SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
QMS, INC.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Notes:
LOGO
To The Stockholders of QMS, Inc.:
You are cordially invited to attend the annual meeting of stockholders to be
held at the Adam's Mark Hotel, 64 Water Street, Mobile, Alabama, 36602, on
Tuesday, January 20, 1998, at 2:00 p.m. local time.
The principal business of the meeting will be (i) to elect one class of
directors to serve a three-year term beginning January 20, 1998, (ii) to
present for stockholder approval an amendment to the QMS, Inc. 1997 Stock
Incentive Plan, and (iii) to present for stockholder approval an amendment to
the QMS, Inc. Stock Option Plan for Directors. During the meeting, we also
will review the results of the past year and report on significant aspects of
our operations during the first quarter of fiscal 1998.
Whether or not you plan to attend the annual meeting, please complete, sign,
date, and return to the Company the enclosed proxy card in the enclosed,
postage-prepaid envelope at your earliest convenience so that your shares will
be represented at the meeting. If you choose to attend the meeting, you may,
of course, revoke your proxy and personally cast your votes.
Sincerely yours,
[Signature of James L. Busby
appears here]
James L. Busby
Chairman of the Board, President, and
Chief Executive Officer
Mobile, Alabama
December 12, 1997
QMS, INC.
ONE MAGNUM PASS
MOBILE, ALABAMA 36618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JANUARY 20, 1998
The annual meeting of stockholders of QMS, Inc. will be held on Tuesday,
January 20, 1998, at 2:00 p.m. local time, at the Adam's Mark Hotel, 64 Water
Street, Mobile, Alabama, 36602.
The meeting is called for the following purposes:
1. To elect three persons to serve as Class I directors for a three-year
term beginning in 1998;
2. To present for stockholder approval a proposal to approve a recent
amendment to the Company's 1997 Stock Incentive Plan;
3. To present for stockholder approval a proposal to approve a recent
amendment to the Company's Stock Option Plan for Directors; and
4. To consider and act upon such other business as may properly come before
the meeting or any adjournment(s).
The Board of Directors has fixed November 24, 1997, as the record date for
the determination of stockholders entitled to notice of and to vote at the
meeting.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES
WILL BE REPRESENTED AT THE MEETING. IF YOU CHOOSE TO ATTEND THE MEETING, YOU
MAY, OF COURSE, REVOKE YOUR PROXY AND PERSONALLY CAST YOUR VOTES.
By Order of the Board of
Directors,
[Signature of Richard A. Wiggins
appears here]
Richard A. Wiggins
Secretary
Mobile, Alabama
December 12, 1997
QMS, INC.
ONE MAGNUM PASS
MOBILE, ALABAMA 36618
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of QMS, Inc. (the "Company") of proxies to be voted at the
annual meeting of stockholders of the Company to be held Tuesday, January 20,
1998, and at any and all adjournments thereof (the "Meeting"). Any proxy given
pursuant to such solicitation and received in time for the Meeting will be
voted with respect to all shares represented by it and will be voted in
accordance with the directions, if any, given in such proxy. If directions are
not given, the proxy will be voted (i) FOR the election of the persons named
herein to serve as Class I directors, (ii) FOR approval of an amendment to the
QMS, Inc. 1997 Stock Incentive Plan, and (iii) FOR approval of an amendment to
the QMS, Inc. Stock Option Plan for Directors. All expenses incurred by this
solicitation will be borne by the Company.
Stockholders who execute proxies may revoke them at any time before they are
voted by filing with the Secretary of the Company either an instrument
revoking the proxy or a duly executed proxy bearing a later date. Proxies also
may be revoked by any stockholder present at the Meeting who expresses a
desire to vote his or her shares in person. A majority of the stockholders
entitled to vote must be present in person, or represented by proxy, to
constitute a quorum and to act upon the proposed business. Failure of a quorum
to be represented at the Meeting will necessitate adjournment and will subject
the Company to additional expense.
The terms "fiscal 1995," "fiscal 1996," "fiscal 1997," and "fiscal 1998" as
used herein refer to the Company's fiscal years ended September 29, 1995,
September 27, 1996, and October 3, 1997, and its fiscal year ending October 2,
1998, respectively.
SHARES ENTITLED TO VOTE
The Notice of the Meeting, this Proxy Statement, and the form of proxy are
first being mailed to stockholders on or about December 12, 1997. At the close
of business on November 24, 1997, the record date for determining the
stockholders entitled to notice of and to vote at the Meeting, there were
10,697,065 shares of common stock, $.01 par value ("Common Stock"), of the
Company outstanding and entitled to vote at the Meeting. Each share is
entitled to one vote.
The election of directors requires the affirmative vote of a plurality of
shares of Common Stock voting in person or by proxy at the Meeting, and the
approval of the proposal regarding the QMS, Inc. 1997 Stock Incentive Plan and
the proposal regarding the QMS, Inc. Stock Option Plan for Directors each
requires the affirmative vote of a majority of the shares of Common Stock
voting in person or by proxy at the Meeting. Therefore, abstentions and votes
withheld from director nominees will not be included in vote totals and will
not be considered in determining the outcome of the election of directors.
Abstentions will have the same effect as votes against the proposal regarding
the Company's incentive stock option plan and stock option plan for directors,
but broker non-votes will have no effect on the voting of such proposal.
YOUR BOARD OF DIRECTORS URGES YOU TO SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE
1
PROPOSAL 1--ELECTION OF DIRECTORS
DIRECTORS AND DIRECTOR NOMINEES
The Company's Certificate of Incorporation provides for three classes of
directors serving staggered terms of office. Upon the expiration of the term
of office for a class of directors, the nominees for that class will be
elected for a term of three years to serve until the election and
qualification of their successors. At the Meeting, three nominees for the
Class I positions will be considered. The Class II and Class III directors
have two years and one year, respectively, remaining in their terms of office.
The Company's Certificate of Incorporation and Bylaws provide that the
Company shall have at least five and no more than ten directors, the exact
number to be determined by resolution of the Board of Directors from time to
time. The Board has, by resolution, set the number of directors at nine. There
is presently one vacancy on the Board resulting from the prior resignation of
a Class II director. The Company will seek to identify candidates who might
fill this vacancy; however, no specific nominee has yet been selected. The
persons named as proxies will not vote the proxies for a greater number of
persons than the number of nominees named herein. Following the Meeting, the
Board of Directors may elect to fill this vacancy pursuant to the authority
vested in it by the Company's Bylaws.
It is the intention of the persons named as proxies to vote the proxies for
the election as Class I directors of the Company of the persons named below,
each of whom is currently a director, unless the stockholders direct otherwise
in their proxies. In the event any of the nominees named below refuses or is
unable to serve as a director (which is not now anticipated), the persons
named as proxies reserve full discretion to vote for such other person or
persons as may be nominated. The election of the nominees to the Board of
Directors requires the presence, by proxy or in person, of the holders of a
majority of all shares of the Company's Common Stock entitled to notice of and
to vote at the Meeting and the affirmative vote of the holders of a plurality
of the shares voted at the Meeting.
Set forth below is certain information furnished to the Company by each of
the Company's directors, including each of the nominees.
YOUR BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES FOR DIRECTORS
NOMINEES FOR DIRECTORS
CLASS I DIRECTORS--CURRENT TERM EXPIRING 1998
JAMES L. BUSBY1 (age 51) has been a director and President, Chief Executive
Officer, and Chairman of the Board of the Company since 1977.
LUCIUS E. BURCH, III (age 56) has been a director of the Company since 1983.
He has been President of Massey Burch Investment Group, Inc. (an investment
management and venture capital firm) since 1981 and Chairman of Massey Burch
Investment Group, Inc. since 1990. He is also a director of Titan Holdings,
Inc. (an insurance holding company), Norrell Corporation (a provider of
temporary personnel to businesses), and Physicians Resource Group (a provider
of physicians practice management services).
- --------
1Mr. Dow and Dr. Parker are brothers-in-law of Mr. Busby.
2
JACK EDWARDS (age 69) has been a director of the Company since July 1996. He
has been a senior member of the law firm of Hand Arendall, L.L.C. since 1985
and was a member of the U.S. House of Representatives for twenty years. He is
also a director of The Southern Company (an electric utility holding company)
and Northrop Grumman Corporation (a manufacturer of defense and electronics
systems), and has served on the Board of Trustees of the University of Alabama
System since 1988.
DIRECTORS CONTINUING IN OFFICE
CLASS II DIRECTORS--TERM EXPIRING 2000
DONALD L. PARKER, PH.D.1 (age 52) has been a director of the Company since
1979 and an executive officer since 1981. In August 1997, Mr. Parker resigned
his position as an executive officer of the Company, effective January 31,
1998, to serve as President of Alto Imaging Technologies, Inc. (a company in
which the Company owns 20% interest). From 1981 to August 1997, he served the
Company as Executive Vice President and Chief Technology Officer (formerly
Executive Vice President, Products and Technology; formerly Senior Vice
President, Marketing and Technology; and formerly Senior Vice President,
Corporate Technology).
F. RIGDON CURRIE (age 67) has been a director of the Company since October
1996. He was a general partner of Pacific Venture Partners from 1983 to 1994,
and has been a special limited partner of MK Global Ventures since 1988. He is
also a director of Wonderware Corporation (a manufacturing software company),
DISC, Inc. (a manufacturer of robotic digital storage libraries), Document
Technologies, Inc. (a manufacturer of high resolution display systems) and six
private companies. He is Chairman of the Board of Opportunity Capital
Corporation (a minority venture capital firm).
CLASS III DIRECTORS--CURRENT TERM EXPIRING 1999
MICHAEL C. DOW1 (age 50) has been a director of the Company since 1977 and
was an executive officer from 1977 until January 1989. He served the Company
in a consulting capacity from February 1989 to January 1992. From 1977 to
January 1989, he served the Company in various capacities, including Senior
Vice President, Marketing and Service; Senior Vice President, Marketing;
Senior Vice President, Sales and Customer Technical Service; Senior Vice
President, Sales and Customer Support; and Senior Vice President, Sales and
Services. Since October 1989, he has served as Mayor of the City of Mobile,
Alabama.
S. FELTON MITCHELL, JR. (age 52) has been a director of the Company since
1987. He has been President, S. Felton Mitchell, Jr., P.C. (attorney) since
1987 and sole proprietor, S. Felton Mitchell, Jr., CPA (accounting) since
1986. He is also a director of Mobile Gas Service Corporation.
CHARLES D. DALEY (age 63) has been a director of the Company since 1990. Mr.
Daley retired from the Company in July 1995 but continues to serve on the
Company's Board of Directors and he returned to serve as Executive Vice
President and Chief Operating Officer of the Company in July 1997. From 1988
until his retirement in 1995, he served as the Company's Executive Vice
President, Finance and Administration (formerly Senior Vice President, Finance
and Administration), Treasurer, and Chief Financial Officer. He previously
served as Vice President, Finance and Administration, at Megatek Corp., a
subsidiary of United Telecommunications, Inc. (a CAD/CAM terminal
manufacturer).
- --------
1Mr. Dow and Dr. Parker are brothers-in-law of Mr. Busby.
3
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1997, the Board of Directors met four times. All incumbent
members of the Board attended at least 75% of the total number of Board
meetings and meetings of committees of which they were members.
During fiscal 1997, the Audit Committee met four times. The Audit Committee
is responsible for reviewing and making recommendations regarding the
Company's employment of independent auditors, the annual audit of the
Company's financial statements and the Company's internal accounting practices
and policies. The current members of the Audit Committee are Messrs. Mitchell
(Chairman), Edwards, and Burch.
During fiscal 1997, the Compensation Committee met four times. The
Compensation Committee is responsible for recommending and reviewing the
compensation, including fringe benefits, of the executive officers and
directors of the Company and for administering the Company's stock option
plans. The current members of the Compensation Committee are Messrs. Burch
(Chairman) and Currie.
The Company has no nominating committee.
DIRECTOR COMPENSATION
No remuneration is paid to executive officers of the Company for services
rendered in their capacities as directors. The Company pays fees to non-
employee directors of $2,000 per month, plus $750 for each day, or part
thereof, spent in meetings of the Board of Directors or committees thereof.
Non-employee directors who are members of a committee are paid an additional
$2,000 a year for each committee on which the non-employee director serves.
Non-employee directors may elect, on an annual basis, to receive stock options
pursuant to the QMS, Inc. Stock Option Plan for Directors in lieu of the
monthly fee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers, and persons who own more than 10% of the
Company's Common Stock to file reports of ownership and changes in ownership
of such securities with the Securities and Exchange Commission (the "SEC") and
the New York Stock Exchange, Inc. Such persons are also required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to the
Company or representations that no Forms 5 were required, the Company believes
that during fiscal 1997 all of the Company's directors and executive officers
complied with all Section 16(a) filing requirements.
EXECUTIVE OFFICERS
The executive officers of the Company serve at the discretion of the Board
of Directors and as of November 24, 1997, included James L. Busby, Donald L.
Parker, Charles D. Daley, Joseph H. Niknejadi, Albert A. Butler, Richard A.
Wiggins, and C. Richard Bowles.
MR. NIKNEJADI (age 51) has been Senior Vice President, National Sales and
Service, of the Company since March 1997; he has been Senior Vice President,
National Service, of the Company since January 1997; and he was Vice
President, National Service, of the Company from October 1990 to January 1997.
Prior to that time, Mr. Niknejadi served as Executive Director, Customer
Service and Support, from May 1989 to October 1990 and as Manager, Customer
Service, from October 1988 to May 1989. Prior to joining the Company, Mr.
Niknejadi was Northeast Regional Service Manager for Paradyne Corporation (a
communications equipment manufacturer).
4
MR. BUTLER (age 55) has been Senior Vice President, Operations, of the
Company since April 1992; from January 1991 to April 1992, he was Vice
President, Corporate Materials and Logistics. Previously, Mr. Butler was with
the General Electric Co. (a manufacturer of electronics) in a number of
manufacturing management positions at the corporate headquarters and in
various operational positions.
MR. WIGGINS (age 49) has been Chief Financial Officer of the Company since
July 1997; he has been Senior Vice President, Finance and Administration,
Treasurer, Secretary and Corporate Controller of the Company since October
1996; he was Vice President and Corporate Controller of the Company from July
1996 to October 1996. Previously, Mr. Wiggins was Executive Vice President of
Finance and Chief Financial Officer of First Image Management Company (a
producer of comprehensive document solutions) from July 1993 to November 1995
and Senior Vice President and Chief Financial Officer of Wedlo, Inc. (a
jewelry manufacturer and retailer) from August 1991 to July 1993.
MR. BOWLES (age 36) has been Vice President, Marketing, of the Company since
February 1997. Prior to that time, Mr. Bowles served as Executive Director,
National Sales, from September 1996 to February 1997; Executive Director,
Marketing, from September 1995 to September 1996; Executive Director, Reseller
Sales, from February 1995 to September 1995; and Executive Director, Product
Marketing, from January 1993 to February 1995. From October 1983 to January
1993, Mr. Bowles served in a number of positions in the marketing, sales, and
engineering organizations of the Company.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of November 24, 1997,
regarding the amount of Common Stock beneficially owned by each of the
executive officers whose names appear in the "Summary Compensation Table"
included herein ("named executive officers"), each director and director
nominee of the Company, all directors and officers of the Company as a group,
and each person known to the Company to own beneficially more than five
percent of the outstanding shares of Common Stock. All shares shown reflect
sole voting and investment power except as otherwise noted.
According to rules adopted by the SEC, a person is a "beneficial owner" of
securities if that person has or shares the power to vote them or to direct
their investment or has the right to acquire beneficial ownership of such
securities within 60 days through the exercise of an option, warrant or right
of conversion of a security, or otherwise. As of the date of this Proxy
Statement, the Company only has shares of Common Stock outstanding.
5
NUMBER OF SHARES AND NATURE OF
BENEFICIAL OWNERSHIP AT
NOVEMBER 24, 1997
VOTING OR
INVESTMENT OPTIONS
POWER EXERCISABLE PERCENT
------------------ WITHIN 60 OF
NAME OR GROUP SOLE(1) SHARED DAYS CLASS(2)
- ------------- ------- ------- ----------- -------
Dimensional Fund Advisors, Inc.(3). 412,250 180,100(4) 0 5.5%
James L. Busby(5).................. 559,418(6) 0 103,000 6.1%
Joseph H. Niknejadi................ 3,245 0 18,600 *
Gerald G. Roenker(7)............... 1,000 3,000(8) 0 *
Donald L. Parker, Ph.D............. 6,891 48,517(9) 58,000 1.1%
Albert A. Butler................... 7,446 1,000(10) 19,600 *
Charles D. Daley................... 0 3,000(10) 11,927 *
Lucius E. Burch, III............... 14,740 69,525(11) 64,466 1.4%
Michael C. Dow..................... 19,000 40,467(10) 39,932 *
S. Felton Mitchell, Jr............. 0 0 56,755 *
Jack Edwards....................... 0 1,000(10) 2,500 *
F. Rigdon Currie................... 0 0 2,500 *
All current directors and executive
officers as a group (14 persons).. 611,740 166,509 400,310 10.6%
- --------
* Indicates beneficial ownership of less than 1.0%.
(1) Includes shares held in the Company's 401(k) plan as follows: Dr. Parker,
6,891; Mr. Butler, 7,446; and all directors and executive officers as a
group, 14,337. It also includes shares held in the Company's Employee
Stock Purchase Plan as follows: All current directors and executive
officers as a group, 2,245.
(2) For each person named and the group identified in the table, "Percent of
Class" has been calculated assuming the exercise of all options
exercisable by that person or group within 60 days after November 24,
1997.
(3) Dimensional Fund's address is 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401.
(4) Includes 73,200 shares held by the DFA Investment Dimensions Group Inc.,
(the "Fund") and 106,900 shares held by the DFA Investment Trust Company
(the "Trust").
(5) Mr. Busby's address is 6106 Cottage Hill Road, Mobile, Alabama 36609.
(6) Includes 17,000 shares held by Mr. Busby's spouse, as to which he has no
voting or investment power and disclaims beneficial ownership.
(7) Mr. Roenker resigned his position as an executive officer of the Company
as of October 4, 1997.
(8) Voting and investment power is shared with Roenker Bates Group with
respect to the indicated shares.
(9) Of the indicated shares, 18,000 are held of record by trusts for Dr.
Parker's children in which Dr. Parker has no beneficial interest. The
voting and investment power of the remaining 30,517 shares is shared with
Dr. Parker's spouse.
(10) Voting and investment power is shared with spouse with respect to the
indicated shares.
(11) Of the indicated shares, 5,000 are held of record by Mr. Burch's spouse;
18,425 are held of record by a trust of which Mr. Burch is a beneficiary
and a co-trustee; 100 are held by dependents of Mr. Burch; and 46,000 are
held of record by investment clients of Mr. Burch's firm (Massey Burch
Investment Group, Inc.). Mr. Burch disclaims beneficial ownership of all
shares held by his spouse, dependents and investment clients of his firm.
EXECUTIVE COMPENSATION TABLES
The following tables present certain information concerning the cash
compensation and stock options provided to the named executive officers. The
notes to these tables provide more specific information regarding
compensation. The executive officer compensation policies of the Board of
Directors are discussed in more detail in the Compensation Committee Report.
6
TABLE I
SUMMARY COMPENSATION TABLE
This table presents the total compensation earned during or with respect to
fiscal 1997, fiscal 1996, and fiscal 1995 by the Company's Chief Executive
Officer and its four most highly compensated executive officers during fiscal
1997 other than the Chief Executive Officer. The Company has outstanding no
stock appreciation rights ("SARs") and no shares of restricted stock.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ($) AWARDS
------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR ($ )BONUS ($) ($)(1) OPTIONS (*) ($)(2)
- ------------------------ ------ ------- --------- ------------ ------------ ------------
James L. Busby 1997 546,886 0 0 20,000 1,103,426
Chairman, President, and 1996 480,922 0 0 10,000 110,888
CEO 1995 595,832 0 0 10,000 183,070
Joseph H. Niknejadi 1997 186,794 165,000 0 10,000 0
Senior Vice President, 1996 120,000 60,000 0 5,000 5,250
Sales and Service 1995 123,077 36,075 0 3,500 4,986
Gerald G. Roenker 1997 323,682 0 25,699 80,000 0
Executive Vice President 1996 274,615 0 4,032 10,000 0
1995 0 0 0 60,000 0
Donald L. Parker, Ph.D. 1997 318,501 0 0 20,000 546,822
Executive Vice Presi-
dent, 1996 274,818 0 0 10,000 82,102
Products & Technology 1995 320,137 1,500 0 5,000 122,667
Albert A. Butler 1997 187,976 15,500 0 5,000 0
Sr. Vice President, 1996 156,763 0 0 6,000 5,250
Operations 1995 179,558 1,500 0 5,000 5,250
- --------
* Number of shares.
(1) Amounts reported in the "Other Annual Compensation" for Mr. Roenker
represent reimbursed relocation expense.
(2) Includes for Mr. Busby: $4,650 for life insurance premiums paid on his
behalf and $1,098,776 accrued in connection with an accelerated
supplemental executive retirement benefits agreement. Includes for Dr.
Parker: $2,640 for life insurance premiums paid on his behalf and $544,182
accrued in connection with an accelerated supplemental executive
retirement benefits agreement. The amounts accrued for the supplemental
retirement plan represent the present value of the total payments to each,
reflecting the financial reporting treatment of such payments as a result
of separation agreements entered into by Mr. Busby and Dr. Parker.
7
TABLE II
FISCAL 1997 STOCK OPTION GRANTS
The following table presents information regarding options to purchase
shares of Common Stock that were issued by the Company to its named executive
officers in fiscal 1997 that may be exercised to purchase shares of Common
Stock. The Company granted no SARs during fiscal 1997.
INDIVIDUAL GRANTS
------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION GRANT DATE
NAME GRANTED(1) YEAR ($/SHARE) DATE VALUE($)(2)
- ------------------------ ---------- ---------- -------- ---------- -----------
James L. Busby.......... 20,000 5.8% $5.625 1/20/07 $52,674
Joseph H. Niknejadi..... 10,000 2.9% $5.625 1/20/07 $26,337
Gerald G. Roenker(3).... 20,000 5.8% $5.625 1/20/07 $38,030
20,000 5.8% $4.500 3/28/07 $28,682
20,000 5.8% $2.688 6/27/07 $18,170
20,000 5.8% $2.875 10/3/07 $19,438
Donald L. Parker, Ph.D.. 20,000 5.8% $5.625 1/20/07 $52,674
Albert A. Butler........ 5,000 1.4% $5.625 1/20/07 $13,169
- --------
(1) All options granted to the named executive officers were granted on
January 20, 1997, except as noted for Mr. Roenker. These options become
exercisable in 20% increments annually beginning on the date of grant and
are subject to accelerated vesting in whole or in part upon a "change of
control" as defined in the Company's 1987 Stock Option Plan.
(2) This column represents the present value of the options on the date of
grant using the Black-Scholes option pricing model adapted for the
Company's Common Stock, utilizing the following assumptions: five-year
stock price volatility of 0.5377; no dividend yield; expected term to
exercise of 730 days; interest rates equal to the U.S. Treasury Note rates
in effect at the date of the grant (approximately 6%) for the expected
term of the option, and no adjustment for non-transferability or
forfeiture. The actual value, if any, an executive may realize will depend
on the excess of the stock price over the exercise price on the date the
option is exercised, so there is no assurance that the value to be
realized by an executive will be at or near the value estimated by the
Black-Scholes model.
(3) Mr. Roenker was granted options to purchase 20,000 shares on January 20,
1997, 20,000 shares on March 28, 1997, 20,000 shares on June 27, 1997, and
20,000 shares on October 3, 1997. Mr. Roenker resigned his position as an
executive officer of the Company on October 4, 1997. All of Mr. Roenker's
outstanding options were forfeited at that time.
8
TABLE III
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND
FISCAL YEAR-END OPTION VALUES
The following table presents information regarding options exercised for
shares of the Company's Common Stock during fiscal 1997 and the value of
unexercised options held at October 3, 1997. The Company has no outstanding
SARs.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 10/3/97(1) OPTIONS AT 10/3/97 ($)(2)
------------------------- -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
James L. Busby 0 $ 0 96,000 29,000 $ 0 $ 0
Joseph H. Niknejadi 0 0 12,900 13,800 0 0
Gerald G. Roenker(3) 0 0 142,500 7,500 3,750 0
Donald L. Parker, Ph.D. 0 0 51,000 26,000 0 0
Albert A. Butler 0 0 14,400 11,600 0 0
- --------
(1) Effective October 3, 1997, certain executive officers voluntarily
surrendered options held by them. Dr. Parker (40,000 shares) and Messrs.
Busby (60,000 shares), Butler (17,000 shares), Niknejadi (15,900 shares),
and Daley (55,000 shares) each surrendered options covering shares.
(2) Based on the closing price on the New York Stock Exchange--Composite
Transactions of the Company's Common Stock on that date ($2.875).
(3) Mr. Roenker's options were forfeited on October 4, 1997 upon his
resignation as an executive officer of the Company.
STOCK PERFORMANCE GRAPH
The following graph compares the Company's five-year cumulative total return
to the S&P 500 and the S&P Computer Systems Composite Index over the five-year
period beginning on October 2, 1992 and ending October 3, 1997. The total
stockholder return assumes $100 invested at the beginning of the period in the
Company's Common Stock, the S&P 500, and the S&P Computer Systems Composite
Index. It also assumes reinvestment of all dividends. Past financial
performance should not be considered to be a reliable indicator of future
performance, and investors should not use historical trends to anticipate
results or trends in future periods.
9
LOGO
EXECUTIVE AGREEMENTS
Mr. Busby and Dr. Parker entered into separation agreements with the Company
on June 30, 1997, and August 5, 1997, respectively. Mr. Busby's agreement
provides for his resignation as an executive officer of the Company as of the
appointment of his successor, with salary of $510,000 per year continuing
through December 31, 1998. Thereafter, Mr. Busby will be paid $287,500 per
year for ten years, pursuant to his supplemental executive retirement plan.
Dr. Parker's agreement sets the effective date of his resignation as an
officer of the Company at January 31, 1998, during which time his salary will
be at the rate of $290,000 per year. Beginning February 1, 1998, and
continuing for ten years, Dr. Parker will be paid $150,000 per year pursuant
to his supplemental executive retirement plan.
Each of Mr. Busby's and Dr. Parker's agreements terminates their rights
under change of control agreements previously executed. Mr. Busby's and Dr.
Parker's agreements also terminate their employment rights prior to December
31, 1998, and January 31, 1998, respectively, under certain extraordinary
conditions as provided in the agreements.
10
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS OF QMS, INC.
The Compensation Committee of the Board of Directors is currently composed
of two non-management directors, Messrs. Burch (Chairman) and Currie. The
Committee is responsible for setting overall policies that govern the
Company's compensation programs, administering certain of the Company's equity
compensation plans, and establishing the cash compensation of executive
officers.
The Company's executive compensation programs are designed to attract,
reward, and retain key executives who will continue to lead the Company in
achieving its objectives in a highly competitive and fast-changing industry.
The cash compensation for each of the Company's executives consists of a
base salary and an annual incentive program. Long-term incentives consist of
stock options granted under the Company's 1984 and 1987 Stock Option Plans and
the QMS, Inc. 1997 Stock Incentive Plan.
CASH COMPENSATION--BASE SALARIES
Base salary targets are established by reviewing published survey data and
compensation information contained in proxy statements regarding similar
positions held by executives of other high technology/electronics firms of
approximately the same size as the Company. The Compensation Committee then
chooses to pay the executive at, above, or below his base salary target
according to a subjective determination by the Compensation Committee based
upon the following two factors:
1. The executive's job performance in the Company's last fiscal year and
2. The executive's perceived potential to contribute to the Company's
performance in the upcoming fiscal year.
Final decisions regarding the establishment of base salary targets and
levels of base salaries are made independently by the Compensation Committee.
The Committee does, however, solicit input from the Company's Chief Executive
Officer, Executive Vice President, and Chief Financial Officer on the level of
performance of executives reporting to them. Base salary adjustments may be
made within a fiscal year based on the executive's performance and
contribution to the Company's results of operations during that period.
For fiscal 1997, in light of the Company's recent results of operation and
financial position, the Compensation Committee set base salaries for the
Company's Chief Executive Officer and other executive officers at levels which
were above those for fiscal 1996, but consistent with the amounts of such base
salaries for prior years. The results of such actions are reflected in the
Summary Compensation Table set forth above.
CASH COMPENSATION--ANNUAL INCENTIVE PROGRAMS
The Compensation Committee believes that an annual cash compensation program
tied to the Company's performance provides appropriate short-term incentives
to the Company's key executive officers. Accordingly, most executive officers
of the Company, including Messrs. Busby and Butler and Dr. Parker, participate
in an annual cash incentive program that requires the Company to achieve a
certain earnings per share level before any payments may be made. The earnings
per share levels are established by the Compensation Committee upon
recommendation by the Executive Vice President and Chief Operating Officer and
the Senior Vice President and Chief Financial Officer of the Company each year
and are generally set at levels providing for an increase in earnings per
share over the prior year before any incentive compensation is earned. The
threshold earnings per
11
share target level for fiscal 1997 was $0.55 per share. If such earnings had
been achieved, each of Messrs. Busby and Butler and Dr. Parker would have
received an additional cash payment equal to 18% of his base salary. If higher
earnings per share levels had been achieved, they would have been eligible to
receive correspondingly higher bonus amounts. The Committee's philosophy is
that executive base salaries should be competitive within the industry and
should be paid regardless of the Company's performance so long as the officer
retains his position, but that the annual incentive portion of executive
compensation should not be paid unless stockholders benefit from improved
earnings per share. Because target earnings per share levels were not attained
in fiscal years 1995, 1996, or 1997, no payments were made under this program
for those years.
Officers who are in sales and service or marketing, including Mr. Niknejadi,
are not part of the same incentive plan, but are subject to individual
incentive arrangements determined by the Chief Operating Officer and approved
by the Compensation Committee. Incentives proposed by the Chief Operating
Officer for fiscal 1997 were not based upon any formula or particular
standards and were unique to each individual officer.
STOCK OPTION PROGRAMS
The Compensation Committee believes that management ownership of a
significant equity interest in the Company is a major incentive in building
stockholder value and aligning the long-term interests of management and
stockholders. To that end, the Compensation Committee has historically granted
stock options at option prices not less than the fair market value of the
Common Stock on the grant date. Any gain from the exercise of the stock
options will occur only when the price of the Company's Common Stock increases
above the option grant price. This situation, in turn, means that stockholder
value is being enhanced. In fiscal 1997, the Compensation Committee granted
stock options to the named executive officers as outlined in Table II--Fiscal
1997 Stock Option Grants set forth above.
COMPENSATION--CHIEF EXECUTIVE OFFICER
The Compensation Committee considers the information set forth above
concerning compensation paid to executives by other companies in setting the
compensation of Mr. Busby as the Chief Executive Officer of the Company. The
Committee's objective in setting Mr. Busby's compensation has been that his
salary be at the high end of a range of salaries paid to chief executive
officers of companies in the high technology/electronics industry of
approximately the same size as the Company. Mr. Busby's base salary for fiscal
1997 was higher than in fiscal 1996 but consistent with levels of prior years
as set forth under "Cash Compensation--Base Salaries." In addition, the
Committee approves the performance objectives set forth in an annual incentive
plan described above, which is designed to permit Mr. Busby (as well as the
other officer-participants in the annual incentive plan) to earn additional
compensation if certain earnings per share levels are achieved. See the
discussion under "Cash Compensation--Annual Incentive Programs" above. The
Committee also granted stock options to Mr. Busby in fiscal 1997 based on the
philosophy described under "Stock Option Programs" above. See "Table II--
Fiscal 1997 Stock Option Grants" for the terms of such options.
LIMITATIONS ON THE DEDUCTIBILITY OF COMPENSATION
Pursuant to the 1993 Omnibus Budget Reconciliation Act, a portion of annual
compensation payable after 1993 to any of the Company's five highest paid
executive officers would not be deductible by the Company for federal income
tax purposes to the extent such officer's overall compensation exceeds
$1,000,000. Qualifying performance-based incentive compensation, however,
would be both deductible and excluded for purposes of calculating the
$1,000,000 base. It has been determined that no portion of anticipated
compensation payable to any executive officer in fiscal 1997 would be non-
deductible. Although the Compensation Committee does not presently intend to
award compensation in excess of the $1,000,000 cap, it will continue to
address this issue when formulating compensation arrangements for executive
officers.
Submitted By the Compensation Committee
of the Board of Directors
Lucius E. Burch, III F. Rigdon Currie
12
The foregoing Report of the Compensation Committee shall not be deemed to
constitute soliciting material and shall not be deemed to be incorporated by
reference as a result of any general incorporation by reference of this Proxy
Statement or any part hereof in the Company's Annual Report to Stockholders on
form 10-K.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Burch, Daley, and Currie served on the Compensation Committee during
fiscal 1997. Mr. Daley ceased to serve on the Committee in July 1997 when he
was named Executive Vice President and Chief Operating Officer of the Company.
PROPOSAL 2--AMENDMENT OF THE
QMS, INC. 1997 STOCK INCENTIVE PLAN
INTRODUCTION
On October 15, 1997, the Board of Directors approved an amendment to the
QMS, Inc. 1997 Stock Incentive Plan (the "Incentive Plan"). The full text of
the Incentive Plan, as amended, is set forth in Appendix A to this Proxy
Statement. The amendment provides for an increase in the shares available
under the Incentive Plan from 500,000 shares to 1,500,000 shares. The Plan was
adopted because the Board of Directors believes the Company must continue to
have the capacity to grant stock incentives to its key employees and
directors.
The Incentive Plan provides the Company with increased flexibility to grant
equity-based compensation to key employees and directors of the Company or any
affiliate for the purpose of providing incentive to stimulate their efforts
toward the continued success of the Company and to operate and manage the
business in a manner that will provide for the long-term growth and
profitability of the Company. Additionally, the Incentive Plan permits the
Company to encourage stock ownership by employees and directors by providing
the employees and directors with a means to acquire a proprietary interest in
the Company, and the Incentive Plan provides the Company with a means to
attract and retain key personnel. The Board of Directors has approved and
seeks stockholder approval of the amendment to the Incentive Plan. The Board
of Directors has reserved 1,500,000 shares of Common Stock for issuance
pursuant to awards that may be made under the Incentive Plan, subject to
adjustment as provided therein. The Incentive Plan is not subject to the
Employee Retirement Income Security Act of 1974, nor is it qualified under
Section 401(a) of the Internal Revenue Code.
The following description of the Incentive Plan is qualified in its entirety
by reference to the applicable provisions of the plan document.
TERMS OF THE INCENTIVE PLAN
Administration. The Incentive Plan will be administered by a Committee (the
"Committee") appointed by the Board of Directors consisting of at least 2
members of the Board of Directors all of whom may be required to satisfy
"disinterested" standards under tax and securities law. The Committee has the
power to determine which eligible persons receive awards and the specific
terms of each award, subject to the general parameters set forth in the
Incentive Plan.
The Incentive Plan permits the Committee to make awards of both incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and nonqualified stock options. The Company intends
that all incentive stock options to be granted under the Incentive Plan will
comply with Section 422 of the Code. The Incentive Plan gives the Committee
wide latitude in determining the specific terms of any particular award;
however, there are certain specific limits described in the Incentive Plan
attributable to federal tax laws.
The number of shares of Common Stock as to which an option is granted and to
whom any option is granted shall be determined by the Committee in its sole
discretion, subject to the provisions of the Incentive Plan. Options issuable
may be made exercisable or settled at such prices and may be made terminable
under such terms as are established by the Committee, to the extent not
otherwise inconsistent with the terms of the Incentive Plan.
13
The maximum number of shares of Common Stock with respect to which options
may be granted during any fiscal year of the Company as to any eligible
recipient shall not exceed 100,000, to the extent required by Section 162(m)
of the Internal Revenue Code for the grant to qualify as qualified
performance-based compensation.
The Incentive Plan generally provides that all rights granted pursuant to
stock incentives shall not be transferable or assignable, except by the laws
of descent and distribution.
Eligibility. All employees and directors of the Company are eligible to
participate in the Incentive Plan; provided, however, that an Incentive Stock
Option can only be granted to an employee of the Company. As of November 24,
1997, 710 individuals were eligible to participate in the Incentive Plan.
Options. Each option granted pursuant to the Incentive Plan must be
authorized by the Committee and evidenced by an agreement (the "Agreement")
containing the terms and the conditions of the option. At the time the option
is granted, the Committee shall determine whether the option is an incentive
stock option or a nonqualified stock option. The Committee may permit an
option exercise price to be paid in cash, by the delivery of previously owned
shares of Common Stock, through a cashless exercise executed through a broker,
by having a number of shares of Common Stock otherwise issuable at the time of
exercise withheld, or in whole or in part in installments with Company
financing for any unpaid portion. The Incentive Plan permits the grant of both
incentive and nonqualified stock options. An incentive stock option may only
be granted within ten (10) years from the earlier of the date the Incentive
Plan is adopted by the Board of Directors or approved by the Company's
stockholders.
The terms of particular options may provide that they terminate, among other
reasons, upon the holder's termination of employment or other status with
respect to the Company and any affiliate, upon a specified date, upon the
holder's death or disability, or upon the occurrence of a change in control of
the Company. Options may also include exercise, conversion or settlement
rights to a holder's estate or personal representative in the event of the
holder's death or disability. At the Committee's discretion, options that are
held by an employee who suffers a termination of employment may be cancelled,
accelerated, paid, or continued, subject to the terms of the applicable
Agreement and to the provisions of the Incentive Plan.
Recapitalizations and Reorganizations. The number of shares of Common Stock
reserved for issuance in connection with the grant or settlement of options or
to which an option is subject, as the case may be, and the exercise price of
each option are subject to adjustment in the event of any recapitalization of
the Company or similar event, effected without the receipt of consideration.
In the event of certain corporate reorganizations, options may be
substituted, cancelled, accelerated, cashed-out, or otherwise adjusted by the
Committee, provided such adjustment is not inconsistent with the express terms
of the Incentive Plan or the applicable Agreement.
Amendment or Termination. Although the Incentive Plan may be amended by the
Board of Directors without stockholder approval, the Board of Directors also
may condition any such amendment upon stockholder approval if stockholder
approval is deemed necessary or appropriate in consideration of tax,
securities, or other laws.
Tax Consequences. The following discussion outlines generally the federal
income tax consequences of participation in the Incentive Plan. Individual
circumstances may vary and each participant should rely on his or her own tax
counsel for advice regarding federal income tax treatment under the Incentive
Plan.
Nonqualified Options. A participant will not recognize income upon the grant
of an option or at any time prior to the exercise of the option or a portion
thereof. At the time the participant exercises a nonqualified option or
portion thereof, he or she will recognize compensation taxable as ordinary
income in an amount equal to the excess of the fair market value of the Common
Stock on the date the option is exercised over the price paid for the Common
Stock, and the Company will then be entitled to a corresponding deduction.
14
Depending upon the period shares of Common Stock are held after exercise,
the sale or other taxable disposition of shares acquired through the exercise
of a nonqualified option generally will result in a short- or long-term
capital gain or loss equal to the difference between the amount realized on
such disposition and the fair market value of such shares when the
nonqualified option was exercised.
Special rules apply to a participant who exercises a nonqualified option by
paying the exercise price, in whole or in part, by the transfer of shares of
Common Stock to the Company.
Incentive Stock Options. A participant who exercises an incentive stock
option will not be taxed at the time he or she exercises the option or a
portion thereof. Instead, he or she will be taxed at the time he or she sells
the Common Stock purchased pursuant to the option. The participant will be
taxed on the difference between the price he or she paid for the stock and the
amount for which he or she sells the stock. If the participant does not sell
the stock prior to two years from the date of grant of the option and one year
from the date the stock is transferred to him or her, the participant will be
entitled to capital gain or loss treatment based upon the difference between
the amount realized on the disposition and the aggregate exercise price and
the Company will not get a corresponding deduction. If the participant sells
the stock at a gain prior to that time, the difference between the amount the
participant paid for the stock and the lesser of the fair market value on the
date of exercise or the amount for which the stock is sold, will be taxed as
ordinary income and the Company will be entitled to a corresponding deduction;
if the stock is sold for an amount in excess of the fair market value on the
date of exercise, the excess amount is taxed as capital gain. If the
participant sells the stock for less than the amount he or she paid for the
stock prior to the one or two year periods indicated, no amount will be taxed
as ordinary income and the loss will be taxed as a capital loss.
Exercise of an incentive option may subject a participant to, or increase a
participant's liability for, the alternative minimum tax.
Options granted under the Incentive Plan during fiscal 1997 included 60,000
to all executive officers as a group, 18,500 to all employees other than
executive officers, and in the amounts shown for the executive officers named
in the Summary Compensation Table.
STOCKHOLDER APPROVAL
The Board of Directors seeks stockholder approval of the amendment to the
Incentive Plan because that portion which authorizes the grant of incentive
stock options must be approved by stockholders under federal tax law. In
addition, the receipt of stockholder approval will enable the Company to
maximize deductions otherwise available in connection with the exercise of
nonqualified stock options.
YOUR BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE QMS, INC. 1997 STOCK INCENTIVE PLAN
PROPOSAL 3--AMENDMENT OF
QMS, INC. STOCK OPTION PLAN FOR DIRECTORS
INTRODUCTION
On November 17, 1997, the Board of Directors approved an amendment (the
"Amendment") of the QMS, Inc. Stock Option Plan for Directors (the "Directors'
Plan"), subject to stockholder approval. A copy of the amendment to the
Director's Plan is attached hereto as Appendix B. The Amendment increases the
aggregate number of shares of the Company's Common Stock that may be issued
pursuant to the Directors' Plan from 250,000 to 500,000.
15
The purpose of the Directors' Plan is to advance the interests of the
Company by encouraging and enabling the acquisition of Common Stock by the
Company's non-employee directors, upon whose judgment and ability the Company
relies to attain its long-term growth and development, to promote a close
identity of interests among the Company, such directors, and stockholders of
the Company, and to provide a means to attract and retain well-qualified
directors.
The Directors' Plan includes an opportunity for non-employee directors to
receive stock options at a below-market exercise price (50% of the Fair Market
Value, as defined in the Directors' Plan, of a share of Common Stock on the
date of grant) as an alternative to the payment of the annual directors'
retainers in cash. The Directors' Plan does not apply to meeting fees or fees
for committee service. In addition, the Directors' Plan provides the
opportunity for the Company to eliminate the cash cost of directors' annual
retainer fees to the extent the directors elect to receive options in lieu of
cash. Further, when any option is exercised, the Company generally will be
able to deduct for federal income tax purposes any difference between the
option price and the market price of Common Stock (see "Federal Income Tax
Matters"). If the Amendment is not approved by the Company's stockholders,
there will be insufficient shares, at the current market price of the Common
Stock, to permit grants of options as provided in the Directors' Plan. The
Board of Directors believes that it is in the best interests of the Company to
continue the Directors' Plan. Accordingly, the Board of Directors has approved
the Amendment increasing the number of shares available under the Directors'
Plan and recommends a vote in favor of the Amendment to the Directors' Plan.
The terms of the Directors' Plan provide for the grant of nonqualified stock
options. The Directors' Plan is not subject to the Employee Retirement Income
Security Act of 1974, nor is it qualified under Code Section 401(a). The
Directors' Plan will terminate on January 24, 2004 unless terminated by the
Board of Directors at an earlier date.
The following description of the Directors' Plan is qualified in its
entirety by reference to the applicable provisions of the Directors' Plan as
so amended and agreements related to the Directors' Plan.
TERMS OF THE DIRECTORS' PLAN
Administration. The Directors' Plan is administered by a committee (the
"Committee") of employee directors appointed by the Board of Directors.
Subject to the express provisions of the Directors' Plan, the Committee has
full and final authority to interpret the Directors' Plan, adopt, amend, and
rescind rules and regulations relating to the Directors' Plan, and make all
other determinations and take all other actions necessary and advisable for
the administration of the Directors' Plan. The Committee's decisions and
determinations on all matters relating to the Directors' Plan are in its sole
discretion and are conclusive.
Eligibility. All non-employee directors are eligible to participate in the
Directors' Plan.
Stock Subject to Directors' Plan. By the adoption of the Amendment, the
Company has authorized and reserved for issuance upon the exercise of options
pursuant to the Directors' Plan 500,000 shares of Common Stock, subject to
adjustment as provided in the Directors' Plan. On November 24, 1997, the
closing sales price per share of the Common Stock was $3.06.
Option Awards. The Directors' Plan provides for annual grants to each non-
employee director of an option to purchase 5,000 shares of Common Stock,
provided the director is first appointed to serve, or continues to serve, as a
non-employee director as of the date of the annual meeting of the Company's
stockholders. The exercise price shall be equal to the Fair Market Value (as
defined in the Directors' Plan) of Common Stock as of the date of grant.
Options Purchased with Retainer Compensation. The Directors' Plan also
provides for the grant of options, as of the date of the annual meeting of the
Board of Directors which is held in conjunction with the Company's annual
meeting of stockholders, to any director who, no later than the date of such
annual meeting of the Board of Directors (and subject to such other rules as
the Committee may adopt from time to time), has filed with the
16
Company an irrevocable election to receive a stock option in lieu of all or a
specified portion of the Annual Director Compensation (as defined in the
Directors' Plan) expected to be earned by the director for the twelve-month
period described in the Directors' Plan and defined as the "Plan Year." The
director is not entitled to receive in cash any portion of the Annual Director
Compensation for which an election has been made to receive an option.
The number of shares of Common Stock subject to each option purchased by any
director for a Plan Year is determined by a formula which provides that each
director shall receive an option to purchase the nearest number of whole
shares of Common Stock (with cash payment for fractional shares) equal to the
portion of Annual Director Compensation allocated to the purchase of the
option divided by the difference between the Fair Market Value (as defined in
the Directors' Plan) on the date the option is granted and the option exercise
price, which will be 50% of the market value of the stock on the date the
option is granted. "Annual Director Compensation" is defined generally as the
amount of fees (or portion thereof subject to the director's election) which
the director shall be entitled to receive during a Plan Year for serving as a
director or as a member of any committee of the Board of Directors pursuant to
the policy in effect for each Plan Year, including retainers paid periodically
and fees paid for attendance at or participation in meetings of the Board of
Directors or any committee thereof.
The operation of the option formula can be illustrated as follows: If the
Fair Market Value of a share of the Company's Common Stock on a given date is
$5.00, each director who elected to receive a stock option in lieu of Annual
Director Compensation of $24,000 for a particular Plan Year would be granted
an option to purchase 9,600 shares of Common Stock at $2.50 per share (the
amount of the Annual Director Compensation of $24,000 divided by $2.50).
Transfer of Options. Directors may not transfer any options issued under the
Directors' Plan other than by will or the laws of intestate succession. Any
option issued to a director and outstanding on the date of his or her death
may be exercised by the administrator of the director's estate, the executor
under his or her will, or the person or persons to whom the option will have
been validly transferred by such executor or administrator pursuant to the
will or laws of intestate succession, but not beyond the first to occur of (i)
the first anniversary of the director's death or (ii) the specified expiration
date of the option; provided, however, that an option that is not exercised
prior to the anniversary of the director's death and which remains exercisable
on the first anniversary will be deemed exercised on the first anniversary of
the date of death to the extent the then Fair Market Value of the shares
subject to the option exceeds the option exercise price and payment of such
exercise price will be effected by withholding a number of shares of Common
Stock otherwise issuable pursuant to the option, the Fair Market Value of
which on such anniversary is equal to the exercise price. If the Fair Market
Value of the Common Stock on the first anniversary of the director's death
equals or is less than the option exercise price, then the option will be
deemed to have expired unexercised.
Exercise of Options. The optionee may pay for shares purchased pursuant to
exercise of any option (i) in cash, (ii) by delivering to the Company a number
of shares of Common Stock the director has beneficially owned at least six
months before the date of exercise and having an aggregate Fair Market Value
of at least the product of the exercise price multiplied by the number of
shares the director intends to purchase upon exercise of the option on the
date of delivery, or (iii) in a cashless exercise through a broker. No option
granted under the Directors' Plan may be exercised before the twelve-month
anniversary of the date upon which it was granted; however, any option issued
under the Directors' Plan will become immediately exercisable upon the
director's retirement due to attainment of at least age 65, death, or
disability, provided that the Committee has the discretion to delay the
exercise of any option immediately exercisable due to retirement or disability
prior to the six-month anniversary of the date of the stock issuance, unless
the Committee is satisfied that an earlier exercise will not trigger recovery
of short-swing profits under Section 16 of the Securities Exchange Act of
1934. No option granted under the Directors' Plan will be exercisable after
the expiration of 20 years from the date upon which it is granted.
17
Termination of Directorship. Except as otherwise provided in the Directors'
Plan, the rights of a director in an option issued under the Directors' Plan
will not terminate upon such director's termination as a director for any
reason. That portion of an option granted under the Directors' Plan which is
attributable to any portion of the Annual Director Compensation which is not
earned due to termination as a director or as a member of a committee of the
Board of Directors (for any reason) or because of lack of attendance or
participation in any meeting of the Board of Directors or any committee
thereof will automatically abate and be cancelled.
Amendment, Modification, and Termination. The Board of Directors may
terminate and in any respect amend or modify the Directors' Plan provided,
however, that no such action by the Board of Directors without approval of the
stockholders may (i) increase the total number of shares of Common Stock
available under the Directors' Plan in the aggregate (except as otherwise
provided in the Directors' Plan), (ii) extend the period during which any
option may be exercised, (iii) extend the term of the Directors' Plan, (iv)
change the option price, or (v) alter the class of persons eligible to receive
options.
Restrictions on Delivery of Shares; Legends. Each option will be subject to
the condition that if at any time the Committee, in its discretion, determines
that the listing, registration, or qualification of the shares covered by such
option upon any securities exchange or under any state or federal law is
necessary or desirable as a condition of or in connection with the granting of
such option or the purchase or delivery of shares thereunder, the delivery of
any or all shares pursuant to such option may be withheld unless and until
such listing, registration or qualification will have been effected or until
receipt of appropriate representations and an opinion of counsel that such
disposition is exempt from such requirement under the Securities Act of 1933
and any applicable state securities laws.
Benefits. Each of Messrs. Burch, Daley, Dow, Edwards, and Mitchell received
options to purchase 5,000 shares, and Mr. Currie received options to purchase
10,000 shares, under the Directors' Plan during fiscal 1997. In addition,
options to purchase 8,888, 8,177, 7,466 and 8,177 shares were issued to
Messrs. Burch, Daley, Dow, and Mitchell, respectively, in lieu of directors'
fees during fiscal 1997.
FEDERAL INCOME TAX MATTERS
Directors are not required to recognize income upon the issuance of options
under the Directors' Plan, nor at any time before the exercise of the option
or a portion thereof. When an optionee exercises an option or portion thereof,
the optionee generally will be required to recognize compensation taxable as
ordinary income in an amount equal to the excess of the fair market value of
the Common Stock on the exercise date over the exercise price of the option,
and the Company is then entitled to a corresponding deduction.
VOTE REQUIRED
The affirmative vote of the holders of at least a majority of the shares of
Common Stock represented and entitled to vote at the Meeting is required to
approve the Amendment to the Directors' Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS
THAT STOCKHOLDERS VOTE FOR THE AMENDMENT TO
THE STOCK OPTION PLAN FOR DIRECTORS
AUDITORS
The firm of Deloitte & Touche LLP has served as the Company's independent
certified public accountants since 1980. The appointment of auditors is a
matter for determination by the Audit Committee of the Board of Directors and
is not being submitted to the stockholders for approval or ratification. A
representative of this firm is expected to attend the Meeting, to respond to
questions from stockholders, and to make a statement if he so desires.
18
CERTAIN TRANSACTIONS AND MATTERS
Jack Edwards, a director and nominee, is a member of the law firm of Hand
Arendall, L.L.C., which serves as counsel for the Company. The $2.6 million
management transition expense included in the fiscal 1997 consolidated
financial statements relates to agreements with the Company's Chairman of the
Board, James L. Busby, and Board member Donald L. Parker.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
Any stockholder of the Company wishing to submit a proposal for action at
the Company's annual meeting of stockholders to be held in 1999 and desiring
the proposal to be considered for inclusion in the Company's proxy material
relating thereto must provide a written copy of the proposal to the management
of the Company at its principal executive office not later than August 14,
1998, and must otherwise comply with the rules of the SEC relating to
stockholder proposals.
ANNUAL REPORT
The Company's 1997 Annual Report to Stockholders is being mailed to the
Company's stockholders with this Proxy Statement. The Annual Report is not
part of the proxy solicitation material.
GENERAL
Management does not know of any other matters to be presented at the Meeting
for action by stockholders. However, if any other matter requiring a vote of
the stockholders is properly presented at the Meeting or any adjournment
thereof, it is intended that votes will be cast pursuant to the proxies with
respect to such matters in accordance with the best judgment of the persons
acting under the proxies.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by use of the mail, certain officers and
regular employees of the Company may solicit the return of proxies by
telephone, telegram, or personal interview. The Company has engaged Corporate
Investor Communications, Inc. to distribute and solicit proxies for the
Meeting at an estimated cost of $4,500 plus reasonable expenses. The Company
has requested that brokerage houses and custodians, nominees and fiduciaries
forward soliciting materials to their principals and beneficial owners of
Common Stock of the Company, and will reimburse them for their reasonable out-
of-pocket expenses.
A list of stockholders entitled to be present and vote at the Meeting will
be available at the offices of the Company, One Magnum Pass, Mobile, Alabama,
for inspection by the stockholders during regular business hours from January
10, 1998, to the date of the Meeting. The list also will be available during
the Meeting for inspection by stockholders who are present.
If you cannot be present in person, you are requested to complete, sign,
date, and return the enclosed proxy promptly. An envelope has been provided
for that purpose. No postage is required if mailed in the United States.
[Signature of Richard A. Wiggins
appears here]
Richard A. Wiggins
Secretary
December 12, 1997
19
APPENDIX A
FIRST AMENDMENT TO QMS, INC. 1997
STOCK INCENTIVE PLAN
THIS FIRST AMENDMENT is made as of the 15th day of October, 1997, by QMS,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the QMS, Inc. 1997 Stock Incentive Plan under
an indenture dated October 23, 1996 (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to reflect an increase in the
number of shares authorized for issuance thereunder;
NOW, THEREFORE, the Company does hereby amend the Plan as follows:
1. By deleting the first sentence of Section 2.2 in its entirety and by
substituting therefor the following:
Subject to adjustment in accordance with Section 4.2, 1,500,000 shares of
Stock, $0.01 par value (the "Maximum Plan Shares"), are hereby reserved
exclusively for issuance pursuant to Options.
2. Notwithstanding the foregoing, the adoption of this First Amendment is
subject to the approval of the stockholders of the Company and in the event
that the stockholders of the Company fail to approve such action within twelve
months of the adoption of this First Amendment, the adoption of this First
Amendment and any options granted subject to stockholder approval of the First
Amendment shall be null and void.
Except as specifically provided herein, the Plan shall remain in full force
and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed as of the day and year first above written.
QMS, INC.
By: _________________________________
Title: ______________________________
[CORPORATE SEAL]
Attest:
- -------------------------------------
Title: ______________________________
A-1
APPENDIX B
SECOND AMENDMENT TO THE
QMS, INC. STOCK OPTION PLAN
FOR DIRECTORS
THIS SECOND AMENDMENT is made as of the 17th day of November, 1997, by QMS,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company maintains the QMS, Inc. Stock Option Plan for Directors
under an indenture dated November 18, 1993 (the "Plan");
WHEREAS, the Company desires to amend the Plan to reflect an increase in the
number of shares authorized for issuance thereunder and for other reasons; and
NOW, THEREFORE, the Company does hereby amend the Plan as follows:
1. By deleting, immediately, the first sentence of Section 3 in its entirety
and by substituting therefor the following:
There are authorized for issuance or delivery upon the exercise of options
to be granted from time to time under the Plan an aggregate of 500,000
shares of the Company's common stock, $.01 par value ("Common Stock"),
subject to adjustment as provided hereinafter in Section 6.
2. By deleting, immediately, Clause (i) of Section 5(b) in its entirety and
by substituting therefor the following:
(i) "Annual Director Compensation" shall mean the amount of the annual
retainer fee which a Director will be entitled to receive during a Plan
Year, excluding fees paid for service on a committee or for attendance at
or participation in meetings of the board or any committee thereof;
provided, however, that if a director elects to receive an option in lieu
of only a portion of Annual Director Compensation, the Annual Director
Compensation for purposes of the foregoing formula shall equal the portion
of the Annual Director Compensation so elected.
3. Notwithstanding the foregoing, the adoption of this Second Amendment is
subject to the approval of the stockholders of the Company and in the event
that the stockholders of the Company fail to approve such action within twelve
months of the adoption of this Second Amendment, the adoption of this Second
Amendment and any options granted subject to stockholder approval of the
Second Amendment shall be null and void.
Except as specifically provided herein, the Plan shall remain in full force
and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed as of the day and year first above written.
QMS, INC.
By: _________________________________
Title: ______________________________
[CORPORATE SEAL]
Attest:
- -------------------------------------
Title: ______________________________
B-1
QMS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON JANUARY 20, 1998
The undersigned hereby appoints Richard A. Wiggins and Lloyd E. Adams, or
either of them, proxies, with power of substitution, to vote the shares of
common stock of QMS, Inc. which the undersigned is entitled to vote at the
annual meeting of stockholders on January 20, 1998 and any adjournment thereof,
as follows:
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE.)
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FOLD AND DETACH HERE
This proxy, properly executed, will be voted as directed hereon. If no direction is made, Please mark
this proxy will be voted FOR all nominees in Proposal 1 and FOR Proposals 2 and 3. The your votes as X
proxies may vote in their discretion as to other matters which may properly come before indicated in
the meeting. this example
1. Election of Directors: NOMINEES: James L. Busby, Lucius E. Burch, III and Jack Edwards
FOR all nominees WITHHOLD (Instructions: To withhold authority to vote for any particular
listed to the right AUTHORITY nominee, draw a line through the name above.)
(except as marked to vote for all nominees
to the contrary) listed to the right
[_] [_]
2. Approval of an amendment 3. Approval of an amendment to the 4. With discretionary power in the transaction
to the Company's 1997 Company's Stock Option Plan for of such other business as may properly come
Stock Incentive Plan. Directors. before the meeting.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[_] [_] [_] [_] [_] [_]
Dated: , 199
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Signature
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Signature (if held jointly)
Title or authority (if applicable)
NOTE: Please sign exactly as name appears hereon. If
shares are registered in more than one name, the
signatures of all persons are required. A corporation
should sign in its full corporate name by a duly
authorized officer, stating his or her title.
Trustees, guardians, executors and administrators
should sign in their official capacity, giving their
full titles as such. If a partnership, please sign in
the partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY, USING THE ENCLOSED ENVELOPE.
NO POSTAGE REQUIRED IF MAILED IN THE
UNITED STATES OF AMERICA.
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FOLD AND DETACH HERE