<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1997
----------------------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
------------- -------------------
Commission file number 0-25352
Ampace Corporation
- -------------------------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Delaware 36-3988574
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
201 Perimeter Park Road, Suite A, Knoxville, TN 37922
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(423) 691-5799
- -------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- -------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--------------- ---------------
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the last practicable date: 3,051,000
-----------------------------
Transitional Small Business Disclosure Format (check one)
Yes No X
--------------- ---------------
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
See Financial Statements attached hereto
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with the
attached interim consolidated financial statements and notes thereto, and with
the Company's audited consolidated financial statements and notes thereto for
the calendar year ended December 31, 1996. It also contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors including the timing of acquisitions,
availability of drivers, fuel prices and the addition of new customers.
RESULTS OF OPERATIONS
During the first quarter of 1997, the Company merged two of its
existing companies, Amanday Express and one of its existing operations located
in Dalton, Georgia, into Ampace Dedicated Services, Inc., (ADS), a subsidiary
established in September 1996 coincidental with the acquisition of certain
intangible assets of SMX Transport, Inc. This consolidation left two operating
subsidiaries of Ampace, ADS and Merchants Dutch Express, Inc., (MDX). The
purpose of the consolidation was to separate the Company's dedicated and short
haul operations from its long haul operations at MDX, and to improve operating
efficiency. One of the Company's main priorities for 1997 is to grow ADS through
the acquisitions of small regional carriers and internal business development,
provided, however, no assurances can be given that the Company will be
successful in making any such acquisitions, or that if any acquisitions are made
that they will be successfully integrated into the Company's business.
During the second quarter of 1997, ADS acquired two regional trucking
companies, Bar-J Enterprises, Inc., based in Calhoun, Georgia, and Walker
Trucking Company, based in Columbus, Ohio. Concurrent with its acquisition of
Bar-J, ADS combined its Dalton, Georgia, operations with Bar-J and moved the
combined operations to a new facility in Calhoun, Georgia.
During the third quarter of 1997, the Company began a restructuring of
MDX. The restructuring included reductions in revenue equipment and various
expenditures. The objective of the restructuring was to eliminate unprofitable
business and reduce major cost categories by changing the Company's operating
profile as it relates to traffic lanes serviced and equipment utilization. To
date, the restructuring has reduced operating revenue by approximately $400,000
a month and improved operating profits over $100,000 a month.
COMPARISON OF THIRD QUARTER 1997 TO THIRD QUARTER 1996
The following table sets forth items in the Consolidated Statements of
Operations as a percentage of operating revenues.
2
<PAGE> 3
<TABLE>
<CAPTION>
Three Months Ended September 30
Percentage of
Operating Revenue
1997 1996
--------------------
<S> <C> <C>
Operating revenues 100.0% 100.0%
Operating expenses:
Salaries, wages and employee benefits 36.8% 41.3%
Purchased transportation 10.7% 4.9%
Fuel 14.3% 17.8%
Depreciation and amortization 9.1% 15.1%
Rent 8.5% 5.6%
Operating supplies and expenses 7.5% 9.6%
Insurance and claims 2.5% 4.2%
Operating taxes and licenses 1.6% 1.9%
General and administrative expenses 4.0% 3.0%
Communications and utilities 2.0% 1.4%
----- -----
Total operating expenses 97.0% 104.8%
----- -----
Operating income 3.0% (4.8%)
Other Income:
Interest expense, net 3.2% 3.1%
----- -----
Income before income taxes (0.2%) (7.9%)
Income taxes (0.1%) (2.9%)
----- -----
Net loss (0.1%) (5.0%)
===== =====
</TABLE>
OPERATING REVENUES
Operating revenues for the third quarter of 1997 increased
approximately $1.9 million or 25% to $9.6 million from $7.7 million in the third
quarter of 1996. The increase in operating revenues was due primarily to
increased revenues associated with the completion of the Company's fourth and
fifth acquisitions, Bar-J Enterprises which was combined into the existing
Calhoun operation, effective May 5, 1997, and Walker Trucking which became the
Columbus operation of ADS, effective June 1, 1997, respectfully.
OPERATING EXPENSES
Overall, all major operating expense categories, except general and
administrative, and communications were influenced by the increase in revenue
hauled by owner operators or independent contractors during the quarter ending
September 30, 1997 compared to the same quarter for 1996. This increase was
associated with the acquisitions and expansion of ADS. Accordingly, when
compared to the same quarter for 1996, salaries, fuel, depreciation, operating
supplies, insurance and operating taxes for the quarter ending September 30,
1997 decreased as a percentage of revenue, while purchased transportation and
rent increased as a percentage of revenue.
Salaries also declined in the third quarter of 1997 compared to the
same quarter in 1996 as a result of the restructuring activities at MDX.
Purchased transportation increased from 4.9% of revenue in 1996 to 10.7% for
1997. This increase was the result of the increased usage of owner operators.
Fuel expense declined from 17.8% during the third quarter of 1996 to 14.3% in
1997 as a result of lower fuel prices and higher miles per gallon during 1997
and because a higher percentage of revenue was handled by independent
contractors during 1997.
Depreciation as a percentage of revenue declined from 15.1% during the
third quarter of 1996 to 9.1% for the same period in 1997 as a result of less
equipment owned, the recognition of equipment gains, better equipment
utilization and the additional freight handled by independent contractors in
1997. Rent increased during 1997 to 8.5% from 5.6% in 1996 as a result of
financing some of the 1997 acquisition and expansion equipment with operating
leases, in addition to the impact of the owner operator freight. Operating
supplies and expenses declined as a percentage of revenue in the third quarter
of 1997 to 7.5% from 9.6% for the same period in 1996 as a result of overall
Company expense reductions and increased utilization of independent contractors
during 1997.
The decline in insurance and claims from 4.2% of revenue for the
quarter ending September 30, 1996 to 2.5% for the same quarter during 1997
resulted primarily from the recognition of premium refunds and more favorable
insurance rates during 1997. The decline in operating taxes was
3
<PAGE> 4
principally due to the increased utilization of owner operators.
General and administrative expenses increased from 3.0% of revenue
during the third quarter of 1996 to 4.0% during 1997. This increase was
principally associated with the development of centralized support staff in
Knoxville, Tennessee. Communication expense increased .6% as a percentage of
revenue in the third quarter of 1997 compared to the same period in 1996. This
increase resulted from the continued centralization of data processing and the
associated communication cost necessary to establish continuous real time
interaction with the various remote operating centers of ADS.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
The following table sets forth items in the Consolidated Statements of
Operations as a percentage of operating revenues.
<TABLE>
<CAPTION>
Nine Months Ended September 30
Percentage of
Operating Revenue
---------------------
1997 1996
---------------------
<S> <C> <C>
Operating revenues 100.0% 100.0%
Operating expenses:
Salaries, wages and employee benefits 38.5% 40.4%
Purchased transportation 9.7% 3.2%
Fuel 15.9% 18.0%
Depreciation and amortization 11.0% 13.3%
Rent 6.9% 7.1%
Operating supplies and expenses 7.5% 8.6%
Insurance and claims 3.0% 3.8%
Operating taxes and licenses 1.9% 1.6%
General and administrative expenses 2.3% 2.8%
Communications and utilities 1.8% 1.2%
---- -----
Total operating expenses 98.5% 100.0%
---- -----
Operating income 1.5% (0.1%)
Other Income:
Interest expenses, net 3.9% 3.0%
---- -----
Income before income taxes (2.4%) (3.1%)
Income taxes (.9%) (1.1%)
==== =====
Net loss (1.5%) (2.0%)
==== =====
</TABLE>
4
<PAGE> 5
OPERATING REVENUES
Operating revenues for the first nine months of 1997 increased
approximately $3.5 million or 15 percent to $26.1 million from $22.6 million for
the first nine months of 1996. The increase in operating revenue was due
primarily to the Company's 1997 acquisitions and general improvement in overall
freight demand during 1997. As discussed above, MDX revenue reductions during
the third quarter of 1997 partially offset the increases from the ADS
acquisitions and overall improvements in freight demand.
OPERATING EXPENSES
Overall operating expenses for the nine months ending September 30,
1997 reflect the impact of the additional owner operator revenue discussed in
the COMPARISON OF THIRD QUARTER 1997 TO THIRD QUARTER 1996, above. Generally,
the change in percentages is less than that of the three month comparison
because of the significant growth of ADS during 1997.
Salaries, wages and benefits decreased as a percentage of revenue from
40.4% for the first nine months of 1996 to 38.5% for the same period of 1997. In
addition to the impact of owner operator freight, higher freight demand during
1997 and the restructuring activities of MDX contributed to the percentage
decline.
Purchased transportation increased from 3.2% to 9.7%. This increase
resulted from the use of independent contractors associated with the Company's
recent acquisitions. Fuel expense decreased from 18.0% of revenue in 1996 to
15.9% of revenue as a result of lower fuel prices during 1997 and an increase in
revenue handled by independent contractors during 1997.
Depreciation declined from 13.3% of revenue for the nine months ending
September 30, 1996 to 11.0% for the same period during 1997. The decrease was
partially due to improved equipment utilization, the reduction in MDX's fleet
size and the recognition of certain equipment gains during 1997. Rent slightly
decreased from 7.1% to 6.9% partially as a result of improving equipment
utilization and the reduction of rented trailers at MDX during 1997.
Operating supplies and expenses decreased from 8.6% in 1996 to 7.5% in
1997. This was a result of general reductions in expenses and an increase in
expenses absorbed by independent contractors. Insurance and claims declined as a
percentage of revenue during the first nine months of 1997 compared to the same
period of 1996 by .8%. This change was partially the result of better claims
experience in ADS and the recognition of a prior year's refund during 1997.
Operating taxes and licenses increased slightly as a percentage of
revenue in the nine months ended September 30, 1997 compared to the same period
of 1996, from 1.6% to 1.9%. This change was partially due to the licensing of
equipment acquired in connection with recent acquisitions. General and
administrative expenses decreased from 2.8% for the period ending September 30,
1996 to 2.3% as a percentage of revenue for the same period during 1997. This
decrease was due primarily to the receipt of a one-time sales tax refund
received during 1997. Communications and utilities increased from 1.2% for the
nine-month period ending September 30, 1996 to 1.8% for the same period during
1997. This increase resulted from the decision to centralize the data processing
and the associated communication cost necessary to establish continuous real
time interaction with the various remote operating centers of ADS.
LIQUIDITY AND CAPITAL RESOURCES
Since its public stock offering in February 1995, the Company has used
the proceeds from the offering to fund acquisitions and support business
development activities. Working capital requirements have been funded with cash
generated from operations and a line of credit secured by the Company's trade
receivables. Equipment purchases have principally been financed by manufacturers
or by asset-based lenders.
During the first nine months of 1997, the Company borrowed $1.1 million
from its line of
5
<PAGE> 6
credit to support working capital needs at MDX and ADS. Subsequent to the close
of the third quarter of 1997, the Company borrowed another $.2 million from its
line of credit for various working capital requirements. Additionally and
subsequent to the third quarter of 1997, certain maturing revenue equipment
leases with guaranteed residuals in the approximate amount of $.9 million were
refinanced over a two year period.
The working capital at December 31, 1996 and September 30, 1997 reflect
as a current liability the guaranteed residuals of maturing capitalized leases,
while the corresponding asset values are shown as Property and Equipment, a long
term asset. This amount is in excess of $1.1 million.
During September 1997 the Company's line of credit was renewed
establishing a new maturity date of January 1, 1999. Additionally, the loan
covenants were modified to require (i) a minimum tangible net worth of $2.0
million, (ii) a minimum net worth of $5.4 million,(iii) a debt-to-equity ratio
not to exceed 4:1, and(iv) maintenance of a $500,000 excess borrowing base. The
Company's feels these changes will be beneficial to its ability to meet
projected capital requirements.
ADS will require additional working capital during the expansion phase
of its operations as additional operating centers are established. The Company
intends to finance future acquisitions through equipment lenders, leases, owner
financing and use of the Company's existing line of credit. Management believes
that operational cash flow, current credit facilities and acquisition related
financing alternatives are sufficient to meet its need for working capital,
including the existing working capital deficit, and expansion plans for 1997.
The Company is currently in discussion with various financial institutions to
secure additional capital for future acquisitions and restructuring existing
debt facilitates and associated loan covenants.
6
<PAGE> 7
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) Exhibit No. Description
<S> <C>
3(i)-1 Amendment to Bylaws
10.1 First Amendment to Employment and Stock Option
Agreement between the Company and Bruce W. Jones
dated October 22, 1997
10.2 First Amendment to Employment and Stock Option
Agreement between the Company and Jay N. Taylor
dated October 22, 1997
10.3 First Amendment to Employment and Stock Option
Agreement between the Company and David C. Freeman
dated October 22, 1997
10.4 Grant of Stock Option to Bruce W. Jones
dated August 21, 1997
10.5 Grant of Stock Option to Jay N. Taylor
dated August 21, 1997
10.6 Grant of Stock Option to David C. Freeman
dated August 21, 1997
27 Financial Data Schedule (for SEC use only)
</TABLE>
7
<PAGE> 8
Attachment-Item 1. Financial Statements
AMPACE CORPORATION
& SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1996 and September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 534,629 $ 661,595
Accounts Receivable, net 3,308,102 5,121,639
Other current assets 1,072,994 1,773,502
------------ ------------
Total Current assets 4,915,725 7,556,736
------------ ------------
Property and equipment, net 12,519,656 10,502,748
Other assets 2,259,669 2,499,096
------------ ------------
$ 19,695,050 $ 20,558,580
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt and
capital lease obligations 5,000,279 6,467,750
Other current liabilities 1,945,682 1,644,662
------------ ------------
Total current liabilities 6,945,961 8,112,412
Long-term debt and capital lease obligations
excluding current installments 6,387,514 6,514,843
------------ ------------
Total liabilities 13,333,475 14,627,255
------------ ------------
Stockholders' equity:
Common stock, $.0001 par Value Authorized
10,000,000 and issued 3,075,000 shares respectively 308 308
Additional paid in capital 7,475,874 7,475,874
Accumulated deficit (1,114,607) (1,517,176)
------------ ------------
Treasury stock, 24,000 shares at cost -- 27,681
Total stockholders' equity 6,361,575 5,931,325
Commitments and contingencies
------------ ------------
$ 19,695,050 $ 20,558,580
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE> 9
AMPACE CORPORATION
& SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended September 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Operating Revenues $ 7,708,000 $ 9,564,810
Salaries, wages and employee benefits 3,184,000 3,516,813
Purchased transportation 374,000 1,022,075
Fuel 1,373,000 1,374,792
Depreciation & amortization 1,167,000 872,335
Rent 432,000 810,509
Operating supplies & expenses 741,000 716,828
Insurance & claims 322,000 236,991
Operating taxes & licenses 151,000 152,846
General & administrative expenses 229,000 381,697
Communication & utilities 108,000 191,597
----------- -----------
Total Operating Expenses 8,081,000 9,276,483
----------- -----------
Operating Income (loss) (373,000) 288,327
Interest expense, net 241,000 304,691
----------- -----------
Income (loss) before taxes (614,000) (16,364)
Income taxes (225,000) (9,237)
----------- -----------
Net income (loss) $ (389,000) $ (7,127)
=========== ===========
Weighted average common shares 3,100,000 3,089,304
=========== -----------
Income (loss) per share $ (.13) $ (.00)
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
9
<PAGE> 10
AMPACE CORPORATION
& SUBSIDIARIES
Consolidated Statements of Operations
Nine Months Ended September 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Operating Revenues $ 22,551,000 $ 26,068,133
Salaries, wages and employee benefits 9,109,000 10,049,224
Purchased transportation 723,000 2,531,770
Fuel 4,057,000 4,159,995
Depreciation & amortization 3,004,000 2,871,183
Rent 1,602,000 1,790,854
Operating supplies & expenses 1,952,000 1,952,683
Insurance & claims 854,000 775,388
Operating taxes & licenses 368,000 490,431
General & administrative expenses 637,000 606,395
Communication & utilities 289,000 456,321
------------ ------------
Total Operating Expenses 22,595,000 25,684,244
------------ ------------
Operating Income (loss) (44,000) 383,889
Interest expense, net 669,000 (1,013,547)
------------ ------------
Income (loss) before taxes (713,460) (629,658)
Income taxes (263,460) (227,089)
------------ ------------
Net income (loss) $ (450,000) $ (402,569)
============ ============
Weighted average common shares 3,000,365 3,096,084
============ ============
Income (loss) per share $ (0.15) $ (0.13)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
10
<PAGE> 11
AMPACE CORPORATION
& SUBSIDIARIES
Condensed Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Operating Activities:
Net income (loss) $ (450,000) (402,569)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,005,000 2,871,183
Changes in operating assets and liabilities:
Accounts receivable, net 184,000 (1,813,537)
Other current asset 425,000 (677,914)
Other current liabilities 204,000 1,483,414
----------- -----------
Net cash provided (used) by operating activities 3,368,000 1,460,577
----------- -----------
Investing activities:
Proceeds from disposals of equipment 91,000 721,227
Acquisition of net assets of subsidiary (846,000) (485,045)
Purchases of property and equipment (2,109,000) (754,534)
----------- -----------
Net cash used by investing activities (2,864,000) (518,352)
----------- -----------
Financing activities:
Proceeds from long-term debt 2,665,000 1,826,444
Purchase of Treasury Stock (27,681)
Payment of Non-Compete (77,000) (77,000)
Principal payments on long-term debt and capital leases (3,797,000) (2,537,022)
Net cash provided by financing activities (1,209,000) (815,259)
----------- -----------
Net increase in cash and cash equivalents (705,000) 126,966
Cash and cash equivalents at beginning of period 1,395,000 534,629
----------- -----------
Cash and cash equivalents at end of period $ 690,000 661,595
=========== -----------
Supplementary disclosure of cash flow information:
Interest paid $ 685,000 623,096
=========== -----------
Income taxes paid $ 54,000 0
=========== -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements
11
<PAGE> 12
AMPACE CORPORATION & SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in annual consolidated financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments necessary
for fair presentation of the periods presented have been reflected and
are of a normal recurring nature. These condensed consolidated
financial statements should be read in conjunction with the audited
financial statements and the notes, as filed with the Securities and
Exchange Commission as part of the Company's 1996 Form 10-KSB. Results
of operations for the interim periods are not necessarily indicative of
the results to be expected for the year.
(2) Debt
On September 2, 1997 the Company renewed its line of credit.
The new terms provide for a maturity date of January 1, 1999 and
covenants that include 1) a minimum tangible net worth of $2,000,000,
2) a minimum net worth of $5,400,000, 3) a maximum debt to shareholder
equity of 4.00:1.00, and 4) a minimum excess collateral availability of
$500,000.
(3) Treasury Stock
Pursuant to authorization from the Board of Directors, the
Company repurchased 24,000 shares of it shares from the public market
at prices ranging from $1.16 to $ 1.44 during 1997.
12
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Ampace Corporation
Date November 13, 1997 BY: /s/ Jay N. Taylor
----------------- ----------------------------
Jay N. Taylor, Chief
Executive Officer
Date November 13, 1997 BY: /s/ Bruce W. Jones
----------------- ----------------------------
Bruce W. Jones, Chief
Financial Officer
13
<PAGE> 1
EXHIBIT 3(i)-1
AMPACE CORPORATION AMENDMENT TO BYLAWS
1. Section 2.2 of the Bylaws of Ampace Corporation (the "Company") is
hereby amended by deleting the text of said section in its entirety and
inserting the following in lieu thereof:
Special meetings of stockholders may be held at such time and place, within
or without the state of Delaware, as shall be stated in a Notice of Meeting
or in a duly executed waiver of notice thereof. Subject to the rights of
the holders of any series of Preferred Stock with respect to such series of
Preferred Stock, if any, special meetings of the stockholders may be called
only by the Chairman of the Board, the President or by the Board of
Directors pursuant to a resolution adopted by a majority of the total
number of directors of the Corporation.
2. Section 3.4 of the Bylaws is amended by deleting the text of said
section in its entirety and inserting the following in lieu thereof:
Subject to the rights of the holders of any series of Preferred Stock with
respect to such series of Preferred Stock, any director, or the entire
Board of Directors, may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least sixty-six
and two-third's percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the Corporation entitled to vote generally in
the election of directors, voting together as a single class.
3. Section 2.8 of the Bylaws is amended by deleting the text of said
section in its entirety and inserting the following in lieu thereof:
Except as otherwise provided by the General Corporation Law of the State of
Delaware ("GCL"), the Certificate of Incorporation of the Corporation or
these Bylaws, when a quorum is present, the affirmative vote of a majority
of shares present in person or represented by proxy at a meeting and
entitled to vote on the subject matter shall be the act of the
stockholders.
4. Article 2 of the Bylaws is amended by adding the following as a new
Section 2.15:
2.15 Fundamental Transactions.
(a) Stockholder Authorization of Fundamental Transaction
Recommended by the Board. Whenever a Fundamental Transaction to be
taken by the vote of the stockholders has been recommended by a
vote of a majority of the directors then in office at a meeting at
which a quorum is present, the proposed Fundamental Transaction
shall be authorized upon receiving the affirmative vote of the
holders
<PAGE> 2
of a majority of the voting power of all of the then-outstanding
shares of the Corporation entitled to vote upon such action, after
taking into account the express terms of any series of Preferred
Stock of the Corporation with respect to such vote.
(b) Stockholder Authorization of Fundamental Transaction Not
Recommended by the Board. Except as provided in Section 2.15(a)
above, whenever a Fundamental Transaction is to be taken by vote of
the stockholders, the proposed Fundamental Transaction shall be
authorized only upon receiving the affirmative vote of the holders
of sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the Corporation entitled
to vote generally in the election of directors, voting together as
a single class, and, in addition, the affirmative vote of the
number or proportion of shares of any series of Preferred Stock of
the Corporation, if any, as shall at the time be required by
statute or the express terms of such series of Preferred Stock.
(c) Fundamental Transaction Defined. For the purposes of this
Section 2.15, the term "Fundamental Transaction" shall mean any of
the following, if any such transaction requires the approval of the
stockholders under the Certificate of Incorporation of the
Corporation as then in effect or the GCL as then in effect with
respect to the Corporation: the sale, lease, exchange or other
disposition of all of substantially all of the assets of the
Corporation; or the merger or consolidation of the Corporation
(other than a merger or consolidation in which holders of
outstanding voting securities of the Corporation will have the
ownership of at least a majority of the voting power of the voting
securities of the surviving corporation (which voting power is to
be held in the same proportion as held by stockholders of the
Corporation immediately prior to such merger or consolidation)); or
the division, reorganization, dissolution, liquidation or winding
up of the Corporation.
5. Article 9 is amended by adding the following at the end of the
second sentence of said Article:
; provided, however, that in the case of amendment by the stockholders,
notwithstanding any other provision of these Bylaws or any provision of law
which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of any particular class or series of
the capital stock of the Corporation required by law, the Certificate of
Incorporation or these Bylaws, the affirmative vote of at least sixty-six
and two-third's percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the Corporation, voting
together as a single class, shall be required to alter, amend or repeal any
provision of these Bylaws.
ADOPTED BY THE BOARD OF DIRECTORS ON OCTOBER 22, 1997.
2
<PAGE> 1
EXHIBIT 10.1
FIRST AMENDMENT TO
EMPLOYMENT AND STOCK OPTION AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AND STOCK OPTION AGREEMENT (the
"Amendment") is entered into this 22nd day of October, 1997, between AMPACE
CORPORATION, a Delaware corporation (the "Company") and Bruce W. Jones (the
"Executive").
WITNESSETH:
WHEREAS, the parties hereto have previously entered into an Employment
and Stock Option Agreement dated February 16, 1995 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Company and the
Executive as follows:
1. Section 5(b) of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:
(b) The Option Price shall be $1.41 per share; provided,
however that in case the Company should at any time subdivide
the outstanding shares of Common Stock, or shall issue a stock
dividend on its outstanding Common Stock, the Option Price
shall be proportionately decreased, and in the case the
Company shall at any time combine the outstanding shares of
Common Stock, the Option Price in effect immediately prior to
such combination shall be proportionately increased, effective
at the close of business on the date of such subdivision,
dividend or combination, as the case may be.
2. The text of Section 5(d) of the Agreement following subsection (v)
of said Section is hereby deleted in its entirety and replaced with the
following:
Upon the occurrence of any event described above (a "Change of
Control"), (i) the Company shall provide the Executive written
notice of such Change of Control and (ii) the Option shall
automatically accelerate and become fully exercisable.
<PAGE> 2
In addition, upon a Change of Control described in Section
5(d)(i), the portion of the Option that is not exercised shall
be assumed by, or replaced with comparable options by, the
surviving corporation. Any replacement options shall entitle
the Executive to receive the same amount and type of
securities as the Executive would have received as a result of
the Change of Control had the Executive exercised the Options
immediately prior to the Change of Control.
3. Section 11 of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:
If this Agreement is terminated for any reason, other than
"Cause," the Executive will be entitled to receive an amount
equal to 2.5 times the total amount of salary and bonus
compensation paid to Executive during the year prior to
termination ("Severance Pay"). For purposes of this paragraph,
"Cause" shall mean (i) the commission of a felony or a crime
involving moral turpitude or the commission of any other act
involving dishonesty, disloyalty or fraud with respect to the
Company or any of its subsidiaries, (ii) conduct tending to
bring the Company or any of its subsidiaries into substantial
public disgrace or disrepute, (iii) willful disregard of
significant management responsibilities directed by the Board,
(iv) gross negligence or willful misconduct with respect to
the Company or any of its subsidiaries or (v) any other
material breach of this Agreement that is not cured within 15
days after written notice thereof to the Executive.
4. The remaining provisions of the Agreement which have not been
modified by this Amendment shall remain in full force and effect as if set forth
herein.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the day and year first above written.
AMPACE CORPORATION
By: /s/ Jay N. Taylor
-------------------------------
Title: President
/s/Bruce W. Jones
-----------------------------------
Bruce W. Jones
2
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO
EMPLOYMENT AND STOCK OPTION AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AND STOCK OPTION AGREEMENT (the
"Amendment") is entered into this 22nd day of October, 1997, between AMPACE
CORPORATION, a Delaware corporation (the "Company") and Jay N. Taylor (the
"Executive").
WITNESSETH:
WHEREAS, the parties hereto have previously entered into an Employment
and Stock Option Agreement dated February 16, 1995 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Company and the
Executive as follows:
1. Section 5(b) of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:
(b) The Option Price shall be $1.41 per share; provided,
however that in case the Company should at any time subdivide
the outstanding shares of Common Stock, or shall issue a stock
dividend on its outstanding Common Stock, the Option Price
shall be proportionately decreased, and in the case the
Company shall at any time combine the outstanding shares of
Common Stock, the Option Price in effect immediately prior to
such combination shall be proportionately increased, effective
at the close of business on the date of such subdivision,
dividend or combination, as the case may be.
2. The text of Section 5(d) of the Agreement following subsection (v)
of said Section is hereby deleted in its entirety and replaced with the
following:
Upon the occurrence of any event described above (a "Change of
Control"), (i) the Company shall provide the Executive written
notice of such Change of Control and (ii) the Option shall
automatically accelerate and become fully exercisable.
<PAGE> 2
In addition, upon a Change of Control described in Section
5(d)(i), the portion of the Option that is not exercised shall
be assumed by, or replaced with comparable options by, the
surviving corporation. Any replacement options shall entitle
the Executive to receive the same amount and type of
securities as the Executive would have received as a result of
the Change of Control had the Executive exercised the Options
immediately prior to the Change of Control.
3. Section 11 of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:
If this Agreement is terminated for any reason, other than
"Cause," the Executive will be entitled to receive an amount
equal to 2.5 times the total amount of salary and bonus
compensation paid to Executive during the year prior to
termination ("Severance Pay"). For purposes of this paragraph,
"Cause" shall mean (i) the commission of a felony or a crime
involving moral turpitude or the commission of any other act
involving dishonesty, disloyalty or fraud with respect to the
Company or any of its subsidiaries, (ii) conduct tending to
bring the Company or any of its subsidiaries into substantial
public disgrace or disrepute, (iii) willful disregard of
significant management responsibilities directed by the Board,
(iv) gross negligence or willful misconduct with respect to
the Company or any of its subsidiaries or (v) any other
material breach of this Agreement that is not cured within 15
days after written notice thereof to the Executive.
4. The remaining provisions of the Agreement which have not been
modified by this Amendment shall remain in full force and effect as if set forth
herein.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the day and year first above written.
AMPACE CORPORATION
By: /s/ Bruce W. Jones
-------------------------------
Title: Chairman
/s/ Jay N. Taylor
-----------------------------------
Jay N. Taylor
2
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT TO
EMPLOYMENT AND STOCK OPTION AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AND STOCK OPTION AGREEMENT (the
"Amendment") is entered into this 22nd day of October, 1997, between AMPACE
CORPORATION, a Delaware corporation (the "Company") and David C.
Freeman (the "Executive").
WITNESSETH:
WHEREAS, the parties hereto have previously entered into an Employment
and Stock Option Agreement dated February 16, 1995 (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as provided herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth below, it is hereby covenanted and agreed by the Company and the
Executive as follows:
1. Section 5(b) of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:
(b) The Option Price shall be $1.41 per share; provided,
however that in case the Company should at any time subdivide
the outstanding shares of Common Stock, or shall issue a stock
dividend on its outstanding Common Stock, the Option Price
shall be proportionately decreased, and in the case the
Company shall at any time combine the outstanding shares of
Common Stock, the Option Price in effect immediately prior to
such combination shall be proportionately increased, effective
at the close of business on the date of such subdivision,
dividend or combination, as the case may be.
2. The text of Section 5(d) of the Agreement following subsection (v)
of said Section is hereby deleted in its entirety and replaced with the
following:
Upon the occurrence of any event described above (a "Change of
Control"), (i) the Company shall provide the Executive written
notice of such Change of Control and (ii) the Option shall
automatically accelerate and become fully exercisable.
<PAGE> 2
In addition, upon a Change of Control described in Section
5(d)(i), the portion of the Option that is not exercised shall
be assumed by, or replaced with comparable options by, the
surviving corporation. Any replacement options shall entitle
the Executive to receive the same amount and type of
securities as the Executive would have received as a result of
the Change of Control had the Executive exercised the Options
immediately prior to the Change of Control.
3. Section 11 of the Agreement is hereby deleted in its entirety and
replaced with the following paragraph:
If this Agreement is terminated for any reason, other than
"Cause," the Executive will be entitled to receive an amount
equal to 2.5 times the total amount of salary and bonus
compensation paid to Executive during the year prior to
termination ("Severance Pay"). For purposes of this paragraph,
"Cause" shall mean (i) the commission of a felony or a crime
involving moral turpitude or the commission of any other act
involving dishonesty, disloyalty or fraud with respect to the
Company or any of its subsidiaries, (ii) conduct tending to
bring the Company or any of its subsidiaries into substantial
public disgrace or disrepute, (iii) willful disregard of
significant management responsibilities directed by the Board,
(iv) gross negligence or willful misconduct with respect to
the Company or any of its subsidiaries or (v) any other
material breach of this Agreement that is not cured within 15
days after written notice thereof to the Executive.
4. The remaining provisions of the Agreement which have not been
modified by this Amendment shall remain in full force and effect as if set forth
herein.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and the
Company has caused these presents to be executed in its name and on its behalf,
all as of the day and year first above written.
AMPACE CORPORATION
By: /s/ Jay N. Taylor
----------------------------
Title: President
/s/ David C. Freeman
---------------------------------
David C. Freeman
2
<PAGE> 1
EXHIBIT 10.4
GRANT OF STOCK OPTION
Date of Grant: As of August 21, 1997
THIS GRANT, dated as of the date of grant first stated above (the "Date
of Grant"), is delivered by Ampace Corporation, a Delaware corporation (the
"Company") to Bruce W. Jones, (the "Grantee"), who is a director of the Company.
WHEREAS, the Board of Directors of the Company (the "Board") on August
21, 1997 approved the grant of this option; and
WHEREAS, the Board desires to grant the stock options documented
herein.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company
hereby grants to the Grantee, as of the Date of Grant, an option to purchase up
to 50,000 shares of Stock at a price of $1.00 per share, which is equal to the
closing price of the Common Stock on the Date of Grant. Such option is
hereinafter referred to as the "Option" and the shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as the "Option
Shares." The Option shall vest if the Company realizes net income of at least
$500,000 for the fiscal year ended December 31, 1997 as reported on the
Company's audited financial statements for such year. Notwithstanding the
foregoing, if any event (a "Change of Control") described in Section 5(d) of the
Employment and Stock Option Agreement dated February 25, 1995 between the
Grantee and the Company (the "Agreement") shall occur, (i) the Company shall
provide the Grantee written notice of such Change of Control and (ii) the Option
shall automatically accelerate and become fully exercisable. In addition, upon a
Change of Control described in Section 5(d)(v)(i) of the Agreement, the portion
of the Option that is not exercised shall be assumed by, or replaced with
comparable options by, the surviving corporation. Any replacement options shall
entitle the Grantee to receive the same amount and type of securities as the
Grantee would have received as a result of the Change of Control had the Grantee
exercised the Option immediately prior to the Change of Control.
2. Termination of Option.
(a) Except as otherwise provided herein, the Option and all rights
hereunder with respect thereto, to the extent such rights shall not have been
exercised, shall terminate and become null and void after the expiration of ten
(10) years from the Date of Grant (the "Option Term").
<PAGE> 2
(b) In the event of the disability or death of the Grantee, or if the
Grantee no longer serves as a director of the Company, the Option may be
exercised during the following period, but only to the extent that the Option
was outstanding on any such date of disability or death or cessation of service:
(i) the one-year period following the date of disability (within the meaning of
Section 22(e)(3) of the Code); (ii) the six-month period following the date of
issuance of letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, but not later than one year after the
Grantee's death; and (iii) the one-year period following the date on which
service as director of the Company ceases. In no event, however, shall any such
period extend beyond the Option Term.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s), but only to the extent that
the Option would otherwise have been exercisable by the Grantee.
(d) Notwithstanding any other provisions set forth herein, if the
Grantee shall commit any act of malfeasance or wrongdoing affecting the Company
or any subsidiary of the Company, any unexercised portion of the Option shall
immediately terminate and be void.
3. Exercise of Option.
(a) The Grantee may exercise the Option at any time after vesting, with
respect to all or any part of the number of Option Shares by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof, which date shall be at least five
days after the giving of such notice unless an earlier time shall have been
mutually agreed upon.
(b) Full payment (in U.S. Dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Board, in whole or in part through the surrender of previously acquired
shares of Stock at their fair market value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment for such Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in part unless
such listing, registration,
2
<PAGE> 3
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Options Shares may be terminated by the Company. The date
specified in the Grantee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in full for the Option
Shares to be purchased upon such exercise shall have been received by such date.
4. Adjustment of and Changes in Stock of the Company.
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the Company, the
Board shall make such adjustment as it deems appropriate in the number and kind
of shares of Stock subject to the Option or in the option price as provided
under the Plan; provided, however, that no such adjustment shall give the
Grantee any additional benefits under the Option.
5. No Rights of Stockholders.
Neither the Grantee nor any personal representatives shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
6. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in case of the death
of the Grantee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar process. In the
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
7. Amendment of an Option.
The Option may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable in
the light of any addition to or change in the Code or in the regulations issued
thereunder, or any federal or state securities law or other law or regulation,
which change occurs after the Date of Grant and by its terms applies to the
3
<PAGE> 4
Option; or (ii) other than in the circumstances described in clause (i), with
the consent of the Grantee.
8. Notice.
Any notice to the Company provided for in this statement shall be
addressed to it in care of its Secretary at its executive offices at 201
Perimeter Park, Suite A, Knoxville, Tennessee 37922, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
records of the Company. Any notice shall be deemed to be duly given if and when
properly addressed and posted by registered or certified mail, postage prepaid.
9. Governing Law.
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of Tennessee, except to the extent preempted by federal
law, which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this grant of Option, and to apply the corporate seal
hereto, and the Grantee has placed his signature hereon, effective as of the
Date of Grant.
AMPACE CORPORATION
By:/s/ Jay N. Taylor
-------------------------------------
Title: President
ACCEPTED AND AGREED TO:
/s/ Bruce W. Jones
----------------------------------------
Grantee
4
<PAGE> 1
EXHIBIT 10.5
GRANT OF STOCK OPTION
Date of Grant: As of August 21, 1997
THIS GRANT, dated as of the date of grant first stated above (the "Date
of Grant"), is delivered by Ampace Corporation, a Delaware corporation (the
"Company") to Jay N. Taylor, (the "Grantee"), who is a director of the Company.
WHEREAS, the Board of Directors of the Company (the "Board") on August
21, 1997 approved the grant of this option; and
WHEREAS, the Board desires to grant the stock options documented
herein.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company
hereby grants to the Grantee, as of the Date of Grant, an option to purchase up
to 50,000 shares of Stock at a price of $1.00 per share, which is equal to the
closing price of the Common Stock on the Date of Grant. Such option is
hereinafter referred to as the "Option" and the shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as the "Option
Shares." The Option shall vest if the Company realizes net income of at least
$500,000 for the fiscal year ended December 31, 1997 as reported on the
Company's audited financial statements for such year. Notwithstanding the
foregoing, if any event (a "Change of Control") described in Section 5(d) of the
Employment and Stock Option Agreement dated February 25, 1995 between the
Grantee and the Company (the "Agreement") shall occur, (i) the Company shall
provide the Grantee written notice of such Change of Control and (ii) the Option
shall automatically accelerate and become fully exercisable. In addition, upon a
Change of Control described in Section 5(d)(v)(i) of the Agreement, the portion
of the Option that is not exercised shall be assumed by, or replaced with
comparable options by, the surviving corporation. Any replacement options shall
entitle the Grantee to receive the same amount and type of securities as the
Grantee would have received as a result of the Change of Control had the Grantee
exercised the Option immediately prior to the Change of Control.
2. Termination of Option.
(a) Except as otherwise provided herein, the Option and all rights
hereunder with respect thereto, to the extent such rights shall not have been
exercised, shall terminate and become null and void after the expiration of ten
(10) years from the Date of Grant (the "Option Term").
<PAGE> 2
(b) In the event of the disability or death of the Grantee, or if the
Grantee no longer serves as a director of the Company, the Option may be
exercised during the following period, but only to the extent that the Option
was outstanding on any such date of disability or death or cessation of service:
(i) the one-year period following the date of disability (within the meaning of
Section 22(e)(3) of the Code); (ii) the six-month period following the date of
issuance of letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, but not later than one year after the
Grantee's death; and (iii) the one-year period following the date on which
service as director of the Company ceases. In no event, however, shall any such
period extend beyond the Option Term.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s), but only to the extent that
the Option would otherwise have been exercisable by the Grantee.
(d) Notwithstanding any other provisions set forth herein, if the
Grantee shall commit any act of malfeasance or wrongdoing affecting the Company
or any subsidiary of the Company, any unexercised portion of the Option shall
immediately terminate and be void.
3. Exercise of Option.
(a) The Grantee may exercise the Option at any time after vesting, with
respect to all or any part of the number of Option Shares by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof, which date shall be at least five
days after the giving of such notice unless an earlier time shall have been
mutually agreed upon.
(b) Full payment (in U.S. Dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Board, in whole or in part through the surrender of previously acquired
shares of Stock at their fair market value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment for such Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in part unless
such listing, registration,
2
<PAGE> 3
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Options Shares may be terminated by the Company. The date
specified in the Grantee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in full for the Option
Shares to be purchased upon such exercise shall have been received by such date.
4. Adjustment of and Changes in Stock of the Company.
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the Company, the
Board shall make such adjustment as it deems appropriate in the number and kind
of shares of Stock subject to the Option or in the option price as provided
under the Plan; provided, however, that no such adjustment shall give the
Grantee any additional benefits under the Option.
5. No Rights of Stockholders.
Neither the Grantee nor any personal representatives shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
6. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in case of the death
of the Grantee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar process. In the
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
7. Amendment of an Option.
The Option may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable in
the light of any addition to or change in the Code or in the regulations issued
thereunder, or any federal or state securities law or other law or regulation,
which change occurs after the Date of Grant and by its terms applies to the
3
<PAGE> 4
Option; or (ii) other than in the circumstances described in clause (i), with
the consent of the Grantee.
8. Notice.
Any notice to the Company provided for in this statement shall be
addressed to it in care of its Secretary at its executive offices at 201
Perimeter Park, Suite A, Knoxville, Tennessee 37922, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
records of the Company. Any notice shall be deemed to be duly given if and when
properly addressed and posted by registered or certified mail, postage prepaid.
9. Governing Law.
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of Tennessee, except to the extent preempted by federal
law, which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this grant of Option, and to apply the corporate seal
hereto, and the Grantee has placed his signature hereon, effective as of the
Date of Grant.
AMPACE CORPORATION
By:/s/ Bruce W. Jones
---------------------------------------
Title: Chairman
ACCEPTED AND AGREED TO:
/s/Jay N. Taylor
---------------------------------------
Grantee
4
<PAGE> 1
EXHIBIT 10.6
GRANT OF STOCK OPTION
Date of Grant: As of August 21, 1997
THIS GRANT, dated as of the date of grant first stated above (the "Date
of Grant"), is delivered by Ampace Corporation, a Delaware corporation (the
"Company") to David C. Freeman, (the "Grantee"), who is a director of the
Company.
WHEREAS, the Board of Directors of the Company (the "Board") on August
21, 1997 approved the grant of this option; and
WHEREAS, the Board desires to grant the stock options documented
herein.
NOW, THEREFORE, the parties hereto intending to be legally bound
hereby, agree as follows:
1. Grant of Option.
Subject to the terms and conditions hereinafter set forth, the Company
hereby grants to the Grantee, as of the Date of Grant, an option to purchase up
to 50,000 shares of Stock at a price of $1.00 per share, which is equal to the
closing price of the Common Stock on the Date of Grant. Such option is
hereinafter referred to as the "Option" and the shares of stock purchasable upon
exercise of the Option are hereinafter sometimes referred to as the "Option
Shares." The Option shall vest if the Company realizes net income of at least
$500,000 for the fiscal year ended December 31, 1997 as reported on the
Company's audited financial statements for such year. Notwithstanding the
foregoing, if any event (a "Change of Control") described in Section 5(d) of the
Employment and Stock Option Agreement dated February 25, 1995 between the
Grantee and the Company (the "Agreement") shall occur, (i) the Company shall
provide the Grantee written notice of such Change of Control and (ii) the Option
shall automatically accelerate and become fully exercisable. In addition, upon a
Change of Control described in Section 5(d)(v)(i) of the Agreement, the portion
of the Option that is not exercised shall be assumed by, or replaced with
comparable options by, the surviving corporation. Any replacement options shall
entitle the Grantee to receive the same amount and type of securities as the
Grantee would have received as a result of the Change of Control had the Grantee
exercised the Option immediately prior to the Change of Control.
2. Termination of Option.
(a) Except as otherwise provided herein, the Option and all rights
hereunder with respect thereto, to the extent such rights shall not have been
exercised, shall terminate and become null and void after the expiration of ten
(10) years from the Date of Grant (the "Option Term").
<PAGE> 2
(b) In the event of the disability or death of the Grantee, or if the
Grantee no longer serves as a director of the Company, the Option may be
exercised during the following period, but only to the extent that the Option
was outstanding on any such date of disability or death or cessation of service:
(i) the one-year period following the date of disability (within the meaning of
Section 22(e)(3) of the Code); (ii) the six-month period following the date of
issuance of letters testamentary or letters of administration to the executor or
administrator of a deceased Grantee, but not later than one year after the
Grantee's death; and (iii) the one-year period following the date on which
service as director of the Company ceases. In no event, however, shall any such
period extend beyond the Option Term.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s), but only to the extent that
the Option would otherwise have been exercisable by the Grantee.
(d) Notwithstanding any other provisions set forth herein, if the
Grantee shall commit any act of malfeasance or wrongdoing affecting the Company
or any subsidiary of the Company, any unexercised portion of the Option shall
immediately terminate and be void.
3. Exercise of Option.
(a) The Grantee may exercise the Option at any time after vesting, with
respect to all or any part of the number of Option Shares by giving the
Secretary of the Company written notice of intent to exercise. The notice of
exercise shall specify the number of Option Shares as to which the Option is to
be exercised and the date of exercise thereof, which date shall be at least five
days after the giving of such notice unless an earlier time shall have been
mutually agreed upon.
(b) Full payment (in U.S. Dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Board, in whole or in part through the surrender of previously acquired
shares of Stock at their fair market value on the exercise date.
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment for such Option Shares. The obligation of the
Company to deliver Stock shall, however, be subject to the condition that if at
any time the Committee shall determine in its discretion that the listing,
registration or qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the Option or the issuance or purchase of
Stock thereunder, the Option may not be exercised in whole or in part unless
such listing, registration,
2
<PAGE> 3
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Options Shares may be terminated by the Company. The date
specified in the Grantee's notice as the date of exercise shall be deemed the
date of exercise of the Option, provided that payment in full for the Option
Shares to be purchased upon such exercise shall have been received by such date.
4. Adjustment of and Changes in Stock of the Company.
In the event of a reorganization, recapitalization, change of shares,
stock split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of capital stock of the Company, the
Board shall make such adjustment as it deems appropriate in the number and kind
of shares of Stock subject to the Option or in the option price as provided
under the Plan; provided, however, that no such adjustment shall give the
Grantee any additional benefits under the Option.
5. No Rights of Stockholders.
Neither the Grantee nor any personal representatives shall be, or shall
have any of the rights and privileges of, a stockholder of the Company with
respect to any shares of Stock purchasable or issuable upon the exercise of the
Option, in whole or in part, prior to the date of exercise of the Option.
6. Non-Transferability of Option.
During the Grantee's lifetime, the Option hereunder shall be
exercisable only by the Grantee or any guardian or legal representative of the
Grantee, and the Option shall not be transferable except, in case of the death
of the Grantee, by will or the laws of descent and distribution, nor shall the
Option be subject to attachment, execution or other similar process. In the
event of (a) any attempt by the Grantee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or interest
hereby conferred, the Company may terminate the Option by notice to the Grantee
and it shall thereupon become null and void.
7. Amendment of an Option.
The Option may be amended by the Board at any time (i) if the Board
determines, in its sole discretion, that amendment is necessary or advisable in
the light of any addition to or change in the Code or in the regulations issued
thereunder, or any federal or state securities law or other law or regulation,
which change occurs after the Date of Grant and by its terms applies to the
3
<PAGE> 4
Option; or (ii) other than in the circumstances described in clause (i), with
the consent of the Grantee.
8. Notice.
Any notice to the Company provided for in this statement shall be
addressed to it in care of its Secretary at its executive offices at 201
Perimeter Park, Suite A, Knoxville, Tennessee 37922, and any notice to the
Grantee shall be addressed to the Grantee at the current address shown on the
records of the Company. Any notice shall be deemed to be duly given if and when
properly addressed and posted by registered or certified mail, postage prepaid.
9. Governing Law.
The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of Tennessee, except to the extent preempted by federal
law, which shall to the extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this grant of Option, and to apply the corporate seal
hereto, and the Grantee has placed his signature hereon, effective as of the
Date of Grant.
AMPACE CORPORATION
By:/s/ Jay N. Taylor
-------------------------------------------
Title: President
ACCEPTED AND AGREED TO:
/s/David C. Freeman
-------------------------------------------
Grantee
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMPACE CORPORATION FOR THE NINE MONTHS ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 661,595
<SECURITIES> 0
<RECEIVABLES> 3,172,340
<ALLOWANCES> 50,701
<INVENTORY> 193,714
<CURRENT-ASSETS> 7,556,736
<PP&E> 17,207,939
<DEPRECIATION> 6,705,191
<TOTAL-ASSETS> 20,559,580
<CURRENT-LIABILITIES> 8,112,412
<BONDS> 0
0
0
<COMMON> 3,080,000
<OTHER-SE> 7,448,193
<TOTAL-LIABILITY-AND-EQUITY> 20,558,580
<SALES> 0
<TOTAL-REVENUES> 26,068,133
<CGS> 0
<TOTAL-COSTS> 25,087,244
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,779
<INTEREST-EXPENSE> 623,096
<INCOME-PRETAX> (629,558)
<INCOME-TAX> (227,089)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (402,569)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> 0
</TABLE>
