Definitive Proxy Statement
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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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.
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(Name of Registrant as Specified In Its Charter)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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previously. Identify the previous filing by registration statement number, or
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ALL AMERICAN SEMICONDUCTOR, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on October 20, 2006
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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 Friday, October 20, 2006, at
1:00 P.M., San Jose, California local time, at Staybridge Suites, 1601 Crane
Court, San Jose, California, for the following purposes:
1. to elect two directors to serve on the Board of Directors until the
2009 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
registered independent public accounting firm for the year ending
December 31, 2006; and
3. to consider and act upon such other matters as may properly come before
the annual meeting or any and all postponements or adjournments
thereof.
Only shareholders of record at the close of business on Tuesday, September 12,
2006, are 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
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Howard L. Flanders
Corporate Secretary
September 15, 2006
Miami, Florida
THE FORM OF PROXY IS ENCLOSED. TO ASSURE THAT YOUR SHARES WILL BE VOTED AT THE
MEETING, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
ALL AMERICAN SEMICONDUCTOR, INC.
16115 N.W. 52nd Avenue
Miami, Florida 33014
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held on October 20, 2006
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INTRODUCTION
General
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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 Friday,
October 20, 2006, at 1:00 P.M., San Jose, California local time, at Staybridge
Suites, 1601 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 September 15, 2006.
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,
2005 (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 Tuesday,
September 12, 2006 (the "Record Date"), are entitled to notice of and to vote at
the Meeting or any adjournments or postponements thereof. On the Record Date,
the Company had 4,000,124 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 9.6% 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
of the Company, (iii) each executive officer of the Company who was serving as
an executive officer at the end of fiscal year 2005 (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)................ 304,746 7.5%
Dimensional Fund Advisors Inc. (4)... 261,273 6.5%
Paul Goldberg (5).................... 178,077 4.4%
Howard L. Flanders................... 42,631 1.1%
John Jablansky....................... 17,490 *
Rick Gordon (6)...................... 7,121 *
Richard E. Siegel (7)................ 6,550 *
Robin L. Crandell.................... 6,000 *
Howard M. Pinsley.................... 5,000 *
Michael W. Forman (8)................ 3,250 *
All executive officers and
directors as a group
(9 persons)(3)(5)(6)(7)(8)........... 570,865 13.7%
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* Less than 1%
(1) The address of Bruce M. Goldberg is 230 Devcon Drive, San Jose,
California 95112.
(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, as previously
amended and restated (the "Option Plan") and the 2000 Nonemployee
Director Stock Option Plan which will be vested and exercisable on or
before November 11, 2006: 69,814 options held by Bruce M. Goldberg;
49,504 options held by Paul Goldberg; 36,956 options held by Howard L.
Flanders; 7,240 options held by John Jablansky; 6,000 options held by
Richard E. Siegel; 6,000 options held by Robin L. Crandell; 2,500
options held by Howard M. Pinsley; 3,000 options held by Michael W.
Forman; and 181,014 options held by the executive officers and
directors as a group. Excludes outstanding stock options to purchase an
aggregate of 60,036 additional shares of the Company's Common Stock
issued under the 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 November 11, 2006.
(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 Goldberg. For federal
securities law purposes only, Bruce 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 Goldberg's sons. Bruce Goldberg disclaims
beneficial ownership over all such securities.
(4) Dimensional Fund Advisors Inc. ("Dimensional") is a registered
investment advisor with offices at 1299 Ocean Avenue, Santa Monica,
California 90401. Information as to the beneficial ownership of the
Company's Common Stock by Dimensional was obtained from an Amendment
No. 1 to Form 13F filed by Dimensional on
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August 1, 2006 with the Securities and Exchange Commission ("SEC")
which disclosed that Dimensional had sole investment discretion over
accounts holding 261,273 shares of the Company's Common Stock, and, as
for 251,673 of those shares, Dimensional also had sole voting
authority.
(5) Includes 57,844 shares of the Company's Common Stock owned of record by
Paul Goldberg's wife, Lola Goldberg, and a total of 500 shares of the
Company's Common Stock held of record by Paul Goldberg as custodian for
two of his grandchildren. For federal securities law purposes only,
Paul Goldberg is deemed to be the beneficial owner of these securities.
(6) Rick Gordon was an executive officer of the Company on December 31,
2005 and until the termination of his employment on February 28, 2006.
(7) Does not include 550 shares of the Company's Common Stock owned by
Richard E. Siegel's wife, Mary N. Siegel, and as to which Mr. Siegel is
not the beneficial owner for federal securities law purposes.
(8) 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
In September 2005, Rick Gordon, then Senior Vice President of Sales and
Marketing of the Company, resigned as a member of the Company's Board in order
to enable the Board to consist of a majority of independent directors, as
required by Rule 4350(c) of the Rules of The Nasdaq Stock Market (the "NASD
Rules") within the time frame permitted by Rule 4350(a)(5) of the NASD Rules.
Mr. Gordon was an executive officer of the Company on December 31, 2005 and
until the termination of his employment on February 28, 2006.
The Company currently has seven 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 78 Chairman of the Board
Bruce M. Goldberg (1) II 51 Director, President and Chief
Executive Officer
Howard L. Flanders II 49 Director, Executive Vice
President, Chief Financial
Officer and Corporate Secretary
Robin L. Crandell (2)(3)(4) III 56 Director
Howard M. Pinsley (2)(3)(4) I 66 Director
Michael W. Forman (2) I 66 Director
Richard E. Siegel II 61 Director
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(1) member of the Executive Committee
(2) member of the Audit Committee
(3) member of the Compensation Committee
(4) member of the Nominating 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 2007, 2008 and 2006, respectively. The Board currently
consists of four independent directors and three management directors and
therefore complies with Rule 4350(c) of the NASD Rules which requires that the
Board consist of a majority of independent directors.
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.
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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 Goldberg was appointed Chief
Executive Officer of the Company. Bruce Goldberg has served as a director of the
Company since 1987. From 1981 until joining the Company, Bruce Goldberg
practiced law. Bruce Goldberg serves as a member of the board of directors of
the National Electronic Distributors Association (NEDA), a not-for-profit trade
association representing distributors of electronic components and their
manufacturer-suppliers.
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.
Robin L. Crandell is Director of Optical Communications Products Sales, the
Americas for JDS Uniphase Corporation, a provider of optical communications
technologies. Prior to the acquisition in May 2004 by JDS Uniphase Corporation
of E20 Communications, Inc., Mr. Crandell was 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 Chairman of the Board, President and Chief Executive
Officer 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 in 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 and 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 in 2003.
Richard E. Siegel was the Executive Vice President and a director of Supertex,
Inc., a manufacturer of high voltage complex proprietary and industry-standard
integrated circuits until January 2006. Mr. Siegel had 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.
Communications with Directors
Shareholders and others who wish to communicate with employee members of the
Board may do so by submitting any such communication addressed directly to the
Board member at the Company's address stated hereinabove. Shareholders and
others who wish to communicate with nonemployee Board members may do so by
submitting such communication to the Company, Attention: Howard L. Flanders,
Corporate Secretary, at the Company's address stated hereinabove, who will
deliver any such communication to the relevant directors in accordance with
their instructions.
Meeting Attendance
The Board formally met seven times during the fiscal year ended December 31,
2005, in addition to acting three times during the year by unanimous written
consent. All Board members attended the meetings, except for two meetings in
which one member was absent and one meeting in which two members were absent,
and executed the unanimous written
4
consents. The Board encourages, but does not require, attendance of all
incumbent directors and director nominees at the annual meeting of shareholders.
At the Company's 2005 annual meeting of shareholders, four Board members were
present in person and three Board members were present by conference telephone.
The independent directors met twice in executive sessions in 2005.
Certain Relationships and Related Transactions
During 2005, the Company purchased product aggregating approximately $2.3
million from Supertex, Inc., a supplier of the Company where a Board member of
the Company, Richard E. Siegel, was the Executive Vice President and a director
until January 2006. Despite these transactions, Mr. Siegel constitutes an
independent director under NASD Rule 4200(a)(15).
The Company leased residential space in San Jose, California from a partnership
which includes two of the Company's executive officers (Paul Goldberg and Bruce
M. Goldberg). Beginning in 2001, the partnership had agreed to varying
reductions in the monthly rental payment. The lease was terminated in September
2005. The Company paid approximately $27,900 to this partnership for the year
ended December 31, 2005.
Board Compensation
Commencing in 2004, nonemployee members of the Board receive an annual fee of
$5,000. Each nonemployee director serving on one or more committees receives an
additional annual fee of $2,000. The chairman of the audit committee receives an
additional annual fee of $1,000.
The nonemployee members of the Board also receive annual grants of options under
the 2000 Nonemployee Director Stock Option Plan. 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, 2005, 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 2005, 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 directors of the Company. Mr.
Pinsley and Mr. Crandell have served on the Audit Committee since 2002 and Mr.
Forman became a member in 2003. During the fiscal year ended December 31, 2005,
the Audit Committee met nine times. The Board and the Audit Committee believe
the Audit Committee's member composition satisfies the NASD Rules that govern
audit committee composition, including the requirement that audit committee
members all be "independent directors" as that term is defined by NASD Rule
4200(a)(15). The Audit Committee operates under a written charter and consistent
with such charter monitors and oversees the Company's financial reporting
process on
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behalf of the Board. It reviews the independence of the Company's registered
independent public accounting firm and is responsible for, among other matters,
authorizing or approving the engagement of the registered independent public
accounting firm 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, the overall quality of the Company's financial reporting, and
reviewing and approving in advance, if appropriate, any proposed related party
transactions. The Audit Committee has established procedures for the receipt,
retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and for the
confidential, anonymous submission by Company employees of concerns regarding
questionable accounting or auditing matters or other Company-related matters.
The procedures for submission and investigation of communications regarding
accounting and auditing matters and other Company-related matters are posted on
the Company's web site, www.allamerican.com. This document is also available in
print upon written request. Such written request should be sent to the Company,
Attention: Chief Financial Officer, at the Company's address stated hereinabove.
The Board has determined that Mr. Pinsley, who as noted above is independent as
that term is used in Item 7(d)(3)(iv) 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.
Compensation Committee
The Compensation Committee currently consists of Howard M. Pinsley and Robin L.
Crandell, two independent directors of the Company. The Compensation Committee
is responsible for determining the compensation of all executive officers of the
Company and acts as the stock option committee of the Board, administering the
Option Plan. The senior management of the Company makes all decisions with
respect to the compensation (other than the granting of stock options) of all
employees other than the executive officers of the Company. See "BOARD OF
DIRECTORS." During the fiscal year ended December 31, 2005, the Compensation
Committee met once and acted once by unanimous written consent.
Nominating Committee
The Nominating Committee is currently comprised of Howard M. Pinsley and Robin
L. Crandell, both independent directors of the Company. The Nominating Committee
operates under a written charter approved by the Board and consistent with such
charter evaluates and proposes nominees for the Board considering the minimum
qualifications required of Board members as set forth in the charter. A copy of
the Nominating Committee charter is available on the Company's web site,
www.allamerican.com. The charter requires that all members of the Nominating
Committee be "independent directors" as that term is defined by NASD Rule
4200(a)(15). The Nominating Committee will consider shareholder recommendations
for nominees for membership on the Board. Such recommendations may be submitted
to the Company, Attention: Howard L. Flanders, Corporate Secretary, at the
Company's address stated hereinabove. The Corporate Secretary will present such
recommendations to the Nominating Committee. There are no specific, minimum
qualifications that the Nominating Committee believes must be met by nominees
recommended by the Nominating Committee and the Nominating Committee will
utilize the same criteria in evaluating nominees recommended by the Nominating
Committee and nominees recommended by shareholders. In evaluating candidates for
nomination to the Board, the charter of the Nominating Committee requires the
Nominating Committee to consider the contribution that a candidate would be
expected to make to the Board and the Company based upon the current composition
and needs of the Board and the candidate's expertise, integrity, prior
experience, education, relationships and other factors that the Board determines
are relevant. The Nominating Committee will identify potential candidates
through recommendations from the Company's officers, directors, shareholders and
other appropriate third parties. Although the Company is not currently paying a
fee to any third party to identify or evaluate potential nominees, there is no
guarantee that the Nominating Committee will not engage a third party search
firm in the future, which engagement is authorized by the Nominating Committee
charter. The Nominating Committee met once during the fiscal year ended December
31, 2005.
AUDIT COMMITTEE REPORT
The Audit Committee of the Company's Board (the "Audit Committee") is currently
comprised of Howard M. Pinsley, Robin L. Crandell and Michael W. Forman, all
independent directors of the Company. Mr. Pinsley and Mr. Crandell have served
on the Audit Committee since 2002 and Mr. Forman became a member in 2003. The
Audit Committee operates under a written charter adopted and amended and
restated by the Board in order to incorporate the changes
6
required by the Sarbanes-Oxley Act, SEC rules and the NASD Rules. The Board and
the Audit Committee believe that the Audit Committee's current member
composition satisfies the NASD Rules that govern audit committee composition,
including the requirement that audit committee members all be "independent
directors" as that term is defined by NASD Rule 4200(a)(15).
The Audit Committee holds discussions with management and the Company's
registered independent public accounting firm 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 registered independent public accounting firm is 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 authorized and approved in 2005 the appointment of the
Company's registered independent public accounting firm, subject to shareholder
ratification. The Company's registered independent public accounting firm 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 registered
independent public accounting firm 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 in the United States, and the Audit Committee has reviewed
and discussed the consolidated financial statements with management and the
registered independent public accounting firm. The Audit Committee also
discussed with the registered independent public accounting firm 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, 2005 for filing with the SEC.
The Audit Committee has considered whether the provision of the non-audit
services described in "Tax Fees" below is compatible with maintaining Lazar
Levine & Felix LLP's independence.
Howard M. Pinsley (Chair)
Robin L. Crandell
Michael W. Forman
Principal Accounting Firm Fees and Services
The Company and its Audit Committee are committed to ensuring the independence
of its registered independent public accounting firm. As such, it is the
Company's policy that all engagements of the Company's registered independent
public accounting firm be pre-approved by the Audit Committee.
Audit Fees. The aggregate fees billed by the Company's registered independent
public 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, 2005 and December 31, 2004 and the review of the
financial statements included in the Company's Forms 10-Q for each year were
$195,000 and $189,000.
Audit Related Fees. There were no fees billed by Lazar Levine & Felix LLP for
2005 and 2004 for assurance and related services that are reasonably related to
the performance of the audit or review of the Company's financial statements
that are not reported under Audit Fees above.
Tax Fees. The aggregate fees billed in 2005 and 2004 for professional services
rendered by Lazar Levine & Felix LLP for tax compliance, tax advice, and tax
planning were $43,000 and $35,000. All such tax services were pre-approved by
the Audit Committee.
All Other Fees. There were no fees billed for services rendered by Lazar Levine
& Felix LLP for 2005 and 2004, other than the services described above.
7
EXECUTIVE OFFICERS OF THE COMPANY
The Company currently has four executive officers. Each officer serves at the
discretion of the Board; however, as of the date of this Proxy Statement, each
officer has an employment agreement 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 78 Chairman of the Board
Bruce M. Goldberg 51 President and Chief Executive Officer
Howard L. Flanders 49 Executive Vice President, Chief Financial
Officer and Corporate Secretary
John Jablansky 49 Senior Vice President of Operations and Asset
Management
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. In 2001, Mr. Jablansky became
Senior Vice President of Product Management and Operations and in December 2005
this title was changed to Senior Vice President of Operations and Asset
Management. 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."
Code of Ethics
The Company has a Code of Ethics and Business Conduct that applies to all
directors, officers and employees, including the Company's principal executive
officers, the Company's principal financial and accounting officer, and the
Company's controller. You can find the Code of Ethics and Business Conduct on
the Company's web site, www.allamerican.com. The Company will post any
amendments to the Code of Ethics and Business Conduct, and any waivers that are
required to be disclosed by the rules of the SEC or any other regulatory agency,
on the Company's web site. This document is also available in print upon written
request. Such written request should be sent to the Company, Attention: Chief
Financial Officer, at the Company's address stated hereinabove.
8
EXECUTIVE COMPENSATION
The following table sets forth information regarding the compensation earned
during each of the fiscal years ended December 31, 2005, 2004 and 2003 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
$100,000:
Summary Compensation Table
--------------------------
Long-term
Compensation
Annual Compensation Awards
---------------------------------- ----------
Other Annual Securities All Other
Salary Compensation Underlying Compensation
Name and Principal Position Year ($) (1) Bonus($) ($) (2) Options(#) ($)(3)
--------------------------- ---- ------- ------- ------------ ---------- --------
Paul Goldberg................... 2005 273,000 - - - 10,000
Chairman of the Board 2004 256,000 150,000 - 13,740 11,000
2003 243,000 - - 41,260 48,000(4)
Bruce M. Goldberg............... 2005 381,000 - - - 27,000
President and Chief 2004 358,000 250,000 - 19,240 28,000
Executive Officer 2003 339,000 - - 58,270 26,000
Howard L. Flanders.............. 2005 203,000 - - - 7,000
Executive Vice President and 2004 191,000 100,000 - 10,110 7,600
Chief Financial Officer 2003 181,000 - - 30,890 12,000
Rick Gordon (5)................. 2005 206,000 - - - 4,000
Sr. Vice President of 2004 194,000 100,000 - 9,500 4,000
Sales Asia and Europe 2003 183,000 - - 22,390 4,000
John Jablansky.................. 2005 194,000(6) - - - 1,000
Sr. Vice President of Operations 2004 183,000(6) - - 2,000 2,000
and Asset Management 2003 174,000(6) - - 6,040 1,000
|
---------------------
(1) Salary paid to Paul Goldberg, Bruce M. Goldberg, Howard L. Flanders and
Rick Gordon in each of the years presented was less than the amount payable
under each executive officer's employment agreement with the Company as a
result of voluntary salary reductions taken by the executive officers which
voluntary salary reductions began in 2001.
(2) Other annual compensation for each of the named executive officers in each
of the years presented did not exceed the lesser of $50,000 or 10% of the
total of annual salary and bonus reported for such named executive officer.
(3) 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."
(4) Includes a distribution of $38,000 under the terms of the 1998 Deferred
Compensation Plan of the Company. See "Deferred Compensation Plans for
Executive Officers and Key Employees."
(5) Rick Gordon was an executive officer of the Company on December 31, 2005
and until the termination of his employment on February 28, 2006. See
"Employment Agreements - Separation Agreement."
(6) Includes commissions paid in the aggregate amount of $68,000 for each of
the years presented.
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
2005 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 in 1993 the Company had advanced substantially all of the
9
premiums for $1,000,000 flexible premium life insurance policies owned by each
of Howard L. Flanders and Rick Gordon. Under the respective insurance agreement
the Company's obligations to make premium payments in connection with Howard L.
Flanders' and Rick Gordon's policies lasted for a maximum of ten years from the
time the insurance policies were acquired in 1993. This obligation terminated in
January 2003. The Company's premium advances were secured by a collateral
assignment of the cash surrender value and death benefit of each of the policies
subject to a five year vesting period which commenced on January 1, 1998. On
January 1, 2003 (the tenth anniversary of the insurance agreements), all
advances were deemed cancelled, the security interests fully released and the
cash surrender value and other benefits of their respective insurance policies
were fully vested in these employees.
Option Grants in Last Fiscal Year
The Company did not grant any stock options during its fiscal year ended
December 31, 2005 to any named executive officer of the Company. The Company
does not have a plan whereby tandem stock appreciation rights ("SARS") are
granted. See "Employees', Officers', Directors' Stock Option Plan" hereinbelow.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-Ended Option
Values
The following table sets forth information concerning the aggregate option
exercises in the fiscal year ended December 31, 2005 and the value of
unexercised stock options as of December 31, 2005 for the individual executive
officers named in the Summary Compensation Table:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options At Options At
Shares FY-End(#) FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Exercise(#) Realized($)(1) Unexercisable Unexercisable(2)
--------------------------------------------------------------------------
Paul Goldberg................ - - 28,878 (E) $ 45,551 (E)
26,122 (U) 30,367 (U)
Bruce M. Goldberg............ 15,000 12,180 45,734 (E) 70,973 (E)
36,776 (U) 47,315 (U)
Howard L. Flanders........... 6,000 4,872 26,567 (E) 37,624 (E)
19,433 (U) 25,083 (U)
Rick Gordon.................. 8,717 27,203 14,567 (E) 13,636 (E)
15,606 (U) 18,181 (U)
John Jablansky............... 4,000 4,648 7,224 (E) 7,357 (E)
3,816 (U) 4,904 (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 the date of exercise.
(2) 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, 2005 (the Company's fiscal year end).
Compensation Committee Report
The Compensation Committee is responsible for recommending to the Board the
compensation of the executive officers, including annual base salaries, cash and
non-cash bonuses, stock ownership plans, retirement plans and other benefits.
With respect to the compensation of the executive officers other than the Chief
Executive Officer, the Compensation Committee makes its recommendations after
consulting with the Chief Executive Officer. In addition, the Compensation
Committee administers the Option Plan and the Company's deferred compensation
plans and will administer all future benefit plans of the Company. The policies
of the Compensation Committee and the Board with respect to the compensation of
10
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 2005 executive officers named in the Summary Compensation
Table were compensated pursuant to employment agreements entered into prior to
2005 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 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 September 6, 2015, 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 1,350,000 shares of the
Company's Common Stock have 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 independent 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 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 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
11
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 2000 Nonemployee 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 881,841 options were granted and had not
expired or been forfeited, of which 344,269 were exercised and 537,572 options
were outstanding (of which 221,550 options were held by executive officers of
the Company as a group and 163,514 options are presently exercisable). These
options, which are held by 164 persons, are exercisable at prices ranging from
$1.92 per share to $9.55 per share and are exercisable through various
expiration dates from 2006 to 2011. There were 468,159 shares available as of
the Record Date for future issuance under the Option Plan.
12
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 have been reserved for issuance
under the Director Stock Option Plan. As of the Record Date, a total of 21,000
options were granted and had not expired or been forfeited, of which 1,500 were
exercised and 19,500 options were outstanding. These options, which are held by
4 persons, have exercise prices ranging from $1.98 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 before taking into account the additional 250,000 shares of Common
Stock issuable pursuant to an amendment to the Option Plan that was approved at
the Company's 2005 annual meeting of shareholders. So long as such registration
statements remain effective under the Securities Act of 1933, as amended (the
"Act"), shares of Common Stock (other than such additional 250,000 shares)
issued upon the exercise of outstanding options under the option plans will be
immediately and freely tradable without restriction under the Act, subject to
applicable volume limitations, if any, under Rule 144 and, in the case of
executive officers and directors of the Company, Section 16 of the Exchange Act.
It is contemplated that the Company will, at the appropriate time, file an
additional registration statement on Form S-8 in order to register the
additional 250,000 shares of Common Stock issuable pursuant to the amendment to
the Option Plan that was approved at the Company's 2005 annual meeting of
shareholders.
Equity Compensation Plan Information
The following table sets forth information about the Company's Common Stock that
may be issued upon exercise of options, warrants and rights under all of the
Company's equity compensation plans as of December 31, 2005, including the
Option Plan and the Director Stock Option Plan. The Company's shareholders have
approved both of these plans.
Number of Securities Remaining
Number of Securities To Weighted Average Available for Future Issuance
Be Issued Upon Exercise Exercise Price of Under Equity Compensation Plans
of Outstanding Options, Outstanding Options, (Excluding Securities
Plan Category Warrants And Rights Warrants and Rights Reflected in the First Column)
------------------------- ----------------------- ------------------- ------------------------------
Equity compensation plans
approved by shareholders 427,770 $3.56 678,929
Equity compensation plans
not approved by shareholders 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. In 2003, the 1988
Deferred Compensation Plan was amended to allow a Participant to elect to
receive a lump sum benefit, providing such Participant has attained at least the
age of 65 and has at such time 25 or more years of service with the Company.
Pursuant to the 1988 Deferred Compensation Plan, commencing on a Participant's
13
retirement date, he or she will receive an annuity for ten years, unless he or
she has elected to receive a lump sum benefit as described above. The amount of
the annuity shall be computed at 30% of the Participant's salary, as defined.
Any Participant with less than ten years of service to the Company as of his or
her retirement date will only receive a pro rata portion of the annuity.
Retirement benefits paid under the 1988 Deferred Compensation Plan will be
distributed monthly. The Company did not pay any benefits under this plan for
2005. The maximum annuity benefit payable to a Participant (including each of
the named executive officers) under the 1988 Deferred Compensation Plan is
presently $30,000 per annum.
During 1996, the Company established a second deferred compensation plan (the
"1996 Deferred Compensation Plan") for executives of the Company. The executives
eligible to participate in the 1996 Deferred Compensation Plan are chosen at the
sole discretion of the Board upon a recommendation from the Compensation
Committee. The Company may make contributions each year in its sole discretion
and is under no obligation to make a contribution in any given year. For 2005
the Company did not make any contributions to the 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 2005, 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 $15,000 in 2005. The Company's 401(k) Plan provides for discretionary
matching contributions by the Company. During 2001 and in prior years, the
Company's 401(k) Plan provided for standard matching contributions by the
Company in the amount of 25% on the first 6% contributed of each participating
employee's salary. No matching contributions were made by the Company for 2005.
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 through 2005 Bruce M. Goldberg and Paul Goldberg voluntarily
agreed to reductions in the base salary that they would otherwise then have been
entitled to receive. 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.
Under the Goldberg Agreement for Paul Goldberg, as amended, he is able to elect,
in his sole discretion, to retire at any time (the "Retirement Election"). Upon
the earlier to occur of the Retirement Election or at the expiration of the term
of his Goldberg Agreement, the Company will be obligated to pay Paul Goldberg
(in addition to any other compensation he may be entitled to upon termination),
and his spouse upon his death, a retirement benefit of $100,000 per annum until
the later of the death of Paul Goldberg or his spouse, provide him and his
spouse, without cost, until the later of their respective deaths, at least the
14
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 or payment for an 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 and the payment of the annual
premium on the Whole Life Policy as described under "Summary Compensation Table"
above.
The Goldberg Agreements, also provide that, in the event of change in control
(as defined in the Goldberg Agreements) 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" above. 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 agreement for Howard L. Flanders 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
Code, 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 Agreement
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").
The Flanders Agreement had an initial term through 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. It provides for a base salary, effective as
of January 1, 2000, of $215,000 per annum, 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 through 2005, Howard L. Flanders voluntarily
agreed to reductions in the base salary that he would otherwise then have been
entitled to receive. Under the Flanders Agreement, Mr. Flanders is 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 the base salary for the applicable year. The Flanders Agreement
also provides for certain additional benefits, including participation in the
Company benefit plans, use of or payment for an automobile and continuance of
all his compensation and other benefits for two years in the event of
disability. Further, if 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 Flanders Agreement. Additionally,
under the Flanders Agreement, the Company has paid premiums under a life
insurance policy for Mr. Flanders with the beneficiary to be as designated by
Mr. Flanders as described under "Summary Compensation Table" above. The Flanders
Agreement also provides that, in the event of a change in control (as defined in
the Flanders Agreement) of the Company, Mr. Flanders would have the option in
his sole discretion to terminate the Flanders Agreement. In such event, and
subject to remaining an employee of the Company (or its successor) for 180 days
after the change in control (other than as a result of his death, disability or
termination without cause), Mr. Flanders, at his option, is entitled to elect to
receive a lump-sum payment equal to his compensation due through the later of
the end of the term of the Flanders Agreement or two years after the change in
control or for such period to continue to receive such compensation as and when
15
due under the Flanders Agreement. In addition, upon a change in control, all
options granted by the Company to Mr. Flanders automatically vest. The Flanders
Agreement also contains covenants not to compete, nonsolicitation and
nondisclosure provisions.
The Jablansky Agreement
On January 31, 2006, the Company entered into an employment agreement (the
"Jablansky Agreement") with John Jablansky, its Senior Vice President of
Operations and Asset Management and an executive officer of the Company. The
Jablansky Agreement is effective as of January 1, 2006 and has an initial term
through December 31, 2006, 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. The Jablansky
Agreement provides for a base salary, effective as of January 1, 2006, of
$200,000 per annum, subject to an annual increase for each calendar year during
the term of the Jablansky Agreement after 2006 equal to the greater of 5% per
annum or the annual increase in the cost of living. Mr. Jablansky is also
entitled to participate in all employee benefit plans offered by the Company,
including, without limitation, medical insurance, dental insurance, pension
and/or profit sharing plans, 401(k) plans, stock option plans and cafeteria
plans, as well as the 1996 Deferred Compensation Plan. Under the Jablansky
Agreement, if the Company were to terminate Mr. Jablansky without cause (as
defined in the Jablansky Agreement) or if Mr. Jablansky were to become disabled,
he would be entitled to receive a severance amount equal to that portion of his
gross annual salary at the time of termination that would have been paid over
the number of weeks equal to the product of 2 multiplied by the full number of
calendar years that Mr. Jablansky had been employed by the Company. This
severance amount would be paid on the basis of regularly occurring payroll
payments as if Mr. Jablansky were still employed by the Company. The Jablansky
Agreement also provides that, in the event that a change in control (as defined
in the Jablansky Agreement) of the Company occurs while Mr. Jablansky is
employed by the Company, and within the 60-day period prior to the date of the
change in control or at any time during the two year period following the date
of the change in control, Mr. Jablansky's employment is terminated by the
Company without cause or the Company elects not to renew the Jablansky Agreement
or the Company requires Mr. Jablansky to relocate to an office outside of
Miami-Dade County, Broward County or Palm Beach County, Florida without Mr.
Jablansky's consent and as a result Mr. Jablansky resigns as an employee of the
Company, (i) Mr. Jablansky would receive a severance amount equal to his then
current annual salary until the later of 12 months after such termination,
non-renewal or resignation or 24 months after the date of the change in control,
with such severance amount being payable on the basis of regularly occurring
payroll payments as if Mr. Jablansky were still employed by the Company, and
(ii) all options granted by the Company to Mr. Jablansky would automatically
vest. The Jablansky Agreement also contains covenants not to compete,
nonsolicitation and nondisclosure provisions.
The Separation Agreement
On March 24, 2006, the Company entered into a separation agreement and general
release (the "Separation Agreement") with Rick Gordon, who was the Company's
Senior Vice President of Sales Asia and Europe and an executive officer of the
Company until February 28, 2006, the effective date of his termination of
employment with the Company. The Separation Agreement provides, among other
things, for severance payments equal to his base salary through February 29,
2008 ($216,300 for the period March 1, 2006 to February 28, 2007 and $227,115
for the period from March 1, 2007 to February 29, 2008) and the cash bonus, if
any is earned, for the calendar years 2006 and 2007 that Mr. Gordon would have
received under his employment agreement with the Company if he had continued as
an employee of the Company. In addition, Mr. Gordon (i) will be entitled to
participate in the medical insurance program offered by the Company from time to
time to all employees through February 29, 2008, subject to the terms set forth
in the Separation Agreement, (ii) will continue to have the use of a
company-leased vehicle through May 6, 2008, the end of the lease term, (iii) had
the right to exercise his outstanding stock options that were vested as of
February 28, 2006 until May 29, 2006, and (iv) received $23,000 in lieu of all
amounts due with respect to any deferred compensation plan. Furthermore, in the
event that Mr. Gordon complies with all of the covenants not to compete and
related restrictions set forth in his employment agreement with the Company, all
of which covenants and restrictions survive the termination of his employment
with the Company, the Company will pay an additional $25,000 in severance. The
payments and benefits to be provided to Mr. Gordon under the Separation
Agreement are in full satisfaction of the substantially similar severance
obligations the Company had under Mr. Gordon's employment agreement with the
Company.
16
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 directors of the Company. See
"BOARD COMMITTEES - Compensation Committee." Since January 1, 2005 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*
Fiscal Years Ended December 31
-----------------------
*Assumes the investment of $100 on January 1, 2001 and reinvestment of dividends
(no dividends were declared on the Company's Common Stock during the period).
17
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 Nominating
Committee of the Board.
Paul Goldberg has been a member of the Board since 1978 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
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 REGISTERED INDEPENDENT PUBLIC ACCOUNTING
FIRM
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 registered
independent public accounting firm for the fiscal year ending December 31, 2006,
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, 2005, see "Principal Accounting Firm Fees and Services" 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 registered independent public accounting
firm 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 registered independent public accounting
firm. 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.
18
SHAREHOLDER'S PROPOSALS FOR 2007 ANNUAL MEETING
Any shareholder of the Company who wishes to present a proposal to be considered
at the 2007 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 May 18, 2007. 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 2007 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 2007 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, 2005 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, 2005, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT BY
THE COMPANY OF A WRITTEN REQUEST BY SUCH PERSON. SUCH WRITTEN REQUEST SHOULD BE
SENT TO THE COMPANY, ATTENTION: HOWARD L. FLANDERS, EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, AT THE COMPANY'S ADDRESS STATED HEREINABOVE.
By Order of the Board of Directors,
/s/ HOWARD L. FLANDERS
-----------------------------------------
Howard L. Flanders
Corporate Secretary
September 15, 2006
Miami, Florida
19
PROXY
ALL AMERICAN SEMICONDUCTOR, INC.
ANNUAL MEETING OF SHAREHOLDERS-OCTOBER 20, 2006
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 Friday, October 20, 2006, at 1:00 P.M., San Jose,
California local time, at Staybridge Suites, 1601 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 2005 Annual Report and the Notice of Annual
Meeting of Shareholders and Proxy Statement relating thereto is hereby
acknowledged.
-----------
(Continued and to be signed on the reverse side) SEE REVERSE
SIDE
-----------
PLEASE SIGN‚ DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE X
1. Election of Directors: 2. Ratification of the selection of FOR AGAINST ABSTAIN
Lazar Levine & Felix LLP as the [ ] [ ] [ ]
NOMINEES: Company's registered independent
[ ] FOR ALL NOMINEES o Paul Goldberg public accounting firm for the year [ ] [ ] [ ]
o Robin L. Crandell ending December 31, 2006.
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES 3. Upon such other matters as may
properly come before the Annual
[ ] FOR ALL EXCEPT Meeting or any and all postponements
(See instruction below) or adjournments thereof.
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.