<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[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
</TABLE>
Texas Equipment Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
TEXAS EQUIPMENT CORPORATION
1305 HOBBS HIGHWAY
SEMINOLE, TX 79360
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 7, 1998
To the Stockholders:
The Annual Meeting of the Stockholders (the "Annual Meeting") of TEXAS
EQUIPMENT CORPORATION, a Nevada Corporation (the "Company"), will be held at
the Midland Hilton Hotel in Midland, Texas, on August 7, 1998 at 9:00 a.m.
local time, to consider and act upon the following matters, all as more fully
described in the accompanying Proxy Statement which is incorporated herein by
this reference:
(1) To elect seven members to the Board of Directors to serve until the
next Annual Meeting of Stockholders and until their respective
successors shall be elected and qualify;
(2) To approve a 1-for-7 reverse stock split of the Company's Common
Stock, $.001 par value (the "Stock"), though the total number of
authorized shares will remain at 50,000,000;
(3) To approve the Company's 1998 Stock Option Plan; and
(4) To transact such other business and to consider and take action upon
any and all matters that may properly come before the Annual Meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on June 30,
1998, as the Record Date for the determination of the Stockholders entitled to
notice of, and to vote at, the Annual Meeting and any adjournment thereof. For
ten days prior to the Annual Meeting, a complete list of Stockholders entitled
to vote at the Annual Meeting will be available for examination by any
Stockholder for any purpose germane to the Annual Meeting during ordinary
business hours at the Company's executive office, located at the address set
forth above.
All Stockholders are cordially invited to attend the Annual Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ JOHN T. CONDIT
John T. Condit
Secretary, Treasurer and Director
Seminole, Texas
July 8 , 1998
IMPORTANT: WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK,
SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
ENVELOPE SO THAT YOUR STOCK MAY BE REPRESENTED AT THE ANNUAL MEETING.
<PAGE> 3
TEXAS EQUIPMENT CORPORATION
1305 HOBBS HIGHWAY
SEMINOLE, TX 79360
_______________
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Texas Equipment Corporation (the "Company") in connection with
the Annual Meeting of Stockholders and any adjournments thereof (the "Annual
Meeting") to be held on August 7, 1998 at the Midland Hilton Hotel in Midland,
Texas, at 1:30 p.m. local time. This Proxy Statement and the associated proxy
are first being sent or given to Stockholders on or about July 20, 1998.
Stockholders are requested to complete, date and sign the accompanying
proxy and return it promptly to the Company. Any proxy given may be revoked by
a Stockholder at any time before it is voted at the Annual Meeting or any
adjournments thereof by filing with the Secretary of the Company a notice in
writing revoking the proxy, or by duly executing and submitting a proxy bearing
a later date. Proxies may also be revoked by any Stockholder present at the
Annual Meeting who expresses a desire to vote such shares in person. Subject
to such revocation, all proxies duly executed and received prior to, or at the
time of, the Annual Meeting will be voted in accordance with the specification
on the proxy card. If no specification is made, proxies will be voted in favor
of the proposals therein. As to other matters, if any, to be voted upon, the
persons designated as proxies will take such actions as they, in their
discretion, may deem advisable. The persons named as proxies were selected by
the Board of Directors of the Company and each of them is a director of the
Company.
The Company will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others forwarding the
solicitation material to beneficial owners of stock. Directors, officers and
regular employees of the Company may solicit proxies personally, by telephone
or by telegraph, but will not be separately compensated for such solicitation
services.
STOCKHOLDER VOTING RIGHTS
The record date for Stockholders entitled to notice of, and to vote
at, the Annual Meeting of Stockholders was the close of business on June 30,
1998 (the "Record Date"). At the close of business on that date, the Company
had issued and outstanding 24,674,808 shares of Common Stock, par value $0.001
("Common Stock"). Each share of the Common Stock outstanding at the close of
business on the Record Date will be entitled to notice of, and to vote at, the
Annual Meeting. Each share of the Company's Common Stock is entitled to one
vote. The holders of shares of Common Stock ("Shares") do not have cumulative
voting rights, which means that the holders of more than 50% of such
outstanding Shares, voting for the election of directors, can elect all
directors of the Company if they so choose and, in such event, the holders of
the remaining Shares will not be able to elect any of the Company's directors.
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. If a quorum is not
2
<PAGE> 4
present, the Stockholders entitled to vote who are present in person or by
proxy at the Annual Meeting have the power to adjourn the Annual Meeting from
time to time, without notice other than an announcement at the Annual Meeting,
until a quorum is present. At any adjourned Annual Meeting at which a quorum
is present, any business may be transacted that might have been transacted at
the Annual Meeting as originally noticed.
Each nominee must receive a plurality of the votes cast to be elected
to the Board of Directors. The seven candidates receiving the highest number of
votes from holders of Common Stock will be elected. The approval of the 1-for-7
reverse stock split and the Company's 1998 Stock Option Plan require the
affirmative vote of the Shares represented and voting at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND EMPLOYEES
The following table sets forth certain information regarding ownership of
the Common Stock as of the Record Date by (i) each person known by the Company
to be the beneficial owner of more than 5% of the outstanding Shares, (ii) both
current directors of the Company, one of whom is Chief Executive Officer, (iii)
the sole remaining executive officer of the Company, and (iv) all executive
officers and directors of the Company as a group. Except as otherwise
indicated, the persons or entities set forth in the table below have sole
investment and voting power with respect to all shares shown as beneficially
owned, subject to community property law, where applicable. The business
address of each director and each current executive officer is c/o Texas
Equipment Corporation, 1305 Hobbs Highway, P.O. Box 790, Seminole, Texas, 79360.
<TABLE>
<CAPTION>
Amount of Nature of
Beneficial Ownership of
Name Common Stock Percent of Class
- ---- ------------ ----------------
<S> <C> <C>
Paul J. Condit I (President, CEO, Chairman)................................ 218,540 (1)...............Less than 1%
John T. Condit (Director, Secretary & Treasurer).......................... 3,235,207 (1)...............13.0
Paul J. Condit II......................................................... 5,835,207 (1)...............23.4
Jefferey E. Condit........................................................ 5,835,206 (1)...............23.4
Condit 1997 Family Trust (2).............................................. 2,600,000 ..................10.5
Milo Mattorano (Vice-President, CFO)......................................... 75,000.................. Less than 1%
All Directors and Executive Officers as a Group (3 persons)............... 3,128,747...................14.0
</TABLE>
(1) Includes, in each case, the right to acquire 218,540 Shares.
(2) Beneficiaries of this irrevocable trust are John T. Condit's two
children, Taylor L. Condit and Christopher B. Condit. John T. Condit
disclaims beneficial ownership of shares held by such trust.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors held one meeting during the 1997 fiscal year,
which was attended by both directors, Paul Condit I and John Condit. The Board
of Directors had no standing audit, nominating or compensation committees during
the 1997 fiscal year.
3
<PAGE> 5
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
of each individual who served as Chief Executive Officer during the fiscal year
ended December 31, 1997, and the other three executive officers for each of the
three fiscal years ended December 31, 1997 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------------------------------
Awards Payouts
---------- -------
Restricted
Other Stock
Annual Awards Options LTIP All Other
Compen- ------ ------- Payout Compen-
Name And Principal Position Year Salary ($) Bonus ($) sation ($) ($) (#) ($) sation ($)
- --------------------------- ---- ---------- --------- ---------- --- --- --- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul J. Condit I,
President and CEO 1997 120,101 -- -- -- 218,540 -- --
1996 43,535 180,260 -- -- -- -- --
1995 29,740 -- -- -- -- -- --
John T. Condit 1997 -- -- -- -- 218,540 -- --
Secretary, Treasurer and 1996 -- -- -- -- -- -- --
Director 1995 -- -- -- -- -- -- --
E.A. Milo Mattorano,
Vice President and CFO 1997 5,384(1) -- -- -- 300,000 -- --
1996 -- -- -- -- -- -- --
1995 -- -- -- -- -- -- --
Johnathan Braun(2), Former
President and Director of
Marinex 1997 243,750 -- -- -- -- -- --
1996 255,833 -- -- -- -- -- --
1995 26,667 -- -- -- -- -- --
</TABLE>
(1) Mr. Mattorano began employment on December 15, 1997.
(2) Mr. Braun resigned from the board and the presidency of Marinex in
August 1997 in connection with litigation between the Company and Mr.
Braun and Charles Platkin. The salary of Mr. Platkin is excluded from
this chart. By August, 1997, the date of the aforementioned
settlement, Mr. Platkin had resigned his positions from the Company
and Marinex.
OPTIONS
The following table sets forth certain information concerning Options
granted to the Named Executive Officers during the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
Potential Realizable Value at Assumed Annual Rates
of Stock Price Appreciation For Option Term
(a) (b) (c) (d) (e) (f) (g) (h)
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/share) Date 0% 5% 10%
---- ---------- ------------- ----------- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul J. Condit 218,540(1) 18.6% 0.375 12/31/02 81,953 127,236 182,018
John T. Condit 218,540(1) 18.6% 0.375 12/31/02 81,953 127,236 182,018
E.A Milo Mattorano 300,000(2) 25.5% 0.5 12/15/02 75,000 137,163 212,365
</TABLE>
(1) Five-year options granted in connection with the personal guarantee by
Paul J. Condit I and John T. Condit of the Company's floor plan with
Deere and bank debt. (See below "Certain Relationships and Related
Transactions".)
(2) Five-year options issued in connection with Mr. Mattorano's employment
agreement with the Company.
The following table sets forth certain information regarding options
exercised by the Named Executive Officers during the year ended December 31,
1997 and the value of such individual's unexercised options as of December 31,
1997.
4
<PAGE> 6
<TABLE>
<CAPTION>
Shares Number of Securities Underlying Value(1) of Unexercised In-the-
Acquired on Unexercised Options at 12/31/97 Money Options at 12/31/97 ($)
Name Exercise (#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C>
Paul J. Condit I -- -- 218,540 -- 81,952/0
John T. Condit -- -- 218,540 -- 81,952/ 0
E.A. Milo Mattorano -- -- -- 300,000 0/75,000
</TABLE>
(1) Value calculated by subtracting the exercise price from the closing bid
price at December 31, 1997 ($.75), and multiplying it by the number of
shares in the grant.
EMPLOYMENT AGREEMENTS
The Company and E.A. Milo Mattorano are parties to an employment
agreement which provides for an indefinite period of employment at a minimum
annual base salary of $140,000, subject to increase by the Board of Directors.
The agreement also provides for the payment to Mr. Mattorano of up to 100% of
his annual salary in the event he is terminated after a Change in Control (as
defined in the employment agreement) and, if he is terminated without cause the
agreement provides for the payment of 25% of his annual salary. The employment
agreement also provides for cash bonuses of (i) $5,000 for each additional John
Deere dealership that is purchased by the Company; (ii) up to $15,000 based on
the increase in net income in fiscal year 1998 compared to fiscal year 1997;
and (iii) one half of one percent of new capital received by the Company.
Three hundred thousand options were also granted to Mr. Mattorano at an
exercise price of $0.50 per share. The employment agreement also contains
confidentiality and non-competition provisions.
The Company has no other written employment contracts with any of its
officers.
DIRECTOR COMPENSATION
On October 1, 1998, the Company will begin paying each director $500
per three month period of service plus reimbursement of expenses related to
attending board and committee meetings. However, directors who are also
officers of the Company have not received, and will not receive, compensation
as directors.
COMPENSATION POLICIES AND PHILOSOPHY
During 1997, the Company did not maintain a separate compensation
committee. The Board of Directors, which determines the compensation officers
and other employees, consists only of the Company's Chief Executive Officer and
his son, John T. Condit. Upon the election of the seven nominees to the Board
of Directors, the Company intends to establish a compensation committee.
The financial success of the Company is linked to the ability of its
executive officers and managers to direct the Company's current operations, to
assess the advantages of potential acquisitions and to realign the operations
of the acquired entities with the operating policies of the Company. A major
objective of the Company's compensation strategy is to attract and retain
top-quality executive officers and managers. Another objective of the
Company's compensation strategy is to reward executive officers and managers
based on the financial performance of operations under their control. Thus,
cash bonuses and options are used, in addition to base salary, to motivate
those responsible to achieve the Company's financial goals and to further align
the interests of the Company's managers with the interests of the Company's
Stockholders.
5
<PAGE> 7
In establishing the compensation levels for the Company's executive
officers, the Board of Directors considers a number of factors, including the
level and types of compensation paid to executive officers in similar positions
by comparable companies. In addition, the Board of Directors evaluates the
Company's performance by looking at factors such as performance relative to
competitors, performance relative to business conditions and the success of the
Company in meeting its financial objectives.
/s/ PAUL J. CONDIT I /s/ JOHN T. CONDIT
---------------------------- ------------------------
Paul J. Condit I, director John T. Condit, director
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated in the State of Nevada as "Hard Funding,
Inc." on August 14, 1990, as a Nevada Corporation to be a "blank check"
corporation whose sole business was to purchase, merge with or acquire a
business or assets from another company. Hard Funding, Inc. ("Hard Funding")
filed a Registration Statement with the Atlanta Regional office of the United
States Securities and Exchange Commission (the "Commission") on Form SB-2, which
registration statement was declared effective as of October 26, 1993. Pursuant
thereto, Hard Funding published a prospectus dated October 26, 1993 (the
"Prospectus") with respect to certain of its securities. On November 8, 1993,
the Company completed its initial public offering by selling to its underwriter,
Westminster Securities Corporation, all 8,500 shares plus the over allotment
shares, for a total of 9,775 shares. As a result of the initial public
offering, the Company received net offering proceeds, after deducting offering
expenses, in the amount of $34,327. An additional 340 shares were issued to the
underwriter as a portion of the underwriting compensation. On February 12,
1996, Hard Funding acquired Marinex Multimedia Corporation ("Marinex") through a
process generally referred to as a "reverse merger". Hard Funding, with its
510,115 shares outstanding, caused 4,000,000 shares of its authorized but
unissued shares to be issued to the stockholders of Marinex in exchange for all
of the outstanding shares of Marinex. As a result of the acquisition, the
officers and directors of Hard Funding resigned and were replaced by the
officers and directors of Marinex; namely, Mr. Jonathan Braun and Mr. Charles
Platkin, who became Stockholders in the Company. On September 17, 1996, the
Company acquired a second subsidiary, Texas Equipment Co., Inc., by issuing
16,850,000 shares of its authorized but unissued stock to Messrs. John Condit,
Paul Condit II and Jeffrey Condit in exchange for all of the outstanding shares
of that company. As a result of the transaction, Mr. Platkin resigned as an
officer and director of the Company although he remained as an officer and
director of the multimedia subsidiary. Paul Condit I and John Condit were
elected as members of the Board of Directors and as officers of the Company.
Messrs. John Condit, Paul Condit II and Jeffrey Condit are the sons of the
Company's President and CEO, Paul Condit I (collectively and individually, the
"Condits"). The Condits, which term does not include the Condit 1997 Family
Trust, beneficially own 59.2% of the Common Stock of the Company as of the
Record Date.
In August of 1997, the Company, Messrs. Braun and Platkin, and Paul
Condit I, John Condit, Paul Condit II and Jeffrey Condit settled litigation
that had been filed earlier in 1997 relating to the acquisition of Texas
Equipment Co., Inc. Messrs. Braun and Platkin returned 250,000 shares to the
Company, agreed to close Marinex and all related operations but retained their
annual compensation of $240,000 each for 1997. All relations between Messrs.
Braun and Platkin and the Company were severed in connection with the
settlement.
Paul J. Condit I and his sons (collectively and individually, the
"Condits") have personally guaranteed Company debt consisting of approximately
$15 million of accounts payable to John Deere & Company ("Deere") and a $3.3
million credit facility at the Company's bank. As of December 31, 1997, the
total
6
<PAGE> 8
balance on this debt was approximately $17 million. According to guarantee
arrangements between the Company and the Condits, up to 6% of the average
outstanding balance guaranteed is payable each year to the Condits in options
as a guarantee fee. In 1997, the Company paid this fee in the form of five-year
options to acquire up to 874,162 shares of Common Stock with an exercise price
of $0.375. In so doing, the Company recorded a non-cash charge of $288,211.
The Company anticipates that the Condits will continue to receive options or
other stock compensation for such guarantees until the Company is able to
finance its accounts payable to Deere by means of a letter of credit or
otherwise obtain a release from such guarantees. The Company believes that
the guarantee arrangements with the Condits were made on terms no less
favorable to the Company than could have been obtained from an unaffiliated
third party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who own
more than 10% of a registered class of the Company's equity securities to file
various reports with the Securities and Exchange Commission concerning their
holdings of, and transactions in, securities of the Company. Copies of these
filings must be furnished to the Company. Based on a review of the copies of
such forms furnished to the Company and written representations from the
Company's executive officers and directors, the Company believes that, during
the year ended December 31, 1997, all of its directors and executive officers
were in compliance with the applicable filing requirements.
STOCKHOLDER RETURN PERFORMANCE
The graph below compares the cumulative total Stockholder return on
the Common Stock with that of the NASDAQ 100 index for the period commencing
January 2, 1995. Also compared against the cumulative total Stockholder return
on the Common Stock is that of Western Power & Equipment Corp. ("WPEC")
beginning June 14, 1995, the date of WPEC's initial public offering, and
ending January 2, 1998. WPEC was chosen for a comparison because it is in the
same line of business and is listed on NASDAQ. The cumulative total returns on
the stocks were calculated by dividing the change in stock price during the
given period by the price of the stock at the beginning of the period. The
last trading prices were used to calculate returns on the NASDAQ 100 and WPEC,
while the closing bid price was used for TEXQ.
Reinvestment of dividends, if any, was assumed.
PERCENTAGE CHANGE IN CLOSING STOCK PRICES
<TABLE>
<CAPTION>
6/14/95 1/2/96 1/2/97 1/2/98
------- ------ ------ ------
<S> <C> <C> <C> <C>
/PEC -- (35)% 7 % 21 %
Nasdaq 100 20 % (34)% 56 % 16 %
TEXQ (18)% 24 % (68)% (67)%
</TABLE>
The following closing stock prices were used in formulating the stock
performance graph above.
CLOSING STOCK PRICE PLUS DIVIDENDS IF ANY
<TABLE>
<CAPTION>
1/2/95 6/14/95 1/2/96 1/2/97 1/2/98
------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
WPEC $ - 6.97 4.50 4.81 5.83
NASDAQ 100 $ 743.58 895.72 591.82 921.95 1,071.13
TEXQ $ 7.00 5.75(1) 7.00 2.25 0.75
</TABLE>
(1) Price reflects trading on 6/21/95, the only day of trading for the Common
Stock during 1995.
7
<PAGE> 9
PROPOSAL ONE
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting, and under
Nevada law, to constitute the entire Board of Directors and hold office until
the next Annual Meeting of Stockholders and thereafter until their respective
successors have been elected and shall qualify. The Board of Directors has
designated the seven persons named below as nominees, two of whom currently
serve as members of the Board of Directors. It is the intention of the persons
named in the enclosed proxy to affirmatively vote the shares covered by each
proxy in favor of the election of all the nominees named in the table below.
The Board of Directors does not anticipate that any nominees will be
unavailable for election, but, in the event of such occurrence, the proxies
will be voted in favor of the substitutes designated by the Board of Directors.
There is no cumulative voting for the Board of Directors.
The following table sets forth information with respect to nominees:
<TABLE>
<CAPTION>
Name Principal Occupation Age
---- -------------------- ---
<S> <C> <C>
Paul J. Condit I President, Director and Chief Executive Officer 64
John T. Condit Secretary, Treasurer and Director 35
E.A. Milo Mattorano Chief Financial Officer and Vice President 52
O.C. Elliott See below 77
Robert T. Maynard See below 63
James D. Arnold See below 30
Mickey L. Ray See below 48
</TABLE>
Paul J. Condit I is President, Chief Executive Officer and a director
of the Company. He has a B.S. degree from Oklahoma State University and has
been in the farm equipment business for over 26 years. Mr. Condit has served
the Company and its subsidiary, Texas Equipment Co., Inc., in his current
capacities since its inception in 1987, before which time Mr. Condit owned and
operated Condit Equipment Company for a total fifteen years.
John Condit, the son of Paul J. Condit I, serves as a Director and
Secretary of the Company and served the Company in his current capacities since
its inception in 1987. He obtained a BBA degree from Texas Tech University in
1986. Since May 1988, he has been President of Domicile Property, Inc., a real
estate acquisition and management firm, in San Antonio, Texas.
E.A. Milo Mattorano has served as the Company's Chief Financial
Officer and a Vice President since December 15, 1997. Prior to joining the
Company, from January 1995 until December 1997, Mr. Mattorano served as Vice
President and Chief Financial Officer of Lasertechnics, Inc., a manufacturer of
laser markers and plastic card printers. From October 1989 to December 1994,
Mr. Mattorano served as Executive Vice President of Finance of Insilco
Corporation, a conglomerate of manufacturing companies in various industries.
Mr. Mattorano is a CPA and worked in the audit department of Deloitte & Touche
for six years from 1974 to 1980. Mr. Mattorano is a graduate of Adams State
College with a degree in Business Administration and Accounting.
O. C. Elliott, is the principal owner of Elliott Cotton Co., Inc.,
Gaines County Produce , Park Place Farms and O. C. Elliott Farms. Mr. Elliott
has brokered loans between various lending institutions and
8
<PAGE> 10
farmers and ranchers since 1961. In addition, as a real estate agent, Mr.
Elliott has handled several farm and ranch transactions in West Texas and in
several other states. Mr. Elliott served in the United States Army from 1940
until 1946.
Robert T. Maynard currently serves on the Board of AMADAS Industries,
Inc. and East Carolina University Education Foundation. Mr. Maynard worked for
Deere for 37 years: from 1984 to 1996, he served as the Vice President and
Division Manager of Deere's Atlanta Division; from 1969 to 1984, Mr. Maynard
served as Vice President and General Manager for 12 years in Deere's Industrial
Equipment Co. in Moline, Illinois and 3 years in Deere's Memphis, Tennessee
operation. Prior to 1969, he worked at various positions for Deere. Mr.
Maynard graduated from East Carolina University with a BS degree in Business
Administration.
James D. Arnold has served as the Assistant Vice Chancellor of Texas
Tech University since September 1997. From 1995 to 1997, Mr. Arnold was the
Assistant Director of Development for the University of Texas at Austin. From
1993 to 1995, he was the Director of Institutional Advancement for Texas Tech
Health Science Center at Odessa. Mr. Arnold worked for Dell Computer
Corporation from 1991 to 1993 as a Senior Account Representative. Mr. Arnold
graduated with a BS degree in Business Administration from the University of
Texas at Austin in 1991 and received a Master of Education in 1993 from Texas
Tech University.
Mickey L. Ray is the principal owner of Mickey Ray & Associates, an
insurance and financial planning and consulting service in Midland, Texas. Mr.
Ray is a CPA and was a partner in Ray, Davis & Ray Associates from 1978 until
1985, at which time he formed Mickey Ray & Associates. Prior to 1978, Mr. Ray
was a controller for The O'Connor-Braman Interest, an oil and gas operation,
and a controller for National City Lines, Inc., a Fortune Transportation
company. A graduate of Texas Tech in 1972 with a BBA degree in accounting, Mr.
Ray has served on a number of community, civic and professional boards and is a
former Mayor for the City of Seminole.
THE BOARD OF DIRECTORS RECOMMENDS THAT EACH HOLDER OF COMMON STOCK
VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
PROPOSAL TWO
REVERSE STOCK SPLIT
The Board of Directors has unanimously adopted a resolution declaring
the advisability of, and submits to the Stockholders for approval, a proposal to
amend the Company's Certificate of Incorporation to effect a reverse split of
the Company's issued and outstanding Common Stock on the effective date of the
amendment on the basis that each 7 Shares then outstanding will be converted
into one share of Common Stock (a "Combined Share"), such transaction referred
to herein as the "Reverse Split". The proposal may be abandoned by the Board of
Directors at any time before or after the Annual Meeting and prior to the date
and time at which the Reverse Split becomes effective (the "Effective Date") if
for any reason the Board of Directors deems it advisable to abandon the
proposal. Furthermore, consummation of the transactions contemplated by this
proposal is subject to further approval by the Board of Directors. The par
value of the Common Stock ($.001 per Share) and the number of Shares of Common
Stock authorized by the Certificate of Incorporation (50,000,000) will remain
the same following the Reverse Split, which will effectively operate as a
proportionate increase to such par value of authorized capital stock.
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The effect of the proposed Reverse Split on the holders of Common Stock
will be as follows:
(1) Holders of record of fewer than 7 Shares of Common Stock on the
Effective Date of the Reverse Split will have their Shares automatically
converted into the right to receive cash in lieu of fractional shares as
described below.
(2) Holders of record of 7 or more Shares on the Effective Date
will have their Shares automatically converted into the greatest whole number of
Combined Shares represented by their aggregate holding (at a whole number
equaling such number of Shares divided by 7, excluding any fractional
remainder), plus the right to receive cash in lieu of any fractional shares, if
any.
CONVERSION OF SHARES INTO COMBINED SHARES AND/OR CASH
Stockholders who hold fewer than 7 shares of record on the Effective
Date will be entitled to receive, in lieu of fractional shares arising as a
result of the Reverse split, cash representing the number of shares of Common
Stock held prior to the Reverse Split. Stockholders who hold more than 7 shares
on the Effective Date will be entitled to receive, in lieu of fractional
Combined Shares arising as a result of the Reverse Split, cash representing the
such fractional amount. Any Stockholder who wishes to receive only Combined
Share(s), but who would otherwise receive some or all of his payment as cash,
may do so by purchasing prior to the Effective Date sufficient additional Shares
of the Company's outstanding Common Stock in the open market to increase the
number of Shares held in his or her name to 7, or a multiple thereof.
As soon as practicable after the Effective Date, the Company will mail
letters of transmittal to each holder of record of the stock certificate or
certificates which represent issued Shares as of the Effective Date. The letter
of transmittal will contain instructions for the surrender of such
certificate(s) to the Exchange Agent in exchange for (1) the certificate(s)
representing the Combined Shares, and (2) cash proceeds for fractional shares,
if any. Stockholders whose number of Shares is a multiple of 7 do not need to
surrender their certificates for the Shares at the time of the Reverse Split,
unless they are desirous of receiving new certificates for Combined Shares.
Until surrendered such certificates for Shares shall be deemed to represent the
certificates for Combined Shares equal to 1/7th of the face amount of such
certificate. No actual distribution will be made until a Stockholder
surrenders his outstanding certificates and letter of transmittal. However,
following the effective date of such Reverse Split no further action on the part
of the Company or the Stockholders of record will be required to convert the
Shares into the right to receive Combined Shares or cash in lieu of fractional
shares on the foregoing basis.
AMENDMENT TO CERTIFICATE OF INCORPORATION
The proposed Reverse Split, if implemented, would be effected by means
of an amendment to the Certificate of Incorporation. Under Nevada law,
Stockholders would have no right to dissent from the proposed Reverse Split of
Common Stock or to dissent from the payment of cash proceeds described herein.
EFFECTS OF THE PROPOSED REVERSE SPLIT
On the Effective Date, each Stockholder of record who owns fewer than
7 Shares will have only the right to receive cash in lieu of receiving
fractional Combined Shares. The interest of each such Stockholder in the
Company will thereby be terminated, and he or she will have no right to vote as
a Stockholder, or share in the assets or any future earnings of the Company.
Each Stockholder on the Effective Date who owns of record 7 or more Shares of
Common Stock will, with respect to any fractional Combined Shares that such
Stockholder might otherwise be entitled to receive in the Reverse Split, have
only the right to receive cash. Such Stockholder will continue as a Stockholder
of the Company with respect to the Combined Shares resulting
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from the Reverse Split. Each such Stockholder will continue to share in the
future growth and earnings of the Company, if any, to the extent of his or her
ownership of Combined Shares following the proposed Reverse Split.
The Company has authorized capital stock of 50,000,000 Shares of
Common Stock. The authorized capital stock will not be changed by reason of the
proposed Reverse Split. As of the Record Date, 24,674,808 Shares of Common
Stock were issued and outstanding. Based upon the Company's best estimates,
the number of issued and outstanding Shares of Common Stock will be reduced as
a result of the proposed Reverse Split to approximately 3,524,972. Hence,
there will be approximately 46,475,028 authorized but unissued Combined Shares
of Common Stock following the proposed Reverse Split.
The $.001 per share par value of the Company's authorized capital
stock will not be changed by reason of the proposed Reverse Split. As a
result, the Company's stated capital (defined generally under Nevada law as the
sum of the par value of all shares that have been issued) will be reduced from
$24,674.80 to approximately $3,524,972. A reduction in stated capital will,
under Nevada law, create a corresponding increase in surplus (defined
thereunder as the amount by which total assets exceed total debts), assuming a
corporation has a surplus prior to the reduction in stated capital. Nevada law
provides that a corporation may make distributions, such as the payment of
dividends, up to the amount of its surplus provided that the distribution does
not cause the corporation to be insolvent. The Company is presently precluded
under Nevada law (and will remain so after giving effect to the reduction of
stated capital) from making any distributions inasmuch as it has (and will
have) no surplus since its total debts exceed (and will continue to exceed) its
total assets, leaving the Company with net debts as opposed to net assets.
The Common Stock is currently registered under Section 12 (g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a
result, the Company is subject to the periodic reporting and other requirements
of the Exchange Act. The proposed Reverse Split will not affect the
registration of the Common Stock under the Exchange Act and the Company has no
present intention of terminating the registration under the Exchange Act in
order to become a "private" company.
PURPOSE OF THE PROPOSED REVERSE SPLIT
A reduction in the number of issued and outstanding Shares caused by
the effect of the proposed Reverse Split will increase proportionately the
Company's earnings per share and book value per share. Such an increase, in
turn, may make the Common Stock more attractive to a broader group of
investors.
There is, however, no assurance that the market for the Common Stock
will be improved. Stockholders should note that the Board of Directors cannot
predict what effect the proposed Reverse Split will have on the market price of
the Common Stock. However, a higher price may diminish the adverse impact that
very low prices have upon the efficient operation of the trading market for the
stock. Also, the brokerage commission on the purchase or sale of a stock with
a relatively low price generally tends to represent a higher percentage of the
sales price than the brokerage commission charged on a stock with a relatively
higher price, to the detriment of the Company's Stockholders and the market for
the Common Stock.
Based on the numbers of Share certificates not divisible by 7 and
considering the recent market price of the Common Stock, the Company estimates
that the amount of cash to be distributed for fractional shares will not be
material.
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EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company will send
letters of transmittal to all Stockholders of record on the Effective Date for
use in transmitting stock certificates ("old certificates") to the Exchange
Agent. Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with old certificates (and
payment of the transfer fee and any related charges), each Stockholder who holds
of record fewer than 7 shares on the Effective Date will then have the right to
receive cash for such fractional shares, and each Stockholder who holds of
record 7 or more Shares will thereafter receive certificates ("new
certificates") representing the whole number of Combined Shares resulting from
the Reverse Split, plus the right to receive cash for any fractional share
resulting therefrom. Until surrendered, each outstanding old certificate held by
a Stockholder holding a number of Shares greater than 7 shall be deemed for all
purposes to represent 1/7th such number of Combined Shares, plus the right to
receive cash in lieu of fractional shares, if any.
FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED REVERSE SPLIT
The following discussion describes certain federal income tax
consequences of the proposed Reverse Split to Stockholders of the Company who
are citizens or residents of the United States, other than Stockholders who
receive their Common Stock as compensation. The actual consequences for each
Stockholder will be governed by the specific facts and circumstances pertaining
to his or her acquisition and ownership of the Common Stock. Thus, the Company
makes no representations concerning the tax consequences for any of its
Stockholders and recommends that each Stockholder consult with his tax advisor
concerning the tax consequences (including federal, state and local income or
other tax) of the proposed Reverse Split. The Company has not sought and will
not seek an opinion of counsel or a ruling from the Internal Reverse Service
regarding the federal income tax consequences of the proposed Reverse Split.
However, the Company believes that because the proposed Reverse Split is not
part of a plan to periodically increase a Stockholder's proportionate interest
in the assets or earnings and profits of the Company, the proposed Reverse
Split probably will have the following federal income tax effects:
(1) A Stockholder who owns fewer than 7 Shares of the Common Stock
before the Reverse Split, and who therefore receives only cash will be treated
as having sold his Shares of Common Stock represented by old certificates and
will recognize gain to the extent that the cash received exceeds his basis in
such Common Stock. If the Shares are a capital asset in the hands of the
Stockholder, then the gain will be taxed either as a long-term or a short-term
capital gain depending on whether the Shares were held for more than one year.
If the Stockholder's basis in the Shares is greater than the cash received, and
if the Shares are a capital asset in the hands of the Stockholder, the
Stockholder will recognize a long-term or a short-term capital loss.
(2) A Stockholder who holds 7 or more Shares and whose Shares are
evenly divisible by 7 before the Reverse Split (i.e., a Stockholder who is
entitled to receive solely new certificates) will not recognize gain or loss on
the exchange. In the aggregate, the Stockholder's basis in the Shares of
Common Stock represented by new certificates will equal his basis in the Shares
of Common Stock represented by old certificates.
(3) A Stockholder who holds 7 or more Shares and whose Shares are
not evenly divisible by 7 before the Reverse Split (i.e., a Stockholder who is
entitled to receive both new certificates and cash) will not recognize gain or
loss on the exchange of old certificates for new certificates. In the aggregate,
the Stockholder's basis in the Shares of Common Stock represented by new
certificates will equal his basis in the highest number of Shares of Common
Stock represented by old certificates that was evenly divisible by 7. The
remaining shares, numbering 6 or fewer, will be treated as having been sold by
such Stockholder who will recognize gain to the extent the cash received exceeds
the Stockholder's basis in the Shares. If the Shares are a capital asset in the
hands of the Stockholder, then the gain will be taxed either as a long-term or a
short-term capital gain,
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depending on whether the Shares were held for more than one year. If the
Stockholder's basis in the Shares is greater than the cash received, then no
gain or loss will be recognized, and the Stockholder's basis in the Shares of
Common Stock represented by new certificates will equal the Stockholder's basis
in the Shares of Common Stock represented by old certificates less the amount of
cash received. The proposed Reverse Split will constitute a reorganization
within the meaning of Section 368 (a)(1)(E) of the Internal Revenue Code of 1986
and the Company will not recognize any gain or loss as a result of the proposed
Reverse Split.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSED REVERSE SPLIT.
PROPOSAL THREE
1998 STOCK OPTION PLAN
ALL NUMERICAL REFERENCES BELOW TO THE SHARES ARE MADE IN TERMS OF THE
NUMBER OF SHARES BEFORE GIVING EFFECT TO THE REVERSE SPLIT.
Overview and Objectives
The 1998 Stock Option Plan (the "Plan") would benefit the Stockholders
by creating a flexible vehicle to provide a variety of incentive compensation
opportunities to employees and directors of the Company. In doing so, the Plan
provides an important link between the compensation of employees and directors
and Company performance. Stock options and other stock-based grants under the
Plan ("Awards") will compensate employees and directors for the creation of
shareholder value. In this way the Plan is intended to encourage and reward
superior performance by individuals whose performance is a key element in
achieving the Company's continued financial and operational success. In
addition, the Plan will assist the Company's recruiting, rewarding, retaining,
and motivating directors and employees by rewarding the creation of stockholder
value.
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Eligibility
Awards may be granted only to directors, officers, employees of the
Company or any of its subsidiaries or consultants or advisers to the Company or
its subsidiaries (in other than a capital-raising or financing capacity), who
are designated as Participants from time to time by the compensation committee
to be established by the Board of Directors (the "Committee"; defined below
under Administration). The Committee shall consider an individual's position,
responsibilities and importance to the Company among other factors in
determining which of the foregoing eligible persons shall be Participants. The
types of Awards to be made to Participants and terms, conditions, and
limitations applicable to the Awards are left to the sole discretion of the
Committee, subject to the terms of the Plan. The Committee's decision as to
eligibility and the nature of timing of Awards under the Plan is final.
Types of Awards
Awards shall be made in the form of Stock Options, restricted stock,
performance awards, and other types of Awards described below up to a maximum
number of shares of Common Stocks which may be issued under the Plan of
3,000,000 (but subject to lower limitations, to the extent described herein with
respect to certain categories of awards). Subject to the other provisions of
this Plan, Awards may also be granted individually, in combination, or in tandem
with, in replacement of, or as alternatives to, grants or rights under this Plan
and any other stock option plan of the Company.
(1) A Stock Option is a right to purchase a specified number of Shares at
a specified price during such specified time, as the Committee shall determine.
(a) Stock Options granted may be either of a type that complies
with the requirements of incentive stock options as defined in Section
422 of the Code ("Incentive Stock Options") or of a type that does not
comply with such requirement ("Non Qualified Stock Options");
provided, however, that the aggregate number of Shares which may be
offered for purchase pursuant to Incentive Stock Options under this
Plan shall not exceed 3,000,000 (in terms of pre-split Shares of
Stock). During any calendar year, the aggregate number of Shares
which may be offered to any Employee pursuant to the Plan shall not
exceed 1,000,000.
(b) The exercise price per Share of any Stock Option shall be
determined by the Committee and set forth in the Award Agreement, but
shall not be less than 85% of the average of the bid and asked price,
averaged over the last 20 trading days (the "Fair Market Value").
However, a Stock Option granted to a "covered employee" as defined in
Section 162(m) of the Code shall not have an exercise price on the date
of the Grant less than 100% of such Fair Market Value.
(c) A Stock Option may be exercised, in whole or in part, by the
giving of written notice of exercise to the Company specifying the
number of Shares to be purchased.
(d) The exercise price of the Shares subject to the Stock Option
may be paid in cash or may also be paid by the tender of Shares
already owned by the Participant (to the extent permitted by Rule
16b-3), or through a combination of cash and Shares, or through such
other means the Committee determines are consistent with the Plan's
purpose and applicable law. No fractional Shares will be issued or
accepted.
(e) If an Incentive Stock Option is granted to a Participant who
owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than ten percent (10%) of the combined voting
power of all classes of stock of the Company (or any parent or
subsidiary), the exercise price shall be at least one hundred ten
percent (110%) of the Fair Market Value of the Common Stock on the date
the Stock Option is granted.
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No portion of any Incentive Stock Option may be exercised after the
expiration of ten (10) years from the date such Stock Option is granted.
However, if a Participant owns or is deemed to own (by reason of the
attribution rules of Section 424 (d) of the Code) more than ten percent (10%)
of the combined voting power of all classes of stock of the Company (or any
parent or subsidiary) and an Incentive Stock Option is granted to such
Participant, the term of such Incentive Stock Option (to the extent required by
the Code at the time of grant) shall be no more than five (5) years from the
date such Stock Option is granted.
Upon termination of Participant's employment, the Participant may not
exercise any Incentive Stock Option later than three (3) months after his
termination of employment, except in the case of death or disability.
If Shares acquired upon exercise of an Incentive Stock Option are
disposed of by a Participant prior to the expiration of either two (2) years
from the date such Incentive Stock Option is granted or one (1) year from the
transfer of Shares to the Participant pursuant to the exercise of such
Incentive Stock Option or in any other disqualifying disposition within the
meaning of Section 422 of the Code, such Participant shall notify the Company
in writing of the date and the terms of such disposition. A disqualifying
disposition by a Participant shall not affect the statutes for any other Stock
Option granted under the Plan as an Incentive Stock Option within the meaning
of Section 422 of the Code.
The Committee may not grant Incentive Stock Options under the Plan to
any Participant to the extent such grant would permit the aggregate Fair Market
Value of the Shares, with respect to which Incentive Stock Options under this
and any other plan of the Company and its subsidiaries are exercisable for the
first time by such Participant during any calendar year, to exceed $100,000.
(2) Shares of Restricted Stock are Shares that are issued to a Participant
and are subject to such terms, conditions, and restrictions as the Committee
deems appropriate, which may include, but are not limited to, restrictions upon
the sale, assignment, transfer, or other disposition of the Restricted Stock
and the requirement of forfeiture of the Restricted Stock upon termination of
employment under certain specified conditions. As a condition to any Award
hereunder, the Committee may require a Participant to pay the Company an amount
equal to, or in excess of, the par value of the shares of Restricted Stock
awarded to him or her. Any such Restricted Stock Award shall automatically
expire if not purchased in accordance with the Committee's requirements if any,
within thirty (30) days after the date of grant. The Committee may provide for
the lapse of any such term or condition or waive any term or condition based on
such factors or criteria as the Committee may determine. The Participant shall
have, with respect to awards of Restricted Stock for which the Participant is
the holder of record, all of the rights of a shareholder of the Company,
including the right to vote the Restricted Stock and the right to receive any
cash or stock dividends on such Restricted Stock. The Committee shall have the
discretionary authority to determine the total number of shares available for
Awards under the Plan as Restricted Stock to be issued during the duration of
the Plan, however, the maximum number of Shares that may be issued to any
Participant or Participants as Restricted Stock under the Plan shall not exceed
1,000,000 Shares.
(3) Performance Awards may be granted under this plan from time to time
based on the terms and conditions as the Committee deems appropriate provided
that such Awards shall not be inconsistent with the terms and purposes of this
Plan. Performance Awards may be in the form of performance units, performance
shares and such other forms of Performance Awards, which the Committee shall
determine. For this purpose, "performance shares" are grants of Shares based
on satisfying pre-established Company performance criteria set by the
Committee. "Performance Units" are cash allotments of dollar-denominated units
whose payment or value is contingent on performance as measured against
predetermined objectives over a multi-year period
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of time. The Committee shall determine the performance measurements and
criteria for such Performance Awards.
(4) The Committee may from time to time grant (i) Shares, (ii) other
stock-based and non-stock-based Awards under this Plan including, without
limitation, those Awards pursuant to which Shares are or may in the future be
acquired, (iii) Awards denominated in Share units, (iv) securities convertible
into Shares, (v) phantom securities (whereby Participants can take advantage in
the appreciation of Share prices without actual ownership of Shares), (vi)
dividend equivalents (whereby a Participant becomes entitled, through the use of
a derivative security attached to a Stock Option, to dividends and other rights
derived from the underlying Shares, had the Participant owned such Share), and
(vii) other forms or derivative related to the Shares a sit deems appropriate.
The Committee shall determine the terms and conditions of such other stock,
stock-based, and non-stock based Awards provided that such Awards shall not be
consistent with the terms and purposes of this Plan.
Shares Subject to the Plan
The number of Shares for which Awards may be granted under the Plan shall
not exceed 3,000,000 Shares. To the extent permitted by Section 16, any
unexercised or undistributed portion of any terminated, expired, exchanged, or
forfeited Awards or Awards settled in cash in lieu of Shares, shall be available
for further Awards.
Additional rules for determining the number of Shares granted under the
Plan may be made by the Board of Directors or the Committee, as each deems
necessary or appropriate.
The Shares that may be issued pursuant to an Award under the Plan may be
treasury or authorized but unissued Common Stock may be acquired, subsequently
or in anticipation of the transaction, in the open market or in private
transactions to satisfy the requirements of the Plan.
Administration
"Committee" means the Compensation Committee of the Board, which shall be
comprised solely of no fewer than two outside directors. For this purpose, the
term "outside director" means a director of the Board who (i) is not an Employee
or a former Employee of the Company, (ii) has never served as an officer of an
entity currently affiliated with the Company, and (iii) is not paid compensation
from the Company, directly or indirectly, in any capacity other than as a
director. Each member of the Committee at the time of his appointment to the
Committee and while he is a member thereof, must also be a "disinterested
person", as that term is defined in Rule 16b-3 promulgated under the Exchange
Act.
The Committee shall have the power to interpret and administer the Plan.
All questions of interpretation with respect to the Plan, the number of shares
or other securities, or units granted, and the terms of any Award Agreements
shall be determined by the Committee and its determination shall be final and
conclusive upon all parties in interest. In the event of any conflict between
an Award Agreement and the Plan, the terms of the Plan shall govern.
The Committee may delegate to the officers or Employees of the Company the
authority to execute and deliver such instruments and documents, to do all such
acts and things, and to take all such other steps deemed necessary, advisable or
convenient for the effective administration of the Plan in accordance with its
terms and purpose, except that the committee may not delegate any discretionary
authority with respect to substantive decisions or functions regarding the Plan
or Awards thereunder as these relate to Insiders
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including but not limited to decisions regarding the timing, eligibility,
pricing, amount or other material terms of such Awards.
A majority of the members of the Committee shall constitute a quorum.
The vote of a majority of a quorum shall constitute action by the Committee.
The Committee will be responsible for declaring the material terms under which
the Performance Awards are to be paid, including performance goals. Prior to
the payment of a performance-based Award, the Committee shall certify that the
predetermined performance goals and any other material terms were in fact
satisfied. The Committee shall periodically determine the Participants in the
Plan and the nature, amount, pricing, timing, and other terms of Awards to be
made to such individuals. However, the Committee must ratify all awards under
the program to the Company's executive officers.
Changes in Capitalization
If, while any Awards are outstanding, the outstanding Shares have
increased, decreased, changed into, or been exchanged for a different number or
kind of shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or similar transaction, appropriate and proportionate adjustments shall
be made by the Committee in the number and/or kind of shares which are subject
to purchase or award under outstanding Awards and in the purchase price or
prices applicable to such outstanding Awards in order to prevent the dilution
or enlargements of rights, to the end that the same proportion of the Company's
Common Stock in each instance shall remain subject to purchase at the same
aggregate purchase price. Likewise, in any such event, the number and/or
kind of Shares, which may be offered under the Plan, shall also be
proportionately adjusted to the same end.
To the extent that the foregoing adjustments relate to Awards, Shares,
or securities of the Company, such adjustments shall be made by the Committee
and its determination in that respect shall be final, binding, and conclusive.
The grant of an Award pursuant to this Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part
of its business or assets.
Change of Control
The Committee shall determine the effect of any Change of Control and
specify such effect in Award Agreements that are issued pursuant to the Plan.
These effects may include, but are not limited to:
(a) Offering to purchase any outstanding Award, all Awards being
deemed vested upon a Change of Control, made pursuant to this Plan
from the holder for its Fair Market Value or such value established
under the Award Agreement, as determined by the Committee, as of the
date of the Change of Control; and/or
(b) Making adjustments or modifications to outstanding Awards as
the Committee deems appropriate to maintain and protect the rights and
interest of Participants following Change of Control.
For the purpose of this section, a "Change of Control" shall mean the
earliest date on which any of the following events occur: there shall be
consummated any consolidation or merger of the Company in which the
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Stockholders own 70% or less of a newly-merged entity, or the Stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company.
The acquisition by a third party of twenty (20%) or more of the
Company's then outstanding securities having the right to vote in the election
of directors; or during any period of two consecutive years, individuals who,
at the beginning of such period constituted the entire Board, cease for any
reason (other than death) to constitute a majority of the directors, unless the
election, or the nomination for election, by the Stockholders of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.
Amendment and Termination
The Board may at any time amend, suspend, or terminate the Plan. The
Committee may at any time alter or amend any or all Award Agreements under the
Plan to comply with any laws that govern such agreements. However, no such
action may, without further approval of the Stockholders, be effective if such
approval is required in order that transactions in Company securities under the
Plan, as they relate to Insiders, be exempt from the operation of Section 16(b)
of the Exchange Act, and the Board may not amend the Plan so as to:
(a) increase the number of Shares which may be issued under the
Plan, except as provided for stock splits, stock dividends or
similar transactions, pursuant to the Plan's anti-dilution
provisions;
(b) materially modify the requirements as to eligibility for
participation to the Plan;
(c) materially increase the benefits accruing to Participants
under the Plan;
(d) extend the duration of the Plan beyond the date approved by
the Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE 1998 STOCK OPTION PLAN.
ANNUAL REPORT
The Company's Annual Report on Form 10-K containing its financial
statements for the fiscal year ended December 31, 1997, has been mailed
concurrently herewith. The Annual Report to Stockholders is incorporated in
this Proxy Statement and is deemed to be a part of the proxy solicitation
material. Any Stockholder who does not receive a copy of such Annual Report on
Form 10-K may obtain one by writing to the Company.
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REPORT FILED WITH SECURITIES AND EXCHANGE COMMISSION
Any beneficial owner of securities of the company whose proxy is
hereby solicited may request and receive without charge a copy of the Company's
Annual Report on Form 10-K, including the financial statements thereto, but
excluding exhibits and schedules, filed with the Securities and Exchange
Commission. Such request should be addressed to: 1305 Hobbs Highway,
Seminole, Texas 79360, Attention: Corporate Secretary.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does
not know of any other matter which will be brought before the Annual Meeting.
However, if any other matter properly comes before the Annual Meeting, or any
adjournment thereof, the person or persons voting the proxies will vote on such
matters in accordance with their best judgment and discretion.
By Order of the Board of Directors,
/s/ PAUL J. CONDIT
------------------------------------
Paul J. Condit I
/s/ JOHN T. CONDIT
------------------------------------
John T. Condit
Seminole, Texas
July 8, 1998
19
