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 Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
AQUA CARE SYSTEMS, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
AQUA CARE SYSTEMS, INC.
(NAME OF PERSONS(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________________
(2) Form, Schedule or Registration No.: ________________________________
(3) Filing Party: ______________________________________________________
(4) Date Filed: ________________________________________________________
<PAGE>
AQUA CARE SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 3, 1996
The Annual Meeting of Stockholders of Aqua Care Systems, Inc. (the
"Company") will be held at Holiday Inn, Hollywood, Florida, on Friday, July 26,
1996, at 10:00 a.m., E.D.T., for the following purposes:
1. To elect four Directors to serve until the next Annual
Meeting of Stockholders and until their successors are duly elected and
qualified.
2. To approve an increase in the number of shares of Common
Stock authorized to 30,000,000 shares of Common Stock.
3. To approve an Amendment to the 1991 Performance Equity Plan
of the Company to increase the number of shares of Common Stock of the
Company covered by such Plan to 2,000,000 shares of Common Stock.
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on June 7, 1996, are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof.
IF YOU CANNOT ATTEND THE ANNUAL MEETING IN PERSON, PLEASE DATE AND
EXECUTE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO THE COMPANY. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
DESIRE TO DO SO, BUT ATTENDANCE AT THE ANNUAL MEETING DOES NOT OF ITSELF SERVE
TO REVOKE YOUR PROXY.
NORMAN J. HOSKIN
Secretary
<PAGE>
AQUA CARE SYSTEMS, INC.
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the holders of Common Stock, par
value $.001 per share, of Aqua Care Systems, Inc. (the "Company") in connection
with the solicitation of Proxies by and on behalf of the Board of Directors of
the Company for use at the Annual Meeting of Stockholders to be held on July 26,
1996 or any adjournment thereof. A form of Proxy for use at the Annual Meeting
is also enclosed. Any such Proxy may be revoked by a stockholder at any time
before it is exercised by either giving written notice of such revocation to the
Secretary of the Company or submitting a later-dated Proxy to the Company prior
to the Annual Meeting. A stockholder attending the Annual Meeting may revoke his
Proxy and vote in person if he desires to do so, but attendance at the Annual
Meeting will not of itself revoke the Proxy.
The Company's principal executive offices are located at 3806 N. 29th
Avenue, Hollywood, FL 33020 through June 30, 1996 and will be changed to 11820
N.W. 37th Street, Coral Springs, Florida 33065 effective July 1, 1996. The
Company's telephone number is (800) 944-7873.
Proxy materials will be mailed to stockholders by the Management of the
Company on or about June 3, 1996. Solicitation may be made by mail, telephone or
telegram by the officers or regular employees of the Company, who will receive
no additional compensation therefor. Arrangements will also be made with
brokerage houses, custodians, nominees and fiduciaries for the forwarding of
proxy materials to the beneficial owners of Common Stock held of record by such
persons, and the Company will reimburse such brokerage houses, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith. The entire expense of solicitation, including the cost
of preparing, assembling and mailing the proxy materials, will be borne by the
Company.
The purposes of the Annual Meeting of Stockholders are (a) to elect a
Board of Directors to serve until the next Annual Meeting of Stockholders, (b)
to approve an increase in the number of shares of Common Stock authorized to
30,000,000 shares of Common Stock, and (c) to approve an Amendment to the 1991
Performance Equity Plan (the "Performance Equity Plan") of the Company to
increase the number of shares of Common Stock of the Company covered by the
Performance Equity Plan to 2,000,000 shares of Common Stock. The Company is not
aware at this time of any other matters that will come before the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons designated as proxies to vote in accordance with their
judgment on such matters. Shares represented by executed and unrevoked Proxies
will be voted in accordance with instructions contained therein or, in the
absence of such instructions, in accordance with the recommendations of the
Board of Directors. Abstentions and broker non-votes will not be counted for
purposes of determining whether any given proposal has been approved by the
stockholders of the Company. Accordingly, abstentions and broker non-votes will
not affect the votes to be taken on the election of Directors, the approval of
the increase in authorized Common Stock and the amendment to the Performance
Equity Plan, which require for approval the affirmative vote of a majority of
the shares of Common Stock present or represented and entitled to vote at the
Annual Meeting.
- 1 -
<PAGE>
As to all matters that may come before the Annual Meeting, each
stockholder will be entitled to one vote for each share of Common Stock of the
Company held by him at the close of business on June 7, 1996. The holders of a
majority of the shares of Common Stock of the Company present in person or by
proxy and entitled to vote will constitute a quorum at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of determining a
the presence of a quorum. At June 7, 1996, the record date for the Annual
Meeting, there were 9,255,726 shares of Common Stock outstanding.
DISSENTERS' RIGHTS OF APPRAISAL
There are no dissenters' rights of appraisal in connection with the
vote of stockholders to be taken with respect to the Outside Directors' Plan or
the Amendment to the Performance Equity Plan.
PROPOSALS BY STOCKHOLDERS
Any proposals by stockholders of the Company intended to be presented
at the 1997 Annual Meeting of Stockholders must be received by the Company for
inclusion in the Company's Proxy Statement and form of Proxy by March 15, 1997.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
At the Annual Meeting, four Directors are to be elected. The Bylaws of
the Company permit the Board of Directors to determine the number of Directors
of the Company. Unless other instructions are specified, the enclosed Proxy will
be voted in favor of the persons named below to serve until the next Annual
Meeting of Stockholders and until their successors shall have been duly elected
and qualified. The affirmative vote of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting is required
for the election of each Director. In the event any of the nominees shall be
unable to serve as a Director, it is the intention of the persons designated as
proxies to vote for substitutes selected by the Board of Directors. The Board of
Directors of the Company has no reason to believe that any of the nominees named
below will be unable to serve if elected.
William K. Mackey, age 45, has served as a Director of the
Company since July 1993. Mr. Mackey was elected Chairman of the Board,
President and Chief Executive Officer and Treasurer of the Company on
May 26, 1995, after a period commencing in 1993 of acting as an
entrepreneur and investor in and a consultant to several public and
private companies. From December 1988 to March 1991, Mr. Mackey served
as President of Avondale Specialty Products, an ink manufacturer. From
August 1989 to May 1993, Mr. Mackey served as a director of Infonow
Corporation, a publicly-held software distribution company. From March
1991 to November 1992, Mr. Mackey served as President and a director of
Docucon, Incorporated, a publicly-held company engaged in the document
conversion business.
- 2 -
<PAGE>
James P. Cefaratti, age 52, has served as a Director of the
Company since January 1992. Since August 1993, Mr. Cefaratti has been
Vice Chairman of Gynesis Health Care Services, Inc., a women's health
care company. From December 1989 to June 1993, Mr. Cefaratti served as
President, Chief Executive Officer and a director of Home Intensive
Care, Inc., which was a national public company specializing in home
infusion therapy and dialysis services prior to being acquired by W.R.
Grace and Company. From May 1989 to December 1989 he served as Senior
Executive Vice President of that company.
William F. Silvia, age 63, served as Chairman of the Board of
Directors of the Company from November 1, 1991 through February 3,
1995. Mr. Silvia has been a private investor and business consultant
from December 1989 to the present. From June 1988 to July 1989, Mr.
Silvia was President and Chief Operating Officer of Batts, Inc., a
privately-owned, 500 employee, manufacturer of garment hangers. From
July 1986 to June 1988, Mr. Silvia operated Silvia Associates, a
general management consulting entity. Prior to that time, Mr. Silvia
spent 30 years at Union Carbide Corporation, where he held several
positions, including President of the Catalysts and Services Division;
President of the Catalysts and Process Systems Division; President of
the Engineering Products Division; Senior Vice President of the Linde
Division; Vice President/General Manager, U.C. Europe-Engineering
Products (Geneva); General Manager-Gas Products, Union Carbide Canada,
LTD; and various middle management positions. Mr. Silvia holds his B.S.
in Civil Engineering from the University of Rhode Island and his M.B.A.
from the State University of New York at Buffalo.
Norman J. Hoskin, age 61, has acted as Chairman of Atlantic
Capital Group, a venture capital company based in Boca Raton, Florida,
since 1989. Mr. Hoskin previously served in a number of positions for
Rentar Industries, a large transportation, warehousing and banking
conglomerate. He currently sits on the Boards of Directors of
Consolidated Technologies and its subsidiary companies. Mr. Hoskin
received his degree from the University of Pennsylvania.
Directors of the Company are elected to serve for a term of one year or
until their successors are elected and qualify, or until their earlier death,
resignation or removal. The Company's officers are elected annually by, and
serve at the pleasure of, the Board of Directors, subject to the terms of any
employment agreements. Mr. Mackey has entered into an employment agreement with
the Company. See "Executive Compensation and Other Information--Employment
Agreements". Messr. Mackey is the sole executive officer of the Company.
Until May 1994, Mr. Silvia, former Chairman of the Board and now a
Director of the Company, had been receiving a consulting fee of $1,500 for each
day he provided consulting services to the Company. The Company paid $11,250 and
$26,500, respectively, during 1994 and 1993 in consulting fees pursuant to the
aforementioned arrangement. Concurrent with the cancellation of this
arrangement, the Company granted options to Mr. Silvia to purchase 25,000 shares
of Common Stock at an exercise price of $3.75 per share. Such options vested
over a one year period from the date of grant and are exercisable at any time
during the subsequent ten years. He also purchased 50,000 shares of Common Stock
on November 14, 1991 for $.002 per share, which was below the fair market value
of the Common Stock as of such date. Mr. Cefaratti, a Director, was granted
options to purchase 50,000
- 3 -
<PAGE>
shares of Common Stock at an exercise price of $3.00 per share on February 28,
1992, all of which are now fully vested. He was also granted options to purchase
35,000 shares of Common Stock at an exercise price of $3.75 per share on May 2,
1994, all of which have now vested. In August 1993, William K. Mackey, then a
Director, was granted options to purchase 50,000 shares at an exercise price of
$2.00 per share. Each of Peter Christos and Kinder Investments, L.P.,
stockholders of the Company, granted William K. Mackey options to purchase
25,000 shares of Common Stock at a price of $4.00 per share, which options are
exercisable for a period of four years commencing October 14, 1994, unless
earlier cancelled upon Mr. Mackey's no longer serving as a Director of the
Company.
Also during March 1994, the Company adopted a compensation plan wherein
each Director of the Company is remunerated at the rate of $1,500 per meeting
attended in person and $500 per meeting attended telephonically, and
furthermore, that each Director is granted options to purchase 10,000 shares of
Common Stock on the date of the first Board of Directors meeting of each new
calendar year at the then current bid price, subsequent to serving one full
calendar year as a Director. Such options are exercisable over the subsequent
ten years and fully vest over a one-year period from the date of grant. Pursuant
to this program, the Company granted two Directors and an advisor to the Company
options to purchase 30,000 shares of the Company's Common Stock at $3.75 per
share on March 11, 1994. The Company also granted three Directors and an advisor
to the Company options to purchase a total of 40,000 shares of the Company's
Common Stock at the then market price per share in January 1995. On June 2,
1995, the Company granted Mr. Hoskin options to purchase up to 35,000 shares of
the Company's Common Stock at $5.00 per share, the then fair market value of the
Common Stock. The Company granted two directors and an advisor to the Company
options to purchased 30,000 shares of the Company's Common Stock at the then
fair market price per share in January 1996. See "1994 Outside Directors' Stock
Option Plan".
MANAGEMENT MATTERS
There are no arrangements or understandings known to the Company
between any of the Directors, nominees for Director or the executive officer of
the Company and any other person pursuant to which any such person was elected
as a Director or an executive officer, except the Employment Agreements between
the Company and William K. Mackey, described under "Executive Compensation and
Other Information -- Employment Agreements" in this Proxy Statement. There are
no family relationships between any Directors, nominees for Director or the
executive officer of the Company. The Board of Directors of the Corporation held
a total of four meetings during 1995.
The Board of Directors of the Company has standing audit, nominating
and compensation committees. The Audit Committee of the Board is responsible for
reviewing all reports from the Company's auditors and monitoring internal
controls. The Audit Committee consisted of Messrs. Cefarrati and Hoskin during
1995 and held one meeting during 1995. The Nominating Committee, which nominates
the persons the Company puts forward each year to be elected to act as Directors
of the Company, consisted of Messrs. Mackey, Schultz and Cefarrati during 1995.
The Nominating Committee met once during 1995. The Nominating Committee has not
established any procedure for the consideration of nominees recommended by
security holders, however, any such nominations made by a stockholder in
accordance with the Certificate of Incorporation and Bylaws of the Company and
applicable law, would be considered by the Company. The Compensation Committee,
which consisted of Messrs. Hoskin, Silvia and Cefaratti during 1995 is
responsible for reviewing and making
- 4 -
<PAGE>
recommendations with respect to the Company's compensation program. The
Compensation Committee held three meetings during 1995.
The Company has no other standing audit, nominating or compensation
committees of the Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and beneficial owners of more than 10% of the Company's
Common Stock are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms that they file. Based
solely on review of the copies of such forms furnished to the Company, or
written representations that no reports on Form 5 were required, the Company
believes that, for the period from January 1, 1995 through March 31, 1996, its
officers, Directors and greater-than-10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them.
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors of the Company proposes an amendment to Article
FOURTH of the Company's Certificate to increase the number of authorized shares
of Common Stock of the Company from 20 million to 30 million shares of Common
Stock, par value $.001 per share. The proposal is subject to the approval of the
holders of a majority of the outstanding shares of Common Stock.
In connection with such proposal, the following resolution will be
introduced at the Annual Meeting:
RESOLVED, that the first paragraph of Article FOURTH of the
Restated Certificate of Incorporation of this Corporation be amended to
read as follows:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is Thirty Five Million
(35,000,000) shares, of which Thirty Million (30,000,000) shares shall
be Common Stock, par value $.001 per share, and Five Million
(5,000,000) shares shall be Preferred Stock, par value $.001 per
share."
INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors recommends that the Company's stockholders
approve the proposed Amendment to the Company's Certificate to increase the
authorized Common Stock of the Company to 30 million shares of Common Stock, par
value $.001 per share, because it considers the proposal to be in the best
long-term and short-term interests of the Company, its stockholders and its
other constituencies. The proposed increase insures that a sufficient number of
shares of Common Stock will be available for possible future transactions,
including, among others, acquisitions, financings and other
- 5 -
<PAGE>
corporate purposes. It is possible that shares of Common Stock may be issued at
a time and under circumstances that may increase or decrease earnings per share
and increase or decrease the book value per share of shares presently held.
The Company does not have any immediate plans, arrangements,
agreements, commitments or understandings with respect to the issuance of any of
the additional shares of Common Stock which would be authorized by the proposed
Amendment of the Company's Certificate.
Under the Company's Certificate, the Company presently has authority to
issue 20 million shares of Common Stock, par value $.001 per share, of which
9,255,726 shares were issued and outstanding on June 7, 1996. In addition, as of
June 7, 1996, approximately 1,900,000 shares of Common Stock were reserved for
issuance under the Company's Stock Option Plans, under which options to purchase
a total of 1,420,582 shares of Common Stock were outstanding.
The Board of Directors recommends that stockholders vote FOR the
adoption of the Amendment to the Company's Certificate to increase the
authorized shares of Common Stock to 30 million shares of Common Stock, par
value $.001 per share. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting will
be necessary for approval of the Amendment to the Company's Certificate.
AMENDMENT TO 1991 PERFORMANCE EQUITY PLAN
GENERAL
On May 13, 1991, the Board of Directors of the Company adopted and the
stockholders of the Company approved the 1991 Performance Equity Plan (the
"Performance Equity Plan"), which covered an aggregate of 300,000 shares of
Common Stock. On July 27, 1995, the stockholders of the Company approved an
Amendment to the Performance Equity Plan of the Company to increase the number
of shares of Common Stock of the Company covered by such Plan to 1,500,000
shares of Common Stock. The Performance Equity Plan provides for the grant of a
variety of incentive awards to officers, key employees, consultants and
independent contractors of the Company. See "Executive Compensation and Other
Information".
Set forth below is a summary of the major features of the Performance
Equity Plan. This summary does not purport to be a complete statement of all the
provisions of the Performance Equity Plan, and is qualified in its entirety by
the text of the composite copy of the Performance Equity Plan attached to this
Proxy Statement as Annex A.
SUMMARY OF THE PLAN. The Performance Equity Plan authorizes the grant
of incentive awards for up to 1,500,000 shares of Common Stock subject to
adjustment in certain events. Incentive awards consist of stock options,
restricted stock awards, deferred stock awards, stock appreciation rights and
other stock-based awards. The Performance Equity Plan will expire at the close
of business on May 13, 2001, unless sooner terminated. Officers, directors and
other key employees and prospective employees and consultants and independent
contractors who perform services for the Company or any of its subsidiaries (but
excluding members of the stock option committee and any person who serves as a
director only) ("Eligible Persons") will be eligible to receive awards under the
Plan. The Performance
- 6 -
<PAGE>
Equity Plan is administered by a stock option committee (the "Committee")
appointed by the Board of Directors, which determines the persons to whom awards
will be granted, the number of awards to be granted and the specific terms of
each grant, subject to the provisions of the Performance Equity Plan.
INCENTIVE AND NON-QUALIFIED OPTIONS. The Performance Equity Plan
provides for the grant of Incentive Stock Options ("ISOs"), as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
Non-Qualified Stock Options ("NQSOs"), both of which may be granted, alone or
with other awards, to an Eligible Person. The exercise price of an option shall
in all cases not be less than 100% of the fair market value of Common Stock on
the date the option is granted (and, in the case of an ISO granted to an
Eligible Person owning more than 10% of the outstanding Common Stock, not less
than 110% of such fair market value). The term of each option shall be fixed by
the Committee but may not exceed ten years (five years in the case of an ISO
granted to a person owning more than 10% of the Company's outstanding Common
Stock). The exercise price must be paid in full at the time of exercise, either
in cash or, subject to any limitations as the Committee may impose, in
securities of the Company or, unless otherwise provided by the terms of the
award agreement, a combination thereof.
STOCK APPRECIATION RIGHTS. The Committee may grant stock appreciation
rights ("SARs") in tandem with options granted under the Performance Equity Plan
or on a free-standing basis. A SAR entitles the holder to surrender to the
Company all or a portion of an option in exchange for an amount (payable in cash
and/or Common Stock) equal to the excess of the Fair Market Value (as defined in
the Performance Equity Plan) of one share of Common Stock over (i) the exercise
price per share of a related option granted to the holder, if issued in tandem
with such option, or (ii) the strike price specified in the SAR, if issued
alone, multiplied by the number of shares subject to the SAR.
RESTRICTED STOCK AWARDS. The Committee may award shares of restricted
stock ("Restricted Stock") which may be issued either alone or in addition to
other awards granted to an Eligible Person. The Committee shall determine the
terms and conditions of the awards, including the terms of any payment,
transferability and the time within which any such award may be subject to
forfeiture (the "Restriction Period"). When issued, Restricted Stock constitutes
issued and outstanding shares of Common Stock. A holder of Restricted Stock
generally has the rights and privileges of a holder of Common Stock except that,
during the Restriction Period, the Company retains custody of the certificates
evidencing the Restricted Stock and any dividends declared with respect to such
Restricted Stock ("Retained Distributions").
DEFERRED STOCK AWARDS. The Committee may award shares of deferred stock
("Deferred Stock"). Shares of Deferred Stock may be awarded either alone or in
addition to other awards granted to an Eligible Person. The Committee shall
determine terms and conditions of the Deferred Stock award, including the
duration of the deferral period.
OTHER STOCK-BASED AWARDS. 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 options, Restricted Stock or Deferred Stock
(collectively, "Stock-Based Awards"). Subject to the terms of the Performance
Equity Plan, the Committee has complete discretion to determine the terms and
conditions applicable to Stock-Based Awards.
- 7 -
<PAGE>
OTHER TERMS AND CONDITIONS. Awards granted under the Performance Equity
Plan will be evidenced by agreements consistent with the Performance Equity Plan
in such form as the Committee may prescribe. All agreements will provide that
the right to exercise options or SARs or receive shares of Common Stock cannot
be transferred except by will or the laws of descent and distribution.
In the event of a "change of control" of the Company, as defined in the
Performance Equity Plan, unless the applicable award agreement provides
otherwise or unless the holder waives any right thereto: (i) each outstanding
option shall become immediately exercisable in full, notwithstanding the vesting
or exercise provisions contained therein, and such right shall remain in effect
until the option's expiration date, and (ii) all restrictions and deferral
limitations on Restricted Stock Awards, Deferred Stock Awards, other Stock-Based
Awards and SARs shall lapse and any related Retained Distributions shall become
vested.
REASONS FOR PROPOSED AMENDMENT
The Board of Directors believes that it is in the best interests of the
Company to increase the number of shares of Common Stock authorized under the
Performance Equity Plan to 2,000,000 and has approved a resolution to that
effect, subject to stockholder approval at the Annual Meeting.
The Board of Directors believes that the success of the Company is
greatly dependent upon its ability to attract and retain officers, employees and
consultants of outstanding ability who are motivated to exert their best efforts
on behalf of the Company, and the Board of Directors believes that the
Performance Equity Plan has been effective in achieving this goal. The Board has
also concluded that increasing the total number of shares of Common Stock
available will permit the Performance Equity Plan to continue to create such
incentives. In the opinion of the Board, this amendment will allow the Company
to attract and retain officers, employees and consultants who are in a position
to contribute materially to the successful conduct of the Company's operations,
to meet competitive situations created by the stock option plans of other
corporations, and to stimulate in those eligible for participation an increased
desire to render greater service to the Company.
FEDERAL TAX CONSEQUENCES
Pursuant to the Code, upon the exercise of an NQSO under the
Performance Equity Plan, the Company is generally entitled to a tax deduction in
an amount equal to the difference between the option price and the fair market
value of the Common Stock on the date the NQSO is exercised. For federal income
tax purposes, the person exercising the option must pay personal income taxes on
an amount equal to the difference between the option price and the fair market
value of the Common Stock on the date the NQSO is exercised. The basis of the
Common Stock obtained by exercising the NQSO will be the option price paid plus
the amount equal to the difference between the option price and the fair market
value of the Common Stock on the date the NQSO is exercised, which amount was
subject to federal income tax. A subsequent sale of the Common Stock by the
person exercising the NQSO will result in a long- or short-term capital gain or
loss depending on the total period of time that the NQSO and Common Stock are
held. Generally, no taxable event occurs under the Code upon the grant of an
NQSO under the Performance Equity Plan.
- 8 -
<PAGE>
Pursuant to the Code, the holder of an ISO will recognize no taxable
income (or loss) upon the grant or exercise of an ISO. Upon the sale of the
underlying shares of Common Stock, the option holder will incur a long-term
capital gain or loss if the provisions of Section 422(b) of the Code are
complied with. In such case, there is no taxable event for the Company. The
principal requirement of Section 422(b), other than the limitations on option
price, duration of option period, time of exercise and volume exercisable in one
year described above, is that, in order for an option to qualify for ISO
treatment, shares received pursuant to exercise of the option may not be
disposed of within two years from the date of grant and one year from the date
of exercise of the option. If an option designated as an ISO ceases to qualify
as an ISO, the tax effects for the option holder and the Company will be
identical to those described above for NQSOs.
PERFORMANCE EQUITY PLAN BENEFITS--1995
The following options were granted under the Performance Equity Plan
during 1995.
NAME AND POSITION
OF INDIVIDUAL
OR NUMBER OF NUMBER OF
PERSONS IN GROUP DOLLAR VALUE OPTIONS
---------------- ------------ -------
William K. Mackey (1) 300,000
Chairman of the Board,
President and CEO
R. Brian Fifer (1) 100,000 (2)
Former Chairman of the Board,
President and CEO
Jeffrey L. Schultz (1) 50,000 (3)
Former Vice President of Marketing
and Business Development
All Executive Officers as (1) 450,000 (2)(3)
a Group (3 persons,
including the above)
All Outside Directors as (1) -0-
a Group (3 persons)
- - - - --------------------
(1) The exercise price of options granted under the 1991 Performance Equity
Plan is equal to fair market value at date of grant. The dollar value of
the options granted is not ascertainable, as it will vary depending upon
the market price of the Company's Common Stock at the date of exercise. See
"Executive Compensation and Other Information Performance Equity Plan and
Outside Directors' Plan".
(2) Mr. Fifer resigned from all positions held with the Company in May 1995,
and all of the options noted above were forfeited.
(3) Mr. Schultz resigned from all positions held with the Company in June 1996,
16,666 of such options are vested and must be exercised before December 31,
1996 or they will be forfeited.
- 9 -
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the approval of the
foregoing amendment to the Performance Equity Plan. The affirmative vote of the
holders of a majority of the outstanding shares of the Common Stock entitled to
vote at the Annual Meeting will be necessary for stockholder approval of the
amendment to the Performance Equity Plan.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the years ended December
31, 1995, 1994 and 1993, representing compensation earned by the Chief Executive
Officer of the Company as of the end of the fiscal year 1995 (the "Named
Executive"), in all capacities in which he served. No other executive officer of
the Company earned over $100,000 in either of such fiscal years. Mr. Fifer
resigned from all of his positions with the Company in May 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATIONS COMPENSATION
----------------------------------------------------- ---------------
NAME AND PRINCIPAL OTHER ANNUAL NUMBER OF
POSITIONS YEAR SALARY BONUS COMPENSATION OPTIONS GRANTED
------------------ ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
R. Brian Fifer(2) 1995 $ 142,326 -0- $2,903(1) 100,000
Chairman of the Board, President, 1994 $ 133,531 $ 38,750 $7,200(1) 200,000
Chief Executive Officer and Treasurer 1993 $ 104,000 -0- $7,200(1) -0-
William K. Mackey(3) 1995 $ 81,673 -0- $107,379(4) 310,000
Chairman of the Board, President
Chief Executive Officer and Treasurer
</TABLE>
STOCK OPTION GRANTS IN 1995
The following table contains information concerning the grant
of stock options to the Names Executive Officers in 1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------------------
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME UNDERLYING OPTIONS GRANTED IN FISCAL YEAR PER SHARE DATE
---- -------------------------- ------------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
R. Brian Fifer (2) 100,000 11.0% $ 3.25 February 3, 2005
William K. Mackey (3) 10,000 1.1% $ 3.25 February 3, 2005
William K. Mackey (3) 50,000 5.5% $ 3.00 July 27, 2005
William K. Mackey (3) 250,000 27.4% $ 1.25 September 8, 2005
</TABLE>
STOCK OPTION EXERCISES IN 1995 AND OPTION VALUES AT DECEMBER 31, 1995
The following table provides information with respect to options
exercised by the Named Executive Officers during 1995 and the number and value
of securities underlying unexercised options held by the Named Executive
Officers at December 31, 1995:
- 10 -
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1995 AT DECEMBER 31, 1995
ACQUIRED VALUE ------------------------------ ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Brian Fifer(2) -- -- -- -- $ -0- -0-
William K. Mackey(3) -- -- 100,000 310,000 $ -0- $312,500
<FN>
- - - - --------------------
(1) Represents a monthly auto expense allowance of $600 for the fiscal years ended 1995, 1994 and 1993.
(2) Mr. Fifer resigned from all positions held with the Company in May 1995, thus vested options had to
be exercised prior to August 26, 1995. All options granted to Mr. Fifer were forfeited on such date.
(3) Mr. Mackey was elected by the Board of Directors to replace Mr. Fifer in May 1995.
(4) Represents finders fees paid to Mr. Mackey by the Company during fiscal year 1995 in connection with
a series of offshore private placements undertaken by the Company. All of these fees were paid to
Mr. Mackey prior to him becoming Chief Executive Officer of the Company in May 1995.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
On September 8, 1995, the Company entered into a five-year employment
agreement with William K. Mackey, Chairman of the Board, President and Chief
Executive Officer. The Agreement provides that Mr. Mackey will receive an annual
base salary of $155,000, plus a bonus, if any, as determined by the Board of
Directors. Pursuant to the terms of the employment agreement, Mr. Mackey was
granted options to purchase 50,000 and 250,000 shares of the Company's Common
Stock at exercise prices of $3.00 and $1.25 per share, the market prices on the
respective grant dates. Such options vest over a six-month and two-year period
and have a term of ten years from the date of grant. The employment agreement
entitles Mr. Mackey to terminate the agreement in the event of a change of
control of the Company and receive severance payments equal to the greater of
the base salary due for the remaining term of the employment agreement or an
amount equal to three times his base salary then in effect, plus bonus. If Mr.
Mackey is terminated without cause, he is entitled to receive a severance
payment equal to the greater of the remaining base salary payments due for the
remaining term of the employment agreement or one year's base salary. If Mr.
Mackey terminates the employment agreement because of a material default by the
Company, he is entitled to receive a severance payment equal to the greater of
the base salary payments due under the remaining term of the employment
agreement or three times the sum of the base salary then in effect and his last
bonus.
The above-described employment agreement contains certain
non-disclosure and non-compete provisions.
PERFORMANCE EQUITY PLAN AND OUTSIDE DIRECTORS' PLAN
As of June 7, 1996, options to purchase an aggregate of 1,420,582
shares have been granted under the Performance Equity Plan and Outside
Directors' Plan as follows.
- 11 -
<PAGE>
NUMBER OF AVERAGE
SHARES OPTION PRICE
--------- -------------
OUTSTANDING JANUARY 1, 1994 340,000 $1.50 - $4.13
Granted 556,000 $3.41 - $3.75
Cancelled (28,000) $3.41 - $4.00
---------
OUTSTANDING DECEMBER 31, 1994 868,000 $1.50 - $4.13
Granted 911,100 $1.25 - $5.00
Exercised (103,518) $1.50 - $4.13
Cancelled (470,000) $3.25 - $4.13
---------
OUTSTANDING DECEMBER 31, 1995 1,205,582 $1.25 - $5.00
Granted 216,000 $1.31 - $2.25
Cancelled (1,000) $3.41
---------
OUTSTANDING JUNE 7, 1996 1,420,582 $1.25 - $5.00
=========
At December 31, 1995 and 1994, respectively, 193,761 and 245,835
options with an average option price of $2.98 and $2.04 were exercisable.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the number of shares
of Common Stock beneficially owned as of June 7, 1996, by (i) each person who is
believed by the Company to be a beneficial owner of more than 5% of the
outstanding Common Stock of the Company; (ii) each director of the Company;
(iii) the Named Executive; and (iv) all directors and executive officers of the
Company as a group. Beneficial ownership has been determined in accordance with
the rules promulgated under Section 13(d) of the Securities and Exchange Act of
1934. All shares of Common Stock are owned both of record and beneficially
unless otherwise indicated.
PERCENTAGE
NAME AND ADDRESS NUMBER OF SHARES OF
OF BENEFICIAL OWNER(1) OWNED COMMON STOCK
- - - - ---------------------- ---------------- ------------
Joel C. Edison (2) 533,333 5.8%
William F. Silvia (4) 95,000 1.0%
James P. Cefaratti (5) 105,000 1.1%
William K. Mackey (6) 161,000 1.7%
Norman J. Hoskin (7) 36,000 *
Directors and executive officers
as a group (four persons) 397,000 4.3%
- - - - ------------------------------------
- 12 -
<PAGE>
(1) The address for all of these persons is the same as the Company's address.
(2) Mr. Edison is the former owner of Joel C. Edison, Ltd., dba KISS
International. 533,333 shares of Common Stock were issued to him in
conjunction with the acquisition of said entity effective July 1, 1994.
(3) Reflects options to purchase 168,334 shares of Common Stock which are
presently exercisable.
(4) Includes options to purchase 45,000 shares of Common Stock which are
presently exercisable.
(5) Includes options to purchase 105,000 shares of Common Stock which are
presently exercisable.
(6) Includes options to purchase 110,000 shares of Common Stock granted by the
Company and additional options to purchase an aggregate of 50,000 shares
of Common Stock granted by Kinder Investments, L.P. and Peter N. Christos.
(7) Includes options to purchase 35,000 shares of Common Stock which are
presently exercisable.
(*) Less than 1%
ESCROW SHARES AND ESCROW OPTIONS
In connection with the Company's initial public offering, substantially
all of the common stockholders and option holders of the Company at the date of
the offering, agreed to place into escrow 50% of their shares of Common Stock
and 50% of their options to purchase Common Stock equalling 975,000 shares of
Common Stock (the "Escrow Shares") and options to purchase 116,250 shares of
Common Stock (the "Escrow Options"). Shares issued upon exercise of the Escrow
Options will be held in escrow as Escrow Shares. Such stockholders (and option
holders to the extent they have exercised such options) may continue to vote the
Escrow Shares; however, the Escrow Shares and Escrow Options are not assignable
or transferable. The following sets forth the number of Escrow Shares and Escrow
Options owned by the Directors and Officers listed below.
NUMBER OF NUMBER OF
HOLDER ESCROW SHARES ESCROW OPTIONS
------ ------------- --------------
William F. Silvia........................ 25,000 0
James P. Cefaratti....................... 0 25,000
All of the Escrow Shares and the Escrow Options will be released in the event
that:
(a) The Minimum Pretax Income amounts to at least $5,200,000 for the
fiscal year ending December 31, 1996, provided that if additional shares are
issued, Minimum Pretax Income shall be increased proportionately; or
(b) The Minimum Pretax Income amounts to at least $6,300,000 for the
fiscal year ending December 31, 1997, provided that if additional shares are
issued, Minimum Pretax Income shall be increased proportionately; or
(c) The closing price of the Company's Common Stock for any 20
consecutive trading days shall average in excess of $25.00 during the period
commencing January 1, 1996 and ending December 31, 1996; or
(d) The closing price of the Company's Common Stock for any 20
consecutive trading days shall average in excess of $30.00 during the period
commencing January 1, 1997 and ending December 31, 1997.
- 13 -
<PAGE>
Any money, securities, rights or property distributed in respect of the
Escrow Shares or Escrow Options, including any property distributed as dividends
or pursuant to any stock split, merger, recapitalization, dissolution, or total
or partial liquidation of the Company, shall be held in escrow until the
release, if any, of the Escrow Shares and Escrow Options.
The Minimum Pretax Income shall be calculated exclusive of any
extraordinary earnings and charges to income resulting from the release of the
Escrow Shares or Escrow Options. For purposes of calculating Minimum Pretax
Income, if additional shares of Common Stock are issued, then the foregoing
Minimum Pretax Income levels for any year would increase proportionately. Based
on a position taken by the Securities and Exchange Commission staff, the Company
expects that the release of the Escrow Shares and Escrow Options will be deemed
compensatory and, accordingly, will result in substantial charges to earnings
equal to the fair market value of the Escrow Shares as of the date on which they
are released. Such charges could substantially increase the loss or reduce or
eliminate the Company's net income, if any, for financial reporting purposes for
the periods in which the Escrow Shares or Escrow Options are released or are
probable of being released. If none of the foregoing earnings or market price
levels are attained by December 31, 1997, the Escrow Shares and Escrow Options,
as well as any dividends or other distributions made with respect thereto, will
be contributed to the capital of the Company and all Escrow Options shall be
cancelled without consideration to the holders thereof.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF KISS
On July 7, 1994, the Company acquired all of the Common Stock of Joel
C. Edison, Ltd., dba KISS International and in connection with such transaction
issued 533,333 restricted shares of Common Stock of the Company valued at
$1,000,000 to Joel C. Edison, an unrelated party and the former President and
CEO of Joel C. Edison Ltd., dba KISS International. As part of that acquisition,
Mr. Edison entered into a consulting agreement which includes a non-competition
clause, pursuant to which Mr. Edison is to receive a consulting fee of $50,000
per annum through June 30, 1997. See "Principal Stockholders".
FINDERS FEES
Mr. Mackey received a total of $107,379 in finders fees from the
Company during fiscal year 1995 in connection with a series of foreign private
placements undertaken by the Company pursuant to Regulation S. All of these fees
were paid to Mr. Mackey prior to him becoming an officer of the Company in May
1995.
Norman J. Hoskin, a director of the Company, is the principal of
Atlantic International Capital Ltd. Atlantic International Capital Ltd. and its
affiliates received fees aggregating approximately $870,000, during the fiscal
year 1995, in connection with private placements undertaken by the Company
during 1995 pursuant to Regulation S.
- 14 -
<PAGE>
RELATIONSHIP WITH
INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman was engaged by the Board of Directors of the Company as
independent public accountants for the Company and its subsidiaries for the
fiscal year 1995 and it is expected that such firm will serve in that capacity
for the 1996 fiscal year. Management expects that a representative of BDO
Seidman will be present at the Annual Meeting to make a statement if he or she
desires to do so and to be available to answer appropriate questions posed by
stockholders.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any business which will be presented for consideration
at the Annual Meeting other than that specified herein and in the Notice of
Annual Meeting of Stockholders, but if other matters are presented, it is the
intention of the persons designated as proxies to vote in accordance with their
judgment on such matters.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
DECEMBER 31, 1995, INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES THERETO, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER OF THE COMPANY WHOSE PROXY IS
SOLICITED BY THE FOREGOING PROXY STATEMENT, UPON THE WRITTEN REQUEST OF ANY SUCH
PERSON ADDRESSED TO NORMAN J. HOSKIN, SECRETARY, SUCH A REQUEST FROM A
BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK MUST CONTAIN A GOOD-FAITH
REPRESENTATION BY SUCH PERSON THAT, AS OF JUNE 7, 1996, HE WAS A BENEFICIAL
OWNER OF THE COMPANY'S COMMON STOCK.
Please SIGN and RETURN the enclosed Proxy promptly.
By Order of the Board of Directors:
NORMAN J. HOSKIN
Secretary
June 3, 1996
- 15 -
<PAGE>
ANNEX A
AQUACARE, INC.
1991 PERFORMANCE EQUITY PLAN
1. PURPOSE; DEFINITIONS.
1.1 PURPOSE. The purpose of the AquaCare, Inc. (the "Company") 1991
Performance Equity Plan (the "Plan") is to enable the Company and its
subsidiaries to offer to its officers and key employees, consultants and
independent contractors, long term performance-based stock and/or other equity
interests in the Company, thereby enhancing its ability to attract, retain and
reward such individuals, and to increase the mutuality of interests between
those individuals and the stockholders of 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 herein:
(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) "Change of Control" means a change of control of the
Company pursuant to Section 10 hereof.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute or statutes thereto.
(e) "Committee" means the Stock Option Committee of the Board
or any other committee of the Board which the Board may designate.
(f) "Common Stock" means the Common Stock of the Company, par
value $.001 per share.
(g) "Company" means AquaCare, Inc., a corporation organized
under the laws of the State of Delaware and any successor thereto.
(h) "Deferred Stock" means Stock to be received, under an
award made pursuant to Section 8 hereof, at the end of a specified deferral
period.
(i) "Disability" means disability as determined under
procedures established by the Committee for purposes of the Plan.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, or any successor statute or statutes thereto.
A-1
<PAGE>
(k) "Exchange Act Holder" means such officer or director or
10% beneficial owner of Common Stock subject to Section 16(b) of the Exchange
Act.
(l) "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 (as hereinafter defined) is listed on
a national securities exchange or quoted on the NASDAQ National Market System,
the closing price of the Common Stock on the last preceding day on which the
Common Stock was traded, as reported on the composite tape or by NASDAQ/NMS
System Statistics, 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 System,
but is traded in the over-the-counter market, the average of the bid and asked
prices for the Common Stock on the last preceding day for which such quotations
are reported by NASDAQ; and (Iii) if the fair market value of the Common Stock
cannot be determined pursuant to clause (i) or (ii) hereof, such price as the
Committee shall determine.
(m) "Formula Price Per Share" means the highest gross price
(before brokerage commissions, soliciting dealers' fees and similar charges)
paid for any share of Common Stock at any time during the ninety-day period
immediately prior to the Change of Control (whether by way of exchange,
conversion, distribution, liquidation or otherwise) paid or to be paid for any
share of Common Stock in connection with a Change of Control. If the
consideration paid or to be paid in any transaction that results in a Change of
Control consists, in whole or in part, of consideration other than cash, the
Board shall take such action, as in its judgment it deems appropriate, to
establish the cash value of such consideration, but such valuation shall not be
less than the value, if any, attributed to such consideration by any other party
to such transaction that results in a Change of Control.
(n) "Holder" means an eligible employee or prospective
employee of the Company or a Subsidiary who has received an award under the
Plan.
(o) "Incentive Stock Option" means any Stock Option intended
to be and designated as an "incentive stock option" within the meaning of
Section 422A of the Code.
(p) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option.
(q) "Other Stock-Based Award" means an award under Section 9
hereof that is valued in whole or in part by reference to, or is otherwise based
upon, Common Stock.
(r) "Plan" means this Aqua Care Systems, Inc. 1991 Performance
Equity Plan, as hereinafter amended from time to time.
(s) "Restricted Stock" means Common Stock received under an
award made pursuant to Section 7 hereof, that is subject to restrictions under
said Section 7.
(t) "SAR Value" means the excess of the Fair Market Value of
one share of Common Stock over the exercise price per share specified in a
related Stock Option in the case of a Stock Appreciation Right granted in tandem
with a Stock Option and the Stock Appreciation Right price per share in the case
of a Stock Appreciation Right awarded on a free standing basis multiplied
A-2
<PAGE>
by the number of shares in respect of which the Stock Appreciation Right shall
be exercised, on the date of exercise.
(u) "Stock Appreciation Right" means the right, pursuant to an
award granted under Section 6 hereof, to recover an amount equal to the SAR
Value.
(v) "Stock Option" or "Option" means any Non-Qualified Stock
Option or Incentive Stock Option to purchase shares of Stock which is awarded
pursuant to the Plan.
(w) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in Section 425(f) of the
Code.
2. ADMINISTRATION.
2.1 COMMITTEE MEMBERSHIP. The Plan shall be administered by the
Committee, the membership of which shall be at all times constituted so as to
not adversely affect the compliance of the Plan with the requirements of Rule
16b-3 under the Exchange Act, to the extent it is applicable, or with the
requirements of any other applicable law, rule or regulation.
2.2 POWERS OF COMMITTEE. The Committee shall have full authority to
award, pursuant to the terms of the Plan, to eligible employees, prospective
employees, independent contractors and consultants described under Section 4
hereof: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, (iv) Deferred Stock, and/or (v) 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 eligible employees, prospective employees,
independent contractors and consultants to whom Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock and/or Other Stock-Based
Awards may from time to time be awarded hereunder;
(b) to determine the Incentive Stock Options, Non-Qualified
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock
and/or Other Stock-Based Awards, or any combination thereof, if any, to be
awarded hereunder to one or more eligible employees or persons;
(c) to determine the number of shares to be covered by each
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award hereunder (including, but not limited
to, share price, any restrictions or limitations, and any vesting, exchange,
surrender, cancellation, acceleration, termination, exercise or forfeiture
provisions, as the Committee shall determine);
(e) 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;
(f) to determine the terms and conditions under which awards
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;
A-3
<PAGE>
(g) to determine the extent and circumstances under which
Common 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
(h) to substitute (A) 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 (B) new awards of
any other type for previously granted awards of the same or other type, which
previously granted awards are upon less favorable terms.
2.3 INTERPRETATION OF PLAN. Subject to Section 11 hereof, 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.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options 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 422A of the Code, or, without the consent of the Holder(s)
affected, to disqualify any Incentive Stock Option under such Section 422A.
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 1,500,000
shares. If any shares of Common Stock that are subject to a Stock Option or
Stock Appreciation Right cease to be subject to such Option or Stock
Appreciation Right, or if any shares that are subject to a Restricted Stock or
Deferred Stock award 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 Common Stock, such shares shall again be available for
distribution in connection with future grants and awards under the Plan. The
number of shares of Common Stock deemed to be issued under the Plan upon the
exercise of an Option or Other Stock-Based Award in the nature of a stock
purchase right shall be reduced by the number of shares of Common Stock
surrendered by the Holder in payment of the exercise or purchase price of the
award and withholding taxes thereon.
3.2 CHARACTER OF SHARES. Shares of Common Stock under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
3.3 ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. In the event of any
merger, reorganization, consolidation, recapitalization, dividend (other than a
dividend or its equivalent which is credited to a Holder or a regular cash
dividend), stock split, reverse stock split, or other change in corporate
structure affecting the Common Stock, such substitution or adjustment shall be
made in the aggregate number of shares reserved for issuance under the Plan, in
the number and exercise price of shares subject to outstanding Options, in the
number of shares and Stock Appreciation Right price relating to Stock
Appreciation Rights, and in the number of shares subject to, and related terms
of, other outstanding awards (including but not limited to awards of Restricted
Stock, Deferred Stock and Other Stock-Based Awards) as may be determined to be
appropriate by the Committee in order to prevent dilution or enlargement of each
Holder's rights, provided that the number of shares subject to any award shall
always be a whole number.
A-4
<PAGE>
4. ELIGIBILITY.
4.1 GENERAL. Awards under the Plan may be made to (i) officers and
other key employees of the Company or any Subsidiary (including officers and key
employees serving as directors of the Company) who are at the time of the grant
of an award under this Plan regularly employed by the Company or any Subsidiary;
(ii) prospective employees of the Company or its Subsidiaries; and (iii)
consultants or independent contractors who the Board believes have contributed
or will contribute to the success of the Company. The exercise of any Stock
Option and the vesting of any award hereunder granted to a prospective employee
shall be conditioned upon such person becoming an employee of the Company or a
Subsidiary. The term "prospective employee" shall mean any person who holds an
outstanding offer of regular employment on specific terms from the Company or a
Subsidiary.
4.2 INELIGIBILITY FOR AWARDS. No person designated by the Board to
serve on the Committee, effective at such future time so that he qualifies as a
disinterested person, shall be eligible to receive any awards under the Plan
during the period from the date such designation is made to the date such
designation becomes effective. Notwithstanding Section 4.1 hereof, no member of
the Committee, while serving as such, shall be eligible to receive an award
under the Plan.
5. STOCK OPTIONS.
5.1 GRANT AND EXERCISE. Stock Options granted under the Plan may be of
two types: (i) Incentive Stock Options and (ii) Non-Qualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms, not inconsistent
with this Plan, as the Committee may from time to time approve. The Committee
shall have the authority to grant to any Holder hereof Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options (in each case with
or without Stock Appreciation Rights) and may be granted alone, in tandem with
or in addition to other awards under the Plan. To the extent that any Stock
Option (or portion thereof) does not qualify as an Incentive Stock Option, it
shall constitute a separate Non-Qualified Stock Option. Unless granted in
substitution for another outstanding award, Options shall be granted for no
consideration other than services.
5.2 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 Common
Stock purchasable under a Stock Option shall be determined by the Committee at
the time of grant but shall be not less than 100% of the Fair Market Value of
the Common Stock at the time of grant (110%, in the case of an Incentive Stock
Option granted to a Holder ("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 or its parent (if any) or subsidiary corporations, as
those terms are defined in Sections 425(e) and (f) of the Code).
(b) OPTION TERM. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more than ten years
(five years, in the case of an Incentive Stock Option granted to a 10%
Stockholder) after the date on which the Option is granted.
A-5
<PAGE>
(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. If the Committee provides, in its discretion, that any Stock
Option is exercisable only in installments, 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.
(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 Common 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 whole shares of Common Stock
which are already owned by the Holder of the Stock Option or, unless otherwise
provided in the Stock Option Agreement, partly in cash and partly in such Common
Stock. 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 Common Stock with respect to which a Stock 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 Common Stock (which shall be
valued at the Fair Market Value of a share of Common Stock on the date of
exercise) 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 Non-Qualified Stock Option a combination of shares of
Deferred Stock and Common Stock; provided that, notwithstanding the provisions
of Section 8 of the Plan, such Deferred Stock shall be fully vested and not
subject to forfeiture. Except as otherwise expressly provided in this Plan or in
the Agreement, no Stock Option may be exercised at any time unless the Holder
thereof is then an employee of the Company or of a Subsidiary. The Holder of a
Stock Option shall have none of the rights of a stockholder with respect to the
shares subject to the Stock Option until such shares shall be transferred to the
Holder upon the exercise of the Stock Option.
(e) BUYOUT AND SETTLEMENT PROVISIONS. The Committee may at any
time offer to buy out for cash or otherwise settle 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, including a
settlement by exchange of a different award under the Plan for the surrender of
the Option.
6. STOCK APPRECIATION RIGHTS.
6.1 GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
tandem with ("Tandem Stock Appreciation Right") or in conjunction with all or
part of any Stock Option granted under the Plan or may be granted on a
free-standing basis. In the case of a Non-Qualified Stock Option, a Tandem Stock
Appreciation Right may be granted either at or after the time of the grant of
such Non-Qualified Stock Option. In the case of an Incentive Stock Option, a
Tandem Stock Appreciation Right may be granted only at the time of the grant of
such Incentive Stock Option. Unless granted in substitution for another
outstanding award, Stock Appreciation Rights shall be granted for no
consideration other than services.
A-6
<PAGE>
A Tandem Stock Appreciation Right shall terminate and shall no longer
be exercisable upon the termination or exercise of the related Stock Option,
except that, unless otherwise determined by the Committee, a Tandem Stock
Appreciation Right granted with respect to less than the full number of shares
covered by a related Stock Option shall not be reduced until after the number of
shares remaining under the related Stock Option equals the number of shares
covered by the Tandem Stock Appreciation Right.
A Tandem Stock Appreciation Right may be exercised by a Holder, in
accordance with Section 6.2 hereof, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the Holder shall be
entitled to receive such amount in the form of payment determined in the manner
prescribed in Section 6.2 hereof. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent Tandem Stock
Appreciation Rights have been exercised.
6.2 TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
the following terms and conditions:
(a) EXERCISABILITY. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock Options
to which they relate shall be exercisable in accordance with the provisions of
Section 5 hereof and this Section 6, and may be subject to such additional
limitations on exercisability as shall be determined by the Committee and set
forth in the Agreement. Other Stock Appreciation Rights shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee and set forth in the Agreement. Notwithstanding
anything to the contrary contained herein (including the provisions of Section
10.1 hereof), any Stock Appreciation Right granted to an Exchange Act Holder to
be settled wholly or partially in cash (i) shall not be exercisable during the
first six months of the term of such Stock Appreciation Right, except that this
special limitation shall not apply in the event of death or Disability of such
Holder prior to the expiration of the six-month period, and (ii) shall only be
exercisable during the period beginning on the third business day following the
date of release for publication of the Company of quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date.
(b) RECEIPT OF SAR VALUE. Upon the exercise of a Stock
Appreciation Right, a Holder shall be entitled to receive up to, but not more
than, an amount in cash and/or shares of Common Stock equal to the SAR Value
with the Committee having the right to determine the form of payment.
(c) SHARES AFFECTED UNDER PLAN. Upon the exercise of a Tandem
Stock Appreciation Right, the Stock Option or part thereof to which such Tandem
Stock Appreciation Right is related shall be deemed to have been exercised for
the purpose of the limitation set forth in Section 3 hereof on the number of
shares of Common Stock to be issued under the Plan, but only to the extent of
the number of shares, if any, issued under the Tandem Stock Appreciation Right
at the time of exercise based upon the SAR Value.
(d) LIMITED STOCK APPRECIATION RIGHTS. The Committee may grant
"Limited Stock Appreciation Rights" i.e., Stock Appreciation Rights that become
exercisable upon the occurrence of one or more of the events which trigger a
Change of Control as defined in Section 10 hereof, and shall be settled in an
amount equal to the Formula Price Per Share, subject to such other terms and
A-7
<PAGE>
conditions as the Committee may specify; provided, however, if any Limited Stock
Appreciation Right is granted to an Exchange Act Holder such Limited Stock
Appreciation Right (i) shall only be exercisable within sixty (60) days after
the event triggering the Change of Control; and (ii) may not be exercised during
the first six months after the date of grant of such Limited Stock Appreciation
Right (except in the event of death or Disability of such Holder prior to the
expiration of the six-month period; and (iii) shall only be exercisable in the
event that the date of the Change of Control was outside the control of such
Holder; and (iv) shall only be settled in cash in an amount equal to the Formula
Price Per Share.
7. RESTRICTED STOCK.
7.1 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 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. Unless granted in substitution for another
outstanding award, Restricted Stock shall be granted for no consideration other
than services.
7.2 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 hereinafter defined) shall
bear a restrictive 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 (A) 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; (B) the Company will retain custody of the stock
certificate or certificates representing the Restricted Stock during the
Restriction Period; (C) 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
A-8
<PAGE>
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; and (D) a breach by the Holder 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 (A) such
Restricted Stock shall become vested in accordance with the terms of the
Agreement, and (B) 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. 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.
8. DEFERRED STOCK.
8.1 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 shall be awarded, the number of shares of Deferred Stock to be awarded,
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. Unless granted in substitution for an
outstanding award or upon exercise of an Option, Deferred Stock shall be issued
for no consideration other than services.
8.2 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 8.2(d) hereof ("Additional
Deferral Period", where applicable), share certificates shall be delivered to
the Holder, or his legal representative, representing the number of the shares
equal to the number covered by the Deferred Stock award.
(b) DIVIDENDS. As determined by the Committee, amounts equal
to any dividends declared during the Deferral Period (or the Additional Deferral
Period, where applicable) with respect to the number of shares covered by a
Deferred Stock award may be paid to the Holder currently or deferred and deemed
to be reinvested in additional Deferred Stock.
(c) VESTING; FORFEITURE. Upon the expiration of the Deferral
Period (or the Additional Deferral Period, where applicable) with respect to
each award of Deferred Stock and the satisfaction of any other applicable
limitations, terms or conditions, such Deferred Stock shall become vested in
accordance with the terms of the Agreement. Any 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 that has been so forfeited.
A-9
<PAGE>
(d) ADDITIONAL DEFERRAL PERIOD. A Holder may request to, and
the Committee may in its sole discretion 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).
9. OTHER STOCK-BASED AWARDS.
9.1 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 either alone or in addition to or in tandem with any other awards under
this Plan or any other plan of the Company.
The Committee shall determine the eligible persons to whom and the time
or times at which grants of such 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. Notwithstanding the foregoing, except to the extent
that an Other Stock-Based Award is granted in substitution for another
outstanding award or is delivered upon exercise of an Option, the amount of
consideration to be required to be received by the Company shall be either no
consideration (other than services) or, in the case of an Other Stock-Based
Award in the nature of a purchase right, an amount equal to or greater than 50%
of the Fair Market Value of the shares to which the award relates on the date of
grant of such award.
9.2 TERMS AND CONDITIONS. Each Other Stock-Based Award shall be subject
to the following terms and conditions:
(a) DIVIDENDS. The Holder of an Other Stock-Based Award shall
be entitled to receive, currently or on a deferred basis, dividends or dividend
equivalents with respect to the number of shares covered by the award, as
determined by the Committee. The Committee may provide that such amounts (if
any) shall be deemed to have been reinvested in additional Common Stock.
(b) VESTING; FORFEITURE. Any Other Stock-Based Award and any
Common Stock covered by an Other Stock-Based Award shall vest or be forfeited to
the extent so provided in the Agreement.
10. ACCELERATION.
10.1 ACCELERATION UPON CHANGE OF CONTROL. Unless the award Agreement
provides otherwise or unless the Holder waives the application of this Section
10.1 prior to a Change of Control (as hereinafter defined), in the event of a
Change of Control:
A-10
<PAGE>
(a) Each outstanding Stock Option, Stock Appreciation Right
and Limited Stock Appreciation Right granted under the Plan shall immediately
become exercisable in full notwithstanding the vesting or exercise provisions
contained in the Agreement; and
(b) All restrictions and deferral limitations related to
awards of Restricted Stock, Deferred Stock and Other Stock-Based Awards, shall
be deemed to have expired and all such awards and any related Retained
Distributions shall become vested.
10.2 CHANGE OF CONTROL DEFINED. A "Change of Control" shall be deemed
to have occurred upon any of the following events:
(a) The consummation of any of the following transactions: any
merger, reverse stock split, recapitalization or other business combination of
the Company, with or into another corporation, or an acquisition of securities
or assets by the Company, pursuant to which the Company is not the continuing or
surviving corporation or pursuant to which shares of Common Stock would be
converted into cash, securities or other property, other than a transaction in
which the majority of the holders of Common Stock immediately prior to such
transaction will own at least 50% of the total voting power of the
then-outstanding securities of the surviving corporation immediately after such
transaction, or any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Company, or the liquidation or dissolution of the Company; or
(b) A transaction in which any person (as such term is defined
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other
entity (other than the Company, or any profit-sharing, employee ownership or
other employee benefit plan sponsored by the Company or any Subsidiary, or any
trustee of or fiduciary with respect to any such plan when acting in such
capacity, or any group comprised solely of such entities): (i) shall purchase
any Common Stock (or securities convertible into Common Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, without the prior consent of the Board, or (ii) shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly (in one transaction or a series of transactions),
of securities of the Company representing 50% or more of the total voting power
of the then-outstanding securities of the Company ordinarily (and apart from the
rights accruing under special circumstances) having the right to vote in the
election of directors (calculated as provided in Rule 13d-3(d) in the case of
rights to acquire the Company's securities); or
(c) If, during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board and
any new director whose election by the Board, or nomination for election by the
Company's stockholders was approved by a vote of at least two thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election by the stockholders was
previously so approved, cease for any reason to constitute a majority thereof.
10.3 GENERAL WAIVER BY COMMITTEE. The Committee may, after grant of an
award, accelerate the vesting of all or any part of any Stock Option, Deferred
Stock, Restricted Stock or any Other Stock-Based Award and/or waive any
limitations or restrictions, if any, for all or any part of an award.
A-11
<PAGE>
10.4 ACCELERATION UPON TERMINATION OF EMPLOYMENT. In the case of a
Holder whose employment with the Company or a Subsidiary is involuntarily
terminated for any reason (other than for cause), the Committee may accelerate
the vesting of all or any part of any award and/or waive in whole or in part any
or all of the remaining deferral limitations or restrictions imposed hereunder
or pursuant to the Agreement.
11. AMENDMENTS AND TERMINATION.
11.1 AMENDMENTS TO PLAN. The Board may at any time, and from time to
time, amend any of the provisions of the Plan, and may at any time suspend or
terminate the Plan; provided, however, that no such amendment shall be effective
unless and until it has been duly approved by the stockholders of the
outstanding shares of Common Stock if (a) it increases the aggregate number of
shares of Common Stock which are available pursuant to the Plan (except as
provided in Section 3 hereof) or (b) the failure to obtain such approval would
adversely affect the compliance of the Plan with the requirements of Rule 16b-3
under the Exchange Act, or with the requirements of any other applicable law,
rule or regulation.
11.2 AMENDMENTS TO INDIVIDUAL AWARDS. The Committee may amend the terms
of any award granted under the Plan; provided, however, that subject to Section
3 hereof, no such amendment may be made by the Committee which in any material
respect impairs the rights of the Holder without the Holder's consent.
12. TERM OF PLAN.
12.1 EFFECTIVE DATE. The Plan shall be effective as of May 13, 1991
("Effective Date"), subject to the approval of the Plan by the stockholders of
the Company 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).
12.2 TERMINATION DATE. No award shall be granted pursuant to the Plan
on or after the tenth anniversary of the Effective Date, but awards granted
prior to such tenth anniversary may extend beyond that date. The Plan shall
terminate at such time as no further awards may be granted and all awards
granted under the Plan are no longer outstanding.
13. GENERAL PROVISIONS.
13.1 INVESTMENT REPRESENTATIONS. The Committee may require each person
acquiring shares of Common Stock pursuant to an 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.
A-12
<PAGE>
13.2 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.
13.3 NO RIGHT OF EMPLOYMENT. Nothing contained in the Plan or in any
award hereunder shall be deemed to confer upon any 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 of its employees at any time.
13.4 WITHHOLDING TAXES. Not later than the date as of which an amount
first becomes includible in the gross income of the Holder for Federal income
tax purposes with respect to any 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 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 conditional
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.
13.5 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 Delaware (without regard to choice of law provisions).
13.6 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).
13.7 EMPLOYEE STATUS. A leave of absence, unless otherwise determined
by the Committee prior to the commencement thereof, shall not be considered a
termination of employment. Any awards granted under the Plan shall not be
affected by any change of employment, so long as the Holder continues to be an
employee of the Company or any Subsidiary.
13.8 NON-TRANSFERABILITY. Other than the transfer of a Stock Option,
Stock Appreciation Right or other award by will or by the laws of descent and
distribution, no award under the Plan may be alienated, sold, assigned,
hypothecated, pledged, exchanged, transferred, encumbered or charged, and any
attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefit. Any Stock Option, Stock
Appreciation Right or other award granted under this Plan is only exercisable
during the lifetime of the Holder by the Holder or by his guardian or legal
representative.
A-13
<PAGE>
13.9 APPLICABLE LAWS. The obligations of the Company with respect to
all awards under the Plan shall be subject to (i) all applicable law, rules and
regulations and such approvals by any governmental agencies as may be required,
including, without limitation, the effectiveness of a registration statement
under the Securities Act of 1933, as amended, and (ii) the rules and regulations
of any securities exchange on which the Common Stock may be listed or the NASDAQ
National Market System if the Common Stock is designated for quotation thereon.
13.10 CONFLICTS. If any of the terms or provisions of the Plan conflict
with the requirements of Rule 16b-3 under the Exchange Act, or with the
requirements of any other applicable law, rule or regulation, and/or with
respect to Incentive Stock Options, Section 422A of the Code, then such terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of said Rule 16b-3, and/or with respect to Incentive Stock Options,
Section 422A of the Code. With respect to Incentive Stock Options, if this Plan
does not contain any provision required to be included herein under Section 422A
of the Code, such provision shall be deemed to be incorporated herein with the
same force and effect as if such provision had been set out at length herein.
13.11 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 60 days after the Agreement has been delivered to the Holder for
his or her execution.
13.12 CONSIDERATION FOR COMMON STOCK. The Committee may not grant any
awards under the Plan pursuant to which the Company will be required to issue
any shares of Common Stock unless the Company will receive consideration for the
shares of Common Stock sufficient under the laws of the State of Delaware so
that such shares of Common Stock will be fully paid and non-assessable when
issued.
13.13 COMMON STOCK CERTIFICATES. Notwithstanding anything to the
contrary contained herein, whenever certificates representing shares of Common
Stock subject to an award are required to be delivered pursuant to the terms of
the Plan, the Company may in lieu of such delivery requirement comply with the
provisions of Section 158 of the Delaware General Corporation Law.
All certificates for shares of Common Stock delivered under the Plan
shall be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed, any applicable Federal or state
securities law, and any applicable corporate law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
13.14 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.
A-14
<PAGE>
PROXY
AQUA CARE SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS -- JULY 26, 1996
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM K. MACKEY and NORMAN J. HOSKIN,
and each of them, with several powers of substitution, proxies to vote the
shares of Common Stock, par value $.001 per share, of Aqua Care Systems, Inc.
which the undersigned could vote if personally present at the Annual Meeting of
Stockholders of Aqua Care Systems, Inc. to be held at Holiday Inn, Hollywood,
Florida 33020, on Friday, July 26, 1996, at 10:00 a.m., E.D.T., and any
adjournment thereof:
1. Election of Directors
[ ] FOR all nominees listed below (except [ ] WITHHOLD AUTHORITY to vote
as marked to the contrary below) for all nominees listed below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
William K. Mackey William F. Silvia
James P. Cefaratti Norman J. Hoskin
2. Approval of the increase in the number of shares of Common Stock
authorized to 30,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on other side)
--------------------------------------------------------------
(Continued from other side)
3. Approval of an Amendment to the 1991 Performance Equity Plan of the
Company to increase the number of shares of Common Stock of the Company
covered by such Plan to 2,000,000 shares of Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, to act upon any matters incidental to the foregoing
and such other business as may properly come before the Annual Meeting
or any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3 ABOVE. Any stockholder who wishes to
withhold the discretionary authority referred to in Item 4 above should mark a
line through the entire Item.
DATED _______________ , 1996 _________________________________________
Signature(s)
_________________________________________
(Please sign exactly and as fully as your
name appears on your stock certificate.
If shares are held jointly, each
stockholder should sign.)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED.
