<PAGE> 1
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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 Rule 14a-11(c) or Rule 14a-12
MARCUM NATURAL GAS SERVICES, INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSONS(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:
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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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
MARCUM NATURAL GAS SERVICES, INC.
1675 BROADWAY
SUITE 2150
DENVER, COLORADO 80202
---------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 12, 1998
---------------------------------------------------------------
To the Stockholders of
Marcum Natural Gas Services, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Marcum Natural Gas Services, Inc. (the "Company") will be
held at the principal executive offices of Metretek, Incorporated, 300 North
Drive, Melbourne, Florida, on Friday, June 12, 1998 at 9:00 a.m., local time,
for the following purposes:
1. To elect three directors, each to serve for a term of three
years expiring at the 2001 Annual Meeting of Stockholders;
2. To consider and vote upon a proposal to adopt and approve the
Company's 1998 Stock Incentive Plan;
3. To consider and vote upon a proposal to amend Article Fourth
of the Company's Restated Certificate of Incorporation to
implement a reverse split ("Reverse Split") of the Company's
Common Stock in the range between one-for-two and
one-for-four, inclusive, in the event the Board of Directors
determines that a Reverse Split is necessary or advisable at
any time within one year from the date of the Annual Meeting,
with the exact size of the Reverse Split to be determined by
the Board of Directors;
4. To consider and vote upon a proposal to ratify the appointment
of Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending December 31, 1998; and
5. To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
Only stockholders of record as of the close of business on May 1, 1998
are entitled to notice of and to vote at the Annual Meeting and at any
adjournments or postponements thereof.
By Order of the Board of Directors,
/s/ Gary J. Zuiderveen
Gary J. Zuiderveen
Secretary
Denver, Colorado
May 8, 1998
================================================================================
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE REQUESTED TO SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
STAMPED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING AND SO DESIRE, YOU MAY REVOKE YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
================================================================================
<PAGE> 3
MARCUM NATURAL GAS SERVICES, INC.
1675 BROADWAY
SUITE 2150
DENVER, COLORADO 80202
---------------------------------------------------------------
PROXY STATEMENT
FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
---------------------------------------------------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of Common Stock, par
value $.01 per share ("Common Stock"), of Marcum Natural Gas Services, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual Meeting
of Stockholders of the Company (the "Annual Meeting") to be held at the
principal executive offices of Metretek, Incorporated, 300 North Drive,
Melbourne, Florida, on Friday, June 12, 1998, at 9:00 a.m., local time, and at
any adjournments and postponements thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement, together with the Notice of Annual Meeting of
Stockholders and the accompanying proxy card, are being first mailed to
stockholders on or about May 8, 1998. The solicitation of proxies will initially
be made by mail and may thereafter be made in person or by mail, telephone,
telecopy, telegram, facsimile or other means of communication by the directors,
officers and regular employees of the Company for no additional or special
compensation. In addition, brokerage houses, banks, nominees, trustees,
custodians and other fiduciaries will be requested by the Company to forward
proxy solicitation materials for shares of Common Stock held of record by them
to the beneficial owners of such shares, and such fiduciaries will, upon
request, be reimbursed by the Company for their reasonable out-of-pocket
expenses incurred in connection therewith. The cost of the solicitation of
proxies for use at the Annual Meeting will be borne by the Company.
VOTING RIGHTS AND PROCEDURES
Only stockholders of record as of the close of business on May 1, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
or at any adjournments or postponements thereof. As of the close of business on
the Record Date, 14,150,060 shares of Common Stock of the Company were issued
and outstanding. Each share of Common Stock outstanding on the Record Date
entitles the holder thereof to one vote on each matter to be voted upon at the
Annual Meeting. The presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of the shares of Common Stock outstanding as of the
Record Date is necessary to constitute a quorum for the transaction of business
at the Annual Meeting.
Directors will be elected by the affirmative vote of a plurality of the
votes cast by the holders of shares of Common Stock present, in person or by
proxy, and entitled to vote at the Annual Meeting. The affirmative vote of the
holders of a majority of the shares of Common Stock present, in person or by
proxy, and entitled to vote at the Annual Meeting will be required to (i) adopt
and approve the Company's 1998 Stock Incentive Plan (the "1998 Stock Plan"), and
(ii) ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998. The
affirmative vote of the holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the Annual Meeting will be required to adopt
and approve the proposal to amend Article Fourth of the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
to implement a reverse split ("Reverse Split") of the Company's Common Stock in
the range between one-for-two and one-for-four, inclusive, in the event the
Board of Directors determines that a Reverse Split is necessary or advisable at
any time within one year from the date of the Annual Meeting, with the exact
size of the Reverse Split to be determined by the Board of Directors (the
"Reverse Split Proposal").
Under the Delaware General Corporation Law and the Company's
Certificate of Incorporation and By-Laws, abstentions and "broker non-votes"
(shares held by brokers or nominees which are voted on at least one matter but
which
<PAGE> 4
are not voted on a particular matter because the broker or nominee does not have
discretionary voting power with respect to that matter and has not received
voting instructions from the beneficial owner of such shares) will be counted as
present for purposes of determining whether a quorum is present at the Annual
Meeting. Abstentions will be treated as present and entitled to vote at the
Annual Meeting and, accordingly, (i) will have no effect on the outcome of the
election of directors, and (ii) will have the same effect as a vote against all
other matters presented to stockholders at the Annual Meeting. Broker non-votes
on a matter will not be considered present and entitled to vote on that matter
and, accordingly, (i) will have no effect on the outcome of a matter requiring
the approval of the holders of a plurality or majority of the shares present, in
person or by proxy, and entitled to vote at the Annual Meeting, and (ii) will
have the same effect as a vote against a matter requiring the approval of a
majority of all shares outstanding and entitled to vote at the Annual Meeting.
If a proxy card is properly signed and returned to the Company at or
prior to the Annual Meeting, unless subsequently properly revoked, the shares
represented by that proxy card will be voted in accordance with the instructions
specified thereon. If a proxy card is properly signed and returned to the
Company at or prior to the Annual Meeting without voting instructions, it will
be voted (i) FOR the election as directors of the persons named as nominees
herein, (ii) FOR the adoption and approval of the 1998 Stock Plan, (iii) FOR the
adoption and approval of the Reverse Split Proposal, and (iv) FOR the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998. If any other
matters are properly presented at the Annual Meeting or any adjournments or
postponements thereof, the persons appointed as proxies in the proxy card will
have the discretionary authority to vote or act thereon in accordance with their
best judgment.
Without affecting any vote previously taken, any stockholder may revoke
a proxy at any time before it is voted, either by delivering to the Secretary of
the Company a written notice of revocation or a properly signed proxy bearing a
later date, or by voting in person at the Annual Meeting. Attendance at the
Annual Meeting will not in and of itself constitute the revocation of a proxy.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of May 1, 1998 (except as
otherwise noted in the footnotes) by (i) each person known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each director and nominee of the Company, (iii) each of the Named Executive
Officers of the Company, and (iv) all directors and executive officers of the
Company as a group. Except as otherwise indicated, the Company believes that the
persons listed in the table below have sole investment and voting power with
respect to the Common Stock owned by them, subject to community property laws,
where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
----------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OF CLASS (2)
- ------------------------ ------ --------------------
<S> <C> <C>
Eagle Research Corporation (3) 2,477,124 16.7
105 Erskine Lane
Scott Depot, West Virginia 25560
W. Phillip Marcum (4) 501,965 3.5
Albert F. Thomasson (5) 393,287 2.8
Robert Lloyd (6) 185,000 1.3
A. Bradley Gabbard (7) 156,850 1.1
Anthony D. Pell (8) 114,840 0.8
Ronald W. McKee (9) 79,734 0.6
Basil M. Briggs (10) 51,500 0.4
Harry I. Skilton (11) 40,000 0.3
All directors and executive officers as a group 1,523,176 10.2
(8 persons) (12)
</TABLE>
- ----------
(1) The Number and Percent of Class of Shares Beneficially Owned by each
beneficial owner are determined in accordance with the rules of the
Securities and Exchange Commission and, accordingly, are adjusted to
give effect to shares of Common Stock that are not outstanding but may
be acquired by such beneficial owner upon the exercise of all options
or other rights to acquire Common Stock that are exercisable within 60
days of May 1, 1998. However, such shares of Common Stock are not
deemed to be outstanding for the purpose of computing the Percent of
Class with respect to any other beneficial owner.
(2) The percentages are based upon 14,150,060 shares of Common Stock
outstanding as of May 1, 1998.
(3) According to its Schedule 13D, dated March 31, 1998, filed with the
Securities and Exchange Commission, Eagle Research Corporation
("Eagle") is a wholly-owned subsidiary of American Meter Company
("American Meter"), and both corporations are ultimately controlled by
Ruhrgas Aktiengesellschaft, a German corporation. Includes 718,882
shares as to which Eagle has the right to acquire upon the conversion
of a convertible, subordinated promissory note.
(4) Includes 330,000 shares which may be acquired by Mr. Marcum under
currently exercisable stock options. Also includes 31,000 shares owned
by Mr. Marcum's wife. Does not include 150,000 shares underlying stock
options that are not exercisable within 60 days.
(5) Includes 9,351 shares beneficially owned or held of record by Mr.
Thomasson's wife and 96,487 shares held in trusts for the benefit of
family members of which he is trustee ("Thomasson Trusts"). Also
includes 2,057 and 48,291 shares which may be acquired under currently
exercisable warrants by Mr. Thomasson and by the Thomasson Trusts,
respectively, and 50,000 shares which may be acquired by Mr. Thomasson
under currently exercisable stock options.
(6) Includes 70,000 shares which may be acquired by Mr. Lloyd under
currently exercisable stock options.
3
<PAGE> 6
(7) Includes 103,000 shares which may be acquired by Mr. Gabbard under
currently exercisable stock options. Also includes 3,000 shares owned
by Mr. Gabbard's children. Does not include 75,000 shares underlying
stock options that are not exercisable within 60 days.
(8) Includes 50,000 shares which may be acquired by Mr. Pell under
currently exercisable stock options and 10,400 shares held by Mr.
Pell's wife.
(9) Includes 51,800 shares which may be acquired by Mr. McKee under
currently exercisable stock options.
(10) Includes 50,000 shares which may be acquired by Mr. Briggs under
currently exercisable stock options. Includes 1,500 shares owned by Mr.
Briggs' wife.
(11) Includes 20,000 shares which may be acquired by Mr. Skilton under
currently exercisable stock options. Although Mr. Skilton is the Vice
President and a director of Eagle and the President, Chief Executive
Officer and a director of American Meter, no shares held by Eagle have
been attributed to Mr. Skilton.
(12) See notes (4) through (11).
4
<PAGE> 7
ELECTION OF DIRECTORS
(ITEM 1)
The Board of Directors of the Company currently consists of eight
members divided into three classes serving staggered three-year terms. In August
1997, Stephen E. McGregor resigned as a director of the Company and Ronald W.
McKee was appointed by the Board of Directors to fill his vacancy. In March
1998, U. E. Patrick resigned as a director of the Company. In April 1998, Harry
I. Skilton, the President and Chief Executive Officer of American Meter Company
("American Meter"), was appointed to the Board of Directors pursuant to the
terms of an agreement among American Meter, Eagle Research Corporation, a
wholly-owned subsidiary of American Meter, the Company, and Metretek,
Incorporated, a wholly-owned subsidiary of the Company, pursuant to which
Metretek acquired certain assets of Eagle.
Three Class I directors are to be elected at the Annual Meeting. The
Board of Directors has nominated the persons listed below as "Nominees," who are
all currently serving as Class I directors, to be re-elected as Class I
directors, each to serve for a three year term expiring at the 2001 Annual
Meeting of Stockholders and until his successor is duly elected and qualified.
All other members of the Board of Directors will continue in office until the
expiration of their respective terms at the 1999 or 2000 Annual Meeting of
Stockholders, as indicated below.
Directors will be elected by the affirmative vote of a plurality of the
votes cast by the holders of shares of Common Stock present, in person or by
proxy, and entitled to vote at the Annual Meeting. If properly signed and
returned to the Company at or prior to the Annual Meeting, the accompanying
proxy card will be voted for the election of the nominees listed below, unless
contrary instructions are specified. Although the Board of Directors has no
reason to believe that any of the nominees listed below will decline or be
unable to serve as a director, should that occur, the persons appointed as
proxies in the accompanying proxy card intend to vote, unless the number of
nominees or directors is reduced by the Board of Directors, for such other
nominee or nominees as the Board of Directors may designate.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ELECTION AS DIRECTORS OF THE PERSONS LISTED BELOW AS "NOMINEES" AS
DIRECTORS. PROXY CARDS SIGNED AND TIMELY RETURNED TO THE COMPANY WILL BE SO
VOTED, UNLESS CONTRARY INSTRUCTIONS ARE SPECIFIED THEREON.
NOMINEES
CLASS I - TERM EXPIRES IN 2001
W. PHILLIP MARCUM, 54, a founder of the Company, has served as the
President, Chief Executive Officer, Chairman of the Board and a director of the
Company since its incorporation in April 1991. He also serves as the Chairman
and Chief Executive Officer of each of the Company's direct wholly-owned
subsidiaries. He currently serves on the board of directors of one public
corporation, Key Energy Group, Inc., East Brunswick, New Jersey, an oil field
service provider, and one privately-held corporation, Hydrologic, Inc.,
Asheville, North Carolina, a water analysis company.
BASIL M. BRIGGS, 62, has served as a director of the Company since June
1991. He has been a practicing attorney in Detroit, Michigan since 1961,
practicing law with Cox Hodgman & Giarmarco, P.C., Troy Michigan since January
1997. Prior thereto, Mr. Briggs was of counsel with Miro, Weiner & Kramer, P.C.,
Bloomfield Hills, Michigan, from 1987 through 1996, and was the President of
Briggs & Williams, P.C., Attorneys at Law, from 1977 through 1986. Mr. Briggs
was the Secretary of Patrick Petroleum Company from 1984, and a director of
Patrick Petroleum Company from 1970, until it was acquired by GPC, an oil and
gas company, in August 1995. Since August 1995, he has been a director of GPC.
ROBERT LLOYD, 59, has served as a director of the Company since July
1993. He currently manages his personal investments. From 1988 to 1989 he was an
Executive Director of Interallianz London Limited, the wholly-owned corporate
finance subsidiary of Interallianz Bank Zurich A.G. Mr. Lloyd formerly held
several positions with Drexel Burnham Lambert Inc. and affiliates, including
Managing Director and Senior Corporate Finance Officer in Europe.
5
<PAGE> 8
CONTINUING DIRECTORS
CLASS II - TERM EXPIRES IN 1999
A. BRADLEY GABBARD, 43, a founder of the Company, has served as a
director and executive officer of the Company since its incorporation in April
1991. He has served as the Executive Vice President since July 1993, and the
Chief Financial Officer and Treasurer of the Company since August 1996 and from
April 1991 until July 1993. He also served as the Vice President and the
Secretary of the Company from April 1991 through July 1993. Mr. Gabbard has
served as the President of Marcum Denver, Inc., a subsidiary of the Company,
since July 1993. From October 1990 to February 1991, Mr. Gabbard was employed by
Boettcher & Company, serving as Vice President in its research department. In
1987, Mr. Gabbard joined Great Horn, Inc., a privately held New York based
investment corporation, as its Vice President in charge of western oil and gas
investment activities. In 1988, Great Horn acquired a controlling interest in
Premier Resources, Ltd., Denver, Colorado, and appointed Mr. Gabbard as the
Executive Vice President and Chief Operating Officer, where he served until the
sale of Premier in 1990. From 1981 to 1987, Mr. Gabbard was employed by Search
Drilling Company, Wichita, Kansas, a privately held oil and gas company,
initially serving as its Vice President of Finance, and later as an Executive
Vice President. From 1976 to 1981, Mr. Gabbard was employed in the Oklahoma City
office of Ernst and Whinney (now Ernst and Young), principally serving clients
in the oil and gas industry. Mr. Gabbard is a certified public accountant.
RONALD W. MCKEE, 50, has served as a director of the Company since
August 1997 and has served as the President and Chief Operating Officer of
Metretek, Incorporated ("Metretek"), a wholly-owned subsidiary of the Company,
since September 1995. Mr. McKee had previously served as the Vice President of
Marketing of Metretek since joining Metretek in 1989. From 1970 to 1989, Mr.
McKee held various sales and marketing management positions with Rockwell
International, Pittsburgh, Pennsylvania and became the general sales and
marketing manager for Rockwell International's plug valve business unit in 1987.
ALBERT F. THOMASSON, 56, has served as a director of the Company since
March 1994. Mr. Thomasson was a director of Metretek from 1981 until it was
acquired by the Company in March 1994. For the past five years, Mr. Thomasson
has been President of AFT Corporation, which provides management consulting
services to selected businesses in the Birmingham, Alabama area; President of
AFTCO Properties, Inc. and Brookhaven Properties, III, Inc., which are engaged
in residential real estate development in the Birmingham area; President of
Thomasson, Coal & Coke, Inc., which is a manufacturer of alloy block for
foundries until it merged into AFT Corporation in 1996; and Managing General
Partner of Opto Oil and Gas Company, which is engaged in the exploration and
development of oil and gas fields.
CLASS III - TERM EXPIRES IN 2000
ANTHONY D. PELL, 59, has served as a director of the Company since June
1994. Mr. Pell is a director of Rochdale Investment Management, Inc., New York,
New York. He was the President and a co-owner of Pell, Rudman & Co., Boston,
Massachusetts, an investment advisory firm, from 1981 until 1993, when it was
acquired by United Asset Management Company, since which time he has served as a
consultant. Mr. Pell was a director of Metretek from 1985 until Metretek was
acquired by the Company in March 1994. Mr. Pell was associated with the law firm
of Coudert Brothers from 1966 to 1968 and with the law firm of Cadwalder,
Wickersham and Taft from 1968 to 1972, specializing in estate and tax planning.
In 1972, Mr. Pell joined Boston Company Financial Strategies, Inc. as a Vice
President and was appointed a Senior Vice President in 1975.
HARRY I. SKILTON, 59, has served as a director of the Company since
April 1998. Mr. Skilton has been the President, Chief Executive Officer and a
director of American Meter Company, Horsham, Pennsylvania, a worldwide supplier
of meters and electronic instruments to the natural gas industry, since 1994. He
is also the Vice President of Eagle Research Corporation, Scott Depot, West
Virginia, a wholly-owned subsidiary of American Meter, and an officer and
director of other American Meter subsidiaries. American Meter is ultimately
controlled by Ruhrgas Aktiengesellschaft ("Ruhrgas"), a German corporation. Mr.
Skilton is also a director of Elster AG and Chairman of International Gas
Measurement Ltd., (UK), which are affiliates of Ruhrgas. From 1992 through 1994,
Mr. Skilton was a principal of DR Consultants, which engaged in general industry
marketing and consulting. From 1990 through 1992, Mr. Skilton was the President,
Chief Operating Officer and a director of Lukens Inc., Coatsville, Pennsylvania,
a diversified company engaged in a manufacture of carbon, steel and related
products. From 1986 through 1990, Mr. Skilton was the Executive Vice
6
<PAGE> 9
President and Group President of the Air Distribution Group of Phillips
Industries, Inc., Dayton, Ohio, which produces building components, air
distribution, transportation materials handling systems. From 1965 through 1984,
Mr. Skilton served in various executive capacities with Illinois Tool Works,
Inc., General Instrument Corporation and Celanese Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held seven meetings during 1997. No director
attended fewer than 75% of the aggregate of the total number of meetings of the
Board of Directors (held during the period for which he has been a director) and
the total number of meetings of committees of the Board of Directors on which he
served (during the period that he served), except Mr. Pell, who attended five of
the meetings of the Board of Directors.
The Board of Directors has a standing Audit Committee and Compensation
Committee, but no standing nominating committee.
The Audit Committee currently consists of Messrs. Thomasson and Lloyd
and has one vacancy. Mr. Patrick was a member of the Audit Committee during
1997. The Audit Committee formally met one time during 1997, and also met
informally several other times. The function of the Audit Committee is to
recommend the appointment of the independent public accountants, to review the
nature and scope of the services of the independent public accountants, to
confer with the independent public accountants and to review the results of
their audit and the Company's internal accounting controls, and to provide
assistance to the Board of Directors with respect to the corporate and reporting
practices of the Company.
The Compensation Committee currently consists of Messrs. Briggs and
Lloyd and currently has one vacancy. During various times in 1997, Messrs.
Marcum, Patrick and McGregor also served on the Compensation Committee. The
Compensation Committee formally met three times during 1997, and also met
informally several other times. The function of the Compensation Committee is to
make recommendations to the Board of Directors regarding compensation to be paid
to the Company's executive officers.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and certain other key employees of the Company
and its subsidiaries are as follows:
W. PHILLIP MARCUM, 54, a founder of the Company, has served as the
President, Chief Executive Officer, Chairman of the Board and a director of the
Company since April 1991. He also serves as the Chairman and Chief Executive
Officer of each of the Company's direct wholly-owned subsidiaries.
A. BRADLEY GABBARD, 43, a founder of the Company, has served as a
director and executive officer of the Company since April 1991. He has served as
the Executive Vice President of the Company since July 1993 and the Chief
Financial Officer and Treasurer of the Company from April 1991 until July 1993
and since 1996. He also served as the Vice President and Secretary of the
Company from April 1991 through July 1993. Since July 1993, Mr. Gabbard has also
served as the President of Marcum Denver, Inc.
RONALD W. MCKEE, 50, has served as the President and Chief Operating
Officer of Metretek since September 1995 and a director of the Company since
August 1997. Mr. McKee had previously served as the Vice President of Marketing
of Metretek since joining Metretek in 1989. From 1970 to 1989, Mr. McKee held
various sales and marketing management positions with Rockwell International,
Pittsburgh, Pennsylvania and became the general sales and marketing manager for
Rockwell International's plug valve business unit in 1987.
WOOD A. BREAZEALE, JR., 68, has served as the President, Chief
Operating Officer and a director of Southern Flow since May 1993. Mr. Breazeale
was formerly President and Chief Operating Officer of the Southern Flow
Companies, a division of Homco International, Inc., and a Vice President of
Homco International, Inc. from 1979 until the Company purchased the assets of
the Southern Flow Companies division of Weatherford in April 1993. Mr. Breazeale
founded Southern Flow Companies in 1953.
7
<PAGE> 10
GARY J. ZUIDERVEEN, 39, has served as the Controller of the Company
since May 1994 and the Secretary and Principal Accounting Officer of the Company
since August 1996. From June 1992 until May 1994, Mr. Zuiderveen was the General
Accounting Manager at the University Corporation for Atmospheric Research in
Boulder, Colorado. From 1983 until June 1992, Mr. Zuiderveen was employed in the
Denver, Colorado office of Deloitte & Touche LLP, providing accounting and
auditing services to clients primarily in the manufacturing and financial
services industries and serving in the firm's national office accounting
research department.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth the total compensation for services the
Company paid to or accrued for its Chief Executive Officer and the persons who
served as executive officers of the Company ("Named Executive Officers") whose
total annual salary and bonus exceeded $100,000 for the fiscal year ended
December 31, 1997 ("fiscal 1997"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------
NAME AND ---------------------- SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS (#) COMPENSATION ($)(1)
------------------ ---- --------- -------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
W. Phillip Marcum 1997 175,250 31,395 200,000 6,127
(President and Chief 1996 162,000 21,900 305,000(2) 12,678
Executive Officer) 1995 162,000 2,250 -0- 5,869
A. Bradley Gabbard 1997 127,292 24,225 100,000 5,877
(Executive Vice President 1996 121,000 13,200 93,000(2) 8,821
and Chief Financial 1995 117,000 1,625 -0- 4,461
Officer)
Ronald W. McKee (3) 1997 100,000 19,380 50,000 3,829
(President of Metretek)
</TABLE>
- ----------
(1) Represents amounts paid or accrued by the Company on behalf of the
Named Executive Officers in fiscal 1997 for (i) matching contributions
under the Company's 401(k) plan of $4,750 for Mr. Marcum, $4,750 for
Mr. Gabbard, and $2,941 for Mr. McKee; (ii) premiums for group term
life insurance of $913 for Mr. Marcum, $663 for Mr. Gabbard and $612
for Mr. McKee; and (iii) premiums for long-term disability insurance of
$464 for Mr. Marcum, $464 for Mr. Gabbard and $276 for Mr. McKee.
(2) Includes options originally granted prior to 1996 to Mr. Marcum
(280,000) and Mr. Gabbard (78,000) that were repriced in 1996.
(3) Mr. McKee was not an executive officer of the Company prior to 1997.
EMPLOYMENT AGREEMENTS AND COMPENSATION ARRANGEMENTS
In 1991, the Company entered into employment agreements with W. Phillip
Marcum, its President, Chief Executive Officer and Chairman of the Board, and A.
Bradley Gabbard, its Executive Vice President and Chief Financial Officer. These
employment agreements were amended on July 14, 1997 to provide for an extension
of the employment term to three years for Mr. Marcum and 18 months for Mr.
Gabbard, with automatic additional one-year renewal periods unless either the
employee or the Company gives 60 days notice of termination. The base salaries
under these employment agreements, which are subject to annual upward adjustment
at the discretion of the Board of Directors, are currently set at $200,000 for
Mr. Marcum and $145,000 for Mr. Gabbard. In addition to the base annual
compensation, the employment agreements provide, among other things, standard
benefits commensurate with the management levels
8
<PAGE> 11
involved. The employment agreements also provide for the Company to establish an
incentive compensation fund, to be administered by the Compensation Committee of
the Board of Directors, to provide for incentive compensation to be paid to each
officer or employee (including Messrs. Marcum and Gabbard) deemed by the
Compensation Committee to have made a substantial contribution to the Company in
the event of a change of control of the Company or of the sale of substantially
all of the assets of the Company or similar transactions. The total amount of
incentive compensation from the fund available for distribution will be
determined by a formula based on the amount by which the fair market value per
share of the Common Stock exceeds $2.52, multiplied by a factor ranging from
10-20% depending upon the ratio of the fair market value to $2.52. In the case
of the sale of a significant subsidiary of the Company or substantially all of
the assets of a significant subsidiary, a similar pro rata distribution is
required. The employment agreements also contain certain restrictions on each
employee's ability to compete, use of confidential information and use of
inventions and other intellectual property.
Effective January 1, 1998, the Company adopted the 1998 Employee Stock
Purchase Plan, pursuant to which all full-time employees of the Company and its
subsidiaries, including the Named Executive Officers, are entitled to purchase
shares of the Company's Common Stock at a purchase price equal to fifty percent
(50%) of the market value of the Common Stock, which market value is equal to
the closing sale price of the Common Stock as reported on the Nasdaq National
Market. A total of 200,000 shares of Common Stock have been reserved for
issuance under the 1998 Employee Stock Purchase Plan. As of March 31, 1998, a
total of 80,531 shares had been purchased by 44 employees, including 21,896
shares purchased by Mr. Marcum, 16,125 shares purchased by Mr. Gabbard, and
8,471 shares purchased by Mr. McKee.
STOCK OPTION GRANTS
The following table sets forth certain information with respect to
stock option grants during fiscal 1997 to the Named Executive Officers:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE
NAME GRANTED (#)(1) IN FISCAL YEAR(2) ($/SH)(3) EXPIRATION DATE
- ---- -------------------- -------------------- --------------- ---------------
<S> <C> <C> <C> <C>
W. Phillip Marcum 200,000 48.8% $0.84 July 14, 2007
A. Bradley Gabbard 100,000 24.4% $0.84 July 14, 2007
Ronald W. McKee 50,000 12.2% $0.94 March 20, 2007
</TABLE>
- ----------
(1) All such options were granted under the Company's 1991 Stock Option
Plan at exercise prices equal to the fair market value of the
underlying Common Stock on the date of grant, based on the last sale
price of the Common Stock on the date of grant as reported on the
Nasdaq Stock Market, and have a term of 10 years from the date of
grant. The options granted to Messrs. Marcum and Gabbard vest and
become exercisable as follows: 25% were vested and exercisable on the
date of grant, and an additional 25% will become vested and exercisable
when the last sale price of the Common Stock, as reported on the Nasdaq
Stock Market, first equals or exceeds each of the following target
prices: $1.50, $2.00, and $2.50. The options granted to Mr. McKee were
fully vested and exercisable on the date of grant.
(2) Based upon 410,000 options granted by the Company during 1997 to
employees.
(3) The exercise price of the options is the fair market value of the
underlying Common Stock, based upon the last sale price of the Common
Stock as reported on the Nasdaq National Market, on the date of grant.
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<PAGE> 12
STOCK OPTION EXERCISES AND VALUES
The following table sets forth certain information, based upon the last
sale price of the Common Stock on December 31, 1997 as reported on the Nasdaq
National Market, with respect to stock options held by the Named Executive
Officers on December 31, 1997:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
ACQUIRED ON VALUE ------------------------------ -----------------------
NAME EXERCISE (#) REALIZED($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
W. Phillip Marcum 25,000 $0 330,000/150,000 $20,500/$61,500
A. Bradley Gabbard 15,000 $0 103,000/75,000 $10,250/$30,750
Ronald W. McKee 10,000 $3,440 54,500/0 $15,500/0
</TABLE>
- ----------
(1) Value Realized is calculated as the excess, if any, of the fair market
value of the underlying Common Stock, based upon the last sale price of
the Common Stock as reported on the Nasdaq National Market, on the date
of exercise over the exercise price of the options, and does not
necessary indicate that the optionee sold the shares of Common Stock
acquired upon such exercise.
(2) Value of Unexercised In-the-Money Options represents the total gain
which would be realized (without considering taxes or brokerage
expenses) if all in-the-money options held at year-end were exercised
and the underlying shares of Common Stock were sold. This total gain is
calculated by multiplying the number of shares of Common Stock
underlying the options by the difference between the fair market value
of the Common Stock at year-end, based upon the last sale price of the
Common Stock as reported on the Nasdaq Stock Market ($1.25), and the
exercise price of the option. An option is "in-the-money" if the fair
market value of the underlying shares of Common Stock exceeds the
exercise price of the option.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive any
additional compensation for serving on the Board of Directors. All directors are
reimbursed for the cost of attending Board of Directors and committee meetings.
Directors who are not employees of the Company or any of its subsidiaries
("Non-Employee Directors") receive a cash fee of $1,000 for each meeting of the
Board of Directors attended. Non-Employee Directors also receive stock options
granted by the Company under the Directors' Stock Option Plan (the "Directors'
Plan"). The Directors' Plan, which is administered by the Board of Directors,
provides for the grant of non-qualified stock options for the purchase of up to
650,000 shares of Common Stock to Non-Employee Directors. Each person who is
first elected or appointed to serve as a Non-Employee Director is automatically
granted an option to purchase 20,000 shares of Common Stock. On the date of the
Annual Meeting of Stockholders each year, each Non-Employee Director is
automatically granted an option to purchase 10,000 shares of Common Stock.
Additional options can be granted to Non-Employee Directors in the discretion of
the Board of Directors. All options vest immediately upon grant, are exercisable
at a price equal to the fair market value of the Common Stock on the date of
grant, and expire ten years after the date of grant. As of May 1, 1998, options
to purchase 440,000 shares of Common Stock were outstanding under the Directors'
Plan at exercise prices ranging from $0.78 to $1.59 per share.
If the 1998 Stock Plan is adopted and approved by the stockholders at
the Annual Meeting, then the automatic formula grants of the Directors' Plan
will continue in the 1998 Stock Plan, and Non-Employee Directors will annually
have the right to elect in advance to receive options under the 1998 Stock Plan
in lieu of cash fees for attending meetings of the Board of Directors. If the
1998 Stock Plan is not adopted and approved, then there are insufficient shares
available for grant under the Directors' Plan to issue the aforementioned
formula grants in 1998.
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<PAGE> 13
On March 7, 1997, options to purchase 50,000 shares of Common Stock
were granted to Mr. McGregor and options to purchase 10,000 shares of Common
Stock were granted to Mr. Lloyd under the Directors' Plan at an exercise price
of $1.03 per share, the fair market value of the Common Stock on the date of the
grant, for personal services rendered in connection with a strategic alliance
between Metretek and CellNet Data Systems, Inc. ("CellNet"). See "Certain
Relationships and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From 1994 until March 1998, Marcum Gas Transmission, Inc. ("MGT"), a
wholly-owned subsidiary of the Company, and Goodrich Petroleum Corporation of
Michigan ("GPCM"), which was then a significant stockholder of the Company, were
co-managing general partners of, and also held limited partnership interests in,
Marcum-Patrick Pipeline Program 1993-1 L.P. (the "Marcum-Patrick Program"), a
limited partnership which holds a 33.3% membership interest in Bayou South Gas
Gathering Company, L.C. ("Bayou"), which owns certain natural gas gathering
systems and related assets in northwest Louisiana and northeast Texas. Mr.
Briggs, a director of the Company, is also a director of GPCM. Mr. Patrick, a
former director of the Company, is also a former director of GPCM. In March
1998, the Marcum-Patrick Program sold its interest in Bayou to the other member
of Bayou and is currently in the process of liquidation.
On March 7, 1997, options to purchase 50,000 shares of Common Stock
were granted to Mr. McGregor and options to purchase 10,000 shares of Common
Stock were granted to Mr. Lloyd under the Directors' Plan at an exercise price
of $1.03 per share for personal services rendered by such non-employee directors
in connection with a strategic alliance between Metretek and CellNet Data
Systems, Inc.
In December 1997, MGT sold one-third of its preferred and performance
share interests and one-third of its interest in future management and
administrative fees in two business trusts to Odessa Exploration Incorporated, a
subsidiary of Key Energy Group, Inc., for a total purchase price of $1 million.
W. Phillip Marcum, the Chairman of the Board, President and Chief Executive
Officer and a director of the Company, is also a director of Key Energy Group,
Inc.
Each material transaction between the Company and any related party is
approved by a majority of the members of the Board of Directors who are
disinterested in the transaction.
1998 STOCK INCENTIVE PLAN
(ITEM 2)
On March 5, 1998, the Board of Directors of the Company adopted the
Marcum Natural Gas Services, Inc. 1998 Stock Incentive Plan (the "1998 Stock
Plan"), subject to stockholder approval. The 1998 Stock Plan authorizes the
Board of Directors to grant non-qualified and incentive stock options, stock
appreciation rights ("SARs"), restricted stock, performance awards and other
stock-based awards to officers, directors, employees, consultants and advisors
of the Company and its subsidiaries. The purpose of the 1998 Stock Plan is to
promote the success of the Company by enabling it to attract, retain, reward and
motivate officers, directors, employees, advisors and consultants of the Company
and its subsidiaries by providing them with an equity interest in the Company in
order to align their interests with those of the Company's stockholders and to
provide such persons with incentives to pursue the long-term growth,
profitability and financial success of the Company and its subsidiaries and
increases in stockholder value. The Board of Directors believes that the 1998
Stock Plan will be, as the Company's existing stock option plans have been, an
important part of the Company's overall compensation program.
The 1998 Stock Plan, if adopted by stockholders, will become effective
as of June 12, 1998 and will replace the Company's existing 1991 Stock Option
Plan and the Company's Directors' Stock Option Plan, and no further awards will
be made under such existing plans, although options outstanding under the
Company's existing plans will not be affected by the adoption of the 1998 Stock
Plan. The 1998 Stock Plan is designed to replace and restructure the Company's
existing stock option plans, both of which are running out of available options,
and provide the Board with greater flexibility to address the compensation needs
of the Company. The Company's 1991 Stock Option Plan and the Company's
Directors' Stock Option Plan have only 207,250 and 10,000 shares, respectively,
available for issuance under such plans.
11
<PAGE> 14
SUMMARY OF THE 1998 STOCK PLAN
The major provisions of the 1998 Stock Plan are summarized below. The
following summary does not purport to be complete and is qualified in its
entirety by reference to the 1998 Stock Plan, which is attached to this Proxy
Statement as Exhibit A and incorporated herein by this reference.
GENERAL. The 1998 Stock Plan provides for the grant of incentive stock
options ("ISOs"), non-qualified stock options ("NQSOs"), restricted stock,
performance awards and other stock-based awards to officers, directors,
employees, consultants and advisors of the Company and its subsidiaries. A
maximum of 1,000,000 shares of Common Stock will be issuable under the 1998
Stock Plan, representing approximately __% of the outstanding shares of Common
Stock on May 1, 1998. The 1998 Stock Plan limits the number of shares of Common
Stock with respect to which awards may be granted during any calendar year to
any individual participant to 100,000 shares of Common Stock. The shares of
Common Stock issuable under the 1998 Stock Plan may be authorized or unissued
shares or treasury shares, including shares repurchased by the Company for
purposes of the 1998 Stock Plan. If any shares subject to any award are
forfeited or payment is made in the form of cash, cash equivalents or property
other than shares, or an award otherwise terminates without payment being made
to the participant in the form of shares, the shares subject to such awards will
again be available under the 1998 Stock Plan. On April ___, 1998, the last
reported sale price of the Company's Common Stock on the Nasdaq National Market
was $_____ per share.
ADMINISTRATION. The 1998 Stock Plan will be administered by the Board
of Directors of the Company. The Board of Directors has the right to delegate to
the administration of the 1998 Stock Plan to a committee comprised of two or
more directors who are not officers or employees of the Company or any its
subsidiaries, and who meet certain other requirements under applicable federal
securities law and federal tax law provisions. The members of the Board of
Directors, or of any committee appointed by the Board of Directors, are eligible
for awards under the Stock Incentive Plan. The Board of Directors is authorized
to designate participants, determine the type and number of awards to be
granted, set the terms, conditions and provisions of awards, cancel or suspend
awards, prescribe forms of award agreements, interpret the 1998 Stock Plan,
establish, amend and rescind rules and regulations related to the 1998 Stock
Plan, and make all other determinations which may be necessary or advisable to
the administration of the 1998 Stock Plan.
ELIGIBILITY. Officers, directors, employees, consultants and advisers
of the Company and its existing or future subsidiaries who, in the determination
of the Board of Directors, are responsible for or contribute to the management,
growth, profitability and successful performance of the Company and its
subsidiaries will be eligible to receive awards under the 1998 Stock Plan. As of
the date of this Proxy Statement, no awards under the 1998 Stock Plan have been
made, and no determination has been made as to which or how many of the persons
initially eligible to receive awards under the 1998 Stock Plan will receive
awards. Therefore, the benefits to be allocated to any individual or to various
groups of employees are not presently determinable. As of April ___, 1998, all
of the approximately ___ employees of the Company and its subsidiaries and all
eight directors of the Company were eligible to receive awards under the 1998
Stock Plan.
STOCK OPTIONS. Under the 1998 Stock Plan, the Board of Directors is
authorized to grant incentive stock options and non-qualified stock options. The
exercise price of stock options will be determined by the Board of Directors but
may not be less than the fair market value of the Common Stock on the date of
grant (or 110% of the fair market value in the case of an ISO granted to an
employee beneficially owning more than 10% of the outstanding Common Stock). The
Board of Directors may grant NQSOs to any eligible participant, but may grant
ISOs only to employees. Stock options will become exercisable at such time or
times in whole or in part as determined by the Board of Directors, except that
ISOs may not be exercised after the expiration of 10 years of the date of grant
(5 years after grant in the case of ISO, granted to an employee beneficially
owning more than 10% of the outstanding Common Stock). Options may be exercised
by payment of the exercise price in cash, shares of Common Stock, exchange of
outstanding awards or other property, or in any combination thereof having a
fair market value equal to the exercise price, as the Board of Directors
determines.
The 1998 Stock Plan retains the current formula grants to directors who
are not officers or employees of the Company or any of its subsidiaries
("Non-Employee Directors"). Under the 1998 Stock Plan, as is the case under the
Company's existing Directors' Stock Option Plan, each person who is first
elected or appointed to serve as a Non-Employee Director will automatically
receive an option to purchase 20,000 shares of Common Stock. On the date of the
annual meeting of stockholders each year, each Non-Employee Director (other than
a person who became a Non-Employee Director within the previous six months) will
automatically receive an option to purchase 10,000 shares of
12
<PAGE> 15
Common Stock. All such options granted to Non-Employee Directors under the
formula provisions of the 1998 Stock Plan will vest immediately upon grant, have
an exercise price equal to the fair market value of the Common Stock on the date
of grant, and expire 10 years after the date of grant. Under the 1998 Stock
Plan, additional (non-formula) options may be granted to the Non-Employee
Directors in the discretion of the Board of Directors. In addition, under the
1998 Stock Plan, Non-Employee Directors will have the right to elect annually in
advance to receive options in lieu of cash fees for attending meetings of the
Board of Directors.
STOCK APPRECIATION RIGHTS. The Board of Directors is authorized to
grant SARs either alone or in tandem with underlying stock options. SARs entitle
the participant upon exercise to receive cash or shares of Common Stock (as
determined by the Board Directors) equal in value to the excess of the fair
market value of the shares of Common Stock covered by the SAR on the date of
exercise over the grant price of the SAR. The grant price for SARs will be fixed
by the Board of Directors but will not be less than the fair market value of the
Common Stock on the date of grant. SARs will be exercisable at such time or
times in whole or in part as determined by the Board of Directors, except that
they may not be exercised after the expiration of 10 years from the date of
grant.
RESTRICTED STOCK. The 1998 Stock Plan also authorizes the award of
restricted stock. An award of restricted stock is an award of shares of Common
Stock that is subject to such restrictions as the Board of Directors determines.
The restricted stock will vest and may be disposed of by the participant only
after such restrictions lapse in whole or in installments as the Board of
Directors determines. Restricted stock awards may be subject to forfeiture if,
for example, the participant's employment terminates before the award vests. A
participant receiving restricted stock will have all the rights of a stockholder
of the Company, including the right to vote the shares and the right to receive
any dividends, unless the Board of Directors otherwise determines. The Board of
Directors, in its sole discretion, may waive or accelerate the lapsing of
restrictions in whole or in part.
DEFERRED STOCK. The 1998 Stock Plan also authorizes the Board of
Directors to make deferred stock awards, generally consisting of a right to
receive shares of Common Stock at the end of specified deferral periods. Awards
of deferred stock are subject to such limitations as the Board of Directors may
impose, which limitations may lapse at the end of the deferral period in
installments or otherwise. Deferred stock awards carry no voting or dividend
rights or other rights associated with stock ownership. Upon termination of
employment during the restriction or deferral period, restricted stock or
deferred stock will be forfeited subject to such exceptions, if any, as are
authorized by the Board of Directors.
BONUS SHARES AND AWARDS IN LIEU OF OBLIGATIONS. The Board of Directors
is authorized under the 1998 Stock Plan to grant shares of Common Stock to
eligible persons as a bonus or in lieu of obligations (such as salary
requirements) to pay cash or deliver other property, subject to such terms as
determined by the Board of Directors.
PERFORMANCE AWARDS. Under the 1998 Stock Plan, the Board of Directors
may make a performance award, which is an award of a number of units that
represent the right to receive a specified number of shares of Common Stock or
cash, or both, upon satisfaction of certain specified performance criteria,
subject to such terms and conditions as the Board of Directors determines.
Performance awards will be earned to the extent such performance goals
established by the Board of Directors are achieved over a period of time
specified by the Board of Directors. The performance objectives may vary from
participant to participant, group to group and period to period. The performance
objectives for awards intended to constitute "qualified performance-based
compensation" (see discussion below under the heading "Certain Federal Income
Tax Consequences") will be based upon one or more of the following: earnings per
share; revenues; cash flow; return on investment; return on net assets, assets,
capital or equities; economic value added; operating margins; net income;
pre-tax earnings; pre-tax earnings before interest, depreciation and
amortization; pre-tax operating earnings after interest expense and before
extraordinary or special items; operating earnings; total stock holder returns;
price of the shares and changes (and changes thereof); and any of the above
goals as compared to the performance of a published or special index deemed
applicable by the Board of Directors including, but not limited to, the Standard
& Poor's 500 Stock Index or a group of comparable companies. The Board of
Directors has the discretion to determine the value of each performance award,
to adjust the performance goal as it deems equitable to reflect events affecting
the Company or changes in law or accounting principles or other factors, and to
determine the extent to which performance awards that are earned may be paid in
the form of cash, deferred cash, shares of Common Stock or other awards or
property, or combination thereof, as determined by the Board of Directors.
13
<PAGE> 16
DIVIDEND EQUIVALENTS. The Board of Directors is authorized to grant
dividend equivalents conferring on a participant the right to receive, quarterly
or on a deferred basis, interest or dividends, or interest or dividend
equivalents. Dividend equivalents may be paid directly to a participant or may
be reinvested under the 1998 Stock Plan.
OTHER STOCK-BASED AWARDS. In order to enable the Company to respond to
material developments in the area of taxes and other legislation and regulations
and interpretations thereof, and to trends in executive compensation practices,
the 1998 Stock Plan authorizes the Board of Directors to grant awards that are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to securities of the Company. The Board of
Directors shall determine the terms and conditions of such awards, including the
consideration paid for awards as purchase rights, which consideration generally
may not be less than the fair market value of the Common Stock on the date that
the purchase right is granted. These awards may include, without limitation,
performance shares and restricted stock units that entitle the participant to
receive, upon satisfaction of performance goals or other conditions, a specified
number of shares of Common Stock or the cash equivalent thereof.
TRANSFERABILITY OF OPTIONS. Under the 1998 Stock Plan, awards are
generally not assignable or transferable by a participant, except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order, except to the Company under the terms of the 1998 Stock Plan, and except
that, upon approval by the Board of Directors, NQSOs and SARs may be transferred
by participants to immediate family members, to trusts for the benefit of
immediate family members and to partnerships or similar entities in which such
participant and his or her immediate family members are the sole parties or
members.
ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. The 1998 Stock Plan
provides that in the event of a "change in control" of the Company (as defined
in the 1998 Stock Plan), all outstanding awards under the 1998 Stock Plan,
regardless of any limitations or restrictions, will immediately vest and become
fully exercisable, and all restrictions applicable to outstanding restricted
stock, performance awards and other stock-based awards will lapse, unless
otherwise provided by the Board of Directors at the time of grant of the award
or unless waived or deferred by the participants. In the event of a change in
control of the Company, with certain exceptions, participants may elect to
surrender any outstanding award and receive in satisfaction thereof a cash,
stock or other payment equal to the value of their outstanding awards based on
the "change in control price" (as defined in the 1998 Stock Plan), which is
generally the highest price paid or offered for the Common Stock during the
preceding 60-day period, of the shares of Common Stock subject to the award or
of the fair market value of any property other than shares of the Company
relating to such award, except that with respect to an ISO or an SAR granted in
tandem with an ISO, the cash payment will be based on the fair market value of
the shares subject to the ISO or SAR on the date on which the change in control
occurred.
AMENDMENT AND TERMINATION OF THE 1998 STOCK PLAN
The Board of Directors has the right to amend, alter, suspend,
discontinue or terminate the 1998 Stock Plan at any time without the consent of
the stockholders or participants, except that (i) stockholder approval of such
action will be required if such approval is required by any federal or state law
or regulation or stock exchange or Nasdaq rule, regulation or policy, or if the
Board of Directors in its discretion determines that obtaining such stockholder
approval is advisable, and (ii) subject to the terms of the 1998 Stock Plan, no
amendment or termination of the 1998 Stock Plan may materially and adversely
affect the rights of a participant under any award granted under the 1998 Stock
Plan without the consent of the affected participant. Unless earlier terminated
by the Board of Directors, no award may be granted under the 1998 Stock Plan
after June 12, 2008, ten years after the date of the Annual Meeting.
ACCOUNTING CONSEQUENCES
Depending on the type and terms of the award, the grant of an award to
under the 1998 Stock Incentive Plan to a participant may constitute an expense
to the Company for accounting and financial reporting purposes, and any such
expense would reduce the Company's income (or increase the Company's loss) for
the relevant accounting period by a like amount. The accounting consequences of
grants, exercises and disposition will in some, but not all, cases be the same
as the tax consequences to the Company described below under "Certain Federal
Income Tax Consequences."
14
<PAGE> 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
of certain kinds of awards that may be granted under the 1998 Stock Plan. This
summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the applicable treasury regulations promulgated and proposed
thereunder, judicial authority and administrative ruling and practice, all as in
effect on the date hereof. Legislative, judicial or administrative rules and
interpretations are subject to change, potentially on a retroactive basis, at
any time, and therefore could alter or modify the statements and conclusions set
forth below. This summary does not purport to be complete and does not address
all aspects of federal income taxation that may be relevant to a particular
participant in light of such participant's personal investment circumstances or
participants subject to special treatment under the federal income tax laws. The
summary also does not address the effects of foreign, state or local tax
consequences. Participants of grants of awards under the 1998 Stock Plan should
consult with their personal tax advisors with respect to such grants and
transactions in awards and shares acquired pursuant to the 1998 Stock Plan.
NQSOS. A participant will not recognize any taxable income, and the
Company is not entitled to a tax deduction, upon the grant of a NQSO. In
general, upon the exercise of a NQSO, a participant will recognize ordinary
income in an amount equal to the difference between the option exercise price
and the fair market value of the Common Stock on the date of exercise, and the
Company will be entitled to a tax deduction in the same amount in the year the
participant exercises the NQSO. Upon subsequent disposition of shares of Common
Stock acquired upon the exercise of a NQSO, a participant will have a capital
gain or loss equal to the difference between the amount realized on the
disposition and the participant's tax basis in the shares, which is generally
the amount paid for the shares plus the amount treated as ordinary income at the
time the NQSO was exercised. Such capital gain or loss will be long-term if the
participant's holding period is longer than one year (for a maximum 28% tax
rate, 18 months for a maximum 20% tax rate), and short-term otherwise. The
participant's taxable disposition of the shares of Common Stock acquired upon
the exercise of a NQSO will not result in any additional tax consequences to the
Company.
ISOS. A participant will generally not recognize any taxable income
upon the grant or exercise of an ISO so long as he or she has been an employee
of the Company or any of its subsidiaries from the date the ISO was granted
until three months before the date of exercise (one year if the employee is
disabled), but the amount by which the fair market value of the Common Stock on
the date of exercise exceeds the option exercise price is a required adjustment
for purposes of the alternative minimum tax applicable to the participant. If
the participant holds the shares of Common Stock received upon the exercise of
the ISO for at least one year after the date of exercise and two years after the
date of grant of the ISO (the "holding period"), then any difference between the
amount realized upon the disposition of the shares and the exercise price will
be treated as long-term capital gain or loss to the participant. The Company
will not be entitled to any tax deduction with respect to the grant or exercise
of an ISO (except as discussed below) if the participant satisfies the holding
period requirements.
If a participant exercises an ISO but does not satisfy the holding
period requirements set forth above, the participant generally will recognize
ordinary income in the year of disposition of the shares of Common Stock
acquired upon the exercise of an ISO equal to the excess, if any, of the fair
market value of the Common Stock on the date of exercise over the option
exercise price, and any excess of the amount realized on such disposition over
the fair market value of the Common Stock on the date of exercise will be taxed
as long-term or short-term capital gain, as applicable. If the participant
disposes of the shares of Common Stock prior to the satisfaction of the holding
period requirements but for proceeds in an amount less than the fair market
value of the Common Stock on the date of exercise, the participant will
recognize ordinary income equal only on the difference between the amount
realized on the disposition of the shares and the option exercise price. In
either event, the Company will be entitled to a tax deduction in an amount equal
to the amount constituting ordinary income to the participant.
If a participant exercises an ISO by tendering shares of Common Stock
(other than the shares acquired upon the exercise of an ISO and not held for the
requisite holding period set forth above) in payment of all or part of the
option exercise price, the participant will not be required to recognize any
taxable income from the exchange and option exercise, and the participant's tax
basis and holding period (for capital gain purposes) for the tendered shares of
Common Stock will be treated as a substituted basis for the shares received upon
the exercise of the ISO. If the participant uses shares received pursuant to the
exercise of an ISO as to which the participant had not satisfied the applicable
holding period requirements, the exchange will be treated as a taxable
disqualifying disposition of the exchanged shares, with the result of the excess
of the fair market value of the shares tendered over the participant's basis in
such shares would be taxable.
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SARS. The grant of a SAR will create no federal income tax consequences
for the participant or the Company. When a participant exercises a SAR, any cash
received and the fair market value of the Common Stock on the date of exercise
will constitute ordinary income to the participant, and the Company will be
entitled to a tax deduction in the same amount in the year of exercise.
RESTRICTED STOCK. The federal income tax consequences of restricted
stock awards depend upon the restrictions imposed on the stock. In the absence
of a Section 83(b) election by a participant, the grant of restricted stock will
not recognize any result in taxable income to the participant or entitle the
Company to a tax deduction in the year of grant if the restricted stock received
is subject to a substantial risk of forfeiture and is either non-transferable or
after transfer remains subject to such substantial risk of forfeiture. In such
case, a participant must recognize ordinary income equal to the fair market
value of the restricted stock received as of the first date the restricted stock
becomes either transferable or not subject to a substantial risk of forfeiture,
whichever occurs earlier. However, a participant may, in his or her discretion,
make a Section 83(b) election to recognize as ordinary income the value of the
restricted stock as of the date of receipt rather than upon lapse of
restrictions on transferability or the substantial risk of forfeiture. The
Company generally will be entitled to a tax deduction in the amount of the fair
market value of the restricted stock transferred to the participant in the year
the participant recognizes ordinary income. Prior to the lapse of restrictions,
dividends paid on restricted stock will be taxable to the participant as
ordinary income in the year such restricted stock is received free of
restrictions, and the Company will be entitled to a tax deduction in the same
amount.
PERFORMANCE AWARDS. A participant who receives a performance award of
shares of Common Stock will generally recognize ordinary income in the year the
award is received equal to the fair market value of the Common Stock on the date
of award. The Company will be entitled to a tax deduction equal to the amount of
ordinary income recognized by the participant in the year such income is
recognized.
OTHER STOCK-BASED AWARDS. A participant will recognize ordinary income
equal to the amount of any cash payments or the fair market value of any Common
Stock or other property a participant receives in connection with other
stock-based awards (less any amounts paid by the participant) in the year the
stock based award is received or made available to the participant without
substantial restrictions or risk of forfeiture in a manner consistent with the
treatment of restricted stock. The Company generally will be entitled to a tax
deduction in the same amount and at the same time the participant recognizes
such ordinary income.
IRS SECTION 162(M). Section 162(m) of the Internal Revenue Code
generally limits the deductible amount of annual compensation paid (including,
unless an exception applies, compensation otherwise deductible in connection
with awards granted under the 1998 Stock Plan) by a public company to a "covered
participant" (the chief executive officer and four other most highly compensated
executive officers of the Company) to no more than $1,000,000. This limit,
however, does not apply to qualified "performance-based compensation." The
Company currently intends to structure stock options and other awards granted
under the 1998 Stock Plan that might be affected by Section 162(m) to comply
with the performance-based compensation exemption to the deductibility limit.
SPECIAL RULES. Special rules will apply to a participant who is subject
to Section 16 of the Securities and Exchange Act of 1934, as amended ("Exchange
Act").
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present, in person or by proxy, and entitled to vote at
the Annual Meeting is required to adopt and approve the 1998 Stock Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION AND APPROVAL OF THE 1998 STOCK PLAN. PROXY CARDS SIGNED AND
TIMELY RETURNED TO THE COMPANY WILL BE SO VOTED, UNLESS CONTRARY INSTRUCTIONS
ARE SPECIFIED THEREON.
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REVERSE STOCK SPLIT PROPOSAL
(ITEM 3)
The Board of Directors is seeking stockholder approval of a proposal,
which it has unanimously approved, to amend Article Fourth of the Company's
Certificate of Incorporation, which amendment is attached to this Proxy
Statement as Exhibit B and incorporated herein by this reference, to implement a
reverse split ("Reverse Split") of the Company's Common Stock in the range
between one-for-two and one-for-four, inclusive, in the event the Board of
Directors determines that a Reverse Split is necessary or advisable at any time
within one year from the date of the Annual Meeting, with the exact size of the
Reverse Split to be determined by the Board of Directors (the "Reverse Split
Proposal"). The stockholders of the Company approved an identical Reverse Split
proposal at the 1997 Annual Meeting, which authorized the Board of Directors in
its discretion to implement a Reverse Split, also in the range between
two-for-one and four-for-one, until June 11, 1998, the day preceding the date of
the 1998 Annual Meeting. As of the date of this Proxy Statement, the Board of
Directors has not implemented a Reverse Split. Although it has not authorized
such implementation before the 1998 Annual Meeting, the Board of Directors has
the right, which it continues to reserve, to implement a Reverse Split under the
authority granted to it at the 1997 Annual Meeting. IN THE EVENT THE BOARD OF
DIRECTORS EFFECTS A REVERSE SPLIT UNDER ITS CURRENT AUTHORIZATION BEFORE THE
1998 ANNUAL MEETING, THEN THE REVERSE SPLIT PROPOSAL TO BE PRESENTED AT THE 1998
ANNUAL MEETING WILL BE WITHDRAWN.
The Reverse Split will not be implemented automatically if the
stockholders approve the Reverse Split Proposal. Implementation of the Reverse
Split will only occur, if stockholder approval is obtained, upon a subsequent
decision by the Board of Directors, in its discretion within one year of the
date of the Annual Meeting, to implement the Reverse Split. All references to
the effects of, and other descriptions of, the Reverse Split in this Proxy
Statement will only apply if the Reverse Split is approved by the stockholders
and subsequently implemented by the Board of Directors. In addition, the exact
size of the Reverse Split of the Company's Common Stock will be fixed by the
Board of Directors in the range between one-for-two and one-for-four, inclusive,
if and at the time the Board of Directors determines to implement the Reverse
Split.
REASONS FOR THE REVERSE SPLIT
ALTHOUGH THE BOARD OF DIRECTORS IS NOT PROPOSING TO IMPLEMENT THE
REVERSE SPLIT AT THIS TIME, THE BOARD OF DIRECTORS IS SEEKING STOCKHOLDER
APPROVAL OF THE REVERSE SPLIT PROPOSAL IN ADVANCE OF A DECISION BY THE BOARD OF
DIRECTORS TO IMPLEMENT THE REVERSE SPLIT IN ORDER TO PROMPTLY RESPOND TO
DEVELOPMENTS THAT THE BOARD, IN ITS DISCRETION, DETERMINES MAKES SUCH REVERSE
SPLIT NECESSARY OR ADVISABLE.
The Company's Common Stock is listed and traded on the Nasdaq National
Market. Effective February 23, 1998, the Nasdaq Stock Market adopted certain
changes to the Nasdaq National Market listing requirements, including adding a
requirement that the minimum bid price per share be at least $1.00. As of April
__, 1998, the closing bid price of the Company's Common Stock as reported on the
Nasdaq National Market was $_____ per share. Although the bid price for the
Company's Common Stock has not been less than $1.00 per share since January 27,
1998, the Company is seeking authorization to implement the Reverse Split in
order to be in a position to comply with the new Nasdaq listing requirements, if
the bid price falls below $1.00 per share. In addition, the Board of Directors
believes that the Reverse Split may be necessary or advisable in order to
improve the liquidity and marketability of the Company's Common Stock, and to
respond to future opportunities which may arise to raise additional capital,
based upon future developments in the business affairs of the Company, the
market and the economy.
The recently adopted $1.00 minimum bid price per share listing
requirement applies not only for listing and trading on the Nasdaq National
Market but also for listing and trading on the Nasdaq SmallCap Market.
Accordingly, in the event the Company is unable to meet the $1.00 minimum bid
price requirement for continued listing on the Nasdaq National Market, trading
of the Common Stock would thereafter be conducted in the over-the-counter market
in the so-called "pink sheets" or on Nasdaq's OTC Bulletin Board. Consequently,
the liquidity of the Company's Common Stock could be impaired through delays in
the timing of transactions, reduction in the news media's coverage of the
Company, and lack of investment analyst interest in covering the Company.
In addition, the Board of Directors believes that the relatively low
market price per share of the Company's Common Stock is impairing the
marketability of the Common Stock to institutional investors and members of the
investing public. In theory, the number of shares outstanding should not, in and
of itself, affect the marketability of the
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<PAGE> 20
Common Stock, the nature of investors who purchase the Common Stock, or the
Company's reputation in the financial community. In practice, however, the
Company believes many brokerage firms and institutional investors are reluctant
to recommend lower priced stock to their clients or to hold them in their
portfolios because they are perceived to be speculative in nature. This
impairment of marketability may affect not only the liquidity and trading price
of the Common Stock, but also the Company's ability to raise additional capital
through the sale of equity securities or securities convertible into equity
securities. In addition, many brokerage houses have policies and practices that
discourage individual brokers within those firms from dealing in lower-priced
stocks. Some of those policies and practices involve time-consuming procedures
that make the handling of lower-priced stock economically unattractive. The
brokerage commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue. Any reduction in brokerage commission resulting from a Reverse Split may
be offset, however, in whole or in part, by increased brokerage commissions
required to be paid by stockholders selling "odd lots" created by the Reverse
Split.
The Board of Directors believes that the decrease in the number of
shares of Common Stock outstanding resulting from the Reverse Split, if it is
effected, will increase the trading price of the outstanding shares and thus
stimulate greater interest in the Common Stock by the financial community and
the investing public, promote greater liquidity for the Company's stockholders,
and result in a bid price level for the Common Stock after the Reverse Split
that will permit it to maintain its Nasdaq National Market listing. The Board of
Directors also believes that the Reverse Split will result in a price level for
the Common Stock that will mitigate the present reluctance, policies and
practices of brokerage firms, and diminish the adverse impact of trading
commissions and recommendation restrictions on the potential market for the
Company's Common Stock. Although any increase in the market price of the Common
Stock resulting from the Reverse Split may be proportionately less than the
decrease in the number of shares outstanding, the Board of Directors believes
that the proposed Reverse Split should result in a market price for the shares
that would be high enough to maintain the Nasdaq National Market listing, to
overcome the reluctance, policies and practices at brokerage houses and
institutional investors referred to above and to diminish the adverse impact of
correspondingly high trading commissions on the market for the Common Stock.
However, there is no assurance that the Reverse Split will achieve the
desired results, that the price per share of the Common Stock after the Reverse
Split will increase at all or proportionately with the decrease in the number of
shares, that the Common Stock will achieve the desired additional marketability,
or that any price increase can be sustained for a prolonged period of time.
Also, it is possible that the liquidity of the Common Stock after the Reverse
Split may be adversely affected by the reduced number of shares outstanding if
the proposed Reverse Split is implemented. In addition, the Reverse Split might
leave some stockholders with one or more "odd lots" of the Company's Common
Stock (stock in amounts of less than 100 shares), which may be more difficult to
sell or require greater commission per share to sell than shares in round lots
of 100.
The Board of Directors believes that approval of the proposal to give
the Board of Directors authority to implement a Reverse Split within the
specified range is desirable so that, if the Board of Directors determines the
Reverse Split is necessary or advisable, it will be able to promptly implement a
Reverse Split without the delay and expense of calling a special meeting of
stockholders of the Company. The Board of Directors believes this flexibility is
important and in the best interest of the stockholders of the Company because it
will enable the Board of Directors to promptly take measures to improve
liquidity and marketability of the Common Stock based upon future opportunities
and developments, or if necessary to increase the minimum bid price of the
Company's Common Stock to meet the minimum level required by the Nasdaq National
Market for continued inclusion.
PRINCIPAL EFFECTS OF THE REVERSE SPLIT
The Reverse Split will become effective only in the event the Board of
Directors, in its discretion at any time within one year after the date of the
Annual Meeting, determines that the Reverse Split is necessary or desirable, and
directs one or more officers of the Company to file a Certificate of Amendment
to the Company's Certificate of Incorporation with the Secretary of State of the
State of Delaware. If the Reverse Split Proposal is adopted by the stockholders
at the Annual Meeting, no further authorization or approval by the stockholders
would be required in order for the Board to implement the Reverse Split.
In the event the Board of Directors determines to implement the Reverse
Split, then the Reverse Split shall become effective upon the close of business
on the date of the filing of the Certificate of Amendment with the Secretary of
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<PAGE> 21
State of the State of Delaware (the "Effective Date"). Upon the Effective Date,
each between two and four shares of Common Stock then issued and outstanding
("Pre-Split Common Stock"), as determined by the Board of Directors, will
automatically, without any action on the part of the holders of such Common
Stock, be converted into one share of Common Stock ("Post-Split Common Stock"),
subject to the cash payment for fractional shares discussed below. From and
after the Effective Date of the Reverse Split, certificates representing shares
of Pre-Split Common Stock will be deemed to represent only the number of whole
shares of Post-Split Common Stock into which the shares of Pre-Split Common
Stock were converted and the right to receive cash in lieu of any fractional
share of Post-Split Common Stock.
Based upon the 14,150,060 shares of Common Stock outstanding as of the
Record Date, the Reverse Split, if implemented, would reduce the number of
outstanding shares of Common Stock to between approximately 7,075,030 and
3,537,515 shares, or by 50% to 75%, depending on the exact size of the Reverse
Split, subject to adjustment as a result of the elimination of fractional
shares. The Reverse Split would not affect the par value of the Common Stock,
which is and will remain $.01 per share, or the number of authorized shares of
Common Stock, which is and will remain 25,000,000 shares. Accordingly, because
the Reverse Split would result in a reduction in the number of shares of Common
Stock outstanding, without any decrease in the authorized number of shares of
Common Stock or increase in the par value of the Common Stock, the Reverse Split
would result in an increased number of shares of Common Stock authorized and
available for issuance, a decrease in the stated capital of the Company and a
corresponding increase in aggregate capital in excess of par value. Except for
changes resulting from the Reverse Split as described herein, the rights and
privileges of holders of shares of Common Stock would remain unchanged, and
implementation of the Reverse Split would not result in any change of the
relative equity interest in the Company or the voting power or the rights and
privileges of the holders of Common Stock. Similarly, the Reverse Split would
not affect the authorized number or par value of any series of the Preferred
Stock, which would remain at 2,500,000 shares of Preferred Stock, par value $.01
per share, or the rights and preferences of holders thereof, except that the
amount and exercise price of the rights to purchase Series C Preferred Stock
pursuant to the Company's Rights Agreement, and the rights and privileges of the
holders of Series C Preferred Stock, would be proportionately adjusted to
reflect the Reverse Split.
If the Reverse Split is implemented, then (depending on the exact size
of the Reverse Split fixed by the Board of Directors) each outstanding option or
warrant would automatically become an option or warrant, as the case may be, to
purchase between 50% and 25% of the number of shares subject to the option or
warrant immediately prior to the Reverse Split at an exercise price which is two
to four times the exercise price of the option or warrant immediately prior to
the Reverse Split, subject to adjustment as a result of the elimination of
fractional shares. In addition, the shares available for issuance under the
Company's 1991 Stock Option Plan, the Company's Directors' Stock Option Plan,
the Company's 1998 Employee Stock Purchase Plan and, if adopted and approved by
the stockholders at the Annual Meeting, the Company's 1998 Stock Incentive Plan,
would be reduced by between approximately 50% to 25% to reflect the Reverse
Split, subject to adjustments required to eliminate fractional shares, and the
other relevant terms and provisions of the Company's stock plans would be
appropriately adjusted to reflect the Reverse Split. If the Reverse Split is
implemented, the aggregate number of shares of Common Stock reserved for
issuance upon the exercise of outstanding warrants and options would decrease
from approximately 1,822,515 shares of Common Stock to between approximately
911,257 and 455,628 shares of Common Stock, subject to adjustment as a result of
the elimination of fractional shares. In addition, if the Reverse Split is
implemented, the number of shares of Common Stock into which the Company's
$1,200,000 principal amount Convertible Promissory Note issued to American Meter
Company can be converted will be reduced from 718,882 shares to between 359,441
and 179,720 shares, and the conversion price will increase to between two and
four times the current conversion price, depending on the exact size of the
Reverse Split. If the Reverse Split is implemented, then the Company would
obtain a new CUSIP number for the Common Stock effective at the time of the
Reverse Split.
Because one effect of the Reverse Split will be to decrease the number
of shares of Common Stock outstanding without any increase in the par value of
the Common Stock, the Company's stated capital would be reduced, but the
aggregate capital in excess of par value attributable to the outstanding Common
Stock would be correspondingly increased. Under Delaware law, the Board of
Directors would have the authority, subject to certain limitations, to transfer
some or all of such capital in excess of par value from capital to surplus. The
Board of Directors has no plans to make such a transfer of capital at this time.
If the Reverse Split is implemented, then the decrease in number of
shares of Common Stock outstanding and reserved for issuance pursuant to the
exercise of outstanding options and warrants and the convertible note will
result in an increase in the number of shares of Common Stock available for
issuance by the Board of Directors for raising additional capital, stock options
and warrants, acquisitions, stock splits, stock dividends or other corporate
purposes. The
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Board of Directors will determine whether, when and on what terms the issuance
of shares of Common Stock may be warranted. Like the presently authorized but
unissued shares of Common Stock, the additional shares of Common Stock which
would become available for issuance upon the implementation of the Reverse Split
would be available for issuance without further action by the Company's
stockholders, unless such action is required by applicable law or the rules of
the Nasdaq Stock Market or any other stock exchange or stock market on which the
Common Stock may be listed in the future. Holders of Common Stock have no
preemptive rights to subscribe to or for any additional shares of the Company.
Except in certain cases such as stock dividends, the issuance of additional
shares of Common Stock would have the effect of diluting the voting power of
existing stockholders. The Company has no present arrangements, commitments,
understandings or agreements with respect to the sale or issuance of any
additional shares of Common Stock, except in connection with outstanding options
and warrants, an outstanding convertible note and an existing license
arrangement, and except that the Company's current bank financing prohibits
paying dividends without lender consent. Although a proposal with the effect of
an increase in the number of authorized but unissued shares of Common Stock may
be construed as having an anti-takeover effect, neither the management of the
Company nor its Board of Directors views this proposal in that perspective. The
proposal has not been prompted by an effort by anyone to gain control of the
Company, and the Company is not aware of any such attempt. However, authorized
but unissued shares of Common Stock could be used by the Board of Directors to
frustrate or make more difficult a change in control of the Company. For
example, shares of Common Stock could be placed privately with purchasers who
might side with the Board of Directors in opposing a hostile takeover bid, or
shares of Common Stock could be issued in order to dilute the ownership interest
of such persons, increase the total amount of consideration necessary for such
persons to obtain control or increase the voting power of friendly third
parties.
EXCHANGE OF CERTIFICATES
If the Reverse Split is approved by the stockholders and implemented by
the Board, then as soon as practicable after the Effective Date stockholders
will be given the option, but will not be required, to exchange their
certificates representing shares of Pre-Split Common Stock ("Pre-Split
Certificates") for certificates representing the number of whole shares of
Post-Split Common Stock ("Post-Split Certificates") into which the shares of
Pre-Split Common Stock have been converted as a result of the Reverse Split.
After the Effective Date (if the Reverse Split is implemented), each stockholder
will receive a letter of transmittal from the Company's transfer agent, American
Securities Transfer & Trust, Inc., Denver, Colorado (the "Exchange Agent"), who
will act as the Exchange Agent in the exchange of stock certificates, containing
the necessary materials and instructions. In order to receive Post-Split
Certificates, stockholders must surrender their Pre-Split Certificates pursuant
to the Exchange Agent's instructions, together with properly executed and
completed letters of transmittal and such evidence of ownership of such shares
as the Company or the Exchange Agent may require, plus the applicable exchange
fees. Pre-Split Certificates not presented for surrender after the Effective
Date will be exchanged for Post-Split Certificates the first time they are
presented for transfer. From and after the Effective Date, each Pre-Split
Certificate will, until surrendered in exchange as described above, be deemed
for all corporate purposes after the Effective Date to evidence ownership of the
whole number of shares of Post-Split Common Stock into which the shares
evidenced by such Pre-Split Certificate have been converted pursuant to the
Reverse Split, plus the right to receive the cash payment in lieu of any
fractional shares of Post-Split Common Stock described below.
DO NOT SEND ANY STOCK CERTIFICATE TO THE COMPANY OR TO THE EXCHANGE AGENT AT
THIS TIME. NOTIFICATION OF THE DETAILED PROCEDURES FOR EFFECTING THE EXCHANGE IF
THE REVERSE SPLIT IS APPROVED AND IMPLEMENTED WILL BE PROVIDED AT A LATER DATE.
ELIMINATION OF FRACTIONAL SHARES
If the Reverse Split is implemented, no fractional shares of Post-Split
Common Stock will be issued. In lieu of receiving fractional shares,
stockholders who would otherwise be entitled to receive fractional shares of
Post-Split Common Stock will, upon surrender of their Pre-Split Certificates,
receive a cash payment in lieu thereof equal to the fair market value of such
fractional share. Holders of less shares of Common Stock than the number of
shares of Pre-Split Common Stock which become converted into one share of
Post-Split Common Stock as a result of the Reverse Split will on the Effective
Date no longer be stockholders of the Company. The fair market value of the
Post-Split Common Stock will be based on the last sale price of the Common Stock
as reported by the Nasdaq National Market on the date immediately preceding the
Effective Date, or, if there are no reported sales on such date, the average of
the high and low bid prices on such date as reported by the Nasdaq National
Market.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated federal income
tax consequences of the Reverse Split to stockholders of the Company, if the
Reverse Split is implemented. This summary is based upon the Code for the
applicable treasury regulations promulgated and proposed thereunder, judicial
authority and administrative rulings and practice, all as in effect on the date
hereof. Legislative, judicial or administrative rules and interpretations are
subject to change, potentially on a retroactive basis, at any time and therefore
could alter or modify the statements and conclusions set forth below. For the
purpose of this discussion, it is assumed that the shares of Common Stock are
held as capital assets by stockholders who are United States persons (i.e.,
citizens or residents of the United States or domestic corporations). This
summary does not purport to be complete and does not address all aspects of
federal income taxation that may be relevant to a particular stockholder in
light of such stockholder's personal investment circumstances, stockholders
holding Common Stock as security for borrowings or those stockholders subject to
special treatment under the federal income tax laws (for example, life insurance
companies, tax-exempt organizations, foreign corporations and nonresident alien
individuals). The summary also does not discuss any consequence of the Reverse
Split under any state, local, foreign, gift or estate tax laws.
No ruling from the Internal Revenue Service or opinion of counsel will
be obtained regarding the federal income tax consequences to the stockholders of
the Company as a result of the Reverse Split. ACCORDINGLY, EACH STOCKHOLDER IS
ENCOURAGED TO CONSULT HIS TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES OF
THE PROPOSED REVERSE STOCK SPLIT TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION
AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME TAX LAWS.
The Company believes that the Reverse Split, if implemented, would be a
tax-free recapitalization to the Company and its stockholders. If the Reverse
Split qualifies as a recapitalization described in Section 368(A)(1)(E) of the
Code, (i) no gain or loss will be recognized by the Company in connection with
the Reverse Split; (ii) no gain or loss will be recognized by holders of Common
Stock who exchange their shares of Pre-Split Common Stock for shares of
Post-Split Common Stock, except that holders of Common Stock who receive cash in
lieu of fractional shares will be treated as if the fractional shares were
distributed to such holders of shares of Pre-Split Common Stock and then
redeemed by the Company and will recognize gain or loss for federal income tax
purposes on the redemption of the fractional shares equal to the difference, if
any, between a holder's basis in the fractional share and the amount of cash
received, which gain or loss will be capital gain or loss and will be a
long-term capital gain or loss if the fractional shares were held for more than
one year (for a maximum 28% tax rate or 18 months for a maximum 20% tax rate);
(iii) the tax basis of the shares of Post-Split Common Stock received by holders
of shares of Pre-Split Common Stock will be the same as the tax basis of the
shares of Pre-Split Common Stock exchanged therefor, less the tax basis
allocated to fractional share interests; and (iv) the holding period of the
shares of Post-Split Common Stock in the hands of holders of shares of
Post-Split Common Stock will include the holding period of their shares of
Pre-Split Common Stock exchanged therefor. The Company expects that less than 5%
of the total fair market value of its Common Stock will be converted into cash
in lieu of issuing fractional shares of Common Stock.
FINANCIAL INFORMATION
The Company's Annual Report for the fiscal year ended December 31, 1997
includes the Company's audited financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," which are
incorporated by reference in this Proxy Statement. A copy of the Annual Report
accompanies this Proxy Statement.
TEXT OF AMENDMENT
The text of the amendment to the Company's Certificate of
Incorporation, which would be filed with the Secretary of State of the State of
Delaware if the Reverse Split is effected, is attached to this Proxy Statement
as Exhibit B and is incorporated herein by this reference. Stockholders are
urged to read the amendment in its entirety.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
Common Stock outstanding and entitled to vote at the Annual Meeting is required
to adopt and approve the Reverse Split Proposal. Properly signed proxies
returned to
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the Company at or prior to the Annual Meeting will be voted in favor of the
Reverse Split Proposal, unless contrary instructions are specified.
NO DISSENTERS' RIGHTS OF APPRAISAL
Under Delaware law, stockholders are not entitled to dissenters' rights
of appraisal with respect to the Reverse Split Proposal.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ADOPTION AND APPROVAL OF THE REVERSE SPLIT PROPOSAL. PROXY CARDS
SIGNED AND TIMELY RETURNED TO THE COMPANY WILL BE SO VOTED, UNLESS CONTRARY
INSTRUCTIONS ARE SPECIFIED THEREON.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 4)
The Board of Directors of the Company has appointed Deloitte & Touche
LLP to serve as the Company's independent auditors for the fiscal year ending
December 31, 1998. Deloitte & Touche LLP has served as the Company's independent
auditors since 1991, the Company's first fiscal year. Services provided to the
Company by Deloitte & Touche LLP in 1997 included the audit of the Company's
consolidated financial statements, services related to filings of reports with
the Securities and Exchange Commission, preparation of tax returns and
consultation in connection with various accounting and tax matters. A
representative of Deloitte & Touche LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he desires to do so,
and is expected to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting is required to ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1998.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE 1998 FISCAL YEAR. PROXY CARDS SIGNED AND
TIMELY RETURNED TO THE COMPANY WILL BE SO VOTED, UNLESS CONTRARY INSTRUCTIONS
ARE SPECIFIED THEREON.
ANNUAL REPORT
The Company's 1997 Annual Report, including audited financial
statements for the fiscal year ended December 31, 1997, accompanies this Proxy
Statement. Stockholders are referred to the Annual Report for financial
information about the Company. The audited financial statements of the Company
and the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in the Company's 1997 Annual Report are hereby
specifically incorporated by reference into this Proxy Statement. Except as
provided above, the Annual Report is not incorporated into this Proxy Statement
and is not deemed to be a part of the proxy solicitation material.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires each person who is a
director, executive officer or beneficial owner of more than 10% of the
outstanding Common Stock of the Company to file reports of ownership on Form 3
and of changes in ownership on Form 4 or Form 5 with the Securities and Exchange
Commission, and to furnish the Company with copies of all such reports filed.
Based solely upon its review of the copies of such forms received by the
Company, and written representations from certain reporting persons that no Form
5's were required to be filed by such persons, the Company believes that, during
1997, all reports required by Section 16(a) were timely filed, except one report
covering one transaction by Mr. Patrick, a former director of the Company.
22
<PAGE> 25
STOCKHOLDER PROPOSALS
Any proposal of a stockholder intended to be presented at the 1999
Annual Meeting of Stockholders must be received by the Company on or before
January 8, 1999 and otherwise meet the requirements of applicable federal and
state law and regulations in order to be considered for inclusion in the
Company's proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other matters to be presented at the Annual Meeting other than the items set
forth in this Proxy Statement. However, if any other matters are properly
presented at the Annual Meeting or at any adjournments or postponements thereof,
the persons appointed as proxies on the accompanying proxy cards will have the
discretionary authority to vote the shares represented by the proxy card in
accordance with their best judgment.
By Order of the Board of Directors
/s/ Gary J. Zuiderveen
Gary J. Zuiderveen
Secretary
May 8, 1998
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<PAGE> 26
EXHIBIT A
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MARCUM NATURAL GAS SERVICES, INC.
1998 STOCK INCENTIVE PLAN
<PAGE> 27
MARCUM NATURAL GAS SERVICES, INC.
1998 STOCK INCENTIVE PLAN
SECTION 1. PURPOSES. The purposes of the Marcum Natural Gas Services,
Inc. 1998 Stock Incentive Plan (the "Plan") are to promote the long-term
interests of Marcum Natural Gas Services, Inc. and its Subsidiaries by (i)
attracting, retaining and rewarding high-quality executives and other key
employees and directors of, and advisors and consultants to, the Company and its
Subsidiaries, (ii) motivating such persons by enabling them to acquire or
increase a proprietary interest in the Company in order to align the interests
of such persons with the Company's stockholders, and (iii) providing such
persons with incentives to pursue and participate in the long-term growth,
profitability and financial success of the Company.
SECTION 2. DEFINITIONS. In addition to the terms defined elsewhere in
the Plan, the following terms as used in the Plan shall have the meanings set
forth below:
(a) "Award" means any Option, SAR (including Limited SAR), Restricted
Stock, Deferred Stock, Performance Award, Dividend Equivalent or Other
Stock-Based Award, together with any other right or interest granted to a
Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing any Award which may, but need not, be executed
or acknowledged by a Participant.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" has the meaning given to such term in Section
9(b)(i) of the Plan.
(e) "Change in Control Price" has the meaning given to such term in
Section 9(b)(ii) of the Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, together with the rules, regulations and interpretations
promulgated thereunder, and any successor provisions, rules, regulations and
interpretations.
(g) "Committee" means a committee of directors designated by the Board,
in its discretion, to administer the Plan; provided, however, that, unless
otherwise determined by the Board, the Committee shall consist of two or more
directors, each of whom shall be (i) a "non-employee director" within the
meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan
by "non-employee directors" is not then required in order for exemptions under
Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside
director" as defined under Section 162(m) of the Code, unless administration of
the Plan by "outside directors" is not then required in order to qualify for tax
deductibility under Section 162(m) of the Code.
(h) "Company" means Marcum Natural Gas Services, Inc., a Delaware
corporation, together with any successor thereto.
(i) "Covered Employee" means any individual who is or, in the
determination of the Board, is likely to be a "covered employee" within the
meaning of Section 162(m) of the Code.
(j) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive cash, Shares, other Awards or other property
equal in value to dividends paid with respect to a specified number of Shares,
or other periodic payments.
(k) "Director" means any individual who is a member of the Board.
(l) "Director Option" means a Non-Qualified Stock Option automatically
granted to each Non-Employee Director pursuant to Section 6(b)(v) of the Plan
without any action by the Board.
<PAGE> 28
(m) "Dividend Equivalent" means a right granted to a Participant under
Section 6(g) hereof to receive cash, Shares, other Awards or other property
equal in value to dividends paid with respect to a specific number of Shares, or
other periodic payments.
(n) "Effective Date" means June 12, 1998.
(o) "Eligible Person" means an officer, employee or director of, or an
advisor or consultant to, the Company or a Subsidiary.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, together with the rules, regulations and
interpretations promulgated thereunder, and any successor provisions, rules,
regulations and interpretations.
(q) "Fair Market Value" means the fair market value of the property or
other item being valued, as determined by the Board in its sole discretion or by
procedures established by the Board; provided, however, that the fair market
value of Shares as of any date means the closing sale price of the Shares on
such date or, if there are no sales on such date, then the closing sale price of
the Shares on the most recent date prior to such date on which there was a sale
of Shares, as reported on the Nasdaq Stock Market, on any other quotation system
approved by the National Association of Securities Dealers, Inc. or on any
national securities exchange on which Shares are then listed or quoted, which
constitutes the primary trading market for the Shares.
(r) "Incentive Stock Option" or "ISO" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor provision
thereto and is expressly designated as an Incentive Stock Option.
(s) "Limited SAR" means a right granted to a Participant under Section
6(c) hereof.
(t) "Non-Employee Director" means a Director who is not an officer or
employee of the Company or any of its Subsidiaries on the applicable date.
(u) "Non-Qualified Stock Option" or "NQSO" means an Option that is not
intended to be an Incentive Stock Option.
(v) "Option" means a right granted under Section 6(b) hereof to
purchase Shares or other Awards at a specific price during a specific time.
(w) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(x) "Participant" means any Eligible Person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
(y) "Performance Award" means a right granted under Section 8 hereof to
receive Awards based upon performance criteria specified by the Board.
(z) "Person" means any individual, corporation, partnership, limited
liability company, association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or other entity.
(aa) "Plan" means the Marcum Natural Gas Services, Inc. 1998 Stock
Incentive Plan, as amended from time to time in accordance with the provisions
hereof.
(bb) "Restricted Stock" means any Shares granted under Section 6(d)
hereof.
(cc) "Related Party" has the meaning given to such term in Section
9(b)(iii) hereof.
(dd) "Rule 16b-3" means Rule 16b-3 as from time to time in effect and
applicable to the Plan and the Participants, as promulgated and interpreted by
the SEC under Section 16 of the Exchange Act, including any successor rule
thereto.
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<PAGE> 29
(ee) "SEC" means the Securities and Exchange Commission or any
successor thereto and shall include the staff thereof.
(ff) "Shares" means shares of common stock, par value $.01 per share,
of the Company, or such other securities of the Company as may be designated by
the Board from time to time.
(gg) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Section 6(c) hereof, to be paid an amount measured by the
appreciation in the Fair Market Value of shares from the date of grant to the
date of exercise.
(hh) "Subsidiary" means any corporation (whether now or hereafter
existing) which, on the date of determination, qualifies as a subsidiary
corporation of the Company under Section 425(f) of the Code, and any successor
thereto.
(ii) "Voting Securities" has the meaning given to such term in Section
9(b)(iv) hereof.
SECTION 3. ADMINISTRATION.
(a) Authority of the Board. The Plan shall be administered by
the Board. Subject to the terms of the Plan and applicable law, and in addition
to other express powers and authorizations conferred on the Board by the Plan,
the Board shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to an Eligible Person;
(iii) determine the number of Awards to be granted, the number of Shares or
amount of cash or other property to which an Award will relate, the terms and
conditions of any Award (including, but not limited to, any exercise price,
grant price or purchase price, any exercise or vesting periods, any limitation
or restriction, any schedule for lapse of limitations, forfeiture restrictions
or restrictions on exercisability or transferability, and any accelerations or
waivers thereof, based in each case on such considerations as the Board shall
determine), and all other matters to be determined in connection with an Award;
(iv) determine whether, to what extent and under what circumstances Awards may
be settled or exercised in cash, Shares, other securities, other Awards or other
property, or Awards may be accumulated, vested, exchanged, surrendered,
canceled, forfeited or suspended; (v) determine whether, to what extent and
under what circumstances cash, Shares, other securities, other Awards, other
property and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the Participant or of the Committee;
(vi) interpret and administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (vii) prescribe the form of each Award
Agreement, which need not be identical for each Participant; (viii) adopt,
amend, suspend, waive or rescind such rules and regulations and appoint such
agents as it shall deem necessary or desirable for the administration of the
Plan; (ix) correct any defect or supply any omission or reconcile any
inconsistency, and to construe and interpret the Plan, the rules and
regulations, any Award Agreement or other instrument entered into or Award made
under the Plan; and (x) make any other determinations and decisions and take any
other action that the Board deems necessary or desirable for the administration
of the Plan. Notwithstanding anything else contained in the Plan to the
contrary, neither the Committee, if any, nor the Board shall have any discretion
regarding whether an Non-Employee Director shall receive a Director Option
pursuant to Section 6(b)(v) hereof or regarding the terms of any Director Option
which are set forth in Section 6(b)(v) hereof.
(b) Exercise of Authority. Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Board, may be made at any time and shall be final,
conclusive and binding upon all Persons, including the Company, its
Subsidiaries, Eligible Persons, Participants, holders or beneficiaries of
Awards, and stockholders. The express grant of any specific power to the Board,
and the taking of any action by the Board, shall not be construed as limiting
any power or authority of the Board. The Board may delegate to officers or
managers of the Company or any Subsidiary, or committees thereof, the authority,
subject to such terms as the Board shall determine, to perform such functions,
including administrative functions, as the Board may determine, to the extent
that such delegation will not result in the loss of an exemption under Rule
16b-3 for Awards granted to Participants subject to Section 16 of the Exchange
Act in respect of the Company and will not cause Awards intended to qualify as
"performance-based compensation" under Section 162(m) of the Code of the Code to
fail to so qualify. The Board may appoint agents to assist it in administering
the Plan.
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<PAGE> 30
(c) Delegation to a Committee. Notwithstanding anything to the
contrary contained herein, the Board may at any time, or from time to time,
appoint a Committee and delegate to such Committee the authority of the Board to
administer the Plan, including to the extend provided by the Board, the power to
further delegate such authority. Upon such appointment and delegation, any such
Committee shall have all the powers, privileges and duties of the Board in the
administration of the Plan to the extent provided in such delegation, except for
the power to appoint members of the Committee and to terminate, modify or amend
the Plan. The Board may from time to time appoint members of any such Committee
in substitution for or in addition to members previously appointed, may fill
vacancies in such Committee and may discharge such Committee. Any such Committee
shall hold its meetings at such times and places as it shall deem advisable. A
majority of members shall constitute a quorum and all determinations shall be
made by a majority of such quorum. Any determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held.
(d) Limitation of Liability. The Board, the Committee, if any,
and each member of each shall be entitled to, in good faith, rely or act upon
any report or other information furnished to him or her by any executive
officer, other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, legal counsel, other consultants or any other agents
assisting in the administration of the Plan. Members of the Board and of the
Committee, if any, and any officer or employee of the Company or a Subsidiary
acting at the direction or on behalf of the Board and of the Committee, if any,
shall not be personally liable for any action or determination taken or made in
good faith with respect to the Plan, and shall, to the extent permitted by law,
be fully indemnified and protected by the Company with respect to any such
action or determination.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in
Section 4(b) hereof, the total number of Shares with respect to which Awards may
be granted under the Plan shall be 1,000,000. If any Shares covered by an Award
granted under the Plan, or to which such an Award relates, are forfeited, or if
an Award otherwise terminates or is canceled without the delivery of Shares, or
if payment is made to the Participant in the form of cash or other property
other than Shares, then the Shares covered by such Award, or to which such Award
relates, or the number of Shares otherwise counted against the aggregate number
of Shares with respect to which Awards may be granted, to the extent of any such
settlement, forfeiture, termination or cancellation, shall again be, or shall
become, Shares with respect to which Awards may be granted, to the extent
permissible under Rule 16b-3. In the event that any Option or other Award
granted hereunder is exercised through the delivery of Shares, the number of
Shares available for Awards under the Plan shall be increased by the number of
Shares surrendered, to the extent permissible under Rule 16b-3. For purposes of
this Section 4(a), the number of Shares to which an Award relates shall be
counted against the number of Shares reserved and available under the Plan at
the time of grant of the Award, unless such number of Shares cannot be
determined at that time, in which case the number of Shares actually distributed
pursuant to the Award shall be counted against the number of Shares reserved and
available under the Plan at the time of distribution; provided, however, that
Awards related to or retroactively added to, or granted in tandem with,
substituted for or converted into, other Awards shall be counted or not counted
against the number of Shares reserved and available under the Plan in accordance
with procedures adopted by the Committee so as to ensure appropriate counting
but avoid double counting; and provided, further, that the number of Shares
deemed to be issued under the Plan upon exercise of an Option or an Other
Stock-Based Award in the nature of a stock purchase right shall be reduced by
the number of Shares surrendered by the Participant in payment of the exercise
or purchase price of the Award.
(b) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, forward or reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, exchange of Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is necessary or determined by the Board to be appropriate in order to
prevent dilution or enlargement of the Participants' rights under the Plan, then
the Board shall proportionately adjust any or all of (i) the number and kind of
Shares or other securities of the Company (or number and kind of other
securities or property) which may thereafter be issued in connection with
Awards; (ii) the number and kind of Shares or other securities of the Company
(or number and kind of other securities or property) issued or issuable with
respect to outstanding Awards; and (iii) the grant, exercise or purchase price
with respect to any Award; provided, in each case, that with respect to Awards
of Incentive Stock Options, no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b)(1) of the
Code, as from time to
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<PAGE> 31
time amended. If, pursuant to the preceding sentence, an adjustment is made to
outstanding Options held by Participants, a corresponding adjustment shall be
made to outstanding Director Options and if, pursuant to the preceding sentence,
an adjustment is made to the number of Shares authorized for issuance under the
Plan, a corresponding adjustment shall be made to the number of Shares subject
to each Director Option thereafter granted pursuant to Section 6(b)(v).
(c) Sources of Shares. Any Shares delivered pursuant to an
Award may consist, in whole or in part, of authorized and unissued Shares or of
treasury Shares, including Shares repurchased by the Company for purposes of the
Plan.
(d) Annual Limits on Awards. Subject to adjustment as provided
in Section 4(b) hereof the maximum number of Shares subject to Awards in any
combination that may be granted during any one fiscal year of the Company to any
one Participant shall be limited to 100,000.
SECTION 5. ELIGIBILITY. Awards may be granted under the Plan only to
Eligible Persons, except that (a) only Eligible Persons who are employees of the
Company or a Subsidiary shall be eligible for the grant of Incentive Stock
Options, and (b) only Non-Employee Directors shall receive Director Options in
accordance with Section 6(b)(v) hereof.
SECTION 6. SPECIFIC TERMS OF AWARDS.
(a) General. Subject to the provisions of the Plan and any
applicable Award Agreement, Awards may be granted as set forth in this Section
6. In addition, the Board may impose on any Award or the exercise thereof, at
the date of grant or thereafter (subject to the terms of Section 10 hereof),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Board shall determine, including terms requiring forfeiture of
Awards in the event of termination of employment by the Participant and terms
permitting a Participant to make elections pertaining to his Award. Subject to
the provisions of the Plan, the Board shall have the right to accelerate the
vesting or exercising of any Award granted under the Plan. Except as provided in
Section 7(a) hereof, or as required by applicable law, Awards shall be granted
for no consideration other than prior and future services.
(b) Options. Subject to the provisions of the Plan, the Board
is authorized to grant Options to Eligible Persons on the following terms and
conditions:
(i) Exercise Price. The exercise price per Share of
an Option shall be determined by the Board; provided, however, that,
except as provided in Section 7(a), such exercise price shall not be
less than the Fair Market Value of a Share on the date of grant of such
Option.
(ii) Option Term. The term of each Option shall be
determined by the Board.
(iii) Methods of Exercise. The Board shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or service requirements), the methods by which
such exercise price may be paid or deemed to be paid, and the form of
such payment, including, without limitation, cash, Shares, other
outstanding Awards or other property (including notes or other
contractual obligations of Participants to make payment on a deferred
bases, to the extent permitted by law) or any combination thereof,
having a Fair Market Value equal to the exercise price.
(iv) Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in all
material respects with the provisions of Section 422 of the Code or any
successor provision thereto. Incentive Stock Options may only be issued
to employees of the Company or a Subsidiary. Anything in the Plan to
the contrary notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted, amended
or altered, nor shall any discretion or authority granted under the
Plan be exercised, so as to disqualify either the Plan or any ISO under
Section 422, unless the Participant has first requested the change that
will result in such disqualification.
(v) Director Options.
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<PAGE> 32
(A) Annual Grants. Notwithstanding any other
provision in the Plan to the contrary, each Non-Employee Director shall
be automatically granted, without action on the part of the Company,
the Board, the Committee or any other person, a Director Option to
purchase 10,000 Shares on the date of each annual meeting of
stockholders of the Company beginning with the 1998 Annual Meeting of
Stockholders; provided, however, that Director Options shall not be
granted to a Non-Employee Director in a given year if, during the
6-month period prior to and including the date the Director Option
would otherwise be granted pursuant to this Section 6(b)(v), such
Non-Employee Director was granted a Director Option pursuant to clause
(B) below.
(B) Grant Upon Initial Election. A Director
Option to purchase 20,000 Shares shall be automatically granted to each
individual who is first elected or appointed to serve as a member of
the Board after the Effective Date and who, as of the time of such
election or appointment, is a Non-Employee Director.
(C) Terms. All Director Options shall be NQSOs
which shall be granted for no consideration other than services. The
exercise price per Share purchasable under a Director Option shall be
equal to the Fair Market Value of the Shares on the date of grant of
the Director Option. Each Director Option shall be exercised by giving
written notice of exercise to the Company accompanied by payment in
full of the Exercise price in cash (including by check) or by surrender
of Shares acquired by the Director at least six months prior to the
Exercise Date, which Shares have a Fair Market Value at the time of
delivery equal to the Exercise price, or a combination of a cash
payment and such a surrender of Shares.
(D) Exercisability. A Director Option shall be
exercisable and fully vested immediately upon grant and shall continue
to be exercisable until the earlier of (1) 10 years after the date of
grant, (2) a number of years after the Non-Employee Director ceases to
serve as a member of the Board equal to the number of years (including
any partial years) the Non-Employee Director served as a member of the
Board, if a Non-Employee Director ceases to serve as a member of the
Board for any reason other than dismissal for cause, and (3) at the
time the Non-Employee Director ceases to serve as a member of the
Board, if he is dismissed for cause; provided, however, that, if a
Non-Employee Director ceases serving as a member of the Board and,
immediately thereafter, he is employed by the Company or a Subsidiary,
then, solely for purposes of this Section 6(b)(v), he shall not be
deemed to have ceased to serve as a member of the Board at any time,
and his continued employment by the Company or any Subsidiary shall be
deemed to be continued service as a member of the Board for purposes of
the Plan (except that such former Board member shall not be eligible
for additional grants and Director Options under the Plan); and
provided, further, that a Director Option shall be exercisable after
the date a Non-Employee Director ceases to serve as a member of the
Board (unless the Non-Employee Director continues to be employed by the
Company or a Subsidiary under the preceding proviso) only to the extent
such Director Option was exercisable at such date.
(E) Non-Exclusivity. The automatic grant of
Director Options under this Section 6(b)(v) shall not be exclusive and,
in addition thereto, additional Options or other Awards may be granted
to such Non-Employee Director in the discretion of the Board or the
Committee of such kinds, in such amounts and at such times as the Board
or the Committee shall decide in its sole discretion.
(c) Stock Appreciation Rights. The Board is authorized to
grant Stock Appreciation Rights to Eligible Persons on the following terms and
conditions:
(i) Right to Payment. A Stock Appreciation Right
shall confer on the Participant to whom it is granted a right to
receive, upon exercise thereof, the excess of (A) the Fair Market Value
of a Share on the date of exercise (or, in the case of a Limited SAR,
the Fair Market Value determined by reference to the Change in Control
Price), or, if the Board shall so determine in the case of any such
right other than one related to any Incentive Stock Option, at any time
during a specified period before or after the date of exercise, over
(B) the grant price of the Stock Appreciation Right as determined by
the Board as of the date of grant of the Stock Appreciation Right,
which, except as provided in Section 7(a) hereof, shall not be less
than the Fair Market Value of a Share on the date of grant.
(ii) Other Terms. The term, methods of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be determined by the Board. Limited SARs that
may
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<PAGE> 33
only be exercised in connection with a Change in Control or other event
as specified by the Board may be granted on such terms, not
inconsistent with this Section 6(c), as the Board may determine. SARs
and Limited SARs may be awarded either on a free-standing basis or in
tandem with other Awards.
(d) Restricted Stock. The Board is authorized to grant
Restricted Stock to Eligible Persons on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of forfeiture and
other restrictions as the Board may impose (including, without
limitation, limitations on the right to vote Restricted Stock or the
right to receive dividends thereon), which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on the achievement of performance goals and/or future
service requirements), in such installments, or otherwise, as the Board
shall determine at the time of grant or thereafter. Except to the
extent restricted under the terms of the Plan and any Award Agreement
relating to the Restricted Stock, a Participant granted Restricted
Stock shall have all of the rights of a stockholder, including the
right to vote the Restricted Stock and the right to receive dividends
thereon (subject to any mandatory reinvestment or other requirement
imposed by the Board). During the restricted period applicable to the
Restricted Stock, subject to Section 11 hereof, the Restricted Stock
may not be sold, transferred, pledged, hypothecated, margined or
otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by
the Committee at the time of grant or thereafter, upon termination of
employment or service on the Board (as determined under criteria
established by the Board) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided, however, that
restrictions on Restricted Stock shall be waived in whole or in part in
the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions on
or the forfeiture of Restricted Stock.
(iii) Certificates for Shares. Restricted Stock
granted under the Plan may be evidenced in such manner as the Board
shall determine, including, without limitation, issuance of
certificates representing Shares. Certificates representing Shares of
Restricted Stock shall be registered in the name of the Participant and
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock, and the Board may
require that the Company retain physical possession of the
Certificates, and that the Participant deliver a stock power to the
Company, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Board may require that any
cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Board, Shares distributed in connection with a stock
split or stock dividend, and other property distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the same
extent as the Restricted Stock with respect to which such Shares or
other property has been distributed.
(e) Deferred Stock. The Board is authorized to grant Deferred
Stock to Eligible Persons on the following terms and conditions:
(i) Issuance and Limitations. Delivery of Shares
shall occur upon expiration of the deferral period specified for the
Award of Deferred Stock by the Board. In addition, an Award of Deferred
Stock shall be subject to such limitations (including a risk of
forfeiture) as the Committee may impose (if any), which limitations may
lapse at the expiration of the deferral period or at other specified
times (including based on achievement of performance goals and/or
future service requirements, separately or in combination, in
installments or otherwise, as the Committee shall determine at the time
of grant or thereafter. A Participant awarded Deferred Stock shall have
no voting rights and shall have no rights to receive dividends in
respect of Deferred Stock, unless and only to the extent that the
Committee shall award Dividend Equivalents in respect of such Deferred
Stock.
(ii) Forfeiture. Except as otherwise determined by
the Board upon termination of employment with or service to the Company
(as determined under criteria established by the Board) during the
applicable deferral period or portion thereof to which forfeiture
conditions apply, Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the Participant)
shall be forfeited; provided,
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however, that the Board may provide, by rule or regulation or in any
Award Agreement or may determine in any individual case, that
restriction or forfeiture conditions relating to Deferred Stock shall
be waived in whole or in part in the event of terminations resulting
from specified causes, and the Board may in other cases waive in whole
or in part the forfeiture of Deferred Stock.
(f) Bonus Shares and Awards in Lieu of Obligations. The Board
is authorized to grant Shares or other Awards as a bonus to Eligible Persons or
in lieu of obligations to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements (including salary requirements),
provided that, in the case of Participants subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of the Board to the
extent necessary to ensure that acquisitions of Shares or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Shares or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Board.
(g) Dividend Equivalents. The Board is authorized to grant
Dividend Equivalents to a Participant. Dividend Equivalents shall confer upon
the Participant rights to receive, currently or on a deferred basis, cash,
Shares, other Awards or other property equal in value to dividends paid with
respect to a specified number of Shares, or otherwise, as determined by the
Board. The Board may provide that Dividend Equivalents shall be paid or
distributed when accrued or shall be deemed to have been reinvested in
additional Shares or Awards or other investment vehicles, and subject to such
restrictions or transferability and risk of forfeiture, as the Board may
specify. Dividend Equivalents may be awarded on a free-standing basis or with
another Award.
(h) Other Stock-Based Awards. The Board is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that are denominated or payable in, valued in whole or in part by reference to,
or otherwise based on, or related to, Shares, as deemed by the Board to be
consistent with the purposes of the Plan, including, without limitation,
purchase rights for Shares, Shares awarded which are not subject to any
restrictions or conditions, convertible or exchangeable debt securities or other
rights convertible or exchangeable into Shares, Awards with value and payment
contingent upon performance of the Company or any other factors designated by
the Board, and Awards valued by reference to the book value of Shares or the
value of securities of or the performance of specified Subsidiaries as the Board
determines. The Board shall determine the terms and conditions of such awards.
Except as provided in Section 7(a) hereof, Shares or securities delivered
pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods and in such forms, including, without limitation, cash, Shares,
other outstanding Awards or other property or any combination thereof, as the
Committee shall determine. Cash awards, as an element of or supplement to any
other Award under the Plan, may also be granted pursuant to this Section 6(h).
(i) Exchange Provisions. The Board may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Shares,
another Award or other property, based on such terms and conditions as the Board
shall determine and communicate to the Participant at the time that such offer
is made.
SECTION 7. GENERAL TERMS OF AWARDS.
(a) Stand-Alone, Additional, Tandem and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Board, be granted
either alone or in addition to, in tandem with or in substitution or exchange
for, any other Award granted under the Plan or any award granted under any other
plan of the Company or any Subsidiary (subject to the terms of Section 10
hereof), or any other right of a Participant to receive payment from the Company
or any Subsidiary. Such additional, tandem, substitute or exchange Awards may be
granted at any time. If an Award is granted in substitution or exchange for
another Award or award, the Board shall require the surrender of such other
Award or award in consideration for the grant of the new Award. The exercise
price of any Option, the grant price of any Stock Appreciation Right or the
purchase price of any other Award conferring a right to purchase Share
retroactively granted in tandem with an outstanding Award or award shall be
either not less than the Fair Market Value of Shares at the date of grant of the
later Award or equal to the Fair Market Value of Shares at the date of grant of
the earlier Award or award. Notwithstanding the foregoing, the exercise price of
any Option, grant price of any Stock Appreciation Right or purchase price of any
other Award conferring a right to purchase Shares which is granted in exchange
or substitution for an option, stock appreciation right or other award granted
by the Company (other than in connection with a transaction described in Section
9(a) hereof) shall not be less than the exercise price, grant price or purchase
price of the exchanged or substituted Option, Stock Appreciation Right or other
Award, and outstanding Awards shall not be amended (other than in
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connection with a transaction described in Section 4(b) hereof to reduce the
exercise price, grant price or purchase price of any such Award.
(b) Decisions Required to be Made by the Board. Other
provisions of the Plan and any Award Agreement notwithstanding, if any decision
regarding an Award or the exercise of any right by a Participant, at any time
such Participant is subject to Section 16 of the Exchange Act or is a Covered
Employee under Section 162(m) of the Code, is required to be made or approved by
the Board in order that a grant to or transaction by such Participant will be
exempt under Rule 16b-3 or qualify as "qualified performance-based compensation"
for purposes of Section 162(m) of the Code then the Board shall retain full and
exclusive power and authority to make such decision or to approve or disapprove
any such decision by the Participant.
(c) Term of Awards. The term of each Award shall be for such
period as may be determined by the Board; provided, however, that in no event
shall the term of any Incentive Stock Option, or a Stock Appreciation Right
granted in tandem therewith, exceed a period of ten years from the date of its
grant.
(d) Form and Timing of Payment of Awards. Subject to the terms
of the Plan and any applicable Award Agreement, payments or substitutions to be
made by the Company or a Subsidiary upon the grant, exercise or settlement of an
Award may be made in such forms as the Board shall determine at the time of
grant or thereafter (subject to the terms of Section 10 hereof), including,
without limitation, cash, Shares, other Awards or other property or any
combination thereof, and may be made in a single payment or substitution, in
installments or on a deferred basis, in each case in accordance with rules and
procedures established by the Board. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents in respect of installment or deferred payments. The
settlement of any Award may be accelerated, and cash paid in lieu of Shares in
connection with such settlement, in the discretion of the Board or upon
occurrence of one or more specified events (in addition to a Change in Control).
(e) Exemptions from Section 16(b) Liability. It is the intent
of the Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of the Plan or
any Award Agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).
(f) Share Certificates. All certificates for Shares delivered
under the terms of the Plan shall be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under federal or state
securities laws, rules and regulations thereunder, and the rules of any national
securities exchange, the Nasdaq Stock Market or any other automated quotation
system on which Shares are listed or quoted. The Board may cause a legend or
legends to be placed on any such certificates to make appropriate reference to
such restrictions or any other restrictions or limitations that may be
applicable to Shares. In addition, during any period in which Awards or Shares
are subject to restrictions or limitations under the terms of the Plan or any
Award Agreement, or during any period during which delivery or receipt of an
Award or Shares has been deferred by the Board or a Participant, the Board may
require any Participant to enter into an agreement providing that certificates
representing Shares issuable or issued pursuant to an Award shall remain in the
physical custody of the Company or such other Person as the Committee may
designate.
SECTION 8. PERFORMANCE AWARDS.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the Board.
The Board may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions, except as limited under Section 8(b)
hereof in the case of a Performance Award intended to qualify under Section
162(m) of the Code.
(b) Performance Awards Granted to Designated Covered
Employees. If the Board determines that a Performance Award to be granted to an
Eligible Person who is designated by the Board as likely to be a Covered
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<PAGE> 36
Employee should qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code, the Board shall comply with the pre-established
performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to each of such
criteria, as specified by the Board consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet the requirements
of Section 162(m) of the Code, including the requirement that the level or
levels of performance targeted by the Board result in the achievement of
performance goals being "substantially uncertain." The Board may determine that
such achievement of performance be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the performance
goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may differ for Performance Awards
granted to anyone Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis, and/or for specified
Subsidiaries or business units of the Company (except with respect to the total
stockholder return and earnings per share criteria), shall be used by the Board
in establishing performance goals for such Performance Awards: (1) earnings per
share; (2) revenues; (3) cash flow; (4) return on investment; (5) return on net
assets, assets, capital or equity; (6) economic value added; (7) operating
margin; (8) net income; (9) pretax earnings; (10) pretax earnings before
interest, depreciation and amortization; (11) pretax operating earnings after
interest expense and before extraordinary or special items; (12) operating
earnings; (13) total stockholder return; (14) price of the shares (and changes
thereof); and (15) any of the above goals as compared to the performance of a
published or special index deemed applicable by the Board including, but not
limited to, the Standard & Poor's 500 Stock Index or a group of comparable
companies.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up to 10
years, a specified by the Board. Performance goals shall be established not
later than 90 days after the beginning of any performance period applicable to
such Performance Awards or at such other date as may be required or permitted
for "performance-based compensation" under Section 162(m) of the Code.
(iv) Performance Award Pool. The Board may establish
a Performance Award pool, which shall be an unfunded pool for purposes of
measuring performance of the Company in connection with Performance Awards. The
amount of such Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria set
forth in Section 8(b)(ii) hereof during the given performance period, as
specified by the Board in accordance with Section 8(b)(iii) hereof. The Board
may specify the amount of the Performance Award pool as a percentage of any such
business criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship to such
business criteria.
(v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Board. The Board may, in its
discretion, reduce the amount of a settlement otherwise to be made in connection
with such Performance Awards, but may not exercise discretion to increase any
such amount payable to a Covered Employee in respect of a Performance Award
subject to this Section 8(b). The Board shall specify the circumstances in which
such Performance Awards shall be paid or forfeited in the event of termination
of employment by the Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) Written Determinations. All determinations by the Board as
to the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b) hereof shall
be made in writing in the case of any Award intended to qualify under Section
162(m) of the Code. The Board may not delegate any responsibility relating to
such Performance Awards.
(d) Status of Section 8(b) Awards under Section 162(m) of the
Code. It is the intent of the Company that Performance Awards under Section 8(b)
granted to persons who are designated by the Committee as likely to be Covered
Employees within the meaning of Section 162(m) of the Code and the regulations
thereunder shall, if so designated by the Board, constitute "performance-based
compensation" within the meaning of Section 162(m) of the Code of the Code and
the regulations thereunder. The foregoing notwithstanding, because the Board
cannot determine with
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certainty whether a given participant will be a Covered Employee with respect to
a fiscal year that has not yet been completed, the term Covered Employee as used
herein shall mean only a person designated by the Committee, at the time of
grant of Performance Awards or an Annual Incentive Award, as likely to be a
Covered Employee with respect to that fiscal year. If any provision of the Plan
as in effect on the date of adoption or any agreements relating to performance
Awards or Annual Incentive Awards that are designated as intended to comply with
Section 162(m) of the Code does not comply or is inconsistent with the
requirements of Section 162(m) of the Code, such provision shall be construed or
deemed amended to the extent necessary to conform to such requirements.
SECTION 9. CHANGE IN CONTROL.
(a) Acceleration of Exercisability and Lapse of Restrictions
and Cash-Out of Awards upon "Change in Control". In the event of a Change in
Control, subject only to the applicable restrictions set forth in Section 11(a)
hereof, the following provisions shall apply unless otherwise provided in the
Award Agreement, and:
(i) All outstanding Awards, pursuant to which the
Participant may have a right to exercise which was not previously exercisable
and vested, shall become fully exercisable and vested as of the time of the
Change in Control and shall remain exercisable and vested for the balance of the
stated term of such Award without regard to any termination of employment or
services by the Participant.
(ii) Unless the right to lapse of restrictions or
limitations is waived or deferred by a Participant prior to such lapse, all
restrictions (including risks of forfeiture and deferrals) on outstanding Awards
subject to restrictions or limitations under the Plan shall lapse and such
Awards shall be deemed fully vested as of the time of the Change in Control.
(iii) All performance criteria, goals and other
conditions to payment of Awards under which payments of cash, Shares or other
property are subject to conditions shall be deemed to be achieved or fulfilled
as of the time of the Change in Control.
(iv) For a period of 60 days following a Change in
Control, each Participant may elect to surrender any outstanding Award and to
receive, in full satisfaction therefor, a cash payment equal to the value of
such Award calculated on the basis of the Change in Control Price of any Shares
or the Fair Market Value of any property other than Shares relating to such
Award; provided, however, that in the case of an Incentive Stock Option, or a
Stock Appreciation Right granted in tandem therewith, the payment shall be based
upon the Fair Market Value of Shares on the date which the Change in Control
occurred; provided further, however, that in the case of a Change in Control
described in Section 9(b)(i)(C) or (D) hereof, the payment described in this
sentence shall not necessarily be made in cash but instead shall be made in the
same form (i.e., cash, Shares, other securities or combination thereof) as
holders of Shares receive in exchange for their Shares in the transaction that
results in the Change in Control. In the event that an Award is granted in
tandem with another Award such that the Participant's right to payment for such
Award is an alternative to payment of another Award, the Participant electing to
surrender any such tandem Award shall surrender all alternative Awards related
thereto and receive payment for the Award which produces the highest payment to
the Participant.
(b) Definition of Certain Terms. For purposes of this Section
9, the following definitions, in addition to those set forth in Section 2, shall
apply:
(i) "Change in Control" means and shall be deemed to
have occurred if:
(A) any Person, other than the Company or a
Related Party, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, except that a Person shall be deemed to be the
beneficial owner of all Shares that such Person has the right to acquire
pursuant to any agreement or arrangement or upon exercise, conversation rights,
warrants, options or otherwise, without regard to the 60 day period referred to
in Rule 13d-3 under the Exchange Act), directly or indirectly, of Voting
Securities representing 25% or more of the total voting power of all the then
outstanding Voting Securities, except that there shall be excluded from the
number of Voting Securities deemed to be beneficially owned by a Person a number
of Voting Securities representing not more than 10 percent of the then
outstanding voting power if such Person is (1) eligible to file a Schedule 13G
pursuant to Rule 13-1(b)(1) under the Exchange Act with respect to Voting
Securities or (2) an underwriter who becomes the beneficial owner of more than
20% of the then outstanding Voting Securities pursuant to a firm commitment
underwriting agreement with the Company; or
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(B) the individuals who, as of the effective
date of the Plan, constitute the members of the Board together with those
directors who are first elected subsequent to such date and whose election by
the Board or nomination for election by the Company's stockholders was approved
by a vote of at least a majority of the members of the Board then still in
office who were either directors as of the effective date of the Plan or whose
election or nomination for election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute at least a majority of the
members of the Board; or
(C) the consummation of a merger,
consolidation, recapitalization or reorganization of the Company, reverse spilt
of any class of Voting Securities, or in an acquisition of securities or assets
by the Company, other than (1) any such transaction which would result in at
least 75% of the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by at least 75% of the holders of outstanding Voting
Securities immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction, or (2) any such transaction which
would result in a Related Party beneficially owning more than 50% of the voting
securities of the surviving entity outstanding immediately after such
transaction; or
(D) the stockholders of the Company approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
other than (1) any such transaction which would result in a Related Party owning
or acquiring more than 50 percent of the assets owned by the Company immediately
prior to the transaction, or (2) a sale or disposition immediately after which
such assets will be owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the common
stock of the Company immediately prior to such sale or disposition.
(E) any other event occurs which the Board
determines, in its discretion, would materially alter the structure of the
Company or its ownership.
(ii) "Change in Control Price" means, with respect to
a Share, the higher of (A) the highest Fair Market Value of the Shares at any
time during the 60 calendar days preceding and the 60 days following the Change
in Control; or (B) the highest price paid per Share in a transaction which
either (1) results in a Change in Control or (2) would be consummated but for
another transaction which results in a Change in Control and, if it were
consummated, would result in a Change in Control. With respect to clause (B) in
the preceding sentence, the "price paid" will be equal to the sum of (1) the
face amount of any portion of the consideration consisting of cash or cash
equivalents and (2) the Fair Market Value of any portion of the consideration
consisting or real or personal property other than cash or cash equivalents, as
established by an independent appraiser selected by the Board.
(iii) "Related Party" means (A) a Subsidiary of the
Company; or (B) an employee or group of employees of the Company or any
majority-owned Subsidiary of the Company; or (C) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
majority-owned Subsidiary of the Company; or (D) an entity owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of Voting Securities.
(iv) "Voting Securities or Security" means any
securities of the Company which carry the right to vote generally in the
election of directors.
SECTION 10. AMENDMENTS TO AND TERMINATION OF THE PLAN AND AWARDS. The
Board may amend, alter, suspend, discontinue or terminate the Plan or the
Committee's authority to grant Awards under the Plan without the consent of
stockholders or Participants, except that any amendment, alteration, suspension,
discontinuation or termination shall be subject to approval of the Company's
stockholders not later than the annual meeting next following such Board action
if stockholder approval is required by any federal or state law or regulation or
the rules of the Nasdaq Stock Market or on any national securities exchange,
stock market or automated quotation system on which the Shares are then listed,
traded or quoted, or if the Board in its discretion determines that obtaining
such stockholder approval is for any reason advisable; provided, however, that,
without the consent of the Participant, no amendment, alteration, suspension,
discontinuation or
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termination of any Award may materially and adversely affect the rights of such
Participant under any Award theretofore granted to him.
SECTION 11. GENERAL PROVISIONS.
(a) Compliance with Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Board, postpone the
issuance or delivery of Shares or payment of other benefits under any Award
until completion of such registration or qualification of such Shares or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to the Nasdaq Stock Market or any national
securities exchange, automated quotation system or any other stock exchange or
stock market upon which the Shares or other securities of the Company are listed
or quoted, or compliance with any other obligation of the Company, as the Board
may consider appropriate, and may require any Participant to make such
representations, furnish such information and comply with or be subject to such
other conditions as it may consider appropriate in connection with the issuance
or delivery of Shares or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations. The
foregoing notwithstanding, in connection with a Change in Control, the Company
shall take or cause to be taken no action, and shall undertake or permit to
arise no legal or contractual obligation, that results or would result in any
postponement of the issuance or delivery of Stock or payment of benefits under
any Award or the imposition of any other conditions on such issuance, delivery
or payment, to the extent that such postponement of other condition would
represent a greater burden on a Participant than existed on the 90th day
preceding the Change in Control.
(b) Transferability. No Award granted under the Plan, nor any
other rights acquired by a Participant under the Plan, shall be assignable or
transferable by a Participant, other than by a will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Board of Retirement Income Security Act of
1974, and each such Award or right shall be exercisable during the Participant's
lifetime only by the Participant or, if admissible under applicable law, by the
Participant's guardian or legal representative or a transferee receiving such
Award pursuant to a QDRO; provided, however, that the Board may, in its sole
discretion, authorize all or a portion of an Award to be transferable by the
Participant, but only to (i) any immediate family members of the Participant,
(ii) any trust or trusts for the exclusive benefit of such immediate family
members, or (iii) a partnership or limited liability company in which such
immediate family members are the only partners or members, provided that (A)
there may be no consideration for any such transfer, other than an interest in a
transferee's partnership, limited liability company or other similar entity, (B)
the Award Agreement related to the Award must expressly provide for such
transferability in a manner consistent with this section 11(b), (C) the Board,
in granting an Award, may impose additional restrictions on transfer or prohibit
such transfer entirely, (D) following any transfer, any such Award shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of the Plan, any
reference to a Participant shall be deemed to refer to the transferee, (E) in
the event of a transferee's death, an Award may be exercised by the personal
representative of the transferee's estate or, if no personal representative has
been appointed, by the successor or successors in interest determined under the
transferee's will or under the applicable laws of descent and distribution.
Following any such transfer, any transferee shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer,
provided for purposes of Section 11(b) hereof, the term "Participant" shall be
deemed to refer to the transferee, and any event of termination of employment of
the Participant as set forth in the Award Agreement or in this Plan shall
continue to be applied with respect to the original Participant, following which
the Award shall be exercisable by the transferee only to the extent, and for the
period specified by, the Award Agreements.
(c) No Rights to Awards; No Stockholder Rights. Nothing in the
Plan shall be construed as giving any Participant, Eligible Person or other
Person any right to claim to be granted any Award under the Plan, or to be
treated uniformly with other Participants and Eligible Persons. No Award shall
confer on any Participant any of the rights of a stockholder of the Company
unless and until Shares are in fact issued to such Participant in connection
with the terms of such Award. Notwithstanding the foregoing, in connection with
each grant of Restricted Stock hereunder, the applicable Award shall specify if
and to what extent the Participant shall not be entitled to the rights of a
stockholder in respect of such Restricted Stock.
(d) Withholding. The Company or any Subsidiary is authorized
to withhold from any Award granted or any payment due under the Plan, including
from a distribution of Shares, amounts of withholding and other taxes due with
respect to an Award, its exercise or any payment thereunder, and to take such
other action as the Committee may deem necessary or advisable to enable the
Company and Participants to satisfy obligations for the
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payment of withholding taxes and other tax obligations relating to any Awards.
This authority shall include authority to withhold or receive Shares, Awards or
other property and to make cash payments in respect thereof in satisfaction of
such tax obligations.
(e) No Right to Employment. Nothing contained in the Plan or
any Award Agreement shall confer, and no grant of an Award shall be construed
as, (i) conferring, upon any Participant or any Eligible Person, any right to
continue in the employ or service of the Company or any Subsidiary or (ii)
interfering in any way with the right of the Company or any Subsidiary to (A)
terminate any Participant's or Eligible Person's employment or service at any
time or (B) increase or decrease the compensation of any Participant or Eligible
Person from the rate in existence at the time of granting of an Award, except as
may be expressly provided in any Award Agreement or other compensation
arrangement.
(f) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to Participant pursuant
to an Award, nothing contained in the Plan or any Award shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company; provided, however, that the Board may authorize the
creation of trusts or make other arrangements to meet the Company's obligations
under the Plan to deliver cash, Shares or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Board otherwise determines.
(g) No Limit on Other Compensatory Arrangements Nothing
contained in the Plan shall prevent the Company or any Subsidiary from adopting
or continuing in effect other or additional compensation arrangements (which may
include, without limitation, employment agreements with executives and
arrangements which relate to Awards under the Plan), and such arrangements may
be either generally applicable only in specific cases.
(h) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award. The Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
(i) Governing Law. The validity, interpretation, construction
and effect of the Plan, any rules and regulations relating to the Plan and any
Award Agreement shall be governed by the laws of the State of Delaware (without
regard to provisions governing conflicts of laws) and applicable federal law.
(j) Severability.
(i) If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or as to any Person or Award, or would disqualify the Plan or any Award under
any law deemed amended to conform to applicable laws or, if it cannot be
construed or deemed amended without, in the determination of the Board,
materially altering the intent of the Plan, it shall be deleted and the
remainder of the Plan shall remain in full force and effect; provided, however,
that, unless otherwise determined by the Board, the provision shall not be
construed or deemed amended or deleted with respect to any Participant whose
rights and obligations under the Plan are not subject to the law of such
jurisdiction or the law deemed applicable by the Board.
(ii) If any of the terms or provisions of the Plan
conflict with the requirements of applicable law or applicable rules and
regulations thereunder, including the requirements of Section 162(m) of the
Code, Rule 16b-3 and/or Section 422A of the Code, then such terms or provisions
shall be deemed inoperative to the extent necessary to avoid the conflict with
applicable law, or applicable rules and regulations, without invalidating the
remaining provisions hereof. With respect to ISOs, if the Plan does not contain
any provision required to be included herein under Section 422A of the Code,
such provisions shall be deemed to be incorporated herein with the same force
and effect as if such provision had been set out at length herein; provided,
further, that to the extent any Option which is intended to qualify as an ISO
cannot so qualify, such Option, to that extent, shall be deemed to be a
Nonqualified Stock Option for all purposes of the Plan.
(k) Rule 16b-3 Compliance. With respect to persons subject to
Section 16 of the Exchange Act, transactions under the Plan are intended to
comply with all applicable terms and conditions of Rule 16b-3 and any successor
provisions. To the extent that any provision of the Plan or action by the Board
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board.
14
<PAGE> 41
(l) Headings. Headings are given to the sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
(m) Award Agreements. Each Award hereunder shall be evidenced
by an Award Agreement which shall be delivered to the Participant and shall
specify the terms and conditions of the Award and any rules applicable thereto.
Such terms may include, but are not limited to, the effect on such Award of the
death, retirement or other termination of employment of a Participant and the
effect, if any, of a change in control of the Company.
(n) Indemnification. Each person who is or shall have been a
member of the Committee, if any, or of the Board shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or expense
that may be imposed upon or reasonably incurred by him in connection with or
resulting from any claim, action, suit or proceeding to which he may be made a
party or in which he may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satisfaction
of any judgment in any such action, suit or proceeding against him, provided he
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive and shall be
independent of any other rights of indemnification to which such persons may be
entitled under the Company's Certificate of Incorporation or By-laws, by
contract, as a matter of law, or otherwise.
(o) Construction. For purposes of the Plan, the following
rules of construction shall apply: (i) the word "or" is disjunctive but not
necessarily exclusive; (ii) words in the singular include the plural; words in
the plural include the singular; and words in the neuter gender include the
masculine and feminine genders; and (iii) words in the masculine or feminine
gender include the other and neuter genders.
SECTION 12. EFFECTIVE DATE AND TERMINATION.
(a) The Plan shall become effective as of June 12, 1998, the
date the Plan was adopted and approved by the stockholders of the Company. Any
Awards granted under the Plan prior to such approval of stockholders shall be
effective when made (unless otherwise specified by the Board at the time of
grant) but shall be conditioned upon and subject to such approval of the Plan by
stockholders.
(b) Awards may be granted under the Plan after June 12, 2008.
Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the Board to
amend, alter, adjust, suspend, discontinue or terminate any such Award or to
waive any conditions or rights under any such Award shall, continue after June
12, 2008.
15
<PAGE> 42
EXHIBIT B
---------
TEXT OF AMENDMENT
TO
ARTICLE FOURTH OF THE RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
-----------------------------------------------------------------------
In the event the Reverse Split Proposal is approved by the stockholders
at the Annual Meeting, and thereafter is implemented by the Board of Directors
within one year of the date of the Annual Meeting, then Article Fourth of the
Company's Restated Certificate of Incorporation, as amended, shall be amended by
the addition of the following:
Effective as of 5:00 p.m., New York, New York time, on the date this
Certificate of Amendment to this Restated Certificate of Incorporation amending
this Article Fourth is filed with the Secretary of State of the State of
Delaware ("1998/9 Reverse Split Effective Date"), each [between two and four,
inclusive] issued and outstanding shares of Common Stock, par value $.01 per
share, of this Corporation ("Pre-Split Common Stock") shall be automatically,
without further action by the holders of the Pre-Split Common Stock, converted
into one share of Common Stock, par value $.01 per share, of the corporation
("Post-Split Common Stock") to give effect to a one-for-[between two and four,
inclusive] reverse stock split ("1998/9 Reverse Split"). From and after the
1998/9 Reverse Split Effective Date, each certificate representing shares of
Pre-Split Common Stock shall be deemed to represent for all purposes the number
of shares of Post-Split Common Stock into which the shares of Pre-Split Common
Stock were converted pursuant to the 1998/9 Reverse Split, plus the right to
receive a cash payment in lieu of any fractional share as described below.
No fractional share of Post-Split Common Stock shall be issued in
connection with the 1998/9 Reverse Split. In lieu thereof, each holder of record
of shares of Pre-Split Common Stock who would otherwise have been entitled to
receive a fractional share of Post-Split Common Stock pursuant to the 1998/9
Reverse Split shall, upon surrender of such holder's certificates representing
shares of Pre-Split Common Stock, be entitled to receive a cash payment equal to
the last sale price of the Common Stock as reported on the Nasdaq National
Market (or, if the Common Stock is not on the 1998/9 Reverse Split Effective
Date traded on the Nasdaq National Market, then the principal stock exchange,
stock market, or stock system on which the Common Stock is traded) on the 1998/9
Reverse Split Effective Date, or, if there is no reported sale on such date, the
average of the last reported high and low bid prices on such date, multiplied by
the fractional share, and such amount shall in no event accrue any interest.
From and after the 1998/9 Reverse Split Effective Date, all fractional shares
shall be canceled and represent only the right to receive the cash payment
described in this paragraph.
<PAGE> 43
PROXY MARCUM NATURAL GAS SERVICES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS JUNE 12, 1998
The undersigned stockholder of Marcum Natural Gas Services, Inc. (the "Company")
hereby appoints W. Phillip Marcum and A. Bradley Gabbard, or either of them (the
"proxy holders"), the proxy or proxies of the undersigned, with full power of
substitution, to exercise all the powers that the undersigned would have if
personally present to act and to vote all of the shares of the Company that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company called to be held on Friday, June 12, 1998, and at any adjournments and
postponements thereof, as follows:
1. To elect three (3) directors of the Company for a three year term expiring
at the 2001 Annual Meeting of Stockholders.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary). all nominees listed below.
W. Phillip Marcum Basil M. Briggs Robert Lloyd
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THE NOMINEE'S NAME ON THE SPACE PROVIDED BELOW:)
- --------------------------------------------------------------------------------
2. To adopt and approve the Marcum Natural Gas Services, Inc. 1998 Stock
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To adopt and approve a proposal to amend Article Fourth of the Company's
Restated Certificate of Incorporation to implement a reverse split
("Reverse Split") of the Company's Common Stock in the range between
one-for-two and one-for-four, inclusive, in the event the Board of
Directors determines that a Reverse Split is necessary or advisable at any
time within one year from the date of the Annual Meeting, with the exact
size of the Reverse Split to be determined by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to take action and to vote
upon such other business as may properly come before the meeting and any
adjournments and postponements thereof.
A VOTE FOR EACH ITEM IS RECOMMENDED BY THE BOARD OF DIRECTORS
---
The shares represented by this proxy card when properly executed will be voted
as specified. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR ITEMS 1,
2, 3 AND 4. All proxies previously given are hereby revoked. Receipt of the
accompanying Proxy Statement is hereby acknowledged.
Date:
------------------------------
-----------------------------------
Signature
-----------------------------------
Additional Signature (if shares
are held jointly)
INSTRUCTIONS: Please sign exactly as your name appears on the label above and
return this proxy card promptly in the accompanying envelope. When shares are
held by joint tenants, both should sign. When shares are held in the name of a
corporation, partnership or limited liability company or other entity, please
sign the full entity name by an authorized officer, partner, manager, member or
other authorized person. When signing as attorney, executor, administrator,
trustee, guardian or in any other representative capacity, please give your full
title as such.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
[ ] Please check this box if you are planning to attend the
Annual Meeting of Stockholders.
