<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Daniel Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
9753 Pine Lake Drive o Houston, Texas 77055 o (713) 467-6000
DANIEL INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 14, 1998
Notice is hereby given that the annual meeting of stockholders of Daniel
Industries, Inc. ("Daniel" or the "Company") will be held at The Luxury
Collection Hotel, 1919 Briar Oaks Lane, Houston, Texas at 4:00 p.m. on
Thursday, May 14, 1998, for the following purposes:
1. To elect three Class II directors of the Company to hold office until
the third succeeding annual meeting of stockholders after their election and
until their respective successors shall have been elected and qualified;
2. To consider and act upon a proposal to approve the Daniel Industries,
Inc. 1997 Stock Option Plan;
3. To consider and act upon a proposal to approve the Daniel Industries,
Inc. 1997 Non-Employee Director Stock Option Plan; and
4. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
Only holders of record of shares of Common Stock of the Company at the
close of business on March 17, 1998, are entitled to notice of and to vote at
the meeting or any adjournment thereof.
All stockholders of the Company are cordially invited to attend the annual
meeting. However, the Board of Directors requests that you promptly sign, date
and mail the enclosed proxy even if you plan to be present at the meeting.
Your proxy should be returned in the enclosed envelope, which requires no
postage if mailed in the United States.
By Order of the Board of Directors,
MICHAEL R. YELLIN
Secretary
March 31, 1998
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY WITHOUT DELAY.
<PAGE> 3
9753 Pine Lake Drive o Houston, Texas 77055 o (713) 467-6000
DANIEL INDUSTRIES, INC.
PROXY STATEMENT
This proxy statement and the enclosed form of proxy ("Proxy") are
being mailed or otherwise delivered on or about March 31, 1998, to holders of
shares of Common Stock, $1.25 par value ("Common Stock"), of Daniel Industries,
Inc. ("Company"). The Proxy is being solicited by the Board of Directors of
the Company ("Board") for use at the annual meeting of stockholders of the
Company to be held on May 14, 1998, and at any adjournment thereof.
Holders of record of shares of Common Stock at the close of business
on March 17, 1998, are entitled to notice of and to vote at the annual meeting.
Such holders will be entitled to cast one vote for each share so held by them
on each matter submitted to stockholders at the meeting. On the record date,
there were issued and outstanding 17,353,419 shares of Common Stock. The
holders of a majority of the total shares of Common Stock outstanding on the
record date, whether present in person or represented by Proxy, will constitute
a quorum for the transaction of business at the annual meeting. The shares
held by each stockholder who signs and returns the Proxy will be counted for
purposes of determining the presence of a quorum at the meeting. Abstentions
are counted toward the calculation of a quorum. Any unvoted position in a
brokerage account will be considered as not voted and will not be counted
toward fulfillment of quorum requirements.
All properly executed Proxies received in time will be voted at the
meeting in accordance with the stockholders' instructions. The Proxy provides
a means for a stockholder to vote for all of the nominees for director listed,
to withhold authority to vote for one or more nominees, or to withhold
authority to vote for all of such nominees. Unless otherwise indicated, the
Proxy will be voted FOR the election of the named nominees for director and FOR
the approval of the Company's 1997 Stock Option Plan (the "1997 Option Plan")
and the Company's 1997 Non-Employee Director Stock Option Plan (the "Director
Plan"). Any stockholder who executes and returns the Proxy may revoke it at
any time before it is voted by providing written notice to the Company's office
prior to the meeting or by voting in person at the meeting.
The Company's by-laws provide that directors are elected by a
plurality of the votes cast. Accordingly, the withholding of authority by a
stockholder will have no effect on the results of the election. Approval of
the 1997 Option Plan, the Director Plan and any other matter that may properly
come before the annual meeting requires the affirmative vote of a majority of
the total shares of Common Stock present in person or represented by Proxy and
entitled to vote at the annual meeting. Abstentions have the same effect as a
vote against a proposal.
The Annual Report to Stockholders of the Company for its fiscal year
ended December 31, 1997, accompanies this proxy statement; however, the Annual
Report does not constitute a part of the Proxy solicitation material.
1
<PAGE> 4
OWNERSHIP OF COMMON STOCK
Principal Stockholders
The following table sets forth certain information with respect to
each person who at March 17, 1998, was known by the Company to be the
beneficial owner at that date of more than five percent of the outstanding
shares of Common Stock. Except as otherwise set forth, such persons have sole
voting and sole investment power with respect to the shares beneficially owned
by them.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned (1) Class
------------------------------------ ---------------------- ----------
<S> <C> <C>
FMR Corp. . . . . . . . . . . . . . . . . . . . . . . . 1,986,100 (2) 11.4%
Edward C. Johnson III
Abigail P. Johnson
82 Devonshire Street
Boston, Massachusetts 02109
David L. Babson and Company Incorporated . . . . . . . . 1,818,888(3) 10.5%
One Memorial Drive
Cambridge, Massachusetts 02142-1300
W.A. Griffin . . . . . . . . . . . . . . . . . . . . . . 1,535,067 (4) 8.8%
9753 Pine Lake Drive
Houston, Texas 77055
</TABLE>
- -------------------------------
(1) Information with respect to beneficial ownership is based upon information
furnished by the stockholder or contained in filings made with the
Securities and Exchange Commission ("SEC").
(2) Based on a Schedule 13G filed with the SEC on February 14, 1998, certain
subsidiaries of FMR Corp. act as investment advisors or managers and, as
such, have sole voting power with respect to 661,100 shares of Common
Stock and sole dispositive power with respect to 1,986,100 shares of
Common Stock held in certain Fidelity funds. Edward C. Johnson III is the
Chairman of FMR Corp., Abigail P. Johnson is a director, and members of
the Johnson family and their family trusts own significant amounts of FMR
Corp. stock; accordingly, Edward and Abigail Johnson are each deemed to be
beneficial owners, with no voting power but sole dispositive power, with
respect to the 1,986,100 shares over which subsidiaries of FMR Corp. act
as investment advisor or manager.
(3) Based on a Schedule 13G filed with the SEC on February 4, 1998, David L.
Babson and Company Incorporated, in its capacity as investment advisor,
has sole voting and dispositive power with respect to 1,818,888 shares of
Common Stock that are owned by numerous investment counseling clients.
(4) At March 17, 1998, W. A. Griffin, Chairman Emeritus of the Board, owned
980,792 shares of Common Stock. Mr. Griffin is also considered to be the
beneficial owner of 534,275 shares of Common Stock held in his capacity as
trustee of a trust in which he has a vested beneficial interest. Mr.
Griffin also is considered to be the beneficial owner of 20,000 shares of
Common Stock that may be acquired within 60 days of March 17, 1998,
through the exercise of outstanding options; provided that, options for
10,000 of those shares were granted under the Director Plan and will be
exercisable only if the stockholders approve the plan as more fully
described herein.
2
<PAGE> 5
Security Ownership of Management
The following table sets forth, as of March 17, 1998 (except as
otherwise noted), the shares of Common Stock beneficially owned by (i) each
director and nominee for director of the Company, (ii) each executive officer
of the Company listed in the Summary Compensation Table set forth below and
(iii) all officers and directors of the Company as a group. Except as
otherwise set forth, such persons have sole voting power and sole dispositive
power with respect to the shares beneficially owned by them.
<TABLE>
<CAPTION>
Percent
Number of Shares of
Name Beneficially Owned Class
----- ------------------ --------
<S> <C> <C>
Ronald C. Lassiter . . . . . . . . . . . . . . . . . . . . 20,332 (1) *
Thomas J. Keefe . . . . . . . . . . . . . . . . . . . . . 24,956 (2) *
Michael M. Carroll . . . . . . . . . . . . . . . . . . . . -- --
W.A. Griffin . . . . . . . . . . . . . . . . . . . . . . . 1,535,067 (3) 8.8%
Brian E. O'Neill . . . . . . . . . . . . . . . . . . . . . 30,000 (4) *
Ralph F. Cox . . . . . . . . . . . . . . . . . . . . . . . 25,000 (5) *
Leo E. Linbeck, Jr. . . . . . . . . . . . . . . . . . . . 20,000 (4) *
Nathan M. Avery . . . . . . . . . . . . . . . . . . . . . 212,150 (2) 1.2%
Gibson Gayle, Jr. . . . . . . . . . . . . . . . . . . . . 30,000 (5) *
W.A. Griffin, III . . . . . . . . . . . . . . . . . . . . 73,519 (6) *
Alex Newton . . . . . . . . . . . . . . . . . . . . . . . 50,000 (7) *
W. Todd Bratton . . . . . . . . . . . . . . . . . . . . . 108,866 (8) *
James M. Tidwell . . . . . . . . . . . . . . . . . . . . . 15,074 (9) *
W. C. Clingman . . . . . . . . . . . . . . . . . . . . . . 54,231(10) *
All current officers and directors as a group (18 persons) 2,199,943(11) 12.4%
</TABLE>
- ---------------------------
* Less than 1%.
(1) Includes 10,000 shares of Common Stock that may be acquired within 60
days of March 17, 1998, through the exercise of an outstanding option,
and 32 shares that are attributable to Mr. Lassiter through his
participation in the Company's profit sharing and savings plan.
(2) Includes 23,700 shares of Common Stock that may be acquired within 60
days of March 17, 1998, through the exercise of outstanding options;
provided that, options for 10,000 of those shares were granted under
the Director Plan and will be exercisable only if the stockholders
approve the plan as more fully described herein.
(3) For further information concerning the shares of Common Stock
beneficially owned by Mr. Griffin, see Note (4) to the table under
"Principal Stockholders."
(4) Represents shares of Common Stock that may be acquired within 60 days
of March 17, 1998, through the exercise of outstanding options;
provided that, options for 10,000 of those shares were granted under
the Director Plan and will be exercisable only if the stockholders
approve the plan as more fully described herein.
(5) Includes 20,000 shares of Common Stock that may be acquired within 60
days of March 17, 1998, through the exercise of outstanding stock
options; provided that, options for 10,000 of those shares were
granted under the Director Plan and will be exercisable only if the
stockholders approve the plan as more fully described herein.
(6) At January 24, 1997, Mr. Griffin, III owned 73,519 shares of Common
Stock.
(7) Represents shares of Common Stock granted to Mr. Newton pursuant to
the Company's Stock Award Plan with respect to which he has sole
voting and no dispositive power.
3
<PAGE> 6
(8) Includes 105,560 shares of Common Stock that may be acquired within 60
days of March 17, 1998, through the exercise of outstanding options,
and 56 shares that are attributable to Mr. Bratton through his
participation in the Company's profit sharing and savings plan with
respect to which he has sole voting power.
(9) Includes 2,617 shares of Common Stock granted to Mr. Tidwell pursuant
to the Company's Stock Award Plan with respect to which he has sole
voting and no dispositive power, 10,000 shares of Common Stock that
may be acquired within 60 days of March 17, 1998, through the exercise
of an outstanding option, and 148 shares that are attributable to him
through his participation in the Company's profit sharing and savings
plan with respect to which he has sole voting power.
(10) Includes 1,163 shares of Common Stock granted to Mr. Clingman pursuant
to the Company's Stock Award Plan with respect to which he has sole
voting and no dispositive power, 45,000 shares of Common Stock that
may be acquired within 60 days of March 17, 1998, through the exercise
of outstanding options, and 6,947 shares that are attributable to him
through his participation in the Company's profit sharing and savings
plan with respect to which he has sole voting power.
(11) Includes 66,723 shares of Common Stock granted to such persons
pursuant to the Company's Stock Award Plan with respect to which they
have sole voting and no dispositive power, 383,613 shares of Common
Stock that may be acquired by them within 60 days of March 17, 1998,
through the exercise of outstanding options, 9,977 shares that are
attributable to such persons through their participation in the
Company's profit sharing and savings plan with respect to which they
have sole voting power, and 534,275 shares held as trustee of a trust.
ELECTION OF DIRECTORS
At the annual meeting of stockholders, three Class II directors of the
Company are to be elected to hold office until the third succeeding annual
meeting of stockholders after their election and until their respective
successors shall have been elected and qualified.
The Proxy lists three persons nominated by the Board for election as
directors at the annual meeting of stockholders. Proxies may not be voted for
more than three nominees for Class II director. The Board does not contemplate
that any of its nominees will become unavailable for any reason. However,
should any nominee of the Board become unavailable, Proxies that do not
withhold authority to vote for that nominee will be voted for another nominee
to be selected by the Board.
4
<PAGE> 7
Directors and Nominees for Director
The following table sets forth for each nominee listed in the Proxy
and each other person whose term of office as a director will continue after
the annual meeting: (i) the name and age of such person; (ii) the principal
occupation of such person for at least the last five years (unless otherwise
noted); and (iii) the year during which such person first became a director.
The table has been prepared from information obtained from such persons.
<TABLE>
<CAPTION>
Director
Name Age Principal Occupation Since
---- --- -------------------- -----
Class II--Nominees for Terms Expiring at the Third Succeeding Annual Meeting
<S> <C> <C> <C>
Ronald C. Lassiter (1) . . . . . 65 Chairman of the Board and Chief Executive Officer of 1985
the Company
Thomas J. Keefe (2) . . . . . . 65 President and Chief Operating Officer of Hensley 1996
Industries, Inc., a steel foundry
Michael M. Carroll (3) . . . . . 61 Dean of George R. Brown School of Engineering at 1998
Rice University
Class III--Directors Whose Terms Expire at the First Succeeding Annual Meeting
W.A. Griffin (4) . . . . . . . 82 Chairman Emeritus of the Board 1951
Brian E. O'Neill (5) . . . . . . 62 President and Chief Executive Officer of Williams 1994
Gas Pipelines
Ralph F. Cox (6) . . . . . . . . 65 Private Consultant in international petroleum 1996
activities since 1994; retired President and Chief
Executive Officer of Greenhill Petroleum Corporation
Class I--Directors Whose Terms Expire at the Second Succeeding Annual Meeting
Leo E. Linbeck, Jr. (7) . . . . 63 Chairman of the Board and Chief Executive Officer of 1988
Linbeck Corporation, a holding company
Nathan M. Avery (8) . . . . . . 63 Chairman of the Board, President and Chief Executive 1996
Officer of Galveston-Houston Company, a manufacturer
of ground engaging tools for the construction and
mining industries
Gibson Gayle, Jr. (9) . . . . . 71 Retired senior partner of Fulbright and Jaworski 1985
L.L.P., a law firm
</TABLE>
- ----------
(1) Mr. Lassiter was elected Chairman of the Board in March 1996. He
became Acting President and Chief Executive Officer of the Company
effective January 24, 1997, upon the resignation of W.A. Griffin, III,
and has continued as Chief Executive Officer following the election of
Alex Newton to the office of President effective July 1, 1997. Mr.
Lassiter served as Chairman of the Board and Chief Executive Officer
of Zapata Corporation, an oil and gas company, from August 1985 until
his retirement in June 1994, and served as Chairman, President and
Chief Executive Officer of Zapata Protein, a producer of marine
protein, from October 1992 until June 1997. Mr. Lassiter continues to
serve as a director of Zapata Corporation.
(2) Pursuant to the terms of the merger agreement providing for the merger of
Bettis Corporation with a wholly-owned subsidiary of the Company, Mr. Keefe
was elected on December 12, 1996, to fill the unexpired term of Richard L.
O'Shields who retired from the Board effective that date. Prior to
assuming his present position with Hensley Industries in November 1995, Mr.
Keefe served as President and Chief Operating Officer of Lennox Industries,
Inc. from July 1992 until June 1995.
5
<PAGE> 8
(3) Dr. Carroll was elected a director of the Company on January 14, 1998, to
fill the vacancy created by the resignation of W.A. Griffin, III. Dr.
Carroll has held a number of professional leadership roles, including
Executive Committee member and Chairman of the Applied Mechanics Division
of the American Society of Mechanical Engineers, President of the American
Academy of Mechanics, President of the Society for Engineering Science and
Governing Board Member of the Engineering Deans' Council of the American
Society for Engineering Education. He has held the McMurtry Professor of
Engineering distinction at Rice University since 1988.
(4) Mr. Griffin served as Chairman of the Board from 1957, and as Chief
Executive Officer of the Company from 1985, until his retirement in
February 1995. He then served as a consultant to the Company until
February 1997.
(5) Prior to assuming his current position in January 1994, Mr. O'Neill
served as President of Williams Gas Pipelines. Mr. O'Neill is a
member of the partnership policy committee of Northern Border
Partners, L.P. ("NBP") and a member of the management committee of
Northern Border Pipeline Company of which NBP has a 70 percent general
partnership interest. He is also a director of the Gas Research
Institute.
(6) Mr. Cox is an independent Trustee for the Fidelity Group of Funds and a
member of the Board of Directors of USA Waste Services, Inc. and Rio
Grande, Inc. Mr. Cox also serves on advisory Boards at Texas A&M
University and the University of Texas. Mr. Cox is a former Vice Chairman
of the Board of Atlantic Richfield Company and President and former Chief
Operating Officer of Champlin Petroleum Company (Union Pacific Resources
Company).
(7) Mr. Linbeck, Jr. serves as a Life Director of the Associated General
Contractors of America and as a director of John Hancock Advisers, Inc. and
Duke Energy Corporation. He is also a director of the Greater Houston
Partnership and is currently serving as Chairman, Americans for Fair
Taxation, and Chairman, Texans for Lawsuit Reform.
(8) Pursuant to the terms of the merger agreement providing for the merger of
Bettis Corporation with a wholly-owned subsidiary of the Company, Mr. Avery
was elected on December 12, 1996, to fill the unexpired term of Ralph H.
Clemons, Jr. who retired from the Board effective that date. Mr. Avery
also serves as a director of TransCoastal Marine Services, Inc. and ITEQ,
Inc. and as an advisory director of Cooper Cameron Corporation.
(9) Mr. Gayle, Jr. was a partner in the law firm of Fulbright & Jaworski L.L.P.
until his retirement on January 1, 1997, and he served as Chairman of that
firm's Executive Committee from 1979 until 1992. Fulbright & Jaworski
L.L.P. provides legal services to the Company on an ongoing basis, and the
Company will continue to engage that firm during the current fiscal year.
Meetings and Committees of the Board
During the fiscal year ended December 31, 1997, the Board held six
meetings, and each director attended at least 75 percent of the combined number
of meetings of the Board and of the committees of the Board of which he was a
member.
The Audit Committee reviews with the Company's independent accountants
the scope and results of the annual audit of the Company's consolidated
financial statements. In addition, the Audit Committee reviews the independent
accountants' management letter containing their recommendations for
improvements to the Company's internal controls. The Audit Committee also
recommends to the Board the selection of independent accountants. The Audit
Committee currently is composed of Gibson Gayle, Jr., Ralph F. Cox and Thomas
J. Keefe. During the fiscal year ended December 31, 1997, the Audit Committee
held four meetings.
The Compensation Committee advises the Board concerning the
compensation and benefits of the executive officers and certain operating
officers of the Company. The Compensation Committee currently is composed of
Brian E. O'Neill, Leo E. Linbeck, Jr. and Thomas J. Keefe. During the fiscal
year ended December 31, 1997, the Compensation Committee held three meetings.
6
<PAGE> 9
The Executive Committee acts on behalf of the Board between regularly
scheduled meetings of the Board of Directors. The Executive Committee, which is
currently composed of Ronald C. Lassiter, Leo E. Linbeck, Jr. and Nathan M.
Avery, did not meet during the fiscal year ended December 31, 1997.
The Nominating Committee recommends to the Board the persons to
nominate for election as directors at the annual meetings of stockholders or to
fill vacancies created by the resignation of a director and currently is
composed of W. A. Griffin, Brian E. O'Neill and Ralph F. Cox. The Nominating
Committee will not consider proposals submitted by security holders. The
Nominating Committee did not meet during the fiscal year ended December 31,
1997.
EXECUTIVE OFFICERS
The following table lists the name, age, current position and period
of service with the Company of each executive officer of the Company. Each
executive officer was elected by the Board and will hold office until the next
annual meeting of the Board or until his or her successor shall have been
elected and qualified.
<TABLE>
<CAPTION>
Officer
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
Ronald C. Lassiter . . . . . . 65 Chairman of the Board and Chief Executive Officer 1997
Alex Newton . . . . . . . . . . 48 President and Chief Operating Officer 1997
James M. Tidwell . . . . . . . 51 Executive Vice President and Chief Financial Officer 1996
W. Todd Bratton . . . . . . . . 53 Executive Vice President and President of Daniel 1996
Measurement and Control
W.C. Clingman . . . . . . . . . 64 Vice President, Information Services 1977
Michael R. Yellin . . . . . . . 52 Vice President, Secretary and Treasurer 1981
Daniel J. Sarik . . . . . . . . 48 Vice President, Business Development 1997
Michael T. Atkins . . . . . . . 44 Vice President, Human Resources 1997
Wilfred M. Krenek . . . . . . . 45 Vice President, Controller and Chief Accounting 1997
Officer
Katie-Pat Bowman . . . . . . . 43 Vice President and General Counsel 1997
</TABLE>
Ronald C. Lassiter was elected Chairman of the Board in March 1996.
He became Acting President and Chief Executive Officer of the Company effective
January 24, 1997, upon the resignation of W.A. Griffin, III, and has continued
as Chief Executive Officer following the election of Alex Newton to the office
of President in July 1997.
Alex Newton joined the Company as President and Chief Operating
Officer effective July 1, 1997. From 1987 until July 1997, Mr. Newton held
various managerial positions with divisions of Camco International Inc., an
oilfield manufacturing and service company, including Reed Tool Company, where
he served as President from February 1996 until July 1997, and the Hycalog
Division, where he served as General Manager from October 1993 until February
1996, General Manager, Eastern Hemisphere, from January 1993 until October
1993, and as General Manager, Western Hemisphere, from September 1987 to
January 1993.
James M. Tidwell joined the Company in August 1996, as Vice President,
Finance and Chief Financial Officer, and was elected Executive Vice President
and Chief Financial Officer effective December 12, 1996. Prior to joining the
Company, Mr. Tidwell served as Vice President of Finance of Hydril Company, an
oilfield equipment company, from August 1992 through August 1996. Prior to
that, Mr. Tidwell was Vice President Finance of ABB Vetco Gray, Inc. from 1988
until 1992 and was President of Vetco Gray, Inc. from 1986 to 1988.
Pursuant to the merger of Bettis Corporation with a wholly-owned
subsidiary of the Company, W. Todd Bratton was elected an Executive Vice
President of the Company on December 12, 1996. He became President of Daniel
Measurement and Control, Inc. in February 1997, and President of the Daniel
Measurement and Control Division in March 1998. Mr. Bratton served as
President of Bettis Corporation from 1988 and as its Chief Executive Officer
from May 1994 until February 1997. Mr. Bratton served in varying capacities
including
7
<PAGE> 10
Executive Vice President, Operations of Galveston-Houston Company, Bettis
Corporation's then-parent company, from 1979 to May 1994.
Daniel J. Sarik joined the Company in August 1997, as Vice President,
Business Development. Prior to joining Daniel, Mr. Sarik served in various
managerial positions with Camco International Inc., including Director of
Marketing of Camco Drilling Group, from January 1992 to August 1997, and as
Director of Marketing of the Hycalog Division, from June 1987 to January 1992.
Michael T. Atkins joined Daniel as Vice President, Human Resources, in
September 1997. He was previously employed with EOTT Energy Corp., a
subsidiary of Enron Corporation involved in crude oil trading and
transportation, as Manager, Human Relations since February 1992. Mr. Atkins
also served as Manager, Human Resources of Mitsubishi Motors Credit of America,
Inc., from July 1989 to January 1992, and as Supervisor of Employee Relations
of The Permian Corporation, another crude oil trading and transportation
company, from February 1986 to June 1989.
Wilfred M. Krenek was elected Vice President, Controller and Chief
Accounting Officer of Daniel effective May 1997. He had served as Vice
President, Chief Financial Officer, Treasurer and Secretary of Bettis
Corporation from May 1994 until May 1997. Prior to that, Mr. Krenek was
employed by Galveston-Houston Company in the capacity of Vice President and
Controller from May 1989 to May 1994, as Controller from July 1987 to May 1989,
and as Tax Manager from April 1985 to July 1987.
Katie-Pat Bowman joined the Company in September 1997 as Vice
President and General Counsel. She was previously employed by Houston law
firms Haynes and Boone LLP, from March 1997 until September 1997, and Fulbright
& Jaworski L.L.P., from August 1987 until March 1997. Prior to that, Ms.
Bowman was employed with Daniel Industries, Inc. from 1981 to 1987 as Internal
Audit and Export Control Manager.
EXECUTIVE COMPENSATION
Report of the Compensation Committee with Respect to Compensation of Executive
Officers
The Compensation Committee of the Board of Directors (the
"Committee"), which is composed of three independent outside directors, is
responsible for advising the Board concerning the compensation and benefits of
the executive officers of the Company.
Compensation Philosophy and Overall Objectives
The Company's compensation program is designed to attract, motivate
and retain management talent required to achieve corporate objectives and
increase stockholder value. It is also designed to align executive
remuneration levels both with the interests of stockholders and with overall
Company performance. The Company's executive compensation program includes a
combination of base salaries and annual and long-term incentives in the form of
cash bonuses, stock awards and stock options, which are linked to the financial
and stock performance of the Company.
The compensation programs are generally administered by or under the
direction of the Committee and are reviewed annually to ensure that
remuneration levels and benefits are competitive and reasonable in light of the
overall performance of the Company. The compensation of all executive
officers, including the Chief Executive Officer, is approved by the full Board
of Directors following recommendations by the Committee.
The Committee determines competitive levels of compensation for
executive positions based on information obtained from published and private
compensation surveys, as well as proxy statements, for companies in the
Company's industry with annual revenues comparable to Daniel's. Although some
of the same companies may be included in the S&P Oil Composite reflected in the
Company's performance graph included elsewhere in the proxy statement, the two
groups are not identical. Variable incentives, both annual and longer term,
are important components of the Company's executive compensation program and
are used to link pay and performance results.
8
<PAGE> 11
Compensation Program Components
Base Salary. The base salary program targets the average or median of
the compensation comparison group. Salary adjustments are based on the
individual's experience, background and performance during the prior year.
During the fiscal year ended December 31, 1997, the Company elected a new Chief
Executive Officer, as well as a number of other new executive officers.
Accordingly, certain market factors were also considered in setting the
salaries of these new officers. The Committee's review and analysis of these
matters are subjective, and no specific weight is given to any single factor.
Overall, the base salaries of the corporate officers and key executives during
1997 approximated both the market mean and median. On January 24, 1997, Ronald
C. Lassiter, the Company's Chairman of the Board, was elected Acting President
and Chief Executive Officer of the Company and received a consulting fee of
$20,833 per month in that capacity. He was elected Chief Executive Officer
effective July 1, 1997, at which time the consulting fee was converted into an
annual salary of $250,000, which was in the 75th percentile of the compensation
peer group. The salaries of the current executive officers who were not
initially hired by Daniel in 1997 increased by an average of 3.7 percent over
1996 levels.
Annual Performance Incentives. In 1997, annual incentive
compensation was provided to the Company's executive officers and other key
executives in the form of cash bonuses based on overall Company operating
income, on the individual's operating unit's operating income (for
non-corporate officers) and on certain individual objectives established for
the executive at the beginning of the year. The Chief Executive Officer was
eligible to receive a target bonus equal to 100 percent of his salary, with the
other executive officers (excluding the President, who is discussed below)
being eligible for target bonuses of between 30 percent and 40 percent of their
respective salaries. However, if the Company exceeded its targeted performance
level, the executive could earn as much as 25 percent above the targeted bonus.
For the fiscal year ended December 31, 1997, the Company exceeded its targeted
operating income, and total cash bonuses approved for the executive officers
named in the Summary Compensation Table were $402,019, including $141,369 paid
to the Chief Executive Officer (which represents a bonus that was prorated to
the date he was elected Chief Executive Officer). The President of the Company
was entitled under his Employment Agreement to receive a bonus of $75,000 (also
included in the $402,019), which was paid in January 1998.
Long Term Compensation. Longer term incentives, in the form of stock
options and restricted stock awards, are designed to directly link a
significant portion of the executive's compensation to the enhancement of
stockholder value. In addition, they encourage management to focus on the
longer term development and prosperity of the Company, in addition to annual
operating profits. Restricted stock grants under the Company's Stock Award
Plan are designed to increase the actual share ownership position of key
executives, providing a strong emphasis on maintaining and enhancing
stockholder value and retaining executives during different states of the
business cycle. Accordingly, from time to time, the Committee grants to the
Company's executive officers restricted stock awards and options to purchase
shares of Common Stock. The number of shares granted is determined based on
the level and contribution of the employee and may take into account the stock
ownership and other options held by the employee. Restricted stock awards and
stock options are generally subject to vesting over a number of years, and
stock options generally have exercise prices equal to the market price of the
Common Stock on the date of grant. During the year ended December 31, 1997,
options to acquire 530,000 shares of Common Stock were granted to the named
executive officers, including an option to acquire 250,000 shares of Common
Stock granted to the Chief Executive Officer. As part of his employment
arrangement, the President of the Company was granted 50,000 shares of
restricted Common Stock, which shares vest at the rate of 20 percent per year
over a five-year period.
Compensation Committee of the Board of Directors
Brian E. O'Neill
Leo E. Linbeck, Jr.
Thomas J. Keefe
9
<PAGE> 12
Cash Compensation
The following table sets forth certain information regarding
compensation paid for services rendered during the fiscal year ended December
31, 1997, the three-month transition period from October 1, 1996 through
December 31, 1996 resulting form the Company's change in fiscal year
(designated as "1996T"), and for the fiscal years ended September 30, 1996 and
September 30, 1995, to each of the Company's Chief Executive Officer, its four
other most highly compensated executive officers, and its former Chief
Executive Officer who served for a period in fiscal 1997:
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards
-------------------------------------- --------------------------
Other Annual Restricted Securities All Other
Compensation Stock Underlying Compensa-
Name and Principal Position Year Salary ($) Bonus ($) ($) (1) Awards($)(2) Options(#) tion ($)(3)
- --------------------------- ---- ---------- --------- ------------ ------------ ---------- ------------
(a) (b) (c) (d) (e) (f) (g) (i)
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald C. Lassiter, Chairman 1997 242,730 (4) 141,369 -- -- 250,000 625
Of the Board and Chief 1996T -- -- -- -- -- --
Executive Officer 1996 -- -- -- -- -- --
100,000 (5) -- -- -- -- --
W.A. Griffin, III, former 1997 21,667 -- -- -- -- 650
President and Chief 1996T 65,150 -- -- -- -- 975
Executive Officer (6) 1996 265,900 -- -- -- -- 8,196
1995 242,200 62,500 64,120 (7) 62,500 (8) 60,000 31,031
Alex Newton, President and 1997 103,227 75,000 -- 706,250 200,000 --
Chief Operating Officer
W. Todd Bratton, Executive 1997 170,592 73,546 -- -- 40,000 1,062
Vice President 1996T 13,670 (9) -- -- -- -- --
James M. Tidwell, Executive 1997 169,942 71,857 -- -- 40,000 2,359
Vice President and Chief 1996T 42,086 -- -- -- -- --
Financial Officer 1996 20,096 12,500 -- 38,625 (10) -- --
W. C. Clingman, Vice 1997 129,733 40,247 -- -- -- 5,603
President, Information 1996T 31,400 -- -- -- -- 469
Services 1996 129,626 13,250 -- 13,250 (10) -- 5,750
1995 119,525 21,000 -- 21,000 (8) 30,000 21,226
</TABLE>
- -------------
(1) Unless otherwise indicated, does not include the value of perquisites and
other benefits as the aggregate amount of such compensation for the named
officer does not exceed the lesser of $50,000 or 10 percent of that
officer's total reported annual salary and bonus.
(2) As of December 31, 1997, Messrs. Newton, Tidwell and Clingman held 50,000,
2,617 and 1,163 shares of Common Stock, respectively, subject to
restriction, having a value of $962,500, $50,377 and $22,388, respectively.
(3) For 1997, 1996T and 1996, represents the vested amount of the Company's
contribution to the Company's profit sharing and savings plan (the "Plan")
that was allocated to each employee's account. For 1995, includes $8,027
and $5,499 as the vested amount of the Company's contribution to the Plan,
and $23,004 and $15,727, as the Company's contribution to the Company's
supplemental retirement plan, in each case, allocated to the accounts of
Messrs. Griffin, III and Clingman, respectively. During 1996, the Company
made additional contributions to the supplemental retirement plan of
$94,591 and $62,094 for the accounts of Messrs. Griffin, III and Clingman,
respectively; however, such plan was terminated by the Company effective
September 30, 1996, and the participants were paid their vested portions of
their accounts ($11,010 and $10,072, in the case of Messrs. Griffin, III
and Clingman, respectively) with all unvested contributions reverting to
the Company.
10
<PAGE> 13
(4) Upon the resignation of Mr. Griffin, III as President and Chief Executive
Officer effective January 24, 1997, Mr. Lassiter became Acting President
and Chief Executive Officer of the Company and was paid a consulting fee of
$20,833 per month for such services. When Alex Newton was elected
President of the Company effective July 1, 1997, Mr. Lassiter was elected
Chief Executive Officer and was awarded an annual salary of $250,000. The
1997 salary amount in the Summary Compensation Table includes amounts paid
to Mr. Lassiter in 1997 as consulting fees.
(5) Effective March 6, 1996, the Company entered into an agreement with Mr.
Lassiter pursuant to which he agreed to serve as Chairman of the Board for
$100,000, which was to be paid in shares of the Company's Common Stock
valued as of the beginning of the period (or 6,558 shares), the issuance of
which was deferred until March 6, 2001.
(6) Mr. Griffin, III resigned as President and Chief Executive Officer
effective January 24, 1997.
(7) Includes $49,985 for initiation fees and dues for various club memberships
and payments to Mr. Griffin, III to compensate him for the tax effect of
receiving those perquisites.
(8) Award was granted in fiscal 1996 in lieu of a portion of the cash bonus
earned in fiscal 1995.
(9) Does not include compensation paid to Mr. Bratton by Bettis Corporation
prior to December 12, 1996, the date Bettis was acquired by Daniel and Mr.
Bratton became an executive officer of the Company.
(10) Award to Mr. Clingman, and award valued at $12,500 to Mr. Tidwell,
were granted in December 1996 in lieu of a portion of the cash bonuses
earned in fiscal 1996.
Option Grants
The following table sets forth certain information regarding stock
options granted during fiscal 1997 to the persons named in the Summary
Compensation Table.
Option Grants in Fiscal 1997
<TABLE>
<CAPTION>
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Exercise or Stock Price Apprecia-
Options Granted Employees in Base Price Expiration tion for Option Terms
Name (#) 1997 Share ($/Share) Date 5% ($) 10% ($)
---- ---- ---- --------------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Ronald C. Lassiter . . . . 250,000* 24.4 14.1875 6/16/07 2,230,610 5,652,805
W.A. Griffin, III . . . . . -- -- -- -- -- --
Alex Newton . . . . . . . . 200,000 19.5 14.1875 6/16/07 1,784,488 4,522,244
W. Todd Bratton . . . . . . 30,000* 2.9 14.1875 6/16/07 267,673 678,337
10,000* 1.0 14.6875 6/18/07 234,081
92,369
James M. Tidwell . . . . . 40,000* 3.9 14.1875 6/16/07 356,898 904,449
W.C. Clingman . . . . . . . -- -- -- -- -- --
</TABLE>
- --------------------
* These options were granted under the 1997 Option Plan and are not
exercisable until the stockholders approve the plan as more fully described
elsewhere in this proxy statement.
Option Exercises
The following table sets forth the aggregate option exercises during
the fiscal year ended December 31, 1997, and the value of outstanding options
at the end of that year held by the persons named in the Summary Compensation
Table.
11
<PAGE> 14
Aggregate Option Exercises in Fiscal 1997 and Option Values at December 31, 1997
<TABLE>
<CAPTION>
Shares Number of Securities Underlying Value of Unexercised In-the-
Acquired on Value Options Unexercised at Year End(#) Money Options at Year End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisale
---- ------------ ------------ ------------------------- ------------------------
<S> <C> <C> <C> <C>
Ronald C. Lassiter...... -- -- 10,000/255,000 53,750/1,292,500
W.A. Griffin, III....... 8,307 35,824 --/-- --/--
Alex Newton............. -- -- --/200,000 --/1,012,500
W. Todd Bratton......... -- -- 105,560/40,000 1,216,782/623,452
James M. Tidwell........ -- -- 10,000/60,000 63,750/330,000
W.C. Clingman........... -- -- 45,000/10,000 204,375/51,250
</TABLE>
Employment, Change of Control and Other Agreements
On June 17, 1997, the Company entered into an agreement with Alex
Newton ("Employment Agreement"), providing for his employment as President and
Chief Operating Officer of the Company for a minimum annual compensation of
$200,000, which is to be reviewed annually by the Compensation Committee of the
Board for possible increases (as adjusted, "Base Salary"). In addition to the
Base Salary, the Company agreed to pay Mr. Newton a cash bonus of at least
$75,000 on January 4, 1998, and, in the sole discretion of the Compensation
Committee, an annual performance bonus thereafter of between 12.5 percent and
100 percent of his Base Salary. The term of the Employment Agreement shall
terminate in the event of Mr. Newton's death, his disability, his resignation
without "Good Reason" (as defined below) or his termination of employment for
"Cause" (as defined below). If the Employment Agreement is terminated prior to
June 17, 1999, by reason of the death or disability of Mr. Newton, he or his
estate will be entitled to receive a pro rata amount of the performance bonus,
if any, that he would have received for the year of termination. If, prior to
June 17, 1999, Mr. Newton terminates his employment for Good Reason or is
terminated by the Company for other than Cause, the Company will pay him a lump
sum amount equal to the greater of the Base Salary that would have been paid
through the remainder of the term had such termination not occurred, or a full
year of Base Salary. If, on or after June 17, 1999, Mr. Newton terminates his
employment for Good Reason or is terminated by the Company for other than
Cause, the Company will pay him a lump sum amount equal to the greater of a
full year of Mr. Newton's (i) Base Salary as in effect at June 17, 1999, or
(ii) salary, exclusive of any bonuses, in effect at the time of his severance
of employment.
In connection with his employment, Mr. Newton was also granted an
award of 50,000 shares of restricted Common Stock, which vests at a rate of 20
percent per year over a five-year period. The shares are subject to immediate
vesting upon the termination of Mr. Newton's employment relationship by reason
of his death or disability, his resignation for Good Reason or his termination
of employment for other than Cause.
The Company entered into a severance agreement with each of W. Todd
Bratton and James M. Tidwell in connection with his employment with Daniel,
which provides for the payment of one year's net salary if he is terminated for
any reason other than criminal misconduct.
The Company has entered into Change of Control Agreements with Ronald
C. Lassiter and each of the other current executive officers named in the
Summary Compensation Table. The terms of Mr. Lassiter's and Mr. Newton's
Change of Control Agreements are their respective periods of employment with
the Company. The other Change of Control Agreements are for a term equal to
the later of (i) three years from February 6, 1997, August 23, 1996, or March
25, 1995, for Mr. Bratton, Mr. Tidwell and Mr. Clingman, respectively, or
(ii) the last Change in Control (hereinafter defined) of the Company, and are
automatically renewable for successive one-year terms if notice of termination
is not given by the Company. The Change of Control Agreement for each of
Messrs. Bratton, Tidwell and Clingman is subject to earlier termination upon
(i) the employee's death, disability or retirement or (ii) termination by the
employee or the Company of the employee's employment by the Company. Under
each Change of Control Agreement, a "change in control" of the Company shall
have occurred if (i) a report on Schedule 13D shall be filed with the SEC
disclosing that any person (or group of persons acting in concert), other than
the Company, one of its subsidiaries or any employee benefit plan of the
Company, is the beneficial owner of 20 percent of the outstanding securities of
the Company entitled to vote for directors ("Voting Stock"); (ii) any person
(or group of persons acting in concert), other than the Company, one of its
subsidiaries or any employee benefit plan of the
12
<PAGE> 15
Company, shall purchase securities pursuant to a tender offer or exchange offer
to acquire any Voting Stock and, immediately thereafter, is the beneficial
owner of 20 percent of the Voting Stock; (iii) the stockholders of the Company
shall approve (w) a merger or consolidation of the Company with any other
person, (x) any sale or other transfer of all or substantially all the assets
of the Company, (y) the dissolution of the Company, or (z) a transaction
immediately after the consummation of which any person (or group of persons
acting in concert) would be the beneficial owner of 50 percent of the
outstanding Voting Stock; or (iv) during any 12-month period, individuals who
at the beginning of that period constituted the Board of Directors cease to
constitute a majority of the Board.
Under the Change of Control Agreements, in the event the employee
terminates his employment as a result of an event of termination for Good
Reason or is terminated by the Company other than as a result of an event of
termination for Cause, in each case following a Change in Control, the Company
would pay (i) Mr. Newton a cash lump sum payment equal to three times the sum
of (A) the amount of annualized Base Salary for the year of termination (prior
to any reduction that constituted an event of termination for Good Reason), and
(B) the greater of (1) the amount of any cash bonus paid or payable to Mr.
Newton for services rendered in the prior fiscal year or (2) 50 percent of the
annualized Base Salary as determined in (A) above, (ii) Mr. Lassiter a cash
lump sum payment equal to three times the sum of (A) the amount of his
annualized base salary for the year of termination (prior to any reduction that
constituted an event of termination for Good Reason), and (B) the amount of any
cash bonus paid or payable to Mr. Lassiter for services rendered in the prior
fiscal year, and (iii) in the case of Messrs. Tidwell, Bratton or Clingman, a
cash lump sum payment equal to two and one-half times the sum of (A) the amount
of base salary the employee would have been paid during the fiscal year of
termination, (B) the amount of any cash bonus paid or payable to the employee
for services rendered in the prior fiscal year, and (C) the amount of any
income that (1) is includable in the employee's gross income for tax purposes
or (2) is attributable to the exercise of options exercised by the employee
within the one-year period prior to the termination date. Each agreement also
obligates the Company to maintain in effect, during the one-year period
following termination (or such earlier date that the employee becomes a
full-time employee of another person), other benefit plans (including life
insurance, medical and disability) for the benefit of such employee or to
provide substantially similar benefits. In the case of Messrs. Tidwell,
Bratton or Clingman, if all or any part of a payment under a Change of Control
Agreement would not be deductible for federal income tax purposes by the
Company or one of its tax affiliates, the amount would be reduced such that no
portion of any change of control payment to such employee (whether under the
Change of Control Agreement or otherwise) is not deductible by the Company or
one of its tax affiliates.
Each Change of Control Agreement provides generally that an event of
termination for Good Reason shall have occurred if the Company shall (i) assign
the employee duties inconsistent with his position in effect immediately prior
to the first Change in Control of the Company; (ii) remove or fail to re-elect
or re-appoint the employee to any position with the Company held immediately
prior to the first Change in Control; (iii) take any other action that results
in a material diminution in such position, authority, duties or
responsibilities; (iv) reduce the employee's annual base salary as in effect
immediately prior to the first Change in Control of the Company or as may be
increased thereafter; (v) relocate the employee's principal office outside of
Houston, Texas; (vi) fail to continue his participation, on substantially the
same basis, in any benefit plan in which the employee participated prior to the
first Change in Control, unless an equitable arrangement shall have been made;
(vii) materially reduce any other benefits that were provided to the employee
by the Company prior to the first Change in Control, including any material
fringe benefits, (viii) reduce the employee's number of paid vacation days, or
(ix) in the case of Mr. Newton, fail to promote him to Chief Executive Officer
by July 1, 2000. An event of termination for Cause shall have occurred if the
employee willfully and continuously fails to substantially perform his duties
or willfully engages in conduct known to be materially injurious to the
Company.
The Company has entered into Change of Control Agreements, similar to
those of Messrs. Bratton, Tidwell and Clingman, with the other current
executive officers, as well as certain of the Company's operating officers.
In connection with his resignation and agreement to provide reasonable
assistance to the Company with respect to unfinished business, Mr. Griffin, III
and the Company entered into an agreement on January 24, 1997, whereby the
Company paid Mr. Griffin, III a lump sum of $2,000,000, removed the
restrictions on 3,030 shares of Common Stock previously granted under the
Company's Stock Award Plan and will pay the cost of COBRA coverage for Mr.
Griffin, III under certain of the Company's insurance programs for up to 18
months, but only to the extent similar benefits are not covered by any
subsequent employer's plans or programs.
13
<PAGE> 16
Compensation of Directors
Directors who are also employees of the Company do not receive fees
for attending meetings of the Board. Each non-employee director of the Company
receives fees of (i) $1,000 for each meeting of the Board and for each
committee meeting thereof that he attends, subject to a maximum daily fee of
$1,000, and (ii) an annual retainer of $15,000 ($12,000 prior to July 1, 1997).
Effective July 1, 1997, the chairman of any committee of the Board receives an
additional annual retainer of $2,500.
Pursuant to the Company's 1997 Non-Employee Director Stock Option
Plan, on each of June 17, 1997 (the date the Director Plan was approved), and
January 1, 1998, each non-employee director serving on such date received an
option to purchase 5,000 shares of Common Stock. The options are fully
exercisable on the date of grant, provided that no options will be exercisable
unless the stockholders approve the Director Plan as set forth below. The
exercise price is the average of the high and low sale prices of the Common
Stock on the date of the grant. Under the Company's 1995 Non-Employee
Directors' Stock Option Plan, Dr. Michael Carroll received an option for 15,000
shares on January 14, 1998, the date of his election to the Board. That option
vests with respect to one third of the shares covered thereby on each of the
first three anniversaries of the date of grant.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Board during the fiscal
year ended December 31, 1997, was an officer or employee of the Company or any
of its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries.
During the fiscal year ended December 31, 1997, no executive officer
of the Company served as (i) a member of the compensation committee (or other
board committee performing equivalent functions) of another entity, one of
whose executive officers served on the Compensation Committee, (ii) a director
of another entity, one of whose executive officers served on the Compensation
Committee, or (iii) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served as a director of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires that the Company's directors, executive officers and 10 percent
stockholders report to the SEC certain transactions involving Common Stock.
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company and
representations received from persons subject to such reporting requirements,
all filings were timely during the fiscal year ended December 31, 1997, except
that Mr. Krenek was late in filing a Form 3 due upon his election in May 1997
as an officer of the Company, Mr. Sarik amended, in February 1998, his Form 3
filed in August 1997 upon his election as an officer of the Company, and all of
the Company's directors (excluding Messrs. Keefe, Carroll and Avery, who were
not directors at the time) were late in reporting the receipt of a stock option
granted by the Company in February 1996.
14
<PAGE> 17
Performance Graph
The following graph compares, as of each of the dates indicated, the
performance of the Common Stock to the Standard & Poor's 500 Stock Index ("S&P
500") and the Standard & Poor's Oil Composite Index ("S&P Oil Composite") for
the Company's last five fiscal years and for the three-month transition period
ended December 31, 1996. The graph assumes that the value of the investment in
the Common Stock and each index was $100 at September 30, 1992, and that all
dividends were reinvested.
[CHART]
<TABLE>
- ---------------------------------------------------------------------------------------------
9-92 9-93 9-94 9-95 9-96 9-97 12-97
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel $100.00 $126.45 $ 96.55 $127.89 $111.07 $128.91 $170.15
S&P 500 $100.00 $113.00 $117.17 $152.02 $182.93 $198.18 $264.29
S&P Oil Composite $100.00 $115.70 $114.02 $136.84 $171.12 $189.90 $234.58
</TABLE>
The foregoing graph is based on historical data and is not necessarily
indicative of future performance. This graph shall not be deemed to be
"soliciting material" or to be "filed" with the SEC or subject to Regulations
14A and 14C under the Exchange Act or to the liabilities of Section 18 under
the Exchange Act.
PROPOSAL FOR THE ADOPTION OF THE 1997 STOCK OPTION PLAN
On June 17, 1997, the Board adopted the Daniel Industries, Inc. 1997
Stock Option Plan pursuant to which options to purchase up to 730,000 shares of
Common Stock may be granted. The 1997 Option Plan is effective as of June 17,
1997, provided that the stockholders of the Company approve the Plan by June
17, 1998. The individuals eligible to participate in the 1997 Option Plan are
such key employees, including officers and employee directors, consultants and
advisors of the Company and its affiliates as a committee of the Board (the
"Committee"), which administers the 1997 Option Plan, may determine from time
to time.
The Committee may grant either incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or non-statutory stock options. The maximum number of shares subject
to options that may be awarded under the 1997 Option Plan to any employee
during any consecutive three-year period is 365,000. The purchase price of
shares subject to an option granted under the 1997 Option Plan is determined by
the Committee at the time of grant, but may not be less than the fair market
value of the shares of Common Stock on the date of grant. Notwithstanding any
other provisions of the 1997 Option Plan to the contrary,
15
<PAGE> 18
the aggregate fair market value (determined as of the date the option is
granted) of the stock with respect to which incentive stock options are
exercisable for the first time by the optionee in any calendar year (under the
1997 Option Plan and any other incentive stock option plan of the Company) may
not exceed $100,000. Options granted under the 1997 Option Plan must be
exercised within ten years from the date of grant. In the case of any eligible
employee who owns or is deemed to own stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company or its
parent or subsidiaries, the option price of any incentive stock option granted
under the 1997 Option Plan may not be less than 110 percent of the fair market
value of the Common Stock on the date of grant, and the exercisable period may
not exceed five years from the date of grant.
Options granted under the 1997 Option Plan are not transferable by the
optionee other than by will or under the laws of descent and distribution. The
1997 Option Plan also provides that no option shall be exercisable after 30
days following the severance of the employment relationship between the
optionee and the Company for any reason other than death. The option
agreements generally provide that, in the event of the death of an optionee
while employed by the Company, the option will terminate on the earlier of the
date of expiration of the option or one year following the date of death. In
such event, the executors or administrators of the optionee or other person to
whom his or her option may be transferred by will or by the laws of descent and
distribution may exercise the option in respect of the number of shares that
were vested on the date of death.
No optionee will recognize income upon the grant of an option under
the 1997 Option Plan. Upon the exercise of any portion of a non-statutory
stock option, the optionee will recognize taxable ordinary income equal to the
excess of the fair market value of the shares so acquired as of the date of
exercise over the option price paid for such shares. The Company ordinarily
will be entitled to a deduction for compensation expense in an amount equal to
the amount of such ordinary income. Upon disposition of the shares acquired
upon the exercise of the option, the optionee will generally recognize a
long-term or short-term capital gain or loss (depending on how long the shares
were held) equal to the excess of the amount realized by him or her upon such
disposition over the fair market value of the shares on the date he or she
exercised the option.
In the case of incentive stock options, and except to the extent the
excess of the fair market value of the acquired shares as of the date of
exercise over the exercise price may constitute income for purpose of the
optionee's alternative minimum tax computation, if the optionee does not
dispose of shares acquired pursuant to the exercise of such option within two
years from the date the option was granted or within one year after the shares
were transferred to him or her, no income would be recognized by the optionee
by reason of his or her exercise of the option. The difference between the
option price and the amount realized upon a subsequent disposition of shares
would be treated as long-term capital gain or loss. In such event, the Company
would not be entitled to any deduction in connection with the grant or exercise
of the option or the disposition of the shares so acquired. If, however, an
optionee disposes of shares acquired pursuant to his or her exercise of an
incentive stock option before the end of the two-year or one-year holding
period noted above, the optionee would be treated as having received, at the
time of disposition, compensation taxable as ordinary income. In such event,
the Company ordinarily will be entitled to a deduction for compensation paid at
the same time in the same amount as compensation is treated as being received
by the optionee. The amount treated as compensation is the excess of the fair
market value of the shares at the time of exercise (or, in the case of a sale
in which a loss, if sustained, would be recognized, the amount realized on the
sale, if less) over the option price; any amount realized in excess of the fair
market value of the shares at the time of exercise would be treated as
long-term or short-term capital gain, depending on how long the shares were
held.
16
<PAGE> 19
The following options have been granted, either in 1997 or 1998, under
the 1997 Option Plan, but will not be exercisable unless Daniel's stockholders
approve the 1997 Option Plan:
<TABLE>
<CAPTION>
Shares Subject Option
Name to Option Price ($) (1)
------- --------- -------------
<S> <C> <C>
Ronald C. Lassiter . . . . . . . . . . . . . . . . . . . . . . . . 250,000 14.19
James M. Tidwell . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 14.19
50,000 16.66
W. Todd Bratton . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 14.19
10,000 14.69
Alex Newton . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
W.C. Clingman . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
All executive officers as a group . . . . . . . . . . . . . . . . 408,000 14.80
All directors who are not executive officers as a group . . . . . -- --
All employees, including all officers who are not executive
Officers, as a group . . . . . . . . . . . . . . . . . . . . 674,858 14.57
</TABLE>
--------------------
(1) Represents fair market value on the date of grant.
As of March 23, 1998, the closing sale price of a share of Common
Stock on the New York Stock Exchange was $19.81.
The Board of Directors has approved the 1997 Option Plan and
recommends that the stockholders vote "FOR" approval of the plan.
PROPOSAL FOR THE ADOPTION OF THE 1997 NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
On June 17, 1997, the Board of Directors of the Company adopted the
Daniel Industries, Inc. 1997 Non-Employee Director Stock Option Plan under
which an aggregate of 120,000 shares may be issued.
Pursuant to the terms of the Director Plan, each non-employee director
of the Company on June 17, 1997, the date the Director Plan was approved by the
Board, was granted an option to purchase 5,000 shares of Common Stock.
Additionally, for so long as shares are available for grant under the Director
Plan, on the first day of each fiscal year, each non-employee director who is
serving on such day will be granted an option to purchase 5,000 shares of
Common Stock. The non-employee directors of the Company include all directors
except Mr. Lassiter.
The purpose of the Director Plan is to advance the interests of the
Company by providing the non-employee directors with additional incentive to
serve the Company by increasing their proprietary interest in the success of
the Company. The options granted under the Director Plan are immediately
exercisable, provided that no option may be exercised until the Director Plan
is approved by the stockholders. Each option granted to the Company's
non-employee directors provides for the purchase of the shares thereunder at a
per share price equal to the average of the high and low sale prices of the
Common Stock on the New York Stock Exchange on the date of grant. The term of
each option granted under the Director Plan is ten years, subject to earlier
termination if the optionee ceases to be a member of the Company's Board of
Directors. If the optionee ceases to be a member of the Board by reason of
death, the option will terminate on the earlier of the expiration date or one
year following the date of death. If the optionee ceases to be a member of the
Board for any other reason, the option will terminate on the earlier of the
expiration date or three months following the date he ceases to be a director.
No optionee will recognize income upon the grant of an option under
the Director Plan. Upon the exercise of any portion of an option, the optionee
will recognize taxable ordinary income equal to the excess of the fair market
value of the shares so acquired as of the date of exercise over the option
price paid for such shares. The Company receives a deduction for compensation
expense for the amount of such ordinary income. Upon disposition of the shares
acquired upon the exercise of the option, the optionee will generally recognize
a long-term capital gain
17
<PAGE> 20
or loss (depending on how long the shares were held) equal to the excess of the
amount realized by the optionee upon such disposition over the fair market
value of the shares on the date the optionee exercised the option.
The following options have been granted under the Director Plan,
subject to stockholder approval of this proposal to approve the Director Plan:
<TABLE>
<CAPTION>
Shares Subject Option
Name to Option Price ($)
---- --------- ---------
<S> <C> <C>
Thomas J. Keefe 5,000 14.19
5,000 18.78
Michael M. Carroll -- --
W.A. Griffin 5,000 14.19
5,000 18.78
Brian E. O'Neill 5,000 14.19
5,000 18.78
Ralph F. Cox 5,000 14.19
5,000 18.78
Leo E. Linbeck, Jr. 5,000 14.19
5,000 18.78
Nathan M. Avery 5,000 14.19
5,000 18.78
Gibson Gayle, Jr. 5,000 14.19
5,000 18.78
All executive officers as a group -- --
All directors who are not executive officers
as a group 70,000 16.48
All employees, including all officers who are not
executive officers, as a group -- --
</TABLE>
The Board of Directors has approved the Director Plan and recommends
that the stockholders vote "FOR" approval of the plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective February 3, 1995, W. A. Griffin entered into a two-year
Consulting Agreement with the Company under which he provided services and
counsel on business matters as requested by the Chief Executive Officer. Under
the Consulting Agreement, the Company paid Mr. Griffin a fee of $135,000 per
year for those services and reimbursed him for certain expenses.
INDEPENDENT ACCOUNTANTS
Upon the recommendation of the Audit Committee, the Board has selected
Price Waterhouse LLP, to audit the consolidated financial statements of the
Company and its subsidiaries for the year ending December 31, 1998. Price
Waterhouse LLP has served as the Company's independent accountants for the past
41 years. Representatives of Price Waterhouse LLP are expected to be available
at the annual meeting of stockholders to respond to appropriate questions, and
they will be permitted to make a statement if they so desire.
18
<PAGE> 21
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of shares of Common Stock intended to be
presented at the annual meeting of stockholders of the Company to be held in
1999 must be received by the Company at its principal executive offices, 9753
Pine Lake Drive, Houston, Texas 77055, no later than December 2, 1998 in order
to be considered for inclusion in the proxy statement and proxy relating to
that meeting.
OTHER INFORMATION
At the date of this proxy statement, the Board knows of no other
matters to be presented for consideration at the annual meeting. However, if
any other matters should properly come before the meeting or any adjournment
thereof, the persons named in the Proxy will have discretionary authority to
vote the shares of Common Stock represented by the Proxy with respect to such
matters. The shares represented by the Proxy will also be voted with respect
to matters incident to the conduct of the meeting.
The cost of solicitation of the Proxies will be borne by the Company.
Arrangements will be made with brokerage firms and other custodians, dealers,
banks and trustees, or their nominees who hold the voting securities of record,
for the forwarding of solicitation material to the beneficial owners thereof.
Upon request, the Company will reimburse such brokers, custodians, dealers,
banks or their nominees for the reasonable out-of-pocket expenses incurred by
them in connection with such distribution of materials. Certain officers and
regular employees of the Company may solicit the return of Proxies by
telephone, telegram or personal interview. In addition, the Company has
employed Morrow & Co. to assist in the solicitation of Proxies and the
coordination of proxy solicitation materials through such brokers, custodians,
dealers, banks or their nominees, for an anticipated fee of $5,000 plus mailing
expenses.
By Order of the Board of Directors,
MICHAEL R. YELLIN
Secretary
19
<PAGE> 22
APPENDIX A
DANIEL INDUSTRIES, INC.
1997 STOCK OPTION PLAN
<PAGE> 23
DANIEL INDUSTRIES, INC.
1997 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
-------
<S> <C>
ARTICLE I - PLAN
Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . 1.2
ARTICLE II - DEFINITIONS
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Incentive Option . . . . . . . . . . . . . . . . . . . . . . . . . 2.8
Non-Employee Director . . . . . . . . . . . . . . . . . . . . . . . 2.9
Nonqualified Option . . . . . . . . . . . . . . . . . . . . . . . . 2.10
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.11
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
Outside Director . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16
10% Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17
ARTICLE III - ELIGIBILITY
ARTICLE IV - GENERAL PROVISIONS RELATING TO OPTIONS
Authority to Grant Options . . . . . . . . . . . . . . . . . . . . 4.1
Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Non-Transferability . . . . . . . . . . . . . . . . . . . . . . . . 4.3
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . 4.4
Changes in the Company's Capital Structure . . . . . . . . . . . . 4.5
ARTICLE V - OPTIONS
Type of Option . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . 5.4
Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . 5.5
Substitution Options . . . . . . . . . . . . . . . . . . . . . . . 5.6
No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . 5.7
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
ARTICLE VI - ADMINISTRATION
ARTICLE VII - AMENDMENT OR TERMINATION OF PLAN
ARTICLE VIII - MISCELLANEOUS
No Employment Obligation . . . . . . . . . . . . . . . . . . . . . 8.1
Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 8.3
Indemnification of the Committee and the Board of Directors . . . . 8.4
Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6
Other Compensation Plans . . . . . . . . . . . . . . . . . . . . . 8.7
Other Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8
Arbitration of Disputes . . . . . . . . . . . . . . . . . . . . . . 8.9
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.10
</TABLE>
<PAGE> 25
ARTICLE I
PLAN
1.1 PURPOSE. This Plan is a plan for employees, consultants and
advisors of the Company and its Affiliates and is intended to advance the best
interests of the Company, its Affiliates, and its stockholders by providing
those persons who have substantial responsibility for the management and growth
of the Company and its Affiliates with additional incentives and an opportunity
to obtain or increase their proprietary interest in the Company, thereby
encouraging them to continue in the employ of the Company or any of its
Affiliates.
1.2 EFFECTIVE DATE OF PLAN. This Plan is effective June 17, 1997, if
within one year of that date it shall have been approved by at least a majority
vote of stockholders voting in person or by proxy at a duly held stockholders'
meeting, or if the provisions of the corporate charter, by-laws or applicable
state law prescribe a greater degree of stockholder approval for this action,
the approval by the holders of that percentage, at a duly held meeting of
stockholders. No Option shall be granted pursuant to this Plan after June 16,
2007.
I-1
<PAGE> 26
ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if,
at the time of the action or transaction, each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
The term "subsidiary corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
2.2 "BOARD OF DIRECTORS" means the board of directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended.
2.4 "COMMITTEE" means the committee designated by the Board of
Directors. The Committee shall be comprised solely of at least two members who
are both Outside Directors and Non-Employee Directors.
2.5 "COMPANY" means Daniel Industries, Inc., a Delaware corporation.
2.6 "EMPLOYEE" means a person employed by the Company or any
Affiliate.
II.7 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date (or, if there
was no sale on such date, the next preceding date on which there was such a
sale) on the principal securities exchange on which the Stock is listed; or (b)
if the Stock is not listed on a securities exchange, an amount as determined by
the Committee in its sole discretion.
2.8 "INCENTIVE OPTION" means an Option granted under this Plan which
is designated as an "Incentive Option" and satisfies the requirements of
section 422 of the Code.
2.9 "NON-EMPLOYEE DIRECTOR" means a "non-employee director" as that
term is defined in Rule 16b-3 of the Securities Exchange Act of 1934.
2.10 "NONQUALIFIED OPTION" means an Option granted under this Plan
other than an Incentive Option.
2.11 "OPTION" means either an Incentive Option or a Nonqualified
Option granted under this Plan to purchase shares of Stock.
2.12 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
II-1
<PAGE> 27
2.13 "OPTIONEE" means a person who is granted an Option under this
Plan.
2.14 "OUTSIDE DIRECTOR" means a member of the Board of Directors
serving on the Committee who satisfies the criteria of section 162(m) of the
Code.
2.15 "PLAN" means the Daniel Industries, Inc. 1997 Stock Option Plan,
as set out in this document and as it may be amended from time to time.
2.16 "STOCK" means the common stock of the Company, $1.25 par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company
or another corporation, that other stock or security.
2.17 "10% STOCKHOLDER" means an individual who, at the time the Option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any Affiliate. An
individual shall be considered as owning the stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust, shall be
considered as being owned proportionately by or for its stockholders, partners,
or beneficiaries.
II-2
<PAGE> 28
ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options shall
be those key Employees as the Committee shall determine from time to time. The
individuals who shall be eligible to receive Nonqualified Options shall be
those key Employees, consultants and advisors of the Company or any of its
Affiliates as the Committee shall determine from time to time. However, no
member of the Committee shall be eligible to receive any Option or to receive
stock, stock options, or stock appreciation rights under any other plan of the
Company or any of its Affiliates, if to do so would cause the individual not to
be an Outside Director or a Non-Employee Director. The Board of Directors may
designate one or more individuals who shall not be eligible to receive any
Option under this Plan or under other similar plans of the Company.
III-1
<PAGE> 29
ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS
4.1 AUTHORITY TO GRANT OPTIONS. The Committee may grant Options to
those individuals as it shall from time to time determine under the terms and
conditions of this Plan. Subject only to any applicable limitations set out in
this Plan, the number of shares of Stock to be covered by any Option shall be
as determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with
respect to which Options may be granted under the Plan shall be 730,000 shares.
The shares may be treasury shares or authorized but unissued shares. The total
number of shares of Stock with respect to which Incentive Options may be
granted under the Plan shall be 730,000 shares. The maximum number of shares
subject to Options which may be issued to any Optionee under the Plan during
any period of three consecutive years is 365,000 shares. The number of shares
stated in this Section 4.2 shall be subject to adjustment in accordance with
the provisions of Section 4.5.
If any outstanding Option expires or terminates for any reason or any
Option is surrendered, the shares of Stock allocable to the unexercised portion
of that Option may again be subject to an Option under the Plan.
4.3 NON-TRANSFERABILITY. Options shall not be transferable by the
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Committee has received evidence
satisfactory to it to the effect that the holder of that Option will not
transfer the Stock except in accordance with applicable law, including receipt
of an opinion of counsel satisfactory to the Company to the effect that any
proposed transfer complies with applicable law. The determination by the
Committee on this matter shall be final, binding and conclusive. The Company
may, but shall in no event be obligated to, register any Stock covered by this
Plan pursuant to applicable securities laws of any country or any political
subdivision. In the event the Stock issuable on exercise of an Option is not
registered, the Company may imprint on the certificate evidencing the Stock any
legend that counsel for the Company considers necessary or advisable to comply
with applicable law. The Company shall not be obligated to take any other
affirmative action in order to cause the exercise of an Option and the issuance
of shares thereunder, to comply with any law or regulation of any governmental
authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or 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, whether of a similar character or
otherwise.
IV-1
<PAGE> 30
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares
he would have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares of
Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved,
that number and class of shares of Stock that would have been received by the
owner of an equal number of outstanding shares of such class of Stock as the
result of the event requiring the adjustment.
If the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or if the Company is liquidated
or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan, after the effective
date of the merger, consolidation, liquidation, sale or other disposition, as
the case may be, each holder of an outstanding Option shall be entitled, upon
exercise of the Option, to receive, in lieu of shares of Stock, the number and
class or classes of shares of stock or other securities or property to which
the holder would have been entitled if, immediately prior to the merger,
consolidation, liquidation, sale or other disposition, the holder had been the
holder of record of a number of shares of Stock equal to the number of shares
as to which the Option shall be so exercised; and (b) the Committee shall waive
any limitations set out in or imposed under this Plan so that, from and after
the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, all Options shall be exercisable in full.
However, no Option will vest under the preceding sentence to the extent that
such vesting could result in a diminution of any compensation that would
otherwise be payable to the Optionee.
The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.
ARTICLE V
OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given
Option shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price at which Stock may be purchased under an
Option shall not be less than the greater of: (a) 100% of the Fair Market
Value of the shares of Stock on the date the Option is granted or (b) the
aggregate par value of the shares of Stock on the date the Option is granted.
In the case of any 10% Stockholder, the price at which shares of Stock may be
purchased under an Incentive Option shall not be less than 110% of the Fair
Market Value of the Stock on the date the Incentive Option is granted.
IV-2
<PAGE> 31
5.3 DURATION OF OPTIONS. No Option shall be exercisable after the
earlier of (a) 10 years from the date the Option is granted or (b) 30 days
after the severance of the employment relationship between the Optionee and the
Company and all Affiliates for any reason other than death. In the case of a
10% Stockholder, no Incentive Option shall be exercisable after the earlier of
(a) five years from the date the Incentive Option is granted or (b) 30 days
after the severance of the employment relationship between the Optionee and the
Company and all Affiliates.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to
time, in whole or in part, in the manner and subject to the conditions the
Committee, in its sole discretion, may provide in the Option Agreement, as long
as the Option is valid and outstanding. To the extent that the aggregate Fair
Market Value (determined as of the time an Incentive Option is granted) of the
Stock with respect to which Incentive Options first become exercisable by the
Optionee during any calendar year (under this Plan and any other incentive
stock option plan(s) of the Company or any Affiliate) exceeds $100,000, the
Incentive Options shall be treated as Nonqualified Options. In making this
determination, Incentive Options shall be taken into account in the order in
which they were granted.
5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
of Stock with respect to which the Option is to be exercised, together with:
(a) cash, check, bank draft, or postal or express money order payable to the
order of the Company for an amount equal to the option price of the shares, or
(b) Stock at its Fair Market Value on the date of exercise, and/or any other
form of payment which is acceptable to such committee, and specifying the
address to which the certificates for the shares are to be mailed. Subject to
Section 8.3, as promptly as practicable after receipt of written notification
and payment, the Company shall deliver to the Optionee certificates for the
number of shares with respect to which the Option has been exercised, issued in
the Optionee's name. If shares of Stock are used in payment of the exercise
price, the aggregate Fair Market Value of the shares of Stock tendered must be
equal to or less than the aggregate exercise price of the shares being
purchased upon exercise of the Option, and any difference must be paid by cash,
check, bank draft, or postal or express money order payable to the Company.
Delivery of the shares shall be deemed effected for all purposes when a stock
transfer agent of the Company shall have deposited the certificates in the
United States mail, addressed to the Optionee, at the address specified by the
Optionee.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally
and beneficially owned by the Optionee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates, (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The
delivery of certificates upon the exercise of Options is subject to the
condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale
or other disposition of an Option.
5.6 SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the
Company or any Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or any Affiliate, or the acquisition by
the Company or any Affiliate of the assets of the employing corporation, or the
acquisition by the Company or any Affiliate of stock of the employing
corporation as the result of which it
V-2
<PAGE> 32
becomes an Affiliate of the Company. The terms and conditions of the
substitute Options granted may vary from the terms and conditions set out in
this Plan to the extent the Committee, at the time
of grant, may deem appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are granted.
5.7 NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
V-3
<PAGE> 33
ARTICLE VI
ADMINISTRATION
This Plan shall be administered by the Committee. All questions of
interpretation and application of this Plan and Options shall be subject to the
determination of the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to writing
and signed by a majority of the members shall be as effective as if it had been
made by a majority vote at a meeting properly called and held. This Plan shall
be administered in such a manner as to permit the Options granted under it
which are designated to be Incentive Options to qualify as Incentive Options.
In carrying out its authority under this Plan, the Committee shall have full
and final authority and discretion, including but not limited to the following
rights, powers and authorities, to:
(a) determine the persons to whom and the time or times at
which Options will be made,
(b) determine the number of shares and the purchase price of
Stock covered in each Option, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each
Option, which need not be identical,
(d) accelerate the time at which any outstanding Option may be
exercised,
(e) define the effect, if any, on an Option of the death,
disability, or retirement of the Optionee,
(f) prescribe, amend and rescind rules and regulations
relating to administration of this Plan, and
(g) make all other determinations and take all other actions
deemed necessary, appropriate, or advisable for the proper
administration of this Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive
and binding on all parties.
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<PAGE> 34
ARTICLE VII
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that to the extent required to maintain the status of any Incentive Option
under the Code, no amendment that would (a) change the aggregate number of
shares of Stock which may be issued under Incentive Options, (b) change the
class of employees eligible to receive Incentive Options, or (c) decrease the
exercise price for Incentive Options below the Fair Market Value of the Stock
at the time it is granted, shall be made without the approval of the Company's
stockholders. Subject to the preceding sentence, the Board shall have the
power to make any changes in this Plan and in the regulations and
administrative provisions under it or in any outstanding Incentive Option as in
the opinion of counsel for the Company may be necessary or appropriate from
time to time to enable any Incentive Option granted under this Plan to continue
to qualify as an incentive stock option or such other stock option as may be
defined under the Code so as to receive preferential Federal income tax
treatment.
VII-1
<PAGE> 35
ARTICLE VIII
MISCELLANEOUS
8.1 NO EMPLOYMENT OBLIGATION. The granting of any Option shall not
constitute an employment contract, express or implied, nor impose upon the
Company or any Affiliate any obligation to employ or continue to employ any
Optionee. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option has been granted to him.
8.2 TAX WITHHOLDING. The Company or any Affiliate shall be entitled
to deduct from other compensation payable to each Optionee any sums required by
federal, state, or local tax law to be withheld with respect to the grant or
exercise of an Option. In the alternative, the Company may require the
Optionee (or other person exercising the Option) to pay the sum directly to the
Company or an Affiliate. If the Optionee (or other person exercising the
Option) is required to pay the sum directly, payment in cash or by check of
such sums for taxes shall be made on the date of exercise. The Company shall
have no obligation upon exercise of any Option until payment has been received,
unless withholding (or offset against a cash payment) as of or prior to the
date of exercise is sufficient to cover all sums due with respect to that
exercise. The Company and its Affiliates shall not be obligated to advise an
Optionee of the existence of the tax or the amount which the employer
corporation will be required to withhold.
8.3 WRITTEN AGREEMENT. Each Option shall be embodied in a written
Option Agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by a member of the Committee on
behalf of the Committee and the Company. The Option Agreement may contain any
other provisions that the Committee in its discretion shall deem advisable
which are not inconsistent with the terms of this Plan.
8.4 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including attorney's fees, the amount of judgments and the amount of approved
settlements made with a view to the curtailment of costs of litigation, other
than amounts paid to the Company itself) reasonably incurred by him in
connection with or arising out of any action, suit, or proceeding in which he
may be involved by reason of his being or having been a member of the Committee
and/or the Board of Directors, whether or not he continues to be a member of
the Committee and/or the Board of Directors at the time of incurring the
expenses--including, without limitation, matters as to which he shall be
finally adjudged in any action, suit or proceeding to have been found to have
been negligent in the performance of his duty as a member of the Committee or
of the Board of Directors. However, this indemnity shall not include any
expenses incurred by any member of the Committee and/or the Board of Directors
in respect of matters as to which he shall be finally adjudged in any action,
suit or proceeding to have been guilty of gross negligence or willful
misconduct in the performance of his duty as a member of the Committee or the
Board of Directors. In addition, no right of indemnification under this Plan
shall be available to or enforceable by any member of the Committee or the
Board of Directors unless, within 60 days after institution of any action, suit
or proceeding, he shall have offered the Company, in writing, the opportunity
to handle and defend same at its own expense. This right of indemnification
shall inure to the benefit of the heirs, executors or administrators of each
member of the Committee and the
VIII-1
<PAGE> 36
Board of Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.
8.5 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.
8.6 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.
8.7 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall this Plan preclude the
Company from establishing any other forms of incentive or other compensation
for employees of the Company or any Affiliate.
8.8 OTHER OPTIONS. The grant of an Option shall not confer upon an
Optionee the right to receive any future or other Options under this Plan,
whether or not Options may be granted to similarly situated Optionees, or the
right to receive future Options upon the same terms or conditions as previously
granted.
8.9 ARBITRATION OF DISPUTES. Any controversy arising out of or
relating to the Plan or an Option Agreement shall be resolved by arbitration
conducted pursuant to the arbitration rules of the American Arbitration
Association. The arbitration shall be final and binding on the parties.
8.10 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
VIII-2
<PAGE> 37
APENDIX B
DANIEL INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<PAGE> 38
DANIEL INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
-------
<S> <C>
ARTICLE I - DEFINITIONS
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
Non-Employee Director . . . . . . . . . . . . . . . . . . . . . . . 1.4
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5
Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Optionee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9
ARTICLE II - GENERAL PROVISIONS RELATING TO OPTIONS
Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Non-Transferability . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Changes in the Company's Capital Structure . . . . . . . . . . . . 2.4
ARTICLE III - OPTIONS
Automatic Awards For Service on the
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 3.1
Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2
Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . 3.3
Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . 3.4
Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . 3.5
Form of Options . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . 3.7
ARTICLE IV - AMENDMENT OR TERMINATION OF PLAN
ARTICLE V - MISCELLANEOUS
No Retention Obligation . . . . . . . . . . . . . . . . . . . . . . 5.1
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4
Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5
Other Compensation . . . . . . . . . . . . . . . . . . . . . . . . 5.6
Other Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
Arbitration of Disputes . . . . . . . . . . . . . . . . . . . . . . 5.8
Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9
</TABLE>
<PAGE> 39
DANIEL INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
This Daniel Industries, Inc. 1997 Non-Employee Director Stock Option
Plan (the "Plan") is adopted, subject to stockholder approval, for the benefit
of the directors of Daniel Industries, Inc., a Delaware corporation (the
"Company") who at the time of their service are not employees of the Company or
any of its subsidiaries. The Plan is intended to advance the interest of the
Company by providing such directors with an additional incentive to serve the
Company by increasing their proprietary interest in the success of the Company.
<PAGE> 40
ARTICLE I
DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which any
such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
1.1 "BOARD OF DIRECTORS" means the board of directors of the Company.
1.2 "COMPANY" means Daniel Industries, Inc., a Delaware corporation.
1.3 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date (or, if there
was no sale on such date, the next preceding date on which there was such a
sale) on the principal securities exchange on which the Stock is listed; or (b)
if the Stock is not listed on a securities exchange, an amount determined by
the Board of Directors in good faith in its sole discretion.
1.4 "NON-EMPLOYEE DIRECTOR" means a director of the Company who while
a director is not an employee of the Company, or a corporation, of which a
majority of voting securities is owned, directly or indirectly, by the Company.
1.5 "OPTION" means an option granted under this Plan to purchase
shares of Stock.
1.6 "OPTION AGREEMENT" means the written agreement which sets out the
terms of an Option.
1.7 "OPTIONEE" means a person who is granted an Option under this
Plan.
1.8 "PLAN" means the Daniel Industries, Inc. 1997 Non-Employee
Director Stock Option Plan, as set out in this document and as it may be
amended from time to time.
1.9 "STOCK" means the common stock of the Company, $1.25 par value,
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Company
or another corporation, that other stock or security.
I-1
<PAGE> 41
ARTICLE II
GENERAL PROVISIONS RELATING TO OPTIONS
2.1 DEDICATED SHARES. The total number of shares of Stock with
respect to which Options may be granted under the Plan shall be 120,000 shares.
The shares may be treasury shares or authorized but unissued shares. The
number of shares stated in this Section 2.1 shall be subject to adjustment in
accordance with the provisions of Section 2.4.
If any outstanding Option expires or terminates for any reason or any
Option is surrendered, the shares of Stock allocable to the unexercised portion
of that Option may again be subject to an Option under the Plan.
2.2 NON-TRANSFERABILITY. Except as expressly provided otherwise in
an Optionee's Option Agreement, Options shall not be transferable by the
Optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during the Optionee's lifetime, only by him.
2.3 REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Option if issuing that Stock would constitute or
result in a violation by the Optionee or the Company of any provision of any
law, statute, or regulation of any governmental authority. Specifically, in
connection with any applicable statute or regulation relating to the
registration of securities, upon exercise of any Option, the Company shall not
be required to issue any Stock unless the Board of Directors has received
evidence satisfactory to it to the effect that the holder of that Option will
not transfer the Stock except in accordance with applicable law, including
receipt of an opinion of counsel satisfactory to the Company to the effect that
any proposed transfer complies with applicable law. The determination by the
Board of Directors on this matter shall be final, binding and conclusive. The
Company may, but shall in no event be obligated to, register any Stock covered
by this Plan pursuant to applicable securities laws of any country or any
political subdivision. In the event the Stock issuable on exercise of an
Option is not registered, the Company may imprint on the certificate evidencing
the Stock any legend that counsel for the Company considers necessary or
advisable to comply with applicable law. The Company shall not be obligated to
take any other affirmative action in order to cause the exercise of an Option
and the issuance of shares thereunder, to comply with any law or regulation of
any governmental authority.
2.4 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or
any issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Stock or its rights, or 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, whether of a similar character or
otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options under this Plan shall be appropriately adjusted in such a manner as to
entitle an Optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the equivalent total number and class of shares
he would have received had he exercised his Option in full immediately prior to
the event requiring the adjustment; and (b) the number and class of shares of
Stock then reserved to be issued under the Plan shall be adjusted by
substituting for the total number and class of shares of Stock then reserved,
that number and class
II-1
<PAGE> 42
of shares of Stock that would have been received by the owner of an equal
number of outstanding shares of such class of Stock as the result of the event
requiring the adjustment.
If the Company is merged or consolidated with another corporation and
the Company is not the surviving corporation, or if the Company is liquidated
or sells or otherwise disposes of substantially all its assets while
unexercised Options remain outstanding under this Plan, after the effective
date of the merger, consolidation, liquidation, sale or other disposition, as
the case may be, each holder of an outstanding Option shall be entitled, upon
exercise of the Option, to receive, in lieu of shares of Stock, the number and
class or classes of shares of stock or other securities or property to which
the holder would have been entitled if, immediately prior to the merger,
consolidation, liquidation, sale or other disposition, the holder had been the
holder of record of a number of shares of Stock equal to the number of shares
as to which the Option shall be so exercised.
The issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe for them, or upon conversion of shares or obligations of
the Company convertible into shares or other securities, shall not affect, and
no adjustment by reason of such issuance shall be made with respect to, the
number, class, or price of shares of Stock then subject to outstanding Options.
II-2
<PAGE> 43
ARTICLE III
OPTIONS
3.1 AUTOMATIC AWARDS FOR SERVICE ON THE BOARD OF DIRECTORS. On the
date that this Plan is approved by the Board of Directors, each person who is a
Non-Employee Director on that date shall be granted an Option to purchase 5,000
shares of Stock. Thereafter, on the first day of each fiscal year of the
Company through and including the 2001 fiscal year of the Company, each person
who is a Non-Employee Director on that date shall be granted an Option to
purchase 5,000 shares of Stock.
3.2 OPTION PRICE. The price at which Stock may be purchased under an
Option shall be equal to 100% of the Fair Market Value of the shares of Stock
on the date the Option is granted.
3.3 AMOUNT EXERCISABLE.
Each Option Agreement evidencing the grant of an Option shall provide
that the Option is exercisable in full immediately upon the date of grant.
However, no Option will be exercisable before the stockholders of the Company
approve the Plan.
3.4 DURATION OF OPTIONS.
Each Option awarded, to the extent it shall not previously have
been exercised, shall terminate on the earliest of the following dates:
(i) on the last day within the three month period
commencing on the date on which the Optionee ceases to be a
member of the Board of Directors, for any reason other than
death, during which period the Optionee shall be entitled to
exercise his Option in respect of the number of shares that the
Optionee would have been entitled to purchase had the Optionee
exercised such Option on the date on which the Optionee ceased to
be a member of the Board of Directors;
(ii) on the last day within the one-year period
commencing on the date of the Optionee's death while serving as a
member of the Board of Directors, during which period the
executor or administrator of the Optionee's estate or the person
or persons to whom the Optionee's Option shall have been
transferred by will or the laws of descent or distribution, shall
be entitled to exercise such Option in respect of the number of
shares that the Optionee would have been entitled to purchase had
the optionee exercised such Option on the date of his death; or
(iii) ten years after the date of grant of such Option.
3.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the
delivery of written notice to the Treasurer of the Company setting forth the
number of shares of Stock with respect to which the Option is to be exercised,
together with: (a) cash, check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option price of
the shares, or (b) Stock at its Fair Market Value on the date of exercise,
and/or any other form of payment which is acceptable to such committee, and
specifying the address to which the certificates for the shares are to be
mailed. As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Optionee certificates for the number
of shares with respect to which the Option has been exercised, issued in the
Optionee's name. If shares of Stock
III-1
<PAGE> 44
are used in payment of the exercise price, the aggregate Fair Market Value of
the shares of Stock tendered must be equal to or less than the aggregate
exercise price of the shares being purchased upon exercise of the Option, and
any difference must be paid by cash, check, bank draft, or postal or express
money order payable to the Company. Delivery of the shares shall be deemed
effected for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the
Optionee, at the address specified by the Optionee.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Optionee, the Optionee shall deliver to the Company certificates registered
in the name of the Optionee representing a number of shares of Stock legally
and beneficially owned by the Optionee, free of all liens, claims, and
encumbrances of every kind, accompanied by stock powers duly endorsed in blank
by the record holder of the shares represented by the certificates, (with
signature guaranteed by a commercial bank or trust company or by a brokerage
firm having a membership on a registered national stock exchange). The
delivery of certificates upon the exercise of Options is subject to the
condition that the person exercising the Option provide the Company with the
information the Company might reasonably request pertaining to exercise, sale
or other disposition of an Option.
3.6 FORM OF OPTIONS. All Options granted under this Plan will be
nonqualified stock options that are not intended to qualify as incentive stock
options under section 422 of the Internal Revenue Code of 1986, as amended.
3.7 NO RIGHTS AS STOCKHOLDER. No Optionee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date a stock
certificate is issued for the Stock.
III-2
<PAGE> 45
ARTICLE IV
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided, however,
that no amendment shall decrease the exercise price for Options below the Fair
Market Value of the Stock at the time it is granted.
IV-1
<PAGE> 46
ARTICLE V
MISCELLANEOUS
5.1 NO RETENTION OBLIGATION. The granting of any Option shall not
impose upon the Company any obligation to continue to retain the Optionee's
services as a director of the Company.
5.2 TAXES. The Company shall not be obligated to advise an Optionee
of the existence of any tax that may apply with respect to the grant or
exercise of an Option.
5.3 WRITTEN AGREEMENT. Each Option shall be embodied in a written
Option Agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Optionee and by an officer of the Company.
5.4 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or plural
shall include the other.
5.5 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of this Plan and shall
not be used in construing the terms of this Plan.
5.6 OTHER COMPENSATION. The adoption of this Plan shall not affect
any other compensation in effect for the Non-Employee Directors, nor shall this
Plan preclude the Company from establishing any other forms of compensation for
Non-Employee Directors.
5.7 OTHER OPTIONS. The grant of an Option shall not confer upon an
Optionee the right to receive any future or other Options under this Plan.
5.8 ARBITRATION OF DISPUTES. Any controversy arising out of or
relating to the Plan or an Option Agreement shall be resolved by arbitration
conducted pursuant to the arbitration rules of the American Arbitration
Association. The arbitration shall be final and binding on the parties.
5.9 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
V-1
<PAGE> 47
APPENDIX C
- --------------------------------------------------------------------------------
DANIEL INDUSTRIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14, 1998
The undersigned stockholder of Daniel Industries, Inc. (the
"Company") hereby appoints Alex Newton, James M. Tidwell and Michael
R. Yellin, or any of them, attorneys and proxies of the undersigned,
with full power of substitution, to vote, as designated on the
reverse side, the number of votes the undersigned would be entitled
to cast if personally present at the Annual Meeting of Stockholders
of the Company to be held at The Luxury Collection Hotel, 1919 Briar
Oaks Lane, Houston, Texas, at 4:00 P.M. on Thursday, May 14, 1998,
and at any adjournment thereof.
THIS PROXY WILL BE VOTED AS DIRECTED. IF YOU EXECUTE AND RETURN
THIS PROXY BUT DO NOT SPECIFY OTHERWISE, THIS PROXY WILL BE VOTED
"FOR" EACH OF THE NOMINEES LISTED HEREIN OR, IF ANY ONE OR MORE OF
THE NOMINEES BECOMES UNAVAILABLE, FOR ANOTHER NOMINEE(S) TO BE
SELECTED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3, WHICH
ARE MORE PARTICULARLY DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT,
RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED.
- --------------------------------------------------------------------------------
<PAGE> 48
- --------------------------------------------------------------------------------
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
DANIEL INDUSTRIES, INC.
RECORD DATE SHARES:
1. Election of three Class II directors.
[ ] FOR all of the nominees for Class II director listed
below.
[ ] WITHHOLD AUTHORITY to vote for election of directors.
[ ] FOR ALL EXCEPT any nominee whose name is listed on the
line below.
NOMINEES: Ronald C. Lassiter, Thomas J. Keefe, Michael M.
Carroll.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, mark the "For All Except" box and write
that person's name in the space provided above.
2. Approval of the Company's 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the Company's 1997 Non-Employee Director Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies named on the reverse side are
authorized to vote upon such other matters as may properly
come before the meeting or any adjournment thereof and upon
matters incident to the conduct of the meeting.
Date:
---------------------------
--------------------------------
Signature of Stockholder(s)
Your signature should
correspond with your name as
it appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please set forth
your full title as it appears
hereon. PLEASE MARK, SIGN, DATE
AND RETURN IMMEDIATELY. PLEASE
NOTE ANY CHANGE OF ADDRESS.
- --------------------------------------------------------------------------------
