5% annual increases). Under these
Agreements, Messrs. Platek and Faibish will each be eligible to receive bonus
payments at the discretion of the Independent Compensation Committee. In
addition, the Agreements provide for each of Messrs. Platek and Faibish to
receive certain stock option grants pursuant to the Company's 1994 Plan. Each
officer has agreed that upon termination of his employment, he will not compete
with the Company for a period of one year in any area within a 50 mile radius of
the Company's principal place of business. The Agreements also provide for
certain payments in the event of either officers' disability and for the use of
a company automobile.
CONCLUSION
The Board of Directors and the Independent Compensation Committee believe
that the quality and motivation of management make a significant difference in
the long term performance of the Company. The Board of Directors and the
Committee also believe that a compensation
16
<PAGE>
program which rewards performance that meets or exceeds high standards also
benefits the stockholders, so long as there is an appropriate downside risk
element to compensation when performance falls short of such standards. The
Board of Directors and the Committee are of the opinion that the Company's
management compensation program meets these requirements, has contributed to the
Company's success, and is deserving of stockholder support.
Henry J. Platek, Jr.
Mair Faibish
Mitchell Gerstein
Dominic. A. Marsicovetere
Michael Ferrone
STOCK PERFORMANCE TABLE
The following chart compares over the last four year period the percentage
change on the Company's common stock between the NASDAQ composite index (COMP)
and The Fleming Companies (FLM: the largest food wholesaler in the U.S).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR KRANTOR NASDAQ COMP. FLEMING
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
9/93 (30)% 30% 0%
- -----------------------------------------------------------------------------------------------------------------------------
6/94 (15)% 20% (15)%
- -----------------------------------------------------------------------------------------------------------------------------
3/95 (60)% 35% (30)%
- -----------------------------------------------------------------------------------------------------------------------------
12/95 (75)% 75% (30)%
- -----------------------------------------------------------------------------------------------------------------------------
9/96 (90)% 90% (50)%
- -----------------------------------------------------------------------------------------------------------------------------
3/97 (90)% 120% (50)%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
ANNUAL REPORT
The Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1995, which includes audited financial statements, has been
previously mailed to stockholders and the 1996 Annual Report shall be mailed to
shareholders when prepared, preparation of which is expected by April 1997. Of
such Reports that for fiscal year ended December 31, 1995 is incorporated here
in by reference; that for 1996 is not presently available, but is incorporated
if and to the extent available if completed prior to the scheduled annual
meeting to which this proxy statement relates.
FORM 10-K
The Company will furnish without charge to each person whose Proxy is being
solicited, upon request of any such person, a copy of the Annual Report of the
Company on Form 10-K for the fiscal year ended December 31, 1995, as filed with
the Securities and Exchange Commission, including the financial statement
schedules and that for 1996, if and when available. Written requests for copies
of such report should be directed to Ms. Grace Sauer, Stockholder Relations,
Krantor Corporation, 120 East Industry Court, Deer Park, New York 11729. The 10-
K report for 1995 is incorporated herein by reference and that for 1996 is
incorporated if and to the extent available if completed prior to the scheduled
annual meeting to which this proxy statements relates.
STOCKHOLDER PROPOSALS
If any stockholder desires to present a proposal for action at the
Company's annual meeting, such proposal must be in compliance with applicable
laws and Securities and Exchange Commission regulations and must be received by
the Company on or prior to April 30, 1997.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission ("SEC"). Such person are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such reports received by it
with respect to fiscal 1995 and 1996, or written representations from certain
reporting persons, the Company believes that all filing requirements applicable
to its directors, officers and persons who own more than 10% of a registered
class of the Company's equity securities have been timely complied with.
By Order of the Board of Directors
/s/ Mitchell Gerstein
--- -----------------
Mitchell Gerstein,
Secretary
March 21, 1997
Deer Park, New York
18
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
KRANTOR CORPORATION
Krantor Corporation (the "Corporation"), organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the "DGCL")
does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted resolutions
setting forth the following amendment to the Certificate of Incorporation of the
Corporation (the "Amendment'), declaring the Amendment to be advisable and
calling for the submission of the proposed Amendment to the stockholders of the
Corporation for consideration thereof. The resolution setting forth the proposed
Amendment is as follows:
ARTICLE FOURTH of the Certificate of Incorporation of Krantor Corporation, a
Delaware corporation, is hereby amended by adding thereto the following
paragraphs to read as follows:
Reverse Split
(i) Effective immediately upon the filing of this Amendment to the Certificate
of Incorporation in the office of the Secretary of State of the State of
Delaware, each outstanding share of previously existing Common Stock shall be
and hereby is converted into and reclassified as one- twenty-fifth of a share of
Common Stock; provided, however, that fractional shares of Common Stock will not
be issued and each holder of a fractional share of Common Stock shall receive in
lieu thereof a cash payment from the Corporation determined by multiplying such
fractional share of Common Stock by twenty-five times the average closing price
of a share of previously existing Common Stock on the NASDAQ Small Cap Market
for the five trading days immediately preceding the effective date, and upon
such other terms as the officers of the Corporation, in their sole discretion,
deem to be advisable and in the best interests of the Corporation.
(ii) Certificates representing reclassified shares are hereby canceled and upon
presentation of the canceled certificates to the Corporation, the holders
thereof shall be entitled to receive certificate(s) representing the new shares
into which such canceled shares have been converted.
SECOND: That thereafter pursuant to a resolution of the Board of Directors, a
special meeting of the stockholders of the Corporation was duly called and held,
upon notice in accordance with Section 222 of the DGCL at which meeting the
necessary number of shares as required by statue were voted in favor of the
Amendment.
THIRD: That the Amendment was duly adopted in accordance with the provisions of
Section 242 of the DGCL.
FOURTH: That the Amendment shall be effective on the date this Certificate of
Amendment is filed and accepted by the Secretary of State of the State of
Delaware.
19
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by
Mair Faibish, its Vice President, and attested by Mitchell Gerstein, its
Secretary, this day of , 1997.
KRANTOR CORPORATION
By: /s/ Mair Faibish
--------------------
Mair Faibish
Vice President
ATTEST: By: /s/ Mitchell Gerstein
- ------- -------------------------
Mitchell Gerstein
Secretary
20
<PAGE>
EXHIBIT B
KRANTOR CORPORATION
120 EAST INDUSTRY COURT
DEER PARK, NEW YORK 11729
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mair Faibish and Mitchell Gerstein, and
each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and vote, as designated herein, all of the
shares of the common stock, par value $.001 per share, of Krantor Corporation
(the "Company"), held of record by the undersigned on at the Special Meeting
(the "Special Meeting") of Stockholders of the Company to be held on , and any
adjournment(s) thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSAL 1, AND PROPOSAL 2, AND THE PROXIES WILL USE
THEIR DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN PROPOSAL 3.
1. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO EFFECT A ONE FOR TWENTY-FIVE REVERSE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK, PAR VALUE $.001 PER SHARE, AS DESCRIBED IN THE COMPANY'S
PROXY STATEMENT RELATING TO THE SPECIAL MEETING.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. PROPOSAL TO ELECT THE FOLLOWING PERSONS TO SERVE AS THE BOARD OF DIRECTORS
FOR KRANTOR CORPORATION FOR ONE YEAR FROM THE EFFECTIVE DATE OF THE SPECIAL
MEETING OF SHAREHOLDERS TO WHICH THIS PROXY RELATES OR UNTIL THEIR SUCCESSORS
ARE ELECTED AND QUALIFIED:
HENRY J. PLATEK, JR.
MAIR FAIBISH
MITCHELL GERSTEIN
DOMINIC MARSICOVETERE
MICHAEL FERRONE
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING AND ANY ADJOURNMENT(S)
THEREOF.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please execute this Proxy as your name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature: Date:
Signature: Date:
22
