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 Section 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):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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[ ] 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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4) Date Filed:
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ALL AMERICAN SEMICONDUCTOR, INC.
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on July 24, 2003
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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 Thursday, July 24, 2003, at
10 A.M., California local time, at Summerfield Suites by Wyndham, 1602 Crane
Court, San Jose, California, for the following purposes:
1. to elect three directors to serve on the Board of Directors until the
2006 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, 2003;
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 Monday, June 16, 2003,
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
June 19, 2003
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 July 24, 2003
--------------------
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 Thursday,
July 24, 2003, at 10 A.M., California local time, at the Summerfield Suites by
Wyndham, 1602 Crane Court, 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 June 19, 2003.
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,
2002 (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 Monday,
June 16, 2003 (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 3,807,184 shares of Common Stock outstanding (the "Shares"), all of
which are entitled to vote at the Meeting. 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.
1
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 2002 (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)........................... 341,932 8.7%
Paul Goldberg (4)............................... 212,823 5.5%
Dimensional Fund Advisors Inc. (5).............. 191,420 5.0%
Howard L. Flanders.............................. 55,800 1.4%
Rick Gordon..................................... 39,800 1.0%
John Jablansky.................................. 12,950 *
Richard E. Siegel............................... 3,100 *
Robin L. Crandell............................... 2,000 *
Howard M. Pinsley............................... 1,750 *
Michael W. Forman (6)........................... 250 *
All executive officers and directors
as a group (9 persons)(3)(4).................... 670,405 16.3%
---------------
* 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; 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; Howard M. Pinsley is 233 Ballston
Avenue, Saratoga Springs, New York 12866; and Michael W. Forman is 1844
N. Nob Hill Rd. #461, Plantation, Florida 33322.
(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 August 15, 2003: 122,000 options held by Bruce
M. Goldberg; 84,250 options held by Paul Goldberg; 51,600 options held
by Howard L. Flanders; 39,600 options held by Rick Gordon; 6,700
options held by John Jablansky; 2,000 options held by Richard E.
Siegel; 2,000 options held by Robin L. Crandell; 750 options held by
Howard M. Pinsley; and 308,900 options held by the executive officers
and directors as a group. Excludes outstanding stock options to
purchase an aggregate of 200,650 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 August 15, 2003.
(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 and 1,500 shares of the Company's Common Stock held of
record by Jayne Goldberg, the wife of Bruce M. Goldberg. For federal
securities law purposes only, Bruce M. Goldberg is deemed to be the
beneficial owner of these securities. Does not include 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.
2
(4) 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.
(5) 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 Form 13F
filed by Dimensional on April 15, 2003 with the SEC and an Amendment to
Schedule 13G filed on February 7, 2003 with the SEC which disclosed
that Dimensional was the beneficial owner of 191,420 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. The Schedule 13G 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.
(6) Includes 250 shares of the Company's Common Stock owned of record by
Michael W. Forman's wife, Ann Forman. For federal securities law
purposes only, Michael W. Forman is deemed to be the beneficial owner
of these securities.
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 74 Chairman of the Board
Bruce M. Goldberg (1) II 47 Director, President and Chief
Executive Officer
Howard L. Flanders II 45 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 53 Director
Howard M. Pinsley (2)(3) I 63 Director
Michael W. Forman (2) I 63 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, 2005 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.
3
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.
Michael W. Forman is President, Chief Executive Officer and a director of NELCO
Financial Services, Inc., a company that provides working capital assistance to
small to medium size companies. Prior to joining NELCO Financial Services in
March 2003, Mr. Forman was a Senior Vice President at Metro Bank. From July 1997
until July 1999, Mr. Forman was President and Chief Executive Officer and a
director of Oceanmark Bank, FSB and from August 1995 to July 1997 Mr. Forman was
President and Chief Credit Officer of Peninsula State Bank. Prior to 1995, Mr.
Forman held various positions within the banking industry for over 28 years. Mr.
Forman became a director of the Company on June 5, 2003.
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 six times during the fiscal year ended December 31, 2002,
in addition to acting seven 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 one meeting in which three members were absent, and
executed the unanimous written consents.
Certain Relationships and Related Transactions
During 2002, the Company purchased product aggregating approximately $2.5
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
on the Company, the partnership reduced the monthly rent to $3,400 beginning in
November 2001. Towards the end of 2002 the rent payment was increased to $4,270
per month, still below the rental amount provided for under the lease. The
Company paid a total of $43,400 to this partnership during 2002.
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, 2002, 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 2002, 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 Howard M. Pinsley, Robin L.
Crandell and Michael W. Forman, all independent nonemployee directors of the
Company. Mr. Crandell served on the Audit Committee throughout 2002 and Mr.
Pinsley became a member on July 31, 2002. Mr. Forman became a member on June 5,
2003. Daniel M. Robbin served as an independent nonemployee director of the
Company and a member of the Audit Committee until his death in October 2002.
During the fiscal year ended December 31, 2002, the Audit Committee met four
times. The Audit Committee monitors and oversees the Company's financial
reporting process on behalf of the Board. It reviews the independence of the
Company's auditors and is now responsible for, among other matters, authorizing
or approving the engagement of the independent auditors for both audit services
and permitted non-auditing services, the scope of audit and non-audit
assignments, related fees, the accounting principles used in financial
reporting, internal financial accounting procedures, the adequacy of the
internal control procedures, critical accounting policies, and the overall
quality of the Company's financial reporting. The Board has determined that Mr.
Pinsley, who is independent as that term is used in Item 7(d)(3)(ii) of Schedule
14A under the Exchange Act, is an audit committee financial expert as defined in
Item 401(h)(2) of Regulation S-K. See "Audit Committee Report" below.
5
Compensation Committee
The Compensation Committee consists of Howard M. Pinsley 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 Company. See "BOARD OF DIRECTORS." During the fiscal year ended December 31,
2002, 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 Michael W. Forman becoming a
member on June 5, 2003. Daniel M. Robbin served on the Audit Committee until his
death in October 2002. The Audit Committee operates under a written charter
adopted and recently amended and restated by the Board in order to incorporate
the changes required by the Sarbanes-Oxley Act, recently adopted SEC rules and
certain proposed rules of The Nasdaq Stock Market. A copy of the amended and
restated 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 in 2002 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, 2002 for filing with the SEC.
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.
Howard M. Pinsley (Chair)
Robin L. Crandell
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 years ended December 31, 2002 and
December 31, 2001 and the review of the financial statements included in the
Company's Forms 10-Q for each year were $136,000 and $92,000, respectively.
Financial Information Systems Design and Implementation Fees. No fees were
billed by Lazar Levine and Felix LLP to the Company in either 2002 or 2001 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 2002 and 2001, other than the services described above, were
$47,000 and $43,000, respectively.
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 74 Chairman of the Board
Bruce M. Goldberg 47 President and Chief Executive Officer
Howard L. Flanders 45 Executive Vice President, Chief Financial
Officer and Corporate Secretary
Rick Gordon 49 Senior Vice President of Sales
John Jablansky 46 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, 2002, 2001, and 2000, 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....................... 2002 243,000 - - - 10,000
Chairman of the Board 2001 278,000 - - - 17,000
2000 291,000 582,000 - 5,000 16,000
Bruce M. Goldberg................... 2002 339,000 - - - 26,000
President and Chief 2001 388,000 - - - 32,000
Executive Officer 2000 407,000 815,000 171,000(3) 5,000 34,000
Howard L. Flanders.................. 2002 181,000 - - 18,000
Executive Vice President and 2001 207,000 - - - 22,000
Chief Financial Officer 2000 215,000 215,000 - 5,000 23,000
Rick Gordon......................... 2002 183,000 - - - 15,000
Senior Vice President of Sales 2001 210,000 - - - 19,000
2000 218,000 218,000 - 5,000 21,000
John Jablansky...................... 2002 174,000(4) - - - 1,000
Senior Vice President of Product 2001 191,000(4) - - - 4,000
Management and Operations 2000 170,000(4) - - 3,000 70,000
---------------
(1) Except for Bruce M. Goldberg in 2000, other annual compensation for each of
the named executive officers in 2002, 2001 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 $68,000, $71,000 and
$72,000 in 2002, 2001 and 2000, respectively.
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
2002 of $7,668. Pursuant to the terms of an employment agreement with Bruce M.
Goldberg, the Company makes annual payments, 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, pursuant to the terms of an insurance
agreement effective as of January 1, 1993 with each of Howard L. Flanders and
Rick Gordon, beginning
8
in 1993 the Company has advanced substantially all of the premiums for
$1,000,000 flexible premium life insurance policies owned by each of Howard L.
Flanders and Rick Gordon. The annual premium in 2002 on each of these policies
was $11,500. Under the respective insurance agreement the Company's obligations
to make premium payments in connection with Howard L. Flanders' and Rick
Gordon's policies lasts for a maximum of ten years from the time the insurance
policies were acquired in 1993. The Company's premium advances were secured by a
collateral assignment of the cash surrender value and death benefit of each of
the policies subject to a five year vesting period which commenced on January 1,
1998. If during the vesting period each of them remained in the employ of the
Company, the premium advances to them were deemed ratably cancelled in scheduled
annual percentage increments until January 1, 2003 (the tenth anniversary of the
insurance agreements), at which time all advances were deemed cancelled, the
security interest fully released and the cash surrender value and other benefits
of their respective insurance policies were fully vested in the employees.
Option Grants in Last Fiscal Year
The Company did not grant any stock options during its fiscal year ended
December 31, 2002 to any executive officer named in the Summary Compensation
Table. The Company does not have a plan whereby tandem stock appreciation rights
("SARS") are granted. See "Employees', Officers', Directors' Stock Option Plan"
hereinbelow.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-Ended Option
Values
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 2002, and the value of
unexercised stock options as of December 31, 2002, for the individual executive
officers named in the Summary Compensation Table:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options At Options At
Shares FY-End(#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Exercise(#) Realized($) Unexercisable Unexercisable(1)
---------------------------------------------------------------
Paul Goldberg................ - - 83,250 (E) -
- - 6,750 (U) -
Bruce M. Goldberg............ - - 121,000 (E) -
- - 9,000 (U) -
Howard L. Flanders........... - - 50,600 (E) -
- - 15,000 (U) -
Rick Gordon.................. - - 38,600 (E) -
- - 7,000 (U) -
John Jablansky............... - - 6,100 (E) -
- - 3,400 (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, 2002 (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
9
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.
During fiscal year 2002 executive officers named in the Summary Compensation
Table were compensated pursuant to employment agreements entered into prior to
2002 or previously existing compensation arrangements. See "Employment
Agreements" hereinbelow.
Howard M. Pinsley
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 are subject to approval by the Company's shareholders. 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 nonemployee directors of the
Company, Howard M. Pinsley 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
10
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 described below 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 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 or a change in control.
As of the Record Date, a total of 1,002,020 options were granted and had not
expired or been forfeited, of which 105,646 were exercised and 896,374 options
were outstanding (of which 499,550 options were held by executive officers and
directors of the Company as a group and 304,150 options are presently
exercisable). These options, which are held by 130 persons, are exercisable at
prices ranging from $1.92 per share to $14.32 per share and are exercisable
through various expiration dates from 2003 to 2007.
11
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 13,500
options were granted and had not expired or been forfeited, all of which were
outstanding. These options, which are held by 5 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.
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, 2002, 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 Under
Be Issued Upon Exercise Exercise Price of 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 624,884 $6.46 444,470
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
12
Compensation Plan will be distributed monthly. The Company paid benefits under
this plan of approximately $15,600 during 2002, none of which was paid to any
executive officer. The maximum benefit payable to a Participant (including each
of the executive officers named in the Summary Compensation Table hereinabove)
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 2002
the Company contributed $115,000 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 (John Jablansky) 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
are eligible to participate in the 401(k) Plan after completing 90 days of
employment. During 2002, each eligible employee could elect to contribute to the
401(k) Plan, through payroll deductions, up to 100% of his or her salary,
limited to $11,000 in 2002. The Company's 401(k) Plan in 2002 and currently
provides for discretionary matching contributions by the Company. Prior to 2002,
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 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 and 2002, Bruce M. Goldberg and Paul Goldberg voluntarily
agreed to reductions in their base salary. 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
13
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.
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 and 2002,
Howard L. Flanders and Rick Gordon voluntarily agreed to reductions in their
base salary. 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
14
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 currently consists of Howard M. Pinsley
and Robin L. Crandell, both being independent, nonemployee directors of the
Company. See "BOARD COMMITTEES - Compensation Committee." Since January 1, 2002
to the date hereof, none of the members of the Compensation Committee had any
relationship with the Company requiring disclosure under Item 404 of Regulation
S-K.
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
--------------------------------------------------------
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
COMPANY 100.00 56.52 41.31 125.22 55.65 29.22
THE ELECTRONIC PARTS AND
EQUIPMENT PEER GROUP INDEX 100.00 75.61 90.58 67.07 59.18 28.94
NASDAQ MARKET INDEX 100.00 141.04 248.76 156.35 124.64 86.94
-----------------------
*Assumes the investment of $100 on January 1, 1998 and reinvestment of dividends
(no dividends were declared on the Company's Common Stock during the period).
15
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.
Paul Goldberg has been a member of the Board since 1978, Rick Gordon has been a
member of the Board since 1992 and Robin L. Crandell 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
------- ---- -----
Paul Goldberg 3 years III
Rick Gordon 3 years III
Robin L. Crandell 3 years III
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, 2003, 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, 2002, 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. The Board is submitting the selection of Lazar Levine & Felix LLP by the
Audit Committee of the Company 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 Audit Committee 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.
16
SHAREHOLDER'S PROPOSALS FOR 2004 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2004 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 February 20, 2004. 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 2004 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 2004 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 SEC 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, 2002 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, 2002, 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
June 19, 2003
Miami, Florida
17
EXHIBIT A
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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, auditing and
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:
o Serve as an independent and objective party to monitor the
company's accounting and financial reporting process, audits
of the financial statements and internal control system.
o Review and appraise the audit efforts of the company's
independent accountants and internal auditing department (if
any).
o Adopt policies governing the pre-approval of all audit
services and permissible non-audit services and disclose such
policies in the company's Annual Reports on Form 10-K and
proxy statements.
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department (if any), and the Board.
II. RESPONSIBILITIES AND DUTIES
The Committee shall primarily further its purpose through the carrying
out of the following activities:
Documents/Reports Review
1. Review, and if necessary update, this Charter at least
annually.
2. Review and discuss with management and the independent
accountants the company's quarterly and annual financial
statements, including matters required to be reviewed under
applicable legal or regulatory requirements or requirements of
The Nasdaq Stock Market, Inc. (the "Nasdaq").
3. Review the regular internal reports to management prepared by
the internal auditing department (if any) and management's
response.
4. Review with management and the independent accountants any
Quarterly Report on Form 10-Q or Annual Report on Form 10-K
prior to its filing and any release of earnings prior to the
release of earnings.
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 that includes the Committee's review and discussion
of matters with management and the independent accountants and
such other
matters as from time to time are required by the Securities
and Exchange Commission (the "SEC") or Nasdaq to be included
therein.
7. Review with management, the internal auditors (if any) and the
independent accountants the company's risk assessment and risk
management policies.
Independent Accountants
1. Directly appoint, retain, approve the compensation of,
evaluate and, if and when necessary, terminate the independent
accountants. The Committee shall have the sole authority to
approve all audit engagement fees and terms. The independent
accountants shall report directly to the Committee.
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 in order to determine the accountants' independence.
4. 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.
5. Review and take appropriate action when needed in order to
assure the independence of the accountants.
6. Pre-approve any permissible non-audit services provided to the
company by the independent accountants.
7. Set policies relating to the company's hiring of employees or
former employees of the independent 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, and internal controls including computerized
information system controls and security.
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 and discuss with the Chief Executive Officer ("CEO")
and Chief Financial Officer ("CFO") any deficiencies that may
exist in the design or operation of the internal controls, as
well as approve any significant changes in the internal
controls. In connection with any periodic report of the
company required to be filed with the SEC, review the contents
of the CEO's and CFO's certificates to be filed under Sections
302 and 906 of the Sarbanes-Oxley Act.
5. Require that the CEO and CFO disclose any fraud they may be
aware of involving management or anyone else intimately
involved with the company's internal controls.
6. Require the independent accountants to report the critical
accounting policies and alternative treatments of financial
information that will be used in the financial reporting
process, as well as those
2
that have been discussed with management and any other matter
related to the conduct of the audit that are required to be
communicated to the Committee under generally accepted
auditing standards. The report should include the following:
(i) all critical accounting policies and practices to be
used;
(ii) all alternative accounting treatments of financial
information within GAAP related to material items
that have been discussed with management, including
the ramifications of the use of alternative
treatments and the treatment preferred by the
independent accountants; and
(iii) other written communications between the independent
accountants and management.
7. Discuss with management each critical accounting estimate
included in Management's Discussion and Analysis of Financial
Condition and Results of Operation included in any of the
company's periodic reports to be filed with the SEC, the
development and selection of the accounting estimate, and the
disclosure in Management's Discussion and Analysis of
Financial Condition and Results of Operation about the
estimate.
8. 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 procedures for handling complaints regarding
accounting, internal accounting controls and auditing matters,
including procedures for confidential, anonymous submission of
concerns by employees regarding accounting and auditing
matters.
2. 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.
3. 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.
4. 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.
5. 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.
6. Review activities, organizational structure and qualifications
of the internal audit department (if any).
7. Provide a focal point for communications among non-Committee
directors, the company's management and the independent
accountants.
8. 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.
3
9. 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 independent accountants
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.
III. OUTSIDE ADVISORS
The Committee shall have the authority, without seeking Board approval,
to retain any outside counsel, accountants, experts or other advisors
whose assistance the Committee deems necessary for the carrying out of
its responsibilities and duties including, in discharging its oversight
responsibilities, investigating any matter brought to its attention.
The Committee shall also have the authority to determine and set the
appropriate compensation for such advisors.
IV. COMPOSITION
The Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be 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. All members of the Committee shall be independent directors
under the standards promulgated by the Nasdaq and shall also satisfy
any more stringent independence requirements of the Nasdaq or the SEC
with respect to audit committee members. 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. One member of the Committee must be a
"financial expert" as defined from time to time by the SEC. The Company
and its management shall assist the members of the Committee in
maintaining appropriate financial literacy.
No member of the Committee may serve on the audit committees of more
than three public companies. Committee members shall not receive any
compensation from the Company other than director's fees. Committee
members shall be selected by majority vote of the Board. The Committee
shall elect by majority vote a Chairperson from its members.
V. MEETINGS
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee shall meet at least annually, and may meet
more often, 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 any of
these groups believe should be discussed privately. The Committee shall
have the authority, to the extent permissible under and consistent with
the Sarbanes-Oxley Act and the requirements of the SEC and the Nasdaq
and as and when it deems appropriate, to delegate certain of its duties
and responsibilities to subcommittees or members of the Committee
including, without limitation, the Chairperson of the Committee.
4
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-JULY 24, 2003
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 Thursday, July 24, 2003, at 10:00 a.m., California
local time, at the Summerfield Suites by Wyndham, 1602 Crane Court, 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 2002 Annual Report and the Notice of Annual
Meeting of Shareholders and Proxy Statement relating thereto is hereby
acknowledged.
-------------
SEE REVERSE
(Continued and to be signed on the reverse side) SIDE
-------------
____________________________________________________________________________________________________________________________________
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
____________________________________________________________________________________________________________________________________
FOR AGAINST ABSTAIN
1. Election of Directors: 2. Ratification of the selection of Lazar [ ] [ ] [ ]
Levine & Felix LLP as the Company's
NOMINEES: independent public accountants for the
[ ] FOR ALL NOMINEES [ ] Paul Goldberg year ending December 31, 2003.
[ ] Rick Gordon
[ ] Robin L. Crandell 3. Upon such other matters as may properly [ ] [ ] [ ]
come before the Annual Meeting or any
and all postponements or adjournments
[ ] WITHHOLD AUTHORITY thereof.
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instruction below)
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark "FOR ALL EXCEPT" and fill in the
circle next to each nominee you wish to withhold, as
shown here: [X]
_______________________________________________________________
_______________________________________________________________
To change the address on your account, please check the
box at right and indicate your new address in the address [ ]
space above. Please note that changes to the registered
name(s) on the account may not be submitted via this
method.
_______________________________________________________________
______________________ __________ ______________________ __________
Signature of Shareholder ______________________ Date: __________ Signature of Shareholder ______________________ Date: __________
Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is
a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.