<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
/ / 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 Section240.14a-11(c) or
Section240.14a-12
ADVANCED MATERIALS, 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)(1)
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:
-----------------------------------------------------------------------
/ / 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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<PAGE>
ADVANCED MATERIALS GROUP, INC.
20211 SOUTH SUSANA ROAD
RANCHO DOMINGUEZ, CALIFORNIA 90221
March 26, 1999
To Our Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of Advanced Materials Group, Inc. (the "Company") which will be held at 10:00
a.m. on April 26, 1999 at the Marriott Hotel, 18000 Von Karman Ave, Irvine,
California 92612. All holders of the Company's outstanding Common Stock as of
March 22, 1999 are entitled to vote at the Annual Meeting.
Enclosed is a copy of the Notice of Annual Meeting of Shareholders, Proxy
Statement and Proxy Card. A current report on the business operations of the
Company will be presented at the meeting and shareholders will have an
opportunity to ask questions.
We hope you will be able to attend the Annual Meeting. Whether or not you
expect to attend, it is important you complete, sign, date and return the proxy
card in the enclosed envelope in order to make certain that your shares will be
represented at the Annual Meeting.
Sincerely,
Steve F. Scott
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
ADVANCED MATERIALS GROUP, INC.
20211 SOUTH SUSANA ROAD
RANCHO DOMINGUEZ, CALIFORNIA 90221
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Advanced
Materials Group, Inc., a Nevada corporation (the "Company"), will be held at
10:00 a.m. local time, on April 26, 1999 at the Marriott Hotel, 18000 Von Karman
Ave, Irvine California 92612 (the "Annual Meeting") for the following purposes:
1. To elect six directors to the Board of Directors;
2. To ratify the appointment of Ernst & Young LLP as the independent
accountants for the Company for the year ending November 30, 1999; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 22, 1999 as
the record date for the determination of shareholders entitled to notice of and
vote at the Annual Meeting and all adjourned meetings thereof.
By Order of the Board of Directors
Steve F. Scott
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: March 26, 1999
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN
ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR
ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY
STATEMENT.
<PAGE>
ADVANCED MATERIALS GROUP, INC.
20211 SOUTH SUSANA ROAD
RANCHO DOMINGUEZ, CALIFORNIA 90221
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1999
VOTING AND PROXY
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Advanced Materials Group, Inc. (the
"Company") for use at the Annual Meeting of Shareholders to be held at 10:00
a.m., local time, on April 26, 1999 at the Marriott Hotel, 18000 Von Karman Ave,
Irvine, California 92612 and at any adjournments thereof. When such proxy is
properly executed and returned, the shares it represents will be voted in
accordance with any directions noted thereon. In voting by proxy with regard to
the election of directors, stockholders may vote in favor of all nominees,
withhold their votes as to all nominees or withhold their votes as to specific
nominees. Stockholders should specify their choices on the accompanying proxy
card. All properly executed proxy cards delivered by stockholders to the Company
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. If no specific instructions are given with regard to the
matters to be voted upon, the shares represented by a signed proxy card will be
voted "FOR" the election of all directors and the ratification of Ernst & Young
LLP as the Company's independent accountants for the year ending November 30,
1999. If any other matters properly come before the Annual Meeting, the persons
named as proxies will vote upon such matters in accordance with their best
judgment. Any shareholder giving a proxy has the power to revoke it at any time
before it is voted by written notice to the Secretary of the Company, by
issuance of a subsequent proxy or by voting at the Annual Meeting in person.
At the close of business on March 22, 1999, the record date for determining
shareholders entitled to notice of and to vote at the Annual Meeting, the
Company had issued and outstanding 8,597,955 shares of Common Stock, par value
$.001 per share (the "Common Stock"). Each share of Common Stock entitles the
holder of record thereof to one vote on any matter coming before the Annual
Meeting. Only shareholders of record at the close of business on March 22, 1999
are entitled to notice of and to vote at the Annual Meeting or at any
adjournments thereof.
The presence, in person or by proxy, of a majority of the outstanding shares
of Common Stock of the Company, regardless of whether a proxy has authority to
vote on all matters presented at the meeting, shall constitute a quorum at the
Annual Meeting. The six nominees for director who receive the highest number of
votes shall be elected. On all matters other than the election of directors, the
proposal will be approved if the number of votes cast in favor of the proposal
exceed the number of votes cast in opposition. Abstentions and broker non-votes
on any particular proposal will not be treated as a vote cast on the proposal
and, therefore, will not affect the outcome of matters to be voted on at the
meeting.
Notwithstanding the foregoing, shareholders may exercise cumulative voting
rights with respect to the election of directors. Cumulative voting allows a
shareholder to cast a number of votes equal to the number of directors to be
elected (six) multiplied by the number of votes held in his, her or its name on
March 22, 1999. This total number of votes may be cast for one nominee or may be
distributed among as many candidates as the shareholder desires.
Pursuant to California law, no shareholder can cumulate votes unless prior
to the voting at the Annual Meeting, a shareholder has given notice of his, her
or its intention to cumulate votes at the Annual Meeting and the nominee for
which the shareholder intends to cumulate votes has properly been nominated. If
any shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination. The Board of Directors does not, at this time,
intend to give such notice or to
<PAGE>
cumulate the votes it may hold pursuant to the proxies solicited herein unless
the required notice by a shareholder is given, in which event votes represented
by proxies delivered pursuant to this Proxy Statement may be cumulated in the
discretion of the proxy holders, in accordance with the recommendation of the
Board of Directors. Therefore, discretionary authority to cumulate votes in such
event is solicited in this Proxy Statement.
The Company will pay the expenses of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling, and mailing the proxy
solicitation materials. Proxies may be solicited personally, or by mail or by
telephone, by directors, officers and regular employees of the Company.
Brokerage firms, nominees, custodians and fiduciaries also may be requested to
forward proxy materials to the beneficial owners of shares held of record by
them. It is anticipated that this proxy statement and accompanying proxy card
will be mailed on or about March 26, 1999 to all shareholders entitled to vote
at the Annual Meeting.
ELECTION OF DIRECTORS
(PROPOSAL 1)
Directors are elected annually and hold office until the next annual meeting
of shareholders or until their respective successors are elected and shall
qualify. It is intended that the proxies solicited by the Board of Directors
will be voted for election of the six nominees listed below unless a contrary
instruction is made on the proxy. If for any reason one or more of these
nominees should be unavailable as a candidate for director, an event which is
not anticipated, the persons named in the accompanying proxy will vote for
another candidate or candidates nominated by the Board of Directors.
All of the nominees for director are, at present, directors of the Company.
THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE PROPOSAL TO ELECT ALL
SIX NOMINEES LISTED BELOW A DIRECTOR OF THE COMPANY.
TIMOTHY R. BUSCH, 44, was elected to the Company's Board of Directors in
September, 1997 and was appointed Chairman in February, 1998. Mr. Busch is a tax
attorney and is president and managing partner of a professional services
practice, The Busch Firm, which he founded in 1979. He is currently also a
director of IMPAC Commercial Holding, Inc. and several privately held companies.
Mr. Busch is a licensed attorney in California, Michigan, Texas and Washington,
D.C. as well as a licensed CPA in California, Michigan and Nevada.
STEVE F. SCOTT, 53, has been President and Director of the Company since
June, 1991, and was appointed Chief Executive Officer in July, 1994. He has been
with the Company and its predecessors for a total of nearly 15 years, including
previous positions as General Manager and Vice President of Sales. Mr. Scott was
President of Pleuss-Staufer, a Swiss based mining company, from 1989 to 1991.
Mr. Scott has a B.S. in Chemical Engineering from the University of Cincinnati
and an MBA from California State University of Long Beach.
N. PRICE PASCHALL, 50, was elected to the Company's Board of Directors in
January, 1994. Mr. Paschall has been Managing Director of Context Capital Group,
an investment-banking firm that serves clients in the medical and industrial
markets, since February, 1992. Mr. Paschall was a partner of Shea, Paschall,
Powell-Hambros Bank, and its predessor company, a firm specializing in mergers
and acquisitions, from January, 1983 to January, 1992. Mr. Paschall holds a
degree in Business Administration from California Polytechnic University in
Pomona.
DR. MICHAEL LEDEEN, 57, was elected to the Company's Board of Directors in
June, 1993. Dr. Ledeen, a Resident Scholar at the American Enterprise Institute
in Washington, D.C. since 1989 and a Senior Advisor at Bear Stearns & Co., Inc.,
an investment banking firm, since May, 1993, is an expert in foreign policy,
intelligence, and international business. The author of a dozen books and
hundreds of articles on twentieth-century history, Dr. Ledeen served as Special
Advisor to Secretary of State Alexander Haig, and as a consultant to the
National Security Council during the Reagan presidency. The founder of the
2
<PAGE>
Washington Quarterly, Dr. Ledeen writes regularly for the American Spectator and
Commentary. He holds a Ph.D. in European History and Philosophy from the
University of Wisconsin, and a B.A. from Pomona College.
DR. ALLAN H. MELTZER, 71, was elected to the Company's Board of Directors in
July, 1994. Dr. Meltzer has been a Professor at Carnegie Mellon University since
1964. He has been a director of Stilhalter Vision A.G, a Swiss mutual fund,
since 1994, has held a number of visiting and honorary teaching posts, and has
been a member of several policy advisory boards and committees. He received an
A.B. in economics from Duke University in 1948, and an M.A. in economics in 1955
and a Ph.D. in economics in 1958 from the University of California, Los Angeles.
MAURICE J. DEWALD, 58, was elected to the Company's Board of Directors in
February, 1998. From June, 1992 to the present, Mr. DeWald has been Chairman and
Chief Executive Officer of Verity Financial Group, Inc., a private investment
and financial advisory firm. Mr. DeWald is a former member of the KPMG Peat
Marwick Board of Directors and also served as the Managing Partner of the Los
Angeles office of KPMG Peat Marwick from 1986 to 1991. He currently serves on
the boards of two companies in the healthcare industry, Tenet Healthcare
Corporation and ARV Assisted Living, Inc. In addition, he currently serves on
the boards of Dai-Ichi Kangyo Bank of California and Monarch Funds.
Following is information regarding J. Douglas Graven, David Lasnier, and Tom
Lane, all of whom are named executive officers of the Company. Neither Mr.
Graven, Mr. Lasnier nor Mr. Lane are nominees for director.
J. DOUGLAS GRAVEN, 43, has been Vice President/CFO since joining the Company
in February, 1996. In May, 1996 he was named Corporate Secretary. From August,
1994 to February, 1996 he was Corporate Controller for Milhous Group, a
privately held holding company for four operating subsidiaries. From March, 1991
to April, 1994 he was Manager, Corporate Accounting for Nissan Motor Corporation
USA, Inc. Mr. Graven received a B.B.A. in accounting from the University of
Cincinnati in 1978, an M.S. in organizational development from Case Western
Reserve University in 1983 and an M.B.A. from the University of Southern
California in 1990. Mr. Graven is a licensed CPA in California.
DAVID LASNIER, 49, is the Senior Vice President and General Manager for
Advanced Materials, Inc. He has held several managerial titles, primarily in
sales and manufacturing, since joining the Company in 1991. Mr. Lasnier received
a B.B.A. in Industrial Engineering and Management from St. Bonaventure
University in 1971 and an MBA from the University of Vermont in 1973.
TOM LANE, 35, has been Chief Executive, Europe, for AML since joining the
Company in January, 1998. From 1993 to 1998 he was Chief Executive of Killeen
SBU, a group of Jefferson Smurfit companies in the corrugated packaging industry
in Ireland. Mr. Lane received a BCL degree from the University College in Dublin
in 1984.
All directors are entitled to receive $500 and reimbursement for
out-of-pocket expenses in connection with their attendance at meetings of the
Board of Directors. In addition, each director is entitled to receive
non-qualified stock options, pursuant to the Company's 1998 Stock Option Plan,
to purchase 20,000 shares of the Company's Common Stock at fair market value
when elected to the Board, and 10,000 shares of Common Stock at fair market
value each January subsequent to their election to the Board.
BOARD OF DIRECTORS MEETINGS
The Board of Directors of the Company held thirteen meetings during the
fiscal year ended November 30, 1998. No Director attended less than 75% of the
total number of meetings of the Board of Directors and of all committees of
which he was a member. The Board has a compensation committee and an audit
committee. The compensation committee is comprised of Messrs. Paschall, Ledeen
and Meltzer and the audit committee is comprised of Messrs. Ledeen and Meltzer.
The compensation committee will evaluate the performance of the Company's
officers, and make recommendations to the Board concerning
3
<PAGE>
compensation. The committee will also determine option grants pursuant to the
Company's 1998 Stock Option Plan. The Board does not have a nominating
committee.
The audit committee meets at least once a year with the Company's auditors
to review the results of the annual audit and to discuss the financial
statements.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(PROPOSAL 2)
The Company has selected the firm of Ernst & Young, LLP as independent
public accountants to perform the audit of the consolidated financial statements
of the Company for the year ending November 30, 1999. Ernst & Young, LLP served
as independent public accountants of the Company during fiscal 1998. The Board
of Directors expects that a representative of Ernst & Young, LLP will be present
at the Annual Meeting and will be given the opportunity to make a statement, if
desired, and to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF ERNST & YOUNG LLP.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Common
Stock beneficially owned as of March 22, 1999 (i) by each person who is known by
the Company to own beneficially OR exercise voting or dispositive control over
5% or more of the Common Stock, (ii) by each of the Company's directors and
nominees for director, and (iii) by all officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE OF
OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING SHARES
- ---------------------------------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Dito Caree LP, Dito Devcar LP and Richard H. Pickup .................. 1,587,096(1) 17.6%
c/o Wedbush Morgan Securities, Inc.
610 Newport Center Drive, Suite 1300
Newport Beach, CA 92660
Director/Nominees:
Timothy R. Busch and the Lenawee Trust ............................... 1,150,295(2) 12.7%
2532 Dupont Dr.
Irvine, CA 92612
Steve F. Scott ....................................................... 490,000(3) 5.4%
20211 South Susana Road
Rancho Dominguez, CA 90221
Michael Ledeen ....................................................... 100,000(4) 1.2%
7312 Western Avenue
Chevy Chase, MD 20815
N. Price Paschall .................................................... 250,000(5) 2.8%
One Penn Plaza, Suite 2134
New York, New York 10119
Allan H. Meltzer ..................................................... 60,000(6) *
GSIA Carnegie-Mellon University
Pittsburgh, PA 15213
Maurice J. DeWald .................................................... 20,000(7) *
303 Kings Road
Newport Beach, CA 92663
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENTAGE OF
OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING SHARES
- ---------------------------------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Officers:
J. Douglas Graven .................................................... 176,417(8) 2.0%
20211 South Susana Road
Rancho Dominguez, CA 90221
David Lasnier ........................................................ 210,000(9) 2.4%
20211 South Susana Road
Rancho Dominguez, CA 90221
Tom Lane ............................................................. 50,000(10) *
Toughes Industrial Park
Newhall, WAAS
Co. Kildare, Ireland
All officers and directors as a group (9 persons)..................... 2,506,712 25.2%
</TABLE>
- ------------------------
* Less than 1%.
(1) Comprised of 957,000 shares held by Dito Caree LP; 200,000 shares held by
Dito Devcar LP; and 430,096 shares issuable upon the exercise of warrants
held by Dito Caree LP that are presently exercisable or exercisable within
60 days of March 22, 1999 (359,819 of which are currently out of the money
and expire on March 25, 1999). Mr. Pickup does not directly own any shares,
but he indirectly controls both Dito Caree LP and Dito Devcar LP. Mr.
Pickup, Dito Caree, LP and Dito Devcar, LP acknowledge that they are a
"group" with respect to the referenced shares.
(2) Comprised of 700,307 shares held by the Lenawee Trust, of which Mr. Busch
and his spouse beneficiaries; 419,988 shares issuable upon exercise of
warrants held by the Lenawee Trust that are presently exercisable or
exercisable within 60 days of March 22, 1999 (381,430 of which are
currently out of the money and expire on March 25, 1999); and 30,000 shares
issuable upon exercise of warrants held by Mr. Busch that are presently
exercisable or exercisable within 60 days of March 22, 1999. Mr. Busch and
the Lenawee Trust acknowledge that they are a "group" with respect to the
referenced shares.
(3) Comprised of 30,000 shares which Mr. Scott owns and 460,000 shares which
Mr. Scott has the right to acquire upon exercise of stock options presently
exercisable or exercisable within 60 days of March 22, 1999.
(4) Comprised of 50,000 shares which Mr. Ledeen owns jointly with his wife and
50,000 shares which Mr. Ledeen has the right to acquire upon exercise of
stock options presently exercisable or exercisable within 60 days of March
22, 1999.
(5) Comprised of 250,000 shares which Mr. Paschall has the right to acquire
upon exercise of options presently exercisable or exercisable within 60
days of March 22, 1999.
(6) Comprised of 60,000 shares which Mr. Meltzer has the right to acquire upon
exercise of options presently exercisable or exercisable within 60 days of
March 22, 1999.
(7) Comprised of 20,000 shares which Mr. DeWald has the right to acquire upon
exercise of options presently exercisable or exercisable within 60 days of
March 22, 1999.
(8) Comprised of 1,200 shares which Mr. Graven owns and 175,217 shares which
Mr. Graven has the right to acquire upon exercise of options presently
exercisable or exercisable within 60 days of March 22, 1999.
(9) Comprised of 210,000 shares which Mr. Lasnier has the right to acquire upon
exercise of options presently exercisable or exercisable within 60 days of
March 22, 1999.
(10) Comprised of 50,000 shares which Mr. Lane has the right to acquire upon
exercise of options presently exercisable or exercisable within 60 days of
March 22, 1999.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company for services rendered during the fiscal years ended November
30, 1996, 1997 and 1998, respectively, to the named Executive Officers during
such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------
---------------------------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS GRANTED
- ---------------------------------------------------- ----------- ---------- --------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Steve F. Scott ..................................... 1998 $ 193,378 $ 76,000 $ 11,943 10,000
President and Chief 1997 $ 188,173 $ 50,000 $ 12,550 85,000
Executive Officer 1996 $ 143,523 -- $ 11,231 185,000
J. Douglas Graven(2)................................ 1998 $ 104,618 $ 44,000 $ 10,418 --
Vice President and 1997 $ 100,921 $ 10,000 $ 11,700 65,217
Chief Financial Officer
David Lasnier(2).................................... 1998 $ 140,270 $ 54,000 $ 8,712 --
Senior Vice President 1997 $ 131,322 $ 25,000 $ 9,400 100,000
Tom Lane(2)......................................... 1998 $ 106,170 $ 21,234 $ 10,617 150,000
Chief Executive, Europe
</TABLE>
- ------------------------
(1) Includes an allowance for automobile expenses, an allowance for medical
insurance, and Company contributions, on behalf of the named Executive
Officer, to the Company's 401(K) Savings Plan. Company contributions to the
401(K) Savings Plan were made in fiscal year 1998 only.
(2) Neither Mr. Graven nor Mr. Lasnier received total compensation in excess of
$100,000 in the fiscal year ended 1996. Mr. Lane was hired by the Company in
January, 1998.
STOCK OPTION GRANTS
The following table sets forth certain information with respect to stock
options granted to each of the named Executive Officers during the fiscal year
ended November 30, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED PRICE EXPIRATION
GRANTED DURING FY98 PER SHARE DATE
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Steve F. Scott.................................................. 10,000 2.40% $ 3.69 1/18/03
Tom Lane........................................................ 150,000 36.00% $ 4.00 12/31/07
</TABLE>
- ------------------------
(1) Total number of options granted to employees during fiscal year 1998 was
416,256.
(2) Neither Mr. J. Douglas Graven or Mr. David Lasnier were granted options to
purchase shares of the Company's Common Stock during the fiscal year ended
November 30, 1998.
6
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise of
options by the named Executive Officers during fiscal 1998 and unexercised stock
options held by each of the named Executive Officers as of November 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES NOVEMBER 30, 1998 AT NOVEMBER 30, 1998
ACQUIRED VALUE -------------------------- --------------------------
ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steve F. Scott ................. 20,000 $ 26,200 460,000 -- $ 271,700 --
J. Douglas Graven............... -- -- 140,217 35,000 $ 55,700 $ 19,300
David Lasnier................... -- -- 210,000 -- $ 102,200 --
Tom Lane........................ -- -- -- 150,000 -- --
</TABLE>
- ------------------------
(1) Market value of underlying securities on date of exercise, minus the
exercise price.
EMPLOYMENT AGREEMENTS
The Company is party to an employment agreement effective July 1, 1998, with
Steve F. Scott, its President and Chief Executive Officer, which provides for
Mr. Scott to receive an annual salary of $201,400 per year until December 1,
1998, and thereafter $225,000 per year. The employment agreement is effective
through May 2, 2000 and provides for full-time employment and may be terminated
by the Company or Mr. Scott at any time for any reason. Upon termination by the
Company, Mr. Scott will be entitled to any unpaid compensation accrued through
the effective date of his termination. If he is terminated by the Company other
than for cause (as defined in the agreement), the Company will provide Mr. Scott
with a severance payment equivalent to two times his most recent annual base
salary plus the aggregate annual cash value of his automobile allowance and
health insurance.
The Company is also party to an employment agreement with J. Douglas Graven,
Vice President and Chief Financial Officer, dated May 2, 1997, which provides
for Mr. Graven to receive an annual salary of $110,000. The employment agreement
is effective through November 2, 1999 and provides for full-time employment and
may be terminated by the Company or Mr. Graven at any time for any reason. Upon
termination by the Company, Mr. Graven will be entitled to any unpaid
compensation accrued through the effective date of his termination. If he is
terminated by the Company other than for cause (as defined in the agreement),
the Company will provide Mr. Graven with a severance payment equivalent to his
base salary divided by twelve and multiplied by the number of months remaining
until November 2, 1999.
The Company is also party to an employment agreement with David Lasnier,
Vice President and General Manager for Advanced Materials, Inc., dated May 2,
1997, which provides for Mr. Lasnier to receive an annual salary of $135,000.
The employment agreement is effective through May 2, 2000 and provides for
full-time employment and may be terminated by the Company or Mr. Lasnier at any
time for any reason. Upon termination by the Company, Mr. Lasnier will be
entitled to any unpaid compensation accrued through the effective date of his
termination. If he is terminated by the Company other than for cause (as defined
in the agreement), the Company will provide Mr. Lasnier with a severance payment
equivalent to his base salary divided by twelve an multiplied by the number of
months remaining until May 2, 2000.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and any persons who own more than 10% of a
registered class of the Company's equity securities to file with the SEC reports
of ownership and changes in ownership of Common Stock and other equity
7
<PAGE>
securities of the Company. Such persons are required to furnish the Company with
copies of such reports. Based solely on review of the copies of such reports
furnished to the Company or written representations that no other reports were
required, the Company believes that, during fiscal 1998, all filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with, except as follows: Maurice DeWald, a director, failed to
file a Form 3 upon his election to the board of directors and was one day late
in filing a Form 5 in connection with one transaction (the Form 5 also reported
his Form 3 holdings); J. Douglas Graven, the Company's vice president and chief
financial officer, was approximately three months late in filing a Form 4 in
connection with one transaction; Steve F. Scott, the Company's president and
CEO, failed to timely file a Form 4 in connection with one transaction that was
subsequently reported on a timely filed Form 5; Timothy R. Busch, a director,
was approximately two weeks late in filing a Form 4 in connection with four
transactions; Tom Lane, the Company's chief executive of European operations was
several months late in filing his initial report on Form 3; and Trilon Dominion
Partners, LLC, a greater than 10% shareholder, did not file a Form 4 in
connection with one transaction (which took place during the Company's 1997
fiscal year) that was subsequently filed on a Form 5 that was filed
approximately one week late.
LIMITATION ON DIRECTOR'S LIABILITIES UNDER NEVADA LAW
The Company's Bylaws include provisions to indemnify its officers and
directors and other persons against expenses, judgments, fines and amounts paid
in settlement in connection with threatened, pending or completed actions, suits
or proceedings against such persons by reason of serving or having served as
officers, directors or in other capacities, except in relation to matters with
respect to which such persons shall be determined to have acted not in good
faith, unlawfully or not in the best interest of the Company; provided, however,
that in the case of a suit or proceeding by or in the right of the Company, such
persons shall be indemnified only to the extent of expenses actually and
reasonably incurred by them in connection with the defense or settlement thereof
and no indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the Company,
unless and only to the extent that the court in which such corporate suit or
proceeding was pending shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the court shall deem proper. The Company has also obtained directors' and
officers' liability insurance in the amount of $2,000,000.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors and officers of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into a consulting agreement with Paschall and Company,
an investment banking firm of which N. Price Paschall, a director, is the
President on March 31, 1997, pursuant to which Paschall and Company agreed to
consult with the Company regarding significant business acquisitions and other
matters requested by the Company. The term of the agreement shall extend for a
minimum period of 24 months. The contract shall be renewed with mutual consent
of the Company and Paschall and Company for 12 month periods. The Company agreed
to pay Paschall and Company consulting fees of $10,000 for the first month and
for each of the next 23 months, a monthly retainer of $4,000. In addition,
Paschall and Company was granted options to purchase 50,000 shares of Common
Stock at an exercise price equal to the fair market value of a share of the
Company's Common Stock as of the close of business on March 31, 1997. If an
acquisition of a Target is completed during the course of this Agreement or
within one (1) year following the termination of this Agreement in which the
Company acquires the stock or assets of the Target, Paschall and Company share
earn options to purchase the following number of shares of the Company's Common
Stock at the price of the day the transaction closes.
8
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1. Options in the amount of 75,000 shares shall be earned if total
consideration for the Target is $10.0 million or less,
2. Additional options will be issued at a pro-rata rate of 10,000 shares
for each additional $1.0 million of purchase price above $10.0 million.
In the opinion of management, all transactions between the Company. and its
officers, directors, principal shareholders or other affiliates have been on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if other matters should come before the Annual Meeting,
it is the intention of each person named in the proxy to vote such proxy in
accordance with his judgment on such matters.
SHAREHOLDER PROPOSALS
The deadline for submitting shareholder proposals to be included in the
Company's proxy materials for next year's annual meeting will be November 27,
1999. Proposals received after November 27, 1999 will not be included in the
Company's proxy materials. The deadline for submitting notice of proposals that
are not to be subject to management's discretionary proxy voting will be
February 10, 2000. Management will use discretionary proxy voting authority to
vote on all proposals received after February 10, 2000.
9
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ADVANCED MATERIALS GROUP, INC.
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
To be Held on April 26, 1999
The undersigned hereby appoints Steve F. Scott and J. Douglas Graven, or
any one of them, as attorneys and proxies with full power of substitution, to
attend and vote all of the shares which the undersigned is entitled to vote at
the 1998 Annual Meeting of Shareholders of Advanced Materials Group, Inc. (the
"Company") and at any adjournments thereof, with the same force and effect as if
the undersigned were personally present.
1. To elect six members of the Company's Board of Directors. The
following six persons have been nominated to serve on the Company's
Board of Directors: Timothy R. Busch, Steve F. Scott, Allan H.
Meltzer, N. Price Paschall, Michael Ledeen and Maurice J. DeWald.
/ / FOR all nominees listed above / / WITHHOLD AUTHORITY to vote
for all nominees listed above
/ / FOR all nominees listed above except:
_____________________________________________________________________
(Instructions: To withhold authority to vote for any one or more
individual nominees, write the name of each such nominee on the line
provided above.)
In the event the Directors are to be elected by cumulative voting, the
Proxies will have the discretion to cumulate votes and to distribute such votes
among all nominees (or if authority to vote for any nominee or nominees has been
withheld, among the remaining nominees, if any) in whatever manner they deem
appropriate.
2. To ratify the appointment of Ernst & Young LLP as the independent
accountants for the Company for the year ending November 30, 1999.
/ / FOR / / AGAINST / / ABSTAIN
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
(Please sign on reverse side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY,
WHICH RECOMMENDS A VOTE FOR ITEMS 1 AND 2. AS TO ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE MEETING, SAID PROXIES WILL VOTE IN ACCORDANCE WITH
THEIR BEST JUDGMENT.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is given, the proxy will be voted FOR Items 1 and 2 herein.
DATED:_________________________, 1999 ____________________________________
____________________________________
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS CARD IN THE ENCLOSED ENVELOPE
NOTE: Please sign exactly as your name or names appear on this card. Joint
owners should each sign personally. When signing as attorney, executor,
administrator, personal representative, trustee or guardian, please give your
full title as such.
