SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
U.S. Automotive Manufacturing, Inc.
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than 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>
[U.S. Automotive Manufacturing, Inc. Letterhead]
July 2, 1999
Dear Fellow Stockholders:
You are cordially invited to attend our Annual Meeting of Stockholders
which will be held on Wednesday, August 18, 1999 at 10:00 A.M., local time, at
711 Fifth Avenue, 11th Floor, New York, New York 10022.
The Notice of Annual Meeting and Proxy Statement which follow describe the
business to be conducted at the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares be represented and voted. After reading the enclosed Notice of
Annual Meeting and Proxy Statement, may I urge you to complete, sign, date and
return your proxy card in the envelope provided. If the address on the
accompanying material is incorrect, please advise our Transfer Agent, Securities
Transfer Corporation, in writing, at 16910 Dallas Parkway, Suite 100, Dallas,
Texas 75248.
Please take special note of Proposal I. As outlined therein, your vote is
being solicited to reduce the authorized shares of the Company's common stock.
Failure to approve such proposal will result in materially higher ($120,000)
franchise taxes in the state of Delaware. This action is necessitated by the
Company's recent reverse split without a reduction in authorized shares.
Approval of the reduction requires approval by holders of over 50% of our
outstanding common stock (not just a majority of those voting). Your vote will
assist management in saving corporate assets, your corporate assets.
Your vote is very important, and we will appreciate a prompt return of your
signed proxy card. We hope to see you at the meeting.
Cordially,
/s/ John W. Kohut
John W. Kohut
Chairman of the Board
<PAGE>
U.S. AUTOMOTIVE MANUFACTURING, INC.
Route 627, Airport Drive
Tappahannock, VA 22560
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 18, 1999
----------
To the Stockholders of U.S. AUTOMOTIVE MANUFACTURING, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of U.S.
Automotive Manufacturing, Inc. (the "Company") will be held on Wednesday, August
18, 1999, at 10:00 A.M., local time, at 711 Fifth Avenue, 11th Floor, New York,
New York 10022 for the following purposes:
1. To elect four (4) directors to hold office until the next Annual Meeting
of Stockholders and until their respective successors have been duly elected and
qualified;
2. To consider and vote upon a proposal to amend the Company's Certificate
of Incorporation to reduce the number of authorized Shares of Common Stock; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on June 25, 1999 are
entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
- --------------------------------------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE ANNUAL MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
- --------------------------------------------------------------------------------
By Order of the Board of Directors,
John W. Kohut
Chairman of the Board
July 2, 1999
<PAGE>
PROXY STATEMENT
U.S. AUTOMOTIVE MANUFACTURING, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 18, 1999
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of U.S. AUTOMOTIVE MANUFACTURING, INC. (the
"Company") for use at the Annual Meeting of Stockholders to be held on
Wednesday, August 18, 1999, including any adjournment or adjournments thereof
(the "Annual Meeting"), for the purposes set forth in the accompanying Notice of
Meeting.
Management intends to mail this proxy statement and the accompanying form
of proxy to stockholders on or about July 8, 1999.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of the
Company are:
Route 627, Airport Drive
Tappahannock, VA 22560
Telephone No.: (800) 446-3032
OUTSTANDING STOCK AND VOTING RIGHTS
Only stockholders of record at the close of business on June 25, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, there were issued and outstanding 1,048,273 shares of the
Company's common stock, $.001 par value per share (the "Common Stock"), the
Company's only class of voting securities. Each share entitles the holder to one
vote on each matter submitted to a vote at the Annual Meeting.
VOTING PROCEDURES
The directors will be elected by the affirmative vote of a plurality of the
shares of Common Stock, present in person or represented by proxy at the Annual
Meeting, provided a quorum exists. A quorum is present if, as of the Record
Date, at least a majority of the outstanding shares of Common Stock are present
in person or by proxy at the Annual Meeting. The proposal to amend the Company's
Certificate of Incorporation will be approved upon receiving the affirmative
vote of the holders of a majority of the shares of Common Stock outstanding on
the Record Date. All other matters at the meeting will be decided by the
affirmative vote of the holders of a majority of the shares of Common Stock cast
with respect thereto, provided a quorum exists. It is currently anticipated that
votes will be counted and certified by an Inspector of Election who is currently
expected to be an employee of the Company or its legal counsel. In accordance
with Delaware law, abstentions and "broker non-votes" (i.e. proxies from brokers
or nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to a matter with
respect to which the brokers or nominees do not have discretionary power to
vote) will be treated as present for purposes of determining the presence of a
quorum. For purposes of determining approval of a
<PAGE>
matter presented at the Annual meeting, abstentions will be deemed present and
entitled to vote and will, therefore, have the same legal effect as a vote
"against" a matter presented at the meeting. Broker non-votes will be deemed not
entitled to vote on the subject matter as to which the non-vote is indicated.
Because of the requirement for an absolute majority of the outstanding Common
Stock to approve the proposed amendment to the Certificate of Incorporation,
broker non-votes will also have the same effect as a vote "against" the proposed
amendment to the Certificate of Incorporation. Broker non-votes will, however,
have no legal effect on the vote on any other particular matter which requires
the affirmative vote of the holders of a majority of the shares of Common Stock
represented at the Annual Meeting.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
The entire cost of soliciting proxies, including the costs of preparing,
assembling, printing and mailing this Proxy Statement, the proxy and any
additional soliciting material furnished to stockholders, will be borne by the
Company. Arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy materials to the beneficial
owners of stock, and such persons may be reimbursed for their expenses by the
Company. Proxies may also be solicited by directors, officers or employees of
the Company in person or by telephone, telegram or other means. No additional
compensation will be paid to such individuals for these services.
ELECTION OF DIRECTORS
At this year's Annual Meeting, four (4) directors will be elected to hold
office for a term expiring at the Annual Meeting of Stockholders to be held in
the year 2000. Each director will be elected to serve until a successor is
elected and qualified or until the director's earlier resignation or removal.
At this year's Annual Meeting, the proxies granted by stockholders will be
voted individually for the election, as directors of the Company, of the persons
listed below, unless a Proxy specifies that it is not to be voted in favor of a
nominee for director. In the event any of the nominees listed below shall be
unable to serve, it is intended that the Proxy will be voted for such other
nominees as are designated by the Board of Directors. Each of the persons named
below has indicated to the Board of Directors of the Company that he or she will
be available to serve.
Name Position
---- --------
John W. Kohut Chairman of the Board, Director(1)
Martin Chevalier Chief Executive Officer, President and Director
David Love Director(1)
Mandel Sherman Director(1)
- ----------
(1) Member, Audit Committee
-2-
<PAGE>
John W. Kohut, 52, has been a director of the Company since August 1997 and
has served as the Chairman of the Board of the Company since Quality Automotive
Company ("Quality") was acquired by the Company, by merger, on August 29, 1997
(the "Merger"). Mr. Kohut also has served since August 1997 as the principal
financial officer of the Company. Prior to the Merger, he was a substantial
equity owner in Quality. Since January 1991 Mr. Kohut has served as President of
RamKo Venture Management, Inc. ("RamKo"), an investment banking and consulting
firm. He currently continues to serve in such capacity. The Company has engaged
RamKo as a consultant to the Company since December 1996.
Martin Chevalier, 53, has been a director of the Company since August 1997
and has served as President and Chief Executive Officer of the Company since the
Merger. He also has served as President of Quality since December 1988. Prior to
the Merger, he was also a principal equity owner of Quality.
David Love, 64, has been a director of the Company since July 1996. He has
served as Chairman of the Audit Committee since August 1997. For more than the
past five plus years, Mr. Love has been a practicing independent Certified
Public Accountant and attorney in the greater Boston area. In addition, Mr. Love
is a practicing arbitrator and mediator. From April 1995 to September 1998, Mr.
Love served as the Chief Financial Officer of Quality Microwave, Inc., a private
corporation located in Wilmington, MA.
Mandel Sherman, 60, has been a director of the Company since July 1996. Mr.
Sherman has also provided consulting services to the Company through Baroque
Investments, Inc., a consulting firm engaged by the Company for a period
commencing in December 1995 and terminating December 31, 2000. Since 1983, Mr.
Sherman has served as an investor and manager in a variety of privately-held
real estate ventures and more recently, investment firms and companies,
including, without limitation, First Providence Financial Association Inc., a
member of the NASD. Since 1996 he has served as President and principal
stockholder of Miss Sloan Capital Ltd., an investment company and General
Partner of Elmgrove Associates II, L.P. ("Elmgrove"), which partnership is a
principal stockholder of the Company. In the past, Mr. Sherman served as an
executive officer in both public and private companies engaged in the precious
metals industry. He has also served as President of Westbury Alloys, LLC. and
Manager of Wingate Financial Associates, LLC since 1996.
Following is information with respect to the Company's other executive officer:
Karen L. Connery, 34, has served as Treasurer, principal accounting officer
and Secretary of the Company since May 1998. Over the past five years, Ms.
Connery has practiced in the areas of tax accounting, auditing and litigation
support for both public accounting firms and as a sole proprietor. Immediately
prior to serving the Company in her present capacity, Ms. Connery provided
services to the Company as a financial consultant.
During the fiscal year ended December 31, 1998, the Board of Directors held
thirteen meetings which were attended by all of the directors. The Board also
took various actions by unanimous written consent in lieu of a meeting.
All directors of the Company hold office until the next annual meeting of
the stockholders and the election and qualification of their successors.
Officers of the Company are elected annually by the Board of Directors and serve
at the discretion of the Board.
-3-
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors, and greater than 10 percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on the Company's review of the copies of such forms
received by the Company, the Company believes that, during the year ended
December 31, 1998, all filing requirements applicable to its officers,
directors, and greater than 10 percent beneficial owners were complied with,
except that Form 4's covering stock options granted to each of the Company's
four (4) directors in July 1998 were not timely filed.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES NAMED ABOVE.
-4-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal years ended December 31,
1998, 1997 and 1996 the compensation of the Company's Chief Executive Officer
and any executive officer of the Company, other than the Chief Executive
Officer, whose aggregate salary and bonus exceeded $100,000 for the fiscal year
ended December 31, 1998 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
------------------- ------ -------
Securities All Other
Name Principal Fiscal Salary ($) Bonus ($) Underlying Options Compensation
---- Position Year ---------- --------- ------------------ ------------
-------- ----
<S> <C> <C> <C> <C> <C> <C>
Martin President and Chief 1998 $225,000 0 6,666 (4) 21,900.50
Chevalier Executive Officer 1997 $ 75,000 (1) 0 0 N/A
John K. Kenney Treasurer, Secretary (2) 1998 $ 27,500 (3) 0 0 N/A
1997 $110,000 $ 36,000 0 N/A
1996 $110,000 $ 18,000 0 N/A
</TABLE>
(1) Based on four months employment at an annual rate of $225,000. Mr.
Chevalier was employed by the Company effective August 29, 1997, following
the Merger.
(2) Mr. Kenney served as President and Chief Executive Officer of the Company
from mid-October, 1995, until September 2, 1997, at which time he was
employed by the Company as Treasurer and Secretary. Mr. Kenney resigned
from his position as Treasurer and Secretary, effective March 27, 1998.
(3) Based on three months employment at an annual rate of $110,000.
(4) Represents Mr. Chevalier's allocation of options to purchase Common Stock
granted on July 8, 1998 under the Company's 1998 Stock Option Plan to the
four members of the Board of Directors. The options vest and are
exercisable in equal annual installments over a four (4) year period and
then, only to the extent that the holder is still employed by the Company
as of the date of such vesting and otherwise still eligible under the terms
of the 1998 Stock Option Plan.
-5-
<PAGE>
The following table sets forth information concerning stock options granted
in the year ended December 31, 1998 to the Named Executives:
Option Grants in Fiscal Year Ended December 31, 1998
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------
Number of
Securities Percent of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted (#) Fiscal Year(%) ($/Sh) Date
- ---- ----------- ---------------- --------- ----------
<S> <C> <C> <C> <C>>
Martin Chevalier.......... 6,666(1) 100% 14.53 7/8/2002
</TABLE>
(1) Represents options to purchase Common Stock granted on July 8, 1998
under the Company's 1998 Stock Option Plan. These options were granted
to Mr. Chevalier in his capacity as a director and constitute his
allocation of options that were granted to all four members of the
Board of Directors on July 8, 1998. The options vest and are
exercisable in equal annual installments over a four (4) year period
and then, only to the extent that the holder is still employed by the
Company as of the date of such vesting and otherwise still eligible
under the terms of the 1998 Stock Option Plan.
The following table sets forth information concerning the value of options
exercised during the year ended December 31, 1998 and the value of unexercised
stock options held by the Named Executives as of December 31, 1998:
Aggregated Option Exercises and Year End Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998 (#) at December 31, 1998 ($)*
-------------------------- --------------------------
Shares Value
Acquired on Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin Chevalier 0 0 1,666(1) 5,000(1) -- --
</TABLE>
- ----------
* Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end market
value of the Common Stock, which was $2.345 on December 31, 1998.
(1) Represents options to purchase Common Stock granted on July 8, 1998
under the Company's 1998 Stock Option Plan. These options were granted
to Mr. Chevalier in his capacity as a director and constitute his
allocation of options that were granted to all four members of the
Board of Directors on July 8, 1998. The options vest and are
exercisable in equal annual installments over a four (4) year period
and then, only to the extent that the holder is still employed by the
Company as of the date of such vesting and otherwise still eligible
under the terms of the 1998 Stock Option Plan.
-6-
<PAGE>
Employment and Consulting Agreements
The Company entered into a three-year employment agreement dated August 29,
1997, with Martin Chevalier, whereby Mr. Chevalier serves as President and Chief
Executive Officer of each of the Company and Quality. The employment agreement
provides for an annual base compensation of $225,000 plus annual bonuses of (i)
five percent (5%) of the first $1,000,000 in audited pre-tax consolidated
profits of the Company and Quality and (ii) ten percent (10%) of audited pre-tax
consolidated profits of the Company and Quality in excess of $1,000,000 but not
to exceed $500,000 in any given year. The employment agreement provides for Mr.
Chevalier's employment on a full-time basis and contains a provision that the
employee will not compete or engage in a business competitive with the current
or anticipated business of the Company during the term of the employment
agreement and for a period of two years thereafter. Mr. Chevalier's employment
under the employment agreement may be terminated for "cause" by the Company or
Quality.
The Company entered into a three-year consulting agreement, which commenced
August 29, 1997, with RamKo, of which Mr. Kohut is the President, pursuant to
which RamKo agreed to provide general business and financial advice to the
Company. The agreement provides for quarterly payments of $45,000 plus
reasonable and necessary expenses. The agreement also provides that services
rendered by RamKo shall not exceed twenty-five (25) days in any given calendar
quarter (otherwise, the Company is liable to RamKo for an additional charge). In
addition, RamKo and its directors, shareholders, agents, officers and employees
have agreed not to perform services or engage in any business deemed to be in
competition with the Company. The agreement may be terminated for "cause" by the
Company.
The Company previously entered into a consulting agreement, which
terminated January 31, 1999, with Baroque Investments Inc. ("Baroque"), of which
Mr. Sherman is the President, pursuant to which Baroque agreed to provide
overall strategic advice and planning in connection with the acquisition and/or
development of complementary products and businesses and the finances of the
Company. The agreement provided for an annual rate of $60,000, payable in
monthly installments of $5,000, plus reasonable and necessary expenses.
Committees of the Board of Directors
In August 1997, the Company established an Audit Committee comprised of
Messrs. Love, Kohut and Sherman. The Audit Committee, among other things, makes
recommendations to the Board of Directors with respect to the engagement of the
Company's independent certified public accountants and the review of the scope
and effect of the audit engagement. During the fiscal year ended December 31,
1998, the Audit Committee held four meetings which were attended by all of the
members of the Audit Committee.
The Company did not have a standing Compensation or Nominating Committee of
its Board of Directors during fiscal 1998 or committees performing similar
functions.
Director Fees and Other Remuneration
All directors receive a director's fee of $25,000 per annum in connection
with their participation on the Board of Directors; provided, however, that each
director is deemed to have waived such fee, or portion thereof during that year,
to the extent that during such year such director otherwise receives
compensation from the Company for services rendered in excess of such aggregate
fee. Mr. Love receives the $25,000 annual director's fee and Mr. Sherman,
effective with the expiration of the Baroque consulting contract on January 31,
1999, will likewise receive the annual director's fee.
On July 8, 1998, the Company granted to the four members of the Board of
Directors options to purchase an aggregate of 20,333 shares of Common Stock
under the Company's 1998 Stock Option Plan.
-7-
<PAGE>
Messrs. Kohut and Chevalier each were granted options to purchase 6,666 shares
of Common Stock and Messrs. Sherman and Love were granted options to purchase
4,666 and 2,333 shares of Common Stock, respectively. The options have an
exercise price of $14.53 per share and cashless exercise provisions. The options
vest and are exercisable in equal installments over a four (4) year period
commencing on the grant date.
In addition to his director fees, Mr. Love received during fiscal 1998 an
additional sum of approximately $7,333 for serving as Chairman of the Audit
Committee. Such fee was discontinued, effective September 1, 1998.
During fiscal 1998, Mr. Kohut received a sum of $180,000 based upon
distributions made by the Company to Ramko pursuant to the Company's consulting
agreement with Ramko. During fiscal 1997, Mr. Kohut received a sum of $60,000
based upon distributions by the Company to Ramko, pursuant to the Company's
consulting agreement with Ramko, pro-rated over four months.
Stock Plans
1992 Stock Option Plan
On March 13, 1992, the Company's Board of Directors and stockholders
approved the Company's 1992 Employee Stock Option Plan (the "1992 Plan"). Under
the 1992 Plan, in the discretion of the Board of Directors, or if applicable, a
Compensation Committee, options may be granted to key employees (including
officers) of the Company and its subsidiaries for the purchase of shares of
Common Stock. The Company is authorized to issue up to options to purchase up to
4,000 shares of Common Stock under the 1992 Plan. The 1992 Plan terminates in
March 2002.
On March 31, 1999, the Company re-priced options granted under the 1992
Plan to purchase 93 shares of Common Stock at a price per share of $1.063 per
share (the closing price of the Common Stock as quoted on the Nasdaq SmallCap
Market on March 31, 1999).
As of the Record date, options to purchase 4,000 shares of Common Stock
were outstanding under the 1992 Plan.
1998 Stock Option Plan
On June 30, 1998, the Company's Board of Directors and stockholders
approved the 1998 Employee Stock Option Plan (the "1998 Plan"), pursuant to
which 66,666 shares of Common Stock were reserved for issuance upon exercise of
options eligible for grant under the 1998 Plan. Unless sooner terminated, the
1998 Plan will expire at the close of business on January 13, 2008.
Any person, including, but not limited to, employees, directors,
independent agents, consultants and attorneys believed by the Board of
Directors, or if applicable, a Stock Option Committee, to have contributed to
the success of the Company, are eligible to be granted non-qualified stock
options under the 1998 Plan. Incentive stock options as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") may be granted
only to employees of the Company or any subsidiary of the Company. Under the
1998 Plan the maximum number of shares that may be covered by stock options
granted hereby to any one person for the duration of the Plan is 13,333 shares.
Incentive stock options granted pursuant to the 1998 Plan ("Incentive Stock
Options") are nontransferable by the optionee during his or her lifetime. All
options granted under the 1998 Plan, will, unless a shorter term is established
by the Board of Directors or the Committee, if applicable, expire if not
exercised within ten years of the grant (five years in the case of Incentive
Stock Options granted to an eligible employee
-8-
<PAGE>
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary of the Company
immediately before the grant ("10% Stockholder")), and under certain
circumstances set forth in the 1998 Plan, may be exercised within 3 months
following termination of employment (one year in the event of death of the
optionee). Options may be granted to optionees in such amounts and at such
prices as may be determined, from time to time, by the Board of Directors or the
Committee. The exercise price of an Incentive Stock Option will not be less than
the fair market value of the shares underlying the Incentive Stock Option on the
date the Incentive Stock Option is granted, provided, however, that the exercise
price of an Incentive Stock Option granted to a 10% Stockholder may not be less
than 110% of such fair market value. The Company may not, in the aggregate,
grant Incentive Stock Options that are first exercisable by any optionee during
any calendar year (under all such plans of the optionee's employer corporation
and its "parent" and "subsidiary" corporations, as those terms are defined in
Section 424 of the Code) to the extent that the aggregate fair market value of
the underlying stock (determined at the time the option is granted) exceeds
$100,000.
As of the Record Date, options to purchase up to 49,333 shares of Common
Stock were outstanding under the 1998 Plan.
-9-
<PAGE>
VOTING SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, the number of shares
of the Company's outstanding Common Stock beneficially owned by (i) each
director of the Company; (ii) each person who is known by the Company to
beneficially own 5% or more of the outstanding Common Stock; (iii) each of the
Named Executives; and (iv) all of the Company's directors and executive officers
as a group (based on information furnished by such persons). Unless otherwise
indicated, the beneficial owners exercise sole voting and/or investment power
over their shares.
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of Beneficial Beneficial
Owner(1) Ownership(2) Percent
- ------------------------------ ------------------------------- ----------
<S> <C> <C>
Elmgrove Associates II, L.P.(3) 135,166(4) 11.9%
Mandel Sherman (5) 160,233(4)(6) 13.8%
John W. Kohut 52,411(7) 4.9%
Martin Chevalier 76,825(8) 7.3%
David Love (9) 13,758(10) 1.3%
John Kenney (11) 0 *
All executive officers and directors as a 303,227 (4)(6)(7)(8)(9)(10) 25.7%
group (5 persons)
</TABLE>
- ----------
* less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner of more
than 5% of the Common Stock is c/o the Company.
(2) A person is deemed to be the beneficial owner of voting securities that can
be acquired by such person within 60 days from the Record Date upon the
exercise of options, warrants or convertible securities. Each beneficial
owner's percentage ownership is determined by assuming that convertible
securities, options or warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60 days of the
Record Date have been exercised. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock beneficially
owned by them.
(3) Elmgrove's address is 210 Dartmouth, Pawtucket, RI 02860. Mandel Sherman, a
director of the Company, is President of the General Partner of Elmgrove.
(4) Includes 85,166 shares issuable upon exercise of currently exercisable
warrants. 50,000 shares of Common Stock held by Elmgrove are subject to a
lock-up agreement, dated August 29, 1997, whereby Elmgrove has agreed to
certain volume restrictions and limitations on the sale of these shares
over a 5 year period.
(5) Mr. Sherman's address is c/o Elmgrove Associates II, L.P. at 210 Dartmouth,
Pawtucket, RI 02860.
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(6) Includes options to purchase up to 2,333 shares of Common Stock and 22,734
shares which the Company has previously authorized for issuance to Mr.
Sherman. Also includes 135,166 shares beneficially owned by Elmgrove. Mr.
Sherman may also be deemed to be the beneficial owner of the shares owned
by Elmgrove by virtue of his position as President of the General Partner
of Elmgrove.
(7) Includes options to purchase up to 3,333 shares of Common Stock. Except for
the aforementioned option shares, all of the shares are subject to a
lock-up agreement, dated August 29, 1997, restricting the sale of shares
over a 5 year period.
(8) Includes options to purchase up to 3,333 shares of Common Stock. Except for
the aforementioned option shares, all of the shares are subject to a
lock-up agreement, dated August 29, 1997, restricting the sale of shares
over a 5 year period.
(9) Mr. Love's address is 68 Hammond Pond Parkway, Chestnut Hill, Massachusetts
02167.
(10) Includes options to purchase up to 1,666 shares of Common Stock, up to 833
shares of Common Stock issuable upon exercise of currently exercisable
warrants and 11,759 shares which the Company has previously authorized for
issuance to Mr. Love.
(11) Mr. Kenney resigned from his position as Treasurer and Secretary, effective
March 27, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, the Company entered into a consulting agreement, which terminated
January 31, 1999, with Baroque, of which Mr. Sherman is the President, pursuant
to which Baroque agreed to provide overall strategic advice and planning in
connection with the acquisition and/or development of complementary products and
businesses and the finances of the Company. The agreement provided for an annual
rate of $60,000, payable in monthly installments of $5,000, plus reasonable and
necessary expenses.
On May 31, 1997, the Company borrowed $350,000 from Elmgrove evidenced by a
non-negotiable promissory note, bearing interest at a rate of 8% per annum,
which was repaid in August 1997. In connection with the loan, the Company
granted to Elmgrove 10 year warrants to purchase 666 shares of the Common Stock
at an exercise price of $56.25 per share.
In connection with the consummation of the Merger with Quality on August
29, 1997, each of Messrs. Chevalier and Kohut, as shareholders of Quality
received promissory notes from the Company, in the amounts of $2,697,841.73 and
$1,802,158.27, respectively, as well as 73,492 and 49,078 shares of Common
Stock, respectively. Such notes bear interest at a rate of 8% per annum, payable
quarterly commencing August 1, 1998, and are payable in full on May 15, 2000.
Such notes are the direct obligation of Quality and are guaranteed by U.S.
Automotive, which also pledged all of its stock in Quality as additional
collateral. The stock pledge is subordinated to the credit facility with LaSalle
Business Credit, Inc. Mr. Kohut currently serves as a director and principal
financial officer of the Company and Mr. Chevalier serves as a director and
President of the Company.
The Company entered into a three-year consulting agreement, which commenced
August 29, 1997, with RamKo, of which Mr. Kohut is the President, pursuant to
which RamKo agreed to provide general business and financial advice to the
Company. The agreement provides for quarterly payments of $45,000 plus
reasonable and necessary expenses. The agreement also provides that services
rendered by RamKo shall not exceed twenty-five (25) days in any given calendar
quarter (otherwise, the Company is liable to RamKo for an additional charge). In
addition, RamKo and its directors, shareholders, agents, officers and employees
have agreed not to perform services or engage in any business deemed to be in
competition with the Company. The agreement may be terminated for "cause" by the
Company.
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On February 27, 1998, the Company sold debt and equity securities to
Elmgrove and David Love, an affiliate of a director and a director of the
Company, respectively. The sale was made pursuant to a private placement
consisting of two (2) unsecured non-negotiable promissory notes in the aggregate
principal amount of $400,000, bearing interest at the rate of 10.5% per annum,
and warrants to purchase up to an aggregate of 6,666 shares of the Common Stock,
maturing in February 2003, at a conversion price equal to the greater of $30.00
per share or the last sales price of the Common Stock as reported on the Nasdaq
SmallCap Market for the trading date immediately preceding the exercise date,
subject to adjustment in certain conditions. The net proceeds to the Company
were approximately $370,000. The warrants are redeemable by the Company, upon
notice of not less than 30 days at a price of $0.75 per warrant, provided that
the closing bid quotation of the Common Stock on all 20 trading days ending on
the third day prior to the day of which the Company gives notice of redemption
has been at least 150% of the then effective exercise price of the warrants. The
holders of the Warrants shall have the right to exercise them until the close of
business on the date fixed for redemption. The exercise price and number of
shares of Common Stock or other securities issuable on exercise of the warrants
are subject to adjustment in certain circumstances, including in the event of a
stock dividend, recapitalization, reorganization, merger or consolidation of the
Company. On each of July 23, 1998 and February 28, 1999, the Company paid in
full the outstanding balances under the promissory notes, together with accrued
interest thereon, to David Love and Elmgrove, respectively.
In March 1999, the Company authorized the issuance to David Love and Mandel
Sherman, directors of the Company, 11,759 and 22,734 shares of the Company's
Common Stock, respectively, in exchange for accrued but unpaid obligations owing
by the Company to such individuals and/or their affiliates.
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PROPOSAL I
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE
OF INCORPORATION TO REDUCE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has adopted a resolution unanimously approving and
recommending to the Company's stockholder's for their approval an amendment to
the Certificate of Incorporation of the Company to provide for a decrease in the
authorized number of shares of Common Stock of the Company from 30,000,000 to
5,000,000 shares of Common Stock. The text of the proposed amendment to Article
FOURTH of the Company's Certificate of Incorporation is attached hereto as
Exhibit A.
The Company's Board of Directors has determined that it is in the best
interests of the Company to reduce the number of shares of Common Stock that are
authorized for issuance by the Company. Delaware, the state in which the Company
is incorporated, assesses franchise taxes on the basis of the number of
authorized shares. As a result, the proposed reduction in the Company's
authorized shares will save approximately $120,000 annually in franchise taxes
payable to the State of Delaware. In the absence of such reduction, the Company
would incur approximately $150,000 in franchise taxes in fiscal 1999 based on
the currently authorized 30,000,000 shares of Common Stock. The Company believes
that reducing the number of shares of Common Stock authorized will enable it to
realize a savings of approximately $120,000 per year in Delaware franchise taxes
at no material disadvantage to the Company.
The Company proposes to amend its Certificate of Incorporation to reduce
the number of authorized shares of Common Stock to 5,000,000 shares of Common
Stock. As of the Record Date there were 1,048,273 shares of the Company's Common
Stock issued and outstanding and outstanding options, warrants and other
convertible securities to acquire approximately 711,000 shares of Common Stock.
The reduction in authorized shares of Common Stock will result in 3,951,727
shares of Common Stock being authorized but unissued as of the Record Date.
As a result of such reduction, fewer authorized shares would be available
for potential issuance in connection with any possible future sales of Common
Stock or Common Stock equivalents or issuances of Common Stock or Common Stock
equivalents in any acquisition transaction which may arise in the future.
However, the Board of Directors believes that following this reduction in
authorized shares, a sufficient number of authorized but unissued shares of
Common Stock will be available to meet the Company's needs in the foreseeable
future, whether in connection with future equity offerings or acquisitions,
although none are currently contemplated, as well as for the issuance of Common
Stock pursuant to the exercise of outstanding stock options, warrants and other
convertible securities as well as options that may be granted in the future
under the 1992 Plan or the 1998 Plan.
The Board believes that the substantial immediate tax savings from the
reduction in authorized shares outweighs any possible near-term need to have a
larger number of authorized shares available for issuance. The reduction in the
number of authorized shares of Common Stock will not affect the number of shares
held by existing stockholders or the rights attendant to those shares.
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<PAGE>
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company is required for the approval of the amendment of
the Company's Certificate of Incorporation to reduce the number of authorized
shares of Common Stock of the Company.
Recommendation
THE BOARD BELIEVES THAT THE PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION IS IN THE BEST INTEREST OF THE COMPANY AND UNANIMOUSLY
RECOMMENDS A VOTE FOR ITS APPROVAL.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Arthur Andersen, LLP has audited and reported upon the financial statements
of the Company for the fiscal year ended December 31, 1998 and the Board of
Directors currently anticipates that it will select Arthur Andersen, LLP to
examine and report upon the financial statements of the Company for the fiscal
year ending December 31, 1999. A representative of Arthur Andersen, LLP is
expected to be present at the Annual Meeting with the opportunity to make a
statement if he or she desires to do so and is expected to be available to
respond to appropriate questions.
CHANGES IN ACCOUNTANTS
On September 12, 1997, the Company dismissed BDO Seidman, LLP as its
principal independent accountant. Each of BDO Seidman LLP's reports on the
Company's financial statements for the fiscal years ended December 31, 1995 and
1996 were qualified as to uncertainty with respect to the Company's ability to
continue as a going concern.
The decision to change accountants was approved by the Board of Directors.
During the fiscal years ended December 31, 1995 and 1996 and during the period
from January 1, 1997 through September 12, 1997, there were no disagreements
with BDO Seidman LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure.
On September 12, 1997, the Company engaged Arthur Andersen LLP as its
principal independent accountants who audited and reported on the financial
statements of the Company for the fiscal years ending December 31, 1997 and
1998. Prior to engaging Arthur Andersen LLP, neither the Company nor anyone
acting on the Company's behalf consulted with Arthur Andersen LLP regarding the
application of accounting principles to any specified transaction or the type of
audit opinion that might be rendered on the Company's financial statements. In
addition, during the fiscal years ended December 1995 and 1996 and the interim
period from January 1, 1997 to September 12, 1997, neither the Company nor
anyone acting on the Company's behalf consulted with Arthur Andersen LLP with
respect to any matters that were the subject of a disagreement (as defined in
paragraph 304(a)(1)(iv)) of Regulation S-B.
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<PAGE>
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
FOR FISCAL YEAR ENDING DECEMBER 31, 1999
Stockholders who wish to present proposals appropriate for consideration at
the Company's Annual Meeting of Stockholders with respect to its fiscal year
ending December 31, 1999, to be held in the year 2000 must submit the proposal
in proper form and in satisfaction of all conditions established by the
Securities and Exchange Commission to the Company at its address set forth on
the first page of this Proxy Statement not later than March 3, 2000 in order for
the to be considered for inclusion in the Company's proxy statement and form of
proxy relating to such annual meeting. Any such proposals, as well as any
questions related thereto, should be directed to the Secretary of the Company.
OTHER INFORMATION
Proxies for the Annual Meeting will be solicited by mail and through
brokerage institutions and all expenses involved, including printing and
postage, will be paid by the Company.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 1998 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE
CLOSE OF BUSINESS ON JUNE 25, 1999. COPIES OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-KSB/A WILL BE PROVIDED TO EACH SUCH STOCKHOLDER WITHOUT CHARGE UPON
WRITTEN REQUEST TO:
U.S. AUTOMOTIVE MANUFACTURING, INC.
ROUTE 627, AIRPORT DRIVE
TAPPAHANNOCK, VA 22560
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board of Directors,
John W. Kohut
Chairman of the Board
July 2, 1999
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<PAGE>
EXHIBIT A
Proposed Language to amend
Article FOURTH of the Certificate of Incorporation
of U.S. Automotive Manufacturing, Inc.
FOURTH: The total number of shares of capital stock which the Company shall
have authority to issue is Five Million (5,000,000) shares of Common Stock, par
value $.001 per share.
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<PAGE>
U.S. AUTOMOTIVE MANUFACTURING, INC.
Route 627, Airport Drive
Tappahannock, VA 22560
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 18, 1999 THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOHN KOHUT and MARTIN CHEVALIER, and each
of them, Proxies, with full power of substitution in each of them, in the name,
place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of U.S. Automotive Manufacturing, Inc. on Wednesday, August 18,
1999, at 711 Fifth Avenue, 11th Floor, New York, New York 10022, or at any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if personally present, upon the following
matters:
1. ELECTION OF DIRECTORS:
|_| FOR all nominees listed below
(except as marked to the contrary
below).
|_| WITHHOLD AUTHORITY
to vote for all nominees listed below.
Martin Chevalier, John W. Kohut, David Love and Mandel Sherman
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
2. Adoption of Amendment to Certificate of Incorporation Reducing Number
of Authorized Shares of Common Stock
|_| For |_| Against |_| Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued and to be signed on reverse side)
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<PAGE>
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES AND THE
PROPOSALS LISTED ABOVE.
DATED: ________________________________, 1999
Please sign exactly as 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 President or other authorized
officer. If a partnership, please sign in partnership name
by authorized person.
___________________________
(Signature)
Name:
___________________________
(Signature if held jointly)
Name:
Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.
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