PRELIMINARY COPY
ACORN HOLDING CORP.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022-6030
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 26, 2002
To the Stockholders:
The Annual Meeting of the Stockholders of ACORN HOLDING CORP. (the
"Company") will be held at 599 Lexington Avenue, 31st Floor, New York, New York,
on Thursday, December 26, 2002, at 11:00 A.M., local time, for the following
purposes:
1. To elect seven directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors have been duly
elected and qualified;
2. To amend the Company's Certificate of Incorporation to reduce the
number of authorized shares of Common Stock, $.01 par value, from 20,000,000
shares to [3,000,000] shares; and
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on November 15,
2002, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting of Stockholders (the "Meeting").
Only stockholders of record at the close of business on this date will be
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
By Order of the Board of Directors
STEPHEN A. OLLENDORFF
SECRETARY
November __, 2002
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE POSTAGE PREPAID ENVELOPE WHICH HAS BEEN PROVIDED, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE PROXY MAY BE REVOKED BY YOU 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 YOUR RIGHT TO VOTE YOUR
SHARES PERSONALLY.
PROXY STATEMENT
ACORN HOLDING CORP.
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022-6030
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 26, 2002
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Acorn Holding Corp. (the "Company") for
use at the 2002 Annual Meeting of Stockholders (the "Meeting") to be held at 599
Lexington Avenue, 31st Floor, New York, New York, on Thursday, December 26,
2002, at 11:00 A.M., local time, and at any adjournment(s) thereof for the
purposes set forth in the accompanying Notice of Meeting of Stockholders.
The principal executive offices of the Company are located at 599
Lexington Avenue, 31st Floor, New York, New York 10022-6030 (telephone no.
212-536-4089). The enclosed proxy and this proxy statement are being transmitted
to stockholders of the Company on or about November 19, 2002.
VOTING SECURITIES; SOLICITATION AND REVOCATION
The Company's Board of Directors has fixed the close of business on
November 15, 2002, as the record date for the determination of stockholders of
the Company who are entitled to receive notice of, and to vote at, the Meeting.
At the close of business on that date, ________ shares of Common Stock, par
value $.01 (the "Common Stock"), were issued and outstanding, each of which is
entitled to one vote on each matter to be voted upon at the Meeting. Unless
otherwise indicated, all of the shares of the Common Stock have been adjusted to
reflect the two-for-five reverse stock split, effective April 19, 1999. The
Company has no other class of securities entitled to vote at the Meeting.
Proxies in the form enclosed are being solicited by, or on behalf of,
the Board of Directors. The persons named in the proxy have been designated as
proxies in respect of the Meeting by the Company's Board of Directors (the
"Board"). Pursuant to Delaware corporate law and the Company's By-laws, the
holders of a majority of the outstanding shares of Common Stock must be present
in person or represented by proxy for a quorum to exist at the Meeting. If a
quorum is present at the Meeting, the nominees for director shall be elected by
a plurality of the votes present (in person or by proxy) at the Meeting and
entitled to vote thereon. The approval of all other matters to be properly
brought by the Board of Directors before the Meeting (assuming a quorum exists)
requires the affirmative vote of the holders of a majority of the shares of
Common Stock present (in person or by proxy) at the Meeting and entitled to vote
thereon.
Abstentions and broker non-votes (i.e., shares of Common Stock
represented at the Meeting by proxies held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) with respect to any proposal will be
included in determining the existence of a quorum. Abstentions and broker
non-votes will not be counted in tabulations of the votes cast on proposals.
Thus, neither abstentions nor broker non-votes will have an effect on the
outcome of the election of the nominees for directors, which requires only a
plurality of the votes at the Meeting, or the proposal to amend the Company's
Certificate of Incorporation (the "Certificate of Incorporation") to reduce the
number of authorized shares of Common Stock, which requires only the affirmative
vote of a majority of the shares of Common Stock present (in person or by proxy)
at the Meeting in favor of such proposal.
Shares represented by properly executed proxies received by the Company
will be voted at the Meeting in the manner specified therein or, if no
specification is made, will be voted (i) "FOR" the election of all of the
nominees for directors named herein, and (ii) "FOR" the proposal to amend the
Company's Certificate of Incorporation. In the unanticipated event that any
other matters are properly presented at the Meeting for action, the persons
named in the proxy will vote the proxies (which confer authority upon them to
vote on any such matters) in accordance with their judgment.
Any proxy given pursuant to this solicitation may be revoked by a
stockholder at any time before it is voted by written notification thereof
delivered to Messrs. Edward N. Epstein and/or Stephen A. Ollendorff (Company
Secretary), c/o of the Company at the address set forth hereinabove, by voting
in person at the Meeting, or by executing and delivering another proxy bearing a
later date. Attendance by a stockholder at the Meeting does not alone serve to
revoke his or her proxy.
The solicitation of proxies will be made principally by mail and, in
addition, may be made by directors and officers of the Company personally or by
telephone or telegraph, without special or extra compensation for such services.
Arrangements will be made with brokerage firms and other custodians, nominees
and fiduciaries to forward proxies and proxy material to their principals, and
the Company will, upon request, reimburse them for their out-of-pocket and
clerical expenses in transmitting proxies and related material to beneficial
owners. The costs of soliciting proxies will be borne by the Company. It is
estimated that said costs will be relatively nominal.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31,
2001, which contains audited financial statements, is being mailed with this
Proxy Statement to all Company stockholders of record as of the close of
business on November 15, 2002.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on November
15, 2002, information as to the stockholders (other than members of the
Company's management), which are known by the Company to beneficially own more
than 5% of its Common Stock.
2
No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner Owned(1) of Class
- ------------------- ------------- ----------
Estate of Herbert Berman(2) 113,440 7.0%
405 Lexington Avenue
New York, NY 10174
Allen Landers, M.D.
1385 York Avenue
New York, NY 10021 101,520 6.4%
- ---------------
(1) Beneficial ownership, as reported in the above table, has been determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934
(the "1934 Act"). Such beneficial ownership includes both sole voting and
sole dispositive power.
(2) Excludes shares of Common Stock owned by the adult children of the late
Herbert Berman.
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of November 15, 2002, the beneficial
ownership of the Common Stock of the Company by (i) each present director and
nominee for election as a director of the Company, (ii) the Named Executives, as
defined below, and (iii) all directors and executive officers of the Company as
a group (based upon information furnished by such persons). Under the rules of
the Commission, a person is deemed to be a beneficial owner of a security if he
has or shares the power to vote or direct the voting of such security or the
power to dispose or direct the disposition of such security. Accordingly, more
than one person may be deemed to be a beneficial owner of the same securities. A
person is also deemed to be a beneficial owner of any securities of which that
person has the right to acquire beneficial ownership within 60 days.
Name and Address of Amount and Nature of Percentage of Outstanding
Beneficial Owner(1) Beneficial Ownership(2) Shares Owned
------------------- ----------------------- ------------
Bert Sager 171,330
(3)(4) 10.4%
Stephen A. Ollendorff 610,380 35.8%
(5)(6)
Edward N. Epstein 385,800 23.6%
(4)(5)(7)
Paula Berliner 67,320 4.2%
(4)
3
Name and Address of Amount and Nature of Percentage of Outstanding
Beneficial Owner(1) Beneficial Ownership(2) Shares Owned
------------------- ----------------------- ------------
Ronald J. Manganiello 58,278 3.7%
(4)(8)
Robert P. Freeman 56,000 3.4%
(4)
Mark Auerbach 1,000 *
(4)
George Farley 1,000 *
(4)
All executive officers and
directors as a group (9 persons) 1,041,236 54.1%
(3)(4)(5)
(6)(7)(8)
- ------------------
* Less than 1%
(1) Unless otherwise indicated, the address of all the Company's directors
and executive officers is c/o the Company's principal executive offices
at 599 Lexington Avenue, New York, NY 10022-6030.
(2) A person is deemed to be the beneficial owner of voting securities that
can be acquired by such person within 60 days from November 15, 2002
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 November 15, 2002 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) Does not include 80 shares of Common Stock owned by Mr. Sager's spouse,
as sole trustee of a trust formed by Mrs. Sager's mother, as to which
Mr. Sager disclaims beneficial ownership.
(4) Includes the following shares that may be acquired upon exercise of
options within 60 days from November 15, 2002: Mr. Sager - 64,000; Mr.
Ollendorff - 120,000; Mr. Epstein - 48,000; Ms. Berliner - 28,000; Mr.
Manganiello - 1,000; Mr. Freeman - 40,000; Mr. Auerbach - 1,000; Mr.
Farley - 1,000 and all directors and executive officers as group (9
persons) 339,000.
(5) Stephen A. Ollendorff, Chairman of the Board, Chief Executive Officer
and Secretary of the Company, has entered into an Irrevocable Proxy and
Voting Agreement with Respect to Election of Directors dated December
19, 1995 with Edward N. Epstein, President of the Company, with respect
to 385,500 shares of Common Stock beneficially owned by Mr. Epstein. See
4
"Certain Relationship and Related Transactions." Accordingly, Mr.
Ollendorff's beneficial ownership includes such shares. Other than as
set forth above, Mr. Ollendorff disclaims beneficial ownership of such
shares.
(6) Includes 400 shares owned by Mr. Ollendorff's spouse.
(7) Includes shares owned by Mr. Epstein as trustee for his minor child.
(8) Includes shares owned by Mr. Manganiello's spouse.
PROPOSAL I: ELECTION OF SEVEN DIRECTORS
The entire Board of Directors is to be elected at the Meeting. The
Company's By-laws provide that the number of directors comprising the Board
shall be at least one, such number to be fixed by resolution of the Board. The
number of directors is presently set at seven. The seven persons listed below,
all of whom have consented to being named in this Proxy Statement and to serving
if elected, have been nominated to serve as directors of the Company until the
Company's 2003 annual meeting of stockholders and until their respective
successors have been duly elected and qualified. All of the nominees are
currently directors of the Company, and each was elected by the Company's
stockholders at the last annual meeting of stockholders.
Proxies in the accompanying form will be voted at the Meeting in favor
of the election of each of the nominees listed below, unless authority to do so
is specifically withheld as to an individual nominee or nominees or all nominees
as a group. Proxies cannot be voted for a greater number of persons than the
number of nominees named. In the unexpected event that any of such nominees
should become unable to or for good cause will not serve, the persons named in
the accompanying proxy have discretionary authority to select and vote for the
election of substitute management nominees. Directors will be elected by a
plurality of the votes present at the Meeting in person or by proxy and entitled
to vote thereon.
Set forth below is certain information with respect to each nominee for
election as a director of the Company (based solely on information provided by
such nominees):
Year of Principal Occupations During
First Past Five Years;
Name and Age Election Other Directorships
- ------------ -------- ---------------------------
Bert Sager(1)(2) 1983 Co-Chairman of the Board of the from November
(77) to December 1998 and Chairman from June 1989
to November 1995; for more than the past five
years, a practicing attorney; director of
Artesyn Technologies, Inc., a manufacturer of
standardized electronic products.
Stephen A.
Ollendorff
(64)(1)(2) 1983 Chief Executive Officer since September 1992,
and Chairman of the Board since November
1995; Of Counsel to the law firm of Hertzog,
Calamari & Gleason from December 1990 until
January 1999; since February 1999, Of Counsel
to the law firm of Kirkpatrick & Lockhart
LLP. Director of Artesyn Technologies, Inc.
5
Edward N. 1995 President and Chief Operating Officer of the
Epstein* Company since November 1995. For more than
(62)(1) the past five years, a principal of Edward N.
Epstein & Assoc., a consulting firm
specializing in corporate structuring and
management; since January 1996, a principal
in the merchant banking firm of New Canaan
Capital LLC; since July 1996, a principal of
Sylhan LLC, an integrated contract
manufacturer specializing in the precision
machining of refractory metal parts.
Paula Berliner 1992 Vice President of the Company since June 1992
(59)(1)(2) until December 1998; since May 1990, private
investor.
Ronald J. 1995 Since January 1996, a principal in the
Manganiello* merchant banking firm of New Canaan Capital
(53)(1)(2) LLC; since July 1996, a principal of Sylhan
LLC; from 1986 to January 1996, Mr.
Manganiello was Chairman and Chief Executive
Officer of Hanger Orthopedic Group, Inc., a
publicly-traded provider of patient care
services and products for orthotic and
prosthetic rehabilitation.
Mark Auerbach 2001 Since June 1993, Senior Vice President and
(64) (1)(2) Chief Financial Officer of Central Lewmar
L.P., a distributor of fine papers. From
December 1995 to January 1999, Chief
Financial Officer of Oakhurst Company, Inc.
and Steel City Products, Inc., each a
distributor of automotive products, and Chief
Executive Officer of Oakhurst Company, Inc.
from December 1995 to May 1997. Also a
director of Pharmaceutical Resources, Inc., a
manufacturer of generic drugs.
George Farley 2001 Retired partner of BDO Seidman; self-employed
(63) (1)(2) certified public accountant and financial
consultant since August 1999. Chief Financial
Officer of Talk America, Inc. (formerly
Talk.com, Inc.) from November 1997 until
August 1999.
- ----------
* Designees for directors of Edward N. Epstein. See "Certain Relationships and
Related Transactions."
6
(1) Member of the Stock Option and Compensation Committee.
(2) Member of the Audit Committee.
(3) Mr. Manganiello was a member of the Board from November 1995 until
January 1997 and was then elected to the Board in December 1997.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE SEVEN
NOMINEES NAMED ABOVE AS DIRECTORS OF THE COMPANY.
BOARD OF DIRECTORS; COMMITTEES OF THE BOARD
The Board met three times during fiscal 2001. During fiscal 2001 no
director attended fewer than 75% of the total number of meetings of the Board
and of the committees of the Board on which he or she served, except that George
Farley missed one Board meeting of the three meetings of the Board and
committees on which he served during his tenure as a director.
The Board has established two standing committees, consisting of the
Audit Committee and the Stock Option and Compensation Committee (the
"Compensation Committee"). The current functions of such committees are as
follows:
The Audit Committee, which met once during fiscal 2001, reviews the
internal and external audit functions of the Company and makes recommendations
to the Board with respect thereto. It also has primary responsibility for the
formulation and development of the auditing policies and procedures of the
Company and for making recommendations to the Board with respect to the
selection of the Company's independent auditing firm. The Chairman of this
Committee is Ronald J. Manganiello. The Audit Committee is governed by the
Company's Audit Committee Charter, a copy of which was attached as an appendix
to last year's Proxy Statement. The Board of the Company has determined that the
current composition of the Audit Committee satisfies The NASDAQ Stock Market's
requirements regarding the independence, financial literacy and experience of
audit committees.
The Compensation Committee is comprised of the entire Board. During
fiscal 2001, the Board acted once in its capacity as the Compensation Committee.
The Compensation Committee has primary responsibility for the administration of
the Company's 2001 Performance Equity Plan (the "2001 Plan") and 2001 Directors
Stock Option Plan (the "Directors Plan"), including responsibility for the
granting of options thereunder. The Committee is also responsible for
establishing the overall philosophy of the Company's executive compensation
program and overseeing the Company's compensation strategy.
SECTION 16(A) COMPLIANCE
Pursuant to Section 16(a) of the 1934 Act, directors and executive
officers of the Company and beneficial owners of greater than 10% of the Common
Stock are required to file certain reports with the Securities and Exchange
Commission in respect of their ownership of Company securities. The Company
7
believes that during fiscal year 2001 all such reports were timely filed other
than with respect to one report required to be filed by Mr. Manganiello. Mr.
Manganiello did not file a Form 4 transaction on a timely basis.
COMPENSATION OF DIRECTORS
Effective December 1998, directors who are not executive officers of
the Company are compensated for their services by payment of an annual retainer
of $12,000, $1,000 per day for each Board meeting attended in person by such
director and $750 for each committee meeting attended in person by such director
(excluding meetings held by telephone conference). Mr. Sager and Mrs. Berliner
are each entitled as consultants to receive $24,000 per year, including
directors fees, for a minimum three-year period, which has been renewed by its
terms. Effective November 1, 2002, until further notice, directors are accruing
all cash compensation due to them.
Directors of the Company who are eligible to serve on the Audit
Committee and do not receive any compensation from the Company other than fees
to which directors are entitled for their service on the Board of Directors
("Eligible Directors") are granted options to purchase 1,000 shares of Common
Stock on the date such director is initially elected to the Board of Directors,
and for each respective fiscal year thereafter, the date on which stockholders
of the Company elect directors at an annual meeting of stockholders pursuant to
the Directors Plan. Eligible Directors are entitled to only one automatic option
grant each calendar year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Ollendorff has entered into an Irrevocable Proxy and Voting
Agreement With Respect to Election of Directors (the "Proxy"), with Edward N.
Epstein, with respect to the shares of Common Stock beneficially owned by Mr.
Epstein (the "Stock"), commencing on December 19, 1995 and terminating on
December 31 of such year in which either party shall have given the other party
at least twelve (12) months' written notice thereof prior to December 31 of such
year. If any shares of the Stock covered by the Proxy are sold to any other
party, the Proxy as it relates to such shares of Stock shall terminate
immediately upon such sale. Pursuant to the Proxy, Mr. Ollendorff undertakes to
vote the Stock, as well as use his best efforts (including voting shares of
stock of the Company owned by him) for the election of the greater of (i) two
(2) directors or (ii) a number of directors equal to 22% (rounded up to the next
highest number) of the entire Board of Directors, acceptable to Mr. Epstein. Mr.
Epstein had designated himself and Ronald J. Manganiello to Mr. Ollendorff with
respect to the election of members of the Board as acceptable to him.
EXECUTIVE OFFICERS
The executive officers of the Company consist of Mr. Ollendorff as
Chairman of the Board, Chief Executive Officer and Secretary, Mr. Epstein, as
President and Chief Operating Officer, and Larry V. Unterbrink as Treasurer.
The following table sets forth certain information with respect to the
executive officer of the Company who is not a director or nominee for election
as a director:
8
Name Age
- ---- ---
Larry V. Unterbrink 67
Treasurer of the Company since February 1990.
Private investor residing in Florida. Since November
1996, a principal of Groupe Financier, a publishing
and consulting firm specializing in international finance.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years ended
December 31, 2001, December 31, 2000 and December 31, 1999, respectively,
respecting compensation earned by the Chief Executive Officer of the Company and
the executive officers (whose salary and bonus earned in fiscal 2001 exceeded
$100,000) of the Company (the "Named Executives").
Annual Compensation(1) Long-Term
Compensation
------------
Securities
Name and Underlying
Principal Position Year Salary($) Bonus($) Options(#)(2)
------------------ ---- --------- -------- -------------
Stephen A. Ollendorff 2001 $264,760(4) -0- --
Chairman and Chief 2000 $256,055(4) -0- --
Executive Officer 1999(3) $250,543(4) -0- --
Edward N. Epstein 2001 $228,760(4) -0- --
President and Chief 2000 $220,948(4) -0- --
Operating Officer 1999 $216,192(4) -0- --
Robert P. Freeman 2001 $262,338 $ 40,669 --
President and Chief 2000 $251,280 $ 61,280 --
Executive Officer - 1999 $203,353 $ 50,000 --
Recticon Enterprises,
Inc.
(1) No officer received perquisites which, are in the aggregate, greater than
or equal to the lesser of $50,000 or 10% of annual salary and bonus.
(2) Represents options awarded under the 1991 Stock Option Plan.
(3) Mr. Ollendorff has voluntarily assumed responsibility for rent and
secretarial expenses relating to the New York office. Mr. Ollendorff does
not receive any fringe benefits from the Company.
9
(4) Effective November, 1999 Messrs. Ollendorff and Epstein voluntarily
reduced by 50% their cash compensation received from the Company. For Mr.
Ollendorff, includes the unpaid balance of $132,380 for the fiscal year
2001, $128,027 for fiscal year 2000 and $20,879 for fiscal year 1999,
reflecting the amounts being accrued on the books of the Company. For Mr.
Epstein, includes the unpaid balance of $114,230 for the fiscal year 2001,
$110,474 for fiscal year 2000 and $18,016 for fiscal year 1999, reflecting
the amounts being accrued on the books of the Company.
The Company does not have any annuity, retirement, pension, deferred or
incentive compensation plan or arrangement under which any executive officers
are entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executives who qualify are permitted to participate in the Company's 2001
Performance Equity Plan.
Effective November 1, 2002, until further notice, the executive officers
of the Company are accruing all cash compensation due to them.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
During the fiscal year ended December 31, 2001, there were no stock
option grants or stock appreciation rights granted to the Named Executives or
any other stock appreciation rights.
On March 2, 1998 the Stock Option and Compensation Committee authorized
the further amendment to certain of the Company's outstanding stock options
(which had previously been amended on November 22, 1994). In exchange for each
optionee agreeing to an increase in the exercise price in the event of a "change
of control" from $1.406 to $3.13 (equal to the "fair market value" of the
Company's Common Stock on March 2, 1998), the Company would expand the
definition of "change of control" to include the merger, sale or liquidation of
the business as set forth in (iv) below. The amended and expanded definition of
"change of control" would occur in the following circumstances: (i) the first
purchase of shares of equity securities of the Company pursuant to a tender
offer or exchange offer (other than an offer by the Company) for 25% or more of
the equity securities of the Company, which offer has not been approved by the
Board of the Company, (ii) a single purchaser or a group of associated
purchasers acquiring, without the approval or consent of the Board of the
Company, securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities in one or a related
series of transactions, (iii) in respect of an election of directors by the
Company's stockholders, the election of any or all of the management's slate of
directors being contested or opposed, whether through a solicitation of proxies,
or otherwise, or (iv) on the day the stockholders of the Company approve (A) a
definitive agreement for the merger or other business combination of the Company
with or into another corporation pursuant to which the stockholders of the
Company do not own, immediately after the transaction, more than 50% of the
voting power of the corporation that survives and is a publicly owned
corporation and not a subsidiary of another corporation, or (B) a definitive
agreement for the sale, exchange, or other disposition of all or substantially
all of the assets of the Company, or (C) any plan or proposal for the
liquidation or dissolution of the Company. As of November 15, 2002, no such
"change of control" has occurred.
10
YEAR-END OPTION VALUES TABLE
The following table sets forth information at December 31, 2001
respecting exercisable and non-exercisable options held by the Named Executives.
During the fiscal year ended December 31, 2001, the Named Executives did not
exercise any stock options. The table also includes the value of "in-the-money"
stock options which represents the spread between the exercise prices of the
existing stock options and the year-end price of the Common Stock.
Number of Unexercised Value of Unexercised In-
Options Held the-Money Options
at December 31, 2001(1) Held at December 31, 2001(1)
------------------------- ----------------------------
Not Not
Name Exercisable Exercisable Exercisable Exercisable
- ---- ----------- ----------- ----------- -----------
Stephen A.
Ollendorff 120,000 -0- $-0- $-0-
Edward N.
Epstein 48,000 -0- $-0- $-0-
Robert P.
Freeman 40,000 -0- $-0- $-0-
- ----------------
(1) Based upon the closing sales price of the Common Stock on December 31, 2001: $1.49.
EMPLOYMENT ARRANGEMENTS
The Company has entered into an employment agreement, for a minimum
three-year period, which has been renewed by its terms, with Stephen A.
Ollendorff, pursuant to which Mr. Ollendorff receives annual compensation of
$250,000, subject to annual cost-of-living adjustments, from the Company. On
January 17, 1996, Mr. Ollendorff's employment agreement was amended in order to
clarify certain terms and conditions, including the geographic location in which
services are to be provided, events of termination and his obligations with
respect to confidential information, non-solicitation of employees and covenants
not to compete. Mr. Ollendorff agrees to devote such time to the business and
affairs of the Company as he believes is necessary for the operations of the
Company. In addition, Mr. Ollendorff has voluntarily assumed responsibility for
rent and secretarial expenses relating to the Company's New York office. Mr.
Ollendorff receives no fringe benefits from the Company.
Effective January 1, 1997, Mr. Ollendorff receives a salary of $120,000
per year as Chairman of the Board of Recticon Enterprises, Inc. ("Recticon"),
which amount is paid by the Company from the amounts paid by Recticon to the
Company each month. In addition, Recticon rents office space in Mr. Ollendorff's
New Jersey office and pays rent directly to Mr. Ollendorff directly for such
space in the amount of $500 per month. Any amounts received by Mr. Ollendorff
from Recticon as rent and/or salary are deducted from his salary from the
Company to the extent and as long as he receives such monies from Recticon.
11
The Company entered into an employment agreement with Edward N. Epstein,
effective January 1, 1996, for a three year period, which has been renewed by
its terms, on a year-to-year basis, through December 31, 2001 at an annual
compensation of $150,000, subject to cost-of-living adjustments. Mr. Epstein
agrees to devote such time to the business and affairs of the Company as he
believes is necessary for the operations of the Company.
As a result of an agreement between Messrs. Epstein and Ollendorff, Mr.
Ollendorff voluntarily reduced his annual compensation by $24,280, effective
July 1997, in order to increase Mr. Epstein's annual compensation for 1997 by
$24,280. Mr. Ollendorff has agreed not to accept any increased compensation
(other than cost-of-living increases) until Mr. Epstein's annual compensation
shall be equal to Mr. Ollendorff's.
Robert P. Freeman, President and Chief Executive Officer of Recticon,
entered into a letter agreement with Recticon as of February 15, 1995, which
provides that if, within one (1) year of a "change of control" (as defined in
the agreement) of Recticon, his employment is terminated without cause by
Recticon, or he resigns because of (i) assignment, without his written consent,
of any duties inconsistent with his position, duties, responsibilities and
status with Recticon, or change in his reported responsibilities, titles of
offices or any plan, act, scheme or design to constructively terminate him, or
(ii) reduction by Recticon of his annual base salary, he shall receive the
following benefits: (i) annual base salary through the date of termination; (ii)
in lieu of any further salary payments, severance pay on the tenth business day
following the date of termination, a lump sum equal to two times his annual base
salary; and (iii) if Mr. Freeman terminates his employment with Recticon between
the first and second year of a change of control for any reason other than "for
cause", Recticon will pay him the amount he would have been paid if he had
remained employed through the end of the second year of a change of control, but
in no event less than an amount equal to six months of base salary. In addition,
Recticon will maintain all medical, health and accident plans for a period of
the earlier of (i) 24 months or (ii) the date of which he is covered by reason
of his being employed by a new employer.
AUDIT COMMITTEE REPORT
Management is responsible for the Company's internal controls and the
financial reporting process. Grant Thornton LLP, the Company's independent
auditor, is responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with auditing standards
generally accepted in the United States. The Audit Committee's responsibility is
to monitor and oversee these processes.
In this context, the Audit Committee reviewed and discussed the audited
financial statements with both Company management and Grant Thornton LLP.
Specifically, the Audit Committee has discussed with Grant Thornton LLP matters
required to be discussed by SAS 61 (Codification of Statements on Auditing
Standards, AU Section 380).
The Audit Committee received from Grant Thornton LLP the written
disclosures and the letter required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and has discussed with Grant
Thornton LLP the issue of its independence from the Company.
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Based on the Audit Committee's review of the audited financial
statements and its discussions with both management and Grant Thornton LLP noted
above, the Audit Committee recommended to the Board that the audited
consolidated financial statements be included in the Company's Annual Report on
Form 10K for the fiscal year ended December 31, 2001.
The Company paid Grant Thornton LLP $_____ in aggregate fees for
professional services rendered for the audit of the Company's fiscal year 2001
annual consolidated financial statements and review of consolidated financial
statements included in the Company's quarterly reports on Form 10-Q.
ALL OTHER FEES
The Company paid Grant Thornton LLP an additional $_____ for other
services, including tax compliance and tax consultation provided to the Company
in fiscal year 2001.
The Audit Committee has considered whether the provision of non-audit
services by Grant Thornton LLP was compatible with maintaining its independence
and has determined that the nature and substance of the non-audit services did
not impair the status of Grant Thornton LLP as the Company's independent
auditors.
AUDIT COMMITTEE:
Ronald J. Manganiello, Chairman
Mark Auerbach
George Farley
PROPOSAL II: AMENDMENT OF CERTIFICATE OF INCORPORATION
TO REDUCE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK TO [3,000,000]
The Company's Board has adopted, subject to stockholder approval at the
Meeting, an amendment to the Company's Certificate of Incorporation (the
"Amendment") that would decrease the Company's authorized number of shares of
Common Stock to [3,000,000] shares from the currently authorized 20,000,000
shares.
The purpose of this reduction is to reduce the franchise taxes that the
Company is required to pay in Delaware, which is based on the number of its
authorized shares. The Company estimates that it will save approximately $13,000
per year in franchise taxes if this Amendment is approved.
As of November 15, 2002, a total of [1,584,142] shares of Common Stock
were issued and outstanding and 779,800 were reserved for future issuance
pursuant to the Company's stock option plans. As a result, if the share
reduction is approved, the Company will still have 636,058 authorized shares of
Common Stock available that can be issued from time to time in the future for
any corporate purposes, including acquisitions or other companies or assets,
sales of stock or securities convertible into stock, possible stock splits or
stock dividends, and issuances of additional options or rights to purchase
13
common stock. The Company has no current plans, arrangements or understandings
with respect to the issuance of any additional shares of Common Stock.
POSSIBLE EFFECTS OF ADOPTION OF PROPOSAL. One consequence of this
proposed reduction is that the Company would be required to seek the approval of
the stockholders for an issuance of shares that would cause the outstanding
shares to exceed the number that are then authorized and unissued. This could
delay the completion, and possibly increase the costs, of a transaction
requiring the issuance of such shares, as it could take as many as 45 to 60
days to obtain that approval. However, we believe that, even after giving effect
to the proposed reduction, there will be sufficient shares available for the
Company's requirements for at least the next two or three years and, if there
were a significant reduction in the number of available shares due to additional
issuances of shares in the meantime, it would be our intention to seek
stockholder approval for an increase in the authorized number of shares at that
time, rather than to wait until additional shares were needed for a particular
transaction.
APPROVAL
Assuming a quorum is present at the Meeting, the Amendment shall be
approved upon the affirmative vote of a majority of the votes cast in person or
by proxy at the Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL AND ADOPTION
OF PROPOSAL II.
TEXT OF AMENDMENT
If the Amendment is approved by the stockholders at the Annual Meeting,
the text of Article IV of the Company's Certificate of Incorporation will be
amended to read as follows:
"ARTICLE IV - AUTHORIZED CAPITAL
The aggregate number of shares of capital stock which the Corporation
shall have authority to issue is [3,000,000] shares of Common Stock, $.01 par
value per share."
INDEPENDENT AUDITORS
The Board has selected the firm of Grant Thornton LLP ("Grant
Thornton"), independent certified public accountants, to act as independent
public accountants and to audit the books, records and accounts for the Company
for the fiscal year ending December 31, 2002. A representative of Grant Thornton
is not expected to be present at the Meeting.
OTHER MATTERS
As of the date of this proxy statement, the Board has no knowledge of any
business which will be presented for consideration at the Meeting, other than as
described above. If any other matter or matters are properly brought before the
Meeting or any adjournment(s) thereof, pursuant to the Company's By-laws, it is
14
the intention of the persons named in the accompanying form of proxy to vote
proxies in accordance with their judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
In accordance with the Company's By-laws and Rules 14a-4(c) and 14a-5(e)
promulgated under the Exchange Act, the Company hereby notifies its stockholders
that it did not receive notice by August 3, 2002, of any proposed matter to be
submitted for stockholder vote at the Meeting, and, therefore, any proxies
received in respect of the Meeting will be voted in the discretion of the
Company's management on other matters which may properly come before the
Meeting.
Any proposal which is intended to be presented by any stockholder for
action at the 2002 Annual Meeting of Stockholders must be received in writing by
the Secretary of the Company at 599 Lexington Avenue, 31st Floor, New York, New
York 10022-6030, not later than August __, 2003 in order for such proposal to be
considered for inclusion in the Proxy Statement and form of proxy relating to
the 2003 Meeting of Stockholders.
The Company further notifies its stockholders that if the Company does
not receive notice by August __, 2003 of a proposed matter to be submitted for
stockholders vote at the 2003 Annual Meeting of Stockholders, then any proxies
held by members of the Company's management in respect of such Meeting may be
voted at the discretion of such management members on such matter if it shall
properly come before such Meeting, without any discussion of such proposed
matter in the proxy statement to be distributed in respect of such Meeting.
By Order of the Board of Directors
STEPHEN A. OLLENDORFF
SECRETARY
Dated: November __, 2002
15
ACORN HOLDING CORP.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 26, 2002
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned stockholder(s) of ACORN HOLDING CORP., a Delaware
corporation (the "Company"), hereby constitutes and appoints EDWARD N. EPSTEIN
and STEPHEN A. OLLENDORFF, and each of them, with full power of substitution in
each, as the agent, attorneys and proxies of the undersigned, for and in the
name, place and stead of the undersigned, to vote at the 2002 Annual Meeting of
Stockholders of the Company to be held at 599 Lexington Avenue, 32nd Floor, New
York, New York 10022-6030 on December 26, 2002, at 11:00 A.M. (local time), and
any adjournment(s) thereof, all of the shares of stock which the undersigned
would be entitled to vote if then personally present in the manner specified and
on any other business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN. IF
NO INSTRUCTIONS ARE GIVEN IN RESPECT OF A PROPOSAL, THIS PROXY WILL BE VOTED
"FOR" SUCH PROPOSAL.
PLEASE MARK BOXES __ OR X IN BLUE OR BLACK INK.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed
contrary below) /___/ below /___/
Mark Auerbach, Paula Berliner, Edward N. Epstein, George Farley,
Ronald J. Manganiello, Stephen A. Ollendorff, Bert Sager
(Instruction: To withhold authority to vote for any individual nominee(s) write
the nominee's name in the space below):
_________________________________________________
(Continued and to be signed on the reverse side.)
16
2. AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO REDUCE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
FOR _____ AGAINST _____ ABSTAIN _____
In their discretion, the proxies are hereby authorized to vote upon
such other business as may properly come before the meeting or any adjournment
thereof and as set forth in Rule 14a-4(c) of the Securities Exchange Act of
1934.
Please sign exactly as name appears above. 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.
Dated ________________________, 2002
_____________________________________
Signature
_____________________________________
Signature if held jointly
Title________________________________