SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check to 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
International Smart Sourcing, Inc.
(Formerly ChinaB2Bsourcing.com)
(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)(4) and O-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule O-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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
INTERNATIONAL SMART SOURCING, INC.
(FORMERLY CHINAB2BSOURCING.COM, INC.)
320 Broad Hollow Road
Farmingdale, NY 11735
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON June 4, 2002
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders (the "Annual
Meeting") of International Smart Sourcing, Inc. (Formerly ChinaB2Bsourcing.com,
Inc.) (the "Company") will be held on June 4, 2002 at 9:00 a.m. New York time at
Koerner Silberberg & Weiner LLP 112 Madison Avenue, 3rd Floor, New York, New
York, for the following purposes:
1. To elect five directors of the Company to serve until the 2003 Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualified.
2. To consider and act upon a proposal to approve an amendment to the
Company's 1998 Stock Option and Grant Plant (the "Grant Plan") to increase
the total number of shares of common stock, par value $.001 per share, of
the Company (the "Common Stock") that may be issued under the Grant Plan
from 800,000 to 1,000,000.
3. To consider and act upon any other matters that may properly be brought
before the Annual Meeting and at any adjournments or postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on the
date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on April 19, 2002 as the
record date for determining the stockholders entitled to notice of and to vote
at the Annual Meeting and at any adjournments or postponements thereof. Only
stockholders of record of the Common Stock at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting and at any
adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is being
solicited by the Board of Directors of the Company, and to mail it promptly in
the enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Harry Goodman
Secretary
Farmingdale, New York
April 26, 2002
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID
ENVELOPE PROVIDED. IF YOU ARE A STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
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INTERNATIONAL SMART SOURCING, INC.
(FORMERLY CHINAB2BSOURCING.COM, INC.)
320 Broad Hollow Road
Farmingdale, NY 11735
PROXY STATEMENT
FOR 2002 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON June 4, 2002
April 26, 2002
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of International Smart Sourcing, Inc. (Formerly
ChinaB2Bsourcing.com, Inc. (the "Company")for use at the 2002 Annual Meeting of
Stockholders of the Company to be held on June 4, 2002, and at any adjournments
or postponements thereof (the "Annual Meeting"). At the Annual Meeting,
stockholders will be asked to vote upon the election of five directors of the
Company, to consider and act upon a proposal to approve an amendment to the
Company's 1998 Stock Option and Grant Plan, and to act upon any other matters
properly brought before them.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about May 1, 2002. The Board of
Directors has fixed the close of business on April 19, 2002 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting (the "Record Date"). Only stockholders of record of the Company's
common stock, par value $.001 per share (the "Common Stock"), at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. Holders of Common Stock outstanding as of the close of business
on the Record Date will be entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of the
total number of shares of Common Stock outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Both abstentions and broker non-votes (as defined below) will be
counted as present in determining the presence of a quorum. A plurality of votes
cast shall be sufficient for the election of directors. Abstentions and broker
non-votes will be disregarded in determining the "votes cast" for purposes of
electing directors and will not affect the election of the candidates receiving
a plurality of votes. The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented and entitled to vote is required
to approve the amendment to of Incorporation. Abstentions will be included in
determining the number of shares of Common Stock present or represented and
entitled to vote for purposes of approval of the proposal to amend the
Certificate of Incorporation, and will therefore have the effect of votes
"against" such proposals. Broker non-votes will not be counted in determining
the number of shares of Common Stock present or represented and entitled to vote
to approve the amendment to the Certificate of Incorporation and will therefore
not have the effect of votes either "for" or "against" such proposals. A "broker
non-vote" is a proxy from a broker or other nominee indicating that such person
has not received instructions from the beneficial owner or other person entitled
to vote the shares which are the subject of the proxy on a particular matter
with respect to which the broker or other nominee does not have discretionary
voting power.
Stockholders of the Company are requested to complete, sign, date, and promptly
return the accompanying Proxy Card in the enclosed, postage-prepaid envelope.
Shares represented by a properly executed proxy received prior to the vote at
the Annual Meeting and not revoked will be voted at the Annual Meeting as
directed on the proxy. If a properly executed proxy is submitted and no
instructions are given, the proxy will be voted FOR the election of the nominees
for director of the Company named in this Proxy Statement and FOR the proposals
to approve the amendment to the Certificate of Incorporation. It is not
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anticipated that any matters other than the election of directors and the
amendment to the Certificate of Incorporation will be presented at the Annual
Meeting. If other matters are presented, proxies will be voted in accordance
with the discretion of the proxy holders.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not such stockholder has previously
given a proxy, but the presence (without further action) of a stockholder at the
Annual Meeting will not constitute revocation of a previously given proxy.
The Company's 2001 Annual Report, including audited financial statements for the
fiscal year ended December 28, 2001 ("Fiscal 2001"), is being mailed to
stockholders concurrently with this Proxy Statement. The Annual Report, however,
is not part of the proxy solicitation materials.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six members. At the
Annual Meeting, five directors will be elected to serve until the 2003 Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualified. The Board of Directors has nominated Andrew Franzone, David
Kassel, Harry Goodman, Carl Seldin Koerner and Mitchell Solomon (each a
"Nominee") to serve as directors. Each of the Nominees is currently serving as a
director of the Company. The Board of Directors anticipates that each of the
Nominees will serve, if elected, as a director. However, if any Nominee is
unable to accept election, the proxies will be voted for the election of such
other person or persons as the Board of Directors may recommend. The Board of
Directors will consider a Nominee for election to the Board of Directors
recommended by a stockholder of record if the stockholder submits the nomination
in compliance with the requirements of the Company's By-laws (the "By-laws").
See "Other Matters-Stockholder Proposals" for a summary of these requirements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
---
Information Regarding the Directors/Nominees
The names, ages, and a description of the business experience, principal
occupation and past employment during the last five years of each of the
Nominees are set forth below.
Name Age Position
David L. Kassel (2) 66 Chairman of the Board of Directors and
Chief Executive Officer
Andrew Franzone 64 President of EHC, Director
Harry Goodman 75 Vice President and Secretary, Director
Carl Seldin Koerner (1)(2) 52 Director
Mitchell Solomon (1)(2) 42 Director
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
David L. Kassel founded Electronic Hardware Corp., a wholly owned subsidiary of
the Company ("EHC")in 1970. Mr. Kassel has served as Chairman of EHC since 1975
and President of Compact Disc Packaging Corp., a wholly owned subsidiary of the
Company ("CDP") since 1995. In 2002, Mr. Kassel became the Chief Executive
Officer of the Company. From 1983 until 1995, he was Chairman of the Board of
Directors of American Safety Closure Corp., a company engaged in the
manufacturing of bottle caps. Mr. Kassel has been the Chairman and principal
stockholder of Allen Field Company, Inc.("AFC")since 1984. Mr. Kassel has been
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the Chairman of Memory Protection Devices, Inc., a company engaged in the
manufacturing of devices for the protection of computer memory, since 1987. Mr.
Kassel has been a partner in K&G Realty Associates, a privately held real estate
company, since 1978.
Andrew Franzone is currently President of EHC. Mr. Franzone also served as
President and Chief Executive Officer of the Company from 1987 through May 2001.
Mr. Franzone served as President of AFC from 1984 until 2001. Mr. Franzone
served as Chairman of the Board of Directors and President of Ackerman Bodnar
Corp., a manufacturer of interior aircraft lighting, from 1974 through 1983.
Harry Goodman served as Vice President of EHC since 1986. Mr. Goodman served as
President of EHC from 1976 to 1986 and began working as an officer of EHC in
1970. Mr. Goodman has been a partner at K&G Realty Associates since 1978. Mr.
Goodman has served as an officer of AFC since 1984. Mr. Goodman has served as an
officer of Memory Protection Devices, Inc. since 1987.
Carl Seldin Koerner joined the Company in 1998 as a director. Mr. Koerner has
been a practicing attorney since 1976 and is a managing partner in the law firm
of Koerner Silberberg & Weiner, LLP. Mr. Koerner established Koerner Silberberg
& Weiner, LLP, in 1986 and has served as counsel to the Company since 1976. Mr.
Koerner has served as a principal of Koerner Kronenfeld Partners, LLC, a
production company, since 1996 and has served on the board of directors of ASI
Solutions Incorporated (NASDAQ: ASIS), a human resources outsourcing firm from
1997 until 2001 when it merged with AON.
Mitchell Solomon joined the Company in 1998 as a director. Mr. Solomon has
served as President and director of Eby Electro Inc., a privately held
corporation, since 1993 and serves as President and director of Aspro Technology
Inc. and ECAM Technology Inc., both privately held corporations.
Board Committees
The Board of Directors of the Company has established a compensation committee
(the "Compensation Committee") and an audit committee (the "Audit Committee").
The Compensation Committee, which consists of David L. Kassel and two
non-employee directors, Carl Seldin Koerner and Mitchell Solomon, determines the
salaries and bonuses of the Company's executive officers. The Compensation
Committee also administers the Company's 1998 Stock Option and Grant Plan. Mr.
Koerner and Mr. Solomon also serve as members of the Audit Committee. The Audit
Committee recommends the appointment of auditors and oversees the accounting and
audit functions of the Company.
Meetings of the Board
During Fiscal 2001, the Board of Directors met four times. During Fiscal 2001,
each director, except Bao-Wen Chen, attended at least 75% of the aggregate of
(i) the total number of meetings of the Board of Directors (held during the
period for which such director served on the Board of Directors) and (ii) the
total number of meetings of all committees of the Board of Directors on which
such director served (during the periods for which such director served on such
committee or committees).
Compensation of Directors
Directors of the Company who are also employees receive no additional
compensation for their service as directors. Non employee Directors of the
Company receive a fee of $ 300 a month for serving on the Board of Directors and
reimbursement of reasonable expenses incurred in attending meetings.
Information Regarding Executive Officers
The names, ages and positions of each of the executive officers of the Company,
as well as a description of their business experience and past employment, are
as set forth below:
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Name Age Position
David L. Kassel 66 Chairman of the Board of Directors
and Chief Executive Officer
David Hale 56 President and Chief Operating Officer
Andrew Franzone 64 President of EHC, Director
Harry Goodman 75 Vice President and Secretary, Director
Arthur Myers 48 Chief Financial Officer
For biographical information regarding Messrs. Franzone, Kassel, and Goodman,
see "-Information Regarding the Directors/Nominees."
David Hale commenced his position as President and Chief Operating Officer in
April 2002. Mr. Hale commenced employment at the Company in October 1999 as
Director of Operations and became Chief Operating Officer in May 2001. Prior to
his Employment at the Company, Hale was a two star major general in the United
States Army serving as the senior U.S. officer in NATO's Allied Land Forces,
Southeastern Europe command. Hale also served as deputy inspector general at the
Pentagon until his retirement in 1998. Hale was the recipient of a Purple Heart
and a Silver Star in Vietnam. Subsequent to his retirement, in 1999 General Hale
entered a plea of guilty to seven counts of "conduct unbecoming an officer and a
gentleman" and one count of making a false official statement for which he
received a reprimand and a $22,000 fine.
Arthur Myers commenced his position as Chief Financial Officer of the Company in
May 2001 and commenced employment at the Company in January 2001 as Vice
President of Finance. Prior to his employment at the Company, Myers served as
Vice President of Finance for Orion Telecommuncations Corp from 1999 to 2001.
Myers also served as Vice President of Finance and Administration and Treasurer
for Quintel Communications, Inc. & Subsidiaries from 1997 to 1999 and served as
Comptroller for Sam Ash Music Corp. from 1995 to 1997.
Report of the Audit Committee of the Board of Directors
The Audit Committee of the Board of Directors of the Company serves as the
representative of the Board for general oversight of the Company's financial
accounting and reporting process, system of internal control, audit process, and
process for monitoring compliance with laws and regulations and the Company's
Standards of Business Conduct. The Company's management has primary
responsibility for preparing the Company's financial statements. The Audit
Committee met a total of four times during the fiscal year ended December 28,
2001.
In this regard, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited
financial statements with the Company's management.
2. The Audit Committee has discussed with the independent
accountants the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standard, AU 380).
3. The Audit Committee has received the written disclosures and the
letter from the independent accountants required by Independence
Standards Board Standard No. 1 (Independence Standards Board
Standards No. 1, Independence Discussions with Audit Committees)
and has discussed with the independent accountants the
independent accountants' independence.
4. Based on the review and discussion referred to in paragraphs (1)
through (3) above, the Audit Committee recommended to the Board
of Directors of the Company, and the Board has approved, that the
audited financial statements be included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 28,
2001, for filing with the Securities and Exchange Commission.
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Each of the members of the Audit Committee is independent as defined under
the listing standards of the National Association of Securities Dealers.
Audit Committee
Carl Koerner
Mitchell Solomon
Audit Firm Fee Summary
During Fiscal 2001, the Company retained Feldman, Sherb & Co., P.C. to provide
services in the following categories and amounts:
Audit Fees
Feldman, Sherb & Co., P.C. billed the Company an aggregate of approximately
$56,000 in fees for professional services rendered in connection with the audit
of the Company's financial statements for the most recent fiscal year and
financial statements included in each of the Company's Quarterly Reports on Form
10-QSB during the fiscal year ended December 28, 2001.
Financial Information Systems Design and Implementation Fees
The Company did not engage Feldman, Sherb & Co., P.C. for professional services
relating to financial information systems design and implementation for the
fiscal year ended December 28, 2001.
All Other Fees
The Company did not engage Feldman, Sherb & Co., P.C. for professional services
related to tax compliance and consulting services for the fiscal year ended
December 28, 2001.
Executive Compensation
Summary Compensation Table. The following table sets forth cash compensation
paid or accrued during the indicated periods by the Company's Chief Executive
Officer and the Company's other executive officers whose total salary and bonus
exceeded $100,000 during Fiscal 2001 (collectively, the "Named Executive
Officers"). No other officers received compensation in excess of $ 100,000 in
2001.
Summary Compensation Table
Summary Compensation Table
Long Term
Annual Compensation Compensation
Awards
-------------------------------- -------- ---------
Fiscal Salary Bonus Options All Other
Year $ $ # Compensation
-----------------------------------------------------
David Kassel 2001 104,104 -- -- 7,800
Chairman of the Board 2000 50,322(2) -- -- 7,800
and Chief Executive Officer 1999 101,152 -- -- 7,800
Andrew Franzone 2001 138,329 -- -- 7,800
President of EHC 2000 138,909 -- -- 7,800
1999 155,507 -- -- 7,800
Harry Goodman 2001 104,776 -- -- 7,800
Executive Vice President 2000 50,190(2) -- -- 7,800
and Secretary 1999 100,000 -- -- 7,800
Arthur Myers 2001 109,071 -- 2,500 --
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Chief Financial Officer
(1) Includes $ 150,000 in consideration for consulting services provided by Mr.
Kassel to the Company. (2) These Officers agreed to accept the amounts indicated
as payment in full for the fiscal year 2000 and agreed to waive any contrary
provisions in their respective employment agreements.
Option Grants. The following table sets forth the option grants made during
Fiscal 2001 to the Named Executive Officers.
Option Grants in Fiscal 2001
Individual Grants
-------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Granted (1) Fiscal Year ($/Share) Date
--------------- ---------------- ---------------- -----------
David Kassel -- -- -- --
Andrew Franzone -- -- -- --
Harry Goodman -- -- -- --
Steven Sgammato 10,000 15.00 2.50 01/02/2006
Carl S. Koerner 5,000 7.50 2.50 01/02/2006
Bao-Wen Chen -- -- -- --
Mitchell Solomon 5,000 7.50 2.50 01/02/2006
Arthur Myers 2,500 3.73 2.50 01/02/2006
David Hale 5,000 7.50 2.50 01/02/2006
(1) These options are fully exercisable after two years from the date of the
grant.
Year-End Option Holdings. The following table sets forth the value of options
held at the end of Fiscal 2001 by the Named Executive Officers. None of the
Named Executive Officers exercised any options during Fiscal 2001.
Fiscal 2001 Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End (#) At Fiscal Year-End ($)
Exercisable/Unexercisable Exercisable/Unexercisable (1)
David Kassel -- --
Andrew Franzone -- --
Harry Goodman -- --
Mitchell Solomon 0 / 5,000 $ 0 / $12,500
Bao-Wen Chen 75,000 / 200,000 $0 / $0
Carl S. Koerner 15,000 / 5,000 $60,000 / $12,500
Steven Sgammato 20,000 / 20,000 $80,000 / $25,000
Arthur Myers 0 / 2,500 $0 / $ 6,250
David Hale 0 / 7,000 $0 / $12,500
(1) Based on $4.00 per share, the price of the last reported trade
of the Common Stock on the Nasdaq Bulletin Board Market on December 28,
2001.
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Employment Agreements
The Company entered into executive employment agreements as of March 15, 1998
with Andrew Franzone, David Kassel and Harry Goodman each an "Executive". The
term of each of the employment agreements ends March 2, 2008 (the "Term"). The
annual base salaries of Messrs. Franzone, Kassel and Goodman under their
employment agreements are $ 125,000, $ 100,000 and $ 100,000, respectively, with
annual salary adjustments equal to the greater of 5 % or the increase in the
Consumer Price Index. Each Executive is entitled to fringe benefits and an
annual bonus to be determined by the Compensation Committee of the Board of
Directors. Each Executive can be terminated for cause (as defined in the
employment agreements) with all future compensation ceasing. If the Executive
dies during the Term or is unable to competently and continuously perform the
duties assigned to him because of ill health or other disability (as defined in
the employment agreements), the Executive or the Executive's estate or
beneficiaries shall be entitled to full compensation for three years following
the date thereof. If the executive is terminated without cause, the executive
shall be entitled to full compensation for the remainder of the Term. If the
Executive resigns, his compensation ceases as of the date of his resignation.
During the period of employment and for two years thereafter the Executives are
prohibited from competing with the Company; provided, however, that the
Executives may provide services to other noncompeting business. In order for a
restrictive covenant to be enforceable under applicable state law, the covenant
must be limited in terms of scope and duration. While the Company believes that
the covenants in the employment contracts are enforceable, there can be no
assurance that a court will declare them enforceable under particular
circumstances.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Interest of Counsel
Koerner Silberberg & Weiner, LLP has been general counsel to the Company since
1986. The Company believes that the fees paid to Koerner Silberberg & Weiner,
LLP are comparable to those fees that would have been paid to an unrelated third
party law firm.
Leases
EHC lease its facility in Farmingdale, New York from K & G Realty Associates ("K
& G"), a partnership owned by David L. Kassel and Harry Goodman, both officers
and directors of the Company. The lease agreement has been extended until
December 31, 2005. The annual rent is currently approximately $ 161,000, with
increases equal to the greater of the increase in the Consumer Price Index or 5
%. Pursuant to a rider of the lease agreement dated as of March 1, 1998, EHC
shall pay as an additional rent, any and all real property taxes for the demised
premises in excess of $ 26,000 per annum. In 2001, the taxes were approximately
$35,000. The mortgage agreement between Long Island Commercial Bank and K & G
dated November 28, 1995, is a 15 year self liquidating adjustable mortgage
currently bearing 9.5 % interest in the original principal amount of $ 610,000,
which as of December 28, 2001 is approximately $453,000. The mortgage is
guaranteed by EHC. By agreement dated November 28, 1995, K & G has assigned all
rents due from EHC to the Long Island Commercial Bank. The Company believes that
the terms and consideration of this lease are no less favorable to the Company
than a lease from a third party.
Officer Loans
Messrs. Kassel and Goodman advanced or arranged for the advance of funds to the
Company for working capital. The loans advanced of arranged for by Mr. Kassel
are represented by the following three notes (i) a demand negotiable promissory
note, dated August 1, 1996, from EHC in favor of Kassel MGT Defined Benefit Plan
for the principal amount of $219,483, bearing interest at a rate of 10 % per
annum, payable in 60 monthly installments of approximately $4,663 per month,
which ended in July 2001 and (ii) a demand negotiable promissory note, dated May
31, 2000, from the Company, in favor of David Kassel for the principal amount of
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$50,000, bearing interest at 10% per annum and (iii) a demand negotiable
promissory note dated August 17, 2000 from the Company, in favor of David Kassel
for the principal amount of $50,000, bearing interest at 10% per annum.
The loans advanced by Mr. Goodman are represented by the following three notes
(i) a demand negotiable promissory note, dated August 1, 1996 from EHC in favor
of Mr. Goodman, for the principal amount of $175,000 bearing interest at a rate
of 10% per annum and payable in 60 monthly installments of approximately $3,719
which ended July 2001, and (ii) a demand negotiable promissory note, dated May
31, 2000, from the Company, in favor of Mr. Goodman for the principal amount of
$50,000, bearing interest at 10% per annum and (iii) a demand negotiable
promissory note dated August 10, 2000 from the Company, in favor of Harry
Goodman for the principal amount of $50,000, bearing interest at 10% per annum.
Affiliated Transactions
EHC and AFC have entered into an engineering consulting and services agreement
on a fee for service basis. Under such agreement, (a) EHC will have the
exclusive right to manufacture or contract for the manufacturing of certain AFC
products on a time and materials basis and (b) EHC will not develop products in
the following lines other than for AFC: (i) point of sale display items; and
(ii) cabinet and furniture plastic hardware. The Company believes the terms and
consideration of this agreement are no less favorable to the Company than
agreements with similar unrelated third party companies. The President of AFC,
Andrew Franzone Jr., is the son of the President of EHC. AFC is owned by three
officer/stockholders of the Company.
The Company recorded sales during the years ended December 28, 2001 and December
29, 2000 of $682,000 and $809,000, respectively to AFC. Gross Profit on such
sales was approximately $257,000 and $235,000 for the years ended December 28,
2001 and December 29, 2000, respectively. Accounts receivable from AFC were
$32,144 at December 28, 2001. On or about September 1, 1999 the Company
converted the outstanding accounts receivable ($253,150) from AFC into a term
loan with payments of $5,132.97 per month including principal and interest for 5
years starting January 1, 2000. The balance of the note receivable on December
28, 2001 was $155,693.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth as of December 28, 2001 (except as otherwise
indicated) certain information regarding the beneficial ownership of Common
Stock by (i) each person or "group" (as that term is defined in Section 13(d)(3)
of the Exchange Act) known by the Company to be the beneficial owner of more
than 5% of the Common Stock, (ii) each executive officer of the Company, (iii)
each director and Nominee and (iv) all directors and executive officers as a
group (10 persons). Except as otherwise indicated, the Company believes, based
on information furnished by such persons, that each person listed below has sole
voting and investment power over the shares of Common Stock shown as
beneficially owned, subject, to community property laws, where applicable.
Number of Shares Percentage of
Name of Beneficial Owner Beneficially Owned (1) Common Stock Owned
---------------------- ------------------
David Kassel 840,000 22.3
Andrew Franzone 450,000 (1) 12.0
Harry Goodman 420,000 (1) 11.2
Steven Sgammato 10,000 (2) .2
Bao-Wen Chen 175,000 4.7
All directors and
executives as a group 1,895,000 50.4
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(1) Includes 100,000 shares owned by wife, of which beneficial ownership is
disclaimed.
(2) Includes 10,000 shares owned by wife, of which beneficial ownership is
disclaimed.
PROPOSAL 2: APPROVAL OF AN AMENDMENT
TO THE COMPANY'S 1998 STOCK OPTION AND GRANT PLAN
Introduction
The Board of Directors has adopted, subject to stockholder approval at the
Annual Meeting, an amendment to the Grant Plan (the "Plan Amendment") pursuant
to which the number of shares of Common Stock reserved for issuance under the
Grant Plan will be increased from 800,000 to 1,000,000.
The Board of Directors believes that the Company's growth and long-term success
depend in large part upon retaining and motivating key personnel and that such
retention and motivation can be achieved in part through the grant of stock
options. The Board of Directors also believes that stock options can play an
important role in the success of the Company by encouraging and enabling the
officers and other employees of the Company, upon whose judgment, initiative and
efforts the Company depends for sustained growth and profitability, to acquire a
proprietary interest in the long-term performance of the Company. The Board of
Directors anticipates that providing such persons with a direct stake in the
Company will ensure a closer identification of the interests of the participants
in the Grant Plan with those of the Company, thereby stimulating the efforts of
such participants to promote the Company's future success and strengthen their
desire to remain with the Company. The Board of Directors believes that the
proposed increase in the number of shares issuable under the Grant Plan will
help the Company accomplish these goals and will keep the Company's equity
incentive compensation in line with that of its competitors.
As of the date of this Proxy Statement, options to purchase 476,500 shares of
Common Stock currently reserved for issuance under the Grant Plan have been
granted.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE GRANT PLAN.
Summary of the Grant Plan
The following description of certain features of the Grant Plan is intended to
be a summary only and does not describe every provision of the Grant Plan.
The Stock Option and Grant Plan (the "Grant Plan") was adopted by the Company's
Board of Directors as of March 17, 1998 and approved by its stockholders as of
March 17, 1998. Officers, directors, employees, consultants, and key persons of
the Company are eligible to participate in the Grant Plan. The Grant Plan is
designed to provide employees and such other individuals with a performance
incentive, a direct stake in the Company's future welfare and an incentive to
remain with the Company. The Company believes that the Grant Plan will encourage
qualified persons to seek employment with the Company.
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The Grant Plan currently provides for grants of an aggregate of 800,000 shares
of Common Stock or options to purchase shares of Common Stock intended to
qualify as incentive stock options ("Incentive Options"), under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") as well as options
that do not so qualify ("Non-Qualified Options"). The Incentive Options shall be
granted only to employees or employee-directors of the Company. Such Incentive
Options shall be exercisable for shares of Common Stock at an exercise price no
less than the fair market value of the share of Common Stock on the date of
grant and are not exercisable after the tenth anniversary of the date of grant.
Notwithstanding the foregoing, pursuant to Section 422 of the Code, optionees
who beneficially own in excess of 10% of the Company's voting stock are not
entitled to receive Incentive Options unless the exercise price of such options
is no less that 110% of the fair market value of the Common Stock on the date of
grant and such options are not exercisable more than five years from the date of
grant. Additionally, to the extent that the aggregate fair market value of the
Common Stock with respect to which the Incentive Options are exercisable for the
first time during any calendar year exceeds $100,000, the options attributable
to the excess over $100,000 shall be treated as Non-Qualified Options under the
Code. Non-Qualified Options shall be exercisable for shares of Common Stock at
an exercise price of no less than 85% of the fair market value of the Common
Stock on the date of grant and are not exercisable after the tenth anniversary
of the date of grant.
The Grant Plan provides that it will be administered by the Compensation
Committee. The Compensation Committee determines which officers, directors,
employees, consultants and key persons shall receive shares or options, whether
the individual shall receive shares or options and if options, the terms and
conditions of the options, including the exercise price of each option, the term
of each option, the number of shares of Common Stock to be covered by each
option and any performance objectives or vesting standards applicable to each
option. Subject to the requirements of the Code, the Compensation Committee will
also designate whether the options granted shall be Incentive Options or
Non-Qualified Options.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and Nasdaq. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on a review of the copies of such reports provided to the Company and written
representations that no other reports were required during, or with respect to,
Fiscal 2001, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners have been satisfied.
Independent Public Accountants
The accounting firm of Feldman, Sherb & Co. P.C. served as the Company's
independent public accountants during Fiscal years 2000 and 2001, is expected to
continue to do so for fiscal year 2002. A representative of Feldman, Sherb & Co.
P.C. is expected to be present at the Annual Meeting, will be given an
opportunity to make a statement if he desires and will be available to respond
to appropriate questions.
Expenses of Solicitation
The cost of solicitation of proxies will be borne by the Company. In an effort
to have as large a representation at the Annual Meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, telegraph or mail by one or more employees of the Company. The
Company also may reimburse brokers, banks, nominees, and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy materials to
their principals who are beneficial owners of Common Stock.
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Stockholder Proposals
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 and
intended to be presented at the Company's 2003 Annual Meeting of Stockholders
must be received by the Company at its principal executive office on or before
January 12, 2003 to be eligible for inclusion in the proxy statement and form of
proxy to be distributed by the Board of Directors in connection with such
meeting.
Any stockholder proposals (including recommendations of nominees for election to
the Board of Directors) intended to be presented at the Company's 2003 Annual
Meeting of Stockholders, other than a stockholder proposal submitted pursuant to
Exchange Act Rule 14a-8, must be received in writing at the principal executive
office of the Company no later than sixty (60) days prior to the date of such
meeting, nor prior to ninety (90) days prior to the date of such meeting,
together with all supporting documentation required by the By-laws; provided,
however, that in the event that less than seventy (70) days' notice or prior
public disclosure of the date of such meeting is given or made to stockholders,
stockholder proposals must be received, together with all required supporting
documentation, not later than the close of business on the tenth day following
the date on which such notice or public disclosure of the date of the annual
meeting is first made.
Other Matters
The Board of Directors does not know of any matters other than those described
in this Proxy Statement, which will be presented for action at the Annual
Meeting. If other matters are presented, proxies will be voted in accordance
with the best judgment of the proxy holders.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
28, 2001 (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO), WHICH WAS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11,2002, WILL BE PROVIDED
WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS MAILED UPON THE
WRITTEN REQUEST OF ANY SUCH PERSON TO ARTHUR MYERS, CHIEF FINANCIAL OFFICER,
INTERNATIONAL SMART SOURCING, INC., 320 BROAD HOLLOW ROAD, FARMINGDALE, NEW YORK
11735.
International Smart Sourcing, Inc.
320 Broad Hollow Road
Farmingdale, New York 11735
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David Hale and Arthur Myers, and each of
them, proxies with full power of substitution to vote for and on behalf of the
undersigned at the Annual Meeting of Stockholders of International Smart
Sourcing, Inc. (the "Company"), to be held at Koerner Silberberg & Weiner LLP,
112 Madison Avenue, 3rd Floor, New York, New York on June 4, 2002 at 9:00 a.m.,
New York time, and at any adjournments or postponements thereof, hereby granting
full power and authority to act on behalf of the undersigned at said meeting and
any adjournments or postponements thereof. The undersigned hereby revokes any
proxy previously given in connection with such meeting and acknowledge receipt
of the Notice of Annual Meeting of Stockholders and Proxy Statement and the 2001
Annual Report to Stockholders.
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THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTION IS INDICATED WITH
RESPECT TO THE PROPOSALS BELOW, THE UNDERSIGNED'S VOTES WILL BE CAST "FOR" EACH
OF SUCH MATTERS. THE UNDERSIGNED'S VOTES WILL BE CAST IN ACCORDANCE WITH THE
PROXIES' DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. PLEASE SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
1. Proposal to elect David Kassel, Andrew Franzone, Harry Goodman, Mitchell
Solomon and Carl Seldin Koerner as Directors of the Company, each for a one
year term to continue until the 2003 Annual Meeting of Stockholders and
until the successor of each is duly elected and qualified.
[ ] FOR ALL [ ] WITHHELD FROM ALL
-----------------------------------------------
[ ] WITHHELD AS TO THE NOMINEE NOTED ABOVE
2. Proposal to approve the amendment to the Company's 1998 Stock Option and
Grant Plan to increase the number of shares of Common Stock of the Company
that may be issued thereunder from 800,000 to 1,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and act upon such other business as may properly come before
the meeting or any adjournments or postponements thereof.
Dated: _________________ Signature: __________________________________
Name: __________________________________
Signature (if held jointly): __________________________________
Name (if held jointly): __________________________________
NOTE: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as an attorney, executor, administrator,
trustee, or guardian, please give full title of such.
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