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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Surge Components, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
SURGE COMPONENTS, INC.
(a Delaware Corporation)
Notice of 2003 Annual Meeting
of Shareholders to be held
at 10:00 A.M. on [ ], 2003
To the Shareholders of
SURGE COMPONENTS, INC.:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of
Shareholders (the "Meeting") of SURGE COMPONENTS, INC. (the
"Company") will be held on [ ], 2003 at 10:00 A.M. at the
Company's offices located at 95 East Jefryn Boulevard, Deer Park,
NY 11729 to consider and vote on the following matters described
under the corresponding numbers in the attached Proxy Statement:
Proposal 1. To elect six directors; and
Proposal 2. To transact such other business as may
properly come before the Meeting.
The Board of Directors has fixed [ ], 2003, at the
close of business, as the record date for the determination of
shareholders entitled to vote at the Meeting, and only holders of
shares of Common Stock of the Company of record at the close of
business on that day will be entitled to vote. The stock
transfer books of the Company will not be closed.
A complete list of shareholders entitled to vote at the
Meeting shall be available for examination by any shareholder,
for any purpose germane to the Meeting, during ordinary business
hours from [ ], 2003 until the Meeting at the offices of
the Company. The list will also be available at the Meeting.
Whether or not you expect to be present at the Meeting,
please fill in, date, sign, and return the enclosed Proxy, which
is solicited by management. The Proxy is revocable and will not
affect your vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Ira Levy, President
Date: [ ], 2003
Requests for additional copies of proxy material and the
Company's Annual Report for its fiscal year ended November 30,
2002 should be addressed to Shareholder Relations, Surge
Components, Inc., 95 East Jefryn Boulevard, Deer Park, NY 11729.
This material will be furnished without charge to any shareholder
requesting it.
SURGE COMPONENTS, INC.
95 East Jefryn Boulevard
Deer Park, NY 11729
Proxy Statement
The enclosed proxy is solicited by the management of Surge
Components, Inc. (the "Company") in connection with the 2003
Annual Meeting of Shareholders (the "Meeting") to be held on [
], 2003 at 10:00 A.M. at the Companys offices located at 95 East
Jefryn Boulevard, Deer Park, NY 11729 and any adjournment
thereof. The Board of Directors (the Board) has set [ ],
2003 as the record date for the determination of shareholders
entitled to vote at the Meeting. A shareholder executing and
returning a proxy has the power to revoke it at any time before
it is exercised by filing a later proxy with, or other
communication to, the Secretary of the Company or by attending
the Meeting and voting in person.
The entire cost of soliciting proxies will be borne by the
Company. The costs of solicitation, which represent an amount
believed to be normally expended for a solicitation relating to
an uncontested election of directors, will include the costs of
supplying necessary additional copies of the solicitation
materials and the Company's Annual Report to Shareholders for its
fiscal year ended November 30, 2002 ("Fiscal 2002")(the "Annual
Report") to beneficial owners of shares held of record by
brokers, dealers, banks, trustees, and their nominees, including
the reasonable expenses of such recordholders for completing the
mailing of such materials and Annual Reports to such beneficial
owners.
Only shareholders of record of the Company's 8,743,326
shares of Common Stock (the "Common Stock") outstanding at the
close of business on [ ], 2003 will be entitled to vote.
Each share of Common Stock is entitled to one vote. Holders of a
majority of the outstanding shares of Common Stock must be
represented in person or by proxy in order to achieve a quorum.
All shares of our Common Stock represented in person or by proxy
(including shares which abstain or do not vote for any reason
with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining
whether a quorum is present at the Annual Meeting. Abstentions
will be treated as shares that are present and entitled to vote
for purposes of determining the number of shares present and
entitled to vote with respect to any particular matter, but will
not be counted as a vote in favor of such matter. Accordingly,
an abstention from voting on a matter has the same legal effect
as a vote against the matter. If a broker or nominee holding
stock in street name indicates on the proxy that it does not have
discretionary authority to vote as to a particular matter (broker
non-votes), those shares will not be considered as present and
entitled to vote with respect to such matter. Accordingly, a
broker non-vote on a matter has no effect on the voting on such
matter. The Company has also authorized and issued 42,700 shares
of Series C Preferred Stock which has no voting rights. The proxy
statement, the attached notice of meeting, the enclosed form of
proxy and the Annual Report are being mailed to shareholders on
or about [ ], 2003. The mailing address of the Company's
principal executive offices is 95 East Jefryn Boulevard,Deer Park,
NY 11729.
PROPOSAL ONE. ELECTION OF DIRECTORS
------------------------------------
The following table sets forth certain information as to the
persons nominated for election as a director of the Company at
the Meeting:
Director
Name Age Positions with Surge Since
---- --- -------------------- --------
Ira Levy 46 Chief Executive Officer, 1981
President and Director
Steven J. Lubman 47 Vice President, Principal 1981
Financial Officer,
Secretary and Director
Alan Plafker 44 Director, Member of the Audit 2001
Committee and Member of the
Compensation Committee
David Siegel 77 Director, Member of the Audit 1983
Committee and Chairman of the
Compensation Committee
Mark Siegel 49 Director, Member of the 1996
Audit and Compensation
Committees
Lawrence Chariton 45 Director, Member of Audit 2001
Committee
Ira Levy has served as President, Chief Executive Officer
and a director of Surge since its inception in November 1981.
From 1976 to 1981, Mr. Levy was employed by Capar Components
Corp., an importer and supplier of capacitor and resistor
products.
Steven J. Lubman has served as Surge's Vice President,
Principal Financial Officer, Secretary and a director since its
inception in November 1981. From 1975 to 1981, Mr. Lubman was
employed by Capar Components, Inc.
David Siegel has served as a director since 1983, as well as
Chairman of the Board from 1983 to February 2000. Mr. Siegel also
serves on the boards of directors of Kent Electronics Corp. and
Micronetics, Inc., each of which is a publicly traded company,
and Great American of Deer Park, Inc., a privately held company
which leases facilities to Surge. David Siegel is the father-in-
law of Ira Levy and the father of Mark Siegel.
Mark Siegel has served as a director since October 1996.
Since 1985, Mr. Siegel has been the President of Mark Siegel
Inc., d/b/a Great American Electronics Corp., an electronics
parts distributor, and Great American of Deer Park, Inc., a
privately held company which leases facilities to Surge. Mark
Siegel is the son of David Siegel and the brother in-law of Ira
Levy.
Alan Plafker has served as a director since June 2001. Mr.
Plafker is the President and Chief Executive Officer of Member
Brokerage Service LLC, a credit union service organization owned
by Melrose Credit Union. Mr. Plafker has over 20 years of
management experience in the insurance and credit union
industries.
Lawrence Chariton has served as a director since August
2001. For the last 25 years, Mr. Chariton has worked as a Sales
Manager for Linda Shop, a retail jewelry business, and is
involved in charitable organizations benefiting the State of
Israel. Mr. Chariton graduated from Hofstra University in 1979
with a Bachelor's Degree in accounting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF
1934.
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Section 16(a) of the Securities Exchange Act of 1934
requires the Company's executive officers and directors, and
persons who own more than ten percent of a registered class of
the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
Based solely on its review of the copies of such forms received
by it, the Company believes that during Fiscal 2002 all executive
officers and directors of the Company complied with all
applicable filing requirements.
AUDIT AND COMPENSATION COMMITTEES
---------------------------------
During Fiscal 2002, the Compensation Committee, consisting
of Messrs. David Siegel and Mark Siegel, had no meetings.
During Fiscal 2002, the Audit Committee (the "Audit
Committee"), consisting of Messrs. Chariton and Plafker, met four
times.
AUDIT COMMITTEE REPORT
----------------------
The Audit Committee consists of independent directors all of
whom meet the independence and experience requirements of Nasdaq
Marketplace Rule 4200(a)(14). The Audit Committees
responsibilities are as described in a written charter adopted by
the Board, which is attached as Appendix A to this Proxy
Statement.
The Audit Committee has reviewed and discussed the Companys
audited financial statements for Fiscal 2002 with management and
with the Companys independent auditors, Seligson & Giannatassio
LLP (S&G). The Audit Committee has discussed with S&G the
matters required to be discussed by the Statement on Auditing
Standards No. 61 relating to the conduct of the audit. The Audit
Committee has received the written disclosures and the letter
from S&G required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed
with S&G its independence. Based on the Audit Committees review
of the audited financial statements and the review and
discussions described in the foregoing paragraph, the Audit
Committee recommended to the Board that the audited financial
statements for Fiscal 2002 be included in the Companys Annual
Report on Form 10-KSB for Fiscal 2002 for filing with the
Securities and Exchange Commission.
Submitted by the members of the Audit Committee:
Alan Plafker
Lawrence Chariton
AUDIT FEES; FINANCIAL INFORMATION SYSTEMS DESIGN AND
IMPLEMENTATION FEES; ALL OTHER FEES
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Audit fees billed to the Company by S&G during Fiscal 2002
for review of the Companys annual financial statements and those
financial statements included in the Companys quarterly reports
on Form 10-QSB totaled $154,220. The Company did not engage S&G
to provide advice to the Company regarding financial information
systems design and implementation during Fiscal 2002. The
Company also engaged S&G during Fiscal 2002 for the preparation
of the Company's tax returns totaling $10,000 in services.
The following table sets forth all compensation awarded to,
earned by, or paid for all services rendered to Surge during the
fiscal years ended November 30, 2002, 2001 and 2000 by those persons
who served as chief executive officer and any executive officer who
received compensation in excess of $100,000 during such years.
Summary Compensation Table
--------------------------
Long-Term
Compensation
Other Shares
Name and Principal Annual Compensation Annual Underlying
Positions Year Salary Bonus Compensation(1) Options
--------- ---- ------ ----- ------------ -------
Ira Levy, 2002 $200,000 $ 0 (3) 0 0
President and Chief 2001 $200,000 $ 48,736(3) 0 0
Executive Officer(2) 2000 $200,000 $528,156(3) 0 250,000
Steven J. Lubman, 2002 $200,000 $ 0 (3) 0 0
Vice President 2001 $200,000 $161,230(3) 0 0
2000 $200,000 $651,028(3) 0 50,000
Adam Epstein, 2001 $184,615 $ 0 0 500,000(4)
Former Chairman of the 2000 $157,692 $ 0 0 1,000,000(4)
Board and Former Chief
Executive Officer(2)
(1) The above compensation figures do not include the cost
for the use of automobiles leased by us, the cost of benefits and
any other perquisites provided by us to such persons in
connection with our business, all of which does not exceed the
lesser of $50,000 or 10% of such person's annual salary and bonus
for the subject fiscal year.
(2) Mr. Epstein became Acting Chief Executive Officer of
Surge in 2000 until his separation from Surge in July 2001. Mr.
Levy served as Chief Executive Officer during all of Fiscal 1998,
Fiscal 1999 and until February 2000, and became Chief Executive
Officer again in July 2001.
(3) Messrs. Levy and Lubman participated in the Surge bonus
pool, which consisted of 10% of Surge's and Challenge's combined
net profits, defined as income before income taxes, accrued
interest charges and annualized costs, and also excluding
interest on Surge's $7 million private placement of its 12%
convertible promissory notes, specifically identifiable costs
relating entirely to Superus and costs associated with the
terminated acquisition of Global, but before the payment of
bonuses. For Fiscal 2000, they each also received $250,000 in
additional year end bonuses.
(4) Pursuant to his Termination and Separation Agreement in
July 2001, all of Mr. Epstein's options terminated except for an
option to purchase up to 125,000 shares of Common Stock at an
exercise price of $2.90 per share, which shall remain exercisable
until the earlier of a material breach by Mr. Epstein of his
agreement or one year and one day after the date of such
agreement. These options expired in July 2002.
Employment Agreements
---------------------
Employment Agreements for Messrs. Levy and Lubman
-------------------------------------------------
Surge entered into employment agreements, each dated as of
February 1, 1996, with Ira Levy, our president, and Steven J.
Lubman, our vice president. These employment agreements provide
that Messrs. Levy and Lubman shall devote all of their business
time to Surge, each in consideration of an annual salary of
$200,000 for five-year periods commencing on July 31, 1996.
Bonuses to Messrs. Levy and Lubman are to be based upon the
performance of Surge and Challenge and determined at the
discretion of our board of directors. Their salaries may be
increased annually during the term of their employment, at the
discretion of our board or its compensation committee. These
employment agreements provide that, during the term of their
employment with Surge and Challenge and for a period of one year
following termination of employment, Messrs. Levy and Lubman are
prohibited from engaging in activities which are competitive with
those of Surge. In March 1998, the employment agreements were
amended to extend their respective terms to July 30, 2003 and to
provide that, unless terminated in writing by either party, on
July 30th of each successive year of the employment agreements,
the employment agreements shall automatically renew for an
additional one-year term, so that on each July 30th there will be
five years remaining on the terms of the agreements. The
employment agreements further provide that in the event of a
change of control where Messrs. Levy or Lubman is not elected to
the Board of Directors of Surge and/or is not appointed as a
Surge officer and/or there has been a change in ownership of at
least 25% of the issued and outstanding stock and such issuance
was not approved by either Mr. Levy or Mr. Lubman, then the non-
approving person(s) may elect to terminate his employment
contract and receive 2.99 times his annual compensation including
benefits, or such other amount then permitted under the Internal
Revenue Code without an excess penalty, in addition to the
remainder of his compensation under his existing employment
contract.
In July 2001, we entered into a Termination and Separation
Agreement with Mr. Epstein. Mr. Epstein had served as our
Chairman and Acting Chief Executive Officer since February 2000,
positions he resigned from effective July 11, 2001. Under the
terms of this agreement, we made severance payments to Mr.
Epstein totaling $100,000 over a six month period. These
severance payments have been completed and we have no further
obligations in connection with this agreement. All of Mr.
Epstein's options terminated except for an option to purchase up
to 125,000 shares of Common Stock at an exercise price of $2.90
per share, which shall remain exercisable until the earlier of a
material breach by Mr. Epstein of his agreement or one year and
one day after the date of the agreement.
Stock Option Plans
------------------
In 1996, we adopted and our shareholders ratified, our 1995
Employee Stock Option Plan. The option plan, as amended, provides
for the grant of options to purchase an aggregate of 850,000
shares of our common stock to our qualified employees, officers,
directors, independent contractors, consultants and other
individuals. The exercise price of options must be at least 85%
of fair market value of the common stock on the date of grant
(100% of fair market value, in the case of incentive stock
options). As of November 30, 2002, options to purchase 685,500
shares were outstanding and 12,000 shares were available for
grant.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
-----------------------------------------------
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at November 30,2002 at November 30, 2002(1)
------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Ira Levy 315,555 0 $0 $0
Steven J.
Lubman 200,000 0 $0 $0
(1) Based on a closing price of $.09 per share on November 30,
2002.
Option Grants in Last Fiscal Year
---------------------------------
There were no options granted in Fiscal 2002.
COMPENSATION OF DIRECTORS
-------------------------
Currently, our directors, other than David Siegel, receive
$500 compensation per month for serving on our Board of
Directors. David Siegel receives $750 per month to serve on our
Board of Directors and as Chairman of the Compensation Committee.
See "Item 12. Certain Relationships and Related Transactions."
Directors are reimbursed for their reasonable expenses incurred
in attending meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth as of March 26, 2003, the
number of shares of Common Stock held of record or beneficially
(i) by each person who held of record, or was known by the
Company to own beneficially, more than five percent of the
outstanding shares of Common Stock, (ii) by each director and
(iii) by all officers and directors as a group:
Percentage of
Amount and Nature Surge Common
Name and address of of Surge Common Stock Stock Benefi-
Beneficial Owner Beneficially Owned cally Owned
------------------- --------------------- -------------
Ira Levy(2) 568,855(3) 6.3%
Steven J. Lubman(2) 455,000(4) 5.1%
Lawrence Chariton(2) 101,795(5) 1.2%
Alan Plafker(2) 20,916(6) *
David Siegel(2) 75,000(7) *
Mark Siegel(2) 101,998(8) 1.2%
All directors and
executive officers
as a group (6 persons) 1,339,301(9) 14.31%
* Less than 1% of the issued and outstanding shares of
Common Stock.
(1) Based on 8,743,326 shares of Common Stock issued and
outstanding as of March 27, 2003.
(2) The business and mailing address for each of these
individuals is c/o Surge Components, Inc., 95 East Jefryn
Boulevard, Deer Park, New York 11729.
(3) Includes 315,555 shares of Common Stock issuable upon
exercise of options granted to Mr. Levy, which options are
exercisable within the next 60 days. Also includes shares of
Common Stock held by Mr. Levy which are subject to certain voting
and transfer restrictions pursuant to a stock purchase agreement
between Mr. Lubman and Mr. Levy. Does not include (a) 105,553
shares of Common Stock issuable upon exercise of a Surge option
granted to Mr. Levy, which options are not exercisable within 60
days, or (b) 1,025,000 shares of Common Stock issuable upon
exercise of options subject to shareholder approval.
(4) Includes 200,000 shares of Common Stock issuable upon
exercise of options granted to Mr. Lubman, which options are
exercisable within the next 60 days. Also includes shares of
Common Stock held by Mr. Lubman which are subject to certain
voting and transfer restrictions pursuant to a stock purchase
agreement between Mr. Lubman and Mr. Levy. Does not include
1,000,000 shares of Common Stock issuable upon exercise of
options granted subject to shareholder approval.
(5) Includes 1,810 shares of Common Stock issuable upon
exercise of warrants held by Mr. Chariton, which warrants are
exercisable within the next 60 days.
(6) Includes 20,000 shares of Common Stock issuable upon
exercise of options granted to Mr. Plafker, which options are
exercisable within the next 60 days.
(7) Includes 40,000 shares of Common Stock issuable upon
exercise of options granted to Mr. D. Siegel, which shares are
exercisable within the next 60 days. Does not include 400,000
shares of Common Stock issuable upon exercise of an option
subject to shareholder approval.
(8) Includes 40,000 shares of Common Stock issuable upon
exercise of options granted to Mr. M. Siegel, which options are
exercisable within the next 60 days. Does not include 225,000
shares of common stock issuable upon exercise of an option
subject to shareholder approval.
(9) Includes an aggregate of 617,365 shares of Common Stock
issuable upon exercise of options and warrants held by Surge's
executive officers and directors, which options and warrants are
exercisable within the next 60 days.
The Company is unaware of any arrangement, the operation of
which, at a subsequent date, may result in a change of control of
the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
In October 2000, we entered into a lease with Great American
Realty of 95 Jefryn Blvd., LLC, a company whose stock is owned 33-
1/3% each by Messrs. Ira Levy and Lubman, two of our executive
officers and directors, and Mr. M. Siegel, one of our directors,
for a 23,250 square foot executive office and warehouse facility,
which we occupied in April 2001. The yearly rental for this
facility is approximately $175,000 for the first year, increasing
by 3% annually to approximately $228,000 in the final year of the
lease. This lease expires on September 30, 2010. Our monthly
rental cost for such lease was $14,967 during Fiscal 2002.
On November 24, 2000, the Company entered into an agreement
with a financial consultant, Equilink Capital Partners, LLC
("Equilink"), for which the consultant received 900,000 Common
Shares, 70,000 shares of the Series C Preferred Stock and five
year warrants to purchase 2,000,000 shares Common Stock
exercisable at $3 per share, for past and future services and
expenses. Included in the past services were fees totaling
$338,438 relating to services and expenses of the aborted
Mailencrypt.com, Inc. merger, $302,812 relating to the
terminated acquisition of Orbit Networks, Inc., $226,812 for
expenses relating to the $7 million convertible note offering
and $3,704,999 relating to the terminated Global DataTel, Inc.
acquisition.
Pursuant to a Redemption Agreement, dated as of April 3,
2001, with Equilink and R. DePalo, its sole shareholder, the
Company purchased from Equilink 423,000 shares of Common Stock
and 8,000 shares of Series C Preferred Stock for $650,000 in
cash. The purchase price for these securities was based upon
approximately 95% of the average closing price of the shares of
Common Stock for the five trading days ended on April 2, 2001.
The Company received general releases from Equilink, Mr. DePalo
and a third party and the Company agreed not to pursue any
action against Equilink or Mr. DePalo, except in limited
specified situations, in connection with the closing of the
redemption transaction.
In April 2002, in connection with a Mutual Release,
Settlement, Standstill and Non-Disparagement Agreement by and
among the Company and Equilink, Robert DePalo, Old Oak Fund Inc.
and Kenneth Orr (collectively, the "Investors"), among other
provisions, the Investors transferred back to the Company
252,000 shares of Common Stock, 19,300 shares of Series C
Preferred Stock, and certain warrants, representing all of the
Company's securities held by the Investors, and agreed, among
other things, not to purchase any securities of the Company and
not to disparage the Company in any manner, in exchange for
$225,000. In addition, the Company and the Investors mutually
agreed to release each other from all claims each party had, now
has, or in the future might have against the other.
We believe that the terms of each of the foregoing
transactions were no less favorable to us than we could have
obtained from non-affiliated third parties, although no
independent appraisals were obtained. We anticipate that all
future transactions with our affiliates, if any, will be on terms
believed by our management to be no less favorable than are
available from unaffiliated third parties and will be approved by
a majority of disinterested directors.
OTHER MATTERS
-------------
The Board of Directors 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 thereof, the persons
named as proxies will have discretionary authority to vote the
shares of Common Stock represented by the accompanying proxy in
accordance with their best judgment.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
----------------------------------------
The Board of Directors has selected S&G, independent
certified public accountants, auditors of the Companys financial
statements for FY2002, as the auditors of the financial
statements of the Company for its current fiscal year ending
November 30, 2003. Representatives of S&G have been invited to
attend the Meeting, but it is uncertain whether they will attend.
If they do, they will be given the opportunity to make a
statement and to answer questions any shareholder may have.
SHAREHOLDERS' PROPOSALS
-----------------------
Any shareholder of the Company who wishes to present a
proposal to be considered at the next annual meeting of
shareholders of the Company and who wishes to have such proposal
presented in the Company's Proxy Statement for such meeting must
deliver such proposal in writing to the Company at 95 East Jefryn
Boulevard, Deer Park, NY 11729 on or before [ ], 2003.
By Order of the Board of Directors
Ira Levy, President
Dated: March 28, 2003
APPENDIX A
Adopted as of March 28, 2003
Audit Committee Charter
Purpose of Committee
The purpose of the Audit Committee (the "Committee") of the
Board of Directors (the "Board") of Surge Components, Inc. (the
"Company") is to:
(a) assist the Board in its oversight of (i) the integrity of
the Company's financial statements, (ii) the Company's
compliance with legal and regulatory requirements, (iii) the
independent auditors' qualifications and independence,
(iv) the performance of the Company's internal audit
function and independent auditors, and (v) the Company's
management of market, credit, liquidity and other financial
and operational risks; and
(b) prepare the report required to be prepared by the Committee
pursuant to the rules of the Securities and Exchange
Commission (the "SEC") for inclusion in the Company's annual
proxy statement.
Committee Membership
The Committee shall consist of no fewer than two members of
the Board. The members of the Committee shall each have been
determined by the Board to be "independent", as applicable, under
the Sarbanes-Oxley Act of 2002 (the "2002 Act"). The Board shall
also determine that each member is "financially literate" and
shall endeavor to have at least one member who has "accounting or
related financial management expertise," in each case as such
qualifications are defined by, to the extent required by, the
applicable SEC rules, that at least one member of the Committee
is an "audit committee financial expert" as defined by the SEC
(or if no member is an "audit committee financial expert",
explaining the reason for not having an audit committee financial
expert on the Committee). No director may serve as a member of
the Committee if such director serves on the audit committees of
more than two other public companies unless the Board determines
that such simultaneous service would not impair the ability of
such director to serve effectively on the Committee, and
discloses this determination in the Company's annual proxy
statement. No member of the Committee may receive any
compensation from the Company other than (i) director's fees,
which may be received in cash, common stock, equity-based awards
or other in-kind consideration ordinarily available to directors;
(ii) a pension or other deferred compensation for prior service
that is not contingent on future service; and (iii) any other
regular benefits that other directors receive.
Members shall be appointed by the Board and shall serve at
the pleasure of the Board and for such term or terms as the Board
may determine.
Committee Structure and Operations
The Board shall designate one member of the Committee as
its chairperson. The Committee shall meet at least once during
each fiscal quarter, with further meetings to occur, or actions
to be taken by unanimous written consent, when deemed necessary
or desirable by the Committee or its chairperson.
The Committee may invite such members of management and
other persons to its meetings as it may deem desirable or
appropriate. The Committee shall report regularly to the Board
summarizing the Committee's actions and any significant issues
considered by the Committee.
Committee Duties and Responsibilities
The following are the duties and responsibilities of the
Committee:
1. To meet with the independent auditors and the Company's
management and such other personnel as it deems appropriate
and discuss such matters as it considers appropriate,
including the matters referred to below. The Committee should
meet separately with the independent auditors and the
Company's management, periodically.
2. To decide whether to appoint, retain or terminate the
Company's independent auditors, including sole authority to
approve all audit engagement fees and terms and to pre-
approve all audit and non-audit services to be provided by
the independent auditors. The Committee shall monitor and
evaluate the auditors' qualifications, performance and
independence on an ongoing basis, and shall be directly
responsible for overseeing the work of the independent
auditors (including resolving disagreements between
management and the auditors regarding financial reporting).
In conducting such evaluations, the Committee shall:
-At least annually, obtain and review a report by the
independent auditors describing: the auditors' internal
quality-control procedures; any material issues raised by
the most recent internal quality-control review or peer
review of the auditors, or by any inquiry or investigation
by governmental or professional authorities, within the
preceding five years, respecting one or more independent
audits carried out by the auditors, and any steps taken to
deal with any such issues; and (to assess the auditors'
independence) all relationships between the independent
auditors and the Company (including information the Company
determines is required to be disclosed in the Company's
proxy statement as to services for audit and non-audit
services provided to the Company and those disclosures
required by Independence Standards Board Standard No. 1, as
it may be modified or supplemented).
-Discuss with the independent auditors any disclosed
relationships or services that may impact the objectivity or
independence of the independent auditors.
-Take into account the opinions of management.
The Committee shall present its conclusions with respect to
the independent auditors to the Board for its information at
least annually.
3. To obtain from management in connection with any audit a
timely report relating to the Company's annual audited
financial statements describing all critical accounting
policies and practices to be used, which report will be
reviewed and concurred with by the independent auditors, and
to obtain from the independent auditors any material written
communications between the independent auditors and
management, such as any "management" letter or schedule of
unadjusted differences.
4. To discuss with management and the independent auditors
the Company's annual audited financial statements and
quarterly financial statements, including the Company's
disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and
to discuss with the Company's Chief Executive Officer
and Chief Financial Officer their certifications to be
provided pursuant to Sections 302 and 906 of the 2002
Act, including whether the financial statements fairly
present, in all material respects, the financial condition,
results of operations and cash flows of the Company
as of and for the periods presented and whether any
significant deficiencies exist in the design or
operation of internal controls that could adversely
affect the Company's ability to record,
process, summarize and report financial data, any
material weaknesses exist in internal controls, or any
fraud has occurred, whether or not material, that
involves management or other employees who have a
significant role in the Company's internal controls. The
Committee shall discuss, as applicable: (a) major issues
regarding accounting principles and financial statement
presentations, including any significant changes in the
Company's selection or application of accounting
principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps
adopted in light of material control deficiencies;
(b) analyses prepared by management and/or the
independent auditors setting forth significant financial
reporting issues and judgments made in connection with
the preparation of the financial statements; and (c) the
effect of regulatory and accounting initiatives, as well
as off-balance sheet structures, on the financial
statements of the Company.
5. To discuss with the independent auditors on at least an
annual basis the matters required to be discussed by
Statement of Accounting Standards No. 61, as it may be
modified or supplemented, as well as any problems or
difficulties the auditors encountered in the course of
the audit work, including any restrictions on the scope
of the independent auditors' activities or access to
requested information, and any significant disagreements
with management. Among the items the Committee will
consider discussing with the independent auditors are:
any accounting adjustments that were noted or proposed
by the independent auditors but were "passed" (as
immaterial or otherwise); and any "management" or
"internal control" letter issued, or proposed to be
issued, by the independent auditors to the Company.
6. To discuss with management and, as appropriate, the
independent auditors periodically, normally on at least
an annual basis:
-The independent auditors' annual audit scope, risk
assessment and plan.
-The form of independent auditors' report on the annual
financial statements and matters related to the conduct of
the audit under generally accepted auditing standards.
-Comments by the independent auditors on internal controls
and significant findings and recommendations resulting from
the audit.
7. To establish 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.
8. To discuss with management periodically, normally on at
least an annual basis, management's assessment of the
Company's market, credit, liquidity and other financial and
operational risks, and the guidelines, policies and
processes for managing such risks.
9. To discuss with the Company's management and Company
lawyer, if it so desires, any significant legal, compliance
or regulatory matters that may have a material impact on the
Company's business, financial statements or compliance
policies.
10. To obtain assurance from the independent auditors that the
audit of the Company's financial statements was conducted in
a manner consistent with Section 10A of the Securities
Exchange Act of 1934, as amended, which sets forth certain
procedures to be followed in any audit of financial
statements required under that Act.
11. To produce the reports described under "Committee Reports"
below.
12. To discharge any other duties or responsibilities delegated
to the Committee by the Board from time to time.
Committee Reports
The Committee shall produce the following reports and
provide them to the Board:
1. Any report, including any recommendation, or other
disclosures required to be prepared by the Committee pursuant
to the rules of the SEC for inclusion in the Company's annual
proxy statement.
2. An annual performance evaluation of the Committee, which
evaluation shall compare the performance of the Committee
with the requirements of this charter. The performance
evaluation shall also include a review of the adequacy of
this charter and shall recommend to the Board any revisions
the Committee deems necessary or desirable, although the
Board shall have the sole authority to amend this charter.
The performance evaluation shall be conducted in such manner
as the Committee deems appropriate.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a
portion of its duties and responsibilities to a subcommittee of
the Committee. The Committee may, in its discretion, delegate to
one or more of its members the authority to pre-approve any audit
or non-audit services to be performed by the independent
auditors, provided that any such approvals are presented to the
Committee at its next scheduled meeting.
Resources and Authority of the Committee
The Committee shall have the resources and authority
appropriate to discharge its duties and responsibilities,
including the authority to select, retain, terminate, and approve
the fees and other retention terms of special or independent
counsel, accountants or other experts, as it deems appropriate,
without seeking approval of the Board or management.
APPENDIX B
SURGE COMPONENTS, INC.
PROXY
The undersigned, revoking all proxies, hereby appoints Ira
Levy and Steven Lubman and each of them, proxies with power of
substitution to each, for and in the name of the undersigned to
vote all shares of Common Stock of Surge Components, Inc. (the
"Company") which the undersigned would be entitled to vote if
present at the Annual Meeting of Shareholders of the Company to
be held on [ ], at 10:00 A.M. at ___________________ and any
adjournments thereof, upon the matters set forth in the Notice of
Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual
Meeting, Proxy Statement and the Company's 2002 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD Authority
below (except as marked vote for all nominees
to the contrary below) listed below _______
(INSTRUCTION: To withhold authority to vote for an individual
nominee, strike a line through such nominee's name in the list
below).
IRA LEVY, STEVEN J. LUBMAN, ALAN PLAFKER, DAVID SIEGEL,
MARK SIEGEL AND LAWRENCE CHARITON
2. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY
PROMPTLY IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
and when properly executed will be voted as directed herein. If
no direction is given, this Proxy will be voted FOR Proposals 1
and 2.
Date: , 2003
_____________________________
(Signature)
_____________________________
(Signature, if held jointly)
Where stock is registered in the names
of two or more persons ALL should sign.
Signature(s) should correspond exactly
with the name(s) as shown above. Please
sign, date and return promptly in the
enclosed envelope. No postage need be
affixed if mailed in the United States.
Requests for copies of proxy materials, the Company's Annual
Report for its fiscal year ended November 30, 2002 on Form 10-KSB
should be addressed to Shareholder Relations, Surge Components,
Inc., 95 East Jefryn Boulevard, Deer Park, NY 11729. This
material will be furnished without charge to any shareholder
requesting it.