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
ACORN HOLDING CORP.
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(Name Of Registrant As Specified In Its Charter)
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(Name Of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] 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:
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(2) Form, Schedule or Registration Statement no.:
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(4) Date Filed:
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ACORN HOLDING CORP.
100 Park Avenue
23rd Floor
New York, New York 10017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held December 18, 1998
To the Stockholders:
The Annual Meeting of the Stockholders of ACORN HOLDING CORP. (the
"Company") will be held at Club 101, 101 Park Avenue, Lobby Level, New York, New
York, on Friday, December 18, 1998, at 11:00 A.M., local time, for the following
purposes:
1. To elect five directors to hold office until the next Annual
Meeting of Stockholders and until their respective successors have been
duly elected and qualified;
2. To ratify the selection of the firm of Grant Thornton LLP as the
independent public accountants of the Company for the 1998 fiscal year; 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 5, 1998,
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 9, 1998
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.
100 Park Avenue
23rd Floor
New York, New York 10017
Annual Meeting of Stockholders
To Be Held December 18, 1998
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 1998 Annual Meeting of Stockholders (the "Meeting") to be held at Club
101, 101 Park Avenue, Lobby Level, New York, New York, on Friday, December 18,
1998, 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 100 Park
Avenue, 23rd Floor, New York, New York 10017 (telephone no. 212-685-5654). The
enclosed proxy and this proxy statement are being transmitted to stockholders of
the Company on or about November 9, 1998
Voting Securities; Solicitation and Revocation
- ----------------------------------------------
The Company's Board of Directors has fixed the close of business on
November 5, 1998, 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, 4,070,406 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. 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.
1
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 of the ratification of the selection of the
independent accountants, 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 "FOR" the election of all of the nominees
for directors named herein, and "FOR" the ratification of the selection of the
firm of Grant Thornton LLP as the Company's independent public accountants for
the 1998 fiscal year. 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.
2
Annual Report
- -------------
The Company's Annual Report for the fiscal year ended December 31, 1997,
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 5, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on November 1,
1998, 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.
No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner Owned(1) of Class
- ------------------- ------------- ----------
Estate of Herbert Berman(2) 283,600 6.97%
405 Lexington Avenue
New York, NY 10174
Allen Landers, M.D.
1385 York Avenue
New York, NY 10021 253,800 6.24%
- ---------------
(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 51,000 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 1, 1998, 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.
3
No. of Shares
Name and Address Beneficially Percentage
of Beneficial Owner(1) Owned(2) of Class
- ---------------------- ------------- ----------
Bert Sager.............. 428,125(3)(4) 10.12%
Stephen A. Ollendorff... 1,453,700 32.37%
(4)(5)(6)
Edward N. Epstein....... 927,500(4)(5)(7) 22.13%
Paula Berliner.......... 168,300(4) 4.06%
Robert P. Freeman....... 140,000(4) 3.36%
Edward S. Croft, III.... - -
Ronald J. Manganiello... 184,946(8) 4.54%
All directors and executive
officers as a group
(8 persons)........... 2,542,892(4) 51.79%
- -----------
* Less than 1%.
(1) The business address, for purposes hereof, of all of the Company's
directors and executive officers is in care of the Company's principal
executive offices at 100 Park Avenue, 23rd Floor, New York, New York
10017.
(2) Beneficial ownership, as reported in the above table, has been
determined in accordance with Rule 13d-3 under the 1934 Act. Unless
otherwise specifically noted herein, the Company believes that all
persons in the above table have sole voting and dispositive power with
respect to all shares of Common Stock shown to be beneficially owned by
them.
(3) Does not include 200 shares of Common Stock owned by Marilyn Sager, his
wife, as sole trustee of a trust formed by her mother, with respect to
which Mr. Sager disclaims beneficial ownership.
(4) Includes the following shares that may be acquired upon the exercise of
options within 60 days of November 1, 1998: Mr. Sager - 160,000; Mr.
Ollendorff - 300,000; Mr. Epstein - 120,000; Ms. Berliner - 70,000; Mr.
Freeman - 100,000; and all directors and executive officers as a group
(8 persons) - 840,000.
4
(5) Stephen A. Ollendorff, the Company's Chief Executive Officer, has
entered into an Irrevocable Proxy and Voting Agreement With Respect to
Election of Directors, dated December 19, 1995, with Edward N.
Epstein, the Company's President, with respect to the 927,500 shares
of Common Stock beneficially owned by Mr. Epstein. This arrangement is
described in "Certain Relationships 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 1,000 shares owned by Bjorg Ollendorff, Mr. Ollendorff's wife.
(7) Includes 7,500 shares owned by Mr. Epstein as trustee for his minor
child.
(8) Includes 32,946 shares owned of record by Lisa Manganiello, Mr.
Manganiello's wife; includes 2,000 shares owned by Mr. Manganiello as
trustee for his children.
PROPOSAL I: ELECTION OF FIVE 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, which is presently set at seven, has been reset to five,
effective immediately prior to the commencement of the Meeting. The five 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 1998 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. Edward S. Croft, III
will not be standing for re-election to the Board due to his other time
commitments.
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.
5
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 1983 Co-Chairman of the Board of the Company
(73) since November 1995 and Chairman from
June 1989 to November 1995; from
inception until June 1989, President;
for more than the past five years, a
practicing attorney; director of
Artesyn Technologies, Inc., a
manufacturer of standardized electronic
products.
Stephen A.
Ollendorff
(60) (1) 1983 Chief Executive Officer since September
1992, and Chairman of the Board since
November 1995; President of the Company
from June 1989 until November 1995 and
Vice President from inception until his
election as President; Of Counsel to
the law firm of Hertzog, Calamari &
Gleason since December 1990. Director
of Artesyn Technologies, Inc. and
Pharmaceutical Resources, Inc., a
manufacturer of generic drugs.
Edward N. 1995 President and Chief Operating Officer
Epstein* of the Company since November 1995.
(58) For more than 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.
6
Year of Principal Occupations During
First Past Five Years;
Name and Age Election Other Directorships
- ------------ -------- --------------------------------------
Paula Berliner 1992 Vice President of the Company since
(55) June 1992; since May 1990, private
investor; director of Republic Security
Financial Corp., a holding company for
Republic Securities Bank.
Ronald J. 1995 Since January 1996, a principal in the
Manganiello* merchant banking firm of New Canaan
(49) (1)(2) Capital 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; director
of Hanger Orthopedic Group, Inc.
Set forth below is certain information with respect to Edward S. Croft, III
who is not standing for re-election as a director of the Company (based solely
on information provided by him).
Year of Principal Occupations During
First Past Five Years;
Name and Age Election Other Directorships
- ------------ -------- --------------------------------------
Edward S. Croft, 1997 Since August 1996, Managing Director
III (55) (1) of Croft & Bender L.L.C., an investment
banking firm and strategic financial
advisory firm. From April 1996 to
August 1996, President of Croft & Co.,
a financial advisory firm; for more
than five years prior to April 1996,
Managing Director of The Robinson-
Humphrey Company, Inc., an investment
banking firm. Director of Artesyn
Technologies, Inc. and Just For Feet,
Inc., an athletic footwear retailer.
- ----------
* Designees for directors of Edward N. Epstein. See "Certain Relationships
and Related Transactions."
(1) Member of the Audit Committee.
(2) 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 FIVE
NOMINEES NAMED ABOVE AS DIRECTORS OF THE COMPANY.
7
Board of Directors; Committees of the Board
- -------------------------------------------
The Board met nine times during fiscal 1997. During fiscal 1997, 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 served.
The Board has established two operating committees, consisting of the Audit
Committee and the Stock Option and Compensation Committee. The current functions
of such committees are as follows:
The Audit Committee, which held two meetings during fiscal 1997, 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 Stock Option and Compensation Committee held two meetings during fiscal
1997. This Committee has primary responsibility for the administration of the
Company's 1991 Stock Option 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. In October 1998, the full Board
of Directors assumed the duties of this Committee.
Section 16(a) Compliance
- ------------------------
The Company is aware of the following late filings of reports required by
Section 16(a) of the 1934 Act in respect of fiscal 1997: Paula Berliner failed
to file, on a timely basis, a Statement of Changes in Beneficial Ownership on
Form 4; Ronald J. Manganiello failed to file, on a timely basis, an Initial
Statement of Beneficial Ownership on Form 3; and Stephen A. Ollendorff failed to
file, on a timely basis, his Annual Statement of Changes in Beneficial Ownership
on Form 5. These filings were subsequently completed on the appropriate forms.
Compensation of Directors
- -------------------------
Effective December 1993, directors who are not executive officers of the
Company are compensated for their services by payment of an annual retainer of
$4,000, $500 for each Board meeting attended in person by such director
(excluding the four regular quarterly Board meetings) and $250 for each
committee meeting attended in person by such director.
8
Certain Relationships and Related Transactions
- ----------------------------------------------
Mr. Ollendorff, Chief Executive Officer of the Company, is of counsel to
Hertzog, Calamari & Gleason, general counsel to the Company. 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' prior
written notice thereof; provided, that the Proxy shall remain in full force and
effect until at least December 31, 1998. 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 directors or (ii) a number of directors equal to 22%
(rounded up to the next highest number) of the entire Board, acceptable to Mr.
Epstein. Pursuant to the foregoing, Mr. Epstein has 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. Sager, as Co-Chairman
of the Board, Mr. Epstein, as President and Chief Operating Officer, Mrs.
Berliner, as Vice President, 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:
Name Age
- ---- ---
Larry V. Unterbrink......................................... 64
Treasurer of the Company since February 1990;
director from 1985 until February 1995. Private
investor residing in Florida. From May 1982 to
December 1994, President and Treasurer of Seahorse
Ltd., a leasing and publishing company. Since
November 1996, a principal of Groupe Financier, a
publishing and consulting firm specializing in
international finance.
9
EXECUTIVE COMPENSATION
Summary Compensation Table
- --------------------------
The following table sets forth information for the fiscal years ended
December 31, 1997, December 31, 1996 and December 31, 1995, respectively,
respecting compensation earned by the Chief Executive Officer of the Company and
the executive officers (whose salary and bonus earned in fiscal 1997 exceeded
$100,000) of the Company serving at the end of fiscal 1997 (the "Named
Executives").
Long-Term
Annual Compensation(1) Compensation
---------------------- ------------
Securities
Name and Principal Underlying
Position Year Salary($) Bonus($) Options(#)(2)
- ------------------- ---- --------- -------- -------------
Stephen A. Ollendorff 1997(3) $254,615(4) -- 50,000
Chairman and Chief 1996(3) $264,042 -- --
Executive Officer 1995(3) $256,750 -- --
Edward N. Epstein 1997 $182,090(4) -- --
President and 1996 $150,000 -- --
Chief Operating 1995 $122,500(5) $ 30,000 150,000
Officer
Robert P. Freeman 1997 $215,920 $ 95,673 50,000
President and Chief 1996 $242,480 $150,000 --
Executive Officer - 1995 $171,340 $ 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.
(4) As a result of an agreement between Messrs. Epstein and Ollendorff,
Mr. Ollendorff voluntarily reduced his annual compensation by $24,280
to $242,475, effective July 1997, in order to increase Mr. Epstein's
annual compensation for 1997 by $24,280 to $209,230. See "Employment
Arrangements" below.
(5) This amount was paid to Mr. Epstein pursuant to his consulting
arrangement with the Company.
10
The Company does not have any annuity, retirement, pension, deferred or
incentive compensation plan or arrangement under which any executive officers
are entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executives who qualify are permitted to participate in the Company's 1991 Stock
Option Plan.
Stock Option Grants In Last Fiscal Year
- ---------------------------------------
The following table sets forth information concerning stock options granted
to the Named Executives during the fiscal year ended December 31, 1997:
No. of Percentage of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted(#) Fiscal Year(%) Share($) Date
- ---- ---------- -------------- -------- ----------
Stephen A. 50,000 50% $1.58 6/1/07
Ollendorff
Edward N. - - - -
Epstein
Robert P. 50,000 50% $1.58 6/1/07
Freeman
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 $.5625 to $1.25 (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 5, 1998, no such
"change of control" has occurred.
11
On November 7, 1996, the Board of Directors authorized the Company to loan
moneys to officers and employees of the Company in order to encourage them to
exercise their stock options. The term of such loans would be for the shorter of
ten years or 60 days after termination of employment of the officer or employee,
interest would accrue and be payable monthly on the principal, at the prevailing
rate applicable to 90-day treasury bills at the time the loan is made, and the
loan would be collateralized at all times, which collateral (subject to
applicable law) may include shares of the Company. The loans must be
collateralized so that the fair market value of the collateral would have to
equal or exceed the principal outstanding amount of the loan at all times. As of
November 5, 1998, no such loans to officers or employees have been made by the
Company.
In October 1998, both Messrs. Ollendorff and Epstein each surrendered
options to purchase 30,000 shares of Common Stock, in order for the Company to
be able to grant options to other employees of the Company and its subsidiaries.
Year-End Option Values Table
- ----------------------------
The following table sets forth information at December 31, 1997 respecting
exercisable and non-exercisable options held by the Named Executives. During
fiscal 1997, 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, 1997(1) Held at December 31, 1997(1)
----------------------- ----------------------------
Not Not
Name Exercisable Exercisable Exercisable Exercisable
- ---- ----------- ----------- ----------- -----------
Stephen A.
Ollendorff 330,000 -0- $-0- $-0-
Edward N.
Epstein 150,000 -0- $80,250 $-0-
Robert P.
Freeman 100,000 -0- $14,000 $-0-
- ----------------
(1) Based upon the closing sales price of the Common Stock on December 31,
1997 ($1.44).
12
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.
The Company entered into an employment agreement with Edward N. Epstein,
effective January 1, 1996, for a three year period, for an annual compensation
of $150,000, subject to cost-of-living adjustments. In addition, the Stock
Option and Compensation Committee granted Mr. Epstein a $30,000 bonus in 1995.
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. Prior to
the execution of such employment agreement, Mr. Epstein had been retained as a
consultant to the Company, at the annual compensation of $120,000.
As a result of an agreement between Messrs. Epstein and Ollendorff, Mr.
Ollendorff voluntarily reduced his annual compensation by $24,280 to $242,475,
effective July 1997, in order to increase Mr. Epstein's annual compensation for
1997 by $24,280 to $209,230. 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.
13
PROPOSAL II: RATIFICATION OF SELECTION
OF 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, 1998. In accordance with a resolution of the
Board, this selection is being presented to the stockholders for their
ratification at the Meeting. The firm of Grant Thornton acted in such capacity
for the Company for the fiscal year ended December 31, 1997. If the stockholders
do not ratify the selection of Grant Thornton, the selection of independent
accountants will be reconsidered by the Board. A representative of Grant
Thornton is not expected to be present at the Meeting.
During the Company's 1995 and 1996 fiscal years, the Company engaged the
accounting firm of Coopers & Lybrand L.L.P. ("C&L"), independent accountants, to
audit the books, records and accounts of the Company. Since the Company withdrew
its election to be treated as a business development company under the
Investment Company Act of 1940 in 1997, its financial statements are prepared on
a consolidated basis. Grant Thornton is presently the auditor for the Company's
principal subsidiary. The Company determined that it would be appropriate to
engage Grant Thornton as its auditor for the fiscal year ended December 31,
1997. The Company notified C&L, on November 3, 1997, that it would no longer
utilize its services as independent accountants. On November 3, 1997, the
Company engaged the firm of Grant Thornton to act as its independent accountants
for the 1997 fiscal year. The Company's decision to change independent
accountants was approved by the Company's Board of Directors upon recommendation
of its Audit Committee. For the 1995 and 1996 fiscal years, C&L's reports on the
Company's financial statements for such fiscal years did not contain an adverse
opinion or a disclaimer of opinion nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. However, there was an
explanatory paragraph in each report relating to the valuation of investments
being based on the best estimate of the Board in the absence of readily
ascertainable market values. In connection with the audits of the Company's
financial statements for each of the two fiscal years ended as of December 31,
1996, and in the subsequent interim period, there were no disagreements with C&L
on any matters of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which if not resolved to the
satisfaction of C&L would have caused C&L to make reference to the matter in
their report on the Company's financial statements for such periods. C&L has
previously stated in connection with filings with the Commission that it agrees
with the statements contained in this paragraph.
The affirmative vote of the holders of a majority of the shares of Common
Stock present at the Meeting, in person or by proxy, is required for the
ratification of the selection of Grant Thornton.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF PROPOSAL II.
14
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
the intention of the persons named in the accompanying form of proxy to vote
proxies in accordance with their judgment. Pursuant to the Company's By-laws,
for business to be properly brought before this Meeting, a stockholder must have
given timely notice thereof on or before November 1, 1998.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal or action at the
Company's 1998 Annual Meeting of Stockholders must comply with the requirements
of Rule 14a-8 of the 1934 Act and the Company's By-Laws. Rule 14a-8 requires,
among other things, that a proposal shall have been received by the Company in
writing at its principal executive office not later than July 20, 1999 in order
for such proposal to be considered for inclusion in the Proxy Statement relating
to the 1999 Annual Meeting of Stockholders. In addition, the Company's By-Laws
require that a stockholder proposal shall have been received by the Company no
earlier than September 30, 1999 and no later than October 20, 1999.
By Order of the Board of Directors
STEPHEN A. OLLENDORFF
Secretary
Dated: November 9, 1998
15
ACORN HOLDING CORP.
Proxy for Annual Meeting of Stockholders
to be Held December 18, 1998
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 1998 Annual Meeting of
Stockholders of the Company to be held at Club 101, 101 Park Avenue, Lobby
Level, New York, New York 10017 on December 18, 1998, 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
(except as marked to the vote for all nominees
contrary below) /__/ listed below /__/
Paula Berliner, Edward N. Epstein,
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. RATIFICATION OF THE SELECTION OF THE FIRM OF
GRANT THORNTON LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE 1998 FISCAL YEAR
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________________________, 1998
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
Title______________________________
17