Preliminary Copy
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Fields Aircraft Spares, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth amount on which
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Preliminary Copy
FIELDS AIRCRAFT SPARES, INC.
2251-A Ward Avenue
Simi Valley, CA 93065
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
August 7, 1997
To the Shareholders of
Fields Aircraft Spares, Inc.:
The 1997 Annual Meeting of Shareholders (the "Annual Meeting") of
Fields Aircraft Spares, Inc., a Utah corporation (the "Company"), will be held
on Thursday, August 7, 1997, at 1:00 p.m. (local time), at the Radisson Simi
Valley Hotel, 999 Enchanted Way, Simi Valley, California 93065, for the
following purposes:
1) to elect six (6) directors of the Company to serve until the
next annual meeting of shareholders (or the expiration of their respective
terms if a staggered Board is approved) or until their successors are duly
elected;
2) increase the number of authorized common shares of the
Company, par value $.05 per share (the "Common Shares"), from 2,000,000 to
5,000,000;
3) amend the Company's Articles of Incorporation to provide for
staggered terms of directors by dividing the Board of Directors into three
groups;
4) approve the Company's 1997 Omnibus Stock Option Plan;
5) ratify the selection by the Board of Directors of Moore
Stephens Frazer & Torbet, Inc. as the independent auditors of the Company for
the 1997 fiscal year; and
6) to transact such other business as may properly come before
the Annual Meeting, or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on Monday, June
16, 1997, as the record date for determining the shareholders entitled to notice
of, and to vote at, the Annual Meeting. Only shareholders of record at that time
are entitled to notice of, and to vote at, the Annual Meeting and any and all
adjournments or postponements thereof.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1996, a Proxy Statement, and a proxy card accompany this notice.
These materials are first being sent to shareholders on or about June 20, 1997.
Shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, please
complete and sign the enclosed proxy card and return it promptly. If you choose,
you may still vote in person at the Annual Meeting even though you previously
submitted a proxy card.
By Order of the Board of Directors,
Carlos Sedillo
Secretary
Simi Valley, California
June 20, 1997
<PAGE>
FIELDS AIRCRAFT SPACES, INC.
2251-A Ward Avenue
Simi Valley, CA 93065
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held on Thursday, August 7, 1997
This Proxy Statement and the accompanying proxy card are being
furnished to the shareholders of Fields Aircraft Spaces, Inc. (the "Company"),
in connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company (the "Board") for use at its 1997 Annual Meeting of
Shareholders to be held on Thursday, August 7, 1997, at 1:00 p.m. (local time),
at the Radisson Simi Valley Hotel, 999 Enchanted Way, Simi Valley, California
93065, and at any adjournments or postponements thereof (the "Annual Meeting").
This Proxy Statement, the accompanying proxy card, and the Company's Annual
Report on Form 10-KSB (the "Annual Report") for the fiscal year ended December
31, 1996 ("Fiscal 1996"), are first being mailed to shareholders on or about
June 20, 1997. The Annual Report is not to be considered a part of the Company's
proxy solicitation materials.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, shareholders will be asked to (i) elect six (6)
directors of the Company to serve until the next annual meeting of shareholders
(or the expiration of their respective terms if a staggered Board is approved)
or until their successors are duly elected and qualified; (ii) increase the
number of authorized common shares of the Company, par value $.05 per share (the
"Common Shares") from 2,000,000 to 5,000,000; (iii) amend the Company's Articles
of Incorporation (the "Articles") to provide for staggered terms of directors by
dividing the Board of Directors into three groups; (iv) approve the Company's
1997 Stock Option Plan; (v) ratify the selection by the Board of Directors of
Moore Stephens Frazer & Torbet, Inc. as the independent auditors of the Company
for the 1997 fiscal year ("Fiscal 1997"); and (vi) to transact such other
business as may properly come before the Annual Meeting. For election of
directors, those candidates receiving the most votes shall be elected, if a
quorum exists. Action on items (ii), (iii), (iv), and (v) above will be approved
by the shareholders if the number of votes cast for the action exceeds the
number of votes cast against the action, and a quorum exists. The Board
recommends a vote "FOR" (a) the election of the nominees for directors of the
Company listed below, (b) the increase of the number of authorized Common Shares
<PAGE>
from 2,000,000 to 5,000,000, (c) the amendment of the Company's Articles to
provide for staggered terms of directors, (d) the approval of the Company's 1997
Stock Option Plan, and (e) the ratification of Moore Stephens Frazer & Torbet,
Inc. as the Company's auditors for Fiscal 1997.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of
the outstanding Common Shares is necessary to constitute a quorum at the Annual
Meeting. Only shareholders of record at the close of business on Monday, June
16, 1997 (the "Record Date"), will be entitled to notice of, and to vote at, the
Annual Meeting. As of the Record Date, there were [1,877,131] Common Shares
outstanding and entitled to vote. Holders of Common Shares as of the Record Date
are entitled to one vote for each share held.
All Common Shares represented by properly executed proxies will, unless
such proxies have previously been revoked, be voted in accordance with the
instructions indicated in such proxies. If no such instructions are indicated,
such shares will be voted in favor of (i.e., "FOR") (i) the election of six (6)
directors of the Company to serve until the next annual meeting of shareholders
(or the expiration of their respective terms if a staggered Board is approved)
or until their successors are duly elected and qualified, (ii) the increase of
the number of authorized Common Shares from 2,000,000 to 5,000,000, (iii) the
amendment of the Company's Articles to provide for staggered terms of directors,
(iv) the approval of the Company's 1997 Omnibus Stock Option Plan, and (v) the
ratification of Moore Stephens Frazer & Torbet, Inc. as the Company's auditors
for Fiscal 1997. Abstentions and broker non-votes will not be counted as votes
cast and will have no effect on the result of a vote on matters identified in
clause (i) above, although both will count towards the presence of a quorum. On
the matters identified in clauses (ii), (iii), (iv), and (v) above, abstentions
will have the same effect as votes against the proposal and broker non-votes
will not be counted as votes cast and will have no effect on the result of the
vote.
Under applicable Utah law, none of the holders of Common Shares are
entitled to appraisal rights in connection with any proposal to be acted on at
the Annual Meeting.
Shareholders who execute proxies may revoke them by giving written
notice to the Secretary of the Company at any time before such proxies are
voted. Attendance at the meeting shall not have the effect of revoking a proxy
unless the shareholder so attending shall, in writing, so notify the Secretary
of the meeting at any time prior to the voting of the proxy.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to shareholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, directors, and regular
<PAGE>
employees of the Company may solicit proxies by written communication,
telephone, facsimile, or personal call. Such persons are to receive no special
compensation for any solicitation activities. The Company will reimburse banks,
brokers, and other persons holding Common Shares in their names, or those of
their nominees, for their expenses in forwarding proxy solicitation materials to
beneficial owners of Common Shares.
The principal executive offices of the Company are located at 2251-A
Ward Avenue, Simi Valley, California 93065, and its telephone number is (805)
583-0080.
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND
PRINCIPAL SECURITY HOLDERS
The following table sets forth the ownership of the Company's Common
Shares by each person who owned of record, or was known to own beneficially,
more than 5% as of May 22, 1997. As of May 22, 1997, there were 1,877,131 Common
Shares and no preferred shares outstanding. As of May 22, there were options and
warrants to acquire 419,665 Common Shares from the Company currently
outstanding. The table also sets forth the present holdings of Common Shares by
all officers and directors, individually and as a group.
Names and Addresses Number of Common Percent of
Principal Shareholders Shares Owned* Class**
- ------------------------------- ------------------ ---------------
McDonnell Douglas Corporation 564,194 30.06%
P.O. Box 516
McDonnell Blvd. at Airport Road
St. Louis, MO 63166-0516
Keusch & Merlo Invest A.G. 233,100* 11.92
Bahnhofplatz 2
CH-8023 Zurich
Switzerland
James A., Jr. and Jeanette Duffield 110,500 5.89
2640 West 10th Place
Tempe, AZ 85281
Names and Addresses of
Officers and Directors
Peter Frohlich (1),(2) 54,927 2.93
128 Mount Street
London W1Y5HA, U.K.
Alan M. Fields (1),(3) 68,052 3.62
341 "A" Street
Fillmore, CA 93015-1931
Lawrence J. Troyna (1),(4) 56,926 3.03
128 Mount Street
London W1Y5HA, U.K.
Leonard I. Fields (5) 30,745 1.64
341 "A" Street
Fillmore, CA 93015-1931
<PAGE>
Carlos Sedillo (1),(6) 13,722 ***
341 "A" Street
Fillmore, CA 93015-1931
Neil E. O'Hara (7) 8,001 ***
341 "A" Street
Fillmore, CA 93015-1931
Mary Sprouse (1) 16,708 **
530 Congress Avenue
Las Vegas, NV 89121
All officers, directors and nominees 235,493 12.55
as a group (6 persons)
* All shares are held beneficially and of record and each
shareholder has sole voting and investment power unless
otherwise noted. A person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60
days from the record date upon the exercise of options or
warrants. The 233,100 shares reported for Keusch & Merlo
Invest A.G. include warrants to acquire 77,700 shares a
$6.25 per share, which are currently exercisable. Except for
the warrants held by Keusch & Merlo Invest A.G., as of
May 22, 1997, there were no options or warrants held by
persons or entities listed in the table that were exercisable within 60
days.
** Each beneficial owner's percentage ownership is determined by assuming
that options and warrants that are held by such person (but not those
held by any other person) and exercisable in such period have been
exercised.
*** Less than 1%.
(1) Officer and Director of the Company
(2) Includes 9,927 shares held by Mr. Frohlich's spouse, Sylvia Frohlich
and 10,000 shares held in the name of a nominee for Mr. Frohlich's
benefit. In addition, Mr. Frohlich has an option to acquire 19,800
shares subject to vesting requirements, which includes the Company
obtaining sales during a 12-month period of $7,500,000 and an average
closing price for the Company's Common Shares for a three-month period
of $6.00, $9.00 and $12.00, respectively, for each one-third of the
options to vest. Vesting of the options may be accelerated in the event
of certain changes of control of the Company. The option must vest by
November 1998 and must be exercised within three years of vesting. Mr.
Frohlich was also granted in April 1997 an option to acquire 30,000
Common Shares at a price of $6.25 per share.
(3) Includes 12,000 shares owned by Alan Fields' spouse, Nancy Fields. Does
not include (a) 13,488 shares owned by Alan Fields's children through a
trust created and funded by Leonard Fields and (b) approximately 47,154
<PAGE>
shares owned by relatives of Alan Fields, including his father Leonard
Fields, a director of the company, and the estate of his uncle George
Fields, who was a former director of the Company. In addition, Alan
Fields has an option to acquire 19,800 shares subject to vesting
requirements, which includes the Company obtaining sales during a
12-month period of $7,500,000 and an average closing price for the
Company's Common Shares for a three-month period of $6.00, $9.00 and
$12.00, respectively, for each one-third of the options to vest.
Vesting of the options may be accelerated in the event of certain
changes of control of the Company. The option must vest by November
1998 and must be exercised within three years of vesting. Mr. Fields
was also granted in April 1997 an option to acquire 30,000 Common
Shares at a price of $6.25 per share.
(4) Includes 10,000 shares owned by Mr. Troyna's spouse, Susan Troyna, and
10,000 shares held in the name of a nominee for Mr. Troyna's benefit.
In addition, Mr. Troyna has an option to acquire 19,800 shares subject
to vesting requirements, which includes the Company obtaining sales
during a 12-month period of $7,500,000 and an average closing price for
the Company's Common Shares for a three-month period of $6.00, $9.00
and $12.00, respectively, for each one-third of the options to vest.
Vesting of the options may be accelerated in the event of certain
changes of control of the Company. The option must vest by November
1998 and must be exercised within three years of vesting. Mr. Troyna
was also granted in April 1997 an option to acquire 30,000 Common
Shares at a price of $6.25 per share.
(5) Leonard Fields is a director of the Company. Includes 13,488 shares
owned by Alan Fields' children through a trust created and funded by
Leonard Fields. Mr. Fields disclaims beneficial ownership of such
shares. Does not include approximately 155,817 shares owned by
relatives of Leonard Fields, including his son Alan Fields, an officer
and director of the Company, and the estate of his brother George
Fields, who was a former director of the Company.
(6) Includes 11,722 shares owned by an affiliated entity.
(7) Mr. O'Hara is an officer of the Company. In addition, Mr. O'Hara has an
option to acquire 7,125 shares subject to vesting requirements, which
includes the Company obtaining sales during a 12-month period of
$7,500,000 and an average closing price for the Company's Common Shares
for a three-month period of $6.00, $9.00 and $12.00, respectively, for
each one-third of the options to vest. Vesting of the options may be
accelerated in the event of certain changes of control of the Company.
The option must vest by November 1998 and must be exercised within
three years of vesting. Mr. O'Hara was also granted in April 1997 an
option to acquire 4,000 Common Shares at a price of $6.25 per share.
<PAGE>
(8) Ms. Sprouse is a nominee for Director. Includes
13,488 shares owned by Alan Fields' children through a
trust created and funded by Leonard Fields. Ms. Sprouse has
voting control of those shares.
<PAGE>
PROPOSAL NO. 1 --
ELECTION OF DIRECTORS
Nominees
At the Meeting, the shareholders will elect all directors to hold
office until the annual meeting of shareholders in 1998 (or the expiration of
their respective terms if a staggered Board is approved) or until their
respective successors are duly elected and qualified. The Board currently
consists of five members: Peter Frohlich, Alan M. Fields, Lawrence J. Troyna,
Leonard I. Fields and Carlos Sedillo. There is currently one vacancy on the
Board. The Board proposes that six directors, listed below as nominees, be
elected as directors of the Company. Each nominee has consented to serve if
elected to the Board. In the event that any nominee is unable to serve as a
director at the time of the Annual Meeting (which is not expected), proxies with
respect to which no contrary direction is made will be voted "FOR" such
substitute nominee as shall be designated by the Board to fill the vacancy.
The names of the nominees, their ages at the Record Date and certain
other information about them are set forth below:
NAME AGE POSITION
Peter Frohlich 55 Chairman and Chief Executive Officer of the
Company; Chairman of FAS
Alan M. Fields 45 President and Director of the Company;
President, Director and Chief Executive
Officer of FAS
Lawrence J. Troyna 53 Chief Financial Officer and Director of the
Company; Chief Financial Officer, Secretary
and Director of FAS
Leonard I. Fields 78 Director of the Company; Director of FAS
Carlos Sedillo 55 General Counsel, Secretary and Director of
the Company; Director of FAS
Mary Sprouse 49 Nominee for Director of the Company
Peter Frohlich is Chairman and Chief Executive Officer of
the Company and Chairman of Fields Aircraft Spares, Incorporated, a wholly owned
subsidiary of the Company ("FAS"). Mr. Frohlich is a Certified Accountant in the
United Kingdom with over 12 years experience in public accounting as a partner
in a large accounting firm. From 1972 to 1980 he was Managing Director of a
public company quoted on the London Stock Exchange. The company employed several
thousand people and had annual sales of approximately $75,000,000. From 1980
until joining the Company in 1987, Mr. Frohlich was a consultant to a number of
public and private companies advising on many aspects of corporate and fiscal
matters, and on mergers and acquisitions with specific regard to refinancing and
restructuring. Mr. Frohlich was appointed Chairman of the Company in 1987. He
<PAGE>
resigned as Chairman in 1989 but remained as a Director until resigning as a
Director in February 1991. Mr. Frohlich was re-appointed a Director and Chairman
of the Company in March 1992. From 1989 to 1991, Mr. Frohlich acted as an
investment advisor to a substantial private group of companies. In 1991, Mr.
Frohlich became Chairman of Tower Group plc, an unquoted United Kingdom public
company. He was retained by a number of its shareholders to attempt to
reorganize the company following multi million pound trading losses. After
several months he concluded that the group should invite the bank to appoint a
receiver and he resigned. Mr. Frohlich is a director of United Equity Holdings,
PLC. If a staggered Board is approved, Mr. Frohlich will be a Class III director
whose term will expire in 2000.
Alan M. Fields is President and a Director of the Company, Director and
Chief Executive Officer of FAS and has served in various capacities since 1992.
From 1989 until 1991 Mr. Fields was a Vice-President and General Manager of
Quantum Microsystems, Inc., a computer systems retailer. From 1985 until 1992,
Mr. Fields acted as an independent sales consultant for several direct sales
companies. His efforts on behalf of those companies resulted in the development
of a combined sales force exceeding 5,000 direct salespersons, and monthly sales
averaging an estimated $350,000. From 1982 until 1984 he was the Founder and
President of Savers Tax Service. Mr. Fields was responsible for all operations
of that company, which he built to over 2,000 clients and 17 offices. That
company was sold in 1984. From 1982 until 1984 Mr. Fields was also the President
and responsible for all operations of AFA Datashare Services, a computer data
processing firm. That company was also sold in 1984. From 1980 until 1984 he was
President, one of the founders, a minority shareholder and head of marketing of
an income tax preparation firm which provided services to over 3,000 Amway
distributors through 16 offices. In 1984, as a result of Amway corporation being
subjected to major negative attacks by the media, the tax preparation firm was
adversely effected resulting in a bankruptcy. Also, as an ongoing result of that
business bankruptcy, Mr. Fields filed personal bankruptcy in 1992. Prior to
entering the business world, Mr. Fields spent five years with the Internal
Revenue Service as a Tax Auditor and Revenue Agent. Alan Fields is the son of
Leonard Fields. If a staggered Board is approved, Mr. Fields will be a Class III
director whose term will expire in 2000.
Lawrence J. Troyna has served since 1992 as a Director and Chief
Financial Officer of the Company and Chief Financial Officer, Secretary and
Director of FAS. Mr. Troyna has a law degree and is a chartered accountant, and
was an audit senior with Price Waterhouse before joining Greyhound Financial
Corporation. He spent 17 years with Greyhound, where he rose to the position of
Deputy Managing Director of Greyhound European Group. As the number "2" in
Europe for this approximately $350,000,000 in assets company, Mr. Troyna was
responsible for the marketing and business development of the company's
investments in real estate, aviation and general equipment. He was also
responsible for overall corporate control. From 1986 until joining the Company
in 1988, Mr. Troyna was Chairman and Chief Executive Officer of Chigwell
Properties Ltd., a United Kingdom real estate company. From 1989 to 1992 he took
a leave of absence from the Company. During his three year absence from the
<PAGE>
Company, Mr. Troyna acted as a financial and real estate consultant to a number
of private and public companies in the United Kingdom. If a staggered Board is
approved, Mr. Troyna will be a Class II director whose term will expire in 1999.
Leonard I. Fields has been a Director of the Company and a Director of
FAS since January 1992. At various times since 1985, he has served in other
capacities for the Company and its subsidiaries. Mr. Fields has a B.S. degree in
Engineering, and has over 40 years of management and sales experience in the
industrial supply field. He was a founder of Union Industrial Supply in 1953 and
for thirty years was Executive Vice President of that company responsible for
all day to day operations. Under his guidance, that company grew to yearly sales
in excess of $5,000,000. Leonard Fields is the father of Alan Fields. If a
staggered Board is approved, Mr. Fields will be a Class II director whose term
will expire in 1999.
Carlos Sedillo has been Secretary and a Director of the Company and a
Director of FAS since 1987. Mr. Sedillo is an attorney and has an LLM in
taxation law. He has practiced law for 31 years and specializes in business and
tax matters. From 1987 until the present, he has served as General Counsel of
the Company. From 1963 until 1974, Mr. Sedillo was President of Stewart Title
and Trust Company. This firm, which was sold in 1974, provided title insurance
services to clients in five states. From 1980 until 1984 Mr. Sedillo was
associated with Alan Fields in the operation of Savers Tax Service, AFA
Datashare Services and Alan Fields and Associates. From August 1989 to January
1992, he was the Secretary and a member of the Board of Directors of Quantum
Microsystems, a company engaged in the retail sales of computer hardware and
software. From 1989 until 1993, Mr. Sedillo was also an officer and a member of
the Board of Directors of Aerobit International, Inc., a manufacturer of oil
well drill bits, and of Graphic Arts Personnel, a personnel company specializing
in temporary help for the printing industry. If a staggered Board is approved,
Mr. Sedillo will be a Class I director whose term will expire in 1998.
Mary Sprouse is an attorney and author. She has practiced law for 21
years and specializes in tax and business matters. Ms. Sprouse is the
author of six books about taxes and personal finance. She is a contributing tax
editor of MONEY magazine and a regular tax columnist for Your Company magazine.
Ms. Sprouse is also a tax consultant to Intuit, a computer software firm, and
appears as an adviser on TurboTax Deluxe, a tax preparation software program.
Ms. Sprouse has been a national spokesperson for the American Express Gold Card
and has starred in an infomercial for her book The MONEY Income Tax Handbook.
Ms. Sprouse has made numerous appearances on television and radio, including the
Today show and Good Morning America, and has been interviewed by and received
publicity from The New York Times, The Los Angeles Times, The Washington Post,
Business Week, Vogue, and People. Ms. Sprouse has been in private practice as a
business and tax attorney since 1981. She was also President of Sprouse Kinney,
Inc. (formerly Women's Tax Service, Inc.) from 1983 to 1986 and President of
Investors Tax Service, Inc. (formerly Savers Tax Service) from 1984 to 1987. In
1982 and 1983, Ms. Sprouse served as General Counsel of Alan Fields &
<PAGE>
Associates, a tax preparation firm. She was also associated with Alan Fields in
the operation of Savers Tax Service and purchased this business from Alan Fields
& Associates in 1984. If a staggered Board is approved, Ms. Sprouse will be a
Class I director whose term will expire in 1998.
Board Committees and Meetings
There is no audit committee, compensation committee, nominating
committee or other committee of the Board of Directors.
The Board held no regular or special meetings. The actions of directors
were held by execution of unanimous consents, in which all directors
participated.
Director Compensation
Except as specifically provided herein, board members receive no fees
for serving as members of the board of directors. However, board members may be
reimbursed their expenses incurred in attending board meetings and the board of
directors may in the future decide to pay directors' fees.
EXECUTIVE OFFICERS
The following table sets forth (i) the names of the executive officers,
(ii) their ages at the Record Date and (iii) the capacities in which they serve
the Company:
Name Age Position(s) with the Company
Peter Frohlich 55 Chairman and Chief Executive
Officer and Director
Alan M. Fields 45 President and Director
Lawrence J. Troyna 53 Chief Financial Officer and
Director
Carlos Sedillo 56 General Counsel, Secretary and
Director
Neil E. O'Hara 43 Vice President of the Company
See "Proposal No. 1 -- Election of Directors - Nominees" for a
description of the backgrounds of Messrs. Frohlich, Fields, Troyna and Sedillo.
Neil E. O'Hara is a Vice-President of the Company and has concentrated
on marketing and sales of the Company. Mr. O'Hara has over 18 years of
management experience in aerospace. He graduated from Adelphi University in 1976
with a Bachelor of Science degree. Mr. O'Hara worked eight years for American
Airlines, rising to the position of Senior Manager of Purchasing and Material.
In that position he oversaw all purchases of interior class I equipment. He then
spent eight years at Weber Aircraft, where at various times he held the
positions of Manager of Marketing & Sales, Manager of New Product Development,
and finally Director of Customer Services and Program Management. While in that
<PAGE>
position, Mr. O'Hara was responsible for all spare parts sales and pricing and
had total management control over new programs and new product development. At
the Company, he is using his experience and contacts to expand our brokerage,
distributorship and consignment programs.
MANAGEMENT COMPENSATION
The following table sets forth the aggregate cash compensation paid by
the Company for services rendered during the last three full fiscal years to the
Company's Chief Executive Officer and to each of the Company's other executive
officers whose annual salary and bonus for the year 1996 exceeded $100,000 (the
"Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation Awards
Securities
Restricted Underlying
Name and Principal Other Annual Stock Stock
Position Year Salary($) Bonus($) Compensation($) Awards($) Options(#)
<S> <C> <C> <C> <C> <C> <C>
Peter Frohlich 1996(1) $130,000 $12,500 -- --
Chairman and CEO 1995 $130,000 -- -- 19,800(2)
1994 $130,000(3) $28,000(4) $3,750(5) --
Alan M. Fields 1996(1) $130,000 $12,500 $2,800 -- --
President 1995 $130,000 -- $2,800 -- 19,800(2)
1994 $130,000(6) $28,000(4)(7) $2,800 $3,750(5)(7) --
Lawrence J. Troyna 1996(1) $130,000 $12,500 -- --
Chief Financial 1995 $130,000 -- -- 19,800(2)
Officer 1994 $130,000(3) $28,000(4) $3,750(5) --
Neil O'Hara 1996(8) $ 83,252 $24,838 $6,000 -- --
Vice President 1995 $ 78,000 $23,625 $6,000 -- 7,125
1994 $ 78,000 $27,662 $6,000 $500(9)
</TABLE>
(1) Does not include $15,773 paid to Mr. Fields in 1996 and $2,500 paid to
each of Mr. Frohlich and Mr. Troyna in 1996 for amounts earned in 1995.
Does include salary of $7,500 earned by Mr. Fields in 1996 and $10,000
earned by each of Mr. Frohlich and Mr. Troyna in 1996, which has been
paid in 1997. In addition, $10,000 bonus to each of the Current
Executive Officers (as defined below) was earned in 1996 but will be
paid in 1997. Does not include options to acquire 30,000 Common Shares
at $6.25 per share granted in April 1997 to each of the Current
Executive Officers which are not qualified stock options for federal
tax purposes.
(2) Represents options granted pursuant to a Management Stock Option Plan,
which is not a qualified stock option plan for federal tax purposes or
purposes of Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act").
(3) Reflects fees paid under the Consulting Agreements between the Company
and Named Executive Officers prior to Named Executive Officers being
employed by the Company.
(4) Represents bonus awarded in 1994, of which $20,000 was paid in 1994 and
$8,000 was paid in 1995.
(5) Represents 15,000 shares awarded (after taking into account the 50 for
1 reverse stock split approved March 29, 1995). Based on a valuation of
$.25 per share or a total value of approximately $3,750 for each award.
At December 31, 1996, based on the closing market price of $4.75 per
share, such shares had a total value of $71,250 for each award. These
stock awards are fully vested.
<PAGE>
(6) Reflects fees paid to Brimat International, Inc. pursuant to a
Consulting Agreement terminated January 1, 1995. Alan Fields, President
of the Company, is President of Brimat International, Inc., which is
owned solely by his father, Leonard Fields.
(7) Paid or awarded to Alan Fields, individually, for services rendered in
his capacity as President of Brimat International, Inc.
(8) Includes $5,000 bonus earned in 1996 but paid in 1997. Does not include
options to acquire 4,000 Common Shares at $6.25 per share granted in
April 1997, which are not qualified stock options for federal tax
purposes.
(9) Represents 2,000 shares awarded (after taking into account the 50 for 1
reverse stock split approved March 29, 1995). Based on a valuation of
$.25 per share or a total value of approximately $500. At December 31,
1996, based on the closing market price of $4.75 per share, such shares
had a total value of $9,500. These stock awards are fully vested.
The Company through FAS has a 401(k) plan and a retirement trust but no
other retirement, pension or profit sharing plans for the benefit of the
Company's officers, directors and employees. Each of the 401(k) plan and the
retirement trust are defined contribution plans. The Company may, at its
discretion, make matching contributions to the 401(k) plan. However, to date, no
matching contributions have been made and the Company does not anticipate making
any matching contributions until the Company achieves profitability. The Company
does provide health insurance and life and disability insurance for its
employees. The board of directors may recommend and adopt additional programs in
the future for the benefit of officers, directors and employees.
Long-Term Incentive Plan Awards and Option Grants in Fiscal Year 1996
The Company has no long-term incentive plan. No options were granted in
fiscal year 1996.
Aggregated Option Exercises and Year-End Option Values in 1996
The following table summarizes for the Named Executive Officers of the
Company the number of stock options, if any, exercised during Fiscal Year 1996,
the aggregate dollar value realized upon exercise, the total number of
unexercised options held at December 31, 1996 and the aggregate dollar value of
in-the-money unexercised options, if any, held at December 31, 1995. Value
realized upon exercise is the difference between the fair market value of the
underlying stock on the exercise date and the exercise price of the option. The
value of unexercised, in-the-money options at December 31, 1996 is the
difference between its exercise price and the fair market value of the
underlying stock on December 31, 1996. The underlying options have not been, and
may never be, exercised; and actual gains, if any, on exercise will depend on
the value of the Common Shares on the actual date of exercise. There can be no
assurance that these values will be realized. See "-Stock Option Plan" below for
a description of the terms of the options.
<PAGE>
Aggregate Option Exercises in Fiscal Year 1996
and Year-End Option Values
<TABLE>
<CAPTION>
Number of Unexercised Options at Value of Unexercised In-The-Money
Options at 12/31/96(1)
12/31/96
Shares Acquired Value
Name on Exercise(#) Realized($) # Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Peter Frohlich None N/A None 19,800 N/A $ 34,650
Lawrence J. Troyna None N/A None 19,800 N/A 34,650
Alan M. Fields None N/A None 19,800 N/A 34,650
Neil O'Hara None N/A None 7,125 N/A 12,469
</TABLE>
(1) The closing bid price of the Common Shares on December 31, 1996 was $4.75.
The exercise price of the options is $3.00.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements.
Effective January 1, 1995, the Board of Directors authorized the
Company to enter into one-year Employment Agreements with each of Peter
Frohlich, Lawrence Troyna, and Alan Fields (the "Current Executive Officers"),
which are automatically renewable for additional one- year periods unless
terminated by the executive officer or the Company at the end of the then
current term. The terms of employment provide for a base salary to each of the
Current Executive Officers of $143,000, which includes $13,000 payable only out
of and to the extent of profits of the Company and was not paid in 1995. In
addition, the Current Executive Officers were entitled to bonuses in calendar
year 1995 of $41,800 payable only in the event that the Company achieved the
minimum financial covenants established by the Company's principal lender. The
minimum financial covenants were not achieved and these bonuses were not earned
in 1995. The Current Executive Officers have been employed on these terms since
January 1, 1995. However, formal employment agreements have not been executed by
either the Company or any of its Current Executive Officers. The parties have
agreed that the written consulting agreements between each Current Executive
Officer and the Company, to the extent not inconsistent with the terms described
in this paragraph, will document the terms of employment. The Company employed
the Current Executive Officers on the same terms for 1996, except that the
annual base salary was set at $157,300 with $27,300 payable only out of and to
the extent of profits of the Company for 1996. Since the Company did not have
profits in 1996, the $27,300 was not earned. However, a bonus equal to
one-week's base salary was paid. In addition, the Current Executive Officers
were entitled to bonuses in 1996 of $41,800 payable only in the event the
Company achieved the minimum financial covenants established by the Company's
principal lender. Since the minimum financial covenants were not achieved, these
bonuses were not earned in 1996. However, the Current Executive Officers were
awarded a bonus of $10,000 for their services in 1996, which will be paid in
1997. Effective November 29, 1995, the Current Executive Officers were each
awarded an option to acquire 19,800 Common Shares of the Company at a purchase
<PAGE>
price of $3.00 per share pursuant to the Management Plan described below. The
Company has employed the Current Executive Officers for 1997 on the same terms
as set forth above, except that the annual base salary is set at $157,000, with
$17,000 payable only out of and to the extent of profits of the Company for 1997
and a one week bonus equal to one week's base salary. To the extent that the
Company has pre-tax net income in 1997, each of the Current Executive Officers
will be entitled to a bonus equal to 6.67% of pre-tax net income, up to a
maximum of $41,800 each. Each Current Executive Officer is also entitled to one
year's base salary if he is terminated for any reason other than cause. In April
1997, each of the Current Executive Officers was granted an option to acquire up
to 30,000 Common Shares at $6.25 per share.
The Company has not entered into any currently effective employment
agreements other than the employment agreements described above.
Insider Participation in Compensation Decisions
The Company has no compensation committee. Compensation decisions are
made by the Board of Directors. Each of the Current Executive Officers is a
member of the Board of Directors and participates in compensation decisions.
Stock Option Plans
Effective November 29, 1995, the Company adopted a Management Stock
Option Plan ("Management Plan") and an Employee Stock Option Plan ("Employee
Plan"). Pursuant to the Management Plan, the Company has issued options to five
individuals involved in the management of the Company to acquire up to 69,025
Common Shares of the Company at a purchase price of $3.00 per share subject to
vesting requirements, which includes the Company obtaining sales during a
12-month period of $7,500,000 and an average closing price for the Company's
Common Shares for a three-month period of $6.00, $9.00 and $12.00, respectively,
for each one-third of the options to vest. The options must vest by November
1998 and must be exercised within three years of vesting. The first one-third of
these options vested as of June 1, 1997. Pursuant to the Employee Plan, the
Company has issued options to acquire 13,500 Common Shares of the Company to 20
employees of the Company at a purchase price of $3.00 per share subject to
vesting requirements, which include the Company obtaining sales during a
12-month period of $7,500,000 and at least one year continued employment after
the grant of the option. The options must vest by November 1998 and must be
exercised within two years of vesting. These options vested as of June 1, 1997.
Neither the Management Plan or the Employee Plan provide for any further options
to be issued. In addition, neither the Management Plan or the Employee Plan is
qualified for federal tax purposes or for purposes of Section 16 of the Exchange
Act.
Other than the 1997 Omnibus Stock Option Plan described below, the
Company has not adopted any other incentive stock option or stock award plan. No
options were granted by the Company to any of its officers, directors or
employees during fiscal years 1994 and 1996. However, the Company has in the
past paid bonuses to certain key employees through grants of Common Shares.
<PAGE>
During calendar year 1994, the Company granted approximately 61,120 Common
Shares to key employees of or consultants to the Company as bonus compensation.
(3,056,002 shares prior to the 50 to 1 reverse stock split approved March 29,
1995.)
On April 2, 1997, the Board of Directors authorized and granted stock
options to key employees (including the Current Executive Officers) and
directors providing for options to acquire an aggregate of 100,000 Common Shares
at a price of $6.25 per share. Half of the options are exercisable on April 2,
1998 and the remainder are exercisable April 2, 1999.
The options expire on April 2, 2000.
On May 8, 1997, the Board of Directors adopted the
Company's 1997 Omnibus Stock Option Plan to enable the Company to issue up
to 100,000 Common Shares to key employees, directors and consultants, subject to
shareholder approval. See "Proposal No. 4 -- Adoption of 1997 Omnibus Stock
Option Plan."
TRANSACTIONS WITH RELATED PARTIES
Except as set forth below, the Company has not entered into any
transactions with officers and directors of the Company or their affiliates that
may involve conflicts of interest or were other than arms' length transactions.
During 1994, the Company was a party to a Consulting Agreement with
Brimat International, Inc., Lawrence Troyna and Peter Frohlich. Pursuant to the
agreement, an annual amount of approximately $130,000 was paid in consulting
fees by the Company to each of Brimat International, Inc., Lawrence Troyna and
Peter Frohlich during that fiscal year. Alan Fields, the President of the
Company is also President of Brimat International, Inc., which is owned by his
father, Leonard Fields. The Consulting Agreements between the Company and
Lawrence Troyna, Peter Frohlich and Brimat, Inc. were terminated effective
January 1, 1995 at which time the Company authorized employment agreements with
each of Lawrence Troyna, Peter Frohlich and Alan Fields. In addition, Alan
Fields, Lawrence Troyna and Peter Frohlich received stock and cash bonuses in
connection with the Consulting Agreements. See "Management Compensation."
The Company paid approximately $27,700, $40,650 and $32,533 (on an
estimated average conversion rate of $1.60 to each British Pound) during
calendar years 1994, 1995 and 1996, respectively, to Belgravia Financial
Services Limited for rent, telephone and medical insurance expenses in
connection with a sales office in London, England during 1994, 1995 and 1996.
Amounts paid to Belgravia Financial Services Limited represent its actual costs,
except that Belgravia Financial Services Limited pays a portion of rent expenses
in London without reimbursement from the Company. Peter Frohlich and Lawrence
Troyna are officers, directors and shareholders of Belgravia Financial Services
Limited.
<PAGE>
During the three most recent full fiscal years, the Company has paid
legal fees in the aggregate of approximately $64,000 to Carlos Sedillo. An
additional $8,000 is owed to Mr. Sedillo for 1996 services but has not yet been
paid. Mr. Sedillo serves as General Counsel and Secretary of the Company is also
is a director of the Company. In April 1997, the Company granted Mr. Sedillo an
option to acquire 2,000 Common Shares of the Company.
<PAGE>
PROPOSAL NO. 2 --
INCREASE OF SHARES AUTHORIZED FOR ISSUANCE
The Company's shareholders are being asked to approve an increase from
2,000,000 to 5,000,000 in the number of Common Shares that the Company is
authorized to issue, by amending the first sentence of Article IV of the
Company's Articles of Incorporation to read as follows:
"Authorized Shares. The total number of shares
of stock that the Corporation shall have authority
to issue is 5,000,000 Common Shares, par value
$.05 per share,and 50,000 Preferred Shares,
$0.001 par value per share."
The Board of Directors has unanimously approved this proposal and recommends a
favorable vote to the shareholders.
The current number of authorized Common Shares is not adequate to cover
existing commitments to issue Common Shares. In addition, the Board of Directors
believes it to be desirable, for the flexibility of the Company in financial
matters, to have additional Common Shares available for issue in transactions
(i) to finance the Company's business expansion, (ii) to be used for potential
acquisitions, (iii) to take advantage of attractive business opportunities, (iv)
to raise additional capital for the Company, (v) to provide stock dividends to
shareholders in the discretion of the Board of Directors, and (vi) to otherwise
further the Company's purposes, such as, but not limited to, stock splits, and
grants of stock options, including the options granted in 1997 and pursuant to
the 1997 Omnibus Stock Option Plan.
If the amendment is adopted, the Board of Directors would be authorized
to issue the additional Common Shares in public or private transactions without
further shareholder approval unless shareholder approval is required for a
particular transaction by applicable laws or regulations. The rights and
privileges of the additional Common Shares to be authorized will be identical to
the rights and privileges of the presently authorized Common Shares.
The Company's financial statements and related information are
incorporated herein by reference to the Company's Form 10-KSB accompanying this
Proxy Statement.
<PAGE>
PROPOSAL NO. 3 --
APPROVAL OF AMENDMENT TO ARTICLES
OF INCORPORATION TO PROVIDE FOR
STAGGERED TERMS OF DIRECTORS
The Company's Bylaws currently provide that the term of each Director
shall begin immediately upon election and continue until the next annual meeting
of shareholders until a successor shall have been elected or qualified. The
Company's Shareholders are being asked to approve the amendment to Section VIII
of the Company's Articles to add an additional paragraph, as set forth in
Exhibit A, that provides for staggered terms of directors by dividing the Board
of Directors into three groups, designated as Class I, Class II and Class III.
Class I will initially consist of two directors, each to hold office until the
annual meeting of shareholders in 1998; Class II will initially consist of two
directors, each to hold office until the annual meeting of shareholders in 1999;
Class III will initially consist of two directors, each to hold office until the
annual meeting of shareholders in 2000; and in each case, until their successors
are duly elected or until their earlier resignation, removal from office, or
death. Starting with the 1998 annual meeting of shareholders one class of
directors would be elected for a three-year term at each Annual Meeting, with
the remaining continuing in office. The directors of each class would be as
follows:
Class I Class II Class III
Carlos Sedillo Lawrence J. Troyna Peter Frohlich
Mary Sprouse Leonard Fields Alan Fields
A staggered Board of Directors, which prevents more than one-third of
the Board from being replaced at any one annual meeting, will help to assure the
continuity and stability of the Company's management and policies since a
majority of the directors will have prior experience as directors of the
Company.
The Board of Directors has unanimously approved this proposal and
recommends a favorable vote to the shareholders.
Purposes and Effects of Proposal No. 3
The purpose of Proposal No. 3 is to discourage certain types of
activity that involve an actual or threatened change in control of the Company.
Proposal No. 3 is designed to make it more difficult and time consuming to
change majority control of the Board and thereby reduce the vulnerability of the
Company to an unsolicited proposal for a takeover that does not contemplate the
acquisition of all of the Company's outstanding shares or an unsolicited
proposal for the restructuring or sale of all or part of the Company. As more
fully discussed herein, the Board believes that, as a general rule, such
takeover proposals are not in the best interests of the Company and its
shareholders.
<PAGE>
There has been a recent trend toward the accumulation of substantial
stock positions in public companies by third parties with a view toward using a
control block of stock to force a merger, consolidation, restructuring or to
force a corporation to repurchase a control block of stock at a premium. Such
actions are taken without advance notice to, or consultation with, the board of
directors or management of the corporation. In many cases, such third parties
seek representation on the corporation's board of directors in order to increase
the likelihood that their proposals will be implemented. If the corporation
resists their efforts to obtain representation on the corporation's board, such
parties may commence proxy contests to have themselves or their nominees elected
to the board of directors in place of certain directors or the entire board. In
some cases, the third party may not be interested in taking over the
corporation, but uses the threat of a proxy fight or takeover bid as means of
forcing the corporation to repurchase its holdings at a substantial premium over
market price.
The Board believes that the threat of removal of the Company's
management in such situations would curtail management's ability to negotiate
effectively with such purchasers. Management would be deprived of the time and
information necessary to evaluate the takeover proposal, to study alternative
proposals and to help ensure that the best price is obtained in any transaction
involving the Company that may ultimately be undertaken.
Proposal No. 3 would have the effect of making it more difficult to
change the composition of the Board. A staggered Board upon which directors
serve three-year terms requires at least two annual shareholder meetings in
order to effect a change in control in the Board. At present, a change in
control of the Board could be effected in one shareholder meeting.
By stabilizing the composition of the Board, Proposal No. 3 is designed
to encourage any person who might seek to acquire control of the Company to
consult with the Company's Board and to negotiate the terms of any proposed
business combination or tender offer. The Board believes that any takeover
attempt or business combination in which the Company is involved should be
thoroughly studied by the Company's management and its Board to assure that all
of the Company's shareholders are treated fairly.
Takeovers or changes in management of the Company that are proposed and
effected without prior consultation and negotiation with the Company's Board and
management may not necessarily be detrimental to the Company and its
shareholders. The adoption of Proposal No. 3 could discourage or frustrate
future attempts to acquire control of the Company that are not approved by the
incumbent Board, but which a majority of shareholders may deem to be in their
best interests. One of the effects of Proposal No. 3 may be to discourage
prospective acquirors from making tender offers for, or open market purchases
of, shares of the Company's Common Shares. Because tender offers are often made
<PAGE>
at a premium above market price, and large purchases made in the open market
often result in temporary fluctuations in the market price of such shares,
shareholders may be denied the opportunity to sell their shares at prices in
excess of historic market prices if the proposed amendments discourage such
tender offers or open market purchases. Proposal No. 3 if adopted, could also
delay or frustrate the assumption of control by a holder of a large block of the
Company's shares or the removal of incumbent directors, even if shareholders
considered such event to be beneficial. However, the Board feels that the
benefits of seeking to protect its ability to negotiate with the proponent of an
unfriendly or unsolicited proposal to take over or restructure the Company
outweigh the disadvantages of discouraging such proposals.
<PAGE>
PROPOSAL NO. 4 --
ADOPTION OF 1997 OMNIBUS STOCK OPTION PLAN
The Company's shareholders are being asked to approve the Company's
1997 Omnibus Stock Option Plan (the "Plan"). The Plan is set forth in full as
Exhibit B to this proxy statement and is incorporated herein by reference.
The Plan, which was approved by the Board of Directors on May 8, 1997,
is designed to enable the Company to offer certain of its officers, employees,
directors and consultants options to acquire equity interests in the Company
thereby attracting, retaining, and rewarding such persons and strengthening the
mutuality of interests between such persons and the Company's shareholders. The
effectiveness of the Plan is subject to the approval of the shareholders, and
upon approval, 100,000 Common Shares will become available for issuance under
the Plan.
Administration
The Plan is to be administered by the Company's Board of Directors and
the Board may delegate responsibility to a committee comprised of two or more
members of the Board in compliance with Rule 16b-3 under the Exchange Act (in
either case, the "Administrator").
The Administrator, subject to the provisions of the Plan, has the
authority to determine and designate officers, employees, directors and
consultants to whom options shall be awarded and the terms, conditions and
restrictions applicable to each option (including, but not limited to, the
number of options, the option price, the term of the option, any restriction or
limitation affecting the exercisability of such option, any vesting schedule of
such option and any forfeiture restrictions, which restrictions or limitations
may be waived by the Administrator in its sole discretion).
Types of Awards
The terms of options granted under the Plan are determined by the
Administrator. The Administrator determines the eligible recipients, option
price, the expiration date of the option (provided that no option is exercisable
more than 10 years after the date the option is granted), the number of Common
Shares to which the option pertains, any conditions relating to the exercise of
the option and such other terms and conditions as the Administrator, in its sole
discretion, shall determine. The Administrator will also specify whether the
option is intended to be an incentive stock option ("ISO") eligible for
preferential tax treatment under Section 422 of the Code or a non-qualified
stock option.
The option price per Common Share purchasable upon exercise of an
option shall be determined by the Administrator at the time of grant. The option
price for ISOs may not be less than the fair market value of the Common Shares
on the date of grant. The option price for non-qualified stock options may not
be less than 85% of the fair market value of the Common Shares on the date of
grant. The option exercise price may be paid (i) in cash or by check payable to
the Company, (ii) to the extent determined by the Administrator, in the form of
<PAGE>
Common Shares duly owned by the participant (and for which the participant has
good title free and clear of any liens and encumbrances) or (iii) to the extent
determined by the Administrator, by reduction in the number of Common Shares
issuable upon such exercise, based, in each case, on the fair market value of
the Common Shares on the last business day preceding the date of exercise. A
participant is not deemed to be the holder of Common Shares, or to have the
rights of a holder of Common Shares, with respect to Common Shares subject to an
option, unless and until a stock certificate representing the Common Shares
subject to an option is issued to the participant.
The term of each option shall be fixed by the Administrator at the time
of grant, but no option shall be exercisable more than 10 years after the date
it is granted.
Unless otherwise determined by the Administrator, in the event that a
participant's employment with, or services as a director of or consultant to,
the Company and all its subsidiaries terminates by reason of the death of the
participant, any option held by such participant exercisable as of the date of
death may be exercised by the legal representative of the participant's estate.
Such option shall be exercisable until the earlier of one year after the date of
death or until the expiration of the term of such option. Options not
exercisable on the date of death shall be forfeited.
Unless otherwise determined by the Administrator, in the event that a
participant's employment with, or services as a director of or consultant to,
the Company and all its subsidiaries terminates by reason of the disability of
the participant, any option held by the participant that was exercisable on the
date of such termination of employment may thereafter be exercised until the
earlier of one year after the date of such termination or until the expiration
of such option, and any option not exercisable on the date of termination of
employment shall be forfeited. If the participant dies during the one year
period, any unexercised options held by the participant may thereafter be
exercised by the legal representative of the participant's estate until the
earlier of one year after the date of death or until the expiration of the term
of such option. If an ISO is exercised after the expiration of the exercise
period that applies for purposes of Section 422 of the Code, such option will be
treated as a non-qualified option.
Unless otherwise determined by the Administrator, if a participant's
employment with, or services as a director of or consultant to, the Company and
all of its subsidiaries terminates for retirement or any reason other than
death, disability or termination for cause, any option that was exercisable on
the date of such termination may be exercised within a period of three months
from the date of termination or until the expiration of the stated term of such
option, whichever period is shorter, and any option not exercisable on the date
of termination of employment shall be forfeited.
In the event of a termination for cause, any option that was not
exercised prior to the date of such termination shall be forfeited.
<PAGE>
In the event of a Change of Control (as defined below), all outstanding
options will immediately become fully exercisable, and upon payment by the
participant of the option exercise price, and, if requested by the Company, a
representation in writing that the participant is acquiring the Common Shares
without a view to distribution thereof, a stock certificate representing the
Common Shares covered thereby will be issued and delivered to the participant. A
"Change of Control" means the occurrence of any of the following events: (i) the
reorganization, merger or consolidation of the Company, (ii) the Company sells
substantially all of its assets to a purchaser or (iii) shares of stock of the
Company representing in excess of 50% of the total combined voting power of all
outstanding classes of stock of the Company are acquired, in one transaction or
a series of transactions, by a single purchaser or group of related purchasers,
in any case, other than a transaction in which the Company or any subsidiary of
the Company is the surviving corporation or the purchaser.
Eligibility
Officers and other employees of the Company and its subsidiaries, and
directors of and consultants for the Company and its subsidiaries are eligible
to be granted stock options under the Plan. Directors who are not employees of
the Company or one of its subsidiaries may not be granted incentive stock
options. At present, no options have been granted under the Plan.
Shares Subject to the Plan
The Plan provides for the issuance of options to purchase up to 100,000
Common Shares. Common Shares to be issued may be either authorized and unissued
shares or issued Common Shares reacquired by the Company and held in treasury.
The maximum number of Common Shares which may be issued under the Plan, the
maximum number of Common Shares with respect to which options may be granted to
any individual during any year, and the number and option prices of Common
Shares subject to outstanding options are subject to adjustment in the event of
a merger, reorganization, consolidation, recapitalization, dividend (other than
a regular cash dividend), stock split, or other change in corporate structure
affecting the Common Shares. Common Shares subject to options that expire,
terminate, or are cancelled without being exercised in full may be reissued
under the Plan.
Federal Income Tax Consequences
The federal income tax discussion set forth below is intended for
general information only. State and local income tax consequences are not
discussed, and may vary from locality to locality.
Non-Qualified Stock Options. Under present Treasury regulations, an
optionee who is granted a non-qualified stock option does not realize taxable
income at the time the option is granted. In general, an optionee is subject to
tax in the year of exercise on an amount of ordinary income equal to the excess
of the fair market value of the shares on the date of exercise over the option
price, and the Company receives a corresponding deduction. Income tax
<PAGE>
withholding requirements apply upon exercise. The optionee's basis in the shares
so acquired is equal to the option price plus the amount of ordinary income upon
which he is taxed. Upon subsequent disposition of the shares, the optionee
realizes capital gain or loss, long-term or short-term, depending upon the
length of time the shares are held after the option is exercised.
Incentive Stock Options. An optionee is not taxed at the time an
incentive stock option is granted. The tax consequences upon exercise and later
disposition depend upon whether the optionee was an employee of the Company or a
subsidiary at all times from the date of grant until three months (one year in
the case of permanent and total disability) (or the estate of such an employee
(the "employee's estate")) preceding exercise and on whether the optionee holds
the shares for more than one year after exercise and two years after the date of
grant of the option (the "holding rule").
If the optionee satisfies both the employment rule and the holding
rule, for regular tax purposes the optionee does not realize income upon
exercise of the option and the Company is not allowed an income tax deduction at
any time. The difference between the option price and the amount realized upon
disposition of the shares by the optionee constitutes a long-term capital gain
or a long-term capital loss, as the case may be.
If the optionee meets the employment rule but fails to observe the
holding rule (a "disqualifying disposition"), the optionee generally recognizes
as ordinary income, in the year of the disqualifying disposition, the excess of
the fair market value of the shares at the date of exercise over the option
price. Any excess of the sales price over the fair market value at the date of
exercise is recognized by the optionee as capital gain (long-term or short-term
depending on the length of time the stock was held after the option was
exercised). If, however, the sales price is less than the fair market value at
the date of exercise, then the ordinary income recognized by the optionee is
generally limited to the excess of the sales price over the option price. In
both situations, the Company's tax deduction is limited to the amount of
ordinary income recognized by the optionee. Under current Internal Revenue
Service guidelines, the Company is not required to withhold any federal income
tax in the event of a disqualifying disposition.
Different consequences apply for optionees who pay the option price in
whole or in part in the form of Common Shares and for optionees subject to the
alternative minimum tax.
Withholding. The Company has the right to reduce the number of Common
Shares deliverable pursuant to the Plan by an amount which has a fair market
value equal to the amount of all federal, state or local taxes to be withheld,
or to deduct the amount of such taxes from any cash payment otherwise to be made
to the participant.
<PAGE>
Termination or Amendment
Unless sooner terminated as provided below, the Plan shall terminate 10
years after its effective date and no options may be granted thereafter.
Termination of the Plan will not affect options granted prior to such
termination.
The Board of Directors may at any time amend, discontinue or terminate
the Plan or any part thereof; provided, however, that, unless otherwise required
by law, the rights of a participant with respect to options granted prior to
such amendment, discontinuance or termination may not be impaired without the
consent of such participant and, provided further, that the Company will seek
shareholder approval for any amendment, if necessary, to comply with the Code,
Federal or state securities law or any other applicable rules or regulations.
The Administrator may amend the terms of any outstanding option,
prospectively or retroactively, provided that no such amendment may impair the
rights of any holder without the holder's consent.
Approval of the Plan
The Plan will become effective, assuming the existence of a quorum, if
the number of votes cast for approval of the Plan exceeds the number of votes
cast against approval. The Board of Directors has unanimously approved this
proposal and recommends a favorable vote to shareholders.
<PAGE>
PROPOSAL NO. 5 --
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed Moore Stephens Frazer & Torbet, Inc.,
independent certified public accountants, as auditors to examine the financial
statements of the Company for Fiscal 1997 and to perform other appropriate
accounting services and is requesting ratification of such appointment by the
stockholders. Moore Stephens Frazer & Torbet, Inc. has served as the Company's
auditors since 1991.
A representative of Moore Stephens Frazer & Torbet, Inc. is expected to
attend the Annual Meeting and will have an opportunity to make a statement if he
desires to do so and to respond to appropriate questions.
The Board of Directors has unanimously approved this proposal and
recommends a favorable vote to the shareholders.
In the event that the shareholders do not ratify the appointment of
Moore Stephens Frazer & Torbet, Inc., the adverse vote will be considered as a
direction to the Board to select other auditors for the next fiscal year.
It is understood that even if the selection of Moore Stephens Frazer &
Torbet, Inc. is ratified, the Board, in its discretion, may direct the
appointment of a new independent accounting firm at any time during the year if
the Board feels that such a change would be in the best interests of the Company
and its shareholders.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's 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 and the
National Association of Securities Dealers. Officers, directors and greater than
ten-percent shareholders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company between January 1, 1996 and December 31, 1996, on year-end reports
furnished to the Company after December 31, 1996 and on representations that no
other reports were required, the Company has determined that during the last
fiscal year all applicable 16(a) filing requirements were met except as follows:
McDonnell Douglas Corporation filed a Form 3 on May 31, 1996, reporting
a beneficial ownership in the Company. The Form 3 should have been filed on or
before April 27, 1996.
<PAGE>
Alan Fields filed a Form 4 on August 12, 1996, reporting
the purchase of 100 Common Shares of the Company during July 1996. The Form
4 should have been filed on or before August 10, 1996.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals on matters appropriate for
shareholder action at the Company's annual meetings consistent with regulations
adopted by the SEC. For such proposals to be considered for inclusion in the
proxy statement and form of proxy relating to the 1998 annual meeting, they must
be received by the Company not later than January 5, 1998. Such proposals should
be addressed to the Company at 341-A Ward Avenue, Fillmore, CA 93015- 1931,
Attention: Alan M. Fields.
OTHER MATTERS
Management does not intend to present, and has no information as of the
date of preparation of this Proxy Statement that others will present, any
business at the Annual Meeting other than business pertaining to matters
required to be set forth in the Notice of Annual Meeting and Proxy Statement.
However, if other matters requiring the vote of the shareholders properly come
before the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote the proxies held by them in accordance with their best
judgment on such matters.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1996, FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT AND IS BEING
DELIVERED WITH THIS PROXY STATEMENT. COPIES OF EXHIBITS TO SUCH FORM 10-KSB WILL
BE AVAILABLE UPON WRITTEN REQUEST FOR A REASONABLE FEE. DIRECT YOUR WRITTEN
REQUEST TO FIELDS AIRCRAFT SPARES, INC., 2251-A WARD AVENUE, SIMI VALLEY, CA
93065, ATTENTION: ALAN M. FIELDS; PHONE: (805) 583-0800.
<PAGE>
Preliminary Copy
FIELDS AIRCRAFT SPARES
2251-A Ward Avenue
Simi Valley, CA 93065
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
August 7, 1997
The undersigned hereby appoints each of Alan Fields and Peter Frohlich,
individually, as proxy and attorney-in-fact for the undersigned with full power
of substitution to vote on behalf of the undersigned at the Company's 1997
Annual Meeting of Shareholders to be held on August 7, 1997, and at any
adjournment(s) or postponement(s) thereof, all of the Common Shares, $.05 par
value, of the Company standing in the name of the undersigned or which the
undersigned may be entitled to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ITEMS 1, 2, 3, 4 AND 5. In their discretion, the
proxies are authorized to vote upon such other business as may properly come
before the Annual Meeting or any adjournments or postponements thereof, hereby
revoking any proxy or proxies heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
1. Election of Directors:
Peter Frohlich FOR [ ] WITHHOLD AUTHORITY [ ]
Alan M. Fields FOR [ ] WITHHOLD AUTHORITY [ ]
Lawrence J. Troyna FOR [ ] WITHHOLD AUTHORITY [ ]
Leonard I. Fields FOR [ ] WITHHOLD AUTHORITY [ ]
Carlos Sedillo FOR [ ] WITHHOLD AUTHORITY [ ]
Mary Sprouse FOR [ ] WITHHOLD AUTHORITY [ ]
2. Increase in the number of the Company's authorized Common Shares from
2,000,000 to 5,000,000 shares:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Amend Articles of Incorporation to provide for staggered terms of
directors:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approve the Company's 1997 Omnibus Stock Option Plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. Ratify the selection by the Board of Directors of Moore Stephens Frazer
& Torbet, Inc. as independent auditors of the Company for the 1997
fiscal year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF FIELDS AIRCRAFT SPARES, INC.
Dated:__________________________, 1997
- -----------------------------------------------
Signature of Stockholder
- -----------------------------------------------
Signature of Stockholder
NOTE: Please date and sign this Proxy exactly as the names appear hereon. When
signing as attorney-in-fact, executor, administrator, trustee or guardian,
please add your title as such. Proxies executed in the name of a corporation
should be signed on behalf of the corporation by a duly authorized officer.
Where shares are owned in the name of two or more persons, all such persons
should sign.
PLEASE MARK, SIGN AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
EXHIBIT A
AMENDMENT TO ARTICLES OF INCORPORATION
PROVIDING FOR A STAGGERED BOARD
Article VIII of the Articles of Incorporation shall be amended by
adding the following as the second paragraph:
The directors shall be divided into three classes, designated
Class I, Class II, and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. The term of the initial
Class I directors shall terminate on the date of the 1998 annual
meeting of shareholders; the term of the initial Class II directors
shall terminate on the date of the 1999 annual meeting of shareholders;
and the term of the initial Class III directors shall terminate on the
date of the 2000 annual meeting of shareholders. At each annual meeting
of shareholders beginning in 1998, successors to the class of directors
whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the
number of directors in each class as nearly equal as possible, but in
no case will a decrease in the number of directors shorten the term of
any incumbent director. A director shall hold office until the annual
meeting for the year in which his or her term expires and until his or
her successor shall be elected and shall qualify, subject, however, to
prior death, resignation or removal from office. Any vacancy on the
Board of Directors that results from an increase in the number of
directors may be filled by a majority of the Board of Directors then in
office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class. Any director
elected to fill a vacancy not resulting from an increase in the number
of directors shall have the same remaining term as his or her
predecessor.
<PAGE>
EXHIBIT B
1997 OMNIBUS STOCK OPTION PLAN
FIELDS AIRCRAFT SPARES, INC.
1997 OMNIBUS STOCK OPTION PLAN
ARTICLE I
Purpose
The purpose of the 1997 Omnibus Stock Option Plan (the "Plan")
is to enable Fields Aircraft Spares, Inc., a Utah corporation (the "Company"),
to offer to certain of its officers, employees, directors, and consultants
options to acquire equity interests in the Company, thereby attracting,
retaining, and rewarding such persons, and strengthening the mutuality of
interests between such persons and the Company's shareholders.
ARTICLE II
Definitions
For purposes of the Plan, the following terms
shall have the following meanings:
2.1 "Administrator" shall mean the Board or, if the Board has
delegated its responsibility to administer the Plan pursuant to Section 3.1, the
committee of the Board to which such responsibility has been delegated.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Change of Control" shall mean the occurrence of any one of
the following: (i) a reorganization, merger, or consolidation of the Company,
(ii) the Company sells substantially all its assets to a purchaser, or (iii)
shares of stock of the Company representing in excess of 50% of the total
combined voting power of all outstanding classes of stock of the Company are
acquired, in one transaction or a series of transactions, by a single purchaser
or group of related purchasers in any case other than in a transaction in which
the Company or a subsidiary of the Company is the surviving corporation or the
purchaser.
<PAGE>
2.4 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
2.5 "Common Stock" shall mean the common stock, $.05 par
value per share, of the Company.
2.6 "Disability" shall mean a disability that
results in a Participant's Termination of Employment with the Company,
as determined pursuant to standard Company procedures.
2.7 "Effective Date" shall mean the date on which the
Plan is adopted by the Board.
2.8 "Fair Market Value" for purposes of the Plan, unless
otherwise required by any applicable provision of the Code or any regulations
issued thereunder, shall mean, as of any date, the average of the high and low
sales prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or traded on any such exchange, on the Nasdaq SmallCap Market
("Nasdaq"), or, if such sales prices are not available, the average of the bid
and asked prices per share reported on Nasdaq, or, if such quotations are not
available, the fair market value as determined by the Board, which determination
shall be conclusive.
2.9 "Incentive Stock Option" shall mean any Stock Option that
is intended to be and is designated as an "incentive stock option" within the
meaning of Section 422 of the Code.
2.10 "Non-Qualified Stock Option" shall mean any
Stock Option that is not an Incentive Stock Option.
2.11 "Participant" shall mean an officer, employee, director or
consultant to whom an Option has been granted under the Plan.
2.12 "Stock Option" or "Option" shall mean any option to
purchase shares of Common Stock granted pursuant to Article VI of the Plan.
2.13 "Termination for Cause" shall mean a Termination of
Employment that has been designated as a "termination for cause" pursuant to
standard Company procedures.
2.14 "Termination of Employment" shall mean, as appropriate,
(a) the termination of a Participant's employment with the Company and its
subsidiaries for reasons other than a military or personal leave of absence
granted by the Company, (b) termination of a Participant's consulting
relationship with the Company or (c) termination of a Participant's service as a
member of the Board.
<PAGE>
ARTICLE III
Administration
3.1 The Administrator. The Plan shall be
administered and interpreted by the Board; provided, however, that the
Board may delegate this responsibility to a committee comprised of two or
more members of the Board.
3.2 Awards. The Administrator shall have full authority to
grant, pursuant to the terms of the Plan, Stock Options to persons eligible
under Article V. In particular, the Administrator shall have the authority:
(a) to select the officers, employees,
directors and consultants to whom Stock Options may from time to time be
granted;
(b) to determine whether and to what
extent Stock Options are to be granted to one or more officers,
employees, directors and consultants eligible to receive Options under
Article V;
(c) to determine the number of shares of
Common Stock to be covered by each Option granted pursuant to Article VI;
and
(d) to determine the terms and conditions,
not inconsistent with the terms of the Plan, of any Option granted under
Article VI (including, but not limited to, the option price, the option term,
installment exercise or waiting period provisions and provisions relating to the
waiver or acceleration thereof).
3.3 Guidelines. Subject to Article VII hereof, the
Administrator shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any Option granted under the Plan (and any agreements relating
thereto); and to otherwise supervise the administration of the Plan. The
Administrator may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Option in the manner and to the extent it
shall deem necessary to carry the Plan into effect. Notwithstanding the
foregoing, no action of the Administrator under this Section 3.3 shall impair
the rights of any Participant without the Participant's consent, unless
otherwise required by law.
3.4 Decisions Final. Any decision, interpretation
or other action made or taken in good faith by the Administrator arising
out of or in connection with the Plan shall be final, binding and
conclusive on the Company, all officers, employees, directors and
consultants, and their respective heirs, executors, administrators, successors
and assigns.
<PAGE>
ARTICLE IV
Share Limitation
4.1 Shares. The maximum aggregate number of shares of Common
Stock that may be issued under the Plan is 100,000 (subject to increase or
decrease pursuant to Section 4.2), which may be either authorized and unissued
shares of Common Stock or issued Common Stock reacquired by the Company. If any
Option granted under the Plan shall expire, terminate or be cancelled for any
reason without having been exercised in full, the number of unpurchased shares
shall again be available for the purposes of the Plan.
4.2 Changes. In the event of any merger, reorganization,
consolidation, recapitalization, dividend (other than a regular cash dividend),
stock split, or other change in corporate structure affecting the Common Stock,
such substitution or adjustment shall be made in the maximum aggregate number of
shares which may be issued under the Plan, the maximum number of shares with
respect to which Options may be granted to any individual during any year, and
the number and option price of shares subject to outstanding Options, as may be
determined to be appropriate by the Board, in its sole discretion, provided that
the number of shares subject to any Option shall always be a whole number.
ARTICLE V
Eligibility
5.1 Employees. Officers and other employees of the Company and
its subsidiaries are eligible to be granted both Incentive Stock Options and
Non-Qualified Stock Options under the Plan.
5.2 Directors and Consultants. Directors and consultants of the
Company and its subsidiaries are eligible to be granted Non-Qualified Stock
Options, but may not receive Incentive Stock Options unless they are employees
of the Company or a subsidiary corporation within the meaning of Section 424 of
the Code.
ARTICLE VI
Grant of Stock Options
6.1 Grants. The Administrator shall have the authority to grant
to any person, to the extent eligible under Article V, one or more Incentive
Stock Options, Non-Qualified Stock Options, or both types of Stock Options. To
the extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not qualify as
an Incentive Stock Option shall constitute a separate Non-Qualified Stock
Option.
6.2 Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify the Plan
under Section 422 of the Code, or, without the consent of the Participants
affected, to disqualify any Incentive Stock Option under such Section 422 of the
Code.
6.3 Terms of Options. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable:
(a) Stock Option Certificate. Each Stock
Option shall be evidenced by, and subject to the terms of, a Stock Option
Certificate executed by the Company. The Stock Option Certificate shall specify
whether the Option is an Incentive Stock Option or a Non- Qualified Stock
Option, the number of shares of Common Stock subject to the Stock Option, the
option price, the option term, and the other terms and conditions applicable to
the Stock Option.
(b) Option Price. The option price per share of
Common Stock purchasable upon exercise of a Stock Option shall be
determined by the Administrator at the time of grant, but shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted if the Stock Option is intended to be an Incentive Stock Option and
shall not be less than 85% of the Fair Market Value of the Common Stock on the
date of grant if the Stock Option is intended to be an Non-Qualified Stock
Option.
(c) Option Term. The term of each Stock
Option shall be fixed by the Administrator at the time of grant, but no
Stock Option shall be exercisable more than ten years after the date it is
granted.
(d) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Administrator at the time of grant, and subject to
Section 6.3(k); provided, however, that the Administrator may waive any
installment exercise or waiting period provisions, in whole or in part, at any
time after the date of grant, based on such factors as the Administrator shall
deem appropriate in its sole discretion.
(e) Method of Exercise. Subject to such
installment exercise and waiting period provisions as may be imposed by the
Administrator, Stock Options may be exercised in whole or in part at any time
during the option term by delivering to the Company written notice of exercise
specifying the number of shares of Common Stock to be purchased and the
aggregate option price therefor. The notice of exercise shall be accompanied by
payment in full of the option price and, if requested by the Company, by the
representation described in Section 9.2. Payment of the option price may be made
(i) in cash or by check payable to the Company, (ii) to the extent determined by
the Administrator on or after the date of grant, in shares of Common Stock duly
owned by the Participant (and for which the Participant has good title, free and
clear of any liens and encumbrances), or (iii) to the extent determined by the
Administrator on or after the date of grant, by reduction in the number of
shares of Common Stock issuable upon such exercise, based, in each case, on the
Fair Market Value of the Common Stock on the last business day preceding the
date of exercise. Upon payment in full of the option price and satisfaction of
the other conditions provided herein, a stock certificate representing the
number of shares of Common Stock to which the Participant is entitled shall be
issued and delivered to the Participant.
(f) Death. Unless otherwise determined by
the Administrator on orafter the date of grant, in the event of a
Participant's Termination of Employment by reason of death, any Stock Option
held by such Participant which was exercisable on the date of death may
thereafter be exercised by the legal representative of the Participant's estate
until the earlier of one year after the date of death or the expiration of the
stated term of such Stock Option, and any Stock Option not exercisable on the
date of death shall be forfeited.
(g) Disability. Unless otherwise determined by
the Administrator on or after the date of grant, in the event of a
Participant's Termination of Employment by reason of Disability, any Stock
Option held by such Participant that was exercisable on the date of such
Termination of Employment may thereafter be exercised by the Participant until
the earlier of one year after such date or the expiration of the stated term of
such Stock Option, and any Stock Option not exercisable on the date of
Termination of Employment shall be forfeited. If the Participant dies during
such one-year period, any unexercised Stock Options held by the Participant at
the time of death may thereafter be exercised by the legal representative of the
Participant's estate until the earlier of one year after the date of the
Participant's death or the expiration of the option term of such Stock Option.
If an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(h) Termination of Employment. Unless
otherwise determined by the Administrator on or after the date of grant, in
the event of a Participant's Termination of Employment by reason of retirement
or for any reason other than death, Disability, or Termination for Cause, any
Stock Option exercisable on the date of such Termination of Employment shall
become fully exercisable, and may thereafter be exercised by the Participant
until the earlier of three months after such date or the expiration of the
stated term of such Stock Option, and any Stock Option not exercisable on the
date of Termination of Employment shall be forfeited.
<PAGE>
(i) Termination for Cause. In the event
of a Termination for Cause, any Share Option held by the Participant which
was not exercised prior to the date of such Termination for Cause shall be
forfeited.
(j) Change of Control. In the event of
a Change of Control, all outstanding Stock Options shall immediately become
fully exercisable, and upon payment by the Participant of the option price (and,
if requested, delivery of the representation described in Section 9.2), a stock
certificate representing the Common Stock covered thereby shall be issued and
delivered to the Participant.
(k) Non-Transferability of Options. No
Stock Option shall be transferrable by the Participant otherwise than by will or
by the laws of descent and distribution, to the extent consistent with the terms
of the Plan and the Option, and all Stock Options shall be exercisable, during
the Participant's lifetime, only by the Participant.
(l) Incentive Stock Option Limitations.
To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other stock option plan of the Company or any subsidiary or parent corporation
(within the meaning of Section 424 of the Code) exceeds $100,000, the
exercisability of such Stock Options shall be deferred until the following
calendar year, or such Options shall be treated as Options which are not
Incentive Stock Options, as determined by the Board.
Should any of the foregoing provisions
not be necessary in order for the Stock Options to qualify as Incentive Stock
Options, or should any additional provisions be required, the Board may amend
the Plan accordingly, without the necessity of obtaining the approval of the
shareholders of the Company.
(m) Ten-Percent Shareholder Rule.
Notwithstanding any other provision of the Plan to the contrary, no
Incentive Stock Option shall be granted to any person who, immediately prior to
the grant, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any subsidiary or parent
corporation (within the meaning of Section 424 of the Code), unless the option
price is at least 110% of the Fair Market Value of the Common Stock on the date
of grant and the Option, by its terms, expires no later than five years after
the date of grant.
6.4 Rights as Shareholder. A Participant shall not be deemed to
be the holder of Common Stock, or to have any of the rights of a holder of
Common Stock, with respect to shares subject to an Option, unless and until the
Option is exercised and a stock certificate representing such shares of Common
Stock is issued to the Participant.
<PAGE>
ARTICLE VII
Termination or Amendment
7.1 Termination or Amendment of Plan. The
Board may at any time amend, discontinue or terminate the Plan or any part
thereof (including any amendment deemed necessary to ensure that the Company may
comply with any regulatory requirement referred to in Article IX); provided,
however, that, unless otherwise required by law, the rights of a Participant
with respect to Options granted prior to such amendment, discontinuance or
termination may not be impaired without the consent of such Participant and,
provided further, that the Company will seek the approval of the Company's
shareholders for any amendment if such approval is necessary to comply with the
Code, Federal or state securities law or any other applicable rules or
regulations.
7.2 Amendment of Options. The Board may amend the terms of any
Option previously granted, prospectively or retroactively, but, subject to
Article IV, no such amendment or other action by the Board shall impair the
rights of any holder without the holder's consent.
ARTICLE VIII
Unfunded Plan
8.1 Unfunded Status. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payment not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company.
ARTICLE IX
General Provisions
9.1 Nonassignment. Except as otherwise provided
in the Plan, any Option granted hereunder and the rights and privileges
conferred thereby may not be sold, transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of an Option, right
or privilege contrary to the provisions hereof, or upon the levy of any
attachment or similar process thereon, such Option and the rights and privileges
conferred thereby shall immediately terminate and the Option shall immediately
be forfeited to the Company.
<PAGE>
9.2 Legend. The Company may require each person
acquiring shares upon exercise of an Option to represent to the Company in
writing that the Participant is acquiring the shares without a view to the
distribution thereof. The stock certificates representing such shares may
include any legend which the Company deems appropriate to reflect any
restrictions on transfer.
All certificates representing shares of Common Stock delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Company may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
or stock market upon which the Common Stock is then listed or traded, any
applicable Federal or state securities law, and any applicable corporate law,
and the Company may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
9.3 Other Plans. Nothing contained in the Plan
shall prevent the Company from adopting other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
9.4 No Right to Employment. Neither the Plan nor the grant of
any Option shall give any Participant or other employee, consultant or director
any right with respect to continuance of employment, consulting relationship or
directorship, as the case may be, with the Company or any subsidiary, nor shall
the Plan impose any limitation on the right of the Company or any subsidiary by
which a Participant is employed to terminate a Participant's employment or
consulting relationship at any time. Neither the Plan nor the grant of any
Option shall give any director the right to continue as a member of the Board or
obligate the Company to nominate any director for reelection by the Company's
shareholders.
9.5 Withholding of Taxes. The Company shall have the right to
reduce the number of shares of Common Stock otherwise deliverable upon exercise
of an Option by an amount that would have a Fair Market Value equal to the
amount of all Federal, state and local taxes required to be withheld, or to
deduct the amount of such taxes from any cash payment otherwise to be made to
the Participant, pursuant to the Plan or otherwise. In connection with such
withholding, the Company may make such arrangements as are consistent with the
Plan as it may deem appropriate.
9.6 Listing and Other Conditions.
(a) If the Common Stock is listed on a
national securities exchange or Nasdaq, the issuance of any shares of Common
Stock upon exercise of an Option shall be conditioned upon such shares being
listed on such exchange or Nasdaq. The Company shall have no obligation to issue
any shares of Common Stock unless and until such shares are so listed, and the
right to exercise any Option shall be suspended until such listing has been
effected.
<PAGE>
(b) If at any time counsel to the
Company shall be of the opinion that any sale or delivery of shares of Common
Stock upon exercise of an Option is or may in the circumstances be unlawful or
result in the imposition of excise taxes under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no obligation
to make such sale or delivery, or to make any application or to effect or to
maintain any qualification or registration under the Securities Act of 1933, as
amended, or otherwise with respect to shares of Common Stock or Options, and the
right to exercise any Option shall be suspended until, in the opinion of such
counsel, such sale or delivery shall be lawful or shall not result in the
imposition of excise taxes.
(c) Upon termination of any period of
suspension under this Section 9.6, any Option affected by such suspension which
shall not then have expired or terminated shall be reinstated as to all shares
available before such suspension and as to shares which would otherwise have
become available during the period of such suspension, but no such suspension
shall extend the term of any Option.
9.7 Governing Law. The Plan and actions taken
in connection herewith shall be governed and construed in accordance with the
laws of the State of Colorado without regard to the conflict of law principles
thereof.
9.8 Construction. Wherever any words are used in the Plan in
the masculine gender they shall be construed as though they were also used in
the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
9.9 Liability of the Board. No member of the Board nor any
employee of the Company or any of its subsidiaries shall be liable for any act
or action hereunder, whether of omission or commission, by any other member of
the Board or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted to
be done by himself.
9.10 Costs. The Company shall bear all expenses incurred in
administering the Plan, including expenses related to the issuance of Common
Stock upon exercise of Options.
9.11 Severability. If any part of the Plan shall be determined
to be invalid or void in any respect, such determination shall not affect,
impair, invalidate or nullify the remaining provisions of the Plan which shall
continue in full force and effect.
9.12 Successors. The Plan shall be binding upon
and inure to the benefit of any successor or successors of the Company.
<PAGE>
9.13 Headings. Article and section headings
contained in the Plan are included for convenience only and are not to be used
in construing or interpreting the Plan.
ARTICLE X
Term of Plan
10.1 Effective Date. The Plan shall be effective as of the
Effective Date, but the grant of any Option hereunder is subject to the express
condition that the Plan be approved by the shareholders of the Company within 12
months after the Effective Date.
10.2 Termination Date. Unless sooner terminated,
the Plan shall terminate ten years after the Effective Date and no Options may
be granted thereafter. Termination of the Plan shall not affect Options granted
before such date.
