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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [_]
Filed by a party other than the registrant [X]
Check the appropriate box:
[_] Preliminary proxy statement.
[_] Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[_] Definitive additional materials.
[_] Soliciting material under Rule 14a-12.
AQUACELL TECHNOLOGIES, INC.
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(Name of Registrant as Specified in Its Charter)
HAROLD W. PAUL, LLC
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computes
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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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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AQUACELL TECHNOLOGIES, INC.
10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
__________________________
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
_________________________
December 4, 2002
_________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders ("Annual Meeting") of AquaCell Technologies, Inc.
(the "Company") will be held at the American Stock Exchange, 86
Trinity Place, New York, New York 10006 on December 4, 2002, at
10:00 a.m., for the following purposes, all as more fully
described in the attached Proxy Statement:
1. To elect two directors to serve for the ensuing three-
year period and until their successors are elected and qualified;
2. To ratify the appointment of Wolinetz, Lafazan &
Company, PC as independent accountants for 2003;
3. To ratify the adoption of the Company's 2002 Directors
Stock Option Plan; and
4. To transact such other business as may properly
come before the meeting and any and all adjournments thereof.
The Board of Directors has fixed the close of business on
October 21, 2002, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the meeting
or any adjournment thereof.
You are earnestly requested to date, sign and return the
accompanying form of proxy in the envelope enclosed for that
purpose (to which no postage need be affixed if mailed in the
United States) whether or not you expect to attend the meeting in
person. The proxy is revocable by you at any time prior to its
exercise and will not affect your right to vote in person in the
event you attend the meeting or any adjournment thereof. The
prompt return of the proxy will be of assistance in preparing for
the meeting and your cooperation in this respect will be
appreciated.
By Order of the Board of Directors
Karen B. Laustsen, Secretary
Rancho Cucamonga, California
October 28, 2002
AQUACELL TECHNOLOGIES, INC.
10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730
__________________________
PROXY STATEMENT
__________________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 4, 2002
__________________________
This Proxy Statement and the accompanying form of proxy is
furnished to stockholders of AquaCell Technologies, Inc.
("Company") in connection with the solicitation of proxies, in
the accompanying form, by the Board of Directors of the Company
for use in voting at the Annual Meeting of Stockholders to be
held at the American Stock Exchange, 86 Trinity Place, New York,
New York 10006 on December 4, 2002, at 10:00 a.m., and at any and
all adjournments thereof. Any proxy given pursuant to this
solicitation may be revoked by the person giving it by giving
notice to the Secretary of the Company in person, or by written
notification actually received by the Secretary, at any time
prior to its being exercised. Unless otherwise specified in the
proxy, shares represented by proxies will be voted FOR the
election of the nominees listed herein.
The Company's executive offices are located at 10410
Trademark Street, Rancho Cucamonga, CA 91730. On or about October
28, 2002, this Proxy Statement and the accompanying form of
proxy, together with a copy of the Annual Report of the Company
for the fiscal year ended June 30, 2002, are to be mailed to each
stockholder of record at the close of business on October 21,
2002.
VOTING SECURITIES
The Board of Directors has fixed the close of business on
October 21, 2002, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting. Only stockholders of record at the close of business on
that date will be entitled to vote at the Annual Meeting or any
and all adjournments thereof. As of October 21, 2002, the Company
had issued and outstanding 8,601,224 shares of Common Stock, the
Company's only class of voting securities outstanding. Each
stockholder of the Company will be entitled to one vote for each
share of Common Stock registered in his name on the record date.
The presence, in person or by proxy, of a majority of all of the
outstanding shares of Common Stock constitutes a quorum at the
Annual Meeting. Proxies relating to "street name" shares that are
returned to the Company but marked by brokers as "not voted" will
be treated as shares present for purposes of determining the
presence of a quorum on all matters but will not be treated as
shares entitled to vote on the matter as to which authority to
vote is withheld by the broker ("broker non-votes"). The election
of directors requires a plurality vote of those shares voted at
the Annual Meeting with respect to the election of directors.
"Plurality" means that the individuals who receive the largest
number of votes cast "FOR" are elected as directors.
Consequently, any shares not voted "FOR" a particular nominee
(whether as a result of a direction to withhold authority or a
broker non-vote) will not be counted in such nominee's favor. All
other matters to be voted on will be decided by the affirmative
vote of a majority of the shares present or represented at the
Annual Meeting and entitled to vote. On any such matter, an
abstention will have the same effect as a negative vote, but
because shares held by brokers will not be considered entitled to
vote on matters as to which the brokers withhold authority, a
broker non-vote will have no effect on the vote.
The following table sets forth certain information as of
October 21, 2002 (on which date 8,601,224 shares of the Company's
Common Stock were outstanding), with respect to (i) those persons
or groups known to the Company to beneficially own more than 5%
of the Company's Common Stock, (ii) each director and nominee,
(iii) each executive officer whose compensation exceeded $100,000
in fiscal 2002, and (iv) all directors and executive officers as
a group. The information is determined in accordance with Rule
13d-3 promulgated under the Securities Exchange Act of 1934 based
upon information furnished by the persons listed or contained in
filings made by them with the Securities and Exchange Commission.
Except as indicated below, the stockholders listed possess sole
voting and investment power with respect to their shares.
1
Shares of Percentage of
Common Stock Common Stock,
Beneficially Warrants and
Name and Address Owned Options
--------------------------------------------- -------------- -------------
James C. Witham............................. 2,017,030 (1) 23.45%
10410 Trademark Street
Rancho Cucamonga, CA 91730
Karen B. Laustsen........................... 576,172 6.70%
10410 Trademark Street
Rancho Cucamonga, CA 91730
Gary S. Wolff............................... 488,367 5.68%
10410 Trademark Street
Rancho Cucamonga, CA 91730
Glenn A. Bergenfield........................ 209,500 (2) 2.42%
10410 Trademark Street
Rancho Cucamonga, CA 91730
Dr. William DiTuro.......................... 162,500 (2) 1.88%
10410 Trademark Street
Rancho Cucamonga, CA 91730
Corbett Water Technologies, Inc............. 751,807 (3) 8.45%
1300 East Berry Street
Fort Worth, TX 76119
Union Labor Life Insurance Co............... 626,000 (4) 6.84%
111 Massachusetts Ave., NW
Washington, DC 20001
All officers and directors as agroup
(five persons).............................. 3,453,569 39.60%
(1) Includes an aggregate of 480,000 shares owned of record by
Witham Group, LLC and JW Acquisitions, LLC which are entities
in which Mr. Witham controls 100% of the outstanding equity.
(2) Includes 60,000 options exercisable within 60 days.
(3) Includes 300,000 warrants exercisable within 60 days.
(4) Includes 550,000 warrants exercisable within 60 days.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Our Restated Certificate of Incorporation provides for three
classes of directors. Directors Witham and Bergenfield have been
appointed to Class I and will serve until the meeting of
stockholders in 2003; directors Laustsen and DiTuro have been
appointed to Class II and will serve until the meeting of
stockholders in 2002; and director Wolff has been appointed to
Class III and will serve until the annual meeting of stockholders
in 2004. After these directors' terms expire, newly elected
directors shall serve for three year terms or until their
successors are duly elected and qualified.
Two persons will be elected at the Annual Meeting to serve
as directors for a term of three years. The Board of Directors
has nominated Karen B. Laustsen and Dr. William DiTuro as the
candidates for election. Unless authority is withheld, the
proxies solicited by the Board of Directors will be voted FOR the
election of these nominees. In case either nominee becomes
unavailable for election to the Board of Directors, an event
which is not anticipated, the persons named as proxies, or their
substitutes, shall have full discretion and authority to vote or
refrain from voting for any other candidate in accordance with
their judgment.
2
Information About the Nominees
Name Age Position
---------------------- ----- -----------------------------------
Karen B. Laustsen..... 42 President, Chief Operating Officer,
Secretary and Director
Dr. William DiTuro.... 46 Director
Ms. Karen B. Laustsen is a founder of AquaCell and has served as its
President, Chief Operating Officer, Secretary, and as a Director since March,
1997. Prior to founding AquaCell, Ms. Laustsen served as President of
JW Acquisition Co. from May, 1996 through March, 1997. From April, 1987 through
May, 1996, Ms. Laustsen served as Executive Vice President and a director of
U.S. Alcohol Testing of America, Inc. Ms. Laustsen also served on the board of
directors of U.S. Drug Testing, Inc. and Good Ideas Enterprises, Inc.
Ms. Laustsen is the wife of James C. Witham, Chairman of AquaCell.
Dr. William DiTuro has been a director of AquaCell since July 1997.
Dr. DiTuro has been self-employed as a sole practitioner of general pediatrics
since 1986 and has served as a clinical instructor of pediatrics at the Robert
Wood Johnson Medical School. Dr. DiTuro served as a director of U.S. Alcohol,
U.S. Drug Testing, Inc. and Good Ideas Enterprises, Inc.
Information About the Other Directors and Executive Officers
The Company's other directors and executive officers are as follows:
Name Age Position
---------------------- ----- -----------------------------------
James C. Witham....... 61 Chairman of the Board and Chief
Executive Officer
Gary S. Wolff........ 64 Chief Financial Officer, Treasurer
and Director
Glenn A. Bergenfield.. 49 Director
Mr. James C. Witham founded AquaCell in March, 1997 and
serves as its Chairman and Chief Executive Officer. Prior to
founding AquaCell, Mr. Witham founded JW Acquisition Co. in May,
1996 and served as its Chief Executive Officer until March, 1997.
From April, 1987 through May, 1996, Mr. Witham founded and served
as Chairman, Chief Executive Officer and President of U.S.
Alcohol Testing. Mr. Witham also served as Chairman and Chief
Executive Officer of U.S. Alcohol's two publicly held
subsidiaries, U.S. Drug Testing, Inc. and Good Ideas Enterprises,
Inc. Mr. Witham is the husband of Karen B. Laustsen, President
of AquaCell.
Mr. Gary S. Wolff is a founder of AquaCell and has served as
its Treasurer, Chief Financial Officer and as a Director since
March, 1997. Prior to founding AquaCell, Mr. Wolff served as
Chief Financial Officer and a director of U.S. Alcohol, a
publicly held company from April, 1987 through July, 1996. Mr.
Wolff also served as Chief Financial Officer and as a director of
U.S. Drug Testing, Inc. and as Treasurer and a director of Good
Ideas Enterprises, Inc. He is licensed as a Certified Public
Accountant in the States of New York and New Jersey and during
the period from July, 1996 through March, 1997 he was self-
employed as a sole practitioner of accounting.
Mr. Glenn A. Bergenfield has been a director of AquaCell
since July 1997. For the past fifteen years, Mr. Bergenfield has
been self-employed as a sole practitioner of law in the State of
New Jersey. Mr. Bergenfield served as a director of U.S.
Alcohol, and as a director of U.S. Drug Testing, Inc. and Good
Ideas Enterprises, Inc.
The executive officers of the Company are elected annually
by the Board of Directors and serve at the discretion of the
Board.
During the fiscal year ended June 30, 2002, the Company's
Board of Directors held six meetings.
The Board of Directors maintains an Executive Committee
currently consisting of directors Witham, Laustsen and Wolff,
which has all of the authority of the Board of Directors except
as limited by applicable law. In addition we have an Audit
3
Committee and a Compensation Committee which are required to
consist of a majority of outside directors. The Audit Committee,
currently consisting of directors Bergenfield and DiTuro,
oversees actions taken by our independent auditors and reviews
our internal audit controls. The Compensation Committee,
currently consisting of directors Witham, Bergenfield and DiTuro,
reviews the compensation levels of our employees and makes
recommendations to the Board regarding compensation.
Audit Committee Information and Report
The Company's audit committee was established in June 2000
and is currently comprised of Glenn Bergenfield and William
DiTuro. The audit committee met three times in the fiscal year
ended June 30, 2002.
Audit Fees
For the fiscal year ended June 30, 2002, the aggregate fees
billed for professional services rendered for the audit of the
Company's annual financial statements and the reviews of its
financial statements included in the Company's quarterly reports
totaled approximately $68,000.
Financial Information Systems Design and Implementation Fees
For the fiscal year ended June 30, 2002, there were no fees
billed for professional services by the Company's independent
auditors rendered in connection with, directly or indirectly,
operating or supervising the operation of its information system
or managing its local area network.
All Other Fees
For the fiscal year ended June 30, 2002, there were fees of
$15,000 billed by the Company's independent auditors for the
audit of an acquired subsidiary.
Audit Committee Report
Each member of the audit committee is an "independent
director" and is "financially literate" as defined under the Amex
listing standards. The Amex listing standards define an
"independent director" generally as a person, other than an
officer of the company, who does not have a relationship with the
company that would interfere with the director's exercise of
independent judgment. The Amex's listing standards define
"financially literate" as being able to read and understand
fundamental financial statements (including a company's balance
sheet, income statement and cash flow statement).
Pursuant to the audit committee's written charter, which was
adopted on June 1, 2000, the audit committee's responsibilities
include, among other things:
. annually reviewing and reassessing the adequacy of the
committee's formal charter;
. reviewing the annual audited financial statements with the
Company's management and its independent auditors and the
adequacy of its internal accounting controls;
. reviewing analyses prepared by the Company's management and
independent auditors concerning significant financial reporting
issues and judgments made in connection with the preparation of
its financial statements;
. making recommendations concerning the engagement of the
independent auditor;
. reviewing the independence of the independent auditors;
4
. reviewing the Company's auditing and accounting principles
and practices with the independent auditors and reviewing major
changes to its auditing and accounting principles and practices
as suggested by the independent auditor or its management; and
. reviewing all related party transactions on an ongoing basis
for potential conflict of interest situations.
The Company's audit committee has met and held discussions
with management and its independent auditors. Management
represented to the committee that the Company's consolidated
financial statements were prepared in accordance with generally
accepted accounting principles, and the committee has reviewed
and discussed the consolidated financial statements with
management and the independent auditors. The committee discussed
with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Company's independent
auditors also provided the audit committee with the written
disclosures required by Independence Standards Board Standard No.
1(Independence Discussions with Audit Committees) and the
committee discussed with the independent auditors and management
the auditors' independence, including with regard to fees for
services rendered during the fiscal year and for all other
professional services rendered by the Company's independent
auditors. Based upon the committee's discussion with management
and the independent auditors and the committee's review of the
representations of management and the report of the independent
auditors to the audit committee, the committee recommended that
the Board of Directors include the audited consolidated financial
statements in its annual report on Form 10-KSB for the fiscal
year ended June 30, 2002.
Glenn Bergenfield
William DiTuro
Executive Compensation
The following table sets forth information concerning
compensation for the fiscal years indicated for services in all
capacities awarded to, earned by or paid to the Company's Chief
Executive Officer and the other executive officers whose
compensation was in excess of $100,000 during the fiscal year
ended June 30, 2002.
Long-Term
Name and Principal Position Annual Compensation Compensation
------------------------------------------------------------ ----------------------------- -------------------------
Options All Other
Year Salary($)(1)(2) Bonus($) Granted(3) Compensation
---- --------------- -------- ----------- ------------
James C. Witham............................................. 2002 265,000 -- -- --
Chairman of the Board and Chief Executive Officer 2001 196,000 -- -- --
2000 153,000 23,000 -- --
Karen B. Laustsen........................................... 2002 160,000 -- -- --
President, Chief Operating Officer, Secretary and Director 2001 99,000 -- -- --
2000 60,000 10,000 -- --
Gary S. Wolff............................................... 2002 142,000 -- -- --
Treasurer, Chief Financial Officer and Director 2001 103,000 -- -- --
2000 79,000 7,000 -- --
(1) Aggregate salaries actually paid in fiscal year 2002 were
$218,000. $349,000 of accrued and unpaid salaries were
utilized to pay principal on certain notes receivable from
third parties that were personally guaranteed by the Company's
executive officers.
(2) All of the officers' compensation for fiscal year 2000 was
accrued and unpaid at June 30, 2000 except for $40,000
in bonuses. In fiscal year 2001, the officers contributed to
capital $214,000 of these 2000 accrued and unpaid
salaries.
(3) No options were granted to the executive officers in the
last fiscal year. The executive officers do not hold
any options.
5
Employment Agreements. On February 12, 2001, we entered into
five-year employment agreements with each of Mr. Witham and
Ms. Laustsen, and a two-year employment agreement with Mr. Wolff.
These agreements provide for base salaries of $265,000, $160,000,
and $142,000, respectively, and also provide for bonuses to be
paid based upon established financial performance targets. Each
of these employment agreements contains standard noncompete,
confidentiality and benefit provisions, including provisions for
severance compensation in the event of a termination without
cause or transactions that result in a change in control of
AquaCell. Each of these contracts provide that after the first
year, the base salary amounts will be subject to increase by 50%
of the amount of any bonus, with such bonus to be based on net
sales and net income earned during the prior year. The terms of
the employment agreements, including bonus criteria were reviewed
and approved by the Compensation Committee.
The following table sets forth certain information at June
30, 2002 with respect to the Company's equity compensation plans
that provide for the issuance of options, warrants or rights to
purchase the Company's securities.
Plan Category Number of Weighted- Number of
Securities to Average Securities
be Issued upon Exercise Price Remaining
Exercise of of Outstanding Available for
Outstanding Options, Future Issuance
Options, Warrants and under Equity
Warrants and Rights Compensation
Rights Plans (excluding
securities
reflected in the
first column)
-------------- --------------- --------------- ----------------
Equity
Compensation
Plans
Approved by 550,500 $ 2.41 449,500
Security
Holders
Equity
Compensation
Plans Not
Approved by -0- -0- 500,000
Security
Holders
Report of the Compensation Committee Concerning Compensation of
Executive Officers
The Compensation Committee of the Board of Directors met
once during the 2002 fiscal year. The Committee has not
developed a formal compensation policy for the Company's
executive officers.
During 2002, Mr. Witham served as the Company's Chairman of
the Board and Chief Executive Officer. The compensation package
provided to Mr. Witham and the other executive officers are based
upon five (5) year and two (2) year employment agreements.
Bonus compensation, if any, to executive officers is based
generally upon the Company's fiscal performance and the
availability of resources as well as the executive officer's
individual performance and level of responsibility.
Stock option awards under the Company's stock option plans
are intended to attract and retain the best available talent and
encourage the highest level of performance by affording key
employees an opportunity to acquire proprietary interests in the
Company. The executive officers are also each entitled to
receive options although none have been granted to date.
James C. Witham
Glenn Bergenfield
William DiTuro
6
Summary of Incentive Stock Plan
Our 1998 Incentive Stock Plan, covering 1,000,000 shares of
our Common Stock, is administered by the Compensation Committee
of our Board of Directors. Among the Compensation Committee's
powers will be the authority to:
. interpret the plan;
. establish rules and regulations for its operation;
. select officers, other key employees, consultants and
advisors to receive awards; and
. determine the form, amount and other terms and conditions of
awards.
Directors, officers, key employees and independent
contractors will be eligible to participate in the plan. The
selection of participants is within the discretion of the
Compensation Committee.
The plan provides for the grant of any or all of the
following types of awards:
. stock options, including nonqualified stock options and
incentive stock options;
. stock awards;
. stock appreciation rights;
. performance shares; and
. performance units.
Awards may be granted by themselves, in combination or in
tandem with other awards as determined by the Compensation
Committee.
. Under the plan, the Compensation Committee may grant awards
in the form of nonqualified stock options or incentive stock
options, shares of our Common Stock, stock appreciation rights,
performance shares or performance units. The Compensation
Committee, with regard to each stock option, will determine the
number of shares subject to the option, the manner and time of
the option's exercise and vesting, and the exercise price per
share of stock subject to the option. The following limitations
are applicable under the plan: no incentive stock options may be
exercisable later than ten years after the date they are granted
and no nonqualified stock options may be exercisable later than
fifteen years after the date they are granted;
. the aggregate fair market value at the time of grant of
shares of Common Stock with respect to which incentive stock
options are exercisable for the first time by a participant
during any calendar year cannot be more than $100,000;
. the exercise price of a stock option will not be less than
100% of the fair market value of the shares of Common Stock on
the date the option is granted for incentive stock options or
less than 85% of the market value for non qualified stock options
(or, in either case, not less than 110% of fair market value if
the optionee is an officer, director or a 10% stockholder);
. the option price must be paid by a participant by check or,
in the discretion of the Compensation Committee, by delivery of
our Common Stock; and
. awards may be subject to such terms, conditions,
restrictions or limitations, as the Compensation Committee deems
appropriate, including restrictions on transferability and
continued employment.
7
Under the plan, each stock appreciation right will entitle
the holder to elect to receive the appreciation in the fair
market value of the shares subject to the stock appreciation
right up to the date the right is exercised. Stock appreciation
rights may be granted independent of, or in connection with,
stock options. In the case of stock appreciation rights issued
independent of stock options, the appreciation shall not be
measured from a value less than 85% of the fair market value of
the shares on the date of grant. If the stock appreciation
rights are issued in connection with stock options, the
appreciation shall be measured from not less than the option
price. No stock appreciation right may be exercised earlier than
six months after the date of grant or later than the earlier of
the term of the related option or fifteen years after the date it
was granted.
Performance shares and units may be awarded either
alone or in addition to other awards and will consist of:
. in the case of performance shares, the right to receive
shares of Common Stock or cash of equal value at the end of a
specified performance period; or
. in the case of performance units, the right to receive a
fixed dollar amount, payable in cash or shares of Common Stock or
a combination of both at the end of a specified performance
period.
The Compensation Committee may condition the performance
shares or units on the attainment of specified performance goals
or such other facts or criteria as the committee shall determine.
The plan provides that awards shall not be transferable
otherwise than by law or by will or the laws of descent and
distribution. However, the Compensation Committee may permit the
transferability of an award to members of the participant's
immediate family or trusts or family partnerships for the benefit
of such family members.
The Board of Directors has the right to amend, suspend or
terminate the plan at any time, subject to the rights of
participants under any outstanding awards. However, no amendment
to the plan may be made without the approval of our stockholders
if such approval is required by law or regulatory authority.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934
requires AquaCell's directors and executive officers to file with
the SEC initial reports of ownership and changes in ownership of
AquaCell's common stock during the fiscal year ended June 30,
2002. AquaCell believes that its officers and directors complied
with all these filing requirements during the fiscal year. The
Company has relied upon the representations of its directors and
executive officers. The Company does not believe any other
stockholders are subject to Section 16(a) filing requirements.
8
Stock Performance Graph
The graph depicted below shows a comparison of cumulative
stockholder returns for the Company, the American Stock Exchange
Index and the Company's peer group.
Comparison of Cumulative Return for
The Period February 12, 2001 to June 30, 2002
TOTAL SHAREHOLDER RETURNS
[GRAPH]
ANNUAL RETURN PERCENTAGE
Years Ending
Company Name / Index Jun01 Jun02
-------------------------------------------------------------------
AQUACELL TECHNOLOGIES INC -10.00 -81.56
AMERICAN STOCK EXCHANGE -2.12 -2.70
PEER GROUP 19.95 27.14
INDEXED RETURNS
Base Years Ending
Period
Company Name / Index 12Feb01 Jun01 Jun02
------------------------------------------------------------------
AQUACELL TECHNOLOGIES INC 100 90.00 16.60
AMERICAN STOCK EXCHANGE 100 97.88 95.23
PEER GROUP 100 119.95 152.51
Peer Group Companies
------------------------------------------------------------------
IONICS INC
OSMONICS INC
PENTAIR INC
9
PROPOSAL NO. 2: APPOINTMENT OF INDEPENDENT AUDITORS
On August 16, 2002, the Board of Directors selected
Wolinetz, Lafazan & Company, PC as the Company's independent
public accountants for the fiscal year ending June 30, 2003.
Although neither federal nor state law requires the approval
of the auditors by stockholders, the Board believes that, in view
of the importance of financial statements to the stockholders,
the selection of independent public accountants should be passed
on by stockholders. Accordingly, approval of the following
resolution will be requested at the Meeting:
"RESOLVED, that the Board of Directors appointment of
Wolinetz, Lafazan & Company, PC to serve as the Company's
independent public accountants for fiscal year ending June
30, 2003 be, and the same hereby is ratified and approved."
The Board of Directors recommends a vote FOR the foregoing
resolution. In the event that stockholders disapprove of the
selection, the Board of Directors will consider the selection of
other auditors.
A representative of Wolinetz, Lafazan & Company, PC will be
present at the Meeting. The Company has been informed that the
representative does not intend to make any statement to the
stockholders at the Meeting, but will be available to respond to
appropriate questions from stockholders.
PROPOSAL NO. 3:
ADOPTION OF THE COMPANY'S 2002 DIRECTORS STOCK OPTION PLAN
In order to provide the Company the ability to issue options
to non-employee directors, the Board adopted the 2002 Directors
Stock Option Plan (the "2002 Directors Plan") effective January
26, 2002, subject to approval by the Company's stockholders,
pursuant to which the Company may issue options to non-employee
directors to acquire up to 500,000 shares of its common stock.
The 2002 Directors Plan is intended to encourage stock ownership
by non-employee directors and thereby enhance their proprietary
interest in the Company. The Company currently has two (2) non-
employee directors serving on the Board of Directors, whose
service as directors is compensated solely by the issuance of
stock options. These directors do not receive any cash
compensation for their service as directors.
A summary of the significant provisions of the 2002
Directors Plan is set forth below.
Administration of the 2002 Directors Plan
The 2002 Directors Plan is administered by a committee (the
"Committee") consisting of two or more persons who are appointed
by, and serve at the pleasure of, the Board and each of whom is a
"disinterested person" as that term is defined in Rule 16b of the
General Rules and Regulations under the Securities Exchange Act
of 1934. Subject to the express provisions of the 2002 Directors
Plan, the Committee has the sole discretion to determine to whom
among those eligible, and the time or times at which, options
will be granted, the number of shares to be subject to each
option and the manner in and price at which options may be
exercised. In making such determinations, the committee may take
into account the nature and period of service of eligible
directors, their level of compensation, their past, present and
potential contributions to the Company and such other factors as
the Committee in its discretion deems relevant.
The Committee may amend, suspend or terminate the 2002
Directors Plan at any time, except that no amendment may be
adopted without the approval of shareholders which would (i)
increase the maximum number of shares which may be issued
pursuant to the exercise of options granted under the Plan; (ii)
change the eligibility requirements for participation in the 2002
Directors Plan; or (iii) extend the term of any incentive stock
options or the period during which any incentive stock options
may be granted under the 2002 Directors Plan.
Unless the 2002 Directors Plan is terminated earlier by the
Board, the 2002 Directors Plan will terminate on December 31,
2012.
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Shares Subject to the 2002 Directors Plan
No more than 500,000 shares of common stock may be issued
pursuant to the exercise of options granted under the 2002
Directors Plan. If any option expires or terminates for any
reason, without having been exercised in full, the unpurchased
shares subject to such option will be available again for
purposes of the 2002 Directors Plan.
Under certain circumstances involving a change in the number
of shares of common stock without the receipt by the Company of
any consideration therefore, such as a stock split, stock
consolidation or payment of a stock dividend, the class and
aggregate number of shares of common stock in respect of which
options may be granted under the 2002 Directors Plan, the class
and number of shares subject to each outstanding option and the
option price per share will be proportionately adjusted. In
addition, if the Company is involved in a merger, consolidation,
dissolution or liquidation, the options granted under the 2002
Directors Plan will be adjusted or, under certain conditions,
will terminate, subject to the right of the option-holder to
exercise his/ her option or a comparable option substituted at
the discretion of the Company prior to such event. An option may
not be transferred other than by will or by the laws of descent
and distribution, and during the lifetime of the option-holder
may be exercised only by such holder.
Participation
The Committee is authorized to grant non-qualified options
under the 2002 Directors Plan from time to time to such non-
employee directors of the Company as the Committee, in its sole
discretion, may determine.
Terms of Options
The Committee has the discretion to fix the term of each
option granted under the 2002 Directors Plan, except past the
maximum length of term of each option is ten (10) years, subject
to earlier termination as provided in the 2002 Directors Plan.
Required Vote
The affirmative vote of holders of a majority of the shares
of common stock present, in person or by proxy, at the Annual
Meeting is required to approve the 2002 Directors Plan pursuant
to the following resolution:
"RESOLVED, that the Company's 2002 Directors Stock Option
Plan be approved in the form annexed as Exhibit A to the
Company's Proxy Statement dated October 28, 2002."
The Board of Directors recommends that you vote FOR the
ratification and approval of the 2002 Directors Plan.
2003 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 2003 Annual
Meeting of Stockholders to be eligible for inclusion in the
Company's Proxy Statement, they must be received by the Company
at its principal office in Rancho Cucamonga, California not later
than June 30, 2003. Stockholders are advised that the Company's
management shall be permitted to exercise discretionary voting
authority under proxies it solicits and obtains for the Company's
2003 Annual Meeting of Stockholders with respect to any proposal
presented by a stockholder at such meeting, without any
discussion of the proposal in the Company's proxy statement for
such meeting, unless the Company receives notice of such proposal
at its principal office in Rancho Cucamonga, California, not
later than September 13, 2003.
SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on
behalf of the company and the cost of this solicitation is being
paid by the Company. In addition to the use of the mails, proxies
may be solicited personally or by telephone or telephone using
the services of directors, officers and regular employees of the
Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the
Company for expenses incurred in sending proxy material to
beneficial owners of the Company's stock.
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OTHER MATTERS
The Board of Directors knows of no matter which will be
presented for consideration at the Annual Meeting other than the
matters referred to in this Proxy Statement. Should any other
matter properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy to vote
such proxy in accordance with their best judgment.
Karen B. Laustsen, Secretary
Rancho Cucamonga, California
October 28, 2002
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Exhibit A
AQUACELL TECHNOLOGIES, INC.
2002 DIRECTORS' STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the AquaCell Technologies, Inc.
Directors' Stock Option Plan is to provide an incentive to non-
employee directors of AquaCell Technologies, Inc. (the
"Corporation"), who are in a position to contribute materially to
the long-term success of the Corporation, to increase their
interest in the Corporation's welfare, and to aid in attracting
and retaining non-employee directors of outstanding ability.
2. Definitions. Unless the context clearly indicates
otherwise, the following terms shall have the meanings set forth
below:
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Code" shall mean the Internal Revenue Code of
1986, as it may be amended from time to time.
(c) "Committee" shall mean a committee whose members
shall, from time to time, be appointed by the Board;
provided, however, that on such date as the
Corporation's Stock is first registered under Section
12 of the Securities Exchange Act of 1934 such
committee shall consist of at least two Directors, all
of whom are disinterested within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934.
(d) "Corporation" shall mean AquaCell Technologies,
Inc., a Delaware corporation, and any successor
thereto.
(e) "Directors" shall mean those members of the Board of
Directors of the Corporation who are not Employees.
(f) "Fair Market Value" shall mean the fair market value of
the Stock as determined by the Committee on the basis
of a review of the facts and circumstances at the time.
(g) "Grantee" shall mean a non-employee director granted a
Stock Option under this Plan.
(h) "Non-Qualified Stock Option" shall mean an option
granted pursuant to the Non-Qualified Stock Option
provisions as set forth in Part II of this Plan.
(i) "Plan" shall mean the AquaCell Technologies, Inc. Directors'
Stock Option Plan as set forth herein as amended from time to
time.
(j) "Stock" shall mean authorized but unissued shares of the
Common Stock of the Corporation or reacquired shares of the
Corporation's Common Stock.
(k) "Stock Option" shall mean an option granted pursuant to the
Plan to purchase shares of stock.
3. Shares of Stock Subject to the Plan. Subject to the
provisions of Paragraph 2 of Part III, the Stock which may be
issued or transferred pursuant to Stock Options granted under the
Plan to Directors shall not exceed 500,000 shares in the
aggregate. If a Stock Option shall expire and terminate for any
reason, in whole or in part, without being exercised, the number
of shares of Stock as to which such expired or terminated Stock
Option shall not have been exercised may again become available
for the grant of Stock Options.
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4. Administration of the Plan. The Plan shall be
administered by the Committee. Subject to the express provisions
of the Plan, the Committee shall have authority to interpret the
Plan, to prescribe, amend, and rescind rules and regulations
relating to it, to determine the terms and provisions of Stock
Option agreements, and to make all other determinations necessary
or advisable for the administration of the Plan. Any controversy
or claim arising out of or related to this Plan shall be
determined unilaterally by and at the sole discretion of the
Committee.
5. Amendment or Termination. The Board may, at any time,
alter, amend, suspend, discontinue, or terminate this Plan;
provided, however, that such action shall not adversely affect
the right of Grantees to Stock Options previously granted and no
amendment, without the approval of the stockholders of the
Corporation, shall increase the maximum number of shares which
may be awarded under the Plan in the aggregate, materially
increase the benefits accruing to Grantees under the Plan, change
the class eligible to receive options under the Plan, or
materially modify the eligibility requirements for participation
in the Plan.
6. Effective Date and Duration of the Plan. The Plan shall
become effective upon its approval by the Board subject to its
subsequent approval by the stockholders of the Corporation. This
Plan shall terminate ten years from the date the Plan becomes
effective, and no Stock Option may be granted under the Plan
thereafter, but such termination shall not affect any Stock
Option theretofore granted.
II. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Stock Options.
(a) Directors of the Corporation who are not also Employees
shall be eligible to receive Non-Qualified Stock
Options under the Plan.
(b) The Committee shall determine and designate from time
to time those Directors who are to be granted Non-
Qualified Stock Options and the amount subject to each
Non-Qualified Stock Option.
(c) The Committee may grant at any time new Non-Qualified
Stock Options to a Director who has previously received
Non-Qualified Stock Options or other options, whether
such prior Non-Qualified Stock Options or other options
are still outstanding, have previously been exercised
in whole or in part, or are canceled in connection with
the issuance of new Non-Qualified Stock Options.
(d) When granting a Non-Qualified Stock Option, the
Committee shall determine the purchase price of the
Stock subject thereto. Such price shall not be less
than 100% of the Fair Market Value of such Stock on the
date the Non-Qualified Stock Option is granted.
(e) The Committee, in its sole discretion, shall determine
whether any particular Non-Qualified Stock Option shall
become exercisable in one or more installments, specify
the installment dates, and, within the limitations
herein provided, determine the total period during
which the Non-Qualified Stock Option is exercisable.
Further, the Committee may make such other provisions
as may appear generally acceptable or desirable to the
Committee.
(f) No Non-Qualified Stock Option shall be exercisable more
than ten years from the date such option is granted.
2. Exercise of Stock Options. The option price of a Non-
Qualified Stock Option shall be payable on exercise of the option
(i) in cash or by check, bank draft or postal or express money
order; (ii) by the surrender of Stock then owned by the Grantee,
provided that the stock surrendered by the Grantee has been owned
by the Grantee for at least six (6) months; or (iii) partially in
accordance with clause (i) and partially in accordance with
clause (ii) of this Paragraph. Shares of Stock so surrendered in
accordance with clause (ii) or (iii) shall be valued at the Fair
Market Value thereof on the date of exercise, surrender of such
Stock to be evidenced by delivery of the certificate(s)
representing such shares in such manner, and endorsed in such
form, or accompanied by stock powers endorsed in such form, as
the Committee may determine.
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3. Termination of Service as a Director.
(a) If a Grantee ceases to be a Director (other than by death),
the terms of any then outstanding Non-Qualified Stock Option held
by the Grantee shall extend for a period ending on the earlier of
the date on which such option would otherwise expire or three
months after such cessation of being a Director and such option
shall be exercisable to the extent it was exercisable as of the
date of cessation of being a Director.
(b) If a Grantee ceases to be a Director by reason of
death, the representative of his estate or
beneficiaries thereof to whom the option has been
transferred shall have the right during the three-month
period following his death to exercise any then
outstanding Non-Qualified Stock Options in whole or in
part. If a Grantee dies within three months after he
ceases to be a Director without having fully exercised
any then outstanding Non-Qualified Stock Options, the
representative of his estate or beneficiaries thereof
to whom the option has been transferred shall have the
right during such three month period to exercise such
options in whole or in part. The number of shares of
Stock in respect of which a Non-Qualified Stock Option
may be exercised after a Grantee's death shall be the
number of shares of Stock in respect of which such
option could be exercised as of the date of the
Grantee's death. In no event may the period for
exercising a Non-Qualified Stock Option extend beyond
the date on which such option would otherwise expire.
III. GENERAL PROVISIONS
1. Substitution of Options. In the event of a corporate
merger or consolidation, or the acquisition by the Corporation of
property or stock of an acquired corporation or any
reorganization or other transaction qualifying under Section 425
of the Code, the Committee shall, in accordance with the
provisions of that Section, substitute options under this Plan
for options under the plan of the acquired corporation provided
(i) the excess of the aggregate fair market value of the shares
subject to option immediately after the substitution over the
aggregate option price of such shares is not more than the
similar excess immediately before such substitution and (ii) the
new option does not give the Director additional benefits,
including any extension of the exercise period.
2. Adjustment Provisions.
(a) If the shares of Stock outstanding are changed in
number or class by reason of a split-up, merger,
consolidation, reorganization, reclassification,
recapitalization, or any capital adjustment, including
a stock dividend, or if any distribution is made to the
holders of common stock other than a cash dividend,
then
(i) the aggregate number and class of shares or other
securities that may be issued or transferred
pursuant to Paragraph 3 of Part I;
(ii) the number and class of shares or other
securities which are issuable under outstanding
Stock Options, and
(iii) the purchase price to be paid per share under
outstanding Stock Options, shall be adjusted as
provided hereinafter.
(b) Adjustment under this Paragraph 2 shall be made in an
equitable manner by the Committee, whose determination
as to what adjustments shall be made, and the extent
thereof, shall be final, binding, and conclusive.
3. General.
(a) Each Stock Option shall be evidenced by a written
instrument containing such terms and conditions, not
inconsistent with this Plan, as the Board shall
approve.
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(b) The granting of a Stock Option in any year shall not
give the Grantee any right to similar grants in future
years or any right to be retained as a Director of the
Corporation.
(c) No director, and no beneficiary or other person
claiming under or through him, shall have any right,
title or interest by reason of any Stock Option to any
particular assets of the Corporation, or any shares of
Stock allocated or reserved for the purposes of the
Plan or subject to any Stock Option except as set forth
herein. The Corporation shall not be required to
establish any fund or make any other segregation of
assets to assure the payment of any Stock Option.
(d) No right under the Plan shall be subject to
anticipation, sale, assignment, pledge, encumbrance, or
charge except by will or the laws of descent and
distribution, and a Stock Option shall be exercisable
during the Grantee's lifetime only by the Grantee.
(e) Notwithstanding any other provision of this Plan or
agreements made pursuant thereto, the Corporation's
obligation to issue or deliver any certificate or
certificates for shares of Stock under a Stock Option,
and the transferability of Stock acquired by exercise
of a Stock Option, shall be subject to all of the
following conditions:
(i) Any registration or other qualification of
such shares under any state or federal law or
regulation, or the maintaining in effect of any
such registration or other qualification which the
Board shall, in its absolute discretion upon the
advice of counsel, deem necessary or advisable;
(ii) The obtaining of any other consent, approval,
or permit from any state or federal governmental
agency which the Board shall, in its absolute
discretion upon the advice of counsel, determine
to be necessary or advisable; or
(iii) Each stock certificate issued pursuant to a
Stock Option shall bear the following legend:
"The transferability of this certificate and the
shares of Stock represented hereby are subject to
restrictions, terms and conditions contained in
the AquaCell Technologies, Inc. 2002 Directors'
Stock Option Plan, and an Agreement between
registered owner of such Stock and the
Corporation. A copy of the Plan and Agreement are
on file in the office of the Secretary of the
Corporation."
(f) All payments to Grantees or to their legal
representatives shall be subject to any applicable tax,
community property, or other statutes or regulations of
the United States or of any state having jurisdiction
thereof. The Grantee may be required to pay to the
Corporation the amount of any withholding taxes which
the Corporation is required to withhold with respect to
a Stock Option or its exercise. In the event that such
payment is not made when due, the Corporation shall
have the right to deduct, to the extent permitted by
law, from any payment of any kind otherwise due to such
person all or part of the amount required to be
withheld.
(g) A Grantee entitled to Stock as a result of the exercise
of an option shall not be deemed for any purpose to be,
or have rights as, a shareholder of the Corporation by
virtue of such exercise, except to the extent a stock
certificate is issued therefore and then only from the
date such certificate is issued. No adjustments shall
be made for dividends or distributions or other rights
for which the record date is prior to the date such
stock certificate is issued. The Corporation shall
issue any stock certificates required to be issued in
connection with the exercise of a Stock Option with
reasonable promptness after such exercise.
(h) The grant or exercise of Stock Options granted under
the Plan shall be subject to, and shall in all respects
comply with, applicable Delaware corporate law relating
to such grant or exercise.
Adopted by the Board of Directors: January 26, 2002 to be
effective upon Stockholders approval.
Adopted by the Stockholders: Subject to approval at next annual
meeting.
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[FRONT PROXY CARD]
AQUACELL TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 4, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Stockholder(s) of AQUACELL TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), hereby appoints
James C. Witham, Proxy, with full power of substitution in the
name, place and stead of the undersigned, to vote the Annual
Meeting of Stockholders of the Company to be held on December 4,
2002 and at all adjournments thereof, according to the number of
votes that the undersigned would be entitled to vote if
personally present, upon the following matters.
1. Election of Directors
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to to vote for all
the contrary below). nominees listed below.
Karen B. Laustsen, Dr. William DiTuro
2. Proposal to ratify the appointment of Wolinetz, Lafazan &
Company, PC as Independent Public Accountants for the
Company for the Fiscal Year ending June 30, 2003.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Proposal to ratify the Company's 2002 Directors Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting
or any adjournment thereof.
(Continued and to be signed on reverse side)
[BACK PROXY CARD]
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS
GIVEN ABOVE. IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE
VOTED FOR THE NOMINEE AND PROPOSALS LISTED ABOVE.
Date _______________________, 2002
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
Please sign exactly as
name appears above. When
shares are held by joint
tenants, both should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give
full title as such. If a
corporation, please sign
in full corporate name by
President or other
authorized officer. If a
partnership, please sign
in partnership name by
authorized person.
Please mark, sign, date and return this proxy card promptly using
the enclosed envelope.