<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 2)
The MicroCap Fund, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
594949 0
-----------
(CUSIP Number)
Eric A. Stern, Esq.
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
May 17, 1996
------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b) (3) or (4), check the following box: /___/
Check the following box if a fee is being paid with the statement: /___/
Page 1 of 31 Pages
Exhibit Index is on Page 18
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Geller & Friend Capital Partners, Inc.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b) /____/
3) SEC USE ONLY
4) SOURCE OF FUNDS
Not Applicable
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
California
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES Not Applicable
BENEFICIALLY 9) SOLE DISPOSITIVE POWER
OWNED BY EACH Not Applicable
REPORTING
PERSON WITH 10) SHARED DISPOSITIVE POWER
Not Applicable
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Not Applicable
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Not Applicable
14) TYPE OF REPORTING PERSON
CO
2
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Marshall Geller
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b) /____/
3) SEC USE ONLY
4) SOURCE OF FUNDS
Not Applicable
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
United States
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES Not Applicable
BENEFICIALLY 9) SOLE DISPOSITIVE POWER
OWNED BY EACH Not Applicable
REPORTING
PERSON WITH 10) SHARED DISPOSITIVE POWER
Not Applicable
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
Not Applicable
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Not Applicable
14) TYPE OF REPORTING PERSON
IN
3
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ROBERT M. PERGAMENT
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b)
3) SEC USE ONLY
4) SOURCE OF FUNDS
PF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES 23,000 (See Item 5)
BENEFICIALLY
OWNED BY EACH 9) SOLE DISPOSITIVE POWER
REPORTING Not Applicable
PERSON WITH
10) SHARED DISPOSITIVE POWER
23,000 (See Item 5)
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
23,000 (See Item 5)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.0% (See Item 5)
14) TYPE OF REPORTING PERSON
IN
4
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GERALD B. CRAMER
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b)
3) SEC USE ONLY
4) SOURCE OF FUNDS
PF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES 66,000 (See Item 5)
BENEFICIALLY
OWNED BY EACH 9) SOLE DISPOSITIVE POWER
REPORTING Not Applicable
PERSON WITH
10) SHARED DISPOSITIVE POWER
66,000 (See Item 5)
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
66,000 (See Item 5)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
3.1% (See Item 5)
14) TYPE OF REPORTING PERSON
IN
5
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
INGLESIDE COMPANY
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b)
3) SEC USE ONLY
4) SOURCE OF FUNDS
PF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
NEW YORK
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES 40,000 (See Item 5)
BENEFICIALLY
OWNED BY EACH 9) SOLE DISPOSITIVE POWER
REPORTING Not Applicable
PERSON WITH
10) SHARED DISPOSITIVE POWER
40,000 (See Item 5)
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
40,000 (See Item 5)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.9% (See Item 5)
14) TYPE OF REPORTING PERSON
PN
6
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
EDWARD J. ROSENTHAL
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b)
3) SEC USE ONLY
4) SOURCE OF FUNDS
PF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES 12,000 (See Item 5)
BENEFICIALLY
OWNED BY EACH 9) SOLE DISPOSITIVE POWER
REPORTING Not Applicable
PERSON WITH
10) SHARED DISPOSITIVE POWER
12,000 (See Item 5)
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,000 (See Item 5)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.56% (See Item 5)
14) TYPE OF REPORTING PERSON
IN
7
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
GOODNESS GARDENS INC.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b)
3) SEC USE ONLY
4) SOURCE OF FUNDS
WC
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
NEW YORK
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES 5,000 (See Item 5)
BENEFICIALLY
OWNED BY EACH 9) SOLE DISPOSITIVE POWER
REPORTING Not Applicable
PERSON WITH
10) SHARED DISPOSITIVE POWER
5,000 (See Item 5)
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,000 (See Item 5)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.23% (See Item 5)
14) TYPE OF REPORTING PERSON
CO
8
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
CRAMER ROSENTHAL MCGLYNN, INC.
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b)
3) SEC USE ONLY
4) SOURCE OF FUNDS
NOT APPLICABLE
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
NEW YORK
<TABLE>
<S> <C>
7) SOLE VOTING POWER
Not Applicable
NUMBER OF 8) SHARED VOTING POWER
SHARES 146,000 (See Item 5)
BENEFICIALLY
OWNED BY EACH 9) SOLE DISPOSITIVE POWER
REPORTING Not Applicable
PERSON WITH
10) SHARED DISPOSITIVE POWER
146,000 (See Item 5)
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
146,000 (See Item 5)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.9% (See Item 5)
14) TYPE OF REPORTING PERSON
IA
9
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert L. Priddy
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b) /____/
3) SEC USE ONLY
4) SOURCE OF FUNDS
PF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
United States
<TABLE>
<S> <C>
7) SOLE VOTING POWER
128,600
NUMBER OF 8) SHARED VOTING POWER
SHARES 4,000
BENEFICIALLY 9) SOLE DISPOSITIVE POWER
OWNED BY EACH 128,600
REPORTING
PERSON WITH 10) SHARED DISPOSITIVE POWER
4,000
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
150,100 (INCLUDING 17,500 COMMON STOCK ISSUABLE UPON
CONVERSION OF PREFERRED STOCK)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN
SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
14) TYPE OF REPORTING PERSON
IN
10
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Michael S. Falk
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b) /____/
3) SEC USE ONLY
4) OURCE OF FUNDS
PF
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
United States
<TABLE>
<S> <C>
7) SOLE VOTING POWER
23,500
NUMBER OF 8) SHARED VOTING POWER
SHARES 10,000
BENEFICIALLY 9) SOLE DISPOSITIVE POWER
OWNED BY EACH 23,500
REPORTING
PERSON WITH 10) SHARED DISPOSITIVE POWER
10,000
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,625 (including 7,125 Common Stock issuable upon conversion of
preferred stock)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.4%
14) TYPE OF REPORTING PERSON
IN
11
<PAGE>
SCHEDULE 13D
CUSIP No. 594949 0
1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Commonwealth Associates
2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / X /
----
(b) /____/
3) SEC USE ONLY
4) SOURCE OF FUNDS
WC
5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) /____/
6) CITIZENSHIP OR PLACE OR ORGANIZATION
New York
<TABLE>
<S> <C>
7) SOLE VOTING POWER
10,000
NUMBER OF 8) SHARED VOTING POWER
SHARES Not Applicable
BENEFICIALLY 9) SOLE DISPOSITIVE POWER
OWNED BY EACH 10,000
REPORTING
PERSON WITH 10) SHARED DISPOSITIVE POWER
Not Applicable
</TABLE>
11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
12,000 (including 3,000 Common Stock issuable upon
conversion of preferred stock)
12) CHECK BOX IF AGGREGATE AMOUNT IN ROW (11) EXCLUDED CERTAIN SHARES /____/
13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.57%
14) TYPE OF REPORTING PERSON
BD
12
<PAGE>
Schedule 13D
Pursuant to Rule 13d-2 and on behalf of Geller & Friend Capital
Partners, Inc., Marshall Geller, Robert M. Pergament, Gerald B. Cramer,
Ingleside Company, Robert L. Priddy, Edward J. Rosenthal, Goodness Gardens Inc.,
Cramer Rosenthal McGlynn, Inc., Michael S. Falk and Commonwealth Associates (the
"Reporting Persons"), we hereby file with the Securities and Exchange Commission
via EDGAR Amendment No. 2 to Schedule 13D filed by the Reporting Persons which
amends the Schedule 13D filed April 9, 1996 relating to the Common Stock of
MicroCap Fund, Inc.
Item 1. Security and Issuer
No Change
Item 2. Identity and Background
No Change
Item 3. Source and Amount of Funds or Other Consideration
No Change
Item 4. Purpose of Transaction
The Reporting Persons plan to nominate individuals for Board of
Directors. The Reporting Persons believe such nominees would support
actions to increase shareholder value and reduce the discount between
the market price of the Common Stock and its net asset value per
share, including such material actions as a change in the dividend
policy of the Company, converting the fund to an open-end fund,
liquidation of a material amount of the Company's assets, and a
merger, reorganization or liquidation of the Company.
The Reporting Persons may acquire additional shares of Common Stock or
other securities of the Company or sell or otherwise dispose of any or
all of the shares of Common Stock or other securities of the Company
beneficially owned by him. The Reporting Persons may take any other
action with respect to the Company or any of its debt or equity
securities in any manner permitted by law.
The Reporting Persons submitted a request for a special meeting of the
stockholders to the Board of Directors ("Meeting Request"), attached
hereto as Exhibit IV and incorporated herein by reference, on behalf
of stockholders entitled to cast more than one third of the votes at
the meeting with proposals to amend the bylaws of the Company, remove
all current directors of
13
<PAGE>
the Company and to vote upon the election of new directors of the
Company.
Kamal Mustafa ("Mustafa"), the Chairman and Chief Executive Officer
(collectively, the "CEO") of the Company has initiated conversations
with the Reporting Persons during which Mustafa has described the
various investments the Company has entered into during his tenure as
CEO and expressed his desire and plan to liquidate the Company.
The Reporting Persons support the liquidation of the Company in a way
that maximizes the return to stockholders on a prompt basis. In order
to achieve an efficient and orderly liquidation in the best interests
of the stockholders, the Reporting Persons believe it is necessary to
appoint an independent committee comprised of two of the Reporting
Persons and an independent third party to oversee the liquidation.
The Reporting Persons also believe that it is in the best interests of
the stockholders that the current directors of the Company resign and
Mustafa resigns as Chairman and Chief Executive Officer. The
Reporting Persons notified the Board of Directors of the preceding
proposals and outlined similar and additional actions in a Letter to
the Board of Directors ("Letter I") of the Company attached hereto as
Exhibit III and incorporated herein by reference.
To date, neither Mustafa nor the Board of Directors has acknowledged
the Meeting Request. In the Company's May 9 press release, it
announced that it had adopted some type of plan of liquidation,
however the Company also stated its intention to hire present
management in connection with such liquidation. This should be
unacceptable to the stockholders and does not implement the proposals
of the Reporting Persons detailed in Letter I. In light of Mustafa's
and the Company's position, the Reporting Persons have delivered a
Second Letter to the Board of Directors ("Letter II") of the Company,
attached hereto as Exhibit IV and incorporated herein by reference,
setting forth the above comments, stating the Reporting Persons'
intent to proceed with the adoption of such proposals at a special
meeting of stockholders (unless the Company first enters into a
binding agreement to implement such proposals) and demanding that the
Board of Directors set a special meeting date.
Except as disclosed in this Item 4 and previously disclosed in the
prior Schedule 13D filed by the Reporting Persons, the Reporting
Persons have no current plans or proposals which relate to or would
result in any of the events described in Item (a)
14
<PAGE>
through (j) of the instructions of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
No Change
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
No Change
Item 7. Material to be Filed as Exhibits:
Agreement of joint filing pursuant to Rule 13d(1)-f promulgated under
the Securities Exchange Act of 1934, as amended.
Second Letter to the Board of Directors
Letter to the Board of Directors
Request for a special meeting of the stockholders
15
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct:
Dated: May 17, 1996
/s/ Marshall Geller
Marshall Geller
GELLER & FRIEND CAPITAL PARTNERS
By: /s/ Marshall Geller
Marshall Geller
/s/ Robert M. Pergament
Robert M. Pergament
/s/ Gerald B. Cramer
Gerald B. Cramer
CRAMER ROSENTHAL MCGLYNN, INC.
By: /s/ Gerald B. Cramer
Gerald B. Cramer
INGLESIDE COMPANY
By: /s/ Barry Gray
Barry Gray
/s/ Edward J. Rosenthal
Edward J. Rosenthal
GOODNESS GARDENS INC.
By: /s/ Edward J. Rosenthal
Edward J. Rosenthal
/s/ Robert L. Priddy
Robert L. Priddy
16
<PAGE>
/s/ Michael S. Falk
Michael S. Falk
COMMONWEALTH ASSOCIATES
By: /s/ Michael S. Falk
Michael S. Falk
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
Agreement of joint filing 21
I pursuant to Rule 13d(1)-f
promulgated under the
Securities Exchange Act of
1934, as amended
II Request for a special 29
meeting of the stockholders
III Letter to the Board of 26
Directors
IV Second Letter to the Board 23
of Directors
</TABLE>
18
<PAGE>
SCHEDULE I
EXECUTIVE OFFICERS AND DIRECTORS
No Change
19
<PAGE>
SCHEDULE II
TRANSACTIONS IN COMMON
STOCK OF
THE MICROCAP FUND, INC.
BY EACH REPORTING PERSON
No Change
20
<PAGE>
EXHIBIT I
AGREEMENT OF JOINT FILING
Pursuant to Rule 13d-1(f) promulgated under the Securities Exchange
Act of 1934, the undersigned persons hereby agree to file with the Securities
and Exchange Commission Amendment No. 2 to the Statement on Schedule 13D (the
"Amendment") to which this Agreement is attached as an exhibit, and agree that
such Amendment, as so filed, is filed on behalf of each of them.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
Dated: May 17, 1996
GELLER & FRIEND CAPITAL
PARTNERS, INC.
Marshall Geller By: /s/ Marshall Geller
/s/ Marshall Geller
Marshall Geller
/s/ Robert M. Pergament
Robert M. Pergament
CRAMER ROSENTHAL MCGLYNN, INC.
Gerald B. Cramer By: /s/ Gerald B. Cramer
/s/ Gerald B. Cramer
Gerald B. Cramer
INGLESIDE COMPANY
Barry Gray By: /s/ Barry Gray
/s/ Edward J. Rosenthal
Edward J. Rosenthal
21
<PAGE>
GOODNESS GARDENS INC.
Edward Rosenthal By: /s/ Edward J. Rosenthal
/s/ Robert L. Priddy
Robert L. Priddy
COMMONWEALTH ASSOCIATES
Michael S. Falk By: /s/ Michael S. Falk
/s/ Michael S. Falk
Michael S. Falk
22
<PAGE>
EXHIBIT IV
May 17, 1996
BY MESSENGER
- ------------
The Board of Directors and Secretary
of The MicroCap Fund, Inc.
575 Fifth Avenue
37th Floor
New York, New York 10801
Gentlemen:
As you know, we are the holders of in excess of 15% of the outstanding
equity securities of The MicroCap Fund, Inc. (the "Company" or the "Fund"). In
recent weeks, we and other stockholders have made no secret of our great
dissatisfaction with the Company's operating performance both on a current and
historical basis. In our public filings and in the associated conversations
with officers of the Company, we have made clear that dramatic changes were
required.
Against that backdrop, we were not surprised by the Board's May 9
announcement that it had adopted some type of a "plan of liquidation."
Unfortunately, neither we nor any of the Company's other public stockholders
have yet been given the opportunity to review that "plan"; put bluntly, we have
great fear that this latest "attempt" to enhance stockholder value will end up
as yet another tactic that advances the interests of the Company's existing
managers at the expense of the stockholders.
Accordingly, this letter will officially confirm that the stockholders
of the Company entitled to cast more than one-third of the votes who on May 6
forwarded to the Company's Secretary a request for a special meeting of
stockholders have not withdrawn that request; indeed, the signatories to this
---
letter believe that the Board's half-hearted liquidation "plan" requires that a
meeting be convened to replace the members of that Board. Thus, we renew our
request that the Company promptly inform us of the place, date and time of such
special meeting.
Let us briefly make the following points with respect to recent
developments affecting the Company:
1. The Board's Inadequate "Plan of Liquidation." While at first
-------------------------------------------
blush the Board's purported commitment to a "plan of liquidation" may sound
attractive and similar to our proposal to liquidate the Fund, upon closer study
of the Company's announcement the inadequacies and dangers of that "plan" become
apparent.
23
<PAGE>
To begin with, the Board has, of course, not deigned to share with its
public stockholders the details of that plan. Thus, we don't know: whether the
Company's course is irrevocable; how long those supervising the liquidation are
given to carry out their tasks; and, most important, whether the Company
managers who have run the Company so poorly in recent months and years are to be
permitted to play material roles in that liquidation (and to receive additional
compensation for liquidating what they operated so badly). Stockholders are
buying and selling the Company's securities while being kept in the dark with
respect to these vital questions.
What little the Company said in its May 9 press release worries us, to
say the least. For example, the Company stated that, notwithstanding the Fund's
horrible performance under incumbent management, it may nonetheless "seek to
engage" those managers after their resignations to perform unspecified services
-----
for unstated compensation. Put most simply, the liquidation should be conducted
under the supervision of persons completely independent of those incumbent
managers and also under new directors who clearly represent the stockholders.
We could continue, but suffice it to say that this half-hearted "plan"
is not likely to satisfy the stockholders of the Company who have so long
suffered the poor stewardship of their investments. A more aggressive,
independently supervised plan is required.
2. Our Proposals. We reiterate the proposals that we made to you in
-------------
our letter forwarding the request for a special meeting. We ask that the Board
commit itself to the four-point plan we have suggested, which calls for: (a) an
irrevocable commitment to liquidation of the Fund, with the immediate
distribution of 75% of the Company's available cash as a return of capital; (b)
the resignation of the entire Board; (c) the prompt liquidation of the Company's
investments under a special committee of three of the new directors (including
one director completely independent of the undersigned); and (d) a liquidating
trust mechanism to permit the pursuit of legal actions on the Company's behalf.
3. Our Willingness to Negotiate in Good Faith. We also confirm the
------------------------------------------
point made in our earlier letter about our willingness to negotiate details in
good faith: although our insistence upon a prompt, irrevocable liquidation
conducted without the involvement of the Company's incumbent managers or current
Board is non-negotiable, any other detail of our plan is subject to discussion.
To that end, representatives of the undersigned late last week and
earlier this week attempted to contact both Mr. Mustafa and the Company's
outside directors to initiate a dialogue. Mr. Mustafa refused to meet with us,
which is perhaps not surprising in light of his track record. But we were
shocked to learn that our May 6 letter, and the accompanying request for special
meeting, were neither forwarded to the outside directors nor considered at the
Board's May 9 meeting. If that is true, it is hard to comprehend how the
members of the Board could have adopted their liquidation "plan" at that meeting
on a fully informed basis. We have taken the liberty of including additional
copies of the May 6 materials for the review of the members of the Board.
* * * * *
24
<PAGE>
The Board of Directors and Secretary
of The MicroCap Fund, Inc.
Page 25
May 17, 1996
Again, we emphasize our willingness to negotiate; we and our counsel
are standing by to meet with authorized representatives of the Company. We also
emphasize, however, that without a written agreement to the contrary, the demand
for a special meeting still stands.
Let us conclude with the observation that, to us, "the handwriting is
on the wall." Since we filed our Schedule 13D protesting the Company's poor
operating results, numerous stockholders have offered strong support for our
positions and proposals. We firmly believe that any election contest will in
fact be no contest at all.
Accordingly, we urge you to negotiate with us to implement a "real"
plan of liquidation, with real teeth in it, so that the Company's stockholders
can take the remaining value of their investment out of the Company's hands and
put it to better use without delay.
All inquiries from the Company or any director of the Company should be directed
to our counsel or Marshall Geller.
Yours sincerely,
GELLER & FRIEND CAPITAL PARTNERS, INC.
MARSHALL GELLER
ROBERT M. PERGAMENT
GERALD B. CRAMER
THE INGLESIDE COMPANY
ROBERT L. PRIDDY
EDWARD J. ROSENTHAL
GOODNESS GARDENS INC.
CRAMER ROSENTHAL McGLYNN, INC.
MICHAEL S. FALK
COMMONWEALTH ASSOCIATES
25
<PAGE>
The Board of Directors and Secretary
of The MicroCap Fund, Inc.
Page 26
May 17, 1996
EXHIBIT III
-----------
May 6, 1996
BY OVERNIGHT DELIVERY
- ---------------------
To the Board of Directors of
The MicroCap Fund, Inc.
Gentlemen:
Delivered with this letter is a request for a special meeting of the
stockholders of The MicroCap Fund, Inc. (the "Company"). In accordance with the
applicable requirements of Section 2-502 of the Maryland General Corporation Law
and the Company's by-laws, the request has been executed by stockholders
entitled to cast at least 25 percent of all the votes entitled to be cast at the
meeting. As you will see, the requesting stockholders are seeking to remove and
replace the Company's incumbent directors and to effect certain changes to the
Company's by-laws.
We regret the need for this step, but the Company's horrific economic
performance, combined with the Board's indifferent response to it, leave us no
choice. It seems clear to us that, absent dramatic action by the Company's
stockholders, a continuation of the disastrous status quo is inevitable.
Nonetheless, we hope to avoid a prolonged and expensive election
contest -even though we are confident that our side would prevail. In the hope
of averting the expenditures of time and effort that such a battle would entail,
we propose that the Board commit itself to the following four-point plan; if it
does so, we would be willing to suspend our request for a special meeting, and
to attempt to persuade the other requesting stockholders to support that
suspension.
Our plan involves the following:
1. Commitment to Orderly Liquidation. The Company would
---------------------------------
irrevocably commit itself to an orderly liquidation of its
investment positions, with the Company dissolving and the net
proceeds of that liquidation distributed to the Company's
stockholders. The Company
26
<PAGE>
The Board of Directors and Secretary
of The MicroCap Fund, Inc.
Page 27
May 17, 1996
would immediately dividend out 75 percent of the available cash
assets of the Company to the stockholders as a return of capital.
2. Change of Board Composition. The incumbent members of the
---------------------------
Board would each resign, and would prior to such resignation
elect to a majority of the vacancies designees of the
undersigned. Independent directors would also be elected,
ensuring compliance with all legal requirements. In addition,
Kamal Mustafa would resign as Chairman and Chief Executive
Officer of the Company.
3. Supervision of Liquidation. The liquidation would be
--------------------------
supervised by a special committee comprised of two of the newly
elected Board members who are designated by the undersigned, and
a third independent party.
4. Liquidating Trust Mechanism. The establishment of a
---------------------------
liquidating litigation trust under the control of an independent
trustee, the assets of which would the Company's claims against
third parties (including Commonwealth Associates). This trust
mechanism would help ensure that any meritorious claims of the
Company could be vigorously pursued, notwithstanding the
liquidation. The Company's existing stockholders would, of
course, be the beneficiaries of the liquidating trust.
In addition, we would be willing to consider appropriate releases and
other transitional assistance for members of the Company's management; given the
Company's regrettable performance in recent years, the last thing it needs is to
squander its remaining assets on divisive litigation.
* * * * *
We hope you will endorse this plan and work toward its prompt
implementation. We stress that any matter of detail is negotiable. The plan's
basic core is, however, unchangeable: the Company must be liquidated, and the
incumbent directors and management must go.
We and our counsel are standing by to meet with you at your earliest
convenience. If you reject our plan, please apprise us of the selected special
meeting date as promptly as practicable.
Yours sincerely,
27
<PAGE>
The Board of Directors and Secretary
of The MicroCap Fund, Inc.
Page 28
May 17, 1996
GELLER & FRIEND CAPITAL PARTNERS, INC.
MARSHALL GELLER
ROBERT M. PERGAMENT
GERALD B. CRAMER
THE INGLESIDE COMPANY
ROBERT L. PRIDDY
EDWARD J. ROSENTHAL
GOODNESS GARDENS INC.
CRAMER ROSENTHAL McGLYNN, INC.
MICHAEL S. FALK
COMMONWEALTH ASSOCIATES
28
<PAGE>
The Board of Directors and Secretary
of The MicroCap Fund, Inc.
Page 29
May 17, 1996
EXHIBIT II
CALL OF SPECIAL MEETING OF STOCKHOLDERS OF
THE MICROCAP FUND, INC.
The MicroCap Fund, Inc.
575 Fifth Avenue
37th Floor
New York, New York 10801
Attention: Secretary of The MicroCap Fund, Inc.
We, the undersigned, are the record holders of, and are entitled to
vote at a meeting of the stockholders of The MicroCap Fund, Inc., a Maryland
corporation (the "Company"), the number of shares specified below of the common
stock, $0.01 par value per share (the "Common Stock"), of the Company, and/or of
the Series A Convertible Preferred Stock, $0.01 par value per share (the
"Preferred Stock"), of the Company. The undersigned stockholders are the record
holders of shares of the Company's capital stock entitled to cast at least 25
percent of the votes entitled to be cast at any meeting of the Company's
stockholders, and are the record holders of at least 25 percent of the
outstanding capital stock of the Company entitled to vote at any such meeting.
Pursuant to Article II, Section 2 of the Bylaws of the Company (the "Bylaws")
and Section 2-502 of the Maryland General Corporation Law, as amended (the
"Corporation Law"), we do hereby request that the secretary of the Company call
a special meeting of the stockholders of the Company (the "Special Meeting") to
be held on such date and at such time and place as shall be specified as
provided in the Bylaws, for the purposes of considering and voting upon the
following proposals:
I. PROPOSALS RELATING TO THE REMOVAL OF THE CURRENT DIRECTORS OF THE COMPANY
AND THE ELECTIONS OF NOMINEES
1. To amend and replace Article III, Section 4 of the Bylaws in its
entirety to provide as follows:
"Section 4. Removal. Any director may be removed from office,
-------
either with or without cause, by the affirmative vote of stockholders
holding
29
<PAGE>
a majority of all the votes entitled to be cast for the election of
such director in an election of directors."
2. To amend and replace Article III, Section 3 of the Bylaws in their
entirety to provide as follows:
"Section 3. Vacancies. Subject to the rights of the holders of
---------
any series of preferred stock then outstanding, any vacancy occurring
in the Board of Directors for any cause other than by reason of
removal from office or an increase in the number of directors may be
filled by a majority of the remaining members of the Board of
Directors, whether or not such majority is less than a quorum. Any
vacancy occurring by reason of such removal from office or such an
increase in the number of directors shall only be filled by vote of
the stockholders at an annual or special meeting of such stockholders.
A director elected by the Board of Directors as provided above to fill
a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until a successor is elected and qualifies.
At any annual meeting of stockholders, stockholders shall be
entitled to elect directors to fill any vacancies in the Board of
Directors that have arisen since the preceding annual meeting of
stockholders and that have been filled by election of a new director
by the Board of Directors as provided above, and any director so
elected by the stockholders shall hold office for a term which
coincides with the remaining term of the class to which such
directorship was previously assigned, and until his successor shall be
elected and shall qualify. In the event such vacancy arose due to
removal from office or an increase in the number of directors, any
director so elected to fill such vacancy by stockholders at an annual
meeting, or at a special meeting at which stockholders are asked to
vote upon the election of directors, shall hold office for a term
which coincides with that of the class to which such directorship has
been apportioned as heretofore provided, and until his successor shall
be elected and shall qualify."
3. To amend and replace the first two sentences of Article III, Section 2
of the Bylaws in their entirety to provide as follows:
"The number of directors of the Corporation shall equal the sum
of five plus the number of such directors, if any, that the holders of
any series of preferred stock of the Corporation may have the right to
elect voting separately as a class."
4. To add a new Article II, Section 11 to the Bylaws to provide as
follows:
30
<PAGE>
"Section 11. Nominations of Director Candidates. Nominations of
----------------------------------
candidates for election as directors of the Corporation at any meeting
of stockholders called for election of directors may be made by the
Board of Directors or by any stockholder entitled to vote at such
meeting at any time prior to the time at which the first ballots are
cast for the election of directors at such meeting."
5. To remove all current directors of the Company and declare the office
of each member of the Board of Directors vacant; and
6. To vote upon the election of new directors of the Company to fill the
vacancies created by the removal of the current directors at the
Special Meeting and to fill any other vacancies then existing on the
Board of Directors, each such nominee to hold office until the
expiration of the term of the director such nominee has replaced and
until such nominee's successor has been elected and shall have
qualified.
II. PROPOSAL RELATING TO CERTAIN AMENDMENTS OF THE BYLAWS
7. To add a new third sentence to Article XXIV of the Bylaws to provide
as follows:
"The foregoing notwithstanding, the following provisions of these
bylaws may only be altered or repealed by the vote of the
Corporation's stockholders taken at an annual meeting, or at a special
meeting if notice thereof be included in the notice of such special
meeting: Article II, Section 11; Article III, Section 2; Article III,
Section 3; Article III, Section 4; and this Article XXIV."
The undersigned hereby request a meeting of the holders of the Common
Stock and, if required under the Company's Articles of Incorporation, of the
holders of the Preferred Stock, to consider and vote upon the foregoing.
Pursuant to Section 2-502 of the Corporation Law and the Bylaws, we request that
the secretary of the Company provide us with written notice of the place, date
and time of the Special Meeting as promptly as practicable.
31
