SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-12
ALPHA PRO TECH, LTD.
- --------------------------------------------------------------------------------
(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)(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 the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(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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ALPHA PRO TECH, LTD.
60 CENTURIAN DRIVE
SUITE 112
MARKHAM, ONTARIO, CANADA
L3R 9R2
Telephone: (905) 479-0654
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TAKE NOTICE that the 2001 Annual Meeting of Shareholders of Alpha Pro Tech,
Ltd., (the "Company") will be held at the Treasure Island Hotel, 3300 Las Vegas
Boulevard South, Las Vegas, Nevada, on:
FRIDAY, JUNE 8, 2001
at the hour of 9:30 o'clock A.M. (local time) for the following purposes:
1. To elect six directors to serve until the 2002 Annual Meeting of
Shareholders.
2. To ratify the appointment of independent accountants.
3. To transact such other business as may properly come before the
Meeting.
Accompanying this Notice is the Proxy Statement and Proxy Card.
The Board of Directors set April 26, 2001, as the record date for the meeting.
This means that owners of the Company's common stock at the close of business on
that date are entitled to (1) receive notice of the meeting and (2) vote at the
meeting and any adjournments or postponements of the meeting. We will make
available a list of Shareholders of the Company as of the close of business on
April 26, 2001 for inspection during normal business hours from May 29 through
June 7, 2001, at the offices of the Company, in Markham, Ontario. This list will
also be available at the meeting.
DATED: May 8, 2001
BY ORDER OF THE BOARD OF DIRECTORS
AL MILLAR, PRESIDENT
YOUR VOTE IS IMPORTANT
WE URGE YOU TO VOTE PROMPTLY BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD.
IF YOU DECIDE TO ATTEND THE MEETING, YOU MAY REVOKE THE PROXY AND VOTE YOUR
SHARES IN PERSON.
ALPHA PRO TECH, LTD.
60 CENTURION DRIVE
SUITE 112
MARKHAM, ONTARIO
L3R 9R2
PROXY STATEMENT
This Proxy Statement and accompanying Proxy Card are first being sent to
shareholders on or about May 8, 2001.
VOTING AND PROXIES
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At our Annual Meeting, shareholders will act upon the matters outlined on the
previous page and described in this Proxy Statement, including the election of
directors and ratification of the appointment of our independent accountants. In
addition, management will respond to questions from shareholders.
WHO IS ENTITLED TO VOTE?
Only holders of record common stock at the close of business on April 26,
2001 are entitled to vote. Each holder of common stock is entitled to one vote
per share. We are authorized to issue 50,000,000 common shares, par value $.01
per share. There were issued and outstanding 23,892,009 shares of common stock
issued and outstanding as of the close of business on April 26, 2001. There is
only one class of shares.
HOW DO I VOTE?
You can vote by filling out the accompanying proxy and returning it in the
postage paid return envelope that we have enclosed for you. Voting information
is provided on the enclosed proxy. If your shares are held in the name of a bank
or broker, follow the voting instructions on the form that you receive from
them.
WHAT IF MY SHARES ARE HELD BY A BROKER OR NOMINEE?
If you hold your shares in "street name" through a broker or other nominee, your
broker or nominee may not be permitted to exercise voting discretion as to some
of the matters to be acted upon. Thus, if you do not give your broker or nominee
specific instructions, your shares may not be voted on those matters and will
not be counted in determining the number of shares for approval.
HOW WILL MY PROXY BE VOTED?
Your proxy, when properly signed and returned to us, and not revoked, will be
voted in accordance with your instructions relating to the election of directors
and on Proposal 2. We are not aware of any other matter that may be properly
presented other than the election of directors and Proposal 2. If any other
matter is properly presented, the persons named in the enclosed form of proxy
will have discretion to vote in their best judgment.
2
WHAT IF I DON'T MARK THE BOXES ON MY PROXY?
Unless you give other instructions on your proxy, the persons named as proxies
will vote in accordance with the recommendations of the Board of Directors. The
Board's recommendation is set forth together with the description of each Item
in this Proxy Statement. In summary, the Board recommends a vote FOR:
o the election of directors;
o the ratification of the appointment of Pricewaterhouse
Coopers, LLP as our independent accountants for 2001.
CAN I GO TO THE ANNUAL MEETING IF I VOTE BY PROXY?
Yes. Attending the meeting does not revoke the proxy. However, you may revoke
your proxy at any time before it is actually voted by giving written notice to
the secretary of the meeting or by delivering a later dated proxy.
WILL MY VOTE BE PUBLIC?
No. As a matter of policy, shareholder proxies, ballots and tabulations that
identify individual shareholders are kept confidential and are only available as
actually necessary to meet legal requirements.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a majority
in voting power of the outstanding shares of common stock entitled to vote will
constitute a quorum, permitting the meeting to conduct its business. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting.
HOW MANY VOTES ARE NEEDED TO APPROVE AN ITEM?
The affirmative vote of shares representing a majority in voting power of the
shares of common stock, present in person or represented by proxy and entitled
to vote at the meeting, is necessary for approval of Proposal 2. Proxies marked
as abstentions on these matters will not be voted and will have the effect of a
negative vote. The election of directors will be by a plurality of the votes
cast. A proxy marked to withhold authority for the election of one or more
directors will not be voted with respect to the director or directors indicated.
PERSONS MAKING THE SOLICITATION
Solicitations will be made by mail and possibly supplemented by telephone or
other personal contact to be made without special compensation by regular
officers and employees of the Company. We may reimburse shareholder's nominees
or agents (including brokers holding shares on behalf of clients) for the cost
incurred in obtaining from their principals authorization to execute proxies. No
solicitation will be made by specifically engaged employees or soliciting
agents. The cost of solicitation will be borne by us.
ANNUAL REPORT
The Annual Report for the year ended December 31, 2000 containing financial and
other information about the Company is enclosed.
3
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors currently consists of six members. Directors are elected
annually for a term of office to expire at the succeeding annual meeting of
shareholders after their election and until their successors are duly elected
and qualified. Messrs. S. Hoffman, A. Millar,R. Isaly, J. Ritota and D. Bennett
were elected at the last Annual Meeting of Shareholders. In June, 2000, our
Board of Directors increased the number of directors to six, and Mr. Russell
Manock was appointed by the Board of Directors to fill the newly created
vacancy. The Board of Directors proposes that the six nominees described below,
all of whom are currently serving as directors, be re-elected for a new term of
one year and until their successors are duly elected and qualified. All nominees
are currently directors and all, other than Mr. Manock, were elected by the
shareholders.
Each of the nominees has consented to serve. If any of them should become
unavailable to serve as a director (which is not now expected), the Board may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by the Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
FOR ELECTION AS DIRECTORS.
There are set forth below following the names of the nominees and our executive
officers, their present positions and offices with the Company, their principal
occupations during the past five years, directorships held with other
corporations, certain other information, their ages and the year first elected
as a director or executive officer.
DIRECTORS AND EXECUTIVE OFFICERS
Director or Executive
Name Age Officer Since Position With the Company
- ---- --- ------------- -------------------------
SHELDON HOFFMAN 63 July 11, 1989 CEO and Director
AL MILLAR 59 July 11, 1989 President and Director
ROBERT H. ISALY 71 November 15, 1989 Director
JOHN RITOTA 49 December 18, 1991 Director
DONALD E. BENNETT, JR. 60 June 23, 1994 Director and Senior Vice
President-Manufacturing
RUSSELL MANOCK 53 June 10, 2001 Director
LLOYD HOFFMAN 40 July 1, 1993 Senior Vice President - Finance and
Administration
MICHAEL SCHEERER 41 January 1, 1997 Senior Vice President - Sales and Marketing
4
SHELDON HOFFMAN is a chartered accountant and has been a director and chief
executive officer of the Company since July 11, 1989. Mr. Hoffman founded and
was president of Absco Aerosols, Ltd., a custom manufacturer of aerosols and
liquids, from 1967 to 1985 until that company was sold to CCL Industries, Inc.
("CCL"), a manufacturer of aerosol and liquid products and containers. Mr.
Hoffman joined CCL from 1986 to 1987 as director of business development and
then joined CCW Systems, Ltd., a water filter manufacturer, as president and
chief executive officer.
ALEXANDER W. MILLAR has been a director of the Company since July 11, 1989 and
president since August 1, 1989. Mr. Millar has spent over 20 years as a
professional in sales and marketing including international marketing. Mr.
Millar, in various sales capacities, including vice-president of sales, was
associated with Mr. Hoffman at Absco Aerosols Ltd. from 1971 to 1985, when the
business was sold to CCL. He then joined CCL as manager of business development
for North America. In March, 1988, he formed Milmed International Distributors
Limited to distribute the Company's products internationally. In 1989 Milmed
gave up its rights to distribute these products internationally at which time
Milmed ceased operations.
ROBERT H. ISALY has been a director of the Company since November 20, 1989. He
was the owner of a nursery, Florida Bedding Plants Inc. from 1986 to 1992. Prior
thereto he was involved with two Ohio based family businesses. The Isaly Dairy
Company and the H.R. Isaly Cheese Company. He is currently an independent
businessman.
JOHN RITOTA has been a director of the Company since December 18, 1991 and since
1981 to the present time has been operating a general dentistry practice, Ritota
and Ritota, with his brother in Del Ray Beach, Florida.
DONALD E. BENNETT, JR. joined the Company on March 24, 1994 as President of its
newly formed Apparel Division which was established to acquire the assets of
Disposable Medical Products, Inc. ("DMPI"), a manufacturer of medical apparel
items including bouffant caps, shoe covers, gowns, coveralls and lab coats. Mr.
Bennett owned and operated DMPI for approximately twenty years prior to the
Company's acquisition of its assets.
RUSSELL MANOCK is a chartered accountant and has been a director of the Company
since June 10, 2000. He has been a senior partner in the public accounting firm,
Snow & Manock in Toronto, Ontario, Canada since 1976.
OUR EXECUTIVE OFFICERS
Three of the executive officers of the Company, Sheldon Hoffman, Al Millar and
Donald E. Bennett, Jr. are also directors and nominees, and are identified
above. Information follows on the other current executive officers of the
Company.
LLOYD HOFFMAN has been employed by the Company since November 15, 1991 in
various capacities and since early 1999 has been Senior Vice President - Finance
and Administration. From 1987 to 1991, Mr. Hoffman was a shareholder and was in
charge of finance and administration at Software Concepts. Inc. a developer of
software for association and magazine publishers.
MICHAEL SCHEERER joined the Company on January 1, 1997 as Senior Vice
President-Sales and Marketing. From 1990 to October 1992, Mr. Scheerer was
Director of Sales-Development and Administration at Baxter Scientific Products.
In October, 1992, he was named Vice President-Sales and Marketing for Baxter's
Critical Environmental Solutions business. In September, 1995, Baxter Scientific
Products was purchased by VWR Scientific Products, Inc. where Mr. Scheerer
served as Vice-President Critical Environmental Solutions and New Business
Ventures until joining the Company.
There are no family relationships between the above persons other than Lloyd
Hoffman who is the son of Sheldon Hoffman.
5
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of March 30, 2001 with
respect to shares of Common Stock of the Company beneficially owned by each
director of the Company, each nominee for director, each executive officer of
the Company, by all officers and directors as a group, and by persons known to
the Company to be beneficial owners of more than 5% of the Company's Stock.
Directors, Executive Officers Number of Shares
and 5% Shareholders Beneficially Owned Percent of Class
- ------------------- ------------------ ----------------
William R. Lykken 1,652,865 6.9%
740 McHugh Avenue
Grafton, ND
Al Millar, President and Director 1,679,811 (1) 6.2%
Sheldon Hoffman, CEO 1,387,138 (2) 5.1%
and Director
Robert H. Isaly, Director 740,613 (3) 2.7%
John Ritota, Director 412,194 (4) 1.5%
Lloyd Hoffman, 364,600 (5) 1.3%
Sr. VP- Finance and Administration
Donald E. Bennett, Jr., Senior 281,667 (6) 1.0%
Vice President-Manufacturing and Director
Russell Manock, Director 51,400 (7) .2%
Michael Scheerer 481,200 (7) 1.8%
Sr. VP-Sales and Marketing
All directors and executive 5,398,623 20.1%
officers as a Group (8 persons)
(1) Includes 800,000 shares subject to currently exercisable options; and
includes 95,942 shares and 60,000 shares subject to currently
exercisable options owned beneficially by Mr. Millar's wife, as to
which Mr. Millar disclaims beneficial ownership.*
6
(2) Includes 800,000 shares subject to currently exercisable options; and
includes 107,502 shares owned beneficially by Mr. Hoffman's wife, as to
which Mr. Hoffman disclaims beneficial ownership. Does not include
410,051 shares owned beneficially by Hoffman Family Trust, as to which
Mr. Hoffman disclaims beneficial ownership. The beneficiaries of the
Hoffman Family Trust are Mr. Hoffman's wife and their two children. Mr.
Hoffman does not have the power to vote or dispose of the shares held
by the Trust.*
(3) Includes 283,000 shares subject to currently exercisable options; and
includes 141,523 shares owned beneficially by Mr. Isaly's wife, as to
which Mr. Isaly disclaims beneficial ownership.*
(4) Includes 365,000 shares subject to currently exercisable options; and
includes 9,000 shares owned beneficially by Dr. Ritota's wife as to
which Dr. Ritota disclaims beneficial ownership.*
(5) Includes 335,000 shares subject to currently exercisable options; and
10,000 shares owned beneficially by Mr. Hoffman's wife, as to which Mr.
Hoffman disclaims beneficial ownership. Mr. Hoffman disclaims
beneficial ownership with respect to any shares of the Company held in
the Hoffman Family Trust (see (2) above), except to the extent of his
pecuniary interest therein.*
(6) Includes 250,000 shares subject to currently exercisable options.*
(7) Includes 40,000 shares subject to currently exercisable options.*
(8) Includes 250,000 shares subject to currently exercisable options; and
38,450 shares owned beneficially by Mr. Scheerer's wife as to which Mr.
Scheerer disclaims beneficial ownership.*
* A currently exercisable option is one which is exercisable within 60
days from the date hereof.
Applicable percentage of ownership is based on 23,909,516 shares of our common
stock outstanding on March 30, 2001 and treats as outstanding all shares
underlying currently exercisable options held by the identified director or
officer in the first column. These shares, however, are not deemed outstanding
for the purpose of computing the percentage ownership of any other person.
The addresses of each of the executive officers and directors is care of Alpha
Pro Tech, Ltd., 60 Centurian Dr., Suite 112, Markham, Ontario, Canada L3R 9R2.
Messrs. Sheldon Hoffman, Al Millar, Lloyd Hoffman and Russsell Manock are
residents of Canada and Messrs. Ritota, Isaly, Bennett and Scheerer reside in
the United States.
7
DIRECTOR'S MEETINGS AND COMMITTEES
Our Board of Directors met four (4) times during 2000. The Board of Directors
has a standing Audit Committee and Compensation Committee.
AUDIT COMMITTEE. The Audit Committee, consisting of Messrs. Manock, Isaly and
Ritota, with Mr. Manock as chairman, met three (3) times in 2000. Each member of
the Audit Committee is "independent" as that term is defined by the applicable
listing standards of the American Stock Exchange.
The Audit Committee's duties include:
o reviewing with management and the independent accountants the
company's accounting policies and practices and the adequacy
of internal controls,
o reviewing the scope and results of the annual examination
performed by the independent accountants,
o making recommendations to the Board of Directors regarding the
appointment of the independent accountants and approval of the
services performed by the independent accountants and the
related fees, and
o performing such other duties as set forth in the audit
committee charter, a copy of which is attached as Exhibit A to
this Proxy Statement.
COMPENSATION COMMITTEE. The Compensation Committee, consisting of Messrs.
Millar, Isaly and Ritota, with Mr. Ritota as chairman, met two (2) times in
2000.
The Compensation Committee makes recommendations to the Board of Directors
concerning salaries and incentive compensation for executive officers of the
Company and administers the Company's employee stock option plans.
The Audit Committee is composed of three directors, all of whom are not officers
or employees of the Company ("Outside Directors"), and the Compensation
Committee is composed of three directors, two of whom are Outside Directors.
In addition to participation at Board and Committee Meetings, the Company's
directors discharge their responsibilities throughout the year through personal
meetings and other communications, including considerable telephone contact with
the CEO and others regarding matters of interest and concern to the Company.
COMPENSATION OF DIRECTORS
Outside Directors are reimbursed for their direct expenses incurred in attending
a meeting.
8
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has furnished the following report
to shareholders of the Company in accordance with rules adopted by the
Securities and Exchange Commission.
The Audit Committee, which is appointed annually by the Board of Directors,
currently consists of three directors, all of whom are independent and meet the
other qualification requirements under the applicable rules of the American
Stock Exchange. The Audit Committee acts under a written charter which was
adopted by the Board of Directors on June 10, 2000 and which is attached as
Exhibit A to the Proxy Statement. As described in its charter, the Audit
Committee is responsible for providing independent, objective oversight of the
Company's accounting functions and internal controls, including recommending to
the Board of Directors an accounting firm to serve as the Company's independent
accountants. The Audit Committee is not responsible for planning or conduct of
the audits or the determination that the Company's financial statements are
complete and accurate and in accordance with the generally accepted accounting
principles.
In accordance with rules adopted by the Securities and Exchange Commission, the
Audit Committee of the Company states that:
o The Audit Committee has reviewed and discussed with management
the Company's audited financial statements for the fiscal year
ended December 31, 2000.
o The Audit Committee has discussed with PricewaterhouseCoopers,
LLP, the Company's independent accountants, the matters
required to be discussed by Statement on Auditing Standards
No. 61, as modified or supplemented.
o The Audit Committee has received the written disclosures and
the letter from PricewaterhouseCoopers LLP required by
Independence Standards Board Standard No. 1 ("Independence
Discussion with Audit Committees"), as modified or
supplemented, and has discussed with PricewaterhouseCoopers
LLP the independent accountant's independence.
Based upon the review and discussions described in this report, the Audit
Committee recommended to the Board of Directors that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000 for filing with the Securities and
Exchange Commission.
This report is submitted on behalf of the members of the Audit Committee:
Russell Manock (Chairman)
Robert H. Isaly
John Ritota
9
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the following
report on executive compensation to the shareholders of the Company.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION PROCEDURES AND POLICIES. Our executive compensation program was
administered by the Compensation Committee of the Board of Directors. The
Committee makes recommendations on all of the three key components of our
executive compensation program, base salary, contractual incentive awards, and
long-term incentives.
The Company's executive compensation program is structured to help the Company
achieve its business objectives by:
- providing compensation opportunities that will attract,
motivate and retain highly qualified managers and executives
- linking executives' total compensation to company and
individual job performance
- providing an appropriate balance between incentives focused on
achievement of annual business plans and longer term
incentives tied to increases in shareholder value
Our executive compensation program is designed to provide competitive
compensation opportunities for all corporate officers. Our total compensation
levels fall in the low to middle of the range of rates paid by other employers
of similar size and complexity, although complete comparative information is not
easily obtainable.
BASE SALARIES
Our salary levels are intended to be consistent with competitive practices and
levels of responsibility, with salary increases reflecting competitive trends,
the overall financial performance of the Company, and the performance of the
individual.
CONTRACTUAL INCENTIVE AWARDS
Pursuant to the executive compensation program, the Company has contracted to
provide two of its executive employees with profit participation incentive
compensation. Messrs. Millar and Hoffman are each entitled to a cash incentive
participation equal to 5% of the consolidated annual pre-tax profits of the
Company.
10
STOCK OPTIONS
We periodically grant incentive and non-qualified stock options to purchase the
Company's Common Stock in order to provide certain compensation to key employees
and those of our subsidiaries with a competitive total compensation package and
to reward them for their contribution to the Company's short and long-term stock
performance. These stock options are designed to align the employees' interest
with those of the shareholders. All options have an option price that is not
less than the fair market value of the stock on the date of grant. The terms of
the options and the dates after which the become exercisable are established by
the Board with respect to incentive stock options, within the parameters of the
1993 Incentive Stock Option Plan and by the Administrative Committee with
respect to the 1993 Stock Option Plan for Directors. We do not grant stock
appreciation rights.
2000 COMPENSATION
The CEO and President are each compensated on a salary and pay-for-performance
approach. Taken into consideration are overall Company performance in attaining
annual growth in revenues, the addition or development of new and enhanced
products, pretax earnings, and the achievement of short and long term goals of
the Company's business as established in its five year plan. Contractual
incentive awards were earned in 2000 by the Company's CEO and President.
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE OF 1986
DEDUCTIBILITY OF COMPENSATION Effective January 1, 1994, the Internal Revenue
Service under Section 162 (m) of the Internal Revenue Code will generally deny
the deduction of compensation paid to the Chairman and the four other highest
paid executive officers required to be named in the Summary Compensation Table
to the extent such compensation exceeds $ 1 million per executive per year
subject to an exception for compensation that meets certain "performance-based"
requirements. Whether the Section 162 (m) limitations with respect to an
executive will be exceeded and whether the Company's tax deduction for
compensation paid in excess of the $ 1 million limit will be denied will depend
upon the resolution of various factual and legal issues that cannot be resolved
at this time. As to options granted under the 1993 Incentive Stock Option Plan,
the Committee intends to qualify to the extent practicable, such options under
the rules governing the Section 162 (m) limitation so that compensation
attributable to such options will not be subject to limitation under such rules.
As to other compensation, while it is not expected that compensation to
executives of the Company will exceed the Section 162 (m) limitation in the
foreseeable future (and no officer of the Company received compensation in 1994
which resulted under Section 162 (m) in the non-deductibility of such
compensation to the Company), various relevant considerations will be reviewed
from time to time, taking into account the interests of the Company and its
Shareholders, in determining whether to endeavor to cause such compensation to
be exempt from the Section 162 (m) limitation.
Respectfully submitted,
John Ritota, Chairman
Robert H. Isaly
Al Millar
11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Membership of the Compensation Committee is set forth under "Report of the
Compensation Committee." Except with respect to their compensation arrangements,
Mr. Hoffman, CEO and Mr. Millar, President, participated in executive
compensation deliberations and recommendations of the Board of Directors.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation during the last three fiscal
years for services in all capacities of those persons who were as of December
31, 2000, the Chief Executive Officer and each of the most highly compensated
executive officers (a total of five persons), to the extent each earned more
than $ 100,000 in salary, bonus and other compensation ("Named Officers").
Annual Compensation Long Term Compensation Awards
------------------- -----------------------------
Name and Shares
Principal Underlying All Other
Position Year Salary($) Bonus ($) Options # Compensation (1)
- -------- ---- --------- --------- ----------- ----------------
Sheldon Hoffman 2000 159,000 91,500 -- --
CEO 1999 140,000 62,500 50,000 --
1998 120,000 17,550 100,000 6,900
Al Millar 2000 159,000 91,500 -- --
President 1999 147,000 62,500 50,000 --
1998 120,000 17,550 100,000 6,900
Michael Scheerer 2000 125,000 30,000 --
Sr. V.P.-Sales 1999 115,000 25,000 25,000 14,000
and Marketing 1998 115,000 -- 100,000 14,000
Donald E. Bennett, Jr. 2000 120,000 25,000 -- 8,400
Sr. V.P.-Manufacturing 1999 109,000 20,000 50,000 9,500
and Director 1998 110,000 -- 25,000 8,400
Lloyd Hoffman 2000 84,500 25,000 25,000 --
Sr. V. P.-Finance
& Administration
(1) Represents annual car allowance
12
STOCK OPTIONS
The following table provides information regarding grants of stock options made
during the fiscal year ended December 31, 2000 to the persons named in the
Summary Compensation Table above:
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Number of % of Total Annual Rate of Stock
Securities Options Price
Underlying Granted to Appreciation for Options
Options Employees in Exercise Exp. Term
Name Granted (#) Fiscal Year Price ($/Share) Date 5%($) 10%($)
---- ----------- ----------- --------------- ----- ----------- -----------
Lloyd Hoffman 25,000 45.45% $.76 1/13/05 $5,250 $11,950
(1) Options awarded under the Plan generally provide for immediate vesting.
(2) All options were granted with an exercise price equal to or greater
than fair market value of the common stock as determined on the date of
the grant.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the 5-year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate of the future common stock price. This table does not take
into account any appreciation in the price of the common stock to date,
which exceeds the hypothetical gain shown in the table.
Options to purchase 236,667 shares of common stock were exercised during the
fiscal year ended December 31, 2000.
EMPLOYMENT ARRANGEMENTS
Messrs. Hoffman and Millar are also entitled to a combined bonus equal to 10% of
the pre-tax net profits of the Company (5% to each). Each earned a bonus of
$91,500 for 2000.
BENEFIT PLANS
INCENTIVE STOCK OPTION PLAN
The Company has an Incentive Stock Option Plan (the "Plan") for Officers and
other Key Employees with 3,750,000 shares reserved for grant thereunder. The
Plan, which was adopted by the Board of Directors in October, 1993 was approved
by Shareholders at the Annual Meeting in June 1994. The Plan is administered by
the Board of Directors which selects the employees to whom the options are
granted, determines the number of shares subject to each option, sets the time
or times when the options will be granted, determines the time when the options
may be exercised and establishes the market value of the shares. The Plan
provides that the purchase price under the option shall be at least 100 percent
of the fair market value of the shares of the Company's Common Stock. The
options are not transferable. There are limitations on the amount of incentive
stock options that an employee can be granted in a single calendar
13
year. The terms of each option granted under the Plan is determined by the Board
of Directors, but in no event may such term exceed ten years. In 2000, options
were granted to 4 employees in at an average exercise price of $.76 per share.
At December 31, 2000 options to purchase 2,899,000 shares were outstanding under
the Plan out of the 3,750,000 shares reserved for such purpose.
RETIREMENT SAVINGS PLAN
The Company has a Retirement Savings Plan (the "401(k) Plan") which is intended
to qualify under Section 401(k) of the Internal Revenue Code. Employees of the
Company who have attained age 21 and completed at least one year of service with
the Company are eligible to make contributions to the 401(k) Plan on a pre-tax
basis of up to 12% of the participant's compensation in any year in accordance
with limitations defined in the Code. Under the 401(k) Plan the Company is
matching 25% of the contributing participant's effective deferral but not in
excess of 4% of such contributing participant's compensation. The pre-tax
contributions made by a participant and the earnings thereon are at all times
fully vested. The participant's interest in Company contributions and the
earnings thereon will become vested at the rate of 20% per year for each year of
service with the Company or, if earlier, upon such participant's death or
disability. A participant's fully vested benefit under the 401(k) Plan may be
distributed to the participant upon his retirement, death, disability or
termination of employment or upon reaching age 59 1/2. The Company's only
contribution in 2000 on behalf of any officer named under "Executive
Compensation" was $1,219 on behalf of Donald E. Bennett, Jr.
DIRECTORS STOCK OPTION PLAN
The Board of Directors of the Company, in October, 1993, approved the 1993
Directors Stock Option Plan (the "Directors Plan") covering an aggregate of
600,000 shares of common stock, subsequently increased to 750,000 shares. A
committee of the Board of Directors who are not eligible to participate
administers the Directors Plan. Only directors of the Company who are not
employees of the Company are eligible to participate in the Plan. Each option
granted has an exercise price equal to fair market value of the date of grant.
As of December 31, 2000, options covering an aggregate of 683,000 shares were
outstanding. In the year ended December 31, 2000, options to purchase 25,000
shares at $1.05 per share were granted to Russell Manock.
The Company does not have any pension, profit sharing or similar plans
established for its employees, other than the bonus payable to Messrs. Hoffman
and Millar.
14
THE COMPANY HAS MADE PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT INCORPORATE
FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART. HOWEVER,
THE FOLLOWING PERFORMANCE GRAPH AND THE REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS OF ALPHA PRO TECH SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY SUCH FILINGS.
[GRAPH]
---------------------------------------------------FISCAL YEAR ENDING---------------------------------------
COMPANY/INDEX/MARKET 12/30/1995 12/29/1996 12/31/1997 12/31/1998 12/31/1999 12/31/00
ALPHA PRO TECH, LTD 100.00 67.48 71.65 33.39 56.35 82.64
Surgical Appliances & Supplies 100.00 96.41 123.44 158.38 141.05 182.50
NASDAQ Market Index 100.00 124.27 152.00 214.39 379.12 237.66
THE ABOVE GRAPH COMPARES THE FIVE-YEAR CUMULATIVE RETURN OF THE COMPANY WITH THE
COMPARABLE RETURN OF TWO INDICES. THE INDUSTRY INDEX REPRESENTS THE INDUSTRY OR
LINE-OF-BUSINESS OF THE COMPANY. THE GRAPH ASSUMES $100 INVESTED ON JANUARY 1,
1996. THE COMPARISON ASSUMES THAT ALL DIVIDENDS ARE REINVESTED.
THE INDUSTRY INDEX REPRESENTS THE SURGICAL APPLIANCES AND SUPPLIES DIVISION
COMPRISED OF 44 CORPORATIONS, COMPILED FROM THE SIC CODE WITHIN WHICH THE
COMPANY IS LISTED.
15
PROPOSAL 2.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
approved PricewaterhouseCoopers, LLP as independent accountants to examine the
financial statements of the Company for the fiscal year 2000. The Board of
Directors has directed that such appointment be submitted for ratification by
the shareholders at the Meeting.
PricewaterhouseCoopers, LLP has served as the independent accountants for the
Company since 1992. A representative of Pricewaterhouse Coopers, LLP is expected
to be present at the Meeting and will have the opportunity to make statements if
he or she desires to do so and will be available to respond to appropriate
questions.
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers, LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended December 31, 2000 and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $84,000.00.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers, LLP for services rendered
to the Company, other than the services described above under "Audit Fees", for
the fiscal year ended December 31, 2000 is compatible with maintaining the
principal accountant's independence.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS, LLP. RATIFICATION
REQUIRES THE AFFIRMATIVE VOTE OF A MAJORITY OF SHARES OF COMMON STOCK PRESENT IN
PERSON OR REPRESENTED BY PROXY AND ENTITLED TO VOTE AT THE MEETING.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's common stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC"). Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company, or
written presentation that no other reports were required, the Company believes
that during 2000 all Section 16(a) filing requirements applicable to its
officers and directors were complied with, except that each of the following
persons filed late Forms 4 reporting the described transactions: all directors
and executive officers filed one late Form 4 with respect to the granting of
stock options, except for Mr. Ritota, who filed two such late Forms 4; Mr.
Bennett filed one late Form 4, and Mr. Ritota filed two late Forms 4, all with
respect to the exercise of options and the sale of shares of underlying common
stock. Mr. Manock filed a late Form 3 Initial Statement of Ownership.
16
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2000, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE MAILED WITHOUT CHARGE TO SHAREHOLDERS UPON REQUEST.
REQUESTS SHOULD BE ADDRESSED TO THE COMPANY AT 60 CENTURIAN DRIVE,
SUITE 112, MARKHAM, ONTARIO L3R 9R2, CANADA, ATTENTION: SHELDON
HOFFMAN, CEO. THE FORM 10-K INCLUDES CERTAIN EXHIBITS WHICH WILL BE
PROVIDED ONLY UPON PAYMENT OF A FEE COVERING THE COMPANY'S REASONABLE
EXPENSES.
FUTURE PROPOSALS
The 2002 Annual Meeting is expected to be held on Friday, June 7, 2002. If any
shareholder wishes to submit a proposal for inclusion in the Proxy Statement for
the Company's 2000 Annual Meeting, the rules of the United States Securities and
Exchange Commission require that such proposal be received at the Company's
principal executive office by January 7, 2002.
OTHER MATTERS
Management knows of no other matters to come before the meeting other than those
referred to in the Notice of Meeting. However, should any other matters properly
come before the meeting, the shares represented by the proxy solicited hereby
will be voted on such matters in accordance with the best judgment of the
persons voting the shares represented by the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
"AL MILLAR"
President
17
EXHIBIT A
ALPHAPRO TECH, LTD.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
1. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist
the Board in fulfilling its oversight responsibilities. The Audit
Committee's primary duties and responsibilities are to:
o Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting and legal compliance.
o Monitor the independence and performance of the Company's
independent auditors and any internal auditing department.
o Report to the Board of Directors, as appropriate.
o Review areas of potential significant financial risk to the
Company.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities and it has access to the
independent auditors as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or experts it deems necessary
in the performance of its duties.
II AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the American
Stock Exchange. The Audit Committee shall be comprised of three
directors as determined by the Board, each of whom shall be independent
non-executive directors, free from any relationship that would
interfere with the exercise of his or her independent judgment. All
members of the Committee shall have a basic understanding of finance
and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have
accounting or related financial management expertise.
Audit Committee members shall be appointed by the Board. If an audit
committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee
membership.
The Committee shall meet at least three times annually, or more
frequently as circumstances dictate. The Audit Committee Chair shall
prepare and/or approve an agenda in advance of each meeting. The
Committee should meet privately in executive session at least annually
with management, the independent auditors, and as a committee to
discuss any matters that the Committee or each of these groups believe
should be discussed. In addition, the Committee, or at least its Chair,
should communicate with management and the independent auditors
quarterly to review the Company's financial statements and significant
findings based upon the auditors limited review procedures.
II AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURE
1. Review and reassess the adequacy of this Charter at least
annually. Submit the charter to the Board of Directors for
approval and have the document published at least every three
years in accordance with SEC regulations.
A - 1
2. Review the Company's annual audited financial statements prior
to filing or distribution. Review should include discussion
with management and independent auditors of significant issues
regarding accounting principles, practices and judgments.
3. In consultation with the management and the independent
auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant
financial risk exposure and the steps management has taken to
monitor, control, and report such exposures. Review
significant findings prepared by the independent auditors
together with management's responses.
4. Review with financial management and the independent auditors
the Company's quarterly financial results prior to the release
of earnings and/or the Company's quarterly financial
statements prior to filing or distribution. Discuss any
significant changes to the Company's accounting principles and
any items required to be communicated by the independent
auditors in accordance with SAS 61. The Chair of the Committee
may represent the entire Audit Committee for purposes of this
review.
INDEPENDENT AUDITORS
5. The independent auditors are ultimately accountable to the
Audit Committee and the Board of Directors. The Audit
Committee shall review the independence and performance of the
auditors and annually recommend to the Board of Directors the
appointment of the independent auditors or approve any
discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid
to the independent auditors.
7. On an annual basis, the Committee should review and discuss
with the independent auditors, all significant relationships
they have with the Company that could impair the auditor's
independence.
8. Review the independent auditors audit plan, discuss scope,
staffing, locations, reliance upon management, and internal
audit and general audit approach.
9. Prior to releasing the year-end earnings, discuss the results
of the audit with the independent auditors. Discuss certain
matters required to be communicated to audit committees in
accordance with AICPA SAS 61.
10. Consider the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
OTHER AUDIT COMMITTEE RESPONSIBILITIES
11. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be
included in the Company's annual proxy statement.
12. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
13. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing
activities.
14. Periodically perform self-assessment of audit committee
performance.
15. Review CFO and Controller succession planning within the
Company.
A - 2
ALPHA PRO TECH, LTD.,
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Al Millar, Sheldon Hoffman and Robert H. Isaly,
and each of them individually with the power of substitution, as Proxy or
proxies of the undersigned, to attend and act for and on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
Treasure Island Hotel, 3300 Las Vegas Boulevard South, Las Vegas, Nevada 89109
on June 8, 2001 at 9:30 A.M. local time and at any adjournment thereof, hereby
revoking any prior Proxy or proxies. This Proxy when properly executed will be
voted as DIRECTED herein by the undersigned. IF NO DIRECTION IS MADE, SHARES
WILL BE VOTED FOR THE ELECTION OF DIRECTORS NAMED IN THE PROXY AND FOR PROPOSAL
2.
(CONTINUED, AND TO BE DATED AND SIGNED ON OTHER SIDE)
- ----- Please mark your
X votes as in this
- ----- example.
1. To elect as directors all the persons named below:
Al Millar Robert H. Isaly
Sheldon Hoffman John Ritota
Donald E. Bennett, Jr. Russell Manock
For: Withhold Vote:
For, except vote withheld from the following nominee(s)
-------------------------------------------------------
2. Ratification of appointment of PricewaterhouseCoopers, LLP, as
Independent Accountants of the Company
For: Against: Abstain:
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Date, sign and return the Proxy Card promptly using the enclosed envelope.
(Signature should conform exactly to name on this proxy. Where shares
are held by joint tenants, both should sign. Executors, administrators,
guardians, trustees, attorneys and officers signing for corporations
should give full title).
Dated: , 2001
-------------------------------
-------------------------------------
Signature
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Signature if held jointly