SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Butler International
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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Notes:
BUTLER INTERNATIONAL, INC.
110 SUMMIT AVENUE
MONTVALE, NEW JERSEY 07645
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
The Annual Meeting of Stockholders of BUTLER INTERNATIONAL, INC. will be
held at its headquarters facility at 110 Summit Avenue, Montvale, New Jersey on
Thursday, May 8, 1997 at 4:00 p.m. for the following purposes:
1. To elect one director to hold office for a term of five years.
2. To vote on a proposal to amend the 1992 Stock Option Plan, 1992
Incentive Stock Option Plan, and 1992 Stock Bonus Plan by
increasing the aggregate number of shares of the Company's
common stock that may be subject to options under all three
plans by 240,000.
3. To vote on a proposal to amend the 1992 Stock Option Plan for
Non-Employee Directors by increasing the aggregate number of
shares of the Company's common stock that may be subject to
option by 60,000.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of the common stock and the 7% Series B
cumulative convertible preferred stock at the close of business on March 31,
1997 are entitled to notice of, and to vote at, this meeting or any adjournment
or adjournments thereof.
By Order of the Board of Directors,
/s/ Warren F. Brecht
Warren F. Brecht
Secretary
Montvale, New Jersey
April 3, 1997
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IF YOU CANNOT PERSONALLY ATTEND THE MEETING, IT IS EARNESTLY REQUESTED THAT YOU
PROMPTLY INDICATE YOUR VOTE ON THE ISSUES INCLUDED ON THE ENCLOSED PROXY AND
DATE, SIGN AND MAIL IT IN THE ENCLOSED SELF-ADDRESSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES. DOING SO WILL SAVE THE COMPANY THE
EXPENSE OF FURTHER MAILINGS. IF YOU SIGN AND RETURN YOUR PROXY CARD WITHOUT
MARKING CHOICES, IT WILL BE UNDERSTOOD THAT YOU WISH TO HAVE YOUR SHARES VOTED
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
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BUTLER INTERNATIONAL, INC.
110 SUMMIT AVENUE
MONTVALE, NJ 07645
April 3, 1997
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Butler
International, Inc., a Maryland corporation (the "Company"). Unless instructed
to the contrary on the proxy, it is the intention of the persons named in the
proxy to vote the proxies FOR the election as a director of the nominee listed
below for a term expiring in 2002; FOR the proposal to amend the 1992 Stock
Option Plan, 1992 Incentive Stock Option Plan, and 1992 Stock Bonus Plan by
increasing the aggregate number of shares of the Company's common stock that may
be subject to option under all three plans by 240,000; and FOR the proposal to
amend the 1992 Stock Option Plan for non-employee directors by increasing the
aggregate number of shares of the Company's common stock that may be subject to
options thereunder by 60,000. In the event that a nominee for director becomes
unavailable to serve, which management does not anticipate, the persons named in
the proxy reserve full discretion to vote for any other person who may be
nominated. Any stockholder giving a proxy may revoke the same at any time prior
to the voting of such proxy. This Proxy Statement and the accompanying proxy
are being mailed on or about April 3, 1997.
Each stockholder of the Company will be entitled to one vote for each share
of common stock and each share of 7% Series B convertible preferred stock,
standing in his or her name on the books of the Company at the close of business
on March 31, 1997. On that date, the Company had outstanding and entitled to
vote 6,156,168 shares of common stock and 2,627,025 shares of 7% Series B
cumulative convertible preferred stock.
PROPOSAL 1: ELECTION OF DIRECTOR
Pursuant to the Company's Articles of Incorporation and By-Laws, as
amended, the Board of Directors currently consists of five classes of directors
having staggered terms of five years each (except for Nikhil S. Nagaswami who
was elected as a Fifth Class Director in 1994 to hold office for four years).
One Director's term expires at each Annual Meeting, with the term of the Third
Class Director expiring at this year's Annual Meeting. Unless instructed to the
contrary on the proxy, the persons named in the proxy will vote for the election
of Frederick H. Kopko, Jr. as a Third Class Director to hold office for five
years. The nominee has been a Director of the Company since 1985.
NOMINEE FOR DIRECTOR -- TERM EXPIRES IN 2002
FREDERICK H. KOPKO, JR.
Mr. Frederick H. Kopko, Jr., age 41, is a partner of the law firm of
McBreen, McBreen & Kopko, Chicago, Illinois, and has been associated with that
firm since January, 1990. Mr. Kopko practices in the area of corporate law. He
has been a director of Mercury Air Group, Inc. since November, 1992. Mr. Kopko
received a B.A. degree in economics from the University of Connecticut, a J.D.
degree from Notre Dame Law School, and an M.B.A. degree from the University of
Chicago. He is the brother of Edward M. Kopko.
The election of the Third Class Director requires the approval of a
majority of the votes cast by holders of the shares of the Company's common
stock and the Company's 7% Series B cumulative convertible preferred stock,
voting together as a single class. Any shares not voted, whether by broker non-
vote or otherwise, have no impact on the outcome of the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
MR. FREDERICK H. KOPKO, JR. AS THIRD CLASS
DIRECTOR.
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DIRECTORS CONTINUING IN OFFICE
EDWARD M. KOPKO DIRECTOR SINCE 1985 -- TERM EXPIRES IN 1999
Mr. Edward M. Kopko, age 42, has been the President and the Chairman of the
Board of Directors of the Company since its inception in November, 1985. Mr.
Kopko has also been the Chairman, President and Chief Executive Officer of
Butler Service Group, Inc. since 1989, and the chairman of other Butler
subsidiaries, devoting his full time to the business of Butler and its
subsidiaries. Mr. Kopko is currently the President and a member of the
Executive Committee of the National Technical Services Association, the
predominant trade association for the contract technical services industry. Mr.
Kopko holds a B.A. degree in economics from the University of Connecticut, an
M.A. degree in economics from Columbia University, and he undertook doctoral
work in economics at Columbia.
JOHN F. HEGARTY DIRECTOR SINCE 1985 -- TERM EXPIRES IN 2001
Mr. Hegarty, age 70, is the Secretary and a Director of UAS Automation
Systems, Inc. ("UAS"), a manufacturer of tile removal equipment. He has been a
director and officer of UAS since June, 1983, serving as its Chairman until
1990. Mr. Hegarty holds a Bachelor's degree in electrical engineering from
Manhattan College.
HUGH G. MCBREEN DIRECTOR SINCE 1986 -- TERM EXPIRES IN 2000
Mr. McBreen, age 42, is a partner of the law firm of McBreen, McBreen &
Kopko and has been associated with that firm since September, 1983. He is also
the Secretary of Peter J. McBreen and Associates, Inc., a risk management and
loss adjustment company. Mr. McBreen practices in the area of aviation law. He
received an A.B. degree from Dartmouth College and a J.D. degree from Notre Dame
Law School.
NIKHIL S. NAGASWAMI DIRECTOR SINCE 1994 -- TERM EXPIRES IN 1998
Mr. Nagaswami, age 40, has been an independent management consultant since
September, 1994, and is currently Managing Director of Uniexcel Management
Systems, Inc. From August, 1992 until August, 1994, he was associated with
Scott Paper Company, where he was Director-Corporate Planning and Analysis.
During 1990 through 1992, when he served as an independent advisor to the Board
of Directors of Butler, he played a key role in developing Butler's long-term
strategy, restructuring its operations, and implementing management processes.
Mr. Nagaswami received a Bachelors of Technology degree in metallurgy from the
Indian Institute of Technology, a Masters of Applied Science degree in materials
science and metallurgy from the University of Delaware, and an M.B.A. degree
from the Wharton School, University of Pennsylvania in financial management,
strategic planning and control.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors met eight times during 1996. The Board of Directors
has two standing committees, the Audit Committee and the Executive Compensation
Committee. The Company does not have a nominating committee of the Board of
Directors.
The Audit Committee consists of Messrs. Frederick H. Kopko, Jr., Hegarty,
McBreen, and Nagaswami. The functions of the Audit Committee are to review with
the Company's independent public auditors the scope and adequacy of the audit to
be performed by such independent public auditors; the accounting practices,
procedures, and policies of the Company; and to review all related party
transactions. The Committee met two times in 1996.
The Executive Compensation Committee consists of Messrs. Frederick H. Kopko,
Jr., Hegarty, McBreen, and Nagaswami. The Committee makes recommendations to
the Board with respect to salaries of employees and is responsible for
determining the amount and allocation of any incentive bonuses among the
employees. In addition, the Committee is authorized to grant stock options
under the Company's Incentive Stock Option Plans and Non-qualified Stock Option
Plans, awards under the Company's Stock Bonus Plan, and loans under the 1990
Employee Stock Purchase Plan to Company individuals who are not members of the
Board. The Committee met one time during 1996.
Each member of the Board attended at least 75% of the appropriate board and
committee meetings.
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DIRECTORS COMPENSATION
The directors of the Company, who are not also full-time employees of the
Company, receive a fee of $1,000 for attendance at each meeting of the Board of
Directors and $850 per Committee meeting attended. The directors waived payment
of compensation in the aggregate amount of $26,800 for Board and Committee
meetings held between January and April of 1996 as part of the Company's cost
reduction plan commenced in late 1995. The cash compensation resumed in May,
1996 and the amount paid to the four non-employee directors combined in 1996 was
$15,400. Directors who are not also employees have participated in the 1989
Directors Stock Option Plan, the 1990 Employee Stock Purchase Plan, the 1992
Stock Option Plan for Non-Employee Directors, and other option grants in prior
years.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, who are appointed by the Board of
Directors, hold office for one-year terms or until their respective successors
have been duly elected and have qualified. The executive officers of the
Company's subsidiaries, who are appointed by such subsidiaries' Boards of
Directors, hold office for one-year terms or until their respective successors
have been duly elected and have qualified.
EDWARD M. KOPKO is the Chairman of the Board of Directors and Chief
Executive Officer. (See "Directors Continuing in Office".)
WARREN F. BRECHT, age 64, has been Senior Vice President-Administration and
Secretary of the Company since November, 1995. He had been the Secretary of the
Company since its inception and the Vice President and Treasurer of the Company
since April, 1987. He concurrently became Senior Vice President -
Administration and Investor Relations of Butler Service Group, Inc. in August,
1990 and Secretary in January, 1993. Mr. Brecht received a B.A. degree in
economics from DePauw University and an M.B.A. degree from Harvard Business
School.
ROBERT F. MURPHY, age 36, has been Senior Vice President since November,
1995. He served as Vice President - Special Projects and Vice President -
Corporate Planning during the period August, 1990 to November, 1995; and was
Controller of the Company from September, 1988 through 1992. Mr. Murphy received
A B.A. degree from the State University of New York at Albany and is a Certified
Public Accountant.
MICHAEL C. HELLRIEGEL, age 43, was appointed Senior Vice President-Finance
and Treasurer in November, 1995 and also became the Chief Financial Officer of
the Company in April, 1996. Prior to that he had served as Vice President and
Controller of the Company since January, 1993 and of Butler Service Group, Inc.
since August, 1988. Mr. Hellriegel received a B.S. degree from St. Peter's
College and an M.B.A. degree, with a concentration in finance, from Fairleigh
Dickinson University. He is a Certified Public Accountant.
R. SCOTT SILVER-HILL, age 43, has been Senior Vice President-Domestic
Operations since November, 1995. He served as a Senior Vice President in the
Contract Technical Services Division from August, 1990 to November, 1995 and was
a Vice President in the Contract Technical Services Division from February, 1988
to August, 1990. Mr. Silver-Hill received B.A. degrees from the University of
California at Santa Barbara in history and political science with an emphasis in
public administration.
HARLEY R. FERGUSON, age 60, has been Senior Vice President and Chief
Information Officer of the Company since April, 1995 when he joined the
Company. Mr. Ferguson was Vice President of O/E Systems from 1994 through 1995
where he directed the Management Information Systems Department. From 1985 to
1994 he was Senior Vice President of Kelly Services, Inc. Mr. Ferguson received
a Bachelor of Science degree in mathematics and physics from Carleton
University, Ottawa, Canada.
3
PRINCIPAL STOCKHOLDERS
On March 31, 1997, the directors, current executive officers of the
Company, all persons known by the Company to be the beneficial owners of more
than 5 % of the Company's outstanding common stock, and all directors and
officers of the Company and its subsidiaries as a group, beneficially owned the
number of shares of the Company's common stock ("Common Stock") and Series B
convertible preferred stock set forth below. Unless otherwise stated, all
shares are held directly with sole voting and investment power. The business
address of the named stockholders is the address of the Company, except as
otherwise noted. Except as disclosed in the chart below, the Company knows of
no other person or group owning 5 % or more of any class of the Company's voting
securities.
SERIES B TOTAL EQUIVALENT
COMMON STOCK/1/ PREFERRED STOCK/2/ VOTING RIGHTS/3/
# OF SHARES # OF SHARES
BENEFICIALLY % OF BENEFICIALLY % OF # OF % OF
NAME OWNED CLASS OWNED CLASS SHARES TOTAL
Edward M. Kopko 350,330/4/ 5.4% 580,837 22.1%/5/ 931,167 10.3%
Frederick H. Kopko, Jr. 160,867/6/ 2.6% 619,806 23.6%/5/ 780,673 8.8%
Hugh G. McBreen 140,914/7/ 2.3% 634,155/8/ 24.1%/5/ 775,069 8.7%
John F. Hegarty 70,833/9/ 1.1% 324,003/10/ 12.3%/5/ 394,836 4.5%
Nikhil S. Nagaswami 40,000/11/ 0.6% -- -- 40,000 0.5%
Warren F. Brecht 40,983/12/ 0.7% -- -- 40,983 0.5%
Robert F. Murphy 54,543/13/ 0.9% -- -- 54,543 0.6%
Michael C. Hellriegel 26,398/14/ 0.4% -- -- 26,398 0.3%
R. Scott Silver-Hill 38,013/15/ 0.6% 35,410 1.3% 73,423 0.8%
Harley R. Ferguson 36,500/16/ 0.6% -- -- 36,500 0.4%
Hollybank Investments, L.P. 425,500/17/ 6.9% -- -- 425,500 4.8%
The Sachs Company 427,000/18/ 6.9% -- -- 427,000 4.9%
All directors and officers
as a group (20 persons)/19/ 1,056,137/20/ 15.2% 2,194,211 83.5% 3,250,348 33.9%
1 Assumes exercises of options and warrants.
2 Series B Preferred Stock consists of 2,627,025 outstanding shares and has
one vote per share, convertible into shares of Common Stock at a rate of
.285 per share of Series B Preferred Stock.
3 Does not assume conversion of Series B Preferred Stock
4 Includes 63 shares beneficially owned by Mr. Kopko's wife (as to which Mr.
Kopko disclaims beneficial ownership) and 290,833 shares that may be
purchased upon exercise of options granted under Butler stock option plans.
5 Messrs. Edward M. Kopko, Frederick H. Kopko, Jr., Hugh G. McBreen and John
F. Hegarty have filed a Schedule 13D with respect to their purchases of
Series B Preferred Stock. The reporting persons disclaim the existence of
a "group" under Section 13(d) of the Exchange Act.
6 Includes 28,333 shares that may be purchased upon exercise of options
granted under Butler stock option plans and 90,000 shares that may be
purchased by Mr. Kopko's wife upon exercise of certain additional warrants
(as to which Mr. Kopko disclaims beneficial ownership). The business
address of Mr. Kopko is 20 North Wacker Drive, Suite 2520, Chicago, IL
60606.
7 Includes 3,625 shares beneficially owned by Mr. McBreen's children (as to
which Mr. McBreen disclaims beneficial ownership), 28,333 shares that may
be purchased upon exercise of options granted under Butler stock option
plans and 60,000 shares that may be purchased upon exercise of certain
additional warrants. The business address of Mr. McBreen is 20 North
Wacker Drive, Suite 2520, Chicago, IL 60606.
8 Includes 57,993 shares beneficially owned by Peter J. McBreen and
Associates (as to which Mr. McBreen disclaims beneficial ownership).
4
9 Includes 58,333 shares that may be purchased upon exercise of options
granted under Butler stock option plans.
10 Includes 48,958 shares beneficially owned by Mr. Hegarty's wife (as to
which Mr. Hegarty disclaims beneficial ownership).
11 Consists of 40,000 shares that may be purchased upon exercise of options
granted under the 1992 Stock Option Plan for Non-Employee Directors.
12 Includes 20,000 shares that may be purchased upon exercise of options
granted under Butler stock option plans.
13 Includes 38,834 shares that may be purchased upon exercise of options
granted under Butler stock option plans.
14 Includes 17,500 shares that may be purchased upon exercise of options
granted under Butler stock option plans.
15 Includes 33,333 shares that may be purchased upon exercise of options
granted under Butler stock option plans.
16 Consists of 4,000 shares beneficially owned by Mr. Ferguson's wife (as
to which Mr. Ferguson disclaims beneficial ownership) and 32,500 shares
that may be purchased upon exercise of options granted under Butler
stock option plans..
17 Based on publicly available information reported on April 1, 1996,
Dorsey R. Gardner, the general partner of Hollybank Investments, L.P.
("Hollybank"), may also be deemed to beneficially own the 425,500 shares
beneficially owned by Hollybank. Except to the extent of his interest as
a limited partner in Hollybank, Mr. Gardner expressly disclaims such
beneficial ownership. Mr. Gardner also beneficially owns 62,350 shares
on an individual basis. The business address of Hollybank is One
Financial Center, Suite 1600, Boston, MA 02111.
18 Based on publicly available information reported on February 12, 1997,
Morton H. Sachs & Company d/b/a The Sachs Company and Morton Sachs
beneficially own 427,000 shares of the Company's Common Stock. The
business address of Morton H. Sachs & Company d/b/a The Sachs Company
and Morton Sachs is 1346 S. Third Street, Louisville, KY 40208.
19 Includes the officers of the Company and its principal subsidiaries.
20 Includes 642,499 shares that may be purchased upon exercise of options
granted under Butler stock option plans and 150,000 shares that may be
purchased upon exercise of various warrants.
EXECUTIVE COMPENSATION
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee") oversees the
executive compensation policies and programs of the Company, including executive
and certain non-executive officers. The Company's executive compensation
programs are intended to attract and retain qualified executives and to motivate
them to achieve goals that will lead to appreciation of stockholder value. A
significant portion of each executive's compensation is dependent upon the
Company's profitability and the appreciation in the market price of the
Company's common stock. Achievement of certain other corporate goals and
individual performance objectives also impact executive compensation.
The main components of executive compensation are: base salary, annual
incentive cash bonus, and longer term equity-based incentive compensation. The
Committee periodically reviews independent surveys, compensation trends, and
competitive factors in making judgments on the appropriate compensation package
for each executive employee. The Compensation Committee's decisions also
acknowledge that Butler's Retirement Program is modest compared with many other
companies.
EXECUTIVE EMPLOYMENT AGREEMENTS: In mid-1989, Edward M. Kopko assumed the
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dual responsibilities of Chairman of the Company and President and CEO of Butler
Service Group, Inc., and the position of Chief Operating Officer of Butler
Service Group was eliminated. An employment agreement was executed with Mr.
Kopko in December, 1991. Mr. Kopko's base salary and cash bonus were predicated
in part on the base salary and cash bonus formula of his predecessor as
President and CEO/COO of Butler Service Group, and partly on his broader
responsibilities as Chairman and CEO of the public company, Butler
International, Inc. The terms of Mr. Kopko's employment agreement are set forth
below under "Employment Agreements".
Michael C. Hellriegel, the Company's Senior Vice President--Finance,
Treasurer, and Chief Financial Officer entered into a new employment agreement
effective January 1, 1996, as authorized by the Executive Compensation
Committee. R. Scott Silver-Hill,
5
the Company's Senior Vice President - Domestic Operations, entered into an
employment agreement effective July, 1991, as authorized by the Executive
Compensation Committee. Harley R. Ferguson, the Company's Vice President and
Chief Information Officer, entered into an employment agreement effective April,
1995, as authorized by the Executive Compensation Committee. The terms of these
employment agreements are set forth below under "Employment Agreements".
BASE SALARY: The salaries of the other executive and non-executive
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officers within the purview of the Committee are based on a periodic review of
surveys of companies of comparable size and complexity. In certain cases, the
Company has hired executive talent from outside, and both base pay and other
compensation elements have been determined with the guidance of the executive
search firm used for that purpose. Except for certain equity adjustments or a
significant increase in responsibilities, annual salary increases are generally
limited to cost of living adjustments.
According to independent surveys, including particularly the Wyatt Data
Services Compensation Surveys All Industries (Excluding Financial Services and
Non Profit Organizations) and the Mercer Information Systems Compensation
Survey, the combined base salaries of the Company's officers as a group,
including the named executive officers, are 7% below the median and nearly 14%
below the average for their positions and company size, based on revenues. Mr.
Kopko's base salary individually is 1% below the median and 10% below the
average for his position and company size. The Wyatt Survey was used because it
covers a much larger number and variety of companies than in the Peer Group,
including over 100 companies in the Company's revenue range.
ANNUAL INCENTIVE CASH BONUS: Each executive officer and certain
---------------------------
non-executive officers are eligible to participate in an annual cash bonus plan.
A contractual agreement is reached early in the year, with each such officer to
be given the opportunity to earn a cash bonus based in part on the achievement
of profitability and in part on the accomplishment of two or three key
individual, department, or business unit objectives that are believed to be
vital to the Company's success. The financial objectives are generally based on
operating income of the Company as a whole, or of a business unit, division or
region--rather than on target thresholds. The mix between financial and
non-financial objectives depends upon the nature of each executive's
responsibilities. An officer with bottom line responsibility typically has a
greater portion of incentive bonus tied to the operating profit of his or her
group. However, all executive officers and non-executive officers have some
portion of their bonus dependent upon the successful completion of non-financial
objectives such as specific projects for their group and/or individually.
The bonuses awarded in 1996 to the officers (other than the CEO) reflect
the mix of corporate, department and individual performance achieved, and are
generally significantly higher than 1995 because of the Company's record
earnings in 1996 compared with a net loss in 1995. This is consistent with the
Committee's intent to tie pay closely to performance. Likewise, Mr. Kopko
received a substantially higher bonus in 1996 for his achievement in leading the
Company to record earnings for that year. Mr. Kopko's bonus was based primarily
on a formula which is a percentage of operating income as defined in his
employment agreement as amended (approximately 83% of the total bonus), and the
balance equal to 25% of the base salary based on the achievement of certain key
objectives. These objectives included a migration to higher margin business,
increasing shareholder value, implementation of an automated system for greater
productivity in the sales and recruiting functions, introducing a formal
efficiency program to control costs and increase profits, reducing the accounts
receivable balance and interest expense, customer satisfaction, employee
satisfaction, and quality improvements.
LONGER-TERM EQUITY-BASED INCENTIVE COMPENSATION: The Company has several
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longer-term, equity-based plans whose purpose is to promote the interests of the
Company and its stockholders by encouraging greater management ownership of the
Company's Common Stock. Such plans provide an incentive for the creation of
stockholder value over the long term, since the full benefit of the compensation
package cannot be realized unless an appreciation in the price of the Company's
Common Stock occurs. Additionally, these plans strengthen the Company's ability
to attract and retain experienced and knowledgeable employees over a longer
period and to furnish additional incentives to those employees upon whose
judgment, initiative and efforts the Company largely depends.
These plans include the 1990 Employee Stock Purchase Plan, the 1985 and
1992 Incentive Stock Option Plans, the 1985 and 1992 Non-Qualified Stock Option
Plans. and the 1992 Stock Bonus Plan.
The 1990 Employee Stock Purchase Plan was designed to provide long-term
incentive compensation to officers, directors and key employees. The Plan
previously made available $2.5 million for loans to such officers, directors,
and key employees to purchase Company stock, the largest portion of which was
purchased on the open market. The Plan's primary purpose is to give such persons
a greater stake in the Company through increased stockholdings. The Plan was
implemented immediately following the adoption in August, 1990 of the Company's
long-term strategic plan developed with the guidance of Braxton Associates, the
strategic planning affiliate of Deloitte & Touche LLP. The Plan rewards
officers, directors, and key employees for achieving long range corporate goals
targeted in the Strategic Plan. The most important of these goals is the
achievement of targeted profitability levels that are sustained over a longer
period of time. The goals to be achieved under the Plan include or have included
the following: maximizing shareholder value,
6
increasing and sustaining profit margins, implementing cost reduction/cost
containment to improve the Company's efficiency and competitive position,
raising additional capital for internal growth and acquisitions, maintaining a
strong financial position, developing new growth objectives for each business
unit based on analysis of market potential, developing and achieving long-range
sales growth, corporate reorganization, restructuring and downsizing, geographic
reorganization at the field level, training and upgrading of the salesforce and
recruiters, and upgrading of systems and processes. Specific long-term goals
have been established each year for Mr. Kopko, as CEO. The goals for other
officers have varied depending on the officer's position.
With respect to the officers participating in the Plan, the Company may
reduce the amount due on each loan by 25% of the original principal balance on
successive anniversary dates of the loan. This reduction is subject to the
recommendation of the Committee, based on long-term performance of each officer
over the period that the officer was assigned responsibility for specific
objectives, and other factors that the Committee may determine at its
discretion, provided that the employee remains employed by the Company or one of
its subsidiaries on such anniversary dates, or has not terminated his employment
for other than a reason permitted by the Plan. The "Long Term Incentive Payout"
portion of executive compensation is the loan forgiveness. Although the Company
was marginally profitable in 1994, the Company did not achieve the profit
margins or the level of sustained profitability targeted by the Committee. Based
on not attaining the long-term goals for 1994, the 25% forgiveness was not
available to participants. In 1995, the Company incurred a significant net loss
and the Company's stock price declined in value. Consequently, the Committee
again determined to forego the 25% loan forgiveness in 1995. Even though 1996
was an excellent year with record profits, the stock price nearly doubling, and
a number of other goals and objectives being accomplished, the Committee noted
that the Employee Stock Purchase Plan is based on a long-term horizon and the
three years 1994 through 1996 taken together were below expectations. Therefore,
the Committee decided to wait until at least 1997 to forgive the remaining 25%
loan balance to assure themselves that the Company was on a continuing course of
growth and profitability. No new loans were granted in 1996.
The number of stock options currently held by an executive officer is
one factor taken into consideration in making new awards. The Committee also
believes it is important that the CEO and other senior officers have a
significant number of stock options whose value can provide a powerful incentive
to driving the Company's bottom line and stock performance. Stock option awards
are also based on an officer's level of responsibilities and expected
contribution, rather than following the achievement of certain targets. In July,
1996, 125,000 stock options were granted to the Chairman and CEO under the 1992
Non-Qualified Stock Option Plan. In December, 1996, a total of 30,000 incentive
stock options were awarded to seven officers, two of whom are listed executive
officers. In January, 1997, a total of 15,000 incentive stock options were
granted to two officers, both of whom are listed executive officers. With the
significant rise in the Company's stock price over the past year, all of the
option grants made in earlier years have increased in value as of March 31,
1997. The future value of all options will depend on the Company's success in
continuing to increase stockholder value.
Under the 1992 Stock Bonus Plan, the Committee may make awards of stock
to individuals who, in the Committee's judgment, have made significant
contributions to the Company or its subsidiaries. Such awards may be made on the
basis of preestablished goals, or to reward performance, or both. The Plan will
also serve to increase employee ownership in the Company and alignment with
stockholders, while conserving cash.
No stock bonus awards were made in 1996.
The Executive Compensation Committee believes that the executive
compensation policies and programs serve the interests of the stockholders. Such
compensation is intended to be a function of the Company's increase in profits
and share price value over a longer term perspective.
EXECUTIVE COMPENSATION COMMITTEE
John F. Hegarty
Frederick H. Kopko, Jr.
Hugh G. McBreen
Nikhil S. Nagaswami
7
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS/2/ PAYOUTS
SECURITIES LONG-TERM ALL
NAME & PRINCIPAL UNDERLYING INCENTIVE OTHER
POSITION YEAR SALARY $ BONUS $ OTHER $/1/ OPTIONS (#) PAYOUTS $/3/ COMPENSATION $/4/
Edward M. Kopko 1996 354,083 531,479 96,360 125,000 -- 55,094
President and 1995 338,171 86,605 96,967 -- -- 55,094
CEO 1994 329,621 395,999 47,015 -- -- 228
Warren F. Brecht 1996 145,388 40,000 2,646 -- -- 7,231
Sr. VP - Admin. 1995 142,538 28,508 2,646 -- -- 8,678
and Secretary 1994 139,144 34,786 2,646 -- -- 7,933
Michael C. 1996 138,592 63,358 1,074 -- -- 877
Hellriegel 1995 117,193 29,663 1,074 10,000 -- 1,094
Sr. VP - Finance,
Treasurer, and CFO 1994 115,391 29,662 1,074 -- -- 979
R. Scott Silver-Hill 1996 153,154 127,120 2,147 7,500 -- 1,030
Sr. VP Domestic 1995 145,493 64,055 2,147 10,000 -- 1,265
Operations 1994 139,898 69,470 2,147 -- -- 1,132
Harley R. Ferguson/5/ 1996 165,490 63,074 -- 7,500 -- --
Sr. VP and Chief 1995 110,299 34,536 -- 25,000 -- --
Information
Officer
1 Consists of imputed interest on loans to buy common stock of the
Company. For Mr. Kopko, in addition to imputed interest on such loans in
the amount of $24,589, includes tax gross-up on imputed interest and
insurance payments, in the amounts of $22,176 and $49,595, respectively.
2 No options were repriced during the last fiscal year or at any time
since the Company's inception.
3 Prior to the reported years, consisted of loan forgiveness under the
Company's 1990 Employee Stock Purchase Plan. See "Report of the
Executive Compensation Committee". No loan forgiveness was made
available to participants for the reported years.
4 Consists of imputed cost of Company-paid term life insurance. For 1995
and 1996, includes Company insurance payments of $54,992 for Mr. Kopko.
5 Mr. Ferguson's employment with the Company commenced in April, 1995.
EMPLOYMENT AGREEMENTS:
- ---------------------
In December, 1991, the Company entered into an employment agreement with
Edward M. Kopko, which continues in effect until three years after a notice of
termination is given by either party. Mr. Kopko is eligible for annual raises of
not less than 5 % of the prior year's salary, and an annual bonus of 5 % of the
Company's operating income of $3 million or less, plus 3 % of operating income
above $3.0 million, plus an amount based on the successful completion of
management objectives and other factors (as such terms are defined in the
Employment Agreement). Mr. Kopko's annual bonus is capped at twice his base
salary for any year. Mr. Kopko is entitled to benefits, including stock options
and payment of taxes on his behalf based on imputed income due to forgiveness by
the Company of notes by him to pay for stock purchases. If the Company breaches
its duty under the employment agreement, if Mr. Kopko determines in good faith
that his status with the Company has been reduced, or if, after a change in
control of the Company, Mr. Kopko determines in good faith that the financial
prospects of the Company have significantly declined, Mr. Kopko may terminate
his employment and receive all salary and bonus owed to him at that time, pro
rated, plus three times the highest annual salary and bonus paid to him in the
three years immediately preceding the termination.
8
In January, 1996, the Company entered into an employment agreement with
Michael C. Hellriegel. Mr. Hellriegel'semployment agreement is terminable by
either party with four months prior notice. Mr. Hellriegel is eligible for
bonuses of up to 30% of his base salary, based on the Company obtaining
specified management objectives (as defined) and other factors and a provision
for an additional bonus based on over-achievement of operating plan. The
employment agreement provides that if Mr. Hellriegel's employment is terminated
other than for cause, he would be entitled to four months salary. The agreement
provides that Mr. Hellriegel will not compete with the Company for a period of
one year after termination of employment.
In July, 1991, the Company entered into an employment agreement with R.
Scott Silver-Hill. Mr. Silver-Hill's employment agreement is terminable by
either party with six months prior notice. Mr. Silver-Hill is eligible for
bonuses of up to 50% of his base salary, based on the Company obtaining
specified management objectives (as defined) and other factors and a provision
for an additional bonus based on over-achievement of operating plan. The
employment agreement provides that if Mr. Silver-Hill's employment is terminated
other than for cause, he would be entitled to six months salary. The agreement
provides that Mr. Silver-Hill will mot compete with the Company for a period of
one year after termination of employment.
In April, 1995, the Company entered into an employment agreement with
Harley R. Ferguson. Mr. Ferguson's employment agreement is terminable by either
party with six months prior notice. Mr. Ferguson is eligible for bonuses of up
to 25% of his base salary, based on the Company obtaining specified management
objectives (as defined) and other factors and a provision for an additional
bonus based on over-achievement of operating plan. The employment agreement
provides that if Mr. Ferguson's employment is terminated other than for cause,
he would be entitled to six months salary. The agreement provides that Mr.
Ferguson will not compete with the Company for a period of one year after
termination of employment.
OPTIONS GRANTED IN 1996
INDIVIDUAL GRANTS
% OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO GRANT DATE
UNDERLYING OPTIONS EMPLOYEES IN FISCAL EXERCISE EXPIRATION PRESENT
NAME GRANTED YEAR PRICE DATE/3/ VALUE/4/
Edward M. Kopko 125,000/1/ 80.6% $7.13 7/16/06 $428,835
R. Scott
Silver-Hill 7,500/2/ 4.8% $9.63 12/16/06 $34,105
Harley R. Ferguson 7,500/2/ 4.8% $9.63 12/16/06 $34,105
1 Consists of options granted under the 1992 Non-Qualified Plan on July
16, 1996, of which options to purchase 25,000 shares were exercisable on
the grant date, and of which options to purchase 25,000 shares will be
exercisable on each of July 16, 1997, July 16, 1998, July 16, 1999 and
July 16, 2000. Exercise of Mr. Kopko's option is subject to satisfactory
financial performance of the Company, along with the achievement of
certain key objectives.
2 Consists of options granted under the 1992 Incentive Stock Option Plan
on December 16, 1996, of which 2,500 will be exercisable on December 16,
1997, December 16, 1998 and December 16, 1999.
3 These options could expire earlier in certain situations such as an
individual's termination of employment with the Company.
4 The estimated fair value of stock options is measured at the date of
grant using the Black-Scholes option pricing model based on the
following assumptions: expected stock price volatility of .43 based on
the average weekly closing price of the Company's Common Stock for 1996;
expected term to exercise of approximately 6.8 years; and interest rates
equal to the U.S. Treasury Note rates in effect at the date of grant
(6.87% for Mr. Kopko and 6.30% for Mr. Silver-Hill and Mr. Ferguson).
The actual value, if any, an individual may realize will depend on the
excess of the stock price over the exercise price on the date the option
is exercised. Consequently, there is no assurance the value realized
will be at or near the value estimated above.
9
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996/1/
AND 1996 YEAR-END OPTION VALUES
# OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT 1996 YEAR-END
AT 1996 YEAR-END
NAME OF INDIVIDUAL EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Edward M. Kopko/2/ 166,833 124,000 $781,065 $452,900
Warren F. Brecht/3/ 20,000 -- $96,548 --
Robert F. Murphy/4/ 25,834 5,000 $128,946 $29,375
Michael C.
Hellriegel/5/ 5,000 5,000 $29,375 $29,375
R. Scott
Silver-Hill/6/ 20,833 12,500 $131,527 $34,063
Harley R.
Ferguson/7/ 6,250 26,250 $25,781 $82,031
1 No shares were acquired upon exercise of options during Fiscal Year
1996.
2 Consists of non-qualified stock options to purchase 22,500 shares,
granted in 1986 and 1987 at an option price of $10.02 per share;
incentive stock options to purchase 83,333 shares, granted in September,
1990 at an exercise price of $4.40 per share; an option to purchase
60,000 shares under the 1992 Incentive Stock Option Plan, granted on
August 2, 1993, at an exercise price of $4.40 per share, with one-fifth
exercisable on February 2, 1994 and the balance exercisable on four
successive anniversary dates; and an option to purchase 125,000 shares
under the 1992 Non-Qualified Plan, granted on July 16, 1996, at an
exercise price of $7.125 per share, with one-fifth exercisable on July
16, 1996 and the balance exercisable on four successive anniversary
dates. Exercise of Mr. Kopko's option is subject to satisfactory
financial performance of the Company, along with the achievement of
certain key objectives.
3 Consists of non-qualified stock options to purchase 4,167 shares,
granted in 1988 at an exercise price of $10.02 per share; incentive
stock options for 8,333 shares, granted in September, 1990 at an
exercise price of $4.40 per share; and an incentive stock option to
purchase 7,500 shares granted under the 1992 ISOP on August 2, 1993 at
an exercise price of $4.00 per share.
4 Consists of incentive stock options to purchase 1,667 shares granted in
November, 1988 at an exercise price of $3.37 per share; incentive stock
options for 4,167 shares granted in September, 1990 at an exercise price
of $4.40 per share; incentive stock options for 5,000 shares granted in
August, 1993 at an exercise price of $4.00 per share; incentive stock
options for 10,000 shares granted in February, 1995 at an exercise price
of $7.00 per share and incentive stock options for 10,000 shares granted
in December, 1995 at an exercise price of $4.38 per share, of which
2,500 are exercisable on each of June 7, 1996, December 1, 1996,
December 1, 1997, and December 1, 1998.
5 Consists of incentive stock options to purchase 10,000 shares granted in
December, 1995 at an exercise price of $4.38 per share, of which 2,500
are exercisable on each of June 7, 1996, December 1, 1996, December 1,
1997, and December 1, 1998.
6 Consists of incentive stock options for 8,333 shares, granted in
September, 1990 at an exercise price of $4.40 per share; incentive stock
options for 7,500 shares, granted in January, 1993 at an exercise price
of $3.13 per share; incentive stock options for 10,000 shares granted in
December, 1995 at an exercise price of $4.38 per share, of which 2,500
are exercisable on each of June 7, 1996, December 1, 1996, December 1,
1997, and December 1, 1998; incentive stock options for 7,500 shares
granted in December, 1996 at an exercise price of $9.63 per share, of
which 2,500 become exercisable on December 16, 1997, December 16, 1998
and December 16, 1999.
7 Consists of incentive stock options for 25,000 shares granted in March,
1995 at an exercise price of $6.13 per share, of which 6,250 became
exercisable on January 2, 1996 and 6,250 become exercisable on January
2, 1997, January 2, 1998, and January 2, 1999; incentive stock options
for 7,500 shares granted in December, 1996 at an exercise price of $9.63
per share, of which 2,500 become exercisable on December 16, 1997,
December 16, 1998 and December 16, 1999.
10
RETIREMENT PLAN
Staff employees of the Company, including the executive officers
referred to in the Summary Compensation Table, are entitled to participate in
the Butler Service Group, Inc. Defined Benefit Plan (the "Plan"), which is a
non-contributory, defined benefit retirement plan. Retirement benefits are
computed on the basis of a specified percentage of the average monthly base
compensation (during any 60 consecutive months of an employee's final 120 months
of employment which results in the highest average) multiplied by the employee's
years of credited service. The Plan provides for several optional forms of
benefit payment including a straight life annuity, a 50% joint and survivor
annuity, a period certain annuity, and a lump sum. Retirement benefits are in
addition to benefits payable from Social Security. Normal retirement age is 65,
although benefits may begin as early as age 55 with ten years of service. A
pension benefit is vested after five years of service.
As of December 31, 1996, the following executive officers of the Company
have the following years of credited service for retirement compensation
purposes: Mr. Kopko--11, Mr. Brecht-11, Mr. Murphy--8, Mr. Hellriegel--15, Mr.
Silver-Hill--15, and Mr. Ferguson--2. The Defined Benefit Plan was frozen as of
December 31, 1996. The following table shows the estimated annual retirement
benefits payable assuming that retirement occurs at age 65. The annual earnings
used to determine pension in the following table is shown in the Salary column
of the Summary Compensation Table.
AVERAGE ANNUAL EARNINGS FOR PENSION PLAN TABLE
THE HIGHEST CONSECUTIVE 60 MONTHS YEARS OF SERVICE
----------------------------------------
OF LAST 120 MONTHS PRIOR TO 1/1/97 10 15 20 25
----------------------------------------
$100,000........... $11,532 $17,298 $23,064 $28,830
$150,000*......... $17,532 $26,298 $35,064 $43,830
*Salary limited by terms of Plan and the law to $150,000 as of January 1, 1994.
For Mr. Kopko, the compensation used for service prior to 1994 is $235,840.
The above pensions are offset by pension equivalents from two other
plans: (1) The Company sponsored Employee Stock Ownership Plan ("ESOP"); and (2)
Pensions purchased from Nationwide Insurance Company due to termination of
predecessor plan.
The ESOP has approximately 58,000 shares of the Company's stock. The
shares of stock were allocated to employees over seven years beginning in 1987
and ending in 1993.
Effective January 1, 1997, a new retirement plan is being implemented
for staff employees, including the executive officers referred to in the Summary
Compensation Table. The new plan is based on a partial Company matching
contribution for staff employees who participate in the Company's 401(k)
Retirement Savings Plan.
PERFORMANCE GRAPH
COMPARISON FIVE-YEAR CUMULATIVE TOTAL RETURN
FISCAL YEAR ENDING
Company 1991 1992 1993 1994 1995 1996
- ------- ---- ---- ---- ---- ---- ----
Butler
International 100 87.71 126.31 168.41 150.86 287.70
Peer Group 100 127.97 183.19 295.94 350.79 548.46
Broad Market 100 100.98 121.13 127.17 164.96 204.98
Assumes $100 invested on Jan. 1, 1992; assumes dividend reinvested; fiscal
year ending Dec. 31, 1996.
Peer Group: CDI Corporation, Joule, Inc., and Volt Information Sciences,
Inc., weighted by market capitalization at the beginning of each period for
which a return is indicated. Dycom Industries, Inc. and Mastec, Inc., which were
included in previous years' peer group are no longer in the same line of
business as the Company.
11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Audit Committee and the Executive Compensation Committee of the Board of
Directors consist of Messrs. Frederick H. Kopko, Jr., Hegarty, McBreen, and
Nagaswami.
During 1996, the Company paid or accrued $519,000 in legal fees and
expenses to McBreen, McBreen & Kopko, of which Messrs. Frederick H. Kopko and
McBreen are partners.
On January 30, 1987, the Company loaned the sum of $201,600 to Frederick
H. Kopko, Jr. to purchase 11,200 shares of Common Stock from the Company. The
demand loan bears interest at the prime rate and the balance as of December 31,
1996, was $105,629.
Messrs. Frederick H. Kopko, Jr., Hegarty, and McBreen previously
executed, in 1990 and 1991, non-interest bearing notes totaling approximately
$569,450, $569,450, and $494,300, respectively, to purchase shares of Common
Stock under various stock purchase and option plans. Pursuant to such plans, the
above-named individuals purchased 97,187, 97,449, and 89,715 shares of Common
Stock, respectively. In May 1995, Frederick H. Kopko, Jr. and Hugh G. McBreen
executed non-interest bearing notes, in the amounts of $142,500 each, to
purchase 60,000 shares of Common Stock each pursuant to the 1992 Stock Option
Plan for Non-Employee Directors.
Except as noted, the full principal amount of each loan set forth above
is currently outstanding and has been outstanding since the date of the loans.
All of the loans set forth above are currently collateralized by all of the
Series B Preferred Stock held by each director.
CERTAIN TRANSACTIONS
Edward M. Kopko previously executed, in 1990 and 1991, non-interest
bearing notes totaling $684,000 to purchase 172,222 shares of Common Stock under
various stock purchase and option plans. The outstanding aggregate balance of
the loans on December 31, 1996, and the largest aggregate principal amount of
the loans outstanding during 1996, was $308,250.
PROPOSAL 2: PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN,
1992 INCENTIVE STOCK OPTION PLAN, AND 1992 STOCK BONUS PLAN
TO INCREASE THE NUMBER OF SHARES AVAILABLE TO BE GRANTED
The Board of Directors recommends the adoption of an amendment to the
Company's 1992 Stock Option Plan (the "Non-Qualified Plan"), 1992 Incentive
Stock Option Plan (the "ISOP"), and 1992 Stock Bonus Plan ("Stock Bonus Plan").
The purpose of the Non-Qualified Plan, the ISOP and the Stock Bonus Plan
is to promote the interests of the Company and its stockholders by strengthening
the Company's ability to attract and retain experienced and knowledgeable
employees and to furnish additional incentives to those employees upon whose
judgment, initiative and efforts the Company largely depends. Since January 1,
1993, the Company has granted options for 506,500 shares under these three plans
and canceled 81,250 options, leaving a balance available of 574,750. The Board
of Directors recommends an increase in the aggregate number of shares that may
be subject to options under all three plans by 240,000 shares. This will afford
the Company the flexibility to make awards deemed necessary during the coming
year.
Copies of the proposed Non-Qualified Plan, the proposed ISOP, and the
proposed Stock Bonus Plan (collectively, "Employee Plans") are available upon
request to the Secretary of the Company. The following is a summary of the
Employee Plans.
DESCRIPTION OF THE NON-QUALIFIED PLAN
- -------------------------------------
The Non-Qualified Plan permits the Executive Compensation Committee (the
"Committee"), consisting of at least two members of the Board of Directors who
are not employees of the Company and who are appointed to the Committee from
time to time by the Board of Directors, to grant common stock options to
individuals who, in the judgment of the Committee, have made significant
contributions to the Company or any subsidiary thereof (including directors and
officers who are full or part-time employees of the Company, but excluding
directors who are not employees of the Company). Options granted under the
Non-Qualified Plan are not intended to qualify as "incentive stock options"
under the Code. The Non-Qualified Plan provides that the maximum term of an
option
12
granted under the Non-Qualified Plan is ten years and that the exercise price of
options granted under the Non-qualified Plan will be not less than 100% of the
fair market value on the date of grant.
DESCRIPTION OF THE ISOP
- -----------------------
The ISOP permits the Committee to grant common stock options to
individuals who, in the judgment of the Committee, have made significant
contributions to the Company or any subsidiary thereof (including directors and
officers who are full or part-time employees of the Company, but excluding
directors who are not employees of the Company).
It is intended that all options granted under the ISOP will qualify as
"incentive stock options" under Section 422 of the Internal Revenue Code of 1986
(the "Code"). If any such options are issued, they may be exercised at a price
that is not less than the fair market value of the stock on the day the option
is granted; provided that, if on the date of any grant the recipient holds more
than 10% of the combined voting power of all classes of the Company's stock or
of any parent or subsidiary of the Company, the exercise price must be at least
110 % of the fair market value of the stock on the day the option is granted.
The ISOP provides that the maximum term of an option granted under the ISOP is
ten years from the date of grant. The aggregate fair market value of the stock
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year may not exceed $100,000.
PROVISIONS COMMON TO THE NON-QUALIFIED PLAN AND THE ISOP
- --------------------------------------------------------
Payment of the option exercise price in either the Non-Qualified Plan or
the ISOP may be in cash, by check, or with the consent of the Committee, by a
non-interest bearing promissory note up to the limit permitted under the Federal
Reserve Board Regulations, of term no greater than seven years, which shall be
secured by a pledge of the shares to be acquired upon exercise of the option. In
addition, payment for shares purchased under an option may, with the consent of
the Committee, be made, in whole or in part by tendering shares of Common Stock,
valued at the fair market value, in lieu of cash.
No option granted under either of the plans will be valid if not granted
before January 1, 2003. There is no formula for determining the numbers of
options to be granted under either of the plans. Any grants of options will
reflect the Committee's judgment (in its sole discretion) of the relative value
of the contribution of the grantee in respect to such matters as revenue
production and expense control.
The Board of Directors may, insofar as permitted by law, from time to
time, with respect to any shares of stock at the time not subject to outstanding
options, suspend or discontinue either the Non-Qualified Plan or the ISOP or
revise or amend them in any respect whatsoever except that, without approval of
the holders of a majority of Common Stock, no such revision or amendment shall
change the number of shares of stock subject to such plan (except as permitted
under certain limited circumstances), change the designation of the class of
employees eligible to receive options, remove the administration of such plan
from the Committee, or render any member of the Committee eligible to receive an
option under such plan while serving thereon.
DESCRIPTION OF THE STOCK BONUS PLAN
- -----------------------------------
The Stock Bonus Plan provides that the Committee may make awards of
stock to individuals who, in the judgment of the Committee, have made
significant contributions to the Company or any subsidiary thereof (including
directors and officers who are full or part-time employees of the Company, but
excluding directors who are not employees of the Company). Awards may be made by
the Committee on the basis of pre-established goals, or to reward performance,
or both. For example, the Committee may identify persons who may become eligible
for a stock award under the Plan, and establish certain goals or targets which,
if met, will entitle the persons so selected to receive such stock. Similarly,
the Committee may identify those persons who have made significant contributions
to the Company and, therefore, are deserving of special awards for their
efforts. Members of the Committee may not receive awards under the Plan. The
Plan will also serve to increase employee ownership in the Company and alignment
with stockholders, while conserving cash.
Upon the receipt of a stock award, the participant must present his
award certificate within 30 days to the Company. If a participant's employment
with the Company is terminated for any reason, other than by death or
disability, prior to the issuance of the shares, the award is deemed to have
lapsed and the shares may become subject to future awards. If a participant dies
or becomes disabled prior to the issuance of the shares, then the award may be
presented by the participant or his personal or legal representative at any time
within six months after the date of the award. Except upon death, the award is
not transferable. Consistent with the interests of the Company in increasing
employee stock ownership, shares acquired under the Plan must be held for six
months following the date of receipt of the shares.
The Plan has a term of ten years, unless extended or earlier terminated
by the Board of Directors.
13
FEDERAL INCOME TAX CONSEQUENCES
- -------------------------------
With respect to options granted under the Non-Qualified Plan, generally
an optionee does not realize taxable income, and the Company will not be allowed
a deduction, upon the grant of a non-qualified stock option. However, the
difference between the option price and the fair market value of the stock on
the date the option is exercised will be taxable as ordinary income to the
optionee and will be deductible by the Company as compensation on such date.
Gain or loss on the subsequent sale of such stock will be eligible for capital
gain or loss treatment by the optionee and will have no federal income tax
consequences to the Company. Different rules may apply if an optionee, who is an
officer, director or more than 10% stockholder, exercises options within six
months of the grant date.
With respect to options granted under the ISOP, if the optionee does not
make a disqualifying disposition of stock acquired on exercise of such options,
no income for federal income tax purposes will result to such optionee upon the
granting or exercise of the option (except that the amount by which the fair
market value of the stock at the time of exercise exceeds the option price will
be a tax preference item under the alternative minimum tax), and in the event of
any sale thereafter, any amount realized in excess of his or her cost will be
taxed as long-term capital gain and any loss sustained will be long-term capital
loss. In such case, the Company will not be entitled to a deduction for federal
income tax purposes in connection with the issuance or exercise of the option. A
disqualifying disposition will occur if the optionee makes a disposition of such
shares within two years from the date of the granting of the option or within
one year after the transfer of such shares to him or her. If a disqualifying
disposition is made, the difference between the option price and the lesser of
(i) the fair market value of the stock at the time the option is exercised or
(ii) the amount realized upon disposition of the stock will be treated as
ordinary income to the optionee at the time of disposition and will be allowed
as a deduction to the Company.
With respect to the restricted stock bonus awards, the participant will
realize income in an amount equal to the fair market value of the shares on the
date of grant, and the Company will be allowed a tax deduction.
The described tax consequences are based on current laws, regulations
and interpretations thereof, all of which are subject to change. In addition,
the discussion is limited to federal income taxes and does not attempt to
describe state and local tax effects that may accrue to participants or the
Company.
PLAN BENEFITS
- -------------
As described above, the selection of the employees of the Company or
subsidiaries thereof who will receive grants under the Employee Plans is to be
determined by the Committee in its sole discretion. Therefore, it is not
possible to predict the amounts that will be received by particular employees.
In 1996, executive officers R. Scott Silver-Hill and Harley R. Ferguson received
aggregate options to purchase 15,000 shares of Common Stock under the 1992 ISOP;
employees who were not executive officers received aggregate options to purchase
15,000 shares of Common Stock under the 1992 ISOP. Edward M. Kopko, Chairman and
CEO, received options to purchase 125,000 shares of Common Stock under the 1992
Non-Qualified Plan. In January, 1997, executive officers Robert F. Murphy and
Michael C. Hellriegel received aggregate options to purchase 15,000 shares of
Common Stock under the 1992 ISOP. However, no dollar value is assigned to such
options because their exercise price was the fair market value of the underlying
Common Stock on the date of grant.
GENERAL
- -------
The Board of Directors believes that the granting of stock options and
stock bonuses is an effective way to allow the Company's officers and employees
to participate in the growth and profitability of the Company. The Board of
Directors further believes that it is important to increase the number of shares
available under the Non-Qualified Plan, the ISOP, and the Stock Bonus Plan in
order to maintain and improve the Company's ability to attract and retain key
personnel, and to serve as an incentive to such personnel to make extra efforts
to contribute to the success of the Company's operations.
The adoption of this amendment to the Non-Qualified Plan, the ISOP, and
the Stock Bonus Plan requires the approval of a majority of the votes cast by
holders of the shares of Common Stock and the Company's 7% Series B Cumulative
Preferred Stock, voting together as a single class, represented at the meeting
and entitled to vote. Shares may be voted for or withheld from this matter.
Under a recent Securities and Exchange Commission ruling, shares entitled to
cast votes on this matter at the meeting which are withheld from this matter
will be treated for all purposes relevant to this matter as being present at the
meeting and entitled to vote and thus will have the same effect as a vote of
such shares against this matter. Shares entitled to cast votes on this matter at
the meeting which are the subject of a broker non-vote on this matter will be
treated for quorum purposes relevant to this matter as being present at the
meeting and
14
entitled to vote but not be so treated in determining whether a majority of
other required percentage of the shares present and entitled to vote on the
matter has been obtained.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2
AMENDING THE 1992 NON-QUALIFIED STOCK OPTION PLAN, THE 1992 INCENTIVE STOCK
OPTION PLAN, AND THE 1992 STOCK BONUS PLAN.
PROPOSAL 3: PROPOSAL TO AMEND THE
1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
TO INCREASE THE NUMBER OF SHARES SUBJECT TO OPTIONS
The Board of Directors recommends the adoption of an amendment to the
Company's 1992 Stock Option Plan for Non- Employee Directors (the "Plan").
The purpose of the Plan is to promote the interests of the Company and
its stockholders by strengthening the Company's ability to attract and retain
experienced and knowledgeable non-employee directors and to encourage them to
acquire an increased proprietary interest in the Company. The Plan is
administered by the Board of Directors (the "Board"). The Plan, as previously
amended, provides for a grant of options to each non-employee director on the
day following the 1992 Annual Meeting and on the day following each subsequent
annual meeting to purchase 10,000 shares of Common Stock at an exercise price
equal to the fair market value on the date of grant. The Plan further provides
that a newly elected non-employee director will receive an additional one-time
grant of options to purchase 10,000 shares of Common Stock on the day following
the meeting of his or her initial election at an exercise price equal to the
fair market value on the date of grant.
The Company recommends an increase in the aggregate number of shares
that may be subject to options under the Plan by an additional 60,000 shares,
and the grant to each director of options to purchase an additional 2,000 shares
of common stock, on the day following each annual meeting, at an exercise price
equal to the fair market value on the date of grant. These amendments will
provide for options to be granted following the 1998 Annual Meeting on the same
terms as options granted following the 1997 Annual Meeting. It will also permit
options to be granted if a new Board member is elected in the future, although
the Company does not have any current plans to nominate a new Board member.
The text of the proposed Plan is available from the Secretary of the
Company. The following is a summary of the Plan, as amended.
Payment of the option exercise price may be in cash, by delivery of
previously owned Common Stock having a fair market value equal to the option
price, by a combination of cash and stock, or by a non-interest bearing
promissory note, of term not greater than seven years, secured by a pledge of
the shares of common stock to be acquired upon exercise of the option.
All options granted under the Plan are non-statutory -- not intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended. The
federal income tax consequences are similar to those described above with
respect to the Non-Qualified Plan.
If an optionee ceases to be a director before an option vests, the
option is forfeited. Each option expires ten years from the date of its grant.
Outstanding options will expire earlier if an optionee terminates service as a
director other than by reason of retirement, total disability or death. In those
events, the option will then expire one year from the date of death or
termination or on the stated grant expiration date, whichever is earlier.
Options are not assignable during the lifetime of the optionee. Options that are
forfeited or terminated will again be available for grant. Shares may be
authorized but unissued, currently held or reacquired shares.
The Board may amend, terminate or suspend the Plan at any time, provided
that no amendment regarding amount, price or timing of the grants may be made
more than once every six months other than to comport with changes in certain
Securities Exchange Act and Internal Revenue Code requirements. Amendments that
would materially increase the number of shares that may be issued, materially
modify the requirements as to eligibility for Plan participation, or materially
increase the benefits to Plan participants must be approved by stockholders.
Under the Plan, each of the four non-employee directors will receive
options to purchase 12,000 shares of Common Stock on May 9, 1997. However, no
dollar value is assigned to the options because their exercise price will be the
fair market value of the Common Stock on the date of grant.
15
The adoption of this amendment to the 1992 Stock Option Plan for
Non-Employee Directors requires the approval of a majority of the votes cast by
holders of the shares of Common Stock and the Company's 7% Series B Cumulative
Preferred Stock, voting together as a single class, represented at the meeting
and entitled to vote. Shares may be voted for or withheld from this matter.
Under a recent Securities and Exchange Commission ruling, shares entitled to
cast votes on this matter at the meeting which are withheld from this matter
will be treated for all purposes relevant to this matter as being present at the
meeting and entitled to vote and thus will have the same effect as a vote of
such shares against this matter. Shares entitled to cast votes on this matter at
the meeting which are the subject of a broker non-vote on this matter will be
treated for quorum purposes relevant to this matter as being present at the
meeting and entitled to vote but not be so treated in determining whether a
majority or other required percentage of the shares present and entitled to vote
on the matter has been obtained.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3,
AMENDING THE 1992 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
SECTION 16 (A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
the Common Stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Based on its review of the copies of such
forms received by it, the Company believes that, except as set forth below, all
filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with. Mr. McBreen filed four late
reports, with respect to four separate purchase transactions, in the aggregate
amount of 7,516 shares of Common Stock.
STOCKHOLDERS PROPOSALS
In order for a stockholder proposal to be considered for inclusion in
the Company's proxy statement and form of proxy relating to the 1998 Annual
Meeting of Stockholders, the proposal must be received by the Company no later
than December 5, 1997.
OTHER MATTERS
The Board of Directors has appointed the firm of Deloitte & Touche LLP
as independent public auditors to audit the financial statements of the Company
for the year ending December 31, 1997. Deloitte & Touche LLP have been the
auditors for the Company and its subsidiaries since the Company's inception.
Representatives of the firm are expected to be present at the annual meeting to
respond to stockholders' questions and to have the opportunity to make any
statements they consider appropriate.
The Board of Directors has at this time no knowledge of any matters to
be brought before this year's Annual Meeting other than those referred to above.
However, if any other matters properly come before this year's Annual Meeting,
it is the intention of the persons named in the proxy to vote such proxy in
accordance with their judgment on such matters.
GENERAL
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1996 is being mailed, together with this Proxy
Statement, to each stockholder. Additional copies of such Annual Report and of
the Notice of Annual Meeting, this Proxy Statement and the accompanying proxy
may be obtained from Morrow & Co., Inc., 909 Third Avenue, New York, New York
10022-4799, or from the Company. The Company has retained Morrow & Co., Inc. to
assist in the solicitation of proxies, primarily from brokers, banks and other
nominees, for an estimated fee of $3,750 plus expenses. The Company will, upon
request, reimburse brokers, banks and other nominees, for costs incurred by them
in forwarding proxy material and the Annual Report to beneficial owners of
Common Stock. In addition, directors, officers and regular employees of the
Company and its subsidiaries, at no additional compensation, may solicit proxies
by telephone, telegram or in person. All expenses in connection with soliciting
management proxies for this year's Annual Meeting, including the cost of
preparing, assembling and mailing the Notice of Annual Meeting, this Proxy
Statement and the accompanying proxy, are to be paid by the Company.
16
The Company will provide without charge (except for exhibits) to any
record or beneficial owner of its securities, on written request, a copy of the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended December 31, 1996, including the financial
statements and schedules thereto. Exhibits to said report will be provided upon
payment of fees limited to the Company's reasonable expenses in furnishing such
exhibits. Written requests should be directed to Cathy D. Shea, Assistant
Secretary of the Company, 110 Summit Avenue, Montvale, New Jersey, 07645.
In order to assure the presence of the necessary quorum at this year's
Annual Meeting, and to save the Company the expense of further mailings, please
date, sign and mail the enclosed proxy promptly in the envelope provided. No
postage is required if mailed within the United States. The signing of a proxy
will not prevent a stockholder of record from voting in person at the meeting.
By Order of the Board of Directors,
/s/ Warren F. Brecht
--------------------
Warren F. Brecht
Secretary
17
PROXY PROXY
BUTLER INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 8, 1997
The undersigned stockholder of BUTLER INTERNATIONAL, INC. hereby
appoints HUGH G. McBREEN, NIKHIL S. NAGASWAMI, AND WARREN F. BRECHT, each with
full power of substitution, as attorneys and proxies to vote all of the shares
of stock of said Company which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of said Company to be held on Thursday, May 8, 1997 at
4:00 p.m. at its headquarters facility, 110 Summit Avenue, Montvale, New Jersey,
or at any and all adjournments thereof, with all powers the undersigned would
possess if personally present, as indicated below, and for the transaction of
such other business as may properly come before said meeting or any and all
adjournments thereof, all as set forth in the April 3, 1997 Proxy Statement for
said meeting:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. Election of Director
___ FOR the nominee ___ WITHHOLD AUTHORITY to vote for the nominee,
Frederick H. Kopko, Jr. Frederick H. Kopko, Jr.
2. Proposal to amend the 1992 Stock Option Plan, 1992 Incentive Stock Option Plan, and 1992 Stock Bonus Plan.
___ FOR ___ AGAINST ___ ABSTAIN
3. Proposal to amend the 1992 Stock Option Plan for Non-Employee Directors.
___ FOR ___ AGAINST ___ ABSTAIN
A majority of the members of said Proxy Committee who shall be present
in person or by substitute at said meeting, or in case but one shall be present
then that one, shall have and exercise all of the powers of said Proxy
Committee.
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED
WILL BE VOTED FOR THE ELECTION AS DIRECTOR OF THE NOMINEE LISTED HEREIN; AND FOR
PROPOSALS 2 AND 3 AS DESCRIBED HEREIN. ON OTHER MATTERS THAT MAY COME BEFORE
SAID MEETING, THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED
PROXY COMMITTEE.
_____________________________________
_____________________________________
(Signature of Stockholder)
DATED:__________________________1997
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
OR NAMES APPEAR TO THE LEFT. IF THE
STOCK IS REGISTERED IN THE NAME OF MORE
THAN ONE PERSON, THE PROXY SHOULD BE
SIGNED BY ALL NAMED HOLDERS. WHEN
SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME OR BY
AUTHORIZED PERSON.