<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
<TABLE>
<S> <C>
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
The Cerplex Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Not applicable
- --------------------------------------------------------------------------------
(Name of Person Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not applicable
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
Not applicable
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Not applicable
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
Not applicable
------------------------------------------------------------------------
(5) Total Fee paid:
Not applicable
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary material:
Not applicable
----------------------------------------------------------------------------
[ ] 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:
Not applicable
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(2) Form, Schedule or Registration Statement No.:
Not applicable
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(3) Filing party:
Not applicable
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(4) Date filed:
Not applicable
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<PAGE> 2
THE CERPLEX GROUP, INC.
1382 BELL AVENUE
TUSTIN, CALIFORNIA 92780
Dear Stockholder:
On behalf of the Board of Directors, you are cordially invited to attend
the Special Meeting of Stockholders (the "Meeting") of The Cerplex Group, Inc.
(the "Company") to be held at 3:00 p.m. (Pacific time) on October 5, 1998 at the
offices of the Company located at 1382 Bell Avenue, Tustin, California.
At the Meeting, you will be asked to consider and vote upon the following
proposals:
1. To approve an amendment to the Company's Certificate of
Incorporation, as set forth in Appendix A to the accompanying Proxy
Statement, to effect a one-for-ten reverse stock split of the Company's
Common Stock whereby every ten outstanding shares of Common Stock of the
Company will be combined and converted into one share of Common Stock of
the Company. As a result of the amendment to the Company's Certificate of
Incorporation, the number of authorized shares of Company Common Stock will
be reduced from 300 million to 75 million.
2. To approve and adopt the Company's 1998 Stock Option and
Restricted Stock Purchase Plan as set forth in Appendix B to the
accompanying Proxy Statement, which provides for the grant to employees,
directors and consultants of the Company of options and awards to purchase
up to 28,355,000 (pre-split) shares of Common Stock.
3. To approve KPMG Peat Marwick LLC as the Company's independent
public accountants and auditors.
4. To transact such other business and to consider and take action
upon any and all other matters that may properly come before the Meeting or
any adjournment or adjournments thereof.
You are urged to carefully consider all the material in the Proxy Statement
and mark, sign, date and return the enclosed proxy as soon as possible,
regardless of whether you expect to attend the Meeting. Giving a proxy will not
prevent you from voting in person at the Meeting.
Very truly yours,
George L. McTavish
Chairman of the Board
and Chief Executive Officer
Dated: September 8, 1998
<PAGE> 3
THE CERPLEX GROUP, INC.
1382 BELL AVENUE
TUSTIN, CALIFORNIA 92780
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 5, 1998
------------------------
Dear Stockholders:
NOTICE IS HEREBY GIVEN THAT THE SPECIAL MEETING (the "Meeting") OF
STOCKHOLDERS OF The Cerplex Group, Inc., a Delaware corporation (the "Company"),
will be held at the Company's offices located at 1382 Bell Avenue, Tustin,
California, October 5, 1998 at 3:00 p.m. (Pacific time), to consider and act
upon the following matters.
1. To approve an amendment to the Company's Certificate of
Incorporation, as set forth in Appendix A to the accompanying Proxy
Statement, to effect a one-for-ten reverse stock split of the Company's
Common Stock whereby every ten outstanding shares of Common Stock of the
Company will be combined and converted into one share of Common Stock of
the Company. The amendment would also reduce the number of authorized
shares of Company Common Stock from 300 million to 75 million.
2. To approve and adopt the Company's 1998 Stock Option and
Restricted Stock Purchase Plan as set forth in Appendix B to the
accompanying Proxy Statement, which provides for the grant to employees,
directors and consultants of the Company of options and awards to purchase
up to 28,355,000 (pre-split) shares of Common Stock.
3. To approve KPMG Peat Marwick LLC as the Company's independent
public accountants and auditors.
4. To transact such other business and to consider and take action
upon any and all other matters that may properly come before the Meeting or
any adjournment or adjournments thereof.
The Board of Directors knows of no other matters that will be presented for
consideration at the Meeting.
The Board of Directors has fixed the close of business on September 4, 1998
as the record date for the determination of stockholders entitled to vote at the
Meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE DATE,
SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED AS PROMPTLY AS
POSSIBLE. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
By Order of the Board of Directors
Philip E. Pietrowski
Secretary
Tustin, California
September 8, 1998
<PAGE> 4
PROXY STATEMENT
OF
THE CERPLEX GROUP, INC.
1382 BELL AVENUE
TUSTIN, CALIFORNIA 92780
------------------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 5, 1998
------------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to holders of common stock, par
value $0.03 per share (the "Common Stock"), of The Cerplex Group, Inc., a
Delaware corporation (the "Company"), and holders of convertible preferred stock
and series B, series C and series D convertible preferred stock, each par value
$.01, of the Company (all such convertible preferred stock is collectively
referred to herein as the "Convertible Preferred Stock"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Special Meeting of Stockholders scheduled to be held at the Company's principal
offices located at 1382 Bell Avenue, Tustin, California on October 5, 1998 and
at any and all adjournments or postponements thereof (the "Meeting").
It is anticipated that this Proxy Statement and the accompanying form of
proxy will first be sent to stockholders on or about September 10, 1998. Only
stockholders of record at the close of business on September 4, 1998 are
entitled to vote at the Meeting.
At the Meeting, stockholders will consider and vote upon proposals (i) to
approve an amendment to the Company's Certificate of Incorporation to effect a
one-for-ten reverse stock split of the Common Stock (the "Charter Amendment"),
(ii) to approve the Company's 1998 Stock Option and Restricted Stock Purchase
Plan (the "1998 Stock Plan") which provides for the grant to employees,
directors and consultants of the Company of options and awards to purchase up to
28,355,000 (pre-split) shares of Common Stock, (iii) to approve KPMG Peat
Marwick LLC as the Company's independent public accountants and auditors (the
"New Auditors"), and (iv) to consider such other business as may properly come
before the Meeting.
REVOCABILITY OF PROXIES
A proxy for use at the Meeting is enclosed. Any stockholder who executes
and delivers such proxy may revoke it at any time prior to its use by: (i)
filing with the Secretary of the Company a notice of revocation of proxy or a
valid proxy bearing a later date, or (ii) by attending the Meeting and voting in
person.
SOLICITATION OF PROXIES
This proxy solicitation is being made by the Board of Directors of the
Company. The expense of the solicitation will be paid by the Company. It is
contemplated that proxies will be solicited through the mail.
OUTSTANDING SECURITIES
The Board of Directors has fixed September 4, 1998 as the record date (the
"Record Date") for the determination of stockholders entitled to notice of, and
to vote at, the Meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote 70,684,297 shares of Common Stock and, in the
aggregate, 259,500 shares of Convertible Preferred Stock. The Convertible
Preferred Stock is entitled to vote together with the Common Stock on an
as-converted basis and converts into an aggregate approximate 88.5 million
shares of Common Stock.
<PAGE> 5
VOTE REQUIRED AND VOTING PROCEDURES
Each holder of Common Stock will be entitled to one vote, in person or by
proxy, for each share standing in its name on the books of the Company as of the
Record Date on each of the matters duly presented for a vote at the Meeting.
Each holder of Convertible Preferred Stock will be entitled to one vote, in
person or by proxy, together with the Common Stock as a single class on each of
the matters duly presented for a vote at the Meeting, for each share of Common
Stock that would be issuable to such holder upon the conversion of all the
shares of Convertible Preferred Stock held by such holder as of such Record
Date.
Also in a separate class vote, each holder of Convertible Preferred Stock
is entitled to one vote, in person or by proxy, for each share standing in its
name on the books of the Company as of the Record Date on each of the matters
duly presented for a vote at the Meeting. The affirmative vote of the holders of
a majority of the outstanding shares of Convertible Preferred Stock on each of
the proposals presented herein was obtained pursuant to a Written Consent of
Stockholders dated September 1, 1998.
In connection with the solicitation by the Board of Directors of proxies
for use at the Meeting, the Board of Directors has designated each of George L.
McTavish, Chairman of the Board and Chief Executive Officer, and Steve Korby,
Executive Vice President and Chief Financial Officer, as proxies. Shares
represented by all properly executed proxies will be voted at the Meeting in
accordance with the instructions specified thereon. If no instructions are
specified, the shares represented by any properly executed proxy will be voted
FOR all proposals.
The Board of Directors is not aware of any matters that will come before
the Meeting other than as described above. However, if such matters are
presented, the named proxies will, in the absence of instructions to the
contrary, vote such proxy in accordance with the judgment of such named proxies
with respect to any such other matter properly coming before the Meeting.
A majority of the votes entitled to be cast by the outstanding shares of
Common Stock and Convertible Preferred Stock, voting together as a single class
(said Convertible Preferred Stock, together with the Common Stock sometimes
collectively referred to herein as the "Voting Stock"), must be represented in
person or by proxy at the Meeting in order to constitute a quorum for the
transaction of business. The affirmative vote of the holders of a majority of
the outstanding shares of Voting Stock is required for the approval of the
Charter Amendment, the 1998 Stock Plan and the New Auditors.
WELSH, CARSON, ANDERSON & STOWE VII, L.P. AND AFFILIATES ("WCAS"), THE
COMPANY'S PRINCIPAL STOCKHOLDERS, WHICH OWN APPROXIMATELY 70% OF THE OUTSTANDING
SHARES OF VOTING STOCK, HAVE AGREED TO VOTE THEIR SHARES IN FAVOR OF THE CHARTER
AMENDMENT, THE 1998 STOCK PLAN AND THE NEW AUDITORS.
The affirmative vote of the holders of a majority of the outstanding shares
of the Convertible Preferred Stock, voting as a separate class, is also required
and has been obtained for the approval of the Charter Amendment and the 1998
Stock Plan.
Abstentions will be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of votes cast with respect to each proposal. Accordingly,
abstentions as to the approval of the Charter Amendment, the 1998 Stock Plan and
the New Auditors will have the same effect as a vote against such proposals.
A proxy submitted by a stockholder may indicate that all or a portion of
the shares of Voting Stock represented by such proxy are not being voted by such
stockholder with respect to a particular matter. This could occur, for example,
when a broker is not permitted to vote stock held in street name on certain
matters in the absence of instructions from the beneficial owner of the stock.
The shares subject to any such proxy which are not being voted with respect to a
particular matter will be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of votes cast with respect to such proposal. Accordingly, such
non-votes as to the approval of the Charter Amendment, the 1998 Stock Plan and
the New Auditors will have the same effect as a vote against such proposals.
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<PAGE> 6
INSPECTOR OF ELECTIONS
The Board of Directors has appointed American Stock Transfer & Trust
Company as the Inspector of Elections for the Meeting. The Inspector of
Elections will determine the number of shares of Voting Stock represented in
person or by proxy at the Meeting, whether a quorum exists, the authenticity and
validity and the effect of proxies, and will receive and count the votes.
PROPOSAL NO. 1
TO AMEND THE CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT AND REDUCE
THE AUTHORIZED COMMON STOCK
GENERAL
The Board of Directors of the Company has adopted, subject to stockholder
approval, a resolution proposing that the Company amend its Certificate of
Incorporation, substantially in the form of Appendix A attached hereto, to
reduce the outstanding number of shares of Common Stock and effect a reverse
stock split (the "Reverse Stock Split") pursuant to which each ten shares of
Common Stock currently outstanding ("Old Common Stock") will become one share of
the Company's new common stock ("New Common Stock"). The Charter Amendment will
also reduce the number of authorized shares of Common Stock to 75,000,000.
The Certificate of Incorporation presently authorizes 300,000,000 shares of
Common Stock, of which 70,684,297 shares were issued and outstanding as of the
Record Date. In addition, as of the Record Date, 95,871,713 shares of Common
Stock were subject to issuance upon exercise of outstanding warrants, options
and other convertible securities, including the Convertible Preferred Stock.
PURPOSES OF THE REVERSE STOCK SPLIT
In deciding to approve and recommend the Reverse Stock Split, the Board of
Directors of the Company considered that the Common Stock, which is currently
trading at approximately $0.11 a share, may not be appealing to many brokerage
firms which may be reluctant to recommend lower priced securities to their
clients and may discourage individual brokers from dealing in lower priced
stocks, particularly stocks that trade at below $1.00, for various reasons
including the perception that such stocks are unduly speculative. Investors may
also be dissuaded from purchasing lower priced stocks because the brokerage
commissions, as a percentage of the total transaction, tend to be higher for
such stocks. Moreover, the analysts at many brokerage firms will not monitor the
trading activity of lower priced stocks. In addition, the Board of Directors
believes that most investment funds are reluctant to invest in lower priced
stocks. The Board of Directors is hopeful that the Reverse Stock Split will
result in a price level for the Common Stock of the Company that will mitigate
the present reluctance on the part of brokers and investors to trade in the
Company's Common Stock. In addition, the Board of Directors is hopeful that the
Reverse Stock Split will permit the Common Stock to be eligible for quotation on
the Nasdaq National Market, or listed or admitted to trading on a national
securities exchange, which would result in a broader trading market for the
Company's securities. The Company's Common Stock is currently quoted on the
Over-the-Counter Bulletin Board.
There can be no assurance either that (i) the Reverse Stock Split will
result in a price level for the Common Stock of the Company that will mitigate
the present reluctance on the part of brokers and investors to trade in the
Company's Common Stock, especially since there are many other factors that
affect both demand for and price of stock or (ii) the Reverse Split will permit
the Common Stock to be eligible for quotation on the Nasdaq National Market or
listed or admitted to trading on a national securities exchange. The Board of
Directors also considered that the effect of the Reverse Stock Split could be a
decrease in the trading price of the Common Stock. Moreover, the Reverse Stock
Split may result in a stockholder owning an odd lot of Common Stock.
Stockholders may incur higher transactional costs to trade an odd lot of Common
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<PAGE> 7
Stock than he or she would incur to trade a round lot. Generally, an odd lot is
fewer than 100 shares and a round lot is 100 shares.
EFFECTIVENESS OF THE REVERSE STOCK SPLIT
If Proposal No. 1 is approved by the stockholders, the Reverse Stock Split
would become effective at such time as the Company files the Charter Amendment
with the Secretary of State of Delaware (the "Effective Date"). Even if the
Reverse Stock Split is approved by the stockholders, it is within the discretion
of the Board of Directors not to carry out the Reverse Stock Split. Upon the
filing of the Charter Amendment, all the Old Common Stock will be converted into
New Common Stock as set forth in the Charter Amendment. No fractional shares
will be issued. In lieu of any such fractional shares, each holder of Old Common
Stock who would otherwise have been entitled to a fraction of a share of New
Common Stock upon surrender of such holder's certificates will be entitled to
receive a cash payment (without interest) determined by multiplying (i) ten,
(ii) the fractional interest to which such holder would otherwise be entitled
(after taking into account all shares of Old Common Stock then held of record by
such holder) and (iii) the average last sale price of shares of Old Common Stock
for the 20 trading days immediately prior to the Effective Date or, if no such
sale takes place on such days, the average of the closing bid and asked prices
thereof for such days, in each case as officially reported on the
Over-the-Counter Bulletin Board. From and after the Effective Date, certificates
representing shares of Old Common Stock shall be deemed to represent only the
right to receive shares of New Common Stock to which an individual stockholder
is entitled.
CERTIFICATES AND FRACTIONAL SHARES
As soon as practicable after the Effective Date, the Company will request
all stockholders to return their stock certificates representing issued shares
of Old Common Stock outstanding on the Effective Date ("Old Certificates") in
exchange for certificates representing the number of whole shares of New Common
Stock into which the shares of Old Common Stock have been converted ("New
Certificates") as a result of the Reverse Stock Split. Each stockholder will
receive a letter of transmittal from the Company's transfer agent, American
Stock Transfer & Trust Company (the "Transfer Agent"), containing instructions
on how to exchange certificates. STOCKHOLDERS SHOULD NOT SUBMIT THEIR OLD
CERTIFICATES TO THE TRANSFER AGENT UNTIL THEY RECEIVE THESE INSTRUCTIONS. In
order to receive New Certificates, stockholders must surrender their Old
Certificates pursuant to the Transfer Agent's instructions, together with the
properly executed and completed letter of transmittal and such evidence of
ownership of such shares as the Company may require.
Beginning with the Effective Date, each Old Certificate, until surrendered
and exchanged as described above, will be deemed for all corporate purposes to
evidence ownership of the whole number of shares of New Common Stock into which
the shares evidenced by such Old Certificates have been converted.
No fractional shares of New Common Stock will be issued as a result of the
Reverse Stock Split. In lieu of receiving fractional shares, stockholders who
hold a number of shares not evenly divisible immediately prior to the Reverse
Stock Split will be entitled to receive cash for any fractional share, as
described above.
CERTAIN EFFECTS OF THE REVERSE STOCK SPLIT
The principal effect of the Reserve Stock Split will be to decrease the
number of shares of Common Stock outstanding from approximately 70.6 million to
approximately 7.1 million. In addition, the Board of Directors will take
appropriate action to adjust proportionately the number of shares of Common
Stock issuable upon exercise of outstanding warrants, options and other
convertible securities, and to adjust the related exercise and conversion
prices, to reflect the Reverse Stock Split. As a result, following the Effective
Date, the number of shares of Common Stock issuable upon the exercise of
outstanding Convertible Preferred Stock, warrants, options and other convertible
securities will be reduced from 95,871,713 to 9,587,171 shares. In addition, if
both the Charter Amendment and the 1998 Stock Plan proposals are approved,
following the Effective Date, the number of shares of New Common Stock reserved
for issuance under the 1998 Stock Plan will be reduced from 28,355,000 to
2,835,500. The authorized number of shares of Common Stock will be
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<PAGE> 8
reduced from 300,00,000 shares to 75,000,000 shares. The number of authorized
shares of Convertible Preferred Stock will not be affected by the Reverse Stock
Split.
The shares of New Common Stock will be fully paid and non-assessable. The
relative voting and other rights of holders of the New Common Stock will not be
altered by the Reverse Stock Split. Because no fractional shares of New Common
Stock will be issued, any stockholder who owns less than 10 shares of Old Common
Stock will cease to be a stockholder of the Company as of the Effective Date;
nevertheless, the Company does not anticipate that the Reverse Stock Split will
result in any material reduction in the number of holders of Common Stock. Each
stockholder's percentage ownership of the New Common Stock will not be altered
except for the effect of the elimination of fractional shares. The Company
estimates that it will cost less than $2,000 to pay for fractional shares. While
the authorized Common Stock of the Company will be reduced from 300 million
shares to 75 million as a result of the Charter Amendment, because such
reduction will not be in the same proportion as the reduction in the number of
outstanding shares of Common Stock, the overall effect will be an increase in
authorized but unissued shares of Common Stock as a result of the Reverse Stock
Split. Such shares may be issued by the Board of Directors in its discretion.
Any such future issuance will have the effect of diluting the percentage of
stock ownership and voting rights of the present holders of Common Stock. The
Board of Directors has no present plans with respect to such an issuance.
Moreover, while the Board of Directors believes it advisable to authorize
and approve the Reverse Stock Split for the reasons set forth above, the Board
of Directors is aware that the increase in the number of authorized but unissued
shares of Common Stock may have a potential anti-takeover effect in that it
would enhance the ability of the Company to issue additional shares which could
be used to thwart persons, or otherwise dilute the stock ownership of
shareholders seeking to control the Company. In addition, the mere availability
of such additional shares may work to discourage an attempt to acquire control
of the Company other than through negotiations with the Board of Directors. The
Reverse Stock Split is not being recommended by the Board of Directors as part
of an anti-takeover strategy and the Board of Directors has no knowledge of any
party seeking to alter its current stockholding position in the Company.
The Reverse Stock Split will not change the par value of shares of Common
Stock. However, under applicable Delaware law, the total capital of the Company
will not be reduced as a result of the Reverse Stock Split, even though the
aggregate par value of all issued and outstanding shares will be reduced to
one-tenth of the aggregate par value prior to the Reverse Stock Split.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following description of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code"), the
applicable Treasury Regulations promulgated thereunder, judicial authority and
current administrative rulings and practices as in effect on the date of this
Proxy Statement. This discussion is for general information only and does not
discuss consequences which may apply to special classes of taxpayers (for
example, nonresident aliens, broker-dealers or insurance companies) or any
aspects of state, local or foreign tax laws. Stockholders are urged to consult
their own tax advisors to determine the particular tax consequences to them of
the Reverse Stock Split.
The Company has been advised that because the Reverse Stock Split is not
part of a plan to increase periodically a stockholder's proportionate interest
in the assets or earnings and profits of the Company, the Reverse Stock Split
should not result in the recognition by stockholders of any gain or loss for
federal income tax purposes (except to the extent of the cash received in lieu
of fractional shares). The holding period for each share of New Common Stock
received by a stockholder will include the stockholder's holding period for its
shares of Old Common Stock with respect to which such share of New Common Stock
is issued, provided that the shares of Old Common Stock were held as a capital
asset. The adjusted tax basis of each share of New Common Stock received by a
stockholder (including the fractional share for which cash is received) will be
the same as the adjusted tax basis of the shares of Old Common Stock with
respect to which such share of New Common Stock is issued. A stockholder who
receives cash in lieu of a fractional share of New Common Stock generally will
recognize taxable gain or loss equal to the difference, if any, between the
amount of cash
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<PAGE> 9
received and the portion of such stockholder's aggregate adjusted tax basis in
the shares of Old Common Stock allocated to such fractional share.
MISCELLANEOUS
The Board of Directors may abandon the proposed Reverse Stock Split at any
time before or after the Meeting and prior to the filing of the Charter
Amendment if for any reason the Board of Directors deems it advisable to do so.
In addition, the Board of Directors may make any and all changes to the Charter
Amendment that it deems necessary to file the Charter Amendment with the
Delaware Secretary of State and give effect to the Reverse Stock Split.
RECOMMENDATION AND VOTE
Assuming the presence of a quorum, the proposal to amend the Company's
Certificate of Incorporation to effect the Reverse Stock Split requires the
approval by the holders of a majority of the outstanding shares of Voting Stock.
Proxies will be voted for or against such approval in accordance with
specifications marked thereon and, if no specification is made, will be voted
FOR such approval. WCAS, WHICH OWNS MORE THAN A MAJORITY OF THE OUTSTANDING
VOTING STOCK, HAS INDICATED ITS INTENTION TO VOTE IN FAVOR OF THE CHARTER
AMENDMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
EACH PROXY RETURNED TO THE PROXY HOLDERS WILL BE VOTED "FOR" APPROVAL OF THE
REVERSE STOCK SPLIT, UNLESS OTHERWISE INSTRUCTED.
PROPOSAL NO. 2
APPROVAL OF 1998 STOCK PLAN
GENERAL
The Board of Directors is proposing for stockholder approval the 1998 Stock
Option and Restricted Stock Purchase Plan (the "1998 Stock Plan"). The Board of
Directors approved the 1998 Stock Plan in July 1998, subject to stockholder
approval at this Meeting. The purposes of the 1998 Stock Plan are (i) to align
the interests of the Company's stockholders and recipients of options under the
1998 Stock Plan by increasing the proprietary interest of such recipients in the
Company's growth and success, and (ii) to advance the interests of the Company
by attracting and retaining officers, other key employees and well-qualified
non-employee directors. Under the 1998 Stock Plan, the Company may grant
incentive stock options (within the meaning of Section 422 of the Code) and
nonqualified stock options and restricted stock purchase awards to purchase an
aggregate of up to 28,355,000 shares of Common Stock prior to the Reverse Stock
Split. The following summary describes the principal features of the 1998 Stock
Plan and is qualified in its entirety by reference to the specific provisions of
the 1998 Stock Plan, a copy of which is attached hereto as Appendix B.
DESCRIPTION OF THE 1998 STOCK PLAN
Shares and Options Subject to Plan. The 1998 Stock Plan provides for the
grant of options or awards to purchase an aggregate 28,355,000 shares of Common
Stock (subject to adjustment, including in connection with the Reverse Stock
Split), either in the form of incentive stock options intended to meet the
requirements of Section 422 of the Code or non-qualified stock options or
restricted stock purchase awards. The 1998 Stock Plan includes provisions for
adjustment of the number of shares of Common Stock available for grant or award
thereunder and in the number of shares of Common Stock underlying outstanding
options in the event of any stock splits, stock dividends or other relevant
changes in the capitalization of the Company.
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Eligibility. Under the 1998 Stock Plan, employees, including officers, are
eligible to receive grants of either incentive stock options ("ISO") structured
to qualify under Section 422 of the Code, or non-qualified stock options and
restricted stock purchase awards, both of which are not intended to meet the
requirements of Code Section 422. Consultants and non-employee directors are
eligible to be granted only nonqualified options and awards.
Administration. Administration of the 1998 Stock Plan has been delegated
to the Compensation Committee of the Board of Directors, consisting entirely of
"outside directors" within the meaning of Section 162(m) of the Code. The
Compensation Committee, within the parameters of the 1998 Stock Plan, has
authority to determine to whom options or awards are granted, the number of
options or awards granted, and the terms of such options and awards. All
questions of interpretation or application of the 1998 Stock Plan are determined
by the Compensation Committee, whose decisions are final and binding upon all
participants.
Terms of Options and Awards. Each option or award granted will be
evidenced by a stock option or restricted stock purchase agreement.
The Committee will fix the term and vesting provisions of all options
granted pursuant to the Plan, provided, however, that the term of any option
granted may not exceed ten years from the date on which the option is granted.
The exercise price of ISOs may not be less than 100% of the fair market
value of the shares of Common Stock, as determined by the Board of Directors or
the Committee, as the case may be, on the date the option is granted. The
exercise price of non-qualified stock options may be equal to, less than or more
than the fair market value of the shares of Common Stock on the date the option
is granted. In addition, the aggregate fair market value (determined as of the
date an ISO is granted) of the shares of stock with respect to which ISOs are
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000. In addition, no ISO shall be granted to an optionee who owns
more than 10% of the total combined voting power of all classes of stock of the
Company.
Restricted stock purchase awards granted under the 1998 Stock Plan will be
in such amounts and at such times as determined by the Compensation Committee.
The purchase price, as well as the vesting provisions, of such awards shall be
determined by the Compensation Committee and the purchase price may be equal to,
less than or more than the fair market value of the shares of Common Stock to be
awarded.
Term of the 1998 Stock Plan. Assuming stockholder approval, the 1998 Stock
Plan will be effective as of July 28, 1998 and will continue in effect until
July 28, 2008.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of incentive stock options, non-qualified stock
options and restricted stock purchase awards are quite complex. Therefore, the
description of tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the tax consequences under applicable state
and local income tax laws may not be the same as under the federal income tax
laws.
Incentive stock options granted pursuant to the 1998 Stock Plan are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Code. If an optionee does not dispose of the shares acquired pursuant
to exercise of an incentive stock option within one year after the transfer of
such shares to the optionee and within two years from grant of the option (the
"ISO holding period requirements"), such optionee will recognize no taxable
income as a result of the grant or exercise of such option. (However, for
alternative minimum tax purposes the optionee will recognize as an item of tax
preference the difference between the fair market value of the shares received
upon exercise and the exercise price.) Any gain or loss that is subsequently
recognized upon a sale or exchange of the shares may be treated by the optionee
as long-term capital gain or loss, as the case may be. The Company will not be
entitled to a deduction for federal
7
<PAGE> 11
income tax purposes with respect to the issuance of an incentive stock option,
the transfer of shares upon exercise of the option or the ultimate disposition
of such shares (provided the ISO holding period requirements are satisfied).
If shares received upon exercise of an incentive stock option are disposed
of prior to satisfaction of the ISO holding period requirements, the optionee
generally will recognize taxable ordinary income, in the year in which such
disqualifying disposition occurs, in an amount equal to the lesser of (i) the
excess of the fair market value of the shares on the date of exercise over the
exercise price, and (ii) the gain recognized on such disposition. Such amount
will ordinarily be deductible by the Company for federal income tax purposes in
the same year, provided that the Company satisfies certain federal income tax
information reporting requirements. In addition, the excess, if any, of the
amount realized by the optionee on such disqualifying disposition over the fair
market value of the shares on the date of exercise of the incentive stock option
will be treated as capital gain, long-term or short-term, depending on whether,
after exercise of the option, the shares were held for more than one year (the
applicable long-term capital gain holding period) prior to such disposition.
Non-qualified stock options may be granted under the 1998 Stock Plan. An
optionee generally will not recognize any taxable income upon grant of a
non-qualified stock option. The optionee will recognize taxable ordinary income,
at the time of exercise of such option, in an amount equal to the excess of the
fair market value of the shares on the date of exercise over the exercise price.
Such amount will ordinarily be deductible by the Company in the same year,
provided that the Company satisfies certain federal income tax information
reporting requirements. Any gain or loss that is subsequently recognized by the
optionee upon a sale or exchange of the shares will be capital gain or loss,
long-term or short-term, depending on whether, after the exercise of the option,
the shares were held for more than one year prior to such sale or exchange.
Restricted stock purchase awards may also be granted pursuant to the 1998
Stock Plan. A recipient of a restricted stock purchase award generally will not
recognize taxable income upon the purchase of shares of restricted stock, unless
he or she makes a timely election under Section 83(b) of the Code. Such a
recipient, however, would recognize taxable ordinary income (and the holding
period for such shares would commence) at the time that such shares become
vested, in an amount equal to the excess of the fair market value of the shares
at that time over the purchase price paid for such shares. If, on the other
hand, the recipient makes a timely election under Section 83(b), he or she would
recognize taxable ordinary income (and the holding period for such shares would
commence) at the time of purchase, in an amount equal to the excess of the fair
market value of the shares at that time (determined without regard to any
transfer restrictions imposed on the shares, vesting provisions or any
restrictions imposed by the securities laws) over the purchase price paid for
such shares. In either case, the Company should be entitled to a deduction in an
amount equal to the ordinary income recognized by the recipient in the same year
that the recipient recognized such income, provided that the Company satisfies
certain federal income tax information reporting requirements. Any gain or loss
that is subsequently recognized by the recipient upon a sale or exchange of the
shares will be capital gain or loss, long-term or short-term, depending on
whether the shares were held for more than one year prior to such sale or
exchange.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Assuming the presence of a quorum, the proposal to adopt the 1998 Stock
Plan requires the approval by the holders of a majority of the outstanding
shares of Voting Stock. Proxies will be voted for or against such approval in
accordance with specifications marked thereon and, if no specification is made,
will be voted FOR such approval. WCAS, WHICH OWNS MORE THAN A MAJORITY OF THE
OUTSTANDING VOTING STOCK, HAS INDICATED ITS INTENTION TO VOTE IN FAVOR OF THE
1998 STOCK PLAN.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
EACH PROXY RETURNED TO THE PROXY HOLDERS WILL BE VOTED FOR APPROVAL OF THE 1998
STOCK PLAN UNLESS OTHERWISE INSTRUCTED.
8
<PAGE> 12
PROPOSAL NO. 3
TO APPROVE THE NEW AUDITORS
KPMG Peat Marwick LLP ("KPMG") has been selected by the Board of Directors
to serve as the Company's principal accounting firm for the 1998 fiscal year.
Representatives of KPMG are expected to be present at the Meeting, will have the
opportunity to make a statement if they so desire, and are expected to be
available to respond to appropriate questions.
Arthur Andersen LLP ("Andersen") was the principal accounting firm for the
Company when the Company operated under the name Aurora Electronics, Inc
("Aurora"). KPMG was the principal accounting firm for Cerplex, Inc. (formerly
known as The Cerplex Group)("Old Cerplex"), which was acquired by the Company in
a merger on April 30, 1998. As a result of the merger, the Company changed its
name from Aurora Electronics, Inc. to The Cerplex Group, Inc. and eliminated
certain operations relating to the business conducted by Aurora. In July 1998,
Andersen's appointment as principal accountant was terminated and the Company
engaged KPMG as the Company's principal accountant. The Company's Board of
Directors approved the decision to change accountants. The opinion of Andersen
on its report dated January 12, 1998 did not contain any adverse opinions or
disclaimers of opinions or modifications as to uncertainty, audit scope or
accounting principles, except that such opinion included an explanatory
paragraph which expressed substantial doubt as to the Company's ability to
continue as a going concern. There were no disagreements between the Company and
Andersen on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedures, which disagreements, if
not resolved to the satisfaction of Andersen, would have caused it to make
reference to the subject matter of the disagreements in connection with its
report.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Assuming the presence of a quorum, the proposal to engage the New Auditors
requires the approval by the holders of a majority of the outstanding shares of
Voting Stock. Proxies will be voted for or against such approval in accordance
with specifications marked thereon and, if no specification is made, will be
voted FOR such approval. WCAS, WHICH OWNS MORE THAN A MAJORITY OF THE
OUTSTANDING VOTING STOCK, HAS INDICATED ITS INTENTION TO VOTE IN FAVOR OF THE
NEW AUDITORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL.
EACH PROXY RETURNED TO THE PROXY HOLDERS WILL BE VOTED FOR APPROVAL OF
APPOINTMENT OF THE NEW AUDITORS UNLESS OTHERWISE INSTRUCTED.
OTHER MATTERS
The Company does not know of any matter other than those discussed in the
foregoing materials contemplated for action at the Meeting. Should any other
matter be properly brought before the Meeting, the holders of the proxies herein
solicited will vote thereon in their discretion.
By order of the Board of Directors
Philip E. Pietrowski
September 8, 1998 Secretary
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<PAGE> 13
APPENDIX A
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
THE CERPLEX GROUP, INC.
The undersigned, the President and Secretary of The Cerplex Group, Inc., a
Delaware corporation (the "Corporation"), do hereby certify as follows:
1. The Board of Directors of The Cerplex Group, Inc. duly adopted a
resolution, in accordance with Section 242 of the General Corporation Law
of the State of Delaware, to amend the Certificate of Incorporation of The
Cerplex Group, Inc. to effect a one-for-ten reverse stock split on the
Common Stock and declaring the advisability thereof.
2. At the Special Meeting of Stockholders held on October 5, 1998,
duly called and held in accordance with the provisions of Section 222 of
the General Corporation Law of the State of Delaware, a majority of the
shares of the outstanding stock entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote thereon as a class,
were voted in favor of such amendment in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
3. Paragraph (A) of Article Fourth of the Certificate of
Incorporation of the Corporation is hereby amended in its entirety to read
as follows:
"(A) The total number of shares of all classes of stock which the
Company shall have the authority to issue is 76,000,000 shares,
consisting of 75,000,000 shares of Common Stock $0.03 par value, and
1,000,000 shares of Preferred Stock, $0.01 par value. Upon amendment of
this Article as herein set forth (the "Effective Date"), each ten (10)
shares of Common Stock issued and outstanding on the Effective Date (the
"Old Common Stock") shall be converted into one (1) share of Common
Stock (the "New Common Stock"), subject to the treatment of fractional
share interests as described below. A holder of each such 10 shares of
Old Common Stock shall be entitled to receive upon surrender of the
certificates representing such Old Common Stock (the "Old Certificates,"
whether one or more) to the Company's Transfer Agent for cancellation, a
certificate or certificates (the "New Certificates," whether one or
more) representing the number of whole shares of the New Common Stock
into which and for which the shares of the Old Common Stock formerly
represented by such Old Certificates so surrendered, are reclassified
under the terms hereof. From and after the Effective Date, Old
Certificates shall represent only the right to receive New Certificates
pursuant to the provisions hereof. No certificates or scrip representing
fractional share interests in New Common Stock will be issued, and no
such fractional share interest will entitle the holder thereof to vote,
or to any rights of a shareholder of the Company. In lieu of any such
fractional shares, each holder of Common Stock who would otherwise have
been entitled to a fraction of a share of Common Stock upon surrender of
such holder's Certificates will be entitled to receive a cash payment
(without interest) determined by multiplying (i) ten, (ii) the
fractional interest to which such holder would otherwise be entitled
(after taking into account all shares of Old Common Stock then held of
record by such holder) and (iii) the average last sale price of shares
of Old Common Stock for the 20 trading days immediately prior to the
Effective Date or, if no such sale takes place on such days, the average
of the closing bid and asked prices thereof for such days, in each case
as officially reported on the OTC Bulletin Board. If more than one Old
Certificate shall be surrendered at one time for the account of the same
stockholder, the number of full shares of New Common Stock for which New
Certificates shall be issued shall be computed on the basis of the
aggregate number of shares represented by the Old Certificates so
surrendered. In the event that the Company's Transfer Agent determines
that a holder of Old Certificates has not tendered all his or
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<PAGE> 14
her certificates for exchange, the Transfer Agent shall carry forward
any fractional share until all certificates of that holder have been
presented for exchange such that payment for fractional shares to any
one person shall not exceed the value of one share. If any New
Certificate is to be issued in a name other than that in which the Old
Certificates surrendered for exchange are issued, the Old Certificates
so surrendered shall be properly endorsed and otherwise in proper form
for transfer, and the person or persons requesting such exchange shall
affix any requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent that such taxes are not payable. From
and after the Effective Date the amount of capital represented by the
shares of the New Common Stock into which and for which the shares of
the Old Common Stock are reclassified under the terms hereof shall be
the same as the amount of capital represented by the shares of Old
Common Stock so reclassified, until thereafter reduced or increased in
accordance with applicable law."
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
, 1998.
The Cerplex Group, Inc.
By:
------------------------------------
George L. McTavish
Chairman and Chief Executive Officer
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<PAGE> 15
APPENDIX B
THE CERPLEX GROUP, INC.
AND ITS SUBSIDIARIES
STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN
Section 1. Purpose. The purpose of The Cerplex Group, Inc. and its
Subsidiaries Stock Option and Restricted Stock Purchase Plan (the "Plan") is to
promote the interests of The Cerplex Group, Inc., a Delaware corporation (the
"Company"), and any Subsidiary thereof and the interests of the Company's
stockholders by providing an opportunity to selected employees, officers and
directors of the Company or any Subsidiary thereof as of the date of the
adoption of the Plan or at any time thereafter to purchase Common Stock of the
Company. By encouraging such stock ownership, the Company seeks to attract,
retain and motivate such employees and other persons and to encourage such
employees and other persons to devote their best efforts to the business and
financial success of the Company. It is intended that this purpose will be
effected by the granting of "non-qualified stock options" and/or "incentive
stock options" to acquire the Common Stock of the Company and/or by the granting
of rights to purchase the Common Stock of the Company on a "restricted stock"
basis. Under the Plan, the Committee shall have the authority (in its sole
discretion) to grant "incentive stock options" within the meaning of Section
422(b) of the Code, "non-qualified stock options" as described in Treasury
Regulation Section 1.83-7 or any successor regulation thereto, or "restricted
stock" awards.
No grant of "incentive stock options" shall be made under this Plan unless
such Plan is approved by the stockholders of the Company within 12 months of the
date of the adoption of such Plan.
Section 2. Definitions. For purposes of the Plan, the following terms
used herein shall have the following meanings, unless a different meaning is
clearly required by the context:
2.1. "Award " shall mean an award of the right to purchase Common Stock
granted under the provisions of Section 7 of the Plan.
2.2. "Board of Directors" shall mean the Board of Directors of the
Company.
2.3. "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.4. "Committee" shall mean the committee of the Board of Directors
referred to in Section 5 hereof; provided that if no such committee is appointed
by the Board of Directors, the Board of Directors shall have all of the
authority and obligations of the Committee under the Plan.
2.5. "Common Stock" shall mean the Common Stock, $.03 par value, of the
Company.
2.6. "Employee" shall mean (i) with respect to an ISO, any person,
including, without limitation, an officer of the Company, who, at the time an
ISO is granted to such person hereunder, is employed by the Company, any Parent
or Subsidiary thereof, and (ii) with respect to a Non-Qualified Option and/or an
Award, any person employed by, or performing services for, the Company or any
Parent or Subsidiary thereof, including, without limitation, directors,
consultants and officers.
2.7. "ISO" shall mean an Option granted to a Participant pursuant to the
Plan that constitutes and shall be treated as an "incentive stock option" as
defined in Section 422(b) of the Code.
2.8. "Non-Qualified Option" shall mean an Option granted to a Participant
pursuant to the Plan that is intended to be, and qualifies as, a "non-qualified
stock option" as described in Treasury Regulation Section 1.83-7 or any
successor regulation thereto and that shall not constitute or be treated as an
ISO.
2.9. "Option" shall mean any ISO or Non-Qualified Option granted to an
Employee pursuant to the Plan.
2.10. "Participant" shall mean any Employee to whom an Award and/or an
Option is granted under the Plan.
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<PAGE> 16
2.11. "Parent" of the Company shall have the meaning set forth in Section
424(e) of the Code.
2.12. "Subsidiary" of the Company shall have the meaning set forth in
Section 424(f) of the Code.
Section 3. Eligibility. Awards and/or Options may be granted to any
Employee. The Committee shall have the sole authority to select the persons to
whom Awards and/or Options are to be granted hereunder, and to determine whether
a person is to be granted a Non-Qualified Option, an ISO or an Award or any
combination thereof. No person shall have any right to participate in the Plan.
Any person selected by the Committee for participation during any one period
will not by virtue of such participation have the right to be selected as a
Participant for any other period.
Section 4. Common Stock Subject to the Plan.
4.1. Number of Shares. The total number of shares of Common Stock for
which Options and/or Awards may be granted under the Plan shall not exceed in
the aggregate 28,355,000 shares of Common Stock (subject to adjustment as
provided in Section 8 hereof).
4.2. Reissuance. The shares of Common Stock that may be subject to
Options and/or Awards granted under the Plan may be either authorized and
unissued shares or shares reacquired at any time and now or hereafter held as
treasury stock as the Committee may determine. In the event that any outstanding
Option expires or is terminated for any reason, the shares allocable to the
unexercised portion of such Option may again be subject to an Option and/or
Award granted under the Plan. If any shares of Common Stock issued or sold
pursuant to an Award or the exercise of an Option shall have been repurchased by
the Company, then such shares may again be subject to an Option and/or Award
granted under the Plan.
4.3. Special ISO Limitations.
(a) The aggregate fair market value (determined as of the date an ISO is
granted) of the shares of Common Stock with respect to which ISOs are
exercisable for the first time by an Employee during any calendar year (under
all incentive stock option plans of the Company or any Parent or Subsidiary of
the Company) shall not exceed $100,000.
(b) No ISO shall be granted to an Employee who, at the time the ISO is
granted, owns (actually or constructively under the provisions of Section 424(d)
of the Code) stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company, unless (i) the option price is at least 110% of the fair market value
(determined as of the time the ISO is granted) of the shares of Common Stock
subject to the ISO and (ii) the ISO by its terms is not exercisable more than
five years from the date it is granted.
4.4. Limitations Not Applicable to Non-Qualified Options or
Awards. Notwithstanding any other provision of the Plan, the provisions of
Sections 4.3(a) and (b) shall not apply, nor shall be construed to apply, to any
Non-Qualified Option or Award granted under the Plan.
Section 5. Administration of the Plan.
5.1. Administration. Subject to the proviso in Section 2.4 hereof, the
Plan shall be administered by a committee of the Board of Directors (the
"Committee") established by the Board of Directors and consisting of no less
than three persons. All members of the Committee shall be "Non-Employee
Directors" within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company becomes a "publicly held corporation" within the meaning of Section
162(m) of the Code and the regulations thereunder and any successor provision
thereto (the "Section 162(m) Provisions"), all members of the Committee shall be
"outside directors" within the meaning of the Section 162(m) Provisions no later
than the earliest applicable date described in Treasury Regulation Section
1.162-27(f)(2) (the "Transition Date"). The Committee shall be appointed from
time to time by, and shall serve at the pleasure of, the Board of Directors.
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<PAGE> 17
5.2. Grant of Options/Awards.
(a) Options. The Committee shall have the sole authority and discretion
under the Plan (i) to select the Employees who are to be granted Options
hereunder; (ii) to designate whether any Option to be granted hereunder is to be
an ISO or a Non-Qualified Option; (iii) to establish the number of shares of
Common Stock that may be subject to each Option; (iv) to determine the time and
the conditions subject to which Options may be exercised in whole or in part;
(v) to determine the amount (not less than the par value per share) and the form
of the consideration that may be used to purchase shares of Common Stock upon
exercise of any Option (including, without limitation, the circumstances under
which issued and outstanding shares of Common Stock owned by a Participant may
be used by the Participant to exercise an Option); (vi) to impose restrictions
and/or conditions with respect to shares of Common Stock acquired upon exercise
of an Option; (vii) to determine the circumstances under which shares of Common
Stock acquired upon exercise of any Option may be subject to repurchase by the
Company; (viii) to determine the circumstances and conditions subject to which
shares acquired upon exercise of an Option may be sold or otherwise transferred,
including, without limitation, the circumstances and conditions subject to which
a proposed sale of shares of Common Stock acquired upon exercise of an Option
may be subject to the Company's right of first refusal (as well as the terms and
conditions of any such right of first refusal); (ix) to establish a vesting
provision for any Option relating to the time when (or the circumstances under
which) the Option may be exercised by a Participant, including, without
limitation, vesting provisions that may be contingent upon (A) the Company's
meeting specified financial goals, (B) a change of control of the Company or (C)
the occurrence of other specified events; (x) to accelerate the time when
outstanding Options may be exercised, provided, however, that any ISOs shall be
deemed "accelerated" within the meaning of Section 424(h) of the Code; and (xi)
to establish any other terms, restrictions and/or conditions applicable to any
Option not inconsistent with the provisions of the Plan. Notwithstanding the
foregoing, however, in the event that the Company becomes a "publicly held
corporation" within the meaning of the Section 162(m) Provisions, the Committee
will not on or after the Transition Date grant any Non-Qualified Option to any
Employee who is likely to be a "covered employee" within the meaning of the
Section 162(m) Provisions, unless the grant of such Non-Qualified Option
complies with the requirements set forth in the Section 162(m) Provisions with
respect to the Company's entitlement to a deduction upon the exercise of such
Non-Qualified Option, including without limitation the requirements relating to
objective performance goals established by the Committee and shareholder
approval.
(b) Awards. The Committee shall have the sole authority and discretion
under the Plan (i) to select the Employees who are to be granted Awards
hereunder; (ii) to determine the amount to be paid by a Participant to acquire
shares of Common Stock pursuant to an Award, which amount may be equal to, more
than, or less than 100% of the fair market value of such shares on the date the
Award is granted (but in no event less than the par value of such shares); (iii)
to determine the time or times and the conditions subject to which Awards may be
made; (iv) to determine the time or times and the conditions subject to which
the shares of Common Stock subject to an Award are to become vested and no
longer subject to repurchase by the Company; (v) to establish transfer
restrictions and the terms and conditions on which any such transfer
restrictions with respect to shares of Common Stock acquired pursuant to an
Award shall lapse; (vi) to establish vesting provisions with respect to any
shares of Common Stock subject to an Award, including, without limitation,
vesting provisions which may be contingent upon (A) the Company's meeting
specified financial goals, (B) a change of control of the Company or (C) the
occurrence of other specified events; (vii) to determine the circumstances under
which shares of Common Stock acquired pursuant to an Award may be subject to
repurchase by the Company; (viii) to determine the circumstances and conditions
subject to which any shares of Common Stock acquired pursuant to an Award may be
sold or otherwise transferred, including, without limitation, the circumstances
and conditions subject to which a proposed sale of shares of Common Stock
acquired pursuant to an Award may be subject to the Company's right of first
refusal (as well as the terms and conditions of any such right of first
refusal); (ix) to determine the form of consideration that may be used to
purchase shares of Common Stock pursuant to an Award (including, without
limitation, the circumstances under which issued and outstanding shares of
Common Stock owned by a Participant may be used by the Participant to purchase
the Common Stock subject to an Award); (x) to accelerate the time at which any
or all restrictions imposed with respect to any shares of Common Stock subject
to an Award will lapse; and (xi) to establish any other terms, restrictions
and/or conditions applicable to any Award not
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<PAGE> 18
inconsistent with the provisions of the Plan. Notwithstanding the foregoing,
however, in the event that the Company becomes a "publicly held corporation"
within the meaning of the Section 162(m) Provisions, the Committee will not on
or after the Transition Date grant any Award to any Employee who is likely to be
a "covered employee" within the meaning of the Section 162(m) Provisions, unless
the grant of such Award complies with the requirements set forth in the Section
162(m) Provisions with respect to the Company's entitlement to a deduction upon
the exercise of such Award, including without limitation the requirements
relating to objective performance goals established by the Committee and
shareholder approval.
5.3. Interpretation. The Committee shall be authorized to interpret the
Plan and may, from time to time, adopt such rules and regulations, not
inconsistent with the provisions of the Plan, as it may deem advisable to carry
out the purposes of the Plan.
5.4. Finality. The interpretation and construction by the Committee of
any provision of the Plan, any Option and/or Award granted hereunder or any
agreement evidencing any such Option and/or Award shall be final and conclusive
upon all parties.
5.5. Expenses, Etc. All expenses and liabilities incurred by the
Committee in the administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons in
connection with the administration of the Plan. The Company, and its officers
and directors, shall be entitled to rely upon the advice, opinions or valuations
of any such persons. No member of the Committee shall be liable for any action,
determination or interpretation taken or made in good faith with respect to the
Plan or any Option and/or Award granted hereunder.
Section 6. Terms and Conditions of Options.
6.1. ISOs. The terms and conditions of each ISO granted under the Plan
shall be specified by the Committee and shall be set forth in an ISO agreement
between the Company and the Participant in such form as the Committee shall
approve. The terms and conditions of each ISO shall be such that each ISO issued
hereunder shall constitute and shall be treated as an "incentive stock option"
as defined in Section 422(b) of the Code. The terms and conditions of any ISO
granted hereunder need not be identical to those of any other ISO granted
hereunder.
The terms and conditions of each ISO shall include the following:
(a) The option price shall be fixed by the Committee but shall in no
event be less than 100% (or 110% in the case of an Employee referred to in
Section 4.3(b) hereof) of the fair market value of the shares of Common
Stock subject to the ISO on the date the ISO is granted. For purposes of
the Plan, the fair market value per share of Common Stock as of any day
shall mean the average of the closing prices of sales of shares of Common
Stock on all national securities exchanges on which the Common Stock may at
the time be listed or, if there shall have been no sales on any such day,
the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if on any day the Common Stock shall
not be so listed, the average of the representative bid and asked prices
quoted in the NASDAQ system as of 3:30 p.m., New York time, on such day,
or, if on any day the Common Stock shall not be quoted in the NASDAQ
system, the average of the high and low bid and asked prices on such day in
the over-the-counter market as reported by National Quotation Bureau
Incorporated, or any similar successor organization. If at any time the
Common Stock is not listed on any national securities exchange or quoted in
the NASDAQ system or the over-the-counter market, the fair market value of
the shares of Common Stock subject to an Option on the date the ISO is
granted shall be the fair market value thereof determined in good faith by
the Board of Directors.
(b) ISOs, by their terms, shall not be transferable otherwise than by
will or the laws of descent and distribution, and, during a Participant's
lifetime, an ISO shall be exercisable only by the Participant.
(c) The Committee shall fix the term of all ISOs granted pursuant to
the Plan (including, without limitation, the date on which such ISO shall
expire and terminate); provided, however, that such term shall in no event
exceed ten years from the date on which such ISO is granted (or, in the
case of an ISO granted to an Employee referred to in Section 4.3(b) hereof,
such term shall in no event exceed five years
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from the date on which such ISO is granted). Each ISO shall be exercisable
in such amount or amounts, under such conditions and at such times or
intervals or in such installments as shall be determined by the Committee
in its sole discretion.
(d) To the extent that the Company or any Parent or Subsidiary of the
Company is required to withhold any Federal, state or local taxes in
respect of any compensation income realized by any Participant as a result
of any "disqualifying disposition" of any shares of Common Stock acquired
upon exercise of an ISO granted hereunder, the Company shall deduct from
any payments of any kind otherwise due to such Participant the aggregate
amount of such Federal, state or local taxes required to be so withheld or,
if such payments are insufficient to satisfy such Federal, state or local
taxes, such Participant will be required to pay to the Company, or make
other arrangements satisfactory to the Company regarding payment to the
Company of, the aggregate amount of any such taxes. All matters with
respect to the total amount of taxes to be withheld in respect of any such
compensation income shall be determined by the Board of Directors, in its
sole discretion.
(e) The terms and conditions of each ISO may include the following
provisions:
(i) In the event a Participant's employment on a full-time basis by
the Company or any Parent or Subsidiary of the Company shall be
terminated for cause or shall be terminated by the Participant for any
reason whatsoever other than as a result of the Participant's death or
"disability" (within the meaning of Section 22(e)(3) of the Code), the
unexercised portion of any ISO held by such Participant at that time may
only be exercised within one month after the date on which the
Participant ceased to be so employed, and only to the extent that the
Participant could have otherwise exercised such ISO as of the date on
which he ceased to be so employed.
(ii) In the event a Participant's employment on a full-time basis
by the Company or any Parent or Subsidiary of the Company shall
terminate for any reason other than (x) a termination specified in
clause (i) above or (y) by reason of the Participant's death or
"disability" (within the meaning of Section 22(e)(3) of the Code), the
unexercised portion of any ISO held by such Participant at that time may
only be exercised within three months after the date on which the
Participant ceased to be so employed, and only to the extent that the
Participant could have otherwise exercised such ISO as of the date on
which he ceased to be so employed.
(iii) In the event a Participant shall cease to be employed by the
Company or any Parent or Subsidiary of the Company on a full-time basis
by reason of his "disability" (within the meaning of Section 22(e)(3) of
the Code), the unexercised portion of any ISO held by such Participant
at that time may only be exercised within one year after the date on
which the Participant ceased to be so employed, and only to the extent
that the Participant could have otherwise exercised such ISO as of the
date on which he ceased to be so employed.
(iv) In the event a Participant shall die while in the employ of
the Company or a Parent or Subsidiary of the Company (or within a period
of one month after ceasing to be an Employee for any reason other than
his "disability" (within the meaning of Section 22(e)(3) of the Code) or
within a period of one year after ceasing to be an Employee by reason of
such "disability"), the unexercised portion of any ISO held by such
Participant at the time of his death may only be exercised within one
year after the date of such Participant's death, and only to the extent
that the Participant could have otherwise exercised such ISO at the time
of his death. In such event, such ISO may be exercised by the executor
or administrator of the Participant's estate or by any person or persons
who shall have acquired the ISO directly from the Participant by bequest
or inheritance.
6.2. Non-Qualified Options. The terms and conditions of each
Non-Qualified Option granted under the Plan shall be specified by the Committee,
in its sole discretion, and shall be set forth in a written option agreement
between the Company and the Participant in such form as the Committee shall
approve. The terms and conditions of each Non-Qualified Option will be such (and
each Non-Qualified Option agreement shall expressly so state) that each
Non-Qualified Option issued hereunder shall not constitute nor be treated as an
"incentive stock option" as defined in Section 422(b) of the Code, but will be a
"non-qualified stock option"
B-5
<PAGE> 20
for Federal, state and local income tax purposes. The terms and conditions of
any Non-Qualified Option granted hereunder need not be identical to those of any
other Non-Qualified Option granted hereunder.
The terms and conditions of each Non-Qualified Option Agreement shall
include the following:
(a) The option (exercise) price shall be fixed by the Committee and
may be equal to, more than or less than 100% of the fair market value of
the shares of Common Stock subject to the Non-Qualified Option on the date
such Non-Qualified Option is granted as determined in good faith by the
Committee.
(b) The Committee shall fix the term of all Non-Qualified Options
granted pursuant to the Plan (including, without limitation, the date on
which such Non-Qualified Option shall expire and terminate). Such term may
be more than ten years from the date on which such Non-Qualified Option is
granted. Each Non-Qualified Option shall be exercisable in such amount or
amounts, under such conditions (including, without limitation, provisions
governing the rights to exercise such Non-Qualified Option), and at such
times or intervals or in such installments as shall be determined by the
Committee in its sole discretion.
(c) Non-Qualified Options shall not be transferable otherwise than by
will or the laws of descent and distribution, and during a Participant's
lifetime a Non-Qualified Option shall be exercisable only by the
Participant.
(d) The terms and conditions of each Non-Qualified Option may include
the following provisions:
(i) In the event a Participant's employment on a full-time basis by
the Company or any Parent or Subsidiary of the Company shall be
terminated for cause or shall be terminated by the Participant for any
reason whatsoever other than as a result of the Participant's death or
"disability" (within the meaning of Section 22(e)(3) of the Code), the
unexercised portion of any Non-Qualified Option held by such Participant
at that time may only be exercised within one month after the date on
which the Participant ceased to be an Employee, and only to the extent
that the Participant could have otherwise exercised such Non-Qualified
Option as of the date on which he ceased to be an Employee.
(ii) In the event a Participant's employment on a full-time basis
by the Company or any Parent or Subsidiary of the Company shall
terminate for any reason other than (x) a termination specified in
clause (i)above or (y) by reason of the Participant's death or
"disability" (within the meaning of Section 22(e)(3) of the Code), the
unexercised portion of any Non-Qualified Option held by such Participant
at that time may only be exercised within three months after the date on
which the Participant ceased to be an Employee, and only to the extent
that the Participant could have otherwise exercised such Non-Qualified
Option as of the date on which he ceased to be an Employee.
(iii) In the event a Participant shall cease to be an Employee of
the Company or any Parent or Subsidiary of the Company on a full-time
basis by reason of his "disability" (within the meaning of Section
22(e)(3) of the Code), the unexercised portion of any Non-Qualified
Option held by such Participant at that time may only be exercised
within one year after the date on which the Participant ceased to be an
Employee, and only to the extent that the Participant could have
otherwise exercised such Non-Qualified Option as of the date on which he
ceased to be an Employee.
(iv) In the event a Participant shall die while an Employee of the
Company or a Parent or Subsidiary of the Company (or within a period of
one month after ceasing to be an Employee for any reason other than his
"disability" (within the meaning of Section 22(e)(3) of the Code) or
within a period of one year after ceasing to be an Employee by reason of
such "disability"), the unexercised portion of any Non-Qualified Option
held by such Participant at the time of his death may only be exercised
within one year after the date of such Participant's death, and only to
the extent that the Participant could have otherwise exercised such
Non-Qualified Option at the time of his death. In such event, such
Non-Qualified Option may be exercised by the executor or administrator
of the
B-6
<PAGE> 21
Participant's estate or by any person or persons who shall have acquired
the Non-Qualified Option directly from the Participant by bequest or
inheritance.
(e) To the extent that the Company is required to withhold any
Federal, state or local taxes in respect of any compensation income
realized by any Participant in respect of a Non-Qualified Option granted
hereunder or in respect of any shares of Common Stock acquired upon
exercise of a Non-Qualified Option, the Company shall deduct from any
payments of any kind otherwise due to such Participant the aggregate amount
of such Federal, state or local taxes required to be so withheld or, if
such payments are insufficient to satisfy such Federal, state or local
taxes, or if no such payments are due or to become due to such Participant,
then, such Participant will be required to pay to the Company, or make
other arrangements satisfactory to the Company regarding payment to the
Company of, the aggregate amount of any such taxes. All matters with
respect to the total amount of taxes to be withheld in respect of any such
compensation income shall be determined by the Committee, in its sole
discretion.
7. Terms and Conditions of Awards. The terms and conditions of each Award
granted under the Plan shall be specified by the Committee, in its sole
discretion, and shall be set forth in a written agreement between the
Participant and the Company, in such form as the Committee shall approve. The
terms and provisions of any Award granted hereunder need not be identical to
those of any other Award granted hereunder.
The terms and conditions of each Award may include the following:
(a) The amount to be paid by a Participant to acquire the shares of
Common Stock pursuant to an Award shall be fixed by the Committee and may
be equal to, more than or less than 100% of the fair market value of the
shares of Common Stock subject to the Award on the date the Award is
granted (but in no event less than the par value of such shares).
(b) Each Award shall contain such vesting provisions, such transfer
restrictions and such other restrictions and conditions as the Committee,
in its sole discretion, may determine, including, without limitation, the
circumstances under which the Company shall have the right and option to
repurchase shares of Common Stock acquired pursuant to an Award.
(c) Stock certificates representing Common Stock acquired pursuant to
an Award shall bear a legend referring to any restrictions imposed on such
Stock and such other matters as the Committee may determine.
(d) To the extent that the Company is required to withhold any
Federal, state or local taxes in respect of any compensation income
realized by the Participant in respect of an Award granted hereunder, in
respect of any shares acquired pursuant to an Award, or in respect of the
vesting of any such shares of Common Stock, then the Company shall deduct
from any payments of any kind otherwise due to such Participant the
aggregate amount of such Federal, state or local taxes required to be so
withheld, or if such payments are insufficient to satisfy such Federal,
state or local taxes, or if no such payments are due or to become due to
such Participant, then such Participant will be required to pay to the
Company, or make other arrangements satisfactory to the Company regarding
payment to the Company of, the aggregate amount of any such taxes. All
matters with respect to the total amount of taxes to be withheld in respect
of any such compensation income shall be determined by the Committee, in
its sole discretion.
Section 8. Adjustments. (a) In the event that, after the adoption of the
Plan by the Board of Directors, the outstanding shares of the Company's Common
Stock shall be increased or decreased or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another entity in each such case through reorganization, merger or
consolidation, recapitalization, reclassification, stock split, split-up,
combination or exchange of shares or declaration of any dividends payable in
Common Stock, the Committee in good faith shall, subject to the provisions of
Section 8(c) below if the circumstances therein specified are applicable,
appropriately adjust (i) the number of shares of Common Stock (and the option
price per share) subject to the unexercised portion of any outstanding Option
(to the nearest possible full share); provided, however, that the limitations of
Section 424 of the Code shall apply with respect to adjustments made to ISOs,
(ii) the number of shares of Common Stock to be acquired pursuant to
B-7
<PAGE> 22
an Award which have not become vested, and (iii) the number of shares of Common
Stock for which Options and/or Awards may be granted under the Plan, as set
forth in Section 4.1 hereof, and such adjustments shall be effective and binding
for all purposes of the Plan.
(b) If any capital reorganization or reclassification of the capital stock
of the Company or any consolidation or merger of the Company with another
entity, or the sale of all or substantially all its assets to another entity,
shall be effected in such a way that holders of Common Stock shall be entitled
to receive stock, securities or assets with respect to or in exchange for Common
Stock, then, subject to the provisions of Section 8(c) below if the
circumstances therein specified are applicable, each holder of an Option shall
thereafter have the right to purchase, upon the exercise of the Option in
accordance with the terms and conditions specified in the option agreement
governing such Option and in lieu of the shares of Common Stock immediately
theretofore receivable upon the exercise of such Option, such shares of stock,
securities or assets (including, without limitation, cash) as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger or sale not taken place.
(c) Notwithstanding Sections 8(a) and 8(b) hereof, in the event of (i) any
offer to holders of the Company's Common Stock generally relating to the
acquisition of all or substantially all of their shares, including, without
limitation, through purchase, merger or otherwise, or (ii) any proposed
transaction generally relating to the acquisition of substantially all of the
assets or business of the Company (herein sometimes referred to as an
"Acquisition"), the Board of Directors may, in its sole discretion, cancel any
outstanding Options (provided, however, that the limitations of Section 424 of
the Code shall apply with respect to adjustments made to ISOs) and pay or
deliver, or cause to be paid or delivered, to the holder thereof an amount in
cash or securities having a value (as determined by the Board of Directors
acting in good faith) equal to the product of (A) the number of shares of Common
Stock (the "Option Shares") that, as of the date of the consummation of such
Acquisition, the holder of such Option had become entitled to purchase (and had
not purchased) multiplied by (B) the amount, if any, by which (1) the formula or
fixed price per share paid to holders of shares of Common Stock pursuant to such
Acquisition exceeds (2) the option price applicable to such Option Shares.
Section 9. Effect of the Plan on Employment Relationship. Neither the
Plan nor any Option and/or Award granted hereunder to a Participant shall be
construed as conferring upon such Participant any right to continue in the
employ of (or otherwise provide services to) the Company or any Subsidiary or
Parent thereof, or limit in any respect the right of the Company or any
Subsidiary or Parent thereof to terminate such Participant's employment or other
relationship with the Company or any Subsidiary or Parent, as the case may be,
at any time.
Section 10. Amendment of the Plan. The Board of Directors may amend the
Plan from time to time as it deems desirable; provided, however, that, without
the approval of the holders of a majority of the outstanding capital stock of
the Company entitled to vote thereon or consent thereto, the Board of Directors
may not amend the Plan (i) to increase (except for increases due to adjustments
in accordance with Section 8 hereof) the aggregate number of shares of Common
Stock for which Options and/or Awards may be granted hereunder, (ii) to decrease
the minimum exercise price specified by the Plan in respect of ISOs or (iii) to
change the class of Employees eligible to receive ISOs under the Plan.
Section 11. Termination of the Plan. The Board of Directors may terminate
the Plan at any time. Unless the Plan shall theretofore have been terminated by
the Board of Directors, the Plan shall terminate ten years after the date of its
initial adoption by the Board of Directors. No Option and/or Award may be
granted hereunder after termination of the Plan. The termination or amendment of
the Plan shall not alter or impair any rights or obligations under any Option
and/or Award theretofore granted under the Plan.
Section 12. Effective Date of the Plan. The Plan shall be effective as of
July 28, 1998, the date on which the Plan was adopted by the Board of Directors.
* * * * *
B-8
<PAGE> 23
THE CERPLEX GROUP, INC.
1382 Bell Avenue
Tustin, California 92780
For the Special Meeting
of Stockholders to be held October 5, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George L. McTavish and Steve Korby, Proxies,
each with full power of submission to vote all of the stock of the undersigned
at the Special Meeting of Stockholders of The Cerplex Group, Inc. (the
"Company") to be held on Monday, October 5, 1998 at 3:00 p.m. (Pacific time) at
the Company's offices located at 1382 Bell Avenue, Tustin, California, and at
any adjournment thereof, in the manner indicated and in their discretion on any
other business which may properly come before said meeting, all in accordance
with and as more fully described in the Notice and accompanying Proxy Statement
for said meeting, receipt of which is hereby acknowledged. THE SHARES
REPRESENTED BY THIS PROXY SHALL BE VOTED AS SPECIFIED BELOW. IF NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED FOR APPROVAL OF EACH OF THE PROPOSALS LISTED
ON THE REVERSE SIDE.
1. Approval and adoption of an amendment to the Company's
Certificate of Incorporation to effect a one-for-ten reverse
stock split of the Common Stock and to reduce the number of
shares of authorized Common Stock from 300 million to 75
million.
FOR / / AGAINST / / ABSTAIN / /
2. Approval and adoption of the 1998 Stock Plan.
FOR / / AGAINST / / ABSTAIN / /
- ---------------------------------------------------------------
3. Approval of KPMG Peat Marwick as the Company's independent
accountants and auditors.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, the proxy holders are authorized to vote
upon such other business as may properly come before the
meeting or any adjournments thereof, if such business was not
known to the Board of Directors prior to the solicitation of
this Proxy.
FOR / / AGAINST / / ABSTAIN / /
IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS
DESCRIBED ABOVE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
Dated: _______________, 1998
Signature(s)___________________________
Please sign exactly as your name appears hereon. Please date, sign and return
the Proxy promptly in the enclosed envelope. When signing as attorney, executor,
administrator, trustee or guardian, please give full title. If the signature is
for a corporation, please sign full corporate name by authorized officer. If the
shares are registered in more than one name, all holders must sign.
33
