<PAGE>
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 Section240.14a-11(c) or
Section240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ALPHA PRO TECH, LTD.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ALPHA PRO TECH, LTD.
60 CENTURIAN DRIVE
SUITE 112
MARKHAM, ONTARIO
L3R 9R2
Telephone: (905) 479-0654
NOTICE OF ANNUAL MEETING
TAKE NOTICE that the 1998 Annual Meeting of Shareholders of Alpha Pro Tech,
Ltd., (the "Company") will be held at Rio Rico Resort and Country Club, 1069
Camino Caralampi, Rio Rico, Arizona 85648 on:
FRIDAY, JUNE 19, 1998
at the hour of 10:00 o'clock A.M. (local time) for the following purposes:
1. To elect five directors
2. To ratify the appointment of independent accountants
3. To transact such other business as may properly come before the Meeting
Accompanying this Notice is the Proxy Statement and Form of Proxy
Only Shareholders of record at the close of business on April 30, 1998 will be
entitled to vote at the meeting and any adjournments thereof.
DATED: Markham, Ontario, May 13, 1998
BY ORDER OF THE BOARD OF DIRECTORS
"Al Millar"
President
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES
WILL BE REPRESENTED AT THE MEETING. IF YOU CHOOSE TO ATTEND THE MEETING, YOU
MAY REVOKE YOUR PROXY AND PERSONALLY CAST YOUR VOTES.
<PAGE>
ALPHA PRO TECH, LTD.
60 CENTURION DRIVE
SUITE 112
MARKHAM, ONTARIO
L3R 9R2
PROXY STATEMENT
REVOCABILITY OF PROXY
This Proxy Statement and accompanying proxy are first being sent to shareholders
on or about May 15, 1998.
The accompanying proxy is solicited by the Board of Directors. It may be
revoked at any time before being voted by written notice given to the secretary
of the meeting or by the delivery of a later dated proxy. Shares represented by
properly executed proxies received by the Company prior to the meeting and not
revoked, will be voted, and where a shareholder specifies a choice with respect
to the matter to be voted upon, the shares will be voted in accordance with the
specifications so made. Where no specification is made, the proxies will be
voted FOR the election of directors (except to the extent that authority
therefore is withheld) and FOR Proposal 2 described in this Proxy Statement.
The Board of Directors is not aware at the date hereof of any other matter
proposed to be presented at the meeting, and does not believe that any matter
may be properly presented other than the election of directors and Proposal 2.
and 3. If any other matter is properly presented, the persons named in the
enclosed form of proxy will have discretionary authority to vote thereon
according to their best judgment. Presence at the meeting does not of itself
revoke the proxy.
VOTING
The only securities of the Company entitled to be voted are shares of Common
Stock.
A quorum consisting of a majority of all shares outstanding and
entitled to vote at the meeting, present in person or by proxy, is
required for the purpose of considering the matters to come before the
meeting. A quorum being present, directors are elected by a plurality
of shares present in person or represented by proxy and entitled to
vote and the ratification of the appointment of independent
accountants requires the affirmative vote of a majority of shares
present in person or represented by proxy and entitled to vote.
<PAGE>
At the meeting, abstentions and broker non-votes (as hereinafter defined) will
be counted as present for the purpose of determining the presence of a quorum.
For the purpose of computing the vote required for approval of matters to be
voted on at the meeting, shares held by shareholders who abstain from voting
will be treated as being "present" and "entitled to vote" on the matter and
thus, an abstention has the same legal effect as a vote against the matter.
However, in the case of a broker non-vote or where a shareholder withholds
authority from his proxy to vote the proxy as to a particular matter, such
shares will not be treated as "present" and "entitled to vote" on the matter
and, thus, a broker non-vote or the withholding of a proxy's authority will have
no effect on the outcome of the vote on the matter. A "broker non-vote" refers
to shares represented at the meeting in person or by proxy by a broker of
nominee where such broker or nominee (i) has not received voting instructions on
a particular matter from the beneficial owners or persons entitled to vote and
(ii) the broker or nominee does not have discretionary voting power on such
matter.
The Company is authorized to issue 50,000,000 Common Shares, par value $.01 per
share. There is one class of shares only. There are issued and outstanding
24,112,442 shares as of the close of business April 30, 1998, the record date
for the meeting, each of which is entitled to one vote on each matter to be
voted on at the meeting.
PERSONS MAKING THE SOLICITATION
Solicitations will be made by mail and possibly supplemented by telephone or
other personal contact to be made without special compensation by regular
officers and employees of the Company. The Company may reimburse shareholder's
nominees or agents (including brokers holding shares on behalf of clients) for
the cost incurred in obtaining from their principals authorization to execute
forms of proxy. No solicitation will be made by specifically engaged employees
or soliciting agents. The cost of solicitation will be borne by the Company.
ANNUAL REPORT
The Annual Report for the year ended December 31, 1997 containing financial and
other information about the Company and its subsidiaries is enclosed.
PROPOSAL 1.
ELECTION OF DIRECTORS
Each Director of the Company is elected annually and holds office until the next
Annual Meeting of Shareholders and until such successor is duly elected. In the
absence of instructions to the contrary, the shares represented by proxy will be
a vote FOR the nominees listed below. All the nominees are currently directors,
and all have consented to be named and to serve if elected.
3
<PAGE>
MANAGEMENT DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE
AS A DIRECTOR. IN THE EVENT THAT PRIOR TO THE MEETING ANY VACANCIES OCCUR IN
THE SLATE OF NOMINEES LISTED BELOW, IT IS INTENDED THAT DISCRETIONARY AUTHORITY
SHALL BE EXERCISED BY THE PERSON NAMED IN THE PROXY AS NOMINEE TO VOTE THE
SHARES REPRESENTED BY PROXY FOR THE ELECTION OF ANY OTHER PERSON OR PERSONS AS
DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES NAMED
BELOW.
A PLURALITY OF THE VOTES CAST AT THE MEETING IS REQUIRED TO ELECT EACH DIRECTOR.
CERTAIN INFORMATION REGARDING EACH NOMINEE FOR DIRECTOR IS GIVEN BELOW.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Director or Executive
Name Age Officer since Position with the Company
- ---- --- ------------- -------------------------
SHELDON HOFFMAN 60 July 11, 1989 CEO and Director of the
Company and Alpha Pro Tech,
Inc.
AL MILLAR 55 July 11, 1989 President and Director of
the Company and Alpha Pro
Tech, Inc.
ROBERT H. ISALY 68 November 15, 1989 Director
JOHN RITOTA 46 December 18, 1991 Director
DONALD E. BENNETT, JR. 57 June 23, 1994 Director and Senior Vice
President-Manufacturing
LLOYD HOFFMAN 37 July 1, 1993 Vice President and
Controller
MICHAEL SCHEERER 38 January 1, 1997 Senior Vice President -
Sales and Marketing
4
<PAGE>
SHELDON HOFFMAN is a chartered accountant and has been a director and chief
executive officer of the Company since July 11, 1989. Mr. Hoffman founded and
was president of Absco Aerosols, Ltd., a custom manufacturer of aerosols and
liquids, from 1967 to 1985 until that company was sold to CCL Industries, Inc.
("CCL"), a manufacturer of aerosol and liquid products and containers. Mr.
Hoffman joined CCL from 1986 to 1987 as director of business development and
then joined CCW Systems, Ltd., a water filter manufacturer, as president and
chief executive officer.
ALEXANDER W. MILLAR has been a director of the Company since July 11, 1989 and
president since August 1, 1989. Mr. Millar has spent over 20 years as a
professional in sales and marketing including international marketing. Mr.
Millar, in various sales capacities, including vice-president of sales, was
associated with Mr. Hoffman at Absco Aerosols Ltd. from 1971 to 1985, when the
business was sold to CCL. He then joined CCL as manager of business development
for North America. In March, 1988, he formed Milmed International Distributors
Limited to distribute the Company's products internationally. In 1989 Milmed
gave up its rights to distribute these products internationally at which time
Milmed ceased operations.
ROBERT ISALY has been a director of the Company since November 20, 1989. He
was the owner of a nursery, Florida Bedding Plants Inc. from 1986 to 1992 and is
currently an independent businessman.
JOHN RITOTA has been a director of the Company since December 18, 1991 and
since 1981 to the present time has been operating a general dentistry practice,
Ritota and Ritota, with his brother in Del Ray Beach, Florida.
DONALD E. BENNETT, JR. joined the Company on March 24, 1994 as President of its
newly formed Apparel Division which was established to acquire the assets of
Disposable Medical Products, Inc. ("DMPI"), a manufacturer of medical apparel
items including bouffant caps, shoe covers, gowns, coveralls and lab coats. Mr.
Bennett owned and operated DMPI for approximately twenty years prior to the
Company's acquisition of its assets.
EXECUTIVE OFFICERS
Three of the executive officers of the Company, Sheldon Hoffman, Al Millar and
Donald E. Bennett, Jr. are also directors and nominees, and are identified
above. Information follows on the other current executive officers of the
Company.
5
<PAGE>
LLOYD HOFFMAN has been employed by the Company starting November 15, 1991 in
the capacity of accountant and since early 1995 in the capacity of Vice
President and Controller. From 1987 to 1991, Mr. Hoffman was a shareholder and
was in charge of finance and administration at Software Concepts. Inc. a
developer of software for association and magazine publishers.
MICHAEL SCHEERER joined the Company on January 1, 1997 as Senior Vice
President-Sales and Marketing. From 1990 to October 1992, Mr. Scheerer was
Director of Sales-Development and Administration at Baxter Scientific Products.
In October, 1992, he was named Vice President-Sales and Marketing for Baxter's
Critical Environmental Solutions business. In September, 1995, Baxter
Scientific Products was purchased by VWR Scientific Products, Inc. where Mr.
Scheerer served as Vice-President Critical Environmental Solutions and New
Business Ventures until joining the Company.
There are no family relationships between the above persons other than Lloyd
Hoffman who is the son of Sheldon Hoffman.
SETTLEMENT WITH BRITISH COLUMBIA SECURITIES COMMISSION
On November 10, 1995, Sheldon Hoffman, a Director and CEO of the Company and
Alexander Millar, a Director and President of the Company settled all
outstanding matters pending before the British Columbia Securities Commission
(the "BCSC"), which were commenced in March 1992 by the British Columbia
Superintendent of Brokers ("Superintendent"). The settlement provides that as
to each of Messrs. Hoffman and Millar: a Cease Trade Order as to sales by them
of the Company's securities in British Columbia shall remain in effect for 2
years; each shall be prohibited from becoming or acting as a director or officer
of any British Columbia reporting issuer, other than the Company, until such
time as they have successfully completed a course of study satisfactory to the
Superintendent concerning the duties of directors and officers of reporting
issuers; full payment to the BCSC shall have been made of $ 29,000 as to Hoffman
and $ 14,500 as to Millar; and the Superintendent consents to their acting in
the capacity of a director or officer of a British Columbia reporting issuer.
All matters pending as to Robert Isaly, a Directory of the Company, were
dropped. On March 9, 1998, the British Columbia Securities Commission, noting
that all of the conditions specified in the settlement having been satisfied,
and considering that it would not be prejudicial to the public interest to do
so, revoked all outstanding orders and prohibitions that were in effect as to
each of Messrs. Hoffman and Millar.
6
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of March 31, 1998 with
respect to shares of Common Stock of the Company beneficially owned by each
director of the Company, each nominee for director, each executive officer of
the Company, by all officers and directors as a group, and by persons known to
the Company to be beneficial owners of more than 5% of the Company's Stock.
Directors, Executive Officers Number of Shares
And 5% Shareholders Beneficially Owned Percent of Class
- ------------------- ------------------ ----------------
Cede & Co. 15,897,817 65.9%
Box 20 Bowling Green Sta.
New York, N.Y.
U.S.A. 10004
Al Millar, President and Director 1,437,297(1) 5.5%
423 Herridge Circle
Newmarket, Ontario
L3Y 7H7
Canada
Sheldon Hoffman, CEO 1,146,686(2) 4.4%
and Director
Hoffman Family Trust 420,091(8) 1.6%
Beneficial Owner of 1268265
Ontario Inc.
Robert H. Isaly, Director 665,613(3) 2.5%
John Ritota, Director 190,194(4) **
Lloyd Hoffman, VP & Controller 323,000(5) 1.2%
Donald E. Bennett, Jr., Senior 263,334(6) 1.0%
Vice President-Manufacturing
and Director
Michael Scheerer 323,500(7) 1.2%
Sr. VP-Sales and Marketing
All Directors and Officers 4,769,715 18.2%
as a Group (7 persons)
7
<PAGE>
*This company is nominee for beneficial owners of these shares whose identity is
unknown to the Company.
** Less than 1%
(1) Includes 300,000 options currently exercisable at $0.75 per share,
expiring October 27, 1998; 200,000 currently exercisable options at
$1.34 per share, expiring December 21, 2000; 100,000 options currently
exercisable at $.97 per share expiring January 5, 2002; and includes
88,428 shares and currently exercisable options to purchase 35,000
shares at $0.75 per share owned beneficially by Mr. Millar's wife as
to which Mr. Millar denies beneficial ownership.*
(2) Includes 300,000 currently exercisable options at $0.75 per share,
expiring October 27, 1998; 200,000 options currently exercisable at $
1.34 per share, expiring December 21, 2000; 100,000 currently
exercisable options at $.97 per share expiring January 5, 2002; and
includes 87,050 shares owned beneficially by Mr. Hoffman's wife, as to
which Mr. Hoffman denies beneficial ownership. Does not include
420,051 owned beneficially by Hoffman Family Trust, as to which Mr.
Hoffman denies beneficial ownership. The beneficiaries of the Hoffman
Family Trust are Mr. Hoffman's wife and their two children. Mr.
Hoffman does not have the power to vote or dispose of the shares held
by the Trust.*
(3) Includes 141,523 shares owned beneficially by Mr. Isaly's wife, as to
which Mr. Isaly denies beneficial ownership; 108,000 currently
exercisable options at $0.75 per share, expiring October 27, 1998; and
50,000 options currently exercisable at $1.34 per share expiring
December 21, 2000; 50,000 currently exercisable options at $.97 per
share, expiring January 5, 2002.
(4) Includes currently exercisable options to purchase 50,000 shares at
$0.75 per share, expiring October 27, 1998; 50,000 currently
exercisable options at $1.34 per share expiring December 21, 2000;
50,000 currently exercisable options at $.97 per share, expiring
January 5, 2002; and includes 2,000 shares owned beneficially by Dr.
Ritota's wife as to which Dr. Ritota denies beneficial ownership.*
8
<PAGE>
(5) Includes 135,000 options currently exercisable at $0.75 per share,
expiring October 27, 1998, 25,000 options currently exercisable at
$1.34 per share expiring December 21, 2000; 50,000 currently
exercisable options at $.97 per share, expiring January 5, 2002; and
5,000 shares owned beneficially by Mr. Hoffman's wife, as to which Mr.
Hoffman denies beneficial ownership. Mr. Hoffman disclaims beneficial
ownership with respect to any shares of the Company held in the
Hoffman Family Trust (see (2) above), except to the extent of his
pecuniary interest therein.*
(6) Includes 100,000 options currently exercisable at $1.00 per share,
50,000 of which expire on April 29, 1999 and 50,000 of which expire on
December 31, 1999; 25,000 currently exercisable options at $2.03 per
share, expiring June 22, 2000; 25,000 options currently exercisable at
$1.34 per share, expiring December 21, 2000; and 100,000 Options
currently exercisable at $.97 per share, expiring January 5, 2002.*
(7) Includes 100,000 options currently exercisable at $0.875 per share
expiring December 21, 2001, and 38,450 shares owned beneficially by
Mr. Scheerer's wife as to which Mr. Scheerer denies beneficial
ownership. See "Management-Employee Arrangements."*
* A currently exercisable option or warrant is one which is exercisable
within 60 days from the date hereof.
Percentages are based on 24,112,442 Common Shares of the Company outstanding on
March 31, 1998 plus the number of shares underlying currently exercisable
options and warrants held by the identified director or officer.
Messrs. Sheldon Hoffman, Al Millar and Lloyd Hoffman are residents of Canada and
Messrs. Ritota, Isaly, Bennett and Scheerer reside in the United States.
9
<PAGE>
DIRECTOR'S MEETINGS
The Board of Directors of the Company met five (5) times during the year ended
December 31, 1997. In 1997, the Company had no standing nominating or
compensation committees, these matters being handled by the entire Board of
Directors. In 1993, the Board of Directors of the Company formed an
Administrative Committee for the 1993 Stock Option Plan for Directors consisting
of Messrs. Al Millar and Sheldon Hoffman which recommends granting of
non-qualified stock options to non-employee directors. The Board of Directors
also has an Audit Committee which reviews the scope and plan of the annual
audit, reviews the audit results and report thereon, oversees action taken by
the Company's independent auditors and reviews the Company's internal controls.
The Company's Audit Committee sits for a term of one year and a new audit
committee is formed each year following the annual meeting. In 1997, the Audit
Committee was composed of Messrs. Hoffman, Isaly and Ritota. One meeting of the
Audit Committee was held in 1997.
In addition to participation at Board and Committee Meetings, the Company's
directors discharge their responsibilities throughout the year through personal
meetings and other communications, including considerable telephone contact with
the CEO and others regarding matters of interest and concern to the Company.
COMPENSATION OF DIRECTORS
Directors who are not officers or employees of the Company ("Outside Directors")
are reimbursed for their direct expenses incurred in attending a meeting.
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE
In 1997, the Company's executive compensation program was administered by the
Board of Directors. The entire Board makes recommendations on two of the three
key components of the Company's executive compensation program, base salary and
contractual incentive awards, and the Outside directors recommend and award the
long-term incentives.
The Company's executive compensation program is structured to help the Company
achieve its business objectives by:
10
<PAGE>
- providing compensation opportunities that will attract, motivate
and retain highly qualified managers and executives
- linking executives' total compensation to company and individual
job performance
- providing an appropriate balance between incentives focused on
achievement of annual business plans and longer term incentives
tied to increases in shareholder value
The Company's executive compensation program is designed to provide competitive
compensation opportunities for all corporate officers. The Company's total
compensation levels falls in the low to middle of the range of rates paid by
other employers of similar size and complexity, although complete comparative
information is not easily obtainable.
BASE SALARIES
The Company's salary levels are intended to be consistent with competitive
practices and levels of responsibility, with salary increases reflecting
competitive trends, the overall financial performance of the Company, and the
performance of the individual.
CONTRACTUAL INCENTIVE AWARDS
Pursuant to the executive compensation program, the Company has contracted to
provide two of its executive employees with profit participation incentive
compensation. Messrs. Millar and Hoffman are each entitled to a cash incentive
participation equal to 5% of the consolidated annual pre-tax profits of the
Company.
STOCK OPTIONS
The Company periodically grants incentive and non-qualified stock options to
purchase the Company's Common Stock in order to provide certain Compensation to
key employees of the Company and its subsidiaries with a competitive total
compensation package and to reward them for their contribution to the Company's
short and long-term stock performance. These stock options are designed to
align the employees' interest with those of the shareholders. All options have
an option price that is not less than the fair market value of the stock on the
date of grant. The terms of the options and the dates after which the become
exercisable are established by the Board with respect to incentive stock
options, within the parameters of the 1993 Incentive Stock Option Plan and by
the Administrative Committee with respect to the 1993 Stock Option Plan for
Directors. The Company does not grant stock appreciation rights.
11
<PAGE>
1997 COMPENSATION
The CEO, President and President of the Company's Disposable Apparel Division
are compensated on a salary and pay-for-performance approach. Taken into
consideration are overall Company performance in attaining annual growth in
revenues, the addition or development of new and enhanced products, pretax
earnings, and the achievement of short and long term goals of the Company's
business as established in its five year plan. No contractual incentive awards
were paid for 1997.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE OF 1986
DEDUCTIBILITY OF COMPENSATION Effective January 1, 1994, the Internal Revenue
Service under Section 162 (m) of the Internal Revenue Code will generally deny
the deduction of compensation paid to the Chairman and the four other highest
paid executive officers required to be named in the Summary Compensation Table
to the extent such compensation exceeds $ 1 million per executive per year
subject to an exception for compensation that meets certain "performance-based"
requirements. Whether the Section 162 (m) limitations with respect to an
executive will be exceeded and whether the Company's tax deduction for
compensation paid in excess of the $ 1 million limit will be denied will depend
upon the resolution of various factual and legal issues that cannot be resolved
at this time. As to options granted under the 1993 Incentive Stock Option Plan,
the Committee intends to qualify to the extent practicable, such options under
the rules governing the Section 162 (m) limitation so that compensation
attributable to such options will not be subject to limitation under such rules.
As to other compensation, while it is not expected that compensation to
executives of the Company will exceed the Section 162 (m) limitation in the
foreseeable future (and no officer of the Company received compensation in 1994
which resulted under Section 162 (m) in the non-deductibility of such
compensation to the Company), various relevant considerations will be reviewed
from time to time, taking into account the interests of the Company and its
Shareholders, in determining whether to endeavor to cause such compensation to
be exempt from the Section 162 (m) limitation.
Respectfully submitted,
Sheldon Hoffman, Chief Executive Officer
Al Millar, President
Donald E. Bennett, Jr.
Robert H. Isaly
John Ritota
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Membership of the Compensation Committee is set forth under "Report of the
Compensation Committee." Except with respect to their compensation
arrangements, Mr. Hoffman, CEO and Mr. Millar, President, participated in
executive compensation deliberations and recommendations of the Board of
Directors.
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate cash and cash equivalent forms of
compensation paid by the Company during the last three fiscal years for services
in all capacities to those persons who were as of December 31, 1997, the Chief
Executive Officer and each of the most highly compensated executive officers (a
total of three persons), to the extent each earned more than $ 100,000 in
salary and bonus ("Named Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- AWARDS
------
Name and Other Shares
Principal Annual Underlying All Other
Position Year Salary($) Bonus($) Compensation Options # Compensation(1)
- -------- ---- --------- -------- ------------ --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Sheldon Hoffman 1997 168,000 100,000 7,300
CEO 1996 141,000 -- -- -- 4,500
1995 115,000 -- -- 200,000 4,500
Al Millar 1997 156,000 100,000 7,500
President 1996 131,000 -- -- -- 7,500
1995 115,000 -- -- 200,000 7,500
Michael Scheerer 1997 115,000 -- 100,000 13,000
</TABLE>
(1) Represents annual car allowance
13
<PAGE>
OPTION GRANTS FOR FISCAL YEAR 1997
For the fiscal year ended December 31, 1997, options under the 1993 Incentive
Stock Option Plan were granted to the following Named Officers on January 6,
1997 at $ .97 per share, expiring January 5, 2002:
Al Millar 100,000
Sheldon Hoffman 100,000
Donald E. Bennett, Jr. 100,000
Michael Scheerer 100,000
Lloyd Hoffman 50,000
EMPLOYMENT ARRANGEMENTS
Messrs. Hoffman and Millar receive annual car allowances of $ 4,500 and $ 7,500
, respectively.
Messrs. Hoffman and Millar are also entitled to a combined bonus equal to 10% of
the pre-tax net profits of the Company (5% to each). No bonus was earned with
respect to the fiscal years ended December 31, 1995, 1996 or 1997.
DONALD E. BENNETT, JR., entered into a three year employment agreement with the
Company in March 1994 as President of the newly formed Apparel Division
providing for an annual salary of $ 65,000, a $ 700 per month automobile
allowance and 15% of the Division's net profit before taxes. During 1995 the
agreement was amended to eliminate the 15% of net profits provision and to
increase his annual salary to $100,000.
MICHAEL SCHEERER entered into a three (3) year employment agreement with the
Company as of January 1, 1997 as Senior Vice President-Sales and Marketing,
providing for an annual salary of $ 112,500. Mr. Scheerer is also entitled to a
cash bonus based upon actual earnings for the year as a percentage of projected
net income, ranging from $ 30,000.00 if 80% of projected earnings are achieved
to $ 200,000 if 200% or more of projected earnings are achieved. If actual
earnings are 100% of projected net income in any year of the agreement, the
agreement shall automatically be extended for an additional two years. Mr.
Scheerer was also granted a five (5) year incentive stock option to purchase up
to 100,000 shares of Common Stock at $.875 per share, the fair market value on
the date of grant. He is also entitled to receive additional incentive stock
options in each year of the agreement based on the actual earnings as a
percentage of projected earnings, as follows:
14
<PAGE>
Actual Earnings Number of
As a % of Projected Earnings Options
- ---------------------------- -------
80% 60,000
90% 80,000
100% 100,000
STOCK OPTIONS PLANS
INCENTIVE STOCK OPTION PLAN
The Company has an Incentive Stock Option Plan (the "Plan") for Officers and
other Key Employees with 3,000,000 shares reserved for grant thereunder. The
Plan, which was adopted by the Board of Directors in October, 1993 was approved
by Shareholders at the Annual Meeting in June 1994. The Plan is administered by
the Board of Directors which selects the employees to whom the options are
granted, determines the number of shares subject to each option, sets the time
or times when the options will be granted, determines the time when the options
may be exercised and establishes the market value of the shares. The Plan
provides that the purchase price under the option shall be at least 100 percent
of the fair market value of the shares of the Company's Common Stock. The
options are not transferrable. There are limitations on the amount of incentive
stock options that an employee can be granted in a single calendar year. The
terms of each option granted under the Plan is determined by the Board of
Directors, but in no event may such term exceed ten years. Between October 28,
1993 and December 31, 1995, five-year options covering an aggregate of 1,859,000
shares were granted to 32 employees in 1996 at an average exercise price of $
0.97 per share. 87,000 options were granted to 3 employees in 1996 at an
average exercise price of $ 1.11 per share, and 575,000 options were granted to
19 employees in 1997 at an average exercise price of $ 1.00 per share.
At the Company's Annual Meeting of Shareholders, held on June 20, 1997,
shareholders approved an increase in the number of shares reserved for grant to
3,000,000.
Included in those employees to whom options were granted are the following
executive officers:
Name Number of Options Granted
- ---- -------------------------
Al Millar, President 600,000
Sheldon Hoffman, CEO 600,000
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Name Number of Options Granted
- ---- -------------------------
Donald E. Bennett, Jr.,
Senior Vice President 250,000
Michael Scheerer, Senior
Vice President 100,000
Lloyd Hoffman, Vice President 210,000
In addition, Donna Millar, an employee of the Company and the wife of Al Millar,
President, was granted an option to purchase 35,000 shares.
DIRECTORS STOCK OPTION PLAN
The Board of Directors of the Company in October 1993 approved the 1993
Directors Stock Option Plan (the "Directors Plan") covering an aggregate of
600,000 shares of Common Stock. The Board of Directors or a Committee thereof
administers the Directors Plan. Directors of the Company who are not employees
of the Company are eligible to participate in the Plan. Each option granted has
an exercise price equal to fair market value on the date of grant. As of
December 31, 1997 options covering an aggregate of 358,000 shares had been
granted to 2 directors at an average exercise price of $ 1.00 per share as
follows:
NAME OPTION DATE EXPIRATION DATE NUMBER OF SHARES
- ---- ----------- --------------- ----------------
Robert H. Isaly January 6, 1997 January 5, 2002 50,000
Robert H. Isaly December 21, 1995 December 20, 2000 50,000
Robert H. Isaly October 28, 1993 October 27, 1998 108,000
John Ritota January 5, 2002 January 6, 1997 50,000
John Ritota December 20, 2000 December 21, 2000 50,000
John Ritota October 28, 1993 October 27, 1998 50,000
The Company does not have any pension, profit sharing or similar plans
established for its employees, other than the bonus payable to Messrs. Hoffman,
Millar and Scheerer described above.
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<PAGE>
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG ALPHA PRO TECH, LTD.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[GRAPH]
ASSUMES $100 INVESTED ON JAN. 1, 1993
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 1997
- -------------------------------FISCAL YEAR ENDING-------------------------------
COMPANY 1992 1993 1994 1995 1996 1997
ALPHA PRO TECH, LTD. 100 14.37 18.68 33.05 22.30 23.68
INDUSTRY INDEX 100 81.43 87.66 132.16 127.42 163.14
BROAD MARKET 100 119.95 125.94 163.35 202.99 248.30
THE ABOVE GRAPH COMPARES THE FIVE-YEAR CUMULATIVE RETURN OF THE COMPANY WITH THE
COMPARABLE RETURN OF TWO INDICES. THE INDUSTRY INDEX REPRESENTS THE INDUSTRY OR
LINE-OF-BUSINESS OF THE COMPANY. THE GRAPH ASSUMES $100 INVESTED ON JANUARY 1,
1993. THE COMPARISON ASSUMES THAT ALL DIVIDENDS ARE REINVESTED.
THE INDUSTRY INDEX REPRESENTS THE ORTHOPEDIC, PROSTHETIC AND SURGICAL APPLIANCES
DIVISION, COMPRISED OF 45 CORPORATIONS, COMPILED FROM THE SIC CODE WITHIN WHICH
THE COMPANY IS LISTED.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of January 31, 1996 Messrs. Millar and Sheldon Hoffman loaned $ 28,245 and $
50,000 respectively to the Company. The terms of the loan provided for a Note
to each of Messrs. Millar and Hoffman, payable on demand, bearing interest at
15% per annum, to be secured by and repaid from the proceeds of an anticipated
income tax refund of approximately $ 168,000. In addition, Messrs. Millar and
Hoffman were issued Warrants to purchase 46,840 and 48,544 shares respectively
of the Company's Common Stock at $ 1.03 per share, the fair market value of the
Common Stock on the date of issuance of the Warrant. The Warrants expired on
January 31, 1997. The loans and accrued interest were repaid in the first
quarter of 1997.
In December 1997, the Company entered into a three-year credit facility with an
asset-based lender. Pursuant to the terms of the credit agreement, the Company
has a $ 2,500,000 line of credit and a $ 400,000 term loan secured by accounts
receivable, inventory, trademarks, patents, property and equipment, and 66.67%
of the issued and outstanding shares of DMPI. The credit facility bears
interest at prime plus 2%, which was 10.5% at December 31, 1997. In the event
the lender comes into possession of the collateral securing the loan, each of
Messrs. Millar and Sheldon Hoffman have agreed to use their best efforts to
assist the lender in disposing of the collateral and collecting the accounts
receivable. In addition, the loan has been guaranteed by each of Messrs. Millar
and Sheldon Hoffman up to a maximum of $ 187,500.
PROPOSAL 2.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Management proposes the appointment of Price Waterhouse, LLP as independent
accountants to examine the financial statements of the Company for the fiscal
year 1998. The Board of Directors has directed that such appointment be
submitted for ratification by the Shareholders at the Meeting.
Price Waterhouse has served as the independent accountants for the Company since
1992. A representative of Price Waterhouse, LLP is expected to be present at
the Meeting and will have the opportunity to make statements if he desires to do
so and will be available to respond to appropriate questions.
The affirmative vote of a majority of the Common Shares present, in person or by
proxy, is required for ratification of the appointment of Price Waterhouse, LLP
as the independent accountants.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE. RATIFICATION REQUIRES THE AFFIRMATIVE VOTE OF
A MAJORITY OF SHARES PRESENT IN PERSON OR REPRESENTED BY PROXY.
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<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's common stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC"). Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company, or
written presentation that no other reports were required, the Company believes
that during 1997 all Section 16(a) filing requirements applicable to its
officers and directors were complied with.
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE MAILED WITHOUT CHARGE TO SHAREHOLDERS UPON
REQUEST. REQUESTS SHOULD BE ADDRESSED TO THE COMPANY AT 60 CENTURIAN
DRIVE, SUITE 112, MARKHAM, ONTARIO L3R 9R2, CANADA, ATTENTION: SHELDON
HOFFMAN, CEO. THE FORM 10-K INCLUDES CERTAIN EXHIBITS WHICH WILL BE
PROVIDED ONLY UPON PAYMENT OF A FEE COVERING THE COMPANY'S REASONABLE
EXPENSES.
FUTURE PROPOSALS
The 1999 Annual Meeting is expected to be held on Friday, June 18, 1999. If any
shareholder wishes to submit a proposal for inclusion in the Proxy Statement
for the Company's 1998 Annual Meeting, the rules of the United States
Securities and Exchange Commission require that such proposal be received at
the company's principal executive office by December 31,1998.
19
<PAGE>
OTHER MATTERS
Management knows of no other matters to come before the meeting other than those
referred to in the Notice of Meeting. However, should any other matters
properly come before the meeting, the shares represented by the proxy solicited
hereby will be voted on such matters in accordance with the best judgment of the
persons voting the shares represented by the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
"AL MILLAR"
President
20
<PAGE>
ALPHA PRO TECH, LTD.,
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Al Millar, Sheldon Hoffman and Robert H. Isaly,
and each of them individually with the power of substitution, as Proxy or
proxies of the undersigned, to attend and act for and on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
Rio Rico Resort and Country Club, 1069 Camino Caralampi, Rio Rico, Arizona
85648 on June 19, 1998 at 10:00 A.M. local time and at any adjournment thereof,
hereby revoking any prior Proxy or proxies. This Proxy when properly executed
will be voted as directed herein by the undersigned. IF NO DIRECTION IS MADE,
SHARES WILL BE VOTED FOR THE ELECTION OF DIRECTORS NAMED IN THE PROXY AND FOR
PROPOSAL 2.
(CONTINUED, AND TO BE DATED AND SIGNED ON OTHER SIDE)
- ----- Please mark your
X votes as in this
- ----- example.
1. To elect as directors all the persons named below:
Al Millar Robert H. Isaly
Sheldon Hoffman John Ritota
Donald E. Bennett, Jr.
For: Withhold Vote:
For, except vote withheld from the following nominee(s)
----------------------------------------------------------------
2. To appoint Price Waterhouse, LLP, as Independent Accountants of the Company
For: Against: Abstain:
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
21
<PAGE>
Date, sign and return the Proxy Card promptly using the enclosed envelope.
(Signature should conform exactly to name on this proxy. Where shares are
held by joint tenants, both should sign. Executors, administrators, guardians,
trustees, attorneys and officers signing for corporations should give full
title).
Dated:________________________________, 1998
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
22
