SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
SEL-LEB MARKETING, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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PRELIMINARY PROXY STATEMENT
S E L - L E B M A R K E T I N G, I N C.
495 RIVER STREET
PATERSON, NEW JERSEY 07524
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 25, 2001
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Sel-Leb Marketing, Inc. (the "Company") will be held on July 25, 2001 at 10:00
a.m. (local time) at the Company's principal executive offices located at 495
River Street, Paterson, New Jersey 07524, for the following purposes:
1. To elect eight members to the Board of Directors to serve until the
next annual meeting of shareholders and until their respective successors are
duly elected and qualified;
2. To consider and vote upon a proposal to amend the Company's
Certificate of Incorporation in order to effect a reverse stock split of the
Company's Common Stock, par value $.01 per share, of not greater than
one-for-eight; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed June 27, 2001 as the record date for the
determination of the shareholders entitled to notice of and to vote at such
meeting or any adjournment thereof, and only shareholders of record at the close
of business on that date are entitled to notice of and to vote at such meeting.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 2000 IS ENCLOSED HEREWITH.
You are cordially invited to attend the meeting. Whether or not you plan to
attend, you are urged to complete, date and sign the enclosed proxy and return
it promptly. If you receive more than one form of proxy, it is an indication
that your shares are registered in more than one account, and each such proxy
must be completed and returned if you wish to vote all of your shares eligible
to be voted at the meeting.
By Order of the Board of Directors,
Jorge Lazaro
SECRETARY
Dated: Paterson, New Jersey
June 29, 2001
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YOUR VOTE IS IMPORTANT.
THE ATTACHED PROXY STATEMENT SHOULD BE READ CAREFULLY. SHAREHOLDERS
ARE URGED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED
POSTAGE PAID ENVELOPE. NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS
VOTED BY GIVING WRITTEN NOTICE TO THE COMPANY. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON THOUGH YOU HAVE PREVIOUSLY SENT
IN YOUR PROXY.
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S E L - L E B M A R K E T I N G, I N C.
495 RIVER STREET
PATERSON, NEW JERSEY 07524
P R O X Y S T A T E M E N T
The enclosed proxy is solicited on behalf of the Board of Directors of
Sel-Leb Marketing, Inc. (the "Company") pursuant to this proxy statement (to be
mailed on or about June 29, 2001) for use at the Annual Meeting of Shareholders
to be held at the time and place shown in the attached notice of annual meeting
and at any adjournment or postponement thereof (the "Annual Meeting"). Shares
represented by properly executed proxies, if returned in time, will be voted at
the Annual Meeting as specified or, if not otherwise specified, in favor of the
election as directors of the nominees named herein and in favor of the proposal
to amend the Certificate of Incorporation in order to effect a reverse stock
split. Such proxies are revocable at any time before they are exercised by
written notice to the Secretary of the Company or by your requesting the return
of the proxy at the Annual Meeting. Any later dated proxies will revoke proxies
submitted earlier.
RECORD DATE
The record date for the determination of holders of common stock, par value
$0.01 per share, of the Company ("Common Stock") who are entitled to notice of
and to vote at the Annual Meeting is June 27, 2001 (the "Record Date").
VOTING SECURITIES
As of the Record Date, 2,261,018 shares of Common Stock of the Company were
outstanding. Holders of record of Common Stock as of the Record Date will be
entitled to one vote for each share held. A majority of all shares of Common
Stock issued, outstanding and entitled to vote at the Annual Meeting, present in
person or represented by proxy, shall constitute a quorum. Abstentions and
broker non-votes are considered present for purposes of determining whether the
quorum requirement is met. A broker non-vote occurs when a nominee holds shares
for a beneficial owner but cannot vote on a proposal because the nominee does
not have discretionary voting power and has not received instructions from the
beneficial owner as to how to vote the shares.
With respect to the matters to come before the shareholders at the Annual
Meeting, (i) the election of directors (Proposal No. 1) shall be determined by a
plurality of the voting power present in person or represented by proxy at the
Annual Meeting and entitled to vote and (ii) the proposal to approve and adopt
an amendment to the Company's Certificate of Incorporation to effect a reverse
stock split (Proposal No. 2) shall be determined by the affirmative vote of a
majority of the outstanding Common Stock entitled to vote at the Annual Meeting.
With respect to the election of directors, only shares that are voted in favor
of a particular nominee will be counted towards such nominee's achievement of a
plurality. Shares present at the Annual Meeting that are not voted for a
particular nominee, shares present by proxy where the shareholder properly
withholds authority to vote for such nominee, and broker non-votes will not be
counted towards such nominee's achievement of a plurality. With respect to
Proposal No. 2, shares with respect to which a shareholder abstains from voting
or directs his proxy to abstain from voting and shares represented by broker
non-votes will have the same effect as votes against the matter since they are
not affirmative votes for the matter.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of the Record Date, the beneficial
ownership of shares of Common Stock by (i) each person who is known by the
Company to own more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, each nominee for election as a director of the Company
and each executive officer of the Company listed in the Summary Compensation
Table and (iii) all of the Company's officers and directors as a group:
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) PERCENT OWNED
------------------- ----------------------- -------------
Harold Markowitz 379,120(3) 13.8%
Paul Sharp 366,313(4) 13.8%
Jorge Lazaro 353,570(5) 12.8%
Jan Mirsky 237,874(6) 8.7%
Jack Koegel 128,063(7) 4.7%
Stanley R. Goodman 9,063(8) *
Edward C. Ross 4,063(9) *
L. Douglas Bailey 6,563(10) *
All officers and directors
as a group (8 persons) 1,484,629(3-10) 54.0%
-------------
* Less than 1%
(1) The address for each such person is c/o Sel-Leb Marketing, Inc., 495 River
Street, Paterson, New Jersey 07524.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Proxy
Statement upon the exercise of options or warrants. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
which are exercisable within 60 days from the date of this Proxy Statement
have been exercised. Unless otherwise noted, the Company believes that all
persons named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Includes 33,470 shares of Common Stock issuable upon exercise of options
granted to Mr. Markowitz under the Stock Option Plan. Does not include
11,354 shares of Common Stock issuable upon exercise of options granted to
Mr. Markowitz under the Stock Option Plan which are not exercisable within
60 days of the date of this Proxy Statement.
(4) Includes 33,470 shares of Common Stock issuable upon exercise of options
granted to Mr. Sharp under the Stock Option Plan. Does not include 11,354
shares of Common Stock issuable upon exercise of options granted to Mr.
Sharp under the Stock Option Plan which are not exercisable within 60 days
of the date of this Proxy Statement.
2
(5) Includes 33,470 shares of Common Stock issuable upon exercise of options
granted to Mr. Lazaro under the Stock Option Plan. Does not include 11,354
shares of Common Stock issuable upon exercise of options granted to Mr.
Lazaro under the Stock Option Plan which are not exercisable within 60 days
of the date of this Proxy Statement.
(6) Includes (i) 86,622 shares of Common Stock issuable upon exercise of a
warrant granted to Mr. Mirsky by the Company and (ii) 151,252 shares of
Common Stock issuable upon exercise of options granted to Mr. Mirsky under
the Stock Option Plan. Does not include 10,312 shares of Common Stock
issuable upon exercise of options granted to Mr. Mirsky under the Stock
Option Plan which are not exercisable within 60 days of the date of this
Proxy Statement.
(7) Includes 128,063 shares of Common Stock issuable upon the exercise of
options granted to Mr. Koegel under the Stock Option Plan. Does not include
11,937 shares of Common Stock issuable upon exercise of options granted to
Mr. Koegel under the Stock Option Plan which are not exercisable within 60
days of the date of this Proxy Statement.
(8) Includes 9,063 shares of Common Stock issuable upon exercise of options
granted to Mr. Goodman under the Company's 1995 Nonemployee Directors'
Stock Option Plan (the "Nonemployee Directors' Plan"). Does not include 963
shares of Common Stock issuable upon exercise of options granted to Mr.
Goodman under the Nonemployee Directors' Stock Option Plan which are not
exercisable within 60 days of the date of this Proxy Statement.
(9) Includes 4,063 shares of Common Stock issuable upon exercise of options
granted to Mr. Ross under the Nonemployee Directors' Plan. Does not include
963 shares of Common Stock issuable upon exercise of options granted to Mr.
Ross under the Nonemployee Directors' Stock Option Plan which are not
exercisable within 60 days of the date of this Proxy Statement.
(10) Includes 6,563 shares of Common Stock issuable upon exercise of options
granted to Mr. Bailey under the Nonemployee Directors' Plan. Does not
include 963 shares of Common Stock issuable upon exercise of options
granted to Mr. Bailey under the Nonemployee Directors' Stock Option Plan
which are not exercisable within 60 days of the date of this Proxy
Statement.
3
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has nominated the eight individuals whose names are
set forth below for election to the Board of Directors, each to hold office
until the next Annual Meeting of Shareholders and until his successor is duly
elected and qualified. Unless otherwise specified, the enclosed proxy will be
voted in favor of the persons named below, all of whom are now directors of the
Company. In the event that any of such nominees for election at the Annual
Meeting should become unavailable for election for any reason not presently
known, it is intended that votes will be cast pursuant to the accompanying proxy
for such substitute nominees as the Board of Directors may designate unless the
Board of Directors reduces the number of directors. The directors are to be
elected by the affirmative vote of the holders of a plurality of the shares of
Common Stock entitled to vote and present in person or represented by proxy at
the Annual Meeting.
RECOMMENDATION OF BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR election of the nominees
identified below as directors of the Company.
INFORMATION REGARDING NOMINEES
The information set forth below, furnished to the Board of Directors by the
respective individuals, shows as to each nominee for election as a director of
the Company (i) his name and age, (ii) his principal position with the Company,
(iii) his principal occupation or employment, if different, and (iv) the month
and year in which he began to serve as a director.
NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
------------ OR EMPLOYMENT --------------
--------------------
Harold Markowitz (60) Chairman of the Board of the Company September 1993
Paul Sharp (51) President and Chief Executive Officer December 1994
of the Company
Jan S. Mirsky (60) Executive Vice President - Finance December 1994
of the Company
Jorge Lazaro (52) Executive Vice President and Secretary September 1993
of the Company
Jack Koegel (49) Vice Chairman of the Board and Chief December 1994
Operating Officer of the Company
Stanley R. Goodman (71) Partner, Goodman & Saperstein December 1994
(law firm)
Edward C. Ross (57) Partner, Finkle, Ross & Rost December 1994
(accounting firm)
4
NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
------------ OR EMPLOYMENT --------------
--------------------
L. Douglas Bailey (59) President, Bailey & Associates, Inc. March 1996
(consulting firm); President and Chief
Executive Officer, Precision Fixtures
and Graphics (manufacturing company)
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS
HAROLD MARKOWITZ, a co-founder of the Company, has been Chairman of the
Board of the Company since December 1994. Prior to such time, he served as
President and a director of the Company from its inception in September 1993 to
December 1994. Mr. Markowitz was also a co-founder of Linette Cosmetics, Inc.
("Linette Cosmetics") and served as a director of Linette Cosmetics from its
inception in 1985 until the May 1995 merger of Linette Cosmetics with and into
the Company (the "Linette Merger"). In 1986, Mr. Markowitz co-founded Beauty
Labs, Inc. ("Beauty Labs"), a publicly-held company which marketed cosmetics and
other accessories to mass merchandisers, and served as the Chairman of the Board
and a director of Beauty Labs from 1987 to 1991.
PAUL SHARP has served as Chief Executive Officer of the Company since May
1995 and as President and a director of the Company since December 1994. Mr.
Sharp also served as Secretary and Treasurer and a director of Linette Cosmetics
from 1990 to December 1994. From 1987 to 1989, Mr. Sharp served as Corporate
Vice President of Zayre Corporation, a mass merchandising retailer, where he was
responsible for the fragrance, cosmetic and health and beauty product lines.
Prior to 1987, Mr. Sharp served in various other capacities at Zayre Corporation
and on the Retail Advisory Board of The Gillette Company, a manufacturer of
personal care products, and was engaged as a retail marketing consultant for
Smith-Kline Beecham Company, a manufacturer of health and beauty aids and
pharmaceuticals.
JAN MIRSKY has served as Executive Vice President-Finance of the Company
since January 1995 and as a director of the Company since December 1994 and,
from January 1995 to June 1997 served as the Chief Operating Officer of the
Company. In addition, he acted as a marketing consultant to the Company from
January 1994 to January 1995, at which time he became an employee of the
Company. From 1991 to January 1995, Mr. Mirsky was engaged as an independent
management, marketing and financial consultant.
JORGE LAZARO, a co-founder of the Company, has been Executive Vice
President of the Company since May 1995 and the Secretary and a director of the
Company since its inception in September 1993. Mr. Lazaro also served as the
President of the Company from December 1994 to May 1995 and as Treasurer of the
Company from its inception to December 1994. Mr. Lazaro was also a co-founder of
Linette Cosmetics and served as President and a director of Linette Cosmetics
from its inception in 1985 until the Linette Merger, and has served as the
Secretary and Treasurer and as a director of Lea Cosmetics, Inc. ("Lea
Cosmetics") from its inception in October 1992 until the merger of Lea Cosmetics
with and into the Company in August 1995.
JACK KOEGEL has served as the Vice Chairman of the Company since September
1995, as the Chief Operating Officer of the Company since June 1997 and as a
director of the Company since December 1994. From 1993 until September 1995, Mr.
Koegel served as President of Retail Concepts 2000, Inc., a retail consulting
company founded by him. Mr. Koegel served as President of Twin Valu Stores (a
division of Super Valu Inc.) from 1991 to 1993 and as Executive Vice President
of ShopKo Stores/Twin Valu Stores (a division of Super Valu Inc.) from 1989 to
1991.
STANLEY R. GOODMAN has served as Assistant Secretary of the Company since
May 1995 and as a director of the Company since December 1994. Since 1989, Mr.
Goodman has been a partner at Goodman & Saperstein, a law firm specializing in
statutory and regulatory issues concerning pharmaceuticals, cosmetics and
related consumer
5
products. He also served as a director and General Counsel of Beauty Labs from
1987 until the time of its merger with Robern Industries, Inc. in 1992.
EDWARD C. ROSS has served as a director of the Company since December 1994.
Mr. Ross has been a partner in the accounting firm of Finkle, Ross & Rost since
1975. He has also been involved as a principal in various start-up companies as
well as established operating businesses, ranging in type from manufacturing to
real estate to financial consulting. Mr. Ross is a Certified Public Accountant
in New York and New Jersey, and is a member of the American Institute of
Certified Public Accountants.
L. DOUGLAS BAILEY has served as a director of the Company since March 1996.
Beginning in 1996, Mr. Bailey became the President and Chief Executive Officer
of Precision Fixtures and Graphics, a manufacturer of store fixtures, and since
1995 he has served as President of Bailey & Associates, Inc., a consulting firm
for the retail industry. Mr. Bailey also serves as a developer for Regent
Properties, an industrial property development and management company founded
and operated by Mr. Bailey and his wife. From 1993 to 1995, Mr. Bailey served as
President of Home Shopping Club, Inc., a subsidiary of Home Shopping Network,
Inc. and the operator of Home Shopping Network, a live, customer-interactive
retail sales television network, and from 1970 to 1992 served as the Senior Vice
President of Eckerd Drug Company, a retail drug store chain. Mr. Bailey also
serves as a director of 800 Travel Systems, Inc., a publicly-held discount
travel reservations company.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held two meetings during 2000. All
directors attended 75% or more of the total number of meetings of the Board and
of the committees of which they were members.
The Executive Committee, the Audit Committee, the Stock Option Committee
and the Compensation Committee are the only standing committees of the Board.
There is no formal nominating committee; the Board of Directors or the Executive
Committee performs this function.
The Executive Committee, which is currently composed of Mr. Markowitz, its
Chairman, and Messrs. Sharp, Mirsky, Lazaro and Koegel, has all the powers of
the Board of Directors in the management of the business and affairs of the
Company, except as such powers are limited by the New York Business Corporation
Law. During 2000, the Executive Committee held two meetings.
The Audit Committee, which is currently composed of Mr. Ross, its Chairman,
and Messrs. Goodman and Mirsky, consults with the auditors of the Company and
such other persons as the members deem appropriate, reviews the preparations for
and scope of the audit of the Company's annual financial statements, reviews the
Company's quarterly financial statements, makes recommendations as to the
engagement and fees of the independent auditors, and performs such other duties
relating to the financial statements of the Company as the Board of Directors
may assign from time to time. The Audit Committee held two meetings during 2000.
The Stock Option Committee, which is currently composed of Mr. Goodman, its
Chairman, and Mr. Ross, has all of the powers of the Board of Directors,
including the authority to issue stock or other securities of the Company, in
respect of any matters relating to the administration of the Company's stock
option plans (other than the grant of options under the Non-Employee Directors'
Plan). The Stock Option Committee held one meeting during 2000.
The Compensation Committee, which is currently composed of Mr. Markowitz,
its Chairman, and Messrs. Goodman and Ross, reviews with the Board of Directors
on a periodic basis existing and proposed compensation plans, programs and
arrangements for executive officers and other employees. All recommendations
regarding compensation arrangements for Mr. Markowitz are made solely by Messrs.
Goodman and Ross. The Compensation Committee held two meetings during 2000.
6
AUDIT COMMITTEE REPORT
The Board of Directors has adopted a charter for the Audit Committee that
sets forth the duties and responsibilities of its members, a copy of which is
attached hereto as Annex A.
The Audit Committee meets with management to review and discuss the audited
financial statements. The Audit Committee also conducts discussions with its
independent auditors, J.H. Cohn LLP, regarding the matters required by the
Statement on Auditing Standards No. 61. As required by Independence Standards
Board Standard No. 1, "Independence Discussion with Audit Committees," the Audit
Committee has discussed with and received the required written disclosures and
confirming letter from J.H. Cohn LLP regarding its independence and has
discussed with J.H. Cohn LLP its independence. Based upon the review and
discussions referred to above, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000.
In addition, the Audit Committee periodically meets with management and the
independent auditors to discuss the quarterly financial statements contained in
the Company's Form 10-QSB filings.
This Audit Committee Report shall not be deemed incorporated by reference
in any document previously or subsequently filed with the Securities and
Exchange Commission that incorporates by reference all or any portion of this
proxy statement, except to the extent that the Company specifically requests
that the Report be specifically incorporated by reference.
Submitted by the Audit Committee of the Board of Directors: Edward C. Ross,
Stanley R. Goodman and Jan S. Mirsky.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires officers and directors of the Company and holders of
more than 10% of the Common Stock (collectively, "Reporting Persons") to file
reports of ownership and changes in ownership of the Common Stock with the
Securities and Exchange Commission within certain time periods and to furnish
the Company with copies of all such reports. Based solely on its review of the
copies of such reports furnished to the Company by such Reporting Persons or on
the written representations of such Reporting Persons that no reports on Form 5
were required, the Company believes that during the year ended December 31,
2000, all of the Reporting Persons complied with their Section 16(a) filing
requirements.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company was paid $500 for each
meeting of the Board of Directors attended by such director during 2000. The
Company also reimbursed each such director for all reasonable expenses incurred
by him in attending meetings. In addition, non-employee directors of the Company
are eligible to participate in the Nonemployee Director's Plan, pursuant to
which an aggregate of 75,000 shares of Common Stock may be granted to
non-employee directors. Pursuant to such Plan, each non-employee director is
automatically granted (i) upon becoming a director of the Company, an option to
purchase 1,250 shares of Common Stock and (ii) each year, on the day of the
Company's annual meeting of shareholders, an option to purchase 1,250 shares of
Common Stock. To date, the Company has granted to Messrs. Bailey, Goodman and
Ross, pursuant to the Nonemployee Directors' Plan, options to purchase 7,500
shares, 10,000 shares and 5,000 shares, respectively.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the
compensation in each of the last three fiscal years of the person who served as
the Company's Chief Executive Officer during the fiscal year ended December 31,
2000, and the Company's four most highly compensated officers (other than the
Chief Executive Officer) who were serving as officers at December 31, 2000
(collectively, the "Named Executive Officers").
LONG TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------- ------------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL FISCAL COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
POSITION YEAR SALARY ($) BONUS ($) ($) ($) SARS(#) ($) ($)
------------------------- ------ ---------- --------- ------------- ------------ ----------- ------- ------------
Paul Sharp 2000 125,000 7,500 16,910(1) -0- -0- -0- -0-
President and 1999 127,404 -0- 17,665(1) -0- 27,000(2) -0- -0-
Chief Executive 1998 101,202 -0- 6,104(1) -0- 30,626(3) -0- -0-
Officer
Harold Markowitz 2000 125,000 7,500 13,234(4) -0- -0- -0- -0-
Chairman of the 1999 127,404 -0- 13,153(4) -0- 27,000(2) -0- -0-
Board 1998 101,202 -0- 13,085(4) -0- 30,626(3) -0- -0-
Jan S. Mirsky 2000 115,000 6,900 7,200(5) -0- -0- -0- -0-
Executive Vice 1999 117,212 -0- 7,200(5) -0- 80,000(6) -0- -0-
President - Finance 1998 93,106 -0- 6,926(5) -0- 148,500(7) -0- -0-
Jorge Lazaro 2000 125,000 7,500 11,358(8) -0- -0- -0- -0-
Executive Vice 1999 127,404 -0- 11,358(8) -0- 27,000(2) -0- -0-
President and 1998 101,202 -0- 11,358(8) -0- 30,626(3) -0- -0-
Secretary
Jack Koegel 2000 100,000 6,000 14,400(9) -0- -0- -0- -0-
Vice Chairman of 1999 101,923 -0- 14,400(9) -0- 69,500(10) -0- -0-
The Board and Chief 1998 80,962 -0- 14,400(9) -0- 106,750(11) -0- -0-
Operating Officer
----------
(1) Includes (i) for 2000, 1999, and 1998, $10,892, $10,892, and $6,104,
respectively, paid by the Company with respect to an automobile for use by
Mr. Sharp in connection with his services to the Company, and (ii) for 2000
and 1999, $6,018 and $6,774, respectively, paid by the Company to Mr. Sharp
with respect to medical insurance purchased directly by him.
8
(2) Reflects (i) the January 6, 1999 grant by the Company to Messrs. Sharp,
Markowitz and Lazaro of 10,000 options, each with an exercise price of
$1.25, (ii) the April 1, 1999 grant by the Company to Messrs. Sharp,
Markowitz and Lazaro of 15,000 options, each with an exercise price of
$2.375, and (iii) the August 2, 1999 grant by the Company to Messrs. Sharp,
Markowitz and Lazaro of 2,000 options, each with an exercise price of
$2.50.
(3) On October 8, 1998, (i) the Company granted to each of Messrs. Sharp,
Markowitz and Lazaro 25,000 options with an exercise price of $.4375 (the
fair market value of the Common Stock on October 8, 1998), and (ii) the
Company adjusted the exercise price of 5,626 outstanding options originally
granted to each of Messrs. Sharp, Markowitz and Lazaro on December 26,
1996. In connection with such repricing, the Company cancelled the
outstanding options, each with an exercise price of $4.00, and granted a
corresponding number of new options, each with an exercise price of $.4375.
(4) Includes for 2000, 1999 and 1998 (i) $11,069, $10,988, and $10,800,
respectively, paid by the Company with respect to an automobile for use by
Mr. Markowitz in connection with his services to the Company and (ii)
$2,165, $2,165, and $2,285, respectively, for certain membership fees paid
by the Company on behalf of Mr. Markowitz.
(5) Represents amounts paid by the Company with respect to an automobile for
use by Mr. Mirsky in connection with his services to the Company.
(6) Reflects (i) the January 6, 1999 grant by the Company to Mr. Mirsky of
10,000 options, with an exercise price of $1.25, (ii) the April 1, 1999
grant by the Company to Mr. Mirsky of 15,000 options, with an exercise
price of $2.375, and (iii) the April 1, 1999 and August 2, 1999 adjustments
of the exercise price of an aggregate of 58,000 options held by Mr. Mirsky,
in connection with which, in each case, the Company cancelled the
outstanding options and granted a corresponding number of new options. See
"-- Repricing of Certain Options During Fiscal 1999."
(7) On October 8, 1998, the Company granted to Mr. Mirsky 25,000 options each
with an exercise price of $.4375 (the fair market value of the Common Stock
on October 8, 1998). On October 8, 1998 and November 4, 1998, the Company
adjusted the exercise price of an aggregate of 123,500 outstanding options
originally granted to Mr. Mirsky. In connection with such repricing, in
each case, the Company cancelled the outstanding options and granted a
corresponding number of new options.
(8) Represents amounts paid by the Company with respect to an automobile for
use by Mr. Lazaro in connection with his services to the Company.
(9) Includes for 2000, 1999 and 1998 (i) $4,800, $4,800 and $4,800,
respectively, paid by the Company to Mr. Koegel with respect to medical
insurance purchased directly by him and (ii) $9,600, $9,600 and $9,600,
respectively, paid by the Company with respect to an automobile for use by
Mr. Koegel in connection with his services to the Company.
(10) Reflects (i) the January 6, 1999 grant by the Company to Mr. Koegel of
10,000 options, with an exercise price of $1.25, (ii) the April 1, 1999
grant by the Company to Mr. Koegel of 15,000 options, each with an exercise
price of $2.375, (iii) the August 2, 1999 grant by the Company to Mr.
Koegel of 2,000 options, each with an exercise price of $2.50, and (iv) the
March 2, 1999 and August 2, 1999 adjustments of the exercise price of an
aggregate of 42,500 options held by Mr. Koegel, in connection with which,
in each case, the Company cancelled the outstanding options and granted a
corresponding number of new options. See "-- Repricing of Certain Options
During Fiscal 1999."
9
(11) On October 8, 1998, the Company granted to Mr. Koegel 25,000 options each
with an exercise price of $.4375 (the fair market value of the Common Stock
on October 8, 1998). On June 4, 1998 and November 4, 1998, the Company
adjusted the exercise price of an aggregate of 81,750 outstanding options
originally granted to Mr. Koegel. In connection with such repricing, in
each case, the Company cancelled the outstanding options and granted a
corresponding number of new options.
OPTION/SAR GRANTS DURING FISCAL 2000
No stock options or stock appreciation rights were granted or issued by the
Company during fiscal 2000 to the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES DURING FISCAL 2000 AND YEAR END
OPTION/SAR VALUES
The following table provides information related to options exercised by
the Named Executive Officers during fiscal 2000 and the number and value of
options and stock appreciation rights held at fiscal year end which are
currently exercisable. No stock appreciation rights were exercised during fiscal
2000.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT FY-END AT FY-END ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
Paul Sharp -0- -0- 33,470 11,354 $6,768 $2,051
Harold Markowitz -0- -0- 33,470 11,354 $6,768 $2,051
Jan S. Mirsky(2) -0- -0- 151,252 10,312 $6,618 $2,051
Jorge Lazaro -0- -0- 33,470 11,354 $6,768 $2,051
Jack Koegel -0- -0- 128,063 11,937 $6,152 $2,051
----------
(1) The values of Unexercised In-the-Money Options/SARs represents the
aggregate amount of the excess of $1.00, the closing sales price for a
share of Common Stock on December 29, 2000, over the relevant exercise
price of all "in-the-money" options.
(2) The values listed do not take into account the warrants held by Mr. Mirsky.
REPRICING OF CERTAIN OPTIONS DURING FISCAL 1999
In March 1999, the Company repriced 12,500 options that had originally been
granted in July 1997 to Mr. Koegel, the Vice Chairman of the Board and Chief
Operating Officer of the Company. Pursuant to such repricing, the Company
cancelled the outstanding options, each with an exercise price of $3.25 per
share, and granted a corresponding number of new shares, each with an exercise
price of $2.00 per share. In April 1999, the Company repriced 8,000 options that
had originally been granted in July 1995 to Mr. Mirsky, the Executive Vice
President - Finance of the Company. Pursuant to such repricing, the Company
cancelled the outstanding options, each with an exercise price of $3.25 per
share, and granted a corresponding number of new shares, each with an exercise
price of
10
$2.375 per share. In August 1999, the Company repriced 30,000 and 50,000 options
that had originally been granted to Mr. Koegel in September 1995 and to Mr.
Mirsky in July 1995, respectively. Pursuant to such repricing, the Company
cancelled the outstanding options, each with an exercise price of $3.75 and
$3.25 per share, respectively, and granted a corresponding number of new shares,
each with an exercise price of $2.50 per share. On the date of the August 1999
option repricings, the closing sale price of the Common Stock was $2.50. The
Board of Directors decided to reprice the foregoing options as a result of a
long-term decline in the market price of the Company's Common Stock which the
Board believed would make it unlikely that any holder would exercise the options
at the then existing exercise price. The Board also believed that the purpose
behind its grant of such options -- I.E., to act as additional motivation for
the Company's officers -- would be undermined by the decline in the price of the
Common Stock to a level substantially below the exercise price of the options.
DESCRIPTION OF STOCK OPTION PLAN
Pursuant to the Stock Option Plan, as amended, stock options covering an
aggregate of 923,134 shares of the Company's Common Stock may be granted to
employees (including officers), directors, consultants and other persons who
perform substantial services for or on behalf of the Company. The Stock Option
Plan is administered by the Stock Option Committee (the "Committee"), which is
vested with complete authority to administer and interpret the Stock Option
Plan, to determine the terms upon which options may be granted, to prescribe,
amend and rescind such interpretations and determinations and to grant options.
Under the Stock Option Plan, "incentive stock options" ("Incentive Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), may be granted to employees (including officers), and
non-incentive stock options ("Non-incentive Options") may be granted to
employees and to other persons (including directors) who perform substantial
services for or on behalf of the Company. Incentive Options and Non-incentive
Options are collectively referred to herein as "Options."
The price at which shares covered by an Option granted under the Stock
Option Plan may be purchased pursuant thereto shall be determined by the
Committee, but shall be no less than the par value of such shares and no less
than the Fair Market Value (as hereinafter defined) of such shares on the date
of grant; provided, however, that in the case of Incentive Options, if the
optionee directly or indirectly beneficially owns more than 10% of the total
combined voting power of all of the outstanding voting stock of the Company (a
"10% Holder"), the purchase price shall not be less than 110% of the Fair Market
Value on the date of grant. As used herein, the term "Fair Market Value" means
the last sale price of a share of Common Stock as reported by the principal
quotation service on which the Common Stock is listed for the date of grant, if
available, or, if the last sale prices are not reported, the mean of the high
bid and low asked prices of a share of Common Stock as reported by such
principal quotation service for the date of grant; provided, however, that if no
such report is available for the date of grant, the Fair Market Value shall be
the last sale price or the mean of the high bid and low asked prices, as the
case may be, on the day next preceding such day for which there was a report;
and provided further, however, that if no such representative quotes are
available, the Fair Market Value shall mean the amount determined by the
Committee to be the fair market value pursuant to any reasonable method in
accordance with applicable regulations of the Internal Revenue Service.
The purchase price of shares issuable upon exercise of an Option granted
under the Stock Option Plan may be paid in cash or by delivery of shares of
Common Stock having an aggregate Fair Market Value on the date of exercise equal
to the exercise price of the option. The Company may also loan the purchase
price to the optionee, or guarantee third-party loans to the optionee, on terms
and conditions acceptable to the Committee.
Under the Stock Option Plan, the total number of shares for Common Stock
for which options may be granted to any one person in any given calendar year
may not exceed 37,500. The Stock Option Plan also provides that the aggregate
fair market value of the stock with respect to which Incentive Options are first
exercisable by any employee during any calendar year under the Stock Option Plan
and all other stock option plans of the Company shall not exceed $100,000. To
the extent that the Fair Market Value of the stock with respect to which
Incentive Options are first exercisable by any employee during any calendar year
(under all plans of the Company) exceeds $100,000, such Options shall be treated
as Options which are not Incentive Options. The number of shares covered
11
by an Option is subject to adjustment for stock dividends, stock splits,
mergers, consolidations, combinations of shares, reorganizations and
recapitalizations.
The Stock Option Plan provides that Options may be exercised within a
period not exceeding ten years after the date of grant, except that the term of
any Incentive Options granted to a 10% Holder may not exceed five years from the
date of grant. Options are generally non-transferable except by will or by the
laws of descent and distribution, and during a participant's lifetime are
exercisable only by him or her. In addition, pursuant to the Stock Option Plan,
various limitations may apply to the exercise of Options by optionees whose
employment is terminated on retirement, disability or otherwise.
As of December 31, 2000, of the 923,134 shares of Common Stock available
for issuance under the Stock Option Plan, 545,758 of such shares are reserved
for issuance upon exercise of currently outstanding options. Accordingly, only
377,376 shares of Common Stock are available for future awards under the Stock
Option Plan.
EXTENSION OF CERTAIN WARRANTS
In March 2000, the Company amended the Warrant and Registration Agreement
between Mr. Mirsky and the Company, extending the expiration date of 86,622
warrants from March 31, 2000 to April 15, 2001. On April 9, 2001, the expiration
date of the warrants was extended to April 15, 2002. The warrants have an
exercise price of $1.25 per share after giving effect to the a two-for-one stock
split effected by the Company in December 1999.
DESCRIPTION OF EMPLOYMENT AGREEMENTS, SEVERANCE ARRANGEMENTS AND CHANGE OF
CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS WITH MESSRS. MARKOWITZ, SHARP AND LAZARO. On June 30,
1995, the Company entered into identical employment agreements with each of
Messrs. Markowitz, Sharp and Lazaro. Pursuant to such agreements, Messrs.
Markowitz, Sharp and Lazaro are employed as the Chairman of the Board, the
President and Chief Executive Officer, and an Executive Vice President,
respectively, of the Company. The agreements provide that such individuals shall
devote substantially all of their working time and attention to the business of
the Company. Each such agreement has an initial term of five years commencing
July 20, 1995, and shall be automatically renewable for successive one-year
periods unless either the Company or the employee elects not to renew his
employment. Pursuant to the employment agreements, as amended, Messrs.
Markowitz, Sharp and Lazaro each received a base salary in 2000 of $125,000, and
are each entitled to receive an annual base salary of $125,000 in each year
during the remainder of the term of his respective agreement, subject to such
increases as shall be approved by the Board of Directors of the Company. The
employment agreements also provide that each of Messrs. Markowitz, Sharp and
Lazaro will be eligible to participate in any medical insurance, pension, profit
sharing or other employment benefit programs generally made available to senior
executives of the Company.
EMPLOYMENT AGREEMENT WITH JAN MIRSKY. On June 30, 1995, the Company entered
into an employment agreement with Mr. Mirsky, pursuant to which Mr. Mirsky is
employed as the Executive Vice President - Finance of the Company and is to
devote substantially all of his working time and attention to the business of
the Company. Such agreement, which became effective July 13, 1995, had an
initial term of eighteen months, and is automatically renewable for successive
one-year periods beginning on January 13th of each year unless either the
Company or Mr. Mirsky elects not to renew his employment. The Company renewed
the agreement again on January 13, 2000. Pursuant to the employment agreement,
as amended, Mr. Mirsky received a base salary in 2000 of $115,000, and is
entitled to receive an annual base salary of $115,000 in each year during the
remainder of the term of the agreement, subject to such increases as shall be
approved by the Board of Directors of the Company. The agreement further
provides that Mr. Mirsky will be eligible to participate in any medical
insurance, pension, profit sharing or other employment benefit programs
generally made available to senior executives of the Company.
EMPLOYMENT AGREEMENT WITH JACK KOEGEL. Pursuant to the Company's employment
agreement with Mr. Koegel, which became effective September 27, 1995, Mr. Koegel
is employed by the Company as the Vice Chairman of the Company and, since June
1997, has been employed as the Chief Operating Officer of the Company. The
agreement provides that Mr. Koegel is to devote substantially all of his working
time and attention to the
12
business of the Company. The agreement provides that services performed by Mr.
Koegel shall be rendered in the St. Paul, Minnesota metropolitan area; however,
Mr. Koegel and the Company have subsequently mutually agreed that his services
shall be performed at the Company's executive offices in Paterson, New Jersey.
Such agreement had an initial term of thirty-six months, and is automatically
renewable for successive one-year periods beginning on September 23 of each year
unless either the Company or Mr. Koegel elects not to renew his employment. The
Company renewed the agreement on September 23, 1999. Pursuant to the employment
agreement, as amended, Mr. Koegel received a base salary of $100,000 in 2000,
and is entitled to receive an annual base salary of $100,000 in each year during
the remainder of the term of the agreement, subject to such increases as shall
be approved by the Board of Directors of the Company. The agreement further
provides that Mr. Koegel will be eligible to participate in any pension, profit
sharing or other employment benefit programs generally made available to senior
executives of the Company other than medical insurance benefits. However, the
agreement provides that the Company will pay Mr. Koegel $400 per month to cover
costs incurred by him in purchasing medical insurance directly. In addition,
pursuant to the agreement, the Company provides Mr. Koegel with a monthly
automobile allowance of $800.
Pursuant to the employment agreement, Mr. Koegel was granted an option in
September 1995 to purchase an aggregate of 93,750 shares of Common Stock at an
exercise price of $11.00 per share. On July 15, 1997, the Company adjusted the
exercise price of 12,500 of such options to $6.50 per share. On June 4, 1998,
the Company adjusted the exercise price of an additional 6,250 of such options
to $2.00 per share, and on November 4, 1998, the Company adjusted the exercise
price of 63,000 of such options to $3.75 per share. In addition, on November 4,
1998, the Company also adjusted to $3.25 per share the exercise price of the
12,500 options which had been repriced in July 1997 and, subsequent to the end
of fiscal 1998, the Company adjusted the exercise price of such options to $2.00
per share. Mr. Koegel's agreement provides that, in the event the Company grants
options, either under the Stock Option Plan or any other stock option plan
adopted by the Company, to Messrs. Markowitz, Sharp, Mirsky and Lazaro during
the term of Mr. Koegel's employment, Mr. Koegel shall be entitled to receive a
proportionate amount of additional options on such terms as may be established
by the Board of Directors.
SEVERANCE ARRANGEMENTS. Each of the employment agreements with Messrs.
Markowitz, Sharp, Lazaro, Mirsky and Koegel provides that the employee's
employment shall terminate (i) for "cause" (as defined in each of the respective
agreements), (ii) by reason of the employee's disability, resignation or death,
(iii) upon the expiration of the employment agreement in accordance with its
terms or (iv) in the event the employee is no longer employed by the Company
after a "Change of Control" (as defined below). Each of the agreements further
provides that, in the event the employee's employment terminates for any reason
(other than termination without cause or in connection with a Change of
Control), the employee shall be entitled to receive his annual base salary, and
any expense reimbursements, due and owing to him at the time of such
termination. In the event the employee is terminated without cause, the employee
shall be entitled to receive annual base salary and expense reimbursements then
due and owing to him, as well as a lump-sum severance payment in an amount equal
to his then annual base salary for the balance of the term of the employment
agreement.
CHANGE OF CONTROL ARRANGEMENTS. Each of the employment agreements with
Messrs. Markowitz, Sharp, Lazaro, Mirsky and Koegel provides that, in the event
of a Change of Control of the Company, each such employee will be entitled to
receive a lump-sum severance payment equal to three times his then annual base
salary if he is discharged for any reason (other than for cause) or terminates
his employment for "Good Reason" prior to the first anniversary of such Change
of Control, and shall be entitled to receive a lump-sum payment equal to his
then annual base salary if he voluntarily leaves the employ of the Company for
reasons other than discharge or for Good Reason prior to the first anniversary
of such Change of Control. As used in the employment agreements, the term
"Change of Control" means (a) any transaction or series of transactions
(including, without limitation, a tender offer, merger or consolidation) the
result of which is that any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act), other than Messrs. Markowitz, Sharp,
Mirsky and Lazaro (and, in the case of Mr. Koegel's employment agreement, Mr.
Koegel) or certain related parties and any "person" or "group" solicited by any
of such persons or their related parties, (i) becomes the beneficial owner of
more than 50% of the total aggregate voting power of all classes of the voting
stock of the Company and/or warrants or options to acquire such voting stock,
calculated on a fully diluted basis, (ii) acquires all or substantially all of
the assets of the Company or (iii) enters into a contract with respect to any of
the foregoing, or (b) during any period of two consecutive years,
13
individuals who at the beginning of such period constituted the Company's Board
of Directors cease for any reason to constitute a majority of the directors then
in office, unless such majority of the directors then in office has been elected
or nominated by Messrs. Markowitz, Sharp, Mirsky and Lazaro (and, in the case of
Mr. Koegel's employment agreement, Mr. Koegel) or certain related parties. In
addition, as used in the agreements, the term "Good Reason" means (i) a change
in the status or position of the employee which reflects a change from the
status and position(s) as were in effect immediately prior to a Change of
Control, (ii) the assignment to the employee of any duties or responsibilities
which, in the employee's reasonable judgment, are inconsistent with his status
or position(s), (iii) the removal of the employee from his current position or
reduction in his pay or requiring him to relocate or (iv) the removal of the
employee, without his consent, to any location outside of the New York/New
Jersey metropolitan area (or, in the case of Mr. Koegel, the St. Paul, Minnesota
metropolitan area) for a continuous period of more than 30 days.
CERTAIN TRANSACTIONS
From time-to-time, the Company transacts business with parties related to
the minority stockholders of Ales Signature, Ltd., a New York corporation, 80%
of the stock of which is owned by the Company. During 2000 and 1999, the Company
purchased inventories at a total cost of approximately $1,440,000 and
$1,505,000, respectively, from companies affiliated with the minority
stockholders. At December 31, 2000, accounts payable included a total of
approximately $17,000 that was related primarily to the purchases of inventories
from these related parties. In addition, during 2000, the Company sold
merchandise to companies affiliated with minority stockholders aggregating
approximately $606,000. At December 31, 2000, accounts receivable included
approximately $121,000 due from these related parties. Sales to such companies
were not significant in 1999.
PROPOSAL NO. 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO AUTHORIZE A REVERSE STOCK SPLIT
General
The Board of Directors of the Company has unanimously adopted a resolution
approving, and recommending to the Company's shareholders for their approval,
a proposed amendment, substantially in the form of Annex B hereto (the "Reverse
Stock Split Amendment") relating to Article FOURTH of the Company's Certificate
of Incorporation authorizing a reverse stock split of the Common Stock (a
"Reverse Stock Split"), which would be effectuated if, and at such time, the
Board determines the Reverse Stock Split would then facilitate continued listing
of our Common Stock on The Nasdaq SmallCap Market ("Nasdaq").
Reasons for the Reverse Stock Split Amendment
The Company's Common Stock is listed on Nasdaq. The continued listing
requirements of Nasdaq for the Common Stock require a company to maintain, among
other things, a minimum bid price per share of $1.00. As of the date of this
Proxy Statement, the Company is not in compliance with such requirement. Nasdaq
has notified the Company that the Company is required to regain compliance with
the minimum bid price requirement by August 9, 2001. The Company is also
currently not in compliance with Nasdaq's requirement regarding there being a
$1,000,000 minimum market value of public float for a 30 consecutive trading day
period. The Company has until August 14, 2001 to regain compliance with the
minimum market value of public float rule.
The Board of Directors believes that the Reverse Stock Split may have the
effect of increasing the market price per share of the Common Stock and allowing
the Common Stock to continue to be included on the Nasdaq system, although there
can be no assurance that the market price of the Common Stock will rise in
proportion to the
14
reduction in the number of outstanding shares resulting from the Reverse Stock
Split or that the post-Reverse Stock Split market price can be maintained or
that the Company's securities will continue to be included on the Nasdaq system.
The Board of Directors has determined that continued trading of the Common
Stock on the Nasdaq system is in the best interests of the shareholders. If the
Company were removed from the Nasdaq system, trading, if any, would thereafter
be conducted in the over-the-counter market on an electronic bulletin board
established for securities that do not meet the Nasdaq inclusion requirements or
in what are commonly referred to as the "pink sheets." As a result, an investor
would find it more difficult to dispose of, or to obtain accurate quotations as
to the price of, the Common Stock. In addition, if the Common Stock were removed
from the Nasdaq system, it would be subject to so-called "penny stock" rules
that impose additional sales practice requirements on broker-dealers who sell
such securities. Consequently, removal from the Nasdaq system, if it were to
occur, could adversely affect the ability or willingness of broker-dealers to
sell the Common Stock and the ability of purchasers to sell the Common Stock in
the secondary market.
The Company has requested that Nasdaq continue listing the Company's
securities and is soliciting your approval of the Reverse Stock Split in
furtherance of this request. There can be no assurance that the Company's
securities will continue to be traded on Nasdaq.
Certain Effects of the Reverse Stock Split
Pursuant to the Reverse Stock Split, each holder of a certain number of
shares of Common Stock, par value $.01 per share ("Old Common Stock"),
immediately prior to the effectiveness of the Reverse Stock Split would become
the holder of one share of Common Stock, par value $.01 per share ("New Common
Stock"). The exact number of shares of Old Common Stock required to receive one
share of New Common Stock is called the "Authorized Number" and will be
determined by the Board of Directors following approval of the Reverse Stock
Split based on market conditions, the likely effect of the Reverse Stock Split
on the market price of the Common Stock and other relevant factors. In no event,
however, will the Authorized Number be greater than eight.
The Company will not issue fractional shares in connection with the Reverse
Stock Split. Instead, holders of Old Common Stock who would otherwise be
entitled to receive a fractional share of New Common Stock because they hold a
number of shares of Old Common Stock that is not evenly divisible by the
Authorized Number will be entitled to receive from the Company a cash payment
equal to the fair market value, as determined by the Board of Directors, of any
fractional share of New Common Stock resulting from the Reverse Stock Split. The
fair market value shall be based on the average of the closing bid prices for
the Old Common Stock as reported by the Nasdaq Stock Market on each of the five
days preceding the date on which the Reverse Stock Split becomes effective.
The Company is currently authorized to issue a maximum of 40,000,000 shares
of Common Stock and up to 10,000,000 shares of Preferred Stock. As of the date
of this Proxy Statement, there were 2,261,018 shares of Common Stock
outstanding. Although the number of authorized shares of Common Stock will not
change as a result of the Reverse Stock Split, the number of outstanding shares
will be reduced to a number that will be approximately equal to (i) the number
of shares of Common Stock outstanding immediately prior to the effectiveness of
the Reverse Stock Split, divided by (ii) the Authorized Number. In addition, the
Company has reserved approximately 1,009,756 shares of Common Stock for issuance
upon exercise of outstanding options and warrants and, upon the effectiveness of
the Reverse Stock Split, the exercise price and/or conversion rate of such
options and warrants will be proportionately adjusted to give effect to the
Reverse Stock Split.
With the exception of the number of outstanding shares, the rights and
preferences of the shares of Common Stock prior and subsequent to the Reverse
Stock Split will remain the same. After the effectiveness of the Reverse Stock
Split, it is not anticipated that the financial condition of the Company, the
percentage ownership of management, the number of the Company's shareholders, or
any aspect of the Company's business would materially change as a result of the
Reverse Stock Split.
If approved, the Reverse Stock Split may result in some shareholders owning
"odd-lots" of less than 100 shares of Common Stock. Brokerage commissions and
other costs of transactions in odd-lots are generally higher than the costs of
transactions in "round-lots" of even multiples of 100 shares.
15
Certain Federal Income Tax Consequences
The receipt of New Common Stock solely in exchange for Old Common Stock
will not generally result in recognition of gain or loss to the shareholders.
The adjusted tax basis of a shareholder's New Common Stock will be the same as
the adjusted tax basis of the shares of Old Common Stock exchanged therefor, and
the holding period of the New Common Stock will include the holding period of
the shares of Old Common Stock exchanged therefor. Shareholders who receive cash
in lieu of fractional shares will be treated as if they had received such
fractional shares and then sold them to the Company, and such shareholders will
recognize gain or loss equal to the difference between the amount of cash
received and their basis in the Common Stock exchanged. No gain or loss will be
recognized by the Company as a result of the Reverse Stock Split.
The foregoing discussion summarizing certain federal income tax
consequences is based on current law and is included for general information
only. Shareholders are urged to consult their own tax advisors as to the
federal, state, local and foreign tax effects of the Reverse Stock Split in
light of their individual circumstances.
Effectiveness of the Reverse Stock Split
The Reverse Stock Split, if approved by the Company's shareholders, would
become effective upon the filing with the Department of State of the State of
New York of a Certificate of Amendment of the Company's Certificate of
Incorporation in substantially the form of the Reverse Stock Split Amendment
attached to this Proxy Statement as Annex B. The exact timing of the filing of
such Certificate of Amendment will be determined by the Board of Directors based
upon its evaluation as to when such action will be most advantageous to the
Company and its shareholders, and the Board of Directors reserves the right to
delay the Reverse Stock Split Amendment for up to twelve months following
shareholder approval thereof. In addition, the Board of Directors reserves the
right, notwithstanding shareholder approval and without further action by the
shareholders, to elect not to proceed with the Reverse Stock Split Amendment if,
at any time prior to filing such Reverse Stock Split Amendment, the Board of
Directors, in its sole discretion, determines that it is no longer in the best
interests of the Company and its shareholders.
The proposed Reverse Stock Split will become effective on the effective
date of the filing of the Reverse Stock Split Amendment (the "Effective Date").
Commencing on the Effective Date, each currently outstanding Common Stock
certificate will be deemed for all corporate purposes to evidence ownership of
the reduced number of shares of Common Stock resulting from the Reverse Stock
Split and any cash which may be payable in lieu of fractional shares. As soon as
practicable after the Effective Date, shareholders will be notified as to the
effectiveness of the Reverse Stock Split and instructed as to how to surrender
their certificates representing Old Common Stock in exchange for certificates
representing New Common Stock (and, if applicable, cash in lieu of fractional
shares). The Company intends to use its transfer agent, Continental Stock
Transfer & Trust Company, as its exchange agent in effecting the exchange of
certificates following the effectiveness of the Reverse Stock Split.
Dissenters' Rights
Pursuant to the New York Business Corporation Law, the Company's
shareholders are not entitled to dissenters' rights of appraisal with respect to
the proposed Reverse Stock Split Amendment.
Vote Required for Approval
The affirmative vote of the holders of a majority of all outstanding shares
of Common Stock entitled to vote at the Annual Meeting, in person or by proxy,
is required for approval of the proposed Reverse Stock Split Amendment.
Recommendation of the Board of Directors
The Company's Board of Directors recommends a vote FOR Proposal No. 2.
16
STOCKHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual meeting
of shareholders, to be held in 2002, must be received by the Company at 495
River Street, Paterson, New Jersey 07524, Attention: Secretary by March 2, 2002
to be included in the proxy statement and form of proxy relating to that
meeting.
AUDITORS
Representatives of J.H. Cohn LLP are expected to attend the Annual Meeting
and, while they are not expected to make a statement, they will have an
opportunity to do so if they desire. They will also be available to respond to
appropriate questions.
AUDIT FEES. The aggregate fees billed by J.H. Cohn LLP for professional
services rendered for the audit of the Company's annual financial statements for
the 2000 fiscal year and the reviews of the financial statements included in the
Company's Form 10-QSBs for the 2000 fiscal year totaled $91,125.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The aggregate
fees billed for professional services to financial information systems design
and implementation by J.H. Cohn LLP for the 2000 fiscal year totaled $27,841.
ALL OTHER FEES. There were no fees billed for services rendered by J.H.
Cohn LLP for the 2000 fiscal year other than the fees reflected above.
The Audit Committee has considered whether the provision of services
covered in the preceding two paragraphs is compatible with maintaining J.H. Cohn
LLP's independence.
OTHER INFORMATION
The cost of soliciting proxies will be borne by the Company. Following the
original mailing of proxy soliciting material, regular employees of the Company
may solicit proxies by mail, telephone, telegraph and personal interview.
Arrangements have been made with brokerage houses and other custodians, nominees
and fiduciaries which are record holders of the Company's stock to forward proxy
soliciting material and annual reports to the beneficial owners of such stock,
and the Company will reimburse such record holders for their reasonable expenses
incurred in providing such services. As of the date of this Proxy Statement, the
Company has not retained the services of a proxy solicitor to assist in the
solicitation of proxies.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 2000 IS ENCLOSED.
OTHER MATTERS
The Board of Directors is aware of no other matters that are to be
presented to shareholders for formal action at the Annual Meeting. If, however,
any other matters properly come before the Annual Meeting or any adjournment
thereof, it is the intention of the persons named in the enclosed form of proxy
to vote such proxy in accordance with their judgment on such matters.
By Order of the Board of Directors,
Jorge Lazaro
SECRETARY
Dated: Paterson, New Jersey
June 29, 2001
17
ANNEX A
AUDIT COMMITTEE CHARTER
COMPOSITION
There shall be a committee of the board of directors (the "Board") to be known
as the audit committee which, no later than June 14, 2001, shall have at least
two (2) members, a majority of the members which shall be independent directors,
as such term is defined in Marketplace Rule 4200 of the National Association of
Securities Dealers, Inc. ("NASD") or successor rule, subject to the exceptions
in NASD Marketplace Rule 4350(d)(2), or successor rule.
The Board shall elect or appoint a chairman of the audit committee who will have
authority to act on behalf of the audit committee between meetings.
RESPONSIBILITIES
The responsibilities of the audit committee are as follows:
o Ensure its receipt from the outside auditor of a formal written
statement, delineating all relationships between the outside auditor
and the company consistent with the Independence Standards Board
Standard 1.
o Actively engage in a dialogue with the outside auditor with respect to
any disclosed relationships or services that may impact the
objectivity and independence of the outside auditor and be responsible
for taking, or recommending that the board of directors take,
appropriate action to oversee the independence of the outside auditor.
o In view of the outside auditor's ultimate accountability to the Board
and the audit committee, as representatives of the shareholders, the
audit committee, acting together with the Board, has the ultimate
authority and responsibility to select, evaluate, and, where
appropriate, replace the outside auditor (or, if applicable, nominate
an outside auditor for shareholder approval in any proxy statement).
o Review with the outside auditor, 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.
o Consider, in consultation with the outside auditor and management of
the company, the audit scope and procedures.
o Review the financial statements contained in the annual report to
shareholders, and financial statements contained in the Form 10-QSB
quarterly reports, with management and the outside auditor to
determine that the outside auditor is satisfied with the disclosure
and content of the financial statements to be presented to the
shareholders.
o Meet with the internal auditor (if any), outside auditor or the
management privately to discuss any matters that the audit committee,
the internal auditor (if any), the outside auditor or the management
believe should be discussed privately with the audit committee.
o Review and reassess the adequacy of the committee's charter annually.
o Prepare a report of the audit committee to be included in the
company's proxy statement in accordance with applicable Securities and
Exchange Commission regulations.
o Make such other recommendations to the Board on such matters, within
the scope of its functions, as may come to its attention and which in
its discretion warrant consideration by the Board.
LIMITATIONS
The audit committee is responsible for the duties set forth in this charter but
is not responsible for either the preparation of the financial statements or the
auditing of the financial statements. Management has the responsibility for
preparing the financial statements and implementing internal controls and the
independent accountants have the responsibility for auditing the financial
statements and monitoring the effectiveness of the internal controls. The review
of the financial statements by the audit committee is not of the same quality as
the audit performed by the independent accountants. In carrying out its
responsibilities, the audit committee believes its policies and procedures
should remain flexible in order to best react to a changing environment.
2
ANNEX B
FORM OF REVERSE STOCK SPLIT AMENDMENT
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
SEL-LEB MARKETING, INC.
Under Section 805 of the New York Business Corporation Law
The undersigned, being an authorized officer of SEL-LEB MARKETING, INC.
(the "Corporation"), does hereby certify:
FIRST. The name of the Corporation is Sel-Leb Marketing, Inc.
SECOND. The Certificate of Incorporation was filed by the Department of
State on September 21, 1993.
THIRD. Article Fourth of the Certificate of Incorporation, which sets forth
the authorized shares of capital stock of the Corporation, is hereby amended to
effect a reclassification of the shares of Common Stock, par value $.01 per
share (the "Common Stock"), currently outstanding (the "Old Shares") so that
each _____ shares of Common Stock issued and outstanding immediately prior to
the date of such amendment shall, effective as of the date of such amendment, be
reclassified and changed into one share of Common Stock (the "New Shares") (the
"Reverse Stock Split"). No fractional shares shall be issued by reason of this
change and the Corporation shall pay to holders of Common Stock outstanding
immediately prior to the filing of this Certificate of Amendment an amount of
cash equal to the product of the fraction of a share of Common Stock to which
such holder otherwise would be entitled, multiplied by the fair market value, as
determined by the Board of Directors of the Corporation, of a share of Common
Stock immediately following the filing of this Certificate of Amendment, which
fair market value shall be based on the average of the closing bid prices for
the Common Stock as reported by the Nasdaq Stock Market on each of the five days
preceding the date on which the Reverse Stock Split becomes effective. As a
result of the foregoing reclassification, the 2,261,018 currently issued and
outstanding Old Shares will be changed into _________ issued and outstanding New
Shares. The 37,738,982 shares of Common Stock currently authorized but unissued
shall remain authorized but unissued shares of Common Stock and the amendment
shall add ______
unissued shares totaling _______ and each of the shares of Preferred Stock, $.01
par value, currently authorized but unissued shall remain authorized but
unissued shares of Preferred Stock. The stated capital of the Corporation
resulting from the decrease in the issued and outstanding shares of Common Stock
will be reduced from $______ to $______.
FOURTH. To effectuate the foregoing, the introductory paragraph of Article
Fourth of the Certificate of Incorporation, which refers to the authorized
shares of the corporation, is amended to read as follows:
"Fourth. (a) The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is Fifty Million (50,000,000),
consisting of Forty Million (40,000,000) shares of common stock, par value $0.01
per share ("Common Stock"), and Ten Million (10,000,000) shares of preferred
stock, par value $0.01 per share ("Preferred Stock")."
FIFTH. The foregoing amendment of the Certificate of Incorporation was
adopted at a meeting of the Board of Directors, followed by the vote of the
holders of a majority of the outstanding shares entitled to vote thereon, at a
meeting of the shareholders.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment on _____________________.
By:
----------------------------------------
Name:
Title:
[PRELIMINARY]
[FRONT]
PROXY SEL-LEB MARKETING, INC.
PROXY SOLICITED BY
THE BOARD OF DIRECTORS OF SEL-LEB MARKETING, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS -- JULY 25, 2001
The undersigned hereby appoints HAROLD MARKOWITZ, JAN S. MIRSKY and JORGE
LAZARO, and each of them, as Proxies, each with full power of substitution and
resubstitution, to represent and to vote, as designated below, all shares of
Common Stock of Sel-Leb Marketing, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company to be held at the Company's offices located at 495
River Street, Paterson, New Jersey at 10:00 a.m. (local time) on July 25, 2001,
and at any adjournment or postponement thereof.
1. Election of Directors
[_] FOR all nominees listed below [_] WITHHOLD
(except as marked to APPROVAL to vote
the contrary below) for all nominees
listed below
Harold Markowitz, Paul Sharp, Jan S. Mirsky, Jorge Lazaro, Jack
Koegel, Stanley R. Goodman, Edward C. Ross and L. Douglas Bailey
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below)
2. Approval and adoption of an amendment to the Company's Certificate of
Incorporation to effect a reverse stock split.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournment
or postponement thereof.
If no direction is given, this proxy will be voted FOR the election of the
nominees set forth in Proposal No. 1 and FOR Proposal No. 2
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ELECTION OF THE NOMINEES SET FORTH IN
PROPOSAL NO. 1 AND FOR PROPOSAL NO. 2
TO BE VALID, THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
[BACK]
Please sign exactly as name
appears at left. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give your full
title as such. If a corporation,
please sign in full corporate
name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated:
---------------------------
---------------------------------
Signature
---------------------------------
Signature
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.