HERTZ TECHNOLOGY GROUP, INC. 75 Varick Street 11th Floor New York, New York 10013 Notice of Annual Meeting of Stockholders to be held February 16, 2000 -------------------------- The Annual Meeting of Stockholders of Hertz Technology Group, Inc. will be held at the Company's offices, 75 Varick Street, 11th Floor, New York, New York 10013 on February 16, 2000 at 4:00 P.M., for the purpose of considering and acting upon the following: 1. Election of five Directors 2. Confirmation of the appointment of Goldstein Golub Kessler LLP as auditors for the fiscal year ending August 31, 2000. 3. To act on a proposal to amend the Company's Certificate of Incorporation to increase the authorized Common Stock from 3,000,000 shares to 6,000,000, $.001 par value. 4. To act on a proposal to increase the stock options available under the 1996 Stock Option Plan from 500,000 to 750,000 shares. 5. Any and all matters incident to the foregoing, and such other business as may legally come before the meeting and any adjournments or postponements thereof. The Board of Directors has fixed the close of business on January 7, 2000 as the record date for determining the stockholders having the right to notice of and to vote at the meeting. By order of the Board of Directors Eli E. Hertz Chairman of the Board, President and Chief Executive Officer New York, New York January 10, 2000 - -------------------------------------------------------------------------------- IMPORTANT: Every stockholder, whether or not he or she expects to attend the annual meeting in person, is urged to execute the proxy and return it promptly in the enclosed business reply envelope. 1 HERTZ TECHNOLOGY GROUP, INC. -------------------- PROXY STATEMENT For Annual Meeting of Stockholders to be Held February 16, 2000 --------------------- Proxies in the form enclosed with this Statement are solicited by Management of Hertz Technology Group, Inc. (the "Company") to be used at the Annual Meeting of Stockholders to be held at 4:00 P.M. on February 16, 2000, for the purposes set forth in the Notice of Meeting and this Proxy Statement. The Company's principal executive offices are at 75 Varick Street, 11th Floor, New York, New York 10013. The approximate date on which this Statement and the accompanying proxy will be mailed to Stockholders is January 10, 2000. THE VOTING AND VOTE REQUIRED On the record date for the meeting, January 7, 2000, there were outstanding 2,129,083 Common Shares, each of which will be entitled to one vote. The only persons known by the Company to be the beneficial owner of five percent or more of the Company's Common Stock as of the Record Date are listed under "Security Ownership of Certain Beneficial Owners" below. Directors are elected by a plurality of the votes cast at the meeting. Confirmation of the appointment of auditors is by the affirmative vote of a majority of the votes cast at the meeting. All shares represented by valid proxies will be voted in accordance with the instructions contained therein. In the absence of instructions, proxies will be voted FOR each of the stated matters being voted on at the meeting. A proxy may be revoked by the stockholder giving the proxy at any time before it is voted, either by oral or written notice, and a prior proxy is automatically revoked by a stockholder giving a subsequent proxy or attending and voting at the meeting. Attendance at the meeting in and of itself does not revoke a prior proxy. Shares represented by proxies which are marked "ABSTAIN" with respect to any proposal will not be counted in determining whether the requisite vote has been received for such proposal. In instances where brokers are prohibited from exercising discretionary authority for beneficial owners who have not returned proxies (so called "broker non-votes"), those shares will be disregarded and, therefore, have no effect on the outcome of the vote. 2 ELECTION OF DIRECTORS Five Directors are to be elected at the Annual Meeting, each for a term of one year and until the election and qualification of a successor. It is intended that votes pursuant to the enclosed proxy will be cast for the election of the five nominees named below. In the event that any such nominee should become unable or unwilling to serve as a Director, the Proxy will be voted for the election of such person, if any, as shall be designated by the Board of Directors. The five nominees are currently members of the Board of Directors. Management has no reason to believe these nominees will not be available for election. The nominees for election and certain information about them are shown in the following table: Name Age Position Director Since ---- --- -------- -------------- Eli E. Hertz 50 Chairman, President and Chief 1996 Executive Officer; Director I. Marilyn Hertz 48 Vice Chairperson, Secretary 1996 and Director Barry J. Goldsammler 46 Senior Vice President, Chief 1997 Financial and Accounting Officer And Director Beryl Ackerman 53 Director 1996 Bruce Borner 48 Director 1996 Certain information about the five nominees are set forth below: Eli E. Hertz was a co-founder of the Company in 1982. He has a B.S. degree in Management Science and Economics and an MBA in Accounting and Management from Long Island University. Mr. Hertz is the husband of I. Marilyn Hertz. I. Marilyn Hertz was a co-founder of the Company. She has been a principal officer of the Company since its formation in 1982. Before becoming a full-time employee of the Company, Mrs. Hertz was an officer of Citibank in its computer systems department. Mrs. Hertz is a graduate of Queens College, and for over 12 years, has lectured on micro and mainframe computer programming at Queens College. Mrs. Hertz is the wife of Eli E. Hertz. Barry J. Goldsammler joined the Company in 1990 and has served in various executive positions since then. Before joining the Company he was vice president for a sheet metal fabricator and treasurer and principal financial officer for a public manufacturing company. Mr. Goldsammler received a B.S. degree in Accounting from Brooklyn College. Bruce Borner has, for more than five years, been president of Computer Projections, a company which is a consultant to, and developer of, a wide range of information/database systems for diverse industries. Mr. Borner has an MBA from the Management Development Institute (IMD) in Lausanne, Switzerland founded by the Harvard Business School. Beryl Ackerman has, since June 1994, been a consultant to Justified Computer Systems, a computer consulting firm. Prior thereto, he was a computer specialist for the New York City Department of Sanitation. He is also a Coordinator for Computer Systems in the Continuing Education Program at Queens College, and a lecturer at Baruch College. 3 Board of Directors and Committees The Board of Directors of the Company (the "Board") held three meetings, the Audit Committee had one meeting and the Compensation Committee had no meetings during the fiscal 1999 year. The Audit and Compensation Committees are comprised of Messrs. Ackerman and Borner. The Compensation Committee, though not having met as a separate body during the past fiscal year, did meet and discussed with the full Board matters relating to stock options and other compensation matters. There is no nominating committee. All directors attended more than 75 percent of the aggregate number of meetings of the Board. The Compensation Committee's function is to review and recommend to the Board the compensation and benefits of all officers of the Company, review general policy matters relating to compensation and benefits of employees of the Company and administer the issuance of stock options and discretionary cash bonuses to the Company's officers, employees, directors and consultants. The Audit Committee meets with management and the Company's independent auditors to determine the adequacy of internal controls and other financial reporting matters. It is the intention of the Company to appoint only independent directors to the Audit and Compensation Committees. The Board of Directors unanimously recommends a vote FOR the election of each of the nominees. Remuneration The following table sets forth the combined remuneration earned during the last three fiscal years by its Chief Executive Officer and the only other executive officer that received compensation in excess of $100,000 for services rendered in all capacities to the Company for its fiscal year ended August 31, 1999. Summary Compensation Table Annual Compensation Long Term Compensation Awards ------------------- ----------------------------- Restricted Securities Name and Principal Stock Underlying Position Year Salary Bonus Awards($) Options(#) -------- ---- ------ ----- --------- ---------- Eli E. Hertz 1999 $ 226,731 -- -- 566,667 Chairman, President and 1998 $ 225,000 -- -- 166,666 (2) Chief Executive Officer 1997 $ 210,674 -- -- 600,000 (2) Barry J. Goldsammler 1999 $ 125,710 -- -- 86,667 Senior Vice President 1998 $ 122,274 -- $ 79,725 (1) 16,666 (2) 1997 $ 106,680 -- -- - ---------- (1) Represents market value of 50,000 shares at date of grant (2) Options canceled without having been exercised 4 Stock Options The following table shows certain information with respect to the stock options granted in 1999 to named executive officers. No Options granted have been exercised. Option Grants in 1999 - -------------------------------------------------------------------------------- Individual Grants of Options Percent Of Total Options Exercise Number of Securities Granted To Employees Price Expiration Name Underlying Option # in Fiscal 1999 ($/Sh) Date - ---- ------------------- -------------- ------ ---- Eli E. Hertz 566,667 51% .85 12/02/03 Barry J. Goldsammler 86,667 8% .85 12/02/03 All the above options become exercisable as to 1/3 of each grant on December 3rd of each of three successive years beginning with 1999. Employment Agreement The Company has entered into an employment agreement ("Agreement") effective as of November 12, 1996 with Eli E. Hertz. The term of his employment will expire on November 11, 2001. The annual salary under the Agreement with Mr. Hertz is $225,000. His salary can be increased only with the approval of a disinterested majority of the Board of Directors. The Agreement provides, among other things, for participation in an equitable manner in any profit-sharing or retirement, separation and disability plans for employees or executives and for participation in other employee benefits applicable to employees and executives of the Company. The Agreement further provides for the use of an automobile and other fringe benefits commensurate with his duties and responsibilities. The Agreement with Mr. Hertz also provides for benefits in the event of retirement, separation and disability. Under the Agreement, employment may be terminated by the Company with cause or by Mr. Hertz with good reason. Termination by the Company without cause, or by Mr. Hertz for good reason, would subject the Company to liability for liquidated damages in an amount equal to Mr. Hertz's base salary for the remaining term of his employment agreement or 12 months, whichever is higher. Directors' Compensation Non-Employee Directors are compensated at the rate of $500 per meeting. In addition, each Non-Employee Director received options to purchase 6,000 shares of the Company's Common Stock at a price of $.85 per share exercisable as to one-third of the options granted on the same date in each of three successive years beginning on the expiration of one year from the granting date. All options expire on December 2, 2003. 5 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth certain information with respect to beneficial ownership of the Company's Common Stock on December 10, 1999 by (i) each person who is known by the Company to own beneficially more than five percent (5%) of the Company's Common Stock; (ii) each of the Company's officers and directors; and (iii) all officers and directors as a group: Name and Address (1) Position with Company Number of Shares Percent of Shares - -------------------- --------------------- ---------------- ----------------- Eli E. Hertz Chairman, President and Chief Executive Officer; Director 708,652 (2) 30.57% (7) I. Marilyn Hertz Vice Chairperson, Secretary Director 576,944 (3) 26.54% (7) Barry J. Goldsammler Senior Vice President, Principal Financial Officer, Chief Accounting Officer Director 78,889 (4) 3.66% (7) Beryl Ackerman Director 3,667 (5) (8) Bruce Borner Director 3,800 (6) (8) --------- ----- All Officers and Directors as a Group (5 persons) 1,371,952 (10) 57.20% (9) - ------------------------------------ (1) The address of all the persons listed above is c/o Hertz Technology Group, Inc., 75 Varick Street, 11th Floor, New York, New York 10013. (2) Includes 188,890 shares issuable upon exercise of currently exercisable options at $.85 per share. (3) Includes 44,444 shares issuable upon exercise of currently exercisable options at $.85 per share. (4) Includes 28,889 shares issuable upon exercise of currently exercisable options at $.85 per share. (5) Includes 3,667 shares issuable upon exercise of currently exercisable options at $.85 per share. (6) Includes 3,667 shares issuable upon exercise of currently exercisable options at $.85 per share. (7) Assumes that all currently exercisable options by such person have been exercised. (8) Less than 1% (9) Assumes all currently exercisable options by officers and directors are exercised. (10) Includes options that are currently exercisable. Section 16(a) Beneficial Ownership Reporting Compliance 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 a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than ten-percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. To the best of the Company's knowledge, based solely on review of the copies of such forms furnished to the Company, or written representations that no other forms were required, the Company believes that all Section 16(a) filing requirements applicable to its officers and directors were complied with during 1999. 6 AMENDMENT TO INCREASE AUTHORIZED COMMON STOCK The authorized capital stock of the Company currently consists of 3,000,000 shares of Common Stock, $.001 par value of which 1,065,117 shares were issued prior to November 2, 1998, after giving effect of the one for three reverse stock split. On May 19, 1999, the Company authorized a two for one stock dividend which increased the number of issued shares to 2,306,949, thereby reducing the number of shares available for issuance to less than 700,000 shares. The reason for the proposed amendment is to allow sufficient shares available for issuance for acquisition and incentive options purposes in the future. By reason of this two for one stock dividend that occurred on May 18, 1999 the 3,000,000 shares are now considerably fewer shares than needed for the Company's present and projected needs. An authorized capitalization of 6,000,000 shares should give the Company about 3,693,000 shares for issuance for acquisitions and incentive options. This should be sufficient to meet the anticipated needs of the Company. Adoption of the proposed amendment requires the affirmative vote of the holders of not less than a majority of the shares of Common Stock outstanding and entitled to vote at the Annual Meeting. The Board of Directors recommends a vote FOR the approval of the proposed amendment reducing the authorized Common Stock. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS The Board proposes that the stockholders ratify the appointment of Goldstein Golub Kessler LLP as the Company's independent auditors for its fiscal year ending on August 31, 2000. Arthur Andersen LLP was the previous independent auditors for the fiscal year ending on August 31, 1998. However, a mutual decision to change independent auditors occurred in January, 1999 and the Company secured the services of Goldstein Golub Kessler, LLP to act as the Company's independent auditors for fiscal year 1999. The report of Goldstein Golub Kessler LLP with respect to the Company's financial statements appears in the Company's Annual Report for the 1999 fiscal year. A representative of Goldstein Golub Kessler LLP will be at the annual meeting and will have an opportunity to make a statement if he desires to do so and will be available to respond to appropriate questions. In the event the stockholders fail to ratify the appointment, the Board will consider it a directive to consider other auditors for a subsequent year. Approval of the foregoing proposal requires the affirmative vote of a majority of the votes cast. The Board of Directors recommends a vote FOR this proposal. INCREASE THE NUMBER OF OPTIONS AVAILABLE UNDER THE STOCK OPTION PLAN FROM 500,000 to 750,000 The Board of Directors recommends that the shareholders ratify an increase in the number of stock options available for issuance under the Stock Option Plan from 500,000 to 750,000. The Plan which is currently authorized to issue 500,000 options has 181,452 options issued to date. Only 318,548 options are remaining for issuance. The Company believes that in the future for incentive options to be issued for key employees, consultants and acquisitions, the number of options should be increased to allow for these incentives. The Board of Directors recommends a vote FOR this proposal. 7 MISCELLANEOUS Other Matters Management knows of no matter other than the foregoing to be brought before the Annual Meeting of Stockholders, but if such other matters properly come before the meeting, or any adjournment thereof, the persons named in the accompanying form of proxy will vote such proxy on such matters in accordance with their best judgment. Reports and Financial Statements The Company's Annual Report for the year ended August 31, 1999 including Audited Financial Statements, accompanies this Proxy Statement. A copy of the Company's Annual Report to the Securities and Exchange Commission on Form 10-KSB is incorporated in the Annual Report. Solicitation of Proxies The entire cost of the solicitation of proxies will be borne by the Company. In addition, proxies may be solicited by directors, officers and regular employees of the Company, without extra compensation, by telephone, telegraph, mail or personal interview. The Company will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable expenses for sending proxies and proxy material to the beneficial owners of its Common Shares. Stockholder Proposals Stockholder proposals intended to be presented at the Company's 2000 Annual Meeting must be received by the Company for inclusion in the Company's proxy statement relating to that meeting not later than August 15, 2000. Such proposals should be addressed to I. Marilyn Hertz, Secretary, Hertz Technology Group, Inc., 75 Varick Street, 11th Floor, New York, New York 10013. EVERY STOCKHOLDER, WHETHER OR NOT HE OR SHE EXPECTS TO ATTEND THE ANNUAL MEETING IN PERSON, IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED BUSINESS REPLY ENVELOPE. - -------------------------------------------------------------------------------- THE COMPANY SHALL PROVIDE EACH STOCKHOLDER WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE COMPANY'S MOST RECENT FISCAL YEAR. REQUEST FOR SUCH REPORT SHOULD BE MADE TO BARRY GOLDSAMMLER, CFO AT THE COMPANY AT 75 VARICK ST., NY, NY 10013 OR BY PHONE AT 212-634-4000. By order of the Board of Directors Eli E. Hertz Chairman of the Board, President and Chief Executive Officer New York, New York January 10, 2000 8 HERTZ TECHNOLOGY GROUP, INC. This proxy solicited by the Board of Directors for the Annual Meeting on February 16, 2000 The undersigned hereby appoints I. Marilyn Hertz and Barry J. Goldsammler, and each of them, with full power of substitution, the attorneys and proxies of the undersigned to attend the Annual Meeting of Stockholders of Hertz Technology Group, Inc. to be held February 16, 2000 at 4:00 P.M., and at any adjournment or adjournments thereof, hereby revoking any proxies heretofore given, to vote all shares of stock of the Company held or owned by the undersigned as indicated on the proposals as more fully set forth in the Proxy Statement, and in their discretion upon such other matters as may come before the meeting. 1. Election of the following Directors -- Eli E. Hertz, I. Marilyn Hertz, Barry J. Goldsammler, Beryl Ackerman and Bruce Borner. FOR all nominees |_| WITHHOLD authority to vote for all nominees |_| FOR all nominees, EXCEPT nominee(s) written below. -------------------------------------------------------------------------- The Board of Directors recommends a vote FOR all nominees and FOR Proposals 2, 3 and 4. 2. Proposal to amend the Company's Certificate of Incorporation to increase its authorized Common Stock from 3,000,000 shares to 6,000,000 shares. FOR |_| AGAINST |_| ABSTAIN |_| 3. Proposal to ratify the appointment of Goldstein Golub Kessler LLP as the Company's independent auditors for 2000. FOR |_| AGAINST |_| ABSTAIN |_| 4. Proposal to ratify the increase of options available under the current Stock Option Plan from 500,000 to 750,000. FOR |_| AGAINST |_| ABSTAIN |_| 9 The shares represented by this proxy will be voted as directed or if no direction is indicated, will be voted FOR the election of each of the nominees and FOR Proposals 2, 3 and 4. As to any other matter, said proxies shall vote in accordance with their best judgment. The undersigned hereby acknowledges receipt of the Notice of and Proxy Statement for the aforesaid Annual Meeting. Date and sign exactly as name appears hereon. Each Joint Tenant must sign. When signed as Attorney, Executor, Trustee, etc. give full title. If signer is corporation, sign in full corporate name by authorized officer. _____________________________________ (Date) _____________________________________ (Signature of Stockholder) _____________________________________ (Signature of Stockholder) 10