SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DSI INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fees paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:<PAGE>
Preliminary Copies
DSI INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 25, 1997
To the Stockholders of DSI Industries, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of DSI
Industries, Inc. (the "Company") will be held at Four Points Hotel, 505 Avenue
Q, Lubbock, Texas, on Thursday, September 25 , 1997 at 10:00 A.M., local
time, for the following purposes:
1. To elect directors;
2. To approve a proposed amendment to the Company's Certificate of
Incorporation to change the name of the Company from DSI Industries, Inc. to
Norton Drilling Services, Inc.;
3. To adopt the DSI Industries, Inc. 1997 Stock Option Plan;
4. To ratify the selection of Robinson Burdette Martin & Cowan LLP as
independent auditors of the Company for the fiscal year commencing December
1, 1996; and
5. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on August 7, 1997
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournments thereof.
Management requests all stockholders to sign and date the enclosed form
of proxy and return it in the postage paid, self-addressed envelope provided for
your convenience. Please do this whether or not you plan to attend the meeting.
Should you attend, you may, if you wish, withdraw your proxy and vote your
shares in person.
By Order of the Board of Directors,
Sherman H. Norton, Jr., Chairman
Lubbock, Texas
August 18, 1997<PAGE>
DSI INDUSTRIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, September 25, 1997
This Proxy Statement is furnished by the Board of Directors of DSI
Industries, Inc. (the "Company") in connection with the solicitation of
proxies to be voted at the Annual Meeting of Stockholders which will be
held at Four Points Hotel, 505 Avenue Q, Lubbock, Texas, on September
25, 1997, at 10:00 A.M., local time, and all adjournments thereof.
Any stockholder giving a proxy will have the right to revoke it at any
time prior to the time it is voted. A proxy may be revoked by written notice
to the Company, Attention: Secretary, by execution of a subsequent proxy
or by attendance and voting in person at the Annual Meeting of
Stockholders. Attendance at the meeting will not automatically revoke the
proxy. All shares represented by effective proxies will be voted at the
Annual Meeting of Stockholders, or at any adjournment thereof. Unless
otherwise specified in the proxy, shares represented by proxies will be voted
(i) for the election of the nominees for director listed below, (ii) in favor of
the name change of the Corporation to Norton Drilling Services, Inc., (iii)
for adoption of the Company's 1997 Stock Option Plan, and (iv) for the
ratification of the selection of the independent auditors.
The Company's executive offices are located at 5211 Brownfield
Highway, Suite 230, Lubbock, Texas 79407-3501, (806) 785-8400. On or
about August 18, 1997 this Proxy Statement and the accompanying form
of proxy together with a copy of the Annual Report of the Company for the
year ended November 30, 1996, including financial statements, are to be
mailed to each stockholder of record at the close of business on August 7,
1997.
VOTING SECURITIES
Only stockholders of record at the close of business on August 7,
1997 are entitled to vote at the meeting. As of August 7, 1997, the
Company had issued and outstanding and entitled to vote 23,359,714
shares of common stock, par value $0.01 per share (the
"Common Stock"), the Company's only class of voting securities
outstanding. Each share of Common Stock entitles the holder thereof to one
vote. A majority of the outstanding shares of Common Stock constitutes
a quorum. If a share is represented for any purpose at the meeting, it is
deemed to be present for all other matters. Abstentions and shares held of
record by a broker or its nominee ("Broker Shares") that are voted on any
matter are included in determining the number of votes present. Broker
Shares that are not voted on any matter will not be included in determining
whether a quorum is present. The election of each nominee for director, as
set forth in Proposal No. 1 below, the adoption of the Company's 1997
Stock Option Plan set forth in Proposal No. 3, and the ratification of the
selection of Robinson Burdette Martin & Cowan LLP as independent
accountants, as set forth in Proposal No.4 below, each requires the
affirmative vote of a majority of the votes cast. The approval of the
amendment to the Company's Certificate of Incorporation, as set forth in
Proposal No. 2 (changing the name of the Company to Norton Drilling
Services, Inc.) requires the affirmative vote of a majority of the outstanding
shares of Common Stock.
The following table sets forth certain information with respect to those
persons or groups known to the Company who beneficially own more than
5% of the Company's Common Stock, for all directors of the Company,
and for David W. Ridley who is an executive officer of the Company, and
for all directors and officers as a group.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership(1) of Class
Sherman H. Norton, Jr. . . . . . . . . . . . 3,510,383(2) 14.1
5211 Brownfield Highway, Suite 230
Lubbock, Texas 79407-3501
Larry Adkins . . . . . . . . . . . . . . . . 10,000(3) *
Carl Beach . . . . . . . . . . . . . . . . . 10,000(4) *
Kevin Lewis. . . . . . . . . . . . . . . . . 10,000(4) *
S. Howard Norton, III. . . . . . . . . . . . 846,022 3.6
John William Norton. . . . . . . . . . . . . 863,421 3.7
David W. Ridley. . . . . . . . . . . . . . . 31,300(5) *
All directors and executive officers
as a group (7 persons). . . . . . . . . . . 5,281,126(6) 21.1
* Less than 1%.
(1) All information is as of August 7, 1997 and was determined in
accordance with Rule 13d-3 under the Securities Exchange Act of
1934 based upon information furnished by the persons listed or
contained in filings made by them with the Securities and Exchange
Commission or otherwise known to the Company. Unless otherwise
indicated, beneficial ownership disclosed consists of sole voting and
dispositive power. Shares of Common Stock subject to option
currently exercisable, or exercisable within sixty days, are deemed
outstanding for computing the percentage of ownership of the person
holding the options, but not deemed outstanding for computing the
percentage of ownership of any other person. Sherman H. Norton, Jr.
is the father of S. Howard Norton and John William Norton, and are
all directors of the Company.
(2) Includes (i) 931,818 shares of Common Stock issuable pursuant to a
convertible note held by Mr. Norton which becomes due on May 18,
1998, (ii) 640,000 shares issuable pursuant to warrants exercisable
at $0.50 per share which expire on February 24, 2007, (iii) 17,024
shares issuable pursuant to warrants exercisable at $0.78 per share
which expire on February 24, 2007, and (iv) 32,000 shares issuable
pursuant to warrants exercisable at $0.625 per share which expire on
April 1, 2002.
(3) Consists of options to purchase 10,000 shares of Common Stock at
an exercise price of $0.56 per share which expire on January 31,
2007.
(4) Consists of options to purchase 10,000 shares of Common Stock at
an exercise price of $0.63 per share which expire on March 31, 2007.
(5) Includes 4,000 shares of Common Stock owned by Mr. Ridley's wife
and 6,000 shares of Common Stock owned by Mr. Ridley's daughter,
Natanya C. Ridley, under the Uniform Gifts to Minors Act. Mr.
Ridley disclaims all beneficial ownership to the aforementioned shares
owned by his wife and daughter.
(6) Includes the securities described above listed in footnotes (2) through
(5) above.
ELECTION OF DIRECTORS
(Proposal No. 1)
The Company's Board of Directors consists of six members. All six
directors are to be elected at the Annual Meeting to constitute the Board of
Directors of the Company to hold office until the next Annual Meeting of
Stockholders and until the election and qualification of their respective
successors. If no other choice is specified in the accompanying proxy, the
persons named therein have advised management that it is their present
intention to vote the proxy for the election of the nominees set forth below.
Each of the nominees is presently a director of the Company. In June 1996,
Larry Adkins was appointed as a Director, and in April 1997, Carl Beach
and Kevin Lewis were appointed Directors by the remaining members of the
Board of Directors to fill vacancies caused by the resignation of Brian
McDonald, Harvey Bayard, Kenneth Levy, D. Brian Hew, Peter Hew, and
Robert Hew. Should any of such nominees become unable to accept
nomination or election, it is intended that the persons named in the
accompanying proxy will vote for the election of such other person as
management may recommend in the place of such nominee.
The following biographical information is provided with respect to
each nominee for director:
Sherman H. Norton, Jr., age 67, has been a Director of the Company
since October 1991 and Chairman of the Board of the Company since
August 1993 and Chief Executive Officer and President since May 1995.
He is currently and has been the President of the Company's subsidiary,
Norton Drilling Company, and its predecessor corporation since 1976.
Sherman H. Norton, Jr. received his Bachelor of Science degree in
Petroleum Engineering from the University of Oklahoma.
S. Howard Norton, III, age 40, has been a Director of the Company since
October 1991. Mr. Norton is a sales representative with the Company's
subsidiary, Norton Drilling Company. From 1991 until 1994, Mr. Norton
was a Vice President of the Company's subsidiary, Norton Drilling
Company, and its predecessor corporation since 1982. S. Howard Norton,
III received his Bachelor of Business Administration degree from Texas
A&M University.
John William Norton, age 37, has been a Director of the Company since
October 1991. Mr. Norton is a sales representative with the Company's
subsidiary, Norton Drilling Company. From 1991 until 1994, Mr. Norton
was a Vice President of the Company's subsidiary, Norton Drilling
Company, and a drilling engineer for Norton Drilling Company and its
predecessor corporation since 1987. From 1986 to 1987, John W. Norton
was self-employed as a drilling engineer consultant. John W. Norton
received his Bachelor of Science degree in Petroleum Engineering from
Texas A&M University.
Larry Adkins, age 50, has been a Director of the Company since June
1996. Mr. Adkins is a senior vice president and operations manager with
Marine Drilling Company, a position he has held since 1993. Prior to that
Mr. Adkins was vice president and operations manager with Marine
Drilling Company. Mr. Adkins received his Bachelor of Science degree in
Broad Field Sciences from Texas Tech University.
Carl C. Beach, age 44, has been a Director of the Company since April
1997. Mr. Beach is a principal in Southstar Corporation, a company
which, as have Mr. Beach's other companies, focuses on oil and gas
exploration in the Gulf Coast and Permian Basin of Texas and New
Mexico. Prior to forming Southstar, Mr. Beach formed BEI Energy
Corporation in 1989 which was later merged with a subsidiary of an
electric utility to form New West Fuels, where Mr. Beach served as
President. After graduating from West Texas State University, Mr. Beach
worked for 15 years at Beach Exploration, Inc. prior to forming BEI
Energy Corporation.
Kevin E. Lewis, age 32, has been a Director of the Company since April
1997. Mr. Lewis is the Chairman of the Board of Furr's/Bishop's,
Incorporated, a restaurant and food processing and distribution company,
and has held such position since June 1993 and served as President and
Chief Executive Officer of that company from July 1994 to December
1996. Prior to serving as Chairman of the Board of Furr's/Bishop's,
Incorporated, Mr. Lewis was a Managing Director in the New York office
of Houlihan, Lokey, Howard & Zukin, Inc., a specialty investment banking
firm, where he had previously served as a Senior Vice President (January
1992 - March 1993), Vice President (January 1990 - December 1991) and
Associate (June 1988 - December 1989). Mr. Lewis was a director of The
LVI Group, Inc. from December 1991 to May 1993 and of
Robertson-Ceco Corporation from July 1993 to May 1997.
The Board of Directors has no standing nominating committee or
committees performing similar functions, but does have a Compensation
Committee consisting of Larry Adkins, Carl Beach and Kevin Lewis who
also comprise the Company's Stock Option Committee which oversees the
Company's stock option plans. The Board of Directors has an Audit
Committee consisting of Larry Adkins and Kevin Lewis. The function of
the Audit Committee is to review and report to the Board of Directors with
respect to various auditing and accounting matters, including the
nomination of the Company's independent public accountants, the scope of
audit procedures, general accounting policy matters, the Company's
internal audit function and the performance of the Company's independent
public accountants. During the past fiscal year, the Company's Board of
Directors held seven meetings. No incumbent director failed to participate
in at least 75% of all meetings of the Board of Directors during the past
fiscal year. The Company has agreed to pay each director who is not also
an employee of the Company $1,000 each quarter, and has further agreed
to grant each such outside director stock options to purchase 10,000 shares
of Common stock at an exercise price equal to the closing price of the
Company's Common Stock on the date of grant. During the past fiscal
year, the Company paid each of former directors Harvey Bayard, Kenneth
Levy and Brian J. McDonald $4,000 in directors fees (and also paid Mr.
Bayard $1,046 and Mr. Levy $15,750 in additional consulting fees), and
paid Mr. Adkins $2,000 and former director Robert C. Hew $1,000 in
directors fees. The Board of Directors' Compensation Committee and Stock
Option Committee each met three tmes during the past fiscal year. The
Audit Committee did not meet during the past fiscal year.
EXECUTIVE OFFICERS
In addition to the nominees set forth above, the only other executive
officer of the Company is David W. Ridley. Mr. Ridley, age 41, became
the Company's Chief Financial Officer, Vice President and Treasurer on
October 16, 1993 and performs similar duties for the Company's
subsidiary, Norton Drilling Company.
EXECUTIVE COMPENSATION
The following table sets forth information regarding all cash
compensation paid by the Company during the fiscal years indicated to
executive officers of the Company whose compensation exceeded $100,000.
No stock options were granted to any such officers during the fiscal years
indicated.
Name of Executive and Fiscal
Principal Positions Year Salary Bonus
Sherman H. Norton, Jr., 1996 $104,500 $ 0.00
Director, Chairman, President and 1995 $ 90,958 $12,500
Chief Executive Officer of the 1994 $ xx,xxx $ 0.00
Company; President and Treasurer
of Norton Drilling Company.
S. Howard Norton, III 1996 $104,500 $ 0.00
Director, Secretary of the Company 1995 $ xx,xxx $ 0.00
1994 $ xx,xxx $ 0.00
John William Norton 1996 $104,500 $ 0.00
Director, Assistant Secretary 1995 $ xx,xxx $ 0.00
Of the Company 1994 $ xx,xxx $ 0.00
Report on Executive Compensation
The compensation of executive officers of the Company is determined
under employment agreements with such executive officers and
compensation decisions are made by the Company's entire Board of
Directors whose names are listed below at the end of this report. As
described below, to a large extent the compensation of the Company's
Chief Executive Officer and other executive officers of the Company is
determined contractually pursuant to agreements entered into with such
officers. The salary of all executive officers are reviewed at least annually.
Numerous factors are reviewed in determining compensation levels. These
factors include: the compensation levels of executive officers at comparable
companies, individual and Company performance, past compensation
levels, years of service, performance of the Company's stock, and other
relevant considerations. The Company's goal is to set cash compensation
at levels consistent with that of comparable companies, and to encourage
stock ownership by such officers. This approach is designed to more
closely align total executive compensation with the long-term performance
of the Company and enable key employees of the Company to participate
in the Company's growth. Through stock ownership, the executive is
rewarded if the Company's stockholders receive the benefit of appreciation
of the price of the Company's Common Stock.
On October 1, 1991, the Company, through its subsidiary, Norton
Drilling Company, entered into five-year employment contracts with each
of Sherman H. Norton, Jr., S. Howard Norton, III, John William Norton
and Johnie P. Rose. In addition to the applicable base salaries payable
under each employment agreement, the four employees could allocate
among themselves an aggregate of $50,000 in additional compensation each
year over the total compensation paid to such employees as a group during
the prior year. Pursuant to these employment agreements, the employees
agreed not to compete with Norton Drilling Company for a five-year period.
On December 1, 1995, the Company, through its subsidiary, Norton
Drilling Company, entered into new five-year employment contracts with
Sherman H. Norton, Jr, S. Howard Norton, III, John William Norton and
Johnie P. Rose which effectively replaced the above-mentioned agreements.
The new contracts provide for annual salaries of $104,500 to each of these
employees. The provisions of the new contracts are the same as the prior
contracts except for the amount of salary and provision for annual bonuses.
Also, on December 1, 1995, Norton Drilling Company entered into a
three-year employment agreement with one of it's employees which
provides for a salary of $78,000 per year. On March 1, 1997, Norton
Drilling Company entered into a new five-year employment agreement with
Sherman H. Norton, Jr. containing the same terms as its existing agreement
with Mr. Norton, but which provides for an annual salary of $153,500.
The Board of Directors and the stockholders have adopted the
Company's 1989 Stock Option Plan (the "1989 Plan"), and the Company's
Board of Directors have adopted, and the stockholders of the Company are
being asked to adopt, a second plan, the Company's 1997 Stock Option
Plan (the "1997 Plan", and together with the 1989 plan, the "Plans"). The
purpose of the Plans is to attract key employees, officers and directors and
to encourage their continued employment and services and their increased
stock ownership in the Company. The Board of Directors believes that the
granting of stock options under the Plans will promote continuity of
management and increased incentive and personal interest in the welfare of
the Company by those who are or may become primarily responsible for
shaping and carrying out the long range plans of the Company and securing
its continued growth, development and financial success. The 1989 Plan
provides for the grant of options to purchase up to 500,000 shares of
Common Stock, and the 1997 Plan provides for the grant of options to
purchase up to 1,150,000 shares of Common Stock.
The Plans are administered by the Stock Option Committee of the
Board of Directors. Options which qualify as Incentive Stock Options
("ISO's") under the Internal Revenue Code of 1986, as amended (the
"Code"), and non-qualifying options ("NQSO's") may be issued by the
Company under the Plans. Options to purchase 500,000 shares of Common
Stock were granted, 173,000 options have been exercised, 65,000 options
have been terminated, and 262,000 options are outstanding pursuant to the
1989 Plan, thus leaving 65,000 shares of Common Stock available for
issuance under the 1989 Plan. No options have been granted to date under
the 1997 Plan.
Options are granted under the Plans on a discretionary basis to
employees, officers and directors of the Company (including officers and
directors who are not also employees) and consultants to the Company as
a reward for past services rendered and/or as an incentive for future
services to be rendered.
BOARD OF DIRECTORS:
Larry Adkins
Carl Beach
Kevin Lewis
S. Howard Norton, III
John William Norton
Sherman H. Norton, Jr.
Stock Options
During the past fiscal year, no stock options were granted to, or
exercised by any executives named above for which salary information is
given.
Stock Price Performance
The Company's Common Stock is traded in the over-the-counter
market under the NASDAQ symbol DSIC. The table below presents the
high and low selling prices for each quarterly period during the last two
fiscal years as supplied by the National Association of Securities Dealers,
Inc. These over-the-counter market quotations represent inter-dealer prices,
without retail mark-up, mark down or commission and may not necessarily
represent actual transactions.
HIGH LOW
December 1, 1994 - February 28, 1995 x.xx x.xx
March 1, 1995 - May 31, 1995 x.xx x.xx
June 1, 1995 - August 31, 1995 x.xx x.xx
September 1, 1995 - November 30, 1995 x.xx x.xx
December 1, 1995 - February 29, 1996 x.xx x.xx
March 1, 1996 - May 31, 1996 x.xx x.xx
June 1, 1996 - August 31, 1996 x.xx x.xx
September 1, 1996 - November 30, 1996 x.xx x.xx
December 1, 1996 - February 28, 1997 0.78 0.41
March 1, 1997 - May 31, 1997 0.66 0.44
June 1, 1997 - August 7, 1997 x.xx x.xx
The following graph compares the total returns (assuming
reinvestment of dividends) on $100 invested on November 30, 1990 in the
Company's Common Stock, the NASDAQ Composite (U.S.) Stock Index,
and the NASDAQ Non-Financial Stocks Index. The stock price
performance shown on the graph below reflects historical data provided by
the National Association of Securities Dealers, Inc. and is not necessarily
indicative of future price performance.
[graph omitted]
CERTAIN TRANSACTIONS
During May, 1993 a former officer of Norton, and an officer/director
of DSI, advanced $500,000 ($90,000 and $410,000, respectively) to
Norton in the form of unsecured demand notes, bearing interest equal to the
entity's primary lending institution's prime rate. Interest charged to
operations on the notes payable was $41,651, $49,116 and $35,579 in
1996, 1995 and 1994, respectively. The notes are convertible into DSI's
common stock at $0.44 per share for an aggregate 1,136,364 shares of
DSI's common stock.
Two officers/directors of DSI, a corporation owned by an
officer/director of DSI, and one former officer of Norton have ownership
interests in an entity from which Norton acquired drilling rig machinery at
a cost of $98,207 in 1994. On December 6, 1993 this entity loaned Norton
$62,000 which was repaid on January 13, 1994 along with accrued interest
in the amount of $239.
In the year ended November 30, 1995, the three individuals and
corporation mentioned above, along with Norton, participated in a joint
venture in three wells. The joint venture contracted with Norton to drill,
equip, and operate the three wells and incurred costs totaling approximately
$83,000 and $716,000 for the years ending November 30, 1996 and 1995,
respectively.
In April, 1996, Norton sold substantially all of its interest in the joint
venture to a corporation in which the two officers/directors of DSI, the
corporation owned by a director of DSI and the former officer of Norton,
are stockholders. The sales price of the interest sold was $200,000 and
Norton realized a gain on the sale of the interest of approximately
$117,000. The corporation's pro rata share of the costs from the date of
sale to November 30, 1996 was approximately $11,000 of which
approximately $700 was outstanding at November 30, 1996.
Each joint venture participant was liable for their pro rata share of the
costs incurred. Norton's share was approximately $17,000 and $200,000
for the years ending November 30, 1996 and 1995, respectively. The
aggregate costs to be borne by the five related parties mentioned above was
approximately $19,000 and $79,000 for the years ending November 30,
1996 and 1995, respectively. The amounts due from the related parties at
November 30, 1996 and 1995 was approximately $1,000 and $11,000,
respectively.
On October 3, 1995, DSI issued 1,083,096 shares of its common
stock at $0.125 per share to a corporation owned by two former
directors/officers of DSI and their spouses in satisfaction of an indebtedness
of the Nursery Segment of $135,387.
On June 6, 1996, the Company effected the closing (the "Closing")
of a Stock Purchase and Settlement Agreement (the "Agreement"), dated
as of May 30, 1996, by and between Brian Hew, Peter Hew and Everbloom
Growers, Inc., a Florida corporation whose sole stockholders are Brian
Hew and Peter Hew and the Company and the following direct and indirect
wholly owned subsidiaries of the Company (collectively, the "DSI
Affiliates"): Sunny's Plants, Inc., a Florida corporation, Sunshine
Botanicals, Inc., a Florida corporation , Interior Plant Supply, Inc., a
Florida corporation, Sunny's Trucking, Inc., a Florida corporation ( the
"Nursery Group"), Norton Drilling Company, a Delaware corporation, and
Lobell Corp., a Delaware corporation.
Pursuant to or in accordance with the Agreement, effective upon the
Closing, the following occurred: (a) The Company purchased 1,083,096
shares of common stock, par value $.01 per share, of the Company from
Everbloom Growers, Inc. in consideration of the payment of $86,647.68;
(b) Each of Brian Hew, Peter Hew and Robert Hew resigned from the
board of directors of the Company and Brian Hew and Peter Hew resigned
from all offices held by them with the Company and the DSI Affiliates; (c)
The Company delivered $30,000 to be used to assist in the resolution of
certain pending tax claims against the Nursery Group; (d) The Company
received an indemnification agreement and; (e) The Company and Brian
Hew, Peter Hew and Robert Hew agreed to certain releases and
indemnification.
On July 22, 1996, the Company effected the closing of a Stock
Purchase Agreement dated as of July 19, 1996, by and between a third
party purchaser ("Buyer") and the Company.
Pursuant to or in accordance with the Stock Purchase Agreement,
effective upon the Closing, the following occurred: (a) Buyer purchased all
the outstanding shares of common stock of Sunny's Plants, Inc., the sole
stockholder of all the capital stock of Sunshine Botanicals, Inc., Interior
Plant Supply, Inc., and Sunny's Trucking, Inc., from the Company, in
consideration of certain releases and the payment by DSI to Buyer of
$10,000; (b) Each of Sherman Norton, Howard Norton, Jay Norton and
David Ridley resigned from their respective positions as Directors and
Officers of Sunny's Plants, Inc. and the Subsidiaries; and (c) The Company
received the Release Agreement.
On August 7, 1996, the Company executed a Security Agreement and
a Guaranty Agreement (the "Agreements") dated as of August 1, 1996 by
and between The Plains National Bank of West Texas (the "Lender") and
the Company.
Pursuant to or in accordance with the Agreements, the Company
granted to the Lender a continuing security interest in all of the outstanding
common stock (1,000 shares) of its only operating subsidiary, Norton
Drilling Company ("Norton"), evidenced by common stock certificate #1.
Furthermore, the Company unconditionally guaranteed the prompt and full
payment and performance of Norton's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants to Lender, including any
amendments, extensions, modifications, renewals, or substitutions, thereto.
The Company's obligations under the Agreements are unlimited and shall
include all present or future obligations between Norton and the Lender,
together with all interest and all of Lender's expenses and costs, incurred
in connection with the obligations.
The Agreements were executed in consideration for the Lender's
funding of a promissory note in the amount of $3,000,000 and a revolving
or draw note with a borrowing facility of $750,000. Payment on the
$3,000,000 note shall be made on demand, but if no demand is made, then
in 82 payments of principal in the amount of $35,715.00 plus accrued
interest beginning September 1, 1996 and continuing at monthly time
intervals thereafter. A final payment of the unpaid principal balance plus
accrued interest is due and payable on July 1, 2003. The $750,000 note is
due on demand, but if no demand is made, then interest only payments
beginning September 1, 1996 and continuing at monthly time intervals
thereafter. A final payment of the unpaid principal balance plus accrued
interest is due and payable on April 1, 1997.
On April 1, 1997, Norton Drilling Company renewed its line of credit
with The Plains National Bank of West Texas. The line of credit, which
had an original borrowing facility of $750,000 and a maturity date of April
1, 1997, was renewed for an additional year on April 1, 1997 with an
increased borrowing facility of $1,000,000.
As of November 30, 1996, Sherman H. Norton, Jr., S. Howard
Norton, John William Norton, and one other employee of Norton Drilling
Company were owed an aggregate of $266,350 under their employment
agreements. At a meeting held on February 23, 1997, the Board of
Directors of DSI authorized the issuance of $166,350 worth of common
stock (valued by an independent valuation expert) which resulted in the
issuance of 396,071 shares of common stock to these four individuals in
partial satisfaction of such unpaid compensation.
AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION
TO CHANGE NAME OF COMPANY TO NORTON DRILLING
SERVICES, INC.
(Proposal No. 2)
The Board of Directors of the Company has adopted, subject to
stockholder approval, a resolution proposing that the Company amend its
Certificate of Incorporation to change the name of the Company from DSI
Industries, Inc. to Norton Drilling Services, Inc. Recently, the Company
discontinued its MRI and plant nursery businesses to focus on its core
business, oil and gas drilling services. The new name reflects the
Company's core business. The name change would be effectuated by
amending Article FIRST of the Company's Certificate of Incorporation to
read as follows in its entirety: "FIRST: The name of the Corporation is
NORTON DRILLING SERVICES, INC., (hereinafter called the
"Corporation")." If Proposal No. 2 is approved by the stockholders, the
proposed name change would become effective at such time as the
Company files the Certificate of Amendment with the Secretary of State of
Delaware. Even if the proposed name change is approved by the
stockholders, the Board of Directors may abandon the proposed name
change at any time before or after the Annual Meeting and prior to the
filing of the Certificate of Amendment related thereto if for any reason the
Board of Directors deems it advisable to do so. In addition, the Board of
Directors may make any and all changes to the applicable Certificate of
Amendment that it deems necessary to file the Certificate of Amendment
with the Delaware Secretary of State and give effect to the name change.
Assuming the presence of a quorum, the proposal to amend the
Company's Certificate of Incorporation to effect the name change requires
the approval by the holders of a majority of the outstanding shares of
Common Stock. Proxies will be voted for or against such approval in
accordance with specifications marked thereon and, if no specification is
made, will be voted FOR such approval.
The Board of Directors recommends a vote FOR the approval of
the proposal to amend the Company's Certificate of Incorporation to
change the name of the Company from DSI Industries, Inc. to Norton
Drilling Services, Inc. (Proposal No. 2). The affirmative vote of the
holders of at least a majority of the issued and outstanding shares of the
Company's Common Stock entitled to vote at the 1997 Annual Meeting
of Stockholders is required to approve the name change.
ADOPTION OF 1997 STOCK OPTION PLAN
(Proposal No. 3)
On July 29, 1997 the Board of Directors of the Company adopted a
stock option plan entitled the "1997 Stock Option Plan" (the "1997 Plan").
A copy of the 1997 Plan is annexed hereto as Exhibit A. Listed below is a
brief summary of the terms of the 1997 Plan, and stockholders should refer
to the text of the 1997 Plan for more details. The purpose of the 1997 Plan
is to induce employees, officers, directors and consultants to remain in the
employ or service of the Company and its subsidiaries, if any, to attract
new employees and to encourage employees, directors, officers, and
consultants to increase their stock ownership in the Company. The Board
of Directors believes that the granting of stock options under the 1997 Plan
will promote continuity of management and increased incentive and
personal interest in the welfare of the Company by those who are or may
become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth, development and
financial success.
Grants representing a maximum of 1,150,000 shares of Common
Stock may be awarded pursuant to the 1997 Plan. This represents less than
5% of the total number of shares of Common Stock which are presently
issued and outstanding. If any options expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject
thereto shall again be available for the purposes of the 1997 Plan. Grants
of various awards, including stock options, stock appreciation rights, and
restricted stock, may be made under the 1997 Plan.
The 1997 Plan provides that Incentive Stock Options ("ISO") under
Section 422 of the Internal Revenue Code of 1986, as amended, (the
"Code") may be granted only to employees of the Company, including
directors and officers who are also employees and Non-Qualified Stock
Options ("NQSO") may be granted to the Company's employees, directors,
officers and consultants regardless of whether such persons are employees
of the Company.
All options granted under the 1997 Plan will have an exercise price
equal to the fair market value of the Company's common stock on the date
of grant (110% of fair market value in the case of 10% or more
stockholders). All options granted under the 1997 Plan shall be non-
transferable except by will or pursuant to the laws of descent and
distribution. In no event may ISO's exercisable for stock having an
aggregate fair market value of $100,000 (together with all ISO's granted
under any other Company plan) be granted which first become exercisable
in any one calendar year.
No options granted under the 1997 Plan may have a term greater than
ten years (five years in the case of ISO's granted to 10% or greater
stockholders). Options (both ISO's and NQSO's) will have termination
provisions substantially the same as are provided under the Company's
1989 Stock Option Plan (e.g. after termination of employment, leaving
office or directorship, death, disability and at the end of the option term).
Options are granted under the Company's stock option plans on a
discretionary basis to employees, officers and directors of the Company
(including officers and directors who are not also employees) and
consultants to the Company as a reward for past services rendered and/or
as an incentive for future services to be rendered.
Under the Code, no income is recognized by the recipient of an ISO
or NQSO at the time an option is granted. Generally, the holder of an ISO
will not recognize income on the exercise of such option, but will recognize
income only when he subsequently disposes of the shares purchased upon
the exercise of such option for a price above the exercise price. However,
the difference between the fair market value of the stock on the date of
exercise and the exercise price of the ISO will be included in the option
holder's income for purposes of determining any alternative minimum tax
liability for the year in which the ISO is exercised. Generally, upon the
disposition of the stock acquired by the exercise of an ISO, the option
holder will recognize gain in the amount of the excess of the selling price
over the exercise price and such gain will be taxable to the recipient as long
term capital gains. The holder of an NQSO will recognize ordinary income
upon the exercise of such option in an amount equal to the excess of the fair
market value of the Company's Common Stock on the date of exercise over
the exercise price. The Company will be entitled to a federal income tax
deduction in the same amount as the ordinary income recognized by the
option holder upon the exercise of the NQSO but only if the Company
withholds income taxes from the option holder with respect to such
exercise. When the option holder disposes of shares acquired upon the
exercise of an NQSO, he will recognize capital gain or loss on the
difference between the amount realized upon the disposition and the fair
market value of the shares on the date of exercise.
The 1997 Plan shall terminate on July 29, 2007. Any option
outstanding under the 1997 Plan at the time of the termination of the 1997
Plan shall remain in effect until such option shall have been exercised or
shall have expired in accordance with its terms. The Board of Directors
may make such modifications of the 1997 Plan as it shall deem advisable.
However, the Board may not without further approval of the holders of a
majority of the shares of the Common Stock present in person or by proxy
at any special or annual meeting of the stockholders increase the number of
shares as to which options may be granted, change the manner in which the
initial option prices are determined, or extend the period during which an
option may be granted or exercised. The Company intends to file a
registration statement under the Securities Act of 1933, as amended
covering the options issuable under the Plan.
The Board of Directors recommends a vote FOR approval of the
1997 Stock Option Plan. Approval of the 1997 Stock Option Plan
requires the affirmative vote of the holders of a majority of the shares
of the Company's Common Stock present, or represented, and entitled
to vote at the Annual Meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal No. 4)
The Board of Directors recommends ratification of the selection
of the independent accounting firm of Robinson Burdette Martin &
Cowan LLP as auditors of the Company for the fiscal year commencing
December 1, 1996. The ratification requires the affirmative vote of the
holders of a majority of the shares of the Company's Common Stock
present, or represented, and entitled to vote at the Annual Meeting. A
representative of Robinson Burdette Martin & Cowan LLP is expected to
attend the meeting, will have the opportunity to make a statement should he
desire to do so, and is expected to be available to respond to appropriate
questions.
1998 STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal for action at the
Company's 1998 Annual Meeting of Stockholders, must comply with and
meet the requirements of the Company's By-Laws and of Regulation 14a-8
of the Securities and Exchange Commission. Regulation 14a-8 requires,
among other things, that any proposal be received by the Company at its
principal executive office, 5211 Brownfield Highway, Suite 230, Lubbock,
Texas 79407-3501 by April 20, 1998.
COMPLIANCE WITH BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten
percent of the Company's Common Stock are required to report their initial
ownership of the Company's Common Stock and any subsequent changes
in that ownership to the Securities and Exchange Commission. Specific
due dates for these reports have been established, and the Company is
required to disclose in this Proxy Statement any failure to file by these
dates. All of these filing requirements with respect to the Company's past
fiscal year were satisfied on a timely basis, except that the Form 4
Statement of Changes in Beneficial Ownership for former director Kenneth
Levy for May 1996, and the Form 4 Statement of Changes in Beneficial
Ownership for director Sherman H. Norton, Jr. for January 1996 were each
filed two days late. In making these disclosures, the Company has relied
solely on written representations of its directors and executive officers and
copies of the reports that they have filed with the Commission.
GENERAL AND OTHER MATTERS
Management knows of no matter other than the matters described
above which will be presented to the meeting. However, if any other matters
properly come before the meeting, or any of its adjournments, the person or
persons voting the proxies will vote them in accordance with his, her or
their best judgment on such matters.
SOLICITATION OF PROXIES
The cost of proxy solicitations will be borne by the Company. In
addition to solicitations of proxies by use of the mails, some officers or
employees of the Company, without additional remuneration, may solicit
proxies personally or by telephone. The Company will also request brokers,
dealers, banks and their nominees to solicit proxies from their clients, where
appropriate, and will reimburse them for reasonable expenses related
thereto.
By Order of the Board of Directors,
Sherman H. Norton, Jr., Chairman
Lubbock, Texas
August 18, 1997
THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED NOVEMBER 30, 1996, INCLUDING
FINANCIAL STATEMENTS AND SCHEDULES THERETO (EXCEPT
EXHIBITS), TO EACH OF THE COMPANY'S STOCKHOLDERS,
UPON RECEIPT OF A WRITTEN REQUEST THEREFOR MAILED
TO THE COMPANY'S OFFICES, ATTENTION: SECRETARY.
REQUESTS FROM BENEFICIAL STOCKHOLDERS MUST SET
FORTH A REPRESENTATION AS TO SUCH OWNERSHIP ON
AUGUST 7, 1997.<PAGE>
[PROXY CARD - FRONT]
PROXY DSI INDUSTRIES, INC.
5211 Brownfield Highway, Suite 230, Lubbock, Texas 79407-3501
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - September 25, 1997
The undersigned hereby appoints Sherman H. Norton, Jr. and
David W. Ridley, , or either of them, as Proxy or Proxies of the
undersigned with full power of substitution to attend and to represent
the undersigned at the Annual Meeting of Stockholders of DSI
Industries, Inc. to be held on September 25, 1997, and at any
adjournments thereof, and to vote thereat the number of shares of
stock of the Company the undersigned would be entitled to vote if
personally present, in accordance with the instructions set forth on
the reverse side hereof. Any proxy heretofore given by the
undersigned with respect to such stock is hereby revoked.
Dated:____________________________________________________, 1997
__________________________________________________________
__________________________________________________________
Please sign exactly as name appears
above. For joint accounts, each joint
owner must sign. Please give full title if
signing in a representative capacity.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
[PROXY CARD - BACK]
1. ELECTION OF DIRECTORS
NOMINEES: Larry Adkins, Carl Beach, Kevin Lewis, S.
Howard Norton, III, John William Norton and Sherman H.
Norton, Jr.
[ ] FOR ALL nominees listed above.
[ ] FOR ALL nominees listed above
EXCEPT:___________________________________________
______
(Instruction: To withhold authority to vote on any individual
nominee, write the name in the space at the right.)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
2. APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY FROM
DSI INDUSTRIES, INC. TO NORTON DRILLING SERVICES,INC.
[ ] FOR APPROVAL[ ] AGAINST APPROVAL [ ] ABSTAIN
3. APPROVAL OF THE COMPANY'S 1997 STOCK OPTION PLAN
[ ] FOR APPROVAL[ ] AGAINST APPROVAL [ ] ABSTAIN
4. RATIFICATION OF THE SELECTION OF ROBINSON BURDETTE MARTIN & COWAN LLP
AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR COMMENCING
DECEMBER 1, 1996.
[ ] FOR RATIFICATION[ ] AGAINST RATIFICATION[ ] ABSTAIN
5. In their discretion, upon such other matters as may properly
come before the meeting.If no specification is made, this proxy will
be voted FOR ALL nominees listed above and FOR APPROVAL of Proposals
2, 3, and 4.
Please indicate whether or not you plan to attend the Annual Meeting
on Thursday, September 25, 1997.
Yes [ ]No [ ]<PAGE>
EXHIBIT A
1997 STOCK OPTION PLAN
OF DSI INDUSTRIES, INC.
1. Purpose. Types of Awards. Construction. The purpose of the
1997 Stock Option Plan of DSI Industries, Inc. (the "Plan") is to
afford an incentive to executive officers, other employees and
non-employee directors and consultants of DSI Industries, Inc., a
Delaware corporation (the "Company"), or any Subsidiary (as
defined below), to acquire a proprietary interest in the Company, to
continue as employees or non-employee directors (as the case may
be), to increase their efforts on behalf of the Company and to
promote the success of the Company's business. To further such
purposes the Committee as deemed below may grant stock options,
stock appreciation rights and restricted stock. The provisions of the
Plan are intended to satisfy the requirements of Section 16(b) of the
Securities Exchange Act of 1934, and shall be interpreted in a
manner consistent with the requirements thereof, as now or hereafter
construed, interpreted and applied by regulations, rulings and cases.
2. Definitions. As used in this Plan, the following words and
phrases shall have the meanings indicated:
(a) "Agreement" shall mean an agreement entered into between the
Company and a Grantee in connection with an award under the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any reference to a section of the
Code or regulation promulgated thereunder shall also refer to any
successor of such section or regulation.
(d) "Committee" shall mean a committee established by the Board
to administer the Plan, the composition of which shall at all times
satisfy the provisions of Rule 16b-3 under the Exchange Act.
(e) "Common Stock" shall mean shares of common stock, par
value $.01 per share, of the Company.
(f) "Company" shall mean DSI Industries, Inc., a corporation
organized under the laws of the State of Delaware, or any successor
corporation.
(g) "Disability" shall mean a Grantee's inability to perform his
duties with the Company or any Subsidiary for more than six
consecutive months by reason of any medically determinable
physical or mental impairment, as determined by a physician
selected by the Grantee and acceptable to the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and as now or hereafter
construed, interpreted and applied by regulations, rulings and cases,
and any reference to a section of the Exchange Act or rule or
regulation promulgated thereunder shall also refer to any successor
of such section, rule or regulation..
(i) "Fair Market Value" per share as of a particular date shall
mean (i) the average high and low trading prices per share of
Common Stock on the national securities exchange on which the
Common Stock is principally traded for the last preceding date on
which there was a sale of such Common Stock on such exchange, or
(ii) if the shares of Common Stock are then traded in an
over-the-counter market, the average high and low trading prices per
share of Common Stock in such over-the-counter market for the last
preceding date on which there was a sale of such Common Stock in
such market, or (iii) if the shares of Common Stock are not then
listed on a national securities exchange or traded in an
over-the-counter market, such value as the Committee, in its sole
discretion, shall determine.
(j) "Grantee" shall mean a person who receives a grant of Options,
Stock Appreciation Rights or Restricted Stock under the Plan.
(k) "Incentive Stock Option" shall mean any option intended to be,
and designated as, an incentive stock option within the meaning of
Section 422 of the Code.
(1) "Insider" shall mean a Grantee who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
(m) "Option" or "Options" shall mean a grant to a Grantee of an
option or options to purchase shares of Common Stock. Options
granted by the Committee to an employee Grantee pursuant to the
Plan shall constitute either Incentive Stock Options or Nonqualified
Stock Options. Options granted to any consultant or non-employee
director shall be Nonqualified Stock Options.
(n) "Option Price" shall mean the exercise price of an Option per
share of Common Stock covered by the Option.
(o) "Option Term" shall mean the period (determined at the
Option's grant) from its date of grant to the last date on which it can
be exercised. The Option Term of any Incentive Stock Option or any
Option granted to any consultant or non-employee director shall not
be longer than ten (10) years. The Option Term of any Incentive
Stock Option granted to a Ten Percent Stockholder shall not be
longer than five (5) years.
(p) "Plan" means this 1997 Stock Option Plan of DSI Industries,
Inc., as amended from time to time.
(q) "Retirement" shall mean a Grantee's retirement in accordance
with the terms of any pension or retirement plan adopted by the
Company (or any Subsidiary), if any, as the case may be, on the
normal retirement date prescribed from time to time by the Company
or such Subsidiary.
(r) "Rule 16b-3" shall mean Rule 16b-3, as from time to time in
effect, promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act, including any successor to
such Rule.
(s) "Stock Appreciation Right" shall mean the right, granted to a
Grantee under Section 9, to be paid an amount measured by the
appreciation in the Fair Market Value of Common Stock from the
date of grant to the date of exercise of the right, with payment to be
made in cash or Common Stock as specified in the award or
determined by the Committee.
(t) "Subsidiary" shall be as defined in Section 424(f) of the Code
and shall include a subsidiary of any subsidiary.
(u) "Ten Percent Stockholder" shall mean an employee Grantee
who, at the time an Incentive Stock Option is granted to such
Grantee, owns stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the employer
corporation or of its parent or subsidiary corporation.
3. Administration. The Plan shall be administered by the
Committee. The Committee shall have the authority in its discretion,
subject to and not inconsistent with the express provisions of the
Plan, to administer the Plan and to exercise all the powers and
authorities either specifically granted to it under the Plan or
necessary or advisable in the administration of the Plan, including,
without limitation, the authority to grant Options, Stock
Appreciation Rights and Restricted Stock; to determine which
Options shall constitute Incentive Stock Options and which Options
shall constitute Nonqualified Stock Options; to determine the
purchase price of the shares of Common Stock covered by each
Option; to determine the persons to whom, and the time or times at
which awards shall be granted; to determine the number of shares to
be covered by each award; to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine
the terms and provisions of the Agreements (which need not be
identical) and to cancel or suspend awards, as necessary; and to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
The Committee may delegate to one or more of its members or to
one or more agents such administrative duties as it may deem
advisable, and the Committee or any person to whom it has
delegated duties as aforesaid may employ one or more persons to
render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determination
and interpretations of the Committee shall be final and binding on all
Grantees of any awards under this Plan. The Board shall fill all
vacancies, however caused, in the Committee. The Board may from
time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute
others. One member of the Committee shall be selected by the Board
as chairman. The Committee shall hold its meetings at such times
and places as it shall deem advisable. All determinations of the
Committee shall be made by a majority of its members either present
in person or participating by conference telephone at a meeting or by
written consent. The Committee may appoint a secretary and make
such rules and regulations for the conduct of its business as it shall
deem advisable, and shall keep minutes of its meetings.
No member of the Board or Committee shall be liable for any
action taken or determination made in good faith with respect to the
Plan or any award granted hereunder.
4. Eligibility. Awards may be granted to executive officers and
other key employees, including officers and directors who are
employees, and to non-employee directors of and consultants to the
Company, except as proscribed by the Exchange Act or the Code.
In determining the employees to whom awards shall be granted and
the number of shares to be covered by each award, the Committee
shall take into account the duties of the respective employees, their
present and potential contributions to the success of the Company
and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan.
5. Stock. The maximum number of shares of Common Stock
reserved for the grant of awards under the Plan shall be 1,150,000
shares, subject to adjustment as provided in Section 11 hereof. Such
shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by the Company.
For purposes of this Section 5, where the exercise price of an Option
is paid in Common Stock pursuant to Section 6(d) of the Plan, only
the net number of additional shares issued and which remain
outstanding in connection with such exercise shall be deemed
"issued" for purposes of the Plan.
If any outstanding award under the Plan should, for any reason
expire, be canceled or be forfeited (other than in connection with the
exercise of a Stock Appreciation Right), without having been
exercised in full, the shares of Common Stock allocable to the
unexercised, canceled or terminated portion of such award shall
(unless the Plan shall have been terminated) become available for
subsequent grants of awards under the Plan; provided, however,
that, in the case of the cancellation or forfeiture of Restricted Stock
with respect to which dividends have been paid or accrued, the
number of shares with respect to such Restricted Stock shall not be
available for subsequent grants hereunder unless, in the case of
shares with respect to which dividends were accrued but unpaid,
such dividends are also canceled or forfeited.
6. Terms and Conditions of Options. Each Option granted
pursuant to the Plan shall be evidenced by a written agreement
between the Company and the Grantee (the "Option Agreement"), in
such form and containing such terms and conditions as the
Committee shall from time to time approve, which Option
Agreement shall comply with and be subject to the following terms
and conditions, unless otherwise specifically provided in such Option
Agreement.
(a) Number of Shares. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) Type of Option. Each Option Agreement shall specifically
state that the Option constitutes an Incentive Stock Option or a
Nonqualified Stock Option.
(c) Option Price. Each Option Agreement shall state the Option
Price, which, in the case of an Incentive Stock Option, shall not be
less than one hundred percent (100%) of the Fair Market Value of
a share of Common Stock covered by the Option on the date of
grant, and in any case shall not be less than the par value of a share
of the Common Stock covered by the Option. The Option Price shall
be subject to adjustment as provided in Section 11 hereof. The date
as of which the Committee adopts a resolution expressly granting an
Option shall be considered the day on which such Option is granted.
(d) Medium and Time of Payment. Payment of the Option Price
may be made (as determined by the Board) (i) in cash, (ii) by
certified check or bank cashier's check payable to the order of the
Company in the amount of such Option Price, or, if permitted by the
Committee: (iii) by promissory note issued by the Grantee in favor
of the Company in an amount equal to such Option Price and
payable on terms prescribed by the Committee and which provides
for the payment of interest at a fair market rate, as determined by the
Committee, (iv) by delivery of capital stock to the Company having
a Fair Market Value (determined on the date of exercise) equal to the
Option Price, (v) by agreeing with the Company to cancel a portion
of the exercisable Options issued hereunder to such Grantee having
a value (measured as the difference between the current Fair Market
Value (determined on the date of exercise) and the Option Price of
the Common Stock subject to such portion) equal to the Option
Price; or (vi) by any combination of the methods of payment
described in (i) through (v) above.
(e) Term and Exercisability of Options. Each Option Agreement
shall provide the exercise schedule for the Option as determined by
the Committe; provided, however, that the Committee shall have the
authority to accelerate the exercisability of any outstanding Option
at such time and under such circumstances as it, in its sole
discretion, deems appropriate. Each Option Agreement shall provide
an Option Term which shall be ten (10) years from the date of the
grant of the Option, unless otherwise provided in Section 2 hereof or
otherwise determined by the Committee. The Option Term shall be
subject to earlier expiration as provided in Sections 6(f )and 6(g)
hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by
written notice delivered in person or by mail to the Secretary of the
Company, specifying the number of shares of Common Stock with
respect to which the Option is being exercised.
(f) Termination of Employee Grantee. Except as provided in this
Section 6(f) and in Section 6(g) hereof, an Option granted to an
employee of the Company or a Subsidiary thereof may be exercised
only if the employee Grantee is then in the employ of the Company
or a Subsidiary thereof (or a corporation issuing or assuming the
Option in a transaction to which Section 424(a) of the Code applies
(or a parent or subsidiary corporation of such corporation)), and the
Grantee has remained continuously so employed since the date of
grant of the Option. In the event that the employment of an employee
Grantee shall terminate (other than by reason of death, Disability or
Retirement), all Options of such Grantee that are exercisable on the
date of such termination shall continue to be exercisable for three
months after the date of such termination (or such longer period as
the Committee shall prescribe in the case of Nonqualified Stock
Options). Notwithstanding the foregoing provisions of this Section
6(f), no Option may be exercised later than the expiration of its
Option Term. To the extent that any Option is not exercisable on the
date of such termination of employment, its Option Term shall
expire on such date.
(g) Termination of Employee Grantee by Death, Disability or
Retirement. If an employee Grantee shall die while employed by the
Company or a Subsidiary thereof, or within three months after the
date of termination of such Grantee's employment (or within such
longer period as the Committee may have provided for exercise of
the Grantee's Options after termination of the Grantee's employment
pursuant to Section 6(f) hereof, or if the employee Grantee's
employment shall terminate by reason of Disability, all Options
theretofore granted to such Grantee (to the extent such Options are
exercisable on the date the Grantee's employment is terminated by
such death or Disability) may be exercised by the Grantee or by the
Grantee's estate or by a person who acquired the right to exercise
such Options by bequest or inheritance or otherwise by reason of
death or Disability of the Grantee, at any time within six months
after the death or Disability of the Grantee. In the event that an
Option granted hereunder shall be exercised by the legal
representatives of a deceased or Disabled Grantee, written notice of
such exercise shall be accompanied by a certified copy of letters
testamentary or equivalent proof of the right of such legal
representatives to exercise such Option. In the event that the
employment of an employee Grantee shall terminate on account of
such Grantee's Retirement, all Options of such Grantee (to the
extent such Options are exercisable on the date of the Grantee's
retirement) may be exercised at any time within three months after
the date of such Retirement. Notwithstanding the foregoing
provisions of this Section 6(g), no Option may be exercised later
than the expiration of its Option Term. To the extent that any Option
is not exercisable on the date of such termination of employment by
reason of death, Disability or Retirement, its Option Term shall
expire on such date.
(h) Other Provisions. The Option Agreements evidencing awards
under the Plan shall contain such other terms and conditions not
inconsistent with the Plan as the Committee may determine.
7. Nonqualified Stock Options. Options granted pursuant to this
Section 7 are intended to constitute Nonqualified Stock Options and
shall be subject only to the general terms and conditions specified in
Section 6 hereof. At the discretion of the Committee, the early
termination provisions contained in Section 6 hereof may be waived
by the Committee as evidenced by their exclusion from any Option
Agreement.
8. Incentive Stock Options. Options granted pursuant to this
Section 8 are intended to constitute Incentive Stock Options and
shall be subject to the following special terms and conditions, in
addition to the general terms and conditions specified in Section 6
hereof.
(a) Value of Shares. The aggregate Fair Market Value (determined
as of the date the Incentive Stock Option is granted) of the shares of
Common Stock with respect to which Incentive Stock Options
granted under this Plan (and all other plans of an employee
Grantee's employer corporation and its parent and subsidiary
corporations) become exercisable for the first time by the Grantee
during any calendar year shall not exceed $100,000. To the extent
that the grant of an Option results in the aggregate Fair Market
Value (determined at the time of grant) of the Common Stock (or
other capital stock of the Company or any subsidiary) with respect
to which Incentive Stock Options are exercisable for the first time by
a Grantee during any calendar year (under all plans of the Company
and subsidiary corporations) to exceed $100,000, such Option shall
be treated as a Nonqualified Stock Option to the extent of such
excess. The provisions of this subsection shall be construed and
applied in accordance with Section 422(d) of the Code and the
regulations, if any, promulgated thereunder. Nothing contained in the
Plan shall be construed to limit the right of the Committee to grant
an Incentive Stock Option and a Nonqualified Stock Option
concurrently under a single stock option Agreement so long as each
Option is clearly identified as to its status.
(b) Ten Percent Stockholder. In the case of an Incentive Stock
Option granted to a Ten Percent Stockholder, (i) the Option Price
shall not be less than one-hundred-ten percent (110%) of the Fair
Market Value of a share of Common Stock on the date of grant of
such Incentive Stock Option, and (ii) the Option Term shall not
exceed five (5) years from the date of grant of such Incentive Stock
Option.
(c) Disqualifying Dispositions of Incentive Stock Options. If
Common Stock acquired upon exercise of any Incentive Stock
Option is disposed of in a disposition that, under Section 422 of the
Code, disqualifies the Grantee from the application of Section 421(a)
of the Code, the Grantee immediately before such disposition of
Common Stock shall comply with any requirements imposed by the
Company in order to enable the Company to secure the related
income tax deduction to which it is entitled in such event.
9. Stock Appreciation Rights. The Committee shall have authority
to grant a Stock Appreciation Right to the employee Grantee of any
Option under the Plan with respect to all or some of the shares of
Common Stock covered by such related Option. A Stock
Appreciation Right shall, except as provided in this Section 9, be
subject to the same terms and conditions as the related Option. Each
Stock Appreciation Right granted pursuant to the Plan shall be
evidenced by a written Agreement between the Company and the
Grantee in such form as the Committee shall time to time approve.
(a) Time of Grant. A Stock Appreciation Right may be granted
either at the time of grant, or at any time thereafter during the term
of the Option; provided, however, that Stock Appreciation Rights
related to Incentive Stock Options may only be granted at the time
of grant of the related Option.
(b) Payment. A Stock Appreciation Right shall entitle the holder
thereof, upon exercise of the Stock Appreciation Right or any
portion thereof, to receive payment of an amount computed pursuant
to Section 9(d).
(c) Exercise. A Stock Appreciation Right shall be exercisable at
such time or times and only to the extent that the related Option is
exercisable, and will not be transferable except to the extent the
related Option may be transferable. A Stock Appreciation Right
granted in connection with an Incentive Stock Option shall be
exercisable only if the Fair Market Value of a share of Common
Stock on the date of exercise exceeds the purchase price specified in
the related Incentive Stock Option.
(d) Amount Payable. Upon the exercise of a Stock Appreciation
Right, the Grantee shall be entitled to receive an amount determined
by multiplying (i) the excess of the Fair Market Value of a share of
Common Stock on the date of exercise of such Stock Appreciation
Right over the Option Price under the related Option, by (ii) the
number of shares of Common Stock as to which such Stock
Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including
such a limit at the time it is granted.
(e) Treatment of Related Options and Stock Appreciation Rights
Upon Exercise. Upon the exercise of a Stock Appreciation Right,
the related Option shall be canceled to the extent of the number of
shares of Common Stock as to which the Stock Appreciation Right
is exercised and upon the exercise of an Option granted in
connection with a Stock Appreciation Right, the Stock Appreciation
Right shall be canceled to the extent of the number of shares of
Common Stock as to which the Option is exercised or surrendered.
(f) Method of Exercise. Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person
or by mail to the Secretary of the Company, specifying the number
of shares of Common Stock with respect to which the Stock
Appreciation Right is being exercised. If requested by the
Committee, the Grantee shall deliver the Agreement evidencing the
Stock Appreciation Right being exercised and the Option Agreement
evidencing any related Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such
Agreements to the Grantee.
(g) Form of Payment. Payment of the amount determined under
Section 9(d), may be made solely in whole shares of Common Stock
in a number determined based upon their Fair Market Value on the
date of exercise of the Stock Appreciation Right or, alternatively, at
the sole discretion of the Committee, solely in cash, or in a
combination of cash and shares of Common Stock as the Committee
deems advisable. If the Committee decides to make full payment in
shares of Common Stock, and the amount payable results in a
fractional share, payment for the fractional share will be made in
cash. Notwithstanding the foregoing, to the extent required by Rule
16b-3 no payment in the form of cash may be made upon the
exercise of a Stock Appreciation Right pursuant to Section 9(d) to
an Insider, unless the exercise of such Stock Appreciation Right is
made during the period beginning on the third business day and
ending on the twelfth business day following the date of release for
publication of the Company's quarterly or annual statements of
earnings.
10. Restricted Stock. The Committee may award shares of
Restricted Stock to any eligible employee. Each award of Restricted
Stock under the Plan shall be evidenced by a written Agreement
between the Company and the Grantee, in such form as the
Committee shall from time to time approve, and shall comply with
the following terms and conditions (and with such other terms and
conditions not inconsistent with the terms of this Plan as the
Committee, in its discretion, shall establish):
(a) Number of Shares. Each Agreement shall state the number of
shares of Restricted Stock to be subject to an award.
(b) Restrictions. Shares of Restricted Stock may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, for such
period as the Committee shall determine from the date on which the
award is granted (the "Restricted Period"). The Committee may also
impose such other restrictions and conditions on the shares as it
deems appropriate including the satisfaction of performance criteria.
Certificates for shares of stock issued pursuant to Restricted Stock
awards shall bear an appropriate legend referring to such
restrictions, and any attempt to dispose of any such shares of stock
in contravention of such restrictions shall be null and void and
without effect. During the Restricted Period, such certificates shall
be held in escrow by an escrow agent appointed by the Committee.
In determining the Restricted Period of an award, the Committee
may provide that the foregoing restrictions shall lapse with respect
to specified percentages of the awarded shares on successive
anniversaries of the date of such award.
(c) Forfeiture. Subject to such exceptions as may be determined
by the Committee, if the Grantee's continuous employment with the
Company or any Subsidiary shall terminate for any reason prior to
the expiration of the Restricted Period of an award, any shares
remaining subject to restrictions (after taking into account the
provisions of Section 10(e) hereof shall thereupon be forfeited by the
Grantee and transferred to, and reacquired by, the Company or a
Subsidiary at no cost to the Company or Subsidiary.
(d) Ownership. During the Restricted Period the Grantee shall
possess all incidents of ownership of such shares, subject to Section
10(b) hereof, including the right to receive dividends with respect to
such shares and to vote such shares.
(e) Accelerated Lapse of Restrictions. The Committee shall have
the authority (and the Agreement may, but need not, so provide) to
cancel all or any portion of any outstanding restrictions prior to the
expiration of the Restricted Period with respect to any or all of the
shares of Restricted Stock awarded on such terms and conditions as
the Committee shall deem appropriate.
11. Effect of Certain Changes. In the event of any extraordinary
dividend, stock dividend, recapitalization, merger, consolidation,
stock split, warrant or rights issuance, or combination or exchange
of such shares, or other similar transactions, the number of shares
of Common Stock available for awards, the number of such shares
covered by outstanding awards, and the price per share of Options
or the applicable market value of Stock Appreciation Rights shall be
equitably adjusted by the Committee to reflect such event and
preserve the value of such awards; provided, however, that any
fractional shares resulting from such adjustment shall be eliminated.
If the Company shall be reorganized, consolidated, or merged with
another corporation, or if all or substantially all of the assets of the
Company shall be sold or exchanged, a Grantee shall at the time of
issuance of the stock under such a corporate event, be entitled to
receive upon the exercise of his award the same number and kind of
shares of stock or the same amount of property, cash or securities as
he would have been entitled to receive upon the occurrence of any
such corporate event as if he had been, immediately prior to such
event, the holder of the number of shares covered by his award and
that his award shall have been fully vested at the time of such event;
provided, however, that in any of such events the Committee shall
have the discretionary power to take any action necessary or
appropriate to prevent Incentive Stock Options granted hereunder
from being disqualified as Incentive Stock Options. Any adjustment
under this Section shall apply proportionately to only the
unexercised portion of any award granted hereunder. If fractions of
a share would result from any such adjustment, the adjustment shall
be revised to the next lower whole number of shares.
12. Surrender and Exchange of Awards. The Committee may
permit the voluntary surrender of all or a portion of any Option
granted under the Plan to an employee or any option granted under
any other plan, program or arrangement of the Company or any
Subsidiary ("Surrendered Option"), to be conditioned upon the
granting to the employee Grantee of a new Option for the same
number of shares of Common Stock as the Surrendered Option, or
may require such voluntary surrender as a condition precedent to a
grant of a new Option to such Grantee. Subject to the provisions of
the Plan, such new Option may be an Incentive Stock Option or a
Nonqualified Stock Option and shall be exercisable at the price,
during such period and on such other terms and conditions as are
specified by the Committee at the time the new Option is granted.
The Committee may also grant Restricted Stock in exchange for
Surrendered Options to any holder of such Surrendered Option.
13. Period During Which Awards May Be Granted. Awards may
be granted pursuant to the Plan from time to time within a period of
ten (10) years from the date the Plan is adopted by the Board, or the
date the Plan is approved by the stockholders of the Company,
whichever is earlier.
14. Nontransferability of Awards. Awards may be granted under
the Plan shall not be transferable otherwise than by will or by the
laws of descent and distribution, and awards may be exercised or
otherwise realized, during the lifetime of the Grantee, only by the
Grantee or by his guardian or legal representative. No award
granted under the Plan shall be subject to execution, attachment or
other process.
15. Approval of Shareholders. The Plan shall take effect as of the
date determined by the Board in its adoption of the Plan but the Plan
(and any grants of awards made prior to the shareholder approval
described in this sentence shall be subject to the approval of the
holder(s) of a majority of the issued and outstanding shares of voting
securities of the Company entitled to vote, which approval must
occur within twelve months of the date the Plan is adopted by the
Board.
16. Agreement by Employee Grantee Regarding Withholding
Taxes. If the Committee shall so require, as a condition of exercise
of an Option or Stock Appreciation Right or the expiration of the
Restricted Period (each a "Tax Event"), each employee Grantee shall
agree that, no later than the date of the Tax Event, the Grantee will
pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of
any kind required by law to be withheld upon the Tax Event.
Alternatively, the Committee may provide that an employee Grantee
may elect, to the extent permitted or required by law, to have the
Company deduct federal, state and local taxes of any kind required
by law to be withheld upon the Tax Event from any payment of any
kind due to the Grantee. The withholding obligation may be satisfied
by the withholding or delivery of Common Stock.
17. Amendment and Termination of the Plan.
(a)The Board at any time and from time to time may suspend,
terminate, modify or amend the Plan; provided, however, that an
amendment which requires stockholder approval in order for the
Plan to continue to comply with Rule 16b-3 or any other law,
regulation or stock exchange requirement shall not be effective
unless approved by the requisite vote of stockholders. Except as
provided in Section 11 hereof, no suspension, termination,
modification or amendment of the Plan may adversely affect any
award previously granted, unless the written consent of the Grantee
is obtained.
(b) The Plan may from time to time be terminated, modified or
amended by the affirmative vote of the holders of a majority of the
shares of the Company's Common Stock present, or represented, and
entitled to vote at a meeting of stockholders duly held in accordance
with applicable state law.
(c) The Board of the Company may at any time terminate the
Plan or from time to time make such modifications or amendments
of the Plan as it may deem advisable; provided, however, that the
Board shall not (i) modify or amend the Plan in any way that would
disqualify any Option issued pursuant to the Plan as an Incentive
Stock Option, or (ii) without approval by the affirmative vote of the
holders of a majority of the shares of the Company's Common Stock
present, or represented, and entitled to vote at a meeting of
stockholders duly held in accordance with applicable state law
increase (except as provided by Section 11) the maximum number
of Common Shares as to which awards may be granted under the
Plan or change the class of persons eligible to receive award under
the Plan.
(d) No termination, modification or amendment of the Plan may
adversely affect the rights conferred by any awards without the
consent of the Grantee thereof.
18. Rights as a Shareholder. Except as provided in Section 10(d)
hereof, a Grantee of an award (or any individual acquiring rights
under such award from the Grantee) shall have no rights as a
shareholder with respect to any shares covered by the award until the
date of the issuance of a stock certificate for such shares to the
Grantee (or such individual). No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distribution of other rights for which the record
date is prior to the date such stock certificate is issued, except as
provided in Section 11 hereof.
19. No Rights to Employment. Nothing in the Plan or in any
award granted or Agreement entered into pursuant hereto shall
confer upon any Grantee the right to continue in the employ of, or a
consultant relationship with, the Company or any Subsidiary or to
be entitled to any remuneration or benefits not set forth in the Plan
or such Agreement or to interfere with or limit in any way the right
of the Company or any such Subsidiary to terminate such Grantee's
employment. Awards granted under the Plan shall not be affected by
any change in duties or position of a Grantee as long as such
Grantee continues to be employed by, or in a consultant relationship
with, the Company or any Subsidiary.
20. Beneficiary. A Grantee may file with the Committee a written
designation of a beneficiary on such form as may be prescribed by
the Committee and may, from time to time, amend or revoke such
designation. If no designated beneficiary survives the Grantee, the
executor or administrator of the Grantee's estate shall be deemed to
be the Grantee's beneficiary.
21. Governing Law. The Plan and all determinations made and
actions taken pursuant hereto shall be governed by the laws of the
State of Delaware.
22. Effective Date and Duration of the Plan. This Plan shall be
effective as of the date determined by the Company, subject to the
approval of the Plan by the stockholders of the Company, and shall
terminate on the tenth anniversary of such date, unless earlier
terminated pursuant to Section 17 hereof. No awards shall be
granted after termination of the Plan.
23. Leave of Absence. For purposes of the Plan, an individual
who is on military or sick leave or other bona fide leave of absence
(such as temporary employment by the United States or any state
government) shall be considered as remaining in the employ of the
Company or of a subsidiary corporation, if any, for 90 days or such
longer period as shall be determined by the Committee.
24. Further Conditions of Exercise.
(a) Unless prior to the exercise of an award, the Common Stock
issuable upon such exercise are the subject of a registration
statement filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), and there is then in effect a prospectus filed as part of such
registration statement meeting the requirements of Section 10(a)(3)
of the Securities Act, the acceptance of such award and the notice of
exercise with respect to such award shall be accompanied by a
representation or agreement deemed hereunder to have been made by
the Grantee to the Company to the effect that such shares are being
acquired for investment only and not with a view to the resale or
distribution thereof, or such other documentation as may be required
by the Company, unless, in the opinion of counsel to the Company,
such representation, agreement or documentation is not necessary to
comply with the Securities Act.
(b) Anything in subsection (a) of this Section 24 to the contrary
notwithstanding, the Company shall not be obligated to issue or sell
any Common Stock until they have been listed on each securities
exchange on which the Common Stock may then be listed and until
and unless, in the opinion of counsel to the Company, the Company
may issue such shares pursuant to a qualification or an effective
registration statement, or an exemption from registration, under such
state and federal laws, rules or regulations as such counsel may
deem applicable. The Company shall use reasonable efforts to effect
such listing, qualification and registration, as the case may be.
