BUTLER INTERNATIONAL, INC.
110 Summit Avenue
Montvale, New Jersey 07645
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 6, 1999
The Annual Meeting of Stockholders of BUTLER INTERNATIONAL, INC. will
be held at its headquarters facility at 110 Summit Avenue, Montvale, New Jersey
on Thursday, May 6, 1999 at 4:00 p.m. for the following purposes:
1. To elect one director to hold office for a term of five years.
2. To vote on a proposal to increase the authorized number of shares of
Preferred Stock.
3. To vote on a proposal to amend and restate the 1992 Employee Stock Plans (i)
by increasing the aggregate number of shares of the Company's Common Stock that
may be subject to option under the Employee Stock Plans; and (ii) by limiting
the number of shares of the Company's Common Stock that may be granted to any
one employee under the Employee Stock Plans in order to comply with Section
162(m) of the Internal Revenue Code of 1986, as amended.
4. To vote on a proposal to approve the Performance Bonus Plan for the President
and Chief Executive Officer of the Company to qualify such plan under Section
162(m) of the Internal Revenue Code of 1986, as amended.
5. To vote on a proposal to amend the 1992 Stock Option Plan for Non-Employee
Directors.
6. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Only holders of record of the Common Stock and the 7% Series B
cumulative convertible Preferred Stock at the close of business on March 25,
1999 are entitled to notice of, and to vote at, this meeting or any adjournment
or adjournments thereof.
By Order of the Board of Directors,
Warren F. Brecht
Secretary
Montvale, New Jersey
April 6, 1999
- --------------------------------------------------------------------------------
If you cannot personally attend the meeting, it is earnestly requested that you
promptly indicate your vote on the issues included on the enclosed proxy and
date, sign and mail it in the enclosed self-addressed envelope, which requires
no postage if mailed in the United States. Doing so will save the Company the
expense of further mailings. If you sign and return your proxy card without
marking choices, it will be understood that you wish to have your shares voted
in accordance with the recommendations of the Board of Directors.
- --------------------------------------------------------------------------------
<PAGE>
BUTLER INTERNATIONAL, INC.
110 Summit Avenue
Montvale, NJ 07645
April 6, 1999
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Butler
International, Inc., a Maryland corporation (the "Company"). Unless instructed
to the contrary on the proxy, it is the intention of the persons named in the
proxy to vote the proxies FOR the election as a director of the nominee listed
below for a term expiring in 2004; FOR the proposal to increase the authorized
number of shares of preferred stock from 5,000,000 to 10,000,000; FOR the
proposal to amend and restate the 1992 Employee Stock Plans (i) by increasing
the aggregate number of shares of the Company's Common Stock that may be subject
to option under the Employee Stock Plans by 250,000; and (ii) by limiting the
number of shares of the Company's Common Stock that may be granted to any one
employee under the Employee Stock Plans in order to comply with Section 162(m)
of the Internal Revenue Code of 1986, as amended; FOR the proposal to approve
the Performance Bonus Plan for the President and Chief Executive Officer of the
Company to qualify such plan under Section 162(m) of the Internal Revenue Code
of 1986, as amended; and FOR the proposal to amend the 1992 Stock Option Plan
for non-employee directors by increasing the aggregate number of shares of the
Company's common stock that may be subject to options thereunder by 60,000. In
the event that a nominee for director becomes unavailable to serve, which
management does not anticipate, the persons named in the proxy reserve full
discretion to vote for any other person who may be nominated. Any stockholder
giving a proxy may revoke the same at any time prior to the voting of such
proxy. This Proxy Statement and the accompanying proxy are being mailed on or
about April 6, 1999.
Each stockholder of the Company will be entitled to one vote for each
share of common stock and each share of 7% Series B convertible preferred stock,
standing in his or her name on the books of the Company at the close of business
on March 25, 1999. On that date, the Company had outstanding and entitled to
vote 6,626,232 shares of common stock and 3,014,564 shares of 7% Series B
cumulative convertible preferred stock.
PROPOSAL 1: ELECTION OF DIRECTOR
Pursuant to the Company's Articles of Incorporation and By-Laws, as
amended, the Board of Directors currently consists of five classes of directors
having staggered terms of five years each. One Director's term expires at each
Annual Meeting, with the term of the Fourth Class Director expiring at this
year's Annual Meeting. Unless instructed to the contrary on the proxy, the
persons named in the proxy will vote for the election of Edward M. Kopko as
Fourth Class Director to hold office for five years. The nominee is currently
the Chairman of the Board of Directors of the Company and has been the Chairman
since the organization of the Company in November, 1985.
Nominee for Director -- Term Expires in 2004
EDWARD M. KOPKO
Mr. Edward M. Kopko, age 44, has been the President and the Chairman of the
Board of Directors of the Company since its inception in November, 1985. Mr.
Kopko has also been the Chairman, President and Chief Executive Officer of
Butler Service Group, Inc. since 1989, and the chairman of other Butler
subsidiaries, devoting his full time to the business of Butler and its
subsidiaries. Mr. Kopko is the past President and a member of the Executive
Committee of the National Technical Services Association, the predominant trade
association for the contract technical services industry. Mr. Kopko holds a B.A.
degree in economics from the University of Connecticut, an M.A. degree in
economics from Columbia University, and he undertook doctoral work in economics
at Columbia.
The election of the Fourth Class Director requires the approval of a
majority of the votes cast by holders of the shares of the Company's common
stock and the Company's 7% Series B cumulative convertible preferred stock,
voting together as a single class. Any shares not voted, whether by broker
non-vote or otherwise, have no impact on the outcome of the vote.
The Board of Directors unanimously recommends a vote FOR the election of
Mr. Edward M. Kopko as Fourth Class Director.
<PAGE>
DIRECTORS CONTINUING IN OFFICE
JOHN F. HEGARTY Director since 1985 -- Term expires in 2001
Mr. Hegarty, age 72, is the Secretary and a Director of UAS Automation
Systems, Inc. ("UAS"), a manufacturer of tile removal equipment. He has been a
director and officer of UAS since June, 1983, serving as its Chairman until
1990. Mr. Hegarty holds a Bachelor's degree in electrical engineering from
Manhattan College.
FREDERICK H. KOPKO, JR. Director since 1985 -- Term expires in 2002
Mr. Frederick H. Kopko, Jr., age 43, is a partner of the law firm of
McBreen, McBreen & Kopko, Chicago, Illinois, and has been associated with that
firm since January, 1990. Mr. Kopko practices in the area of corporate law. He
has been a director of Mercury Air Group, Inc. since November, 1992 and a
Director of Sonic Foundry, Inc. since December, 1995. Mr. Kopko received a B.A.
degree in economics from the University of Connecticut, a J.D. degree from Notre
Dame Law School, and an M.B.A. degree from the University of Chicago. He is the
brother of Edward M. Kopko.
HUGH G. McBREEN Director since 1986 -- Term expires in 2000
Mr. McBreen, age 44, is a partner of the law firm of McBreen, McBreen &
Kopko and has been associated with that firm since September, 1983. He is also
the Secretary of Peter J. McBreen and Associates, Inc., a risk management and
loss adjustment company. Mr. McBreen practices in the area of aviation law. He
received an A.B. degree from Dartmouth College and a J.D. degree from Notre Dame
Law School.
NIKHIL S. NAGASWAMI Director since 1994 - Term expires in 2003
Mr. Nagaswami, age 42, has been an independent management consultant
since September, 1994, and is currently Managing Partner of Uniexcel Management
Systems de Mexico. From August, 1992 until August, 1994, he was associated with
Scott Paper Company, where he was Director-Corporate Planning and Analysis.
During 1990 through 1992, when he served as an independent advisor to the Board
of Directors of Butler, he played a key role in developing Butler's long-term
strategy, restructuring its operations, and implementing management processes.
Mr. Nagaswami received a Bachelors of Technology degree in metallurgy from the
Indian Institute of Technology, a Masters of Applied Science degree in materials
science and metallurgy from the University of Delaware, and an M.B.A. degree
from the Wharton School, University of Pennsylvania in financial management,
strategic planning and control.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors met five times during 1998. The Board of Directors
has four standing committees, the Audit Committee, the Executive Compensation
Committee, the Stock Option Committee and the Section 162(m) Executive
Compensation Committee. The Company does not have a nominating committee of the
Board of Directors.
The Audit Committee consists of Messrs. Frederick H. Kopko, Jr., Hegarty,
McBreen, and Nagaswami. The functions of the Audit Committee are to review with
the Company's independent public auditors the scope and adequacy of the audit to
be performed by such independent public auditors; the accounting practices,
procedures, and policies of the Company; and to review all related party
transactions. The Committee met two times in 1998.
The Executive Compensation Committee consists of Messrs. Frederick H.
Kopko, Jr., Hegarty, McBreen, and Nagaswami. The Committee makes recommendations
to the Board with respect to salaries of employees and is responsible for
determining the amount and allocation of any incentive bonuses among the
employees. The Committee met two times during 1998.
The Stock Option Committee consists of Messrs. Hegarty and Nagaswami. The
Committee is authorized to grant stock options under the Company's Incentive
Stock Option Plans and Non-qualified Stock Option Plans, and awards under the
Company's Stock Bonus Plan. The Committee met one time during 1998.
2
<PAGE>
The Section 162(m) Executive Compensation Committee consists of Messers.
Hegarty and Nagaswami. This Committee was constituted on December 15, 1998. The
Committee makes recommendations to the Board with respect to the salary of
Edward M. Kopko, and is responsible for establishing objective, formula-based
performance bonus goals and certification as to the goals being met. The
Committee is also responsible for determining the amount of any incentive bonus
to Edward M. Kopko. The Committee is also authorized to grant to Mr. Kopko stock
options under the Company's Stock Option Plan and the Incentive Stock Option
Plan, and awards under the Company's Stock Bonus Plan. The Committee met one
time during 1998.
Each member of the Board attended at least 75% of the appropriate board and
committee meetings.
DIRECTORS COMPENSATION
The directors of the Company, who are not also full-time employees of the
Company, receive a fee of $1,000 for attendance at each meeting of the Board of
Directors and $850 per Committee meeting attended. The cash compensation paid to
the four non-employee directors combined in 1998 was $33,750. Directors who are
not also employees have participated in the 1989 Directors Stock Option Plan,
the 1990 Employee Stock Purchase Plan, the 1992 Stock Option Plan for
Non-Employee Directors, and other option grants in prior years.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, who are appointed by the Board of
Directors, hold office for one-year terms or until their respective successors
have been duly elected and have qualified. The executive officers of the
Company's subsidiaries, who are appointed by such subsidiaries' Boards of
Directors, hold office for one-year terms or until their respective successors
have been duly elected and have qualified.
Edward M. Kopko is the Chairman of the Board of Directors and Chief
Executive Officer. (See "Proposal 1: Election of Director".)
Michael C. Hellriegel, age 45, was appointed Senior Vice President-Finance
and Treasurer in November, 1995 and also became the Chief Financial Officer of
the Company in April, 1996. Prior to that he had served as Vice President and
Controller of the Company since January, 1993 and of Butler Service Group, Inc.
since August, 1988. Mr. Hellriegel received a B.S. degree from St. Peter's
College and an M.B.A. degree, with a concentration in finance, from Fairleigh
Dickinson University. He is a Certified Public Accountant.
R. Scott Silver-Hill, age 45, has been Senior Vice President-Domestic
Operations since November, 1995. He served as a Senior Vice President in the
Contract Technical Services Division from August, 1990 to November, 1995 and was
a Vice President in the Contract Technical Services Division from February, 1988
to August, 1990. Mr. Silver-Hill received B.A. degrees from the University of
California at Santa Barbara in history and political science with an emphasis in
public administration.
Harley R. Ferguson, age 62, has been Senior Vice President and Chief
Information Officer of the Company since April, 1995 when he joined the Company.
Mr. Ferguson was Vice President of O/E Systems from 1994 through 1995 where he
directed the Management Information Systems department. From 1985 to 1994 he was
Senior Vice President of Kelly Services, Inc. Mr. Ferguson received a Bachelor
of Science degree in mathematics and physics from Carleton University, Ottawa,
Canada.
3
<PAGE>
PRINCIPAL STOCKHOLDERS
On March 25, 1999, the directors, current executive officers of the
Company, all persons known by the Company to be the beneficial owners of more
than 5% of the Company's outstanding common stock, and all directors and
officers of the Company and its subsidiaries as a group, beneficially owned the
number of shares of the Company's common stock ("Common Stock") and Series B 7%
cumulative convertible preferred stock ("Series B Preferred Stock") set forth
below. Unless otherwise stated, all shares are held directly with sole voting
and investment power. The business address of the named stockholders is the
address of the Company, except as otherwise noted. Except as disclosed in the
chart below, the Company knows of no other person or group owning 5% or more of
any class of the Company's voting securities.
<TABLE>
Series B Total Equivalent
<CAPTION>
Common Stock1 Preferred Stock2 Voting Rights3
# of Shares # of Shares
Beneficially % of Beneficially % of # of % of
Name Owned Class Owned Class Shares Total
<S> <C> <C> <C> <C> <C> <C>
Edward M. Kopko 351,871 4 5.2% 666,524 22.1% 5 1,018,395 10.4%
Frederick H. Kopko, Jr. 184,867 6 2.8% 715,106 23.7% 5 899,973 9.3%
Hugh G. McBreen 164,914 7 2.5% 692,468 8 23.0% 5 857,382 8.8%
John F. Hegarty 51,1339 0.8% 371,802 10 12.3% 5 422,935 4.4%
Nikhil S. Nagaswami 64,0001 1 1.0% -- -- 64,000 0.7%
Michael C. Hellriegel 42,1241 2 0.6% -- -- 42,124 0.4%
R. Scott Silver-Hill 59,1231 3 0.9% 40,633 1.4% 99,756 1.0%
Harley R. Ferguson 45,3101 4 0.7% -- -- 45,310 0.5%
Hollybank Investments, L.P. 425,500 15 6.4% -- -- 425,500 4.4%
The Sachs Company 376,500 16 5.7% -- -- 376,500 4.0%
Kennedy Capital Management 373,900 17 5.7% -- -- 373,900 3.9%
Lord Abbett & Co. 578,879 18 8.7% -- -- 578,879 6.1%
All directors and officers
as a group (18 persons)19 1,083,413 20 15.0% 2,486,533 82.5% 3,569,946 34.9%
</TABLE>
1 Assumes exercises of options and warrants.
2 Series B Preferred Stock consists of 3,014,564 outstanding shares,
has one vote per share, and is convertible into shares of Common Stock
at a rate of .285 per share of Series B Preferred Stock.
3 Does not assume conversion of Series B Preferred Stock
4 Includes 160,733 shares that may be purchased upon exercise of
options granted under Butler stock option plans.
5 Messrs. Edward M. Kopko, Frederick H. Kopko, Jr., Hugh G. McBreen
and John F. Hegarty have filed a Schedule 13D with respect to their
purchases of Series B Preferred Stock. The reporting persons disclaim
the existence of a "group" under Section 13(d) of the Exchange Act.
6 Includes 52,333 shares that may be purchased upon exercise of
options granted under Butler stock option plans. The business address
of Mr. Kopko is 20 North Wacker Drive, Suite 2520, Chicago, IL 60606.
7 Includes 3,625 shares beneficially owned by Mr. McBreen's children
(as to which Mr. McBreen disclaims beneficial ownership), 34,000
shares that may be purchased upon exercise of options granted under
Butler stock option plans and 40,000 shares that may be purchased upon
exercise of certain additional warrants. The business address of Mr.
McBreen is 20 North Wacker Drive, Suite 2520, Chicago, IL 60606.
8 Includes 1,362 shares owned by Mr. McBreen's wife (as to which Mr.
McBreen disclaims beneficial ownership).
9 Includes 44,800 shares that may be purchased upon exercise of
options granted under Butler stock option plans.
10 Includes 56,180 shares beneficially owned by Mr. Hegarty's wife (as
to which Mr. Hegarty disclaims beneficial ownership).
4
<PAGE>
11 Consists of 64,000 shares that may be purchased upon exercise of
options granted under the 1992 Stock Option Plan for Non-Employee
Directors.
12 Includes 32,500 shares that may be purchased upon exercise of
options granted under Butler stock option plans.
13 Includes 48,333 shares that may be purchased upon exercise of
options granted under Butler stock option plans.
14 Includes 2,000 shares beneficially owned by Mr. Ferguson's wife (as
to which Mr. Ferguson disclaims beneficial ownership) and 42,500
shares that may be purchased upon exercise of options granted under
Butler stock option plans.
15 Based on publicly available information reported on March 23, 1998,
Dorsey R. Gardner, the general partner of Hollybank Investments, L.P.
("Hollybank"), may also be deemed to beneficially own the 425,500
shares beneficially owned by Hollybank. Except to the extent of his
interest as a limited partner in Hollybank, Mr. Gardner expressly
disclaims such beneficial ownership. Mr. Gardner also beneficially
owns 56,000 shares on an individual basis. The business address of
Hollybank is One International Place, Suite 2401, Boston, MA 02110.
16 Based on publicly available information reported on February 11,
1999, Morton H. Sachs & Company d/b/a The Sachs Company and Morton
Sachs beneficially own 376,500 shares of the Company's Common Stock.
The business address of Morton H. Sachs & Company d/b/a The Sachs
Company and Morton Sachs is 1346 S. Third Street, Louisville, KY
40208.
17 Based on publicly available information reported on February 11,
1999, Kennedy Capital Management, Inc. beneficially owns 373,900
shares of the Company's Common Stock. The business address of Kennedy
Capital Management, Inc. is 10829 Olive Boulevard, St. Louis, MO
63141.
18 Based on publicly available information reported on February 12,
1999, Lord Abbett & Company beneficially owns 578,879 shares of the
Company's Common Stock. The business address of Lord Abbett & Company
is 767 Fifth Avenue.
19 Includes the officers of the Company and its principal subsidiaries.
20 Includes 680,400 shares that may be purchased upon exercise of
options granted under Butler stock option plans and 40,000 shares that
may be purchased upon exercise of various warrants.
EXECUTIVE COMPENSATION
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee") oversees the
executive compensation policies and programs of the Company, including executive
and certain non-executive officers. The Company's executive compensation
programs are intended to attract and retain qualified executives and to motivate
them to achieve goals that will lead to appreciation of stockholder value. A
significant portion of each executive's compensation is dependent upon the
Company's profitability and the appreciation in the market price of the
Company's common stock. Achievement of certain other corporate goals and
individual performance objectives also impact executive compensation.
The main components of executive compensation are: base salary, annual
incentive cash bonus, and longer-term equity-based incentive compensation. The
Committee periodically reviews independent surveys, compensation trends, and
competitive factors in making judgments on the appropriate compensation package
for each executive employee. The Compensation Committee's decisions also
acknowledge that Butler's Retirement Program is modest compared with many other
companies.
Executive Employment Agreements: In mid-1989, Edward M. Kopko assumed the
dual responsibilities of Chairman of the Company and President and CEO of Butler
Service Group, Inc., and the position of Chief Operating Officer of Butler
Service Group was eliminated. An employment agreement was executed with Mr.
Kopko in December, 1991. Mr. Kopko's base salary and cash bonus were predicated
in part on the base salary and cash bonus formula of his predecessor as
President and CEO/COO of Butler Serivce Group, and partly on his broader
responsibilities as Chairman and CEO of the public company, Butler
International, Inc. The terms of Mr. Kopko's employment agreement are set forth
below under "Employment Agreements".
Michael C. Hellriegel, the Company's Senior Vice President--Finance,
Treasurer, and Chief Financial Officer entered into a new employment agreement
effective January 1, 1996, as authorized by the Executive Compensation
Committee. R. Scott Silver-Hill, the Company's Senior Vice President - Domestic
Operations, entered into an employment agreement effective July, 1991, as
authorized by the Executive Compensation Committee, Harley R. Ferguson, the
Company's Senior Vice President and Chief Information Officer, entered into an
employment agreement effective April, 1995, as authorized by the Executive
Compensation Committee. The terms of these employment agreements are set forth
below under "Employment Agreements".
Base Salary: The salaries of the other executive and non-executive officers
within the purview of the Committee are based on a periodic review of surveys of
companies of comparable size and complexity. In certain cases, the Company has
hired executive talent from outside, and both base pay and other compensation
elements have been determined with the guidance of the executive search firm
used for that purpose. Except for certain adjustments or a significant increase
in responsibilities, annual salary increases are generally limited to cost of
living adjustments.
According to independent surveys, including particularly the Wyatt Data
Services Compensation Surveys - All Industries (Excluding Financial Services and
Non Profit Organizations) and the Mercer Information Systems Compensation
Survey, the combined base salaries of the Company's officers as a group,
including the named executive officers, are 7.0% below the median and 9.8% below
the average for their positions and company size, based on revenues. Mr. Kopko's
base salary individually is 1.9% below the median and 2.1% below the average for
his position and company size. The Wyatt Survey was used because it covers a
much larger number and variety of companies than in the Peer Group, including
over 100 companies in the Company's revenue range.
Annual Incentive Cash Bonus: Each executive officer and certain
non-executive officers are eligible to participate in an annual cash bonus plan.
A contractual agreement is reached early in the year, with each such officer to
be given the opportunity to earn a cash bonus based in part on the achievement
of profitability and in part on the accomplishment of several key individual,
department, or business unit objectives that are believed to be vital to the
Company's success. The financial objectives are generally based on operating
income of the Company as a whole, or of a business unit, division or
region--rather than on target thresholds. The mix between financial and
non-financial objectives depends upon the nature of each executive's
responsibilities. An officer with bottom line responsibility typically has a
greater portion of incentive bonus tied to the operating profit of his or her
group. However, all executive officers and non-executive officers have some
portion of their bonus dependent upon the successful completion of non-financial
objectives such as specific projects for their group and/or individually.
The bonuses awarded in 1998 to the officers (other than the CEO) reflect
the mix of corporate, department and individual performance achieved, and are
higher than 1997 because of the Company's significantly higher record earnings
in 1998. This is consistent with the Committee's intent to tie pay closely to
performance. Likewise, Mr. Kopko received a higher bonus in 1998 for his
achievement in leading the Company to record earnings for the year. Mr. Kopko's
bonus was based primarily on a formula which is a percentage of operating income
as defined in his employment agreement as amended (approximately 88% of the
total bonus), and the balance equal to 25% of the base salary based on the
achievement of certain key objectives. These objectives included a continuing
migration to higher margin business, increasing shareholder value, continuing
technology improvements for greater productivity in the sales and recruiting
functions, refining the efficiency and productivity improvement programs, and
customer satisfaction, employee satisfaction, and quality improvements.
Longer-Term Equity-Based Incentive Compensation: The Company has several
longer-term, equity-based plans whose purpose is to promote the interests of the
Company and its stockholders by encouraging greater management ownership of the
Company's Common Stock. Such plans provide an incentive for the creation of
stockholder value over the long term, since the full benefit of the compensation
package cannot be realized unless an appreciation in the price of the Company's
Common Stock occurs. Additionally, these plans strengthen the Company's ability
to attract and retain experienced and knowledgeable employees over a longer
period and to furnish additional incentives to those employees upon whose
judgment, initiative and efforts the Company largely depends.
These plans include the 1990 Employee Stock Purchase Plan, the 1985 and
1992 Incentive Stock Option Plans, the 1985 and 1992 Non-Qualified Stock Option
Plans, and the 1992 Stock Bonus Plan.
6
<PAGE>
The 1990 Employee Stock Purchase Plan was designed to provide long-term
incentive compensation to officers, directors and key employees. The Plan, which
made available $2.5 million for loans to such officers, directors, and key
employees to purchase Company stock, rewards such persons for, among other
things, achieving long range corporate goals, achievement of targeted
profitability levels that are sustained over a longer period of time, developing
new growth objectives for each business unit based on analysis of market
potential, developing and achieving long-range sales growth, and upgrading of
technology, systems and processes. Specific long-term goals have been
established each year for Mr. Kopko, as CEO. The goals for other officers have
varied depending on the officer's position. The Company may reduce the amount
due on each loan by 25% of the original principal balance on successive
anniversary dates of the loan subject to the recommendation of the Committee,
based on long-term performance of each officer over the specified period and
other factors, provided that the employee remains employed by the Company or one
of its subsidiaries on such anniversary dates. Based on not attaining the
long-term goals for 1994, the 25% forgiveness was not available to participants.
In 1995, the Company incurred a significant net loss and the Company's stock
price declined in value. Consequently, the Committee again determined to forego
the 25% foregiveness in 1995. Even though 1996, 1997 and 1998 were excellent
years with record profits, significant increases in the stock price, and a
number of other goals and objectives being accomplished, the Committee noted
that the Employee Stock Purchase Plan is based on a long-term horizon and
decided not to implement the forgiveness provision for 1998. No new loans were
granted in 1998.
The number of stock options currently held by an executive officer is one
factor taken into consideration in making new awards. The Committee also
believes it is important that the CEO and other senior officers have a
significant number of stock options whose value can provide a powerful incentive
to driving the Company's bottom line and stock performance. Stock option awards
are also based on an officer's level of responsibilities and expected
contribution rather than following the achievement of certain targets. In
December, 1998, a total of 22,500 incentive stock options were awarded to three
listed executive officers. With the rise in the Company's stock price over the
past year, all of the option grants made in years prior to 1998 have increased
in value as of March 25, 1999. The future value of all options will depend on
the Company's success in continuing to increase stockholder value.
Under the 1992 Stock Bonus Plan, the Committee may make awards of stock to
individuals who, in the Committee's judgment, have made significant
contributions to the Company or its subsidiaries. Such awards may be made on the
basis of preestablished goals, or to reward performance, or both. The Plan will
also serve to increase employee ownership in the Company and alignment with
stockholders, while conserving cash. No stock bonus awards were made in 1998.
The Executive Compensation Committee believes that the executive
compensation policies and programs serve the interests of the stockholders. Such
compensation is intended to be a function of the Company's increase in profits
and share price value over a longer-term perspective.
Internal Revenue Code Section 162(m): Section 162(m) of the Code prevents
publicly held corporations, including the Company, from taking a tax deduction
for compensation paid to a "covered employee" in a taxable year to the extent
that the compensation exceeds $1 million and is not qualified performance-based
compensation under the Code. Generally, covered employees are the executive
officers named in the Summary Compensation Table. Accordingly, the Company is
proposing that the Company's Employee Stock Plans as amended and restated be
approved by the stockholders (see Proposal No. 3) and that the Company's
Performance Bonus Plan for the President and Chief Executive Officer be approved
by the stockholders (see Proposal No. 4). The Company's Employee Stock Plans
have been amended and restated to meet Internal Revenue Service regulations so
that the compensation realized in connection with stock options and awards
granted thereunder will be excluded from the deduction limit.
Portions of the Compensation paid to Mr. Kopko for 1998 under the Company's
Performance Bonus Plan may not meet the criteria for deductibility under Section
162(m). However, the amount exceeding the limits on deductibility is not
material to the Company. If the Company's Performance Bonus Plan is approved by
the stockholders, certain compensation otherwise subject to the deductibility
limitation under Section 162(m) would qualify as tax deductible. The Committee's
intent is to preserve the deductibility of compensation payments and benefits to
the extent reasonably practical. The Committee, however, retains the discretion
to authorize compensation that does not qualify for income tax deductibility.
EXECUTIVE COMPENSATION COMMITTEE
John F. Hegarty
Frederick H. Kopko, Jr.
Hugh G. McBreen
Nikhil S. Nagaswami
7
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
Awards 2 Payouts
Securities Long-Term All
Name & Principal Underlying Incentive Other
Position Year Salary $ Bonus $ Other $ 1 Options (#) Payouts $ Compensation $ 3
<S> <C> <C> <C> <C> <C> <C>
Edward M. Kopko 1998 403,595 4 823,781 102,211 -- -- 55,424
President and 1997 377,031 604,483 96,360 -- -- 55,094
CEO 1996 354,083 531,479 96,360 125,000 -- 55,094
Michael C. Hellriegel 1998 158,224 4 113,416 1,074 10,000 -- 1,330
Sr. VP - Finance, 1997 149,239 80,320 1,074 12,500 -- 877
Treasurer, and CFO 1996 138,592 63,358 1,074 -- -- 877
R. Scott Silver-Hill 1998 174,958 4 218,599 2,147 7,500 -- 1,398
Sr. VP Domestic 1997 159,870 180,885 2,147 7,500 -- 1,030
Operations 1996 153,154 152,226 2,147 7,500 -- 1,030
Harley R. Ferguson 1998 182,325 4 71,045 -- 5,000 -- 9,575
Sr. VP and Chief 1997 171,970 63,024 -- 5,000 -- --
Information Officer 1996 165,490 63,074 -- 7,500 -- --
<FN>
1 Consists of imputed interest on loans to buy common stock of the Company.
For Mr. Kopko, in addition to imputed interest on such loans in the amount
of $27,665 for 1998 and $24,589 for 1997 and 1996, includes tax gross-up on
imputed interest and insurance payments in the amounts of $24,951 and
$49,595, respectively, in 1998 and $22,176 and $49,595 in 1997 and 1996.
2 No options were repriced during the last fiscal year or at any time since
the Company's inception.
3 Consists of imputed cost of Company-paid term life insurance. Includes
Company insurance payments of $54,992 for Mr. Kopko.
4 Salaries for 1998 include 53 payroll weeks.
</FN>
</TABLE>
Employment Agreements:
In July, 1994, the Company entered into an amended and restated
employment agreement with Edward M. Kopko, which continues in effect until three
years after a notice of termination is given by either party. Under the amended
and restated employment agreement as further amended on December 15, 1998, Mr.
Kopko is eligible for annual raises of not less than 5 % of the prior year's
salary. Subject to approval by the stockholders of the Company as described
under Proposal 4, Mr. Kopko will also receive an annual bonus of 5 % of the
Company's operating income of $3 million or less, plus 3 % of operating income
above $3 million, plus an amount based on the successful completion of
management objectives and other factors (as such terms are defined in the
amended and restated Employment Agreement), with such annual bonus being capped
at four times his base salary for any year. For a more detailed discussion of
the proposed bonus arrangements, please refer to Proposal 4: Proposal to Approve
the Performance Bonus Plan. Mr. Kopko is entitled to benefits, including stock
options and payment of taxes on his behalf based on imputed income. If the
Company breaches its duty under the employment agreement, if Mr. Kopko
determines in good faith that his status with the Company has been reduced, or
if, after a change in control of the Company, Mr. Kopko determines in good faith
that the financial prospects of the Company have significantly declined, Mr.
Kopko may terminate his employment and receive all salary and bonus owed to him
at that time, pro rated, plus three times the highest annual salary and bonus
paid to him in the three years immediately preceding the termination.
In January, 1996, the Company entered into an employment agreement with
Michael C. Hellriegel. Mr. Hellriegel's employment agreement is terminable by
either party with four months prior notice. Mr. Hellriegel is eligible for
bonuses of up to 50% of his base salary, based on the Company obtaining
specified management objectives (as defined) and other factors and a provision
for an additional bonus based on over-achievement of profit plan. The employment
agreement provides that if Mr. Hellriegel's employment is terminated other than
for cause, he will be entitled to four months salary. The agreement provides
that Mr. Hellriegel will not compete with the Company for a period of one year
after termination of employment.
8
<PAGE>
In July, 1991, the Company entered into an employment agreement with R.
Scott Silver-Hill. Mr. Silver-Hill's employment agreement is terminable by
either party with six months prior notice. Mr. Silver-Hill is eligible for
bonuses of up to 50% of his base salary, based on the Company obtaining
specified management objectives (as defined) and other factors and a provision
for an additional bonus based on over-achievement of operating plan. The
employment agreement provides that if Mr. Silver-Hil s employment is terminated
other than for cause, he will be entitled to six months salary. The agreement
provides that Mr. Silver-Hill will not compete with the Company for a period of
one year after termination of employment.
In April, 1995, the Company entered into an employment agreement with
Harley R. Ferguson. Mr. Ferguson's employment agreement is terminable by either
party with six months prior notice. Mr. Ferguson is eligible for bonuses of up
to 25% of his base salary, based on the Company obtaining specified management
objectives (as defined) and other factors and a provision for an additional
bonus based on over-achievement of operating plan. The employment agreement
provides that if Mr. Ferguson's employment is terminated other than for cause,
he will be entitled to six months salary. The agreement provides that Mr.
Ferguson will not compete with the Company for a period of one year after
termination of employment.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN 1998
Individual Grants
Number of % of
Securities Total Options Grant Date
Underlying Options Granted to Exercise Expiration Present
Name Granted Employees in Fiscal Year Price Date 4 Value 5
<S> <C> <C> <C> <C> <C>
Michael C. Hellriegel 10,000 1 44.4% $21.87 12/30/08 $98,356
R. Scott Silver-Hill 7,500 2 33.3% $21.87 12/30/08 $73,767
Harley R. Ferguson 5,000 3 22.2% $21.87 12/30/08 $49,178
<FN>
1 Consists of options granted under the 1992 Incentive Stock Option Plan on
December 30, 1998, of which 3,334 will be exercisable on December 30, 1999
and 3,333 will be exercisable on each of December 30, 2000 and 2001.
2 Consists of options granted under the 1992 Incentive Stock Option Plan on
December 30, 1998, of which 2,500 will be exercisable on each of December
30, 1999, 2000 and 2001.
3 Consists of options granted under the 1992 Incentive Stock Option Plan on
December 30, 1998, of which 1,667 will be exercisable on each of December
30, 1999 and 2000, and 1,666 will be exercisable on December 30, 2001.
4 These options could expire earlier in certain situations such as an
individual's termination of employment with the Company.
5 The estimated fair value of stock options is measured at the date of
grant using the Black-Scholes option pricing model based on the following
assumptions: expected stock price volatility of 45% based on the average
weekly closing price of the Company's common stock for 1998; expected term
to exercise of approximately 6.7 years; and interest rates equal to the
U.S. Treasury Note rates in effect at the date of grant (4.65% for options
granted on December 30, 1998). The actual value, if any, an individual may
realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised. Consequently, there is no
assurance the value realized will be at or near the value estimated above.
</FN>
</TABLE>
9
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
# of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at 1998 Year-End at 1998 Year-End
Shares Acquired
Name of Individual On Exercise Value Exercisable/ Exercisable/
Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Edward M. Kopko 0 $0 285,733 1 $5,858,095
Michael C. Hellriegel 0 $0 11,667 2 $222,503
20,833 $214,891
R. Scott Silver-Hill 0 $0 30,833 3 $631,886
17,500 $179,256
Harley R. Ferguson 0 $0 25,4174 $480,863
17,083 $222,694
<FN>
1 Consists of non-qualified stock options to purchase 17,400 shares,
granted in 1986 and 1987 at an option price of $10.02 per share; incentive
stock options to purchase 83,333 shares, granted in September, 1990 at an
exercise price of $4.40 per share; a currently exercisable option to
purchase 60,000 shares under the 1992 Incentive Stock Option Plan, granted
on August 2, 1993, at an exercise price of $4.40 per share; and an option
to purchase 125,000 shares under the 1992 Non-Qualified Plan, granted on
July 16, 1996, at an exercise price of $7.125 per share, which became fully
exercisable on December 15, 1998.
2 Consists of currently exercisable incentive stock options to purchase
10,000 shares granted in December, 1995 at an exercise price of $4.38 per
share; incentive stock options for 7,500 shares granted in January, 1997 at
an exercise price of $10.00 per share, of which 2,500 became exercisable on
each of January 7, 1998 and January 7, 1999 and 2,500 of which will become
exercisable on January 7, 2000; incentive stock options for 5,000 shares
granted in December, 1997 at an exercise price of $16.88 per share, of
which 1,667 became exercisable on December 9, 1998, 1,667 of which will
become exercisable on December 9, 1999, and 1,666 of which will become
exercisable on December 9, 2000; and incentive stock options for 10,000
shares granted in December, 1998 at an exercise price of $21.87 per share,
of which 3,334 will become exercisable on December 30, 1999, and 3,333 will
become exercisable on each of December 30, 2000 and December 30, 2001.
3 Consists of currently exercisable incentive stock options for 8,333
shares, granted in September, 1990 at an exercise price of $4.40 per share;
currently exercisable incentive stock options for 7,500 shares, granted in
January, 1993 at an exercise price of $3.13 per share; currently
exercisable incentive stock options for 10,000 shares granted in December,
1995 at an exercise price of $4.38 per share; incentive stock options for
7,500 shares granted in December, 1996 at an exercise price of $9.63 per
share, of which 2,500 became exercisable on each of December 16, 1997 and
December 16, 1998, and of which 2,500 will become exercisable on December
16, 1999; incentive stock options for 7,500 shares granted in December,
1997 at an exercise price of $16.88 per share, of which 2,500 became
exercisable on December 9, 1998, and of which 2,500 will become
exercisable on each of December 9, 1999 and December 9, 2000; and incentive
stock options for 7,500 shares granted in December, 1998 at an exercise
price of $21.87 per share, of which 2,500 will become exercisable on each
of December 30, 1999, December 30, 2000 and December 30, 2001.
10
<PAGE>
4 Consists of currently exercisable incentive stock options for 25,000 shares
granted in April, 1995 at an exercise price of $6.13 per share; incentive
stock options for 7,500 shares granted in December, 1996 at an exercise
price of $9.63 per share, of which 2,500 became exercisable on each of
December 16, 1997 and December 16, 1998; and of which 2,500 will become
exercisable December 16, 1999; incentive stock options for 5,000 shares
granted in December, 1997 at an exercise price of $16.88 per share, of
which 1,667 became exercisable on December 9, 1998, 1,667 of which will
become exercisable on December 9, 1999, and 1,666 of which will become
exercisable on December 9, 2000; and incentive stock options for 5,000
shares granted in December, 1998 at an exercise price of $21.87 per share,
of which 1,667 will become exercisable on each of December 30, 1999 and
December 30, 2000, and 1,666 of which will become exercisable on December
30, 2001.
</FN>
</TABLE>
RETIREMENT PLAN
Staff employees of the Company, including the executive officers
referred to in the Summary Compensation Table, are entitled to participate in
the Butler Service Group, Inc. Defined Benefit Plan (the "Plan"), which is a
non-contributory, defined benefit retirement plan. Retirement benefits are
computed on the basis of a specified percentage of the average monthly base
compensation (during any 60 consecutive months of an employee's final 120 months
of employment which results in the highest average) multiplied by the employee's
years of credited service. The Plan provides for several optional forms of
benefit payment including a straight life annuity, a 50% joint and survivor
annuity, a period certain annuity, and a lump sum. Retirement benefits are in
addition to benefits payable from Social Security. Normal retirement age is 65,
although benefits may begin as early as age 55 with ten years of service. A
pension benefit is vested after five years of service.
The Defined Benefit Plan was frozen as of December 31, 1996. As of December
31, 1996, the following executive officers of the Company had the following
years of credited service for retirement compensation purposes: Mr. Kopko--11,
Mr. Hellriegel--15, Mr. Silver-Hill--15, and Mr. Ferguson--2. The following
table shows the estimated annual retirement benefits payable assuming that
retirement occurs at age 65. The annual earnings used to determine pension in
the following table is shown in the Salary column of the Summary Compensation
Table.
<TABLE>
<CAPTION>
Average Annual Earnings for PENSION PLAN TABLE
the Highest Consecutive 60 Months Years of Service
--------------------------------------------------
of Last 120 Months Prior to 1/1/97 10 15 20 25
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000........... $11,532 $17,298 $23,064 $28,830
$150,000*......... $17,532 $26,298 $35,064 $43,830
</TABLE>
*Salary limited by terms of Plan and the law to $160,000 as of January 1, 1997.
For Mr. Kopko, the compensation used for service prior to 1994 is $235,840.
The above pensions are offset by pension equivalents from two other
plans: (1) The Company sponsored Employee Stock Ownership Plan ("ESOP"); and (2)
Pensions purchased from Nationwide Insurance Company due to termination of
predecessor plan.
The ESOP has approximately 46,000 shares of the Company's stock. The shares
of stock were allocated to employees over seven years beginning in 1987 and
ending in 1993.
Effective January 1, 1997, a new retirement plan was implemented for staff
employees, including the executive officers referred to in the Summary
Compensation Table, and for certain salaried employees of Butler Technology
Solutions ("BTS"). The new plan is based on a partial Company matching
contribution for staff employees and BTS salaried employees who participate in
the Company's 401(k) Retirement Savings Plan.
11
<PAGE>
PERFORMANCE GRAPH
Comparison of Five-year Cumulative Total Return
Among Butler International, Inc.
Peer Group Index and NASDAQ Market
[GRAPHIC OMITTED]
ASSUMES $100 INVESTED ON JANUARY 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1998
During the past several years the Company has been strategically broadening
and strengthening its business mix to include higher value added services. The
peer group index first used a year ago includes 20 public companies, and is more
representative of the breadth of Butler's current business mix and the direction
in which the Company is heading, than was the much narrower peer group used
prior to 1997.
Peer Group: Alternative Resources, CDI Corporation, Comforce
Corporation, Computer Horizons Corporation, Computer Task Group, Inc., Interim
Services, Inc., Joule, Inc., Keane, Inc., Kelly Services, Manpower, Inc.,
Metamor Worldwide, Inc., Modis Professional Services, National Techteam, Inc.,
Olsten Corporation, On Assignment, Inc., RCM Technologies, Inc., Renaissance
Worldwide, Robert Half International, SOS Staffing Services, Inc., and Volt
Information Sciences, Inc., weighted by market capitalization at the beginning
of each period for which a return is indicated.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Audit Committee and the Executive Compensation Committee of the Board
of Directors consist of Messrs. Frederick H. Kopko, Jr., Hegarty, McBreen, and
Nagaswami. The Stock Option Committee and the Section 162(m) Executive
Compensation Committee of the Board of Directors consist of Messrs. Hegarty and
Nagaswami.
During 1998, the Company paid or accrued $732,000 in legal fees and
expenses to McBreen, McBreen & Kopko, of which Messrs. Frederick H. Kopko, Jr.
and McBreen are partners.
Under various stockholder-approved option plans and other stock purchase
agreements, Messrs. Frederick H. Kopko, Jr., Hegarty and McBreen have executed
primarily non-interest bearing notes payable to the Company to purchase common
stock. As of December 31, 1998, $2,179,474 remained outstanding under such
notes. In addition, in 1998, Frederick H. Kopko, Jr., executed a note in the
amount of $181,000 to purchase 50,000 shares of the Company's common stock, and
Hugh G. McBreen executed notes in the aggregate amount of $168,279 to purchase
38,333 shares of the Company's common stock.
12
<PAGE>
Except for one note from Frederick H. Kopko, Jr., with a December 31,
1998 balance reduced to $116,515, the full principal amount of each loan set
forth above is currently outstanding and has been outstanding since the date of
the loans. All of the loans set forth above are currently collateralized by all
of the Series B Preferred Stock held by each director.
CERTAIN TRANSACTIONS
Edward M. Kopko previously executed, in 1990 and 1991, non-interest
bearing notes totaling $684,000 to purchase 172,222 shares of Common Stock under
various stock purchase and option plans. In 1997, Edward M. Kopko executed a
non-interest bearing note for $51,102 to purchase 5,100 shares of Common Stock
that had been granted under the 1985 Non-Qualified Stock Option Plan. The
outstanding aggregate balance of the loans on December 31, 1998, and the largest
aggregate principal amount of the loans outstanding during 1998 was $359,352. On
March 2, 1999, Edward M. Kopko executed a non-interest bearing note for $890,625
to purchase 125,000 shares of Common Stock that had been granted under the 1992
Non-Qualified Stock Option Plan. On March 2, 1999, the Company also provided
Edward M. Kopko with a loan in the amount of $822,441 to enable him to meet his
tax obligation on this exercise, including statutory withholding taxes.
PROPOSAL 2: PROPOSAL TO
AMEND THE ARTICLES OF INCORPORATION
TO INCREASE AUTHORIZED
SHARES OF PREFERRED STOCK
Proposed Amendment
The Board of Directors recommends the adoption of an amendment to the
Company's Articles of Incorporation to increase the amount of authorized
Preferred Stock from 5,000,000 to 10,000,000 shares. If the proposed amendment
is approved, the first and second paragraphs of Article Fifth of the Articles of
Incorporation shall be amended to read as follows:
"The total number of shares of capital stock of all classes which the
Corporation shall have authority to issue is Ninety-Three Million Three
Hundred Thirty-Three Thousand Three Hundred Thirty-Three (93,333,333)
shares of capital stock classified as designated below, with the par value
of One Tenth of One Cent ($0.001) each, and with the aggregate par value of
Ninety-Three Thousand Three Hundred Thirty-Three Dollars and Thirty-Three
Cents ($93,333.33).
Subject to the authority granted below to the Board of Directors of
the Corporation with respect to the designation, classification and
reclassification of the unissued shares of the Corporation, Eighty-Three
Million Three Hundred Thirty-Three Thousand Three Hundred Thirty-Three
(83,333,333) of such shares are hereby designated and classified as Common
Stock, and Ten Million (10,000,000) of such shares are hereby designated
and classified as Preferred Stock."
On March 25, 1999, 6,626,232 shares of Common Stock were issued and
outstanding and 3,014,564 shares of Preferred Stock were issued and outstanding,
all of which shares of preferred stock were classified as 7% Series B Cumulative
Convertible Preferred Stock. The proposed amendment would increase the number of
authorized but unissued shares of Preferred Stock from 1,985,436 to 6,985,436
shares.
The additional shares of Preferred Stock authorized by the proposed
amendment, along with the 1,985,436 shares not previously issued, would be
issuable at any time in the sole discretion of the Board of Directors, without
the necessity of further approval by the stockholders except as required by law.
Such Preferred Stock could be classified and issued as 7% Series B Cumulative
Convertible Preferred Stock or could be issued in classes with such other
provisions, including dividend rates, conversion prices (if any), voting rights,
redemption prices and similar matters as determined by the Board of Directors.
The holders of the Company's Common Stock and Preferred Stock do not currently,
and would not as a result of the proposed increase in authorized shares, have
preemptive rights to subscribe for any additional capital stock of the Company.
Purpose of Proposed Amendment
The Board of Directors believes that the proposed increase in the
authorized Preferred Stock is in the best interest of both the Company and its
stockholders. The increase will provide the Board of Directors additional
flexibility to raise capital, to reserve additional shares for issuance pursuant
to stock dividends, and to make acquisitions through the use of stock. The
Company has no present commitments, agreements or undertakings to issue shares
of Preferred Stock except as required to pay stock dividends. The Company does
not have any present intention to use the additional shares for any other
purpose other than these routine corporate purposes.
13
<PAGE>
Effect of Proposed Amendment
The increase in the authorized but unissued shares of Preferred Stock
could make a change in control of the Company more difficult to achieve. The
flexibility to issue additional Preferred Stock can enhance the Board's
arm's-length bargaining capability on behalf of the Company's stockholders in a
take-over situation, and the ability to designate the rights of, and to issue,
such stock could be used by an incumbent board to make a change of control of
the Company more difficult. The Board has no present intention to use the
Preferred Stock for such a purpose. The Company is not aware of any present
effort to effect a change of control or takeover of the Company.
Although the purpose of seeking an increase in the number of authorized
capital stock is not intended for anti-takeover purposes, the SEC rules require
disclosure of charter and bylaw provisions that could have an anti-takeover
effect. Provisions that require disclosure under the Company's Articles of
Incorporation include: (i) a classified Board of Directors with staggered terms,
(ii) Board authority to issue one or more series of preferred stock up to a
maximum of 5 million shares or, if the amendment passes, a maximum of 10 million
shares, (iii) certain business combination transactions require a greater than
majority of stockholder approval, (iv) members of the Board of Directors can
only be removed for cause, (v) amendments to certain articles of the Articles of
Incorporation may require, under certain circumstances, a greater than majority
stockholder approval and (vi) amendment of the bylaws may require, under certain
circumstances, greater than majority stockholder approval.
Articles of Incorporation
The amendment would take effect on the date of filing of articles of
amendment to the Articles of Incorporation with the Maryland Secretary of State.
The Board of Directors has authorized and approved the amendment and the
proposed change to the Company's Articles of Incorporation. If approved by the
stockholders, the amendment to the Company's Articles of Incorporation would be
filed immediately following the voting, unless the Company subsequently
determines that the amendment is not in the best interests of the stockholders
and the Company.
General
The adoption of this amendment to the Articles of Incorporation
requires the approval of a majority of the outstanding shares of Common Stock
and the Company's 7% Series B Cumulative Convertible Preferred Stock, voting
together as a single class, represented at the meeting and entitled to vote.
Shares may be voted for or withheld from this matter. Shares entitled to cast
votes on this matter at the meeting which are withheld from this matter or which
are the subject of a broker non-vote will have the same effect as a vote of such
shares against this matter.
The Board of Directors unanimously recommends a vote FOR Proposal 2
amending the Company's Articles of Incorporation.
PROPOSAL 3: PROPOSAL TO AMEND AND RESTATE THE 1992 EMPLOYEE STOCK
PLANS
The Board of Directors recommends the adoption of amendments to and
restatement of, the Company's 1992 Employee Stock Plans. In 1992, the Company
adopted an employee stock-based program consisting of three integrated plans.
These plans are the 1992 Stock Option Plan (the "Non-Qualified Plan"), 1992
Incentive Stock Option Plan (the "ISOP"), and 1992 Stock Bonus Plan ("Stock
Bonus Plan").
The purpose of the Non-Qualified Plan, the ISOP and the Stock Bonus Plan is
to promote the interests of the Company and its stockholders by strengthening
the Company's ability to attract and retain experienced and knowledgeable
employees and to furnish additional incentives to those employees upon whose
judgment, initiative and efforts the Company largely depends. Prior to
Stockholder approval of the proposed amendments and restatement of the Plans, a
maximum of 1,480,000 shares may be issued thereunder. Since January 1, 1993, the
Company has granted options for 554,000 shares under these three plans and
canceled 84,250 options, leaving a balance available of 1,010,250.
The following descriptions of the Non-Qualified Plan, the ISOP, and the
Stock Bonus Plan, as proposed to be amended and restated (collectively,
"Employee Stock Plans") are intended only as summaries which are qualified in
their entirety by reference to the text of the Employee Stock Plans, copies of
which are attached hereto as Appendix A.
14
<PAGE>
Description of the Non-Qualified Plan
The Non-Qualified Plan permits the Stock Option Committee (the
"Committee"), consisting of at least two members of the Board of Directors who
are not employees of the Company and who are appointed to the Committee from
time to time by the Board of Directors, to grant common stock options to
individuals who, in the judgment of the Committee, have made significant
contributions to the Company or any subsidiary thereof (including directors and
officers who are full or part-time employees of the Company, but excluding
directors who are not employees of the Company). Options granted under the
Non-Qualified Plan are not intended to qualify as "incentive stock options"
under the Code. The Non-Qualified Plan provides that the maximum term of an
option granted under the Non-Qualified Plan is ten years and that the exercise
price of options granted under the Non-qualified Plan will be not less than 100%
of the fair market value on the date of grant.
Description of the ISOP
The ISOP permits the Committee to grant common stock options to
individuals who, in the judgment of the Committee, have made significant
contributions to the Company or any subsidiary thereof (including directors and
officers who are full or part-time employees of the Company, but excluding
directors who are not employees of the Company).
It is intended that all options granted under the ISOP will qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of 1986
(the "Code"). If any such options are issued, they may be exercised at a price
that is not less than the fair market value of the stock on the day the option
is granted; provided that, if on the date of any grant the recipient holds more
than 10% of the combined voting power of all classes of the Company's stock or
of any parent or subsidiary of the Company, the exercise price must be at least
110 % of the fair market value of the stock on the day the option is granted.
The ISOP provides that the maximum term of an option granted under the ISOP is
ten years from the date of grant. The aggregate fair market value of the stock
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year may not exceed $100,000.
Provisions Common to the Non-Qualified Plan and the ISOP
Payment of the option exercise price in either the Non-Qualified Plan
or the ISOP may be in cash, by check, or with the consent of the Committee, by a
non-interest bearing promissory note up to the limit permitted under the Federal
Reserve Board Regulations, of term no greater than seven years, which shall be
secured by a pledge of the shares to be acquired upon exercise of the option. In
addition, payment for shares purchased under an option may, with the consent of
the Committee, be made, in whole or in part by tendering shares of Common Stock,
valued at the fair market value, in lieu of cash.
No option granted under either of the plans will be valid if not granted
before January 1, 2003. There is no formula for determining the numbers of
options to be granted under either of the plans. Any grants of options will
reflect the Committee's judgment (in its sole discretion) of the relative value
of the contribution of the grantee in respect to such matters as revenue
production and expense control.
The Board of Directors may, insofar as permitted by law, from time to
time, with respect to any shares of stock at the time not subject to outstanding
options, suspend or discontinue either the Non-Qualified Plan or the ISOP or
revise or amend them in any respect whatsoever except that, without approval of
the holders of a majority of Common Stock, no such revision or amendment shall
change the number of shares of stock subject to such plan (except as permitted
under certain limited circumstances), change the designation of the class of
employees eligible to receive options, remove the administration of such plan
from the Committee, or render any member of the Committee eligible to receive an
option under such plan while serving thereon.
Description of The Stock Bonus Plan
The Stock Bonus Plan provides that the Committee may make awards of
stock to individuals who, in the judgment of the Committee, have made
significant contributions to the Company or any subsidiary thereof (including
directors and officers who are full or part-time employees of the Company, but
excluding directors who are not employees of the Company). Awards may be made by
the Committee on the basis of pre-established goals, or to reward performance,
or both. For example, the Committee may identify persons who may become eligible
for a stock award under the Plan, and establish certain goals or targets which,
if met, will entitle the persons so selected to receive such stock. Similarly,
the Committee may identify those persons who have made significant contributions
to the Company and, therefore, are deserving of special awards for their
efforts. Members of the Committee may not receive awards under the Plan. The
Plan will also serve to increase employee ownership in the Company and alignment
with stockholders, while conserving cash.
15
<PAGE>
Upon the receipt of a stock award, the participant must present his award
certificate within 30 days to the Company. If a participant's employment with
the Company is terminated for any reason, other than by death or disability,
prior to the issuance of the shares, the award is deemed to have lapsed and the
shares may become subject to future awards. If a participant dies or becomes
disabled prior to the issuance of the shares, then the award may be presented by
the participant or his personal or legal representative at any time within six
months after the date of the award. Except upon death, the award is not
transferable. Consistent with the interests of the Company in increasing
employee stock ownership, shares acquired under the Plan must be held for six
months following the date of receipt of the shares.
The Plan has a term of ten years, unless extended or earlier terminated
by the Board of Directors.
Federal Income Tax Consequences
With respect to options granted under the Non-Qualified Plan, generally
an optionee does not realize taxable income, and the Company will not be allowed
a deduction. However, the difference between the option price and the fair
market value of the stock on the date the option is exercised will be taxable as
ordinary income to the optionee and will be deductible by the Company as
compensation on such date. Gain or loss on the subsequent sale of such stock
will be eligible for capital gain or loss treatment by the optionee and will
have no federal income tax consequences to the Company. Different rules may
apply if an optionee, who is an officer, director or more than 10% stockholder,
exercises options within six months of the grant date.
With respect to options granted under the ISOP, if the optionee does not
make a disqualifying disposition of stock acquired on exercise of such options,
no income for federal income tax purposes will result to such optionee upon the
granting or exercise of the option (except that the amount by which the fair
market value of the stock at the time of exercise exceeds the option price will
be a tax preference item under the alternative minimum tax), and in the event of
any sale thereafter, any amount realized in excess of his or her cost will be
taxed as long-term capital gain and any loss sustained will be long-term capital
loss. In such case, the Company will not be entitled to a deduction for federal
income tax purposes in connection with the issuance or exercise of the option. A
disqualifying disposition will occur if the optionee makes a disposition of such
shares within two years from the date of the granting of the option or within
one year after the transfer of such shares to him or her. If a disqualifying
disposition is made, the difference between the option price and the lesser of
(i) the fair market value of the stock at the time the option is exercised or
(ii) the amount realized upon disposition of the stock will be treated as
ordinary income to the optionee at the time of disposition and will be allowed
as a deduction to the Company.
With respect to the restricted stock bonus awards, the participant will
realize income in an amount equal to the fair market value of the shares on the
date of grant, and the Company will be allowed a tax deduction.
The described tax consequences are based on current laws, regulations and
interpretations thereof, all of which are subject to change. In addition, the
discussion is limited to federal income taxes and does not attempt to describe
state and local tax effects that may accrue to participants or the Company.
Plan Benefits
As described above, the selection of the employees of the Company or
subsidiaries thereof who will receive grants under the Employee Stock Plans is
to be determined by the Committee in its sole discretion. Therefore, it is not
possible to predict the amounts that will be received by particular employees.
In 1998, executive officers Michael C. Hellriegel, R. Scott Silver-Hill and
Harley R. Ferguson received aggregate options to purchase 22,500 shares of
Common Stock under the 1992 ISOP. However, no dollar value is assigned to such
options because their exercise price was the fair market value of the underlying
Common Stock on the date of grant.
Reasons for and Effect of the Proposed Amendments and Restatements.
The Board of Directors believes that the approval of the proposed
amendments to and restatements of the Employee Stock Plans is necessary to
achieve the purposes of such plans and to promote the welfare of the Company and
its stockholders generally. The Board of Directors believes that the proposed
amendments to the Employee Stock Plans will aid the Company in attracting and
retaining directors, officers, and key employees and motivating such persons to
exert their best efforts on behalf of the Company. In addition, the Company
expects that the proposed amendments will further strengthen the identity of
interest of the directors, officers, and key employees with that of the
stockholders.
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Increase in the Number of Shares Reserved for Issuance
It is proposed to increase the number of shares of Common Stock reserved
for issuance under the Employee Stock Plans from 1,480,000 to 1,730,000. The
proposed increase in the number of shares issuable pursuant to the Employee
Stock Plans will enable the Company to grant additional options and other awards
to current participants, which will enable such participants to maintain their
proportionate interest in the Company, and to attract such additional personnel
as may be necessary in view of the Company's expanding operations.
In the event that the amendments to and restatements of the Employee Stock
Plans are not approved by the stockholders, the Employee Stock Plans will remain
in effect as previously adopted. Any options outstanding under the Employee
Stock Plans prior to the amendments to and restatement of the Employee Stock
Plans shall remain valid and unchanged.
Amendments Intended to Comply with Internal Revenue Code Section 162(m)
The Board of Directors has adopted amendments to the Employee Stock
Plans that limit the number of shares of Common Stock with respect to options or
awards that may be granted to any one employee of the Company in any one year to
a maximum of 200,000 shares of Common Stock. This amendment is being submitted
to stockholders in order to satisfy the stockholder approval requirements of
Section 162(m) of the Internal Revenue Code. Section 162(m) generally disallows
a tax deduction to the Company for compensation in excess of $1.0 million paid
in any year to its Chief Executive Officer and four other most highly
compensated executive officers (the "Highly Compensated Officers") unless such
compensation qualifies as "performance-based compensation." Upon stockholder
approval of the amendments to and restatements of the Employee Stock Plans, all
options and awards granted following the date of the Meeting generally will
qualify as "performance-based compensation" and will entitle the Company to take
a tax deduction for compensation paid as a result of option exercises by the
Company's Highly Compensated Officers.
If not approved, then future exercises of grants under the Employee Stock
Plans will not be qualified under Section 162(m) and therefore may not be
deductible by the Company. The Board of Directors believes that it is in the
best interest of the Company to continue to grant options and/or issue shares of
Common Stock under the Employee Stock Plans and in the Company's best interests
to adopt the proposed amendments to and restatements of the Employee Stock
Plans.
Restatements of the Employee Stock Plans
The restatements of the Employee Stock Plans are intended to provide an
integrated document to avoid confusion.
General
The adoption of these amendments to and restatements of the
Non-Qualified Plan, the ISOP, and the Stock Bonus Plan requires the approval of
a majority of the votes cast by holders of the shares of Common Stock and the
Company's 7% Series B Cumulative Preferred Stock, voting together as a single
class, represented at the meeting and entitled to vote. Shares may be voted for
or withheld from this matter. Shares entitled to cast votes on this matter at
the meeting which are withheld from this matter will be treated for all purposes
relevant to this matter as being present at the meeting and entitled to vote and
thus will have the same effect as a vote of such shares against this matter.
Shares entitled to cast votes on this matter at the meeting which are the
subject of a broker non-vote on this matter will be treated for quorum purposes
relevant to this matter as being present at the meeting and entitled to vote but
not be so treated in determining whether a majority or other required percentage
of the shares present and entitled to vote on the matter has been obtained.
The Board of Directors unanimously recommends a vote FOR Proposal 3
amending and restating the 1992 Non-Qualified Stock Option Plan, the 1992
Incentive Stock Option Plan, and the 1992 Stock Bonus Plan.
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PROPOSAL 4: PROPOSAL TO APPROVE THE PERFORMANCE BONUS PLAN
Effective January 1, 1991, the Company and Edward M. Kopko, the
Company's President and Chief Executive Officer, entered into a certain
employment agreement, which was subsequently amended and restated on July 11,
1994. On December 15, 1998, the Board of Directors and the Executive
Compensation Committee approved the terms of an amendment to the amended and
restated employment agreement (the "Amended and Restated Employment Agreement").
The Amended and Restated Employment Agreement contains a performance-based bonus
plan for Mr. Kopko (the " Performance Bonus Plan"). With respect to the years
beginning with 1999, the Performance Bonus Plan is subject to approval by the
Company's stockholders in accordance with the provisions of Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"). Section 162(m)
generally authorizes the tax deduction of compensation in excess of $1,000,000
per taxable year payable to a chief executive officer (and certain other
officers) only where such compensation is based on performance and satisfies
certain other requirements and is approved by the stockholders. No other
employee is eligible to participate in the Performance Bonus Plan.
If the Performance Bonus Plan is approved by the affirmative vote of
the holders of at least a majority of the shares of Common and Preferred Stock
present and entitled to vote at the meeting and certain other requirements set
forth in Section 162(m) of the Code are satisfied, performance bonus payments to
Mr. Kopko pursuant to the Performance Bonus Plan will, beginning in the year
1999, qualify for deduction under Section 162(m) of the Code. If the Performance
Bonus Plan is not approved by the stockholders, Mr. Kopko has agreed to forego
payment of all amounts due him thereunder and return to the Company any advances
he has received under such Plan.
The Board of Directors believes that the Performance Bonus Plan
provides a powerful incentive for Mr. Kopko to lead the Company in achieving
earnings growth and appreciation of stockholder value. Therefore, the Board
unanimously recommends that the stockholders vote in favor of the proposal to
approve the Performance Bonus Plan for the President and Chief Executive Officer
of the Company.
Summary of the Performance Bonus Plan
A copy of the Amended and Restated Employment Agreement, which contains
the Performance Bonus Plan, is available upon request to the Secretary of the
Company. The following is a summary of the Performance Bonus Plan.
Under the Amended and Restated Employment Agreement, Mr. Kopko has
agreed to serve as President and Chief Executive Officer of the Company, and in
a similar capacity for the Company's subsidiaries, for a term commencing on
January 1, 1991 and terminating three years after a notice of termination is
given by either the Company or Mr. Kopko, subject to earlier termination in
accordance with the terms of the Amended and Restated Employment (the
"Employment Term").
The Amended and Restated Employment Agreement provides for base
compensation to Mr. Kopko and the payment of a performance bonus (referred to in
the Amended and Restated Employment Agreement as an annual cash bonus) in an
amount equal to 5% of the Company's operating income of $3 million or less, plus
3% of operating income above $3 million. The Amended and Restated Employment
Agreement also provides for an incentive bonus based on the successful
completion of management objectives and other factors. In no event is the total
annual bonus to exceed four times Mr. Kopko's base salary.
The Amended and Restated Employment Agreement further provides that
prior to the end of each calendar quarter, the Company shall advance to Mr.
Kopko an amount equal to the sum of the following: (i) eighty percent (80%) of
the Company's estimate of Mr. Kopko's performance bonus for said quarter based
on the operating income of the Company, as reported to the Board of Directors
for the quarter; and (ii) eighty percent (80%) of the Company's incentive bonus
for said quarter, based on satisfactory progress toward completion of the
management objectives. To the extent that the quarterly advances exceed the
annual cash bonuses, as declared, the Amended and Restated Employment Agreement
provides that Mr. Kopko must return this excess.
"Operating Income" is defined in the Amended and Restated Employment
Agreement as net income of the Company's principal operating subsidiary before
adjustments for Federal and State income taxes and taxes imposed at the
federal/national level by foreign countries (based upon income), and excluding
extraordinary items. "Operating income" is also defined to exclude such items as
corporate expense allocation from the Company and certain goodwill amortization,
and to include items such as general and administrative expense and related
working capital interest income and expense.
18
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General
Ratification and approval of the Performance Bonus Plan requires the
approval of a majority of the votes cast by holders of the shares of Common
Stock and the Company's 7% Series B Cumulative Preferred Stock, voting together
as a single class, represented at the meeting and entitled to vote. Shares may
be voted for or withheld from this matter. Shares entitled to cast votes on this
matter at the meeting which are withheld from this matter will be treated for
all purposes relevant to this matter as being present at the meeting and
entitled to vote and thus will have the same effect as a vote of such shares
against this matter. Shares entitled to cast votes on this matter at the meeting
which are the subject of a broker non-vote on this matter will be treated for
quorum purposes relevant to this matter as being present at the meeting and
entitled to vote but not be so treated in determining whether a majority or
other required percentage of the shares present and entitled to vote on the
matter has been obtained.
The Board of Directors unanimously recommends a vote FOR Proposal 4 approving
the Performance Bonus Plan.
PROPOSAL 5: PROPOSAL TO AMEND THE
1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
TO INCREASE THE NUMBER OF SHARES SUBJECT TO OPTIONS
The Board of Directors recommends the adoption of an amendment to the
Company's 1992 Stock Option Plan for Non-Employee Directors (the "Plan").
The purpose of the Plan is to promote the interests of the Company and
its stockholders by strengthening the Company's ability to attract and retain
experienced and knowledgeable non-employee directors and to encourage them to
acquire an increased proprietary interest in the Company. The Plan is
administered by the Board of Directors (the "Board"). The Plan provides for a
grant of options to each non-employee director on the day following each annual
meeting to purchase 12,000 shares of Common Stock at an exercise price equal to
the fair market value on the date of grant. The Plan further provides that a
newly elected non-employee director will receive an additional one-time grant of
options to purchase 12,000 shares of Common Stock on the day following the
meeting of his or her initial election at an exercise price equal to the fair
market value on the date of grant.
Currently 370,000 shares are authorized for issuance and 286,000 have been
issued under the Plan. The Company recommends an increase in the aggregate
number of shares that may be subject to options under the Plan by an additional
60,000 shares. This amendment will provide for options to be granted following
the 2000 Annual Meeting on the same terms as options granted following the 1999
Annual Meeting. It will also permit options to be granted if a new Board member
is elected in the future, although the Company does not have any current plans
to nominate a new Board member.
The text of the proposed Plan is available from the Secretary of the
Company. The following is a Plan summary, as amended.
Payment of the option exercise price may be in cash, by delivery of
previously owned Common Stock having a fair market value equal to the option
price, by a combination of cash and stock, or by a non-interest bearing
promissory note, of term not greater than seven years, secured by a pledge of
the shares of common stock to be acquired upon exercise of the option. All
options granted under the Plan are non-statutory -- not intended to qualify
under Section 422 of the Internal Revenue Code of 1986, as amended. The federal
income tax consequences are similar to those described above with respect to the
Non-Qualified Plan.
If an optionee ceases to be a director before an option vests, the
option is forfeited. Each option expires ten years from the date of its grant.
Outstanding options will expire earlier if an optionee terminates service as a
director other than by reason of retirement, total disability or death. In those
events, the option will then expire one year from the date of death or
termination or on the stated grant expiration date, whichever is earlier.
Options are not transferable during the lifetime of the optionee, except that an
option may be transferable to members of the optionee's immediate family, to a
partnership whose members are only the optionee and/or members of the optionee's
immediate family, or to a trust for the benefit of only the optionee and/or
members of the optionee's immediate family. Options that are forfeited or
terminated will again be available for grant. Shares may be authorized but
unissued, currently held or reacquired shares.
The Board may amend, terminate or suspend the Plan at any time,
provided that no amendment regarding amount, price or timing of the grants may
be made more than once every six months other than to comport with changes in
certain Securities Exchange Act and Internal Revenue Code requirements.
Amendments that would materially increase the number of shares that may be
issued, materially modify the requirements as to eligibility for Plan
participation, or materially increase the benefits to Plan participants must be
approved by stockholders.
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<PAGE>
Under the Plan, each of the four non-employee directors will receive
options to purchase 12,000 shares of Common Stock on May 7, 1999. However, no
dollar value is assigned to the options because their exercise price will be the
fair market value of the Common Stock on the date of grant.
The adoption of this amendment to the 1992 Stock Option Plan for
Non-Employee Directors requires the approval of a majority of the votes cast by
holders of the shares of Common Stock and the Company's 7% Series B Cumulative
Preferred Stock, voting together as a single class, represented at the meeting
and entitled to vote. Shares may be voted for or withheld from this matter.
Shares entitled to cast votes on this matter at the meeting which are withheld
from this matter will be treated for all purposes relevant to this matter as
being present at the meeting and entitled to vote and thus will have the same
effect as a vote of such shares against this matter. Shares entitled to cast
votes on this matter at the meeting which are the subject of a broker non-vote
on this matter will be treated for quorum purposes relevant to this matter as
being present at the meeting and entitled to vote but not be so treated in
determining whether a majority or other required percentage of the shares
present and entitled to vote on the matter has been obtained.
The Board of Directors unanimously recommends a vote FOR Proposal 5,
amending the 1992 Stock Option Plan for Non-Employee Directors.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the Common
Stock, to file reports of ownership and changes in ownership with the Securities
and Exchange Commission. Based on its review of the copies of such forms
received by it, the Company believes that, except as set forth below, all filing
requirements applicable to its officers, directors, and greater than ten-percent
beneficial owners were complied with. John F. Hegarty did not timely file three
reports, covering five transactions. Upon discovery, appropriate reports were
subsequently filed by Mr. Hegarty.
STOCKHOLDERS PROPOSALS
In order for a stockholder proposal to be considered for inclusion in
the Company's proxy statement and form of proxy relating to the 2000 Annual
Meeting of Stockholders, the proposal must be received by the Company no later
than December 3, 1999.
OTHER MATTERS
The Board of Directors has appointed the firm of Deloitte & Touche LLP as
independent public auditors to audit the financial statements of the Company for
the year ending December 31, 1999. Deloitte & Touche LLP have been the auditors
for the Company and its subsidiaries since the Company's inception.
Representatives of the firm are expected to be present at the annual meeting to
respond to stockholders' questions and to have the opportunity to make any
statements they consider appropriate.
The Board of Directors has at this time no knowledge of any matters to be
brought before this year's Annual Meeting other than those referred to above.
However, if any other matters properly come before this year's Annual Meeting,
it is the intention of the persons named in the proxy to vote such proxy in
accordance with their judgment on such matters.
GENERAL
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1998 is being mailed, together with this Proxy
Statement, to each stockholder. Additional copies of such Annual Report and of
the Notice of Annual Meeting, this Proxy Statement and the accompanying proxy
may be obtained from Morrow & Co., Inc., 909 Third Avenue, New York, New York
10022-4799, or from the Company. The Company has retained Morrow & Co., Inc. to
assist in the solicitation of proxies, primarily from brokers, banks and other
nominees, for an estimated fee of $3,900 plus expenses. The Company will, upon
request, reimburse brokers, banks and other nominees, for costs incurred by them
in forwarding proxy material and the Annual Report to beneficial owners of
Common Stock. In addition, directors, officers and regular employees of the
Company and its subsidiaries, at no additional compensation, may solicit proxies
by telephone, telegram or in person. All expenses in connection with soliciting
management proxies for this year's Annual Meeting, including the cost of
preparing, assembling and mailing the Notice of Annual Meeting, this Proxy
Statement and the accompanying proxy, are to be paid by the Company.
20
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The Company will provide without charge (except for exhibits) to any record
or beneficial owner of its securities, on written request, a copy of the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1998, including the financial
statements and schedules thereto. Exhibits to said report will be provided upon
payment of fees limited to the Company's reasonable expenses in furnishing such
exhibits. Written requests should be directed to Cathy D. Shea, Assistant
Secretary of the Company, 110 Summit Avenue, Montvale, New Jersey, 07645.
In order to assure the presence of the necessary quorum at this year's
Annual Meeting, and to save the Company the expense of further mailings, please
date, sign and mail the enclosed proxy promptly in the envelope provided. No
postage is required if mailed within the United States. The signing of a proxy
will not prevent a stockholder of record from voting in person at the meeting.
By Order of the Board of Directors,
Warren F. Brecht
Secretary
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PROXY PROXY
BUTLER INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
May 6, 1999
The undersigned stockholder of BUTLER INTERNATIONAL, INC. hereby appoints
JOHN F. HEGARTY, HUGH G. McBREEN, AND WARREN F. BRECHT, each with full power of
substitution, as attorneys and proxies to vote all of the shares of stock of
said Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of said Company to be held on Thursday, May 6, 1999 at 4:00 p.m. at
its headquarters facility, 110 Summit Avenue, Montvale, New Jersey, or at any
and all adjournments thereof, with all powers the undersigned would possess if
personally present, as indicated below, and for the transaction of such other
business as may properly come before said meeting or any and all adjournments
thereof, all as set forth in the April 6, 1999 Proxy Statement for said meeting:
The Board of Directors recommends a vote FOR proposals 1, 2, 3, 4 and 5.
1. Election of Director.
___ FOR the nominee, ___ WITHHOLD AUTHORITY to vote for the nominee,
Edward M. Kopko Edward M. Kopko
2. Proposal to increase the authorized number of shares of Preferred Stock.
___ FOR ___ AGAINST ___ ABSTAIN
3. Proposal to amend and restate the 1992 Employee Stock Plans (i) by increasing
the aggregate number of shares of the Company's Common Stock that may be
subject to option under the Employee Stock Plans; and (ii) by limiting the
number of shares of the Company's Common Stock that may be granted to any one
employee under the Employee Stock Plans in order to comply with Section
162(m) of the Internal Revenue Code of 1986, as amended.
___ FOR ___ AGAINST ___ ABSTAIN
4. Proposal to approve the Performance Bonus Plan for the President and Chief
Executive Officer of the Company to qualify such plan under Section 162(m) of
the Internal Revenue Code of 1986, as amended.
___ FOR ___ AGAINST ___ ABSTAIN
5. Proposal to amend the 1992 Stock Option Plan for Non-Employee Directors.
___ FOR ___ AGAINST ___ ABSTAIN
A majority of the members of said Proxy Committee who shall be present
in person or by substitute at said meeting, or in case but one shall be present
then that one, shall have and exercise all of the powers of said Proxy
Committee.
This Proxy will be voted as directed but if no direction is indicated
will be voted FOR the election as director of the nominee listed herein; and FOR
proposals 2 through 5 as described herein. On other matters that may come before
said meeting, this Proxy will be voted in the discretion of the above-named
Proxy Committee.
-------------------------------
-------------------------------
(Signature of Stockholder)
DATED: 1999
--------------------
Note: Please sign exactly as
your name or names appear to the
left. If the stock is registered
in the name of more than one
person, the proxy should be
signed by all named holders.
When signing as attorney,
executor, administrator, trustee
or guardian, please give full
title. If a corporation, please
sign in full corporate name by
president or other authorized
officer. If a partnership,
please sign in partnership name
by authorized person.
<PAGE>
APPENDIX A
AMENDED AND RESTATED
BUTLER INTERNATIONAL, INC.
1992 STOCK OPTION PLAN
(as Proposed to be Amended and Restated May 6, 1999)
I.
THE PLAN
The name of this Stock Option Plan shall be the Butler International,
Inc. 1992 Stock Option Plan (referred to as the "Plan").
The purpose of this Plan is to promote the growth and general
prosperity of Butler International, Inc. (the "Company") by permitting it to
grant options to purchase shares of its common stock in order to attract and
retain the best available personnel for positions of substantial responsibility.
It is further intended as an incentive for and to encourage stock ownership by
certain individuals so that they may acquire or increase their proprietary
interest in the success of the Company, and to encourage them to remain
associated with and contribute to the success of the Company.
The Plan shall be governed by the laws of the State of Maryland; if any
provision hereof is held by any court of competent jurisdiction to be invalid or
unenforceable, that provision shall be severed and the remaining provision shall
continue to be fully effective.
This plan shall become effective as of January 1, 1993. No grant of any
option shall be valid unless granted prior to January 1, 2003.
II.
ADMINISTRATION AND AMENDMENT OF THE PLAN
The Plan shall be administered by the Executive Compensation Committee
(the "Committee") which shall consist of at least two members of the Board of
Directors who are not employees of the Company and who are appointed to the
Committee from time to time by the Board of Directors. If any member of the
Committee becomes an employee of the Company, his membership on the Committee
shall automatically terminate. A majority of the Committee shall constitute a
quorum and acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by all members of the Committee,
shall be deemed to be valid acts of the Committee. No member of the Committee
shall be eligible to receive an option under the Plan.
The Company shall effect the grant of options to such employees and in
such amounts as the Committee directs. The Committee from time to time may
adopt rules and regulations for carrying out the Plan. The determination or the
interpretations and constructions of any provision of the Plan by the Committee,
shall be final and conclusive unless otherwise determined by the Board. The
determinations or the interpretations and constructions of any provision of the
Plan by the Board shall be final and conclusive. The Board of Directors may,
insofar as permitted by law, from time to time, with respect to any shares of
stock at the time not subject to outstanding options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever except that, without
approval of the holders of a majority of the stock of the Company, no such
revision or amendment shall change the number of shares of stock subject to the
Plan (except as may occur as a result of an occurrence described in Section V),
change the designation of the class of employees eligible to receive options,
remove the administration of the Plan from the Committee, or render any member
of the Committee eligible to receive an option under the Plan while serving
thereon.
III.
ELIGIBILITY
Options may be granted only to those individuals who in the discretion
of the Committee have made significant contributions to the Company or any
subsidiary thereof, including officers and directors who are full or part-time
employees of the Company, but excluding directors who are not employees of the
Company. The Plan does not and will not confer upon any right to employment with
the Company, nor will the Plan have any effect upon his right, or upon the right
of the Company, to terminate the association at any time. No more than 200,000
shares of Common Stock in options or awards may be granted, in total, in any one
year, to any one individual, pursuant to this Plan, the Butler International,
Inc. 1992 Incentive Stock Option Plan, and the Butler International, Inc. 1992
Stock Bonus Plan.
<PAGE>
IV.
OPTION TERMS
Stock Options granted pursuant to this Plan shall be evidenced by a
stock option agreement executed by the Company and by the optionee to whom such
option is granted, which options shall contain or be subject to the following
terms and conditions:
A. Each agreement shall state the number of shares subject to the
option granted.
B. The purchase price of each share under the option shall be
established by the Committee at the time at which such option is
granted, provided that no such purchase price shall be less than
100% of the fair market value of the Stock at the time of grant.
C. The period of the option shall be that which is established by the
Committee at the time at which the option is granted, provided that
no option granted shall be exercisable after the expiration of ten
years from the date of grant.
D. The option may be exercised only if the optionee has been
continuously associated with the Company since the date of the
grant. Except as otherwise specifically provided herein, the
optionee must hold the option for at least six (6) months prior to
exercise. If an optionee shall cease to be associated with the
Company for any reason other than death, he may, but only within two
weeks of such cessation, exercise his option to the extent he was
entitled to exercise it as of the date of such cessation.
In the event of death of an optionee while associated with the Company, the
option shall be exercisable only within three months of the date of the
optionee's death and then only by a person who acquired the right to exercise
such option by bequest or inheritance or by reason of the death of the optionee
and shall be exercisable only to the extent that the optionee was entitled to
exercise the option at the date of his death.
If an optionee is terminated without cause, his options may, but only at the
express discretion of the Board, continue to be exercised throughout their term,
as defined in this Section.
E. The option price shall be paid in cash, by check, or, with the
consent of the Committee, by a non-interest bearing promissory note
up to the limit permitted under the Federal Reserve Board
regulations, of term no greater than seven years, payable to the
Company, which shall be secured by a pledge of the shares to be
acquired upon exercise of the Option. In addition, payment for
shares purchased under an option may, with the consent of the
Committee, be made, in whole or in part, by tendering shares of the
Company's common stock, valued at fair market value, in lieu of
cash.
F. Options granted under the Plan may not be sold, pledged, assigned or
transferred in any manner otherwise than by will or the laws of the
descent or distribution, and may be exercised during the lifetime of
the optionee only by that optionee.
G. The number of shares and exercise price of any option granted
hereunder shall be adjusted to take into account any stock
dividends, stock splits, stock exchanges, mergers, consolidation or
other capital changes, excluding payment of cash dividends,
occurring between the date of grant and the date of exercise.
H. The option agreements authorized under this Plan shall contain such
other provisions or restrictions as the Committee or the Board of
Directors shall deem advisable.
<PAGE>
V.
UNDERLYING SHARES
The Company shall set aside 1,730,000 shares of its common stock (after taking
account of the 1 for 6 reverse stock split effective June 29, 1992) to be made
available for stock options granted pursuant to this Plan, the Butler
International, Inc. 1992 Incentive Stock Option Plan, and the Butler
International, Inc. 1992 Stock Bonus Plan. The number of shares available shall
be adjusted to take into account any future stock dividends, stock splits, stock
exchanges, mergers, consolidations or other capital changes.
Exercise of any options granted hereunder shall be further subject
to compliance with all state and federal laws relating to the offer and sale of
securities. In the event shares of stock subject to such options are not covered
by a registration statement, such options may be exercised only upon the
optionee making certain representations in writing to the Company that, at the
time of such exercise, the optionee intends to acquire such shares for
investment and not for distribution or resale and certain other representations
relating to the optionee's intent as in the opinion of counsel to the Company
may be necessary to qualify the offer and sale of such shares for such
exemptions, if any, from the registration requirements of state and federal
securities laws as may be deemed to be available. If any law or regulation of
the Securities and Exchange Commission, or of any other commission or agency
having jurisdiction or regulatory authority over the issuance of such shares
shall require the Company or the exercising optionee to take any action with
respect to the shares of stock acquired by the exercise of the option, then the
date upon which the Company shall deliver or cause to be delivered the stock
certificate or certificates for the shares of stock shall be postponed until
full compliance has been made with all such requirements. Although not bound by
anything herein to do so, the Company may file a registration statement with the
appropriate state and federal regulatory authorities as to the shares of stock
subject to such options. In the event the Company does file such a registration
statement, the Company may, but is not obligated to, maintain the effectiveness
of such registration statement by filing amended and supplemental prospectuses
with the appropriate regulatory authorities.
<PAGE>
AMENDED AND RESTATED
BUTLER INTERNATIONAL, INC.
1992 INCENTIVE STOCK OPTION PLAN
(As Proposed to be Amended and Restated May 6, 1999)
The purpose of the Butler International, Inc. 1992 Incentive Stock
Option Plan (the "Plan") is to advance the interests of Butler International,
Inc. (hereinafter called the "Company") and its stockholders by strengthening
the Company's ability to attract and retain employees of experience and ability
and to furnish additional incentives to those employees upon whose judgment,
initiative, and efforts the successful conduct and development of the business
of the Company largely depends. This Plan is intended to be an incentive stock
option plan within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"). Options granted in accordance with the terms
hereof and as provided in Section 422A of the Code are to be incentive stock
options. Options granted and not so qualifying under the Code are called
non-qualified stock options. Options granted and not so qualifying under the
Code are called non-qualified stock options. The Plan will be effective as of
January 1, 1993.
1. Administration and Amendment of the Plan. The Plan shall be
administered by the Executive Compensation Committee (the "Committee") which
shall consist of at least two members of the Board of Directors who are not
employees of the Company and who are appointed to the Committee from time to
time by the Board of Directors. If any member of the Committee becomes an
employee of the Company, his membership on the Committee shall automatically
terminate. A majority of the Committee shall constitute a quorum and acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all members of the Committee, shall be deemed to be
valid acts of the Committee. No member of the Committee shall be eligible to
receive an option under the Plan.
The Company shall effect the grant of options to such employees and in
such amounts as the Committee directs. The Committee, from time to time, may
adopt rules and regulations for carrying out the Plan. The determination or the
interpretations and constructions of any provision of the Plan by the Committee,
shall be final and conclusive unless otherwise determined by the Board. The
determinations or the interpretations and constructions of any provision of the
Plan by the Board, shall be final and conclusive. The Board of Directors may,
insofar as permitted by law, from time to time, with respect to any shares of
Stock (as defined below) at the time not subject to outstanding options, suspend
or discontinue the Plan or revise or amend it in any respect whatsoever except
that, without approval of the holders of a majority of the Stock of the Company,
no such revision or amendment shall change the number of shares of Stock subject
to the Plan (except as may occur as a result of an occurrence described in
Section (6), change the designation of the class of employees eligible to
receive options, remove the administration of the Plan from the Committee, or
render any member of the Committee eligible to receive an option under the Plan
while serving thereon.
2. Shares of Stock Subject to the Plan. A total of 1,730,000 shares of
the authorized common stock of the Company, par value $0.001 per share
("Stock"), (after taking account of the 1 for 6 reverse stock split effective
June 29, 1992) shall be reserved for issuance under the Plan, the Butler
International, Inc. 1992 Stock Option Plan and the Butler International, Inc.
1992 Stock Bonus Plan. Such shares subject under the Plan to an option which,
for any reason, expires or is terminated unexercised may again be subject to an
option under the Plan.
3. Eligibility. Options may be granted only to those individuals who in
the discretion of the Committee have made significant contributions to the
Company or any subsidiary thereof, including officers and directors who are full
or part-time employees of the Company, but excluding directors that are not
employees of the Company. The Plan does not and will not confer upon any right
to employment with the Company, nor will the Plan have any effect upon his
right, or upon the right of the Company, to terminate the association at any
time No more than 200,000 shares of common stock in options or awards may be
granted , in total, in any one year, to any one individual, pursuant to this
Plan, the Butler International, Inc. 1992 Stock Option Plan and the Butler
International, Inc. 1992 Stock Bonus Plan.
4. Price. The exercise price shall be not less than the fair market
value of the Stock on the day the option is granted; provided however that if
the employee to whom the option is granted, on the date of grant, possesses more
than 10 percent of the total combined voting power of all classes of stock of
the Company or of any parent or subsidiary of the Company, then the exercise
price shall be at least 110 percent of the fair market value of the shares of
Stock subject to the option on the day the option is granted. In the event that
the Company's Stock is traded on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") then the fair market value of the Stock
will be the average between the closing bid and asked price as reported by
NASDAQ or such other similar and/or replacement quotation system on the day the
option is granted.
<PAGE>
5. Other Terms and Conditions. Each option granted shall be evidenced
by a stock option agreement which shall be executed by the Company and by the
employee to whom such option is granted (the "optionee") and shall contain, or
be subject to, the following terms and conditions:
(a) The option, by its terms, shall not be exercisable after the period of
time established by the Committee provided that no option granted shall
be exercisable after the expiration of ten years from the date of
grant; provided further that no option granted to an employee who, on
the date of grant, possesses more than ten percent of the total
combined voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company shall be exercisable after the
expiration of five years from the date of grant. Except as otherwise
specifically provided herein, no option granted hereunder shall be
exercisable until six months after the grant thereof.
(b) The option can be exercised only if the optionee has been continuously
employed by the Company since the date of its grant. Absence on leave
approved by the Company shall not be considered an interruption of
employment. If an optionee shall cease to be employed by the Company
for any reason other than death, retirement or disability (within the
meaning of Section 105 (d)(4) of the Code), he or she may, but only
within three months of such cessation (but in no event more than ten
years from the date of grant), exercise his or her options to the
extent that he or she was entitled to exercise it as of the date of the
cessation. The Plan does not and will not confer upon any optionee any
right with respect to continuance of employment by the Company, nor
will it interfere in any way with his or her right, or the Company's
right, to terminate his or her employment at any time. In the event of
the disability or retirement of an optionee while in the employ of the
Company, the option shall be exercisable only within two weeks of the
date of the optionee's disability or retirement (but in no event more
than ten years from the date of grant) and shall be exercisable only to
the extent that the optionee was entitled to exercise the option at the
date of his or her disability or retirement. Upon the death of any
optionee, while in active employment or within the two week period
referred to above, the person or persons to whom such optionee's rights
under the option are transferred by will or the laws of descent and
distribution may within three months (but in no event more than ten
years from the date of grant), of the date of such optionee's death,
purchase all of any part of the shares with respect to which the
optionee was entitled to exercise at the date of his or her death. If
an optionee is terminated without cause, his options may, but only at
the express discretion of the Board, continue to be exercised
throughout their term. as defined in this Section.
(c) The option shall be valid only if granted prior to January 1, 2003.
(d) Exercise of any options granted hereunder shall be further subject to
compliance with all state and federal laws relating to the offer and
sale of securities. In the event shares of Stock subject to such
options are not covered by a registration statement, such options may
be exercised only upon the optionee making certain representations in
writing to the Company at the time of such exercise to the effect that
the optionee intends to acquire such shares for investment and not for
distribution or resale and such other representations relating to the
optionee's intent as in the opinion of counsel to the Company may be
necessary to qualify the offer and sales of such shares for such
exemptions if any, from the registration requirements of state and
federal securities laws as may be deemed to be available.
(e) The option price shall be paid in cash, by check, or, with the consent
of the Committee, by a noninterest bearing promissory note up to the
limit permitted under the Federal Reserve Board regulations, of term no
greater than seven years, payable to the Company, which shall be
secured by a pledge of the shares to be acquired upon exercise of the
option. In addition, payment for shares purchased under an option may,
with the consent of the Committee, be made, in whole or in part, by
tendering shares of the Company's common stock, valued at fair market
value, in lieu of cash.
(f) The option shall be nontransferable except by will or by the laws of
descent and distribution, and during the lifetime of the optionee the
option shall be exercisable only by the optionee. No optionee or person
who acquired the right to exercise such option by will or by the laws
of descent and distribution, as the case may be, will be deemed to be a
holder of any shares subject to an option unless and until certificates
for such shares are issued to him or her or such person.
(g) The aggregate value of stock options which may become initially
exercisable in any calendar year shall not exceed $100,000. If the
options initially exercisable in any calendar year do exceed $100,000,
the excess over $100,000 shall be treated as non-qualified stock
options.
<PAGE>
(h) If provided for in the Incentive Stock Option Agreement, Optionee may,
at any time while this Plan remains in effect, pursuant to paragraphs
(1) through (3) below, sell any Stock acquired pursuant to the Plan
back to the Company
(1) In order to sell Stock back to the Company, Optionee must give
written notice to the Company which states the number of
shares he wishes to sell to the Company.
(2) Within 30 calendar days after the Company's receipt of the
notice described in paragraph (1), the Company will purchase
all of the shares covered by Optionee's notice. Optionee may,
by written notice, at any time, either withdraw his request to
have his shares purchased or have the Company delay purchases
of his shares pursuant to any purchase schedule Optionee may
request.
(3) All purchases under this Section will be made at the fair
market value of the Stock on the date such shares are
tendered.
6. Dilution or other adjustments. In the discretion of the Board of
Directors, the 1,730,000 shares of Stock reserved hereunder and under the Butler
International, Inc. 1992 Stock Option Plan and the Butler International, Inc.
1992 Stock Bonus Plan, and the number of shares subject to, and the exercise
price of, any options granted and outstanding hereunder shall be adjusted to
take into account any future stock dividends, stock splits, stock exchanges,
mergers, consolidations, reorganizations, recapitalizations, or other changes in
the corporate structure affecting the Company's Stock.
<PAGE>
AMENDED AND RESTATED
BUTLER INTERNATIONAL, INC.
1992 STOCK BONUS PLAN
(As Proposed to be Amended and Restated May 6, 1999)
1. Purpose. This 1992 Stock Bonus Plan (the "Plan") of Butler
International, Inc. (the "Company") is hereby adopted for the purpose
of furthering the interests of the Company by providing incentives for
officers and key employees of the Company who may be designated for
participation in the Plan and to provide additional means of attracting
and retaining competent personnel.
2. Administration. The Plan shall be administered by the Executive
Compensation Committee (referred to herein as the "Committee"). The
Committee shall at all times consist of at least two directors of the
Company. All members of the Committee shall be "disinterested
directors", as defined in Rule 16b-3 ("Rule 16b-3") promulgated under
the Securities Exchange Act of 1934, as amended. Accordingly, no member
of the Committee shall have received, for a period of at least one year
prior to his or her serving as a member of the Committee, any grant or
award of any equity securities of the Company pursuant to the Plan or
any other plan of the Company except under any formula plan, ongoing
securities acquisition plan, or pursuant to an election to receive an
annual retainer in cash or securities, as described in Rule 16b-3.
Committee members may not receive awards under the Plan.
3. Interpretation. Subject to the provisions of the Plan and applicable
law, the Committee is authorized to interpret the Plan and to
prescribe, amend and rescind rules and regulations relating to the Plan
and to any awards made thereunder, and to make all other determinations
necessary or advisable for the administration of the Plan.
4. Participants. The Committee shall determine and designate from time to
time those individuals who in the discretion of the Committee have made
significant contributions to the Company or any subsidiary thereof,
including officers and directors who are full or part-time employees of
the Company, but excluding directors who are not employees of the
Company. The Plan does not and will not confer upon any right to
employment with the Company, nor will the Plan have any effect upon his
right, or upon the right of the Company, to terminate the association
at any time.
The Committee may make awards pursuant to this Plan ("Awards") to such
participants of shares of the common stock, par value $.001 per share,
of the Company ("Shares") in such amounts as the Committee shall from
time to time determine. No member of the Committee shall have any right
to participate in the Plan or to vote or decide upon any matter
relating solely to a member of his immediate family or solely to any
rights or benefits of a member of his immediate family under the Plan.
Participation in the Plan shall not confer any right of continuation of
service as a director, officer or employee of the Company. No more than
200,000 shares of common stock in options or awards may be granted, in
total, in any one year, to any one individual, pursuant to this Plan,
the Butler International, Inc. 1992 Incentive Stock Option Plan and the
Butler International, Inc. Stock Option Plan.
5. Criteria for Award. The Committee may make Awards under the Plan based
on either of the following bases:
(a) The Committee may determine those officers or employees of the
Company who may become eligible to become participants, and
establish certain goals or minimum targets which, if met or
achieved, will enable each of the participants to receive an
Award under the Plan; or
(b) The Committee may identify those officers and employees who
have made contributions to the Company and who are deserving
of special awards for their efforts, and make an Award to each
of them; or
(c) A combination of (a) and (b) above.
6. Shares Subject to the Plan. The Company shall reserve and keep
available 1,730,000 Shares (after taking account of the 1 for 6 reverse
stock split effective June 29, 1992) of the authorized and unissued
Shares of the Company for issuance to participants under the Plan, the
Butler International, Inc. 1992 Stock Option Plan and the Butler
International, Inc. 1992 Incentive Stock Option Plan. If any Awards
made under the Plan are forfeited, in whole or in part, the Shares so
released from the Award may be made the subject of other Awards under
the Plan.
7. Share Restructure. In the event there is any change in the Company's
Shares, as by stock splits, reverse stock splits, stock dividends,
reclassifications or recapitalization, the number and type of Shares
available for Awards under the Plan shall be appropriately adjusted by
the Committee.
<PAGE>
8. Effect of Award. The granting of an Award shall take place only when an
Award Certificate is executed by or on behalf of the Committee and
delivered to the participant, and all conditions for the effectiveness
of the Award have been satisfied. The issuance of an Award Certificate
to a participant shall entitle such participant to receive the number
of Shares specified in the Award Certificate as a bonus under this
Plan, without any monetary consideration for such Shares.
9. Presentment of Award Certificates. To receive Shares upon the grant of
an Award, a participant (or his successor) shall present and surrender
the Award Certificate to the Secretary of the Company at the Company's
principal executive offices within 30 days after the date of the Award.
Certificates representing the shares will generally be issued to the
participant within 15 days after proper presentment of the Award
Certificate. If the Award Certificate is presented by the successor of
a participant following his death, proof shall be submitted,
satisfactory to the Committee, of the right of the successor to receive
such Shares. If the Award Certificate is not presented within the
proper time, the Award shall be deemed to have lapsed, unless the
Committee extends the time for presentment, and the Shares issuable
thereunder shall thereafter become available for future Awards.
10. Transfer of Awards. No Award or Award Certificate shall be transferable
otherwise than by will or the laws of descent and distribution, and may
be presented for issuance of Shares during his lifetime only by the
participant and only in the manner set forth herein.
11. Termination and Forfeiture of Awards. An Award will terminate, be
forfeited and lapse immediately if such participant's employment or
relationship with the Company terminates for any reason other than the
death or disability of the participant. If participant's employment or
relationship with the Company is terminated for disability or death,
the participant or his personal representative, estate or heirs, as the
case may be, subject to any restrictions in effect or imposed by the
Committee at the time the Award is made, may present the Award and
receive the Shares during a period of six months after such date.
12. Rights as Stockholder. A participant shall have no rights as a
stockholder until the date of the issuance to him of a certificate
representing such Shares; provided, however, that in the absence of any
extraordinary events, certificates representing Shares in respect of
which an Award has been presented shall be issued on or before the
tenth day after proper presentment. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record
date is prior to the date such Award is properly presented in the
manner set forth herein.
13. Holding Period. A participant shall hold, and not sell or otherwise
dispose of, Shares received under the Plan for a period of six months
after the date of receipt of the Shares.
14. Amendments and Termination. The Board of Directors may, insofar as
permitted by law, from time to time, with respect to any shares of
stock at the time not subject to outstanding Awards, suspend or
discontinue the Plan or revise or amend it in any respect whatsoever
except that, without approval of the holders of a majority of the stock
of the Company, no such revision or amendment shall change the number
of shares of stock subject to the Plan (except as may occur as a result
of an occurrence described in Section 7), change the designation of the
class of employees eligible to receive awards, remove the
administration of the Plan from the Committee, or render any member of
the Committee eligible to receive an award under the Plan while serving
thereon.
15. Period of Plan. The Plan shall become effective on January 1, 1993;
unless extended or earlier terminated by the Board of Directors, the
Plan shall continue in effect until, and shall terminate on, the tenth
anniversary of the effective date of the Plan.
<PAGE>
