SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of 1934
Filed by the Registrant [X]
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check the appropriate box:
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MATRIX SERVICE COMPANY
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(Name of Registrant as Specified in Its Charter)
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MATRIX SERVICE COMPANY
10701 East Ute Street
Tulsa, Oklahoma 74116
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of the Stockholders
of Matrix Service Company, a Delaware corporation (the "Company"),
will be held at Liberty Bank & Trust Company, First National Tower,
15 East Fifth St., 41st Floor, Tulsa, Oklahoma, on the 29th day of
October, 1997, at 10:00 a.m., Tulsa time, for the following
purposes:
1. To elect six directors to serve until the annual stockholders'
meeting in 1998 or until their successors have been elected and
qualified;
2. To consider and vote upon a proposal to amend the Company's 1991
Stock Option Plan.
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1998; and
4. To act upon such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September
12, 1997, as the record date for determining stockholders entitled
to notice of and to vote at the meeting and any adjournment
thereof. Only stockholders of record at the close of business on
September 12, 1997 are entitled to notice of and to vote at the
meeting and any adjournment thereof.
By Order of The Board of Directors
C. William Lee
Secretary
September 19, 1997
Tulsa, Oklahoma
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL
MEETING REGARDLESS OF WHETHER YOU PLAN TO ATTEND. THEREFORE,
PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY. IF
YOU ARE PRESENT AT THE MEETING, AND WISH TO DO SO, YOU MAY REVOKE
THE PROXY AND VOTE IN PERSON.
MATRIX SERVICE COMPANY
10701 East Ute Street
Tulsa, Oklahoma 74116
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of
Matrix Service Company (the "Company") for use at the Annual
Meeting of Stockholders to be held on October 29, 1997, and at any
adjournments thereof. The Annual Meeting will be held at 10:00
a.m., Tulsa time, at Liberty Bank & Trust Company, First National
Tower, 15 East Fifth St., 41st Floor, Tulsa, Oklahoma. If the
accompanying proxy is properly executed and returned, the shares it
represents will be voted at the meeting in accordance with the
directions noted thereon or, if no direction is indicated, it will
be voted in favor of the proposals described in this proxy
statement. In addition, the proxy confers discretionary authority
in the persons named in the proxy authorizing those persons to
vote, in their discretion, on any other matters properly presented
at the Annual Meeting. The Board of Directors is not currently
aware of any other such matters. Any stockholder giving a proxy
has the power to revoke it at any time before it is voted by
written notice or by execution of a subsequent proxy sent to C.
William Lee, Secretary, Matrix Service Company, 10701 East Ute
Street, Tulsa, Oklahoma 74116. The proxy also may be revoked if the
stockholder is present at the meeting elects to vote in person.
The approximate date on which this Proxy Statement and the
accompanying proxy will first be sent to stockholders is September
24, 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on September 12, 1997, the record date for
the determination of stockholders of the Company entitled to
receive notice of and to vote at the Annual Meeting or any
adjournments thereof, 9,491,153 shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), were
outstanding. Each share of Common Stock is entitled to one vote
upon each of the matters to be voted on at the meeting. The
presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock is required for a quorum.
The following table sets forth, as of September 12, 1997, certain
information with respect to the shares of Common Stock beneficially
owned by (i) each person known by the Company to own beneficially
five percent or more of its outstanding shares of Common Stock,
(ii) each director and director nominee of the Company, (iii) each
executive officer of the Company named in the Summary Compensation
Table herein and (iv) all directors, director nominees and
executive officers of the Company as a group. Except as described
below, each of the persons listed below has sole voting and
investment power with respect to the shares listed.
Identity of Beneficial Owner Number of Shares Percent of Class
- ---------------------------- ---------------- ----------------
FBL Investment (1)
5400 University Avenue
West Des Moines, IA 50266 1,321,900 13.9
David L. Babson & Co. (2)
One Memorial Drive
Cambridge, MA 02142-1300 1,067,600 11.3
The TCW Group, Inc.(3)
865 Figueroa Street
Los Angeles, CA 90017 567,700 6.0
Dimensional Fund Advisors, Inc. (4)
1299 Ocean Avenue
Santa Monica, CA 90401 564,500 6.0
Franklin Resources, Inc.
777 Mariners Island Blvd.
San Mateo, CA 94403-7777 498,000 5.3
Doyl D. West (5) 232,378 2.4
C. William Lee (5) 326,856 3.4
William P. Wood (5) 115,368 1.2
Robert L. Curry (5) 26,500 *
John S. Zink (5) 52,500 *
Hugh E. Bradley (5) 22,500 *
Robert A. Heath (5) 11,428 *
Tim S. Selby (5) 262,832 2.8
Bradley S. Vetal (5) 40,389 *
All directors and executive officers
as a group (17 persons) (5) 1,485,669 15.7
*Indicates ownership of less than one percent of the outstanding
shares of Common Stock.
(1) According to the Schedule 13G dated May 5, 1997.
(2) According to the Schedule 13G dated February 17, 1997.
(3) According to the Schedule 13G dated February 14, 1997.
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of
564,500 shares of Matrix Service Company stock as of March 31,
1997, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or
in series of the DFA Investment Trust Company, a Delaware business
trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimension disclaims beneficial ownership of all such shares.
(5) Includes the following shares of Common Stock that are issuable
upon the exercise of stock options that are exercisable within 60
days after September 12, 1997: Mr. West - 154,928; Mr. Lee -
17,856; Mr. Wood - 22,500; Mr. Curry - 26,500; Mr. Zink - 22,500;
Mr. Bradley - 22,500; Mr. Heath -11,428; Mr. Selby - 20,000; Mr.
Vetal - 19,286; officers and directors as a group - 393,441.
PROPOSAL NUMBER 1: Election of Directors
The Board of Directors has nominated and urges you to vote "For"
the election of the six nominees identified below who have been
nominated to serve as directors until the next Annual Meeting of
Stockholders or until their successors are duly elected and
qualified. Each of the nominees is a member of the Company's
present Board of Directors. Proxies solicited hereby will be voted
"For" all six nominees unless stockholders specify otherwise in
their proxies. The affirmative vote of the holders of a plurality
of the Common Stock present in person or by proxy at the meeting is
required for election of the nominees.
If, at the time of the 1997 Annual Meeting of Stockholders, any of
the nominees should be unable or decline to serve, the
discretionary authority provided in the proxy may be used to vote
for a substitute or substitutes designated by the Board of
Directors. The Board of Directors has no reason to believe that
any substitute nominee or nominees will be required.
Nominees
The nominees for director, and certain additional information with
respect to each of them, are as follows:
Doyl D. West, age 55, is a founder of the Company and has served as
a director and as Chairman of the Board since the Company's
inception in 1984. From 1984 to November 1992, Mr. West also
served as President of the Company and from 1984 to May 31, 1993,
he served as Chief Executive Officer. In September 1994 Mr. West
was again elected to serve as President and Chief Executive Officer
of the Company. Prior to founding the Company, Mr. West served in
various capacities with Tank Service, Inc., most recently as
President. Tank Service, Inc. was engaged in repair and
maintenance of the tankage in refineries and marketing and pipeline
terminals.
C. William Lee, age 57, is a founder of the Company and has served
as its Vice President-Finance and as a director since the Company's
inception in 1984. Prior to 1984, Mr. Lee served as Vice
President-Finance and Secretary-Treasurer of Tank Service, Inc.
William P. Wood, age 41, has served as a director of the Company
since November 1989. Mr. Wood has been a general partner of Austin
Ventures, a venture capital firm, for more than the past five
years. Mr. Wood is also a director of Intelliquest Information
Group, an information services company.
Robert L. Curry, age 74, was elected as a director of the Company
effective in August 1991. Mr. Curry has been retired since 1985.
From 1976 to 1985 he was President of Refractory Construction,
Inc., a refinery turnaround company, where he held various other
executive positions from 1972 to 1976. From 1952 to 1972, Mr.
Curry held various positions, including Manager of Refineries, with
Apco Oil Corporation, an independent oil and gas company.
Hugh E. Bradley, age 68, was elected as a director of the Company
effective on April 20, 1993. Mr. Bradley retired in October 1993.
Previously he had served as the Division Manager for Texaco Trading
& Transportation, Inc., Mid-Continent Region from 1988 to 1993.
Mr. Bradley is a graduate Petroleum Engineer from the Colorado
School of Mines.
John S. Zink, age 68, was elected as a director of the Company
effective on April 20, 1993. He is President and founder of Zeeco,
Inc., Chairman of the John Zink Foundation and past President and
Chairman of the John Zink Company. Mr. Zink graduated from
Oklahoma State University with a degree in Mechanical Engineering.
Mr. Zink belongs to the Mechanical Engineering Scholastic
Fraternity, Pi Tau Sigma, and has been inducted into the O.S.U.
Engineering Hall of Fame. He is a registered Professional
Engineer. Mr. Zink is also a director of Liberty Bank & Trust
Company of Tulsa and Unit Corporation, a drilling and energy
company.
The Board recommends that the stockholders vote "For" the election
of each of the above named nominees.
The Board of Directors and its Committees
The Company's Certificate of Incorporation and Bylaws provide that
the number of directors on the Board shall be fixed from time to
time by the Board of Directors but shall not be less than three nor
more than 15 persons. The Board in its discretion and in
accordance with such authority has fixed its size at six members.
No proxy will be voted for a greater number of persons than the
number of nominees named herein. Directors hold office until the
next annual meeting of the stockholders of the Company or until
their successors have been elected and qualified. Vacancies may be
filled by recommendations from the Nominating Committee, and a
majority vote by the remaining directors. The Company's Board of
Directors met five times during fiscal year 1997. During fiscal
year 1997, each member of the Board of Directors attended 100% of
the meetings of the Board of Directors and the committees of which
he was a member.
The Board has three standing committees:
Audit Compensation Nominating
-------- ------------ ----------
Members: Bradley Curry Bradley
Curry Wood Curry
Lee Zink West
The Audit Committee's functions include making recommendations
concerning the engagement of independent auditors, reviewing with
the independent auditors the plan and results of the auditing
engagement, reviewing professional services provided by the
independent auditors, reviewing the independence of the independent
auditors, considering the range of audit and nonaudit fees and
reviewing the adequacy of the Company's internal accounting
controls. The Audit Committee held five meetings during fiscal
1997.
The Compensation Committee's functions include reviewing executive
salary and bonus structure and approving salary and bonus awards to
key executives, and administering the Company's stock option plans
and making grants thereunder. The Compensation Committee held two
meetings during fiscal 1997 and took certain actions by unanimous
written consent in lieu of meetings.
The Nominating Committee was established to make nominations and
recommendations to the Board of Directors for individuals to be
presented to the stockholders for election to the Board of
Directors. The Nominating Committee held one meeting during fiscal
1997. Holders of Common Stock wishing to recommend a person for
consideration as nominee for election to the Board can do so in
accordance with the Company's Bylaws by giving timely written
notice to the Secretary of the Company at 10701 East Ute Street,
Tulsa, Oklahoma 74116, giving each such nominee's name, address,
appropriate biographical information, a description of all
arrangements or understandings between the stockholder and each
nominee and any other person or persons (naming such person or
person), and any other information that would be required in a
proxy statement. Any such recommendation should be accompanied by
a written statement from the person recommended, giving his or her
consent to be named as a nominee and, if nominated and elected, to
serve as a director. A notice must be delivered to the Secretary
not later than 80 days prior to the date of any annual or special
meeting; provided, however, that in the event that the date of such
annual or special meeting was not publicly announced by the Company
more than 90 days prior to the meeting, notice by the stockholder
must be delivered to the Secretary of the Company not later than
the close of business on the tenth day following the day on which
public announcement of the date of such meeting is communicated to
the stockholders. Such notice to the Secretary must set forth the
name and address of the stockholder who intends to make the
nomination and a representation that the stockholder is a holder of
record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice.
Director Compensation
During fiscal 1997, the directors who are not employees of the Company
were reimbursed for out-of-pocket expenses incurred in attending meetings
of the Board of Directors and committee meetings. In addition, each of
Messrs. Hugh Bradley, Robert Curry, William Wood and John Zink received
$7,000 plus $1,000 for each meeting they attended as compensation for
serving as directors, and was granted options to purchase 5,000 shares of
the Company's stock under the Matrix Service Company 1995 Nonemployee
Directors' Stock Option Plan.
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding
compensation paid or accrued during each of the Company's last
three fiscal years to the Chief Executive Officer and each of the
Company's four other most highly compensated executive officers
(the "Named Officers"):
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
----------------------------------------- --------------------------------------
Awards Payouts
------------------------ -------------
Restricted Securities Long-Term
Other Annual Stock Underlying Incentive All Other
Name and Fiscal Compensation Award(s) Options/SARs Payout Compensation
Principal Position Year Salary ($) Bonus ($) ($) (1) ($) (#) ($) ($)
- ---------------------------- ------ ---------- -------- ------------ ------------ ------------ ---------- ------------
Doyl D. West 1997 268,146 40,000 25,000
Chairman of Board, President 1996 236,282 - N/A N/A 25,000 N/A N/A
Chief Executive Officer 1995 158,676 - 110,000
C. William Lee 1997 143,630 25,000 -
Vice President-Finance 1996 132,791 - N/A N/A 25,000 N/A N/A
& Chief Financial Officer 1995 127,905 - -
Bradley S. Vetal 1997 169,753 25,000 -
Vice President- 1996 139,236 - N/A N/A 25,000 N/A N/A
Tank Division 1995 132,679 - -
Tim S. Selby 1997 143,500 - -
President-Matrix Service, Inc. 1996 140,000 - N/A N/A - N/A N/A
San Luis Tank Division 1995 130,000 - -
Robert A. Heath 1997 137,239 - -
President- 1996 129,779 - N/A N/A - N/A N/A
Heath Engineering, Ltd. 1995 126,138 - -
(1) During each of the three years ended May 31, 1994, 1995 and
1996, perquisites for each individual named in the Summary
Compensation Table aggregated less than 10% of the total annual
salary and bonus reported for such individual in the Summary
Compensation Table, or $50,000, if lower. Accordingly, no such
amounts are included in the Summary Compensation Table.
Stock Option Grants During Fiscal 1997
The following table sets forth information with respect to grants
of stock options to purchase Common Stock pursuant to the Company's
1991 Stock Option Plan to the Named Officers identified in the
Summary Compensation Table above. No stock appreciation rights
("SARs") were granted during fiscal 1997 or were outstanding at May
31, 1997.
OPTION GRANTS IN FISCAL 1997
Individual Grants (1)
---------------------------------------------------------------------------------------
% of
Number of Total Options Potention Realizable Value at
Shares Underlying Granted Exercise Assumed Annual Rates of Stock
Stock Options to Employees Price Expiration Price Appreciation of Option Term (3)
Name Granted (#) in Fiscal 1997 ($/Share) Date 5% ($) 10% ($)
- ------------------ ------------------ -------------- ---------- ----------- ---------- ----------
Doyl D. West $25,000 (2) 22.12 $5.88 10-22-2006 $92,500 $234,250
C. William Lee - N/A N/A N/A N/A N/A
Bradley S. Vetal - N/A N/A N/A N/A N/A
Tim S. Selby - N/A N/A N/A N/A N/A
Robert A. Heath - N/A N/A N/A N/A N/A
(1) Options granted during the year ended May 31, 1997 vest
equally over five years of service and expire ten years from date
of grant. No SARs were granted during fiscal 1997.
(2) Options for Mr. West will vest over two years of service and
expire ten years from date of grant.
(3) An appreciation in stock price is required for optionees to
receive any gain. A stock price appreciation of zero percent would
render the options without value to the optionees. The Securities
and Exchange Commission requries disclosures of the potential
realizable value of each grant. The disclosure assumes the options
will be held for the full ten-year term prior to exercise. Such
options may be exercised prior to the end of such ten-year term.
The actual value, if any, an executive officer may realize will
depend upon the excess of the stock price over the exercise price
on the date the option is exercised. There is no assurance that
appreciation, if any, in the stock price will occur at the rates
shown in the table.
Option Exercises and Holdings
The following table sets forth information with respect to the
Named Officers identified in the Summary Compensation Table
concerning the exercise of stock options and the value of
unexercised options held as of the end of fiscal year 1997.
AGGREGATED STOCK OPTION EXERCISES IN YEAR ENDING MAY 31, 1997
AND OPTION VALUES AT MAY 31, 1997
Value of Unexercised
Number of Shares In-the-Money
Underlying Unexercised Stock Options
Options at May 31, 1997 at May 31, 1997 (1)
---------------------------- ----------------------------
Shares Acquired Value
on Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------------- -------- ------------ ------------- ----------- -------------
Doyl D. West - - 107,928 142,072 $317,115 (2) $404,635 (2)
C. William Lee - - 17,856 29,644 45,979 (3) 69,021 (3)
Bradley S. Vetal - - 19,286 31,429 77,778 (4) 73,930 (4)
Tim S. Selby - - 20,000 15,000 55,000 (5) 41,250 (5)
Robert A. Heath - - 8,571 11,429 23,570 (6) 31,430 (6)
(1) Value was calculated by subtracting the applicable exercise
price from the fair market value of the Company's Common Stock on
May 31, 1997, which was $8.38 (last trading day of fiscal year)
based on the average of the high and low sales price of the Common
Stock on May 31, 1997 on the Nasdaq National Market, multiplied by
the number of shares underlying the unexercised options.
(2) Mr. West holds options to purchase 95,428 shares at an
exercise price of $5.625 and 12,500 shares at an exercise price of
$4.00; these options were exercisable in fiscal year 1997. Mr.
West also holds options to purchase 104,572 shares at an exercise
price of $5.625, 12,500 shares at an exercise price of $4.00 and
25,000 shares at an exercise price of $5.875 at May 31, 1997.
(3) Mr. Lee holds options to purchase 12,856 shares at an exercise
price of $5.625 and 5,000 shares at an exercise price of $6.25;
these options were exercisable in fiscal year 1997. Mr. Lee also
holds options to purchase 9,644 shares at an exercise price of
$5.625, and 20,000 shares at an exercise price of $6.25 at May 31,
1997.
(4) Mr. Vetal holds options to purchase 2,250 shares at an
exercise price of $.67; 3,465 shares at an exercise price of $.80;
8,571 shares at an exercise price of $5.625; 5,000 shares at an
exercise price of $6.25; these options were exercisable in fiscal
year 1997. Mr. Vetal also holds options to purchase 11,429 shares
at an exercise price of $5.625; and 20,000 shares at a price of
$6.25 at May 31, 1997.
(5) Mr. Selby holds options to purchase 20,000 shares at an
exercise price of $5.625; these options were exercisable in fiscal
year 1997. Mr. Selby also holds options to purchase 15,000 shares
at an exercise price of $5.625 at May 31, 1997.
(6) Mr. Heath holds options to purchase 8,571 shares at an
exercise price of $5.625; these options were exercisable in fiscal
year 1997. Mr. Heath also holds options to purchase 11,429 shares
at an exercise price of $5.625 at May 31, 1997.
Employment Agreements
In connection with the acquisition of San Luis Tank Piping
Construction Company in June 1991, Mr. Tim Selby executed a
five- year Employment and Non-Competition Agreement with the Company,
which was extended for an additional three years. The agreement
provides that Mr. Selby will receive a salary of $140,000 for the year
ending May 31, 1996; compensation after that date will be determined
by the Compensation Committee of the Board of Directors.
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG MATRIX SERVICE COMPANY, THE NASDAQ STOCK MARKET-US INDEX AND
THE S & P ENGINEERING & CONSTRUCTION INDEX
Research Data Group Total Return - Data Summary
MTRX
Cumulative Total Return
--------------------------------------------------
5/92 5/93 5/94 5/95 5/96 5/97
Matrix Service Co. MTRX 100 45 37 20 29 41
NASDAQ Stock Market-US INAS 100 120 127 151 219 247
S & P Engineering & Const. IENG 100 97 122 108 143 129
* $100 invested on May 31, 1992 in the Company's Common Stock.
Includes reinvesting of dividends, where applicable. The Company's
fiscal year ends May 31.
The performance graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended,
except to the extent that the Company specifically incorporates
this graph by reference, and shall not otherwise be deemed filed
under such acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted
in the graph above. The Company will not make or endorse any
predictions as to future stock performance.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee ("Committee") of the Board of Directors
of the Company currently consists of Robert L. Curry, William P.
Wood, and John S. Zink, all of whom are independent directors who
are not employees and who qualify as disinterested persons for
purposes of Rule 16b-3 adopted under the Securities Exchange Act of
1934. The Committee is responsible for evaluating the performance
of management, determining the compensation for certain executive
officers of the Company and administering the Company's stock
option plan under which grants may be made to employees of the
Company. The Committee has furnished the following report on
executive compensation for the fiscal year ending May 31, 1997.
Under the supervision of the Committee, the Company has developed
a compensation policy which is designed to attract and retain key
executives responsible for the success of the Company and motivate
all management to work as a team, to maximize long-term stockholder
value.
The annual compensation package of the executive officers primarily
consists of (i) a cash salary which reflects the responsibilities
relating to the position and individual performance, (ii) variable
performance awards payable in cash and tied to the individual's and
the Company's performance against pre-established financial
measures and (iii) long- term stock-based incentive awards which
strengthen the relationship between the interests of the executive
officers and the interests of the Company's stockholders.
In determining the level and composition of compensation for each
of the Company's executive officers, the Committee takes into
account various qualitative and quantitative indicators of each
officer's performance. The Committee's objectives in determining
compensation are to allow the Company to attract, motivate and
retain the management personnel necessary for the Company's success
and to provide an executive compensation program comparable to that
offered by the companies with which the Company competes for such
management personnel. Although no specific target has been
established, the Committee generally seeks to set salaries at the
medium to high end of the range in comparison to peer group
companies. In setting such salaries, the Compensation Committee
considers its peer group to be certain companies with market
capitalizations similar to that of the Company with which it
competes for aboveground tank services and refinery maintenance
services. Such peer group does not necessarily include the
companies comprising the Standard and Poor's Engineering and
Construction Index reflected in the performance graph in this Proxy
Statement, which is the industry categorization the Company has
been placed in by its market makers. In evaluating the performance
of management, the Committee takes into consideration such factors
as revenue and earnings growth, improved safety performance through
reduced rates of recordable injuries of the Company as well as the
achievement of specific qualitative goals by the individual
relating to the particular officer's area of responsibility.
Base compensation is established through negotiation between the
Company and the executive officer at the time the executive is
hired, or during the negotiation phase of an acquisition, and then
subsequently (in general annually) when such officer's base
compensation is subject to review or reconsideration. While the
Company has entered into employment agreements with certain of its
executive officers, such agreements provide that base salaries
after the initial year will be determined by the Compensation
Committee or the Chief Executive Officer after review of the
officer's performance. In establishing or reviewing base
compensation levels for each executive officer, the Committee, in
accordance with its general compensation policy, considers numerous
factors, including the responsibilities relating to the position,
the qualifications of the executive and the relevant experience the
individual brings to the Company, strategic goals for which the
executive has responsibility, and compensation levels of other
companies at a comparable stage of development to compete with the
Company for business, engineering, and executive talents. As
stated above, such comparable companies are generally those with
similar market capitalizations and not necessarily among the
companies comprising the Standards and Poor's Engineering and
Construction indices as reflected in the Performance Graph in this
Proxy Statement. No predetermined weights are given to any such
factors. The initial salaries for each of the executive officers in
fiscal year 1997 were set taking into account these factors in
accordance with the Company's general compensation policy discussed
above. The base salaries for the executive officers generally, and
the Chief Executive Officer specifically, for fiscal 1997 are in
the medium level in comparison with the Company's peer group
companies.
In addition to each executive officer's base compensation, the
Committee may award cash bonuses and/or grant awards under the
Company's Stock Option Plan to chosen executive officers depending
on the extent to which certain defined personal and corporate
performance goals are achieved. Such corporate performance goals
include revenue and earnings growth of the Company, as discussed
above.
The Chief Executive Officer's compensation is the responsibility of
the Compensation Committee. Based upon the Compensation Committee's
assessment of Mr. West's ability to effectively lead the Company
into the future as determined by his past performance and
experience with the Company's business and markets, the
Compensation Committee determined that Mr. West's compensation
package would consist of the following: (i) annual base salary of
$ 265,000, (ii) annual cash bonus based upon a predetermined
financial performance of the Company, and (iii) a Stock Option
Agreement granting Mr. West an option to purchase 25,000 shares of
Common Stock over a two-year period beginning in October 1996 under
the Company's 1991 Stock Option Plan at an exercise price of $
5.875 per share (the market value of the Common Stock on the date
of grant).
Equity incentives are not limited to executive officers. Grants of
stock options are made to management and staff of the Company in
amounts determined by the Compensation Committee. The amounts of
such grants are determined based on the individual employee's
position with the Company and his or her potential ability to
beneficially impact the performance of the Company. By giving
management and staff a stake in the financial performance of the
Company, the Compensation Committee's goal is to provide incentives
to these employees of the Company to enhance the financial
performance of the Company and, thus, stockholder value.
All employees of the Company, including executive officers, are
eligible to receive long-term stock based incentive awards under
the Company's Stock Option Plan as a means of providing such
individuals with a continuing proprietary interest in the Company.
Such grants further the mutual interests of the Company's employees
and its stockholders by providing significant incentives for such
employees to achieve and maintain high levels of performance. The
Company's Stock Option Plan enhances the Company's ability to
attract and retain the services of qualified individuals. Factors
considered in determining whether such awards are granted to an
executive officer of the Company include the executive's position
in the Company, his or her performance and responsibilities, the
number of options, if any, currently held by the officers, and the
vesting schedule of any such options. While the Committee does not
adhere to any firmly established formulas or schedules for the
issuance of options, the Committee will generally tailor the terms
of any such grant to achievement of its goal as a long-term
incentive award by providing for a vesting schedule encompassing
several years as tying the vesting dates to particular corporate or
personal milestones.
The report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities
Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such acts.
Compensation Committee
Robert L. Curry
William P. Wood
John S. Zink
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own
more than ten percent of the Common Stock, to file initial reports
of ownership and reports of changes in ownership (Forms 3, 4 and 5)
of the Common Stock with the Securities and Exchange Commission
(the "SEC") and the NASDAQ Stock Market. Officers, directors and
greater than 10 percent stockholders are required by SEC
regulations to furnish the Company with copies of all such forms
that they file.
To the Company's knowledge, based solely on the Company's review of
the copies of such reports received by the Company and on written
representations by certain reporting persons, the Section 16(a)
filing requirements were satisfied by the Company's directors,
officers and ten percent stockholders, except for one transaction
by Connie J. Conger not timely reported on Form 4; this transaction
was subsequently reported in a report on Form 5.
PROPOSAL NUMBER 2: Amendment to the Company's 1991 Stock Option
Plan
Background
The Company's 1991 Stock Option Plan (the "1991 Plan") was adopted
by the Board of Directors of the Company on May 17, 1991 and
approved by the Company's stockholders on October 24, 1991. At the
1992 Annual Meeting of Stockholders, the Company's stockholders
approved an amendment increasing the number of shares of Common
Stock that may be issued under the plan from 350,000 to 700,000.
In April 1993 the Company's Board of Directors approved an
amendment increasing such number to 770,000. In July 1994 the
Company's Board of Directors approved an amendment increasing such
number to 970,000.
The purpose of the 1991 Plan is to provide long-term incentives to
selected officers and key employees to contribute to the future
success and prosperity of the Company. An additional purpose for
the adoption of the 1991 Plan is to enable the Company to attract
and retain qualified individuals who are not employees of the
Company to serve on the Company's board of directors. The 1991
Plan authorizes the Compensation Committee to grant incentive stock
options ("ISOs") to the Company's key employees and nonqualified
stock options ("NQOs") to key employees and nonemployees who are
elected for the first time as directors of the Company after
January 1, 1991 ("outside directors").
As of May 31, 1997, the Compensation Committee had granted
substantially all of the options which could be granted under the
1991 Plan. Because the Board of Directors believed that the 1991
Plan accomplished its objectives and that the Company should be in
a position to continue to provide incentives to officers and other
key employees, the Board of Directors approved and adopted on
August 29, 1997, subject to approval by the Company's stockholders
at the Annual Meeting, an amendment to the 1991 Plan increasing the
number of shares of Common Stock which may be issued under such
plan from 970,000 to 1,320,000.
Summary of the 1991 Plan
Set forth below is a summary of the material terms of the 1991
Plan. This summary is qualified in its entirety by reference to
the full text of the 1991 Plan, as proposed to be amended, which is
attached as Exhibit A to this Proxy Statement.
General
The 1991 Plan is administered by the Compensation Committee of the
Board of Directors. No member of the Compensation Committee is
eligible to participate in the 1991 Plan. The Compensation
Committee selects the key employees to whom options are granted,
the time at which options are granted and expire, and the number of
shares of Common Stock which may be purchased upon the exercise of
options.
ISOs and NQOs enable optionees to purchase shares of Common Stock
at the option price. The option price per share may not be less
than the fair market value of the Common Stock at the time the
option is granted. In order to purchase the shares, a participant
must pay the full option price to the Company. The purchase price
may be paid in any combination of cash or stock of the Company,
including stock previously acquired under the same option or in
accordance with the cashless exchange procedure under Regulation T
of the Federal Reserve Board. ISOs granted under the 1991 Plan are
intended to qualify under Section 422 of the Internal Revenue Code
(the "Code").
Options may be granted under the 1991 Plan with durations of no
more than ten years from the date of grant, but, in any event, may
expire sooner if, in the case of employee optionees, the optionee's
employment terminates. Any shares as to which an option expires,
lapses unexercised, or is terminated or canceled may be subject to
a new option.
Options granted under the 1991 Plan are not transferable except by
will or the laws of intestate succession. Upon an optionee's
death, options are exercisable by the optionee's legal
representative or beneficiary for up to three months.
Federal Income Tax Consequences
Under current federal tax law, a participant who is granted an ISO
does not recognize any taxable income at the time of grant or at
the time of exercise. Likewise, the Company is not entitled to any
deduction at the time of grant or at the time of exercise. When an
ISO is exercised, the difference between the fair market value of
the shares on the exercise date and the exercise price is an item
of tax adjustment which may cause the participant to be subject to
the alternative minimum tax. When the shares of Common Stock
acquired upon exercise of an ISO are sold, the participant will
recognize a capital gain or loss equal to the difference between
the sale price and the exercise price, provided the participant has
held the stock for the longer of two years from the date of grant
or one year from the date of exercise. If an optionee makes a
"disposition" of the stock received upon exercise of an ISO prior
to meeting the holding periods described above, the gain on the
disposition will be treated as ordinary income to the extent of the
excess of the fair market value on the date of exercise over the
exercise price. The balance of the gain, if any, realized upon such
a disposition generally will be treated as capital gain. The
Company will be entitled to a deduction in the year of disposition
only to the extent of the amount of gain, if any, that is taxable
to the optionee as ordinary income. If the amount realized at the
time of the disposition is less than the option price, the optionee
will not be required to treat any amount as ordinary income
provided the disposition is a type that would give rise to a
recognizable loss, and in such event the loss will be treated as a
long-term or short-term loss depending on the holding period of the
shares.
A participant who is granted a NQO does not recognize taxable
income at the time of grant, but does recognize taxable income at
the time of exercise equal to the difference between the fair
market value of the shares on the exercise date and the exercise
price of the shares, and the Company is entitled to a corresponding
compensation expense deduction. When the shares acquired upon
exercise of a NQO are sold, the participant will recognize a
capital gain or loss equal to the difference between the sale price
and the fair market value at the time of exercise; and in such
event the gain, if any, will be treated as long-term, mid-term or
short-term capital gain, depending on the holding period of the
shares. Any loss will be treated as long-term or short-term capital
loss, depending on the holding period of the shares.
Amendment
The Board of Directors may amend the 1991 Plan at any time but may
not, without stockholder approval, adopt any amendment which would
materially increase the maximum number of options that may be
granted or the number of shares that may be issued upon the
exercise of options granted under the 1991 Plan, unless the
increase results from a stock dividend, stock split or other change
in the capital stock of the Company, or materially modify the
eligibility requirements of the 1991 Plan.
Vote Required
The affirmative vote of holders of a majority of the shares of
Common Stock entitled to vote at the Annual Meeting is required to
approve the amendment to the 1991 Plan. For purposes of
determining whether the requisite approval has been received,
abstentions are treated as "no" votes, while broker non-votes are
disregarded. The Board of Directors recommends a vote "For"
approval of the amendment to the 1991 Plan increasing the aggregate
number of shares of Common Stock which may be issued under the 1991
Plan from 970,000 to 1,320,000.
PROPOSAL NUMBER 3: Selection Of Auditors
The Board of Directors has reappointed the firm of Ernst & Young
LLP as the Company's independent public accountants for the fiscal
year ending May 31, 1998, subject to ratification by the Company's
stockholders. Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting of Stockholders and will have an
opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions from those attending the meeting.
Ernst & Young LLP has served as auditors for the Company since
1984.
The affirmative vote of holders of a majority of the shares of
Common Stock present in person or represented by proxy at the
Annual Meeting is required to ratify the appointment of Ernst &
Young LLP as the independent accountants for fiscal 1998.
The Board of Directors recommends a vote "For" ratification of
Ernst & Young's appointment.
Proposals of Stockholders
A proposal of a stockholder intended to be presented at the next
annual meeting of stockholders must be received at the Company's
principal executive offices no later than May 22, 1998, if the
proposal is to be considered for inclusion in the Company's proxy
statement relating to such meeting.
Financial Information
A copy of the Company's Annual Report on Form 10-K, including any
financial statements and schedules and exhibits thereto, may be
obtained without charge by written request to C. William Lee, Vice
President-Finance, Matrix Service Company, 10701 East Ute Street,
Tulsa, Oklahoma 74116.
Other Matters
The cost of solicitation of these proxies will be borne by the
Company. In addition to solicitation by mail, certain directors,
officers, and regular employees of the Company may solicit proxies
by telecopy, telephone, and personal interview.
By Order of the Board of Directors
/s/ C. William Lee
- ----------------------
C. William Lee
September 19, 1997
Tulsa, Oklahoma
[TYPE] EXHIBIT A
[DESCRIPTION] MATRIX SERVICE COMPANY 1991 STOCK OPTION PLAN, AS AMENDED
1.Purpose
The purpose of the Matrix Service Company 1991 Stock Option Plan,
as amended, (the "Plan"), is to enhance the ability of Matrix
Service Company (the "Company") and its Subsidiaries (as defined
below) to attract and retain individuals possessing superior
managerial talent to serve as employees and outside directors of
the Company and its Subsidiaries, and to provide long-term
incentives to such persons to contribute to the future success and
prosperity of the Company and its Subsidiaries. Accordingly, under
the Plan the Company may grant to key employees and to persons who
are first elected as directors of the Company after January 1, 1991
("outside directors") options ("Options") to purchase shares of the
Company's common stock, par value $.01 per share ("Common Stock").
Options granted under the Plan may be either (i) incentive stock
options ("ISOs") which are qualified under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), with
respect to grants to key employees, or (ii) nonqualified stock
options ("Nonqualified Options"), with respect to grants to either
key employees or outside directors.
For purposes of the Plan, a "Subsidiary" shall be any corporation
in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of all classes of
stock in such corporation.
2.Administration and Interpretation
A. Administration. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors
of the Company (the "Board"). The Committee may prescribe, amend
and rescind rules and regulations for administration of the Plan
and shall have full power and authority to construe and interpret
the Plan. The Committee may correct any defect or any omission or
reconcile any inconsistency in the Plan or in any grant made under
the Plan in the manner and to the extent it shall deem desirable.
Committee members shall be appointed by and shall serve at the
pleasure of the Board. All members of the Committee shall be
"disinterested persons" within the meaning of Rule 16b-3 of the
General Rules and Regulations of the Securities Exchange Act of
1934 (the "1934 Act"). The Board may from time to time appoint
members of the Committee in substitution for or in addition to
members previously appointed and may fill vacancies, however
caused, in the Committee. A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of
the members present at a meeting, or the acts of a majority of the
members evidenced in writing, shall be the acts of the Committee.
Members of the Committee may, in the discretion of the Board,
receive compensation for their services as members, and all
expenses and liabilities they incur in connection with the
administration of the Plan shall be borne by the Company.
The day-to-day administration of the Plan may be
carried out by such officers and employees of the Company or
its Subsidiaries as shall be designated from time to time by
the Committee. The Committee may employ attorneys,
consultants, accountants, appraisers, brokers or other
persons, and the Committee, the Company and the officers and
employees of the Company shall be entitled to rely upon the
advice, opinions or valuations of any such persons.
The Committee shall have the authority to make all
decisions concerning Options granted under the Plan, including
without limitation the selection of the persons to whom
Options are granted, the number of shares of Common Stock
subject to each Option and the terms and conditions of each
Option, to construe the terms and provisions of the Plan and
the option agreements ("Agreements") under which Options are
granted, and to adopt, from time to time, such rules and
regulations, not inconsistent with the terms of the Plan, as
it may deem advisable to carry out the Plan. All decisions by
the Committee shall be final. The effective date of an
Option, as determined by the Committee, is referred to herein
as the "Grant Date."
B. Interpretation. The interpretation and construction
by the Committee of any provisions of the Plan or of any grant
under the Plan and any determination by the Committee under
any provision of the Plan or any such grant shall be final and
conclusive for all purposes.
C. Limitation on Liability. Neither the Committee nor
any member thereof shall be liable for any act, omission,
interpretation, construction or determination made in
connection with the Plan in good faith, and the members of the
Committee shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss,
damage or expense (including counsel fees) arising therefrom
to the full extent permitted by law and the articles of
incorporation of the Company. The members of the Committee,
if appointed, shall be named as insureds under any directors
and officers liability insurance coverage that may be in
effect from time to time.
3. Shares Subject to Grants Under the Plan
The aggregate number of shares which may be issued under
Options granted under the Plan shall not exceed 970,000 shares of
Common Stock. Such shares may consist of authorized but unissued
shares of Common Stock or previously issued shares of Common Stock
reacquired by the Company. Any of such shares which remain
unissued and which are not subject to outstanding Options at the
termination of the Plan shall cease to be subject to the Plan, but
until termination of the Plan, the Company shall at all times make
available a sufficient number of shares to meet the requirements of
the Plan and the outstanding Options. The number of shares of
Common Stock which are available for Options under the Plan shall
be decreased by each exercise of an Option, and to the extent that
such Option lapses the shares theretofore subject to such Option
may again be subject to other Options granted under the Plan. If
any Option, in whole or in part, expires or terminates unexercised
or is canceled or forfeited, the shares theretofore subject to such
Option may be subject to another Option granted under the Plan.
The aggregate number of shares which may be issued under Options
granted under the Plan shall be subject to adjustment as provided
in Section 6 hereof.
4. Eligibility
The individuals who shall be eligible to receive Options under
the Plan shall be such key employees and outside directors as the
Committee from time to time shall determine; provided, however,
that outside directors shall only be eligible to receive
Nonqualified Options under the Plan. In granting Options, the
Committee shall take into consideration the contribution an
individual has made or may make to the success of the Company or
its Subsidiaries and such other factors as the Committee shall
determine. The Committee shall also have the authority to consult
with and receive recommendations from officers and other employees
of the Company and its Subsidiaries with regard to these matters.
In no event shall any individual or his legal representatives,
heirs, legatees, distributees or successors have any right to
participate in the Plan except to such extent, if any, as the
Committee shall determine.
Options may be granted under the Plan from time to time in
substitution for stock options, restricted stock or other stock-
based compensation granted by other corporations where, as a result
of a merger or consolidation of such other corporation with the
Company or a Subsidiary, or the acquisition by the Company or a
Subsidiary of the assets of such other corporation, or the
acquisition by the Company or a subsidiary of stock of, or other
beneficial ownership interest in, such other corporation, the
individuals who held such other stock options, restricted stock or
other stock-based compensation become eligible to receive Options
under the Plan.
5. Grants and Terms of Options
A. Grants of Options. Grants of Options under the Plan
shall be for such number of shares of Common Stock and shall
be subject to such terms and conditions as the Committee shall
designate.
B. Terms of Options. Each grant of an Option shall be
evidenced by an Agreement executed by the recipient of the
Option (the "Optionee") and an authorized officer of the
Company. Each Agreement shall be in a form approved by the
Committee, shall comply with and be subject to the terms and
conditions of the Plan and may contain such other provisions,
consistent with the terms and conditions of the Plan, as the
Committee shall deem advisable. References herein to an
Agreement shall include, to the extent applicable, any
amendment to the Agreement and any interpretation or
construction thereof by the Committee pursuant to this Plan.
(1) Exercise of Options. Options shall not be
exercisable prior to the date six months following the
Grant Date. In addition, the Committee may include in
each Agreement a provision stating that the Option
granted therein may not be exercised in whole or in part
for an additional period of time specified in such
Agreement, and may further limit the exercisability of
the Option in such manner as the Committee deems
appropriate. Except as provided herein or as so
specified in the Agreement or in a resolution of the
Committee, any Option may be exercised in whole at any
time or in part from time to time during its term. The
Committee may, in its discretion, at any time and from
time to time accelerate the exercisability of all or part
of any Option. An Optionee may exercise an Option by
providing written notice to the Company at any time or
from time to time during the period such Option is
exercisable and by satisfying such other conditions as
are set forth in the Agreement relating to the Option
including, without limitation, satisfying the
requirements for tax withholding with respect to such
exercise.
(2) Payment of Option Exercise Price. Upon
exercise of an Option, the full price per share (the
"Exercise Price" for the shares with respect to which the
Option is being exercised shall be payable to the Company
(i) in cash or by check payable and acceptable to the
Company or (ii) subject to the approval of the Committee,
(a) by tendering to the Company shares of Common Stock
owned by the Optionee having an aggregate market Value
Per Share (as defined below) as of the date of exercise
and tender that is not greater than the Exercise Price
for the shares with respect to which the Option is being
exercised and by paying any remaining amount of the
Exercise Price as provided in (i) above; provided,
however, that the Committee may, upon confirming that the
Optionee owns the number of additional shares being
tendered, authorize the issuance of a new certificate for
the number of shares being acquired pursuant to the
exercise of the Option less the number of shares being
tendered upon the exercise, and return to the Optionee
(or not require surrender of)the certificate for the
shares being tendered upon the exercise; or (b) by the
Optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company cash or a
check payable and acceptable to the Company to pay the
option exercise price; provided that in the event the
Optionee chooses to pay the Option exercise as provided
in (ii)(b) above, the Optionee and the broker shall
comply with such procedures and enter into such
agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment
procedure. Payment instruments will be received subject
to collection.
(3) Number of Shares. Each Agreement shall
state the total number of shares of Common Stock that is
subject to the Option, which number shall be subject to
adjustment pursuant to Section 6.
(4) Exercise Price. The Exercise Price for
each option shall be fixed by the Committee on the Grant
Date. The Exercise Price shall be the market Value per
Share on the Grant Date, but in no event less than the
par value of the Common Stock. The Exercise Price shall
be subject to adjustment pursuant to Section 6.
(5) Term. The term of each Option shall be
determined by the Committee at the Grant Date; provided,
however, that each Option shall expire no later than ten
years from the Grant Date (such date, as determined by
the Committee or provided for herein, being referred to
hereafter as the "Expiration Time").
(6) Market Value Per Share. "Market Value Per
Share" shall be determined as of any particular date by
any fair and reasonable means determined by the
Committee.
(7) Termination of Employment; Death of an
Outside Director. (a) If the employment of an employee
Optionee is terminated for any reason other than a
Qualified Termination (defined below), the Option granted
to such Optionee shall automatically expire
simultaneously with such termination. In the event of
termination of an employee Optionee's employment due to
death, retirement on or after reaching age 65 (or if
prior to age 65, with the consent of the Committee),
permanent disability (as determined under the standards
of the Company's long-term disability program) or
termination by the Company for any reason other than
"cause" (each of such four events being a "Qualified
Termination"), the Option may be exercised by the
Optionee (or his estate, personal representative or
beneficiary at any time within the three-month period
commencing on the day next following such Qualified
Termination (or within the next succeeding three months
if the Optionee dies or becomes disabled within the
three-month period following a Qualified Termination
relating to other than the Optionee's death or disability
) to the full extent that the Optionee was entitled to
exercise the same on the day immediately prior to such
Qualified Termination. For purposes of this clause,
"cause" shall mean:
(i) final conviction of the Optionee of a
felony under the laws of the United States or any state
thereof which results or was intended to result directly or
indirectly in gain or personal enrichment by the Optionee
at the expense of the Company.
(ii) participation by the Optionee as an
employee, officer or principal shareholder in any business
engaged in activities in direct competition with the
Company without the consent of the Company; or
(iii) gross and willful inattention to
Optionee's duties as an employee for a continuous period of
three months other than due to Optionee's total physical
disability, or other cause reasonably beyond the control of
Employee, which inattention to duty has a material adverse
effect on the Company.
(b) In the event of the death of an Optionee that
is an outside director, the Option may be exercised by the
Optionee's estate, personal representative or beneficiary at
any time within the three- month period commencing on the day
next following such Optionee's death to the full extent that
the Optionee was entitled to exercise the same on the day
immediately prior to his death.
(c) The Committee may, in its discretion, (i)
accelerate the exercisability of all or part of an Option that
is not otherwise exercisable or (ii) provide that an Option
shall remain outstanding and be exercisable following
termination of employment (or other specified events in the
case of nonemployees) on such other terms and conditions as
the Committee shall approve.
(8) Special Terms Applicable to Incentive Stock Options.
ISOs may be granted only to individuals who are key employees
of the Company at the time the ISO is granted. ISOs may be
granted to the same individual on more than one occasion, but
in no event shall an ISO be granted after December 31, 2000.
No employee shall be eligible to receive an ISO if,
on the Grant Date, such employee owns (including ownership
through the attribution provisions of Section 424 of the code)
in excess of 10% of the outstanding voting stock of the
Company (or of its parent or subsidiary as defined in Section
424 of the code) unless the following two conditions are met:
(i) the option price for the shares of Common
Stock subject to the ISO is at least 110% of the fair
market value of the shares of Common Stock on the Grant
Date; and
(ii) the Agreement provides that the term of
the ISO does not exceed five years.
No employee shall be eligible to receive ISOs (under
this Plan and all other option Plans of the Company, its
parent and subsidiary corporations) that are exercisable for
the first time in any calendar year with respect to stock with
an aggregate fair market value (determined at the Grant Date)
in excess of $100,000. Notwithstanding any provision to the
contrary in any Agreement pursuant to which Options are
granted, options which are intended to be ISOs and would
otherwise qualify as ISOs but for the requirement set forth in
the preceding sentence, shall be treated as ISOs to the extent
allowed under such requirement and the balance of such Options
shall be traded as Nonqualified Options and their validity
shall not be affected in any way whatsoever.
6. Recapitalization or Reorganization
A. The existence of the Plan and the Options granted
hereunder shall not affect in any way the right or power of
the Board or the shareholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its
business, any merger or consolidation of the Company, any
issue of bonds, debentures, or shares of preferred stock ahead
of or affecting Common Stock or the rights thereof, the
dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any
other corporate act or proceeding.
B. The shares with respect to which Options may be
granted are share of Common Stock as presently constituted.
If, and whenever, prior to the termination of the Plan or the
expiration of an outstanding Option, the Company shall effect
a subdivision of shares of Common Stock or the payment of a
stock dividend on Common Stock without receipt of
consideration by the Company, the remaining shares of Common
Stock available under the Plan and the number of shares of
Common Stock with respect to which outstanding Options may
thereafter be exercised shall be proportionately increased,
and the Exercise price under outstanding Options shall be
proportionately reduced. If, and whenever, prior to the
termination of the Plan or the expiration of an outstanding
Option, the Company shall effect a consolidation of shares of
Common Stock, the remaining shares of Common Stock available
under the Plan and the number of shares of Common Stock with
respect to which any outstanding Option may thereafter be
exercised shall be proportionately reduced, and the Exercise
price under the outstanding Options shall be proportionately
increased.
C. Except as may otherwise be expressly provided in the
Plan, the issuance by the Company of shares of stock of any
class or securities convertible into shares of stock of any
class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the
Company convertible into such shares or other securities, and
in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect
to, the number of shares of Common Stock available under the
Plan or subject to Options theretofore granted or the Exercise
Price per share.
D. If the Company effects a recapitalization or
otherwise materially changes its capital structure (both of
the foregoing are herein referred to as a "Fundamental
Change"), then thereafter upon any exercise of an Option
theretofore granted, the holder shall be entitled to purchase
under such Option, in lieu of the number of shares of Common
Stock that would have been received the number and class of
shares of stock and securities to which the holder would have
been entitled pursuant to the terms of the Fundamental Change
if, immediately prior to such Fundamental Change, the Optionee
had been the holder of record of the number of shares of
Common Stock.
E. Any adjustment provided for above shall be subject
to any required shareholder action.
7. Recipient's Agreement
If, in the opinion of counsel for the Company, at the time of
the exercise of any Option it is necessary or desirable, in order
to comply with any then applicable laws or regulations relating to
the sale of securities, for the individual exercising the option to
agree to hold any shares issued to the individual for investment
and without intention to resell or distribute the same and for the
individual to agree to dispose of such shares only in compliance
with such laws and regulations, the individual shall be required,
upon the request of the Company, to execute and deliver to the
Company a further agreement to such effect.
8. Miscellaneous
A. No Employment Contract. Nothing contained in the
Plan shall be construed as conferring upon any employee the
right to continue in the employ of the Company or any
Subsidiary.
B. Employment with Subsidiaries. Employment by the
Company for the purpose of this Plan shall be deemed to
include employment by, and to continue during any period in
which an employee is in the employment of, any Subsidiary.
C. No Rights as a Shareholder. A person granted an
Option under the Plan shall have no rights as a shareholder
with respect to shares covered by such person's Option until
the date of the issuance of shares to the person upon the
exercise of the Option. No adjustment will be made for
dividends or other distributions or rights for which the
record date is prior to the date of such issuance.
D. No Restriction on Corporate Action. Nothing
contained in the Plan shall be construed to prevent the
Company or any Subsidiary from taking any corporate action
that is deemed by the Company or such Subsidiary to be
appropriate or in its best interest, whether or not such
action would have an adverse effect the Plan or any option
granted under the Plan. No person that receives, or is
eligible to receive, Options under the Plan shall have any
claim against the Company or any Subsidiary as a result of any
such action.
E. Non-assignability. Neither a person that receives
Options under the Plan nor such person's beneficiary shall
have the power or right to sell, exchange, pledge, transfer,
assign or otherwise encumber or dispose of such person's or
beneficiary's Options received under the Plan except by will
or the laws of intestate succession; and to the extent any
such option received under the Plan is awarded to a spouse
pursuant to any divorce proceeding, such interest shall be
deemed to be terminated and forfeited notwithstanding any
vesting provisions or other terms herein or in the Agreement
evidencing such option.
F. Governing Law; Construction. All rights and
obligations under the Plan shall be governed by, and the Plan
shall be construed in accordance with, the laws of the State
of Delaware without regard to the principles of conflicts of
laws. Titles and headings to Sections herein are for purposes
of reference only, and shall in no way limit, define or
otherwise affect the meaning or interpretation of any
provision of the Plan.
G. Amendment and Termination. The Committee may from
time to time and at any time alter, amend, suspend,
discontinue or terminate this Plan and any grants of Options
hereunder; provided, however, that no such action of the
Committee may, without the approval of the shareholders of the
Company, alter the provisions of the Plan so as to (A)
materially increase the maximum number of shares of Common
Stock that may be issued upon the exercise of Options granted
under the Plan (except as provided in Section 6) or (B)
materially modify the requirements relating to eligibility to
receive Options under the Plan. The Plan shall terminate on
December 31, 2000, and no options shall be awarded after such
date.
H. Preemption by Applicable Laws and Regulations.
Anything in the Plan or any Agreement to the Contrary
notwithstanding, if, at any time specified herein or therein
for the making of any determination or the taking of any
action, any law, regulation or requirement of any governmental
authority having jurisdiction in the premises shall require
the Company to take any additional action not otherwise
required by the Plan or an Agreement in connection with any
such determination or action, the making of such determination
or the taking of such action, as the case may be, shall be
deferred until such additional action shall have been taken.
I. Effective Date. The Plan was initially adopted by
the Board of Directors of the Company in May 1991, and
approved by the Company's stockholders on October 24, 1991,
effective as of May 14, 1991. On August 13, 1992 the Board of
Directors approved an amendment to the Plan increasing the
number of shares of Common Stock which may be issued under the
Plan from 350,000 shares to 700,000 shares, and the
stockholders of the Company approved this increase at the
annual meeting on October 30, 1992. The Board authorized a
further amendment to the Plan in April 1993, increasing the
number of shares of Common Stock under the Plan to 770,000
shares. In July 1994 the Board authorized an amendment to the
Plan to increase the number of shares of Common Stock issuable
under the Plan to 970,000 shares, which was approved by the
Company's stockholders at the November 3, 1994 Annual Meeting of
Stockholders. In August 1997 the Board authorized an amendment
to the Plan to increase the number of shares of Common Stock issuable
under the Plan from 970,000 shares to 1,320,000 shares subject to
approval by the Company's stockholders at the 1997 annual meeting
of stockholders.
