<PAGE> 1
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
ELEK-TEK, INC.
- -------------------------------------------------------------------------------
(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)(4) 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
ELEK-TEK, INC.
7350 North Linder Avenue
Skokie, Illinois 60077
(847) 677-7660
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
AUGUST 8, 1997
To the Stockholders of ELEK-TEK, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
ELEK-TEK, Inc., which will be held on August 8, 1997, at 9:00 o'clock a.m.,
local time, at the offices of ELEK-TEK, Inc., 7350 North Linder Avenue, Skokie,
Illinois, for the following purposes:
1. To elect Directors; and
2. To consider such other matters as may properly come before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on June 30, 1997 will be
entitled to notice of and to vote at the meeting and at any adjournment thereof.
Accompanying this notice is a Proxy Statement, a form of proxy and a copy of our
Annual Report to Stockholders.
WE HOPE YOU ATTEND THE MEETING IN PERSON, BUT, IF YOU CANNOT, PLEASE SIGN, DATE
AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED SO THAT YOUR
SHARES MAY BE VOTED AT THE MEETING.
By Order of the Board of Directors,
MIGUEL A. MARTINEZ, JR.
Secretary
Skokie, Illinois
July 9, 1997
<PAGE> 3
ELEK-TEK, INC.
7350 North Linder Avenue
Skokie, Illinois 60077
(847) 677-7660
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
AUGUST 8, 1997
This Proxy Statement is furnished in connection with the solicitation of proxies
for use at the annual meeting of stockholders of ELEK-TEK, Inc. (the "Company")
to be held on August 8, 1997, and at any adjournments thereof. This Proxy
Statement and accompanying proxy were first mailed to stockholders on or about
July 9, 1997. The accompanying proxy is solicited on behalf of the Board of
Directors of the Company and, unless otherwise agreed, is revocable by the
stockholder giving it at any time before it is voted by filing with the
Secretary of the Company a notice of revocation or a duly executed proxy bearing
a later date, or by attending the meeting and voting in person. All shares
represented by each properly executed unrevoked proxy received in time for the
meeting will be voted.
The close of business on June 30, 1997 has been fixed by the Board of Directors
as the record date for the determination of stockholders entitled to vote at the
meeting and at any adjournments thereof. Holders of shares of Common Stock as of
such date are entitled to one vote per share. There are no cumulative voting
rights with respect to the election of directors. As of June 1, 1997, there were
outstanding 6,312,500 shares of Common Stock, $.01 par value, of the Company.
Shares owned by stockholders who are present in person, or which are represented
by proxy, at the annual meeting will be tabulated by the election inspectors
appointed for the meeting and will determine whether or not a quorum is present.
The election inspectors will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of any matter submitted to the
stockholders for a vote. If a broker or other nominee indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will be considered as present but not entitled
to vote with respect to that matter.
ELECTION OF DIRECTORS
It is intended that the shares represented by the proxies will be voted for the
election of the nominees named below as directors of the Company. Persons are
elected directors of the Company to hold office until the next annual meeting of
stockholders and until their successors are duly elected and qualified. The
affirmative vote of the holders of a plurality of the shares of Common Stock
represented in person or by proxy at the annual meeting is required to elect
directors.
In the event that any nominee named below becomes unavailable for election for
any reason, which is not anticipated, the shares represented by the proxies will
be voted for any substitute nominee designated by the Board of Directors of the
Company, unless the Board reduces the number of directors. As indicated in the
accompanying proxy, the authority to vote for the election of directors or for
any individual nominee or nominees may be withheld by the stockholder giving the
proxy.
<PAGE> 4
The nominees, and certain information concerning them as furnished by such
nominees, are as follows:
<TABLE>
<CAPTION>
Principal Occupation Served as
and Positions with a Director
Name (Age) the Company Since
---------- -------------------- ----------
<S> <C> <C>
Richard L. Rodriguez (37) President and Chief Executive Officer of the Company 1996
Robert J. Lipsig (54) Principal in Core Financial Corporation; Chairman of 1995
the Board of the Company
Harvey Kinzelberg (52) President and Chief Executive Officer of Sequel 1995
Capital Corporation
Susan J. Kaiser (40) Private Investor 1993
Miguel A. Martinez, Jr. (42) Vice President and Chief Financial Officer of the --
Company
</TABLE>
Richard L. Rodriguez has been President and Chief Operating Officer of the
Company since March 1, 1996 and Chief Executive Officer and a director of the
Company since April 19, 1996. From February 1993 to February 1996, he was Senior
Vice President at Creative Computer Inc., a computer products reseller. From
January 1990 to February 1993, he was General Manager for Personal Support
Computers, Inc.
Robert J. Lipsig has been a director of the Company since December 1995 and was
elected Chairman of the Executive Committee of the Board of Directors on April
19, 1996. On October 16, 1996, he was elected non-executive Chairman of the
Board of the Company. He has been a private investor since 1994. From 1988 to
1994, he was Chairman of the Board and Chief Executive Officer of ERO, Inc., a
Nasdaq listed company, which is a manufacturer and importer of children's
leisure products. From 1977 to 1984, he served as President and Chief Operating
Officer of ERO, Inc. Mr. Lipsig is a member of the Board of Directors of ERO,
Inc.
Harvey Kinzelberg has been a director of the Company since April 1995 and served
as non-executive Chairman of the Board of the Company from April 19, 1996 to
October 16, 1996. He has been President and Chief Executive Officer of Sequel
Capital Corporation, a financial services firm, since May 1992. From 1979 to
April 1992, he was Chairman of the Board of Meridian Leasing Corporation, a
computer leasing company.
Susan J. Kaiser has been a director of the Company since October 1993. She is
presently a private investor. From June 1992 to June 1993, she was Manager of
stock option and futures trading of Nikko Securities, in Osaka, Japan. From 1985
through 1991, she was a member of the Chicago Board Options Exchange and
Mercantile Exchange.
Miguel A. Martinez, Jr. has been a Vice President and the Chief Financial
Officer of the Company since April 22, 1996. From January 1996 to April 1996, he
was Vice President Finance and Administration of Office 1 Superstores.
Previously, he was the Controller at the Reliable Corporation from September
1987 through December 1995.
CONCERNING THE BOARD OF DIRECTORS
Directors who are employees of the Company receive no compensation for serving
on the Company's Board. Directors who are not employees of the Company receive a
fee at an annual rate of $10,000 for services rendered as a director, plus
$1,000 per meeting attended in person and $500 per meeting in
-2-
<PAGE> 5
which they participate by telephone. Beginning in October 1996, the Chairman of
the Board is paid an additional fee at an annual rate of $40,000, payable in
monthly installments, and beginning January 1, 1997, the Chairpersons of the
Audit and Compensation Committees each receives an additional fee at an annual
rate of $5,000, payable in quarterly installments. On January 2, 1997, the
Company issued 2,500 shares of Common Stock to each director, other than Mr.
Rodriguez, in consideration for past services. All directors are also reimbursed
for expenses incurred in connection with attendance at meetings.
During 1996, the Board of Directors held 10 meetings, including telephonic
meetings. No director attended or participated in fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors and the
total number of meetings held by all committees of the Board on which he or she
served.
The Board of Directors has an Executive Committee, an Audit Committee, a
Compensation Committee and has recently created a Nominating Committee. The
Executive Committee is empowered to exercise the authority of the Board of
Directors in the management of the business and affairs of the Company between
meetings of the Board of Directors, except as such authority may be limited by
the provisions of the Delaware General Corporation Law (the "DGCL"). Messrs.
Lipsig (Chairman) and Kinzelberg and Ms. Kaiser were elected to the Executive
Committee on April 19, 1996. The Executive Committee met five times in 1996. The
Audit Committee is responsible for recommending to the Board of Directors the
engagement of the independent auditors of the Company and for reviewing with the
independent auditors the scope and results of the audit, the internal accounting
controls and audit practices of the Company, and the scope of the professional
services furnished by the independent auditors. The Audit Committee, which is
composed of Ms. Kaiser (Chairwoman) and Alvin Richer and Dennis G. Flanagan, met
two times in combined meetings with the full Board in 1996. The Compensation
Committee is to review management compensation levels, provide recommendations
regarding salaries and other compensation for the Company's officers, including
bonuses and other incentive programs, and administer the Company's 1993
Incentive Stock Option Plan. Messrs. Kinzelberg (Chairman) and Lipsig and Ms.
Kaiser were elected to the Compensation Committee on April 19, 1996. Mr. Richer
served on the Compensation Committee from April 19 to June 13, 1996. The
Compensation Committee met three times in 1996.
The Board of Directors recently created a Nominating Committee, which is
responsible for proposing nominees to the Board of Directors. Messrs. Lipsig and
Rodriguez were appointed to the Nominating Committee on December 13, 1996. The
Nominating Committee, which did not meet in 1996, met in a combined meeting with
the Board in March 1997. The Company's bylaws establish procedures, including
advance notice procedures, with regard to the nomination, other than by or at
the direction of the Board of Directors, of persons for election as directors.
In general, notice must be delivered to the Company at its principal executive
offices not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting. Such notice must set forth
all information with respect to each such nominee required by the federal
securities laws (including such nominee's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected).
-3-
<PAGE> 6
EXECUTIVE COMPENSATION
The following table shows the cash compensation, as well as certain other
compensation, of the Chief Executive Officer of the Company, each of the other
executive officers of the Company whose annual compensation exceeded $100,000
and one former executive officer of the Company for services in all capacities
to the Company during the fiscal years ended December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
=================================================================================================================================
Long Term
Compensation
Annual Compensation Awards
- ---------------------------------------------------------------------------------------------------------------------------------
Securities
Underlying All Other
Name and Principal Position Year Salary Bonus Options(1) Compensation(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard L. Rodriguez, 1996 $214,861 $ 0 126,000 $ 8
President and Chief Executive Officer(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Karim Hadchiti, 1996 126,006 35,000 25,000 7
Vice President - Operations(4)
- ---------------------------------------------------------------------------------------------------------------------------------
Scott Koerner, 1996 107,692 0 25,000 7
Sr. Vice President - Sales(5)
- ---------------------------------------------------------------------------------------------------------------------------------
Cameron B. Estes, Jr., 1996 200,000 0 -- 8,312
former Chief Executive Officer(6) 1995 200,000 10,811 -- 3,896
1994 146,154 61,992 -- 1,350
=================================================================================================================================
</TABLE>
(1) Number of shares of Common Stock subject to options granted during the
year indicated under the Company's 1993 Incentive Stock Option Plan.
(2) Represents contributions to the Company's 401(k) plan made by the
Company on behalf of the named executives and the amount of premium for
the Company's group term life insurance plan attributed to the
compensation of executive officers of the Company. For 1996, $8, $7, $7
and $5 were attributed to the compensation of Messrs. Rodriguez,
Hadchiti, Koerner, and Estes, respectively, for group term life
insurance premiums paid by the Company.
(3) Mr. Rodriguez was elected President and Chief Operating Officer of the
Company on March 1, 1996 and Chief Executive Officer of the Company on
April 19, 1996.
(4) Mr. Hadchiti was elected Vice President-Operations on April 19, 1996.
(5) Mr. Koerner was elected Senior Vice President-Sales of the Company on
April 19, 1996.
(6) Mr. Estes resigned as Chairman of the Board, Chief Executive Officer and
a director of the Company on April 19, 1996.
-4-
<PAGE> 7
STOCK OPTIONS
OPTION GRANTS. The following table sets forth certain information regarding
options to purchase shares of Common Stock granted during 1996 to the executive
officers of the Company named in the Summary Compensation Table.
<TABLE>
<CAPTION>
============================================================================================================================
Individual Grants
-------------------------------------------------------------------------------------------------
% of Total
Number of Options
Securities Granted to Grant Date
Underlying Employees Exercise Present
Options in Fical Price per Expiration Value
Name Granted Year Share(1) Date ($)(2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard L.
Rodriguez(3) 126,000 39% $2.75 March 1, 2006 $128,520
- ----------------------------------------------------------------------------------------------------------------------------
Karim Hadchiti(4) 25,000 8 4.38 May 3, 2006 42,250
- ----------------------------------------------------------------------------------------------------------------------------
Scott Koerner(4) 25,000 8 4.875 April 29, 2006 47,000
============================================================================================================================
</TABLE>
(1) The option exercise price is equal to the fair market value per share of
Common Stock on the date of grant.
(2) Calculated pursuant to the Black-Scholes option pricing model. Assumes
with respect to Mr. Rodriguez expected volatility of 30%, risk-free rate
of return of 5.59%, no dividend yield, time of exercise of five years
and no risk of forfeiture. Assumes with respect to Messrs. Hadchiti and
Koerner expected volatility of 30%, risk-free rate of return of 6.43%,
no dividend yield, time of exercise of five years and no risk of
forfeiture.
(3) Option was granted pursuant to Mr. Rodriguez's employment agreement
under the Company's 1993 Incentive Stock Option Plan. The option is an
incentive stock option. One-quarter of the shares covered by the option
granted become vested and exercisable upon the anniversary of the date
of grant of the option, until the fourth anniversary of the date of
grant, whereupon the option becomes fully vested and exercisable.
(4) All options are incentive stock options under the Company's 1993
Incentive Stock Option Plan. Beginning one year after the date of grant,
one-fifth of the options granted become vested and exercisable annually
upon the anniversary of the date of grant of the options.
-5-
<PAGE> 8
UNEXERCISED OPTIONS. No options to purchase shares of Common Stock were
exercised by the executive officers of the Company named in the Summary
Compensation Table during 1996. The following table sets forth certain
information regarding the number and value of unexercised options to purchase
shares of Common Stock held at the end of 1996 by the executive officers of the
Company named in the Summary Compensation Table:
<TABLE>
<CAPTION>
========================================================================================================================
Number of Securities Underlying Value of Unexercised In-the-Money
Name Unexercised Options at Fiscal Year End Options at Fiscal Year End(1)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------
Richard L. Rodriguez 31,500 94,500 $23,625 $70,875
--------------------------------------------------------------------------------------------------------------------
Karim Hadchiti 0 25,000 0 0
--------------------------------------------------------------------------------------------------------------------
Scott Koerner 0 25,000 0 0
========================================================================================================================
</TABLE>
(1) Value of unexercised in-the-money options is equal to the excess, if
any, of the fair market value per share of Common Stock at December 31,
1996 over the option exercise price per share multiplied by the number
of shares subject to options.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company entered into an employment agreement dated as of March 1, 1996,
amended in June 1997, with Richard L. Rodriguez pursuant to which he serves as
President and Chief Operating Officer of the Company. On April 19, 1996, he was
also elected as Chief Executive Officer and a director of the Company. The
employment agreement is for an initial four-year period and, unless terminated,
is automatically extended for successive one-year periods thereafter. Under the
employment agreement, Mr. Rodriguez's annual base salary is $260,000, subject to
annual review, commencing in 1999 he is entitled to receive a performance bonus
in an amount not less than 20% of his base salary if the Company achieves net
earnings goals to be mutually determined by the Board of Directors and Mr.
Rodriguez. Pursuant to the employment agreement, Mr. Rodriguez was granted an
option to purchase 126,000 shares of Common Stock exercisable at a price of
$2.75 per share (the closing price for the Common Stock on the date of grant),
vesting at the rate of one-fourth of the number of shares of Common Stock
subject to the option on each of the first four anniversary dates of the date of
grant of the option.
In the event that the Company terminates the employment agreement other than as
a result of Mr. Rodriguez's disability or for Cause (as defined in the
employment agreement), Mr. Rodriguez will be entitled to receive severance pay
(i) if such termination occurs during the initial term of the employment
agreement, in twelve monthly installments, in an aggregate amount equal to his
annual base salary in effect at the time of termination or (ii) if such
termination occurs during any successive term of the employment agreement, in
six monthly installments, in an aggregate amount equal to one-half of his annual
base salary in effect at the time of termination.
Additionally, if termination occurs following a Change in Control, the
employment agreement grants Mr. Rodriguez the severance rights available to the
executive officers of the Company as described immediately below.
Each other executive officer of the Company has recently executed a severance
compensation agreement ("Severance Agreement") which grants such officer the
severance rights described below if (i) during the twelve month period following
the first Change in Control (as defined in the Severance Agreement), the Company
terminates the executive's employment other than for Cause, Disability,
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<PAGE> 9
Retirement or on account of the executive's death; (ii) during the six month
period following the Change in Control, the executive terminates employment for
Good Reason; or (iii) during the second six month period following the Change in
Control, the executive terminates employment for any reason. Upon the occurrence
of any event listed immediately above, (i) the Company shall pay to the
executive severance compensation equal to the executive's annual base salary in
effect immediately prior to the Change in Control, which compensation shall be
payable in one lump-sum amount on or before the fifteenth day following the
termination date; provided, however, that the executive must sign a full and
complete release of the Company from any and all liabilities, except for those
provided under the Severance Agreement, in a form acceptable to the Company, and
(ii) all stock options held by the executive, without any further action, shall
be automatically exercisable in full. If an executive is terminated for Cause,
no severance benefits shall accrue to the executive.
In connection with the resignation of Cameron B. Estes as Chairman of the Board,
Chief Executive Officer and a director of the Company on April 19, 1996, the
Company agreed to retain Mr. Estes as a consultant from May 1, 1996 to April 30,
1998, during which time Mr. Estes will receive compensation at the annual rate
of $200,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is presently composed of Messrs. Kinzelberg and
Lipsig and Ms. Kaiser. Mr. Richer also served as a member of the Compensation
Committee during 1996. None of the members of the Compensation Committee is or
was formerly an officer or employee of the Company.
The Company leases its Indianapolis store from Mr. Estes, as the Executor of the
Estate of Hal Goldman, who died in July 1994. Under the terms of the lease,
which expires October 31, 2008, the Company paid rent of $362,301 during 1996
and will pay rent at an annual rate of $362,825 during 1997.
The Company leases its Lincolnwood store from Morton Goldman and Mr. Estes, as
the Executor of the Estate of Hal Goldman. Under the terms of the lease, which
expires October 31, 1998, the Company pays rent at an annual rate of $155,250
subject to increases in the Consumer Price Index.
In December 1992, the Company, while an S Corporation under the Internal Revenue
Code, distributed subordinated notes in the aggregate principal amount of $8
million to its stockholders, Morton Goldman and Hal Goldman. As of December 31,
1996, the aggregate principal amount outstanding under the subordinated notes
was $4,286,000. The subordinated notes bear interest at an annual rate of prime
plus 1/2%, but not less than 6% nor more than 10%.
The Company entered into tax indemnification agreements with Morton Goldman and
Hal Goldman in 1993 that, among other things, indemnify each for additional tax
liability (including penalties, interest and legal fees), in excess of $100,000
with respect to each of them, resulting from the Company's operations during any
taxable period for which the Company was an S Corporation. The Company does not
at present expect that any payments will be made by the Company, nor have any
payments been made, pursuant to the tax indemnification agreements.
Pursuant to his employment arrangement, in May 1996, the Company made a loan to
Mr. Rodriguez to induce him to relocate and received a Mortgage Note for
$150,000. The Mortgage Note is payable in full on or before March 1, 1999, does
not bear interest and, subject to Mr. Rodriguez's continuing
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<PAGE> 10
employment with the Company, will be forgiven in annual increments of $50,000 in
1997, 1998 and 1999, with accelerated forgiveness upon a change in control of
the Company.
BOARD OF DIRECTORS REPORT ON COMPENSATION
Although neither the Board of Directors nor the Compensation Committee has
adopted a formal compensation policy applicable to the Company's executive
officers, the purpose of the Company's executive compensation is to enable the
Company to attract, retain and motivate qualified executives to ensure the
long-term success of the Company and its business strategies. The Compensation
Committee intends to review the compensation policy for the Company's executive
officers in order to align executive compensation with the business objectives
and performance of the Company and to place greater emphasis on incentive
compensation.
Executive compensation has generally consisted of three principal components:
base salary, bonus and stock options. Company performance is not the principal
consideration when base salaries are established. In March 1996, the Company
entered into an employment agreement with Richard L. Rodriguez pursuant to which
he serves as President and Chief Operating Officer of the Company. On April 19,
1996, he was also elected Chief Executive Officer of the Company. Under his
employment agreement, Mr. Rodriguez's annual base salary is $260,000, subject to
annual review. He is also entitled to an incentive bonus, as described below.
This employment agreement is intended to secure for the Company the services of
Mr. Rodriguez and to provide him an appropriate incentive for maximum effort on
behalf of the Company. This employment agreement is described in the section
captioned "Employment and Severance Agreements" preceding this report.
While the Company has no formal bonus policy applicable to all executive
officers, the Company's policy is to pay bonuses based on financial results. The
Board believes that creating incentive compensation for the Company's executive
officers which is tied to the Company's annual income will encourage a
continuous focus on increasing profitability and stockholder value. Under his
employment agreement, as amended in June 1997, commencing in 1999 Mr. Rodriguez
is entitled to receive a performance bonus in an amount not less than 20% of his
base salary if the Company achieves net earnings goals determined by the Board
of Directors and Mr. Rodriguez.
In 1993, the Company established the 1993 Incentive Stock Option Plan. During
1996, the Board granted incentive stock options to all of the Company's
executive officers. Pursuant to his employment agreement, Mr. Rodriguez was
granted an option to purchase 126,000 shares of Common Stock exercisable at a
price of $2.75 per share which vests at the rate of one-fourth of the number of
shares of Common Stock subject to the option on each of the first four
anniversary dates of the date of grant of the option. During 1996, each of
Miguel Martinez, Scott Koerner, David Zasada, Karim Hadchiti and Jane McCarthy
were granted an option to purchase 25,000 shares of Common Stock exercisable at
a price equal to the fair market value per share of Common Stock on the date of
grant. Such options vest at the rate of one-fifth of the number of shares of
Common Stock subject to the option on each of the first five anniversary dates
of the date of grant of the option. These options are intended to encourage the
creation of stockholder value over the long-term by aligning the financial
interests of the executive officers with those of the Company's stockholders.
The salary, bonus and stock options paid or granted by the Company to the Chief
Executive Officer and the other two most highly compensated executive officers
of the Company in 1996 is set forth in the tables preceding this report. The
Board of Directors believes that the present executive officers of
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<PAGE> 11
the Company are dedicated to increasing profitability and stockholder value and
that the compensation to be paid to the executive officers of the Company will
contribute to this focus.
THE BOARD OF DIRECTORS
Dennis G. Flanagan Robert J. Lipsig
Susan J. Kaiser Alvin Richer
Harvey Kinzelberg Richard L. Rodriguez
The foregoing Board of Directors Report on Compensation shall not be deemed to
be incorporated by reference into any filing of the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates such information by reference.
OWNERSHIP OF VOTING SECURITIES
The following tabulation shows, as of June 1, 1997, (a) the name, address and
Common Stock ownership for each person known by the Company to be the beneficial
owner of more than five percent of the Company's outstanding Common Stock (the
only class of voting securities outstanding), (b) the Common Stock ownership of
each current director and nominee for director, (c) the Common Stock ownership
of each of the executive officers of the Company named in the Summary
Compensation Table, and (d) the Common Stock ownership of all directors and
executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership(1) Common Stock
------------------------ ----------------------- ------------
<S> <C> <C>
Cameron B. Estes, Jr.(2) 2,443,112 38.8%
Morton Goldman(3) 1,926,236 30.6
Richard L. Rodriguez(4) 44,400 *
Harvey Kinzelberg(4) 22,500 *
Robert J. Lipsig(4) 25,000 *
Alvin Richer(4) 17,500 *
Dennis G. Flanagan(4) 22,500 *
Susan J. Kaiser(4) 52,500 *
Miguel A. Martinez, Jr.(4) 18,400 *
Scott Koerner(4) 7,600 *
Karim Hadchiti(4) 18,400 *
All directors and executive officers as a group (11
persons)(4) 244,800 3.9%
</TABLE>
- ------------------------------------
* Less than one percent.
(1) Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
1934. Unless otherwise stated below, each such person has sole voting
and investment power with respect to all such shares. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage
owned by such person, but are not deemed outstanding for the purpose of
calculating the percentage owned by each other person listed.
(2) Includes 2,408,112 shares of Common Stock held by Mr. Estes as the
Executor of the Estate of Hal Goldman. The address for Mr. Estes is 12
Bridlewood Road, Northbrook, Illinois 60062.
(3) The address for Mr. Goldman is 170 Yerington Circle, Glenbrook, Nevada
89413.
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<PAGE> 12
(4) Includes shares of Common Stock which may be acquired through the
exercise of stock options as follows: Mr. Kinzelberg, 10,000 shares; Mr.
Lipsig, 10,000 shares; Mr. Richer, 10,000 shares; Mr. Flanagan, 10,000
shares; Ms. Kaiser, 10,000 shares; Mr. Rodriguez, 31,500 shares; Mr.
Martinez, 5,000 shares; Mr. Koerner, 5,000 shares; Mr. Hadchiti, 5,000
shares; all directors and executive officers as a group, 106,500 shares.
COMPANY PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's Common
Stock with the cumulative total return of the Nasdaq Market Index and the common
stock of a peer group selected by the Company for the period beginning on August
13, 1993 (the date of the Company's initial public offering) through December
31, 1996.
TOTAL SHAREHOLDER RETURNS
[LINE GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ELEK-TEK, NASDAQ PEER GROUP
(FISCAL YEAR COVERED) INC. MARKET
INDEX
<S> <C> <C> <C>
13-AUG-93 100 100 100
DEC-93 162.07 105.26 117.04
DEC-94 78.16 102.92 144.68
DEC-95 25.29 145.44 174.38
DEC-96 32.18 178.90 233.91
</TABLE>
Assumes $100 invested on August 13, 1993 in the Company's Common Stock, the
Nasdaq Market Index and the common stock of the peer group members, and all
indices assume dividend reinvestment. Peer group index members are CDW Computer
Centers, Inc., CompUSA, Inc., Egghead, Inc., Micro Warehouse, Inc. and MicroAge,
Inc. The 1993 peer group index also includes Babbage's Inc. and Software ETC.
Stores, Inc., and the 1994, 1995 and 1996 peer group indices also include
NeoStar Retail Group Incorporated. Babbage's Inc. and Software ETC. Stores, Inc.
were merged into NeoStar Retail Group Incorporated in 1994. The peer group index
is capitalization-weighted.
The foregoing table shall not be deemed to be incorporated by reference into any
filing of the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference.
-10-
<PAGE> 13
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company's financial statements for the year ended December 31, 1996 were
audited by Coopers & Lybrand, independent public accountants. The Company's
independent auditors for fiscal year 1997 have not yet been engaged.
Representatives of Coopers & Lybrand are expected to attend the annual meeting
to respond to appropriate questions and to make an appropriate statement if they
desire to do so.
STOCKHOLDER PROPOSALS
Stockholders who desire to submit proposals for inclusion in the proxy statement
of the Board of Directors to be utilized in connection with the 1998 Annual
Meeting of Stockholders must submit such proposals to the Secretary of the
Company no later than March 9, 1998.
GENERAL
The cost of soliciting proxies will be borne by the Company. In addition to the
use of the mails, proxies may be solicited by personal interview, telephone,
telecopy, telex and telegraph, and by directors, officers and regular employees
of the Company without special compensation therefor. The Company will arrange
for the forwarding of proxy material to the beneficial owners of Common Stock
held of record on the record date by banks, brokers, dealers and other nominees
whose reasonable expenses in handling proxy material with beneficial owners will
be reimbursed by the Company. In addition, the Company has retained Georgeson &
Co. to assist in the solicitation of proxies. Fees and expenses for the services
of Georgeson & Co. are expected to be approximately $6,000.
Management knows of no other business other than that set forth above to be
transacted at the meeting, but if other matters requiring a vote of the
stockholders arise, the persons designated as proxies will vote the shares
represented by the proxies in accordance with their judgment on such matters.
By Order of the Board of Directors,
MIGUEL A. MARTINEZ, JR.
Secretary
DATED: Skokie, Illinois
July 9, 1997
-11-
<PAGE> 14
PROXY ELEK-TEK, INC.
7350 N. Linder Avenue - Skokie, Illinois 60077
The undersigned hereby appoints Richard L. Rodriguez, Harvey
Kinzelberg and Miguel A. Martinez, Jr., or any of them, as attorneys and
proxies, each with the power to appoint a substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Elek-Tek, Inc. (the "Company") held of record
by the undersigned on April 17, 1996, at the annual meeting of
stockholders to be held on June 13, 1996 or any adjournment thereof.
<TABLE>
<S> <C> <C>
1. Election of Directors -- Nominees are: Susan J. Kaiser Miguel A. Martinez, Jr.
Harvey Kinzelberg Richard L. Rodriguez
Robert J. Lipsig
[ ] FOR all listed nominees or a substitute therefor if [ ] WITHHOLD AUTHORITY to vote for all listed nominees
any nominee is unable or for good cause refuses to
serve
(except do not vote for the nominee(s) whose name(s)
I have written below)
</TABLE>
------------------------------------------------------------------------
(INSTRUCTION -- To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided above.)
In Their Discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
(Continued and to be signed on the other side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1. THIS PROXY IS REVOCABLE AT ANY
TIME.
Dated , 1997
-----------------------------------
Signature
-----------------------------------
Signature (if held jointly)
PLEASE SIGN, DATE AND RETURN PROXY
IMMEDIATELY IN THE ENCLOSED
ENVELOPE.
(IMPORTANT: please sign your name
exactly as it appears at left. In
the case of joint holders, all
should sign. When signing as an
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
partnership, please sign in
partnership name by authorized
person.)
