<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMERIQUEST TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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 Act Rule 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:
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[ ] 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.:
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(3) Filing party:
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(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
AmeriQuest letterhead
DECEMBER 31, 1998
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of AmeriQuest Technologies, Inc.
("AmeriQuest") will be held on January 28, 1999, at 9:30 a.m., local time, at
our corporate headquarters located at 2465 Maryland Road, Willow Grove, PA 19090
for the following purposes:
(1) to elect five directors;
(2) to consider a proposal to approve the 1998 Equity Compensation Plan;
and
(3) to transact any other business appropriately brought before the
meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ITS NOMINEES FOR ELECTION
TO THE BOARD OF DIRECTORS AND FOR THE PROPOSAL TO APPROVE THE 1998 EQUITY
COMPENSATION PLAN. PLEASE READ THE ATTACHED PROXY STATEMENT FOR FURTHER
INFORMATION.
Stockholders of record at the close of business on December 18, 1998 will be
entitled to vote at the Annual Meeting.
The approximate date of mailing for this proxy statement is December 31, 1998.
Sincerely yours,
Jon D. Jensen
Chief Operating Officer,
Chief Financial Officer and Secretary
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING,
YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD
AS SOON AS POSSIBLE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information.............. 1
Proposal 1: Election of
Directors...................... 2
Information about the Board of
Directors..................... 3
Proposal 2: 1998 Equity
Compensation Plan.............. 4
Stock Ownership.................. 8
Executive Officers
Compensation................... 9
Report of the Compensation
Committee...................... 10
Performance Graph................ 12
Other Information................ 13
Recent Change of Control........ 13
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Relationships and
Certain Transactions.......... 14
Compensation Committee
Interlocks and Insider
Participation................. 14
Compliance under Section 16(a)
of the Securities Exchange Act
of 1934....................... 14
Expenses of Solicitation........ 14
Accountants..................... 14
Proposals for Next Year's
Meeting....................... 15
Exhibit -- 1998 Equity
Compensation Plan.............. 16
</TABLE>
i
<PAGE> 4
AMERIQUEST TECHNOLOGIES, INC.
2465 MARYLAND ROAD
WILLOW GROVE, PENNSYLVANIA
GENERAL INFORMATION
WHAT ARE YOU VOTING FOR
Two matters will be voted on at the Annual Meeting:
(1) the election of five directors; and
(2) a proposal to approve the 1998 Equity Compensation Plan (the "Plan").
Your Board of Directors recommends that you vote for its five nominees for
election to the Board and the proposal to approve the Plan. Information
concerning the Board's nominees and the Plan are contained in this Proxy
Statement.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before the
Annual Meeting and has no reason to believe any other matters will be presented.
If, however, other matters properly come before the meeting, the persons named
as proxies on the enclosed proxy card intend to vote upon such matters as they
deem appropriate.
VOTING
Stockholders as of the close of business on December 18, 1998 are entitled to
vote at the Annual Meeting. As of that date, there were 66,881,906 shares of
common stock eligible to vote. Each share of common stock is entitled to one
vote.
To vote, you should sign and date each proxy card you receive and return it in
the postage-prepaid envelope. If you return your signed proxy card but do not
mark the boxes showing how you wish to vote, your shares will be voted FOR the
Board's nominees for election to the Board and FOR the proposal to approve the
Plan.
You have the right to revoke your proxy at any time before the meeting by: (1)
notifying AmeriQuest's Secretary at the address listed above, (2) returning a
later-dated proxy card or (3) voting in person at the Annual Meeting.
THE ANNUAL MEETING
There must be a quorum for action to be taken at the Annual Meeting. A "quorum"
is holders of a majority of the outstanding shares of common stock and the
holders may be present in person or by proxy. If you submit a properly executed
proxy card, then you will be considered part of the quorum even if you withhold
your vote in the election of directors and abstain from voting on other
proposals; in addition, "broker non-votes" are counted as present for
establishing a quorum. However, abstentions and broker non-votes are not counted
in the tally of votes FOR or AGAINST a proposal. A WITHHELD vote is the same as
an abstention. A broker non-vote occurs when a broker votes on some matters on
the proxy card but not on others, often because the broker does not have the
authority to do so.
Any stockholder of record as of December 18, 1998 can attend the Annual Meeting.
1
<PAGE> 5
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting. Each director elected at
the Annual Meeting will serve until the 1999 Annual Meeting and until his
successor is elected and qualified.
The Board currently consists of J.R. Dick Iverson, Jon D. Jensen, Alexander C.
Kramer, Jr., Marc L. Werner, Edward B. Cloues II, Walter A. Reimann and Charles
C. Soltis. Mr. Kramer, Mr. Jensen, Mr. Cloues, Mr. Reimann and Mr. Soltis have
been nominated for re-election by the Board. We have provided below information
on each of the nominees.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THESE NOMINEES. DIRECTORS ARE
ELECTED BY A PLURALITY OF THE VOTES CAST.
ALEXANDER C. KRAMER, JR. Mr. Kramer, age 55, has served as President and
Chief Executive Officer and as a director of
AmeriQuest since October 1997. From November
1995 to October 1997 Mr. Kramer served
AmeriQuest in various positions, most recently
as Vice President and General Manager of the
Advanced System Group. Mr. Kramer was Vice
President-Operations of Robec, Inc. for thirteen
years until its acquisition by AmeriQuest in
November 1995. Mr. Kramer also currently serves
as co-president of Listen Group Partners LLC
("Listen Group"), an entity which owns
approximately 48% of AmeriQuest's common stock.
JON D. JENSEN Mr. Jensen, age 55, has served as Chief
Operating Officer, Chief Financial Officer and
Secretary since October 1997 and as a director
of AmeriQuest since August 1998. From November
1995 to October 1997, he served as controller of
our Advanced Systems Group. Between September
1994 and November 1995, Mr. Jensen served as
Chief Financial Officer of Robec, Inc., which
was acquired by AmeriQuest in November 1995. He
also worked part time as a director and acting
chief financial officer at the Fredericks
Company from May 1995 to January 1997. Prior to
joining Robec, Mr. Jensen was treasurer and
controller of Philadelphia Gear, Inc. from 1988
until June 1994. Mr. Jensen currently serves as
co-president of Listen Group.
EDWARD B. CLOUES II Mr. Cloues, age 50, has served as a director of
AmeriQuest since December 1998. He has served as
the chairman of the board and chief executive
officer of K-Tron International, Inc., a
manufacturer of industrial feeders, since
January 1998. Prior to joining K-Tron, Mr.
Cloues was a senior partner in the law firm of
Morgan, Lewis & Bockius LLP, which is
AmeriQuest's general outside counsel. He is also
a director and non-executive Chairman of the
Board of AMREP Corpora-
2
<PAGE> 6
tion, a real estate development company and
provider of distribution and fulfillment
services to publishers.
WALTER A. REIMANN Mr. Reimann, age 68 served as a director of
AmeriQuest since December 1998. He has been the
president and chief executive officer of The
Fredericks Company, a specialty glass and
sensors manufacturing company whose products are
used in commercial and military applications,
since 1983.
CHARLES W. SOLTIS Mr. Soltis, age 59, has served as a director of
AmeriQuest since December 1998. He been the
managing partner of Soltis Management Services,
a general management consulting firm which he
founded, since 1972.
INFORMATION ABOUT THE BOARD OF DIRECTORS
MEETINGS
The Board of Directors met four times in the last fiscal year and acted by
written consent three times in the last fiscal year.
COMMITTEES
The Board of Directors currently has two standing committees: an Audit Committee
and a Compensation Committee. The Board does not have a Nominating Committee.
The AUDIT COMMITTEE reviews the adequacy of our internal control systems and
financial reporting procedures. In addition, the Audit Committee reviews the
general scope of our audit, the fees charged by the independent accountants, and
the performance of non-audit services provided by the independent accountants.
The Audit Committee consists of Messrs. Cloues and Reimann.
The COMPENSATION COMMITTEE recommends to the Board of Directors the compensation
of AmeriQuest's chief executive officer and chief financial officer, reviews and
takes action on the recommendations of the chief executive officer as to the
appropriate compensation for our other officers, reviews other compensation and
personnel development matters generally and administers the stock option plans.
The Compensation Committee consists of Messrs. Reimann and Soltis.
COMPENSATION
AmeriQuest pays its outside directors $1,500 per calendar quarter and $1,000 per
meeting attended, plus expenses incurred to attend meetings. As a member of the
Board's Acquisition Committee, Mr. Werner was paid an additional $5,000 per
month from September 1997 to August 1998. In addition, all directors are
eligible to receive stock options as a form of supplemental compensation.
3
<PAGE> 7
PROPOSAL 2
1998 EQUITY COMPENSATION PLAN
The Board of Directors has adopted, subject to stockholder approval, the 1998
Equity Compensation Plan (the "Plan"). The following is a summary of the key
features of the Plan. Please refer to the full text of the Plan, attached as an
Exhibit to this Proxy Statement, for a more complete description of the terms of
the Plan.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES PRESENT IN
PERSON OR BY PROXY AND ENTITLED TO VOTE IS REQUIRED TO APPROVE THE PLAN. YOUR
BOARD OF DIRECTORS RECOMMEND A VOTE FOR THE PROPOSAL TO APPROVE THE 1998 EQUITY
COMPENSATION PLAN.
SUMMARY OF THE PLAN
WHAT IS THE PLAN'S PURPOSE?
The purpose of the Plan is to provide designated employees, consultants and
advisors who perform services for AmeriQuest or its subsidiaries and
non-employee members of the Board with the opportunity to receive stock options
and stock awards. We believe that the Plan will encourage the participants to
contribute materially to our growth, thereby benefitting AmeriQuest's
stockholders, and will align the economic interests of the participants with
those of the stockholders.
HOW MANY SHARES MAY BE GRANTED UNDER THE PLAN?
The Plan provides for the issuance of up to 4,700,000 shares. If options
terminate, expire or lapse unexercised or if restricted stock is forfeited, the
shares attributable to such grants and awards may again be subject to grants
under the Plan. The Plan provides that no more than 800,000 shares may be
subject to grants to any individual during any calendar year. The shares
issuable under the Plan are in addition to the options to purchase approximately
1,910,000 shares issued (and additional 90,000 options issuable) under the 1996
Equity Incentive Plan and options to purchase approximately 128,141 shares
issued under stock options plans of predecessor companies.
HOW IS THE PLAN ADMINISTERED?
The Plan is administered by the Compensation Committee of the Board of Directors
(the "Compensation Committee") which consists of two persons. The Compensation
Committee has full power and authority to administer and interpret the Plan.
The Compensation Committee selects the employees, consultants, advisors and non-
employee directors to receive grants and determines the number of shares of
common stock that will be subject to each grant. As of the date of mailing of
this proxy statement, there are approximately 70 employees, and 5 non-employee
directors eligible to receive grants under the Plan. No options or other awards
have been granted under the Plan.
WHAT KIND OF OPTIONS CAN BE GRANTED? WHAT LIMITATIONS APPLY TO THE GRANTS?
The Plan provides for the grant of incentive stock options ("ISOs") and
non-qualified stock options. ISOs are stock options that meet certain conditions
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
ISOs provide certain benefits to option holders who meet the Code's holding
period requirements. Non-qualified stock options are options other than ISOs.
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<PAGE> 8
The Compensation Committee will establish the terms of the grants, including
vesting and exercise periods. The option price of an option may be equal to,
greater than or less than the fair market value of a share of common stock on
the date of grant, provided that (i) the option price of an ISO may not be less
than the fair market value of a share of common stock on the date of grant and
(ii) an ISO that is granted to a holder of 10% of our common stock must have an
option price of not less than 110% of the fair market value of the common stock
on the date of grant.
The Compensation Committee determines the term of each option, which may not
exceed ten years from the date of grant. However, an ISO granted to a holder of
10% or more of our common stock may not have a term longer than five years from
the date of grant. The grantee may pay the option price (i) in cash, (ii) with
the consent of the Compensation Committee, by tendering shares of common stock
owned by the grantee, or (iii) by another method approved by the Compensation
Committee, including payment through a broker. Options may be exercised while
the grantee is an employee, consultant, advisor or member of the Board or within
a specified time after termination of employment or service, depending on the
circumstances of the termination of their employment or service.
WHAT KINDS OF STOCK AWARDS MAY BE MADE UNDER THE PLAN?
The Compensation Committee may grant unrestricted or restricted stock to
employees, consultants, advisors or non-employee directors as it deems
appropriate. The Compensation Committee will establish the amount and terms of
each stock grant.
MAY GRANTS BE TRANSFERRED BY THE PARTICIPANT?
Grants under the Plan may not be transferred except upon the grantee's death or,
with respect to grants other than ISOs, if permitted by the Compensation
Committee pursuant to a domestic relations order. The Compensation Committee may
permit a grantee to transfer nonqualified stock options to family members or
certain trusts or partnerships on such terms as the Compensation Committee deems
appropriate.
WHAT HAPPENS IN THE EVENT OF A "CHANGE OF CONTROL"?
The Plan provides that, unless the Compensation Committee determines otherwise,
in the event of a Change of Control (as defined below), outstanding options will
automatically accelerate and become fully exercisable and restrictions and
conditions on outstanding stock grants will immediately lapse. Unless the
Compensation Committee determines otherwise, upon a Change of Control where
AmeriQuest is not the surviving corporation (or survives only as a subsidiary of
another corporation), outstanding options will be assumed by or replaced with
comparable options to purchase securities of the surviving corporation. The Plan
permits the Compensation Committee, in the event of a Change of Control, to
require that grantees surrender their outstanding options in exchange for
payment by AmeriQuest, in cash or common stock, of the amount by which the fair
market value of the common stock exceeds the option price, or the Compensation
Committee may terminate unexercised options after giving the grantees an
opportunity to exercise their outstanding options.
A Change of Control will be deemed to occur if (i) any person (other than
AmeriQuest or certain related entities or person) acquires our securities
representing more than 50% of the voting power of our then outstanding
securities, subject to certain exceptions; (ii) a merger or consolidation of
AmeriQuest occurs where the stockholders immediately before the transaction will
not hold, immediately after the transaction, more than 50% of the
5
<PAGE> 9
stock of the surviving corporation, (iii) a sale or other disposition of
substantially all of the assets of AmeriQuest occurs, (iv) a liquidation or
dissolution of AmeriQuest occurs, (v) any person has commenced a tender offer or
exchange offer for 30% or more of the voting power of our stock; or (vi) after
the date the Plan is approved by the stockholders, directors are elected such
that a majority of the Board members have been members for less than two years,
unless the election or nomination for election of each new director who was not
a director at the beginning of such two-year period was approved by a vote of at
least two-thirds of the directors then still in office who were directors at the
beginning of such period.
DOES THE PLAN PROVIDE FOR ANTI-DILUTION ADJUSTMENTS?
Yes, in the event of certain changes in our stock (such as stock splits, stock
dividends and recapitalizations), the Compensation Committee may adjust the
number or kind of shares of common stock and the option price subject to
outstanding options and stock grants, and the number and type of shares of
common stock that may be issued under the Plan (including the individual limit
on grants during a year).
WHEN WILL THE PLAN TERMINATE? HOW IS THE PLAN AMENDED?
The plan provides that it will terminate ten years from its effective date. The
Compensation Committee may amend or terminate the Plan, provided that the
Compensation Committee shall not amend the Plan without stockholder approval if
such approval is required in order for incentive stock options to meet the
requirements of section 422 of the Code or to exempt compensation under the Plan
from the limits of section 162(m) of the Code.
FEDERAL INCOME TAX TREATMENT OF STOCK OPTIONS
Under the Code, as currently in effect, a director, consultant, advisor or
employee receiving nonqualified stock options under the Plan will not recognize
income when the options are granted. The grantee will recognize ordinary income
upon the exercise of a nonqualified stock option to the extent that the fair
market value of the shares at the time of exercise exceeds the option price.
AmeriQuest is generally entitled to a corresponding deduction for federal income
tax purposes at the time of exercise.
ISOs may only be granted to employees. An employee generally will not recognize
federal taxable income upon the grant or exercise of an ISO. An employee who
disposes of the shares acquired upon exercise of an ISO after two years from the
date the ISO was granted and one year from the date such shares were transferred
to him or her upon exercise of the ISO will recognize capital gain or loss in
the amount of the difference between the amount realized on the sale and the
option price. As a general rule, if an employee disposes of the shares acquired
upon exercise of an ISO before satisfying both holding period requirements (a
"disqualifying disposition"), the employee will recognize ordinary income to the
extent of the difference between the fair market value of such shares on the
date of exercise and the option price. The gain, if any, in excess of the amount
recognized as ordinary income on such a disqualifying disposition will be
capital gain. The tax rate of capital gain depends on the length of time the
employee held the shares prior to the disposition. AmeriQuest generally will not
be entitled to a tax deduction by reason of an exercise of an ISO, unless a
disqualifying disposition occurs.
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Under Section 162(m) of the Code, AmeriQuest may be precluded from claiming a
federal income tax deduction for total remuneration in excess of $1,000,000 paid
to the chief executive officer or to any of the other four most highly
compensated employees in any year. Total remuneration generally includes amounts
received upon the exercise of options and amounts taxable upon the grant or
vesting of stock awards. An exception exists for performance-based compensation
that meets certain requirements. Options under the Plan are intended to qualify
for treatment as performance-based compensation, but stock awards will not
qualify for such treatment.
As of December 18, 1998, the last reported sales price of the common stock as
reported on the OTC Bulletin Board was 5/64 or approximately 8 cents per share.
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<PAGE> 11
STOCK OWNERSHIP
The following table shows how much stock the officers, directors,
director-nominees and holders of more than 5% of outstanding common stock
beneficially owned as of December 18, 1998. In general a person is considered to
"beneficially own" shares if the person has the power to vote or transfer the
shares for the purposes of this table, a person is also considered to
beneficially own shares that may be issued upon exercise of stock options that
are exercisable currently or within 60 days. Each stockholder listed below has
the sole power to vote or transfer shares listed to the stockholder's name,
unless otherwise noted.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
AS OF DECEMBER 18, 1998
------------------------------------------
AGGREGATE NUMBER OF
NAME SHARES BENEFICIALLY OWNED PERCENTAGE(1)
- ---- ------------------------- --------------
<S> <C> <C>
Listen Group Partners, L.L.C.(2)............ 31,849,878 47.6%
Alexander C. Kramer, Jr.(3)................. 31,871,384 47.7%
Jon D. Jensen(4)............................ 31,849,878 47.6%
Marc L. Werner(5)........................... 80,000 *
J.R. Dick Iverson........................... 10,000 *
Edward B. Cloues II......................... 0 *
Walter A. Reimann........................... 0 *
Charles W. Soltis........................... 0 *
Directors and Officers as a Group........... 31,961,384 47.8%
</TABLE>
- -------------------------
* Less than 1% of AmeriQuest's outstanding shares of common stock.
(1) All percentages are based on 66,881,906 shares outstanding on December 18,
1998. If a person holds options that are currently exercisable or
exercisable within 60 days, the number of shares underlying the options are
considered outstanding and beneficially owned for the purpose of computing
that person's percentage ownership. Such shares are not considered
outstanding for the purpose of computing the beneficial ownership of others
listed in the table.
(2) The address for Listen Group is c/o AmeriQuest Technologies, Inc., 2465
Maryland Road, Willow Grove, Pennsylvania 19090. Listen Group is an entity
equally owned and managed by AmeriQuest executive officers: Alexander C.
Kramer, Jr. and Jon D. Jensen.
(3) Includes the 31,849,878 shares of common stock held by Listen Group (see
note 2) and options to purchase 21,506 shares of common stock which are
currently exercisable. Mr. Kramer's address is c/o AmeriQuest Technologies,
Inc., 2465 Maryland Road, Willow Grove, Pennsylvania 19090.
(4) Consists solely of the 31,849,878 shares of common stock held by Listen
Group (see note 2). Mr. Jensen's address is c/o AmeriQuest Technologies,
Inc., 2465 Maryland Road, Willow Grove, Pennsylvania 19090.
(5) Includes 20,000 shares of common stock held by Mr. Werner as custodian for
certain of his children.
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<PAGE> 12
EXECUTIVE OFFICERS COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, for the last three fiscal years, the cash and other
compensation paid to Mr. Kramer and Mr. Jensen, AmeriQuest's only executive
officers. For the purposes of this section, Messrs. Kramer and Jensen are
referred to as the "Named Executive Officers."
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
--------------------
NAME YEAR SALARY BONUS
- ---- ---- -------- --------
<S> <C> <C> <C>
Alexander C. Kramer, Jr.(1)...................... 1998 $200,000 $145,000
President and Chief Executive Officer 1997 $150,000 $165,000
1996 $150,000 $ 19,974
Jon D. Jensen(2)................................. 1998 $157,500 $145,000
Chief Financial Officer and 1997 $140,000 $ 94,000
Chief Operating Officer 1996 $125,000 $ 2,692
</TABLE>
- -------------------------
(1) Mr. Kramer assumed the position of President and Chief Executive Officer on
October 7, 1997. Prior to that date, Mr. Kramer served AmeriQuest in various
capacities.
(2) Mr. Jensen assumed the position of Chief Financial Officer and Chief
Operating Officer on October 7, 1997. Prior to that date, Mr. Jensen served
AmeriQuest in various capacities.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the Named Executive Officers in fiscal year 1998.
FISCAL YEAR END VALUES
The following table shows the number and value of options held as of September
30, 1998 by the Named Executive Officers. No Named Executive Officer exercised
any options in fiscal year 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alexander C. Kramer, Jr.... 21,506 5,376 -- --
Jon D. Jensen.............. 0 0 -- --
</TABLE>
EMPLOYMENT AGREEMENTS
AmeriQuest and Alexander C. Kramer, Jr. entered into an Employment Agreement
dated as of October 1, 1997 under which Mr. Kramer serves as our President and
Chief Executive Officer. The agreement provides for an initial term of one year
and is renewed automatically for additional one year terms until terminated in
accordance with procedures specified in the agreement. The agreement provides
for an annual base salary of $200,000
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<PAGE> 13
and an annual performance bonus of up to $229,000 if Mr. Kramer achieves certain
performance criteria specified in the agreement. Should AmeriQuest terminate Mr.
Kramer's service "without cause," Mr. Kramer would be entitled to severance pay
equal to six month's salary; should Mr. Kramer be terminated as a result of a
"change in control," he would be entitled to severance pay equal to one year.
AmeriQuest and Jon D. Jensen entered into an Employment Agreement dated October
1, 1997 under which Mr. Jensen serves as our Chief Financial Officer and Chief
Operating Officer. The agreement provides for an initial term of one year and is
renewed automatically for additional one year terms until terminated in
accordance with procedures specified in the agreement. The agreement provides
for an annual base salary of $157,500 and an annual performance bonus of up to
$180,000 if Mr. Jensen achieves certain performance criteria specified in the
agreement. Should AmeriQuest terminate Mr. Jensen's service "without cause," Mr.
Jensen would be entitled to severance pay equal to six month's salary; should
Mr. Jensen be terminated as a result of a "change in control," he would be
entitled to severance pay equal to one year.
Mr. Kramer and Mr. Jensen waived the change of control provisions in their
respective employment agreements with respect to the transaction pursuant to
which the Listen Group acquired shares from Computer 2000. See "Recent Change of
Control" on page 13.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors performs five principal
tasks. It:
- recommends to the full Board the compensation of AmeriQuest's chief
executive officer and chief operating officer,
- reviews the recommendations of the chief executive officer as to the
appropriate compensation of AmeriQuest's other officers,
- approves the granting of any bonuses to officers,
- generally reviews other compensation and personnel development matters,
and
- administers the stock option plans.
In fulfilling these duties, it is the objective of the Compensation Committee to
have a policy that will enable AmeriQuest to attract, retain and reward
executive officers of outstanding ability. Employees of Computer 2000 who also
served as officers and directors of the Company were paid by Computer 2000.
AmeriQuest's compensation policy for executives is to pay competitively and to
be fair in the administration of pay. This is the same policy applicable to all
employees of AmeriQuest. Base salary levels for AmeriQuest's executive officers
are intended to be generally competitive with other comparable companies, taking
into account such factors as the level of responsibility involved, the need for
special expertise and the specific individual's experience and prior performance
at AmeriQuest. Cash bonuses based on individual and company performance have
been used to create an incentive for outstanding performance.
Although AmeriQuest has a September 30 fiscal year, executive base salaries are
reviewed by the Committee annually in January, with any adjustments normally
becoming effective on January 1. During this review the Committee considers the
performance of AmeriQuest
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<PAGE> 14
during the prior year, the individual executive's contribution to that
performance and changes in the role and responsibility of the executive during
that year.
On October 27, 1997 Alexander C. Kramer was promoted to chief executive officer
and Jon D. Jensen was promoted to chief operating officer and chief financial
officer. The Compensation Committee desired to create an incentive for these
officers to remain with AmeriQuest, and to base a significant portion of their
compensation on their ability to turn around AmeriQuest to achieve profitability
and other objectives.
AmeriQuest also has a stock option plan. AmeriQuest has never issued restricted
stock or stock appreciation rights to executive officers, and it does not have
any long-term incentive plans other than the stock option plan. When Computer
2000 controlled a majority of the outstanding shares of AmeriQuest, AmeriQuest
ceased issuing additional stock options under the stock option. In addition,
Computer 2000 did not support any other long term incentive programs for
AmeriQuest officers. As part of the sale of a controlling interest by Computer
2000, the Board of Directors authorized the reservation of 6,700,000 shares
(approximately 10% of the post-transaction number of outstanding shares) for
future issuances of stock options. Because of the compensation levels of
AmeriQuest's officers, the Compensation Committee has not traditionally
considered the effect of Section 162(m) of the Code limiting deduction in excess
of $1 million.
Upon receiving his promotion to chief executive officer, the Compensation
Committee agreed to increase Mr. Kramer's base salary from $150,000 to $200,000
and set an annual performance bonus of up to $229,000 if Mr. Kramer and
AmeriQuest achieve certain performance criteria. Mr. Kramer's increased
compensation reflects a higher level of responsibility with respect to strategic
direction of AmeriQuest. Mr. Kramer's bonus of $145,000 for 1998 was determined
based upon Mr. Kramer's and the Company's performance, but took into account Mr.
Kramer's equity interest in the Company. This bonus represented a discount from
the formula bonus entitlement set by the Compensation Committee in January 1998,
which would have resulted in a higher bonus entitlement. Mr. Kramer's
compensation is competitive with compensation paid by AmeriQuest in the past to
its chief executive officers.
The Compensation Committee has engaged an executive compensation consulting firm
to assist it in identifying appropriate compensation plans going forward.
Respectfully submitted by the Compensation Committee
as of December 23, 1998.
Walter A. Reimann
Charles W. Soltis
11
<PAGE> 15
PERFORMANCE GRAPH
The performance graph below compares the percentage change in the cumulative
stockholder return of AmeriQuest from October 1, 1993 through September 30, 1998
with the percentage change in the cumulative total return over the same period
on (i) an index of computer distribution and manufacturing companies, which
includes Merisel, Tech Data, Software Spectrum, Micro Age, Intelligent
Electronics, Inacom, Western Digital, Seagate, Dell and Compaq (the "CDMC
Index") and (ii) the NASDAQ Stock Market -- U.S. Companies. This graph assumes
an initial investment of $100 on October 1, 1993 in each of AmeriQuest common
stock, the CDMC Index and the NASDAQ Stock Market -- U.S. Companies Index.
Performance Graph
<TABLE>
<CAPTION>
AQS/AMQT NASDAQ CDMC
<S> <C> <C> <C>
1994 100 100 100
1995 42 137 116
1996 22 161 190
1997 8 221 634
1998 3 222 1981
</TABLE>
12
<PAGE> 16
OTHER INFORMATION
RECENT CHANGE OF CONTROL
On July 20, 1998, Listen Group Partners, L.L.C., an entity owned and managed by
AmeriQuest's senior management, acquired the 36,349,878 shares of AmeriQuest's
common stock owned by Computer 2000, Inc., a wholly-owned subsidiary of Computer
2000 AG, a German corporation, for $1.00 (the "Transaction"). Those shares
represented approximately 54% of the outstanding shares of common stock. As a
result, Listen Group assumed control of AmeriQuest.
As part of the Transaction, the following things occurred:
- Computer 2000 contributed to the capital of AmeriQuest approximately $28
million in intercompany debt and an additional $3 million in cash;
- AmeriQuest redeemed and canceled 300,000 shares of Series H Cumulative
Convertible Preferred Stock, which were convertible into 41,958,042
shares of common stock, held by Computer 2000;
- AmeriQuest canceled the achievement warrants equivalent to 7,035,280
shares of common stock and a maintenance option equivalent to 2,357,235
shares of common stock, held by Computer 2000;
- as a result of the Transaction, the number of outstanding shares of
common stock, on a fully diluted basis, was reduced from approximately
118 million to approximately 67 million;
- a total of 6.7 million additional shares of common stock were reserved
for issuance to AmeriQuest employees as incentive compensation (including
the 4.7 million shares issuable under the Plan);
- Listen Group and AmeriQuest obtained the release of Computer 2000 from
all guarantees of AmeriQuest's obligations;
- Computer 2000's representatives on the Board of Directors, Harry
Krischik, Manfred H. Guenzel, Richard Obermaier and Anton Roedl,
resigned. Jon Jensen was immediately elected to fill one of the
vacancies;
- Listen Group and AmeriQuest jointly and severally indemnified Computer
2000 and its director designees against any damages arising following the
closing of the Transaction due to actions taken with respect to
AmeriQuest prior to the closing;
- Listen Group paid approximately $220,000 for transaction related
expenses, including a D&O insurance tail policy covering Computer 2000
and the current directors of AmeriQuest and the $1 direct consideration,
which was funded with capital contributions by Messrs. Kramer and Jensen
to Listen Group;
- Messrs. Kramer and Jensen waived the change of control provisions in
their respective employment agreements with AmeriQuest with respect to
the Transaction; and
- AmeriQuest entered into a $10 million asset-backed line of credit with
Fleet Capital Corporation replacing our prior line of credit with IBM
Credit Corporation.
On September 11, 1998, Listen Group sold 1,640,000 shares of the common stock it
acquired to Holger Heims, a former executive officer of AmeriQuest, and
2,680,000 shares of common stock it acquired to Solux Limited, for $1.00.
13
<PAGE> 17
CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
See "Recent Change of Control," above, for a description of the acquisition by
Listen Group Partners L.L.C., an entity owned and managed by AmeriQuest's senior
management, of 36,349,878 shares of AmeriQuest's common stock owned by Computer
2000, Inc., a wholly-owned subsidiary of Computer 2000 AG, a German corporation.
See "Executive Compensation -- Employment Agreements" on page 13 for a
description of the employment agreements entered into between AmeriQuest and
each of Messrs. Kramer and Jensen.
Edward B. Cloues II, who has been nominated to serve on the Board of Directors,
was until January 5, 1998 a partner in Morgan, Lewis & Bockius LLP, a law firm
which performed services for AmeriQuest in the fiscal year ended September 30,
1998. During such fiscal year, AmeriQuest paid Morgan, Lewis & Bockius LLP
approximately $125,000 in legal fees. AmeriQuest has retained Morgan, Lewis &
Bockius LLP to perform legal services during the current fiscal year.
Soltis Management Services, of which Charles W. Soltis, who has been nominated
to serve on the Board of Directors, is managing partner, was retained by
AmeriQuest in connection with the search for a Vice President of Marketing and
Sales.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
COMPLIANCE UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934 requires our directors and
officers, and persons who beneficially own more than 10% of AmeriQuest's common
stock to file certain reports with the Securities and Exchange Commission.
Based on our review of information provided by persons subject to the Section 16
filing requirements, we believe that all required filings were made on a timely
basis, except that Listen Group filed its initial Form 3 two days late.
EXPENSES OF SOLICITATION
The expense of soliciting proxies for the Annual Meeting will be paid for by
AmeriQuest. Following the original mailing of the proxies and other soliciting
materials, AmeriQuest officers, employees and/or agents may also solicit proxies
by mail, telephone, facsimile or in person. We will request that brokers,
custodians, nominees and other record holders of common stock forward copies of
the proxy and other soliciting materials to persons for whom they hold shares of
common stock and seek instructions for the exercise of proxies. In such cases,
AmeriQuest, upon the request of the record holders, will reimburse such holders
for their reasonable expense.
ACCOUNTANTS
Arthur Andersen LLP served as our independent public accountants for the 1998
fiscal year and has been selected to serve as our independent public accountants
for the 1999 fiscal year. We have requested that a representative of Arthur
Andersen LLP attend the Annual Meeting. The representative will have an
opportunity to make a statement, if they wish, and will be available to respond
to appropriate stockholders' questions.
14
<PAGE> 18
PROPOSALS FOR NEXT YEAR'S MEETING
Any eligible stockholder who wishes to submit a proposal for presentation at our
2000 Annual Meeting must submit the proposal not later than August 31, 1999, to
AmeriQuest, Inc., 2465 Maryland Road, Willow Grove, Pennsylvania 19090,
Attention: Secretary, for inclusion, if appropriate, in our proxy statement and
form of proxy relating to our 2000 Annual Meeting.
15
<PAGE> 19
EXHIBIT
PROPOSED 1998 EQUITY COMPENSATION PLAN
16
<PAGE> 20
AMERIQUEST TECHNOLOGIES, INC.
1998 EQUITY COMPENSATION PLAN
The purpose of the AmeriQuest Technologies, Inc. 1998 Equity Compensation Plan
(the "Plan") is to provide (i) designated employees of AmeriQuest Technologies,
Inc. (the "Company") and its subsidiaries, (ii) certain consultants and advisors
who perform services for the Company or its subsidiaries and (iii) non-employee
members of the Board of Directors of the Company (the "Board") with the
opportunity to receive grants of incentive stock options, nonqualified stock
options and stock of the Company. The Company believes that the Plan will
encourage the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders, and will align the
economic interests of the participants with those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee appointed by the Board (the "Committee"), which may consist
of "outside directors" as defined under section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and related
Treasury regulations and "non-employee directors" as defined under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the
Plan, (ii) determine the type, size and terms of the grants to be
made to each such individual, (iii) determine the time when the
grants will be made and the duration of any applicable exercise or
restriction period, including the criteria for exercisability and the
acceleration of exercisability and (iv) deal with any other matters
arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations,
agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in its
sole discretion. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested in
it hereunder shall be conclusive and binding on all persons having
any interest in the Plan or in any awards granted hereunder. All
powers of the Committee shall be executed in its sole discretion, in
the best interest of the Company, not as a fiduciary, and in keeping
with the objectives of the Plan and need not be uniform as to
similarly situated individuals.
2. Grants
Awards under the Plan may consist of grants of incentive stock options
("Incentive Stock Options") and nonqualified stock options ("Nonqualified Stock
Options") as described in Section 5 (Incentive Stock Options and Nonqualified
Stock Options are collectively referred to as "Options") and stock grants as
described in Section 6 ("Stock Grants") (Options and Stock Grants are
hereinafter collectively referred to as "Grants"). All Grants shall be subject
to the terms and conditions set forth herein and to such other terms and
conditions consistent with this Plan as the Committee deems appropriate and as
are specified in writing by the Committee to the individual in a grant
instrument or an amendment to the grant instrument (the "Grant Instrument"). The
Committee shall
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<PAGE> 21
approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company
Stock") that may be issued or transferred under the Plan is 4,700,000
shares. After a Public Offering, the maximum aggregate number of
shares of Company Stock that shall be subject to Grants made under
the Plan to any individual during any calendar year shall be 800,000
shares, subject to adjustment as described below. The shares may be
authorized but unissued shares of Company Stock or reacquired shares
of Company Stock, including shares purchased by the Company on the
open market for purposes of the Plan. If and to the extent Options
granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised or if any
shares subject to a Stock Grant are forfeited, the shares subject to
such Grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares
of Company Stock outstanding (i) by reason of a stock dividend,
spinoff, recapitalization, stock split, or combination or exchange of
shares, (ii) by reason of a merger, reorganization or consolidation
in which the Company is the surviving corporation, (iii) by reason of
a reclassification or change in par value, or (iv) by reason of any
other extraordinary or unusual event affecting the outstanding
Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock
is substantially reduced as a result of a spinoff or the Company's
payment of an extraordinary dividend or distribution, the maximum
number of shares of Company Stock available for Grants, the maximum
number of shares of Company Stock that any individual participating
in the Plan may be granted in any year, the number of shares covered
by outstanding Grants, the kind of shares issued under the Plan, and
the price per share of such Grants may be appropriately adjusted by
the Committee to reflect any increase or decrease in the number of,
or change in the kind or value of, issued shares of Company Stock to
preclude, to the extent practicable, the enlargement or dilution of
rights and benefits under such Grants; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
Any adjustments determined by the Committee shall be final, binding
and conclusive.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees"), including Employees who are officers or members of the
Board, and members of the Board who are not Employees ("Non-Employee
Directors") shall be eligible to participate in the Plan. Consultants
and advisors who perform services for the Company or any of its
subsidiaries ("Key Advisors") shall be eligible to participate in the
Plan if the Key Advisors render bona fide services and such services
are not in connection with the offer or sale of securities in a
capital-raising transaction.
(b) Selection of Grantees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall
determine the
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<PAGE> 22
number of shares of Company Stock subject to a particular Grant in
such manner as the Committee determines. Employees, Key Advisors and
Non-Employee Directors who receive Grants under this Plan shall
hereinafter be referred to as "Grantees".
5. Granting of Options
(a) Number of Shares. The Committee shall determine the number of shares
of Company Stock that will be subject to each Grant of Options to
Employees, Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the
meaning of section 422 of the Code or Nonqualified Stock
Options that are not intended so to qualify or any combination
of Incentive Stock Options and Nonqualified Stock Options, all
in accordance with the terms and conditions set forth herein.
Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to Employees,
Non-Employee Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and
may be equal to, greater than, or less than the Fair Market
Value (as defined below) of a share of Company Stock on the
date the Option is granted; provided, however, that (x) the
Exercise Price of an Incentive Stock Option shall be equal to,
or greater than, the Fair Market Value of a share of Company
Stock on the date the Incentive Stock Option is granted and
(y) an Incentive Stock Option may not be granted to an
Employee who, at the time of grant, owns stock possessing more
than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the
Company, unless the Exercise Price per share is not less than
110% of the Fair Market Value of Company Stock on the date of
grant.
(iii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the
principal trading market for the Company Stock is a national
securities exchange or the Nasdaq National Market, the last
reported sale price thereof on the relevant date or (if there
were no trades on that date) the latest preceding date upon
which a sale was reported, or (y) if the Company Stock is not
principally traded on such exchange or market, the mean
between the last reported "bid" and "asked" prices of Company
Stock on the relevant date, as reported on Nasdaq or, if not
so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the
Company Stock is not publicly traded or, if publicly traded,
is not subject to reported transactions or "bid" or "asked"
quotations as set forth above, the Fair Market Value per share
shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of
grant. However,
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<PAGE> 23
an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, or any
parent or subsidiary of the Company, may not have a term that exceeds
five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan,
as may be determined by the Committee and specified in the Grant
Instrument. The Committee may accelerate the exercisability of any or
all outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised
while the Grantee is employed by, or providing service to, the
Company as an Employee, Key Advisor or member of the Board. In
the event that a Grantee ceases to be employed by, or provide
service to, the Company for any reason other than a
"disability", death, or termination for "cause", any Option
which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date on which the
Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be
specified by the Committee), but in any event no later than
the date of expiration of the Option term. Except as otherwise
provided by the Committee, any of the Grantee's Options that
are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for
"cause" by the Company, any Option held by the Grantee shall
terminate as of the date the Grantee ceases to be employed by,
or provide service to, the Company. In addition,
notwithstanding any other provisions of this Section 5, if the
Committee determines that the Grantee has engaged in conduct
that constitutes "cause" at any time while the Grantee is
employed by, or providing service to, the Company or after the
Grantee's termination of employment or service, any Option
held by the Grantee shall immediately terminate, and the
Grantee shall automatically forfeit all shares underlying any
exercised portion of an Option for which the Company has not
yet delivered the share certificates, upon refund by the
Company of the Exercise Price paid by the Grantee for such
shares.
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company because the Grantee is "disabled", any
Option which is otherwise exercisable by the Grantee shall
terminate unless exercised within one year after the date on
which the Grantee ceases to be employed by, or provide service
to, the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than
the date of expiration of the Option term. Except as otherwise
provided by the Committee, any of the Grantee's Options which
are not otherwise exercisable as of the date on which the
Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.
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<PAGE> 24
(iv) If the Grantee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the
Grantee ceases to be employed or provide service on account of
a termination specified in Section 5(e)(i) above (or within
such other period of time as may be specified by the
Committee), any Option that is otherwise exercisable by the
Grantee shall terminate unless exercised within one year after
the date on which the Grantee ceases to be employed by, or
provide service to, the Company (or within such other period
of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term.
Except as otherwise provided by the Committee, any of the
Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(v) For purposes of this Section 5(e) and Section 6:
(A) The term "Company" shall mean the Company and its parent
and subsidiary corporations.
(B) "Employed by, or provide service to, the Company" shall
mean employment or service as an Employee, Key Advisor or
member of the Board (so that, for purposes of exercising
Options and satisfying conditions with respect to Stock
Grants, a Grantee shall not be considered to have
terminated employment or service until the Grantee ceases
to be an Employee, Key Advisor and member of the Board),
unless the Committee determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Cause" shall mean, except to the extent specified
otherwise by the Committee, a finding by the Committee
that the Grantee (i) has breached his or her employment
or service contract with the Company, (ii) has been
engaged in disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her
employment or service, (iii) has disclosed trade secrets
or confidential information of the Company to persons not
entitled to receive such information, or (iv) has engaged
in such other conduct detrimental to the interests of the
Company as the Committee considers to be "cause."
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of
exercise to the Company with payment of the Exercise Price. The
Grantee shall pay the Exercise Price for an Option as specified by
the Committee (x) in cash, (y) with the approval of the Committee, by
delivering shares of Company Stock owned by the Grantee (including
Company Stock acquired in connection with the exercise of an Option,
subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the
Exercise Price or (z) by such other method as the Committee may
approve, including payment through a broker in accordance with
procedures permitted by Regulation T of the Federal Reserve Board.
Shares of Company Stock used to
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<PAGE> 25
exercise an Option shall have been held by the Grantee for the
requisite period of time to avoid adverse accounting consequences to
the Company with respect to the Option. The Grantee shall pay the
Exercise Price and the amount of any withholding tax due (pursuant to
Section 7) at the time of exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the
date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year,
under the Plan or any other stock option plan of the Company or a
parent or subsidiary, exceeds $100,000, then the Option, as to the
excess, shall be treated as a Nonqualified Stock Option. An Incentive
Stock Option shall not be granted to any person who is not an
Employee of the Company or a parent or subsidiary (within the meaning
of section 424(f) of the Code).
6. Stock Grants
The Committee may issue or transfer shares of Company Stock to an Employee, Non-
Employee Director or Key Advisor under a Stock Grant of restricted or
unrestricted stock, upon such terms as the Committee deems appropriate. The
following provisions are applicable to Stock Grants:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Stock Grants may be issued or transferred for
consideration or for no consideration, such as pursuant to a bonus
program, as determined by the Committee. The Committee may establish
conditions under which restrictions on shares of Company Stock shall
lapse over a period of time or according to such performance or other
criteria as the Committee deems appropriate. The period of time
during which the Company Stock will remain subject to restrictions
will be designated in the Grant Instrument as the "Restriction
Period."
(b) Number of Shares. The Committee shall determine the number of shares
of Company Stock to be issued or transferred pursuant to a Stock
Grant and any restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in
Section 5(e)) during a period designated in the Grant Instrument as
the Restriction Period, or if other specified conditions are not met,
the Stock Grant shall terminate as to all shares covered by the Grant
as to which the restrictions have not lapsed, and those shares of
Company Stock must be immediately returned to the Company. The
Committee may, however, provide for complete or partial exceptions to
this requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge
or otherwise dispose of the shares of restricted stock covered by the
Stock Grant except to a Successor Grantee under Section 8(a). Each
certificate for a share of restricted Company Stock shall contain a
legend giving appropriate notice of the restrictions in the Grant.
The Grantee shall be entitled to have the legend removed from the
stock certificate covering the shares subject to restrictions when
all restrictions on such shares have lapsed. The Committee may
determine that the Company will not issue certificates for shares of
restricted Company
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<PAGE> 26
Stock until all restrictions on such shares have lapsed, or that the
Company will retain possession of certificates for such shares until
all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee
shall have the right to vote shares of restricted Company Stock and
to receive any dividends or other distributions paid on such shares,
subject to any restrictions deemed appropriate by the Committee.
(f) Lapse of Restrictions. All restrictions imposed on restricted
Company Stock shall lapse upon the expiration of the applicable
Restriction Period and the satisfaction of all conditions imposed by
the Committee. The Committee may determine, as to any or all
restricted Stock Grants, that the restrictions shall lapse without
regard to any Restriction Period.
7. Withholding of Taxes
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require that the Grantee or other
person receiving or exercising Grants pay to the Company the amount
of any federal, state or local taxes that the Company is required to
withhold with respect to such Grants, or the Company may deduct from
other wages paid by the Company the amount of any withholding taxes
due with respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation
with respect to a Grant by having shares withheld up to an amount
that does not exceed the Grantee's minimum applicable withholding tax
rate for federal (including FICA), state and local tax liabilities.
The election must be in a form and manner prescribed by the Committee
and shall be subject to the prior approval of the Committee.
8. Transferability of Grants
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's
lifetime. A Grantee may not transfer those rights except by will or
by the laws of descent and distribution or, with respect to Grants
other than Incentive Stock Options, if permitted in any specific case
by the Committee, pursuant to a domestic relations order (as defined
under the Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the regulations thereunder). When a
Grantee dies, the personal representative or other person entitled to
succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Grant
under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the
foregoing, the Committee may provide, in a Grant Instrument, that a
Grantee may transfer Nonqualified Stock Options to family members,
one or more trusts for the benefit of family members, or one or more
partnerships of which family members are the only partners, according
to such terms as the Committee may
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<PAGE> 27
determine; provided that the Grantee receives no consideration for
the transfer of an Option and the transferred Option shall continue
to be subject to the same terms and conditions as were applicable to
the Option immediately before the transfer.
9. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the voting power of the then
outstanding securities of the Company (other than pursuant to a
merger or consolidation of the Company where the shareholders of the
Company, immediately prior to the merger or consolidation, will
beneficially own, immediately after the merger or consolidation,
shares entitling such shareholders to more than 50% of all votes to
which all shareholders of the surviving corporation would be entitled
in the election of directors (without consideration of the rights of
any class of stock to elect directors by a separate class vote);
(b) The shareholders of the Company approve (or, if shareholder approval
is not required, the Committee approves) an agreement providing for
(i) the merger or consolidation of the Company with another
corporation where the shareholders of the Company, immediately prior
to the merger or consolidation, will not beneficially own,
immediately after the merger or consolidation, shares entitling such
shareholders to more than 50% of all votes to which all shareholders
of the surviving corporation would be entitled in the election of
directors (without consideration of the rights of any class of stock
to elect directors by a separate class vote), (ii) the sale or other
disposition of all or substantially all of the assets of the Company,
or (iii) a liquidation or dissolution of the Company;
(c) Any person has commenced a tender offer or exchange offer for 30% or
more of the voting power of the then outstanding shares of the
Company; or
(d) After the date this Plan is approved by the shareholders of the
Company, directors are elected such that a majority of the members of
the Board shall have been members of the Board for less than two
years, unless the election or nomination for election of each new
director who was not a director at the beginning of such two-year
period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such
period.
10. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, unless the
Committee determines otherwise, (i) the Company shall provide each
Grantee with outstanding Grants written notice of such Change of
Control, (ii) all outstanding Options shall automatically accelerate
and become fully exercisable and (iii) the restrictions and
conditions on all outstanding Stock Grants shall immediately lapse.
(b) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of
another
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corporation), unless the Committee determines otherwise, all
outstanding Options that are not exercised shall be assumed by, or
replaced with comparable options by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the
Committee may take one or both of the following actions: the
Committee may (i) require that Grantees surrender their outstanding
Options in exchange for a payment by the Company, in cash or Company
Stock as determined by the Committee, in an amount equal to the
amount by which the then Fair Market Value of the shares of Company
Stock subject to the Grantee's unexercised Options exceeds the
Exercise Price of the Options, or (ii) after giving Grantees an
opportunity to exercise their outstanding Options, terminate any or
all unexercised Options at such time as the Committee deems
appropriate. Such surrender or termination shall take place as of the
date of the Change of Control or such other date as the Committee may
specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary,
in the event of a Change of Control, the Committee shall not have the
right to take any actions described in the Plan (including without
limitation actions described in Subsection (c) above) that would make
the Change of Control ineligible for pooling of interests accounting
treatment or that would make the Change of Control ineligible for
desired tax treatment if, in the absence of such right, the Change of
Control would qualify for such treatment and the Company intends to
use such treatment with respect to the Change of Control.
11. Requirements for Issuance or Transfer of Shares. No Company Stock shall
be issued or transferred in connection with any Grant hereunder unless and
until all legal requirements applicable to the issuance or transfer of
such Company Stock have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any Grant made
to any Grantee hereunder on such Grantee's undertaking in writing to
comply with such restrictions on his or her subsequent disposition of such
shares of Company Stock as the Committee shall deem necessary or advisable
as a result of any applicable law, regulation or official interpretation
thereof, and certificates representing such shares may be legended to
reflect any such restrictions. Certificates representing shares of Company
Stock issued or transferred under the Plan will be subject to such
stop-transfer orders and other restrictions as may be required by
applicable laws, regulations and interpretations, including any
requirement that a legend be placed thereon.
12. Amendment and Termination of the Plan
(a) Amendment. The Committee may amend or terminate the Plan at any
time; provided, however, that the Committee shall not amend the Plan
without shareholder approval if such approval is required in order
for Incentive Stock Options granted or to be granted under the Plan
to meet the requirements of section 422 of the Code or such approval
is required in order to exempt compensation under the Plan from the
deduction limit under section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the
Plan is
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<PAGE> 29
terminated earlier by the Committee or is extended by the Committee
with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not
materially impair the rights of a Grantee unless the Grantee consents
or unless the Committee acts under Section 18(b). The termination of
the Plan shall not impair the power and authority of the Committee
with respect to an outstanding Grant. Whether or not the Plan has
terminated, an outstanding Grant may be terminated or amended under
Section 18(b) or may be amended by agreement of the Company and the
Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples,
oral or written, may amend the Plan in any manner. The Plan shall be
binding upon and enforceable against the Company and its successors
and assigns.
13. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of assets to assure
the payment of any Grants under this Plan. In no event shall interest be paid or
accrued on any Grant, including unpaid installments of Grants.
14. Rights of Participants
Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee
Director or other person to any claim or right to be granted a Grant under this
Plan. Neither this Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
15. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered pursuant to
the Plan or any Grant. The Committee shall determine whether cash, other awards
or other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
16. Headings
Section headings are for reference only. In the event of a conflict between a
title and the content of a Section, the content of the Section shall control.
17. Effective Date of the Plan.
Subject to approval by the Company's shareholders, the Plan shall be effective
on December 8, 1998.
18. Miscellaneous
(a) Grants in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i)
limit the right of the Committee to make Grants under this Plan in
connection with the acquisition, by purchase, lease, merger,
consolidation or otherwise, of the business or assets of any
corporation, firm or association, including Grants to employees
thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to grant
stock options or make other awards outside of this Plan. Without
limiting the foregoing, the Committee may make a
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<PAGE> 30
Grant to an employee of another corporation who becomes an Employee
by reason of a corporate merger, consolidation, acquisition of stock
or property, reorganization or liquidation involving the Company or
any of its subsidiaries in substitution for a stock option or
restricted stock grant made by such corporation. The terms and
conditions of the substitute grants may vary from the terms and
conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the
substitute grants.
(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company
Stock under Grants shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be
required. With respect to persons subject to section 16 of the
Exchange Act, it is the intent of the Company that the Plan and all
transactions under the Plan comply with all applicable provisions of
Rule 16b-3 or its successors under the Exchange Act. In addition, it
is the intent of the Company that the Plan and applicable Grants
under the Plan comply with the applicable provisions of section
162(m) of the Code and section 422 of the Code. To the extent that
any legal requirement of section 16 of the Exchange Act or section
162(m) or 422 of the Code as set forth in the Plan ceases to be
required under section 16 of the Exchange Act or section 162(m) or
422 of the Code, that Plan provision shall cease to apply. The
Committee may revoke any Grant if it is contrary to law or modify a
Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding
the withholding of taxes on payments to Grantees. The Committee may,
in its sole discretion, agree to limit its authority under this
Section.
(c) Governing Law. The validity, construction, interpretation and effect
of the Plan and Grant Instruments issued under the Plan shall be
governed and construed by and determined in accordance with the laws
of the State of Delaware, without giving effect to the conflict of
laws provisions thereof.
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