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:
|X| Preliminary Proxy Statement | | Confidential, For Use of the
| | Definitive Proxy Statement Commission
| | Definitive Additional Materials Only (as permitted by Rule
| | Soliciting Material Pursuant to 14a-6(e)(2))
Rule 14a-11(c) or Rule 14a-12
AUTOMOBILE PROTECTION CORPORATION - APCO
(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:
Common Stock, par value $.001 per share
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(2) Aggregate number of securities to which transaction applies:
Not applicable
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:*
Not applicable
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(4) Proposed maximum aggregate value of transaction:
Not applicable
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(5) Total fee paid:
$0
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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______________
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
Preliminary Proxy Material: Confidential, for use of the Commission Only
AUTOMOBILE PROTECTION CORPORATION - APCO
15 Dunwoody Park Drive, Suite 100
Atlanta, Georgia 30338
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held June 12, 1997
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Automobile Protection Corporation - APCO ("Company") will be held at the
executive offices of the Company, 15 Dunwoody Park Drive, Suite 100, Atlanta,
Georgia on Thursday, June 12, 1997, at 9:00 a.m. local time, for the following
purposes:
1. To consider and act upon a proposal to approve an amendment to the
Amended and Restated Articles of Incorporation of the Company ("Articles of
Incorporation") to provide for classification of the Board of Directors of the
Company into four classes serving staggered terms.
2. To elect four directors.
3. To consider and act upon a proposal to approve changes to the
Articles of Incorporation (i) to require that all shareholder action by written
consent be by all the shareholders entitled to vote thereon, (ii) to provide
that only certain persons, not including shareholders, may call special meetings
of shareholders, (iii) to provide that notice of shareholders proposals at an
annual meeting be given to the Secretary of the Company in advance of the
meeting, (iv) to provide that nominations of directors by shareholders be given
to the Secretary of the Company in advance of an annual meeting, and (v) to
provide for a 66 2/3 vote to amend or repeal the above provisions and the
amendment to create the staggered board of directors.
4. To consider and act upon a proposal to adopt the 1997 Performance
Equity Plan to provide for the issuance of up to 500,000 shares of Common Stock
of the Company (representing less than 5% of the outstanding Common Stock on the
record date.
5. To approve an adjournment or postponement of the Annual Meeting, if
necessary, to permit further solicitation of proxies in the event there are not
sufficient votes at the Annual Meeting to approve any of the Proposals 1 through
4 above.
6. To transact such other business as may properly come before the
Annual Meeting.
Only shareholders of record at the close of business on April 24, 1997,
will be entitled to notice of, and to vote at, the meeting and any adjournments
thereof.
The proposal to create a board of directors with staggered terms and
the proposal to amend the Certificate of Incorporation may be considered to be
anti-takeover in nature. Shareholders are urged to review the information about
these proposals set forth in the Proxy Statement.
YOU ARE URGED TO READ THE ATTACHED PROXY STATEMENT, WHICH CONTAINS
INFORMATION RELEVANT TO THE ACTION TO BE TAKEN AT THE MEETING. IN ORDER TO
ASSURE THE PRESENCE OF A QUORUM, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING
IN PERSON, PLEASE SIGN AND DATE THE ACCOMPANYING PROXY CARD AND MAIL IT PROMPTLY
IN THE ENCLOSED ADDRESSED, POSTAGE PREPAID ENVELOPE. YOU MAY REVOKE YOUR PROXY
IF YOU SO DESIRE AT ANY TIME BEFORE IT IS VOTED.
By Order of the Board of Directors
Martin J. Blank
Secretary
Atlanta, Georgia
May 9, 1997
<PAGE>
Automobile Protection Corporation - APCO
-------------------------------
PROXY STATEMENT
-------------------------------
GENERAL INFORMATION
This Proxy Statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by the Board of Directors ("Board") of
Automobile Protection Corporation - APCO. ("Company") to be used at the Annual
Meeting of Shareholders of the Company to be held on June 12, 1997, and any
adjournment or adjournments thereof ("Annual Meeting"). The matters to be
considered at the Annual Meeting are set forth in the attached Notice of
Meeting.
The Company's executive officers are located at 15 Dunwoody Park Drive,
Suite 100, Atlanta, Georgia 30338. This Proxy Statement and the enclosed form of
proxy are first being sent to shareholders on or about May 9, 1997.
The proposals to create a board of directors with staggered terms and
to amend the Certificate of Incorporation may be considered anti-takeover in
nature. Approval of each of these proposals are not dependent on approval of the
other. The Board is not aware of any specific effort to accumulate the Common
Stock or obtain control of the Company by any means. These proposals are being
made to enhance the continuity and stability of the Company's management and
provide management the opportunity to evaluate the efforts to gain control of
the Company so as to best apprise shareholders and preserve shareholder
interests.
Record Date and Outstanding Shares
The Board has fixed the close of business on April 24, 1997 as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the Annual Meeting. Only shareholders of record at the close of
business on that date will be entitled to vote at the Annual Meeting or any and
all adjournments thereof. As of April 24, 1997, the Company has issued and
outstanding [10,669,370] shares of Common Stock, par value $.001 ("Common
Stock") and 300 shares of Class C Preferred Stock outstanding and entitled to
vote at the Annual Meeting, comprising all of the Company's issued and
outstanding voting stock. Each shareholder of the Common Stock will be entitled
to one vote for each share of Common Stock on all matters put forth at the
Annual Meeting. The holders of the Class C Preferred Stock are entitled to vote
only in the election of directors and are entitled to elect the smallest number
of directors that will constitute a majority of the board of directors of the
Company until September 1998.
Solicitation and Revocation
Proxies in the form enclosed are solicited by and on behalf of the
Board. The persons named in the proxy have been designated as proxies by the
Board. Any proxy given pursuant to such solicitation and received in time for
the Annual Meeting will be voted as specified in such proxy. If no instructions
are given, proxies will be voted (i) "FOR" the proposal to amend the Articles of
Incorporation to create a staggered board of directors as described below under
Proposal 1, (ii) "FOR" the election of the nominees listed below under Proposal
2, (iii) "FOR" the proposal to amend the Articles of Incorporation to provide
for consent action by all the shareholders, to provide that only certain persons
may call a special meeting of shareholders, to provide advance notice of
shareholder proposals and nominations for director and to provide supermajority
vote to change the above amendments as described below under Proposal 3, and
(iv) "FOR" the adoption of the 1997 Performance Equity Plan ("Equity Plan") as
described below under Proposal 4 and, in the discretion of the proxies named on
the proxy card with respect to any other matters properly brought before the
meeting and any adjournments thereof. In such unanticipated event that any other
matters are properly presented at the Annual Meeting for action, the persons
named in the proxy will vote the proxies in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the shareholder
at any time before it is exercised by written notification delivered to the
Secretary of the Company, by voting in person at the Annual Meeting, or by
delivering another proxy bearing a later date. Attendance by a shareholder at
the Annual Meeting does not alone serve to revoke his or her proxy.
1
<PAGE>
Quorum
The presence, in person or by proxy, of a majority of the shares of
Common Stock entitled to vote at the Annual Meeting will constitute a quorum at
the Annual Meeting, except, as to the election of directors, where it is also
necessary that the holders of a majority of the Class C Preferred Stock
outstanding also be present in person or by proxy for a quorum to exist for that
matter. A proxy submitted by a shareholder may indicate that all or a portion of
the shares represented by such proxy are not being voted ("shareholder
withholding") with respect to a particular matter. Similarly, a broker may not
be permitted to vote stock ("broker non-vote") held in street name on a
particular matter in the absence of instructions from the beneficial owner of
such stock. The shares subject to a proxy which are not being voted on a
particular matter (because of either shareholder withholding or broker non-vote)
will not be considered shares entitled to vote on such matter. These shares,
however, may be considered present and entitled to vote on other matters and
will count for purposes of determining the presence of a quorum, unless the
proxy indicates that such shares are not being voted on any matter at the Annual
Meeting, in which case such shares will not be counted for purposes of
determining the presence of a quorum.
Voting
Under Proposals 1 and 3 below, the approval of the amendments to the
Articles of Incorporation must be approved by the affirmative vote of a majority
of the shares of Common Stock outstanding and entitled to vote. Abstentions from
voting with respect to Proposals 1 and 3 are considered present and entitled to
vote with respect to such proposals and, therefore, have the same effect as a
vote against the proposal. Shares deemed present at the Annual Meeting but not
entitled to vote on Proposals 1 and 3 (because of either shareholder withholding
or broker non-vote) will have the effect of a negative vote because this
proposal requires the affirmative vote of a majority of the outstanding shares
of the Company.
Under Proposal 2 below, the persons nominated for election as directors
will be elected by a plurality of the votes of Common Stock and Class C
Preferred Stock, subject to the right of the Class C Preferred Stock to elect
the smallest number of directors that will constitute a majority of the board of
directors. "Plurality" means that the nominees who receive the highest number of
votes cast "FOR" will be elected as the directors of the Company for the ensuing
year. Consequently, any shares not voted "FOR" a particular nominee (because of
either shareholder withholding or broker non-vote) will not be counted in such
nominee's favor.
Under Proposal 4 below, the approval of the Equity Plan must be
approved by the affirmative vote of a majority of shares present at the Annual
Meeting and entitled to vote. Abstentions from voting with respect to Proposal 4
are considered present and entitled to vote with respect to such proposal and,
therefore, have the same effect as a vote against the proposal. Shares deemed
present at the Annual Meeting but not entitled to vote on Proposal 4 (because of
either shareholder withholding or broker non-vote) will have no effect on such
vote.
Security Ownership of Certain Beneficial Owners
The table and accompanying footnotes on the following pages set forth
certain information as of April 24, 1997 with respect to the stock ownership of
(i) those persons or group who beneficially own more than 5% of the Company's
Common Stock and all the Class C Preferred Stock, (ii) each director and
director-nominee of the Company, (iii) the Company's Chief Executive Officer and
each of the Company's next four most highly compensated executive officers whose
individual compensation exceeded $100,000 in the year ended December 31, 1996,
and (iv) all directors and executive officers of the Company as a group (based
upon information furnished by such persons). Shares of Common Stock issuable
upon exercise of options and warrants which are currently exercisable or
exercisable within 60 days of the date of this Proxy Statement have been
included in the following table.
2
<PAGE>
<TABLE>
<CAPTION>
Percent of Number of Shares of
Number of Shares Ownership of Class C Redeemable
of Common Stock Common Stock Preferred Stock
Name of Beneficial Owner(1) Beneficially Owned Outstanding Beneficially Owned
- --------------------------- ------------------ ------------ ------------------
<S> <C> <C> <C>
Martin J. Blank ............... 1,030,168(2) 9.5% 150
Larry I. Dorfman .............. 1,059,168(3) 9.7% 150
Howard C. Miller .............. 141,452(4) 1.3% --
Mechlin D. Moore .............. 30,207(5) * --
Directors and officers as a ... 2,260,995(6) 20.2% 300
group (4 persons)
_________________________
<FN>
* Less than 1%.
(1) The address for each of Messrs. Blank, Dorfman, Miller and Moore is 15
Dunwoody Park Drive, Suite 100, Atlanta, Georgia 30338.
(2) Includes options to purchase 173,000 shares of the Common Stock which
are currently exercisable. Excludes Class C Redeemable Preferred Stock.
The Class C Redeemable Preferred Stock gives the holders the right to
elect the majority of the Company's Board of Directors until September
11, 1998.
(3) Includes options to purchase 203,000 shares of the Common Stock which
are currently exercisable. Excludes options to purchase 10,000 shares
of Common Stock which are not currently exercisable and Class C
Redeemable Preferred Stock. The Class C Redeemable Preferred Stock
gives the holders the right to elect the majority of the Company's
Board of Directors until September 11, 1998.
(4) Includes options to purchase 140,452 shares of the Common Stock which
are currently exercisable.
(5) Includes options to purchase 29,207 shares of the Common Stock which
are currently exercisable.
(6) Includes options to purchase 545,659 shares of Common Stock. Excludes
10,000 options to purchase shares of Common Stock which are not
currently exercisable.
</FN>
</TABLE>
PROPOSAL 1:
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Board has unanimously approved, and recommends that the
shareholders consider and approve, the proposal to amend the Articles of
Incorporation to provide for the classification of the board of directors into
four classes, each class as nearly equal as possible, serving staggered terms of
four years, after expiration of an initial term which for three classes will be
less than four years (see "Proposal 2" below), with one class being elected each
year. Assuming shareholder approval of this proposal, the nominees for election
to the board of directors would be classified as recommended in Proposal 2, and
the shareholders would vote for the nominees for the terms set forth in Proposal
2.
The Board believes that the staggered four-year term of a classified
board of directors, as opposed to the one-year term that is currently in place,
will help to assure the continuity and stability of the Company's current
policies in the future, because a majority of the directors at any given time
will have prior experience as directors of Company.
In order to establish four staggered classes after approval of this
proposal, certain of the directors elected at the Annual Meeting would serve
initial terms of less than four years: the term of one class of one director
(Class I) would terminate at the annual meeting of shareholders to be held
during the 1998 fiscal year, the term of the second
3
<PAGE>
class of one director (Class II) would terminate at the annual meeting of
shareholders to be held during the 1999 fiscal year, the term of the third class
of one director (Class III) would terminate at the annual meeting of
shareholders to be held during the 2000 fiscal year, and the term of the fourth
class of one director (Class IV) would terminate at the annual meeting of
shareholders to be held during the 2001 fiscal year.
There is no cumulative voting in the election of directors; therefore,
a plurality of the votes cast at a meeting for directors of a class would elect
all the directors of that class. The classification provision will apply to
every election of directors, whether or not a change in a majority of the board
of directors arguably might be beneficial to the Company and its shareholders
and whether or not shareholders holding a majority of the then outstanding
shares of Common Stock believe that such a change might be desirable.
The classification of directors will have the effect of making it more
difficult to change the overall composition of the board of directors. At least
three shareholders' meeting will be required for shareholders to effect a change
in a majority of the board of directors. Currently, by operation of the Georgia
Business Corporation Code and the Articles of Incorporation of the Company, as
it would otherwise be in effect, only one meeting of shareholders would be
required to effect a change in the majority of the board of directors. Although
there has been no problem in the past with the continuity or stability of the
board of directors, the Board believes that the longer time required to elect a
majority of a classified board of directors will help assure continuity and
stability in the management of the business and affairs of the Company in the
future, because a majority of the directors at any given time will have prior
experience as directors of the Company. A classified board of directors may also
provide additional time to review any proposal for a business combination,
corporate restructuring, or other significant transactions and the alternatives
to such transactions. Accordingly, there would be a greater opportunity to
assure that the interest of the shareholders of the Company are protected to the
maximum extent possible. If the shareholders approve a classified board of
directors, thereafter individual directors may only be removed for cause, at a
special meeting of the shareholders in accordance with the Georgia Corporation
Business Code. See "Proposal 3" below which, if adopted, will limit the ability
of shareholders to call a special meeting.
The affirmative vote of a majority of the outstanding shares of Common
Stock is required to approve the amendment to the Articles of Incorporation.
Unless otherwise specified, the proxies solicited by the Company will be voted
"FOR" the approval of the amendment to the Articles of Incorporation. The
proposed amendment will become effective upon the filing of a Certificate of
Amendment with the Secretary of State of the State of Georgia.
If the shareholders of the Company fail to approve this proposal, the
current provisions of the Articles of Incorporation and the Georgia Business
Corporation Code will continue to govern. Shareholders are urged to consider the
impact of approving the creation of a board of directors with staggered terms
with Proposal 3 below. The overall impact of these proposals may have
anti-takeover effect. Approval of one of these proposals is not dependent on
approval of the other proposal by the shareholders.
Although the Company believes that the material provisions of the
amendment to the Articles of Incorporation are set forth above, reference should
be made to the text of the Certificate of Amendment for the form of amendment, a
copy of which is attached to this Proxy Statement as Annex I.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO PROVIDE
FOR CLASSIFICATION OF THE BOARD OF DIRECTORS
PROPOSAL 2:
ELECTION OF DIRECTORS
At the Annual Meeting, four directors are to be elected to hold office
commencing immediately after the Annual Meeting. If the proposed amendment to
the Articles of Incorporation providing for classification of the board of
directors into four classes, as described under Proposal 1 above, is adopted,
one director (Class I) will be elected for a term expiring at the annual meeting
of shareholders to be held during the 1998 fiscal year, one director
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<PAGE>
(Class II) will be elected for a term expiring at the annual meeting of
shareholders to be held during the 1999 fiscal year, one director (Class III)
will be elected for a term expiring at the annual meeting of shareholders to be
held during the 2000 fiscal year, and one director (Class IV) will be elected
for a term expiring at the annual meeting of shareholders to be held during the
2001 fiscal year. Martin J. Blank has been nominated to serve as the director in
Class I, Mechlin D. Moore has been nominated to serve as the director in Class
II, Howard C. Miller has been nominated to serve as the director in Class III,
and Larry I. Dorfman has been nominated to serve as the director in Class IV.
Each of such nominees presently serves as a director of the Company. Upon the
expiration of the initial terms of the directors in each of the classes, their
successors will be elected for terms of four years. Those nominees for director
in each class receiving a plurality of the votes cast at the Annual Meeting for
directors for such class will be elected, subject to the right of the holders of
the Class C Preferred Stock until September 1998 to elect the smallest number of
directors that represents a majority of the members of the board of directors.
The consequence of this latter provision is that at this Annual Meeting the
holders of the Class C Preferred Stock have the right to elect three directors
and, if the annual meeting for fiscal 1998 is held prior to September 1998, the
holders of the Class C Preferred Stock will in all likelihood will have the
right to elect the directors in Class I.
The board of directors currently is not divided into any classes. If
the proposed amendment to the Articles of Incorporation providing for
classification of the board of directors is not adopted, the four directors will
be elected at the Annual Meeting to serve until the next annual meeting of
Shareholders or until their respective successors have been duly elected and
qualified. In such event, the four nominees named above will be management's
nominees for such positions and those nominees receiving a plurality of the
votes cast at the Annual Meeting will be elected. Of these four persons, the
holders of the Class C Preferred Stock have the right to elect three directors.
Unless otherwise specified, the proxies solicited by the Company will
be voted "FOR" the nominees mentioned above. In case any such nominee becomes
unavailable for election to the board of directors, which is not anticipated,
the persons named in the enclosed form of proxy will have full discretion to
vote or refrain from voting for any other nominee in accordance with their best
judgment.
The nominees, their ages, the year in which each first became a
director and the positions held, if any, are as follows:
<TABLE>
<CAPTION>
Director
Nominee Age Since Position
- ----------------- ----- --------- --------------------------------
<S> <C> <C> <C>
Martin J. Blank 50 1984 Chairman of the Board, Chief
Operating Officer, Secretary and
Director
Larry I. Dorfman 41 1984 President, Chief Executive
Officer and Director
Howard C. Miller 70 1989 Director
Mechlin D. Moore 66 1991 Director
</TABLE>
Martin J. Blank, a co-founder of the Company, has served as Secretary and
Director since its incorporation in September 1984 and as the Chairman of the
Board and Chief Operating Officer since April 1988. Mr. Blank is an attorney
admitted to the bar in the States of Georgia and California. Mr. Blank's
experience prior to co-founding the Company includes the practice of law and
representation and financial management for professional athletes.
Larry I. Dorfman, a co-founder of the Company, has served as President and
Director since its incorporation in September 1984 and as Chief Executive
Officer since April 1988. Prior to co-founding the Company, Mr. Dorfman was Vice
President-Sales for Paymaster Checkwriter Company, Inc. in Atlanta with
responsibility for the direction and supervision of its sales force.
Howard C. Miller has served as Director of the Company since January 1989.
Mr. Miller currently serves on the audit committee of the United States Olympic
Committee and as a Director of Stone Container Corporation. Mr. Miller's past
experience includes President and CEO of Avis, Inc., Vice President of ITT,
President and CEO of Canteen Corporation.
5
<PAGE>
Mechlin D. Moore has served as Director of the Company since June 1991. Mr.
Moore is an independent consultant in insurance communication and marketing. Mr.
Moore's past experience includes President of the Insurance Information
Institute and Senior Vice President of United Air Lines, Inc.
Executive Compensation
Set forth in the following table is information as to the compensation
paid or accrued to the chief executive officer and to each officer receiving
compensation of at least $100,000 (collectively the "Named Executive Officers"),
for the periods indicated.
<TABLE>
<CAPTION>
Long Term
Compensation Options/
Name and Principal Position Period Salary(1) Other No. of Shares(2)
- --------------------------- ------ --------- ----- -------------
<S> <C> <C> <C> <C>
Larry I. Dorfman
President and Chief Executive 12 mos. ended 12/31/96 $ 362,240 $ 5,093 --
Officer 12 mos. ended 12/31/95 $ 249,636 -- --
4 mos. ended 12/31/94 $ 40,288 -- --
12 mos. ended 8/31/94 $ 124,723 -- 200,000
Martin J. Blank
Chairman and Chief Operating 12 mos. ended 12/31/96 $ 362,240 $18,416 --
Officer 12 mos. ended 12/31/95 $ 249,636 -- --
4 mos. ended 12/31/94 $ 40,288 -- --
12 mos. ended 8/31/94 $ 124,723 -- 200,000
<FN>
(1) Represents base salary and compensation based upon the number of
vehicle service contracts processed each month. See "Report on
Executive Compensation, Employment Arrangements (Chief Executive Officer
and Chief Operating Officer)."
(2) On September 10, 1993, the Company's Board of Directors granted each
executive 100,000 non-qualified stock options to purchase 100,000
shares of the Common Stock at $1.93 per share, which is 110% of the
market value of one share of the Common Stock on the date of grant. On
June 28, 1994, the Company's Board of Directors granted each executive
100,000 non-qualified stock options to purchase 100,000 shares of the
Common Stock at $2.54 per share, which is 110% of the market value of
one share of the Common Stock on the date of grant.
</FN>
</TABLE>
Option Grants during 1996
No grants of stock options or stock appreciation rights were made
during 1996 to the Named Executive Officers.
Option Exercises During 1996 and Year-end Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options
Acquired Value Options at 12/31/96 at December 31, 1996
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------- --------- -------------------------- --------------------------
(#) ($) (#) ($)
<S> <C> <C> <C> <C>
Larry I. Dorfman -- -- 203,000/10,000 $437,920/$25,000
Martin J. Blank -- -- 173,000/-- $362,020/--
</TABLE>
1988 Stock Option Plan
The Company has a stock option plan ("1988 Plan") pursuant to which
800,000 shares of the Common Stock have been reserved for issuance upon exercise
of options designated as "incentive stock options" or "non-qualified options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended. The purpose of the 1988 Plan is to encourage stock ownership by certain
officers and employees of the Company, and certain other
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<PAGE>
persons instrumental to the success of the Company, and give them a greater
personal interest in the success of the Company. Persons who are directors of
the Company are not eligible to receive options under the 1988 Plan. The 1988
Plan is administered by the Board of Directors of the Company, or a committee
appointed by the Board of Directors, which determines among other things, the
persons to be granted options under the 1988 Plan, the number of shares subject
to each option and the option price. The exercise price of any option granted
under the 1988 Plan may not be less than the fair market value of the shares
subject to the option on the date of grant, provided however, that the exercise
price of any incentive option granted to an eligible employee owning more than
10% of the outstanding Common Stock may not be less than 110% of the fair market
value of the shares underlying such option on the date of grant. The term of
each option and the manner in which it may be exercised is determined by the
Board of Directors, or a committee appointed by the Board of Directors, provided
that no option may be exercised more than 10 years after the date of grant and,
in the case of an incentive option granted to an eligible employee owning more
than 10% of the Common Stock, not more than 5 years after the date of grant.
Incentive options may be granted only to employees. Options may be exercised as
provided in the option agreement, but no option granted to an employee may be
exercised unless the grantee is a regular employee of the Company, or a
subsidiary, and has been in such position for at least one year after the date
of grant, except that in the event of death, options may be exercised until the
sooner of the expiration date of the option or six months following the death of
the optionee. Each option not exercised expires as provided in the option
agreement. Options are non-transferable, except in the event of death of the
optionee. At March 31, 1997, options to purchase 654,956 shares of the Common
Stock, at prices ranging from $0.83 to $5.00 per share, were outstanding under
the 1988 Plan. Between inception of the 1988 Plan and March 31, 1997, 73,429
options have been exercised at an average exercise price of $1.28 per share.
Performance Graph
The following graph demonstrates the performance of the cumulative
total return to the Company's shareholders during the past five years in
comparison to the cumulative total return for the NASDAQ Market Index and the
cumulative total return for a group of companies in SIC code 641 - Insurance
Agents, Brokers and Service (the "Peer Group").
FIVE-YEAR CUMULATIVE TOTAL RETURNS
VALUE OF $100 INVESTED ON DECEMBER 31, 1990
(ID: Graphic -- Performance Graph)
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
APCO 100 103.70 177.77 266.65 333.31 507.38
SIC 641 Code Index 100 108.53 99.96 100.89 118.16 140.83
Nasdaq Market Index 100 100.98 121.13 127.17 164.96 204.98
</TABLE>
Director Compensation
Members of the board of directors who are not otherwise employees of
the Company receive director fees of $4,000 per meeting attended. In addition,
directors are reimbursed for their expenses in attending all meetings of the
board of directors. Directors will also be eligible for other compensation and
benefits as may be approved by the board of directors from time to time,
including benefits under the 1988 Outside Directors' Stock Option Plan
("Director's Plan") and benefits pursuant to a determination by the board of
directors or a committee of the board of directors appointed for the purpose of
administering the 1997 Performance Equity Plan ("Equity Plan") (see "Proposal 4"
below), under the Equity Plan, if the Equity Plan is adopted by the Shareholders
at the Annual Meeting. At March 31, 1997, there were 28,197 shares of Common
Stock remaining under the Director's Plan for grant pursuant to the automatic
grant provision. The Company currently does not anticipate that it will adopt a
replacement plan to the Director's Plan when it expires or when all the shares
of Common Stock thereunder have been granted because changes in the rules and
regulations implemented by the Securities and Exchange Commission under Section
16 of the Securities Exchange Act of 1934, as amended, no longer make it
necessary to provide for automatic grants to officers and directors of public
companies to afford an exemption from that section.
7
<PAGE>
Outside Directors' Stock Option Plan
The Company has a stock option plan for the benefit of its directors
who are not salaried employees of the Company or full time consultants to the
Company or its subsidiaries ("Directors' Plan") pursuant to which 300,000 shares
of the Common Stock have been reserved for issuance upon exercise of such
options. The purpose of the Directors' Plan is to advance the interests of the
Company by affording eligible directors of the Company the opportunity to
acquire an equity interest or increase their equity interest in the Company. The
Directors' Plan terminates in May 1998. Each eligible director in office on the
effective date of the Directors' Plan and each director elected to a regular
term as a director at an annual meeting of shareholders thereafter at which
directors are elected, will automatically be granted an option to purchase the
maximum number of full shares having an aggregate market value on the date of
grant equal to $25,000 at an exercise price per share equal to the fair market
value of a share of the Common Stock on the date of grant. An option may be
exercised at any time for a period of 10 years from the date of grant. The
number of shares which may be purchased upon exercise of an option is subject to
adjustment in certain circumstances. Options are not transferable other than by
will or the laws of descent and distribution, and in the event of death, an
option may be exercised by the optionee's legatee, distributee or personal
representative. Options are granted under the Directors' Plan without regard to
other forms of compensation eligible directors may receive from the Company. At
March 31, 1997, options to purchase 180,481 shares of Common Stock, at prices
ranging from $0.88 to $4.00 were outstanding under the Directors' Plan.
The following table shows the number of shares of the Common Stock
covered by options granted under the Directors' Plan to current directors since
January 1, 1996, the number of shares of the Common Stock acquired by current
directors since that date through exercise of options and the number of Common
Stock subject to all outstanding options of current directors at December 31,
1997. Additionally, 10,822 options granted to a former director of the Company,
which are exercisable at $2.32 per share and expire in 2004, are also
outstanding.
<TABLE>
<CAPTION>
Howard C. Miller Mechlin D. Moore
---------------- ----------------
<S> <C> <C>
Granted 1/1/96 - 12/31/96:
Number of shares 6,250 6,250
Average per share option price $4.00 $4.00
Exercised 1/1/96 - 12/31/96:
Number of shares 0 66,322(2)
Aggregate option price of options
exercised 0 $1.13
Net value realized 0 $181,606
Unexercised options at 12/31/96:
Number of shares 140,452 29,207
Average unrealized value per share
on 12/31/96(1) $2.85 $1.71
<FN>
(1) Calculated as the difference between the market price of one share of
the Common Stock on December 31, 1996 and the average per share option
price.
(2) Disclosed in the Company's Proxy Statement for the 1996 Annual Meeting.
</FN>
</TABLE>
Board Meetings and Committees
During the fiscal year ended December 31, 1996, the Board of Directors
met or took other action on four occasions. All the directors participated in
all such meetings and actions.
The Board has an Audit Committee and a Compensation Committee. The
Audit Committee, currently comprised of Martin J. Blank and Howard C. Miller,
was formed to: (i) recommend annually to the board of directors the appointment
of the independent auditors of the Company; (ii) review with the independent
auditors the scope of the annual audit and review their final report relating
thereto; (iii) review with the independent auditors the accounting practices and
policies of the Company; (iv) review with the internal and independent auditors
the overall accounting and financial controls of the Company; (v) be available
to independent auditors during the year for consultation; and
8
<PAGE>
(vi) review related party transactions by the Company on an ongoing basis and
review potential conflicts of interest situations where appropriate. The Audit
Committee had one meeting in 1996.
The Compensation Committee, currently comprised of Larry I. Dorfman,
Howard C. Miller and Mechlin D. Moore was formed to review overall executive
compensation and review the Company's employee benefit plans. The Compensation
Committee held one meeting in 1996 at which it reviewed the executive
compensation of the executive officers of the Company, including Messrs. Martin
J. Blank and Larry I. Dorfman, and the stock option plans of the Company. The
Compensation Committee and the Board continued its policy of linking
compensation of executive officers to enhanced shareholders value. The
Compensation Committee also reviewed the recommendation of management noting
that there were only 71,615 shares remaining available for grant under the 1988
Plan, and determined that the Equity Plan was necessary to provide additional
shares of Common Stock for award to officers, directors, employees and
consultants as incentive compensation. Moreover, because the Equity Plan
provides for equity based awards in addition to stock options, the Compensation
Committee believed that the Equity Plan will provide management with increased
flexibility in structuring incentive based compensation. It was determined that
these factors were necessary to enable management to attract and retain
qualified persons for employment with and service to the Company.
Report on Executive Compensation
To date, the compensation policies of the Company have been developed
to link the compensation of the executive officers of the Company with enhanced
shareholder value. Through the establishment of short- and long-term incentive
plans and the use of base salary and performance bonus combinations, the Company
has sought to align the financial interests of its executive officers with those
of its shareholders.
Employment Arrangements (Chief Executive Officer and Chief Operating
Officer)
The Chief Executive Officer and Chief Operating Officer each receive a
base salary of $72,000 plus additional compensation based upon the number of
vehicle service contracts processed each month which exceed a prescribed level.
Messrs. Blank and Dorfman are eligible to participate in other employee benefit
plans as generally made available to employees of the Company.
Martin J. Blank -- Larry I. Dorfman -- Howard C. Miller -- Mechlin D. Moore
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires officers, directors and
persons who beneficially own more than 10% of a registered class of equity
securities of the Company ("10% Shareholders") to file reports of ownership and
changes in ownership with the Commission. Officers, directors and 10%
Shareholders also are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
furnished to it, and written representations that no other reports were
required, the Company believes that during the fiscal year ended December 31,
1996, each of its officers, directors and 10% Shareholders complied with the
Section 16(a) reporting requirements.
Certain Relationships and Related Transactions
There are no reportable relationships and related transactions between
the Company and its officers and directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION
OF THE FOUR NOMINEES LISTED ABOVE AS DIRECTORS.
9
<PAGE>
PROPOSAL 3:
APPROVAL OF CERTAIN AMENDMENTS
TO THE ARTICLES OF INCORPORATION OF THE COMPANY
General
The Board has unanimously approved, and recommends that the
shareholders consider and approve, amendments to the Articles of Incorporation
(i) to require that all shareholder action by written consent be by all the
shareholders entitled to vote thereon, (ii) to provide that only certain
persons, not including shareholders, may call special meetings of shareholders,
(iii) to provide that notice of shareholder proposals at an annual meeting be
given to the Secretary of the Company in advance of the meeting, (iv) to provide
that nominations of directors by shareholders be given to the Secretary of the
Company in advance of an annual meeting, and (v) to provide for a 66 2/3% vote
to amend or repeal the above provisions and to change the creation of the
staggered board of directors. The proposed amendments are to some extent
interrelated, and the purpose of some of the amendments is to prevent the
circumvention of the desired protection afforded by other amendments. Thus, the
Board believes it appropriate to present these proposed amendments as one
related group that the shareholders must vote for or against as a single
proposal.
The purpose and intended effect of the proposed amendments are to
enhance the continuity and stability of the Company's management by making it
more difficult and time-consuming for a third party to gain control of the
Company's board of directors. The Board believes that these amendments will
provide the Company's management with the means and opportunity to defend
shareholder interests. The proposed amendments may make it more difficult or
discourage an unsolicited tender offer, proxy contest or assumption of control
by a holder of a large block of the Common Stock of the Company and the removal
of incumbent management, event in the event that any of these transactions are
favored by the shareholders of the Company.
The Board has no present intention to put before the shareholders any
other proposal which would operate as a significant impediment to an attempt by
a third party to obtain control of the Company. The Articles of Incorporation of
the Company already allows the board of directors to authorize the issuance of,
and to determine the voting and other rights of, one or more classes of up to
5,000,000 shares of Preferred Stock. In addition, if the proposal to amend the
Articles of Incorporation to provide for a staggered board of directors is
approved, the existence of a staggered board of directors may be deemed to have
anti-takeover effect. See "Proposal 1" above.
Description of Amendments
The proposal being submitted to the shareholders consists of five
amendments to the Company's Articles of Incorporation: (a) to provide that the
shareholders of the Company may act only at a meeting, and not by written
consent; (b) to provide that only certain persons, not including the
shareholders, may call special meetings of the shareholders; (c) to specify the
notice requirement that shareholders must satisfy in order to present a proposal
for consideration at an annual meeting of shareholders; (d) to specify the
procedures that shareholders must follow in order to nominate directors; and (e)
to provide that the affirmative vote of at least 66 2/3% of the outstanding
shares of the Common Stock is required to amend or to repeal the provisions
described in (a), (b), (c) and (d) above and the proposal to provide for a
staggered board of directors if Proposal 1 above is approved by the shareholders
at the Annual Meeting.
Amendment to Require that Shareholder Action to be Taken by Written
Consent by be Action of All the Shareholders. The Board recommends that the
Company's Certificate of Incorporation be amended to add Article VIII to replace
the current Article VIII so that all action by shareholder written consent be
taken upon approval of all the shareholders entitled to vote on the proposal as
provided in the Georgia Business Corporation Code.
Currently the Certificate of Incorporation provides that the
shareholders may take action by written consent of the holders of shares of
outstanding Common Stock having the requisite number of votes that would be
necessary to authorize such action at a meeting of shareholders at which all
shares of stock entitled to vote thereon were present
10
<PAGE>
and authorized to vote. Such action currently may be taken without prior action,
prior notice to all the shareholders and without a shareholder vote.
The adoption of this amendment would eliminate the ability of the
Company's shareholders to act by written consent in lieu of a meeting unless all
the shareholders approved the action. It is intended to prevent solicitation of
consents by shareholders seeking to effect changes without giving all of the
Company's shareholders entitled to vote on a proposed action an adequate
opportunity to participate at the action or a meeting where such proposed action
is considered. The proposed amendment would prevent a takeover bidder holding or
controlling a large block of the Common Stock of the Company from using the
written consent procedure to take shareholder action unilaterally.
The Board does not believe that the elimination of a simple majority
shareholder action by written consent will create a significant impediment to a
tender offer or other effort to take control of the Company. Nevertheless, the
effect of this proposal may be to make more difficult, or delay, certain actions
by a person or group acquiring a substantial percentage of the Common Stock of
the Company, even though such actions might be desired by, or beneficial to, the
holders of a majority of the Common Stock of the Company.
This amendment will ensure that all shareholders will have advance
notice of any attempted major corporate action by shareholders, and that all
shareholders will have an equal opportunity to participate in the written
consent at a meeting where such action is being considered. It should reduce the
possibility of disputes or confusion regarding the validity of purported
shareholder action. The amendment could provide some encouragement to a
potential acquiror to negotiate directly with the board of directors.
Amendment to Provide that Only Certain Persons, Not Including the
Shareholders, May Call Special Meetings of Shareholders. The Board recommends
that the Company's Articles of Incorporation be amended to add a new Article X,
which provides that special meetings of shareholders of the Company may be
called at any time by the board of directors, the Chairman of the Board of
Directors or the President of the Company. Special meetings of shareholders may
not be called by any other person or persons.
The Company's bylaws currently permit shareholders having not less than
10% of the voting capital stock of the Company to call a special meeting. The
proposed amendment eliminates any authority for the shareholders of the Company
to call special meetings of shareholders for any reason. It will insulate the
management of the Company from requests for special meetings, allowing
management to concentrate on its business functions. A shareholder will not be
able to force shareholder consideration of a proposal over the opposition of the
board of directors by calling a special meeting of shareholders prior to such
time as the board of directors believes such consideration to be appropriate.
Since shareholder approval of mergers subsequent to a hostile takeover usually
requires the calling of a special meeting, the approval of the proposed
amendment would make it more difficult for persons interested in obtaining
approval of a merger to do so. This will encourage persons seeking to enter into
negotiations with the Company to deal directly with management, which will then
be able to properly evaluate any such proposals.
Shareholders should recognize that this provision will apply to any
reason which shareholders may have to call a special meeting and not merely to
meetings called subsequent to hostile takeovers. It may prevent shareholders
from calling a special meeting even when a majority desires to do so.
This provision is in accordance with the Georgia Business Corporation
Code, which provides that special meetings of the shareholders may be called by
the board of directors or by such person or persons as may be authorized by the
Articles of Incorporation or Bylaws.
Amendment to Provide Notice Requirement for Shareholders to Present
Proposals at an Annual Meeting of Shareholders. The Board recommends that the
Company's Articles of Incorporation be amended to add new Article XI, which
provides that only business that may be conducted at any annual meeting of the
shareholders is business that has been brought before the annual meeting by, or
at the direction of, the majority of the directors or by any shareholder of the
Company who provides timely notice of the proposal in writing to the Secretary
of the Company. To be timely, a shareholder's notice must be delivered to, or
mailed to and received at, the principal
11
<PAGE>
executive offices of the Company not less than 60 days prior to the scheduled
annual meeting, regardless of any postponements, deferrals or adjournments of
that meeting to a later date. If, however, less than 70 days' notice or prior
public disclosure of the date of the scheduled meeting is given or made, notice
by the shareholder, to be timely, must be so delivered or received not later
than the close of business on the tenth day following the earlier of the day on
which such notice of the date of the scheduled annual meeting was mailed or the
day on which such public disclosure was made. The shareholder's notice to the
Secretary must set forth in writing each matter the shareholder proposes to
bring before the annual meeting including; a brief description thereof and the
reasons for conducting such business at the annual meeting; the names and
addresses, as they appear on the corporate books, of shareholders supporting
such proposal; the class and number of shares of the Company's stock which are
beneficially owned by the supporting shareholders on the date of the presenting
shareholders notice; and any financial interest the presenting shareholder and
supporting shareholders have in the proposal. The determination as to whether
the notice provisions have been met will be make by the presiding officer at the
annual meeting. This provision applies only to new business and not to other
reports of officer, directors, or committees of the board of directors.
At the present time neither the Articles of Incorporation nor the
Bylaws of the Company specify what business may be conducted at an annual
meeting. Therefore, any business may be conducted that is specified in the
notice of annual meeting or that is properly brought before the meeting. A
determination as to whether business (other than as specified in the notice of
meeting) is properly before a meeting would generally be made by the chairman of
the meeting at the time any such business was presented.
The proposed amendment provides an orderly procedure for notification
to the board of directors of business which is to be presented at shareholder's
meetings. This will enable the board of directors to plan such meetings and
also, to the extent it deems it necessary or desirable, to inform the
shareholders, prior to the meeting, of any new business that will be presented
at the meeting. The board of directors will also be able to make a
recommendation or statement of its position so as to enable shareholders to
better determine whether they desire to attend the meeting or grant a proxy to
the board of directors as to the disposition of any such business. The proposed
amendment does not give the board of directors any power to approve or
disapprove the business that shareholders desire to be conducted at the meeting,
but it does provide for a more orderly procedure for conducting the meeting.
The proposed procedure may limit to some degree the ability of
shareholders to initiate discussion at a shareholders' meeting. It will also
preclude the conducting of business at a particular meeting if the proper notice
procedures have not been followed. This will also have the effect of
discouraging belated attempts by third parties to begin ill-considered,
disruptive discussions at shareholders' meetings. Nothing in the proposed
amendment precludes discussion by any shareholder of any business properly
brought before the annual meeting.
Amendment to Provide Notice Requirement for Nominations of Directors by
Shareholders. The Board recommends that the Company's Articles of Incorporation
be amended to add Article XII, which provides that, subject to any existing
rights of holders of Preferred Stock then outstanding, only persons who are
nominated in accordance with the procedures specified in Article XII are
eligible for election as directors. Such nominations may be made at a meeting of
the shareholders, by, or at the direction of, the board of directors by any
nominating committee or person appointed by the board of directors or by any
shareholder of the Company entitled to vote for the election of directors at the
meeting, provided such shareholder has complied with the notice procedures.
Written notice of a shareholder nomination must be made to the Secretary of the
Company not less than 60 days prior to the scheduled meeting, regardless of any
postponements, deferrals or adjournments of that meeting to a later date. If,
however, less than 70 day's notice or prior public disclosure of the date of the
scheduled meeting is given, notice by the shareholder must be so delivered or
received not later than the close of business on the tenth day following the
earlier of the day on which such notice of the date of the scheduled annual
meeting was mailed on the day on which public disclosure was made. This notice
must set forth the name, age, business address and residence address of the
person being nominated, that person's principal occupation or employment, the
class and number of shares of capital stock of the Company which are
beneficially owned by that person and any other information required to be
disclosed under the rules of the Securities and Exchange Commission. The notice
must also include the name and the address of the shareholder presenting the
nomination and the class and number of shares of the Company's stock which are
beneficially owned by that person on the date of the shareholder notice. Other
relevant information may also be
12
<PAGE>
requested by the Company. The validity of the notice will be determined by the
presiding officer at the annual meeting.
Without this amendment, a shareholder could nominate any person for
election as a director, without prior notice to the board of directors or the
other shareholders, at any meeting called for the purpose of electing directors.
The advance notice requirement, by preventing shareholder nominations from the
floor at the annual meeting of shareholders, affords the board of directors a
meaningful opportunity to consider the qualifications of the proposed nominees
and, to the extent it deems it necessary or desirable, to inform shareholders
about such qualifications. This provision, it is believed, will further the
objective of the board of directors to identify candidates who have the
character, education, training, experience and proven accomplishments that give
promise of significant contribution to the responsible and profitable conduct of
the Company's business. The board of directors believes that it is advantageous
to be able to consider in advance the qualification of any proposed nominee, as
opposed to being confronted with a surprise nomination at or shortly before the
annual meeting of shareholders.
Although the amendment does not give the board of directors any power
to approve or disapprove shareholder nominations for directors, it will preclude
shareholder nominations if proper procedures are not followed. Although the
board of directors does not believe that the proposed amendment will have a
significant impact on any attempt by a third party to obtain control of the
Company, it is possible that it may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate of directors, or
otherwise attempting to obtain control of the Company or effect a change in
management, without regard to whether this would be beneficial to the Company or
its shareholders.
Amendment to Require a 66 2/3% Vote to Amend or Repeal Certain
Provisions of the Articles of Incorporation. The Board recommends that the
Company's Articles of Incorporation be amended to add Article XIII, which
requires that in order to amend, repeal or adopt any provision inconsistent with
Articles VIII, IX, X, XI, XII and XIII of the Articles of Incorporation relating
to the above provisions and the creation of the staggered board of directors,
the affirmative vote of at least 66 2/3% of the outstanding shares of Common
Stock shall be required.
Under the Georgia Business Corporation Code, amendments to the Articles
of Incorporation require the approval of the holders of a majority of the
outstanding stock entitled to vote thereon, but the law also permits a
corporation to include provisions in its Articles of Incorporation which require
a greater vote than the vote otherwise required by law for any corporate action.
With respect to such supermajority provisions, the Georgia code requires that
any alteration, amendment or repeal thereof be approved by an equally large
shareholder vote.
The requirement of an increased shareholder vote is designed to prevent
a person holding or controlling a majority, but less than 66 2/3% of the shares
of the Company from avoiding the requirements of the proposed amendments by
simply repealing them.
Required Vote to Approve Amendments
The affirmative vote of a majority of the outstanding shares of Common
Stock is required to approve the amendments to the Articles of Incorporation.
Unless otherwise specified, the proxies solicited by the Company will be voted
"FOR" the approval of the amendments to the Articles of Incorporation. The
proposed amendments will become effective upon the filing of a Certificate of
Amendment with the Secretary of the State of Georgia.
Although the Company believes that the material provisions of the
amendment to the Articles of Incorporation are set forth above, reference should
be made to the text of the Certificate of Amendment for the form of amendment, a
copy of which is attached to this Proxy Statement as Annex I.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENTS TO THE ARTICLES OF INCORPORATION (1) TO REQUIRE THAT ALL
SHAREHOLDER ACTION BY WRITTEN CONSENT BE BY ALL THE SHAREHOLDERS ENTITLED TO
VOTE THEREON, (2) TO PROVIDE THAT ONLY CERTAIN PERSONS, NOT INCLUDING
SHAREHOLDERS, MAY CALL SPECIAL MEETINGS OF SHAREHOLDERS, (3) TO PROVIDE THAT
13
<PAGE>
NOTICE OF SHAREHOLDERS PROPOSALS AT AN ANNUAL MEETING BE GIVEN TO THE
SECRETARY OF THE COMPANY IN ADVANCE OF THE MEETING, (4) TO PROVIDE THAT
NOMINATIONS OF DIRECTORS BY SHAREHOLDERS BE GIVEN TO THE SECRETARY OF THE
COMPANY IN ADVANCE OF AN ANNUAL MEETING, AND (5) TO PROVIDE FOR A 66 2/3% VOTE
TO AMEND OR REPEAL THE ABOVE PROVISIONS AND TO CHANGE THE CREATION OF THE
STAGGERED BOARD OF DIRECTORS.
PROPOSAL 4:
APPROVAL OF THE 1997 PERFORMANCE EQUITY PLAN
On April 4, 1997, the Board unanimously adopted the Equity Plan,
subject to shareholder approval. The Equity Plan provides for the grant of
options to purchase up to 500,000 shares of Common Stock to be made to
employees, officers, directors and consultants of the Company and its
subsidiaries. The Equity Plan is intended to assist the Company and its
subsidiaries in attracting, retaining and motivating employees, officers,
directors and consultants of particular merit. The number of shares of Common
Stock subject to the Equity Plan represents less than 5% of the number of
outstanding shares of Common Stock as of the record date.
Although the Company believes that all material provisions of the
Equity Plan have been set forth in this Proxy Statement, this summary does not
discuss all the elements of the Equity Plan and is qualified in its entirety by
reference to the text of the Equity Plan, a copy of which is attached to this
Proxy Statement as Annex II and is incorporated herein by reference.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE APPROVAL OF THE EQUITY PLAN.
Summary of the Equity Plan
Administration
The Equity Plan will be administered by the Board or by a committee
("Committee") appointed by the Board, whose members will serve at the pleasure
of the Board. If appointed, the Committee will have two or more members, each of
whom will be a "non-employee" director (i.e., a director who is not an officer
of the Company or a subsidiary or affiliate, a consultant to the Company
receiving compensation from such activity in excess of $60,000 except for being
a director, or a person with any other reportable interest in a transaction or
business relationship with the Company). If no Committee is so designated, then
the Equity Plan will be administered by the Board. The Board or, if appointed,
Committee, has full authority, subject to the provisions of the Equity Plan, to
award (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock, (v) Stock Reload Options and/or (vi) other stock-based
awards (collectively, "Awards").
Subject to the provisions of the Equity Plan, the Board or the
Committee determines, among other things, the persons to whom from time to time
Awards may be granted ("Holders"), the specific type of Awards to be granted
(e.g., Stock Option, Restricted Stock, etc.), the number of shares subject to
each Award, share prices, any restrictions or limitations on such Awards and any
vesting, exchange, deferral, surrender, cancellation, acceleration, termination,
exercise or forfeiture provisions related to such Awards. The interpretation and
construction by the Board or the Committee of any provisions of, and the
determination of any questions arising under, the Equity Plan or any rule or
regulation established by the Board or the Committee pursuant to the Equity Plan
will be final, conclusive and binding on all persons interested in the Equity
Plan.
Shares Subject to the Plan; General Terms
The Equity Plan authorizes the granting of Awards the exercise of which
would allow up to an aggregate of 500,000 shares of Common Stock of the Company
to be acquired by the Holders of said Awards. In order to prevent the dilution
or enlargement of the rights of Holders under the Equity Plan, the number of
14
<PAGE>
shares of Common Stock authorized by the Equity Plan is subject to adjustment
by the Board in the event of any increase or decrease in the number of shares
of outstanding shares of Common Stock resulting from a stock dividend, stock
split, reverse stock split and certain other changes to the shares of Common
Stock of the Company. If any Award granted under the Equity Plan is forfeited or
terminated, the shares of Common Stock of the Company that were available
pursuant to such Award will again be available for distribution in connection
with Awards subsequently granted under the Equity Plan.
Any equity security granted pursuant to the Equity Plan must be held
for six months from the date of grant or in the case of an option, at least six
months must elapse from the date of acquisition of the option to the date of
disposition of the option (other than upon exercise or conversion) or its
underlying equity security. In the event of a "change of control," as defined in
the Equity Plan, any option not then otherwise exercisable will immediately
become exercisable in full.
Eligibility
Subject to the provisions of the Equity Plan, Awards may be granted to
key employees, officers, directors, consultants and other persons who are deemed
to have rendered or to be able to render significant services to The Company or
its subsidiaries and are deemed to have contributed or to have the potential to
contribute to the success of the Company. Incentive Options (as hereinafter
defined) may be awarded only to persons who, at the time of such awards, are
employees of The Company or its subsidiaries.
Acceleration in Vesting
If (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), is or becomes the
"beneficial owner" (as referred in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 15% or more of the
combined voting power of the Company's then outstanding securities in one or
more transactions, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the board of
directors cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period, then, the vesting periods of any and all Options and other awards
granted and outstanding under the Equity Plan shall be accelerated and all such
Options and awards will immediately and entirely vest, and the respective
holders thereof will have the immediate right to purchase and/or receive any and
all Common Stock subject to such Options and awards on the terms set forth in
the Equity Plan and the respective agreements respecting such Options and
awards.
Types of Awards
Options. The Equity Plan provides both for "incentive stock options"
("Incentive Options") as defined in Section 422 of the Code, and for options not
qualifying as Incentive Options ("Non-qualified Options"), both of which may be
granted with any other stock-based award under the Equity Plan. The Board or the
Committee will determine the exercise price per share of Common Stock
purchasable under an Incentive or Non-qualified Option (collectively,
"Options"). The exercise price of a Non-qualified Option may be less than 100%
of the fair market value on the last trading day before the date of the grant.
The exercise price of an Incentive Option may not be less than 100% of the fair
market value on the last trading day before the date of grant (or in the case of
an Incentive Option granted to a person possessing at the time of grant more
than 10% of the total combined voting power of all classes of stock of the
Company, not less than 110% of such fair market value).
The Board or the Committee determines when Options are to be granted
and when they may be exercised. However, an Incentive Option may only be granted
within a ten-year period commencing on April 4, 1997 and may only be exercised
within ten years of the date of the grant (or within five years in the case of
an Incentive Option granted to a person who, at the time of the grant, owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or of its parent or any subsidiary). Subject to any
limitations or
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conditions of the Equity Plan and the Board or the Committee may impose, Options
may be exercised, in whole or in part, during the term of the Option by giving
written notice of exercise to the Company specifying the number of shares of
Common Stock of the Company to be purchased. Such notice must be accompanied by
payment in full of the purchase price, either in cash, securities or in kind of
the Company, or in combination thereof. Options granted under the Equity Plan
are exercisable only by the Holder during his or her lifetime. The Options
granted under the Equity Plan may not be transferred other than by will or by
the laws of descent and distribution.
Generally, if the Holder received an option as an employee of the
Company or a subsidiary, no Option, or any portion thereof, granted under the
Equity Plan may be exercised by the Holder unless he or she is employed by the
Company or a subsidiary at the time of the exercise and has been so employed
continuously from the time the Option was granted. However, in the event the
Holder's employment with the Company is terminated due to disability, the Option
will be fully vested and the Holder may still exercise his or her Option for a
period of one year (or such other lesser period as the Board or the Committee
may specify at the time of grant) from the date of such termination or until the
expiration of the stated term of the Option, whichever period if shorter.
Similarly, should a Holder die while in the employment of the Company or a
subsidiary, the Option will be fully vested on the date of death and his or her
legal representative or legatee under his or her will may exercise the decedent
Holder's Option for a period of one year from death (or such other greater or
lesser period as the Board or the Committee specifies at the time of grant) or
until the expiration of the stated term of the Option, whichever is shorter.
Further, if the Holder's employment is terminated without cause or due to normal
retirement (upon attaining the age of 65), then the portion of any Option that
has vested by the date of such retirement or termination may be exercised for
the lesser of three months after retirement or the balance of the Option's term.
Stock Appreciation Rights. The Board or the Committee may grant Stock
Appreciation Rights ("SARs" or singularly "SAR") in conjunction with all or part
of any Option granted under the Equity Plan or may grant SARs on a free-standing
basis. In conjunction with Non-qualified Options, SARs may be granted either at
or after the time of the grant of such Non-qualified Options. In conjunction
with Incentive Options, SARs may be granted only at the time of the grant of
such Incentive Options. An SAR entitles the Holder thereof to receive an amount
(payable in cash and/or shares of Common Stock of the Company, as determined by
the Board or the Committee) equal to the excess fair market value of one share
of Common Stock of the Company over the SAR price or the exercise price of the
related Option, multiplied by the number of shares subject to the SAR.
Restricted Stock Awards. The Board or the Committee may award shares of
restricted stock ("Restricted Stock") either alone or in addition to other
Awards granted under the Equity Plan. The Board or the Committee shall determine
the restricted period during which the shares of stock may be forfeited if, for
example, the Holder's employment with the Company is terminated. In order to
enforce the forfeiture provisions, the Equity Plan requires that all shares of
Restricted Stock awarded to the Holder remain in the physical custody of the
Company until the restrictions on such shares have terminated.
Deferred Stock. The Board or the Committee may award shares of deferred
stock ("Deferred Stock") either alone or in addition to other Awards granted
under the Equity Plan. The Board or the Committee shall determine the deferral
period during which time the receipt of the stock is deferred. The Award may
specify, for example, that the Holder must remain employed by the Company during
the entire deferral period in order to be issued the stock.
Stock Reload Options. A Stock Reload Option permits a Holder who
exercises an Option by delivering already owned stock (i.e., the stock-for-stock
method) to receive back from the Company a new Option (at the current market
price) for the same number of shares delivered to exercise the Option, which new
Option may not be exercised until one year after it was granted and expires on
the date the original Option would have expired (had it not been previously
exercised). The Board or the Committee may grant Stock Reload Options in
conjunction with any Option granted under the Equity Plan. In conjunction with
Incentive Options, Stock Reload Options may be granted only at the time of the
grant of such Incentive Option. In conjunction with Non-qualified Options, Stock
Reload Options may be granted either at or after the time of the grant of such
Non-qualified Options.
Other Stock-Based Awards. The Board or the Committee may grant
performance shares and shares of stock valued with reference to the performance
of the Company, either alone or in addition to or in tandem with Stock
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Options, Restricted Stock or Deferred Stock. Subject to the terms of the Equity
Plan, the Board or the Committee has complete discretion to determine the terms
and conditions applicable to any such stock-based awards. Such terms and
conditions may require, among other things, continued employment and/or the
attainment of specified performance objectives.
Withholding Taxes
Upon the exercise of any Award granted under the Equity Plan, the
Holder may be required to remit to the Company an amount sufficient to satisfy
all Federal, state and local withholding tax requirements prior to delivery of
any certificate or certificates for shares of Common Stock of the Company.
Subject to certain stringent limitations under the Equity Plan and at the
discretion of the Board, the Holder may satisfy these requirements by electing
to have the Company withhold a portion of the shares to be received upon the
exercise of the Award having a value equal to the amount of the withholding tax
due under applicable federal, state and local laws.
Agreements
Options, Restricted Stock, Deferred Stock, and SARs and other
stock-based awards granted under the Equity Plan will be evidenced by agreements
consistent with the Equity Plan in such form as the Board or the Committee may
prescribe. Neither the Equity Plan nor agreements thereunder confer any right to
continued employment upon any Holder.
Term and Termination of the Equity Plan
The Equity Plan was effective as of April 4, 1997 ("Effective Date"),
subject to the approval of the Equity Plan by the shareholders of the Company
within one year after the Effective Date. Any Awards granted under the Equity
Plan prior to such approval shall be effective when made (unless otherwise
specified by the Committee at the time of grant), but shall be conditioned upon,
and subject to, the approval of the Equity Plan by the shareholders of the
Company. If the Equity Plan is not so approved, all Awards granted thereunder
shall be of no effect and any Common Stock of the Company received by a Holder
shall be deemed forfeited and returned to the Company by the Holder. Unless
terminated by the Board, the Equity Plan shall continue to remain effective
until such time as no further Awards may be granted and all Awards granted under
the Equity Plan are no longer outstanding. Notwithstanding the foregoing, grants
of Incentive Options may only be made during the ten-year period following the
Effective Date.
Amendments to the Plan
The Board may at any time, and from time to time, amend, alter, suspend
or discontinue any of the provisions of the Equity Plan, but no amendment,
alteration, suspension or discontinuance shall be made that would impair the
rights of a Holder of any Award theretofore granted, without his or her consent.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of
participation in the Equity Plan is only a summary of the general rules
applicable to the grant and exercise of stock options and does not purport to
give specific details on every variable and does not cover, among other things,
state, local and foreign tax treatment of participation in the Equity Plan. The
information is based on present law and regulations, which are subject to being
changed prospectively or retroactively.
Incentive Options
The Holder will recognize no taxable income and the Company will not
qualify for any deduction upon the grant or exercise of an Incentive Option.
Upon a disposition of the shares underlying the Option after the later of two
years from the date of grant or one year after the issuance of the shares to the
Holder, the Holder will recognize the difference, if any, between the amount
realized and the exercise price as long-term capital gain or long-term
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capital loss (as the case may be) if the shares are capital assets. The excess,
if any, of the fair market value of the shares on the date of exercise of an
Incentive Option over the exercise price will be treated as an item of
adjustment in computing the alternative minimum tax for a Holder's taxable year
in which the exercise occurs and may result in an alternative minimum tax
liability for the Holder. If the Common Stock of the Company acquired upon the
exercise of an Incentive Option are disposed of before expiration of the
necessary holding period of two years from the date of the grant of the Option
and one year after the exercise of the Option, (i) the Holder will recognize
ordinary compensation income in the taxable year of disposition in an amount
equal to the excess, if any, of the lesser of the fair market value of the
shares on the date of exercise or the amount realized on the disposition of the
shares, over the exercise price paid for such shares; and (ii) the Company will
qualify for a deduction equal to any such amount recognized, subject to the
limitation that the compensation be reasonable. The Holder will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets, as short-term or
long-term capital gain, depending on the length of time that the Holder held the
shares, and the Company will not qualify for a deduction with respect to such
excess. In the case of a disposition of shares in the same taxable year as the
exercise of the Option, where the amount realized on the disposition is less
than the fair market value of the shares on the date of exercise, there will be
no adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price, which is the same amount included in
regular taxable income.
Non-qualified Options
With respect to Non-qualified Options (i) upon grant of the Option, the
Holder will recognize no income; (ii) upon exercise of the Option (if the Common
Stock of the Company is not subject to a substantial risk of forfeiture), the
Holder will recognize ordinary compensation income in an amount equal to the
excess, if any, of the fair market value of the shares on the date of exercise
over the exercise price, and the Company will qualify for a deduction in the
same amount, subject to the requirement that the compensation be reasonable; and
(iii) the Company will be required to comply with applicable Federal income tax
withholding requirements with respect to the amount of ordinary compensation
income recognized by the Holder. On a disposition of the shares, the Holder will
recognize gain or loss equal to the difference between the amount realized and
the sum of the exercise price and the ordinary compensation income recognized.
Such gain or loss will be treated as capital gain or loss if the shares are
capital assets and as short-term or long-term capital gain or loss, depending
upon the length of time that the Holder held the shares.
If the shares acquired upon exercise of a Non-qualified Option are
subject to a substantial risk of forfeiture, the Holder will recognize income at
the time when the substantial risk of forfeiture is removed and the Company will
qualify for a corresponding deduction at such time.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has examined and reported upon the financial
statements of the Company since 1988, including for the year ending December 31,
1996. Price Waterhouse has no direct or indirect interest in the Company or any
affiliate of the Company. A representative of Price Waterhouse LLP is expected
to be present at the meeting with an opportunity to make a statement if the
representative desires to do so and is expected to be available to respond to
appropriate questions from shareholders.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of
the Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telegraph using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the Common
Stock.
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Georgeson & Co. will assist in the solicitation of proxies by the
Company for a fee of approximately $8,500, plus reasonable out-of-pocket
expenses.
1998 SHAREHOLDER PROPOSALS
In order for shareholder proposals for the 1998 Annual Meeting of
Shareholders to be eligible for inclusion in the Company's Proxy Statement, they
must be received by the Company at its principal office in Atlanta, Georgia, by
January 9, 1998, and if Proposal 3 above is adopted by the shareholders of the
Company, in accordance with the Articles of Incorporation.
OTHER MATTERS
The Board knows of no matter which will be presented for consideration
at the meeting other than the matters referred to in this Proxy Statement.
Should any other matter properly come before the meeting, it is the intention of
the persons named in the accompanying proxy to vote such proxy in accordance
with their best judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996 IS BEING FURNISHED HEREWITH TO EACH SHAREHOLDER OF RECORD AS
OF THE CLOSE OF BUSINESS ON APRIL 24, 1997. ADDITIONAL COPIES OF THE ANNUAL
REPORT AND COPIES OF THE COMPANY'S REPORT ON FORM 10-K WILL BE PROVIDED FREE OF
CHARGE UPON REQUEST TO:
AUTOMOBILE PROTECTION CORPORATION - APCO
15 DUNWOODY PARK DRIVE, SUITE 100
ATLANTA, GEORGIA 30338
ATTENTION: INVESTOR RELATIONS
(770) 394-7070
By Order of the Board of Directors
Martin J. Blank
Secretary
Atlanta, Georgia
May 9, 1997
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ANNEX I
ARTICLES OF AMENDMENT
OF
AUTOMOBILE PROTECTION CORPORATION - APCO
To the Secretary of State
of the State of Georgia
Pursuant to the provisions of the Georgia Business Corporation Code,
Automobile Protection Corporation - APCO ("corporation") does hereby adopt the
following Articles of Amendment.
1. The name of the corporation is "Automobile Protection Corporation -
APCO."
2. The following are amendments to the Amended Restated Articles of
Incorporation ("Articles of Incorporation"):
(a) Article VIII of the Articles of Incorporation is hereby deleted and
in its place is added a new Article VIII as follows:
VIII.
Any action required by law or by the Articles of Incorporation
or Bylaws of the corporation to be taken at a meeting of the
shareholders of the corporation or any other action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a
written consent setting forth the action so taken, shall be signed by
all the shareholders entitled to vote on the action to be taken.
(b) Article IX is hereby added to the Articles of Incorporation and
shall be as follows:
IX.
The board of directors shall be and is divided into four
classes: Class I, Class II, Class III and Class IV. The number of
directors in each class shall be the whole number contained in the
quotient arrived at by dividing the authorized number of directors by
four. If a fraction is also contained in such quotient and if such
fraction is one-fourth (1/4), the extra director shall be a member of
Class IV. If the fraction is two-fourths (2/4), one of the extra
directors shall be a member of Class IV and the other shall be a member
of Class III. If the fraction is three-fourths (3/4), one of the
directors shall be a member of Class IV, one shall be a member of Class
III and one shall be a member of Class II. Each director shall serve
for a term ending on the date of the fourth annual meeting following
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the annual meeting at which such director was elected: provided
however, those directors elected to be the initial directors of Class I
shall serve for a term ending on the date of the annual meeting in
1998, those directors elected to be the initial directors of Class II
shall serve for a term ending on the date of the annual meeting in
1999, and those directors elected to be the initial directors of Class
III shall serve for a term ending on the date of the annual meeting in
2000.
In the event of any increase or decrease in the authorized
number of directors, (i) each director then serving as such shall
nevertheless continue as a director in the class of which he or she is
a member until the expiration of his or her current term, or his or her
prior death, retirement, resignation or removal, and (ii) the newly
created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board of Directors to such class
or classes as shall, so far as possible bring the number of directors
in the respective classes into conformity with the formula in this
Article IX, as applied to the new authorized number of directors.
Notwithstanding any of the foregoing provisions of this
Article IX, each director shall serve until his or her successor is
elected and has qualified or until his or her death, retirement,
resignation or removal. No director may be removed during his or her
term except for cause at a special meeting of the shareholders. Should
a vacancy occur or be created, the majority of the remaining directors
(even though less than a quorum) may fill the vacancy for the full term
of the class in which the vacancy occurs or is created.
(c) Article X is hereby added to the Articles of Incorporation and shall
be as follows:
X.
Special meetings of the shareholders of the corporation for
any purpose or purposes may be called at any time by the board of
directors, the Chairman of the Board of Directors or the President of
the corporation. Special meetings of the shareholders of the
corporation may not be called by any other person or persons.
(d) Article XI is hereby added to the Articles of Incorporation and
shall be as follows:
XI.
At an annual meeting of shareholders, only such business shall
be conducted, and only such proposals shall be acted upon, as shall
have been brought before the annual meeting (a) by, or at the direction
of, a majority of the directors, or (b) by any shareholder of the
corporation who complies with the notice procedures set forth in this
Article XI. For a proposal to be properly
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brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a shareholder's notice must be delivered to,
or mailed and received at, the principal executive offices of the
corporation not less than 60 days prior to the scheduled annual
meeting, regardless of any postponements, deferrals or adjournments of
that meeting to a later date; provided, however, that if less than 70
days' notice or prior public disclosure of the date of the scheduled
annual meeting is given or made, notice by the shareholder to be
timely, must be so delivered or received not later than the close of
business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or
the day on which such public disclosure was made. A shareholder's
notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the annual meeting (a ) a brief
description of the proposal desired to be brought before the annual
meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the corporation's
books, or the shareholder proposing such business and any other
shareholders known by such shareholder to be supporting such proposal,
(c) the class and number of shares of the corporation's stock which are
beneficially owned by the shareholder on the date of such shareholder
notice and by any other shareholders known by such shareholder to be
supporting such proposal on the date of such shareholder notice, and
(d) any financial interest of the shareholder in such proposal and by
any other shareholders known by such shareholder to be supporting such
proposal.
The presiding officer of the annual meeting shall determine
and declare at the annual meeting whether the shareholder proposal was
made in accordance with the terms of this Article XI. If the presiding
officer determines that a shareholder proposal was not made in
accordance with the terms of this Article XI, he or she shall so
declare at the annual meeting and any such proposal shall not be acted
upon at the annual meeting.
This provision shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers,
directors and committees of the board of directors, but, in connection
with such reports, no new business shall be acted upon at such annual
meeting unless stated, filed and received as herein provided.
(e) Article XII is hereby added to the Articles of Incorporation and
shall be as follows:
XII.
Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, only persons who are nominated in
accordance with the following procedures shall be eligible for election
as directors. Nominations of
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persons for election to the board of directors of the corporation may
be made at a meeting of shareholders by or at the direction of the
board of directors by a nominating committee or person appointed by the
board of directors or by any shareholder of the corporation entitled to
vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Article XII. Such nominations,
other than those made by or at the direction of the board of directors,
shall be made pursuant to timely notice in writing to the Secretary of
the corporation. To be timely, a shareholder's notice must be delivered
to, or mailed and received at, the principal executive offices of the
corporation not less than 60 days prior to the scheduled annual
meeting, regardless of any postponements, deferrals or adjournments of
that meeting to a later date; provided however, that if less than 70
days' notice or prior public disclosure of the date of the scheduled
annual meeting is given or made, notice by the shareholder, to be
timely, must be so delivered or received not later than the close of
business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or
the day on which such public disclosure was made. A shareholder's
notice to the Secretary shall set forth (a) as to each person whom the
shareholder proposes to nominate for election or reelection as a
director, (i) the name, age, business address and residence address of
the person, (ii) the principal occupation or employment of the person,
(iii) the class and number of shares of capital stock of the
corporation which are beneficially owned by the person, and (iv) any
other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to any rules or regulations under the Securities Exchange Act
of 1934, as amended; and (b) as to the shareholder giving the notice
(i) the name and address, as they appear on the corporation's books, of
the shareholder, and (ii) the class and number of shares of the
corporation's stock which are beneficially owned by the shareholder on
the date of such shareholder notice. The corporation may require any
proposed nominee to furnish such other information as may reasonably be
required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The presiding officer of the annual meting shall determine and
declare at the annual meeting whether the nomination was made in
accordance with the terms of this Article XII. If the presiding officer
determines that a nomination was not made in accordance with the terms
of this Article XII, he or she shall so declare at the annual meeting
and any such defective nomination shall be disregarded.
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(f) Article XIII is hereby added to the Articles of Incorporation and
shall be as follows:
XIII.
Notwithstanding anything contained in these Articles of
Incorporation to the contrary, the affirmative vote of at least 66-2/3%
of the outstanding shares of Common Stock of the corporation shall be
required to amend or repeal Articles VIII, IX, X, XI, XII and XIII of
these Articles of Incorporation or to adopt any provision inconsistent
therewith.
3. The amendments herein provided were duly approved by the board of
directors and recommended to the shareholders of the corporation on April 4,
1997.
4. The amendments herein provided were duly adopted by the shareholders of
the corporation on ___________, 1997 in accordance with the provisions of
Section 14-2-1003 of the Georgia Business Corporation Code.
5. The effective time and date of these amendments to these Articles of
Incorporation shall be immediately upon its filing with the Secretary of State
of the State of Georgia.
Executed this ______
day of _________, 1997.
---------------------------------------------
Martin J. Blank, Secretary of the Corporation
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ANNEX II
Approved by Board of Directors on April 4, 1997
Approved by Stockholders on ___________, 1997
AUTOMOBILE PROTECTION CORPORATION - APCO
1997 Performance Equity Plan
Section 1. Purpose; Definitions.
1.1 Purpose. The purpose of the Automobile Protection Corporation - APCO
(the "Company") 1997 Performance Equity Plan (the "Plan") is to enable the
Company to offer to its key employees, officers, directors and consultants whose
past, present and/or potential contributions to the Company and its Subsidiaries
have been, are or will be important to the success of the Company, an
opportunity to acquire a proprietary interest in the Company. The various types
of long-term incentive awards which may be provided under the Plan will enable
the Company to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its businesses.
1.2 Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Agreement" means the agreement between the Company and the Holder
setting forth the terms and conditions of an award under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto and the regulations promulgated thereunder.
(d) "Committee" means the Stock Option Committee of the Board or any other
committee of the Board, which the Board may designate to administer the Plan or
any portion thereof. If no Committee is so designated, then all references in
this Plan to "Committee" shall mean the Board.
(e) "Common Stock" means the Common Stock of the Company, par value $.001
per share.
(f) "Company" means Automobile Protection Corporation - APCO, a corporation
organized under the laws of the State of Georgia.
(g) "Deferred Stock" means Stock to be received, under an award made
pursuant to Section 9, below, at the end of a specified deferral period.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
(i) "Effective Date" means the date set forth in Section 13.1, below.
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(j) "Fair Market Value", unless otherwise required by any applicable
provision of the Code or any regulations issued thereunder, means, as of any
given date: (i) if the Common Stock is listed on a national securities exchange
or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale
price of the Common Stock in the principal trading market for the Common Stock
on the last trading day preceding the date of grant of an award hereunder, as
reported by the exchange or Nasdaq, as the case may be; (ii) if the Common Stock
is not listed on a national securities exchange or quoted on the Nasdaq National
Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market,
the closing bid price for the Common Stock on the last trading day preceding the
date of grant of an award hereunder for which such quotations are reported by
the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar
publisher of such quotations; and (iii) if the fair market value of the Common
Stock cannot be determined pursuant to clause (i) or (ii) above, such price as
the Committee shall determine, in good faith.
(k) "Holder" means a person who has received an award under the Plan.
(l) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(m) "Nonqualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(n) "Normal Retirement" means retirement from active employment with the
Company or any Subsidiary on or after age 65.
(o) "Other Stock-Based Award" means an award under Section 10, below, that
is valued in whole or in part by reference to, or is otherwise based upon,
Stock.
(p) "Parent" means any present or future parent corporation of the Company,
as such term is defined in Section 424(e) of the Code.
(q) "Plan" means the Automobile Protection Corporation - APCO 1997
Performance Equity Plan, as hereinafter amended from time to time.
(r) "Restricted Stock" means Stock, received under an award made pursuant
to Section 8, below, that is subject to restrictions under said Section 8.
(s) "SAR Value" means the excess of the Fair Market Value (on the exercise
date) of the number of shares for which the Stock Appreciation Right is
exercised over the exercise price that the participant would have otherwise had
to pay to exercise the related Stock Option and purchase the relevant shares.
(t) "Stock" means the Common Stock of the Company, par value $.001 per
share.
(u) "Stock Appreciation Right" means the right to receive from the Company,
on surrender of all or part of the related Stock Option, without a cash payment
to the Company, a number of shares of Common Stock equal to the SAR Value
divided by the exercise price of the Stock Option.
(v) "Stock Option" or "Option" means any option to purchase shares of Stock
which is granted pursuant to the Plan.
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(w) "Stock Reload Option" means any option granted under Section 6.3,
below, as a result of the payment of the exercise price of a Stock Option and/or
the withholding tax related thereto in the form of Stock owned by the Holder or
the withholding of Stock by the Company.
(x) "Subsidiary" means any present or future subsidiary corporation of the
Company, as such term is defined in Section 424(f) of the Code.
Section 2. Administration.
2.1 Committee Membership. The Plan shall be administered by the Board or a
Committee. Committee members shall serve for such term as the Board may in each
case determine, and shall be subject to removal at any time by the Board. The
Committee members, to the extent possible, shall be "non-employee" as defined in
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended.
2.2 Powers of Committee. The Committee shall have full authority to award,
pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options
and/or (vi) Other Stock-Based Awards. For purposes of illustration and not of
limitation, the Committee shall have the authority (subject to the express
provisions of this Plan):
(a) to select the officers, key employees, directors and consultants of the
Company or any Subsidiary to whom Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Reload Stock Options and/or Other Stock-Based
Awards may from time to time be awarded hereunder.
(b) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited to,
number of shares, share price or other consideration, such as other securities
of the Company or other property, any restrictions or limitations, and any
vesting, exchange, surrender, cancellation, acceleration, termination, exercise
or forfeiture provisions, as the Committee shall determine);
(c) to determine any specified performance goals or such other factors or
criteria which need to be attained for the vesting of an award granted
hereunder;
(d) to determine the terms and conditions under which awards granted
hereunder are to operate on a tandem basis and/or in conjunction with or apart
from other equity awarded under this Plan and cash awards made by the Company or
any Subsidiary outside of this Plan;
(e) to permit a Holder to elect to defer a payment under the Plan under
such rules and procedures as the Committee may establish, including the
crediting of interest on deferred amounts denominated in cash and of dividend
equivalents on deferred amounts denominated in Stock;
(f) to determine the extent and circumstances under which Stock and other
amounts payable with respect to an award hereunder shall be deferred which may
be either automatic or at the election of the Holder; and
(g) to substitute (i) new Stock Options for previously granted Stock
Options, which previously granted Stock Options have higher option exercise
prices and/or contain other less favorable terms, and (ii) new awards of any
other type for previously granted awards of the same type, which previously
granted awards are upon less favorable terms.
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2.3 Interpretation of Plan.
(a) Committee Authority. Subject to Section 12, below, the
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any award issued under the Plan (and to determine the form and
substance of all Agreements relating thereto), and to otherwise supervise the
administration of the Plan. Subject to Section 12, below, all decisions made by
the Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding upon all persons,
including the Company, its Subsidiaries and Holders.
(b) Incentive Stock Options. Anything in the Plan to the
contrary notwithstanding, no term or provision of the Plan relating to Incentive
Stock Options (including but limited to Stock Reload Options or Stock
Appreciation rights granted in conjunction with an Incentive Stock Option) or
any Agreement providing for Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the Plan
be so exercised, so as to disqualify the Plan under Section 422 of the Code, or,
without the consent of the Holder(s) affected, to disqualify any Incentive Stock
Option under such Section 422.
Section 3. Stock Subject to Plan.
3.1 Number of Shares. The total number of shares of Common Stock
reserved and available for distribution under the Plan shall be 500,000 shares.
Shares of Stock under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares. If any shares of Stock that have been
granted pursuant to a Stock Option cease to be subject to a Stock Option, or if
any shares of Stock that are subject to any Stock Appreciation Right, Restricted
Stock, Deferred Stock award, Reload Stock Option or Other Stock-Based Award
granted hereunder are forfeited or any such award otherwise terminates without a
payment being made to the Holder in the form of Stock, such shares shall again
be available for distribution in connection with future grants and awards under
the Plan. Only net shares issued upon a stock-for-stock exercise (including
stock used for withholding taxes) shall be counted against the number of shares
available under the Plan.
3.2 Adjustment Upon Changes in Capitalization, Etc. In the event of any
change in the number of outstanding shares of Common Stock of the Company
occurring as the result of a stock split, reverse stock split or stock dividend
on the Common Stock, after the grant of an Award, the Company shall
proportionately adjust the number of shares of Stock subject to the Award and
the price to be paid on exercise of an Award as well as the aggregate number of
shares reserved for issuance under the Plan. Any right to acquire a fractional
share of Stock resulting from any adjustments will be rounded to the nearest
whole share of Stock. If the Company shall be the surviving corporation in any
merger, combination or consolidation, any outstanding Award shall pertain and
apply to the shares of Stock to which the Holder is entitled, without adjustment
for issuance by the Company of any securities in the merger, combination or
consolidation. In the event of a change in the par value of the Common Stock of
the Company which is subject to any outstanding Award, such Award will be deemed
to pertain to the shares of Stock resulting from any such change. To the extent
that the foregoing adjustments relate to the Common Stock of the Company, the
adjustments will be made by the Committee whose determination will be final,
binding and conclusive.
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Section 4. Eligibility.
Awards may be made or granted to key employees, officers,
directors and consultants who are deemed to have rendered or to be able to
render significant services to the Company or its Subsidiaries and who are
deemed to have contributed or to have the potential to contribute to the success
of the Company. No Incentive Stock Option shall be granted to any person who is
not an employee of the Company or a Subsidiary at the time of grant.
Section 5. Required Six-Month Holding Period.
A period of not less than six months must elapse from the date of grant
of an award under the Plan, (i) before any disposition by a Holder of a
derivative security (as defined in Rule 16a-1 promulgated under the Securities
Exchange Act of 1934, as amended) issued under this Plan or (ii) before any
disposition by a Holder of any Stock purchased or granted pursuant to an award
under this Plan.
Section 6. Stock Options.
6.1 Grant and Exercise. Stock Options granted under the Plan may be of
two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms, not inconsistent
with this Plan, or with respect to Incentive Stock Options, not inconsistent
with the Plan and the Code, as the Committee may from time to time approve. The
Committee shall have the authority to grant Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options and which may be
granted alone or in addition to other awards granted under the Plan. To the
extent that any Stock Option intended to qualify as an Incentive Stock Option
does not so qualify, it shall constitute a separate Nonqualified Stock Option.
An Incentive Stock Option may be granted only within the ten-year period
commencing from the Effective Date and may only be exercised within ten years of
the date of grant (or five years in the case of an Incentive Stock Option
granted to an optionee ("10% Stockholder") 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.
6.2 Terms and Conditions. Stock Options granted under the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The exercise price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant and may not be less than 100% of the Fair Market Value of the
Stock as defined above; provided, however, that the exercise price of an
Incentive Stock Option granted to a 10% Stockholder shall not be less than 110%
of the Fair Market Value of the Stock.
(b) Option Term. Subject to the limitations in Section
6.1, above, the term of each Stock Option shall be fixed by the Committee.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee and as set forth in Section 11, below. If the Committee provides,
in its discretion, that any Stock Option is exercisable only in installments,
i.e., that it vests over time, the Committee may waive such installment exercise
provisions at any time at or after the time of grant in whole or in part, based
upon such factors as the Committee shall determine.
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(d) Method of Exercise. Subject to whatever installment,
exercise and waiting period provisions are applicable in a particular case,
Stock Options may be exercised in whole or in part at any time during the term
of the Option, by giving written notice of exercise to the Company specifying
the number of shares of Stock to be purchased. Such notice shall be accompanied
by payment in full of the purchase price, which shall be in cash or, unless
otherwise provided in the Agreement, in shares of Stock (including Restricted
Stock and other contingent awards under this Plan) or, partly in cash and partly
in such Stock, or such other means which the Committee determines are consistent
with the Plan's purpose and applicable law. Cash payments shall be made by wire
transfer, certified or bank check or personal check, in each case payable to the
order of the Company; provided, however, that the Company shall not be required
to deliver certificates for shares of Stock with respect to which an Option is
exercised until the Company has confirmed the receipt of good and available
funds in payment of the purchase price thereof. Payments in the form of Stock
shall be valued at the Fair Market Value of a share of Stock on the date prior
to the date of exercise. Such payments shall be made by delivery of stock
certificates in negotiable form which are effective to transfer good and valid
title thereto to the Company, free of any liens or encumbrances. Subject to the
terms of the Agreement, the Committee may, in its sole discretion, at the
request of the Holder, deliver upon the exercise of a Nonqualified Stock Option
a combination of shares of Deferred Stock and Common Stock; provided that,
notwithstanding the provisions of Section 9 of the Plan, such Deferred Stock
shall be fully vested and not subject to forfeiture. A Holder shall have none of
the rights of a stockholder with respect to the shares subject to the Option
until such shares shall be transferred to the Holder upon the exercise of the
Option.
(e) Transferability. Except as may be set forth in the
Agreement, no Stock Option shall be transferable by the Holder other than by
will or by the laws of descent and distribution, and all Stock Options shall be
exercisable, during the Holder's lifetime, only by the Holder.
(f) Termination by Reason of Death. If a Holder's employment
by the Company or a Subsidiary terminates by reason of death, any Stock Option
held by such Holder, unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, shall be fully vested and may thereafter
be exercised by the legal representative of the estate or by the legatee of the
Holder under the will of the Holder, for a period of one year (or such other
greater or lesser period as the Committee may specify at grant) from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter.
(g) Termination by Reason of Disability. If a Holder's
employment by the Company or any Subsidiary terminates by reason of Disability,
any Stock Option held by such Holder, unless otherwise determined by the
Committee at the time of grant and set forth in the Agreement, shall be fully
vested and may thereafter be exercised by the Holder for a period of one year
(or such other greater or lesser period as the Committee may specify at the time
of grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter.
(h) Other Termination. Subject to the provisions of Section
14.3, below, and unless otherwise determined by the Committee at the time of
grant and set forth in the Agreement, if a Holder is an employee of the Company
or a Subsidiary at the time of grant and if such Holder's employment by the
Company or any Subsidiary terminates for any reason other than death or
Disability, the Stock Option shall thereupon automatically terminate, except
that if the Holder's employment is terminated by the Company or a Subsidiary
without cause or due to Normal Retirement, then the portion of such Stock Option
which has vested on the date of termination of employment may be exercised for
the lesser of three months after termination of employment or the balance of
such Stock Option's term.
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(i) Additional Incentive Stock Option Limitation. In the case
of an Incentive Stock Option, the aggregate Fair Market Value of Stock
(determined at the time of grant of the Option) with respect to which Incentive
Stock Options become exercisable by a Holder during any calendar year (under all
such plans of the Company and its Parent and Subsidiary) shall not exceed
$100,000.
(j) Buyout and Settlement Provisions. The Committee may at any
time, in its sole discretion, offer to buy out a Stock Option previously
granted, based upon such terms and conditions as the Committee shall establish
and communicate to the Holder at the time that such offer is made.
(k) Stock Option Agreement. Each grant of a Stock Option shall
be confirmed by, and shall be subject to the terms of, the Agreement executed by
the Company and the Holder.
6.3 Stock Reload Option. The Committee may also grant to the Holder
(concurrently with the grant of an Incentive Stock Option and at or after the
time of grant in the case of a Nonqualified Stock Option) a Stock Reload Option
up to the amount of shares of Stock held by the Holder for at least six months
and used to pay all or part of the exercise price of an Option and, if any,
withheld by the Company as payment for withholding taxes. Such Stock Reload
Option shall have an exercise price equal to the Fair Market Value as of the
date of the Stock Reload Option grant. Unless the Committee determines
otherwise, a Stock Reload Option may be exercised commencing one year after it
is granted and shall expire on the date of expiration of the Option to which the
Reload Option is related.
Section 7. Stock Appreciation Rights.
7.1 Grant and Exercise. The Committee may grant Stock Appreciation
Rights to participants who have been, or are being granted, Options under the
Plan as a means of allowing such participants to exercise their Options without
the need to pay the exercise price in cash. In the case of a Nonqualified Stock
Option, a Stock Appreciation Right may be granted either at or after the time of
the grant of such Nonqualified Stock Option. In the case of an Incentive Stock
Option, a Stock Appreciation Right may be granted only at the time of the grant
of such Incentive Stock Option.
7.2 Terms and Conditions. Stock Appreciation Rights shall be subject
to the following terms and conditions:
(a) Exercisability. Stock Appreciation Rights shall be
exercisable as shall be determined by the Committee and set forth in the
Agreement, subject to the limitations, if any, imposed by the Code, with respect
to related Incentive Stock Options.
(b) Termination. A Stock Appreciation Right shall terminate
and shall no longer be exercisable upon the termination or exercise of the
related Stock Option.
(c) Method of Exercise. Stock Appreciation Rights shall be
exercisable upon such terms and conditions as shall be determined by the
Committee and set forth in the Agreement and by surrendering the applicable
portion of the related Stock Option. Upon such exercise and surrender, the
Holder shall be entitled to receive a number of Option Shares equal to the SAR
Value divided by the exercise price of the Option.
(d) Shares Affected Upon Plan. The granting of a Stock
Appreciation Right shall not affect the number of shares of Stock available
under for awards under the Plan. The number of shares available for awards under
the Plan will, however, be reduced by the number of shares of Stock acquirable
upon exercise of the Stock Option to which such Stock Appreciation Right
relates.
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Section 8. Restricted Stock.
8.1 Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be awarded, the price
(if any) to be paid by the Holder, the time or times within which such awards
may be subject to forfeiture (the "Restriction Period"), the vesting schedule
and rights to acceleration thereof, and all other terms and conditions of the
awards.
8.2 Terms and Conditions. Each Restricted Stock award shall be subject
to the following terms and conditions:
(a) Certificates. Restricted Stock, when issued, will be
represented by a stock certificate or certificates registered in the name of the
Holder to whom such Restricted Stock shall have been awarded. During the
Restriction Period, certificates representing the Restricted Stock and any
securities constituting Retained Distributions (as defined below) shall bear a
legend to the effect that ownership of the Restricted Stock (and such Retained
Distributions), and the enjoyment of all rights appurtenant thereto, are subject
to the restrictions, terms and conditions provided in the Plan and the
Agreement. Such certificates shall be deposited by the Holder with the Company,
together with stock powers or other instruments of assignment, each endorsed in
blank, which will permit transfer to the Company of all or any portion of the
Restricted Stock and any securities constituting Retained Distributions that
shall be forfeited or that shall not become vested in accordance with the Plan
and the Agreement.
(b) Rights of Holder. Restricted Stock shall constitute issued
and outstanding shares of Common Stock for all corporate purposes. The Holder
will have the right to vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent distributions as the Board may
in its sole discretion designate, pay or distribute on such Restricted Stock and
to exercise all other rights, powers and privileges of a holder of Common Stock
with respect to such Restricted Stock, with the exceptions that (i) the Holder
will not be entitled to delivery of the stock certificate or certificates
representing such Restricted Stock until the Restriction Period shall have
expired and unless all other vesting requirements with respect thereto shall
have been fulfilled; (ii) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock during the
Restriction Period; (iii) other than regular cash dividends and other cash
equivalent distributions as the Board may in its sole discretion designate, pay
or distribute, the Company will retain custody of all distributions ("Retained
Distributions") made or declared with respect to the Restricted Stock (and such
Retained Distributions will be subject to the same restrictions, terms and
conditions as are applicable to the Restricted Stock) until such time, if ever,
as the Restricted Stock with respect to which such Retained Distributions shall
have been made, paid or declared shall have become vested and with respect to
which the Restriction Period shall have expired; (iv) a breach of any of the
restrictions, terms or conditions contained in this Plan or the Agreement or
otherwise established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock and any
Retained Distributions with respect thereto.
(c) Vesting; Forfeiture. Upon the expiration of the
Restriction Period with respect to each award of Restricted Stock and the
satisfaction of any other applicable restrictions, terms and conditions (i) all
or part of such Restricted Stock shall become vested in accordance with the
terms of the Agreement, subject to Section 11, below, and (ii) any Retained
Distributions with respect to such Restricted Stock shall become vested to the
extent that the Restricted Stock related thereto shall have become vested,
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subject to Section 11, below. Any such Restricted Stock and Retained
Distributions that do not vest shall be forfeited to the Company and the Holder
shall not thereafter have any rights with respect to such Restricted Stock and
Retained Distributions that shall have been so forfeited.
Section 9. Deferred Stock.
9.1 Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom and the time or times at which grants of Deferred
Stock will be awarded, the number of shares of Deferred Stock to be awarded to
any person, the duration of the period (the "Deferral Period") during which, and
the conditions under which, receipt of the shares will be deferred, and all the
other terms and conditions of the awards.
9.2 Terms and Conditions. Each Deferred Stock award shall be subject
to the following terms and conditions:
(a) Certificates. At the expiration of the Deferral Period (or
the Additional Deferral Period referred to in Section 9.2 (d) below, where
applicable), share certificates shall be issued and delivered to the Holder, or
his legal representative, representing the number equal to the shares covered by
the Deferred Stock award.
(b) Rights of Holder. A person entitled to receive Deferred
Stock shall not have any rights of a stockholder by virtue of such award until
the expiration of the applicable Deferral Period and the issuance and delivery
of the certificates representing such Stock. The shares of Stock issuable upon
expiration of the Deferral Period shall not be deemed outstanding by the Company
until the expiration of such Deferral Period and the issuance and delivery of
such Stock to the Holder.
(c) Vesting; Forfeiture. Upon the expiration of the Deferral
Period with respect to each award of Deferred Stock and the satisfaction of any
other applicable restrictions, terms and conditions all or part of such Deferred
Stock shall become vested in accordance with the terms of the Agreement, subject
to Section 11, below. Any such Deferred Stock that does not vest shall be
forfeited to the Company and the Holder shall not thereafter have any rights
with respect to such Deferred Stock.
(d) Additional Deferral Period. A Holder may request to, and
the Committee may at any time, defer the receipt of an award (or an installment
of an award) for an additional specified period or until a specified event (the
"Additional Deferral Period"). Subject to any exceptions adopted by the
Committee, such request must generally be made at least one year prior to
expiration of the Deferral Period for such Deferred Stock award (or such
installment).
Section 10. Other Stock-Based Awards.
10.1 Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under applicable law, that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related
to, shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Plan, including, without limitation, purchase rights, shares of
Common Stock awarded which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights convertible into shares
of Common Stock and awards valued by reference to the value of securities of or
the performance of specified Subsidiaries. Other Stock-Based Awards may be
awarded
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either alone or in addition to or in tandem with any other awards under this
Plan or any other plan of the Company.
10.2 Eligibility for Other Stock-Based Awards. The Committee shall
determine the eligible persons to whom and the time or times at which grants of
such other stock-based awards shall be made, the number of shares of Common
Stock to be awarded pursuant to such awards, and all other terms and conditions
of the awards.
10.3 Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee and
to Section 11, below.
Section 11. Accelerated Vesting and Exercisability.
If (i) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"), is or becomes the
"beneficial owner" (as referred in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 15% or more of the
combined voting power of the Company's then outstanding securities in one or
more transactions, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the board of
directors cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning of such
period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the periods, then, the vesting periods of any and all Options and other
awards granted and outstanding under the Plan shall be accelerated and all such
Options and awards will immediately and entirely vest, and the respective
holders thereof will have the immediate right to purchase and/or receive any and
all Stock subject to such Options and awards on the terms set forth in this Plan
and the respective agreements respecting such Options and awards.
Section 12. Amendment and Termination.
The Board may at any time, and from time to time, amend alter, suspend
or discontinue any of the provisions of the Plan, but no amendment, alteration,
suspension or discontinuance shall be made which would impair the rights of a
Holder under any Agreement theretofore entered into hereunder, without the
Holder's consent.
Section 13. Term of Plan.
13.1 Effective Date. The Plan shall be effective as of April 4, 1997
("Effective Date"), subject to the approval of the Plan by the Company's
stockholders within one year after the Effective Date. Any awards granted under
the Plan prior to such approval shall be effective when made (unless otherwise
specified by the Committee at the time of grant), but shall be conditioned upon,
and subject to, such approval of the Plan by the Company's stockholders and no
awards shall vest or otherwise become free of restrictions prior to such
approval.
13.2 Termination Date. Unless terminated by the Board, this Plan shall
continue to remain effective until such time no further awards may be granted
and all awards granted under the Plan are no longer outstanding. Notwithstanding
the foregoing, grants of Incentive Stock Options may only be made during the ten
year period following the Effective Date.
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Section 14. General Provisions.
14.1 Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of the Agreement executed by the
Company and the Holder. The Committee may terminate any award made under the
Plan if the Agreement relating thereto is not executed and returned to the
Company within 10 days after the Agreement has been delivered to the Holder for
his or her execution.
14.2 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a general
creditor of the Company.
14.3 Employees.
(a) Engaging in Competition With the Company. In the event a
Holder's employment with the Company or a Subsidiary is terminated for any
reason whatsoever, and within eighteen months after the date thereof such Holder
accepts employment with any competitor of, or otherwise engages in competition
with, the Company, the Committee, in its sole discretion, may require such
Holder to return to the Company the economic value of any award which was
realized or obtained by such Holder at any time during the period beginning on
that date which is six months prior to the date of such Holder's termination of
employment with the Company.
(b) Termination for Cause. The Committee may, in the event a
Holder's employment with the Company or a Subsidiary is terminated for cause,
annul any award granted under this Plan to such employee and, in such event, the
Committee, in its sole discretion, may require such Holder to return to the
Company the economic value of any award which was realized or obtained by such
Holder at any time during the period beginning on that date which is six months
prior to the date of such Holder's termination of employment with the Company.
(c) No Right of Employment. Nothing contained in the Plan or
in any award hereunder shall be deemed to confer upon any Holder who is an
employee of the Company or any Subsidiary any right to continued employment with
the Company or any Subsidiary, nor shall it interfere in any way with the right
of the Company or any Subsidiary to terminate the employment of any Holder who
is an employee at any time.
14.4 Investment Representations. The Committee may require each person
acquiring shares of Stock pursuant to a Stock Option or other award under the
Plan to represent to and agree with the Company in writing that the Holder is
acquiring the shares for investment without a view to distribution thereof.
14.5 Additional Incentive Arrangements. Nothing contained in the Plan
shall prevent the Board from adopting such other or additional incentive
arrangements as it may deem desirable, including, but not limited to, the
granting of Stock Options and the awarding of stock and cash otherwise than
under the Plan; and such arrangements may be either generally applicable or
applicable only in specific cases.
14.6 Withholding Taxes. Not later than the date as of which an amount
must first be included in the gross income of the Holder for Federal income tax
purposes with respect to any option or other award under the Plan, the Holder
shall pay to the Company, or make arrangements satisfactory to the Committee
regarding the payment of, any Federal, state and local taxes of any kind
required by law to be withheld or paid with respect to such amount. If permitted
by the Committee, tax withholding or
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payment obligations may be settled with Common Stock, including Common Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditioned upon such payment
or arrangements and the Company or the Holder's employer (if not the Company)
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Holder from the Company or any
Subsidiary.
14.7 Governing Law. The Plan and all awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of New York (without regard to choice of law provisions).
14.8 Other Benefit Plans. Any award granted under the Plan shall not be
deemed compensation for purposes of computing benefits under any retirement plan
of the Company or any Subsidiary and shall not affect any benefits under any
other benefit plan now or subsequently in effect under which the availability or
amount of benefits is related to the level of compensation (unless required by
specific reference in any such other plan to awards under this Plan).
14.9 Non-Transferability. Except as otherwise expressly provided in the
Plan or the Agreement, no right or benefit under the Plan may be alienated,
sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.
14.10 Applicable Laws. The obligations of the Company with respect to
all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the Securities Act
of 1933, as amended, and (ii) the rules and regulations of any securities
exchange on which the Stock may be listed.
14.11 Conflicts. If any of the terms or provisions of the Plan or an
Agreement (with respect to Incentive Stock Options) conflict with the
requirements of Section 422 of the Code, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of said
Section 422 of the Code. Additionally, if this Plan or any Agreement does not
contain any provision required to be included herein under Section 422 of the
Code, such provision shall be deemed to be incorporated herein and therein with
the same force and effect as if such provision had been set out at length herein
and therein. If any of the terms or provisions of any Agreement conflict with
any terms or provision of the Plan, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of the
Plan. Additionally, if any Agreement does not contain any provision required to
be included therein under the Plan, such provision shall be deemed to be
incorporated therein with the same force and effect as if such provision had
been set out at length therein.
14.12 Non-Registered Stock. The shares of Stock to be distributed under
this Plan have not been, as of the Effective Date, registered under the
Securities Act of 1933, as amended, or any applicable state or foreign
securities laws and the Company has no obligation to any Holder to register the
Stock or to assist the Holder in obtaining an exemption from the various
registration requirements, or to list the Stock on a national securities
exchange.
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AUTOMOBILE PROTECTION CORPORATION - APCO
Solicited by the Board of Directors
for Annual Meeting to be held on June 12, 1997
P The undersigned hereby appoints Martin J. Blank and Larry I.
Dorfman, and each of them, as proxies, with full power of
substitution in each of them, in the name, place and stead of the
undersigned, to vote at the Annual Meeting of Shareholders of
AUTOMOBILE PROTECTION CORPORATION - APCO on Thursday, June 12, 1997
at 9:00 a.m. (EST), or at any adjournments thereof. This proxy will
R be voted in accordance with the instructions given below. If no
instructions are given, this proxy will be voted "FOR" all the
following proposals. Approval of any one of the following proposals
is not contingent on approval of any other proposal.
O 1. To consider and act upon a proposal to approve an amendment to
the Amended and Restated Articles of Incorporation of the Company
("Articles of Incorporation") to provide for classification of
the Board of Directors of the Company into four classes serving
X staggered terms.
FOR |_| AGAINST |_| ABSTAIN |_|
Y
2. To elect four directors.
FOR all nominees listed below, WITHHOLD AUTHORITY to vote
except as marked to the contrary for all nominees listed below|_|
below |_|
Martin J. Blank (Class I), Mechlin D. Moore (Class II),
Howard C. Miller (Class III) and Larry I. Dorfman (Class IV
(If Proposal 1 is approved, the directors will serve with
classes indicated.)
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space below.
---------------------------------------------------------------
3. To consider and act upon a proposal to approve changes to the
Articles of Incorporation (i) to require that all shareholder
action by written consent be by all the shareholders entitled to
vote thereon, (ii) to provide that only certain persons, not
including shareholders, may call special meetings of
shareholders, (iii) to provide that notice of shareholders
proposals at an annual meeting be given to the Secretary of the
Company in advance of the meeting, (iv) to provide that
nominations of directors by shareholders be given to the
Secretary of the Company in advance of an annual meeting, and (v)
to provide for a 66 2/3 vote to amend or repeal the above
provisions and the amendment to create the staggered board of
directors.
FOR |_| AGAINST |_| ABSTAIN |_|
4. To consider and act upon a proposal to adopt the 1997 Performance
Equity Plan.
FOR |_| AGAINST |_| ABSTAIN |_|
5. To approve an adjournment or postponement of the Annual Meeting,
if necessary, to permit further solicitation of proxies in the
event there are not sufficient votes at the Annual Meeting to
approve any of the Proposals 1 through 4 above.
FOR |_| AGAINST |_| ABSTAIN |_|
<PAGE>
6. In their discretion, the Proxies are authorized to vote upon
such other business as may come before the meeting or any
adjournments thereof.
|_| I plan to attend the Annual Meeting.
Date______________________, 1997
_______________________________
Signature
_______________________________
Signature if held jointly
Please sign exactly as name
appears above. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor, administrator
trustee or guardian, please give
full title as such. If a
corporation, please sign in
full corporate name by the
President or other authorized
officer. If a partnership,
please sign in the partnership
name by an authorized person.
<PAGE>
