Surge Components, Inc. Sends Letter to Shareholders

Transcription

1 Surge Cmpnents, Inc. Sends Letter t Sharehlders Yur C-Funders Ira Levy and Steve Lubman Drive the Cmpany s Strng, Sustained Grwth and Prfitability Yur Bard Believes Activist Investrs Tfias and Rexrad are Unqualified t Serve n the Bard Vte Tday n the GOLD Prxy Card fr Cntinued Lng-Term Value fr All Sharehlders Octber 2016 Dear Fellw Sharehlders, Yur Cmpany has delivered strng grwth and prfitability in the eight years fllwing the difficult perid fr the electrnic cmpnents industry. Further, yur Bard f Directrs, tgether with management, cntinue t deply a cmprehensive strategy t drive additinal lng-term grwth and value. This strategy is already bearing fruit, particularly due t the visin and tireless effrts f Ira Levy and Steve Lubman, wh funded Surge ver 35 years ag and have built it frm the grund up. This is why yur Bard supprts their re-electin as directrs at the Annual Meeting f Sharehlders t be held n Nvember 22, We urge yu t supprt Steve and Ira and t allw them t cntinue t create lng-term sharehlder value. We recmmend that yu disregard the incrrect claims made by tw activist sharehlders, Michael Tfias and Bradley Rexrad. Fr example, they have issued statements that we believe cmpletely mischaracterize the Cmpany s recently adpted sharehlder rights plan, which was put in place t prtect valuable tax assets. Yu shuld als ignre these activists because their stated bjective is t push fr a fire sale f yur Cmpany. These activists are ready t exit their psitins. The prblem is that the activists want yu t exit with them,

2 whether yu want t r nt. Given the limited liquidity f ur stck and the size f their psitins, liquidating their stakes wuld be difficult fr them t d in the near term. This may explain why Messrs. Tfias and Rexrad are pushing fr a hasty sale f the Cmpany, even if it wuld mean leaving mney yur mney n the table. Such a sale wuld mean freging yur pprtunities fr lng-term sharehlder value creatin with Surge. We remain steadfast in ur cmmitment t engaging cnstructively with, and sliciting input frm, all f ur sharehlders. Cnsistent with this cmmitment, yur Bard and management have sught fr mre than a year t find a cllabrative way frward with Messrs. Tfias and Rexrad. This makes it particularly disappinting that they have chsen t wage a cstly and distracting prxy cntest and cntinue t press fr an ill-advised sale f the Cmpany especially at a time when there is such strng psitive mmentum in the business and the industry. We therefre strngly urge that yu DO NOT SIGN ANY WHITE PROXY CARD SENT TO YOU BY MESSRS. TOFIAS AND REXROAD OR ANYONE ACTING ON THEIR BEHALF. We believe that the success f ur plan fr the future f the Cmpany hinges n Ira s and Steve s nging and invaluable cntributins as directrs. They cntinue t build ur rbust platfrm f tp-tier custmer relatinships, technlgical savvy and wrld-class supply chain. Yur Bard is cnfident that Steve and Ira will cntinue taking all steps necessary t realize the lng-term value f yur investments in the Cmpany. Indeed, it seems nnsensical t us that Messrs. Tfias and Rexrad wuld seek t remve Ira and Steve frm the Bard, and pssibly sell the Cmpany away frm them, when they are the principal drivers f the success f the Cmpany. Perhaps it is because Messrs. Tfias and Rexrad actually care nthing fr the value f the Cmpany and the value f yur investment, beynd a fire-sale price? In the fllwing pages, we present mre facts and figures that supprt ur recmmendatin, and utline hw we plan t cntinue t deliver utsized returns and lasting value t ALL sharehlders.

3 Yur vte is imprtant and will shape the Cmpany s ability t deliver lng-term sharehlder value. Please sign, date and return the GOLD prxy card tday. Sincerely, The Bard f Directrs f Surge Cmpnents, Inc.

4 Since the industry-wide dwnturn receded in 2008, Surge sharehlders investments have appreciated significantly:

5 Over the Past Eight Years, the Bard, Tgether with Management, Successfully Executed a Sharp Turnarund Fllwing a Difficult Time in Our Industry, Ultimately Driving Strng, Sustained Grwth THIS HAS SIGNIFICANTLY BOOSTED SHAREHOLDER VALUE Executed Turnarund Fllwing Difficult Delivered Strng Grwth Over Past 8 Years Increased Sharehlder Value Current Management Has Built an Efficient Business with Excellent Industry Relatinships and the Business is Perfrming Well. This past quarter, we delivered a 6.6% year-ver-year increase in grss prfits and a 26% grss prfit margin. Additinally, we have a strng balance sheet, with cash n hand f $6.9 millin and zer debt.

6 The Cmpany Is Well-Psitined fr Cntinued Success and Further Grwth Slidified a rbust custmer base, including Frtune 500 technlgy cmpanies and ther businesses in varius market segments Established a wrld-class supply chain with very strng relatinships Built an extremely efficient and lean cmpany frm an peratinal perspective 00 Develped an internatinal ftprint that cntinues t grw Technlgical savvy and engineers n staff = leader rather than a fllwer in the industry FURTHER SUCCESS AND LONG-TERM GROWTH

7 Surge s Bard f Directrs Has Been an Excellent Steward f Sharehlder Value and Has Adhered t Strng Crprate Gvernance Principles Develping strategic plans fr utilizing cash n hand. Maintaining the right resurces t cmpete and t create maximum efficiency in the business. Executing a $500,000 stck buyback. Demnstrating nging cmmitment t maintaining a rbust dialgue in the bardrm by reviewing Bard cmpsitin. Recently-appinted directr Martin Nvick is an industry expert with nearly fur decades f experience. We are cnfident that his skillset will be bth cmplementary and additive t ur highly experienced Bard. Benchmarking executive cmpensatin practices. A natinally-recgnized, independent executive cmpensatin firm evaluated the Cmpany s practices. They determined that Surge s executive cmpensatin is fully in-line with similar cmpanies. Stck and ptin grants are in-line with peer cmpanies. Prtecting Surge s valuable tax assets. We recently adpted a sharehlder rights plan t preserve and prtect the Cmpany s valuable incme tax net perating lss carryfrwards ( NOLs ) estimated at ver $10 millin. This is intended t reduce the likelihd f an unintended impairment f Surge s valuable NOL tax assets in the event f an wnership change. This plan will be subject t a sharehlder vte at the upcming Annual Meeting.

8 Dissident Sharehlders Tfias and Rexrad Have FAILED t Put Frth a Cncrete Plan t Drive Sharehlder Value and Lack Relevant Skills The activists want t replace the Cmpany s c-funders, wh have built Surge ver the past 35 years frm the grund up int the successful and grwing wrld-class business that it is tday, and cntinue t drive its grwth and value. The activists are unqualified t serve n Surge s Bard they have never served n any public cmpany bards and have never wrked in ur industry befre, d nt understand the cmplexity f the business and have presented n strategic plan beynd selling the Cmpany. They want a hasty fire sale f the Cmpany t exit their investment, leaving mney yur mney n the table.

9 Management Has a Cmprehensive Strategy t Drive Surge Frward Further fcusing ur sales effrts n higher margin custmers Began t see the benefits f this in the third quarter f 2016 Cntinued grwth in distributed sales channels We are a franchised line at tw f the tp distributrs Avnet Inc. and Future Electrnics Cntinued grwth in electrnic manufacturing services Strategic supplier at tw f the tp EMS cmpanies in the wrld Ptential acquisitins t build the business SURGE S MANAGEMENT HAS A CLEAR VISION FOR CONTINUED DYNAMIC GROWTH. TOFIAS AND REXROAD DO NOT.

10 Abut Surge Cmpnents, Inc. Funded in Nvember 1981, Surge is a supplier f capacitrs, discrete semi-cnductrs and audible/sunding devices. Surge s capacitr prduct prtfli includes aluminum electrlytic capacitrs, film capacitrs, and ceramic capacitrs. In the discrete semicnductr prtfli, Surge s strengths include general purpse, recvery, schttky, plymer ESD, and transient vltage suppressrs, transistrs, dides, and a full line f bridge rectifiers. With mre than 30 years in the industry, Surge helps custmers bring their prducts t market using the highest quality cmpnents with the mst cmpetitive ecnmics t scale. Surge supplies its tp quality prducts t custmers in many market segments, including, but nt limited t, pwer, energy, autmtive, cmputer, telecm and security. Cautinary Nte Regarding Frward-Lking Statements This press release cntains frward-lking statements within the meaning f Sectin 27A f the Securities Act f 1933, as amended, and Sectin 21E f the Securities Exchange Act f 1934, as amended, that are intended t qualify fr the safe harbr frm liability established by the Private Securities Litigatin Refrm Act f All statements ther than statements f histrical facts cntained herein, including statements regarding ur future results f peratins and financial psitin, business strategy and plans and bjectives f management fr future peratins, are frward-lking statements. These statements invlve knwn and unknwn risks, uncertainties and ther factrs that may cause ur actual results, perfrmance r achievements t be materially different frm any future results, perfrmance r achievements expressed r implied by the frward-lking statements. In sme cases, frward-lking statements can be identified by terms such as may, will, shuld, expects, plans, anticipates, culd, intends, target, prjects, cntemplates, believes, estimates, predicts, ptential r cntinue r the negative f these terms r ther similar wrds. These statements are nly predictins and are based largely n ur current expectatins and prjectins abut future events and financial trends that may affect ur business, financial cnditin and results f peratins. We discuss many f the risks in greater detail under the heading Risk Factrs in ur Annual Reprt n Frm 10-K. Als, these frward-lking statements represent ur estimates and assumptins nly as f the date f this press release. Except as required by law, we assume n bligatin t revise r update any frward-lking statements whether as a result f new infrmatin, events r circumstances ccurring after the date f this press release r therwise.

11 Additinal Infrmatin and Where t Find It Surge Cmpnents, Inc. (the Cmpany ), its directrs, its directr nminees and certain f its executive fficers are participants in the slicitatin f prxies frm Cmpany stckhlders in cnnectin with the matters t be cnsidered at the Cmpany s 2016 Annual Meeting f Stckhlders (the 2016 Annual Meeting ). The Cmpany has filed a definitive prxy statement and frm f GOLD prxy card with the U.S. Securities and Exchange Cmmissin (the SEC ) in cnnectin with such slicitatin f prxies frm the Cmpany's stckhlders. COMPANY STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY STATEMENT AND ACCOMPANYING GOLD PROXY CARD AS THEY CONTAIN IMPORTANT INFORMATION. Infrmatin regarding the names f the Cmpany's directrs and executive fficers and their respective interests in the Cmpany by security hldings r therwise is set frth in the Cmpany s definitive prxy statement fr the 2016 Annual Meeting, filed with the SEC n Octber 21, Additinal infrmatin can be fund in the Cmpany's Annual Reprt n Frm 10-K fr the fiscal year ended Nvember 30, 2015 and the Quarterly Reprts n Frm 10- Q fr the quarters ended February 29, 2016, May 31, 2016, and August 31, Stckhlders may btain the definitive prxy statement, any amendments r supplements t the definitive prxy statement and ther dcuments filed by the Cmpany with the SEC fr n charge at the SEC s website at Cpies may als be btained at n charge at the Cmpany s website, by writing t Surge Cmpnents, Inc., t the attentin f the Crprate Secretary, 95 East Jefryn Blvd., Deer Park, New Yrk 11729, r by calling the Cmpany s prxy slicitr, Okapi Partners LLC, tll-free at (877) r cllect at (212) Media Cntact Slane & Cmpany Je Germani, jgermani@slanepr.cm

12 IMPORTANT Yur vte is imprtant. N matter hw many shares f Cmmn Stck yu wn, please give the Bard yur prxy FOR the electin f the Nminees by taking three steps: SIGNING the enclsed GOLD prxy card, DATING the enclsed GOLD prxy card, and MAILING the enclsed GOLD prxy card TODAY in the envelpe prvided (n pstage is required if mailed in the United States). If any f yur shares f Cmmn Stck are held in the name f a brkerage firm, bank, bank nminee r ther institutin, nly it can vte such shares f Cmmn Stck and nly upn receipt f yur specific instructins. Depending upn yur brker r custdian, yu may be able t vte either by tll-free telephne r by the Internet. Please refer t the enclsed vting frm fr instructins n hw t vte electrnically. Yu may als vte by signing, dating and returning the enclsed GOLD vting frm. If yu have any questins r require any additinal infrmatin, please cntact Okapi Partners at the address set frth belw Avenue f the Americas, 24th Flr New Yrk, NY (212) Call Tll-Free at: (877) inf@kapipartners.cm