<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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:
-------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
4. Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
5. Total fee paid:
-------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
-------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
3. Filing Party:
-------------------------------------------------------------------------
4. Date Filed:
-------------------------------------------------------------------------
<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 12, 1998
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 12, 1998, 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:
To elect Directors to serve for the ensuing year and until their
successors are elected.
To ratify the selection of Deloitte & Touche LLP as independent auditors
of the Company for its fiscal year ending December 31, 1998.
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 31, 1998
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
DAVID P. NELSON
Secretary
Santa Ana, California
April 6, 1998
- --------------------------------------------------------------------------------
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 12, 1998
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 12, 1998 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 6, 1998, 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
31, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on March 31, 1998, 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.
1
<PAGE> 4
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than December 7, 1998 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
There are six 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. Each
nominee listed below is currently a director of the Company, four directors
having been elected by the stockholders, and two directors, Grant Ferrier and
Daniel P. Whelan, having been appointed by the Board. Three vacancies on the
Board will remain after the 1998 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 six 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.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote.
NOMINEES
The names of the nominees and certain information about them are set
forth below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
Grant Ferrier 36 President, Environmental Business International, Inc.
Stephen L. Greaves (1) 39 President and General Manager, Erin Mills
International Investment Corporation
Lee W. Melody (1) 56 President and Chief Executive Officer,
MotorVac Technologies, Inc.
Ronald J. Monark (2)(3) 58 Chairman of the Board, MotorVac Technologies, Inc.
Gerald C. Quinn (1)(2)(3) 49 President, The Erin Mills Investment Corporation
Daniel P. Whelan (2) 47 President and Chief Executive Officer,
Evergreen Holdings, Inc.
</TABLE>
- ----------
(1) Member of Nominating 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.
Grant Ferrier. Mr. Ferrier has been a member of the Board of Directors
of the Company since January 1998. Since 1988, Mr. Ferrier has been President
and Chief Executive Officer of Environmental Business International, Inc., a
business research, management consulting and publishing company serving the
environmental industry. Mr. Ferrier holds B.S. degrees in Mechanical Engineering
and Conservation and Resource Studies from the University of California,
Berkeley.
2
<PAGE> 5
Stephen L. Greaves. Mr. Greaves has been a member of the Board of
Directors of the Company since 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.
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 has been a member of the
Board of Directors of the Company since March 1995. 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, currently an independent consultant, has
been a member of the Board of Directors of the Company since May 1997 and has
served as Chairman of the Board of Directors of the Company since November 1997.
From June 1989 to December 1996, Mr. Monark was President and Chief Executive
Officer of San Diego-based Mitchell International, an automotive information
company. From January 1, 1997 to December 31, 1997, Mr. Monark served on the
Managing Committee and was President and Chief Executive Officer of Mitchell
Repair Information Company LLC, a limited liability company jointly-owned by
Snap-on, Inc. and The 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 a member of the Board of Directors
of the Company since August 1992, and served as Chairman of the Board of
Directors of the Company until November 1997. 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 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.
Daniel P. Whelan. Mr. Whelan has been a member of the Board of Directors
of the Company since January 1998. Since 1996, Mr. Whelan has been President and
Chief Executive Officer of Evergreen Holdings, Inc. ("Evergreen"), a
privately-held company that refines used motor oil. From 1995 to 1996, Mr.
Whelan served as Vice President and Chief Financial Officer of Evergreen. From
1994 to 1995, Mr. Whelan was self-employed as a consultant. From 1989 to 1994,
Mr. Whelan served as Vice President, Chief Financial Officer and Secretary of
Birtcher Medical Systems, Inc., a manufacturer of electronic surgical devices.
Mr. Whelan holds a B.S. degree in Business Administration/Finance from San Jose
State University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
3
<PAGE> 6
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1997, the Company's Board of
Directors held four regular meetings. The Board of Directors has established an
Audit Committee, a Compensation Committee and a Nominating Committee. The Audit
Committee, which is composed of Mssrs. Quinn, Whelan and Ronald J. Monark,
consults with the Company's independent auditors concerning their engagement,
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. The Audit Committee met once during
the fiscal year ended December 31, 1997. The Compensation Committee, which is
composed of Mssrs. Quinn, Monark and George L. Schmutz, 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. The Compensation Committee met three times during
the fiscal year ended December 31, 1997. The Nominating Committee, which is
composed of Mssrs. Melody, Greaves, Schmutz and Quinn, nominates individuals for
election as directors of the Company. The Nominating Committee did not meet
during the fiscal year ended December 31, 1997. No procedure has been
established for the consideration by the Nominating Committee of nominees
recommended by stockholders.
During the fiscal year ended December 31, 1997, 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, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
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, 1998, 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.
4
<PAGE> 7
ADDITIONAL INFORMATION
MANAGEMENT
Set forth below is information regarding the executive officers and key
employees of the Company and current directors not listed in Proposal 1 above.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lee W. Melody 56 President, Chief Executive Officer and Director
Michael G. Arkell 51 Vice President--Sales
David P. Nelson 56 Vice President of Finance, Chief Financial Officer,
Treasurer and Secretary
John A. Rome 59 Vice President--Operations
William E. Maya 48 Director
George L. Schmutz (1)(3) 58 Director
</TABLE>
- ----------
(1) Member of the Nominating Committee of the Board of Directors.
(3) Member of the Compensation Committee of the Board of Directors.
Biographical Information regarding 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.
David P. Nelson. Mr. Nelson joined the Company in November 1997 and
currently serves as Vice President of Finance, Chief Financial Officer,
Treasurer and Secretary of the Company. From 1990 to 1997, Mr. Nelson served as
Vice President of Finance of Geodynamics Corp., a publicly-traded aerospace
company that was acquired by Logicon Inc. in 1996. Mr. Nelson holds B.A. and
M.A. degrees in Economics from the University of California Los Angeles.
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.
William E. Maya. Mr. Maya has been a member of the Board of Directors of
the Company since May 1997. 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
5
<PAGE> 8
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. is 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.
George L. Schmutz. George L. Schmutz has been a member of the Board of
Directors since 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table on the following page sets forth certain information regarding
the beneficial ownership of the Company's Common Stock as of March 31,1998 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.
<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%
Radley Court, Suite 200
Collymore Rock
St. Michael, Barbados, West Indies
Lee W. Melody (4) 85,696 1.9%
Michael G. Arkell (4) 9,416 *
Gerald C. Quinn (3) (4) 2,776,008 61.4%
Stephen L. Greaves (4) (5) 2,775,360 61.4%
Ronald J. Monark (4) 17,000 *
George L. Schmutz (4) 8,000 *
William E. Maya (4) 2,000 *
Daniel P. Whelan (4) 0 *
Grant Ferrier (4) 0 *
All Directors and Executive Officers, 2,918,234 64.6%
as a group (11 persons)
</TABLE>
- ----------
* Less than one percent.
(1) Based upon information supplied by officers, directors and principal
stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based
on 4,514,918 shares outstanding on March 31, 1998. Shares of Common
Stock subject to options or warrants currently exercisable or
convertible, or exercisable or convertible within 60 days of March 31,
1998, 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, 1998 for each of the following persons: Mr. Melody, 72,616; Mr.
Arkell, 8,096; Mr. Quinn, 4,996; Mr. Greaves, 4,048; Mr. Monark, 2,000;
Mr. Maya, 2,000; and Mr. Schmutz, 2,000.
(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"). TEMIC is a wholly-owned subsidiary of The
Erin Mills Development Corporation, a corporation organized under the
laws of the province of Ontario, Canada ("EMDC"). Consequently, TEMIC
and EMDC, by virtue of their control of EMIIC, would be deemed to share
voting and investment power of the shares of Common Stock owned by
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
6
<PAGE> 9
of EMIIC are Gerald C. Quinn (who is also the Chairman of the Board of
the Company), Humphrey Metzger, Andrew C. Ferreira, Dr. Trevor A.
Carmichael and Stephen L. Greaves (who is also a director of the
Company). In addition, the members of the boards of directors of TEMIC
and EMDC may be deemed to have beneficial ownership of the shares of
Common Stock of the Company owned by EMIIC by virtue of TEMIC and EMDC's
control of EMIIC. The members of the boards of directors of TEMIC and
EMDC are Rudy Bratty, John H. Daniels, Peter Daniels, Alfredo
DeGasperis, Marco Muzzo, Elly Reisman, and Larry Robbins, none of whom
are officers or directors of the Company. Stephen L. Greaves, a member
of the Board of Directors of the Company, is General Manager of EMIIC.
Gerald C. Quinn, a member of the Board of Directors of the Company, is
President of TEMIC and Executive Vice President of EMDC. None of the
Company's officers or directors beneficially owns any equity securities
of EMIIC, TEMIC or EMDC. 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, TEMIC or EDMC. Each of the members of the boards of
directors of EMIIC, TEMIC and EDMC disclaims beneficial ownership of any
of the shares of the Company's Common Stock beneficially owned by EMIIC,
TEMIC or EMDC.
(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, 1998, 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, 1998,
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, 1998, 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.
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION
Prior to December 1997, each of the Company's non-employee directors
received $750 for attendance at each meeting of the Board of Directors and each
meeting of any committee of the Board of Directors held on days other than those
on which meetings of the Board of Directors were held. Effective January 15,
1998, each of the Company's non-employee directors will receive monthly
directors" fees of $1,000 (the "Monthly Fee") and will receive $750 for
attendance at each meeting of the Board of Directors. Mssrs. Greaves and Quinn
are not entitled to receive the Monthly Fee until December 1, 1998. Non-employee
directors of the Company who are also members of the Audit and Compensation
Committees of the Board of Directors will receive $375 for attendance at each
meeting of such committees that are held on days other than those on which
meetings of the Board of Directors are held. Non-employee directors are also
reimbursed for expenses incurred in connection with attendance at meetings of
the Board of Directors or committees thereof. On May 13, 1997, Mssrs. Greaves
and Quinn were each granted an option under the Company's 1996 Stock Incentive
Award Plan to purchase 268 shares of Common Stock at an exercise price of
$3.3125 per share. Such options were fully vested as of the date of grant and
expire on May 13, 2007.
7
<PAGE> 10
1996 DIRECTOR STOCK PLAN
The Company's 1996 Director Stock Plan (the "Director Plan") was adopted by the
Board of Directors and the Company's stockholders in February 1996, and became
effective on April 25, 1996. 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 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. Directors eligible
to receive options under the Director Plan include those individuals who are not
employees of the Company nor any Participating Company (as defined in the
Director Plan), including EMIIC, TEMIC and EMDC ("Eligible Directors"). Pursuant
to the Director Plan, each individual first elected or appointed as an Eligible
Director 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 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 such
director is to receive 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 Eligible Director's
cessation of Board service. Options granted under the Director Plan are
nontransferable and generally expire three months after termination of the
Eligible Director's service to the Company. In general, if an Eligible 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.
Unless terminated earlier by the Board of Directors, the Director Plan will
terminate on April 25, 2006. Pursuant to the Director Plan, on May 13, 1997,
Mssrs. Maya, Monark and Schmutz were each granted options to purchase 2,000
shares of the Company's Common Stock at an exercise price of $3.3125 per share.
8
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the nine-month fiscal period ended
December 31, 1995 and the twelve-month fiscal years ended December 31, 1996 and
1997, 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:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION (1) OPTIONS(#) COMPENSATION
<S> <C> <C> <C> <C> <C> <C>
Lee W. Melody 1995 $105,000 $0 $11,042 12,640 -0-
President, Chief 1996 155,833 15,845 14,573 168,400 -0-
Executive 1997 166,650 15,794 15,267 -0- -0-
Officer and
Director
Michael G. Arkell 1995 11,410 -0- -0- -0- -0-
Vice President of 1996 100,000 795 16,712 17,320 -0-
Sales 1997 100,000 1,000 15,465 2,680 -0-
Allan T. Maguire, 1995 $90,350 -0- 11,484 -0- -0-
Former Vice 1996 123,800 12,408 15,266 62,540 -0-
President, 1997 97,980 -0- 4,618 -0- $54,061 (2)
Finance,
Chief
Financial
Officer and
Treasurer
</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 and 1997 as follows: (i)
with respect to Mr. Melody, an automobile allowance in the amount of
$4,500, $6,000 and $6,000, respectively, and benefits aggregating
$6,542, $8,573 and $9,267, respectively, (ii) with respect to Mr.
Arkell, an automobile allowance in the amount of $0, $5,214 and $6,000,
respectively, and benefits aggregating $0, $11,498 and $9,465,
respectively, and (iii) with respect to Mr. Maguire, an automobile
allowance in the amount of $4,500, $6,000 and $4,618, respectively, and
benefits aggregating $6,984, $9,266 and $8,498, respectively.
(2) Mr. Maguire's employment with the Company terminated as of October 10,
1997. The amount indicated under "All Other Compensation" above
represents (i) $11,885 worth of accrued vacation benefits paid through
October 10, 1997 and (ii) $42,176 paid as continuation of base salary,
plus car allowance and other compensation, pursuant to a letter
agreement between the Company and Mr. Maguire dated September 26, 1997.
See "Certain Relationships and Related Transactions."
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
9
<PAGE> 12
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.
STOCK 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,
1998, a total of 126,400 shares of Common Stock were reserved for issuance under
the 1994 Plan, 106,934 were subject to outstanding options, and a total of
325,000 shares of Common Stock were reserved for issuance under the 1996 Plan,
242,636 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.
10
<PAGE> 13
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 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, 1997 to the Named
Executive Officers:
OPTIONS GRANTED IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE
UNDERLYING OPTIONS GRANTED PRICE EXPIRATION
NAME GRANTED TO EMPLOYEES IN FISCAL YEAR ($/SH) DATE
<S> <C> <C> <C> <C>
Michael G. Arkell 2,680 (1) 14% $4.69 2/25/07
</TABLE>
- ----------
(1) The exercise price of such option is equal to the fair market value of
the Common Stock on the date of grant. Such option becomes exercisable
at the rate of 20% per year.
The table on the following page sets forth information regarding the
aggregate value of unexercised options held by the Named Executive Officers of
the Company at December 31, 1997.
11
<PAGE> 14
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END ($) (1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Lee W. Melody 54,220 145,780 --- ---
Michael G. Arkell 5,360 14,640 --- ---
Allan T. Maguire 30,994 -0- --- ---
</TABLE>
- ----------
(1) Calculated based on the estimated fair market value of the Company's
Common Stock as of December 31, 1997, less the exercise price payable
upon the exercise of such options. Such estimated fair market value as
of December 31, 1997 was $1.75, the last price posted at the close of
trading on December 31, 1997. Because the value of unexercised
in-the-money options at December 31, 1997 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 not less than
$135,000, 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.
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.
12
<PAGE> 15
On November 13, 1997, the Company hired David P. Nelson as its Vice
President, Finance and Chief Financial Officer under an employment agreement
(the "Nelson Employment Agreement") that expires February 10, 2001. The Nelson
Employment Agreement automatically renews for successive one-year terms unless
the Company delivers to Mr. Nelson written notice of its intent not to renew at
least 60 days prior to the expiration date of the then current term. The Nelson
Employment Agreement provides for payment to Mr. Nelson of an annual salary of
$110,000, 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 President of the Company.
For the fiscal year ending December 31, 1998, Mr. Nelson's shall be is entitled
to receive a bonus of not less than $5,000. In addition to salary and bonuses,
Mr. Nelson 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 the performance of his duties. The Company
also pays the annual cost of premiums for health insurance coverage for Mr.
Nelson and his dependents. Pursuant to and in connection with the execution of
the Nelson Employment Agreement, Mr. Nelson was granted an option under the
Company's 1996 Stock Incentive Award Plan to purchase 20,000 shares of the
Company's Common Stock at an exercise price of $1.875 per share. Such option
vests over five (5) years at a rate of 20% per year. Under the terms of the
Nelson Employment Agreement, if Mr. Nelson's employment with the Company is
terminated for cause (as defined in the Nelson Employment Agreement), Mr. Nelson
will be entitled to receive his base salary through the date of termination and,
if Mr. Nelson's employment with the Company is terminated without cause
(including on account of non-renewal of the Nelson Employment Agreement), he
will be entitled to receive payment of his base salary for a period of 6 months
from the date of termination and the Company will be required to pay the
premiums for health care benefits for him and his dependents for such 6-month
period. Under the terms of the Nelson Employment Agreement, in the event that
Mr. Nelson's employment is terminated without cause or Mr. Nelson resigns from
his employment for "good reason" (as defined in the Nelson Employment Agreement)
following a change in control of the Company (as defined in the Nelson
Employment Agreement), then Mr. Nelson will be entitled to receive payment of
twelve months worth of his base salary in a lump sum payment within ten days of
the date of his termination and the Company will be required to pay the annual
premiums for health benefits for him and his dependents for a period of twelve
months following the date of termination.
The Company and Allan T. Maguire entered into an Amended and Restated
Employment Agreement dated March 21, 1996 (the "Maguire Employment Agreement").
The Maguire Employment Agreement provided 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 received an automobile
allowance in the amount of $500 per month and was reimbursed for all reasonable
and necessary travel and other business expenses incurred in connection with the
performance of his duties. The Company also paid the annual cost of premiums for
health insurance coverage for Mr. Maguire and his dependents. Under the terms of
the Maguire Employment Agreement, if Mr. Maguire's employment with the Company
was terminated for cause (as defined in the Maguire Employment Agreement), Mr.
Maguire would have been entitled to receive his base salary through the date of
termination and, if Mr. Maguire's employment with the Company was terminated
without cause (including on account of non-renewal of the Maguire Employment
Agreement), he would have been entitled to receive payment of his base salary
for a period of 12 months from the date of termination and the Company would
have been required to pay the annual premiums for health care benefits for him
and his dependents for such 12-month period. Under the terms of the Maguire
Employment Agreement, in the event that Mr. Maguire's employment was terminated
without cause or Mr. Maguire resigned 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
would have been 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 would
have been required to pay the annual premiums for health benefits for him and
his dependents for a period of twelve months following the date of termination.
Mr. Maguire's employment with the Company terminated as of October 10, 1997. In
connection with such termination, the Company and Mr. Maguire entered into a
letter agreement, dated September 26, 1997, which superseded certain provisions
of the Maguire Employment Agreement. See "Certain Relationships and Related
Transactions."
13
<PAGE> 16
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.
On September 26, 1997, the Company entered into a letter agreement with
Allan T. Maguire, the former Vice President, Finance, Chief Financial Officer,
Secretary and Treasurer of the Company, pursuant to which Mr. Maguire resigned
as Vice President, Finance, Chief Financial Officer, Secretary and Treasurer of
the Company effective September 5, 1997, and the Company agreed to continue
payment of Mr. Maguire's regular base salary until the earlier to occur of (i)
April 10, 1998 or (ii) "New Employment" (as defined in the letter agreement).
Such continuation of base salary could result in additional payments to Mr.
Maguire of approximately $80,000. The Company also agreed to pay Mr. Maguire a
monthly car allowance of $500.00 until April 10, 1998, and agreed to pay for Mr.
Maguire's health premiums for him and his existing dependents until the earlier
to occur of (i) April 10, 1998 or (ii) "New Employment" (as defined in the
letter agreement). The letter agreement also provided for reimbursement of up to
$1,000 in legal fees and costs incurred by Mr. Maguire in connection with his
review of the letter agreement. In addition, under the letter agreement, vested
options held by Mr. Maguire to acquire up to approximately 30,994 shares of the
Company's Common Stock were extended to remain exercisable through October 10,
1999. As of the date hereof, Mr. Maguire has not exercised any of the options
that were extended under the letter agreement.
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 from the public.
In December 1997 and March 1998, the Company advanced loans to senior
employees, including four executive officers, to purchase shares of Company
Common Stock on the open market. The loans, which carry an interest rate of
5.69%, are due upon the earlier to occur of three years from the date of advance
or the date the executive's employment with the Company terminates for any
reason. The notes are collateralized by the shares purchased. The Company has
agreed to finance up to an aggregate of $215,000 of such loans, subject to
certain maximum amounts for each senior employee as set forth below.
<TABLE>
<CAPTION>
Shares Amount Purchased Potential
Officer Purchased and Financed Maximum Amount
<S> <C> <C> <C>
Lee W. Melody 10,980 $23,403 $100,000
John A. Rome 4,636 9,894 40,000
David P. Nelson 2,928 6,368 25,000
Michael G. Arkell 1,220 2,943 10,000
</TABLE>
14
<PAGE> 17
The Company has entered into indemnity agreements with certain officers
and directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party be
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
By-laws.
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
DAVID P. NELSON
Secretary
April 6, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 IS AVAILABLE WITHOUT
CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, MOTORVAC TECHNOLOGIES,
INC., 1431 SOUTH VILLAGE WAY, SANTA ANA, CALIFORNIA 92705.
15
<PAGE> 18
MOTORVAC TECHNOLOGIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
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 12, 1998, at 2:00 p.m., local time, and hereby appoints Lee W.
Melody and David P. Nelson, 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 as more specifically described
in the Proxy Statement, 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.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
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
(except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY
to vote for all nominees below
NOMINEES: Stephen L. Greaves, Grant Ferrier, Lee W. Melody, Ronald J. Monark,
Gerald C. Quinn, Daniel P. Whelan
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE(S)' NAME(S)
BELOW:
(continued and to be signed on the reverse 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, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2
Dated: , 1998
---------------------------------
Signature(s)
---------------------------------
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.
