SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Matrix Service Company
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(Name of Registrant as Specified In Its Charter)
Matrix Service Company
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
MATRIX SERVICE COMPANY
10701 East Ute Street
Tulsa, Oklahoma 74116
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of the Stockholders of
Matrix Service Company, a Delaware corporation (the "Company"), will be held at
Bank One, First National Tower, 15 East Fifth St., 41st Floor, Tulsa, Oklahoma,
on the 23rd day of October, 2001, at 10:00 a.m., Central Standard time, for the
following purposes:
1. To elect six directors to serve until the annual stockholders' meeting
in 2002 or until their successors have been elected and qualified;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 2002; and
3. To act upon such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on September 10,
2001, as the record date (the "Record Date") for determining stockholders
entitled to notice of and to vote at the meeting and any adjournment thereof.
Only stockholders of record on the Record Date are entitled to notice of and to
vote at the meeting and any adjournment thereof.
By Order of the Board of Directors
/s/ MICHAEL J. HALL
Michael J. Hall
Secretary
September 17, 2001
Tulsa, Oklahoma
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS
OF WHETHER YOU PLAN TO ATTEND. THEREFORE PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY. IF YOU ARE PRESENT AT THE MEETING AND WISH TO DO SO YOU
MAY REVOKE THE PROXY AND VOTE IN PERSON.
================================================================================
MATRIX SERVICE COMPANY
10701 East Ute Street
Tulsa, Oklahoma 74116
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of Matrix
Service Company (the "Company") for use at the Annual Meeting of Stockholders to
be held on October 23, 2001, and at any adjournments thereof. The Annual Meeting
will be held at 10:00 a.m., Central Standard time, at Bank One, First National
Tower, 15 East Fifth St., 41st Floor, Tulsa, Oklahoma. If the accompanying proxy
is properly executed and returned, the shares it represents will be voted at the
meeting in accordance with the directions noted thereon or, if no direction is
indicated, it will be voted in favor of the proposals described in this proxy
statement. In addition, the proxy confers authority in the persons named in the
proxy to vote, in their discretion, on any other matters properly presented at
the Annual Meeting. The Board of Directors is not currently aware of any other
such matters. Any stockholder giving a proxy has the power to revoke it at any
time before it is voted by written notice or by execution of a subsequent proxy
sent to Michael J. Hall, Secretary, Matrix Service Company, 10701 East Ute
Street, Tulsa, Oklahoma 74116. The proxy also may be revoked if the stockholder
is present at the meeting and elects to vote in person.
The approximate date on which this Proxy Statement and the accompanying
proxy will first be sent to stockholders is September 17, 2001.
VOTING SECURITIES
At the close of business on the Record Date there were 7,663,116 shares of
the Company's common stock, par value $0.01 per share (the "Common Stock"),
outstanding. Each outstanding share of Common Stock is entitled to one vote upon
each of the matters to be voted on at the meeting. The presence, in person or by
proxy, of at least a majority of the outstanding shares of Common Stock is
required for a quorum.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 10, 2001, certain
information with respect to the shares of Common Stock beneficially owned by (i)
each person known by the Company to own beneficially five percent or more of its
outstanding shares of Common Stock, (ii) each director and director nominee of
the Company, (iii) each executive officer of the Company named in the Summary
Compensation Table herein and (iv) all directors, director nominees and
executive officers of the Company as a group. Except as described below, each of
the persons listed below has sole voting and investment power with respect to
the shares listed.
----------------------------------------------------- ------------------------ -----------------------
Identity of Beneficial Owner Number of Shares Percent of Class
----------------------------------------------------- ------------------------ -----------------------
Van Den Berg Management (1) 1,181,816 15.42
1301 Capitol of Texas Highway, Suite B228
Austin, TX 78746
Strong Capital Management, Inc. (2) 789,800 10.31
100 Heritage Reserve
Menomonee Falls, WI 53051
Dimensional Fund Advisors, Inc. (3) 706,300 9.22
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Hugh E. Bradley (4) 32,500 *
Michael J. Hall (4) 121,000 1.56
I, Edgar Hendrix (4) 2,500 *
Paul K. Lackey (4) 2,500 *
Bradley S. Vetal (4) 133,818 1.72
John S. Zink (4) 72,500 *
Vance Davis (4) 13,600 *
John S. Newmeister (4) 18,300 *
James P. Ryan (4) 10,000 *
All directors and executive officers as a group 466,813 5.82
(12 persons) (4)
3
* Indicates ownership of less than one percent of the outstanding shares of
common stock.
(1) According to Schedule 13G dated August 10, 2001.
(2) According to Schedule 13G dated January 31, 2001.
(3) According to Schedule 13G dated February 2, 2001.
(4) Includes the following shares of common stock that are issuable upon the
exercise of stock options that are exercisable within 60 days after
September 10, 2001: Mr. Bradley - 32,500 shares; Mr. Hall - 86,000 shares;
Mr. Lackey - 2,500 shares; Mr. Vetal - 107,000 shares; Mr. Zink - 42,500
shares; Mr. Hendrix - 2,500 shares; Mr. Newmeister - 17,200 shares; Mr.
Rogers - 28,000 shares; Mr. Ryan - 6,000 shares; 12 Directors and Executive
Officers as a group - 360,300 shares.
PROPOSAL NUMBER 1: Election of Directors
The Board of Directors has nominated and urges you to vote "For" the
election of the six nominees identified below who have been nominated to serve
as directors until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. Proxies solicited hereby will be
voted "For" all six nominees unless stockholders specify otherwise in their
proxies. The affirmative vote of the holders of a plurality of the Common Stock
present in person or by proxy at the meeting is required for election of the
nominees.
If, at the time of the 2001 Annual Meeting of Stockholders, any of the
nominees should be unable or decline to serve, the discretionary authority
provided in the proxy may be used to vote for a substitute or substitutes
designated by the Board of Directors. The Board of Directors has no reason to
believe that any substitute nominee or nominees will be required.
Nominees
The nominees for director, and certain additional information with respect
to each of them, are as follows:
Hugh E. Bradley, age 72, was elected as a Director of the Company effective
on April 20, 1993. Mr. Bradley retired in October 1993. Previously he had served
as the Division Manager for Texaco Trading & Transportation, Inc., Mid-Continent
Region from 1988 to 1993. Mr. Bradley is a graduate Petroleum Engineer from the
Colorado School of Mines.
Michael J. Hall, age 57, has served as Vice President Finance and Chief
Financial Officer of the Company since November 1998. Prior to working for
Matrix, Mr. Hall was Vice President and Chief Financial Officer for Pexco
Holdings, Inc. from 1994 to 1997 and Vice President Finance and Chief Financial
Officer for Worldwide Sports & Recreation, Inc., an affiliated company, from
1996 to 1997. From 1984 to 1994, Mr. Hall worked for T.D. Williamson, Inc., as
Senior Vice President, Chief Financial and Administrative Officer, and Director
of Operations, Europe, Africa and Middle East Region. Mr. Hall graduated Summa
Cum Laude from Boston College with a degree in Accounting and earned his MBA
with honors from Stanford Graduate School of Business.
I. E. (Ed) Hendrix, age 57, has served as Executive Vice President and
Chief Financial Officer of Spectrum Field Services, Inc., subsequent to the
company's inception in July 2000. Mr. Hendrix previously served as Vice
President-Treasurer for Parker Drilling, a New York Stock Exchange company
engaged in worldwide oil and gas drilling and equipment services. He also was a
management consultant with Ernst & Young LLP. Mr. Hendrix has an undergraduate
degree from Oklahoma Christian
4
University and also has a Masters of Business Administration from the University
of Oklahoma. Mr. Hendrix is a Member of the Board of Trustees for American
Performance Mutual Funds and formerly served as a Board Member of Whitmar
Exploration Inc., Houston, TX.
Paul K. Lackey, age 58, is Executive Vice President & Chief Financial
Officer of The NORDAM Group, an aircraft component manufacturing and repair
firm. Prior to joining NORDAM in July 2001, Mr. Lackey was President of The
University of Oklahoma - Tulsa and Senior Vice President of the OU system.
Previous to joining OU in August 1999, Mr. Lackey was a key member of Governor
Frank Keating's administration. He was the Governor's Chief of Staff from
February 1997 to July 1999. From 1995 to 1997, he served as the Oklahoma Cabinet
Secretary of Health and Human Services. Before his service in state government,
Mr. Lackey was President of Flint Industries, an oil and gas services and
commercial construction firm. He was appointed Chief Financial Officer for Flint
in 1977, later became Chief Operating Officer and, ultimately, President. He is
a past Chairman of the Metropolitan Tulsa Chamber of Commerce. A graduate of the
University of Mississippi with a B.S. in Mathematics, Mr. Lackey earned his
Master's Degree in Business Administration from the University of Texas. He
served in the U.S. Army as an artillery officer.
Bradley S. Vetal, age 45, has served as President, Chief Executive Officer
and Director of the Company since March 1999. Mr. Vetal has been with the
Company since January 1987 and has served as President of Matrix Service, Inc.
since June 1, 1992. From June 1996 to March 1999 Mr. Vetal was Vice President-
Tank Division of Matrix Service Company and responsible for all AST operations.
From June 1991 through May 1992, Mr. Vetal served as Vice President of Eastern
Operations of Matrix Service Mid-Continent, Inc. Mr. Vetal graduated Cum Laude
from the University of Michigan with a degree in Mechanical Engineering.
John S. Zink, age 72, was elected as a director of the Company effective on
April 20, 1993. He is Founder and past President of Zeeco, Inc., Chairman of the
John Zink Foundation and past President and Chairman of the John Zink Company.
Mr. Zink graduated from Oklahoma State University with a degree in Mechanical
Engineering. Mr. Zink belongs to the Mechanical Engineering Scholastic
Fraternity, Pi Tau Sigma, and has been inducted into the O.S.U. Engineering Hall
of Fame. He is a registered Professional Engineer. Mr. Zink is also a director
of Unit Corporation, a drilling and energy company.
The Board of Directors recommends that the stockholders vote "For" the
election of each of the above named nominees.
The Board of Directors and its Committees
The Company's Certificate of Incorporation and Bylaws provide that the
number of directors on the Board shall be fixed from time to time by the Board
of Directors but shall not be less than three nor more than 15 persons. The
Board has fixed its size at six members. Directors hold office until the next
annual meeting of the stockholders of the Company or until their successors have
been elected and qualified. Vacancies may be filled by recommendations from the
Corporate Governance Committee and a majority vote by the remaining directors.
The Company's Board of Directors met 4 times during fiscal year 2001. During
fiscal year 2001, each member of the Board of Directors attended 100% of the
meetings of the Board of Directors and the committees of which he was a member,
with the exception of Mr. Zink who attended 72% of the meetings of the Board of
Directors and the committees of which he was a member.
5
The Board has three standing committees:
Corporate
Audit Compensation Governance
------- ------------ ----------
Members: Bradley Bradley Lackey
Hendrix* Hendrix Vetal*
Zink Lackey* Zink
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* Chairman
The Audit Committee's functions include making recommendations concerning
the engagement of independent auditors, reviewing with the independent auditors
the plan and results of the auditing engagement, reviewing professional services
provided by the independent auditors, reviewing the independence of the
independent auditors, considering the range of audit and nonaudit fees and
reviewing the adequacy of the Company's internal accounting controls. The Audit
Committee held 4 meetings during fiscal 2001.
The Compensation Committee's functions include reviewing executive salary
and bonus structure and approving salary and bonus awards to key executives, and
administering the Company's stock option plans and making grants thereunder. The
Compensation Committee held 5 meetings during fiscal 2001.
The Corporate Governance Committee was established to make nominations and
recommendations to the Board of Directors for individuals to be presented to the
stockholders for election to the Board of Directors. The Corporate Governance
Committee approved the six director nominations by unanimous consent at a
regularly scheduled board meeting. The Corporate Governance Committee held no
meetings during fiscal 2001.
Holders of Common Stock wishing to recommend a person for consideration as
a nominee for election to the Board can do so in accordance with the Company's
Bylaws by giving timely written notice to the Secretary of the Company at 10701
East Ute Street, Tulsa, Oklahoma 74116. The written notice should give each such
nominee's name, address, appropriate biographical information, a description of
all arrangements or understandings between the stockholder and each nominee and
any other person or persons (naming such person or person), and any other
information that would be required in a proxy statement. Any such recommendation
should be accompanied by a written statement from the person recommended, giving
his or her consent to be named as a nominee and, if nominated and elected, to
serve as a director. A notice must be delivered to the Secretary not later than
80 days prior to the date of any annual or special meeting; provided, however,
that in the event that the date of such annual or special meeting is not
publicly announced by the Company more than 90 days prior to the meeting, notice
by the stockholder must be delivered to the Secretary of the Company not later
than the close of business on the tenth day following the day on which public
announcement of the date of such meeting is communicated to the stockholders.
Such notice to the Secretary must set forth the name and address of the
stockholder who intends to make the nomination and a representation that the
stockholder is a holder of record of stock of the Company entitled to vote at
such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice.
Director Compensation
Directors of the Company are reimbursed for out-of-pocket expenses incurred
in attending the Board of Directors and committee meetings. In addition, each
Director who is not an employee of the Company receives $7,000 plus $1,000 for
each meeting attended in person and $500 for each teleconference Board of
Directors meeting attended and $500 for each committee meeting attended either
in person or by telephone. In addition, each outside Director is annually
granted options to purchase 5,000 shares of the Company's Common Stock under the
Matrix Service Company 1995 Nonemployee Directors' Stock Option Plan.
6
Effective October 18, 2000, the Deferred Fee Plan for Members of the Board
of Directors of Matrix Service Company was adopted. The purpose of this Plan is
to permit members of the Board of Directors of the Company to elect to take
their fees presently, in the form of cash, or to defer any right to payment of
the Director fees until a future date. For those members of the Board of
Directors that choose to defer their fees, and thus place the fees at
substantial risk of forfeiture, the Plan permits such members to have an
opportunity to earn interest on the deferred fees, or to participate in the
performance and growth of the Company through an award of Phantom Stock (SARs).
Executive Officers of the Company
George L. Austin, age 35, has served as Vice President of Financial
Planning & Reporting since April 1999. Mr. Austin previously served as Vice
President of Finance for Flint Energy Construction Company from February 1994 to
March 1999. Mr. Austin was an Audit Manager with Ernst & Young LLP. Mr. Austin
has a Bachelor of Science Degree from Oklahoma State University. Mr. Austin is a
Certified Public Accountant, a member of the American Institute of Certified
Public Accountants and the Financial Executives Institute.
Vance R. Davis, age 41, has served as Vice President of Tank Maintenance
and Repair - Union Operations for the Company since June 1997. Mr. Davis served
as Regional Manager from June 1994 to June 1997. Mr. Davis has served as a
Project Manager and Operations Manager for the Houston Region from April 1988 to
June 1994. Prior to joining the Company, Mr. Davis worked in various capacities
for Pasadena Erectors, Advance Tank & Construction Company, Kamyr Installations,
Graver Tank & Manufacturing and Tank Service, Inc.
John S. Newmeister, age, 53, has served as Vice President of Marketing for
the Company since May 2000 and previously as Vice President of Tank
Construction. Prior to working for the Company, Mr. Newmeister worked for Pitt-
Des Moines, Inc. for 24 years holding numerous positions, including President of
Hydrostorage, Inc. Mr. Newmeister holds a Bachelor of Science Degree in Civil
Engineering from University of Iowa.
Bradley J. Rinehart, age 37, has served as Vice President of Tank
Maintenance & Repair -Non-Union Operations for the Company since May 1997;
Regional Manager - Michigan Region from April 1991 to April 1997; Operations
Manager - Michigan Region from January 1990 to March 1991; Project Manager -
Michigan Region from January 1988 to December 1989. Mr. Rinehart holds a
Bachelor of Science Degree in Construction Science from the University of
Oklahoma.
Glen W. Rogers, age 51, has served as Vice President of Products, Technical
& Support Services for the Company since June 1997. Mr. Rogers served as Vice
President of Operations for the Company from October 1993 to May 1997. From
March 1992 to October 1993, Mr. Rogers served as Vice President of Construction
managing a $23 million dollar grass roots terminal project in Cushing, Oklahoma
for Matrix Service, Inc. Previous to working for the Company, Mr. Rogers was an
Engineering Manager for Williams Pipeline Company from October 1984 to March
1992. Mr. Rogers worked for Edeco, Inc. from March 1979 to October 1984 serving
as Senior Project Engineer. Mr. Rogers holds a Bachelor of Science Degree in
Civil Engineering from Kansas State University. Mr. Rogers is a member of the
American Society of Civil Engineering and the National Society of Professional
Engineers.
James P. Ryan, age 46, has served as Vice President of the Plant Services
Division since October 1999. Mr. Ryan is responsible for West Coast AST
Operations, Turnarounds and Plant Maintenance operations. Mr. Ryan has 21 years
of construction related experience in the area of heavy industrial construction.
Mr. Ryan was a 1979 graduate from Purdue University in Civil Engineering.
Previous employers include MW Kellogg, Kiewit Industrial Co. and Hoffman
Construction Company. Prior to employment with Matrix, Mr. Ryan provided
independent consulting services to the Power industry.
7
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding
compensation paid or accrued during each of the Company's last three fiscal
years to the Chief Executive Officer and each of the Company's four other most
highly compensated executive officers (the "Named Officers"):
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
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Awards Payouts
------------------------------------------
Other
Annual Restricted Securities Long-Term
Name and Fiscal Compensation Stock Underlying Incentive All other
Principal Position Year Salary ($) Bonus ($) ($) (1) Award(s) Options/SARs Payout ($) Compensation ($)
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Bradley S. Vetal(2) 2001 228,190 45,122 30,000
Chairman of Board, 2000 215,402 91,664 N/A N/A - N/A N/A
President and Chief 1999 181,651 89,000 185,000
Executive Officer -
Michael J. Hall 2001 172,371 33,320 20,000
Vice President 2000 165,400 49,915 N/A N/A - N/A N/A
Finance and Chief 1999 113,835 19,375 100,000
Financial Officer
James P. Ryan 2001 145,000 20,465 5,000
Vice President 2000 91,539 - N/A N/A 25,000 N/A N/A
Western Operations 1999 - - -
Vance R. Davis 2001 131,592 26,182 20,000
Vice President 2000 119,970 26,900 N/A N/A - N/A N/A
Tank Maintenance 1999 107,965 43,298 10,000
and Repair -
Union Operations
John S. Newmeister 2001 140,085 15,900 20,000
Vice President 2000 135,371 21,600 N/A N/A - N/A N/A
Marketing 1999 129,599 10,000 4,000
(1) During each of the three years ended May 31, 1999, 2000 and 2001,
perquisites for each individual named in the Summary Compensation
Table aggregated less than 10% of the total annual salary and bonus
reported for such individual in the Summary Compensation Table, or
$50,000, if lower. Accordingly, no such amounts are included in the
Summary Compensation Table.
(2) The bonus paid to Mr. Vetal in fiscal year 1999 was the result of his
performance as Vice President-Tank Division. No bonus was awarded to
Mr. Vetal for his role as President and Chief Executive Officer, a
position he assumed in March 1999.
8
Stock Option Grants During Fiscal 2001
The following table sets forth information with respect to grants of stock
options to purchase Common Stock pursuant to the Company's 1990 and 1991 Stock
Option Plans to the Named Officers identified in the Summary Compensation Table
above. No stock appreciation rights ("SARS") were granted during fiscal 2001 or
were outstanding at May 31, 2001.
OPTION GRANTS IN FISCAL 2001
Individual Grants (1)
----------------------------------------------------------------------------------------
% of
Number of Total Options Potential/Realizable Value at
Shares Underlying Granted Exercise Assumed Annual Rates of Stock
Stock Options to Employees Price Expiration Price Appreciation of Option Term (4)
Name Granted (#) In Fiscal 2001 ($/Share) Date 5% ($) 10% ($)
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Bradley S. Vetal 30,000 13.95% 4.25 10/18/10 80,184 203,202
Michael J. Hall 20,000 9.30% 4.25 10/18/10 53,456 135,468
James P. Ryan 5,000 2.33% 4.25 10/18/10 13,364 33,867
Vance R. Davis 20,000 9.30% (2) (2) 58,767 148,927
John S. Newmeister 20,000 9.30% (3) (3) 58,767 148,927
(1) Options granted during the year ended May 31, 2001 vest equally over five
years of service and expire ten years from date of grant.
(2) Options for Mr. Davis in fiscal year 2001 were granted at exercise prices
of $4.81 (as to 15,000 shares) and $4.25 (as to 5,000 shares) with
expiration dates of July 11, 2010 and October 18, 2010, respectively.
(3) Options for Mr. Newmeister in fiscal year 2001 were granted at exercise
prices of $4.81 (as to 15,000 shares) and $4.25 (as to 5,000 shares) with
expiration dates of July 11, 2010 and October 18, 2010, respectively.
(4) An appreciation in stock price is required for optionees to receive any
gain. A stock price appreciation of zero percent would render the options
without value to the optionees. The Securities and Exchange Commission
requires disclosures of the potential realizable value or present value of
each grant. The disclosure assumes the options will be held for the full
ten-year term prior to exercise. Such options may be exercised prior to
the end of such ten-year term. The actual value, if any, an executive
officer may realize will depend upon the excess of the stock price over the
exercise price on the date the option is exercised. There is no assurance
that appreciation, if any, in the stock price will occur at the rates shown
in the table.
9
Option Exercises and Holdings
The following table sets forth information with respect to the Named
Officers identified in the Summary Compensation Table concerning the exercise of
stock options and the value of unexercised options held as of the end of fiscal
year 2001.
AGGREGATED STOCK OPTION EXERCISES IN YEAR ENDING MAY 31, 2001
AND OPTION VALUES AT MAY 31, 2001
Number of Shares Value of Unexercised
Underlying Unexercised Options at In-the-Money Stock Options
May 31, 2001 (#) at May 31, 2001 (1) ($)
-----------------------------------------------------------------------------
Shares Acquired Value
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
Bradley S. Vetal - - 94,000 141,000 280,890 (2) 462,585 (2)
Michael J. Hall - - 58,667 61,333 175,796 (3) 189,524 (3)
James P. Ryan - - 5,000 25,000 10,310 (4) 56,240 (4)
Vance Davis 6,000 3,334 7,600 26,000 24,550 (5) 68,805 (5)
John S. Newmeister - - 12,400 22,400 43,750 (6) 58,455 (6)
(1) Value was calculated by subtracting the applicable exercise price from the
fair market value of the Company's Common Stock on May 31, 2001, which was
$7.25 (last trading day of fiscal year) based on the average of the high
and low sales price of the Common Stock on May 31, 2001 on the Nasdaq
National Market, multiplied by the number of shares underlying the
unexercised options.
(2) Mr. Vetal holds options to purchase 60,000 shares at an exercise price of
$3.78, 14,000 shares at an exercise price of $4.38 and 20,000 shares at an
exercise price of $5.63 that were exercisable in fiscal 2001. Mr. Vetal
also holds options to purchase 90,000 shares at an exercise price of $3.78,
30,000 shares at an exercise price of $4.25 and 21,000 shares at an
exercise price of $4.38 at May 31, 2001.
(3) Mr. Hall holds options to purchase 12,000 shares at an exercise price of
$3.78 and 46,667 shares at an exercise price of $4.38 that were exercisable
in fiscal 2001. Mr. Hall also holds options to purchase 18,000 shares at
an exercise price of $3.78, 20,000 shares at and exercise price of $4.25
and 23,333 shares at an exercise price of $4.38 at May 31, 2001.
(4) Mr. Ryan holds options to purchase 5,000 shares at an exercise price of
$5.19 that were exercisable in Fiscal 2001. Mr. Ryan also and holds
options to purchase 5,000 shares at an exercise price of $4.25 and 20,000
shares at an exercise price of $5.19 at May 31, 2001.
(5) Mr. Davis holds options to purchase 3,600 shares at an exercise price of
$3.63 and 4,000 shares at an exercise price of $4.38 that were exercisable
in fiscal 2001. Mr. Davis also holds options to purchase 5,000 shares at
an exercise price of $4.25, 6,000 shares at an exercise price of $4.38 and
15,000 shares at an exercise price of $4.81 at May 31, 2001.
(6) Mr. Newmeister holds options to purchase 10,800 shares at an exercise price
of $3.63 and 1,600 shares at an exercise price of $4.38 that were
exercisable in fiscal 2001. Mr. Newmeister also holds options to purchase
5,000 shares at an exercise price of $4.25, 2,400 shares at an exercise
price of $4.38 and 15,000 shares at an exercise price of $4.81 at May 31,
2001.
10
Report of the Compensation Committee of the Board of Directors
The Compensation Committee ("Committee") of the Board of Directors of the
Company currently consists of Hugh E. Bradley, I. Edgar Hendrix and Paul K.
Lackey, all of whom are independent directors who are not employees and who
qualify as non-employee directors for purposes of Rule 16b-3 adopted under the
Securities Exchange Act of 1934. The Committee is responsible for evaluating the
performance of the Chief Executive Officer and the Chief Financial Officer
("Named Executive Officers"), determining the compensation of the Named
Executive Officers and administering the Company's stock option plan under which
grants may be made to employees of the Company. The Committee has furnished the
following report on executive compensation for the fiscal year ending May 31,
2001.
The annual compensation package of the Named Executive Officers primarily
consists of (i) a cash salary which reflects the responsibilities relating to
the position and individual performance, (ii) variable performance awards
payable in cash and tied to the individual's and the Company's performance
against pre-established financial measures and (iii) long-term stock-based
incentive awards which strengthen the relationship between the interests of the
Named Executive Officers and the interests of the Company's stockholders.
In determining the level and composition of compensation for each Named
Executive Officer, the Committee takes into account various qualitative and
quantitative indicators of each officer's performance. The Committee's
objectives in determining compensation are to allow the Company to attract,
motivate and retain the executive personnel necessary for the Company's success
and to provide an executive compensation program comparable to that offered by
the companies with which the Company competes for such management personnel.
Although no specific target has been established, the Committee generally seeks
to set salaries at or below the average of a range in comparison to peer group
companies based upon experience of the Named Executive Officers. In setting
salaries, the Compensation Committee considers its peer group to be certain
companies with market capitalizations similar to that of the Company. This peer
group does not necessarily include the companies comprising the Standard and
Poor's Engineering and Construction Index reflected in the performance graph in
this Proxy Statement, which is the industry categorization the Company has been
placed in by its market makers. In evaluating the performance of the Named
Executive Officers, the Committee takes into consideration such factors as total
operating income (TOI) based on a fiscal budget plan which is reviewed by the
Committee.
Base compensation is established through negotiation between the Company
and the Named Executive Officer at the time the executive is hired, or named to
the executive position, and then subsequently (in general annually) when such
officer's base compensation is subject to review or reconsideration. Base
salaries after the initial year will be determined by the Compensation Committee
after review of the officer's performance. In establishing or reviewing base
compensation levels for each Named Executive Officer, the Committee, in
accordance with its general compensation policy, considers numerous factors,
including the responsibilities relating to the position, the qualifications of
the executive and the relevant experience the individual brings to the Company,
strategic goals for which the executive has responsibility, and compensation
levels of other companies at a comparable stage of development that compete with
the Company for business and executive talents. No predetermined weights are
given to any such factors. The salaries for each of the Named Executive Officers
in fiscal year 2001 were set taking into account these factors in accordance
with the Company's general compensation policy discussed above.
In addition to each Named Executive Officer's base compensation, the
Committee may award cash bonuses and/or grant awards under the Company's Stock
Option Plan to Named Executive Officers depending on the extent to which certain
defined personal and corporate performance goals are achieved. Such corporate
performance goals include revenue and earnings targets of the Company, as
discussed above.
11
The Chief Executive Officer's compensation is the responsibility of the
Compensation Committee. Based upon the Compensation Committee's assessment of
Mr. Vetal's ability to effectively lead the Company into the future as
determined by his past performance and experience with the Company's business
and markets, the Compensation Committee determined that Mr. Vetal's compensation
package would consist of the following: (i) annual base salary of $228,190 and
(ii) annual bonus target of 70% of annual salary based upon the Company
achieving specific TOI targets as discussed above. For the past year, the Chief
Executive Officer's bonus resulted in a 20% of salary bonus as determined by the
Compensation Committee.
The Chief Financial Officer's compensation is the responsibility of the
Compensation Committee. Based upon the Compensation Committee's assessment of
Mr. Hall's ability to effectively lead the Company into the future as determined
by his past performance and experience with the Company's business and markets,
the Compensation Committee determined that Mr. Hall's compensation package would
consist of the following: (i) annual base salary of $172,371 and (ii) annual
bonus target of 50% of annual salary based upon the Company achieving specific
TOI targets as discussed above. For the past year, the Chief Financial Officer's
bonus resulted in a 20% of salary bonus as determined by the Compensation
Committee.
Equity incentives are not limited to executive officers. Grants of stock
options are made to management and staff of the Company in amounts determined by
the Compensation Committee. The amounts of such grants are determined based on
the individual employee's position with the Company and his or her potential
ability to beneficially impact the performance of the Company. By giving
management and staff a stake in the financial performance of the Company, the
Compensation Committee's goal is to provide incentives to these employees of the
Company to enhance the financial performance of the Company and, thus,
stockholder value.
Salaried employees of the Company with grade levels of 27 or greater,
including the Named Executive Officers, are eligible to receive long-term stock
based incentive awards under the Company's Stock Option Plan as a means of
providing such individuals with a continuing proprietary interest in the
Company. Such grants further the mutual interests of the Company's employees and
its stockholders by providing significant incentives for such employees to
achieve and maintain high levels of performance. The Company's Stock Option Plan
enhances the Company's ability to attract and retain the services of qualified
individuals. Factors considered in determining whether such awards are granted
includes the employee's position in the Company, his or her performance and
responsibilities, the number of options, if any, currently held, and the vesting
schedule of any such options. The Committee has adopted an established schedule
for the issuance of options, with designated option grants for specific salary
grades over a 3-year period.
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such acts.
Members of the Compensation Committee
Hugh E. Bradley
I. Edgar Hendrix
Paul K. Lackey
12
Report of the Audit Committee of the Board of Directors
The Audit Committee has:
. Reviewed and discussed the audited financial statements with
management.
. Discussed with the independent auditors the matters required to be
discussed by SAS 61.
. Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, and
has discussed with the independent auditors the auditors'
independence.
. Based on the review and discussions above, recommended to the Board of
Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the last fiscal year for
filing with the Securities and Exchange Commission.
The Board of Directors has determined that the members of the Audit
Committee are independent. The Audit Committee has adopted a written charter.
Members of the Audit Committee:
Hugh E. Bradley
I. Edgar Hendrix
John S. Zink
For the year ended May 31, 2001, the Company paid Ernst & Young, LLP audit
fees of $90,000 and fees for quarterly reviews of $9,300.
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filling under the Securities Act of 1944, as amended, or
under the Securities Exchange Act of 1934, as amended, except to the extent that
the Company specifically incorporated this information by reference, and shall
not otherwise be deemed filed under such acts.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than ten percent
of the Common Stock, to file initial reports of ownership and reports of changes
in ownership (Forms 3, 4 and 5) of the Common Stock with the Securities and
Exchange Commission (the "SEC") and the NASDAQ Stock Market. Officers, directors
and greater than 10 percent stockholders are required by SEC regulations to
furnish the Company with copies of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and on written representations by
certain reporting persons, the Section 16(a) filing requirements were satisfied
by the Company's directors, officers and ten percent stockholders, except for
one transaction for the granting of Phantom Stock (SARs) by Paul K. Lackey not
timely reported on Form 4.
13
PROPOSAL NUMBER 2: Selection of Auditors
The Board of Directors has reappointed the firm of Ernst & Young LLP as the
Company's independent public accountants for the fiscal year ending May 31,
2002, subject to ratification by the Company's stockholders. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting of
Stockholders and will have an opportunity to make a statement, if they desire to
do so, and to respond to appropriate questions from those attending the meeting.
Ernst & Young LLP has served as auditors for the Company since 1984.
The affirmative vote of holders of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting is required to
ratify the appointment of Ernst & Young LLP as the independent accountants for
fiscal 2002.
The Board of Directors recommends a vote "For" ratification of Ernst & Young's
appointment.
Proposals of Stockholders
A proposal of a stockholder intended to be presented at the next annual
meeting of stockholders must be received at the Company's principal executive
offices no later than May 31, 2002, if the proposal is to be considered for
inclusion in the Company's proxy statement relating to such meeting.
14
PERFORMANCE GRAPH
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MATRIX SERVICE COMPANY,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P ENGINEERING & CONSTRUCTION INDEX
[PERFORMANCE GRAPH APPEARS HERE]
Total Return Analysis
5/31/96 5/30/97 5/29/98 5/31/99 5/31/00 5/31/01
Matrix Service $ 100 $ 206 $ 185 $ 96 $ 111 $ 122
S&P Engineering & Construction $ 100 $ 119 $ 115 $ 83 $ 82 $ 50
Nasdaq Composite $ 100 $ 164 $ 208 $ 292 $ 402 $ 39
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Data from BRIDGE Information
Systems, Inc.
$100 invested on May 31, 1996 in the Company's Common Stock. Includes
reinvesting of dividends, where applicable. The Company's fiscal year ends May
31.
The performance graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporated this graph by reference, and shall not otherwise be
deemed filed under such acts.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted in the graph
above. The Company will not make or endorse any predictions as to future stock
performance.
15
Financial Information
A copy of the Company's Annual Report on Form 10-K, including any financial
statements and schedules and exhibits thereto, may be obtained without charge by
written request to Michael J. Hall, Vice President Finance, Matrix Service
Company, 10701 East Ute Street, Tulsa, Oklahoma 74116.
Other Matters
The cost of solicitation of these proxies will be borne by the Company. In
addition to solicitation by mail, certain directors, officers, and regular
employees of the Company may solicit proxies by telecopy, telephone, and
personal interview.
By Order of the Board of Directors
/s/ MICHAEL J. HALL
Michael J. Hall
September 17, 2001
Tulsa, Oklahoma
16
PROXY PROXY
MATRIX SERVICE COMPANY
CUSIP 57685310
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints BRADLEY S. VETAL, MICHAEL J.
HALL, and each or either of them, lawful attorneys and proxies of the
undersigned, with full power of substitution and re-substitution, for and in the
name, place and stead of the undersigned, to attend the Annual Meeting of
Stockholders of Matrix Service Company (herein the "Company") to be held at Bank
One, First National Tower, The Board Room, 41st Floor, 15 East Fifth Street,
Tulsa, Oklahoma, on the 23rd day of October, 2001 at 10:00 a.m., Central
Standard Time, and any adjournment(s) thereof, with all powers the undersigned
would possess if personally present and to vote thereat, as specified herein,
the number of shares the undersigned would be entitled to vote if personally
present.
In accordance with their discretion, said attorneys and proxies are authorized
to vote upon such other business as may properly come before the meeting or any
adjournments thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
=============================================================================
ENVELOPE.
========
Every properly signed proxy will be voted in accordance with the specification
made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS
1 AND 2. All prior proxies are hereby revoked.
PROPOSAL 1: ELECTION OF DIRECTORS (INSTRUCTION: To withhold authority to vote for any individual
FOR all nominees WITHHOLD AUTHORITY nominee, strike a line through the nominee's name in the list
(except as marked to vote for all nominees below.)
to the contrary) listed to the right
[ ] [ ] Hugh E. Bradley, Michael J. Hall, I. Edgar Hendrix, Paul K.
Lackey, Bradley S. Vetal, John S. Zink
PROPOSAL 2: If authority to vote FOR any nominee is not withheld, this
TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS proxy will be voted for such nominee.
THE INDEPENDENT AUDITORS OF THE COMPANY FOR THE
FISCAL YEAR 2002 --------------------------------------------------
| |
FOR AGAINST ABSTAIN | Share ownership label |
[ ] [ ] [ ] | 4" x 1 1/2" |
| |
* NOTE * SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE --------------------------------------------------
THE MEETING OR ANY ADJOURNMENT THEREOF
(Please sign exactly as name appears hereon. When
signing as attorney, executor, administrator, trustee,
guardian, etc., give full title as such. For joint accounts,
each joint owner should sign.)
This proxy will also be voted in accordance with the discretion
of the proxies or proxy on any other business. Receipt is
hereby acknowledged of the Notice of Annual Meeting and Proxy
Statement of the Company dated September 17, 2001.
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(Signature)
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(Signature if held jointly)
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(Date)