<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
QMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
QMS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee Required.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(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 ActRule 0-11 (Set forth the amount on which the
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:
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(4) Date Filed:
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Notes:
<PAGE>
[QMS LOGO APPEARS HERE]
To The Stockholders of QMS, Inc.:
You are cordially invited to attend the annual meeting of stockholders to be
held at the Adam's Mark Hotel, 64 Water Street, Mobile, Alabama, 36602, on
Tuesday, January 21, 1997, at 2:00 p.m. local time.
The principal business of the meeting will be (i) to elect one class of
directors to serve a three-year term beginning January 21, 1997, (ii) to
present for stockholder approval an amendment to the Company's Stock Option
Plan for Directors, and (iii) to present for stockholder approval the QMS,
Inc. 1997 Stock Incentive Plan. During the meeting, we also will review the
results of the past year and report on significant aspects of our operations
during the first quarter of fiscal 1997.
Whether or not you plan to attend the annual meeting, please complete, sign,
date, and return to the Company the enclosed proxy card in the enclosed,
postage-prepaid envelope at your earliest convenience so that your shares will
be represented at the meeting. If you choose to attend the meeting, you may,
of course, revoke your proxy and personally cast your votes.
Sincerely yours,
/s/ James L. Busby
-------------------------------------
James L. Busby
Chairman of the Board, President,
and
Chief Executive Officer
Mobile, Alabama
December 23, 1996
<PAGE>
QMS, INC.
ONE MAGNUM PASS
MOBILE, ALABAMA 36618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 21, 1997
The annual meeting of stockholders of QMS, Inc. will be held on Tuesday,
January 21, 1997, at 2:00 p.m. local time, at the Adam's Mark Hotel, 64 Water
Street, Mobile, Alabama, 36602.
The meeting is called for the following purposes:
1.To elect two persons to serve as Class II directors for a three-year term
beginning in 1997;
2. To present for stockholder approval a proposal to approve a recent
amendment to the Company's Stock Option Plan for Directors;
3.To present for stockholder approval a proposal to adopt the QMS, Inc. 1997
Stock Incentive Plan; and
4. To consider and act upon such other business as may properly come before
the meeting or any adjournment(s).
The Board of Directors has fixed November 25, 1996 as the record date for
the determination of stockholders entitled to notice of and to vote at the
meeting.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. IF YOU CHOOSE TO ATTEND THE
MEETING, YOU MAY, OF COURSE, REVOKE YOUR PROXY AND PERSONALLY CAST YOUR VOTES.
By Order of the Board of Directors,
/s/ Richard A. Wiggins
------------------------------------
RICHARD A. WIGGINS
Secretary
Mobile, Alabama
December 23, 1996
<PAGE>
QMS, INC.
ONE MAGNUM PASS
MOBILE, ALABAMA 36618
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of QMS, Inc. (the "Company") of proxies to be voted at the
annual meeting of stockholders of the Company to be held Tuesday, January 21,
1997, and at any and all adjournments thereof (the "Meeting"). Any proxy given
pursuant to such solicitation and received in time for the Meeting will be
voted with respect to all shares represented by it and will be voted in
accordance with the directions, if any, given in such proxy. If directions are
not given, the proxy will be voted (i) for the election of the persons named
herein to serve as Class II directors, (ii) FOR approval of an amendment to
the Company's Stock Option Plan for Directors, and (iii) FOR adoption of the
QMS, Inc. 1997 Stock Incentive Plan. All expenses incurred by this
solicitation shall be borne by the Company.
Stockholders who execute proxies may revoke them at any time before they are
voted by filing with the Secretary of the Company either an instrument
revoking the proxy or a duly executed proxy bearing a later date. Proxies also
may be revoked by any stockholder present at the Meeting who expresses a
desire to vote his or her shares in person. A majority of the stockholders
entitled to vote must be present in person, or represented by proxy, to
constitute a quorum and to act upon the proposed business. Failure of a quorum
to be represented at the Meeting will necessitate adjournment and will subject
the Company to additional expense.
The terms "fiscal 1994," "fiscal 1995," "fiscal 1996," and "fiscal 1997" as
used herein refer to the Company's fiscal years ended September 30, 1994,
September 29, 1995, and September 27, 1996, and its fiscal year ending October
3, 1997, respectively.
SHARES ENTITLED TO VOTE
The Notice of the Meeting, this Proxy Statement, and the form of proxy are
first being mailed to stockholders on or about December 23, 1996. At the close
of business on November 25, 1996, the record date for determining the
stockholders entitled to notice of and to vote at the Meeting, there were
10,695,665 shares of common stock, $.01 par value ("Common Stock"), of the
Company outstanding and entitled to vote at the Meeting. Each share is
entitled to one vote.
The election of directors requires the affirmative vote of a plurality of
shares of Common Stock voting in person or by proxy at the Meeting, and the
approval of the proposals regarding the Company's Stock Option Plan for
Directors and the QMS, Inc. 1997 Stock Incentive Plan requires the affirmative
vote of a majority of the shares of Common Stock voting in person or by proxy
at the Meeting. Therefore, abstentions and votes withheld from director
nominees will not be included in vote totals and will not be considered in
determining the outcome of the election of directors. Abstentions will have
the same effect as votes against the proposals regarding the Company's plans,
but broker non-votes will have no effect on the voting of such proposals.
YOUR BOARD OF DIRECTORS URGES YOU TO SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE
1
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
DIRECTORS AND DIRECTOR NOMINEES
The Company's Certificate of Incorporation provides for three classes of
directors serving staggered terms of office. Upon the expiration of the term
of office for a class of directors, the nominees for that class will be
elected for a term of three years to serve until the election and
qualification of their successors. At the Meeting, two nominees for the Class
II positions will be considered. The Class I and Class III directors have one
year and two years, respectively, remaining in their terms of office.
The Company's Certificate of Incorporation and Bylaws provide that the
Company shall have at least five and no more than ten directors, the exact
number to be determined by resolution of the Board of Directors from time to
time. The Board has, by resolution, set the number of directors at nine. Mr.
G. William Speer resigned his position on the Board of Directors effective
September 30, 1996 leaving one vacancy of a Class II director on the Board.
The Company will seek to identify candidates who might fill this vacancy;
however, no specific nominee has yet been selected. The persons named as
proxies will not vote the proxies for a greater number of persons than the
number of nominees named herein. Following the Meeting, the Board of Directors
may elect to fill this vacancy pursuant to the authority vested in it by the
Company's Bylaws.
It is the intention of the persons named as proxies to vote the proxies for
the election as Class II directors of the Company of the persons named below,
each of whom is currently a director, unless the stockholders direct otherwise
in their proxies. In the event any of the nominees named below refuses or is
unable to serve as a director (which is not now anticipated), the persons
named as proxies reserve full discretion to vote for such other person or
persons as may be nominated. The election of the nominees to the Board of
Directors requires the presence, by proxy or in person, of the holders of a
majority of all shares of the Company's Common Stock entitled to notice of and
to vote at the Meeting and the affirmative vote of the holders of a plurality
of the shares voted at the Meeting.
Set forth below is certain information furnished to the Company by each of
the Company's directors, including each of the nominees.
YOUR BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES FOR DIRECTORS
NOMINEES FOR DIRECTORS
CLASS II DIRECTORS --- TERM EXPIRING 2000
DONALD L. PARKER, PH.D.(/1/) (age 51) has been a director of the Company
since 1979 and an executive officer since 1981. Since 1981, he has served as
the Company's Executive Vice President and Chief Technology Officer (formerly
Executive Vice President, Products and Technology; formerly Senior Vice
President, Marketing and Technology; and formerly Senior Vice President,
Corporate Technology).
F. RIGDON CURRIE (age 66) has been a director of the Company since October
1996. He was a general partner of Pacific Venture Partners from 1983 to 1994,
and has been a special limited partner of MK Global Ventures since 1988. He is
also a director of Wonderware Corporation (a manufacturing software company),
DISC, Inc. (a manufacturer of robotic digital storage libraries), Document
Technologies, Inc. (a manufacturer of high resolution display systems) and
four private companies. He is Chairman of the Board of Opportunity Capital
Corporation (a minority venture capital firm) and a member of two non-profit
boards.
- --------
(/1/) Mr. Dow and Dr. Parker are brothers-in-law of Mr. Busby.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS --- CURRENT TERM EXPIRING 1998
JAMES L. BUSBY(/1/) (age 50) has been a director and President, Chief
Executive Officer, and Chairman of the Board of the Company since 1977.
LUCIUS E. BURCH, III (age 55) has been a director of the Company since 1983.
He has been President of Massey Burch Investment Group, Inc. (an investment
management and venture capital firm) since 1981 and Chairman of Massey Burch
Investment Group, Inc. since 1990. He is also a director of Titan Holdings,
Inc. (an insurance holding company), Norrell Corporation (a provider of
temporary personnel to businesses), and Physicians Resource Group (a provider
of physicians practice management services).
JACK EDWARDS (age 68) has been a director of the Company since July 1996. He
has been a senior member of the law firm of Hand Arendall, L.L.C. since 1985
and was a member of the U.S. House of Representatives for twenty years. He is
also a director of The Southern Company (a parent firm of five electric
utilities) and Northrop Grumman Corporation (a manufacturer of defense and
electronics systems), and has served on the Board of Trustees of the
University of Alabama System since 1988.
CLASS III DIRECTORS --- CURRENT TERM EXPIRING 1999
MICHAEL C. DOW(/1/) (age 49) has been a director of the Company since 1977
and was an executive officer from 1977 until January 1989. He served the
Company in a consulting capacity from February 1989 to January 1992. From 1977
to January 1989, he served the Company in various capacities, including Senior
Vice President, Marketing and Service; Senior Vice President, Marketing;
Senior Vice President, Sales and Customer Technical Service; Senior Vice
President, Sales and Customer Support; and Senior Vice President, Sales and
Services. Since October 1989, he has served as Mayor of the City of Mobile,
Alabama.
S. FELTON MITCHELL, JR. (age 51) has been a director of the Company since
1987. He has been President, S. Felton Mitchell, Jr., P.C. (attorney) since
1987 and sole proprietor, S. Felton Mitchell, Jr., CPA (accounting) since
1986. He is also a director of Mobile Gas Service Corporation.
CHARLES D. DALEY (age 62) has been a director of the Company since 1990. Mr.
Daley retired from the Company in July 1995 but continues to serve on the
Company's Board of Directors. From 1988 until his retirement in 1995, he
served as the Company's Executive Vice President, Finance and Administration
(formerly Senior Vice President, Finance and Administration), Treasurer, and
Chief Financial Officer. Prior thereto, he was Vice President, Finance and
Administration at Megatek Corp., a subsidiary of United Telecommunications,
Inc. (a CAD/CAM terminal manufacturer).
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1996, the Board of Directors met four times. All incumbent
members of the Board attended at least 75% of the total number of Board
meetings and meetings of committees of which they were members.
During fiscal 1996, the Audit Committee met four times. The Audit Committee
is responsible for reviewing and making recommendations regarding the
Company's employment of independent auditors, the annual audit of the
Company's financial statements and the Company's internal accounting practices
and policies. The current members of the Audit Committee are Messrs. Mitchell
(Chairman), Edwards, and Burch.
During fiscal 1996, the Compensation Committee met four times. The
Compensation Committee is responsible for recommending and reviewing the
compensation, including fringe benefits, of the executive officers and
directors of the Company and for administering the Company's stock option
plans. The current members of the Compensation Committee are Messrs. Burch
(Chairman), Currie, and Daley.
- --------
(/1/) Mr. Dow and Dr. Parker are brothers-in-law of Mr. Busby.
3
<PAGE>
The Company has no nominating committee.
DIRECTOR COMPENSATION
No remuneration is paid to executive officers of the Company for services
rendered in their capacities as directors. The Company pays fees to non-
employee directors of $1,500 per month, plus $750 for each day, or part
thereof, spent in meetings of the Board of Directors or committees thereof.
Non-employee directors who are members of a committee are paid an additional
$2,000 a year for each committee on which the non-employee director serves.
Non-employee directors may elect to receive stock options pursuant to the QMS,
Inc. Stock Option Plan for Directors in lieu of cash compensation.
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, executive officers, and persons who own more than 10% of the
Company's Common Stock to file reports of ownership and changes in ownership
of such securities with the Securities and Exchange Commission (the "SEC") and
the New York Stock Exchange, Inc. Such persons are also required by SEC
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 or representations that no Forms 5 were required, the Company believes
that during fiscal 1996 all of the Company's directors and executive officers
complied with all Section 16(a) filing requirements.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the Board
of Directors and as of November 25, 1996 included James L. Busby, Donald L.
Parker, Gerald G. Roenker, Albert A. Butler, Richard A. Wiggins, Allen F.
Yuhas, Raymond H. Alstadt, and Joseph H. Niknejadi.
MR. ROENKER (age 47) has been Executive Vice President and Chief Operating
Officer of the Company since September 1995 and Chief Financial Officer since
February 1996. Mr. Roenker also served as Treasurer of the Company from
September 1995 to October 1996. Mr. Roenker worked as a consultant with the
Company from January through September 1995. Prior thereto, Mr. Roenker worked
for Roenker Bates Group, a management consulting firm which he founded in
1989; prior thereto, he was Chief Financial Officer at KZF, Inc. (a midwest
design firm) from 1979 to 1989.
MR. BUTLER (age 54) has been Senior Vice President, Operations of the
Company since April 1992; from January 1991 to April 1992, he was Vice
President, Corporate Materials and Logistics. Prior thereto, Mr. Butler was
Manager of Logistics at General Electric Co. (a manufacturer of electronics).
MR. WIGGINS (age 48) has been Senior Vice President, Finance and
Administration, Treasurer, and Secretary of the Company since October 1996; he
was Vice President and Corporate Controller of the Company from July 1996 to
October 1996. Prior thereto, Mr. Wiggins was Executive Vice President of
Finance and Chief Financial Officer of First Image Management Company (a
producer of comprehensive document solutions) from July 1993 to November 1995
and Vice President--Chief Financial Officer of Wedlo, Inc. (a vertically
integrated jewelry manufacturer and retailer) from August 1991 to July 1993.
MR. YUHAS (age 48) has been Senior Vice President, Sales and Marketing, of
the Company since July 1996. Prior thereto, Mr. Yuhas was Senior Vice
President of Worldwide Sales at Storage Dimensions, Inc. (a disk and tape
storage vendor) from July 1994 to July 1996 and Senior Vice President of
Worldwide Sales and Service for RasterOps Corporation (a producer of
videographics technology) from August 1992 to July 1993. Mr. Yuhas was
previously employed by the Company from 1987 to 1992 as Senior Vice President
of Worldwide Sales and Service.
MR. ALSTADT (age 48) has been Vice President, Products and Technology, of
the Company since October 1995. Prior thereto, Mr. Alstadt served as Vice
President of Product Engineering from March 1994 to October 1995, as Executive
Director of Product Engineering from October 1990 to March 1994, and as
Director of Product Engineering from April 1990 to October 1990. Prior to
joining the Company, Mr. Alstadt was a senior program manager at Avex (an
electronic contract manufacturer).
4
<PAGE>
MR. NIKNEJADI (age 50) has been Vice President, National Service, of the
Company since October 1990. Prior thereto, Mr. Niknejadi served as Executive
Director, Customer Service and Support from May 1989 to October 1990 and as
Manager, Customer Service from October 1988 to May 1989. Prior to joining the
Company, Mr. Niknejadi was Northeast Regional Service Manager for Paradyne
Corporation (a communications equipment manufacturer).
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of November 25, 1996
regarding the amount of Common Stock beneficially owned by each of the
executive officers whose names appear in the "Summary Compensation Table"
included herein ("named executive officers"), each director and director
nominee of the Company, all directors and officers of the Company as a group,
and each person known to the Company to own beneficially more than five
percent of the outstanding shares of Common Stock. All shares shown reflect
sole voting and investment power except as otherwise noted.
According to rules adopted by the SEC, a person is a "beneficial owner" of
securities if that person has or shares the power to vote them or to direct
their investment or has the right to acquire beneficial ownership of such
securities within 60 days through the exercise of an option, warrant or right
of conversion of a security, or otherwise. As of the date of this Proxy
Statement, the Company only has shares of Common Stock outstanding.
<TABLE>
<CAPTION>
NUMBER OF SHARES AND NATURE
OF BENEFICIAL OWNERSHIP AT
NOVEMBER 25, 1996
--------------------------------------
VOTING OR OPTIONS
INVESTMENT POWER EXERCISABLE
--------------------- WITHIN 60 PERCENT OF
NAME OF GROUP SOLE(/1/) SHARED DAYS CLASS(/2/)
------------- --------- ------- ----------- ----------
<S> <C> <C> <C> <C>
James L. Busby(/3/).......... 559,943(/4/) 0 150,000 6.5%
Donald L. Parker, Ph.D....... 6,045 30,517(/5/) 88,000 1.2%
Gerald G. Roenker............ 1,000 3,000(/6/) 62,500 *
Albert A. Butler............. 6,011 1,000(/5/) 28,400 *
Gregory R. Jones(/7/)........ 0 0 0 *
Lucius E. Burch, III......... 14,740 23,425(/8/) 50,828 *
Michael C. Dow............... 19,000 40,467(/5/) 27,716 *
S. Felton Mitchell, Jr....... 0 0 43,828 *
Charles D. Daley............. 0 3,000(/5/) 55,250 *
Jack Edwards................. 0 1,000(/5/) 0 *
F. Rigdon Currie............. 0 0 0 *
All current directors and
executive officers as a group
(14 persons)................. 608,852 102,509 545,922 11.2%
</TABLE>
- --------
* Indicates beneficial ownership of less than 1.0%.
(1) Includes shares held in the Company's 401(k) plan as follows: Dr. Parker,
6,045; Mr. Butler, 6,011; and all directors and executive officers as a
group, 13,019. It also includes shares held in the Company's Employee
Stock Purchase Plan as follows: All current directors and executive
officers as a group, 150.
(2) For each person named and the group identified in the table, "Percent of
Class" has been calculated assuming the exercise of all options
exercisable by that person or group within 60 days after November 25,
1996.
(3) Mr. Busby's address is 6106 Cottage Hill Road, Mobile, Alabama 36609.
(4) Includes 17,000 shares held by his spouse, as to which Mr. Busby has no
voting or investment power and disclaims beneficial ownership.
(5) Voting and investment power shared with spouse with respect to the
indicated shares.
(6) Voting and investment power shared with Roenker Bates Group with respect
to the indicated shares.
(7) Mr. Jones resigned his position as an executive officer of the Company as
of September 30, 1996.
(8) Of the indicated shares, 5,000 are held of record by Mr. Burch's spouse
and 18,425 are held of record by a trust of which Mr. Burch is a
beneficiary and a co-trustee. Mr. Burch disclaims beneficial ownership of
all shares held by his spouse.
5
<PAGE>
EXECUTIVE COMPENSATION TABLES
The following tables present certain information concerning the cash
compensation and stock options provided to the named executive officers. The
notes to these tables provide more specific information regarding
compensation. The executive officer compensation policies of the Board of
Directors are discussed in more detail in the Compensation Committee Report.
TABLE I
SUMMARY COMPENSATION TABLE
This table presents the total compensation earned during or with respect to
fiscal 1996, fiscal 1995, and fiscal 1994 by the Company's Chief Executive
Officer and its four most highly compensated executive officers during fiscal
1996 other than the Chief Executive Officer. The Company has outstanding no
stock appreciation rights ("SARs") and no shares of restricted stock.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION($)
---------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($)(/1/) ($) ($)(/2/) (*) ($)(/3/)
------------------ ------ -------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James L. Busby 1996 480,922 0 0 0 110,888
Chairman, President, and
CEO 1995 595,832 0 0 10,000 183,070
1994 593,685 0 0 10,000 52,589
Donald L. Parker, Ph.D. 1996 274,818 0 0 0 82,102
Executive Vice
President, 1995 320,137 1,500 0 5,000 122,667
Products & Technology 1994 318,235 0 0 5,000 43,663
Gerald G. Roenker 1996 274,615 0 4,032 0 0
Chief Operating Officer 1995 0 0 0 0 0
1994 0 0 0 0 0
Albert A. Butler 1996 156,763 0 0 0 5,250
Sr. Vice President,
Operations 1995 179,558 1,500 0 5,000 5,250
1994 149,916 0 0 5,000 5,068
Gregory R. Jones(/4/) 1996 153,846 15,000 0 0 5,142
Vice President, General
Counsel, 1995 121,538 1,500 0 0 3,616
and Secretary 1994 94,769 0 0 0 3,010
</TABLE>
- --------
* Number of shares.
(1) Amounts reported in the "Salary" column include automobile allowance for
Messrs. Busby and Butler and Dr. Parker and accounting services for Mr.
Busby and Dr. Parker for all three fiscal years but such amounts do not
exceed the lesser of $50,000 or 10% of such officer's salary for such
year.
(2) Amount reported in the "Other Annual Compensation" for Mr. Roenker
represents reimbursed relocation expense.
(3) Includes for Mr. Busby: $5,250 contributed on his behalf to the Company's
401(k) Plan, $4,650 for life insurance premiums paid on his behalf, and
$100,988 accrued in connection with a supplemental executive retirement
benefits agreement. Includes for Dr. Parker: $5,250 contributed on his
behalf to the Company's 401(k) Plan, $3,431 for life insurance premiums
paid on his behalf, and $73,421 accrued in connection with a supplemental
executive retirement benefits agreement. Includes for Mr. Butler: $5,250
contributed on his behalf to the Company's 401(k) Plan. Includes for Mr.
Jones: $5,142 contributed on his behalf to the Company's 401(k) Plan.
(4) Mr. Jones resigned from his position as an executive officer of the
Company as of September 30, 1996.
6
<PAGE>
TABLE II
FISCAL 1996 STOCK OPTION GRANTS
The following table presents information regarding options to purchase
shares of Common Stock that were issued by the Company to its named executive
officers in fiscal 1996 that may be exercised to purchase shares of Common
Stock. The Company granted no SARs during fiscal 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES OR BASE DATE
OPTIONS IN FISCAL PRICE EXPIRATION VALUE
NAME GRANTED(/1/) YEAR ($/SHARE) DATE ($)(/2/)
---- ------------ ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
James L. Busby............ 10,000 2.0% $5.625 1/23/06 $23,595
Donald L. Parker, Ph.D.... 10,000 2.0% $5.625 1/23/06 $23,595
Gerald G. Roenker......... 10,000 2.0% $5.625 1/23/06 $25,762
Albert A. Butler.......... 6,000 1.2% $5.625 1/23/06 $14,157
Gregory R. Jones.......... 5,000 1.0% $5.625 1/23/06 $11,797
</TABLE>
- --------
(1) All options granted to the named executive officers were granted on
January 23, 1996. These options become exercisable in 20% increments
annually beginning on the date of grant (except for Mr. Roenker's option
which becomes exercisable in 25% increments annually beginning on the
first anniversary of the date of grant) and are subject to accelerated
vesting in whole or in part upon a "change of control" as defined in the
Company's 1987 Stock Option Plan.
(2) This column represents the present value of the options on the date of
grant using the Black-Scholes option pricing model adapted for the
Company's Common Stock, utilizing the following assumptions: three-year
stock price volatility of 0.5394; no dividend yield; expected term to
exercise of 456 days; interest rates equal to the U.S. Treasury Note rates
in effect at the date of the grant (approximately 6%) for the expected
term of the option, and no adjustment for non-transferability or
forfeiture. The actual value, if any, an executive may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised, so there is no assurance that the value to be
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
7
<PAGE>
TABLE III
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND
FISCAL YEAR-END OPTION VALUES
The following table presents information regarding options exercised for
shares of the Company's Common Stock during fiscal 1996 and the value of
unexercised options held at September 27, 1996. The Company has no outstanding
SARs.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT 9/27/96
SHARES VALUE OPTIONS AT 9/29/96 ($)(/1/)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James L. Busby.......... 0 $ 0 143,000 22,000 $ 250 $ 1,000
Donald L. Parker, Ph.D.. 0 0 82,000 17,000 250 1,000
Gerald G. Roenker....... 0 0 50,000 20,000 68,750 15,000
Albert A. Butler........ 0 0 24,800 13,200 150 600
Gregory R. Jones........ 0 0 14,200 16,300 1,913 5,150
</TABLE>
- --------
(1) Based on the closing price on the New York Stock Exchange--Composite
Transactions of the Company's Common Stock on that date ($5.75).
8
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STOCK PERFORMANCE GRAPH
The following graph compares the Company's five-year cumulative total return
to the S&P 500 and the S&P Computer Systems Composite Index over the five-year
period beginning on September 28, 1991 and ending September 27, 1996. The
total stockholder return assumes $100 invested at the beginning of the period
in the Company's Common Stock, the S&P 500, and the S&P Computer Systems
Composite Index. It also assumes reinvestment of all dividends. Past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG S&P 500, S&P COMPUTER SYSTEMS INDEX AND QMS, INC. INDEX
<CAPTION>
S&P
Measurement period S&P 500 Computer Systems QMS, Inc.
(Fiscal year covered) Index Index
- --------------------- ------- ---------------- ---------
<S> <C> <C> <C>
Measurement PT -
09/28/91 $100.00 $100.00 $100.00
FYE 09/27/92 $111.05 $ 83.55 $ 32.07
FYE 09/27/93 $125.41 $ 55.90 $ 39.67
FYE 09/27/94 $130.08 $ 81.67 $ 41.30
FYE 09/27/95 $168.64 $117.83 $ 19.57
FYE 09/27/96 $202.81 $142.05 $ 45.11
</TABLE>
EXECUTIVE AGREEMENTS
The Company has entered into an Executive Agreement with each of Mr. Busby
and Dr. Parker. Each agreement will remain in effect so long as the executive
remains employed by the Company and thereafter until all payments to which the
executive is entitled under the agreement have been made. Among other things,
each agreement provides that if, within 18 months after the date of a Change
of Control (as defined in each agreement), while the executive is employed by
the Company, (i) the executive's employment is involuntarily terminated
(except for cause) or (ii) the executive voluntarily terminates his employment
because of material changes in the nature or scope of his duties or employment
(including a change of the principal place of performance of his duties) or
the reduction of his compensation without his consent, then the executive may
exercise his rights to receive payments under the agreement (the "Executive
Payment"), including a cash payment of 299% of his "base amount," as defined
in Section 280G of the Internal Revenue Code of 1986 (the "Code"). If the
executive dies before the payment is made, his legal representative is
entitled to receive the Executive Payment.
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Under the agreement, a "Change of Control" of the Company means (i) the
acquisition by any individual, entity, or group (other than an employee
benefit plan of the Company) of 20% or more of the combined voting power of
the Company's then outstanding securities entitled to vote generally in the
election of directors or (ii) a change in the composition of the Board of
Directors such that the persons who either were directors on the date of the
agreement, or who became directors subsequent to such date and whose election
or nomination to the Board of Directors was duly approved by the persons who
were directors on the date of the agreement, shall not constitute a majority
of the members of the Board of Directors.
Each agreement also provides for the payment of all costs and expenses
incurred by the executive to (i) defend the validity of the agreement, (ii)
contest any determinations by the Company concerning the amounts payable by
the Company under the agreement, (iii) determine in any tax year of the
executive the tax consequences to the executive of any amounts payable (or
reimbursable) under the agreement, or (iv) prepare responses to an Internal
Revenue Service audit of, and otherwise defend, his personal income tax return
for any year which is the subject of any such audit or any adverse
determination, administrative proceeding, or civil litigation arising
therefrom that is occasioned by or related to an audit by the Internal Revenue
Service of the Company's income tax returns.
Should any of the payments or reimbursements that are provided for under the
agreement to be paid to or for the benefit of the executive or payments or
benefits under any other plan, agreement, or arrangement between the executive
and the Company, be determined or alleged to be subject to an excise or
similar purpose tax pursuant to Section 4999 of the Code or any successor or
other comparable federal, state, or local tax law, the Company shall pay to
the executive such additional compensation as is necessary to place the
executive in the same after-tax position he would have been in had no such tax
been paid or incurred by the executive.
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS OF QMS, INC.
The Compensation Committee of the Board of Directors is currently composed
of three non-management directors, Messrs. Burch (Chairman), Currie, and
Daley. The Committee is responsible for setting overall policies that govern
the Company's compensation programs, administering certain of the Company's
equity compensation plans, and establishing the cash compensation of executive
officers.
The Company's executive compensation programs are designed to attract,
reward, and retain key executives who will continue to lead the Company in
achieving its objectives in a highly competitive and fast-changing industry.
The cash compensation for each of the Company's executives consists of a
base salary and an annual incentive program. Long-term incentives consist of
stock options granted under the Company's 1984 and 1987 Stock Option Plans.
CASH COMPENSATION--BASE SALARIES
Base salary targets are established by reviewing published survey data and
compensation information contained in proxy statements regarding similar
positions held by executives of other high technology/electronics firms of
approximately the same size as the Company. The Compensation Committee then
chooses to pay the executive at, above, or below his base salary target
according to a subjective determination by the Compensation Committee based
upon the following two factors:
1. The executive's job performance in the Company's last fiscal year and
2. The executive's perceived potential to contribute to the Company's
performance in the upcoming fiscal year.
Final decisions regarding the establishment of base salary targets and
levels of base salaries are made independently by the Compensation Committee.
The Committee does, however, solicit input from the Company's Chief Executive
Officer, Executive Vice President, and Chief Financial Officer on the level of
performance of executives reporting to them. Base salary adjustments may be
made within a fiscal year based on the executive's performance and
contribution to the Company's results of operations during that period.
10
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For fiscal 1996, in light of the Company's recent results of operation and
financial position, the Compensation Committee set base salaries for the
Company's Chief Executive Officer and other executive officers at levels which
were below the amounts of such base salaries for prior years. The results of
such actions are reflected in the Summary Compensation Table set forth above.
CASH COMPENSATION--ANNUAL INCENTIVE PROGRAMS
The Compensation Committee believes that an annual cash compensation program
tied to the Company's performance provides appropriate short-term incentives
to the Company's key executive officers. Accordingly, Mr. Busby and Dr. Parker
participate in an annual cash incentive program that requires the Company to
achieve a certain earnings per share level before any payments may be made.
The earnings per share levels are established by the Compensation Committee
upon recommendation by the Executive Vice President and Chief Financial
Officer of the Company each year and are generally set at levels providing for
an increase in earnings per share over the prior year before any incentive
compensation is earned. The threshold earnings per share target level for
fiscal 1996 was $0.47 per share. If such earnings had been achieved, each of
Mr. Busby and Dr. Parker would have received an additional cash payment equal
to 18% of his base salary. If higher earnings per share levels had been
achieved, they would have been eligible to receive correspondingly higher
bonus amounts. The Committee's philosophy is that executive base salaries
should be competitive within the industry and should be paid regardless of the
Company's performance so long as the officer retains his position, but that
the annual incentive portion of executive compensation should not be paid
unless stockholders benefit from improved earnings per share. Because target
earnings per share levels were not attained in fiscal years 1994, 1995, or
1996, no payments were made under this program for those years.
STOCK OPTION PROGRAMS
The Compensation Committee believes that management ownership of a
significant equity interest in the Company is a major incentive in building
stockholder value and aligning the long-term interests of management and
stockholders. To that end, the Compensation Committee has historically granted
stock options at option prices not less than the fair market value of the
Common Stock on the grant date. Any gain from the exercise of the stock
options will occur only when the price of the Company's Common Stock increases
above the option grant price. This situation, in turn, means that stockholder
value is being enhanced. In fiscal 1996, the Compensation Committee granted
stock options to the named executive officers as outlined in Table II above
setting forth fiscal 1996 stock option grants.
COMPENSATION--CHIEF EXECUTIVE OFFICER
The Compensation Committee considers the information set forth above
concerning compensation paid to executives by other companies in setting the
compensation of Mr. Busby as the Chief Executive Officer of the Company. The
Committee's objective in setting Mr. Busby's compensation has been that his
salary be at the high end of a range of salaries paid to chief executive
officers of companies in the high technology/electronics industry of
approximately the same size as the Company. However, with respect to fiscal
1996, the Compensation Committee reduced Mr. Busby's base salary below levels
of prior years as set forth under "Cash Compensation--Base Salaries." In
addition, the Committee approves the performance objectives set forth in an
annual incentive plan described above, which is designed to permit Mr. Busby
(as well as the other officer-participants in the annual incentive plan) to
earn additional compensation if certain earnings per share levels are
achieved. See the discussion under "Cash Compensation--Annual Incentive
Programs" above. The Committee also granted stock options to Mr. Busby in
fiscal 1996 based on the philosophy described under "Stock Option Programs"
above. See "Table II--Fiscal 1996 Stock Option Grants" for the terms of such
options.
LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION
Pursuant to the 1993 Omnibus Budget Reconciliation Act, a portion of annual
compensation payable after 1993 to any of the Company's five highest paid
executive officers would not be deductible by the Company for federal income
tax purposes to the extent such officer's overall compensation exceeds
$1,000,000. Qualifying
11
<PAGE>
performance-based incentive compensation, however, would be both deductible
and excluded for purposes of calculating the $1,000,000 base. It has been
determined that no portion of anticipated compensation payable to any
executive officer in 1996 would be non-deductible. Although the Compensation
Committee does not presently intend to award compensation in excess of the
$1,000,000 cap, it will continue to address this issue when formulating
compensation arrangements for executive officers.
Submitted By the Compensation Committee
of the Board of Directors
Lucius E. Burch, III F. Rigdon Currie* Charles D. Daley*
The foregoing Report of the Compensation Committee shall not be deemed to
constitute soliciting material and shall not be deemed to be incorporated by
reference as a result of any general incorporation by reference of this Proxy
Statement or any part hereof in the Company's Annual Report to Stockholders on
form 10-K.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Burch, Mitchell and Speer served on the Compensation Committee
during fiscal 1996. Mr. Speer is a partner in the law firm of Powell,
Goldstein, Frazer & Murphy of Atlanta, Georgia, which acts as corporate
counsel for the Company.
AUDITORS
The firm of Deloitte & Touche LLP has served as the Company's independent
certified public accountants since 1980. The appointment of auditors is a
matter for determination by the Audit Committee of the Board of Directors and
is not being submitted to the stockholders for approval or ratification. A
representative of this firm is expected to attend the Meeting, to respond to
questions from stockholders, and to make a statement if he so desires.
PROPOSAL 2--AMENDMENT OF
QMS, INC. STOCK OPTION PLAN FOR DIRECTORS
INTRODUCTION
On October 23, 1996, the Board of Directors approved an amendment (the
"Amendment") of the QMS, Inc. Stock Option Plan for Directors (the "Directors'
Plan"), subject to stockholder approval. A copy of the amendment to the
Director's Plan is attached hereto as Appendix A. The Amendment increases the
aggregate number of shares of the Company's Common Stock that may be issued
pursuant to the Directors' Plan from 125,000 to 250,000.
The purpose of the Directors' Plan is to advance the interests of the
Company by encouraging and enabling the acquisition of Common Stock by the
Company's non-employee directors, upon whose judgment and ability the Company
relies to attain its long-term growth and development, to promote a close
identity of interests among the Company, such directors, and stockholders of
the Company, and to provide a means to attract and retain well-qualified
directors.
The Directors' Plan includes an opportunity for non-employee directors to
receive stock options at a below-market exercise price (50% of the Fair Market
Value, as defined in the Directors' Plan, of a share of Common Stock on the
date of grant) as an alternative to the payment of directors' fees in cash. In
addition, the Directors' Plan provides the opportunity for the Company to
eliminate the cash cost of directors' annual retainer fees to the
- --------
* Mr. Currie and Mr. Daley were appointed to serve on the Compensation
Committee on September 30, 1996, and therefore did not participate in the
deliberations of the Committee during fiscal 1996.
12
<PAGE>
extent the directors elect to receive options in lieu of cash. Further, when
any option is exercised, the Company generally will be able to deduct for
federal income tax purposes any difference between the option price and the
market price of Common Stock (see "Federal Income Tax Matters"). If the
Amendment is not approved by the Company's stockholders, the Directors' Plan
will effectively terminate because there are no available shares authorized
for issuance or delivery upon the exercise of options granted under the
Directors' Plan since January 23, 1996. The Board of Directors believes that
it is in the best interests of the Company to continue the Directors' Plan.
Accordingly, the Board of Directors has approved the Amendment increasing the
number of shares available under the Directors' Plan and recommends a vote in
favor of the Amendment to the Directors' Plan.
The terms of the Directors' Plan provide for the grant of nonqualified stock
options. The Directors' Plan is not subject to the Employee Retirement Income
Security Act of 1974, nor is it qualified under Code Section 401(a). The
Directors' Plan will terminate on January 24, 2004 unless terminated by the
Board of Directors at an earlier date.
The following description of the Directors' Plan is qualified in its
entirety by reference to the applicable provisions of the Directors' Plan as
so amended and agreements related to the Directors' Plan.
TERMS OF THE DIRECTORS' PLAN
Administration. The Directors' Plan is administered by a committee (the
"Committee") of employee directors appointed by the Board of Directors.
Subject to the express provisions of the Directors' Plan, the Committee has
full and final authority to interpret the Directors' Plan, adopt, amend, and
rescind rules and regulations relating to the Directors' Plan, and make all
other determinations and take all other actions necessary and advisable for
the administration of the Directors' Plan. The Committee's decisions and
determinations on all matters relating to the Directors' Plan are in its sole
discretion and are conclusive.
Eligibility. All non-employee directors are eligible to participate in the
Directors' Plan.
Stock Subject to Directors' Plan. By the adoption of the Amendment, the
Company has authorized and reserved for issuance upon the exercise of options
pursuant to the Directors' Plan 250,000 shares of Common Stock, subject to
adjustment as provided in the Directors' Plan. On November 25, 1996, the
closing sales price per share of the Common Stock was $5.75.
Option Awards. The Directors' Plan provides for annual grants to each non-
employee director of an option to purchase 5,000 shares of Common Stock,
provided the director is first appointed to serve, or continues to serve, as a
non-employee director as of the date of the annual meeting of the Company's
stockholders. The exercise price shall be equal to the Fair Market Value (as
defined in the Directors' Plan) of Common Stock as of the date of grant.
Options Purchased with Retainer Compensation. The Directors' Plan also
provides for the grant of options, as of the date of the annual meeting of the
Board of Directors which is held in conjunction with the Company's annual
meeting of stockholders, to any director who, no later than the date of such
annual meeting of the Board of Directors (and subject to such other rules as
the Committee may adopt from time to time), has filed with the Company an
irrevocable election to receive a stock option in lieu of all or a specified
portion of the Annual Director Compensation (as defined in the Directors'
Plan) expected to be earned by the director for the twelve-month period
described in the Directors' Plan and defined as the "Plan Year." The director
is not entitled to receive in cash any portion of the Annual Director
Compensation for which an election has been made to receive an option.
The number of shares of Common Stock subject to each option purchased by any
director for a Plan Year is determined by a formula which provides that each
director shall receive an option to purchase the nearest number of whole
shares of Common Stock (with cash payment for fractional shares) equal to the
portion of
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Annual Director Compensation allocated to the purchase of the option divided
by the difference between the Fair Market Value (as defined in the Directors'
Plan) on the date the option is granted and the option exercise price, which
will be 50% of the market value of the stock on the date the option is
granted. "Annual Director Compensation" is defined generally as the amount of
fees (or portion thereof subject to the director's election) which the
director shall be entitled to receive during a Plan Year for serving as a
director or as a member of any committee of the Board of Directors pursuant to
the policy in effect for each Plan Year, including retainers paid periodically
and fees paid for attendance at or participation in meetings of the Board of
Directors or any committee thereof.
The operation of the option formula can be illustrated as follows: If the
Fair Market Value of a share of the Company's Common Stock on a given date is
$10.00, each director who elected to receive a stock option in lieu of
hypothetical Annual Director Compensation of $21,000 for a particular Plan
Year would be granted an option to purchase 4,200 shares of Common Stock at
$5.00 per share (the amount of the Annual Director Compensation of $21,000
divided by $5.00). The Annual Director Compensation of $21,000 in this
hypothetical example is based on $1,500 a month in retainer fees and $3,000
for preparation and attendance at four Board of Directors meetings.
Transfer of Options. Directors may not transfer any options issued under the
Directors' Plan other than by will or the laws of intestate succession. Any
option issued to a director and outstanding on the date of his or her death
may be exercised by the administrator of the director's estate, the executor
under his or her will, or the person or persons to whom the option will have
been validly transferred by such executor or administrator pursuant to the
will or laws of intestate succession, but not beyond the first to occur of (i)
the first anniversary of the director's death or (ii) the specified expiration
date of the option; provided, however, that an option that is not exercised
prior to the anniversary of the director's death and which remains exercisable
on the first anniversary will be deemed exercised on the first anniversary of
the date of death to the extent the then Fair Market Value of the shares
subject to the option exceeds the option exercise price and payment of such
exercise price will be effected by withholding a number of shares of Common
Stock otherwise issuable pursuant to the option, the Fair Market Value of
which on such anniversary is equal to the exercise price. If the Fair Market
Value of the Common Stock on the first anniversary of the director's death
equals or is less than the option exercise price, then the option will be
deemed to have expired unexercised.
Exercise of Options. The optionee may pay for shares purchased pursuant to
exercise of any option (i) in cash, (ii) by delivering to the Company a number
of shares of Common Stock the director has beneficially owned at least six
months before the date of exercise and having an aggregate Fair Market Value
of at least the product of the exercise price multiplied by the number of
shares the director intends to purchase upon exercise of the option on the
date of delivery, or (iii) in a cashless exercise through a broker. No option
granted under the Directors' Plan may be exercised before the twelve-month
anniversary of the date upon which it was granted; however, any option issued
under the Directors' Plan will become immediately exercisable upon the
director's retirement due to attainment of at least age 65, death, or
disability, provided that the Committee has the discretion to delay the
exercise of any option immediately exercisable due to retirement or disability
prior to the six-month anniversary of the date of the stock issuance, unless
the Committee is satisfied that an earlier exercise will not trigger recovery
of short-swing profits under Section 16 of the Securities Exchange Act of
1934. No option granted under the Directors' Plan will be exercisable after
the expiration of 20 years from the date upon which it is granted.
Termination of Directorship. Except as otherwise provided in the Directors'
Plan, the rights of a director in an option issued under the Directors' Plan
will not terminate upon such director's termination as a director for any
reason. That portion of an option granted under the Directors' Plan which is
attributable to any portion of the Annual Director Compensation which is not
earned due to termination as a director or as a member of a committee of the
Board of Directors (for any reason) or because of lack of attendance or
participation in any meeting of the Board of Directors or any committee
thereof will automatically abate and be cancelled.
Amendment, Modification, and Termination. The Board of Directors may
terminate and in any respect amend or modify the Directors' Plan provided,
however, that no such action by the Board of Directors without
14
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approval of the stockholders may (i) increase the total number of shares of
Common Stock available under the Directors' Plan in the aggregate (except as
otherwise provided in the Directors' Plan), (ii) extend the period during
which any option may be exercised, (iii) extend the term of the Directors'
Plan, (iv) change the option price, or (v) alter the class of persons eligible
to receive options.
Restrictions on Delivery of Shares; Legends. Each option will be subject to
the condition that if at any time the Committee, in its discretion, determines
that the listing, registration, or qualification of the shares covered by such
option upon any securities exchange or under any state or federal law is
necessary or desirable as a condition of or in connection with the granting of
such option or the purchase or delivery of shares thereunder, the delivery of
any or all shares pursuant to such option may be withheld unless and until
such listing, registration or qualification will have been effected or until
receipt of appropriate representations and an opinion of counsel that such
disposition is exempt from such requirement under the Securities Act of 1933
and any applicable state securities laws.
Benefits. Each of Messrs. Burch, Daley, Dow, Edwards, and Mitchell received
options to purchase 5,000 shares under the Directors' Plan during fiscal 1996.
In addition, options to purchase 8,888, 7,466 and 8,888 shares were issued to
Messrs. Burch, Dow, and Mitchell, respectively, in lieu of directors' fees
during fiscal 1996.
FEDERAL INCOME TAX MATTERS
Directors are not required to recognize income upon the issuance of options
under the Directors' Plan, nor at any time before the exercise of the option
or a portion thereof. When an optionee exercises an option or portion thereof,
the optionee generally will be required to recognize compensation taxable as
ordinary income in an amount equal to the excess of the fair market value of
the Common Stock on the exercise date over the exercise price of the option,
and the Company is then entitled to a corresponding deduction.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the shares of
Common Stock represented and entitled to vote at the Meeting is required to
approve the Amendment to the Directors' Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE STOCK OPTION PLAN FOR DIRECTORS
15
<PAGE>
PROPOSAL 3 - ADOPTION OF THE
QMS, INC. 1997 STOCK INCENTIVE PLAN
INTRODUCTION
On October 23, 1996, the Board of Directors approved the QMS, Inc. 1997
Stock Incentive Plan (the "Incentive Plan"), the full text of which is set
forth in Appendix B to this Proxy Statement. The Board of Directors adopted
the Incentive Plan to replace the 1987 Stock Option Plan which otherwise would
have expired on November 10, 1997. The Plan was adopted because the Board of
Directors believes the Company must continue to have the capacity to grant
stock incentives to its key employees and directors. In adopting the Incentive
Plan, the Board of Directors also terminated the 1987 Stock Option Plan,
subject to the approval by stockholders of the Incentive Plan. Therefore, if
the Incentive Plan is approved by stockholders, no further awards will be made
under the 1987 Stock Option Plan.
The Incentive Plan provides the Company with increased flexibility to grant
equity-based compensation to key employees and directors of the Company or any
affiliate for the purpose of providing incentive to stimulate their efforts
toward the continued success of the Company and to operate and manage the
business in a manner that will provide for the long-term growth and
profitability of the Company. Additionally, the Incentive Plan permits the
Company to encourage stock ownership by employees and directors by providing
the employees and directors with a means to acquire a proprietary interest in
the Company, and the Incentive Plan provides the Company with a means to
attract and retain key personnel. The Board of Directors has approved and
seeks stockholder approval of the Incentive Plan. The Board of Directors has
reserved 500,000 shares of Common Stock for issuance pursuant to awards that
may be made under the Incentive Plan, subject to adjustment as provided
therein. The Incentive Plan is not subject to the Employee Retirement Income
Security Act of 1974, nor is it qualified under Section 401(a) of the Internal
Revenue Code.
The following description of the Incentive Plan is qualified in its entirety
by reference to the applicable provisions of the plan document.
TERMS OF THE INCENTIVE PLAN
Administration. The Incentive Plan will be administered by a Committee (the
"Committee") appointed by the Board of Directors consisting of at least 2
members of the Board of Directors all of whom may be required to satisfy
"disinterested" standards under tax and securities law. The Committee has the
power to determine which eligible persons receive awards and the specific
terms of each award, subject to the general parameters set forth in the
Incentive Plan.
The Incentive Plan permits the Committee to make awards of both incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and nonqualified stock options. The Company intends
that all incentive stock options to be granted under the Incentive Plan will
comply with Section 422 of the Code. The Incentive Plan gives the Committee
wide latitude in determining the specific terms of any particular award;
however, there are certain specific limits described in the Incentive Plan
attributable to federal tax laws.
The number of shares of Common Stock as to which an option is granted and to
whom any option is granted shall be determined by the Committee in its sole
discretion, subject to the provisions of the Incentive Plan. Options issuable
may be made exercisable or settled at such prices and may be made terminable
under such terms as are established by the Committee, to the extent not
otherwise inconsistent with the terms of the Incentive Plan.
The maximum number of shares of Common Stock with respect to which options
may be granted during any fiscal year of the Company as to any eligible
recipient shall not exceed 100,000, to the extent required by Section 162(m)
of the Internal Revenue Code for the grant to qualify as qualified
performance-based compensation.
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The Incentive Plan generally provides that all rights granted pursuant to
stock incentives shall not be transferable or assignable, except by the laws
of descent and distribution.
Eligibility. All employees and directors of the Company are eligible to
participate in the Incentive Plan; provided, however, that an Incentive Stock
Option can only be granted to an employee of the Company. As of November 25,
1996, 865 individuals were eligible to participate in the Incentive Plan.
Options. Each option granted pursuant to the Incentive Plan must be
authorized by the Committee and evidenced by an agreement (the "Agreement")
containing the terms and the conditions of the option. At the time the option
is granted, the Committee shall determine whether the option is an incentive
stock option or a nonqualified stock option. The Committee may permit an
option exercise price to be paid in cash, by the delivery of previously owned
shares of Common Stock, through a cashless exercise executed through a broker,
by having a number of shares of Common Stock otherwise issuable at the time of
exercise withheld, or in whole or in part in installments with Company
financing for any unpaid portion. The Incentive Plan permits the grant of both
incentive and nonqualified stock options. An incentive stock option may only
be granted within ten (10) years from the earlier of the date the Incentive
Plan is adopted by the Board of Directors or approved by the Company's
stockholders.
The terms of particular options may provide that they terminate, among other
reasons, upon the holder's termination of employment or other status with
respect to the Company and any affiliate, upon a specified date, upon the
holder's death or disability, or upon the occurrence of a change in control of
the Company. Options may also include exercise, conversion or settlement
rights to a holder's estate or personal representative in the event of the
holder's death or disability. At the Committee's discretion, options that are
held by an employee who suffers a termination of employment may be cancelled,
accelerated, paid, or continued, subject to the terms of the applicable
Agreement and to the provisions of the Incentive Plan.
Recapitalizations and Reorganizations. The number of shares of Common Stock
reserved for issuance in connection with the grant or settlement of options or
to which an option is subject, as the case may be, and the exercise price of
each option are subject to adjustment in the event of any recapitalization of
the Company or similar event, effected without the receipt of consideration.
In the event of certain corporate reorganizations, options may be
substituted, cancelled, accelerated, cashed-out, or otherwise adjusted by the
Committee, provided such adjustment is not inconsistent with the express terms
of the Incentive Plan or the applicable Agreement.
Amendment or Termination. Although the Incentive Plan may be amended by the
Board of Directors without stockholder approval, the Board of Directors also
may condition any such amendment upon stockholder approval if stockholder
approval is deemed necessary or appropriate in consideration of tax,
securities, or other laws.
Tax Consequences. The following discussion outlines generally the federal
income tax consequences of participation in the Incentive Plan. Individual
circumstances may vary and each participant should rely on his or her own tax
counsel for advice regarding federal income tax treatment under the Incentive
Plan.
Nonqualified Options. A participant will not recognize income upon the grant
of an option or at any time prior to the exercise of the option or a portion
thereof. At the time the participant exercises a nonqualified option or
portion thereof, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock on the date the option is exercised over the price paid for the Common
Stock, and the Company will then be entitled to a corresponding deduction.
Depending upon the period shares of Common Stock are held after exercise,
the sale or other taxable disposition of shares acquired through the exercise
of a nonqualified option generally will result in a short- or long-term
capital gain or loss equal to the difference between the amount realized on
such disposition and the fair market value of such shares when the
nonqualified option was exercised.
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Special rules apply to a participant who exercises a nonqualified option by
paying the exercise price, in whole or in part, by the transfer of shares of
Common Stock to the Company.
Incentive Stock Options. A participant who exercises an incentive stock
option will not be taxed at the time he or she exercises the option or a
portion thereof. Instead, he or she will be taxed at the time he or she sells
the Common Stock purchased pursuant to the option. The participant will be
taxed on the difference between the price he or she paid for the stock and the
amount for which he or she sells the stock. If the participant does not sell
the stock prior to two years from the date of grant of the option and one year
from the date the stock is transferred to him or her, the participant will be
entitled to capital gain or loss treatment based upon the difference between
the amount realized on the disposition and the aggregate exercise price and
the Company will not get a corresponding deduction. If the participant sells
the stock at a gain prior to that time, the difference between the amount the
participant paid for the stock and the lesser of the fair market value on the
date of exercise or the amount for which the stock is sold, will be taxed as
ordinary income and the Company will be entitled to a corresponding deduction;
if the stock is sold for an amount in excess of the fair market value on the
date of exercise, the excess amount is taxed as capital gain. If the
participant sells the stock for less than the amount he or she paid for the
stock prior to the one or two year periods indicated, no amount will be taxed
as ordinary income and the loss will be taxed as a capital loss.
Exercise of an incentive option may subject a participant to, or increase a
participant's liability for, the alternative minimum tax.
No options were granted under the Incentive Plan during fiscal 1996.
STOCKHOLDER APPROVAL
The Board of Directors seeks stockholder approval of the Incentive Plan
because that portion which authorizes the grant of incentive stock options
must be approved by stockholders under federal tax law. In addition, the
receipt of stockholder approval will enable the Company to maximize deductions
otherwise available in connection with the exercise of nonqualified stock
options.
YOUR BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE QMS, INC. 1997 STOCK INCENTIVE PLAN
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
Any stockholder of the Company wishing to submit a proposal for action at
the Company's annual meeting of stockholders to be held in 1998 and desiring
the proposal to be considered for inclusion in the Company's proxy material
relating thereto must provide a written copy of the proposal to the management
of the Company at its principal executive office not later than August 25,
1997 and must otherwise comply with the rules of the SEC relating to
stockholder proposals.
ANNUAL REPORT
The Company's 1996 Annual Report to Stockholders is being mailed to the
Company's stockholders with this Proxy Statement. The Annual Report is not
part of the proxy solicitation material.
GENERAL
Management does not know of any other matters to be presented at the Meeting
for action by stockholders. However, if any other matter requiring a vote of
the stockholders is properly presented at the Meeting or any adjournment
thereof, it is intended that votes will be cast pursuant to the proxies with
respect to such matters in accordance with the best judgment of the persons
acting under the proxies.
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The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mail, certain officers and
regular employees of the Company may solicit the return of proxies by
telephone, telegram, or personal interview. The Company has engaged Corporate
Investor Communications, Inc. to distribute and solicit proxies for the
Meeting at an estimated cost of $4,500 plus reasonable expenses. The Company
has requested that brokerage houses and custodians, nominees and fiduciaries
forward soliciting materials to their principals and beneficial owners of
Common Stock of the Company, and will reimburse them for their reasonable out-
of-pocket expenses.
A list of stockholders entitled to be present and vote at the Meeting will
be available at the offices of the Company, One Magnum Pass, Mobile, Alabama,
for inspection by the stockholders during regular business hours from January
13, 1997 to the date of the Meeting. The list also will be available during
the Meeting for inspection by stockholders who are present.
If you cannot be present in person, you are requested to complete, sign,
date, and return the enclosed proxy promptly. An envelope has been provided
for that purpose. No postage is required if mailed in the United States.
/s/ Richard A. Wiggins
---------------------------------
RICHARD A. WIGGINS
Secretary
December 23, 1996
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APPENDIX A
FIRST AMENDMENT TO THE
QMS, INC. STOCK OPTION PLAN
FOR DIRECTORS
THIS FIRST AMENDMENT is made as of the 23rd day of October, 1996, by QMS,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the QMS, Inc. Stock Option Plan for Directors
under an indenture dated November 18, 1993 (the "Plan");
WHEREAS, the Company desires to amend the Plan to reflect an increase in the
number of shares authorized for issuance thereunder and for other reasons; and
WHEREAS, the Company now desires to amend the Plan, to make the changes
herein embodied;
NOW, THEREFORE, the Company does hereby amend the Plan as follows:
1. By deleting, immediately, the first sentence of Section 3 in its entirety
and by substituting therefor the following:
"There are authorized for issuance or delivery upon the exercise of options
to be granted from time to time under the Plan an aggregate of 250,000
shares of the Company's common stock, $.01 par value ("Common Stock"),
subject to adjustment as provided hereinafter in Section 6."
2. By deleting, effective November 1, 1996, the fourth sentence of Section 5
in its entirety and by substituting therefor the following:
"No option granted under the Plan may be exercised before the twelve-month
anniversary of the date upon which it was granted; however, any option
granted under the Plan shall become immediately exercisable upon the
retirement of the Director due to the attainment of at least age 65, death
or disability; provided that the Committee has the discretion to deny the
exercise of any option that becomes immediately exercisable due to
retirement or disability prior to the six-month anniversary of the date of
the stock issuance, unless the Committee is satisfied that an earlier
exercise will not trigger recovery of short-swing profits under Section 16
of the Securities Exchange Act of 1934."
3. Notwithstanding the foregoing, the adoption of this First Amendment is
subject to the approval of the stockholders of the Company and in the event
that the stockholders of the Company fail to approve such action within twelve
months of the adoption of this First Amendment, the adoption of this First
Amendment and any options granted subject to stockholder approval of the First
Amendment shall be null and void.
Except as specifically provided herein, the Plan shall remain in full force
and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed as of the day and year first above written.
QMS, Inc.
By:__________________________________
Title:_______________________________
ATTEST:
- -------------------------------------
Title:_______________________________
[CORPORATE SEAL]
<PAGE>
APPENDIX B
QMS, INC.
1997 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 DEFINITIONS. Whenever used herein, the masculine pronoun shall be deemed
to include the feminine, and the singular to include the plural, unless the
context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified person.
(b) "Associate" means (1) any corporation, partnership or other organization
of which a specified person is an officer or partner, or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities thereof, (2) any trust or other estate in which the
specified person has a substantial beneficial interest or as to which
specified person serves as trustee or in a similar fiduciary capacity, (3) any
relative or spouse of such specified person, or any relative of such spouse,
who has the same home as such person or who is a director or officer of such
person and (4) any person who is a trustee, officer or partner of such
specified person or of any corporation, partnership or other entity which is
an Affiliate of such specified person.
(c) "Beneficial Owner" shall be defined by reference to Rule 13d-3 under the
Exchange Act as such Rule was in effect on the date hereof; provided, however,
that any individual, corporation, partnership, Group, association or other
person or entity which, directly or indirectly, owns or has the right to
acquire any of the Company's outstanding securities entitled to vote generally
in the election of directors at any time in the future, whether such right is
contingent, absolute, direct or indirect, pursuant to any agreement,
arrangement or understanding or upon exercise of conversion rights, warrants
or options, or otherwise, shall be deemed the Beneficial Owner of such
securities.
(d) "Board of Directors" means the board of directors of the Company.
(e) "Cause" has the same meaning as provided in the employment agreement
between the Participant and the Company or, if applicable, any affiliate of
the Company on the date of Termination of Service, or if no such definition or
employment agreement exists, "Cause" means conduct amounting to (1) fraud or
dishonesty against the Company or its affiliates, (2) Participant's willful
misconduct, repeated refusal to follow the reasonable directions of the board
of directors of the Company or its affiliates, or knowing violation of law in
the course of performance of the duties of Participant's service with the
Company or its affiliates, (3) repeated absences from work without a
reasonable excuse, (4) repeated intoxication with alcohol or drugs while on
the Company or affiliates' premises during regular business hours, (5) a
conviction or plea of guilty or nolo contendere to a felony or a crime
involving dishonesty, or (6) a breach or violation of the terms of any
agreement to which Participant and the Company or its affiliates are party.
(f) "Change in Control" means any one of the following events (1) when any
individual, corporation, partnership, Group, association or other person or
entity, together with his, its or their Affiliates and/or Associates (other
than a trustee or other fiduciary holding securities under an employee benefit
plan of the Company), is or becomes the Beneficial Owner of securities of the
Company representing twenty percent (20%) or more of the combined voting power
of the Company's then outstanding securities entitled to vote generally in the
election of directors or (2) when the Continuing Directors shall at any time
fail to constitute a majority of the members of the Board of Directors.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee appointed by the Board of Directors to
administer the Plan pursuant to Plan Section 2.3.
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(i) "Company" means QMS, Inc., a Delaware corporation.
(j) "Continuing Director" means a director who either was a member of the
Board of Directors on the date hereof, or who became a member of the Board of
Directors subsequent to such date and whose election, or nomination for
election by the Company's stockholders, was Duly Approved by the Continuing
Directors at the time of such nomination or election, either by a specific
vote or by approval of the proxy statement issued by the Company on behalf of
the Board of Directors in which such person was named as nominee for director,
without due objection to such nomination.
(k) "Disability" has the same meaning as provided in the long-term
disability plan or policy maintained or, if applicable, most recently
maintained, by the Company or, if applicable, any affiliate of the Company for
the Participant. If no long-term disability plan or policy was ever maintained
on behalf of the Participant or, if the determination of Disability relates to
an Incentive Stock Option, Disability shall mean that condition described in
Code Section 22(e)(3), as amended from time to time. In the event of a
dispute, the determination of Disability shall be made by the Board of
Directors and shall be supported by advice of a physician competent in the
area to which such Disability relates.
(l) "Disposition" means any conveyance, sale, transfer, assignment, pledge
or hypothecation, whether outright or as security, inter vivos or
testamentary, with or without consideration, voluntary or involuntary.
(m) "Duly Approved by the Continuing Directors" means an action approved by
the vote of at least a majority of the Continuing Directors then on the Board
of Directors, except, if the votes of such Continuing Directors in favor of
such action would be insufficient to constitute an act of the Board of
Directors if a vote by all of its members were to have been taken, then such
term shall mean an action approved by the unanimous vote of the Continuing
Directors then on the Board of Directors so long as there are at least three
(3) Continuing Directors on the Board of Directors at the time of such
unanimous vote.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" refers to the determination of value of a share of
Stock. If the Stock is actively traded on any national securities exchange or
any Nasdaq quotation or market system, Fair Market Value shall mean the
closing price at which sales of Stock shall have been sold on the most recent
trading date immediately prior to the date of determination, as reported by
any such exchange or system selected by the Committee on which the shares of
Stock are then traded. If the shares of Stock are not actively traded on any
such exchange or system, Fair Market Value shall mean the arithmetic mean of
the bid and asked prices for the shares of Stock on the most recent trading
date within a reasonable period prior to the determination date as reported by
such exchange or system. If there are no bid and asked prices within a
reasonable period or if the shares of Stock are not traded on any exchange or
system as of the determination date, Fair Market Value shall mean the fair
market value of a share of Stock as determined by the Committee taking into
account such facts and circumstances deemed to be material by the Committee to
the value of the Stock in the hands of the Participant; provided that, for
purposes of granting awards other than Incentive Stock Options, Fair Market
Value of a share of Stock may be determined by the Committee by reference to
the average market value determined over a period certain or as of specified
dates, to a tender offer price for the shares of Stock (if settlement of an
award is triggered by such an event) or to any other reasonable measure of
fair market value and provided further that, for purposes of granting
Incentive Stock Options, Fair Market Value of a share of Stock shall be
determined in accordance with the valuation principles described in the
regulations promulgated under Code Section 422.
(p) "Group" means persons who act in concert as described in Section
13(d)(3) of the Exchange Act.
(q) "Incentive Stock Option" means an incentive stock option, as defined in
Code Section 422, described in Plan Section 3.2.
(r) "Non-Qualified Stock Option" means a stock option, other than an option
qualifying as an Incentive Stock Option, described in Plan Section 3.2.
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(s) "Option" means a Non-Qualified Stock Option or an Incentive Stock
Option.
(t) "Over 10% Owner" means an individual who at the time an Incentive Stock
Option is granted owns Stock possessing more than 10% of the total combined
voting power of the Company or one of its Parents or Subsidiaries, determined
by applying the attribution rules of Code Section 424(d).
(u) "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if, with respect to Incentive
Stock Options, at the time of granting of the Option, each of the corporations
other than the Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in the
chain.
(v) "Participant" means an individual who receives an Option hereunder.
(w) "Plan" means the QMS, Inc. 1997 Stock Incentive Plan.
(x) "Stock" means the Company's common stock, $0.01 par value per share.
(y) "Stock Incentive Agreement" means an agreement between the Company and a
Participant or other documentation evidencing an award of an Option.
(z) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, with respect to
Incentive Stock Options, at the time of the granting of the Option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
(aa) "Termination of Service" means the termination of the service
relationship, whether employment or otherwise, between a Participant and the
Company and its affiliates, regardless of the fact that severance or similar
payments are made to the Participant for any reason, including, but not by way
of limitation, a termination by resignation, discharge, death, Disability or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to Termination of Service,
including, but not by way of limitation, the question of whether a leave of
absence constitutes a Termination of Service, or whether a Termination of
Service is for Cause.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 PURPOSE OF THE PLAN. The Plan is intended to (a) provide incentive to
employees and directors of the Company and its affiliates to stimulate their
efforts toward the continued success of the Company and to operate and manage
the business in a manner that will provide for the long-term growth and
profitability of the Company; (b) encourage stock ownership by employees and
directors by providing them with a means to acquire a proprietary interest in
the Company by acquiring shares of Stock; and (c) provide a means of obtaining
and rewarding key personnel.
2.2 STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with
Section 4.2, 500,000 shares of Stock, $0.01 par value, (the "Maximum Plan
Shares") are hereby reserved exclusively for issuance pursuant to Options. At
no time shall the Company have outstanding Options and shares of Stock issued
in respect of Options in excess of the Maximum Plan Shares. The shares of
Stock attributable to the nonvested, unpaid, unexercised, unconverted or
otherwise unsettled portion of any Option that is forfeited or cancelled or
expires or terminates for any reason without becoming vested, paid, exercised,
converted or otherwise settled in full shall again be available for purposes
of the Plan.
2.3 ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. The Committee shall have full authority in its discretion to
determine the officers, employees, directors and consultants of the Company or
its affiliates to whom Options shall be granted and the terms and provisions
of Options, subject to
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the Plan. Subject to the provisions of the Plan, the Committee shall have full
and conclusive authority to interpret the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; to determine the terms and
provisions of the respective Option Agreements and to make all other
determinations necessary or advisable for the proper administration of the
Plan. The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). The Committee's decisions shall be final and binding on all
Participants.
As to any matter involving a Participant who is not a "reporting person" for
purposes of Section 16 of the Exchange Act, the Committee may delegate to any
member of the Board of Directors or officer of the Company the administrative
authority to (a) interpret the provisions of the Participant's Stock Incentive
Agreement and (b) determine the treatment of Options upon a Termination of
Service, as contemplated by Plan Section 3.3.
The Committee shall consist of at least two members of the Board of
Directors and, during those periods that the Company is subject to the
provisions of Section 16 of the Exchange Act, the Board of Directors shall
consider the advisability of whether each such appointee shall qualify as a
"non-employee director," as that term is defined in Rule 16b-3 as then in
effect under the Exchange Act, and, during those periods that the Company has
issued equity securities required to be registered under Section 12 of the
Exchange Act, the Board of Directors shall consider the advisability of
whether each such appointee shall separately qualify as an "outside director,"
within the meaning of Code Section 162(m) and the regulations promulgated
thereunder. Each member of the Committee shall serve at the pleasure of the
Board of Directors, and the Board of Directors may from time to time remove
members from or add members to the Committee. Vacancies on the Committee shall
be filled by the Board of Directors. The Committee shall select one of its
members as Chairman and shall hold meetings at the times and in the places as
it may deem advisable. Acts approved by a majority of the Committee in a
meeting at which a quorum is present, or acts reduced to or approved in
writing by a majority of the members of the Committee, shall be the valid acts
of the Committee.
2.4 ELIGIBILITY AND LIMITS. Options may be granted only to employees and
directors of the Company or an affiliate; provided, however, that an Incentive
Stock Option may only be granted to an employee of the Company or any Parent
or Subsidiary. In the case of Incentive Stock Options, the aggregate Fair
Market Value (determined as of the date an Incentive Stock Option is granted)
of stock with respect to which stock options intended to meet the requirements
of Code Section 422 become exercisable for the first time by an individual
during any calendar year under all plans of the Company and its Parents and
Subsidiaries shall not exceed $100,000; provided further, that if the
limitation is exceeded, the Incentive Stock Option(s) which cause the
limitation to be exceeded shall be treated as Non-Qualified Stock Option(s);
except as the terms of the Stock Incentive Agreement may expressly provide
otherwise. To the extent required under Code Section 162(m) and regulations
thereunder for compensation to be treated as qualified performance-based
compensation, the maximum number of shares of Stock with respect to which
Options may be granted during any single fiscal year of the Company to any
Participant who is a covered employee, within the meaning of Code Section
162(m) and the regulations promulgated thereunder (a "Covered Employee"),
shall not exceed 100,000.
SECTION 3 GENERAL TERMS OF OPTIONS
3.1 GENERAL TERMS AND CONDITIONS.
(a) The number of shares of Stock as to which an Option shall be granted
shall be determined by the Committee in its sole discretion, subject to the
provisions of Section 2.2 as to the total number of shares available for
grants under the Plan. If a Stock Incentive Agreement so provides, a
Participant may be granted a new Option to purchase a number of shares of
Stock equal to the number of previously owned shares of Stock tendered in
payment of the Exercise Price (as defined below) for each share of Stock
purchased pursuant to the terms of the Stock Incentive Agreement.
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(b) Each Option shall be evidenced by a Stock Incentive Agreement in such
form and containing such terms, conditions and restrictions as the Committee
may determine is appropriate. Each Stock Incentive Agreement shall be subject
to the terms of the Plan and any provision in a Stock Incentive Agreement that
is inconsistent with the Plan shall be null and void.
(c) The date an Option is granted shall be the date on which the Committee
has approved the terms and conditions of the Stock Incentive Agreement and has
determined the recipient of the Option and the number of shares covered by the
Option and has taken all such other action necessary to complete the grant of
the Option.
(d) The Committee may provide in any Stock Incentive Agreement that, in the
event of a Change in Control, the Option shall or may be cashed out on the
basis of any price (the "Change in Control Price") not greater than the
highest price paid for a share of Stock in any transaction reported by any
market or system selected by the Committee on which the shares of Stock are
then actively traded during a specified period immediately preceding or
including the date of the Change in Control or offered for a share of Stock in
any tender offer occurring during a specified period immediately preceding or
including the date the tender offer commences; provided that, in no case shall
any such specified period exceed one (1) year. For purposes of this
Subsection, the cash-out of an Option shall be on the basis of the excess, if
any, of the Change in Control Price (but not more than the Fair Market Value
of the Stock on the date of the cash-out in the case of Incentive Stock
Options) over the Exercise Price with or without regard to whether the Option
may otherwise be exercisable only in part.
(e) Options shall not be transferable or assignable except by will or by the
laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant; in the event of the
Disability of the Participant, by the legal representative of the Participant;
or in the event of the death of the participant, by the personal
representative of the Participant's estate or if no personal representative
has been appointed, by the successor in interest determined under the
Participant's will.
3.2 OTHER TERMS AND CONDITIONS OF OPTIONS. Each Option granted under the
Plan shall be evidenced by a Stock Incentive Agreement. At the time any Option
is granted, the Committee shall determine whether the Option is to be an
Incentive Stock Option or a Non-Qualified Stock Option, and the Option shall
be clearly identified as to its status as an Incentive Stock Option or a Non-
Qualified Stock Option. At the time any Incentive Stock Option is exercised,
the Company shall be entitled to place a legend on the certificates
representing the shares of Stock purchased pursuant to the Option to clearly
identify them as shares of Stock purchased upon exercise of an Incentive Stock
Option. An Incentive Stock Option may only be granted within ten (10) years
from the earlier of the date the Plan is adopted by the Board of Directors or
approved by the Company's stockholders.
(a) Option Price. Subject to adjustment in accordance with Section 4.2 and
the other provisions of this Section 3.2, the exercise price (the "Exercise
Price") per share of Stock purchasable under any Option shall be as set forth
in the applicable Stock Incentive Agreement. With respect to each grant of an
Incentive Stock Option to a Participant who is not an Over 10% Owner or to
each grant of any Option to a Participant who is then a Covered Employee, the
Exercise Price per share shall not be less than the Fair Market Value on the
date the Option is granted. With respect to each grant of an Incentive Stock
Option to a Participant who is an Over 10% Owner, the Exercise Price shall not
be less than 110% of the Fair Market Value on the date the Option is granted.
(b) Option Term. The term of an Option shall be as specified in the
applicable Stock Incentive Agreement; provided, however that any Incentive
Stock Option granted to a Participant who is not an Over 10% Owner shall not
be exercisable after the expiration of ten (10) years after the date the
Option is granted and any Incentive Stock Option granted to an Over 10% Owner
shall not be exercisable after the expiration of five (5) years after the date
the Option is granted. "
(c) Payment. Payment for all shares of Stock purchased pursuant to exercise
of an Option shall be made in any form or manner authorized by the Committee
in the Stock Incentive Agreement or by amendment thereto, including, but not
limited to, cash or, if the Stock Incentive Agreement provides, (1) by
delivery to the Company
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of a number of shares of Stock which have been owned by the holder for at
least six (6) months prior to the date of exercise having an aggregate Fair
Market Value of not less than the product of the Exercise Price multiplied by
the number of shares the Participant intends to purchase upon exercise of the
Option on the date of delivery; (2) in a cashless exercise through a broker;
(3) by having a number of shares of Stock withheld, the Fair Market Value of
which as of the date of exercise is sufficient to satisfy the Exercise Price;
or (4) in whole or in part in installments, in which case the Stock Incentive
Agreement may require no down payment but shall provide for at least annual
installments in cash, together with accrued interest on the unpaid principal
balance at a rate at least equal to the minimum rate required at the date of
exercise of the Option in order not to be a below-market loan under Code
Section 7872 and the minimum rate required at the date of exercise of the
Option under Regulations prescribed by the Secretary of the Treasury under
Section 483(c)(1)(B) of the Code, and shall require that the unpaid balance of
the aggregate Exercise Price shall be evidenced by a promissory note, secured
by a pledge of shares of stock acquired pursuant to the exercise of the
Option. Payment shall be made at the time that the Option or any part thereof
is exercised, and no shares shall be issued or delivered upon exercise of an
option until full payment has been made by the Participant. The holder of an
Option, as such, shall have none of the rights of a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted under the
Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee
shall specify in the Stock Incentive Agreement; provided, however, that
subsequent to the grant of an Option, the Committee, at any time before
complete termination of such Option, may accelerate the time or times at which
such Option may be exercised in whole or in part, including, without
limitation, upon a Change in Control and may permit the Participant or any
other designated person to exercise the Option, or any portion thereof, for
all or part of the remaining Option term notwithstanding any provision of the
Stock Incentive Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an Incentive
Stock Option, in the event of the Termination of Service of a Participant, the
Option or portion thereof held by the Participant which is unexercised shall
expire, terminate, and become unexercisable no later than the expiration of
three (3) months after the date of Termination of Service; provided, however,
that in the case of a holder whose Termination of Service is due to death or
Disability, one (1) year shall be substituted for such three (3) month period.
For purposes of this Subsection (e), Termination of Service of the Participant
shall not be deemed to have occurred if the Participant is employed by another
corporation (or a parent or subsidiary corporation of such other corporation)
which has assumed the Incentive Stock Option of the Participant in a
transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options. Notwithstanding
anything to the contrary in this Section 3.2, any Option issued in
substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such
other terms and conditions as the Committee may prescribe to cause such
substitute Option to contain as nearly as possible the same terms and
conditions (including the applicable vesting and termination provisions) as
those contained in the previously issued option being replaced thereby.
3.3 TREATMENT OF AWARDS UPON TERMINATION OF SERVICE. Except as otherwise
provided by Plan Section 3.2(e), any award under this Plan to a Participant
who suffers a Termination of Service may be cancelled, accelerated, paid or
continued, as provided in the Stock Incentive Agreement or, in the absence of
such provision, as the Committee may determine. The portion of any award
exercisable in the event of continuation or the amount of any payment due
under a continued award may be adjusted by the Committee to reflect the
Participant's period of service from the date of grant through the date of the
Participant's Termination of Service or such other factors as the Committee
determines are relevant to its decision to continue the award.
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SECTION 4 GENERAL PROVISIONS
4.1 WITHHOLDING. The Company shall deduct from all cash distributions under
the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan, the Company shall have the right to require
the recipient to remit to the Company an amount sufficient to satisfy any
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares. A Participant may pay the
withholding tax in cash, or, if the applicable Stock Incentive Agreement
provides, a Participant may elect to have the number of shares of Stock he is
to receive reduced by the smallest number of whole shares of Stock which, when
multiplied by the Fair Market Value of the shares of Stock determined as of
the Tax Date (defined below), is sufficient to satisfy federal, state and
local, if any, withholding taxes arising from exercise or payment of an Option
(a "Withholding Election"). A Participant may make a Withholding Election only
if both of the following conditions are met:
(a) The Withholding Election must be made on or prior to the date on which
the amount of tax required to be withheld is determined (the "Tax Date") by
executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable; however, the
Committee may in its sole discretion disapprove and give no effect to the
Withholding Election.
4.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION.
(a) The number of shares of Stock reserved for the grant of Options; the
number of shares of Stock reserved for issuance upon the exercise or payment,
as applicable, of each outstanding Option; and the Exercise Price of each
outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision
or combination of shares or the payment of an ordinary stock dividend in
shares of Stock to holders of outstanding shares of Stock or any other
increase or decrease in the number of shares of Stock outstanding effected
without receipt of consideration by the Company.
(b) In the event of any merger, consolidation, extraordinary dividend
(including a spin-off), reorganization or other change in the corporate
structure of the Company or its Stock or tender offer for shares of Stock, the
Committee, in its sole discretion, may make such adjustments with respect to
awards and take such other action as it deems necessary or appropriate to
reflect or in anticipation of such merger, consolidation, extraordinary
dividend, reorganization, other change in corporate structure or tender offer,
including, without limitation, the substitution of new awards, the termination
or adjustment of outstanding awards, the acceleration of awards or the removal
of restrictions on outstanding awards, all as may be provided in the
applicable Stock Incentive Agreement or, if not expressly addressed therein,
as the Committee subsequently may determine in the event of any such merger,
consolidation, extraordinary dividend (including a spin-off), reorganization
or other change in the corporate structure of the Company or its Stock or
tender offer for shares of Stock. Any adjustment pursuant to this Section 4.2
may provide, in the Committee's discretion, for the elimination without
payment therefor of any fractional shares that might otherwise become subject
to any Options.
(c) The existence of the Plan and the Options granted pursuant to the Plan
shall not affect in any way the right or power of the Company to make or
authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the Company,
any issue of debt or equity securities having preferences or priorities as to
the Stock or the rights thereof, the dissolution or liquidation of the
Company, any sale or transfer of all or any part of its business or assets, or
any other corporate act or proceeding.
4.3 CASH AWARDS. The Committee may, at any time and in its discretion, grant
to any holder of an Option the right to receive, at such times and in such
amounts as determined by the Committee in its discretion, a cash amount which
is intended to reimburse such person for all or a portion of the federal,
state and local income taxes imposed upon such person as a consequence of the
receipt of the Option or the exercise of rights thereunder.
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4.4 COMPLIANCE WITH CODE. All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder shall be construed
in such manner as to effectuate that intent.
4.5 RIGHT TO TERMINATE SERVICE. Nothing in the Plan or in any Stock
Incentive Agreement shall confer upon any Participant the right to continue as
an employee, officer or director of the Company or any of its affiliates or
affect the right of the Company or any of its affiliates to terminate the
Participant's service at any time.
4.6 RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS. Each Option is
subject to the condition that if at any time the Committee, in its discretion,
shall determine that the listing, registration or qualification of the shares
covered by such Option upon any securities exchange or under any state or
federal law is necessary or desirable as a condition of or in connection with
the granting of such Option or the purchase or delivery of shares thereunder,
the delivery of any or all shares pursuant to such Option may be withheld
unless and until such listing, registration or qualification shall have been
effected. If a registration statement is not in effect under the Securities
Act of 1933 or any applicable state securities laws with respect to the shares
of Stock purchasable or otherwise deliverable under Options then outstanding,
the Committee may require, as a condition of exercise of any Option or as a
condition to any other delivery of Stock pursuant to an Option, that the
Participant or other recipient of an Option represent, in writing, that the
shares received pursuant to the Option are being acquired for investment and
not with a view to distribution and agree that the shares will not be disposed
of except pursuant to an effective registration statement, unless the Company
shall have received an opinion of counsel that such disposition is exempt from
such requirement under the Securities Act of 1933 and any applicable state
securities laws. The Company may include on certificates representing shares
delivered pursuant to an Option such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale
as the Company, in its discretion, shall deem appropriate.
4.7 NON-ALIENATION OF BENEFITS. Other than as specifically provided with
regard to the death of a Participant, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge; and any attempt to do so shall be void. No such
benefit shall, prior to receipt by the Participant, be in any manner liable
for or subject to the debts, contracts, liabilities, engagements or torts of
the Participant.
4.8 TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors at any
time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the
approval of stockholders of the Company if such approval is necessary or
advisable with respect to tax, securities or other applicable laws. No such
termination or amendment without the consent of the holder of an Option shall
adversely affect the rights of the Participant under such Option.
4.9 STOCKHOLDER APPROVAL. The Plan shall be submitted to the stockholders of
the Company for their approval within twelve (12) months before or after its
adoption by the Board of Directors. If such approval is not obtained, any
Option granted under the Plan shall be void.
4.10 INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification that they may have as directors of the Company or as members
of the Committee, the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including attorneys' fees actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or
in connection with the Plan or any option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except
in relation to matters as to which it shall be adjudged in such action, suit
or proceeding that such Committee member is liable for negligence in the
performance of his duties; provided that within 60 days after institution of
any such action, suit or proceeding a Committee member shall in writing offer
the Company the opportunity, at its own expense, to handle and defend the
same.
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4.11 CHOICE OF LAW. The laws of the State of Delaware shall govern the Plan,
to the extent not preempted by federal law.
4.12 EFFECTIVE DATE OF PLAN. The Plan shall become effective upon the date
the Plan is approved by the Board of Directors.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
23rd day of October, 1996.
QMS, Inc.
By:__________________________________
Title:_______________________________
ATTEST:
- -------------------------------------
Title:_______________________________
[CORPORATE SEAL]
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QMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JANUARY 21, 1997
The undersigned hereby appoints Richard A. Wiggins and Gregory R. Jones,
or either of them, proxies, with power of substitution, to vote the shares of
common stock of QMS, Inc. which the undersigned is entitled to vote at the
annual meeting of stockholders on January 21, 1997 and any adjournment thereof,
as follows:
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE.)
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THIS PROXY, PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREON. IF NO DIRECTION Please mark [X]
IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES IN PROPOSAL 1 AND FOR your votes as
PROPOSALS 2 AND 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS indicated in
WHICH MAY PROPERLY COME BEFORE THE MEETING. this example
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1. Election of Directors: NOMINEES: Donald L. Parker, Ph.D. and F. Rigdon Currie
FOR all nominees WITHHOLD
listed to the right AUTHORITY (Instructions: To withhold authority to vote for any particular
(except as marked to vote for all nominees nominee, draw a line through the name above.)
to the contrary) listed to the right
[ ] [ ]
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2. Approval of an amendment to the 3. Approval of the Company's 1997 4. With discretionary power in the
Company's Stock Option Plan for Directors. Stock Option Incentive Plan. transaction of such other business
as may properly come before the
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN meeting.
[ ] [ ] [ ] [ ] [ ] [ ]
Dated: , 199
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Signature
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Signature (if held jointly)
Title or authority (if applicable)
NOTE: Please sign exactly as name appears
hereon. If shares are registered in more
than one name, the signature of all
persons are required. A corporation
should sign in its full corporate name by
a duly authorized officer, stating his or
her title. Trustees, guardians, executors
and administrators should sign in their
official capacity, giving their full
titles as such. If a partnership, please
sign in the partnership name by an
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
NO POSTAGE REQUIRED IF MAILED IN THE
UNITED STATES OF AMERICA.
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