UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended November 30, 1997
Commission File number 0-l87l6
MATRIX SERVICE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 73-1352l74
(State of incorporation) (I.R.S. Employer
Identification No.)
l070l E. Ute St., Tulsa, Oklahoma 74ll6-l5l7
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code:
(9l8) 838-8822
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act
of 1934 during the preceding l2 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
As of January 13, 1998, there were 9,491,153 shares of the Company's
common stock, $.01 par value per share, issued and 9,428,139 shares
outstanding.
PART I.- FINANCIAL INFORMATION
ITEM 1. Financial Statements
Matrix Service Company
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
[CAPTION]
Three Months Ended Six Months Ended
November 30 November 30
------------------ ----------------
(unaudited) (unaudited)
1997 1996 1997 1996
------------------ -----------------
[MULTIPLIER] 1,000
Revenues $62,017 $48,212 $111,536 $87,842
Cost of revenues 56,875 43,574 101,652 79,239
------- ------- ------- -------
Gross profit 5,142 4,638 9,884 8,603
Selling, general and
administrative expenses 3,205 2,719 6,211 5,178
Goodwill and noncompete
amortization 296 216 592 432
------- ------- ------- -------
Operating income 1,641 1,703 3,081 2,993
Other income (expense):
Interest income 30 28 74 57
Interest expense (260) (115) (518) (229)
Other 92 116 100 67
------- ------- ------- -------
Income before income
tax expense 1,503 1,732 2,737 2,888
Provision for federal and
state income tax expense 550 778 1,015 1,302
------- ------- ------- -------
Net income $953 $954 $1,722 $1,586
======= ======= ======= =======
Net income per common and
common equivalent shares:
Primary $0.10 $0.10 $0.17 $0.17
Fully diluted $0.10 $0.10 $0.17 $0.17
Weighted average common and
common equivalent shares
outstanding:
Primary 9,858,467 9,569,550 9,926,630 9,555,545
Fully diluted 9,927,143 9,569,550 9,948,677 9,562,788
See Notes to Condensed Consolidated Financial Statements
[MULTIPLIER] 1,000
Matrix Service Company
Condensed Consolidated Balance Sheets
(in thousands)
November 30, May 31,
1997 1997
----------- ---------
(unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 162 $ 1,877
Accounts receivable 41,615 37,745
Costs and estimated earnings
in excess of billings on
uncompleted contracts 12,737 11,349
Inventories 6,145 4,989
Prepaid expenses 521 456
Deferred taxes 1,074 1,021
Income tax receivable 976 317
-------- -------
Total current assets 63,230 57,754
Investment in undistributed equity
of a foreign joint venture 174 174
Property, plant and equipment at cost:
Land and buildings 20,944 15,097
Construction equipment 24,630 24,444
Transportation equipment 5,783 5,504
Furniture and fixtures 3,439 3,164
Construction in progress 890 2,614
------- -------
55,686 50,823
Less accumulated depreciation 25,444 20,861
------- -------
Net property, plant and equipment 30,242 29,962
Goodwill, net of accumulated
amortization 30,700 28,721
Other assets 743 261
-------- --------
Total assets $125,089 $116,872
======== ========
See Notes to Condensed Consolidated Financial Statements
[MULTIPLIER] 1,000
Matrix Service Company
Condensed Consolidated Balance Sheets
(in thousands)
November 30, May 31,
1997 1997
------------ ---------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $12,777 $12,307
Billings on uncompleted contracts in
excess of costs and estimated earning 8,434 6,325
Accrued expenses 5,163 9,414
Current portion of long-term debt 2,234 1,495
------- -------
Total current liabilities 28,608 29,541
Long-term debt:
Bank credit agreement 8,750 5,000
Acquisition notes payable 115 407
Term notes payable 5,045 955
------- -------
Total long-term debt 13,910 6,362
Deferred income taxes 4,757 4,757
Stockholders' equity:
Common stock 95 95
Capital in excess of par value 50,903 50,903
Retained earnings 27,573 26,269
Cumulative translation adjustment (220) (145)
------- -------
Total capital and
retained earnings 78,351 77,122
Less:Treasury stock, at cost 537 910
------- -------
Total stockholders' equity 77,814 76,212
------- -------
Total liabilities and stockholders'
equity $125,089 $116,872
======== ========
See Notes to Condensed Consolidated Financial Statements
[MULTIPLIER] 1,000
Matrix Service Company
Condensed Consolidated Cash Flow Statements
(in thousands)
Six Months Ended
November 30
(unaudited)
1997 1996
-----------------
Cash flow from operating activities:
Net income $1,722 $1,586
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,037 2,795
Changes in current assets and
liabilities increasing
(decreasing) cash:
Accounts receivable 717 8
Costs and estimated earnings in
excess of billings on uncompleted
contracts (254) (3,441)
Inventories 69 (852)
Prepaid expenses (74) (89)
Accounts payable (2,948) 779
Billings on uncompleted contracts
in excess of costs and estimated
earnings 1,642 1,786
Taxes receivable and other accruals (4,899) (1,340)
Other (5) 34
------ ------
Net cash (used in) provided by
operating activities (993) 1,266
Cash flow from investing activities:
Capital expenditures (1,433) (3,049)
Acquisition of subsidiary,
net of cash acquired (4,182) 47
Other, net 50 36
------ ------
Net cash used in investing
activities (5,565) (2,966)
Matrix Service Company
Condensed Consolidated Cash Flow Statements
(in thousands)
Six Months Ended
November 30,
(unaudited)
1997 1996
------ ------
Cash flows from financing activities:
Issuance of acquisition payable 286 -
Repayment of acquisition payables (281) (265)
Repayment of equipment notes (14) (11)
Issuance under long-term credit
agreement 10,750 3,000
Repayments under long-term
credit agreement (2,000) (2,000)
Repayment of long-term debt (4,042) (544)
Issuance of stock - -
Change in treasury stock 144 19
------ ------
Net cash provided by
financing activities 4,843 199
------ ------
Increase in cash and cash
equivalents (1,715) (1,501)
Cash and cash equivalents at beginning
of period 1,877 1,899
------ ------
Cash and cash equivalents at end
of period $ 162 $ 398
====== ======
See Notes to Condensed Consolidated Financial Statements
MATRIX SERVICE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
NOTE A - BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned. All significant
inter-company balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Rule 10-0l of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission and
do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments which are, in the opinion of management, necessary for
a fair statement of the results for the interim periods.
The accompanying financial statements should be read in conjunction with the
audited financial statements for the year ended May 3l, 1997, included in the
Company's Annual Report on Form 10-K for the year then ended. The Company's
business is seasonal; therefore, results for any interim period may not
necessarily be indicative of future operating results.
NOTE B - BUSINESS ACQUISITIONS
On June 17, 1997, the Company acquired all of the outstanding common stock of
General Service Corporation and its affiliated companies, Maintenance
Services, Inc., Allentech, Inc., and Environmental Protection Services
(collectively "GSC") for up to $7.8 million, subject to certain adjustments.
The purchase price consisted of $4.75 million in cash and a $250 thousand,
prime rate (currently 8.25%) promissory note payable in 12 equal quarterly
installments. In addition, the stockholders of GSC are entitled to receive
in the future up to an additional $2.75 million in cash if GSC satisfies
certain earnings requirements. Under the provision of the contract the
stockholders have the right to elect 70% of the earnout amount upon change
of control of the Company. The stockholders of GSC have elected to receive
70% of the earnout to satisfy this provision, upon the closing of the
transaction between the Company and ITEQ, Inc. (SEE NOTE C - RECENT EVENT)
The transaction was accounted for as a purchase and created approximately
$3.0 million of goodwill and non-competition covenants.
NOTE C - RECENT EVENT
On December 16, 1997, the Company and ITEQ, Inc. ("ITEQ") entered into a Plan
and Agreement of Merger whereby ITEQ will acquire the Company. The
shareholders of the Company will be able to tender a share of Company common
stock for either $10 cash or .8333 of one share of ITEQ common stock, subject
to the cash portion of the purchase price not exceeding 50% nor being less
than 30% of the total consideration. The acquisition is subject to shareholder
and regulatory approval and the absence of any dissenters. The transaction
is expected to close by March 1998, and will be accounted for using the
purchase method of accounting.
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Three Months Ended November 30, 1997 Compared With The Three Months
Ended November 30, 1996
General Service Corporation ("GSC") was acquired by Matrix Service Company
(the "Company") on June 17, 1997. Accordingly, the results of operations
of GSC for the quarter are included for the current period, but none of GSC's
operations are included in the prior year period.
Revenues for the quarter ended November 30, 1997 were $62.0 million as
compared to revenues of $48.2 million for the quarter ended November 30,
1996, representing an increase as compared with the same period in 1996 of
$13.8 million or 28.6%. The increase is due to the inclusion of GSC revenues
and increased revenues from capital projects in the Northwest from the
refinery division.
Gross profit increased to $5.1 million for the quarterly period ended
November 30, 1997 from gross profit of $4.6 million for the quarterly
period ended November 30, l996, an increase of approximately $504 thousand
or 10.9%. Gross profit as a percentage of revenues decreased to 8.3% for the
1997 period from 9.6% for the 1996 period. The decrease in gross profit
percentage for the current period as compared with the prior period is due
to pricing pressure on above ground tank maintenance work in the West and
Gulf Coast areas and additional capital work in the refinery division, which
historically provides lower margins.
Selling, general and administrative expenses increased to $3.2 million for the
quarterly period ended November 30, 1997 as compared to $2.7 million for the
quarterly period ended November 30, 1996, an increase of $486 thousand or
17.9%. Selling, general and administrative expenses as a percentage of
revenues decreased to 5.2% for the current period as compared to 5.64% for
the prior period. The increase in selling, general and administrative
expenses for the period is due mainly to the inclusion of GSC. The decrease
in expenses as a percentage of revenue results from the expenses being spread
over greater revenues.
Operating income decreased to $1.6 million for the quarterly period ended
November 30, 1997 from income of $1.7 million for the quarterly period ended
November 30, 1996, a decrease of $62 thousand or approximately 3.6%. The
decrease in operating profit was due to lower gross profit margins, increased
selling, general and administrative expenses and increased amortization
expense.
Interest expense increased to $260 thousand for the quarterly period ended
November 30, 1997 from $115 thousand of interest expense for the quarterly
period ended November 30, 1996. The increase resulted from an increased
level of borrowing under the Company's credit facility principally as a
result of borrowings for the acquisition of GSC.
The effective tax rate for the quarterly period ended November 30, 1997
decreased to 36.6% as compared to 44.9% for the 1996 period. The reduction
is due principally to the utilization of a net operating loss carryforward
available from GSC.
Net income decreased to $953 thousand for the quarterly period ended November
30, 1997 from net income of $954 thousand for the quarterly period ended
November 30, 1996. The decrease was due to decreased operating profit and
increased interest expense for the 1997 period as compared with the 1996
period.
Six Months Ended November 30, 1997 Compared With The Six Months
Ended November 30, 1996
General Service Corporation ("GSC") was acquired by Matrix Service Company
(the "Company") on June 17, 1997. Accordingly, the results of operations
of GSC for five and one-half months are included for the current period,
but none of GSC's operations are included in the prior year six month period.
Revenues for the six months ended November 30, 1997 were $ 111.5 million as
compared to revenues of $87.8 million for the six months ended November 30,
1996, representing an increase of approximately $ 23.7 million or 27.0%.
The increase was due to increased revenues from the Company's refinery
maintenance and construction operations on the West Coast and the inclusion
of GSC in the six month period ended November 30, 1997, as compared with the
same period in 1996.
Gross profit increased to $9.9 million for the six months ended November 30,
1997 from gross profit of $8.6 million for the six months ended November 30,
1996. Gross profit as a percentage of revenues decreased to 8.9% for the 1997
period from 9.8% for the 1996 period. The decrease in gross profit percentage
for the current period as compared with prior period is due to lower profit
margins on maintenance and repair work on above ground storage tanks in the
Gulf Coast and West Coast markets, elevated water tanks and capital work in
the refinery divisions.
Selling, general and administrative expenses increased to $6.2 million for
the six months ended November 30, 1997 compared to $5.2 million for the six
months ended November 30, 1996, an increase of $1.0 million or approximately
19.9%. The increase in selling, general and administrative expenses is
primarily due to the inclusion of GSC expenses. Selling, general and
administrative expenses as a percentage of revenues decreased to 5.6% for
the current period as compared with 5.9% for the 1996 period. The decrease
in the selling, general and administrative expenses as a percentage of
revenues for the current period as compared to the prior period is the
result of the expenses being spread over greater revenues.
Operating income increased to $3.1 million for the six months ended November
30, 1997 from income of $3.0 million for the six months ended November 30,
1996. The increase was due to the inclusion of GSC and increased operations
from the refinery division offset by lower margins for tank maintenance and
repair in certain markets and elevated water tanks.
Net income increased to $1.7 million in the 1997 period from net income of
$1.6 million in 1996. The increase was due principally to the inclusion of
GSC.
Liquidity and Capital Resources
The Company has financed its operations recently with cash generated by
operations and advances under the Company's credit facility. The Company has
a credit facility with a commercial bank under which the Company may borrow
a total of $25.0 million. The Company may borrow up to $15.0 million under
a revolving credit agreement based on the level of the Company's eligible
receivables. The agreement provides for interest at the Prime Rate minus
three quarters of one percent (3/4 of 1%), or a LIBOR based option of LIBOR
plus one and one quarter percent (1 and 1/4%), and matures on October 31,
1999. At November 30, 1997, the interest rate was 7.22% and the outstanding
advances under the revolver totaled $8.75 million. The credit facility also
provides for two term loans of up to $5.0 million each. On October 5, 1994
and June 19, 1997 term loans of $4.9 million and $5.0 million, respectively,
were made to the Company. The 1994 term loan is due on August 31, 1999 and
is to be repaid in 54 equal payments beginning in March 1995 at an interest
rate based upon the Prime Rate or a LIBOR option. The 1997 term loan is due
January 23, 2002 and is to repaid in 54 equal payments beginning January 7,
1998 at an interest rate based upon the prime rate or a LIBOR option. At
November 30, 1997, the interest rate on the term loans was 7.72%, and the
outstanding balance was $2.0 million and $5.0 million, respectively.
Operations of the Company used $933 thousand of cash for the six months
ended November 30, 1997 as compared with providing cash from operations of
$1.3 million for the six months ended November 30, 1996, representing a
decrease of approximately $2.3 million. The decrease was primarily the
result of a decrease of $3.7 million in accounts payable and a decrease
in income taxes and other accruals of $3.6 million offset by a net increase
of $3.0 million in billings on uncompleted contracts in excess of costs and
estimated earnings in excess of billings and an increase of $1.6 million in
inventory and receivables.
Capital expenditures during the six month period ended November 30, 1997
totaled approximately $1.4 million. Of this amount approximately $699
thousand was used to purchase welding and construction equipment and $239
thousand was used to purchase transportation equipment for field operations.
The Company has invested approximately $505 thousand for office expansion for
support of field operations. In addition, the Company has currently budgeted
approximately $2.1 million for additional capital expenditures primarily to
be used to purchase construction equipment during the remainder of fiscal
year 1998. The Company expects to be able to finance any such expenditures
with available working capital.
The Company believes that its existing funds, amounts available for borrowing
under its credit facility, and cash generated by operations will be sufficient
to meet the Company's working capital needs at least through fiscal 1998 and
possibly thereafter unless significant expansions of operations not now
planned are undertaken, in which case the Company would arrange additional
financing as a part of any such expansion.
PART II
OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders:
The Company's annual meeting of stockholders was held in Tulsa, Oklahoma at
10:00 a.m. local time, on Wednesday, October 29, 1997. Proxies for the
meeting were solicited pursuant to Regulation 14 under the Securities Exchange
Act of 1934, as amended. There was no solicitation in opposition to the
nominees for election as directors as listed in the proxy statement, and all
nominees were elected.
Out of a total of 9,402,139 shares of the Company's common stock outstanding
and entitled to vote, 7,311,462 shares were present at the meeting in person
or by proxy, representing approximately 77.76 percent. Matters voted upon at
the meeting were as follows:
a) Election of six directors to serve on the Company's board of directors.
Messrs. Bradley, Curry, Lee, West, Wood and Zink were elected to serve until
the 1998 Annual Meeting. The vote tabulation with respect to each nominee
was as follows:
Authority
Nominee For Withheld
- -------- ---------- ----------
Doyl D. West 7,166,910 144,552
C. William Lee 7,167,110 144,352
Hugh E. Bradley 7,167,110 144,352
Robert L.Curry 7,167,010 144,452
William P. Wood 7,166,810 144,652
John S. Zink 7,167,010 144,452
b) The stockholders approved an amendment to the Company's 1991 Stock Option
Plan increasing the number of shares issuable under the plan from 970,000 to
1,320,000.
Number of Votes Cast
- --------------------
For Against Abstain Non-Votes
--- ------- -------- ---------
6,391,566 870,892 12,145 36,859
c) There were 7,297,860 shares voted for the ratification of the appointment
of Ernst & Young LLP as the Company's independent public accountants, with
10,602 shares voted against, 3,000 abstentions, and zero broker non-votes.
ITEM 6. Exhibits and Reports on Form 8-K:
A. Exhibit 10.1 - 1991 Stock Option Plan, as amended.
B. Exhibit 11 - Computation of earnings per share.
C. Reports on Form 8-K: None
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATRIX SERVICE COMPANY
Date: January 14, 1998
By: /s/C. William Lee
-----------------
C. William Lee
Vice President-Finance
Chief Financial Officer
Signing on behalf of the registrant and
as the registrant's chief financial officer.
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.
[ARTICLE] 5
[MULTIPLIER] 1,000
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] May-31-1998
[PERIOD-START] Sep-01-1997
[PERIOD-END] Nov-30-1997
[COMMON] 9,858
[NET-INCOME] 953
[EPS-PRIMARY] 0.10
[COMMON] 9,927
[NET-INCOME] 953
[EPS-DILUTED] 0.10
[FISCAL-YEAR-END] May-31-1997
[PERIOD-START] Sep-01-1996
[PERIOD-END] Nov-30-1996
[COMMON] 9,570
[NET-INCOME] 954
[EPS-PRIMARY] 0.10
[COMMON] 9,570
[NET-INCOME] 954
[EPS-DILUTED] 0.10
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] May-31-1998
[PERIOD-START] Jun-01-1997
[PERIOD-END] Nov-30-1997
[COMMON] 9,927
[NET-INCOME] 1,722
[EPS-PRIMARY] 0.17
[COMMON] 9,949
[NET-INCOME] 1,722
[EPS-DILUTED] 0.17
[FISCAL-YEAR-END] May-31-1997
[PERIOD-START] Jun-01-1996
[PERIOD-END] Nov-30-1996
[COMMON] 9,556
[NET-INCOME] 1,586
[EPS-PRIMARY] 0.17
[COMMON] 9,563
[NET-INCOME] 1,586
[EPS-DILUTED] 0.17
5
1,000
6-MOS
MAY-31-1998
NOV-30-1997
162
0
41,615
0
6,145
63,230
55,686
(25,444)
125,089
28,608
0
95
0
0
77,719
125,089
62,017
62,017
56,875
56,875
3,593
0
(258)
1,503
550
0
0
0
0
953
0.10
0.10
