SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities 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 ss. 240.14a-11(c) or ss. 240.14a-12
THERAPY LASERS, 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:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
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THERAPY LASERS, INC.
10450 WESTOFFICE DR.
HOUSTON, TEXAS 77042
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 31, 2000
This Proxy Statement is being first mailed on July 10, 2000, to
stockholders of Therapy Lasers, Inc. (the "Company") by the Board of Directors
to solicit proxies (the "Proxies') for use at the Special Meeting of
Stockholders (the "Meeting") to be held on the 31st day of July, 2000 at 10:00
a.m. at 10450 Westoffice, Houston, Texas, and at such other time and place to
which the meeting may be adjourned.
All shares represented by valid Proxies, unless the stockholder otherwise
specifies, will be voted FOR: (i) the amendment to the Company's Bylaws to
increase the number of directors from 3 to 5 persons, and to provide that
directors be elected to staggered terms, (ii) the election of the 2 additional
directors for staggered terms of 3 years each, the election of 2 directors for 2
year terms, and the election of 1 director for a 1 year term, (iii) the
amendment to the Company's Articles of Incorporation to change the Company's
name to OMNISOURCE, INC., (iv) the approval and adoption of a Stock Incentive
Plan as described in this Proxy Statement, and (v) at the discretion of the
proxy holders, with regard to any other matters that may properly come before
the Meeting and at any adjournments thereof.
Any stockholder executing a Proxy retains the right to revoke it at any
time prior to exercise at the Meeting. A Proxy may be revoked by delivery of
written notice of revocation to the Secretary of the Company, by execution and
delivery of a later Proxy or by voting the shares in person at the Meeting. If
not revoked, all shares represented by properly executed Proxies will be voted
as specified therein.
RECORD DATE AND VOTING SECURITIES
The record date for determining the stockholders entitled to notice of and
to vote at the Meeting and any adjournments thereof is the close of business on
July 10, 2000, (the "Record Date"), at which time the Company had issued and
outstanding 5,830,265 shares of Common Stock. Common Stock is the only class of
outstanding voting securities of the Company.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the Common Stock issued and outstanding and entitled to vote thereat
is necessary to constitute a quorum to transact business. In deciding all
questions and other matters, a holder of Common Stock on the Record Date will be
entitled to cast one vote for each share of Common Stock registered in such
holder's name.
Proposals to be voted on at the Meeting require the affirmative vote of a
majority of the voting power present and entitled to vote at the meeting. Votes
cast by proxy or in person at the Meeting will be tabulated by the election
inspectors appointed for the meeting. Abstentions and broker nonvotes (as
hereafter defined) will be counted as present by the election inspectors for the
purpose of determining the presence of a quorum. For the purpose of computing
the vote required for approval of matters to be voted on at the Meeting, the
election inspectors will treat shares held by a stockholder who abstains from
voting as being "present" and "entitled to vote"on the matter and, thus, an
abstention has the same legal effect as a vote against the matter. The election
inspectors will treat shares referred to as a "broker non votes" (shares held by
brokers or nominees as to which they have no discriminatory power to vote on a
particular matter and have received no instructions from the beneficial owners
or persons entitled to vote thereon), if any, as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. However,
for purposes of determining the outcome of any matter requiring discretionary
authority to vote, broker non-votes will be treated as
<PAGE>
not present and not entitled to vote with respect to that matter (even though
those shares are considered present and entitled to vote for quorum purposes and
may be entitled to vote on other matters.)
A STOCKHOLDER MAY, WITH RESPECT TO THE ELECTION OF DIRECTORS: (I) VOTE FOR
THE ELECTION OF THE NOMINEE NAMED HEREIN; OR (II) WITHHOLD AUTHORITY TO VOTE FOR
SUCH NOMINEE. A STOCKHOLDER MAY, WITH RESPECT TO EACH OTHER MATTER TO BE VOTED
UPON: (I) VOTE FOR THE MATTER; (II) VOTE AGAINST THE MATTER; OR (III) ABSTAIN
FROM VOTING ON THE MATTER.
PROPOSAL 1: INCREASE NUMBER OF DIRECTORS AND STAGGER THE BOARD
The Company currently has three (3) director seats. The Company proposes
to amend Article II, Section 1 of the Company's Bylaws to increase the number of
directors from three (3) to five (5), and to provide for staggered terms of the
directors. Classification of the board of directors into three groups enables
directors to serve for terms up to three years and prevents the entire board
from being replaced at any annual meeting. Although there have been no problems
in this regard, this will, in the future, help ensure the continuity and
stability of the Company's management and policies since the majority of
directors will have prior experience as directors of the Company. The proposed
amendment to the Bylaws would be accomplished by amending Article II, Section 1
to read as follows:
ARTICLE II, SECTION 1. THE BOARD OF DIRECTORS OF THE COMPANY SHALL CONSIST
OF FIVE (5) PERSONS WHO SHALL BE CHOSEN BY THE STOCKHOLDERS ANNUALLY, AT THE
ANNUAL MEETING OF THE COMPANY. THE DIRECTORS SHALL BE DIVIDED INTO THREE
CLASSES, WITH EACH CLASS TO BE AS NEARLY EQUAL IN NUMBER AS REASONABLY POSSIBLE,
AND WITH THE INITIAL TERM OF OFFICE OF THE FIRST CLASS OF DIRECTORS TO EXPIRE AT
THE 2001 ANNUAL MEETING OF STOCKHOLDERS, THE INITIAL TERM OF OFFICE OF THE
SECOND CLASS OF DIRECTORS TO EXPIRE AT THE 2002 ANNUAL MEETING OF STOCKHOLDERS
AND THE INITIAL TERM OF OFFICE OF THE THIRD CLASS OF DIRECTORS TO EXPIRE AT THE
2002 ANNUAL MEETING OF STOCKHOLDERS, IN EACH CASE UPON THE ELECTION AND
QUALIFICATION OF THEIR SUCCESSORS. COMMENCING WITH THE 2001 ANNUAL MEETING OF
STOCKHOLDERS, DIRECTORS ELECTED TO SUCCEED THOSE DIRECTORS WHOSE TERMS HAVE
THEREUPON EXPIRED SHALL BE ELECTED TO A TERM OF OFFICE TO EXPIRE AT THE THIRD
SUCCEEDING ANNUAL MEETING OF STOCKHOLDERS AFTER THEIR ELECTION, AND UPON THE
ELECTION AND QUALIFICATION OF THEIR SUCCESSORS. IF THE NUMBER OF DIRECTORS IS
CHANGED, ANY INCREASE OR DECREASE SHALL BE APPORTIONED AMONG THE CLASSES SO AS
TO MAINTAIN OR ATTAIN THE NUMBER OF DIRECTORS IN EACH CLASS AS NEARLY EQUAL AS
REASONABLY POSSIBLE, BUT IN NO CASE WILL A DECREASE IN THE NUMBER OF DIRECTORS
SHORTEN THE TERM OF ANY INCUMBENT DIRECTOR.
This amendment may have the detrimental effect of discouraging
prospective purchasers of the shares of the Company from making tender offers
for or open market purchases of shares of the Company. This proposed amendment
to Article II, Section 1 of the Bylaws has the effect of making it more
difficult to change the composition of the board of directors. The effect could
be to delay or frustrate the concentration of control by a holder of a large
block of the Company's shares or the removal of incumbent directors even if
shareholders consider such events to be beneficial. The board of directors
believes, however, that the benefits of this provision outweigh the
disadvantages of discouraging proposals to take over the Company. The staggered
board of directors is not being recommended in response to any specific effort
of which the board of directors is aware to obtain control of the Company.
The affirmative vote of shareholders holding at lest a majority of Common
Stock voting in person or by proxy at the Special General Meeting is necessary
for approval of the Bylaw amendment. Unless otherwise specified, proxies
solicited by the Board of Directors will be voted FOR the Bylaw amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
BYLAW AMENDMENT.
PROPOSAL 2: ELECTION OF DIRECTORS
Three Directors of the Company were elected at the regular Annual
Shareholders Meeting on February 29, 2000 to serve for a period of one year, or
until their replacements were elected and qualified to serve. On such date, Mark
A. Chapman, Catherine Cullen and Leon D. Hogg were elected to one year terms. If
Proposal 1 above is approved, two additional persons will need to be elected to
the Board of Directors to fill the vacancies created by the increase in the
number of directors, and such persons would serve for three (3) year terms each.
It is
<PAGE>
proposed that Charles Sheffield and Michael Newman be nominated for election at
this meeting to hold office for a three year term expiring on 2003. On April 28,
2000, the Company acquired Gulf Coast Fan & Light, Inc., BuilderSource, Inc. and
Builders Lighting & Hardware, Inc., all principally owned by Charles Sheffield.
Subsequent to the acquisition of these companies, Mr. Sheffield was elected as
President of the Company. Michael Newman is President of New Horizons Computer
Learning Center of San Antonio, Texas.
In accordance with the changes to the Company's Bylaws as proposed in
Proposal 1, the other directors, Mark Chapman, Leon D. Hogg, and Catherine
Cullen, would be nominated for re-election to serve staggered terms as follows:
Mark Chapman would serve for a two-year term, Leon D. Hogg would serve for a two
year term, and Catherine Cullen would serve for a one year term, so that there
is always continuity on the Board.
DIRECTORS NOMINATED THIS YEAR FOR TERMS TO EXPIRE IN 2003.
Charles Sheffield, age 46, is a graduate of the University of Houston with
a BBA in Finance. In 1973 he founded Sheffield Construction Co., Inc. which
became U.S .Design & Construction Corp. when he took the company national in the
early and mid-80's.In the 20 years he headed the company, Mr. Sheffield took it
from a small local firm to a leading national contractor of national and
regional retail stores. During this period, Mr. Sheffield also founded Gulf
Coast Fan & Light, Inc. (1984), a major supplier of ceiling fans and electrical
fixtures to the builder market in Texas. This base was expanded into a group of
companies that provide a host of electrical and hardware products to the home
building and commercial markets. Mr Sheffield still serves as Chairman of the
Board of U.S. Design & Construction Corp. and U.S. Ceiling Fan Corp.
Michael Newman, age 53, graduated from Clemson University with a degree in
mathematics. He served as a management consultant with Deloite and Touche in
Washington, D.C. before buying an oil and gas trucking firm in Mississippi which
he expanded and sold to a public exploration company, but continued to serve as
President until l991. He then returned to Texas where he purchased and operated
several Texas and California franchises of the New Horizons Computer Learning
Centers. He subsequently sold the franchises back to the Franchisor, but agreed
to continue serving as President for two more years.
DIRECTORS NOMINATED THIS YEAR FOR TERMS TO EXPIRE IN 2002.
Leon D. Hogg, age 80, is a retired commercial and mortgage banker, who
served as President of Therapy Lasers, Inc. from 1995 to April, 2000. He holds a
bachelor's degree from the University of North Texas, and continues to serve
Therapy Lasers, Inc. as director, corporate secretary, and public relations
director. When operating his mortgage banking firm, Lee Hogg & Co. Inc., Mr.
Hogg arranged financing for apartment buildings, office buildings and
undeveloped property for many projects in the Houston area.
Mark A. Chapman, age 57, is a graduate of Kansas State University in 1965,
with a major in Political Science-History, and is a graduate of the University
of Texas Law School. He is a member of the State Bar of Texas (inactive) and is
a licensed Texas Real Estate Broker, also inactive, and has long been active in
the Oil and Gas business, serving as President of Broughton Petroleum, Inc.
DIRECTOR NOMINATED THIS YEAR FOR TERM TO EXPIRE IN 2001.
Catherine Cullen, is a longtime Houstonian and widow of the late Lucien
Hugh Cullen, agreed to serve out his term as director of the Company subsequent
to his death in January, 2000. Both Mr. and Mrs. Cullen were active in civic
affairs in Houston for many years.
FOR INFORMATION RELATING TO COMMON STOCK OWNED BY EACH OF THE DIRECTORS SEE
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
PRINCIPAL STOCKHOLDERS AND MANAGEMENT OWNERSHIP
The following table sets forth information, as of the Record Date,
regarding the beneficial ownership of
<PAGE>
Common Stock as of the Record Date by (i) each person or group known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (ii) each director and nominee for director for the Company, (iii), the
Company's executive officers, and (iv) all directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF
COMMON STOCK (1)
---------------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (2) COMMON STOCK
------------------------ ----------------- ------------
<S> <C> <C>
Charles Sheffield, President ............................ 4,739,876 81.3
Leon D,. Hogg, VP of Public Relations, Director ......... 100,400 1.7
Mark A. Chapman, Director ............................... 92,030 1.6
Catherine Cullen, Director .............................. 46,000 .8
Michael Newman .......................................... 0 0
All directors & executive officers as a group (5 persons) 4,978,306 85.4
</TABLE>
(1) "Beneficial Owner" means generally any person who, directly or indirectly,
has or shares voting power or investment power with respect to a security. All
information with respect to the beneficial ownership of any stockholder has been
furnished by such Stockholder, and the Company believes that, except as
otherwise indicated, each stock- holder has sole voting and investment power
with respect to shares listed as beneficially owned by such stockholder.
MEETINGS AND COMMITTES OF THE BOARD OF DIRECTORS.
The business of the Company is managed under the direction of the Board of
Directors which meets on a regularly scheduled basis to review significant
developments affecting the Company and to receive reports from the Company
President who is responsible for day-to-day operations and to act on matters
requiring their approval. The Board also holds special meetings and acts by
written consent when important matters require Board approval.
Since the Company had no income from operations the previous year, only
two meetings of the Board were held. In light of the acquisition of three income
producing corporations, regularly scheduled meetings are currently planned to be
held at least each two months. Special meetings may be called if the necessity
arises in the opinion of the operating officers. The Company's Board of
Directors currently has no standing committees. Until such time as the growth of
the Company makes it necessary, one Committee will oversee matters of Audit, of
Finance, and of Compensation. Members of that Committee will be voted on at the
next Board Meeting.
EXECUTIVE OFFICERS
NAME: AGE: OFFICE AND EMPLOYMENT DURING LAST 5 YEARS
Charles Sheffield 46 President and Chief Operating Officer;
Leon D. Hogg 80 Vice President- Public Relations, Secretary,
Director
EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION. Directors receive no compensation in their capacities as
directors. All Directors are reimbursed for expenses, if any, connected with
attendance at Board Meetings.
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
LONG TERM
---------
COMPENSATION AWARDS
-------------------
OTHER
ANNUAL SECURITIES ALL OTHER
FISCAL COMPEN- UNDERLY- COMPEN-
NAME AND PRINCIPAL YEAR SALARY BONUS SATION($) ING SATION($)
POSITIONS ($) ($) OPTIONS(#)
<S> <C> <C> <C> <C> <C> <C>
Charles Sheffield, ......... 2000 60,000 0 0 0 0
President and Chief
Executive Officer of
the Company
Leon D. Hogg, Vice ......... 2000 20,000 0 0 0 0
President- Public Relations, 1999
Secretary of the Company 1998
</TABLE>
The Company currently has no other direct employees.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers (as defined in Rule 16a-1(f)), directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Such persons are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it and written
representations from persons required to file such reports ("Reporting
Persons"), the Company believes that all filing requirements applicable to such
Reporting Persons were timely complied with during the fiscal year ended
December 31, 1999.
CERTAIN TRANSACTIONS
Effective April 28, 2000, Charles Sheffield acquired control of the
Company pursuant to the acquisition by the Company of all of the stock of three
corporations that are engaged in the hardware, ceiling fan lighting and
electrical component industry: Gulf Coast Fan & Light, Inc.; Buildersource,
Inc.; and Builders Lighting and Hardware, Inc. Such companies had combined
revenues in excess of $5 million for the 1999 tax year and have a minimum net
worth of $500,000. The terms of such acquisitions are described below. Pursuant
to the acquisition of Gulf Coast Fan & Light, Inc., Mr. Sheffield received as
consideration for his interests in Gulf Coast Fan & Light, Inc. a total amount
of 3,255,000 shares of Company common stock; pursuant to the acquisition of
Buildersource, Inc., Mr. Sheffield received as consideration for his interests
in Buildersource, Inc. a total amount of 166,000 shares of Company common stock;
pursuant to the acquisition of Builders Lighting and Hardware, Inc., Mr.
Sheffield received a total amount of 880,000 shares of Company common stock.
Upon consummation of these transactions, Mr. Sheffield, directly and indirectly
through his control of a corporation that also owns stock in the Company, owned
4,739,876, which represented approximately 81.3 % of the outstanding common
stock of the Company as of April 28, 2000, the date of such transactions. Upon
consummation of these transactions, the Board of Directors elected Mr. Charles
Sheffield as the President and CEO of the Company.
<PAGE>
The acquisition of Gulf Coast Fan & Light, Inc. was effected by the
issuance of an aggregate of 3,500,000 shares of the Company's Common Stock and a
$1,000,000 10-year promissory note, a $390,000 5-year promissory note, and a
$50,000 3-year promissory note. The owners of Gulf Coast Fan & Light, Inc. who
received stock in the Company were Charles Sheffield, James R. Sheffield, Jr.,
Louise Mautz, and William Scheel. The acquisition of Buildersource, Inc. was
effected by the issuance of an aggregate of 200,000 shares of the Company's
Common Stock. The owners of Buildersource, Inc. who received stock in the
Company were Charles Sheffield, James R. Sheffield, Jr., Louise Mautz, William
Scheel, Scott Meador and Bob Meador. The acquisition of Builders Lighting and
Hardware, Inc. was effected by the issuance of an aggregate of 1,000,000 shares
of the Company's Common Stock. The owners of Builders Lighting and Hardware,
Inc. received stock in the Company were Charles Sheffield, David Bero, James R.
Sheffield, Jr., Louise Mautz, William Scheel, Carolyn Sheffield, Jeremy
Sheffield, Jason Sheffield, and Joshua Sheffield. Upon consummation of these
transactions, the Board of Directors elected Mr. Charles Sheffield as the
President and CEO of the Company.
The company leases the spaces which Gulf Coast Fan & Light, Inc. and
Builders Source, Inc. occupy from Mr. Sheffield for the amounts of $2,014.00 per
month and $2,736.00 per month, respectively.
Gulf Coast Fan & Light, Inc., has approximately 21/2years remaining on a 3
year licensing agreement from U.S. Ceiling Fan Corp., a company controlled by
Mr. Sheffield, for Gulf Coast Fan & Light, Inc. use of the "Old Jacksonville
Ceiling Fan" brand name. This licensing will require no payments during the
remainder of the agreement.
PROPOSAL 3: CHANGE OF COMPANY NAME
The Company proposes to amend Section First of the Company's Articles of
Incorporation to change the name of the Company from Therapy Lasers, Inc. to
OmniSource, Inc. The Company is no longer in the therapy laser business, and the
change of name reflects the Company's current lines of business and business
strategy. To continue to be known as "Therapy Lasers" does not provide
customers, suppliers, or investors with a true indication of the nature of the
Company's business. The change of the Company's name would be accomplished by
amending Article First of the Company's Articles of Incorporation to be and read
as substantially as follows:
FIRST. The name of the corporation is:OmniSource.
The affirmative vote of shareholders holding at least a majority of Common Stock
voting in person or by proxy at the Special General Meeting is necessary for
approval of the Articles of Incorporation amendment. UNLESS OTHERWISE SPECIFIED,
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THE ARTICLES OF
INCORPORATION AMENDMENT.
PROPOSAL 4: APPROVAL OF STOCK INCENTIVE PROGRAM
The Board of Directors is proposing the approval of a Stock Incentive Plan
(the "Plan") as a principal component of the Company's compensation program for
the purpose of tying compensation results directly to stockholder value,
specifically the market price of the Common Stock. The purposes of the Plan are
to attract, retain, motivate and incentivize the directors, executives, and key
employees, to provide them with a strong incentive to advance the interests of
the Company, and to otherwise align the interests of management more closely
with those of the Company and its Shareholders. The Company may grant options
that are intended to qualify as incentive stock options within the meaning of
Section 422 of the Internal Revenue Code or non-statutory options not intended
to qualify as incentive options, award restricted stock, restricted stock units,
performance units and bonus stock.
BOARD RECOMMENDATION.
The Board of Directors unanimously recommends a vote FOR the proposal to
approve the Plan. Unless otherwise instructed, the enclosed Proxy will be voted
FOR such proposal.
The following is a summary of the material provisions of the Plan. The
summary is subject to the terms of the Plan. The Company will provide upon
request, a copy of the full text of the Plan to each person to whom a copy of
this
<PAGE>
Proxy Statement is delivered. Requests should be directed to Leon Hogg,
Corporate Secretary.
ADMINISTRATION AND ELIGIBILITY
The Plan is administered by the Board of Directors and by the Stock Option
Committee (the "Committee"). Subject to the provisions of the Plan, the
Committee has authority to construe the respective option agreements, award
restricted stock, restricted stock units, performance units and bonus stock, to
prescribe, amend and rescind rules and regulations relating to the Plan, and to
make all other determinations in the judgment of the Committee necessary or
desirable for the administration and purposes of the Plan.
Options may be granted to persons who are, at the time of grants,
employees, officers or directors of, or consultants or advisors to, the Company;
provided that incentive stock options may be granted only to persons who are
eligible to receive such options under Section 422 of the Code. The granting of
options to directors and officers shall be determined either (a) by the full
Board of Directors, or (b) by a committee consisting solely of two or more
directors.
NUMBER OF SHARES.
Subject to adjustments as provided in the Plan, the number of shares of
Common Stock authorized for issuance under the Plan is 1,500,000. The types of
awards which the Committee has authority to grant consists of (1) stock options
(2) restricted stock, (3) restricted stock units, (4) performance units, and (5)
bonus stock. Each of these are described herein.
EXERCISE PRICE AND TERMS OF STOCK OPTIONS
The Committee has the authority to grant incentive stock options and
non-qualified stock options to officers and key employees of the Company, and
non-qualified stock options to non-employee directors. The Committee (or in the
alternative, the full Board of Directors) selects the exercise price per share
of stock, provided the exercise price cannot be less than (a) 110% of fair
market value per share for incentive stock options granted to a holder of more
than 10% of the Company's capital stock, (b) 100% of fair market value for
incentive stock options generally, and (C) 50% of fair market value for
non-qualified options. The option price may be paid in cash or Common Stock
owned by the optionee as provided in the Plan. The Committee shall also
determine the expiration of the option period, provided that no stock options
shall be exercisable later than 10 years after the date on which the option is
granted, provided however, in the case of incentive stock options granted to a
holder of more than 10% of the Company's capital stock, such date shall not be
later than 5 years after the date on which the option is granted. In all cases,
options shall be subject to earlier terminations as provided in the Plan.
All options are non-transferable other than by will or the laws of descent
and distribution. The Committee has the authority under the Plan to set the
times within which the options vest. Unless the stock option agreement with
respect to any options otherwise provides, the options become exercisable on a
cumulative basis of 33-1/3% of the total number of shares covered thereby on
each of the first, second, and third anniversary dates of the grant of the
option. Holders of incentive stock options may generally exercise such options
up to three months after voluntary termination of employment (which termination
has been made with the consent of the Company) unless termination results from
death or disability, in which case such options may be exercised at any time
prior to the expiration date of such stock option, or within one year after the
date of termination of employment, whichever period is shorter. Holders of
non-qualified stock options may exercise such options at any time prior to the
expiration date of such non-qualified stock option, or within one year after the
date of voluntary termination of employment (which termination has been made
with the consent of the Company), whichever period is shorter.
Notwithstanding the foregoing, if the employment terminates for any reason
other than voluntary termination with the consent of the Company, retirement
under a retirement plan of the Company, or death, all outstanding stock options
shall automatically terminate.
The Committee determines when options granted under the Plan become
exercisable. The Committee may accelerate the date on which any option granted
may be exercised, provided that no such extension shall be permitted if it would
cause the Plan to fail to comply with Section 422 of the Code or with Rule 16b-3
promulgated under the
<PAGE>
Exchange Act.
The Committee has authority, with the consent of the affected optionee, to
cancel or amend any outstanding options under the Plan and to grant in
substitution therefor new options covering the same or a different number of
shares of Common Stock and having an exercise price per share which may be lower
or higher than the exercise price per share of the outstanding options.
RESTRICTED STOCK OR RESTRICTED STOCK UNITS
Restricted Common Stock or restricted stock units awarded by the Committee
will be subject to such restrictions as the Committee may impose thereon and
will be subject to forfeiture if certain events (which may, in the discretion of
the Committee, include termination of employment or directorship and/or
performance- based event) specified by the Committee occur prior to the lapse of
the restrictions. The agreement between the Company and the grantee will set
forth the number of shares of restricted stock or restricted stock units awarded
to the grantee, the restrictions imposed thereon, the duration of such
restrictions, the events the occurrence of which would cause a forfeiture, and
such other terms and conditions as the Committee in its discretion deems
appropriate. Unless otherwise provided in the agreement, shares of restricted
stock or restricted stock units will vest at the rate of 3-1/3% on each of the
first three anniversaries of the date of grant of the award.
Following a restricted stock award and prior to the lapse or termination
of the applicable restrictions, stock certificates for the shares of restricted
stock will be held in escrow. Upon the lapse or termination of the restrictions,
the stock certificates will be delivered to the grantee. From the date a
restricted stock award is effective, however, the grantee will be a stockholder
with respect to the shares of restricted stock, and will have a ll the rights of
a stockholder with respect to such shares, including the right to vote the
shares and to receive all dividends and other distributions paid with respect to
the shares, subject only to the restrictions imposed by the Committee.
Restricted stock or restricted stock units may be issued for no
consideration or for such consideration as shall be determined at the time of
the award by the Committee.
PERFORMANCE UNITS
The Committee may award performance units (expressed in dollars or shares)
to be earned by an awardee based on the level of performance of the Company, a
subsidiary or subsidiaries, a branch, department or other unit thereof or the
awardee individually over a specified period of not less than one year
("Performance Period"). For each Performance Period the Committee will establish
a Performance Target, and a Minimum Target which may be the same or less than
the Performance Target. Targets may be expressed in terms of earnings per share,
return on assets, return on equity, asset growth, ratio of capital to assets or
such other level or levels of performance by the Company, a subsidiary or
subsidiaries, a branch, department or other unit thereof or the awardee
individually as the Committee may establish.
An awardee shall earn the performance unit in full by meeting the
Performance Target for the Performance Period. If the Minimum Target has not
been attained at the end of the Performance Period, no part of the performance
unit shall have been earned by the awardee. If the Minimum Target is attained
but the Performance Target is not attained, the portion of the performance unit
earned by the awardee shall be determined on the basis of a formula established
by the Committee.
Payment in respect of earned performance units, whether expressed in
dollars or shares, may be made in cash, in Common Stock, or partly in cash and
partly in Common Stock as determined by the Committee at the time of payment.
For this purpose, performance units expressed in dollars will be converted to
shares, and performance units expressed in shares will be converted to dollars,
based on the fair market value of the Common Stock as of the date the amount
payable is determined by the Committee.
Except as otherwise provided below under "Additional Rights in Certain
Events", if the employment of an awardee terminates prior to the close of a
Performance Period for any reason other than voluntary termination with the
consent of the Company or a subsidiary, retirement under any retirement plan of
the Company or a subsidiary of death, the performance
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units of the awardee will be deemed not to have been earned, and no portion of
such performance units may be paid. If prior to the close of the Performance
Period the employment of an awardee is voluntarily terminated with the consent
of the Company or a subsidiary or the awardee retires under any retirement plan
of the Company or a subsidiary or the awardee dies during employment, the
Committee may in its discretion determine to pay all or any part of the
performance unit based upon the extent to which the Committee determines the
Performance Target or Minimum Target has been achieved as of the date of
termination of employment, retirement or death, the period of time remaining
until the close of the Performance Period and/or such other factors as the
Committee may deem relevant.
Performance unit awards may have such other terms and conditions as the
Committee in its discretion deems appropriate.
BONUS STOCK
The Committee will have the authority in its discretion to award bonus
shares of Common Stock to eligible individuals in recognition of the
contribution of the awardee to the performance of the Company, a subsidiary or
subsidiaries, or a branch, department or other unit, in recognition of the
awardee's individual performance or on the basis of such other factors as the
Committee may deem relevant. Any bonus stock awarded would not be subject to any
restrictions or possibilities of forfeiture.
ADDITIONAL RIGHTS IN CERTAIN EVENTS
The Plan provides for certain additional rights upon the occurrence of one
or more events described in Section 9 of the Plan ("Section 9 Events"). Such an
event is deemed to have occurred when (1) the Company acquires actual knowledge
that any person (other than the Company, a subsidiary or any employee benefit
plan sponsored by the Company or a person approved under certain circumstances
by the Board of Directors) has acquired beneficial ownership, directly or
indirectly, of securities of the Company representing 20% or more of the voting
power of the Company, (2) a tender offer is made to acquire securities of the
Company representing 20% or more of the voting power of the Company, (3) a
person other than the Company solicits proxies relating to the election or
removal of 50% or more of any class of the Board of Directors, or (4) the
stockholders of the Company approve a merger, consolidation, share exchange,
division or sale or other disposition of assets of the Company as a result of
which the stockholders of the Company immediately prior to the transaction will
not own a majority of the voting power of the surviving or resulting company or
any company which acquires the stock of the Company or more than 20% of its
consolidated assets.
Unless the agreement between the Company and the awardee otherwise
provides, if any Section 9 Event occurs (1) all outstanding stock options will
become immediately and fully exercisable, (2) all stock options held by an
awardee whose employment with the Company or a subsidiary terminates within one
year of any Section 9 Event for any reason (other than voluntary termination
with the consent of the Company or a subsidiary, retirement under any retirement
plan of the Company or subsidiary, or death) will be exercisable for a period of
three months from the date of such termination of employment, but in no event
after the expiration date of the stock option, (3) all restrictions applicable
to restricted stock awarded under the Plan will lapse, and (4) all performance
units for which the Performance Period has not yet expired will be deemed to
have been fully earned as of the date of the Section 9 Event, regardless of the
attainment or non-attainment of the Performance Target or any Minimum Target.
AMENDMENT AND TERMINATION
The Board of Directors may at any time modify or amend the Plan in any
respect, provided that no such alteration or amendment of the Plan shall,
without stockholder approval (i) increase by more than 10% the total number of
shares which may be issued under the Plan to persons subject to Section 16 under
the Securities Exchange Act of 1934 ("Section 16 Persons"), (ii) materially
increase the benefits accruing under the Plan to Section 16 Persons, (iii)
materially modify the requirements as to eligibility for participation in the
Plan by Section 16 Persons, (iv) make any changes in the class of employees
eligible to receive incentive stock options under the Plan, or (v) increase the
number of shares with respect to which incentive stock options may be granted
under the Plan. Termination or any amendment of the Plan shall not, without the
consent of an optionee, adversely effect his or her rights under an option
previously granted.
If an awardee engages in a business which is in competition with the
Company or any of its subsidiaries, the
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Company may immediately terminate all outstanding stock options held by the
awardee, declare forfeited all restricted stock held by the awardee as to which
the restrictions have not yet lapsed and terminate all outstanding performance
unit awards held by the awardee for which the applicable Performance Period has
not been completed. The preceding sentence shall not apply if the exercise
period of the stock option upon termination of employment or a directorship has
been extended, the lapse of the restrictions applicable to the restricted stock
has been accelerated or the performance unit has been deemed to have been earned
as a result of the occurrence of a Section 9 Event.
The Plan shall terminate with respect to incentive stock options upon the
earlier of June __, 2010, or the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise or cancellation
of options granted thereunder. The Plan shall terminate with respect to
non-qualified options on July 31, 2010.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to awards granted under the
Plan and with respect to the sale of shares of Common Stock acquired under the
Plan.
INCENTIVE STOCK OPTIONS
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Shares"). The
exercise of an incentive stock option may, however, subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Shares will vary with the
length of time that the participant has owned the ISO Shares at the time it is
sold. If the participant sells ISO Shares after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Shares over the exercise price.
If the participant sells ISO Shares for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Shares for more than
one year prior to the date of sale.
If a participant sells ISO Shares for less than the exercise price, then
the participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Shares. This capital loss will be a
long-term capital loss if the participant has held the ISO Shares for more than
one year prior to the date of sale.
NON-QUALIFIED STOCK OPTIONS
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a non-qualified stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
non-qualified stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Shares") on the Exercise Date
over the exercise price.
With respect to any NSO Shares, a participant will have a tax basis equal
to the exercise price plus any income recognized upon the exercise of the
option. Upon selling NSO Shares, a participant generally will recognize capital
gain or loss in an amount equal to the excess of the sale price of the NSO
Shares over the participant's tax basis in the NSO Shares. This capital gain or
loss will be a long-term gain or loss if the participant has held the NSO Shares
for more than one year prior to the date of the sale.
RESTRICTED STOCK. A participant granted shares of restricted stock will
not recognize any taxable income for Federal income tax purposes until the first
time such participant's rights in the shares are transferable or are not subject
to a substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Section 83(b) of the Code to be taxed
on receipt of the shares. In either case, the amount of such income will be
equal to the excess of the fair market value of the stock the time the income is
recognized over the amount (if any) paid for the stock. The Company or one of
its subsidiaries generally will be entitled to a deduction for compensation paid
in the same amount treated as compensation income to the grantee.
PERFORMANCE UNITS. A participant granted performance units recognizes
income in the amount of the award of those units when they vest and are no
longer subject to substantial risk of forfeiture and such person is entitled to
receive the value of the award. Any cash or Common Stock received pursuant to
the award will be treated as compensation income received by the awardee
generally in the year in which the awardee receives such cash or shares of
Common Stock. In each case, the amount of compensation income will equal the
amount of cash
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and the fair market value of the Common Stock on the date compensation income is
recognized. The Company or one of its subsidiaries generally will be entitled to
a deduction for compensation paid in the same amount treated as compensation
income to the awardee.
BONUS STOCK. Any Common Stock received pursuant to an award of shares of
bonus stock will generally be treated as compensation income received by the
awardee in the year in which the awardee receives such shares. In such case, the
amount of compensation income will equal the fair market value of the Common
Stock on the date compensation income is recognized. The Company or one of its
subsidiaries generally will be entitled to a corresponding deduction in the same
amount for compensation paid.
OTHER TAX MATTERS. The exercise of a stock option by an awardee, the lapse
of restrictions on restricted stock, or the deemed earnout of performance units
following the occurrence of a Section 9 Event, in certain circumstances, may
result in (i) a 20% Federal excise tax (in addition to Federal income tax) to
the awardee on certain payments of Common Stock or cash resulting from such
exercise or deemed earnout of performance units or, in the case of shares of
restricted stock, on all or a portion of the fair market value of the Common
Stock on the date the restrictions lapse, and (ii) the loss of a compensation
deduction which would otherwise be allowable to the Company or one of its
subsidiaries as explained above.
TAX CONSEQUENCES TO THE COMPANY. The grant of an option under the Plan
will have no tax consequences to the Company. Moreover, in general, neither the
exercise of an incentive stock option nor the sale of any Common Stock acquired
under the Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the Plan. Any deduction will be subject to the limitations of Section 162(m) of
the Code, which provides for certain limitations on the deductibility of
non-performance based compensation. The Company will have a withholding
obligation with respect to ordinary compensation income recognized by
participants.
AMENDED AND RESTATED PLAN: NEW PLAN BENEFITS
Grants and awards under the Plan which may be made to Company executive
officers, directors and other employees are not presently determinable. If the
stockholders approve the Plan, such grants and awards will be made at the
discretion of the Committee or the Board of Directors in accordance with the
compensation policies of the Compensation Committee, which are discussed in the
"Compensation Committee Report on Executive Compensation" above.
ANNUAL REPORT
The 2000 Annual Report on Form 10-K for the Company's fiscal year ended
February 29, 2000 , is being mailed to each stockholder receiving this Proxy
Statement, but does not form any part of the proxy solicitation material.
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before
the Meeting nor does the Board of Directors know of any matters which other
persons intend to bring before the Meeting. If, however, other matters not
mentioned in this Proxy Statement properly come before the Meeting, the persons
named in the accompanying form of proxy will vote thereon in accordance with the
recommendation of the Board of Directors.
STOCKHOLDER PROPOSALS AND SUBMISSIONS FOR 2000 ANNUAL MEETING
If any Stockholder wishes to present a proposal to be considered for
inclusion in the proxy materials to be solicited by the Company's Board of
Directors with respect to the next Annual Meeting of Stockholders, such proposal
shall have been presented to the Company's management by March 31, 2001. Such
proposals should be directed to the Company, 10450 Westoffice, Houston, Texas
77042.
THE BOARD OF DIRECTORS ENCOURAGES STOCKHOLDERS TO ATTEND THE MEETING.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, DATE,
SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED ENVELOPE TO WHICH NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES. YOUR VOTE IS IMPORTANT.
IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE MEETING AND WISH TO VOTE IN
PERSON, YOU MAY WITHDRAW YOUR PROXY AT ANYTIME PRIOR TO THE VOTE.
By Order of the Board of Directors
Dated: July 10, 2000 /s/ CHARLES SHEFFIELD
CHARLES SHEFFIELD
PRESIDENT
