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
ROSEDALE DECORATIVE PRODUCTS, LTD.
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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 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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(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:
ROSEDALE DECORATIVE PRODUCTS, LTD.
731 Millway Avenue
Concord, Ontario, Canada L4K 3S8
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 3, 1999
Concord, Ontario, Canada
April 30, 1999
The Annual Meeting of Stockholders (the "Annual Meeting") of Rosedale
Decorative Products, Ltd., an Ontario, Canada corporation (the "Company"), will
be held at the Holiday Inn, Yorkdale, 3450 Dufferin Street, Toronto, Ontario,
Canada M6A 2V1 on June 3, 1999 at 11:00 a.m. (local time) for the following
purposes:
1. To elect five directors to the Company's Board of Directors, each to
hold office until his successor is duly elected and qualified or until his
earlier resignation or removal (Proposal No. 1);
2. To approve the removal of a restriction on the issuance of the Company's
Class A Special Shares that requires that shares be issued to officers and
directors only on the same terms as it is offered to all other existing
shareholders or to new shareholders (Proposal No. 2);
3. To consider and act upon a proposal to ratify the Board of Directors'
selection of Schwartz Levitsky Feldman as the Company's independent auditors for
the fiscal year ending December 31, 1999 (Proposal No. 3); and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors, are
more fully described in the Proxy Statement which is attached and made a part of
this Notice.
The Board of Directors has fixed the close of business on April 30, 1999 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. However, whether or not you expect to attend the Annual Meeting in
person, you are urged to mark, date, sign and return the enclosed proxy card as
promptly as possible in the postage-prepaid envelope provided to ensure your
representation and the presence of a quorum at the Annual Meeting. If you send
in your proxy card and then decide to attend the Annual Meeting to vote your
shares in person, you may still do so. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
By Order of the Board of Directors,
/s/ SIDNEY ACKERMAN
Sidney Ackerman
President
IMPORTANT
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. IF A QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF
RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THANK YOU FOR ACTING PROMPTLY
ROSEDALE DECORATIVE PRODUCTS, LTD.
731 Millway Avenue
Concord, Ontario, Canada L4K 3S8
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board") of Rosedale Decorative Products, Ltd., an
Ontario, Canada corporation (the "Company"), of proxies in the enclosed form for
use in voting at the Annual Meeting of Stockholders (the "Annual Meeting") to be
held at the Holiday Inn Yorkdale, 3450 Dufferin Street, Toronto, Ontario, Canada
M6A 2V1 on June 13, 1999 at 11:00 a.m. (local time), and any adjournment or
postponement thereof. Only holders of record of the Company's common stock, no
par value per share (the "Common Stock") on April 30, 1999 (the "Record Date")
will be entitled to vote at the Meeting. At the close of business on the Record
Date, the Company had outstanding 2,765,000 shares of Common Stock.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to its exercise. Any proxy given is revocable prior
to the Meeting by an instrument revoking it or by a duly executed proxy bearing
a later date delivered to the President of the Company. Such proxy is also
revoked if the stockholder is present at the Meeting and elects to vote in
person.
The Company will bear the entire cost of preparing, assembling, printing
and mailing the proxy materials furnished by the Board of Directors to
stockholders. Copies of the proxy materials will be furnished to brokerage
houses, fiduciaries and custodians to be forwarded to the beneficial owners of
the Common Stock. In addition to the solicitation of proxies by use of the mail,
some of the officers, directors and regular employees of the Company may
(without additional compensation) solicit proxies by telephone or personal
interview, the costs of which the Company will bear.
This Proxy Statement and the accompanying form of proxy is being sent or
given to stockholders on or about May 5, 1999.
Stockholders of the Company's Common Stock are entitled to one vote for
each share held. Such shares may not be voted cumulatively.
Each validly returned proxy (including proxies for which no specific
instruction is given) which is not revoked will be voted "FOR" each of the
proposals as described in this Proxy Statement and, at the proxy holders'
discretion, on such other matters, if any, which may come before the Meeting
(including any proposal to adjourn the Meeting).
Determination of whether a matter specified in the Notice of Annual Meeting
of Stockholders has been approved will be determined as follows. Those persons
will be elected directors who receive a plurality of the votes cast at the
Meeting in person or by proxy and entitled to vote on the election. Accordingly,
abstentions or directions to withhold authority will have no effect on the
outcome of the vote. For each other matter specified in the Notice of Annual
Meeting of Stockholders, the affirmative vote of a majority of the shares of
Common Stock present at the Meeting in person or by proxy and entitled to vote
on such matter is required for approval. Abstentions will be considered shares
present in person or by proxy and entitled to vote and, therefore, will have the
effect of a vote against the matter. Broker non-votes will be considered shares
not present for this purpose and will have no effect on the outcome of the vote.
Directions to withhold authority to vote for directors, abstentions and broker
non-votes will be counted for purposes of determining whether a quorum is
present for the Meeting.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, the stockholders will elect five (5) directors to
serve until the next Annual Meeting of Stockholders or until their respective
successors are elected and qualified. In the event any nominee is unable or
unwilling to serve as a director at the time of the Annual Meeting, the proxies
may be voted for the balance of those nominees named and for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy, or for the balance of the nominees named without nomination of a
substitute, or the size of the Board may be reduced in accordance with the
Bylaws of the Company. The Board has no reason to believe that any of the
persons named below will be unable or unwilling to serve as a nominee or as a
director if elected.
Assuming a quorum is present, the five nominees receiving the highest
number of affirmative votes of shares entitled to be voted for them will be
elected as directors of the Company for the ensuing year. Unless marked
otherwise, proxies received will be voted "FOR" the election of each of the five
nominees named below. In the event that additional persons are nominated for
election as directors, the proxy holders intend to vote all proxies received by
them in such a manner as will ensure the election of as many of the nominees
listed below as possible, and, in such event, the specific nominees to be voted
for will be determined by the proxy holders.
Name Age Position
Alan Fine 53 Chief Executive Officer and Chairman of the Board
Sidney Ackerman 53 President and Director
Norman G. Maxwell 51 Chief Financial Officer, Operations Manager and Director
Ken Page 36 Director
Gregory Sichenzia 36 Director
The following information with respect to the principal occupation or
employment of each nominee for director, the principal business of the Company
or other organization in which such occupation or employment is carried on, and
such nominee's business experience during the past five years, has been
furnished to the Company by the respective director nominees:
Alan Fine has served as the Chief Executive Officer and Chairman of the
Board of the Company since its inception in May 1997. In 1982, Mr. Fine founded
Rosedale Wallcoverings & Fabrics Inc. and has served as the President of
Rosedale Wallcovering & Fabrics, Inc. since 1987. Mr. Fine has also served as
the Secretary for Ontario Paint & Wallpaper Ltd since 1978. From 1972 to 1977
Mr. Fine was the Manager of Wallpaper Distribution for Ontario Paint & Wallpaper
Ltd.
Sidney Ackerman has served as the President of the Company since its
inception in May 1997. In 1971, Mr. Ackerman was responsible for the development
of Ontario Wallcoverings which became the wallpaper distribution arm of Ontario
Paint & Wallpaper Ltd. In June 1978, Mr. Ackerman was elected Director and
Treasurer of Ontario Paint & Wallpaper Ltd. Since 1994, Mr. Ackerman has served
as the President of Ontario Paint & Wallpaper Ltd.
Norman G. Maxwell has been Chief Financial Officer and Operations Manager
of the Company since its inception in May 1997 and has served as a director of
the Company since May 1997. Prior thereto, since 1992, Mr. Maxwell has served as
the Vice President of Finance with Ontario. From 1989 to 1992, Mr. Maxwell
served as the Comptroller of Ontario. Mr. Maxwell has been in the wallcovering
industry for over 20 years and has been a Certified Management Accountant since
1977.
Ken Page has been a Director of the Company since June 1998. Since 1992 Mr.
Page has been a partner of the law firm of Page Hill in Toronto, Ontario,
Canada. Mr. Page graduated from the University of Western Ontario with an LLB in
1986 and was admitted to the bar in Ontario 1988.
2
Gregory Sichenzia has been a Director of the Company since August 1998. Mr.
Sichenzia is a partner of the law firm of Sichenzia, Ross & Friedman LLP in New
York, New York and has been since May 1998. He had been a partner of Singer
Zamansky LLP in New York, New York, since November 1996. Prior thereto and since
August 1994, he had been an associate attorney at Schneck Weltman Hashmall &
Mischel LLP in New York City.
Sichenzia, Ross & Friedman LLP serves as the Company's United States legal
counsel for all securities related matters.
Directors serve until the next annual meeting of stockholders or until
their successors are elected and qualified. Officers serve at the discretion of
the Board of Directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1998, the Board of Directors of
the Company held two (2) meetings and acted by unanimous written consent on two
(2) occasions. No director attended fewer than 75% of the total number of
meetings of the Board of Directors during the last fiscal year.
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee consists of three directors, Gregory Sichenzia, Ken
Page and Sidney Ackerman. Mr. Sichenzia and Mr. Page are independent directors
who are not salaried officers of the Company. The purpose of the Compensation
Committee is to review the Company's compensation of its executives, to make
determinations relative thereto and to submit recommendations to the Board of
Directors with respect thereto in order to ensure that such officers and
directors receive adequate and fair compensation. The Compensation Committee is
also responsible for administering the Company's 1998 Stock Option Plan. The
Compensation Committee met one (1) time during the last fiscal year.
The Audit Committee is composed of three directors, Gregory Sichenzia, Ken
Page and Alan Fine. The Audit Committee is responsible for the general oversight
of audit, legal compliance and potential conflict of interest matters, including
(a) recommending the engagement and termination of the independent public
accountants to audit the financial statements of the Company, (b) overseeing the
scope of the external audit services, (c) reviewing adjustments recommended by
the independent public accountant and addressing disagreements between the
independent public accountants and management, (d) reviewing the adequacy of
internal controls and management's handling of identified material inadequacies
and reportable conditions in the internal controls over financial reporting and
compliance with laws and regulations, and (e) supervising the internal audit
function, which may include approving the selection, compensation and
termination of internal auditors. The Audit Committee met one (1) time during
the last fiscal year.
The Board does not have a nominating committee or a committee performing
the functions of a nominating committee. Although there are no formal procedures
for stockholders to nominate persons to serve as directors, the Board will
consider nominations from stockholders, which should be addressed to Norman
Maxwell at the Company's address set forth above.
COMPENSATION OF DIRECTORS
Directors currently receive no cash fees for services provided in that
capacity, but are reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at meetings of the Board or any committee thereof
they attend. The Company is currently reviewing its policy on compensation of
outside directors and may pay outside directors in the future.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES NAMED ABOVE.
The proxy holders intend to vote the shares represented by proxies for all
of the board's nominees, except to the extent authority to vote for the nominees
is withheld.
3
PROPOSAL NO. 2
REMOVAL OF RESTRICTIONS ON THE ISSUANCE OF CLASS A SPECIAL SHARES
At the Annual Meeting, the Company's stockholders are being asked to
approve a resolution to remove certain restrictions on the issuance of the
Company's Class A Special Shares.
The Company's Articles of Incorporation authorize the issuance of an
unlimited number of shares of Class A Special Shares (the "Special Shares") with
such designations, rights and preferences as shall be determined from time to
time by the Board of Directors. Accordingly, the Company's Board of Directors is
empowered, without stockholder approval, to issue Special Shares with voting,
liquidation, conversion or other rights that could adversely affect the rights
of the holders of the Common Stock. In the Company's final prospectus
distributed in connection with the Company's initial public offering in June
1998, the Company made an undertaking that it would not offer the Special Shares
to certain officers and directors of the Company except on the same terms as it
is offered to all other existing shareholders or new shareholders. The
undertaking was necessary solely to qualify the Company's securities for sale in
the State of Oregon. The Company may now rely on an after-market trading
exemption for the sale of its securities in that State. The Board believes that
the restriction on the Special Shares no longer serves any purpose and the
Board, therefore, believes that removal of the restriction on the Special Shares
is in the best interest of the Company and should be approved by its
shareholders.
First, Management believes that such a limitation on the issuance of the
Company's Special Shares limits the ability of the Company to effectively manage
the Company's operations. The adoption of this proposal would benefit the
Company by strengthening its ability to attract, retain and motivate existing
and new management and directors upon whose judgment, interest and special
effort, the successful conduct of its operation is largely dependent. For this
purpose, the Board may deem it necessary and appropriate at some point in the
future to issue Special Shares under an employee stock incentive benefits. In
addition, the Company may also want to issue Special Shares to non-employee
directors as a means through which such directors would be encouraged to acquire
stock ownership, thereby strengthening their commitment to the welfare and
growth of the Company. Such a plan would provide a direct incentive for our
outside directors to become stockholders in the Company and as a means of
retaining such directors as member of the Board. The Company does not currently
have any plans to issue any Special Shares or adopt an employee stock benefits
plan involving the Special Shares.
Second, the Board of Directors believes that the restriction on the
issuance of the Special Shares could potentially hinder the ability of the
Company to fend off an inadequately priced tender offer or hostile takeover
attempt. Removal of the restrictions would ultimately be in the best interests
of all the stockholders since the Board of Directors would have the ability to
issue Special Shares to deter or delay an attempted takeover that the Board of
Directors considered to be not in the best interests of the Company and its
stockholders. The ability of the Company to issue the Special Shares without
restriction could enhance the ability of the Board and ultimately the
stockholders, to negotiate from the strongest practical position with any
potential acquiring corporation or group. The Board could also consider the
adoption of a stockholder rights plan involving the Special Shares. Such plans
are designed to protect the stockholders from unfair or coercive takeover
attempts and to prevent a potential acquiror from gaining control of a company
without fairly compensating all of the Company's stockholders.
Any future issuance of Special Shares would have to comply with the Board's
fiduciary duty to act in the best interest of the Company and its shareholders.
Stockholders should be aware, however, that rights plans are viewed by certain
investors to be detrimental to stockholder value because they may render more
difficult or even discourage an acquisition attempt or other transaction that a
majority of the stockholders might believe to be in their best interest, thereby
depriving stockholder of the opportunity to receive a premium for their stock
over the then-current market price of such stock that might have been be
obtained in the absence of such plans. Rights plans have also been criticized by
certain investors as making the removal of management more difficult. The Board
has no current plans to issue any such stock, nor is the Board aware of any
current proposals by any party to acquire control of the Company.
Removal of the restrictions on the issuance of Special Shares may provide a
benefit that inures to the advantage of management and directors of the Company.
Certain officers and directors of the Company would be eligible to receive Class
A Special Shares on more favorable terms than are generally available to other
shareholders. However, the Board of Directors believes that the removal of this
restriction is ultimately in the best interests of the Company and
4
its stockholders because such shares may be used to attract and retain qualified
management and directors and will give the Board substantial leverage in
negotiating a merger or takeover of the Company.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF A RESOLUTION TO REMOVE THE
RESTRICTIONS ON THE ISSUANCE OF CLASS A SPECIAL SHARES.
The proxy holders intend to vote the shares represented by proxies to
approve the resolution removing the restrictions on the issuance of shares of
the Company's Class A Special Shares, except to the extent authority to vote for
the resolution is withheld.
5
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Schwartz Levitsky Feldman, Chartered Accountants, has served as the
operating subsidiaries independent auditors since 1994 and the Company's
independent auditors since its inception in 1997 and has been appointed by the
Board to continue as the Company's independent auditors for the fiscal year
ending December 31, 1999. In the event that ratification of this selection of
auditors is not approved by a majority of the shares of Common Stock voting at
the Annual Meeting in person or by proxy, the Board will reconsider its
selection of auditors. Schwartz Levitsky Feldman has no interest, financial or
otherwise, in the Company.
Representatives from the accounting firm of Schwartz Levitsky Feldman will
be present at the Meeting will be afforded the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.
RECOMMENDATION OF THE BOARD:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF SCHWARTZ
LEVITSKY FELDMAN AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
The proxy holders intend to vote the shares represented by proxies to
ratify the appointment of Schwartz Levitsky Feldman as the Company's independent
auditors for the fiscal year ending December 31, 1999, except to the extent
authority to vote for such approval is withheld.
6
STOCK OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of December 31, 1998, by (i) all persons known by
the Company to be beneficial owners of five percent (5%) or more of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each of the executive officers of the Company, (iv) all directors and executive
officers of the Company as a group.
Number of Shares Approximate
Beneficially Percentage of
Name (1) Owned Common Stock
Sidney Ackerman(2) 375,000 13.6%
Alan Fine(3) 562,500 20.3%
Rosalyn Fine(4) 187,500 6.8%
The Ackerman Family Trust(5) 375,000 13.6%
All Executive Officers and Directors
as a Group (two persons) 937,500 33.9%
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(1) Unless otherwise indicated, the address is c/o Rosedale Decorative
Products Ltd., 731 Millway Avenue, Concord, Ontario, Canada L4K 3S8.
(2) Does not include 375,000 shares of Common Stock held by the Ackerman
Family Trust. Includes 106,500 shares of Common Stock owned by 1274152 Ontario
Inc. of which Sidney Ackerman is a 25% owner.
(3) Includes 268,500 shares of Common Stock owned by 454590 Ontario Limited
of which Alan Fine and the Fine Family Trust are shareholders and includes
159,750 shares of Common Stock owned by 1274152 Ontario Inc. of which Alan Fine
is a 12.5% owner.
(4) Includes 53,250 shares of Common Stock owned by 1274152 Ontario, Inc.
of which Rosalyn Fine is a 12.5% owner. Rosalyn Fine is the former wife of Alan
Fine and the sister of Sidney Ackerman.
(5) The Ackerman Family Trust owns 375,000 shares of Common Stock,
including 106,500 shares of Common Stock owned by 1274152 Ontario, Inc. of which
The Ackerman Family Trust is a 25% owner, held in trust for the benefit of
Sidney Ackerman's wife and two minor children. Sheldon Shapiro and Fred Stoppell
are trustees of The Ackerman Family Trust. Under the terms of the trust
instrument, the trustees have the power to vote the shares.
Voting Agreement
Effective March 31, 1998, Sidney Ackerman, Alan Fine, The Ackerman Family
Trust, 1274152 Ontario Inc. and 454590 Ontario Limited (the "Shareholders"),
entered into a Common Stock voting agreement. Pursuant to the terms of the
voting agreement, each of the Shareholders agrees to vote all of their Shares
unanimously in respect of any matter to be voted on at any meeting of the
shareholders of the Company. In the event the Shareholders cannot express
unanimity or any of them abstains from voting then the Shareholders agree to
vote all of their Shares against such matter or withhold all of their votes in
respect of such matter as applicable and to so instruct their proxies. The
provisions of the voting agreement shall apply to any shares in the capital
stock of the Company to which voting rights attach which may be issued to the
Shareholders at any time during the term of the voting agreement and any shares
in the capital stock of the Company which are issued in replacement of any
shares or after acquired shares. The voting agreement does not apply to any
shares that are sold or transferred to a Shareholder and does not apply to any
shares that are sold or transferred to a third party in an arm's-length
transaction. The voting agreement terminates upon Sidney Ackerman or Alan Fine
being no longer employed by the Company or any of its subsidiaries or the date
upon which any Shareholder divests itself of all shares in an arm's-length
transaction for fair market consideration, whichever is earlier.
7
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain summary information with respect to
the compensation paid to the Company's Chief Executive Officer, and the
Company's President, for services rendered in all capacities to the Company for
the fiscal period ended December 31, 1998. Other than as listed below, the
Company had no executive officers whose total annual salary and bonus exceeded
$100,000 for that fiscal year:
Summary Compensation Table
Long-Term Compensation
Awards Payouts
Securities All
Restricted Underlying Other
Other Stock Options/ LTIP Compen-
Compen- Award(s) SARs Payouts sation
Name Position Year Salary sation Bonus ($) (#)(1)(2) ($) ($)
(1)
Alan Fine(1) Chief 1998 $ 160,000 $7,602 ---- ---- ---- ---- ----
Executive 1997 $ 173,360 $7,020 ---- ---- ---- ---- ----
Officer 1996 $ 41,068 $8,582 $121,003 ---- ---- ---- ----
Sidney President 1998 $ 160,000 $8,995 ---- ---- ---- ---- ----
Ackerman(1) 1997 $ 173,360 $9,595 ---- ---- ---- ---- ----
1996 $ 41,068 $8,621 $121,003 ---- ---- ---- ----
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(1) Reflects total compensation received from both the Company's Ontario
and Rosedale subsidiaries.
STOCK OPTIONS GRANTS AND EXERCISES
No stock options were granted to the named executive officers during the
last completed fiscal year.
The following table shows the value at December 31, 1998 of unexercised
options held by the named executive officers:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option
Values
Number of securities Value of unexercised in-the-
underlying unexercised money options at fiscal year-
options at fiscal year-end end ($)
(#)
Shares acquired Value Realized
Name on exercise (#) ($) Exercisable/unexercisable Exercisable/unexercisable
- -------------------------- ------------------- ------------------ --------------------------- -------------------------------
Alan Fine, Chief 0 0 0/0 0/0
Executive Officer
Sidney Ackerman, 0 0 0/0 0/0
President
- -------------------------- ------------------- ------------------ --------------------------- -------------------------------
EMPLOYMENT CONTRACTS
On June 18, 1998, Alan Fine and Sidney Ackerman both entered into five year
employment agreements with the Company. Alan Fine is retained as Chief Executive
Officer of the Company at an annual salary of $160,000. Sidney Ackerman is
retained as President of the Company at an annual salary of $160,000.
The employment agreements with Alan Fine and Sidney Ackerman provide that
upon the death of any of the two employees that three years full salary will be
paid to the employee's estate in a lump sum payment. The agreements also provide
for reimbursement of reasonable business expenses.
Alan Fine and Sidney Ackerman are entitled to bonuses of up to $10,000 each
based on achieving sales, profitability and management goals as predetermined by
the Board of Directors or compensation committee and other subjective criteria
as determined by the Board of Directors or Compensation Committee.
8
Alan Fine and Sidney Ackerman shall each receive $20,000 per year
additional compensation, including car allowance, insurance and retirement
savings with matched contributions by the Company and such other perquisites.
Upon the resignation, or exercise of retirement option upon reaching the
age of 60, the Company shall pay the employee a lump sum resignation allowance
equal to three years salary plus equivalent in benefits. Based upon any wrongful
termination of either Alan Fine or Sidney Ackerman, the Company shall pay the
employee a lump sum resignation allowance of 5 years salary and equivalent in
benefits.
In the event that there is a change in control of the Company, through an
acquisition where any person acquires more than 50% of the shares of the
Company, an amalgamation, consolidation or merger with another corporation
resulting in at least 50% of the voting shares of the surviving corporation
being controlled by a new acquirer or the sale directly or otherwise of all of
the assets of the Company to a third party in a non-distress situation, then the
Company shall pay to Alan Fine and Sidney Ackerman a lump sum payment equal to
the sum of one and one-half times their respective annual salaries paid or
payable in respect of the most recently completed fiscal year.
Stock Option Plan
The Company has adopted a Stock Option Plan (the "1998 Plan"), pursuant to
which 750,000 shares of Common Stock are reserved for issuance.
The 1998 Plan is administered by the Compensation Committee or the board of
directors, who determine, among other things, those individuals who shall
receive options, the time period during which the options may be partially or
fully exercised, the number of shares of Common Stock issuable upon the exercise
of the options and the option exercise price.
The 1998 Plan is for a period for ten years. Options may be granted to
officers, directors, consultants, key employees, advisors and similar parties
who provide their skills and expertise to the Company. Options granted under the
1998 Plan may be exercisable for up to ten years, may require vesting, and shall
be at an exercise price all as determined by the board. Options will be
non-transferable except to an option holder's personal holding company or
registered retirement savings plan and are exercisable only by the participant
during his or her lifetime.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 70, the option remains
exercisable for three months from such occurrence but not beyond the option's
expiration date. Other termination gives the participant three months to
exercise, except for termination for cause which results in immediate
termination of the option.
Options granted under the 1998 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, Common Stock having a
fair market equal to the cash exercise price, the participant's personal
recourse note, or with an assignment to the Company of sufficient proceeds from
the sale of the Common Stock acquired upon exercise of the Options with an
authorization to the broker or selling agent to pay that amount to the Company,
or any combination of the above.
The exercise price of an option may not be less than the fair market value
per share of Common Stock on the date that the option is granted in order to
receive certain tax benefits under the Income Tax Act of Canada (the "ITA"). The
exercise price of all future options will be at least 85% of the fair market
value of the Common Stock on the date of grant of the options. A benefit equal
to the amount by which the fair market value of the shares at the time the
employee acquires them exceeds the total of the amount paid for the shares or
the amount paid for the right to acquire the shares shall be deemed to be
received by the employee in the year the shares are acquired pursuant to
paragraph 7(1) of the ITA. Where the exercise price of the option is equal to
the fair market value of the shares at the time the option is granted, paragraph
110(1)(d) of the ITA allows a deduction from income equal to one quarter of the
benefit as calculated above. If the exercise price of the option is less than
the fair market value at the time it is granted, no deduction under paragraph
110(1)(d) is permitted. Options granted to any non-employees, whether directors
or consultants or otherwise will confer a tax benefit in contemplation of the
person becoming a shareholder pursuant to subsection 15(1) of the ITA.
Options under the 1998 Plan must be issued within ten years from the
effective date of the 1998 Plan.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the
9
Company become available again for issuance under the 1998 Plan.
The 1998 Plan may be terminated or amended at any time by the board of
directors, except that the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the 1998 Plan may not be
increased without the consent of the shareholders of the Company.
Information regarding executive compensation will appear under the caption
"Executive Compensation" in the Information Statement and is incorporated herein
by reference.
TRANSACTIONS WITH MANAGEMENT
In 1995, Alan Fine, Chief Executive Officer of the Company and Sidney
Ackerman, President of the Company each loaned funds to the Company's Ontario
and Rosedale subsidiaries. As at December 31, 1998, the outstanding amounts of
loans made by Alan Fine to Ontario and Rosedale were $234,841 and $460,108,
respectively, and the outstanding amount of the loans made by Sidney Ackerman to
Ontario and Rosedale were $164,229 and $315,809, respectively. These loans are
secured by a general security agreement on the personal property of Rosedale and
Ontario and bear interest at a rate equal to the prime rate of interest charged
by the National Bank of Canada plus 1.5% per annum and are payable on demand.
Alan Fine, Chief Executive Officer of the Company, and Sidney Ackerman,
President of the Company, own all of the issued and outstanding capital stock of
966578 Ontario Inc. and 976168 Ontario Inc. The Company leases space for its
retail store, located in downtown Toronto, from 966578 Ontario Inc. The lease
calls for rental payments in the amount of $16,100 per annum, plus general sales
taxes, payable in equal monthly instalments of $1,342. The lease is for a one
year term, automatically renewable from year to year unless terminated in
writing by either the landlord or the tenant on 30 days written notice.
In 1995, two related companies, 966578 Ontario Inc. and 976168 Ontario Inc.
were loaned funds by the Company. As of December 31, 1997, the Company had
outstanding loan receivables from 976168 Ontario Inc. in the amount of $1,933.
The loans bear interest at a rate equal to the prime rate of interest as charged
by the National Bank of Canada plus 1.5% and are payable on demand.
The Company has second mortgages from two related companies, 1216748
Ontario Inc. and 1217576 Ontario Inc., both of which are 50% owned by Sidney
Ackerman, President and Alan Fine, Chief Executive Officer. The principal amount
of the loans from 1216748 Ontario Inc. and 1217576 Ontario Inc. are $168,768 and
$153,073, respectively. The mortgages are secured by land and buildings and bear
interest at 9% per annum and are payable on demand.
The Company has available credit facilities up to a maximum of $6,635,000
which bear interest at rates varying between the bank's prime rate and prime
plus .25%. The credit facilities are secured by general assignments of book
debts, pledge of inventory under Section 427 of the Bank Act of Canada, general
security agreements providing a first floating charge over all assets,
guarantees and postponement of claims to a maximum of $1,630,000 from the
Company and its subsidiaries, guarantees from affiliated companies up to
$555,000, assignment of life insurance of $1,000,000 on each of the lives of two
key officers and assignment of fire insurance.
During fiscal year 1998, the Company paid Sichenzia, Ross & Friedman LLP an
aggregate of $190,947.88. These fees included legal fees for a protracted
initial public offering of the Company's securities, qualifying the Company's
securities for listing on the Nasdaq Stock Market and for sale in various states
as well as ongoing legal services. Gregory Sichenzia is a partner of Sichenzia,
Ross & Friedman LLP ("SRF") and has also served as director of the Company since
August 1998. SRF now receives $4,000 per month from the Company for ongoing
legal services.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at next year's Annual
Meeting of Stockholders must be received by Norman Maxwell at Rosedale
Decorative Products, Ltd., 731 Millway Avenue, Concord, Ontario, Canada L4K 3S8,
no later than December 1, 1999.
OTHER PROPOSED ACTION
The Board of Directors is not aware of any other business which will come
before the Meeting, but if any such
10
matters are properly presented, the proxies solicited hereby will be voted in
accordance with the best judgment of the persons holding the proxies. All shares
represented by duly executed proxies will be voted at the Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended December 31, 1998, all Reporting Persons complied with all applicable
filing requirements.
AVAILABILITY OF CERTAIN DOCUMENTS REFERRED TO HEREIN
THIS PROXY STATEMENT REFERS TO CERTAIN DOCUMENTS OF THE COMPANY THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS ARE AVAILABLE TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS
DELIVERED, UPON ORAL OR WRITTEN REQUEST, WITHOUT CHARGE, DIRECTED TO NORMAN
MAXWELL, ROSEDALE DECORATIVE PRODUCTS, LTD., 731 MILLWAY AVENUE, CONCORD,
ONTARIO, CANADA L4K 3S8, TELEPHONE NUMBER (416) 593-4519. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, SUCH REQUESTS SHOULD BE MADE BY MAY 15, 1999.
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OTHER MATTERS
The Board of Directors knows of no other business that will be presented to
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, proxies in the enclosed form will be voted in respect thereof as the
proxy holders deem advisable.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
/s/ Sidney Ackerman
Sidney Ackerman
President
Concord, Ontario
Canada
April 30, 1999
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PROXY PROXY
ROSEDALE DECORATIVE PRODUCTS, LTD.
PROXY FOR ANNUAL MEETING TO BE HELD ON JUNE 3, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Alan Fine and Sidney Ackerman, or either of
them, as proxies, each with the power to appoint his substitute, to represent
and to vote all the shares of common stock of Rosedale Decorative Products, Ltd.
(the "Company"), which the undersigned would be entitled to vote, at the
Company's Annual Meeting of Stockholders to be held on June 3, 1999 and at any
adjournments thereof, subject to the directions indicated on the reverse side
hereof.
In their discretion, the Proxies are authorized to vote upon any other
matter that may properly come before the meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF
NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT--This Proxy must be signed and dated on the reverse side.
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THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT!
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
Rosedale Decorative Products, Ltd. to be held at the Holiday Inn Yorkdale, 3450
Dufferin Street, Toronto, Ontario, Canada M6A 2V1 on June 3, 1999 at 11:00 a.m.
(local time).
Please read the proxy statement which describes the proposals and presents
other important information, and complete, sign and return your proxy promptly
in the enclosed envelope.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1-3
1. ELECTION OF DIRECTORS -- For Withhold
Nominees:
Alan Fine [_] [_]
Sidney Ackerman [_] [_]
Norman G. Maxwell [_] [_]
Ken Page [_] [_]
Gregory Sichenzia [_] [_]
For Against Abstain
2 Proposal to remove restrictions on the [_] [_] [_]
issuance of Class A Special Shares.
For Against Abstain
3. Proposal to ratify Schwartz Levitsky [_] [_] [_]
Feldman as independent auditors.
If you plan to attend the Annual Meeting please mark this box [_]
Dated:________________, 1999
Signature ______________________________________________________________________
Name (printed) _________________________________________________________________
Title __________________________________________________________________________
Important: Please sign exactly as name appears on this proxy. When signing
as attorney, executor, trustee, guardian, corporate officer, etc., please
indicate full title.
FOLD AND DETACH HERE
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