<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Alpha Pro Tech, Ltd
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ALPHA PRO TECH, LTD.
60 CENTURIAN DRIVE
SUITE 112
MARKHAM, ONTARIO
L3R 9R2
Telephone: (905) 479-0654
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TAKE NOTICE that the 1999 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 18, 1999
at the hour of 10:00 o'clock A.M. (local time) for the following purposes:
1. To elect five directors.
2. To amend the company's 1993 Incentive Stock Option Plan so as to increase
the number of shares available under the Plan.
3. To ratify the appointment of independent accountants.
4. To transact such other business as may properly come before the Meeting.
Accompanying this Notice is the Proxy Statement and Form of Proxy.
The Board of Directors set May 3, 1999, as the record date for the meeting. This
means that owners of the Company's Common Stock at the close of Business on that
date are entitled to (1) receive notice of the Meeting and (2) vote at the
Meeting and any adjournments or postponements of the Meeting. We will make
available a list of Shareholders of the Company as of the close of business on
May 3, 1999 for inspection during normal business hours from June 4 through June
15, 1999, at the offices of the Company, in Markham, Ontario. This list will
also be available at the Meeting.
DATED: May 13, 1999
BY ORDER OF THE BOARD OF DIRECTORS
"Al Millar"
President
YOUR VOTE IS IMPORTANT
<PAGE>
WE URGE YOU TO VOTE PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
IF YOU DECIDE TO ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR
SHARES IN PERSON.
ALPHA PRO TECH, LTD.
60 CENTURION DRIVE
SUITE 112
MARKHAM, ONTARIO
L3R 9R2
PROXY STATEMENT
This Proxy Statement and accompanying proxy are first being sent to Shareholders
on or about May 13, 1999.
VOTING AND PROXIES
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our Annual Meeting, Shareholders will act upon the matters outlined on the
previous page and described in this Proxy Statement, including the election of
directors, amending our 1993 Incentive Stock Option Plan and ratification of the
appointment of our independent accountants. In addition, management will respond
to questions from Shareholders.
WHO IS ENTITLED TO VOTE?
Only holders of record at the close of business on May 3, 1999 of Common Stock
are entitled to vote. Each holder of Common Stock is entitled to one vote per
share. We are authorized to issue 50,000,000 Common Shares, par value $.01 per
share. There were issued and outstanding 24,112,449 shares of Common Stock as of
the close of business on May 3, 1999. There is only one class of shares.
HOW DO I VOTE?
You can vote by filling out the accompanying proxy and returning it in the
postage paid return envelope that we have enclosed for you. Voting information
is provided on the enclosed form of proxy. If your shares are held in the name
of a bank or broker, follow the voting instructions on the form that you receive
from them.
WHAT IF MY SHARES ARE HELD BY A BROKER OR NOMINEE?
If you hold your shares in "street name" through a broker or other nominee, your
broker or nominee may not
<PAGE>
be permitted to exercise voting discretion as to some of the matters to be acted
upon. Thus, if you do not give your broker or nominee specific instructions,
your shares may not be voted on those matters and will not be counted in
determining the number of shares for approval.
HOW WILL MY PROXY BE VOTED?
Your proxy, when properly signed and returned to us, and not revoked, will be
voted in accordance with your instructions relating to the election of directors
and on Items 2 and 3. We are not aware of any other matter that may be properly
presented other than the election of directors and Items 2 and 3. If any other
matter is properly presented, the persons named in the enclosed form of proxy
will have discretion to vote in their best judgment.
WHAT IF I DON'T MARK THE BOXES ON MY PROXY?
Unless you give other instructions on your form of proxy, the persons named as
proxies will vote in accordance with the recommendations of the Board of
Directors. The Board's recommendation is set forth together with the description
of each Item in this Proxy Statement. In summary, the Board recommends a vote
FOR:
o the election of directors;
o amending our 1993 Incentive Stock Option Plan;
o the ratification of the appointment of Pricewaterhouse Coopers,
LLP as our independent accountants for 1999.
CAN I GO TO THE ANNUAL MEETING IF I VOTE BY PROXY?
Yes. Attending the meeting does not revoke the proxy. However, you may revoke
your proxy at any time before it is actually voted by giving written notice to
the secretary of the meeting or by delivering a later dated proxy.
WILL MY VOTE BE PUBLIC?
No. As a matter of policy, Shareholder proxies, ballots and tabulations that
identify individual shareholders are kept confidential and are only available as
actually necessary to meet legal requirements.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a majority
in voting power of the outstanding shares of Common Stock entitled to vote will
constitute a quorum, permitting the meeting to conduct its business. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
<PAGE>
HOW MANY VOTES ARE NEEDED TO APPROVE AN ITEM?
The affirmative vote of shares representing a majority in voting power of the
shares of Common Stock, present in person or represented by proxy and entitled
to vote at the meeting, is necessary for approval of Items 2, 3 and 4. Proxies
marked as abstentions on these matters will not be voted and will have the
effect of a negative vote. The election of directors will be by a plurality of
the votes cast. A proxy marked to withhold authority for the election of one or
more directors will not be voted with respect to the director or directors
indicated.
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, 1998 containing financial and
other information about the Company is enclosed.
ITEM 1.
ELECTION OF DIRECTORS
The Board of Directors currently consists of five members. Directors are elected
annually for a term of office to expire at the succeeding annual meeting of
Shareholders after their election and until their successors are duly elected
and qualified. The Board of Directors proposes that the nominees described
below, all of whom are currently serving as directors, be re-elected for a new
term of one year and until their successors are duly elected and qualified. All
nominees are currently directors and were elected by the Shareholders.
Each of the nominees has consented to serve. If any of them should become
unavailable to serve as a director (which is not now expected), the Board may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by the Board.
There are set forth below following the names of the nominees and our executive
officers, their present positions and offices with the Company, their principal
occupations during the past five years, directorships held with other
corporations, certain other information, their ages and the year first elected
as a director or executive officer.
DIRECTORS AND EXECUTIVE OFFICERS
Director or Executive
<PAGE>
<TABLE>
<CAPTION>
Name Age Officer Since Position with the Company
- ---- --- ------------- -------------------------
<S> <C> <C> <C>
SHELDON HOFFMAN 61 July 11, 1989 CEO and Director of the Company
and Alpha Pro Tech, Inc.
AL MILLAR 57 July 11, 1989 President and Director of the
Company and Alpha Pro Tech, Inc.
ROBERT H. ISALY 69 November 15, 1989 Director
JOHN RITOTA 47 December 18, 1991 Director
DONALD E. BENNETT, JR. 58 June 23, 1994 Director and Senior Vice President-
Manufacturing
LLOYD HOFFMAN 38 July 1, 1993 Senior Vice President - Finance and
Administration
MICHAEL SCHEERER 39 January 1, 1997 Senior Vice President - Sales and
Marketing
</TABLE>
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. Prior
thereto he was involved with two Ohio based family businesses. The Isaly Dairy
Company and the H.R. Isaly Cheese Company. He 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"),
<PAGE>
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.
OUR 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.
LLOYD HOFFMAN has been employed by the Company since November 15, 1991 in
various capacities and since early 1999 has been Senior Vice President - Finance
and Administration. 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.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of March 31, 1999 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.
<TABLE>
<CAPTION>
Directors, Executive Officers Number of Shares
And 5% Shareholders Beneficially Owned Percent of Class
- ------------------- ------------------ ----------------
<S> <C> <C>
Cede & Co. 16,830,967 62.1%*
Box 20 Bowling Green Sta.
New York, N.Y.
U.S.A. 10004
William R. Lykken
740 McHugh Avenue
Grafton, ND 1,652,865 6.1%
Al Millar, President and Director 1,602,297 (1) 5.9%
423 Herridge Circle
Newmarket, Ontario
<PAGE>
L3Y 7H7
Canada
Sheldon Hoffman, CEO 1,332,138 (2) 4.9%
and Director
Hoffman Family Trust 415,051 1.5%
Beneficial Owner of 1268265 Ontario Inc.
Robert H. Isaly, Director 715,613 (3) 2.6%
John Ritota, Director 370,194 (4) 1.4%
Lloyd Hoffman, Sr. VP- Finance and Administration 328,000 (5) 1.2%
Donald E. Bennett, Jr., Senior 331,667 (6) 1.2%
Vice President-Manufacturing and Director
Michael Scheerer 448,500 (7) 1.7%
Sr. VP-Sales and Marketing
All Directors and Officers 5,128,409 18.9%
as a Group (7 persons)
</TABLE>
*This company is nominee for beneficial owners of these shares whose identity is
unknown to the Company.
(1) Includes the following currently exercisable options: 300,000 at $0.75
per share, expiring April 21, 2003; 200,000 at $1.34 per share, expiring
December 21, 2000; 100,000 at $.97 per share, expiring January 5, 2002;
100,000 at $0.58 per share, expiring September 30, 2003; 50,000 at $0.49
per share expiring January 10, 2004; and includes 88,428 shares and
currently exercisable options to purchase 35,000 shares at $0.75 per
share and 15,000 shares at $0.49 per share owned beneficially by Mr.
Millar's wife, as to which Mr. Millar denies beneficial ownership.*
(2) Includes the following currently exercisable options: 300,000 at $0.75
per share, expiring October 27, 1998; 200,000 at $ 1.34 per share,
expiring December 21, 2000; 100,000 at $.97 per share, expiring January
5, 2002 ; 100,000 at $0.58 per share, expiring September 30, 2003; 50,000
at $0.49 per share expiring January 10, 2004; and includes 122,502 shares
owned beneficially by Mr. Hoffman's wife, as to which Mr. Hoffman denies
beneficial ownership. Does not include 415,051 shares 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 and the following currently
exercisable options: 108,000 at $0.75 per share, expiring April 21, 2003;
50,000 at $1.34 per share, expiring December 21, 2000; 50,000 at $.97 per
share, expiring January 5,
<PAGE>
2002; and 50,000 at $0.49 per share, expiring January 10, 2004.*
(4) Includes the following currently exercisable options: 50,000 shares at
$0.75 per share, expiring April 21, 2003; 50,000 at $1.34 per share,
expiring December 21, 2000; 50,000 at $.97 per share, expiring January 5,
2002; 175,000 $0.49 per share, expiring January 10, 2004; and includes
7,000 shares owned beneficially by Dr. Ritota's wife as to which Dr.
Ritota denies beneficial ownership.*
(5) Includes the following currently exercisable options: 135,000 at $0.75
per share, expiring April 21, 2003; 25,000 at $1.34 per share, expiring
December 21, 2000; 50,000 at $.97 per share, expiring January 5, 2002;
25,000 at $0.89 per share, expiring April 1, 2003; 50,000 at $0.49 per
share, expiring January 10, 2004; and 25,000 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 the following currently exercisable options: 100,000 at $1.00
per share, 50,000 of which expire on December 9, 2003 and 50,000 of which
expire on December 31, 1999; 25,000 at $2.03 per share, expiring June 22,
2000; 25,000 at $1.34 per share, expiring December 21, 2000; 100,000 at
$.97 per share, expiring January 5, 2002; 25,000 at $0.89 per share,
expiring April 1, 2003; and 50,000 at $0.49 per share, expiring January
10, 2004.*
(7) Includes the following currently exercisable options: 100,000 at $0.875
per share, expiring December 21, 2001; 100,000 at $0.89 per share,
expiring April 2, 2003; 25,000 at $0.49 per share, expiring January 10,
2004, 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 is one which is exercisable within 60 days
from the date hereof.
Percentages are based on 24,112,449 Common Shares of the Company outstanding on
March 31, 1999 plus 2,968,000 shares underlying currently exercisable options 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.
DIRECTOR'S MEETINGS
The Board of Directors of the Company met three (3) times during the year ended
December 31, 1998. In 1998, 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 1998, the Audit
Committee was composed of Messrs.
<PAGE>
Hoffman, Isaly and Ritota. One meeting of the Audit Committee was held in 1998.
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 1998, 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:
- 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
<PAGE>
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.
1998 COMPENSATION
The CEO and President are each 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. Contractual
incentive awards were earned in 1998 by the Company's CEO and President in 1998.
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.
<PAGE>
Respectfully submitted,
Sheldon Hoffman, Chief Executive Officer
Al Millar, President
Donald E. Bennett, Jr.
Robert H. Isaly
John Ritota
<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, 1998, the Chief
Executive Officer and each of the most highly compensated executive officers (a
total of four 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 1998 120,000 17,550 100,000 6,900
CEO 1997 168,000 100,000 7,300
1996 141,000 --- --- --- 4,500
Al Millar 1998 120,000 17,550 100,000 6,900
President 1997 156,000 100,000 7,500
1996 131,000 --- --- --- 7,500
Michael Scheerer 1998 115,000 --- --- 100,000 14,000
1997 115,000 --- 100,000 13,000
Donald E. Bennett, Jr. 1998 110,000 --- --- 25,000 8,400
</TABLE>
(1) Represents annual car allowance
OPTION GRANTS FOR FISCAL YEAR 1998
For the fiscal year ended December 31, 1998, options under the 1993 Incentive
Stock Option Plan were granted to the following Named Officers on April 1, 1998
at $ .58 per share, expiring April 1, 2003; on December 10, 1998 at $0.58
expiring September 30, 2003:
<PAGE>
APRIL 1, 1998 DECEMBER 10, 1998
------------- -----------------
Al Millar 100,000
Sheldon Hoffman 100,000
Donald E. Bennett, Jr. 25,000
Michael Scheerer 100,000
Lloyd Hoffman 25,000
EMPLOYMENT ARRANGEMENTS
Messrs. Hoffman and Millar each receive annual car allowances of $6,900.
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, 1996 or 1997. Each earned a bonus
of $17,550 in 1998.
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:
Actual Earnings Number of
As a % of Projected Earnings Options
- ---------------------------- -------
80% 60,000
90% 80,000
100% 100,000
BENEFIT 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
<PAGE>
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 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, 575,000
options were granted to 19 employees in 1997 at an average exercise price of $
1.00 per share and 410,667 options were granted to 15 employees in 1998 at an
average price of $0.74 per share. Between October 28, 1993 and December 31, 1998
206,000 options granted to 15 employees were cancelled and are available for
grant under the Plan. At December 31, 1998 options to purchase 2,725,667 shares
were outstanding under the Plan out of the 3,000,000 shares reserved for such
purpose.
At the Company's Annual Meeting of Shareholders, to be held on June 18, 1999,
shareholders are being asked to approve an increase in the number of shares
reserved for grant to 3,750,000.
Included in those employees to whom options were granted are the following
executive officers:
NAME NUMBER OF OPTIONS GRANTED
- ---- -------------------------
Al Millar, President 700,000
Sheldon Hoffman, CEO 700,000
Donald E. Bennett, Jr.,
Senior Vice President 275,000
Michael Scheerer, Senior
Vice President 200,000
Lloyd Hoffman, Senior Vice President 235,000
In addition, Donna Millar, an employee of the Company and the wife of Al Millar,
President, was granted options to purchase 35,000 shares.
RETIREMENT SAVINGS PLAN
In 1998, the Company initiated a Retirement Savings Plan (the "401(k) Plan")
which is intended to qualify under Section 401(k) of the Internal Revenue Code.
Employees of the Company who have attained age 21 ad completed at least one year
of service with the Company are eligible to make contributions to the 401(k)
Plan on a pre-tax basis of up to 12% of the participant's compensation in any
year in accordance with limitations defined in the Code. Under the 401(k) Plan
the Company is matching 25% of the contributing participant's effective deferral
but not in excess of 4% of such contributing participant's compensation. The
pre-tax contributions made by a participant and the earnings thereon are at all
times fully vested. The participant's
<PAGE>
interest in Company contributions and the earnings thereon will become vested at
the rate of 20% per year for each year of service with the Company or, if
earlier, upon such participant's death or disability. A participant's fully
vested benefit under the 401(k) Plan may be distributed to the participant upon
his retirement, death, disability or termination of employment or upon reaching
age 59 1/2. At December 31, 1998 the Company had accrued a contribution to the
401(k) Plan of $9,717. The Company's contribution on behalf of the officers
named under "Executive Compensation" were as follows: Sheldon Hoffman - $-0-; Al
Millar - $-0-; Michael Scheerer - $-0- and Donald E Bennett - $592.
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 increase additional 150,000 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, 1998 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.
<PAGE>
[Stock Performance graph appears here]
<TABLE>
<CAPTION>
- ----------------------------------------------------------FISCAL YEAR ENDING----------------------------------------------
COMPANY/INDEX/MARKET 12/31/1993 12/30/1994 12/29/1995 12/31/1996 12/31/1997 12/31/1998
<S> <C> <C> <C> <C> <C> <C>
ALPHA PRO TECH, LTD. 100.00 130.00 230.00 155.20 164.80 76.80
Surgical Appliances & Supplies 100.00 107.65 162.30 156.47 200.34 257.06
NASDAQ Market Index 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
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,
1994. THE COMPARISON ASSUMES THAT ALL DIVIDENDS ARE
<PAGE>
REINVESTED.
THE INDUSTRY INDEX REPRESENTS THE SURGICAL APPLIANCES AND SUPPLIES DIVISION
COMPRISED OF 40 CORPORATIONS, COMPILED FROM THE SIC CODE WITHIN WHICH THE
COMPANY IS LISTED.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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.
AMENDMENT TO 1993 INCENTIVE STOCK OPTION PLAN
On October 27, 1993, the Board of Directors of the Company adopted the Alpha Pro
Tech, Ltd., 1993 Incentive Stock Option Plan (the "Plan") which was approved by
the Shareholders at the 1994 Annual Meeting. The Plan is designed to qualify as
an "incentive stock option plan" under Section 422A of the Internal Revenue
Code. Under the Plan, the Company's Board of Directors or the Company's Stock
Option Committee was originally authorized to grant option to purchase up to
1,600,000 shares of Common Stock to key employees of the Company and its
subsidiaries, including officers, which amount was increased to 2,100,000 by a
vote of shareholders at the 1996 Annual Meeting and further increased to
3,000,000 at the 1997 Annual Meeting. See "Executive Compensation - Stock Option
Plans" for a description of the Plan.
The Plan is intended to induce new executives to become associated with the
Company, and to provide a closer identity of interest between present key
employees and the Company by encouraging their ownership of Common Stock of the
Company. Consistent with this intention the Board of Directors believed it would
be in the best interest of the Company and its shareholders to further increase
the number of shares available under the Plan from the previous amount of
3,000,000 and voted to increase the number of shares to 3,750,000 subject to
shareholder approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE FOLLOWING
RESOLUTION, APPROVAL OF WHICH REQUIRES AN AFFIRMATIVE VOTE OF A MAJORITY OF
SHARES PRESENT IN PERSON OR REPRESENTED BY PROXY.
"RESOLVED", that the first sentence of paragraph 8 of the 1993 Incentive
Stock Option Plan adopted by the Board of Directors in 1993 and approved
by a majority of the shareholders in June 1994 be amended to read as
follows:
8. STOCK SUBJECT TO THE PLAN; EFFECT OF RECAPITALIZATION, MERGER,
ETC.
(a) Shares which may be subject to Options Granted. Subject to
adjustments made
<PAGE>
pursuant to subsection (b) of this Section 8 the total
number of shares which may be granted under the Plan (which
shares may be authorized but unissued shares or treasury
shares) is 3,750,000 shares of common stock, par value $.01
per share.
PROPOSAL 3.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Management proposes the appointment of Pricewaterhouse Coopers, LLP as
independent accountants to examine the financial statements of the Company for
the fiscal year 1999. The Board of Directors has directed that such appointment
be submitted for ratification by the Shareholders at the Meeting.
Pricewaterhouse Coopers, LLP has served as the independent accountants for the
Company since 1992. A representative of Pricewaterhouse Coopers, 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 Pricewaterhouse
Coopers, 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.
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 1998 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, 1998, 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.
<PAGE>
FUTURE PROPOSALS
The 2000 Annual Meeting is expected to be held on Friday, June 16, 2000. If any
Shareholder wishes to submit a proposal for inclusion in the Proxy Statement for
the Company's 2000 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 31,1999.
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
<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 18, 1999 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. Proposal to amend 1993 Stock Option Plan
For: Against: Abstain:
3. To appoint Pricewaterhouse Coopers, LLP, as Independent Accountants of
the Company
For: Against: Abstain:
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
<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:________________________________, 1999
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
