<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Motorvac Technologies, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1 Title of each class of securities to which transaction applies:
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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):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1 Amount Previously Paid:
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<PAGE> 2
MOTORVAC TECHNOLOGIES, INC.
1431 SOUTH VILLAGE WAY
SANTA ANA, CALIFORNIA 92705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, MAY 13, 1997
TO THE STOCKHOLDERS OF MOTORVAC TECHNOLOGIES, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Motorvac Technologies, Inc., a Delaware corporation (the "Company"), will be
held on Tuesday, May 13, 1997, at 2:00 p.m., local time, at the Holiday Inn
Select, located at 17941 Von Karman Avenue, Irvine, California, 92614 for the
following purpose:
1. To elect Directors to serve for the ensuing year and until
their successors are elected.
2. To ratify the selection of Deloitte & Touche LLP as
independent auditors of the Company for its fiscal year ending
December 31, 1997.
3. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 25,
1997 as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
ALLAN T. MAGUIRE
Secretary
Santa Ana, California
April 21, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
MOTORVAC TECHNOLOGIES, INC.
1431 SOUTH VILLAGE WAY
SANTA ANA, CALIFORNIA 92705
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Motorvac Technologies, Inc., a Delaware corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on Tuesday, May 13, 1997 at 2:00
p.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Holiday Inn Select,
located at 17941 Von Karman Avenue, Irvine, California, 92614. The Company
intends to mail this proxy statement and accompanying proxy card on or about
April 21, 1997, to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of this proxy statement,
the proxy and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by Directors, officers or other regular employees of the
Company. No additional compensation will be paid to Directors, officers or
other regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on
March 25, 1997 will be entitled to notice of and to vote at the Annual Meeting.
At the close of business on March 25, 1997 the Company had outstanding and
entitled to vote 4,514,918 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to
one vote for each share held on all matters to be voted upon at the Annual
Meeting. All votes will be tabulated by the inspector of election appointed
for the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power
to revoke it at any time before it is voted. It may be revoked by filing with
the Secretary of the Company at the Company's principal executive office, 1431
South Village Way, Santa Ana, California, 92705, a written notice of revocation
or a duly executed proxy bearing a later date, or it may be revoked by
attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
<PAGE> 4
SHAREHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company
not later than December 21, 1997 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
There are seven nominees for the nine Board positions presently
authorized by the Company's Bylaws. Each Director to be elected will hold
office until the next annual meeting of stockholders and until his successor is
elected and has qualified, or until such Director's earlier death, resignation
or removal. With the exception of William E. Maya and Ronald J. Monark, each
nominee listed below is currently a director of the Company, three directors
having been elected by the stockholders, and two directors, John I. Leahy and
George A. Schmutz, having been appointed by the Board. William E. Maya and
Ronald J. Monark have been selected by the Board of Directors as nominees for
election by the stockholders at the 1997 Annual Meeting of Stockholders to
which this Proxy Statement relates. Two vacancies on the Board will remain
after the 1997 Annual Meeting. The Board intends to fill these vacancies with
suitable candidates when they are found.
Shares represented by executed proxies will be voted, if authority to
do so is not withheld, for the election of the seven nominees named below. In
the event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for
election has agreed to serve if elected and management has no reason to believe
that any nominee will be unable to serve.
In any election of Directors, the nominees receiving the highest
number of votes, up to the number of Directors to be elected, are elected.
NOMINEES
The names of the nominees and certain information about them are set
forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Stephen L. Greaves 38 President and General Manager,
Erin Mills International Investment Corporation
John I. Leahy 66 President, Management and Marketing Associates, Inc.
William E. Maya 47 Chairman and Chief Executive Officer,
Advanced Spine Fixation Systems, Inc.
Lee W. Melody (1)(4) 55 President and Chief Executive Officer, Motorvac
Technologies, Inc.
Ronald J. Monark 57 President and Chief Executive Officer, Mitchell
Repair Information LLC
Gerald C. Quinn (1)(2)(3)(4) 48 President, The Erin Mills Investment Corporation
George A. Schmutz (3) 57 President, Corporate Directions, Inc.
----------------------------------
</TABLE>
(1) Member of Executive Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
(3) Member of Compensation Committee of the Board of Directors.
(4) Member of Nominating Committee of the Board of Directors.
-2-
<PAGE> 5
Stephen L. Greaves. Mr. Greaves was appointed to serve as a director
of the Company in August 1994. Mr. Greaves has served as General Manager and a
director of Erin Mills International Investment Corporation since March 1993,
and was appointed President in February 1997. Between September 1985 and
December 1991, Mr. Greaves held key marketing positions with ESSO, Standard
Oil's regional office in Barbados. From January 1992 to February 1993, he was
a self-employed marketing consultant. Mr. Greaves is also a director of
Highwaymaster Communications, Inc. and several private companies. Mr. Greaves
holds a B.A. in Economics from the University of Western Ontario, London,
Canada, and an MBA in Marketing/Finance from Concordia University, Montreal,
Canada.
John I. Leahy. Mr. Leahy was appointed to serve as a director of the
Company in February 1997. Mr. Leahy has been President of Management and
Marketing Associates, Inc., a management consulting firm, since 1986. Prior to
that, Mr. Leahy was President and Group Executive Officer for the Western
Hemisphere for The Black & Decker Corporation, an electric tool manufacturer.
Mr. Leahy is a director of Allied Capital Corporation II, a venture capital
investment company, as well as a number of privately held companies. In
addition, Mr. Leahy is also a Trustee of Loyola College of Maryland and St.
Mary's University. Mr. Leahy is a graduate of Harvard University's Advanced
Management Program.
William E. Maya. Mr. Maya has been selected as a nominee for election
to the Board of Directors. Since September 1995, Mr. Maya has been Chairman
and Chief Executive Officer of Advanced Spine Fixation Systems, Inc., a medical
device company that designs, develops, manufactures and markets advanced spinal
implants and instrumentation for the surgical treatment of various spinal
conditions and disorders. From September 1994 to August 1995, Mr. Maya served
as Chairman of Vide Pharmaceuticals, an early stage research and development
pharmaceutical company. From 1987 to 1994, Mr. Maya held various positions at
Birtcher Medical Systems, Inc., where he most recently served as Vice Chairman,
President and Chief Executive Officer. Birtcher Medical Systems, Inc. was a
publicly held company engaged in the sale of physician office products. Mr.
Maya holds an undergraduate degree in Science from Saint Joseph's College,
Philadelphia, Pennsylvania.
Lee W. Melody. Mr. Melody joined the Company in October 1994 as Vice
President--Marketing, assumed the position of Chief Operating Officer in
December 1994, was appointed President effective March 1, 1995 and was
appointed Chief Executive Officer in February 1997. Mr. Melody's prior
experience involved sales, marketing and manufacturing. Prior to joining the
Company, from March 1993 to July 1994, Mr. Melody was a principal in an
automotive after-market franchise and Mr. Melody was President and CEO of
McGuire Nicholas, a consumer goods product company in hardware sales, from
October 1991 to February 1993. Prior to that time, he was Vice President of
Marketing and Sales of RSI Home Products, a manufacturer of bath products,
vanities and medicine cabinets, from January 1990 to December 1990, and Senior
Vice President of Allegretti & Company, a manufacturer of electrical lawn and
garden products, from 1987 to 1990. Mr. Melody served in the U.S. Navy
Submarine Service from 1960 to 1966 and graduated from the Executive Program of
the UCLA Graduate School of Management in 1989.
Ronald J. Monark. Mr. Monark has been selected as a nominee for
election to the Board of Directors. Mr. Monark is the President and Chief
Executive Officer of Mitchell Repair Information LLC, a limited liability
company jointly-owned by Snap-on, Inc. and the Thomson Corporation. From June
1989 to December 1996, Mr. Monark was President and Chief Executive Officer of
San Diego-based Mitchell International, an automotive information company.
Prior to 1989 Mr. Monark served as Executive Vice President and Chief Operating
Officer of this subsidiary of Thomson Corporation. Mr. Monark's previous
experience includes positions with KLM Automotive Publishing, Inc., an
automotive publishing company, and Morgan Yacht, a yacht builder, division of
Beatrice Foods, and five years as a Management Consultant with McKinsey &
Company and Peat, Marwick Mitchell. Mr. Monark graduated Phi Beta Kappa from
the College of William and Mary in Williamsburg, Virginia, and holds an MBA
from the University of Chicago.
Gerald C. Quinn. Mr. Quinn has been Chairman of the Board of the
Company since August 1992. Mr. Quinn is President of The Erin Mills Investment
Corporation ("TEMIC") and Executive Vice President of The Erin Mills
Development Corporation ("EMDC") and has been since 1989. TEMIC is associated
with EMDC by way of common ownership and was formed by five of Toronto's
largest land developers and builders. In 1989, the owners of EMDC decided to
diversify their investments and formed TEMIC. TEMIC is a private corporation
with
-3-
<PAGE> 6
over $100 million in venture capital investments. Mr. Quinn is a Chartered
Accountant and has a Bachelor of Science in Chemistry. He is a former partner
in the Insolvency Practice of Ernst & Young and, prior to joining TEMIC and
EMDC, was a senior officer in two publicly-traded corporations. Mr. Quinn is
also a director of EMIIC, Synsorb Biotech, Inc., a biotechnology research and
development company, and Highwaymaster Communications, Inc., a manufacturer and
distributor of cellular truck tracking systems.
George A. Schmutz. George A. Schmutz was appointed as a member of
the Board of Directors in June, 1996. Since 1984, Mr. Schmutz has been
President of Corporate Directions, Inc., a firm specializing in executive
search. Mr. Schmutz' background includes fifteen years with Xerox Corporation
in a number of management roles, including President of Arista Manufacturing
Systems, formerly a software services division of Xerox. Mr. Schmutz holds a
Bachelor of Science degree in Business Administration from Kansas State
University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1996, the Company's Board of
Directors held eight regular meetings and two special meetings. The Board of
Directors has established the following committees: (i) an Executive Committee,
which is responsible for reviewing and analyzing, and making recommendations to
the Board of Directors regarding the strategic business direction of the
Company; (ii) an Audit Committee, which consults with the Company's independent
auditors concerning their engagement and audit plan and report and management
letter and, with the assistance of the independent auditors, monitors the
adequacy of the Company's internal accounting controls and financial management
practices; (iii) a Compensation Committee, which is responsible for reviewing
the compensation and benefits of the Company's executive officers, making
recommendations to the Board of Directors concerning the compensation and
benefits of the Company's executive officers and administering the Company's
Stock Incentive Award Plans; and (iv) a Nominating Committee, which nominates
individuals for election as directors of the Company. No procedure has been
established for the consideration by the Nominating Committee of nominees
recommended by stockholders.
During the fiscal year ended December 31, 1996, each Board member
attended 75% or more of the aggregate of the meetings of the Board and of the
committees on which he served held during the period for which he was a
director or committee member, respectively.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
Directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with; except that (i)
an initial report of ownership was filed late by each of The Erin Mills
Development Corporation, an Ontario, Canada corporation, and The Erin Mills
Investment Corporation, an Alberta, Canada corporation and (ii) one report,
covering one transaction, was filed late by James M. Andre, a former Director
of the Company.
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<PAGE> 7
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997, and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Deloitte & Touche
LLP has audited the Company's financial statements since the fiscal year ended
March 31, 1995. Representatives of Deloitte & Touche LLP are expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
Stockholder ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Deloitte & Touche
LLP to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of the Company and its
stockholders.
The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting will be required to ratify the selection
of Deloitte & Touche LLP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
ADDITIONAL INFORMATION
MANAGEMENT
Set forth below is information regarding the executive officers of the
Company and current directors not listed in Proposal 1 above.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------------------------------------------------------------------
<S> <C> <C>
Gerald C. Quinn(1)(2)(3)(4) 48 Chairman of the Board
Lee W. Melody (1)(4) 55 President, Chief Executive Officer and Director
Michael G. Arkell 50 Vice President--Sales
Allan T. Maguire 40 Vice President of Finance, Chief Financial
Officer, Treasurer, Secretary and Director
John A. Rome 58 Vice President--Operations
James M. Andre, Ph.D. (2) 49 Director
Robert P. Schaen (2)(3)(4) 70 Director
</TABLE>
__________________________________
(1) Member of Executive Committee of the Board of Directors
(2) Member of Audit Committee of the Board of Directors
(3) Member of Compensation Committee of the Board of Directors
(4) Member of Nominating Committee of the Board of Directors
-5-
<PAGE> 8
Biographical Information regarding Mr. Quinn and Mr. Melody is set forth under
Proposal 1 above.
Michael G. Arkell. Mr. Arkell joined the Company in November 1995
and currently serves as Vice President--Sales. Mr. Arkell has over 25 years of
management experience in sales and marketing in the automotive, heavy duty and
industrial industries. Prior to joining the Company from 1989 through 1995,
Mr. Arkell was Director, Domestic Sales for Korody-Colyer, a manufacturer and
remanufacturer of diesel internal engine parts. Mr. Arkell holds a Bachelor of
Science in Business Administration from the University of Washington.
Allan T. Maguire. Mr. Maguire joined the Company in January 1994 as
Vice President of Finance and Chief Financial Officer. Mr. Maguire currently
serves as the Vice President of Finance, Chief Financial Officer, Treasurer and
Secretary of the Company and has served as a director of the Company since
February 1994. From June 1992 through December 1993, he was Vice President of
Finance of The Erin Maxx Corporation, a company engaged in the manufacture and
marketing of trading cards that was funded by EMIIC and its affiliates. Prior
to that time, Mr. Maguire served as Vice President, Finance of the LCL Group, a
diversified holding company, from November 1991 to June 1992, as Controller of
Kelsey's of Canada Limited, an owner, operator and franchisor of a restaurant
chain, from April 1991 to November 1991 and held various financial positions,
including divisional controller, with the restaurant division of Scott's
Hospitality, Inc., a diversified holding company, from February 1985 to April
1991. Mr. Maguire graduated from Fanshawe College in London, Ontario, Canada
and is a Certified General Accountant.
John A. Rome. Mr. Rome joined the Company in July 1995 as Vice
President--Operations. Mr. Rome is responsible for the design of new products,
the redesign of production techniques and the implementation of inventory
controls for the Company. Mr. Rome's prior experience includes operations
management, manufacturing engineering and quality assurance. Prior to joining
the Company, from October 1993 through July 1995, Mr. Rome was self employed
and wrote technical, operational and instructional manuals, which are currently
being implemented at the Company. From 1992 through October 1993, he served as
the Manager of Operations for Sierracin/Harrison, a manufacturer of aerospace
fasteners. From 1990 through 1992, Mr. Rome was Vice President--Operations and
Director of Quality Assurance for Robertshaw Controls Company, a manufacturer
of thermostats and gas valves for the heating and air conditioning industries.
Mr. Rome holds a Bachelor of Science degree in Mechanical Engineering from
Barrow-In-Furness of Cumbria, England.
James M. Andre, Ph.D. Dr. Andre was appointed to serve as a director
of the Company in January 1994. He is currently an adjunct faculty member of
Pepperdine University and has a business consulting practice. He served as an
Assistant Professor of Clinical Finance and Business Economics at the
University of Southern California School of Business Administration from 1984
to 1996. From 1975 to 1984, Dr. Andre held various executive positions in
private industry. He has experience in the fields of manufacturing, mortgage
banking, real estate and retail. In addition to receiving a degree in
accounting from Santa Clara University, Dr. Andre holds an MBA in Finance and
Ph.D. in Education from the University of Southern California.
Robert P. Schaen. Robert P. Schaen has been on the Board of
Directors of the Company since December 1994. Mr. Schaen is currently the Vice
Chairman and Chief Financial Officer of the Lease Resolution Corporation and
has been since its inception in 1992. Prior to that, Mr. Schaen was Vice
President and Comptroller of Ameritech, the Midwest telephone company created
upon the divestiture of AT&T, from February 1983 to June 1991. Prior to that,
he served in various positions with various Bell System companies, including
New York Telephone Company and Illinois Bell Telephone Company, and AT&T
Corporate. Mr. Schaen retired in 1991 after 39 years of service with Ameritech
and the Bell System. Mr. Schaen served in the U.S. Navy during and after World
War II, having retired with the rank of Commander. Mr. Schaen is a graduate of
Hobart College in Geneva, New York, and has completed the Advanced Management
Program at Harvard Graduate School of Business Administration.
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<PAGE> 9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 31, 1997 by: (i)
each Director and nominee for Director; (ii) each of the Named Executive
Officers (defined below); (iii) all executive officers and Directors of the
Company as a group; and (iv) all those known by the Company to be beneficial
owners of more than five percent of its Common Stock. Except as otherwise
indicated below, the Company believes that each person listed below has sole
voting and investment power with respect to the shares owned, subject to
applicable community property laws.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
-------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
- - ----------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Erin Mills International Investment Corporation(2)(3) 2,771,012 61.4%
Suite 204(L), Trident House Broad Street
Bridgetown, Barbados, West Indies
Lee W. Melody (4) 42,300 *
Allan T. Maguire (4) 31,094 *
Michael G. Arkell (4) 5,460 *
Gerald C. Quinn (3) (4) 2,774,008 61.4%
James M. Andre (4) 9,660 *
Stephen L. Greaves (4) (5) 2,773,692 61.4%
Robert P. Schaen (4) 14,960 *
George L. Schmutz (4) 2,000 *
John I. Leahy (4) 1,000 *
William E. Maya (4) 0 *
Ronald J. Monark (4) 0 *
All Directors and Executive Officers, 2,883,162 62.3%
as a group (12 persons) (6)
</TABLE>
_____________________________________
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or convertible,
or exercisable or convertible within 60 days of March 31, 1997, are
deemed outstanding for computing the percentage of the persons holding
such options but are not deemed outstanding for computing the
percentage of any other person. Share numbers include the following
number of shares subject to options exercisable within 60 days of
March 31, 1997 for each of the following persons: EMIIC, 0; Mr.
Melody, 40,200; Mr. Maguire, 30,994; Mr. Arkell, 5,360; Mr. Quinn,
2,996; Dr. Andre, 8,660, Mr. Greaves, 2,680; and Mr. Schaen, 8,660.
(2) Erin Mills International Investment Corporation, a Barbadian
corporation ("EMIIC"), is a majority-owned subsidiary of The Erin
Mills Investment Corporation, a corporation organized under the laws
of the province of Ontario, Canada ("TEMIC"). Consequently, TEMIC
would be deemed to have sole voting and investment power of the shares
of Common Stock owned by EMIIC by virtue of its control of EMIIC. The
members of the board of directors of EMIIC may also be deemed to have
beneficial ownership of the shares of Common Stock owned by EMIIC.
The members of the board of directors of EMIIC are Gerald C. Quinn
(who is also the Chairman of the Board of the Company), Humphrey
Metzgen, Andrew C.
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<PAGE> 10
Ferreira, Dr. Trevor A. Carmichael, and Stephen L. Greaves (who is
also a director of the Company). In addition, the members of the
board of directors of TEMIC may be deemed to have beneficial ownership
of the shares of Common Stock of the Company owned by EMIIC by virtue
of TEMIC's control of EMIIC. The members of the board of directors of
TEMIC are Rudy Bratty, John H. Daniels, Peter Daniels, Alfredo
DeGasperis, Marco Muzzo, Eli Reisman, and Larry Robbins, none of whom
are officers or directors of the Company. Gerald C. Quinn, the
Chairman of the Board of the Company, is also President of TEMIC.
None of the Company's officers or directors beneficially owns any
equity securities of TEMIC. One individual, John H. Daniels, who is
neither an officer nor director of the Company, owns approximately
12-1/2% of the outstanding ownership interests of EMIIC and TEMIC, and
no other person beneficially owns more than 5% of the outstanding
ownership interests of EMIIC or TEMIC. Each of the members of the
boards of directors of EMIIC and TEMIC disclaims beneficial ownership
of any of the shares of the Company's Common Stock beneficially owned
by EMIIC or TEMIC.
(3) Includes 2,771,012 shares of Common Stock held by EMIIC. See Note (2)
above. Mr. Quinn beneficially owns 1,000 Class Q Preference shares of
EMIIC, constituting 100% of the issued and outstanding Class Q
Preference shares of EMIIC, which are non-voting (except in the case
of a proposed dissolution of EMIIC) and entitle him to receive a
priority distribution upon the liquidation or dissolution of EMIIC
equal to approximately 3% of EMIIC's return on invested capital for
investments where the initial capital investment was made by EMIIC
prior to May 1, 1994. As of March 31, 1997, Mr. Quinn's stock
purchase rights through EMIIC entitled him to receive 83,130 shares of
Common Stock of the Company at the original purchase price paid by
EMIIC. At March 31, 1997, EMIIC owned 2,771,012 shares of Common
Stock of the Company, or 61.37% of the outstanding shares of Common
Stock. The above table reflects EMIIC's ownership at March 31, 1997,
inclusive of Mr. Quinn's right to acquire 83,130 shares from EMIIC.
Except with respect to the shares subject to his purchase rights, Mr.
Quinn disclaims beneficial ownership of any of the shares of the
Company's Common Stock held by EMIIC.
(4) The address of such stockholder is c/o MotorVac Technologies, Inc.,
1431 South Village Way, Santa Ana, California 92705.
(5) Includes 2,771,012 shares of Common Stock held by EMIIC. See Note (2)
above. Mr. Greaves disclaims beneficial ownership of any of the
shares of the Company's Common Stock held by EMIIC.
(6) Includes shares beneficially owned by directors' and executive
officers' as listed above, plus an additional 4,580 shares
beneficially owned by an executive officer not listed in the above
table.
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
The Company's directors, who are not also employees of the Company and
who are not employees of EMIIC, TEMIC or EMDC, receive $750 for attendance at
each Board of Directors meeting and are reimbursed for expenses incurred in
connection with attendance at Board of Directors' meetings. During 1996, no
additional compensation was paid for attendance at committee meetings. For
1997, additional compensation will be paid for attendance at committee meetings
when such meetings are not held on the same date as Board meetings. Pursuant
to the terms of the Company's 1994 Stock Incentive Award Plan, each director
who is not also an employee of the Company (but including those directors who
are employees of EMIIC, TEMIC or EMDC (the "Non-Employee Directors")) were
granted ten-year options to purchase 3,160 shares of Common Stock, which become
exercisable at the rate of 20% per year, commencing one year from the date of
grant; provided that the exercisability of options to acquire 50% of such
shares was accelerated such that upon consummation of the initial public
offering completed April 25, 1996, options to purchase 1,580 of such shares
became exercisable. The options granted to such Non-Employee Directors have an
exercise price of $5.10 per share. In addition, on February 28, 1996, the
Compensation Committee of the Board of Directors granted ten-year options to
purchase 5,500 shares of Common Stock at exercise prices equal to the per share
initial public offering price of $5.375 to each Non-Employee Director under
-8-
<PAGE> 11
the Company's 1996 Stock Incentive Award Plan. These additional options become
exercisable at the rate of 20% per year from the date of grant.
Certain Directors of the Company from time to time perform consulting
services for the Company. Such Directors are paid an hourly or per diem rate
for their services. It is the Company's policy that such hourly and per diem
rates be no greater than those which are generally available from the public.
1996 DIRECTOR STOCK PLAN
The Company's 1996 Director Stock Plan (the "Director Plan") was
adopted by the Board of Directors and was approved by the written consent of
the stockholders in February 1996 and became effective on April 25, 1996, the
date the Company's Common Stock was registered pursuant to the Securities
Exchange Act of 1934, as amended (the "Director Plan Effective Date"). A total
of 50,000 shares of Common Stock have been reserved for issuance under the
Director Plan. The purpose of the Director Plan is to attract and retain
qualified non-employee directors ("Eligible Director") of the Company and more
closely align the interests of such directors with that of the stockholders
through increased stock ownership by non-employee directors. Pursuant to the
Director Plan, each individual first elected or appointed as a non- employee
director after the Director Plan Effective Date is automatically granted a
non-qualified stock option to purchase 2,000 shares of Common Stock on the date
of the annual meeting of stockholders occurring on or after the date of such
election or appointment ("Initial Grant"). In addition, at each subsequent
annual meeting of stockholders, each Eligible Director who was previously
granted an Initial Grant is automatically granted a non-qualified stock option
to purchase an additional 2,000 shares of Common Stock. To be eligible to
receive such automatic grants, the stockholders must elect or reelect the
Eligible Director at the annual meeting of stockholders coinciding with the
date the Eligible Director receives such automatic grant. The purchase price
of each share subject to options granted under the Director Plan is equal to
100% of the fair market value of a share of Common Stock on the automatic grant
date. All options granted pursuant to the Director Plan are immediately
exercisable in full for fully vested shares of Common Stock. Each option will
have a term of ten years and one day, subject to earlier termination following
the non-employee director's cessation of Board service. Options granted under
the Directors Plan are nontransferable and generally expire three months after
termination of the non-employee director's service to the Company. In general,
if a non-employee director is permanently disabled or dies during his or her
service to the Company, such option may be exercised up to twelve months
following such disability or death. The Director Plan will terminate on the
tenth anniversary of the Director Plan Effective Date.
COMPENSATION OF EXECUTIVE OFFICERS
The table on the following page sets forth, for the nine-month fiscal
year ended December 31, 1995 and the twelve month fiscal year ended December
31, 1996, certain compensation awarded to or earned by the Company's chief
executive officer and the other most highly compensated executive officers of
the Company who earned in excess of $100,000 in salary and bonus (collectively,
the "Named Executive Officers") for services rendered to the Company.:
-9-
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ---------------------
SECURITIES UNDERLYING OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) COMPENSATION (1)
--------------------------- ---- ------ ----- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Lee W. Melody 1995 $105,000 $0 12,640 $11,042
President, Chief Executive 1996 155,833 15,845 168,400 14,573
Officer and Director
Allan T. Maguire 1995 $90,350 0 - 11,484
Vice President of Finance, 1996 123,800 12,408 62,540 15,266
Chief Financial Officer,
Treasurer, Secretary and
Director
Michael G. Arkell 1995 83,886 0 - 10,792
Vice President of Sales 1996 100,000 795 17,320 16,712
</TABLE>
___________________________________
(1) The amounts indicated under the heading "Other Annual Compensation"
represent automobile allowances and health insurance benefits provided
to the Named Executive Officers for the nine months ended December 31,
1995 and twelve months ended December 31, 1996 as follows: (i) with
respect to Mr. Melody, an automobile allowance in the amount of $4,500
and $6,000, respectively, and benefits aggregating $6,542 and $8,573,
respectively, (ii) with respect to Mr. Maguire, an automobile
allowance in the amount of $4,500 and $6,000, respectively, and
benefits aggregating $6,984 and $9,266, respectively, and (iii) with
respect to Mr. Arkell, an automobile allowance in the amount of $3,384
and $5,214, respectively, and benefits aggregating $7,408 and $11,498,
respectively.
CASH BONUS PLAN
The Board of Directors of the Company adopted a Cash Bonus Plan (the
"Cash Bonus Plan") in April 1996. The purpose of the Cash Bonus Plan is to
attract and retain qualified personnel, provide incentives to employees and
officers of the Company and promote the success of the Company's business.
Pursuant to the Cash Bonus Plan, the Company is authorized to create a bonus
pool in an amount equal to 10% of the Company's net income after taxes for each
fiscal year as set forth in the Company's audited financial statements for such
fiscal year, subject to certain adjustments by the Board of Directors or the
Compensation Committee. All employees and officers of the Company are eligible
to participate in the Cash Bonus Plan; however, only those persons recommended
by the President of the Company and selected by the Board of Directors or
Compensation Committee of the Company are entitled to receive bonuses from the
bonus pool for any fiscal year. Each employee or officer of the Company
selected to participate in the Cash Bonus Plan for any fiscal year is entitled
to receive a bonus from the bonus pool in an amount determined in the sole and
absolute discretion of the Board or Compensation Committee, after due
consideration of the recommendation of the President of the Company.
Participants in the Cash Bonus Plan have the right to defer receipt of all or
any portion of any bonus earned. The Cash Bonus Plan is administered by the
Board of Directors, or at the option of the Board of Directors, by the
Compensation Committee of the Company. In the event that the employment or
officer status of any person is terminated during any fiscal year, then that
person generally will not be entitled to receive any bonus from the bonus pool
for the fiscal year in which the termination of employment or officer status
change occurred. The Board of Directors has the power to amend, suspend, alter
or terminate the Cash Bonus Plan at any time, and the Cash Bonus Plan shall
continue in effect until such time as it is terminated by the Board of
Directors. On June 6, 1996, the Board of Directors resolved that Lee W. Melody
will be entitled to receive at least 50% of any amount to be paid under the
Cash Bonus Plan.
-10-
<PAGE> 13
OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its Stock
Incentive Award Plan (the "1994 Plan") and its 1996 Stock Incentive Award Plan
(the "1996 Plan"; together with the 1994 Plan, the "Plans"). As of March 31,
1997, a total of 126,400 shares of Common Stock were reserved for issuance
under the 1994 Plan, all of which were subject to outstanding options, and a
total of 325,000 shares of Common Stock were reserved for issuance under the
1996 Plan, 290,680 of which were subject to outstanding options.
The 1994 Plan was adopted by the Board of Directors and was approved
by the written consent of the stockholders in February 1994. The 1996 Plan was
adopted by the Board of Directors and was approved by the written consent of
the stockholders in February 1996. The purpose of the Plans is to attract and
retain qualified personnel, provide additional incentives to employees,
officers, directors and consultants of the Company and promote the success of
the Company's business. Pursuant to the Plans, the Company may grant incentive
and nonqualified stock options, restricted stock, stock appreciation rights,
dividend equivalents, stock payments and/or performance awards (collectively
"Incentive Awards") to key employees, officers, directors, and consultants of
the Company.
The Board of Directors has delegated to the Compensation Committee the
discretionary authority to designate the persons to whom Incentive Awards may
be granted (provided that incentive stock options can only be granted to
employees of the Company), determine the time when Incentive Awards will be
granted, the amounts, terms and conditions of such grants (consistent with the
terms of the Plans), interpret the Plans, and adopt rules for the operation of
the Plans.
The maximum term of Incentive Awards granted under the Plans is ten
years. Incentive Awards granted under the Plans are non- transferable and
generally expire three months after the termination of the grantee's service to
the Company. In general, if a grantee is permanently disabled or dies during
his or her service to the Company, such Incentive Award may be exercised up to
twelve months following such disability or death.
Stock Options. Under the Plans, the exercise price of incentive and
non-qualified stock options must equal at least the fair market value of the
Common Stock on the date of grant. In addition, the exercise price of
incentive stock options granted to any person who at the time of grant owns
stock possessing more than 10% of the total combined voting power of all
classes of stock must be at least 110% of the fair market value of such stock
on the date of grant and the term of those options cannot exceed five years.
The aggregate fair market value of the stock with respect to which incentive
stock options are first exercisable in any calendar year may not exceed
$100,000 per optionee.
Stock Appreciation Rights. Stock appreciation rights awarded under
the Plan vest or become exercisable as determined by the Compensation
Committee. Upon exercise of a stock appreciation right, the grantee is
entitled to receive an amount equal to the excess of the fair market value of a
share of Common Stock on the exercise date of such stock appreciation right
over the fair market value of a share of Common Stock on the date of grant of
such stock appreciation right.
Restricted Stock. Restricted stock granted under the Plans generally
may not be sold, transferred or otherwise hypothecated until the restrictions
on transferability imposed by the Compensation Committee are removed or expire.
Generally, holders of restricted stock have all the rights of a stockholder
with respect to the restricted stock granted, including the right to vote the
shares and receive all dividends and other distributions paid or made with
respect thereto.
Performance Awards. Performance awards may be granted by the
Compensation Committee based on the performance of the Company's stock over a
period determined by the Compensation Committee or any other measures
determined appropriate by the Compensation Committee. Payment of performance
awards generally will be in cash unless replaced by a stock payment in full or
in part as determined by the Compensation Committee.
Stock Payments and Dividend Equivalents. The Compensation Committee
may grant stock payments to eligible persons for all or any portion of the
compensation (other than base salary) that would otherwise become
-11-
<PAGE> 14
payable to such eligible person in cash. The Compensation Committee may also
grant dividend equivalent rights based on the dividends declared on the stock
of the Company on record dates during the period between the date an option or
stock appreciation right is granted and the date such option or stock
appreciation right is exercised or such other periods as determined by the
Compensation Committee. Dividend equivalents are converted into additional
shares of stock or cash in accordance with a formula determined by the
Compensation Committee.
The Board of Directors may amend, suspend, alter or terminate the
Plans at any time provided that the Board of Directors shall not amend the
Plans to reduce the minimum option price requirements set forth in the Plans,
to increase the maximum number of stock appreciation rights or shares of stock
subject to Incentive Awards available for grant under the Plans, to provide for
the administration of the Plans other than by the Board of Directors or the
Compensation Committee, to change the classes of persons eligible to receive
Incentive Awards, to extend the maximum period during which Incentive Awards
may be exercised or to extend the term of the Plans, without the approval of a
majority of the outstanding voting stock of the Company. The Board of
Directors adopted an amendment on August 15, 1996 to the Plans to comply with
recent changes in Rule 16b-3 promulgated under the Securities and Exchange Act
of 1934, as amended, and to provide that, upon the consummation of certain
events, including the dissolution or liquidation of the Company, the merger or
consolidation of the Company, the sale of all or substantially all of the
assets of the Company, the acquisition of equity securities of the Company
representing 20% or more of the aggregate voting power of the outstanding
equity securities of the Company or a change in the composition of a majority
of the Board of Directors (collectively, a "Terminating Transaction"), that all
outstanding Incentive Awards shall become immediately exercisable.
The following table sets forth certain information regarding options
granted by the Company during fiscal year ended December 31, 1996 to the Named
Executive Officers:
OPTIONS GRANTED IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE
- - ------------------ --------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Lee W. Melody 168,400 56% $5.10 Note (1)
to
$6.125(1)
Allan T. Maguire 62,540 21% $5.10 Note (1)
to
$5.375(1)
Michael G. Arkell 17,320 6% $5.10 Note (1)
to
$5.375(1)
</TABLE>
________________________________________
(1) On January 30, 1996 the following options were granted at an exercise
price of $5.10 per share: Mr. Melody, 15,800 shares; Mr. Maguire,
4,740 shares. On February 19, 1996 the following options were granted
at an exercise price of $5.10 per share: Mr. Arkell, 6,320 shares. On
April 25, 1996 the following options were granted at an exercise price
of $5.375 per share: Mr. Melody, 82,500 shares; Mr. Maguire, 57,800
shares; Mr. Arkell, 11,000 shares. On June 6, 1996 the following
options were granted at an exercise price of $6.125 per share: Mr.
Melody, 70,100 shares. The exercise price of these options is equal
to the fair market value of the Common Stock on each respective date
of grant. Each such option becomes exercisable at the rate of 20% per
year and expires on the tenth anniversary of the date of grant.
-12-
<PAGE> 15
The following table sets forth information regarding options exercised
during the Company's fiscal year ended December 31, 1996 by the Named Executive
Officers of the Company, as well as the aggregate value of unexercised options
held by such individuals at December 31, 1996:
AGGREGATED OPTION EXERCISES LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE-
UNDERLYING UNEXERCISED MONEY OPTIONS AT FISCAL YEAR
SHARES OPTIONS AT FISCAL YEAR END END ($) (1)
ACQUIRED ON VALUE ----------------------------- ----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ----------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lee W. Melody -0- -0- 23,700 176,300 --- ---
Allan T. Maguire -0- -0- 19,434 71,546 --- ---
Michael G. Arkell -0- -0- 3,160 14,160 --- ---
</TABLE>
__________________________
(1) Calculated based on the estimated fair market value of the Company's
Common Stock as of December 31, 1996, less the exercise price payable
upon the exercise of such options. Such estimated fair market value
as of December 31, 1996 was $4.875, the last price posted at the close
of trading on December 31, 1996. Because the value of unexercised
in-the-money options at December 31, 1996 was less than zero in all
cases, no amount is shown.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company and Lee W. Melody have entered into an Employment
agreement dated October 24, 1994, as amended by that certain First Amendment to
Employment Agreement dated as of November 3, 1995 (collectively, the "Melody
Employment Agreement"). The Melody Employment Agreement expires on February
21, 2000 and provides for payment to Mr. Melody of an annual salary of
$150,000, subject to annual review and potential adjustment, and bonuses based
upon his performance during each fiscal year of the Company in an amount
determined in the sole and absolute discretion of the Board of Directors. In
addition to salary and bonuses, Mr. Melody receives an automobile allowance in
the amount of $500 per month and is reimbursed for all reasonable and necessary
travel and other business expenses incurred in connection with performance of
his duties. The Company also pays the annual cost of premiums for health
insurance coverage for Mr. Melody and his dependents. If Mr. Melody's
employment with the Company is terminated for cause (as defined in the Melody
Employment Agreement), then Mr. Melody is entitled to receive his base salary
through the date of termination. If Mr. Melody's employment with the Company
is terminated without cause (including on account of non-renewal of the Melody
Employment Agreement), then he is entitled to receive payment of his base
salary for a period of 12 months from the date of such termination and the
Company is required to continue to pay the annual premiums for health care
benefits for him and his dependents for such 12-month period. In the event
that Mr. Melody's employment is terminated without cause or Mr. Melody resigns
from his employment for "good reason" (as defined in the Melody Employment
Agreement) following a change in control of the Company (as defined in the
Melody Employment Agreement), then Mr. Melody is entitled to receive payment of
his base salary in a lump sum payment within ten days of the date of his
termination and the Company is required to pay the annual premiums for health
benefits for him and his dependents for a period of twelve months following the
date of such termination.
The Company and Allan T. Maguire have entered into an Amended and
Restated Employment Agreement dated March 21, 1996 (the "Maguire Employment
Agreement"). The Maguire Employment Agreement expires on December 31, 1998,
with an automatic renewal for a further three (3) years in the event the
Company fails to give notice of non-renewal (as defined in the Maguire
Employment Agreement), and provides for payment to Mr. Maguire of an annual
salary of $123,800, subject to annual review and potential adjustment, and
bonuses based upon his performance during each fiscal year of the Company in an
amount determined in the sole and absolute discretion of the President of the
Company. In addition to salary and bonuses, Mr. Maguire receives an automobile
-13-
<PAGE> 16
allowance in the amount of $500 per month and is reimbursed for all reasonable
and necessary travel and other business expenses incurred in connection with
the performance of his duties. The Company also pays the annual cost of
premiums for health insurance coverage for Mr. Maguire and his dependents. If
Mr. Maguire's employment with the Company is terminated for cause (as defined
in the Maguire Employment Agreement), then Mr. Maguire is entitled to receive
his base salary through the date of termination. If Mr. Maguire's employment
with the Company is terminated without cause (including on account of
non-renewal of the Maguire Employment Agreement), then he is entitled to
receive payment of his base salary for a period of 12 months from the date of
such termination and the Company is required to pay the annual premiums for
health care benefits for him and his dependents for such 12-month period. In
addition, if Mr. Maguire's employment with the Company is terminated for any
reason prior to December 31, 1996, then the Company is obligated to pay Mr.
Maguire's moving expenses to any location in Canada or the United States. In
the event that Mr. Maguire's employment is terminated without cause or Mr.
Maguire resigns from his employment for "good reason" (as defined in the
Maguire Employment Agreement), following a change in control of the Company (as
defined in the Maguire Employment Agreement), then Mr. Maguire is entitled to
receive payment of his base salary in a lump sum payment within ten days of the
date of his termination and the Company is required to pay the annual premiums
for health benefits for him and his dependents for a period of twelve months
following the date of such termination.
On November 20, 1995, the Company hired Michael G. Arkell as its Vice
President--Marketing and Sales under an employment agreement (the "Arkell
Employment Agreement") that expires on February 17, 1999 and provides for an
annual salary of $100,000 subject to annual review and potential adjustment,
plus an incentive bonus based upon the Company achieving certain sales and
operating profit goals. In addition to salary and incentive bonus, Mr. Arkell
receives an automobile allowance in the amount of $500 per month and is
reimbursed for all reasonable and necessary travel and other business expenses
incurred in connection with performance of his duties. The Company also pays
the annual cost of premiums for health insurance coverage for Mr. Arkell and
his dependents. If Mr. Arkell's employment with the Company is terminated for
cause (as defined in the Arkell Employment Agreement), then Mr. Arkell would be
entitled to receive his base salary through the date of termination. If Mr.
Arkell's employment with the Company is terminated without cause, then he is
entitled to receive payment of his base salary for a period of six months from
the date of such termination and the Company is required to continue to pay the
annual premiums for health care benefits for him and his dependents for such
six-month period.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the initial public offering, EMIIC and certain other
companies affiliated with EMIIC, from time to time, made loans to the Company
in order to fund its ongoing operations. As at December 31, 1995, there were
four separate Secured Subordinated Promissory Notes outstanding totaling
$5,273,872. The principal amount of three of these notes totaling $4,410,300
was converted into 820,521 shares Common Stock of the Company on April 24,
1996, concurrent with the initial public offering. Additionally, $123,572,
which represented initial public offering costs advanced to the Company by
EMIIC, was repaid to EMIIC on May 6, 1996. The accrued interest totaling
approximately $836,000, with respect to the above indebtedness of $5,273,872,
was repaid to EMIIC and an affiliate of EMIIC on May 6, 1996.
The $1,420,000 principal amount of the fourth note remained
outstanding following the offering, and together with the then accrued interest
of $93,312, was repaid on December 16, 1996 from the proceeds of the issuance
of a note payable to Imperial Bank. The note payable to an affiliate of EMIIC
bore interest at a rate of 2% in excess of the prime rate as published from
time to time in the Western Edition of The Wall Street Journal. EMIIC is the
principal stockholder of the Company and Gerald C. Quinn is a director of the
Company and is a member of the board of directors of EMIIC and is an employee
of TEMIC, the parent corporation of EMIIC. Stephen L. Greaves, a director of
the Company, is also a member of the board of directors and an officer of
EMIIC.
The Company believes that each of the loans and other transactions
between it and EMIIC and EMIIC's affiliates were on terms no less favorable to
the Company than were available from independent third parties.
-14-
<PAGE> 17
On September 30, 1994, the Company entered into a letter agreement
with Robert G. Reese, a director of the Company and the former President and
Chief Executive Officer of the Company, pursuant to which Mr. Reese resigned as
President and Chief Executive Officer and as a director of the Company
effective September 30, 1994, and MotorVac agreed to pay Mr. Reese $15,000 in
cash and to continue payment of his regular base salary through March 31, 1995,
which resulted in additional payments to Mr. Reese of approximately $75,000.
The Company also agreed to pay Mr. Reese's health premiums for him and his
existing dependents for a period of six months from the date of termination of
his employment, which resulted in an additional payment for the benefit of Mr.
Reese of approximately $5,700. The letter agreement also provided for a
reimbursement of business expenses incurred by Mr. Reese in connection with his
assisting the Company in the transition of his responsibilities. Under the
letter agreement, Mr. Reese was to be paid certain fees and granted stock
options in the event that the Company successfully entered into contracts with
certain specified companies. On account of these provisions, Mr. Reese
received payments equal to approximately $28,000 and was granted options to
acquire up to additional 14,220 shares of Common Stock of the Company. In
addition, under the letter agreement, outstanding options to acquire up to
14,220 shares of the Company's Common Stock from EMIIC were extended to remain
exercisable through December 31, 1995. As of the date hereof, Mr. Reese has
exercised options with respect to the 14,220 shares of Common Stock from EMIIC
that were extended under the letter agreement through December 31, 1995 and the
additional options granted to him to acquire up to an additional 14,220 shares
of Common Stock from the Company terminated unexercised on December 31, 1995.
Certain Directors of the Company from time to time perform consulting
services for the Company. Such Directors are paid an hourly or per diem rate
for their services. It is the Company's policy that such hourly and per diem
rates be no greater than those which are generally available form the public.
OTHER MATTERS
The Board of Directors knows of no other matters that will be
presented for consideration at the Annual Meeting. If any other matters are
properly brought before the meeting, it is the intention of the persons named
in the accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
ALLAN T. MAGUIRE
Secretary
April 21, 1997
-15-
<PAGE> 18
MOTORVAC TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1997
The undersigned stockholder of Motorvac Technologies, Inc., a Delaware
corporation, hereby acknowledges the receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement with respect to the Annual Meeting of
Stockholders of Motorvac Technologies, Inc. to be held at the Holiday Inn
Select, located at 17941 Von Karman Avenue, Irvine, California 92614, on
Tuesday, May 13, 1997, at 2:00 p.m., local time, and hereby appoints LEE W.
MELODY and ALLAN T. MAGUIRE, and each of them, as attorneys and proxies of the
undersigned, each with full power of substitution, to vote all of the shares of
stock of MOTORVAC TECHNOLOGIES, INC. which the undersigned may be entitled to
vote at such meeting, and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. IF
SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE
THEREWITH.
PROPOSAL 1: To elect directors to hold office until the next Annual
Meeting of Stockholders and until their successors are elected.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
below). listed below.
Nominees: Stephen L. Greaves, John I. Leahy, William E. Maya, Lee W.
Melody, Ronald J. Monark, Gerald C. Quinn, George A. Schmutz.
To withhold authority to vote for any nominee(s), write such nominee(s)' name(s)
below:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Continued and to be signed on other side)
<PAGE> 19
(continued from other side)
PROPOSAL 2: To ratify the selection of Deloitte & Touche LLP as
independent auditors of the Company for its fiscal year ending
December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
DATED _________________ _________________________________________
_________________________________________
SIGNATURE(S)
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians and attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating title.
If signer is a partnership, please sign in
partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
