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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:
[ ] 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 14a-11(c) or Rule 14a-12
MFRI, INC.
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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.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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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 the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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MFRI, INC.
7720 LEHIGH AVENUE
NILES, ILLINOIS 60714
May 30, 1997
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of MFRI,
Inc. will be held at The Standard Club, 320 South Plymouth Court, Chicago,
Illinois on Friday, June 27, 1997, at 10:00 a.m., Chicago time, for the
following purposes:
1. to elect directors;
2. to vote upon the Amended and Restated 1994 Stock Option Plan; and
3. to transact such other business as may properly come before the
meeting.
By order of the Board of Directors,
MICHAEL D. BENNETT
Secretary
___________
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PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of MFRI, Inc. (the "Company") for
use at the annual meeting of stockholders to be held on June 27, 1997 and at
any adjournment thereof. Only stockholders of record at the close of business
on May 9, 1997 will be entitled to notice of and to vote at the meeting. The
Company had outstanding 4,965,729 shares of common stock as of the close of
business on March 31, 1997. There are no other voting securities. Each
stockholder is entitled to one vote per share for the election of directors, as
well as on other matters. If the accompanying proxy form is signed and
returned, the shares represented thereby will be voted; such shares will be
voted in accordance with the directions on the proxy form, or in the absence of
direction as to any proposal, they will be voted for such proposal; and it is
intended that they will be voted for the nominees named herein, except to the
extent authority to vote is withheld. The stockholder may revoke the proxy at
any time prior to the voting thereof by giving written notice of such
revocation to the Company, by executing and duly delivering a subsequent proxy
or by attending the meeting and voting in person.
In case any nominee named herein for election as a director is not
available when the election occurs, proxies in the accompanying form may be
voted for a substitute as well as for the other persons named herein. The
Company expects all nominees to be available and knows of no matters to be
brought before the meeting other than those referred to in the accompanying
notice of annual meeting. If, however, any other matters properly come before
the meeting, it is intended that proxies in the accompanying form will be
voted thereon in accordance with the judgment of the persons voting such
proxies.
The presence at the annual meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of common stock of the Company ("Common
Stock") shall constitute a quorum. Abstentions will be treated as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the stockholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
A plurality of the votes of the shares present in person or represented by
proxy at the meeting will be required to elect the directors. The favorable
vote of a majority of the shares present in person or represented by proxy at
the meeting will be required for the approval of the Amended and Restated 1994
Stock Option Plan.
In addition to the use of the mails, proxies may be solicited by
directors, officers, or regular employees of the Company in person, by
telegraph, by telephone or by other means. The cost of the proxy solicitation
will be paid by the Company.
The Company's fiscal years ended January 31, 1997, 1996 and 1995 are
referred to herein as 1996, 1995 and 1994, respectively.
This Proxy Statement and the form of proxy are first being mailed on June
2, 1997 to stockholders of the Company.
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PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 31, 1997, with respect to any
person who is known to the Company to be the beneficial owner of more than 5%
of the outstanding shares of common stock of the Company, the name and address
of such owner, the number of shares of common stock beneficially owned, the
nature of such ownership, and the percentage such ownership is of the
outstanding shares of Common Stock:
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
David Unger
7720 Lehigh Avenue
Niles, IL 60714 553,536(1) 11.1%
Henry M. Mautner
7720 Lehigh Avenue
Niles, IL 60714 456,688(2) 9.2%
Ryback Management Corporation
Adviser to the Lindner Funds
7711 Carondellet Avenue
P.O. Box 16900
St. Louis, MO 63105 386,000(3) 7.8%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 349,700(4) 7.0%
Kennedy Capital Management, Inc.
10829 Olive Boulevard
St. Louis, MO 63141 318,500(5) 6.4%
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(1) Includes 33,750 shares that are subject to stock options granted by the
Company that were exercisable on March 31, 1997 or which became
exercisable within 60 days thereafter. Includes 17,000 shares held in
joint tenancy with Reporting Person's spouse, 8,500 of which the Reporting
Person disclaims beneficial ownership of. Also includes 12,859 shares
owned by the Reporting Person's spouse all of which the Reporting Person
disclaims beneficial ownership of.
(2) Includes 33,750 shares that are subject to stock options granted by the
Company that were exercisable on March 31, 1997 or which became
exercisable within 60 days thereafter. Includes 3,000 shares held in
joint tenancy with Reporting Persons' spouse, 1,500 of which the Reporting
Person disclaims beneficial ownership of.
(3) According to a Schedule 13G dated January 27, 1997, Ryback Management is
an investment adviser to several investment companies including Lindner
Fund, Inc. Of the 386,000 shares beneficially owned by Ryback Management
341,000 shares are held by Lindner Growth Fund a registered investment
company.
(4) According to a Schedule 13G dated February 12, 1997, held in investment
advisory accounts of Heartland Advisors, Inc. As a result, various
persons have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the securities. The
interests of one such account, Heartland Value Fund, a series of Heartland
Group, Inc., a registered investment company, relates to more than 5% of
the class.
(5) According to a Schedule 13G dated February 10, 1997, Kennedy Capital
Management, Inc. is a registered investment adviser.
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The following table sets forth certain information concerning the
ownership of securities of the Company of each director, nominee and executive
officer named in the Summary Compensation Table hereof ("Named Executive
Officers") and all directors and executive officers of the Company as a group:
Approximate Number Subject to Stock Options
of Shares of Common Granted by the Company
Stock of the Company which were Exercisable on
Beneficially Owned Percent of March 31, 1997 or Within
Name at March 31, 1997 (1) Class 60 Days Thereafter
---- --------------------- ----- ------------------
David Unger ............... 553,536 11.1% 33,750
Henry M. Mautner........... 456,688 9.2% 33,750
Gene K. Ogilvie ........... 48,772 1.0% 33,750
Fati A. Elgendy ........... 37,594 * 25,975
Don Gruenberg ............. 4,837 * 2,000
Bradley E. Mautner ........ 174,523 3.5% 3,750
Arnold F. Brookstone ...... 13,750 * 10,750
Eugene Miller ............. 12,750 * 10,750
Stephen B. Schwartz ....... 5,950 * 5,750
Joel Tyler Headley, III ... 28,750 * 28,750
All directors and executive
officers as a group
(17 persons) .............. 1,388,171 28.0% 230,025
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* Less than 1%.
(1) Includes shares, if any, held by spouse; held in joint tenancy with
spouse; held by or for the benefit of the named person or one or more
members of his immediate family; with respect to which the named person
has or shares voting or investment powers; or in which the named person
otherwise has a beneficial interest.
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NOMINEES FOR ELECTION AS DIRECTORS
Nine directors are to be elected at the meeting to hold office until the
annual meeting of stockholders in 1998 and until their respective successors
are elected and qualified. All of the nominees, except for Don Gruenberg, were
previously elected directors by the stockholders.
NAME PRINCIPAL
---- OCCUPATION, NAME OF
ORGANIZATION IN
WHICH OCCUPATION IS
CARRIED ON,
OFFICES, AND FIRST BECAME A
POSITIONS, IF ANY, DIRECTOR OF THE
HELD WITH THE COMPANY OR A
COMPANY; AND AGE PREDECESSOR
-------------------- -----------
David Unger Director, Chairman 1989
of the Board,
President and Chief
Executive Officer
of the Company; Age
62
Henry M. Mautner Director and Vice 1989
Chairman of the
Board of the
Company; Age 69
Gene K. Ogilvie Vice President and 1989
Director of the
Company; President
and Chief Operating
Officer of Midwesco
Filter Resources,
Inc.; Age 57
Fati A. Elgendy Vice President and 1994
Director of the
Company; President
and Chief Operating
Officer of
Perma-Pipe, Inc.;
Age 48
Bradley E. Mautner Vice President and 1995
Director of the
Company; Age 41
Don Gruenberg Vice President and 1997
Director of the
Company; President
of Thermal Care
Division; Age 54
Arnold F. Brookstone Director of the 1990
Company; Retired
Executive Vice
President and Chief
Financial and
Planning Officer of
Stone Container
Corporation; Age 67
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NAME PRINCIPAL
---- OCCUPATION, NAME OF
ORGANIZATION IN
WHICH OCCUPATION IS
CARRIED ON,
OFFICES, AND FIRST BECAME A
POSITIONS, IF ANY, DIRECTOR OF THE
HELD WITH THE COMPANY OR A
COMPANY; AND AGE PREDECESSOR
-------------------- -----------
Eugene Miller Director of the 1990
Company;
Executive-In-Residence
and Adjunct
Professor of
Florida Atlantic
University; Age 71
Stephen B. Schwartz Director of the 1995
Company; Retired
Senior Vice
President of IBM
Corporation; Age 62
David Unger served as President of Midwesco, Inc. ("Midwesco") from 1972
through January 1994, and was Vice President from February 1994 through
December 1996. He was also a director of Midwesco from 1972 through December
1996 and served that company in various executive and administrative capacities
starting in 1958.
Henry M. Mautner was the Chairman of Midwesco from 1972 through December
1996, and served that company in various executive and administrative
capacities since 1949. Mr. Mautner is the father of Bradley E. Mautner.
Gene K. Ogilvie has been employed by the Company or its predecessor in
various executive capacities since 1969. He served as a Vice President of
Midwesco from 1982 through December 1996 and General Manager of Midwesco Filter
Resources, Inc. ("Midwesco Filter"), or its predecessor since 1980 and
President and Chief Operating Officer of Midwesco Filter since 1989. Midwesco
Filter is a wholly-owned subsidiary of the Company.
Fati A. Elgendy, who was associated with Midwesco since 1978, was Vice
President, Director of Sales of the Perma-Pipe Division of Midwesco from 1990
to 1991. In 1991, he became Executive Vice President of the Perma-Pipe
Division, a position he continued to hold after the acquisition of the division
by the Company (the "Acquisition") to form Perma-Pipe, Inc. on January 28,
1994. In March of 1995, Mr. Elgendy became President and Chief Operating
Officer of Perma-Pipe, Inc. Perma-Pipe, Inc. is a wholly-owned subsidiary of
the Company.
Bradley E. Mautner served as President of Midwesco from January 1994
through December 1996. In addition, since February 1996, he has served as the
Chief Executive Officer of Midwesco Services, Inc. ("Midwesco Services") which
prior to December 1996 was a 50% owned affiliate of Midwesco.
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Don Gruenberg served as Vice President of Midwesco from August 1980 to
December 1996. From 1968 to 1969 he was employed by Airtemp division of
Chrysler Corporation in various positions and, from 1970 to 1974, he was
employed in various positions by Dunham-Bush Inc. Prior to rejoining Thermal
Care in 1980, he was employed by Thermal Care/Mayer, a division of Midwesco
from 1974 to 1979. During the intervening period, Mr. Gruenberg served as an
independent manufacturer's representative for several product lines in the
Midwest region. Mr. Gruenberg is a member of the National Board, Society of
the Plastics Industry.
Arnold F. Brookstone served as Executive Vice President and Chief
Financial and Planning Officer of Stone Container Corporation, an international
pulp and paper manufacturer, from January 1991 until his retirement in January
1997. From 1981 to January 1991, he was Senior Vice President and Chief
Financial and Planning Officer of that company. Mr. Brookstone is a director
of Donnelly Corporation, a manufacturer of automotive products and
Stone-Consolidated Corporation, a manufacturer of paper products. He is also a
trustee of the Rembrandt Funds, a family of mutual and money-market funds and a
director of several privately held companies.
Eugene Miller served as Vice Chairman of the Board of Directors and Chief
Financial Officer of USG Corporation, a building materials holding company,
from March 1987 until his retirement as of May 31, 1991. On March 17, 1993,
USG Corporation filed a petition in bankruptcy to effectuate a repackaged plan
of reorganization for that corporation which became effective on May 6, 1993.
Mr. Miller is currently Executive-In-Residence and Adjunct Professor of Florida
Atlantic University. He also serves as a director of several privately held
companies.
Stephen B. Schwartz served as a senior vice president of IBM Corporation
from 1990 until his retirement in 1992. Mr. Schwartz is currently a director
of Niagara Mohawk Power Company, an electric and gas utility company. From
1957 to 1992, Mr. Schwartz served in various capacities for IBM Corporation.
BOARD OF DIRECTORS
Directors who are not employees of the Company or a parent or subsidiary
of the Company are compensated by a fee of $2,000 for each day of attendance at
Board meetings and a $200 fixed fee per hour for engagement in any other
activity on behalf of the Company authorized by the Board of Directors and are
reimbursed for expenses.
Pursuant to the Company's 1990 Independent Directors Stock Option Plan, as
amended (the "Directors Plan"), an option to purchase 1,000 shares of common
stock of the Company is granted automatically to each director who is not an
employee of the Company, any of its subsidiaries, any parent of the Company or
any of such parent's subsidiaries on the date he or she is first elected as a
director of the Company. Option exercise prices will be at the fair market
value of the Common Stock on the date of grant. Options granted under the
Directors Plan are not intended to be "incentive stock options." The aggregate
number of shares which
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may be sold pursuant to the Directors Plan may not exceed 100,000. Such
options may be exercised for periods of up to ten years from the date of grant.
The Company has entered into indemnification agreements with each person
who is currently a member of the Board of Directors of the Company and expects
to enter into such agreements with persons who may in the future become
directors of the Company. In general, such agreements provide for
indemnification against any and all expenses incurred in connection with, as
well as any and all judgments, fines, and amounts paid in settlement resulting
from, any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the
fact that such director is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise.
The Board of Directors of the Company held meetings or acted by written
consent seven times during 1996. The Board of Directors has standing
compensation and audit committees; it does not have a standing nominating
committee.
The Compensation Committee, consisting of David Unger, Henry M. Mautner,
Arnold F. Brookstone, Eugene Miller and Stephen B. Schwartz reviews the
compensation paid to the officers of the Company, reports to the stockholders
with respect to the compensation paid to the officers of the Company, approves
material departures from the Company's past compensation policies, determines
the optionees and grant amounts under the Company's 1989 and 1993 Stock Option
Plans and makes recommendations to the Board with respect to the Company's
compensation policies. The Compensation Committee held one meeting during
1996.
The Audit Committee, consisting of Arnold F. Brookstone, Eugene Miller and
Stephen B. Schwartz recommends independent public accountants for appointment
by the Board of Directors as auditors of the Company, reviews and makes
recommendations to the Board with respect to the scope of the annual audit of
the Company, reviews recommendations made by the auditors with respect to the
accounting methods used and the adequacy of the Company's system of internal
control and advises the Board with respect to such recommendations, and
approves non-audit services. The Audit Committee held one meeting during 1996.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid by the Company during each of the last three years ended January 31, 1997
to the Company's Chief Executive Officer and to each other person who was
serving as an executive officer of the Company at the end of 1996 whose salary
and bonus for 1996 exceeded $100,000.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- -------------------------------------
AWARDS
---------------------------
NAME AND PRINCIPAL RESTRICTED PAYOUTS ALL OTHER
POSITION YEAR SALARY BONUS OTHER(1) STOCK OPTIONS # LTIP COMP.(2)
- ----------------------- ---- -------- -------- -------- ---------------- --------- -------- ---------
David Unger 1996 $125,000 $114,280 $2,887 --- 5,000 --- 20,000
Chairman and Chief 1995 125,000 60,291 1,548 --- 5,000 --- ---
Executive Officer 1994 125,000 29,835 3,534 --- 0 --- ---
1996 $70,000 $114,280 $1,734 --- 5,000 --- 20,000
Henry M. Mautner 1995 70,000 60,291 1,491 --- 5,000 --- ---
Vice Chairman 1994 70,000 29,835 1,626 --- 0 --- ---
Gene K. Ogilvie
Vice President, 1996 $110,000 $218,360 $4,588 --- 5,000 --- 15,000
President, Midwesco 1995 110,000 195,240 2,600 --- 5,000 --- ---
Filter Resources, Inc. 1994 90,000 99,193 3,761 --- 0 --- ---
Fati A. Elgendy
Vice President, 1996 $110,000 $151,820 $3,233 --- 5,000 --- 15,000
President, Perma-Pipe, 1995 110,000 30,000 2,931 --- 11,600 --- ---
Inc. 1994 100,000 30,000 3,373 --- 11,900 --- ---
Joel Tyler Headley, III 1996 $95,000 $127,696 $4,378 --- 5,000 --- 10,000
Vice President - 1995 95,000 114,405 2,985 --- 5,000 --- ---
Marketing and Sales 1994 77,000 61,254 1,533 --- 0 --- ---
(1) Represents contributions made by the Company to the Named Executive
Officer's account under the Midwesco, Inc. 401(k) Plan and the Midwesco,
Inc. Profit Sharing Plan.
(2) Represents accrual of non-qualified deferred compensation.
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1996 OPTION GRANTS
The following table sets forth certain information regarding option grants
to the named Executive Officers during 1996.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF APPRECIATION FOR
UNDERLYING OPTIONS OPTION TERM
OPTIONS GRANTED IN EXERCISE EXPIRATION ---------------------
NAME GRANTED YEAR PRICE DATE 5%($) 10%($)
- ----------------------- -------------------- -------------------- -------------- --------------- ---------- ----------
David Unger 5,000 5.81% $6.88 04/30/06 21,634 54,825
Henry M. Mautner 5,000 5.81% $6.88 04/30/06 21,634 54,825
Gene K. Ogilvie 5,000 5.81% $6.88 04/30/06 21,634 54,825
Fati A. Elgendy 5,000 5.81% $6.88 04/30/06 21,634 54,825
Joel Tyler Headley, III 5,000 5.81% $6.88 04/30/06 21,634 54,825
1996 YEAR-END UNEXERCISED STOCK OPTIONS
The following table sets forth information relating to stock options held
by the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YE OPTIONS AT FISCAL YE
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ------------- ----------- -------------
David Unger 28,750 11,250 $12,458 $20,317
Henry M. Mautner 28,750 11,250 $12,458 $20,317
Gene K. Ogilvie 28,750 11,250 $12,458 $20,317
Fati A. Elgendy 16,350 22,150 $18,074 $37,166
Joel Tyler Headley, III 23,750 11,250 $12,458 $20,317
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
On December 30, 1996, The Company acquired the Thermal Care Division
("Thermal Care") and certain other specified assets and liabilities of Midwesco
by the merger of Midwesco with and into MFRI (the "Merger"). Immediately prior
to the effectiveness of the Merger, Midwesco contributed certain of its assets
and liabilities to a new subsidiary ("New Midwesco"), the shares of which were
thereafter distributed to Midwesco's shareholders. Through the
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Merger, an aggregate of 2,124,298 shares of Common Stock were issued to the
shareholders of Midwesco and the 1,717,666 shares of Common Stock owned by
Midwesco immediately prior to the consummation of the merger were cancelled.
David Unger, Henry M. Mautner, Bradley E. Mautner and all directors and
officers of MFRI as a group beneficially owned 43.7%, 19.8%, 8.0% and 72.9%,
respectively, of Midwesco and immediately after the merger owned the same
percentages of New Midwesco.
David Unger, Chairman of the Board and Chief Executive Officer of the
Company, and Henry M. Mautner, Vice Chairman of the Board of the Company, serve
on the Compensation Committee of the Company's Board of Directors. Prior to
the Merger, Messrs. Unger and Henry Mautner also served on the Board of
Directors of Midwesco, and they have served on the Board of Directors of New
Midwesco since its inception. In addition, Mr. Unger serves on the Board of
Directors of Midwesco Services Inc. (formerly known as Mid Res, Inc.), a
50%-owned affiliate of New Midwesco. David Unger and Henry Mautner serve as
Vice President and Chairman of the Board, respectively, of New Midwesco.
Michael D. Bennett, Vice President and Chief Financial Officer of the Company,
is a director of Midwesco Services and Bradley E. Mautner, Vice President and
director of the Company, is President of New Midwesco and Chief Executive
Officer and a director of Midwesco Services.
Pursuant to the Amended and Restated Management Services Agreement dated
as of January 28, 1994 ("Former Services Agreement"), the Company provided
certain services to Midwesco and Midwesco provided certain facilities and
services to the Company. The Services Agreement provided for the allocation of
costs of any shared employees, services and facilities (including the Niles,
Illinois facility of Midwesco which is owned by Messrs. Mautner and Unger and
had been leased to Midwesco since 1977) between the Company and Midwesco based
upon the cost accounting method utilized by the Company and Midwesco. A
limited number of persons, including Michael D. Bennett, were employed by both
Midwesco and the Company; the respective compensation expense for such
employees was divided between the companies based upon the level of services
performed by such employees for each company. Independent auditors reviewed
the appropriateness of the annual allocation of the costs of the shared
employees, services and facilities. Any material change to the terms of the
Former Services Agreement had to be approved by a majority of the directors,
including a majority of Independent Directors (as defined in the Former
Services Agreement). Immediately subsequent to the Merger, MFRI and New
Midwesco entered into a services agreement ("New Services Agreement")
containing substantially the same terms as those of the Former Services
Agreement. Any material change to the terms of the New Services Agreement must
be approved by a majority of the directors, including a majority of the
Independent Directors. Pursuant to both the Former Services Agreement and the
New Services Agreement, the Company reimbursed Midwesco a net aggregate of
$565,000 during 1996.
Simtech, Inc. ("Simtech"), an 80.6% owned subsidiary of New Midwesco (and,
prior to the consummation of the Merger, Midwesco), has an exclusive agreement
with a third party to import thermoplastic piping (such as polypropylene and
polyvinylidene fluoride) used by the Company. As of January 28, 1994, the
Company began to purchase such thermoplastic piping
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and related products from Simtech, generally for actual cost plus 10%. During
fiscal 1997 the Company made payments to Simtech aggregating approximately
$410,000.
In 1989, as amended in 1994, Midwesco Filter agreed, at its expense, to
file a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), on no more than two occasions with respect to all or a
portion of the shares of common stock of Midwesco Filter owned by Midwesco,
upon the request of Midwesco, and include all or a portion of said shares, in
the event of the filing of a registration statement under the Securities Act
with respect to other shares of Common Stock. Such registration rights were
terminated upon the consummation of the Merger. Following the consummation of
the Merger, pursuant to a registration rights agreement among the Company and
the former shareholders of Midwesco, the Company filed, at its expense, a
registration statement to register the Common Stock issued to such shareholders
in the Merger under the Securities Act of 1933, as amended (the "Securities
Act")
REPORT OF COMPENSATION COMMITTEE OF BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Company considers the following general guidelines in determining the
compensation of its officers and key employees:
-- Salary set at levels sufficient to attract and retain
employees capable of contributing materially to the
Company's long-term success;
-- Annual bonus related to operating profit in excess of a
predefined amount of the Company or of the Company's
subsidiary in which the officer or key employee is employed;
-- Stock options; and
-- Non-qualified deferred compensation.
The Company also makes annual contributions to the accounts of eligible
employees in the 401(k) Employee Savings and Protection Plan formerly sponsored
by Midwesco, Inc.
The Company's 1989 Stock Option Plan (the "1989 Plan"), the 1993 Stock
Option Plan ("1993 Plan") and the 1994 Stock Option Plan ("1994 Plan")
(collectively, the "Plans") were adopted in order to provide officers and other
key employees with long-term incentives in order to create an interest in the
Company parallel to that of the Company's public stockholders. Option exercise
prices will be no less than fair market value of the Common Stock on the date
of grant. Under the Plans, options may be granted to key employees (including
officers, whether or not directors) of the Company, its subsidiaries, Midwesco,
Inc., and its affiliates. The options granted under the Plans may be exercised
for periods of up to ten years from the date of grant. Under the 1989 Plan and
1993 Plan, 250,000 shares of common stock of the Company are reserved for
issuance upon the exercise of options granted thereunder. Under the
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1994 Plan, 250,000 shares of common stock of the Company are reserved for
issuance upon the exercise of options granted thereunder, which number shall
be increased by the number equal to 1% of the aggregate number of shares of
common stock outstanding as of the last day of the most recently ended fiscal
year of the Company. Provided the Company does not issue any additional shares
of its common stock, the maximum number of shares which may be sold to all
optionees pursuant to the 1994 Plan during the term of the 1994 Plan will be
738,771 (1,086,139 if the annual increase is amended to 2%). The Committee
believes additional incentive compensation should be made available to officers
and other key employees which will increase the effectiveness of the Company's
executive compensation program.
The Committee believes that the combination of salary, annual bonus
directly variable with the Company's operating profitability, and stock
options, the ultimate value of which is determined by future share price
growth, are important factors in the executive compensation program designed to
enhance Company profitability and stockholder value.
The compensation of David Unger, Chairman of the Board and Chief Executive
Officer of the Company, reflected in the Summary Compensation Table, is based
on his contribution to the Company. Mr. Unger's annual bonus in 1995 and 1996
increased significantly based upon the increase in the Company's pretax
earnings.
The compensation of Henry M. Mautner, Vice Chairman of the Board of the
Company, reflected in the Summary Compensation Table, is based on his
contribution to the Company, with consideration given to his compensation from
Midwesco, Inc., which is not borne by the Company and, accordingly, was not
included in the Summary Compensation Table. Mr. Mautner's annual bonus in 1995
and 1996 increased significantly based upon the increase in the Company's
pretax earnings.
Gene K. Ogilvie, Vice President of the Company and President of Midwesco
Filter, receives annual compensation consisting of base salary of $110,000 and
an annual bonus. Mr. Ogilvie's bonus is calculated on the same basis as that
of Midwesco Filter's other officers. Mr. Ogilvie's annual bonus increased
significantly in 1995 and 1996, in line with Midwesco Filter's increased
profitability compared with predefined amounts.
Fati A. Elgendy, Vice President of the Company and President of Perma
Pipe, receives annual compensation consisting of base salary of $110,000 and an
annual bonus. Mr. Elgendy's bonus is calculated on the same basis as that of
Perma Pipe's other officers. Mr. Elgendy's annual bonus increased
significantly in 1996, in line with Perma-Pipe's increased profitability
compared with predefined amounts.
13
15
The cash compensation for Joel Tyler Headley, III, Vice President of the
Company and of Midwesco Filter, increased significantly in 1995 and 1996, in
line with Midwesco Filter's increased profitability compared with predefined
amounts.
Arnold F. Brookstone
Henry M. Mautner
Eugene Miller
Stephen B. Schwartz
David Unger
Members of the Compensation Committee
14
16
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph compares the yearly percentage change in
the Company's cumulative total stockholder return on its Common Stock with the
cumulative total returns of the Nasdaq Market Index (the "Nasdaq Index"); a
selected peer group of companies consisting of Air & Water Technologies Corp.,
BHA Group, Inc., Environmental Elements Corp., ITEQ, Inc., Shaw Group, Inc.,
Synalloy Corporation, and Total Containment, Inc.; and the same peer group
excluding Environmental Elements Corp., ITEQ, Inc., Synalloy Corporation, and
Total Containment, Inc. (all of which were included in the current year for the
first time as companies similar to the Company), but including Natec Resources,
Inc., (which has been liquidated), NOXSO Corporation, and Wahlco Environmental
Systems, Inc. (both of which have been excluded as less similar to the Company
than the other companies in the peer group). The comparison assumes $100
investments on February 1, 1992 in the Company's common stock, the Nasdaq
Index, the Selected Peer Group and the Old Peer Group, and further assumes
reinvestment of dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG MFRI, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
January 31,
-------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
MFRI, Inc. 100 155.00 145.00 100.00 122.50 156.88
Nasdaq Market Index 100 99.66 125.55 118.65 166.13 218.63
Old Peer Group 100 72.21 56.48 27.19 34.15 37.64
Selected Peer Group 100 75.46 59.70 35.18 42.68 51.32
ASSUMES $100 INVESTED ON FEB. 1, 1992
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JAN. 31, 1997
15
17
APPROVAL OF AMENDED AND RESTATED 1994 STOCK OPTION PLAN
The Board of Directors believes that stock option plans are important in
attracting and retaining employees of high caliber and outstanding
capabilities. Accordingly, the Board of Directors on March 22, 1994 adopted a
stock option plan designated as the 1994 Stock Option Plan (the "1994 Plan").
Under the 1994 Plan, as currently in effect, the Company may from time to
time on or before February 29, 2004 grant to key employees (including officers,
whether or not directors) of the Company, any of its subsidiaries, any parent
of the Company or any of such parent's affiliates options to purchase shares of
the Common Stock. Key employees, for the purposes of the 1994 Plan with
respect to the grant of non-statutory options only, shall also include advisors
and consultants to the Company (including employees of such advisors and
consultants) provided that such advisors and consultants render bona fide
services to the Company that are not connected with the offer or sale of
securities in a capital raising transaction. As of April 30, 1997, there were
approximately 110 persons eligible to participate in the 1994 Plan. Options
are granted on such terms and at such prices as determined pursuant to the 1994
Plan. The aggregate number of shares of such stock which may be sold to all
optionees pursuant to this Plan shall not exceed 250,000; provided, however, on
February 1, 1995 and each February 1 thereafter during the term of the 1994
Plan, the aggregate number of shares that may be sold pursuant to the terms of
the 1994 Plan shall be increased by the number equal to 1% of the aggregate
number of shares of Common Stock outstanding as of the last day of the most
recently ended fiscal year of the Company.
Under the proposed amendment to the 1994 Plan, which was approved by the
Board of Directors on April 9, 1997, commencing on February 1, 1998 and each
February 1 thereafter during the term of the 1994 Plan, the aggregate number of
shares that may be sold pursuant to the terms of the 1994 Plan would be
increased by the number equal to 2% of the aggregate number of shares of common
stock outstanding as of the last day of the most recently ended fiscal year of
the Company. The 1994 Plan, as proposed to be amended, is in all other
respects identical to the 1994 as currently in effect.
Provided the Company does not issue any additional shares of its common
stock, the maximum number of shares which may be sold to all optionees pursuant
to the 1994 Plan, as proposed to be amended, during the term of the 1994 Plan
will be 1,086,139 shares. The aggregate number of shares of stock which may be
sold to all optionees pursuant to the exercise of incentive stock options
pursuant to the 1994 Plan shall not exceed 250,000.
The 1994 Plan does not limit the number of shares which may be allocated
to any one person, except that the aggregate fair market value (as of the date
an option is granted) of shares with respect to which incentive stock options
are exercisable for the first time by an optionee during any calendar year
under all incentive stock option plans of the Company, and any parent and
subsidiary corporations of the Company, may not exceed $100,000. Options
granted under this Plan may be either options which are intended to be
incentive stock options within the
16
18
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
("incentive stock options"), or options which are not intended to be incentive
stock options ("non-statutory options"). Options granted under the 1994 Plan
will expire not more than ten years from the date of the grant, and the
purchase price per share to be specified in each option will be not less than
the fair market value of a share of the Company's common stock on the date the
option is granted.
On the basis of the form adopted by the Board of Directors for use under
the 1994 Plan, options will accrue in four equal annual cumulative
installments, with the first installment accruing approximately one year after
the date of grant. Options may not be exercised by an optionee after
termination of employment, except that the optionee has three months after
termination of employment for any reason other than death or permanent
disability, or the optionee's estate or the optionee has one year after death
or permanent disability to exercise an option, but in no event may an option be
exercised later than its expiration date. If an optionee's employment is
terminated for cause, any options granted to the optionee will terminate on the
date of the optionee's termination of employment as to the shares for which the
optionee has not made payment and the optionee will have no right thereafter
for any reason to pay for or receive any of the shares constituting any
installment or installments under the optionee's options accrued as of the date
of his termination and for which the optionee has not yet made payment. In the
event of a merger, consolidation, reorganization or dissolution of the Company,
or the sale or exchange of substantially all of the Company's assets (i) the
rights under options and stock appreciation rights outstanding under the 1994
Plan will terminate, except to the extent and subject to such adjustments as
may be provided by the Board of Directors or by the terms of the plan or
agreement of merger, consolidation, reorganization, dissolution or sale or
exchange of such assets, and (ii) the Company must notify the holders of
outstanding options of such event at least 30 days prior to the effective date
of such event.
The 1994 Plan provides that a committee of disinterested directors of the
Company shall administer the plan. Arnold F. Brookstone, Eugene Miller and
Stephen B. Schwartz serve as the committee of disinterested directors and its
duties include (i) determining the number of shares which may be purchased by
each optionee (ii) determining whether incentive stock options or non-statutory
stock options are to be granted to an optionee (iii) determining whether the
optionee shall receive stock appreciation rights and the number of shares to
which such stock appreciation rights shall relate and (iv) determining or
specifying the purchase price of each such share. The Board of Directors may
in its discretion prescribe such provisions and interpretations not
inconsistent with the 1994 Plan as it deems necessary or advisable for carrying
out the purposes of the 1994 Plan. The Board of Directors may amend the 1994
Plan without stockholder approval, except that any amendment that would (i)
materially increase the benefits accruing to participants under the 1994 Plan,
(ii) materially increase the number of shares which may be issued under the
1994 Plan, or (iii) materially modify the requirements as to eligibility for
participation under the 1994 Plan, must be approved by a vote of the
stockholders of the Company.
17
19
Under present law, upon the grant and exercise of an incentive stock
option ("ISO"), an optionee will not recognize taxable income for federal
income tax purposes. After shares are acquired upon the exercise of an ISO, if
the optionee waits at least one year before disposing the shares, and at least
two years after the corresponding option was granted, gain or loss recognized
on the subsequent disposition of the shares will be treated as long-term
capital gain or loss. Such gain or loss is computed as the difference between
the exercise price and the sale price. If the shares are disposed of prior to
those times in a transaction that is a taxable sale or exchange, the optionee
will recognize taxable income (taxed as ordinary compensation income for
federal income tax purposes) in an amount equal to the lesser of (i) the excess
of the fair market value of the shares on the date of exercise over the option
price (with any remaining gain taxed under the capital gain rules summarized
below) or (ii) the excess of the amount received for the shares over the option
price. To the extent individual optionees qualify for capital gain treatment
only in connection with ISO shares, neither the Company nor its subsidiaries
will be entitled to a deduction for federal income tax purposes in connection
with the grant or exercise of an ISO. In other cases, the Company or its
subsidiaries will receive a federal income tax deduction at the same time and
in the same amount that the optionee recognizes taxable income in connection
with ISO shares.
Notwithstanding the foregoing, the amount by which the fair market
value of ISO shares at the time of exercise exceeds the option price will be
treated as an adjustment item for purposes of determining whether the optionee
is subject to the alternative minimum tax ("AMT") for a year. AMT liability
may be significant to an optionee. However, if the value of ISO shares
decreases and the shares are sold by the optionee in the same year that they
were acquired, the amount of the adjustment (and, thus, the amount subject to
AMT) will not exceed the fair market value of the shares when they were sold.
The optionee may be entitled to a credit against his or her regular tax
liability in subsequent years for the amount of AMT incurred in the year an ISO
was exercised. Moreover, an optionee's basis in ISO shares will be increased
by the amount of AMT liability.
Upon the grant of a non-statutory option, an optionee will not
recognize taxable income for federal income tax purposes. Upon the exercise of
a non-statutory option, the optionee will recognize as taxable income (taxed as
ordinary compensation income) in an amount equal to the excess of the fair
market value of the shares acquired, determined at the time of exercise, over
the option price. Upon receipt of payment from the exercise of appreciation
rights by an employee, the employee will recognize compensation income taxable
as ordinary income for federal income tax purposes in an amount equal to the
sum of any cash payment and the fair market value of any shares received
determined at the time of such payment. The Company or its subsidiaries will
be entitled to a federal income tax deduction to the extent the employee
recognizes compensation income taxable as ordinary income for federal income
tax purposes.
Special rules apply to delay the recognition of ordinary income for
shares acquired by optionees subject to the "short-swing profit" rules under
Section 16(b) of the Securities Exchange Act of 1934, as amended, until such
time that the optionee is no longer precluded from selling such shares under
such rules.
The Revenue Reconciliation Act of 1990 set a maximum tax rate on net
capital gains of individuals, trusts and estates for a year of 28%. Therefore,
recognized capital gains will be taxed at the lesser of (i) the highest
marginal tax rate applied to the individual's income for such taxable year or
(ii) 28%. A taxpayer's capital gains income for a year is generally based on:
(A) the net amount of long-term capital gains offset by long-term capital
losses on those capital assets held by a taxpayer for more than one year, and
(B) offset by net short-term capital losses on all other capital assets.
However, if net capital losses exceed capital gains, the overall loss is
subject to certain deduction limitations.
In general, the AMT rate for an individual is 26% up to the first
$175,000 (or $87,500 for married taxpayers filing separate returns) of
alternative minimum taxable income ("AMTI") less certain exemptions that are
phased-out for taxpayers with more than $150,000 in AMTI and completely
phased-out for taxpayers with AMTI of $330,000 or more. AMTI in excess of
$175,000 is taxed at a 28% rate. The amount of a taxpayer's AMT liability is
offset by the taxpayer's regular federal income tax.
18
20
For financial accounting purposes, under generally accepted accounting
principles presently in effect, the grant or exercise of an option under the
Company's option plans (that does not include appreciation rights) does not
result in a charge to the Company's net income. An option that includes
appreciation rights, in general, results in a charge to income based on the
amount actually paid under the right less the applicable tax benefit.
The closing price on May 30, 1997 for the Company's common stock, as
reported by the Nasdaq National Market, was $7 7/8 per share.
If the proposed amendment to the 1994 Plan is not approved by the
stockholders, the annual increase in the number of shares that may be sold
pursuant to the terms of the 1994 Plan will continue to be the number equal to
1% of the aggregate number of shares of Common Stock outstanding as of the last
day of the most recently ended fiscal year of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN.
19
21
AUDITORS
Representatives of Deloitte & Touche LLP, the Company's auditors, are
expected to be present at the meeting and will be available to respond to
questions and may make a statement if they so desire.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the annual meeting
of stockholders in 1997 must be received by the Company by January 31, 1998 in
order to be eligible for inclusion in the proxy statement and proxy form
relating to such meeting.
IMPORTANT
All stockholders are cordially invited to attend the meeting in person.
If you cannot be present at the meeting, please sign and date the enclosed
Proxy and mail it PROMPTLY in the enclosed self-addressed envelope. No postage
need be affixed if mailed in the United States.
20
22
MFRI, INC.
FORM OF AMENDED AND RESTATED
1994 STOCK OPTION PLAN
The Company may from time to time on or before February 29, 2004 grant to
key employees (including officers, whether or not directors) of the Company,
any of its subsidiaries, any parent of the Company or any of such parent's
affiliates options to purchase shares of the Company's common stock (the
"Plan"). Key employees, for the purposes of the MFRI, Inc. 1994 Stock Option
Plan with respect to the grant of non-statutory options only, shall also
include advisors and consultants to the Company (including employees of such
advisors and consultants) provided that such advisors and consultants render
bona fide services to the Company that are not connected with the offer or sale
of securities in a capital raising transaction. Options granted under this
Plan may be either options which are intended to be incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended ("incentive stock options"), or options which are not intended to be
incentive stock options ("non-statutory options"). The aggregate number of
shares of such stock which may be sold to all optionees pursuant to this Plan
shall not exceed 250,000; provided, however, on February 1, 1995 and each
February 1 thereafter until February 1, 1997, the aggregate number of shares
that may be sold pursuant to the terms of this Plan shall be increased by the
number equal to 1% of the aggregate number of shares of common stock
outstanding as of the last day of the most recently ended fiscal year of the
Company; and provided further, however, on February 1, 1998 and each February 1
thereafter during the term of this Plan, the aggregate number of shares that
may be sold pursuant to the terms of this Plan shall be increased by the number
equal to 3% of the aggregate number of shares of common stock outstanding as of
the last day of the most recently ended fiscal year of the Company. The
selection of optionees, determination of the form of option and the number of
shares allocated to each optionee shall be made by a committee of disinterested
directors of the Company. The purchase price per share to be specified in any
option granted pursuant to this Plan shall be not less than the fair market
value of such stock on the date such option is granted, and may be paid in
cash, in common stock of the Company or in any combination thereof. The Board
of Directors may provide for the exercise of options under this Plan from time
to time in installments or otherwise, and may authorize the granting of such
options upon such other terms and conditions and for such periods up to ten
years from the date of grant as it may in its discretion determine; provided,
however, that any option granted hereunder shall not be transferable by the
optionee other than by will or the laws of descent and distribution and may be
exercisable during such optionees lifetime only by the optionee or by such
optionees guardian or legal representative; and further provided, however, that
the aggregate fair market value (determined at the time an option is granted)
of shares with respect to which incentive stock options are exercisable for the
first time by an optionee during any calendar year (under all incentive stock
option plans of the Company, any parent and any subsidiary corporations of the
Company) shall not exceed $100,000. Notwithstanding anything contained herein
to the contrary, the aggregate number of shares of such stock which may be sold
to all optionees pursuant to the exercise of incentive stock options pursuant
to the Plan shall not exceed 250,000.
The Company may from time to time grant to the holder of any option issued
hereunder the right to elect to exercise stock appreciation rights with respect
to all or any portion of the shares subject to such option in lieu of such
option rights thereunder by surrendering the option rights as to all or such
portion of the shares as to which option rights shall at such time be
exercisable under such option, and receiving, with respect to each share as to
which option rights are so surrendered, an amount in payment equal to the
excess of the fair market value of such share on the date of surrender over the
purchase price specified for such share in the option. Such payment may be
made in cash, in common stock of the Company, or in any combination thereof,
subject, in the case of cash, to the consent of the Company. The number of
shares of common stock to be issued and delivered by the Company upon the
exercise of stock appreciation rights hereunder shall be determined by dividing
the amount of the payment to be made in the form of common stock by the fair
market value of a share of the Company's common stock as of the date of
surrender, and the value of any fractional share shall be paid by the Company
in cash. No stock appreciation right shall, in any event. be exercisable
within six months of the date of its grant. For purposes of determining the
aggregate number of shares of the Company's common stock sold to all optionees
pursuant to this Plan, each share as to which option rights have been
surrendered upon the exercise of stock appreciation rights shall be treated as
if it were a share sold under this Plan.
A-1
23
At any time when an optionee is required to pay to the optionees employer
an amount required to be withheld under applicable income tax laws in
connection with the exercise of a non-statutory option, the optionee may
satisfy this obligation in whole or in part by electing (the "Election") to
have the Company withhold shares of common stock having a value equal to the
amount required to be withheld. The value of the shares to be withheld shall
be based on the fair market value of such shares on the date that the amount of
tax to be withheld shall be determined ("Tax Date"). Each Election must be
made prior to the Tax Date. The Board may disapprove of any Election or may
suspend or terminate the right to make Elections. An Election is irrevocable.
If the optionee is an officer of the Company within the meaning of section
16 of the Securities Exchange Act of 1934, as amended, then the Election is
subject to the following additional restrictions:
(i) No Election shall be effective for a Tax Date which occurs within six
months of the grant of the option.
(j) The Election must be made either six months prior to the Tax Date or
must be made during a period beginning on the third business dav following the
date of release for publication of the Company's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date.
In the event of a stock dividend, stock split, or combination or other
reduction in the number of issued shares of common stock of the Company, the
Board of Directors of the Company shall make such adjustments in the number of
unpurchased shares subject to this Plan, the number of shares subject to
options outstanding in this Plan, the exercise price specified in options
outstanding under this Plan, and the number of shares subject to stock
appreciation rights outstanding under this Plan as it shall determine to be
appropriate and equitable. In the event of a merger, consolidation,
reorganization or dissolution of the Company, or the sale or exchange of
substantially all of the Company's assets, (i) the rights under options and
stock appreciation rights outstanding hereunder shall terminate, except to the
extent and subject to such adjustments as may be provided by the Board of
Directors of the Company or by the terms of the plan or agreement of merger,
consolidation, reorganization, dissolution or sale or exchange or such assets,
and (ii) the Company shall notify the holders of outstanding optionees of such
event at least 30 days prior to the effective date of such event.
The Board of Directors of the Company may, in its discretion, prescribe
such provisions and interpretations not inconsistent herewith as it shall deem
necessary or desirable for the implementation of this Plan. The Board of
Directors of the Company may, without stockholder consent, amend this Plan;
provided, however, and amendment that would (i) materially increase the
benefits accruing to participants hereunder, (ii) materially increase the
number of shares which may be issued hereunder, or (iii) materially modify the
requirements as to eligibility for participation hereunder, must be approved by
a vote of the stockholders of the company.
A-2
24
PROXY PROXY
MFRI, INC.
FOR SHARES OF COMMON STOCK SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON JUNE 27, 1997
The undersigned hereby appoints DAVID UNGER, HENRY M. MAUTNER, BRADLEY E.
MAUTNER, FATI A. ELGENDY and GENE K. OGILVIE, and each of them, proxies with
power of substitution and revocation, acting by majority of those present and
voting, or if only one is present and voting then that one, to vote, as
designated on the reverse side hereof, all of the shares of stock of MFRI, INC.
which the undersigned is entitled to vote, at the annual meeting of
stockholders to be held at The Standard Club, 320 South Plymouth Court,
Chicago, Illinois on June 27, 1997 at 10:00 a.m. Chicago time, and at any
adjournment thereof, with all the powers the undersigned would possess if
present.
PLEASE VOTE SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
MFRI, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /
A vote FOR item is recommended by
the Board of Directors.
For Against For all Except
1. Election of Directors: / / / / / /
- David Unger
- Henry M. Mautner
- Gene K. Ogilvie
- Fati A. Elgendy
- Bradley E. Mautner
- Don Gruenberg
- Arnold F. Brookstone
- Eugene Miller
- Stephen B. Schwartz
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below and mark
the oval "For All Except")
-----------------------
2. Amended and Restated 1994 For Against Abstain
Stock Option Plan. / / / / / /
3. Upon any other matter that For Against Abstain
may properly come before the / / / / / /
meeting.
--------------------------------------------------------------
Signature
--------------------------------------------------------------
Signature
THIS PROXY WILL BE VOTED IN ACCORDANCE NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
WITH SPECIFICATIONS MADE. IF NO CHOICES FOR JOINT ACCOUNTS, BOTH OWNERS SHOULD SIGN. WHEN
ARE INDICATED, THIS PROXY WILL BE VOTED SIGNING AS EXECUTOR, ADMINISTRATOR, ATTORNEY, TRUSTEE
FOR EACH OF THE NOMINEES LISTED UNDER OR GUARDIAN, ETC., PLEASE SIGN YOUR FULL TITLE.
ITEM 1 AND ITEM 2.
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