SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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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 240.14a-11(c) or Rule 240.14a-12
All American Semiconductor, Inc.
................................................................................
(Name of Registrant as Specified In Its Charter)
................................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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computed pursuant to Exchange Act Rule 0-11 (Set forth the
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ALL AMERICAN SEMICONDUCTOR, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on August 22, 2001
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To: The shareholders of All American Semiconductor, Inc.
The annual meeting of the shareholders of All American Semiconductor, Inc. (the
"Company"), a Delaware corporation, will be held on Wednesday, August 22, 2001,
at 10 A.M., California local time, at the Courtyard by Marriott, 1727 Technology
Drive, San Jose, California, for the following purposes:
1. to elect two directors to serve on the Board of Directors until the
2004 annual meeting of shareholders or until election and qualification
of their respective successors;
2. to approve the increase in the number of shares of common stock
reserved for issuance under the Company's Employees', Officers',
Directors' Stock Option Plan as previously amended and restated (the
"Option Plan") to 1,100,000 shares;
3. to approve the increase in the number of nonqualified stock options to
purchase shares of common stock automatically awarded to each
nonemployee director on the date of each annual meeting of the
shareholders of the Company under the Company's 2000 Nonemployee
Director Stock Option Plan (the "Director Stock Option Plan") to 1,000
shares;
4. to ratify the selection of Lazar Levine & Felix LLP as the Company's
independent public accountants for the year ending December 31, 2001;
and
5. to consider and act upon such other matters as may properly come before
the annual meeting or any and all postponements or adjournments
thereof.
Only shareholders of record at the close of business on Wednesday, July 11,
2001, will be entitled to notice of and to vote at the meeting or at any
adjournments or postponements thereof.
By Order of the Board of Directors,
/s/ HOWARD L. FLANDERS
-----------------------------------------
Howard L. Flanders,
Corporate Secretary
July 20, 2001
Miami, Florida
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
ALL AMERICAN SEMICONDUCTOR, INC.
16115 N.W. 52nd Avenue
Miami, Florida 33014
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held on August 22, 2001
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INTRODUCTION
General
- -------
The enclosed proxy is solicited by and on behalf of the Board of Directors
("Board") of All American Semiconductor, Inc. (the "Company") for use at the
Company's annual meeting of shareholders (the "Meeting") to be held on
Wednesday, August 22, 2001, at 10 A.M., California local time, at the Courtyard
by Marriott, 1727 Technology Drive, San Jose, California, and at any
adjournments or postponements thereof. The Company is first mailing this Proxy
Statement and the accompanying proxy to its shareholders on or about July 20,
2001.
Proxies in the form enclosed, if properly executed and received in time for
voting, and not revoked, will be voted as directed in accordance with the
instructions thereon. Any properly executed and timely received proxy, not so
directing to the contrary, will be voted "FOR" each of the items listed on the
proxy. Any person signing and mailing the enclosed proxy may revoke it at any
time before it is voted by giving written notice of revocation to Howard L.
Flanders, the Corporate Secretary of the Company, by submission of a duly
executed proxy bearing a later date or by voting in person at the Meeting.
Attendance at the Meeting will not in and of itself constitute a revocation of a
proxy. Any notice revoking a previously submitted proxy should be sent to Howard
L. Flanders, Corporate Secretary, All American Semiconductor, Inc., 16115 N.W.
52nd Avenue, Miami, Florida 33014. Revocations will not be effective unless
received in writing by the Corporate Secretary of the Company prior to the
Meeting.
The expense of this solicitation will be borne by the Company. In addition to
solicitation by mail, arrangements may be made with brokers and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and the Company will, upon request, reimburse them for reasonable expenses in
doing so. Solicitation of proxies from some shareholders may also be made by the
Company's officers and regular employees by telephone, telecopy, the Internet,
or in person after the initial solicitation, without additional compensation or
remuneration therefor.
A copy of the Company's annual report for the fiscal year ended December 31,
2000 (which has included therein audited consolidated financial statements for
the Company) is being mailed to the Company's shareholders together with this
Proxy Statement.
Voting Securities
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All voting rights are vested exclusively in the holders of the Company's common
stock, $.01 par value per share (the "Common Stock"), with each share entitled
to one vote. Only shareholders of record at the close of business on Wednesday,
July 11, 2001 (the "Record Date"), are entitled to notice of and to vote at the
Meeting or any adjournments or postponements thereof. On the Record Date, the
Company had 4,040,150 shares of Common Stock outstanding (the "Shares"), all of
1
which (except 32,141 shares held by a wholly-owned subsidiary of the Company and
183,246 treasury shares of the Company) are entitled to vote at the Meeting. For
purposes of this Proxy Statement, the "Shares" shall not include the shares of
Common Stock held by the wholly-owned subsidiary of the Company nor treasury
shares. The presence at the Meeting, in person or by proxy, of the holders of a
majority of the Shares will constitute a quorum for the transaction of business.
Approximately 10.6% of the Shares are (and were on the Record Date) owned by
Paul Goldberg and Bruce M. Goldberg and members of their families and certain
affiliated trusts (collectively the "Goldberg Group"), in addition to
approximately 4.1% of the Shares as to which Paul Goldberg and Bruce M. Goldberg
act as voting trustees with respect to the election of directors of the Company.
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." The
members of the Goldberg Group have informed the Company that they intend to vote
in favor of all proposals made by the Board in this Proxy Statement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each person
known by the Company to be the beneficial owner of more than five percent (5%)
of the Company's Common Stock, (ii) each director or nominee for director, (iii)
each executive officer of the Company who was serving as an executive officer at
the end of fiscal year 2000 (including the Chief Executive Officer) and (iv) all
executive officers and directors of the Company as a group. Except as indicated
in the notes to the following table, the persons named in the table have sole
voting and investment power with respect to all Shares shown as beneficially
owned by them.
Percent of
Name and Address Amount and Nature of Outstanding
of Beneficial Owner (1) Beneficial Ownership (2) Shares (2)
----------------------- ------------------------ -----------
Bruce M. Goldberg (3)(4) ................ 497,428 12.6%
Paul Goldberg (3)(5) .................... 373,319 9.5%
Rick Gordon ............................. 57,650 1.5%
Howard L. Flanders ...................... 43,650 1.1%
John Jablansky .......................... 12,025 *
Daniel M. Robbin ........................ 8,100 *
Richard E. Siegel ....................... 1,850 *
Robin L. Crandell ....................... 750 *
Lewis B. Freeman ........................ -- --
All executive officers and directors
as a group (9 persons)(3)(4)(5) ......... 839,776 20.2%
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* Less than 1%
(1) The address of each of Paul Goldberg, Howard L. Flanders and John
Jablansky is 16115 N.W. 52nd Avenue, Miami, Florida 33014; each of
Bruce M. Goldberg and Rick Gordon is 230 Devcon Drive, San Jose,
California 95112; Daniel M. Robbin is 4697 Carlton Golf Drive, Lake
Worth, Florida 33467; Richard E. Siegel is 10 Long Spur Street, Portola
Valley, California 94028; Robin L. Crandell is 2700 Augustine Drive,
Suite 110, Santa Clara, California 95054; and Lewis B. Freeman is 2601
South Bayshore, Suite 1900, Coconut Grove, Florida 33133.
(2) Includes as to the person indicated the following outstanding stock
options to purchase shares of the Company's Common Stock issued under
the Option Plan and the Director Stock Option Plan which will be vested
and exercisable on or before September 9, 2001: 124,000 options held by
Bruce M. Goldberg; 89,750 options held by Paul Goldberg; 57,450 options
held by Rick Gordon; 39,450 options held by Howard L. Flanders; 5,775
options held by John Jablansky; 6,100 options held by Daniel M. Robbin;
2
750 options held by Richard E. Siegel; 750 options held by Robin L.
Crandell; and 324,025 options held by the executive officers and
directors as a group. Excludes outstanding stock options to purchase an
aggregate of 93,175 additional shares of the Company's Common Stock
issued under the Option Plan and the Director Stock Option Plan to the
executive officers and directors as a group that will not be vested nor
exercisable as of September 9, 2001. For purposes of calculating the
Percent of Outstanding Shares, the shares of Common Stock held by a
wholly-owned subsidiary of the Company and treasury shares of the
Company totaling 215,387 are not deemed to be outstanding.
(3) Includes for each of Bruce M. Goldberg and Paul Goldberg and all
executive officers and directors as a group 154,996 shares of the
Company's Common Stock that Paul Goldberg and Bruce M. Goldberg, as
trustees, have the right to vote through December 29, 2001 with respect
to the election of directors of the Company pursuant and subject to a
voting trust agreement, dated as of December 29, 1995, among the
trustees and the former stockholders of two affiliated, privately held
companies (Added Value Electronics Distribution, Inc. and
A.V.E.D.-Rocky Mountain, Inc.) acquired by the Company in December
1995, who were issued such shares in connection with such acquisitions.
(4) Includes a total of 79,500 shares of the Company's Common Stock held of
record by Bruce M. Goldberg as trustee for his sons and for his nieces
and nephew. For federal securities law purposes only, Bruce M. Goldberg
is deemed to be the beneficial owner of these securities. Does not
include 1,500 shares of the Company's Common Stock held of record by
Jayne Goldberg, the wife of Bruce M. Goldberg, and 19,209 shares of the
Company's Common Stock held of record by an unrelated third party as
trustee for Bruce M. Goldberg's sons. Bruce M. Goldberg disclaims
beneficial ownership over all such securities.
(5) Includes 57,844 shares of the Company's Common Stock owned of record by
Paul Goldberg's wife, Lola Goldberg, and a total of 500 shares of the
Company's Common Stock held of record by Paul Goldberg as custodian for
two of his grandchildren. For federal securities law purposes only,
Paul Goldberg is deemed to be the beneficial owner of these securities.
Does not include 35,940 shares of the Company's Common Stock held of
record by Robin Phelan, the daughter of Paul and Lola Goldberg, over
which securities Paul and Lola Goldberg disclaim beneficial ownership.
BOARD OF DIRECTORS
The Company currently has eight directors serving on its Board. The directors of
the Company and their ages and positions (if any) with the Company as of the
Record Date are as follows:
Name Class Age Position
- ---- ----- --- --------
Paul Goldberg (1) III 72 Chairman of the Board
Bruce M. Goldberg (1) II 46 Director, President and Chief
Executive Officer
Howard L. Flanders II 43 Director, Executive Vice President,
Chief Financial Officer and
Corporate Secretary
Rick Gordon III 47 Director, Senior Vice President of
Sales
Robin L. Crandell (2)(3) III 51 Director
Lewis B. Freeman (2) I 52 Director
Daniel M. Robbin (2)(3) I 66 Director
Richard E. Siegel II 55 Director
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(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
3
The Company's Certificate of Incorporation provides for a staggered Board,
consisting of three classes. The terms of office of Class I, II and III
directors expire in 2001, 2002 and 2003, respectively.
The following is a brief resume of the Company's directors:
Paul Goldberg, one of the co-founders of the Company and the father of Bruce M.
Goldberg, has been employed by the Company in various executive capacities since
its predecessor's formation in 1964, and has served as Chairman of the Board
since 1978. Paul Goldberg was also Chief Executive Officer of the Company until
1997 and President of the Company until 1994.
Bruce M. Goldberg, the son of Paul Goldberg, joined the Company in 1988 as Vice
President, in 1990 became Executive Vice President and in 1994 became President
and Chief Operating Officer. In 1997, Bruce M. Goldberg was appointed Chief
Executive Officer of the Company. Bruce M. Goldberg has served as a director of
the Company since 1987. From 1981 until joining the Company, Bruce M. Goldberg
practiced law.
Howard L. Flanders joined the Company in 1991 as its Vice President and Chief
Financial Officer, and in 1992 became a director of the Company and Corporate
Secretary. In 1997, Mr. Flanders was appointed Executive Vice President of the
Company. Prior to joining the Company, Mr. Flanders, who is a CPA, was
Controller of Reliance Capital Group, Inc., a subsidiary of Reliance Group
Holdings, Inc., where he held various positions since 1982. Prior thereto, Mr.
Flanders was an accountant with the predecessor to the public accounting firm of
PricewaterhouseCoopers LLP.
Rick Gordon has been employed by the Company since 1986. He was originally the
General Manager of the Company's Northern California office and Northwest
Regional Manager. In 1990, Mr. Gordon became the Western Regional Vice President
and in 1992 Vice President of North American Sales and a director of the
Company. In 1994, Mr. Gordon was appointed Senior Vice President of Sales and
Marketing for the Company and currently holds the title of Senior Vice President
of Sales. Before working for the Company, Mr. Gordon was Western Regional Vice
President for Diplomat Electronics, another electronic components distributor,
from 1975 until 1986.
Robin L. Crandell is Partner and Vice President of Sales for Phase II Technical
Sales, a manufacturers sales representation firm. Prior to 1998, Mr. Crandell
was Senior Vice President of Sales and Marketing for Samsung Electronics,
Storage System Division, Vice President of North American Business Operations
for VLSI Technology and Vice President of North American Sales for Samsung
Semiconductor. Prior thereto he held various sales positions at Advanced Micro
Devices and was a senior engineer with Litton Data Systems. Mr. Crandell has a
BSEE degree from California State Polytechnic University. Mr. Crandell became a
director of the Company on November 29, 1999.
Lewis B. Freeman is a CPA and has been a principal of Lewis B. Freeman &
Partners, Inc., an accounting and financial consulting firm providing services
to both governmental agencies and businesses, since 1992. Presently, Mr. Freeman
also is principal of Freeman Dawson, certified public accountants specializing
in business counseling and individual and corporate tax planning. In addition to
being a CPA, Mr. Freeman is also a member of the Florida Bar. Mr. Freeman became
a director of the Company on June 1, 2001.
Daniel M. Robbin has been involved in electronics distribution for over 39
years. Mr. Robbin retired in 1994 from Avnet Corporation, one of the largest
distributors in the electronic components industry, where he spent 34 years,
most recently as Senior Vice President of Avnet, Inc. and Executive Vice
President of its subsidiary, Time Electronics. Mr. Robbin became a director of
the Company in 1997. Mr. Robbin was a consultant to the Company from 1995 to
June 1999.
Richard E. Siegel is the Executive Vice President and a director of Supertex,
Inc., a manufacturer of complex proprietary and industry-standard integrated
circuits. Mr. Siegel has been with Supertex since 1981. Prior thereto, Mr.
Siegel worked at Signetics Corporation, Fairchild Semiconductor, Ford
Instrument, and Grumman Aircraft Corporation. Mr. Siegel has a B.S. degree in
Mechanical Engineering from the City College of New York. Mr. Siegel became a
director of the Company on November 29, 1999.
4
The Board formally met five times during the fiscal year ended December 31,
2000, in addition to acting four times during the year by unanimous written
consent. All Board members attended the meetings, except for one meeting in
which two members were absent, and executed the unanimous written consents.
Certain Relationships and Related Transactions
During 2000, the Company purchased product aggregating approximately $3.8
million from Supertex, Inc., a supplier of the Company where a Board member of
the Company, Richard E. Siegel, is the Executive Vice President and a director.
In January 2001, the Company, with the approval of the Board, entered into a
lease for a California townhouse owned by Paul Goldberg and Bruce M. Goldberg
for the purpose of accommodating employees of the Company visiting the San Jose
area. The lease has a term expiring in 2006 and provides for monthly rent of
$4,800 on a triple-net basis. The Company believes that this rental amount
approximates what the Company was incurring to accommodate corporate visitors to
this area prior to entering into this lease.
Board Compensation
The members of the Board do not currently receive compensation from the Company
for acting in their capacity as directors of the Company nor has the Company
adopted any standard arrangement for compensating nonemployee directors of the
Company other than grants of options under the Director Stock Option Plan, an
amendment to which the shareholders of the Company are being asked to consider
and approve at the Meeting. See "ITEM 3. AUTHORIZATION OF INCREASE IN ANNUAL
OPTION GRANT UNDER DIRECTOR STOCK OPTION PLAN" in "PROPOSALS." In addition to
the Director Stock Option Plan, the Company may decide in the future to further
compensate directors and/or to establish a standard cash compensation
arrangement for nonemployee directors. See "EXECUTIVE COMPENSATION-2000
Nonemployee Director Stock Option Plan."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors and executive officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Directors, executive officers and greater than ten
percent shareholders are also required by the SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, during the fiscal year ended December 31, 2000, all
Section 16(a) filing requirements applicable to its directors, executive
officers and greater than ten percent shareholders were satisfied.
BOARD COMMITTEES
Executive Committee
The Executive Committee is comprised of Paul Goldberg and Bruce M. Goldberg.
During 2000, the Executive Committee did not meet formally, however, its members
spoke on nearly a daily basis in connection with the operations of the Company.
The Executive Committee possesses substantially all of the powers of the Board
and acts as the Board between Board meetings.
Audit Committee
The Audit Committee is currently comprised of Daniel M. Robbin, Robin L.
Crandell and Lewis B. Freeman, all independent nonemployee directors of the
Company. Mr. Freeman became a member on June 1, 2001. During the fiscal year
ended December 31, 2000, the Audit Committee met twice. The Audit Committee is
responsible for, among other things, reviewing the independence and recommending
the selection of the independent auditors, reviewing the arrangements and scope
5
of the independent audit, reviewing internal accounting procedures and controls
and reviewing the reports and recommendations of the independent auditors with
respect to internal controls. See "AUDIT COMMITTEE REPORT" below.
Compensation Committee
The Compensation Committee consists of Daniel M. Robbin and Robin L. Crandell,
two independent nonemployee directors of the Company. The Compensation Committee
is responsible for determining the compensation of all executive officers of the
Company and acts as the stock option committee of the Board, administering the
Option Plan. The senior management of the Company makes all decisions with
respect to the compensation (other than the granting of stock options) of all
employees other than the executive officers of the Company. See "BOARD OF
DIRECTORS." During the fiscal year ended December 31, 2000, the Compensation
Committee did not meet formally, but acted six times during the year by
unanimous written consent.
Nominating Committee
The Board does not have a Nominating Committee, such function being performed by
the Board as a whole.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board (the "Audit Committee") is currently
composed of three independent directors, with Lewis B. Freeman becoming a member
on June 1, 2001. The Audit Committee operates under a written charter adopted by
the Board. A copy of the Audit Committee's charter is attached to this Proxy
Statement as Exhibit A. The Board and the Audit Committee believe that the Audit
Committee's current member composition satisfies the rules of the National
Association of Securities Dealers, Inc. (the "NASD") that governs audit
committee composition, including the requirement that audit committee members
all be "independent directors" as that term is defined by NASD Rule 4200(a)(14).
The Audit Committee holds discussions with management and the independent
accountants regarding current audit activities. Management has the primary
responsibility for the Company's financial statements, systems of internal
controls and the financial reporting process. The independent accountants are
responsible for performing an independent audit of the Company's consolidated
financial statements in accordance with generally accepted accounting standards
and to issue a report thereon. The Audit Committee's responsibility is to
monitor and oversee these processes.
The Audit Committee recommended to the Board the appointment of the Company's
independent accountants, subject to shareholder ratification. The Company's
independent accountants also provided to the Audit Committee the written
disclosure and letter required by Independence Standards Board Standard No. 1
("Independence Discussions with Audit Committees"), and the Audit Committee
discussed with the independent accountants that firm's independence from the
Company and its management.
Management represented to the Audit Committee that the Company's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles, and the Audit Committee has reviewed and discussed the
consolidated financial statements with management and the independent
accountants. The Audit Committee also discussed with the independent accountants
matters required to be discussed by Statement on Auditing Standards No. 61
("Communication with Audit Committees"). Based on these discussions and reviews,
the Audit Committee recommended that the Board include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 for filing with the Securities and Exchange Commission.
The Audit Committee has considered whether the provision of the non-audit
services described in "Financial Information Systems Design and Implementation
Fees" and "All Other Fees" below is compatible with maintaining Lazar Levine &
Felix LLP's independence.
Daniel M. Robbin (Chair)
Robin L. Crandell
Lewis B. Freeman
6
Principal Accounting Firm Fees
Audit Fees. The aggregate fees billed by the Company's accounting firm, Lazar
Levine & Felix LLP, for professional services rendered for the audit of the
Company's annual financial statements for the year ended December 31, 2000 and
the review of the financial statements included in the Company's Forms 10-Q for
that year were $97,000.
Financial Information Systems Design and Implementation Fees. No fees were
billed by Lazar Levine and Felix LLP to the Company for professional services
with regard to financial information systems design and implementation.
All Other Fees. The aggregate fees billed for services rendered by Lazar Levine
& Felix LLP for 2000, other than the services described above, were $66,000.
EXECUTIVE OFFICERS OF THE COMPANY
The Company currently has five executive officers. Each officer serves at the
discretion of the Board; however, as of the date of this Proxy Statement, Paul
Goldberg, Bruce M. Goldberg, Howard L. Flanders and Rick Gordon have employment
agreements with the Company. See "EXECUTIVE COMPENSATION-Employment Agreements."
The executive officers of the Company and their ages and positions as of the
Record Date are as follows:
Name Age Position
- ---- --- --------
Paul Goldberg 72 Chairman of the Board
Bruce M. Goldberg 46 President and Chief Executive Officer
Howard L. Flanders 43 Executive Vice President, Chief Financial Officer
and Corporate Secretary
Rick Gordon 47 Senior Vice President of Sales
John Jablansky 44 Senior Vice President of Product Management and
Operations
John Jablansky has been employed by the Company since 1981. He was originally in
sales and since 1982 has worked in various capacities within the product
management department. In 1997, Mr. Jablansky was appointed Senior Vice
President of Product Management of the Company and in 2001 became Senior Vice
President of Product Management and Operations. Prior to joining the Company,
Mr. Jablansky was employed by Milgray Electronics, another electronic components
distributor.
For a brief resume of the Company's executive officers other than John
Jablansky, see "BOARD OF DIRECTORS."
7
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation earned
during each of the fiscal years ended December 31, 2000, 1999, and 1998, by the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company whose total annual salary and bonus exceeded
$100,000:
Summary Compensation Table
--------------------------
Long-term
Compensation
Annual Compensation Awards
----------------------------------- ------------
Other Annual Securities All Other
Compensation Underlying Compensation
Name and Principal Position Year Salary($) Bonus($) ($)(1) Options(#) ($)(2)
- --------------------------- ---- --------- -------- ------------ ------------- ------------
Paul Goldberg ...................... 2000 291,000 582,000 -- 5,000 16,000
Chairman of the Board 1999 261,000 83,000 -- 15,000 12,000
1998 251,000 116,000 -- -- 8,600
Bruce M. Goldberg .................. 2000 407,000 815,000 171,000(3) 5,000 34,000
President and Chief 1999 392,000 121,000 168,000(3) 15,000 27,000
Executive Officer 1998 319,000 116,000 64,000(3) -- 26,000
Howard L. Flanders ................. 2000 215,000 215,000 -- 5,000 23,000
Executive Vice President and 1999 191,000 55,000 -- 30,000 18,000
Chief Financial Officer 1998 182,000 77,000 -- -- 18,000
Rick Gordon ........................ 2000 218,000 218,000 -- 5,000 21,000
Senior Vice President of Sales 1999 198,000 55,000 -- 10,000 16,000
1998 189,000 77,000 -- -- 16,000
John Jablansky ..................... 2000 170,000(4) -- -- 3,000 70,000
Senior Vice President of Product 1999 165,000(4) -- -- 4,000 24,000
Management and Operations 1998 155,000(4) -- -- -- 24,000
- ------------------
(1) Except for Bruce M. Goldberg, other annual compensation for each of the
named executive officers in 1998, 1999 and 2000 did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus
reported for such named executive officer.
(2) All other compensation includes Company contributions to life insurance
policies, where the Company is not the beneficiary, to the Deferred
Compensation Plans and to the 401(k) Plan of the Company. See
hereinbelow and "Deferred Compensation Plans for Executive Officers and
Key Employees" and "401(k) Plan."
(3) Includes payments made in connection with Bruce M. Goldberg's
relocation to San Jose to be based where the sales and marketing
functions of the Company are headquartered. See "Employment
Agreements-The Goldberg Agreements" hereinbelow.
(4) Includes commissions paid in the aggregate amounts of $72,000, $72,000
and $65,000 in 2000, 1999 and 1998, respectively, based on meeting
certain levels of gross profits in each of those years.
The Company pays for a $550,000 universal life insurance policy on the life of
Paul Goldberg with benefits payable to his wife, which had an annual premium in
2000 of $7,668. Pursuant to the terms of an employment agreement with Bruce M.
Goldberg, the Company makes annual advances, currently in the amount of $21,995,
to Bruce M. Goldberg to cover the annual premium on a $1,000,000 whole life
insurance policy (the "Whole Life Policy") on the life of Bruce M. Goldberg. The
Company is obligated to continue, for the duration of Bruce M. Goldberg's
employment with the Company, to pay the annual premium to Bruce M. Goldberg for
the Whole Life Policy. In addition, beginning in 1993 the Company has advanced,
and intends to continue to advance, the premiums for $1,000,000 flexible premium
8
life insurance policies owned by each of Howard L. Flanders and Rick Gordon. The
Company's advances are secured by a collateral assignment of the cash value and
death benefit of each of the policies. The current annual premium on each of
these policies is $11,500. The Company's obligations to make premium payments in
connection with Howard L. Flanders' and Rick Gordon's policies are expected to
last for a maximum of ten years. Howard L. Flanders and Rick Gordon have been
with the Company for a period of eight years from the year in which the policy
was acquired ( January 1993) and provided they each remain in the employ of the
Company or they have become disabled or a change in control has occurred during
the term of their employment, the advances will be deemed canceled and the
security released thereafter ratably over a five-year vesting period until such
time as all advances are deemed canceled.
Option Grants in Last Fiscal Year
The following table shows all grants of options to the named executive officers
of the Company during the fiscal year ended December 31, 2000. Pursuant to SEC
rules, the table also shows the value of the options granted at the end of the
option terms (as indicated below) if the price of the Company's stock was to
appreciate annually by 0%, 5% and 10%, respectively. There is no assurance that
such stock price will appreciate at the rates shown in the table. All of the
options set forth in the table are stock options issued pursuant to the Option
Plan. The Company does not have a plan whereby tandem stock appreciation rights
("SARS") are granted. See "Employees', Officers', Directors' Stock Option Plan"
hereinbelow.
Potential Realizable
Closing Value at Assumed
Number of % of Market Annual Rates of Stock
Securities Total Options Price on Price Appreciation
Underlying Granted to Exercise Date of for Option Term
Options Employees in Price Grant Expiration ----------------------
Name Granted (#) Fiscal Year ($/Share) ($/Share)(1) Date 0%($) 5%($) 10%($)
- ------------------ ----------- ------------- --------- ------------ ---------- ------ ------ ------
Paul Goldberg 5,000(2) 3.8% 14.320 13.875 06/12/05 -- 16,942 40,129
Bruce M. Goldberg 5,000(3) 3.8% 13.018 13.875 06/12/06 4,285 27,879 57,812
Howard L. Flanders 5,000(3) 3.8% 13.018 13.875 06/12/06 4,285 27,879 57,812
Rick Gordon 5,000(3) 3.8% 13.018 13.875 06/12/06 4,285 27,879 57,812
John Jablansky 3,000(3) 2.3% 13.018 13.875 06/12/06 2,571 16,727 34,687
(1) For purposes of and as provided under the Option Plan, "fair market
value" on the date of grant of any option is the average of the market
price of a share of Common Stock for each of the seven (7) consecutive
business days preceding such date; the market price on each such day is
the closing sales price of a share of Common Stock on The Nasdaq Stock
Market on such day. The Compensation Committee of the Company believes
this calculation more accurately reflects "fair market value" of the
Company's Common Stock on any given day as compared to simply using the
closing market price on the date of grant. As a result, the closing
market price on the date of grant at times may be different than the
exercise price per share.
(2) These options vest 25% per year commencing on June 13, 2001.
(3) These options vest 20% per year commencing on June 13, 2001.
9
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-Ended Option
Values
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 2000, and the value of
unexercised stock options as of December 31, 2000, for the individual executive
officers named in the Summary Compensation Table:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options At Options At
Shares FY-End(#) FY-End($)
Acquired on Value Exercisable/ Exercisable/
Exercise(#) Realized($) Unexercisable Unexercisable(1)
---------------------------------------------------------------
Paul Goldberg ............. - - 84,750 (E) $123,069 (E)
- - 25,250 (U) 86,006 (U)
Bruce M. Goldberg ......... - - 119,000 (E) 101,996 (E)
- - 26,000 (U) 93,984 (U)
Howard L. Flanders ........ - - 38,330 (E) 42,516 (E)
- - 29,270 (U) 138,324 (U)
Rick Gordon ............... - - 56,330 (E) 98,788 (E)
- - 13,270 (U) 46,612 (U)
John Jablansky ............ - - 4,675 (E) 17,436 (E)
- - 7,325 (U) 21,492 (U)
- ------------------
(1) Value is based upon the difference between the exercise price of the
options and the last reported sale price of the Common Stock on The
Nasdaq Stock Market on December 31, 2000 (the Company's fiscal year
end).
Compensation Committee Report
The Compensation Committee is responsible for recommending to the Board the
compensation of the executive officers, including annual base salaries, cash and
non-cash bonuses, stock ownership plans, retirement plans and other benefits.
With respect to the compensation of the executive officers other than the Chief
Executive Officer, the Compensation Committee makes its recommendations after
consulting with the Chief Executive Officer. In addition, the Compensation
Committee administers the Option Plan and the Company's deferred compensation
plans and will administer all future benefit plans of the Company. The policies
of the Compensation Committee and the Board with respect to the compensation of
the executive officers is intended to establish levels of annual compensation
that are consistent with the Company's annual and long-term goals and to reward
individuals for corporate performance as well as individual achievements. In
part, the Compensation Committee believes in using incentives such as annual
incentive cash bonuses and stock option grants and deferred compensation plans
as a means of motivating its executive officers to perform at the highest levels
possible and to tie directly the compensation of the Company's executive
officers to the operating performance of the Company. The Compensation Committee
also takes into consideration the compensation of executive officers at
companies similar in size to the Company and at other companies within the same
industry as the Company.
The Compensation Committee, in conjunction with the Board, authorized in March
and April, 2000, respectively, effective as of January 1, 2000 (and in certain
cases retroactively for 1999) certain modifications to the employment agreements
of Paul Goldberg, the Chairman of the Board, and Bruce M. Goldberg, Chief
Executive Officer and President of the Company, including the extension of the
term of their respective agreements until December 31, 2005, increases in their
respective base salaries, and, in the case of Bruce M. Goldberg, increases in
the percentage rate for his annual cash bonus. Increases in compensation for
Bruce M. Goldberg reflect the substantial increase in his cost of living
associated with his relocation to Silicon Valley, California. In addition, the
Compensation Committee, in conjunction with the Board, authorized new four-year
employment agreements commencing January 1, 2000 for each of Howard L. Flanders,
10
Executive Vice President and Chief Financial Officer, and Rick Gordon, Senior
Vice President of Sales of the Company. The employment agreements (as modified)
continue to include an annual incentive cash bonus, which together with stock
options previously issued to the executive officers, establishes an incentive
compensation program that the Compensation Committee believes appropriate in
order to establish a mechanism to tie the operating performance of the Company
and the return on investment made by the Company's shareholders over the next
several years to such executive officer's annual compensation during such
period. In particular, a potentially significant portion of each executive
officer's annual cash compensation is in the form of an annual bonus arrangement
based on a percentage of the pre-tax income of the Company. As part of
determining the compensation packages set forth in such employment agreements,
the Compensation Committee considered the backgrounds, the tenure and the
experience of the executive officers as well as the results of operations for
1999 and projected results for 2000 and thereafter, as well as, in the case of
Bruce M. Goldberg, his relocation to San Jose, California and the resulting
increase in his cost of living. See "Employment Agreements" hereinbelow. The
incentive portion of the compensation of John Jablansky, who is the other
executive officer named in the Executive Compensation Tables in this Proxy
Statement, is also based on the operating performance of the Company. His
incentive compensation is based on the Company meeting certain levels of gross
profit dollars.
Daniel M. Robbin
Robin L. Crandell
Employees', Officers', Directors' Stock Option Plan
In 1987, the Company established an Employees', Officers', Directors' Stock
Option Plan (as previously amended and restated the "Option Plan"). Subsequent
thereto certain amendments to and a restatement of the Option Plan have been
adopted by the Board and approved by the shareholders of the Company. The Option
Plan may be further modified or amended by the Board, but certain modifications
and amendments must be approved by the Company's shareholders to continue in
effect. On June 12, 2001, the Board authorized and adopted, subject to
shareholder approval, an increase in the number of shares reserved for issuance
under the Option Plan from 900,000 to 1,100,000. See "ITEM 2. AUTHORIZATION OF
ADDITIONAL SHARES UNDER OPTION PLAN" in "PROPOSALS." The Board is recommending
approval of such amendment by the Company's shareholders at the Meeting.
The Option Plan provides for the granting to key employees of both "incentive
stock options," within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") and "nonqualified stock options" ("nonqualified
stock options" are options which do not comply with Section 422 of the Code) and
for the granting to nonemployee directors and independent contractors associated
with the Company of nonqualified stock options.
A general description of the Option Plan, as previously in effect and as
amended, is presented below. Reference is also made to ITEM 2 in "PROPOSALS" for
a detailed description of the amendment for which shareholder approval is being
sought at the Meeting. A copy of the Option Plan may be obtained without charge
upon written request to Howard L. Flanders, the Corporate Secretary, at the
Company's principal executive offices, 16115 N.W. 52nd Avenue, Miami, Florida
33014.
Purpose. The purpose of the Option Plan is to secure for the Company and its
subsidiaries the benefits of the additional incentive to selected key employees
and nonemployee directors of and independent contractors associated with the
Company inherent in the ownership of Common Stock, to promote the success and
profitability of the Company's business and to help the Company attract, secure
and retain the services of such key employees, nonemployee directors and
independent contractors.
Term of the Option Plan. Unless earlier terminated, the Option Plan will
continue in effect through April 18, 2009, after which it will expire and no
further options could thereafter be granted under the Option Plan. The
expiration of the Option Plan, or its termination by the Board, will not affect
any options previously granted and then outstanding under the Option Plan. Such
outstanding options would remain in effect until they have been exercised,
terminated or have expired.
11
Number of Shares. Prior to the adoption by the Board of the amendment described
in ITEM 2 in "PROPOSALS," a maximum of 900,000 shares of the Company's Common
Stock was reserved for issuance upon the exercise of options granted under the
Option Plan, subject to any adjustments required upon changes in capitalization
to prevent dilution or enlargement of the shares issuable pursuant to the Option
Plan by reason of any stock split, stock dividend, combination of shares,
recapitalization or other change in the capital structure of the Company.
Subject to the approval of the shareholders of the Company at the Meeting, the
number of shares of the Company's Common Stock reserved for issuance under the
Option Plan has been authorized by the Board to be increased to 1,100,000
shares.
Administration. The Option Plan is administered by the Compensation Committee
comprised of two or more nonemployee directors appointed by the Board from among
its members. Any member of the Compensation Committee may be removed at any time
either with or without cause by action of the Board and a vacancy on the
Compensation Committee due to any reason can be filled by the Board. The current
members of the Compensation Committee are two of the independent, nonemployee
directors of the Company, Daniel M. Robbin and Robin L. Crandell. Subject to the
express limitations of the Option Plan, the Compensation Committee has
authority, in its discretion, to interpret the Option Plan, to adopt, prescribe,
amend and rescind rules and regulations as it deems appropriate concerning the
holding of its meetings and administration of the Option Plan, to determine and
recommend persons to whom options should be granted, the date of each option
grant, the number of shares of Common Stock to be included in each option, any
vesting schedule, the option price and term (which in no event will be for a
period more than ten years from the date of grant) and the form and content of
agreements evidencing options to be issued under the Option Plan.
Eligibility to Participate in Option Plan. Options may be currently granted
under the Option Plan to any key employee or nonemployee director or prospective
key employee or nonemployee director (conditioned upon, and effective not
earlier than, his or her becoming an employee or director) of or independent
contractor associated with the Company or its subsidiaries. However, as required
by the Code, nonemployee directors and independent contractors are only eligible
to receive nonqualified stock options. In determining key employees to whom
options will be granted, the Compensation Committee takes into consideration the
key employee's present and potential contribution to the success and growth of
the Company's business and other such factors as the Compensation Committee may
deem proper or relevant in its discretion including whether such person performs
important job functions or makes important decisions for the Company, as well as
the judgment, initiative, leadership and continued efforts of eligible
participants. Employees who are also officers or directors of the Company or its
subsidiaries will not by reason of such offices be ineligible to receive
options. However, no member of the Compensation Committee is eligible to receive
options under the Option Plan and it is currently contemplated that nonemployee
directors would be granted options under the Director Stock Option Plan and not
the Option Plan. The Compensation Committee has not adopted formal eligibility
limitation criteria. Therefore, quantification of the current number of
employees, nonemployee directors and independent contractors that would
technically be eligible for participation is not currently readily determinable.
Exercise Price. The exercise price for all options granted under the Option Plan
shall not be less than the fair market value of the Company's Common Stock on
the date of grant (or, in the case of incentive stock options, 110% of the fair
market value if the beneficiary of the grant beneficially owns 10% or more of
the outstanding shares of the Company's Common Stock). For purposes of the
Option Plan, fair market value on the date of grant of any option is the average
of the "market price" of a share of Common Stock for each of the seven (7)
consecutive business days preceding such date. The "market price" on each such
day shall be (i) if the Common Stock is listed on a securities exchange
(including The Nasdaq Stock Market), the closing sales price on such exchange on
such day or, in the absence of reported sales on such day, the mean between the
reported closing bid and asked prices on such exchange on such day, or (ii) if
the Common Stock is not listed on a securities exchange (including The Nasdaq
Stock Market), the mean between the closing bid and asked prices as quoted by
the National Association of Securities Dealers, Inc. through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") for such
day; provided, however, that, if there are no such quotations or if it is
determined that the fair market value is not properly reflected by such NASDAQ
quotations or the Common Stock is not traded on an exchange or over the counter,
fair market value shall be determined by such other method as the Compensation
Committee determines to be reasonable. Notwithstanding the foregoing, if on, or
within ten (10) days prior to, the date of grant of any options a registration
statement filed by the Company with the SEC in connection with a public offering
of Common Stock becomes effective, the fair market value of a share of such
Common Stock shall be the public offering price per share of Common Stock being
offered pursuant to such offering.
12
Limitations on Grant of Options. Except as may be specifically limited by the
terms of the Option Plan, the granting of options is made at the sole discretion
of the Compensation Committee. Further, the aggregate fair market value of the
Company's Common Stock (determined at the date of the option grant) for which an
employee may be granted incentive stock options which first become exercisable
in any calendar year under the Option Plan may not exceed $100,000. Options
granted pursuant to the Option Plan are not transferable during an optionee's
lifetime.
Option Period. The term of and any vesting schedule (whether the option will be
exercisable immediately, in stages or otherwise, or the vesting will be based
upon any condition such as the operating performance of the Company or other
events such as a change in control) for an option granted under the Option Plan
is established by the Compensation Committee, but the term may not be more than
ten years from the date of grant of the option, except that, in the case of a
person receiving an incentive stock option who at such time owns the Company's
Common Stock representing more than 10% of the Company's Common Stock
outstanding at the time the option is granted, the term of such incentive stock
option shall not exceed five years from the date of grant of the option. In
general, options will not be exercisable after the expiration of their term.
Furthermore, the Compensation Committee has the authority and discretion to
determine the time frame in which an optionee has to exercise his options
(subject to the ten-year limitation from date of grant) in the event of his
termination of employment due to death, disability, termination without cause,
retirement, voluntarily leaving the Company and change in control.
Nontransferability. No option granted under the Option Plan is transferable
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order and, subject to any transfer pursuant to a
qualified domestic relations order, each option will be exercisable, during the
lifetime of an optionee, only by such optionee.
Manner of Exercise and Payment for Options. Options granted under the Option
Plan shall be exercised by an optionee (or upon his or her death by his or her
personal representative, executor or administrator), as to all or part of the
Common Stock covered by the options which have vested (subject to any minimum
numbers of shares that must be purchased at any time under the terms of a
particular stock option agreement), by giving written notice of exercise to the
Company specifying the number of shares to be purchased and accompanied by
payment of the full purchase price for the shares being purchased. Payment in
full of such purchase price is to be made (a) by check payable to the Company or
(b) with the prior consent of the Compensation Committee or to the extent
provided in the applicable option agreement, by tendering to the Company
previously acquired shares of Common Stock having a fair market value
(determined as of the date such options are exercised) equal to the entire
purchase price, or (c) with the prior consent of the Compensation Committee or
to the extent provided in the applicable option agreement, by a combination of
(a) and (b) above. No shares of Common Stock can be issued until full payment
therefore has been received by the Company, and no optionee has any of the
rights of a shareholder of the Company until the certificates for such shares of
Common Stock are issued to the optionee following the exercise of his or her
options.
Recapitalization, Consolidation and Similar Transactions. In the event of any
stock split, stock dividend, combination of shares, reclassification or
recapitalization which changes the character or amount of the Company's
outstanding Common Stock while any portion of any options theretofore granted
under the Option Plan are outstanding but unexercised, the Compensation
Committee shall make such adjustments in the character and number of shares
subject to such options and in the option price, as shall be equitable and
appropriate in order to make such options, as nearly as may be practicable,
equivalent to such options immediately prior to such change, subject to
complying with any requirements of the Code in the event that incentive stock
options are involved.
Effect of Acquisition of Company. In the event of any sale of assets, merger,
consolidation, combination or other corporate reorganization of the Company with
or into another entity which results in the outstanding Common Stock of the
Company being converted into or exchanged for different securities, cash or
other property, each outstanding option, subject to the other provisions of the
Option Plan and any limitations applicable to a particular option, may be
assumed by the successor entity (or a parent or subsidiary of such successor
entity) or the optionee may receive from such successor entity (or a parent or
subsidiary of such successor entity) a new option for such outstanding option,
which new option shall be, as nearly as may be practicable, equivalent to the
outstanding option and in conformity with Section 424(a) of the Code and the
regulations thereunder, if applicable.
13
Amendment and Termination of Option Plan. The Board may at any time amend,
modify or terminate the Option Plan except with respect to outstanding options,
but may not make any amendment to the Option Plan which increases the maximum
number of shares which may be subject to awards of options (except in connection
with recapitalizations or similar transactions, see "Recapitalization,
Consolidation and Similar Transactions"), which materially increases the
benefits accruing to participants under the Option Plan or which changes the
class or persons eligible for the grant of options or otherwise materially
modifies the requirements for eligibility for participation in the Option Plan,
unless such action of the Board shall be approved or ratified by the
shareholders of the Company. The Board may also terminate the Option Plan prior
to its expiration date, after which no further options may be granted under the
Option Plan.
Federal Income Tax Consequences. The following is a brief summary of the
applicable Federal income tax consequences of options granted under the Option
Plan based on U.S. Federal income tax laws in effect on the date of this Proxy
Statement.
Incentive Stock Options. No taxable income is recognized by a holder of an
option (an "optionee") upon the grant or exercise of an incentive stock option
("ISO") (unless the alternative minimum tax rules apply as described below). No
taxable ordinary income is recognized by an optionee upon the disposition of an
ISO by an optionee (except to the extent the ISO affects the determination of
the optionee's alternative minimum taxable income under Section 56 of the Code,
as discussed in the paragraph below entitled "Alternative Minimum Taxable Income
Adjustment"), provided (i) no disposition of any share of Common Stock issued
pursuant to the exercise of the ISO is made by the optionee within two (2) years
from the date of the grant of the ISO nor within one (1) year after the transfer
of such share to him or her (a disposition within either of such periods is
hereinafter referred to as a "disqualifying disposition"); and (ii) the optionee
was an employee of the Company at all times from the date of the grant of the
ISO to the date, generally, three (3) months before the date of such exercise
(the optionee is "continuously employed") (that is, the optionee may exercise
the ISO within three (3) months following his or her termination of employment
without the recognition of taxable income on such exercise).
If any share of Common Stock is transferred to an optionee pursuant to his or
her exercise of an ISO, and if no disqualifying disposition of such share is
made by the optionee and the optionee is continuously employed by the Company,
then upon the subsequent disposition of such share by the optionee, (i) any
amount realized in excess of the option exercise price is treated as long-term
capital gain (subject to various tax rates depending on how long such share is
held); (ii) any loss sustained is a long-term capital loss; and (iii) no
deduction under Section 162 of the Code (relating to trade or business expenses)
("employer tax deduction") is allowed to the Company for federal income tax
purposes.
If any share of Common Stock transferred to an optionee pursuant to his or her
exercise of an ISO is disposed of by the optionee in a disqualifying
disposition, then for the taxable year of such disposition (i) the optionee
recognizes ordinary compensation income in an amount equal to the lesser of (a)
the excess, if any, of the fair market value of such share at the time of the
exercise of the option over the option exercise price and (b) the amount
realized on such disposition over the option exercise price; (ii) the basis of
such share is then increased by the amount of any income recognized, and any
additional gain or loss recognized by the optionee with respect to such share is
treated as short-term or long-term capital gain or loss (as the case may be);
and (iii) the Company is allowed an employer tax deduction in an amount equal to
the optionee's ordinary compensation income described in (i) above.
Nonqualified Stock Options. With respect to nonqualified stock options ("NSOs"):
(i) generally, no income is recognized by the optionee at the time the option is
granted; (ii) generally, at exercise, ordinary income is recognized by the
optionee in an amount equal to the difference between the option exercise price
paid for the shares and the fair market value of the shares on the date of
exercise, and the Company is entitled to an employer tax deduction in the same
amount; and (iii) upon disposition of the shares, any gain or loss is treated as
capital gain or loss. In the case of an optionee who is also an employee at the
time of grant, any income recognized upon exercise of an NSO will constitute
wages for which federal income tax withholding will be required.
Alternative Minimum Taxable Income Adjustment. The exercise by an optionee of an
ISO granted under the Option Plan may subject the optionee to alternative
minimum tax ("AMT") under Section 56 of the Code. Under Section 56(b)(3) of the
Code, for purposes of computing the amount of the alternative minimum taxable
income ("AMTI") of an individual for any taxable year, (i) Section 83 (relating
to NSOs) as opposed to Section 421 (relating to ISOs) of the Code applies to the
14
transfer of a share of Common Stock pursuant to the exercise of an ISO (that is,
the ISO is treated as an NSO) and (ii) the optionee must treat the difference,
if any, between the fair market value of the ISO and the option exercise price
as an adjustment in determining AMTI under Section 56(b)(3) of the Code in the
first taxable year in which the optionee's rights in such share are either
transferable or are not subject to a substantial risk of forfeiture under
Section 83(a) of the Code. An optionee may alter the timing and amount of such
an AMTI adjustment, if any, by filing with the Internal Revenue Service an
election under Section 83(b) of the Code within thirty (30) days after the date
of the exercise of an ISO. Such an AMTI adjustment, if any, is also added to the
basis of such share for purposes of determining adjusted gain or loss under the
AMT upon disposition of such share. No such AMTI adjustment is required if the
exercise of an ISO and the subsequent disposition of such share occur within the
same taxable year.
Outstanding Options. As of the Record Date, a total of 830,630 options
(including a maximum of 88,900 options that the Company has agreed to issue to
certain non-executive employees in connection with the cancellation of their
options as described below) were granted or committed to be granted and had not
expired or been forfeited, of which 105,646 were exercised and 636,084 options
were outstanding. Of the outstanding options, 411,200 options were held by
executive officers and directors of the Company as a group, see "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-Ended Option Values" and
321,775 options are presently exercisable. The outstanding options, which are
held by 98 persons, are exercisable at prices ranging from $3.27 per share to
$14.32 per share and are exercisable through various expiration dates from 2001
to 2007. The outstanding options indicated above reflect the cancellation
effective June 21, 2001 of 88,900 options which had exercise prices ranging from
$13.02 per share to $16.71 per share. In connection with such cancellation, the
Company has agreed with each of the Company's non-executive employees electing
to such cancellation to issue no earlier than six months but no later than nine
months from the date of cancellation an equal number of options to such employee
at the then fair market value of the Company's Common Stock. None of the
executive officers or directors were offered the election to cancel any options.
Recent Price of Common Stock. On the Record Date, the closing sale price of the
Common Stock on The Nasdaq National Market was $4.75 per share.
2000 Nonemployee Director Stock Option Plan
In June 2000, the Company established the 2000 Nonemployee Director Stock Option
Plan (the "Director Stock Option Plan"). The Director Stock Option Plan provides
for awards of options to purchase shares of Common Stock of the Company to
nonemployee directors of the Company. Under the Director Stock Option Plan, on
or about the day of each nonemployee director's initial election to the
Company's Board, each nonemployee director will be awarded nonqualified stock
options to purchase at least 1,500 shares of the Company's Common Stock, but not
to exceed a maximum of 15,000 shares, at the fair market value of the Company's
Common Stock on the date on which the option is granted. The Board will
determine the number of options to be granted to a nonemployee director upon his
or her initial election as it deems necessary or advisable and in the best
interests of the Company in order to attract and obtain outstanding and highly
qualified candidates to serve on the Company's Board. Prior to the amendment
approved by the Board as hereinafter discussed, on the date of the Company's
annual meeting of shareholders occurring later than 12 months after a
nonemployee director's initial election, the Director Stock Option Plan provided
such nonemployee director (subject to his or her re-election if up for election
at such annual meeting) would be automatically awarded additional options to
purchase 750 shares of Common Stock at the fair market value of the Company's
Common Stock on the date on which the option is granted. On June 12, 2001, the
Board authorized and adopted, subject to shareholder approval, an increase in
the annual grant of options from 750 to 1,000. See "ITEM 3. AUTHORIZATION OF
INCREASE IN ANNUAL OPTION GRANT UNDER DIRECTOR STOCK OPTION PLAN" in
"PROPOSALS." The Board is recommending approval of such amendment by the
Company's shareholders at the Meeting.
A general description of the Director Stock Option Plan, as previously in effect
and as amended, is presented below. Reference is also made to ITEM 3 in
"PROPOSALS" for a detailed description of the amendment for which shareholder
approval is being sought at the Meeting. A copy of the Director Stock Option
Plan may be obtained without charge upon written request to Howard L. Flanders,
the Corporate Secretary, at the Company's principal executive offices, 16115
N.W. 52nd Avenue, Miami, Florida 33014.
15
Purpose. The purpose of the Director Stock Option Plan is to provide incentives
which will attract and retain outstanding individuals to serve as members of the
Board, thereby strengthening the mutuality of interests between such persons and
the Company's shareholders.
Number of Shares. The number of shares of the Company's Common Stock reserved
for issuance under the Director Stock Option Plan is 75,000 shares, subject to
any future anti-dilution adjustments.
Administration. Although the Board generally administers the Director Stock
Option Plan, the Director Stock Option Plan is substantively self-executing
except that the Board is given discretion to determine the number of shares
(from 1,500 up to 15,000 shares) included in the option granted to an individual
upon his initial election to the Board. See "Stock Options" below.
Eligibility. Participation in the Director Stock Option Plan is limited to
members of the Board who are not salaried officers or employees of the Company
or any of its direct or indirect subsidiaries (a "Nonemployee Director").
Stock Options. As required by the Code, nonemployee directors of a company are
only eligible to receive nonqualified stock options (options that do not meet
the requirements of Section 422 of the Code). Stock options consist of grants
from the Company, in the form of agreements, which enable the holder to purchase
a specific number of shares of Common Stock, at set terms and at a fixed
purchase price, which terms and price are hereinafter described. With respect to
the election of any new Nonemployee Director, effective on the date of a
Nonemployee Director's initial election to the Board, each Nonemployee Director
will be awarded a nonqualified stock option to purchase between 1,500 shares and
15,000 shares of Common Stock (the "Initial Option") as determined in the sole
discretion of the Board. In addition, prior to the adoption by the Board of the
amendment increasing the annual grant, effective on the date of each annual
meeting of shareholders of the Company, commencing with the Meeting, each
Nonemployee Director (subject to his or her re-election if up for election at
such annual meeting) would have been automatically awarded an additional
nonqualified stock option to purchase 750 shares of Common Stock (the
"Additional Option"); provided, however, that a Nonemployee Director is not
granted such Additional Option if such Nonemployee Director was granted an
Initial Option in the immediately preceding 12 months period upon his or her
initial election to the Board. Subject to the approval of the shareholders of
the Company at the Meeting, the Board authorized an increase in the annual grant
of options to purchase 1,000 shares of Common Stock.
Exercise Price. The exercise price for all options granted under the Director
Stock Option Plan is 100% of the Fair Market Value (as hereinafter defined) of
Common Stock on the date of the grant. The "Fair Market Value" on the date of
the grant of any option is the average of the "market price" of a share of
Common Stock for each of the seven (7) consecutive business days preceding such
date. The "market price" on each such day shall be (i) if the Common Stock is
listed on a securities exchange (including The Nasdaq Stock Market), the closing
sales price on such exchange on such day or, in the absence of reported sales on
such day, the mean between the reported closing bid and asked prices on such
exchange on such day, or (ii) if the Common Stock is not listed on a securities
exchange (including The Nasdaq Stock Market), the mean between the closing bid
and asked prices as quoted by the National Association of Securities Dealers,
Inc. through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") for such day; provided, however, that, if there are no such
quotations or if it is determined that the fair market value is not properly
reflected by such NASDAQ quotations or the Common Stock is not traded on an
exchange or over the counter, fair market value shall be determined by such
other method as the Board determines to be reasonable.
Term and Vesting of Exercise Rights. All options granted under the Director
Stock Option Plan are subject to a ten year term. The right to exercise such
options, in whole or in part, from time to time after the date granted, will
vest in 50% annual increments on each of the first two anniversary dates from
the date of grant. Accordingly, no option granted will be exercisable during the
first year following the date such option is granted. Notwithstanding the above
vesting schedule, any option granted under the Director Stock Option Plan
becomes fully vested and exercisable upon (i) the death of a Nonemployee
Director while serving on the Board, (ii) a Nonemployee Director's "Retirement"
(meaning a Nonemployee Director's termination of service as a member of the
Board after the age of 70 years or at any time with the consent of the Board),
(iii) the permanent disability (inability, due to mental, emotional or physical
injury or illness, to perform the essential functions of a Board member) of a
Nonemployee Director or (iv) any change in control (as defined) of the Company.
If a Nonemployee Director's service is terminated for any reason, his or her
option may be exercised to the extent it has vested and is exercisable at the
16
date of such termination for a period of time pursuant to the terms of the
Director Stock Option Plan. In the case of a termination other than for death,
permanent disability or Retirement of a Nonemployee Director, the period for
exercise as to vested options following termination is 90 days. In the case of
Retirement or permanent disability, the period for exercise as to vested options
is 180 days. In the case of death, the period for exercise as to vested options
is 12 months. However, in no event may an option be exercised more than ten
years after the date the option is granted.
Manner of Exercise and Payment of Exercise Price. Options granted under the
Director Stock Option Plan are exercised by a Nonemployee Director (or upon his
or her death by his or her personal representative, executor or administrator or
upon incapacity by his guardian), as to all or part of the Common Stock covered
by the options which have vested, by giving written notice of exercise to the
Secretary of the Company. Payment in full of such purchase price is to be made
(a) by check payable to the Company for the purchase price of the shares to be
purchased or (b) by tendering to the Company previously acquired shares of
Common Stock, held for at least 6 months, having a Fair Market Value (determined
as of the date such options are exercised) equal to the entire purchase price of
the shares to be purchased or (c) by a combination of both methods. No shares of
Common Stock may be issued until full payment therefore has been received by the
Company and no Nonemployee Director has any of the rights of a shareholder of
the Company until the certificates for such shares of Common Stock are issued to
the Nonemployee Director following the exercise of his or her options.
Nontransferability. Any options granted under the Director Stock Option Plan are
nontransferable by the Nonemployee Director, other than as required by law or by
will or the laws of descent and distribution or to an immediate family member (a
spouse or lineal descendent) or a trust or family partnership or other entity
for the benefit of such persons (collectively "Permitted Transferees"). Options
may be exercised during the lifetime of the Nonemployee Director only by the
Nonemployee Director or the Nonemployee Director's guardian or legal
representative, unless transferred to a Permitted Transferee, in which case such
options can be exercised by the Permitted Transferee. In the event of the death
of a Nonemployee Director, options theretofore granted to him or her are
exercisable during the 12 month period after his or her death (but not beyond
the ten-year term of the grant) and then only (i) by the executor or
administrator of the estate of the deceased Nonemployee Director or the person
or persons to whom the deceased Nonemployee Director's rights under the option
pass by will or the laws of descent and distribution or, if previously
transferred to a Permitted Transferee, by the Permitted Transferee, and (ii) to
the extent that the deceased Nonemployee Director (or Permitted Transferee) was
entitled to do so at the date of the Nonemployee Director's death.
Adjustment on Changes in Capitalization. If the Company at any time changes the
number of issued shares of Common Stock without new consideration to the Company
(such as by stock dividend or stock split), the total number of shares available
for stock option grants under the Director Stock Option Plan will be
appropriately adjusted and the number of shares covered by and the exercise
price for each outstanding option shall be adjusted so that the aggregate
consideration payable to the Company and the value of such option shall not be
changed. If, during the term of any option granted, the Common Stock shall be
changed into another kind of stock, securities, cash or other property as a
result of reorganization, sale, merger, consolidation, or other similar
transaction, adequate provision will be made whereby the Nonemployee Directors
shall thereafter be entitled to receive, upon the due exercise of any
outstanding options, the stock, securities, cash or other property the
Nonemployee Directors would have been entitled to receive immediately prior to
the effective date of any such transaction for Common Stock which could have
been acquired through the exercise of such options.
Amendment and Discontinuation of the Director Stock Option Plan. The Board may
amend, suspend or discontinue the Director Stock Option Plan at any time, but no
such action may adversely affect any outstanding option, provided, however, that
any such amendment shall be adopted subject to and conditioned upon obtaining
the approval of the Company's shareholders if the amendment without such
subsequent approval of the Company's shareholders (a) would result in the
Director Stock Option Plan losing its status as a protected plan under Rule
16b-3 (as then in effect) of the Exchange Act or (b) would violate the Exchange
Act or any other rules or regulations promulgated thereunder or the rules of The
Nasdaq Stock Market, Inc. or any other securities exchange on which the
Company's Common Stock is traded. The Director Stock Option Plan is effective
indefinitely until discontinued by action of the Board.
17
Federal Income Tax Consequences. The following is a brief summary of the
applicable Federal income tax consequences of options granted under the Director
Stock Option Plan based on U.S. Federal income tax laws in effect on the date of
this Proxy Statement. With respect to nonqualified stock options: (i) generally,
no income is recognized by the optionee at the time the option is granted; (ii)
generally, at exercise, ordinary income is recognized by the optionee in an
amount equal to the difference between the option exercise price paid for the
shares and the fair market value of the shares on the date of the exercise, and
the Company is entitled to an employer tax deduction in the same amount; and
(iii) upon disposition of the shares, any gain or loss is treated as capital
gain or loss.
Outstanding Options. As of the Record Date, a total of 6,000 options were
granted and had not expired or been forfeited under the Director Stock Option
Plan, all of which were outstanding. These options, which are held by 4 persons,
are exercisable at prices ranging from $7.15 per share to $10.53 per share
(based on Fair Market Value at date of grant) and vest over a two-year period
and are exercisable over a ten-year period.
Registration Statements
Except with respect to the increased number of shares reserved for issuance
under the Option Plan being submitted for approval by the Company's shareholders
at the Meeting, the Company has filed registration statements on Form S-8 with
the SEC in order to register all of the shares of Common Stock issuable under
the Company's two option plans. So long as such registration statements remain
effective under the Securities Act of 1933, as amended (the "Act"), shares of
Common Stock issued upon the exercise of outstanding options under the option
plans will be immediately and freely tradable without restriction under the Act,
subject to applicable volume limitations, if any, under Rule 144 and, in the
case of executive officers and directors of the Company, Section 16 of the
Exchange Act. It is contemplated that the Company will at the appropriate time
file an additional registration statement on Form S-8 in order to register the
200,000 additional shares reserved if the Company's shareholders approve the
increase in the number of shares of Common Stock reserved for issuance pursuant
to the Option Plan from 900,000 to 1,100,000 shares of Common Stock. See "ITEM
2. AUTHORIZATION OF ADDITIONAL SHARES UNDER OPTION PLAN" in "PROPOSALS."
Deferred Compensation Plans for Executive Officers and Key Employees
Effective January 1, 1988, the Company established a deferred compensation plan
(the "1988 Deferred Compensation Plan") for executive officers and key employees
of the Company. The employees eligible to participate in the 1988 Deferred
Compensation Plan (the "Participants") are chosen at the sole discretion of the
Board, upon a recommendation from the Compensation Committee. Pursuant to the
1988 Deferred Compensation Plan, commencing on a Participant's retirement date,
he or she will receive an annuity for ten years. The amount of the annuity shall
be computed at 30% of the Participant's salary, as defined. Any Participant with
less than ten years of service to the Company as of his or her retirement date
will only receive a pro rata portion of the annuity. Retirement benefits paid
under the 1988 Deferred Compensation Plan will be distributed monthly. The
Company paid benefits under this plan of approximately $15,600 during 2000, none
of which was paid to any executive officer. The maximum benefit payable to a
Participant (including each of the executive officers) under the 1988 Deferred
Compensation Plan is presently $30,000 per annum.
During 1996, the Company established a second deferred compensation plan (the
"1996 Deferred Compensation Plan") for executives of the Company. The executives
eligible to participate in the 1996 Deferred Compensation Plan are chosen at the
sole discretion of the Board upon a recommendation from the Compensation
Committee. The Company may make contributions each year in its sole discretion
and is under no obligation to make a contribution in any given year. For 2000
the Company committed to contribute $175,000 under this plan. Participants in
the plan will vest in their plan benefits over a ten-year period. If the
participant's employment terminates due to death, disability or a change in
control of management, he or she will vest 100% in all benefits under the plan.
Retirement benefits will be paid, as selected by the participant, based on the
sum of the contributions made and any additions based on investment gains. One
executive officer of the Company has been chosen as a participant in the 1996
Deferred Compensation Plan.
401(k) Plan
The Company maintains a 401(k) Plan (the "401(k) Plan"), which is intended to
qualify under Section 401(k) of the Code. All full-time employees of the Company
over the age of 21 are eligible to participate in the 401(k) Plan after
18
completing 90 days of employment. Each eligible employee may elect to contribute
to the 401(k) Plan, through payroll deductions, up to 15% of his or her salary,
limited to $10,500 in 2000. The Company makes matching contributions and in 2000
its contributions were in the amount of 25% on the first 6% contributed of each
participating employee's salary.
Employment Agreements
The Goldberg Agreements
The Company has employment agreements with each of Paul Goldberg, its Chairman
of the Board, and Bruce M. Goldberg, its Chief Executive Officer and President
(collectively and as amended the "Goldberg Agreements"). Effective January 1,
2000, the term of each of the Goldberg Agreements was extended until December
31, 2005, with automatic additional successive one-year renewal periods
thereafter unless terminated in writing by the Company or the employee at least
60 days prior to the expiration of the then current term and subject, in the
case of Paul Goldberg, to earlier termination in the event that Paul Goldberg
elects to exercise his right to retire as hereinafter described. Each of the
Goldberg Agreements provides for a base salary, in the case of Paul Goldberg, of
$291,167 per annum effective January 1, 2000, and, in the case of Bruce M.
Goldberg, of $391,723 per annum effective January 1, 1999, subject to an annual
increase equal to the greater of 4% per annum or the increase in the cost of
living. Under the Goldberg Agreements, Paul Goldberg and Bruce M. Goldberg are
entitled to receive, in the case of Paul Goldberg, an annual cash bonus equal to
3% and, in the case of Bruce M. Goldberg, an annual cash bonus in 1999 equal to
4% and in 2000 and thereafter 5% of the Company's pre-tax income, before
nonrecurring and extraordinary charges, in excess of $1,000,000 in any calendar
year. Such annual bonus compensation for each of Paul Goldberg and Bruce M.
Goldberg is limited in any year to an amount no greater than two times his
respective base salary for the applicable year. In addition, upon a change in
control, all options granted by the Company to Paul Goldberg and Bruce M.
Goldberg automatically vest.
In 1998, the Board of Directors approved a loan to Bruce M. Goldberg in the
amount of $125,000 in connection with his relocation to Silicon Valley. This
loan, which was evidenced by a promissory note and bore interest at 5% per
annum, was forgiven effective December 31, 2000.
Under the Goldberg Agreement for Paul Goldberg, as amended, he is able to elect,
in his sole discretion, to retire at any time (the "Retirement Election"). Upon
the earlier to occur of the Retirement Election, his death or at the expiration
of the term of his Goldberg Agreement, the Company will be obligated to pay Paul
Goldberg (in addition to any other compensation he may be entitled to upon
termination), and his spouse upon his death, a retirement benefit of $100,000
per annum until the later of the death of Paul Goldberg or his spouse, provide
him and his spouse, without cost, until the later of their respective deaths, at
least the same level of medical and health insurance benefits as was provided
prior to his retirement and continue to pay the premiums on the life insurance
policy insuring his life as described under "Summary Compensation Table"
hereinabove.
The Goldberg Agreements also provide certain additional benefits to each of Paul
Goldberg and Bruce M. Goldberg, including participation in the Company benefit
plans, use of a Company automobile and, in the case of Bruce M. Goldberg,
continuance in the event of disability of all his respective compensation and
other benefits for two years.
The Goldberg Agreements, also provide that, in the event of change in control
(as defined) of the Company, each of Paul Goldberg and Bruce M. Goldberg shall
have the option in his sole discretion to terminate his Goldberg Agreement. In
such event, Paul Goldberg would be entitled to elect (in lieu of electing to
continue to receive some or all of the compensation, payments and benefits as
and when due under his Goldberg Agreement) to receive a lump sum payment equal
to the sum of (i) Paul Goldberg's compensation due through the greater of the
end of the term of his Goldberg Agreement or three years after the change in
control, (ii) the present value (assuming a certain discount rate and life
expectancy) of the retirement payments payable to Paul Goldberg commencing from
the later of the end of the term or three years after the change in control
until his death, (iii) an amount sufficient to pay, until the later of his or
his spouse's death, the premium for at least the same level of health insurance
benefits as was provided before the change in control and (iv) an amount
sufficient to pay until his death, the premiums on the life insurance policy
insuring his life as described under "Summary Compensation Table." Similarly,
under the Goldberg Agreement for Bruce M. Goldberg, in the event of a change in
control and Bruce M. Goldberg's election to terminate his Goldberg Agreement,
Bruce M. Goldberg at his option will be entitled to elect to receive a lump sum
payment equal to his compensation due through the later of the end of the term
of his Goldberg Agreement or three years after the change in control or for such
period to continue to receive such compensation as and when due under the
Goldberg Agreement. The Goldberg Agreements (as well as the employment
agreements for each of Howard L. Flanders and Rick Gordon discussed below) also
19
provide for reimbursement of, and a gross-up for, any federal tax liability
imposed pursuant to Section 4999 or Section 280G (or any successor provisions)
of the Code and any similar state or local taxes, as a result of a change in
control payment, consideration and/or benefit made or provided by the Company
pursuant to such employment agreements.
The Flanders/Gordon Agreements
Effective as of January 1, 2000, the Company entered into a new employment
agreement with Howard L. Flanders, its Executive Vice President, Chief Financial
Officer and Corporate Secretary (the "Flanders Agreement"), and Rick Gordon, its
Senior Vice President of Sales (the "Gordon Agreement" and collectively with the
Flanders Agreement, the "Flanders/Gordon Agreements"). The Flanders/Gordon
Agreements each expire on December 31, 2003, with automatic additional
successive one-year renewal periods thereafter unless terminated in writing by
the Company or the employee at least 60 days prior to expiration of the then
current term. They provide for a base salary, effective as of January 1, 2000,
of $215,000 per annum for Mr. Flanders and $218,000 per annum for Mr. Gordon,
subject to an annual increase commencing January 1, 2001, equal to the greater
of 5% per annum or the increase in the cost of living. Under the Flanders/Gordon
Agreements, Messrs. Gordon and Flanders are entitled to receive an annual cash
bonus equal to 2% of the Company's pre-tax income, before nonrecurring and
extraordinary charges, in excess of $1,000,000 in any calendar year. Such annual
cash bonus compensation is limited in any year to an amount no greater than such
executive's base salary for the applicable year. The Flanders/Gordon Agreements
also provide for certain additional benefits, including participation in the
Company benefit plans, use of a Company automobile and continuance of all their
respective compensation and other benefits for two years in the event of
disability. Further, if Mr. Gordon or Mr. Flanders were to be terminated without
cause (which includes requiring employee to perform duties not commensurate with
his offices or which differ materially from duties that presently exist or,
after a change in control, changing the location where employee is based), he is
entitled to receive severance benefits equal to the greater of two-years
compensation or the remainder of the compensation due under the applicable
Flanders/Gordon Agreement. Additionally, under the Flanders/Gordon Agreements,
the Company will pay premiums under a life insurance policy for each of Messrs.
Gordon and Flanders with the beneficiary to be as designated by Mr. Gordon or
Mr. Flanders, respectively, as described under "Summary Compensation Table"
above. The Flanders/Gordon Agreements also provide that, in the event of a
change in control (as defined) of the Company, each of Mr. Gordon and Mr.
Flanders would have the option in his sole discretion to terminate the
applicable Flanders/Gordon Agreement. In such event, and subject to remaining an
employee of the Company (or its successor) for 180 days after the change in
control (other than as a result of his death, disability or termination without
cause), Mr. Gordon or Mr. Flanders, at his option, is entitled to elect to
receive a lump-sum payment equal to his respective compensation due through the
later of the end of the term of the applicable Flanders/Gordon Agreement or two
years after the change in control or for such period to continue to receive such
compensation as and when due under such Flanders/Gordon Agreement. In addition,
upon a change in control, all options granted by the Company to Messrs. Flanders
and Gordon automatically vest. The Flanders/Gordon Agreements also contain
covenants not to compete, nonsolicitation and nondisclosure provisions.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board consists of Daniel M. Robbin and Robin
L. Crandell, both being independent, nonemployee directors of the Company. See
"BOARD COMMITTEES-Compensation Committee." Since January 1, 2000 to the date
hereof, neither member of the Compensation Committee had any relationship with
the Company requiring disclosure under Item 404 of Regulation S-K.
20
STOCK PRICE PERFORMANCE CHART
The following graph compares the five-year cumulative total returns* of the
Company's Common Stock with the NASDAQ Market Index and the Electronic Parts and
Equipment Peer Group Index (SIC Code 5065). The stock price performance shown
below is not necessarily indicative of future price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, THE ELECTRONIC PARTS AND EQUIPMENT
PEER GROUP INDEX AND NASDAQ MARKET INDEX*
(GRAPHICAL REPRESENTATION OF DATA BELOW)
FISCAL YEAR ENDED DECEMBER 31
---------------------------------------------------
1995 1996 1997 1998 1999 2000
COMPANY 100.00 43.24 62.16 35.14 25.68 77.84
THE ELECTRONIC PARTS AND
EQUIPMENT PEER GROUP INDEX 100.00 115.68 119.12 90.07 107.90 79.89
NASDAQ MARKET INDEX 100.00 124.27 152.00 214.39 378.12 237.66
- ------------------
*Assumes the investment of $100 on January 1, 1996 and reinvestment of dividends
(no dividends were declared on the Company's Common Stock during the period).
PROPOSALS
ITEM 1. ELECTION OF DIRECTORS
It is intended that the votes will be cast pursuant to the accompanying proxy
for the nominees named below, unless otherwise directed. The Board has no reason
to believe that such nominees will become unavailable; however, in the event
that such nominees should be unavailable, proxies solicited by the Board will be
voted for the election of substitute nominees designated by the Board.
Daniel M. Robbin has been a member of the Board since 1997 and Lewis B. Freeman
has been a member of the Board since June 2001. The names of the nominees and
the terms and class are set forth below. For biographical and other information
regarding such nominees, see "BOARD OF DIRECTORS."
Nominee Term Class
------- ---- -----
Daniel M. Robbin 3 years I
Lewis B. Freeman 3 years I
Proxies cannot be voted for a greater number of persons than the nominees named
above.
21
The nominees for directors who receive a plurality of the votes cast by the
holders of the Shares will be elected. Abstentions (withheld authority) and
broker or nominee non-votes are not counted in determining the number of Shares
voted for or against any nominee for director.
The Board recommends a vote in favor of the nominees for election to the Board.
ITEM 2. AUTHORIZATION OF ADDITIONAL SHARES UNDER OPTION PLAN
The Company proposes to increase the number of shares of Common Stock reserved
for issuance upon the exercise of options granted under the Option Plan to
1,100,000 shares (the "Reserved Share Increase"). Prior to the Board's
authorization and adoption of the Reserved Share Increase subject to shareholder
approval, 900,000 shares were reserved for issuance upon the exercise of options
granted under the Option Plan. The Company believes that increasing the number
of reserved shares will permit greater employee, officer and director
participation in the Option Plan and, as a result, will foster initiative,
increased performance and greater employee loyalty. In addition, it will enable
the Company to continue in the future to be able to grant options as incentives
to existing employees as well as in order to attract and retain the best
qualified personnel.
As of this date, the Company has no commitment to issue any other specific
options under the Option Plan other than those previously issued and disclosed
herein as well as those associated with a cancellation of 88,900 options in June
2001. However, the Compensation Committee has the authority to issue options, at
any time, in its sole discretion. See "EXECUTIVE COMPENSATION-Employees',
Officers', Directors' Stock Option Plan" for a discussion of the material
features of the Option Plan and, in particular, "Outstanding Options" under that
section for a discussion of the future issuance of options associated with the
cancellation of options in June 2001.
The affirmative vote of a majority of the Shares represented at the Meeting
which cast a vote on this proposal is required to approve this proposal.
Abstentions (withheld authority) and broker or nominee non-votes are not counted
in determining the number of Shares voted for or against this proposal. The
Goldberg Group has indicated that they intend to vote in favor of this proposal.
The Board recommends a vote in favor of this proposal.
ITEM 3. AUTHORIZATION OF INCREASE IN ANNUAL OPTION GRANT UNDER DIRECTOR STOCK
OPTION PLAN
The Company proposes to increase the number of nonqualified stock options to
purchase shares of Common Stock automatically awarded to each nonemployee
director on the date of each annual meeting of shareholders of the Company from
750 to 1,000 shares under the Director Stock Option Plan. The Company believes
that increasing the annual option grant will provide further incentive to
attract and retain outstanding individuals to serve as members of the Board,
thereby strengthening the mutuality of interest between such persons and the
Company's shareholders. See "EXECUTIVE COMPENSATION-2000 Nonemployee Director
Stock Option Plan" for a discussion of the material features of the Director
Stock Option Plan.
The affirmative vote of a majority of the Shares represented at the Meeting
which cast a vote on this proposal is required to approve this proposal.
Abstentions (withheld authority) and broker or nominee non-votes are not counted
in determining the number of Shares voted for or against this proposal. The
Goldberg Group has indicated that they intend to vote in favor of this proposal.
The Board recommends a vote in favor of this proposal.
22
ITEM 4. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
It is intended that the votes will be cast pursuant to the accompanying proxy
for the ratification of Lazar Levine & Felix LLP as the Company's independent
public accountants for the fiscal year ending December 31, 2001, unless
otherwise directed.
The firm of Lazar Levine & Felix LLP certified the accounts of the Company for
the fiscal years ended December 31, 1988 and thereafter. For a discussion of the
fees paid to Lazar Levine & Felix LLP for services rendered during the year
ended December 31, 2000, see "Principal Accounting Firm Fees" under "AUDIT
COMMITTEE REPORT." No member of such firm or any associate thereof has any
financial interest in the Company or its subsidiaries. A member of such firm is
not expected to be present at the Meeting.
Shareholder approval of the Company's auditors is not required under Delaware
law. Consistent with past practices, the Board is submitting its selection of
Lazar Levine & Felix LLP to its shareholders for ratification in order to
determine whether the shareholders generally approve of the Company's auditors.
If the selection of Lazar Levine & Felix LLP is not approved by the
shareholders, the Board will reconsider its selection.
The affirmative vote of a majority of the Shares represented in person or by
proxy at the Meeting which cast a vote on this proposal is required to approve
this proposal. Abstentions (withheld authority) and broker or nominee non-votes
are not counted in determining the number of Shares voted for or against this
proposal.
The Board recommends a vote in favor of this proposal.
23
SHAREHOLDER'S PROPOSALS FOR 2002 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2002 annual meeting of shareholders and who wishes to have such proposal
receive consideration for inclusion in the Company's proxy statement for such
meeting must deliver such proposal in writing to the Company at 16115 N.W. 52nd
Avenue, Miami, Florida 33014, not later than March 22, 2002. Any such
shareholder proposal must comply with the requirements of Rule 14a-8 promulgated
under the Securities Exchange Act of 1934.
The persons named as proxies for the 2002 annual meeting of shareholders will
generally have discretionary authority to vote on any matter presented by a
shareholder for action at that meeting. In the event that the Company receives
notice of any shareholder proposal no later than forty-five (45) days before the
date on which the Company first mailed this Proxy Statement, then, so long as
the Company includes in its proxy statement for the 2002 annual meeting of
shareholders advice on the nature of the matter and how the named proxies intend
to vote the shares for which they have received discretionary authority, such
proxies may exercise discretionary authority with respect to such matter, except
to the extent limited by the rules of the Securities and Exchange Commission
governing shareholder proposals.
OTHER MATTERS
The Board has no knowledge of any other matters which may come before the
Meeting and does not intend to present any other matters. However, if any other
matters shall properly come before the Meeting or any adjournment or
postponements thereof, the persons named as proxies will have discretionary
authority to vote the shares represented by the accompanying proxy in accordance
with their best judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2000 IS
BEING PROVIDED TO SHAREHOLDERS WITH THIS PROXY STATEMENT. THE COMPANY WILL
FURNISH TO EACH PERSON SOLICITED HEREUNDER, WITHOUT CHARGE, COPIES OF ITS ANNUAL
REPORT ON FORM 10-K (INCLUDING EXHIBITS) FOR THE COMPANY'S YEAR ENDED DECEMBER
31, 2000, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT BY
THE COMPANY OF A WRITTEN REQUEST BY SUCH PERSON. SUCH WRITTEN REQUEST SHOULD BE
SENT TO THE COMPANY, ATTENTION: HOWARD L. FLANDERS, EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, AT THE COMPANY'S ADDRESS STATED HEREINABOVE.
By Order of the Board of Directors,
/s/ HOWARD L. FLANDERS
-----------------------------------------
Howard L. Flanders,
Corporate Secretary
July 20, 2001
Miami, Florida
24
EXHIBIT A.
----------
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
-------------------------------------------
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibilities relating to
the company's accounting and financial reporting practices by providing a
channel of communication between the Board and the company's independent
accountants and internal auditors (if any) and by reviewing the company's
financial reports and its auditing, accounting and financial reporting processes
generally. Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the company's
policies, procedures and practices at all levels. The Committee's primary duties
and responsibilities are to:
[ ] Serve as an independent and objective party to monitor the
company's financial reporting process and internal control
system.
[ ] Review and appraise the audit efforts of the company's
independent accountants and internal auditing department.
[ ] Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department (if any), and the Board of Directors.
The Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgment as a
member of the Committee; provided, however, that prior to June 14, 2001
the Committee may be composed of only two independent directors.
An independent director will not include a director who:
(i) is an officer or employee of the company or its
subsidiaries;
(ii) has been employed by the corporation or any of its
affiliates in the current year or any of the past
three years;
(iii) accepted compensation from the company or any of its
affiliates in excess of $60,000 during the previous
fiscal year, other than compensation for board
service, benefits under a tax-qualified retirement
plan, or non-discretionary compensation;
(iv) is a member of the immediate family of an individual
who is, or has been in any of the past three years,
employed by the company or any of its affiliates as
an executive officer;
(v) is a partner, controlling shareholder, or executive
officer of any for-profit business organization to
which the company made or from which the company
received payments that exceed five percent of such
business organization's consolidated gross revenues
for that year or $200,000, whichever is more, in any
of the past three years; or
(vi) is employed as an executive of another entity where
any of the company's executives are on that entity's
compensation committee.
All members of the Committee shall have a working familiarity with
basic finance and accounting practices, including the ability to read
and understand the company's fundamental financial statements, and by
June 14, 2001 at least one member of the Committee shall have
accounting or related financial management expertise.
Committee members shall be selected by majority vote of the Board. The
Committee shall elect by majority vote a Chairperson from its members.
III. MEETINGS
The Committee shall meet annually, or more frequently as circumstances
dictate. As part of its job to foster open communication, the Committee
may meet with management, the director of the internal auditing
department (if any) and the independent accountants in separate
executive sessions to discuss any matters that the Committee or each of
these groups believe should be discussed privately. In addition, the
Committee or at least its Chairperson should meet with the independent
accountants and management quarterly to review the company's financial
statements consistent with Section IV below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review, and if necessary update, this Charter at least
annually.
2. Review the company's quarterly and annual financial
statements.
3. Review the regular internal reports to management prepared by
the internal auditing department (if any) and management's
response.
4. Review with financial management and the independent
accountants any Form 10-Q or 10-K prior to its filing or prior
to the release of earnings. The Chair of the Committee may
represent the entire Committee for purposes of this review.
5. Inform the Board of its determination whether or not to
recommend that the audited financial statements be included in
the company's Annual Report on Form 10-K.
6. Prepare a report for inclusion in the company's annual proxy
statement stating that the Committee has:
(i) reviewed and discussed the audited financial
statements with management;
(ii) discussed with the independent accountants the
matters relating to the conduct of the audit;
(iii) received from the independent accountants written
disclosure and a letter regarding the accountants'
independence, and discussed with the accountants
their independence; and
(iv) recommended to the Board that the audited financial
statements be included in the company's Annual Report
on Form 10-K.
Independent Accountants
1. Recommend to the Board the selection of the independent
accountants, considering independence and effectiveness and
approve the fees and other compensation to be paid to the
independent accountants.
2
2. Obtain from the independent accountants a written statement
describing all relationships between the accountants and the
company.
3. Review and discuss with the accountants on an annual basis all
significant relationships the accountants have with the
company to determine the accountants' independence.
4. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.
5. Periodically consult with the independent accountants out of
the presence of management about internal controls and the
fullness and accuracy of the company's financial statements.
6. Consider and approve, if appropriate, actions required to
maintain the independence of the accountants.
Financial Reporting Processes
1. In consultation with the independent accountants and the
internal auditors (if any), review the integrity of the
company's financial reporting processes, both internal and
external.
2. Consider the independent accountants' judgments about the
quality and appropriateness of the company's accounting
principles as applied in its financial reporting.
3. Consider and approve, if appropriate, major changes to the
company's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the
internal auditing department (if any).
4. Review with the independent accountants the scope of their
annual and quarterly examinations and the accounting
principles used in conducting the examinations.
Process Improvement
1. Establish regular and separate systems of reporting to the
Committee by each of management, the independent accountants
and the internal auditors (if any) regarding any significant
judgments made in management's preparation of the financial
statements and the view of each as to the appropriateness of
such judgments.
2. Following completion of the annual audit, review separately
with each of management, the independent accountants and the
internal auditing department (if any) any significant
difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to
required information.
3. Review any significant disagreement among management and the
independent accountants or the internal auditing department
(if any) in connection with the preparation of the financial
statements.
4. Review with the independent accountants, the internal auditing
department (if any) and management the extent to which changes
or improvements in financial or accounting practices, as
approved by the Committee, have been implemented. This review
should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the
Committee.
5. Review activities, organizational structure, and
qualifications of the internal audit department (if any).
6. Provide a focal point for communications among non-Committee
directors, the company's management, and the independent
accountants.
3
7. Review with independent accountants, the company's internal
auditor (if any), and financial and accounting personnel, the
adequacy and effectiveness of the accounting and financial
controls of the company, and elicit any recommendations for
the improvement of such internal control procedures or
particular areas where new or more detailed controls or
procedures are desirable.
8. Meet with independent accountants to appraise the
effectiveness of the audit effort. Such appraisal shall
include a discussion of the overall approach to and the scope
of the examination, with particular attention to those areas
on which either the Committee or the auditors believed
emphasis was necessary or desirable.
Reporting
1. Annually, report to the Board its activities during the past
year. This report shall discuss any specific actions the
Committee has taken as well as the Committee's plans for the
coming year. Additionally, during the year, as appropriate,
the Committee shall report significant matters and findings to
the Board.
4
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-August 22, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Paul Goldberg and Bruce
M. Goldberg, and each of them, as proxies, with full power of substitution to
each, for and in the name, place and stead of the undersigned to vote all shares
of Common Stock of All American Semiconductor, Inc. (the "Company") which the
undersigned would be entitled to vote at the Annual Meeting of Shareholders of
the Company to be held on Wednesday, August 22, 2001, at 10:00 a.m., California
local time, at the Courtyard by Marriott, 1727 Technology Drive, San Jose,
California, and at any and all postponements and adjournments thereof. The Board
of Directors recommends a vote "FOR" Proposals 1, 2, 3 and 4 on reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. WHERE A VOTE IS NOT SPECIFIED, THE
PROXIES WILL VOTE THE SHARES REPRESENTED BY THE PROXY "FOR" EACH OF PROPOSALS 1,
2, 3 AND 4 ON REVERSE SIDE.
A MAJORITY OF SAID PROXIES PRESENT AND ACTING IN PERSON OR BY THEIR
SUBSTITUTES (OR IF ONLY ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE
ALL OF THE POWER CONFERRED HEREBY. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY
AS TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. PLEASE
SIGN EXACTLY AS YOUR NAME APPEARS IN THE RECORDS OF THE COMPANY. IF THE SHARES
ARE HELD IN THE NAMES OF TWO OR MORE PERSONS, EACH SHOULD SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, GUARDIANS, ATTORNEYS AND CORPORATE OFFICERS SHOULD ADD
THEIR TITLES.
Receipt of the Company's 2000 Annual Report and the Notice of Annual
Meeting of Shareholders and Proxy Statement relating thereto is hereby
acknowledged.
---------------
SEE REVERSE
SIDE
---------------
----- Please mark your
| X | votes as in this
----- example
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of ----- ----- 2. Increase the number of shares of ----- ----- -----
Directors | | | | Nominees: Daniel M. Robbin common stock reserved for issuance | | | | | |
| | | | Lewis B. Freeman under the Company's Employees', | | | | | |
----- ----- Officers', Directors' Stock Option Plan. ----- ----- -----
Instructions: To withhold authority
to vote for any individual nominee, 3. Increase the number of nonqualifed ----- ----- -----
write that namonee's name in the stock options automatically awarded to | | | | | |
space provided below. each nonemployee director under the | | | | | |
For, except vote withheld from the Company's 2000 Nonemployee Director ----- ----- -----
following nominee(s): Stock Option Plan.
___________________________________ 4. Ratification of the selection of Lazar ----- ----- -----
Levine & Felix LLP as the Company's | | | | | |
independent public accountants for the | | | | | |
year ending December 31, 2001. ----- ----- -----
5. Upon such other matters as may properly come before the Annual
Meeting or any and all postponements or adjournments thereof.
SIGNATURE(s)___________________________________________________________________________________ DATED:_____________________, 2001
RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
(NOTE: Please complete, date and sign exactly as your name appears hereon. When signing as attorney, executor, guardian, trustee
or corporate official, please add your title. If shares are held jointly, each holder should sign.)