SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 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)
Payment of Filing Fee (Check the appropriate box):
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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ALL AMERICAN SEMICONDUCTOR, INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on October 2, 2002
--------------------
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, October 2, 2002,
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 three directors to serve on the Board of Directors until the 2005
annual meeting of shareholders or until election and qualification of their
respective successors;
2. to ratify the selection of Lazar Levine & Felix LLP as the Company's
independent public accountants for the year ending December 31, 2002; and
3. 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 Tuesday, August 27,
2002, 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
September 4, 2002
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 October 2, 2002
--------------------
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, October 2, 2002, 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 September
4, 2002.
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,
2001 (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
-----------------
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 Tuesday,
August 27, 2002 (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 which (except 32,141 shares held by a wholly-owned subsidiary of the Company
and 186,196 treasury shares of the Company) are entitled to vote at the Meeting.
For purposes of this Proxy Statement, the "Shares" shall not
1
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"). 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 2001 (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)........................... 336,432 8.5%
Dimensional Fund Advisors Inc. (4).............. 226,120 5.9%
Paul Goldberg (5)............................... 208,073 5.3%
Howard L. Flanders.............................. 48,800 1.3%
Rick Gordon..................................... 36,800 *
John Jablansky.................................. 11,550 *
Daniel M. Robbin................................ 11,000 *
Richard E. Siegel............................... 3,100 *
Robin L. Crandell............................... 2,000 *
Howard M. Pinsley............................... 1,000 *
All executive officers and directors
as a group (9 persons)(3)(5).................... 658,755 16.0%
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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 950 Bascom Avenue, Suite 1113, San Jose, California 95128; and
Howard M. Pinsley is 233 Ballston Avenue, Saratoga Springs, New York 12866.
(2) Includes as to the person indicated the following outstanding stock options
to purchase shares of the Company's Common Stock issued under the
Employees', Officers', Directors' Stock Option Plan and the 2000
Nonemployee Director Stock Option Plan which will be vested and exercisable
on or before October 26, 2002: 118,000 options held by Bruce M. Goldberg;
79,500 options held by Paul Goldberg; 44,600 options held by Howard L.
Flanders; 36,600 options held by Rick Gordon; 5,300 options held by John
Jablansky; 9,000 options held by Daniel M. Robbin; 2,000 options held by
Richard E. Siegel; 2,000 options held by Robin L. Crandell; and 297,000
options held by the executive officers and directors as a group. Excludes
outstanding stock options to purchase an aggregate of 59,700 additional
shares of the Company's Common Stock issued under the Employees',
Officers', Directors' Stock Option Plan and the 2000 Nonemployee Director
Stock Option Plan to the executive officers and directors as a group that
will not be vested nor exercisable as of October 26, 2002.
2
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 218,337 are not deemed to be
outstanding.
(3) 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.
(4) Dimensional Fund Advisors Inc. ("Dimensional") is a registered investment
advisor with offices at 1299 Ocean Avenue, Santa Monica, California 90401.
Information as to the beneficial ownership of the Company's Common Stock by
Dimensional was obtained from a Schedule 13F filed on August 6, 2002 with
the Securities and Exchange Commission (the "SEC") which disclosed that
Dimensional was the beneficial owner of 226,120 shares, over all of which
it had sole voting power and sole dispositive power in its role as
investment advisor or manager to certain investment companies, trusts and
accounts which own the shares. Such filing further disclosed that the
shares were acquired in the ordinary course of business and were not
acquired for the purpose of, and do not have the effect of, changing or
influencing the control of the Company and were not acquired in connection
with or as a participant in any transaction having such purpose or effect.
(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 73 Chairman of the Board
Bruce M. Goldberg (1) II 47 Director, President and Chief
Executive Officer
Howard L. Flanders II 44 Director, Executive Vice
President, Chief Financial
Officer and Corporate Secretary
Rick Gordon III 49 Director, Senior Vice President
of Sales
Robin L. Crandell (2)(3) III 52 Director
Howard M. Pinsley (2) I 62 Director
Daniel M. Robbin (2)(3) I 67 Director
Richard E. Siegel II 57 Director
------------------
(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
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 2004, 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
3
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 Senior Vice President of Worldwide Sales and Marketing for
E2O Communications, Inc., a manufacturer of high-performance fiber optic
transmission components and modules. Prior to joining E2O Communications, Inc.
in March 2002, Mr. Crandell was Partner and Vice President of Sales for Phase II
Technical Sales, a manufacturers sales representation firm specializing in
semiconductors. 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. Previously 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 in 1999.
Howard M. Pinsley is the President, Chief Executive Officer and a director of
Espey Mfg. & Electronics Corp., a company which has designed, developed and
manufactured high voltage applications for industry and defense since 1928. Mr.
Pinsley has been with Espey for over 20 years. Prior to joining Espey, Mr.
Pinsley was a junior accountant at an accounting firm located in New York City.
Mr. Pinsley became a director of the Company on July 31, 2002.
Daniel M. Robbin was involved in electronics distribution for over 39 years. Mr.
Robbin retired in 1994 from Avnet Inc., 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 in 1999.
The Board formally met five times during the fiscal year ended December 31,
2001, in addition to acting four times during the year by unanimous written
consent. All Board members attended the meetings, except for three meetings in
which one member was absent, and executed the unanimous written consents.
Certain Relationships and Related Transactions
During 2001, the Company purchased product aggregating approximately $2.4
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.
4
In January 2001, the Company, with the approval of the Board, entered into a
lease for a California townhouse for the purpose of accommodating employees of
the Company visiting the San Jose area. The townhouse is owned by a partnership
that consists of Paul Goldberg and his spouse and Bruce M. Goldberg. The lease
has a term expiring in 2006 and provides for monthly rent of $4,800 on a
triple-net basis. In consideration of the impact of the severe industry
downturn, the partnership reduced the monthly rent to $3,400 beginning November
2001. The reduced rent will continue until industry conditions improve.
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 2000 Nonemployee Director Stock
Option Plan. In addition to the 2000 Nonemployee Director Option Stock 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 "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 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, 2001, 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 2001, 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 Howard M. Pinsley, all independent nonemployee directors of the
Company. Mr. Pinsley became a member on July 31, 2002. During the fiscal year
ended December 31, 2001, the Audit Committee met five times. In 2001, the Audit
Committee was responsible for, among other things, reviewing the independence
and recommending the selection of the independent auditors, reviewing the
arrangements and scope 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. In the future, the
responsibilities of the Audit Committee will be expanded to comply with the
responsibilities of audit committees required by the Sarbanes-Oxley Act of 2002
and the rules promulgated by the SEC and The Nasdaq National Market. 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
Employees', Officers', Directors' Stock 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
5
Company. See "BOARD OF DIRECTORS." During the fiscal year ended December 31,
2001, the Compensation Committee met twice and acted once 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 Mr. Pinsley becoming a member on
July 31, 2002. The Audit Committee operates under a written charter adopted by
the Board. 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 in 2001 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, 2001 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
Howard M. Pinsley
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, 2001 and
the review of the financial statements included in the Company's Forms 10-Q for
that year were $92,000.
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 2001, other than the services described above, were $43,000.
6
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 73 Chairman of the Board
Bruce M. Goldberg 47 President and Chief Executive Officer
Howard L. Flanders 44 Executive Vice President, Chief Financial
Officer and Corporate Secretary
Rick Gordon 49 Senior Vice President of Sales
John Jablansky 45 Senior Vice President of Product Managment
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, 2001, 2000, and 1999, 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 2001 278,000 - - - 17,000
Chairman of the Board 2000 291,000 582,000 - 5,000 16,000
1999 261,000 83,000 - 15,000 12,000
Bruce M. Goldberg 2001 388,000 - - - 32,000
President and Chief 2000 407,000 815,000 171,000(3) 5,000 34,000
Executive Officer 1999 392,000 121,000 168,000(3) 15,000 27,000
Howard L. Flanders 2001 207,000 - - - 22,000
Executive Vice President and 2000 215,000 215,000 - 5,000 23,000
Chief Financial Officer 1999 191,000 55,000 - 30,000 18,000
Rick Gordon 2001 210,000 - - - 19,000
Senior Vice President of Sales 2000 218,000 218,000 - 5,000 21,000
1999 198,000 55,000 - 10,000 16,000
John Jablansky 2001 191,000(4) - - - 4,000
Senior Vice President of Product 2000 170,000(4) - - 3,000 70,000
Management and Operations 1999 165,000(4) - - 4,000 24,000
---------------
(1) Except for Bruce M. Goldberg, other annual compensation for each of the
named executive officers in 1999, 2000 and 2001 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 $71,000, $72,000 and
$72,000 in 2001, 2000 and 1999, 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
2001 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
life
8
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 $11,500. The Company's obligations to make premium payments in
connection with Howard L. Flanders' and Rick Gordon's policies are expected to
last for a maximum of ten years. Howard L. Flanders and Rick Gordon have been
with the Company for a period of nine years from the year in which the policy
was acquired (January 1993) and provided they each remain in the employ of the
Company or they have become disabled or a change in control has occurred during
the term of their employment, the advances will be deemed canceled and the
security released thereafter ratably over a five-year vesting period until such
time as all advances are deemed canceled.
Option Grants in Last Fiscal Year
The Company did not grant any stock options during its fiscal year ended
December 31, 2001 to any named executive officer of the Company. The Company
does not have a plan whereby tandem stock appreciation rights ("SARS") are
granted. See "Employees', Officers', Directors' Stock Option Plan" hereinbelow.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-Ended Option
Values
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 2001, and the value of
unexercised stock options as of December 31, 2001, for the individual executive
officers named in the Summary Compensation Table:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options At Options At
Shares FY-End(#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Exercise(#) Realized($) Unexercisable Unexercisable(1)
-------------------------------------------------------------------------
Paul Goldberg................ - - 93,500 (E) $ 3,038 (E)
- - 16,500 (U) 3,038 (U)
Bruce M. Goldberg............ - - 127,000 (E) 4,392 (E)
- - 18,000 (U) 6,588 (U)
Howard L. Flanders........... - - 45,450 (E) 8,784 (E)
- - 22,150 (U) 13,176 (U)
Rick Gordon.................. - - 59,450 (E) 2,928 (E)
- - 10,150 (U) 4,392 (U)
John Jablansky............... - - 6,575 (E) 1,171 (E)
- - 5,425 (U) 1,757 (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, 2001 (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 Employees', Officers', Directors' Stock 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
9
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,
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. 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. 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. A maximum of
1,100,000 shares of the Company's Common Stock has been 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.
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,
10
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.
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.
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.
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.
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
11
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.
As of the Record Date, a total of 734,530 options were granted and had not
expired or been forfeited, of which 105,646 were exercised and 628,884 options
were outstanding (of which 347,700 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 291,000 options are
presently exercisable). These options, which are held by 131 persons, are
exercisable at prices ranging from $3.27 per share to $14.32 per share and are
exercisable through various expiration dates from 2002 to 2007.
2000 Nonemployee Director Stock Option Plan
In June 2000, the Company established the 2000 Nonemployee Director Stock Option
Plan, as amended (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. 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 provides
such nonemployee director (subject to his or her re-election if up for
re-election at such annual meeting) will be automatically awarded additional
options to purchase 1,000 shares of Common Stock at the fair market value of the
Company's Common Stock on the date on which the option is granted. An aggregate
of 75,000 shares of the Company's Common Stock has been reserved for issuance
under the Director Stock Option Plan. As of the Record Date, a total of 9,000
options were granted and had not expired or been forfeited, all of which were
outstanding. These options, which are held by 4 persons, have exercise prices
ranging from $1.96 per share to $10.53 per share (based on fair market value at
date of grant) and vest in 50% annual increments over a two-year period and are
exercisable over a ten-year period. Under certain circumstances, including
death, permanent disability, retirement or a change in control, vesting is
accelerated and the options become fully exercisable.
Registration Statements
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.
12
Equity Compensation Plan Information
The following table sets forth information about our Common Stock that may be
issued upon exercise of options, warrants and rights under all of our equity
compensation plans as of December 31, 2001, including the Option Plan and the
Director Stock Option Plan. Our stockholders have approved both of these plans.
Number of Securities Remaining
Number of Securities To Weighted Average Available for Future Issuance
Be Issued Upon Exercise Exercise Price of Under Equity Compensation Plans
of Outstanding Options, Outstanding Options, (Excluding Securities
Plan Category Warrants And Rights Warrants and Rights Reflected in the First Column)
----------------------------- ----------------------- ------------------- --------------------------------
Equity compensation plans
approved by stockholders 635,634 $6.75 433,720
Equity compensation plans
not approved by stockholders N/A N/A N/A
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 2001, 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 2001
the Company contributed $110,000 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
completing 90 days of employment. During 2001, each eligible employee could
elect to contribute to the 401(k) Plan, through payroll deductions, up to 15% of
his or her salary, limited to $10,500 in 2001. The Company's 401(k) Plan
provides for discretionary matching contributions by the Company. During 2001
and in prior years, the Company's 401(k) Plan provided for standard matching
contributions by the Company 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
13
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. During 2001, Bruce M. Goldberg and Paul Goldberg voluntarily agreed to
reductions in their base salary which amounted to approximately $35,000 and
$25,000, respectively, for 2001. 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 and is included in Mr.
Goldberg's compensation for 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 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
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 Internal Revenue Code of 1986, as amended, 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.
14
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. During 2001, Howard L.
Flanders and Rick Gordon voluntarily agreed to reductions in their base salary
which amounted to approximately $19,000 for each for 2001. 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, 2001 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.
15
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 YEARS ENDED DECEMBER 31
---------------------------------------------------
1996 1997 1998 1999 2000 2001
------ ------ ------ ------ ------ ------
COMPANY 100.00 143.75 81.25 59.38 180.00 80.00
THE ELECTRONIC PARTS AND
EQUIPMENT PEER GROUP INDEX 100.00 102.98 77.86 93.28 69.06 60.94
NASDAQ MARKET INDEX 100.00 122.32 172.52 304.29 191.25 152.46
-----------------------
*Assumes the investment of $100 on January 1, 1997 and reinvestment of dividends
(no dividends were declared on the Company's Common Stock during the period).
16
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.
Bruce M. Goldberg has been a member of the Board since 1987, Howard L. Flanders
has been a member of the Board since 1992 and Richard E. Siegel has been a
member of the Board since 1999. 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
------- ---- -----
Bruce M. Goldberg 3 years II
Howard L. Flanders 3 years II
Richard E. Siegel 3 years II
Proxies cannot be voted for a greater number of persons than the nominees named
above.
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. 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, 2002, 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, 2001, 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.
17
SHAREHOLDER'S PROPOSALS FOR 2003 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2003 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 21, 2003. 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 2003 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 its Proxy Statement, then, so long as the
Company includes in its proxy statement for the 2003 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, 2001 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, 2001, 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
September 4, 2002
Miami, Florida
18
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-OCTOBER 2, 2002
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, October 2, 2002, 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 and 2 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 AND 2 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 2001 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 ----- ----- Nominees: Bruce M. Goldberg 2. Ratification of the ----- ----- -----
Directors Howard L. Flanders selection of Lazar Levine
----- ----- Richard E. Siegel & Felix LLP as the Company's ----- ----- -----
independent public accountants
for the year ending
December 31, 2002.
Instructions: To withhold authority
to vote for any individual nominee, 3. Upon such other matters as ----- ----- -----
write that nominee's name in the may properly come before the
space provided below. Annual Meeting or any and all ----- ----- -----
For, except vote withheld from the postponements or adjourments
following nominee(s): thereof.
------------------------------------ RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
SIGNATURE(s)_________________________________ DATED: ____________, 2002
(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.)