<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
ODS NETWORKS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
ODS NETWORKS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
1101 EAST ARAPAHO ROAD
RICHARDSON, TEXAS 75081
(972) 234-6400
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1998
------------------------
To the Stockholders of
ODS NETWORKS, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Meeting") of ODS Networks, Inc. (the "Company") will be held at the Holiday Inn
Richardson Select, 1655 N. Central Expressway, Richardson, Texas, at 10:00 A.M.,
local time, on Tuesday, April 21, 1998, for the following purposes:
(1) To elect five (5) directors to serve until the next Annual Meeting of
Stockholders and until their respective successors are duly elected and
qualified;
(2) To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 1998; and
(3) To transact such other business as may properly come before the Meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The record date for determining those
stockholders who will be entitled to notice of, and to vote at, the Meeting and
at any adjournment thereof is March 2, 1998. A list of stockholders entitled to
vote at the Meeting will be available for inspection at the offices of the
Company.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
STOCKHOLDERS ARE URGED, WHETHER OR NOT THEY PLAN TO ATTEND THE MEETING, TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE. YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR
TO THE MEETING. IF YOU DECIDE TO ATTEND THE MEETING AND WISH TO CHANGE YOUR
PROXY VOTE, YOU MAY DO SO BY VOTING IN PERSON AT THE MEETING.
By Order of the Board of Directors
MICHAEL L. PAXTON
SECRETARY
Richardson, Texas
March 20, 1998
<PAGE>
ODS NETWORKS, INC.
1101 EAST ARAPAHO ROAD
RICHARDSON, TEXAS 75081
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 21, 1998
------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The enclosed proxy (the "Proxy") is being solicited on behalf of the Board
of Directors of ODS Networks, Inc. (the "Company") for use at the Annual Meeting
of Stockholders (the "Meeting") to be held at the Holiday Inn Richardson Select,
1655 N. Central Expressway, Richardson, Texas, at 10:00 A.M., local time, on
Tuesday, April 21, 1998, or at such other time and place to which the Meeting
may be adjourned. Proxies, together with copies of this Proxy Statement, are
being mailed to stockholders of the Company on or about March 20, 1998.
Execution and return of the enclosed Proxy will not affect a stockholder's
right to attend the Meeting and to vote in person. Any stockholder executing a
Proxy retains the right to revoke it at any time prior to exercise at the
Meeting. A Proxy may be revoked by delivery of written notice of revocation to
the Secretary of the Company, by execution and delivery of a later Proxy or by
voting the shares in person at the Meeting. A Proxy, when executed and not
revoked, will be voted in accordance with the instructions thereon. In the
absence of specific instructions, Proxies will be voted by those named in the
Proxy "FOR" the election as directors of those nominees named in the Proxy
Statement, "FOR" the proposal to ratify the appointment of Ernst & Young LLP as
independent auditors for the Company, and in accordance with their best judgment
on all other matters that may properly come before the Meeting.
The enclosed form of Proxy provides a method for stockholders to withhold
authority to vote for any one or more of the nominees for director while
granting authority to vote for the remaining nominees. The names of all nominees
are listed on the Proxy. If you wish to grant authority to vote for all
nominees, check the box marked "FOR." If you wish to withhold authority to vote
for all nominees, check the box marked "WITHHOLD." If you wish your shares to be
voted for some nominees and not for one or more of the others, check the box
marked "FOR" and indicate the name(s) of the nominee(s) for whom you are
withholding the authority to vote by writing the name(s) of such nominee(s) on
the Proxy in the space provided.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on March 2, 1998, will be
entitled to notice of and to vote at the Meeting. On March 2, 1998, the Company
had issued and outstanding 16,527,587 shares of Common Stock, $.01 par value
(the "Common Stock"), which is the only class of its capital stock outstanding.
QUORUM AND VOTING
The presence at the Meeting, in person or by Proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum. Each holder of Common Stock is entitled to one vote for
each share held on each matter, including the election of directors, to be voted
on at the Meeting. Assuming the presence of a quorum, the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Meeting, present in person or by Proxy, is required for the approval
of each matter submitted to the Meeting, except that in the election of
directors, the five nominees receiving the greatest number of votes shall be
deemed elected even though receiving
<PAGE>
the affirmative vote of less than a majority of the outstanding shares entitled
to be voted at the Meeting. Additionally, in the election of directors,
cumulative voting is prohibited and Proxies cannot be voted for more than five
nominees.
In the election of directors, votes that are withheld will be excluded
entirely from the vote and will have no effect. An abstention with regard to the
appointment of the independent auditors will be counted as a vote against that
proposal. Under the rules of the Nasdaq Stock Market, brokers who hold stock in
street name have the authority to vote on certain routine matters when they have
not received instructions from beneficial owners. Brokers that do not receive
instructions are entitled to vote on the election of directors and the proposal
to ratify the appointment of the Company's independent auditors. A broker
non-vote or other limited proxy as to a proposal will be counted towards a
quorum, but cannot be voted on such proposal and therefore will not be
considered a part of the vote with respect to that proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 2, 1998, unless
otherwise indicated, by (i) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii)
each director and nominee as a director of the Company, (iii) the Company's
Chief Executive Officer, (iv) each of the Company's six other most highly
compensated executive officers for fiscal 1997 and (v) the directors and
executive officers of the Company as a group. The persons and entities named in
the table have sole voting and investment power with respect to all such shares
owned by them, unless otherwise indicated.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF
OWNER OR GROUP(1) BENEFICIAL OWNERSHIP CLASS
- -------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
G. Ward Paxton(2)............................................................... 1,361,441 8.2%
T. Joe Head(3).................................................................. 2,390,160 14.3
Franklin Resources, Inc.(4)..................................................... 1,178,093 7.1
Michael L. Paxton(5)............................................................ 943,150 5.7
Mark A. Paxton(6)............................................................... 886,050 5.4
Julie Paxton Puckett(7)......................................................... 887,800 5.4
Donald M. Johnston(8)........................................................... 41,427 *
Robert Anderson(9).............................................................. 50,000 *
J. Fred Bucy(10)................................................................ 40,000 *
Eric H. Gore(11)................................................................ 37,800 *
Garry L. Hemphill(12)........................................................... 115,978 *
Joseph V. Howard(13)............................................................ 33,900 *
Timothy W. Kinnear.............................................................. 250 *
Joe W. Tucker, Jr.(14).......................................................... 34,800 *
All directors and executive officers as a group (19 persons)(15)................ 5,489,706 32.4
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the outstanding shares of
Common Stock.
(1) The addresses of the persons or entities shown in the foregoing table who
are beneficial owners of more than 5% of the Common Stock are as follows: G.
Ward Paxton, T. Joe Head and Michael L. Paxton, 1101 East Arapaho Road,
Richardson, Texas 75081; Franklin Resources, Inc., 777 Mariners Island
Blvd., P.O. Box 7777, San Mateo, California 94403; Mark A. Paxton, P.O. Box
437, Allen, Texas 75013; and Julie Paxton Puckett, P.O. Box 439, Allen,
Texas 75013.
(2) Includes 21,800 shares which G. Ward Paxton may effectively acquire upon the
exercise of options within 60 days of March 2, 1998.
2
<PAGE>
(3) Includes 17,600 shares which Mr. Head may effectively acquire upon the
exercise of options within 60 days of March 2, 1998.
(4) Shares beneficially held at December 31, 1997, by Franklin Resources, Inc.,
a parent holding company, through its subsidiaries, Templeton Investment
Counsel, Inc., Templeton Investment Management Limited, Templeton Investment
Management (Australia) Limited, and Templeton Global Advisors Limited,
investment advisors pursuant to the Investment Advisors Act, reflected by a
report on Schedule 13G dated February 3, 1998, filed with the Securities and
Exchange Commission. Voting and investment powers as to these shares are
shared among these entities.
(5) Includes 40,200 shares which Michael L. Paxton may effectively acquire upon
the exercise of options within 60 days of March 2, 1998. Includes 29,400
shares held by Mr. Paxton as trustee for the benefit of his minor children
as to which beneficial ownership is disclaimed by Mr. Paxton. Also includes
13,950 shares held by Mr. Paxton as trustee for the benefit of the minor
children of Mark A. Paxton as to which beneficial ownership is disclaimed by
Mr. Paxton.
(6) Includes 8,000 shares deemed to be beneficially owned by Mark A. Paxton and
44,100 shares held by Mr. Paxton as trustee for the benefit of his minor
children, as to which beneficial ownership is disclaimed by Mr. Paxton. Also
includes 7,900 shares held by Mr. Paxton as trustee for the benefit of the
minor children of Michael L. Paxton as to which beneficial ownership is
disclaimed by Mr. Paxton.
(7) Includes 58,800 shares held by Julie Paxton Puckett as trustee for the
benefit of her minor children as to which beneficial ownership is disclaimed
by Mrs. Puckett.
(8) Includes 16,000 shares which Mr. Johnston may acquire upon the exercise of
options within 60 days of March 2, 1998.
(9) Represents shares which Mr. Anderson may acquire upon the exercise of
options within 60 days of March 2, 1998.
(10) Includes 26,000 shares which Mr. Bucy may acquire upon the exercise of
options within 60 days of March 2, 1998.
(11) Represents shares which Mr. Gore may effectively acquire upon the exercise
of options within 60 days of March 2, 1998.
(12) Includes 33,200 shares which Mr. Hemphill may effectively acquire upon the
exercise of options within 60 days of March 2, 1998.
(13) Includes 33,300 shares which Mr. Howard may effectively acquire upon the
exercise of options within 60 days of March 2, 1998.
(14) Represents shares which Mr. Tucker may effectively acquire upon the
exercise of options within 60 days of March 2, 1998.
(15) Includes an aggregate of 418,960 shares which may be effectively acquired
upon the exercise of options within 60 days of March 2, 1998. Includes 5,000
shares held by the spouse of an officer, the beneficial ownership of which
shares such officer disclaims. Also, includes 2,000 shares deemed
beneficially owned by an officer whose spouse may acquire such shares upon
exercise of options within 60 days of March 2, 1998, the beneficial
ownership of which shares such officer disclaims.
ELECTION OF DIRECTORS
The Company's Board of Directors for the ensuing year will consist of five
directors who are each to be elected at the Meeting for a term of office
expiring at the next Annual Meeting of Stockholders or until their respective
successors have been elected and qualified. It is intended that the persons
named in the following table will be nominated as directors of the Company and
that the persons named in the
3
<PAGE>
accompanying Proxy, unless otherwise directed, will vote for the election of
such nominees at the Meeting. Each of the nominees has indicated his willingness
to serve as a member of the Board of Directors, if elected; however, in the
event any nominee shall become unavailable for election to the Board of
Directors for any reason not presently known or contemplated, the Proxy holders
will be vested with discretionary authority in such instance to vote the
enclosed Proxy for such substitute as the Board of Directors shall designate.
The following slate of five nominees has been nominated by the Board of
Directors:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION(S) SINCE
- ----------------------------------------------- --- ----------------------------------------------- -----------
<S> <C> <C> <C>
G. Ward Paxton................................. 62 Chairman of the Board, President, Chief 1983
Executive Officer and Director
Robert Anderson (1)(2)......................... 77 Director 1988
J. Fred Bucy (1)(2)............................ 69 Director 1993
T. Joe Head.................................... 41 Senior Vice President and Director 1983
Donald M. Johnston (1)(2)...................... 48 Director 1983
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
G. WARD PAXTON is co-founder of the Company and has served as Chairman of
the Board, President, Chief Executive Officer and a director since the Company's
inception in September 1983 and served as Chief Financial Officer from 1983
until 1994. Prior to founding the Company, Mr. Paxton was Vice President of
Honeywell Optoelectronics, a division of Honeywell, Inc., from 1978 to 1983.
From 1969 to 1978, Mr. Paxton was Chairman of the Board, President, Chief
Executive Officer and founder of Spectronics, Inc., which was acquired by
Honeywell, Inc. in 1978. Prior to founding Spectronics, Inc., Mr. Paxton held
various managerial and technical positions at Texas Instruments Incorporated
from 1959 to 1969. Mr. Paxton holds Ph.D., M.S. and B.S. degrees in Physics from
the University of Oklahoma. Mr. Paxton holds no other directorships.
ROBERT ANDERSON has served as a director of the Company since 1988. Mr.
Anderson is currently Chairman Emeritus of Rockwell International Corp.
("Rockwell"). He was Chairman of the Board of Rockwell from 1979 to 1988, its
Chief Executive Officer from 1974 to 1988, and a director until February 1993.
Prior to joining Rockwell, Mr. Anderson served 22 years with Chrysler
Corporation, becoming Vice President and General Manager of the
Chrysler-Plymouth Division in 1965. Mr. Anderson currently is a director of
Timken Corporation, Gulfstream Aerospace, Aftermarket Technology Corporation and
Motor Cargo, Inc.
J. FRED BUCY has served as a director of the Company since 1993. Mr. Bucy
was employed in various technical and managerial capacities by Texas Instruments
Incorporated ("TI") from 1953 through his retirement in 1985. At the time of his
retirement, Mr. Bucy was President, Chief Executive Officer and a director of
TI. Among other activities, Mr. Bucy is a director of Thomas Group, Inc.
(consulting services); a member of the Coordinating Board Advisory Committee on
Research of the Texas College and University System; a Trustee of Southwest
Research Institute; a former member of the Board of Regents of Texas Tech
University and Texas Tech University Health Sciences Center from 1973 to 1991,
including four years as its Chairman; and currently (re-appointed by Governor
George W. Bush in 1995) Chairman of the Texas National Research Laboratory
Commission. Mr. Bucy has been accorded Distinguished Alumnus and Distinguished
Engineer Awards by Texas Tech University, is a fellow of the Institute of
Electrical and Electronics Engineers, a member of National Academy of Engineers,
and is a life member of the Navy League. Mr. Bucy was awarded an honorary Doctor
of Science degree from Texas Tech University in 1994.
4
<PAGE>
T. JOE HEAD is co-founder of the Company and has served as Senior Vice
President and a director since its inception in September 1983. Prior to
co-founding the Company, Mr. Head held the positions of Product Marketing
Manager and Marketing Engineer of Honeywell Optoelectronics from 1980 to 1983.
Mr. Head holds a B.S. degree in Electrical Engineering from Texas A & M
University. Mr. Head holds no other directorships.
DONALD M. JOHNSTON has served as a director of the Company since November
1983. Mr. Johnston is President and Chief Executive Officer of Massey Burch
Capital Corp., a venture capital firm focusing on investments in the South. He
served as President of Massey Burch Investment Group, Inc., a venture capital
firm ("Massey Burch"), from 1990 until December 1993, and he has been a
principal of that firm since 1982. Prior to joining Massey Burch, Mr. Johnston
was the President of InterFirst Venture Corporation, a venture capital
subsidiary of Interfirst Bancshares, Inc., and the Executive Director of First
Dallas, Ltd., a corporate finance group in London, England. Mr. Johnston holds a
B.A. degree from Vanderbilt University and an M.B.A. degree from Southern
Methodist University. Mr. Johnston is not a director of any other publicly-held
company.
All directors of the Company hold office until the next ensuing annual
meeting of stockholders and until their respective successors are duly elected
and qualified. All officers of the Company are elected annually by the Board of
Directors and serve at the discretion of the Board. G. Ward Paxton is the father
of Michael L. Paxton, who serves as an executive officer of the Company in the
capacity of Vice President and Secretary. Steven D. Thompson who serves as an
executive officer of the Company in the capacity of Vice President of Software
Engineering is the brother-in-law of Kandis L. Tate Thompson, who serves as an
executive officer of the Company in the capacity of Controller-Finance and
Accounting. There are no other family relationships between any director or
officer of the Company and any other such person.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF SUCH
NOMINEES.
BOARD OF DIRECTORS AND COMMITTEES
The business affairs of the Company are managed under the direction of the
Board of Directors. The Board meets on a regularly scheduled basis during the
fiscal year of the Company to review significant developments affecting the
Company and to act on matters requiring Board approval. It also holds special
meetings as required from time to time when important matters arise requiring
Board action between scheduled meetings. The Board of Directors or its
authorized committees met nineteen times during the 1997 fiscal year. During
fiscal year 1997, each incumbent director participated in at least 75% or more
of the aggregate of (i) the total number of meetings of the Board of Directors
(held during the period for which he was a director) and (ii) the total number
of meetings of all committees of the Board on which he served (during the period
that he served).
The Board of Directors has established Audit and Compensation Committees to
devote attention to specific subjects and to assist it in the discharge of its
responsibilities. The functions of these committees, their current members and
the number of meetings held during fiscal year 1997 are described below.
AUDIT COMMITTEE. The Audit Committee recommends to the Board of Directors
the appointment of the firm selected to be independent auditors for the Company
and monitors the performance and independence of such firm; reviews and approves
the scope of the annual audit and quarterly reviews and evaluates with the
independent auditors the Company's annual audit and annual consolidated
financial statements; reviews with management the status and effectiveness of
internal accounting controls; and evaluates all public financial reporting
documents of the Company. Donald M. Johnston (Chairman), Robert Anderson and J.
Fred Bucy are members of the Audit Committee. The Audit Committee met five times
during the 1997 fiscal year.
5
<PAGE>
COMPENSATION COMMITTEE. The Compensation Committee is empowered to review
and advise management and make recommendations to the Board of Directors with
respect to the compensation and other employment benefits of executive officers
and key employees of the Company. The Compensation Committee also administers
the Company's Incentive Stock Option Plans (the "Stock Option Plans") for
officers and key employees and the Company's incentive bonus programs for
executive officers and salaried non-sales employees. The Compensation Committee
is authorized, among other powers, to determine from time to time the
individuals to whom options shall be granted, the number of shares to be covered
by each option and the time or times at which options shall be granted pursuant
to the Stock Option Plans. The Compensation Committee is currently comprised of
Messrs. Anderson (Chairman), Bucy and Johnston. The Compensation Committee met
seven times during the 1997 fiscal year.
The Company does not have a nominating committee. The functions customarily
attributable to a nominating committee are performed by the Board of Directors
as a whole.
PROPOSAL TO RATIFY THE APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP, independent public
accountants, to serve as independent auditors of the Company and to audit its
consolidated financial statements for fiscal year 1998, subject to approval by
stockholders at the Meeting. Ernst & Young LLP, has served as the Company's
independent auditors since the Company's inception and is, therefore, familiar
with its affairs and financial procedures. To the knowledge of management of the
Company, neither such firm nor any of its members has any direct or material
indirect financial interest in the Company, nor any connection with the Company
in any capacity other than as independent auditors.
Although stockholder ratification and approval of this appointment is not
required by law or otherwise, in keeping with the Company's policy that its
stockholders should be entitled to a voice in this regard and as a matter of
good corporate practice, the Board of Directors is seeking ratification of this
appointment. If the appointment is not ratified, the Board of Directors must
then determine whether to appoint other auditors prior to the end of the current
fiscal year, and in such case, the opinions of stockholders will be taken into
consideration.
The following resolution concerning the ratification of the appointment of
independent auditors will be submitted to the Meeting:
"RESOLVED, that the appointment by the Board of Directors of the Company of
Ernst & Young LLP, independent auditors, to audit the consolidated financial
statements and related books, records, and accounts of the Company and its
subsidiaries for the fiscal year ending December 31, 1998, is hereby
ratified."
A representative of Ernst & Young LLP, the Company's independent auditors
for fiscal year 1997, is expected to be in attendance at the Meeting and will be
afforded the opportunity to make a statement. The representative will also be
available to respond to appropriate questions.
The enclosed Proxy will be voted as specified, but if no specification is
made, it will be voted in favor of the adoption of the resolution of
ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information regarding all cash
compensation paid or to be paid by the Company or any of its subsidiaries, as
well as other compensation paid or accrued, during the fiscal years indicated,
to the Company's Chief Executive Officer and each of the Company's six other
most highly compensated executive officers for such respective periods in all
capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------------
----------------------------------------- SECURITIES PAYOUTS
OTHER ANNUAL RESTRICTED UNDERLYING -----------
BONUS COMPENSATION STOCK OPTIONS/SARS LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2) AWARD(S) ($) (#)(3) PAYOUTS ($)
- ------------------------------- --------- ----------- --------- ----------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
G. Ward Paxton ................ 1997 $ 325,000 -- -- -- 26,000 --
Chairman of the Board, 1996 325,000 -- -- -- 17,500 --
President and Chief Executive 1995 250,000 165,400 -- -- 16,000 --
Officer
T. Joe Head ................... 1997 245,000 -- -- -- 21,000 --
Senior Vice President 1996 245,000 -- -- -- 14,000 --
1995 190,000 125,742 -- -- 13,000 --
Eric H. Gore .................. 1997 90,000 97,801 -- -- 10,000 --
Vice President--Strategic 1996 80,000 136,658 -- -- 16,000 --
Business Development 1995 75,000 199,686 -- -- 8,000 --
Garry L. Hemphill ............. 1997 205,000 -- -- -- 15,000 --
Vice President--Operations 1996 195,000 -- -- -- 10,000 --
1995 160,000 84,704 -- -- 10,000 --
Joseph V. Howard .............. 1997 105,000 111,584 -- -- 15,000 --
Vice President--North 1996 90,000 237,338 -- -- 18,000 --
American Sales 1995 80,000 123,688 -- -- 8,000 --
Timothy W. Kinnear ............ 1997 205,000 -- -- -- 15,000 --
Vice President and Chief 1996 195,000 -- -- -- 20,000 --
Financial Officer(5) 1995 -- -- -- -- -- --
Joe W. Tucker ................. 1997 105,000 77,000 -- -- 15,000 --
Jr., Vice President-- 1996 195,000 -- -- -- 18,000 --
International Sales 1995 160,000 84,704 -- -- 10,000 --
<CAPTION>
ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION ($)(4)
- ------------------------------- ---------------
<S> <C>
G. Ward Paxton ................ $ 1,600
Chairman of the Board, 1,500
President and Chief Executive 1,080
Officer
T. Joe Head ................... 1,600
Senior Vice President 1,500
1,080
Eric H. Gore .................. 1,600
Vice President--Strategic 1,500
Business Development 1,080
Garry L. Hemphill ............. 1,600
Vice President--Operations 1,500
1,080
Joseph V. Howard .............. 1,600
Vice President--North 1,500
American Sales 1,065
Timothy W. Kinnear ............ 1,600
Vice President and Chief --
Financial Officer(5) --
Joe W. Tucker ................. --
Jr., Vice President-- --
International Sales --
</TABLE>
- ------------------------------
(1) Includes incentive bonus payments earned for services rendered to the
Company in the year indicated that were paid in the following year, except
as to Mr. Gore, Mr. Howard and Mr. Tucker whose bonus compensation was paid
in substantial part in the year indicated.
(2) Excludes certain incidental perquisites, the total of which did not exceed
the lesser of $50,000 or 10% of cash compensation for any named individual.
(3) Incentive stock options to acquire shares of Common Stock issued pursuant to
the Company's Stock Option Plans. Options granted in 1996 and 1997 to
Messrs. Gore, Mr. Hemphill, Mr. Howard, Mr. Kinnear and Mr. Tucker were
exchanged on January 30, 1998 pursuant to the stock option exchange program
described in the section of this Proxy Statement entitled "Exchange of Stock
Options Subsequent to December 31, 1997".
(4) This amount consists of the annual employer matching payments to the
Company's qualified 401(k) Savings Plan.
(5) Information included in the Summary Compensation Table as to Mr. Kinnear's
1996 salary compensation reflects the annualized amount of such compensation
as if he had been employed in such capacity for the entire 1996 fiscal year.
Mr. Kinnear actually earned and was paid $56,875 in salary from his date of
initial employment, September 16, 1996, until the end of the 1996 fiscal
year.
7
<PAGE>
OPTION GRANTS DURING FISCAL YEAR 1997
The following table provides information related to options to acquire
shares of Common Stock granted to the named executive officers of the Company
during fiscal year 1997. The Company does not have any outstanding stock
appreciation rights ("SARs").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/ SAR'S EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------------------- -------------- ------------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
G. Ward Paxton..................... 26,000(2) 4.30% $ 15.27(4) 1/23/02 $ 63,564 $ 184,181
T. Joe Head........................ 21,000(2) 3.47 15.27(4) 1/23/02 51,341 148,761
Eric H. Gore....................... 10,000(3) 1.65 13.88(5) 1/23/07 87,291 221,211
Garry L. Hemphill.................. 15,000(3) 2.48 13.88(5) 1/23/07 130,936 331,817
Joseph V. Howard................... 15,000(3) 2.48 13.88(5) 1/23/07 130,936 331,817
Timothy W. Kinnear................. 15,000(3) 2.48 13.88(5) 1/23/07 130,936 331,817
Joe W. Tucker Jr................... 15,000(3) 2.48 13.88(5) 1/23/07 130,936 331,817
</TABLE>
- --------------------------
(1) The potential realizable value illustrates the value that may be realized
upon exercise of the options immediately prior to the expiration of their
respective terms, assuming the specified compounded rates of appreciation of
the Company's Common Stock over the term of each option. These values do not
take into account provisions of each option providing for termination of the
option following cessation of employment, nontransferability or effective
vesting over five years.
(2) Incentive stock options to acquire shares of Common Stock granted pursuant
to the Company's Stock Option Plans, each for a term of five years from date
of grant. Each option effectively vests and is exercisable with respect to
20% of the shares covered thereby on each anniversary date thereof in 1998
through 2002, is nontransferable and is subject to termination under certain
conditions upon cessation of employment of the optionee.
(3) Incentive stock options to acquire shares of Common Stock granted pursuant
to the Company's Stock Option Plans, each of which was for a term of ten
years from date of grant, effectively vested and was exercisable with
respect to 20% of the shares covered thereby on each anniversary date
thereof, was nontransferable and subject to termination under certain
conditions upon cessation of employment of the optionee, were exchanged on
January 30, 1998 pursuant to the stock option exchange program described in
the section of this Proxy Statement entitled "Exchange of Stock Options
Subsequent to December 31, 1997".
(4) The exercise price per share of each option was equal to 110% of the fair
market value of the Common Stock per share on the date of grant.
(5) The exercise price per share of each option was equal to 100% of the fair
market value of the Common Stock per share on the date of grant.
OPTION EXERCISES AND FISCAL YEAR END HOLDINGS
The following table sets forth information with respect to options exercised
by the named executives of the Company during fiscal year 1997 and the number
and value of options held at fiscal year end.
8
<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FY-END(#)(2) AT FY-END($)(1)(2)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. Ward Paxton.............. -- -- 9,900 49,600 -- --
T. Joe Head................. -- -- 8,000 40,000 -- --
Eric H. Gore................ -- -- 37,400 31,600 $ 90,000 $ 33,840
Garry L. Hemphill........... -- -- 26,800 38,600 23,736 2,608
Joseph V. Howard............ -- -- 33,300 38,200 72,020 --
Timothy W. Kinnear.......... -- -- 4,000 31,000 -- --
Joe W. Tucker, Jr........... -- -- 30,000 45,000 5,184 2,592
</TABLE>
- --------------------------
(1) The closing price for the Company's Common Stock as reported by The Nasdaq
Stock Market (National Market System) on December 31, 1997, was $6.44 per
share. The indicated value is calculated on the basis of the difference
between the option exercise price per share and $6.44, multiplied by the
number of shares of Common Stock underlying each "in-the-money" option.
(2) Except as to Messrs. Paxton and Head, certain of the incentive stock options
shown as exercisable and unexercisable by the other named executives were
exchanged pursuant to the Company's stock option exchange program described
in the section of this Proxy Statement entitled "Exchange of Stock Options
Subsequent to December 31, 1997".
EXCHANGE OF STOCK OPTIONS SUBSEQUENT TO DECEMBER 31, 1997
On January 21, 1998, the Compensation Committee of the Board of Directors
approved a stock option exchange program (the Exchange Program), pursuant to
which certain employees and officers holding incentive stock options (i) awarded
under the Company's 1987 Incentive Stock Option Plan in 1997 and (ii) awarded
prior to December 31, 1997, under to the Company's 1995 Stock Option Plan (the
1995 Plan), were given the opportunity to exchange such options (Existing
Options) for new options (New Options), based on the fair market value of the
Company's Common Stock at the close of business on January 30, 1998. All
directors of the Company, including G. Ward Paxton, President and Chief
Executive Officer, and T. Joe Head, Senior Vice President, were ineligible to
participate in the Exchange Program.
As a result of significant declines in the market value of the Company's
Common Stock since issuance of the Existing Options, the Existing Options were
exercisable at prices which substantially exceeded the market value of the
Common Stock. In approving the Exchange Program and in keeping with the
Company's philosophy of utilizing equity incentives to motivate and retain
qualified employees, the Compensation Committee acknowledged that retention and
attraction of qualified employees are critical to the Company's success and its
ability to continue to meet its performance objectives. Additionally,
recognizing that stock options constitute a significant component of the
Company's compensation structure, the Compensation Committee deemed it important
to regain the incentive intended to be provided by the New Options to purchase
shares of the Company's Common Stock and therefore serve as a significant factor
in the Company's ability to continue to attract and retain the services of
superior quality personnel.
9
<PAGE>
Pursuant to the Exchange Program, eligible holders of the Existing Options
were offered the opportunity to exchange, on a share-for-share basis, such
options for New Options having an exercise price of $7.50 per share, the fair
market value of the Company's Common Stock on the exchange date of January 30,
1998. Each New Option was awarded under the 1995 Plan and vests and is
exercisable with respect to 20% of the shares covered thereby on each
anniversary date thereof. Eligible employees holding Existing Options for an
aggregate of 646,800 shares of Common Stock with an average per share exercise
price of approximately $15.87 elected to participate in the Exchange Program and
were issued New Options covering the same aggregate number of underlying shares
as they had held pursuant to their respective Existing Options. Other than the
new exercise price and the commencement of a new vesting schedule, the option
agreements relating to the New Options are substantially identical to the option
agreements of the Existing Options they replaced.
COMPENSATION OF DIRECTORS
Each non-employee director receives an annual cash retainer fee of $12,000,
plus a fee of $1,500 for each meeting of the Board of Directors attended
(exclusive of telephonic meetings) and for each meeting of a committee of the
Board of Directors attended (exclusive of committee meetings held on the same
day as Board meetings). Each non-employee director is also reimbursed for all
reasonable expenses incurred in attending such meetings. No director who is an
employee of the Company receives any fees for service as a director or member of
any committee of the Board.
Each of the Company's non-employee directors is eligible to receive stock
options under the 1995 Non-Employee Directors Stock Option Plan for 20,000
shares of Common Stock on the fifth anniversary following the date of the most
recent grant under such plan, assuming such non-employee director is then in
office. Initial grants of stock options under this plan were awarded on April
27, 1995, to Messrs. Anderson, Bucy and Johnston, current non-employee directors
of the Company. Options granted pursuant to the Plan provide for an exercise
price per share equal to 100% of the fair market value per share on the date of
the grant, have a term of ten years, and are subject to a five-year vesting
schedule and certain other conditions.
EMPLOYMENT AGREEMENTS
Neither the Company nor its subsidiaries has any employment agreements with
any of its executives.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Compensation Committee of the Board of Directors sets the
compensation for the Chief Executive Officer, reviews the design, administration
and effectiveness of the compensation programs for other key executives, and
approves stock option grants for all executive officers. The Compensation
Committee is currently composed of three independent, non-employee directors who
have no interlocking relationships. The data and information included in the
various compensation tables appearing elsewhere in this Proxy Statement should
be read in conjunction with and deemed to be a part of this report.
NAMED EXECUTIVES. This report includes disclosure of the required
compensation information for the Company's Chief Executive Officer and its six
other most highly compensated officers (collectively, the "Named Executives").
COMPENSATION OBJECTIVES. The Company operates in the highly competitive and
rapidly changing high technology industry. The Compensation Committee believes
that the compensation programs for executive officers of the Company should be
designed to attract, motivate and retain talented executives who contribute to
the success of the Company and should be determined within a competitive
framework based on the achievement of overall business objectives and financial
performance and individual contributions. Within this framework, the Committee's
objectives are to:
10
<PAGE>
- Provide a total compensation program competitive with the compensation
practices of organizations in the high technology industry of comparable
size to the Company.
- Provide annual variable incentive awards based on the Company's overall
financial performance relative to corporate objectives.
- Align the financial interests of executive officers with those of
stockholders by providing equity-based incentives.
BASE SALARY. The salaries of the executive officers, including the Chief
Executive Officer, are determined annually by the Committee with reference to
(i) salaries paid to executives with similar responsibilities at comparable
companies, primarily in the high technology industry, (ii) each officer's
performance and (iii) the Company's overall financial results, without specific
weighting being attributed to any of these factors. The Compensation Committee
believes that the Company must offer salaries within a competitive market range
to attract and retain talented executives. However, the Compensation Committee
manages salaries for the executive group as a whole in a conservative fashion in
order to place more emphasis on incentive compensation. For 1997, the
Compensation Committee established the base salaries for each of the Named
Executives as indicated in the tables accompanying this report.
INCENTIVE BONUS PLAN. To reinforce the attainment of corporate objectives,
the Compensation Committee believes that a substantial portion of the potential
annual compensation of each executive officer should be in the form of variable
incentive pay. The incentive cash bonus program for executives is established
annually by the Compensation Committee based upon the Company's achievement of
sales and net income targets established at the beginning of the fiscal year.
The incentive plan for executives, other than certain executives in the
Company's sales organization, requires a threshold level of Company financial
performance before any incentives are awarded. Once the threshold objective for
net income of a fiscal year is reached, specific formulas are in place to
calculate the actual incentive payment for each executive for such year. In
fiscal 1997, the Company did not achieve its threshold level of profitability;
thus, non-sales executives, including the Chief Executive Officer and three of
the other Named Executives, did not receive any incentive bonus awards. Certain
executives in the sales organization, including three of the Named Executives,
received incentive sales commission awards in fiscal 1997 based upon the degree
of achievement of targeted sales objectives established at the beginning of the
fiscal year.
EQUITY-BASED INCENTIVES. The goal of the Company's equity-based incentive
awards is to align the interests of executive officers with stockholders. The
Committee determines the value allocated to equity-based incentives according to
each executive's position within the Company, individual performance,
contributions to achievement of corporate objectives and related factors, and
awards stock options to create a meaningful opportunity for stock ownership.
The Company has previously adopted three Stock Option Plans (collectively,
the "Plans"), including the 1983 Incentive Stock Option Plan, the 1987 Incentive
Stock Option Plan and the 1995 Stock Option Plan, to provide long-term incentive
compensation for eligible participants. Generally, executive officers and other
key employees of the Company and its subsidiaries are eligible to participate in
the Plans; however, non-employee directors of the Company are not eligible to
participate in these Plans. Stock option grants under the Plans provide the
right to purchase shares of the Company's Common Stock at fair market value on
the date of grant, or in the case of an optionee who at the time of the grant
holds more than 10% of the total combined voting securities of the Company, 110%
of the fair market value on the date of grant. Stock options generally vest
within a five year period and provide terms of five or ten years, as applicable.
In 1997, the Compensation Committee and the Board of Directors approved the
grant of stock options pursuant to the Plans to the Named Executives indicated
in the tables accompanying this report.
CEO COMPENSATION. The annual base salary for G. Ward Paxton for fiscal 1997
was established by the Compensation Committee based on Mr. Paxton's personal
performance of his duties and on salary
11
<PAGE>
levels paid to chief executive officers of comparable companies. Mr. Paxton did
not receive an incentive bonus award for 1997 because the Company did not
achieve its threshold level of profitability established at the beginning of the
year. The option grant made to Mr. Paxton in fiscal 1997 was based upon his
performance and leadership with the Company.
Respectfully submitted,
COMPENSATION COMMITTEE
of the Board of Directors
Robert Anderson, CHAIRMAN
Donald M. Johnston
J. Fred Bucy
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member or nominee for election as a member of the Board of Directors or
any committees of the Board has an interlocking relationship with the board (or
member of such board) or any committee (or member of such committee) of a board
of any other company.
STOCK PERFORMANCE INFORMATION
The following chart illustrates the percentage of change in the cumulative
total stockholder return on the Company's Common Stock for the applicable
portion of the fiscal year ended December 31, 1992 (since the Company's initial
public offering of Common Stock) and each of the five fiscal years in the five-
year period ended December 31, 1997, compared with the cumulative total return
on the Center for Research in Securities Prices ("CRSP") Total Return Index for
The Nasdaq Stock Market and the CRSP Total Return Index for Nasdaq Computer
Manufacturing Stocks, respectively, for the same periods.
STOCK PERFORMANCE*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRSP TOTAL RTN. INDEX FOR CRSP TOTAL RTN. INDEX FOR
<S> <C> <C> <C>
ODS Networks, Inc. The Nasdaq Stock Market Nasdaq Computer Mfg. Stocks
5/21/92 $100.00 $100.00 $100.00
12/31/92 $194.44 $117.51 $125.29
12/31/93 $152.78 $134.26 $118.34
12/31/94 $323.61 $131.34 $130.16
12/31/95 $561.11 $190.04 $204.83
12/31/96 $266.66 $233.92 $272.62
12/31/97 $143.11 $287.17 $329.79
</TABLE>
12
<PAGE>
- ------------------------
* The comparison assumes (i) $100 was invested on May 21, 1992 (the effective
date of the Company's initial public offering of Common Stock) in the
Company's Common Stock and in each of the foregoing indices and (ii) that
any dividends paid by companies included in the comparative indices were
reinvested in additional shares of the same class of equity securities of
such companies at the frequency with which dividends were paid during the
applicable periods depicted.
The stock performance information depicted in the foregoing chart is not
necessarily indicative of future stock performance. The chart shall not be
deemed to be incorporated by reference in any filing by the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), except to the extent that the Company specifically
incorporates such information by reference.
CERTAIN TRANSACTIONS
On December 12, 1997, the Company loaned Jerry W. Pate, an executive officer
of the Company, the principal sum of $79,000 for a term maturing on June 30,
1998. The non-interest bearing loan is secured by certain personal property and
had a principal balance of $78,000 at March 2, 1998.
The Company has entered into indemnification agreements with each of its
directors and executive officers to provide them with the maximum
indemnification allowed pursuant to its certificate of incorporation, bylaws and
applicable law.
COMPLIANCE WITH SECTION 16 REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission (the "SEC").
Such persons are required by SEC regulation promulgated pursuant to the Exchange
Act to furnish the Company with copies of all Section 16(a) report forms they
file with the SEC.
Based solely on its review of the copies of such report forms received by it
with respect to fiscal year 1997, the Company believes that all filing
requirements applicable to its directors, officers and persons who own more than
10% of a registered class of the Company's equity securities have been timely
complied with in accordance with Section 16(a) of the Exchange Act.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at subsequent annual meetings of the Company consistent with Rule 14a-8
promulgated under the Exchange Act. For such proposals to be considered for
inclusion in the Proxy Statement and Proxy relating to the 1999 Annual Meeting
of Stockholders, such proposals must be received by the Company not later than
November 20, 1998. Such proposals should be directed to ODS Networks, Inc., 1101
East Arapaho Road, Richardson, Texas 75081, Attention: Secretary (telephone:
(972) 234-6400; telecopy: (972) 234-1467).
EXPENSES OF SOLICITATION
All costs incurred in the solicitation of Proxies for the Meeting will be
borne by the Company. In addition to the solicitation by mail, officers and
employees of the Company may solicit Proxies by telephone, telefax, or
personally, without additional compensation. The Company may also make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the beneficial
owners of shares of Common Stock held of record by such persons, and the Company
may reimburse such brokerage houses and other custodians, nominees and
fiduciaries
13
<PAGE>
for their out-of-pocket expenses incurred in connection therewith. In addition,
ChaseMellon Shareholder Services LLC has been retained by the Company to aid in
the solicitation of Proxies and will solicit Proxies by mail, telephone, telefax
and personal interview and may request brokerage houses and nominees to forward
soliciting material to beneficial owners of Common Stock. For these services,
ChaseMellon Shareholder Services LLC will be paid fees not to exceed $4,000,
plus expenses.
ADDITIONAL INFORMATION AVAILABLE
UPON THE WRITTEN REQUEST OF ANY STOCKHOLDER, THE COMPANY WILL FURNISH,
WITHOUT CHARGE, A COPY OF THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K, AS
FILED WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO.
THE REQUEST SHOULD BE DIRECTED TO THE SECRETARY AT THE COMPANY'S OFFICES
INDICATED ABOVE.
The Company's 1997 Annual Report to Stockholders accompanies this Proxy
Statement. The Annual Report, which includes financial statements, does not form
and is not to be deemed part of this Proxy Statement.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors and
management are not aware of any other matter, other than those described herein,
which will be presented for consideration at the Meeting. Should any other
matter requiring a vote of the stockholders properly come before the Meeting or
any adjournment thereof, the enclosed Proxy confers upon the persons named in
and entitled to vote the shares represented by such Proxy discretionary
authority to vote the shares represented by such Proxy in accordance with their
best judgment in the interest of the Company on such matters. The persons named
in the enclosed Proxy also may, if it is deemed advisable, vote such Proxy to
adjourn the Meeting from time to time.
PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
MICHAEL L. PAXTON
SECRETARY
Richardson, Texas
March 20, 1998
14
<PAGE>
P ODS NETWORKS, INC.
1101 EAST ARAPAHO ROAD
R RICHARDSON, TEXAS 75081
O ANNUAL MEETING OF STOCKHOLDERS--APRIL 21, 1998
X THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
Y The undersigned stockholder(s) of ODS Networks, Inc., a Delaware
corporation (the "Company"), hereby appoints G. Ward Paxton and T. Joe
Head, and each of them, attorneys-in-fact and proxies of the undersigned,
with full power of substitution, to represent and to vote all shares of
common stock of the Company which the undersigned is entitled to vote at
the Annual Meeting of Stockholders to be held at the Holiday Inn Richardson
Select, 1655 N. Central Expressway, Richardson, Texas 75080, at 10:00 A.M.,
local time, on Tuesday, April 21, 1998 and at any adjournment thereof.
(CONTINUED ON REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE>
PROXY WILL BE VOTED "FOR" PROPOSALS 1 AND 2. Mark
your votes as
indicated in X
this example
<TABLE>
<S> <C> <C> <C>
1. Election of Directors Nominees: G. Ward Paxton, Robert Anderson, J. Fred Bucy,
T. Joe Head, and Donald M. Johnston
FOR all nominees WITHHOLD INSTRUCTION: To withhold authority to vote for any individual
(except as marked AUTHORITY nominee, write that nominee's name in the space provided below.
to the contrary) to vote for all nominees
---------------------------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP as In their discretion, such attorneys-in-fact and
independent auditors of the Company for the fiscal year proxies are authorized to vote upon such other
ending December 31, 1998. business as properly may come before the meeting.
FOR AGAINST ABSTAIN I will will not be attending the meeting
YOU ARE REQUESTED TO COMPLETE, DATE, SIGN,
------ AND RETURN THIS PROXY PROMPTLY. ALL JOINT
| OWNERS MUST SIGN. PERSONS SIGNING AS
| EXECUTORS, ADMINISTRATORS, TRUSTEES, CORPORATE
| OFFICERS, OR IN OTHER REPRESENTATIVE CAPACITIES
SHOULD SO INDICATE.
Date: 1998
----------------------------,
----------------------------------------
Signature
----------------------------------------
Signature
FOLD AND DETACH HERE
</TABLE>
