SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to SEC.240.14a-11(c) or SEC.240.14a-12
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
================================================================================
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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pursuant to Exchange Act Rule 0-11. (Set forth the amount on
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[ ] Fee paid previously with preliminary materials.
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statement number, or the Form or Schedule and the date of its filing.
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BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
11615 N. HOUSTON ROSSLYN
HOUSTON, TEXAS 77086
April 8, 2004
Dear Stockholder:
You are cordially invited to attend the 2004 annual meeting of Stockholders
of Boots & Coots International Well Control, Inc. (the "Company") to be held at
3:00 p.m., on May 19, 2004, at the Crown Plaza Brookhollow located at 12801
Northwest Freeway, Houston, Texas 77040.
At the 2004 annual meeting, you will be asked to elect two Class I
directors to serve for a term of three years, to approve the 2004 Long-Term
Incentive Plan and to approve an Amendment to the Nonemployee Director Stock
Option Plan. The board of directors recommends that you vote FOR these
proposals.
Details regarding the matters to be acted upon at the 2004 annual meeting
appear in the accompanying Proxy Statement. Please give this material your
careful attention.
Whether or not you are able to attend the annual meeting, it is important
that your shares be represented and voted. Accordingly, be sure to complete,
sign and date the enclosed proxy card and mail it in the envelope provided as
soon as possible so that your shares may be represented at the meeting and voted
in accordance with your wishes. If you do attend the 2004 annual meeting, you
may vote in person even if you have previously returned your proxy card.
On behalf of our board of directors and management, thank you for your
continued support of Boots & Coots.
Very truly yours,
/s/ K. Kirk Krist /s/ Jerry L. Winchester
-------------------- --------------------------
K. Kirk Krist Jerry L. Winchester
Chairman Chief Executive Officer
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
11615 N. HOUSTON ROSSLYN
HOUSTON, TEXAS 77086
__________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 2004
To the Stockholders of Boots & Coots International Well Control, Inc.:
The annual meeting of stockholders of Boots & Coots International Well
Control, Inc., a Delaware corporation, will be held on May 19, 2004, at 3:00
p.m., local time, at the Crown Plaza Brookhollow located at 12801 Northwest
Freeway, Houston, Texas 77040, for the following purposes:
1. To elect two Class I directors for a term of three years or until a
successor is elected and qualified.
2. To approve the 2004 Long-Term Incentive Plan.
3. To approve an amendment to the Nonemployee Director Stock Option
Plan which includes (i) an increase in the number of shares included in the
initial stock option grant to Nonemployee Director, (ii) a one-time stock option
grant to incumbent Nonemployee Director and (iii) an increase in the aggregate
number of shares that may be awarded by stock option grants.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 7, 2004, are
entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ Brian Keith
----------------------------------------
Brian Keith, Corporate Secretary
April 8, 2004
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE AT
YOUR EARLIEST CONVENIENCE. IF YOU DO ATTEND THE MEETING IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON. THE PROMPT RETURN OF PROXIES WILL
ENSURE A QUORUM AND SAVE THE COMPANY THE EXPENSE OF FURTHER SOLICITATION.
--------------------------------------------------------------------------------
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
11615 N. HOUSTON ROSSLYN
HOUSTON, TEXAS 77086
PROXY STATEMENT
For Annual Meeting of Stockholders
To be Held on May 19, 2004
GENERAL
This proxy statement is furnished in connection with the solicitation of
proxies by Boots & Coots International Well Control, Inc. (the "Company" or "we"
or "us") on behalf of its board of directors, to be used at the annual meeting
of the stockholders of the Company on May 19, 2004. The proxy statement and the
accompanying proxy card are first being mailed to stockholders on or about April
14, 2004.
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by mail, solicitation of proxies may be made by personal
interview, special letter, telephone or telecopy by any of our officers,
directors and employees who will receive no special compensation for these
activities. Brokerage firms will be requested to forward proxy materials to
beneficial owners of shares registered in their names and will be reimbursed for
their expenses.
PROXIES
If you are not able to attend the 2004 annual meeting in person, you may
vote by completing the enclosed proxy card and returning it to the Company.
Instructions for voting by mail are included on your proxy card. You are urged
to sign and return your proxy card promptly to make certain your shares will be
voted at the meeting. Our board of directors will vote your shares according to
your instructions. If you sign and return your proxy card but do not specify a
choice, your shares will be voted as the board of directors has recommended,
which is FOR the election of the nominees for the Class I directors named in the
accompanying form of proxy, FOR the approval of the 2004 Long-Term Incentive
Plan and FOR the amendment to the Nonemployee Director Stock
1
Option Plan. Although the board of directors is not aware of any other proposals
to be presented at the meeting, your proxy authorizes the persons named in the
proxy card to vote on your behalf with respect to any other matters brought
before the stockholders. You may revoke your proxy at any time before it has
been exercised by giving written notice of revocation to the Secretary of the
Company, by filing with the Company a duly executed proxy bearing a later date,
or by voting in person at the meeting.
VOTING PROCEDURES AND TABULATION
The Company will appoint one or more inspectors of election to serve at the
2004 annual meeting. The inspector(s) will ascertain the number of shares
outstanding and the voting power of each of the shares, determine the shares
represented at the meeting and the validity of proxies and ballots, count all
votes and ballots, make a written report of the meeting and perform certain
other duties as required by law. Each inspector will sign an oath to perform
his or her duties in an impartial manner and to the best of his or her
abilities.
The inspectors will tabulate the number of votes cast for or withheld as to
the vote on the nominees for Class I director, the 2004 Long Term Incentive Plan
and the amendment to the Nonemployee Director Stock Option Plan. Under Delaware
law and the Company's Amended and Restated Certificate of Incorporation and
Bylaws, abstentions and broker non-votes will have no effect on the voting on
the election of directors, provided a quorum is present, because directors are
elected by a plurality of the shares of stock present in person or by proxy at
the meeting and entitled to vote. For all proposals other than the election of
directors, the affirmative vote of a majority of the shares of common stock
represented in person or by proxy at a meeting of stockholders at which a quorum
is present is required. A broker non-vote or other limited proxy as to a
proposal voted on at the meeting will be counted towards a meeting quorum, but
cannot be voted on the proposal and therefore will not be considered a part of
the voting power with respect to the proposal.
VOTING SECURITIES
Only the holders of record of our common stock, par value $0.00001 per
share, at the close of business on April 7, 2004, the record date for the
meeting, are entitled to vote on the election of directors at the meeting. For
matters other than the election of directors, the holders of Series A, C and E
Preferred Stock, par value $0.00001 per share ("Preferred Stock") are entitled
to vote together as a single class with the holders of common stock, voting
together as a single class. On the record date, there were 27,299,794 shares of
common stock, 50,000, 2,414 and 582 shares of Series A, C and E, respectively,
Preferred Stock outstanding and entitled to be voted at the meeting. A majority
of the shares of common stock, present in person or by proxy, is necessary to
constitute a quorum. Each share of common stock and Preferred Stock is entitled
to one vote.
2
PROPOSAL I:
ELECTION OF CLASS I DIRECTORS
The business and affairs of the Company are managed by our board of
directors, which exercises all corporate powers of the Company and establishes
broad corporate policies. The Amended and Restated Certificate of Incorporation
of the Company requires that our board of directors consist of at least three
and no more than nine individuals, with the exact number to be determined by the
board. Currently, the size of the board of directors is fixed at five members,
thereby requiring the Company to have a minimum of three independent directors
under the rules of the American Stock Exchange. Of our current directors, W.
Richard Anderson, Robert S. Herlin and E. J. DiPaolo are each "independent" as
defined under the rules of the American Stock Exchange.
Our Amended and Restated Certificate of Incorporation requires that our
board of directors be divided into three classes, with each class having a
staggered three-year term. Directors are elected to serve until the annual
meeting of stockholders for the year in which their term expires and until their
successors have been elected and qualified, subject, however, to their prior
death, resignation, retirement, disqualification or removal from office.
Assuming a quorum is present at the 2004 annual meeting, two Class I directors
will be elected by a plurality of the votes of the holders of common stock
present in person or represented by proxy at the meeting. Abstentions and
broker non-votes have no effect on the vote. All duly submitted and unrevoked
proxies will be voted for W. Richard Anderson and Robert Stevens Herlin, the
Class I nominees, except where authorization so to vote is withheld. If any
nominee should become unavailable for election for any unforeseen reason, the
persons designated as proxies will have full discretion to vote for another
person nominated by the board of directors.
The nominees selected to stand for re-election to our board of directors
are W. Richard Anderson and Robert Stevens Herlin, who have consented to serve
as Class I directors if elected. Mr. Anderson and Mr. Herlin are presently
directors of the Company and have served continuously in that capacity since
1999 and 2003, respectively.
Name of Year First Elected Position with the
Nominee Age Director Company Class Term
------- --- -------- ------- ----- ----
W. Richard
Anderson 51 1999 Director I Expires 2007
Robert Stevens
Herlin 49 2003 Director I Expires 2007
Mr. Anderson has served as a director of the Company since August 1999. Mr.
Anderson also serves on the Audit Committee and the Compensation Committee. Mr.
Anderson is the President, Chief Financial Officer and a director of Prime
Natural Resources, a privately held exploration and production company. Prior to
his employment at Prime in January 1999, he was employed by Hein & Associates
LLP, a certified public accounting firm, where he served as a partner from 1989
to January 1995 and as a managing partner from January 1995 through December
1998. There are no family relationships between Mr. Anderson and any other
director or executive officer of the Company.
3
Mr. Herlin was appointed a director of the Company on September 30, 2003.
Mr. Herlin serves on the Audit Committee and chairs the Compensation Committee.
Since 2003, Mr. Herlin has served as the President, CEO and a Director of
Natural Gas Systems, a private company involved in the acquisition and
redevelopment of oil and gas properties. Since 2003, Mr. Herlin has served as a
partner with Tatum Partners, a company that provides CFO's and CEO's on a
contract basis to clients. Prior to his employment at Natural Gas Systems, he
was CFO of Intercontinental Tower Corporation, a wireless telecom infrastructure
operation in South America from 2000 to 2003. From 1997 to 2000, he was
President, CEO and CFO of Benz Energy, a company engaged in oil and gas
exploration based on 3-D seismic information. Benz Energy filed for protection
in November 2000 under Chapter 11 of Federal bankruptcy law and subsequently,
liquidated under Chapter 7. There are no family relationships between Mr.
Herlin and any other director or executive officer of the Company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE NOMINEES LISTED ABOVE
COMMITTEES AND BOARD MEETINGS
As permitted by the Bylaws of the Company, the board of directors has
designated from its members a Compensation Committee and an Audit Committee. The
Company does not have a standing nominating committee of the board of directors
or any other committee that performs a similar function. During 2003, the board
of directors held 10 meetings. All current directors attended 100 % of such
meetings held during the period in which such director served. In addition, the
current committees of the board of directors, the composition and functions
thereof and the number of meetings held in 2003 are as set forth below:
Compensation Committee. The Company's Compensation Committee is comprised
of two or more directors appointed from time to time by, and serving at the
discretion of, the board of directors. Tracy S. Turner and W. Richard Anderson
served on the Compensation Committee until Mr. Turner's resignation on May 7,
2003. Our board of directors appointed Messrs. Di Paolo and Herlin to join Mr.
Anderson on the Compensation Committee effective November 12, 2003, and Mr.
Herlin was designated the chairman of the committee. The Compensation Committee
administers the Company's stock option plans, and in this capacity makes all
option grants or awards to employees, including executive officers, under the
plans. In addition, the Compensation Committee is responsible for making
recommendations to the board of directors with respect to the compensation of
the Company's chief executive officer and its other executive officers and for
establishing compensation and employee benefit policies. The Compensation
Committee met two times during 2003 and once during the first quarter of 2004.
The Compensation Committee approved the 2004 Long Term Incentive Plan, bonuses
under the Company's 2003 Incentive Bonus Plan and Mr. Winchester's new
employment agreement.
4
CONSIDERATION OF DIRECTOR NOMINEES.
The Company does not presently maintain a nominating committee of the board
of directors. Instead, we rely on the judgment of our independent board members
to identify and select qualified candidates for election to our board. Although
our board may authorize the establishment of a nominating committee in the
future, our current board is relatively small, and our independent directors
already serve on the Audit Committee, the Compensation Committee, or both. Our
independent directors identify nominees to the board according to the criteria
outlined below, and the board ultimately selects nominees based upon the same
criteria.
The Company's independent directors consider the following criteria in
recommending the nomination of individuals for re-election to the Company's
board:
- Record of past attendance at board of directors and committee
meetings;
- Ability to contribute to a positive, focused atmosphere in the board
room;
- Absence of any cause for removal from the board of directors; and
- Past contributions in service on the board of directors.
In addition, all nominees for re-election shall evidence a desire and
willingness to attend future board of directors and committee meetings. All
decisions regarding whether to recommend the nomination of a director for
re-election is within the sole discretion of the independent members of our
board.
The Company's independent directors consider the following criteria in
recommending new nominees to the board of directors and its committees from time
to time:
- Expertise and perspective needed to govern the business and strengthen
and support executive management - for example: strong financial
expertise, knowledge of international operations, or knowledge of the
oil field services and petroleum industries.
- Sound business judgment and a sufficiently broad perspective to make
meaningful contributions, under pressure if necessary.
- Interest and enthusiasm in the Company and a commitment to become
involved in its future.
- The time and energy to meet board commitments.
- Constructive participation in discussions, with the capacity to
quickly understand and evaluate complex and diverse issues.
- Dedication to the highest ethical standards.
- Supportive of management, but independent, objective, and willing to
question and challenge both openly and in private exchanges.
- Willingness to anticipate and explore opportunities.
All decisions regarding whether to recommend the nomination of a new
individual for election to the board of directors is within the sole discretion
of the independent members of our board.
5
All new nominees and directors for re-election will be evaluated without regard
to race, sex, age, religion, or physical disability.
SECURITY HOLDER COMMUNICATIONS. Security holder communications intended for
the board of directors or for particular directors (other than stockholder
proposals submitted pursuant to Exchange Act Rule 14a-8 and communications made
in connection with such proposals) may be sent in care of the Company's
Secretary at Boots & Coots International Well Control, Inc., 11615 N. Houston
Rosslyn, Houston, Texas 77086. The Secretary will forward all such
communications to the board of directors or to particular directors as directed
without screening such communications.
The Company has adopted a Code of Business Conduct and Ethics that covers
all employees, directors, and officers that relates to the honest and ethical
conduct in all business dealings, full, fair accurate timely and understandable
disclosures in all reports filed by the Company with or submitted to the
Securities and Exchange Commission and in other public communications,
compliance with applicable governmental rules and regulations, and avoidance of
conflicts of interest. The Code of Business Conduct and Ethics is available on
the 'Company Info' link at www.bncg.com.
------------
AUDIT COMMITTEE REPORT
Audit Committee. In 2003, the members of the Audit Committee were Messrs.
Anderson, DiPaolo, Turner, Herlin, Easley, and Krist. Messrs. Easley, Turner
and Krist resigned from the Audit Committee effective May 16, 2003, May 6, 2003
and May 7, 2003, respectively. The resignations of Messrs. Easley and Turner
were related to their resignation from the board of directors; while Mr. Krist
resigned as his increased involvement with the Company impaired his status as
'independent'. All members of the Audit Committee were "independent", as such
term is defined in Section 121(A) of the American Stock Exchange's listing
standards, at the time the members served on the Audit Committee. Our board of
directors appointed Messrs. Di Paolo and Herlin to the committee on November 12,
2003. Messrs. Anderson, Di Paolo and Herlin currently serve on the Audit
Committee. During 2003, the Audit Committee met four times. The Audit Committee
reviews the Company's financial reporting processes, its system of internal
controls, and the audit process for monitoring compliance with laws and
regulations. In addition, the committee reviews, with the Company's auditors,
the scope of the audit procedures to be applied in the conduct of the annual
audit, as well as the results of that audit. Our board has determined that each
of the Audit Committee members is independent, in accordance with the audit
committee requirements of the American Stock Exchange. Messrs Anderson and
Herlin are financial experts within the meaning of Item 401 (h) of Regulation
S-K promulgated by the U.S. Securities and Exchange Commission.
The Audit Committee has reviewed and discussed the audited financial
statements for the fiscal year ended December 31, 2003, with the Company's
management. The committee also discussed with Mann Frankfort Stein & Lipp CPAs,
LLP, ("Mann Frankfort"), our independent auditors for the 2003 fiscal year, the
matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Sec. 380), as modified or supplemented, and have received
the written disclosures and the letter from Mann Frankfort required by
Independence Standards Board Standard No. 1 (Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees), as modified or
supplemented. The committee also discussed with Mann Frankfort any issues
relating to the independence of the Audit Committee. Based on the above
6
review and discussions, the Audit Committee has recommended to the board of
directors that the audited financial statements for the fiscal year ended
December 31, 2003 be included in the Company's Annual Report on Form 10-K.
Respectfully submitted,
THE AUDIT COMMITTEE
W. Richard Anderson
E. J. DiPaolo
Robert S. Herlin
During 2002 and 2003, the Company incurred the following fees for services
performed by Mann Frankfort:
---------------------------------------------------------
AUDIT FEES
---------------------------------------------------------
Fee Type 2002 2003
----------------------------------- -------- ----------
Audit Fees $135,900 $ 126,000
----------------------------------- -------- ----------
Audit Related fees - 45,300
----------------------------------- -------- ----------
Tax Fees - -
----------------------------------- -------- ----------
Other Fees - -
----------------------------------- -------- ----------
Total Fees $135,900 $ 171,300
---------------------------------------------------------
During 2002, Mann Frankfort reviewed two of our quarterly reports on Form
10-Q and the audit related to 2002 as they replaced our previous auditors,
Arthur Anderson, mid-year. Fees for 2003 include audit fees for the 2003 audit
and the review of three of our quarterly reports on Form 10-Q.
AUDIT FEES
Audit fees represent the aggregate fees for professional services rendered
by Mann Frankfort for the audit of our annual financial statements for the
fiscal years ended December 31, 2002 and December 31, 2003, and the reviews of
our financial statements included in our Forms 10-Q for the second and third
quarter of 2002 and all of fiscal 2003.
AUDIT-RELATED FEES
Audit-related fees primarily include professional services rendered by Mann
Frankfort for audits of the Company's employee benefit plans.
TAX FEES
The Company uses an independent consultant other than Mann Frankfort to
perform all tax related work.
7
ALL OTHER FEES
No other professional services were rendered by Mann Frankfort.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has established written pre-approval policies that
require the approval by the Audit Committee of all services provided by Mann
Frankfort as the principal independent accountants and all audit services
provided by other independent accountants. All of the services described above
provided by Mann Frankfort to the Company were approved in accordance with the
policy.
WORK PERFORMED BY PRINCIPAL ACCOUNTANT'S FULL TIME, PERMANENT EMPLOYEES
Mann Frankfort's work on the Company's audit was performed by Mann
Frankfort partners and employees.
THE SELECTION OF AUDITORS
Mann Frankfort has examined the Company's financial statements beginning
with the fiscal year ending December 31, 2002. The Board of Directors has
appointed Mann Frankfort as principal independent accountants to examine the
financial statements and the books and records of the Company for the year
ending December 31, 2004. The appointment was made upon the recommendation of
the Audit Committee. Mann Frankfort has advised that neither the firm nor any
member of the firm has any direct financial interest or any material indirect
interest in the Company. Also, during at least the past two years, neither the
firm nor any member of the firm has had any connection with the Company in the
capacity of promoter, underwriter, voting trustee, Director, officer or
employee.
Representatives of Mann Frankfort will be present at the annual meeting,
will have an opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions from stockholders.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following tables list the names and ages of each director
and/or executive officer of the Company, as well as those persons expected to
make a significant contribution to the Company.
NAME AGE POSITION
--------------------- --- -----------
Kirk Krist 45 Chairman of the Board
Jerry L. Winchester 46 President, Chief Executive Officer and Director
8
W. Richard Anderson 51 Director
E. J. DiPaolo 51 Director
Robert Stevens Herlin 49 Director
Kevin D. Johnson 52 Senior Vice President of Finance
BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS
K. Kirk Krist has served as a director since the acquisition of IWC
Services by the Company on July 29, 1997. On December 4, 2002, Mr. Krist was
elected Chairman of the Board. Mr. Krist is a 1982 graduate of the University
of Texas with a B.B.A. in Business. He has been a self-employed oil and natural
gas investor and venture capitalist since 1982.
Mr. Winchester has served as the Company's President and COO since 1998.
In July of 2002 he assumed the position of Chief Executive Officer. Prior to
joining the Company, Mr. Winchester was employed by Halliburton Energy Services
since 1981 in positions of increasing responsibility, most recently as Global
Manager - Well Control, Coil Tubing and Special Services. He received his B.S.
in Engineering Technology from Oklahoma State University in 1982 and is an
active member of the Society of Petroleum Engineers and the International
Association of Drilling Contractors.
Mr. Anderson has served as a director of the Company since August 1999. Mr.
Anderson also serves as chairman of the Audit Committee and is a member of the
Compensation Committee. Mr. Anderson is the President, Chief Financial Officer
and a director of Prime Natural Resources, a closely-held exploration and
production company. Prior to his employment at Prime in January 1999, he was
employed by Hein & Associates LLP, a certified public accounting firm, where he
served as a partner from 1989 to January 1995 and as a managing partner from
January 1995 until October 1998. There are no family relationships between Mr.
Anderson and any other director or executive officer of the Company.
Mr. Herlin was appointed a director of the Company on September 30, 2003.
Mr. Herlin serves on the Audit Committee and chairs the Compensation Committee.
Since 2003, Mr. Herlin has served as the President, CEO and a Director of
Natural Gas Systems, a private company involved in the acquisition and
redevelopment of oil and gas properties. Since 2003, Mr. Herlin has served as a
partner with Tatum Partners, a service company that provides CFO's and CEO's on
a contract basis to clients. Prior to his employment at Natural Gas Systems, he
was CFO of Intercontinental Tower Corporation, a wireless telecom infrastructure
operation in South America from 2000 to 2003. From 1997 to 2000, he was
President, CEO and CFO of Benz Energy, a company engaged in oil and gas
exploration based on 3-D seismic information. Benz Energy filed for protection
in November 2000 under Chapter 11 of Federal bankruptcy law; subsequently,
filing was converted to a Chapter 7. There are no family relationships between
Mr. Herlin and any other director or executive office of the Company.
E.J. "Jed" DiPaolo has served as a director from May 1999 to December 4,
2002 then was reappointed on September 30, 2003. Mr. DiPaolo serves as a Class
II Director for a term that will expire on the date of the annual meeting of
stockholders scheduled for calendar year 2005. Mr.
9
DiPaolo also serves on the Audit and Compensation Committees. Since August of
2003, Mr. DiPaolo is a consultant with Growth Capital Partners, L.P., a company
engaged in investments and merchant banking. Mr. DiPaolo was the Senior Vice
President, Global Business Development of Halliburton Energy Services, having
had responsibility for all worldwide business development activities until his
retirement in 2002. Mr. DiPaolo was employed at Halliburton Energy Services from
1976 until his retirement in progressive positions of responsibility.
Kevin D. Johnson, CPA, has served as the Senior Vice President - Finance
for the Company since March, 2003. Mr. Johnson previously served as controller
for the Company since July 1999. Prior to joining the Company, Mr. Johnson
served as assistant controller from March 1997 through June 1999 for ITEQ, Inc.,
a public company, engaged in manufacturing and construction of storage tanks and
industrial air filtration systems. Mr. Johnson worked for 10 years in various
accounting capacities from August 1987 to January 1997 with Battle Mountain Gold
Company, a public company engaged in world-wide gold mining, and prior to that,
in the oilfield service sector from July 1978 to May 1987 in various capacities
including corporate controller at Galveston Houston Company, a public company at
that time. Prior to his employment at Galveston Houston Company, Mr. Johnson was
employed by Brown and Root (KBR) where Mr. Johnson started as a systems analyst
and accountant. Mr. Johnson graduated with a BBA in Accounting/Information
Systems from the University of North Texas in 1975.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth the cash and non-cash
compensation information for the years ended December 31, 2001, 2002 and 2003
for the Chief Executive Officer and the other executive officers whose salary
and bonus earned for services rendered to the Company exceeded $100,000 for the
most recent fiscal year.
SUMMARY COMPENSATION TABLE
------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
----------------------------------------- -----------------------------------
Awards Payouts
------------------------- --------
Other Securities
Name Annual Restricted Underlying All Other
And Compen- Stock Options/ LTIP Compen-
Principal Salary Bonus sation Awards(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
--------------------- ---- ------------------- --------- --------- ------------ ----------- -------- -----------
Kirk Krist (1) 2003 $ 236,775 $ 157,950 $ 5,000
Chairman of the
Board
--------------------- ---- ------------------- --------- --------- ------------ ----------- -------- -----------
Jerry Winchester 2003 263,500 187,500 $ 72,000(2) 500,000(2) $ 3,606(3)
Chief Executive 2002 257,914 4,086
Officer 2001 259,066 378,250(4) 3,287
--------------------- ---- ------------------- --------- --------- ------------ ----------- -------- -----------
Kevin Johnson 2003 127,833 62,500 3,835(3)
Principal 2002 98,944
Accounting 2001 96,132
Officer
------------------------------------------------------------------------------------------------------------------------
(1) Mr. Krist is not an employee of the Company and is compensated pursuant to terms of a Consulting Agreement
between Mr. Krist and the Company. Non-executive board members, including Mr. Krist, receive $5,000 for each
board meeting attended effective in the fourth quarter of 2003, which is reflected in Mr. Krist's
10
compensation under the heading "Other Annual Compensation".
(2) Effective October 1, 2003, the Company granted Mr. Winchester options to purchase 500,000 shares of common
stock at an exercise price equal to the fair market value of the shares on that date. Mr. Winchester also
received 300,000 shares of restricted stock, of which 60,000 vested on October 1, 2003 with the remainder to
vest over the next four years, conditioned upon continued employment at the time of each vesting.
(3) Reflects life insurance premium as required by employment agreements and matching contributions to 401(k) plan.
(4) 352,750 shares of common stock covered by these options are vested.
OPTION/SAR GRANTS IN FISCAL YEAR 2003
----------------------------------------------------------------------------------------------------
Individual Grants Potential Realizable Value at
---------------------------------------------------------------------- Assumed Annual Rates of
Percent of Stock Price Appreciation for
Total Options Term
Optons/ ----------------------------
Number of SARS
Securites Granted to
Underlying Employees Exercise of
Option/SARS In Fiscal Base Price Expiration 5% ($) 10% ($)
Name Granted (#) Year ($/Share) Date
---------------- ------------ ----------- ------------- ---------- ------------- -------------
Jerry Winchester 500,000 100% $ 1.20 09/30/2014 $---- 377,337 $---- 956,245
----------------------------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES
AND DECEMBER 31, 2003 OPTION/SAR VALUES
-----------------------------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised In the
Shares Value Unexercised Options /SARs Money Options/SARs
Acquired on Realized At December 31, 2003 At December 31, 2003
Name Exercise (#) ($) (shares) ($)
---------------- ------------ ---------- ------------------------------ -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------------- ------------ ---------- ------------- --------------- -------------- ---------------
Kirk Krist 10,125 $ 85,050 - - - -
---------------- ------------ ---------- ------------- --------------- -------------- ---------------
Jerry Winchester 244,768 2,056,051 512,500 25,500 $ 30,000 -
---------------- ------------ ---------- ------------- --------------- -------------- ---------------
Kevin Johnson 7,811 65,612 2,550 5,550 - -
-----------------------------------------------------------------------------------------------------------
(1) Based on the fair market value of shares of common stock on the date the options were
exercised. The actual value received upon sales of the shares may vary materially from the value
cited in the above table.
11
EQUITY COMPENSATION PLAN INFORMATION
---------------------------------------------------------------------------------------------------------------
NUMBER OF NUMBER OF SECURITIES
SECURITIES TO BE REMAINING AVAILABLE FOR
ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
OPTIONS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
(a) (b) (c)
---------------------------------------- ----------------- ---------------------- --------------------------
Plan Category
---------------------------------------- ----------------- ---------------------- --------------------------
Equity compensation plans approved
by security holders . . . . . . . . 823,000 $ 1.96 1,266,000
---------------------------------------- ----------------- ---------------------- --------------------------
Equity compensation plans not approved
by security holders . . . . . . . . - - -
---------------------------------------- ----------------- ---------------------- --------------------------
Total . . . . . . . . . . . . . . . . 823,000 $ 1.96 1,266,000
---------------------------------------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In the period covered by this report, none of the Company's executive
officers served as a board member or member of a Compensation Committee or
similar body for another company that had an executive officer serving as a
member of the Company's board of directors or Compensation Committee.
Compensation of Directors. Directors who are employees of the Company do
not generally receive a retainer or fees for service on the board or any
committees. The Chairman of the board and directors who are not employees of
the Company are entitled to receive a fee of $5,000 for attendance at each
meeting of the board, $2,500 per committee chaired and $2,500 for each special
committee meeting. Both employee and non-employee directors are reimbursed
for reasonable out-of-pocket expenses incurred in attending meetings of the
board or committees and for other reasonable expenses related to the performance
of their duties as directors. In addition, subsequent to December 31, 2003,
subject to stockholder approval of the amendment to the Nonemployee Director
Stock Option Plan, each nonemployee director was granted an option for 100,000
shares of common stock at fair market value on September 30, 2003 ($1.24).
These options will vest over a two year period beginning on September 30, 2003.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
Determination of Executive Compensation. The objectives of the Compensation
Committee in determining executive compensation are to retain and reward
qualified individuals serving as our executive officers. To achieve these
objectives, the committee relies primarily on salary, annual bonuses (awardable
either in stock or cash) and awards under the Company's various stock option
plans. In making its decisions, the committee takes into account the conditions
within our industry, our income statement and cash flow and the attainment of
any designated business objectives. Individual performances are also reviewed,
taking into account the individual's responsibilities, experience and potential,
his or her period of service and current salary and the individual's
compensation level as compared to similar positions at other companies. The
committee's evaluation of these considerations is, for the most part, subjective
and, to date, it has not established any specific written compensation plans or
formulas pursuant to which the executive officers', annual compensation is
determined. The Company's executive officers have been compensated to date
12
pursuant to their respective employment agreements. Messrs. Anderson, DiPaolo
and Herlin currently serve on the Compensation Committee.
Beginning in 1999 and continuing through 2003, the board of directors
initiated efforts to address the Company's liquidity problems and to improve its
overall capital structure by endeavoring to restructure the Company's debt and
equity positions. The program involved a series of steps designed to raise new
operating capital, sell assets of certain subsidiaries, retire and modify the
Company's existing senior debt, restructure its subordinated debt and increase
its stockholders' equity. The board agreed that the implementation of this
program would require additional time, effort and responsibility from the
Company's executive officers and its board of directors. Additionally, the board
recognized that, due to the scope of the challenges faced by the Company with
its then current debt and liquidity problems, and the high probability that the
Company might not be successful in its reorganization efforts, the board as a
whole, the Chief Executive Officer and the Company's executive management faced
increased risk and liabilities in the event of failure. The board of directors
instructed the Compensation Committee to review and determine, in light of this
program and the increased risks incurred, the most effective means in which to
compensate and provide incentives for the board as a whole, the Chief Executive
Officer, the Company's executive management and it's non-employee outside
directors. The Compensation Committee established a bonus plan that awards
certain employees a cash bonus in an amount equal to a varying percentage of
their base salary depending the Company's performance against certain EBITDA and
revenue goals. In 2003, The Company achieved the stretch goal based on EBITDA
and as a result, paid, $407,950 to executives and $50,000 to an outside director
COMPENSATION ARRANGEMENTS
Determination of the Chief Executive Officer's Compensation. On July 27,
2002, the Company elected Jerry L. Winchester as its Chief Executive Officer.
Under the terms of his employment agreement, the Company pays Mr. Winchester an
annual salary of $250,000 and an annual automobile allowance of $18,000. In
addition, Mr. Winchester has been granted an option to purchase up to 500,000
shares of common stock of the Company at a per share price of $1.20 (fair market
value on October 1, 2003, date the agreement was effective). The option vested
on the Effective Date of the Agreement. Mr. Winchester was also granted 300,000
shares of restricted stock with 60,000 shares vesting on the Effective Date of
the Agreement and the remainder to be vested over 4 years, conditioned upon
continued employment at the time of each vesting. The terms of Mr. Winchester's
contract were negotiated utilizing the input of a third party compensation
consultant who evaluated competitive market trends and a market study, and the
terms were based upon the key roles of Mr. Winchester in maintaining the close
working relationship with Halliburton, developing new business, identifying and
completing acquisitions, resolving outstanding issues of prior period litigation
and maturing debt, and providing leadership during a period of volatility in the
business of the Company. The option award pertains to Mr. Winchester's
performance on these issues during 2003, while the restricted stock award is an
incentive to his performance during the period of the contract.
Mr. Krist serves as Chairman of the Board of the Company and, in addition
to his role as Chairman, serves from time to time as a consultant to the
Company. Mr. Krist's consulting agreement, which was effective as of March 1,
2003, provides for annual compensation of $198,600 and an annual automobile
allowance of $12,000 commencing on February 15, 2003. Mr. Krist's
13
agreement continues on a month to month basis until the board of directors
determines that Mr. Krist's increased level of service to the Company is no
longer required. The board of directors will notify Mr. Krist in writing when
that time arrives, at which time the annual compensation of $198,600 shall
immediately cease and the consultant agreement will terminate.
In order to compensate Mr. Krist for his increased level of service
performed from October 1, 2002 to January 31, 2003, Mr. Krist received
additional compensation of $7,000 per month for a period of ten months beginning
in March 2003
COMPENSATION OF DIRECTORS
1997 Outside Directors' Option Plan. On November 12, 1997, the board of
directors of the Company adopted the Nonemployee Director Stock Option Plan (the
"Directors' Plan") and the Company's stockholders approved such plan on December
8, 1997. The Directors' Plan provides for the issuance each year of an option to
purchase 3,750 shares of common stock to each member of the board of directors
who is not an employee of the Company. The purpose of the Directors' Plan is to
encourage the continued service of outside directors and to provide them with
additional incentive to assist the Company in achieving its growth objectives.
Options may be exercised over a five-year period with the initial right to
exercise starting one year from the date of the grant, provided the director has
not resigned or been removed for cause by the board of directors prior to such
date. After one year from the date of the grant, options outstanding under the
Directors' Plan may be exercised regardless of whether the individual continues
to serve as a director. Options granted under the Directors' Plan are not
transferable except by will or by operation of law. Options to purchase 48,000
shares of common stock have been granted under the Directors' Plan at an
exercise price of $3.00 per share. In addition, subsequent to December 31,
2003, subject to stockholder approval of the amendment to the Nonemployee
Director Stock Option Plan, each outside director is granted an option for
100,000 shares of common stock at fair market value on September 30, 2003
($1.24). These options will vest over a two year period beginning on September
30, 2003.
14
PERFORMANCE OFCOMMON STOCK
The following graph compares the Company's total stockholder return on its
common stock for the years ended December 31, 1999, 2000, 2001, 2002 and 2003
with the Standard & Poors' 500 Stock Index and the Standard & Poors' Energy
Composite Index over the same period.
[GRAPHIC OMITTED]
----------------------------------------------------------------------------------------------
12/98 12/99 12/00 12/01 12/02 12/03
---------------------------------------------- ------ ------ ------ ------ ------ ------
Boots & Coots International Well Control, Inc. 100.00 14.58 16.67 16.67 5.33 42.00
S&P 500 Index 100.00 119.53 107.41 93.40 71.57 90.46
S&P Energy Composite Index 100.00 117.80 136.38 150.51 130.49 159.70
----------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2004, information regarding
the ownership of common stock of the Company owned by (i) each person (or
"group" within the meaning of Section 13(d)(3) of the Security Exchange Act of
1934) known by the Company to own beneficially more than 5% of the common stock;
(ii) each director of the Company, (iii) each of the named executive officers
and (iv) all executive officers and directors of the Company as a group.
15
NAME AND ADDRESS OF AMOUNT AND
BENEFICIAL OWNER(1) NATURE OF PERCENT OF CLASS
------------------- BENEFICIAL ----------------
OWNERSHIP
---------
Jerry L. Winchester 598,676(2) 2.1%
K. Kirk Krist 80,259 *
W. Richard Anderson 60,441(3) *
Jed DiPaolo - -
Robert S. Herlin - -
Kevin D. Johnson 2,550(4) *
Prudential Insurance Company of America 2,463,939(5) 8.2%
All executive officers and directors as a group
(six people) 741,926 2.6%
_______________
* less than 1%
(1) Unless otherwise noted, the business address for purposes hereof for
each person listed is 11615 N. Houston Rosslyn, Houston, Texas 77086.
Beneficial owners have sole voting and investment power with respect
to the shares unless otherwise noted.
(2) Includes restricted stock of 60,000 shares and warrants and/or options
to purchase 537,500 shares of common stock exercisable within 60 days.
(3) Includes warrants and/or options to purchase 57,941 shares of common
stock exercisable within 60 days.
(4) Includes warrants and/or options to purchase 2,550 shares of common
stock exercisable within 60 days.
(5) Includes warrants to purchase 2,431,020 shares of common stock and
preferred stock convertible into 32,919 of common stock exercisable
within 60 days.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors to file reports of ownership and changes in
ownership of Company common stock with the Securities and Exchange Commission
and the American Stock Exchange. Based upon a review of the Forms 3, 4, and 5
presented to it, the Company believes that the all reports were filed on a
timely basis.
PROPOSAL II:
ADOPTION OF THE BOOTS & COOTS
2004 LONG-TERM INCENTIVE PLAN
The board of directors has adopted the Boots & Coots International Well
Control, Inc. 2004 Long-Term Incentive Plan (the "2004 Plan") and is
recommending that stockholders approve the 2004 Plan at the annual meeting. The
2004 Plan is integral to the Company's compensation strategies and programs. The
use of stock options and other stock awards among companies in our industry is
prevalent. The 2004 Plan will maintain the flexibility that the Company needs to
keep pace with its
16
competitors and effectively recruit, motivate, and retain the caliber of
employees essential for achievement of the Company's success. The 2004 Plan will
also provide the employees and consultants of the Company, largely responsible
for the management, growth, and protection of the business of the Company, with
an ownership stake in the Company.
The 2004 Plan will permit stock option grants, restricted stock grants,
phantom stock grants, stock bonuses, and cash awards (collectively, "Incentive
Awards"). Stockholder approval of the 2004 Plan will permit the
performance-based awards discussed below to qualify for deductibility under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Awards and grants under the 2004 Plan are referred to as "Benefits." Those
eligible for Benefits under the 2004 Plan are referred to as "Participants."
Participants include all employees and consultants of the Company and its
subsidiaries.
As of December 31, 2003, approximately 1,266,000 shares were available for
new grants under the Company's existing stock incentive plans and there were
approximately 823,000 shares subject to outstanding benefits under these and
predecessor plans. While the existing stock incentive plans will remain in
place, they do not provide sufficient shares for market-competitive grant levels
after the 2004 stockholder meeting.
A summary of the principal features of the 2004 Plan is provided below, but
is qualified in its entirety by reference to the full text of the 2004 Plan that
was filed electronically with this proxy statement with the Securities and
Exchange Commission. Such text is not included in the printed version of this
proxy statement. A copy of the 2004 Plan is available from the Company's
Secretary at the address on the cover of this document.
SHARES AVAILABLE FOR ISSUANCE
The aggregate number of Incentive Awards under the 2004 Plan with respect
to a number of shares of common stock that may be issued under the 2004 Plan
will not exceed 6,000,000 shares (subject to the adjustment provisions discussed
below). The grant of a cash bonus shall not reduce the number of shares of
common stock with respect to which Incentive Awards may be granted pursuant to
the 2004 Plan. The 6,000,000 new shares represent 21.9 percent of the currently
outstanding shares of common stock.
ADMINISTRATION AND ELIGIBILITY
The 2004 Plan will be administered by the Compensation Committee of the
board of directors or such other committee as the board of directors shall
appoint from time to time to administer the 2004 Plan (the "Committee"), which
Committee will consist of two or more directors, each of whom will qualify both
as a "non-employee director" within the meaning set forth in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and as an "outside director" within the meaning of the definition of such
term as contained in Treasury Regulation 1.162-27(e)(3) interpreting Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the board of directors. The Committee shall from
time to time designate the employees and consultants of the Company who shall be
granted Incentive Awards and the amount and type of such Incentive Awards.
17
The Committee shall have full authority to administer the 2004 Plan,
including authority to interpret and construe any provision of the 2004 Plan and
the terms of any Incentive Award issued under it and to adopt such rules and
regulations for administering the 2004 Plan as the Committee may deem necessary.
Decisions of the Committee shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the date on
which any option granted under the 2004 Plan becomes exercisable, (ii) extend
the date on which any option granted under the 2004 Plan ceases to be
exercisable, (iii) accelerate the vesting date or issue date of a restricted
stock grant, or waive any condition imposed under the 2004 Plan with respect to
any share of restricted stock granted under the 2004 Plan, and (iv) accelerate
the vesting date or waive any condition imposed under the 2004 Plan with
respect to any share of Phantom Stock granted under the Plan. No Participant may
receive in any Plan Year stock options covering, or restricted stock for more
than 1,000,000 shares.
In addition, the Committee may, in its absolute discretion, grant Incentive
Awards to Participants on the condition that such Participants surrender to the
Committee for cancellation such other Incentive Awards (including, without
limitation, Incentive Awards with higher exercise prices) as the Committee
specifies. Incentive Awards granted on the condition of surrender of
outstanding Incentive Awards shall not count against the 2004 Plan limits until
such time as such Incentive Awards are surrendered.
BENEFITS
Stock options
Grants of Options
The Committee is authorized to grant stock options to Participants
("Optionees"), which may be either incentive stock options ("ISOs") or
nonqualified stock options ("NSOs"). NSOs and ISOs are collectively referred to
as "stock options." Consultants to the Company shall not be entitled to receive
ISOs. The exercise price of any NSO granted under the 2004 Plan shall be such
price as the Committee shall determine on the date on which such NSO is granted;
provided, that such price may not be less than the greater of (i) 50% of the
fair market value of a share of common stock on the date on which such NSO is
granted or (ii) the minimum price required by law. The exercise price of any
ISO granted under the 2004 Plan shall be not less than the fair market value of
a share of common stock on the date on which such ISO is granted. No ISO may be
granted to an individual if, at the time of the proposed grant, such individual
owns, directly or indirectly, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, unless the
exercise price of such ISO is at least 110% of the fair market value of a share
of common stock at the time such incentive stock is granted and such ISO is not
exercisable after the expiration of five years from the date such ISO is
granted. The term of a stock option cannot exceed 10 years. ISOs may not be
granted more than 10 years after the date that the 2004 Plan was adopted by the
Board. Each stock option shall be subject to earlier termination, expiration, or
cancellation as provided in the 2004 Plan.
The aggregate fair market value of shares of common stock with respect to
which ISOs are exercisable for the first time by a Participant during any
calendar year under the 2004 Plan (and any other stock option plan of the
Company) shall not exceed $100,000. If such aggregate fair market value exceeds
$100,000, then ISOs granted under the 2004 Plan shall be deemed to be NSOs. For
purposes of the 2004 Plan, fair market value shall be determined in such manner
as the Committee
18
may deem equitable, or as required by applicable law or regulation. Generally,
fair market value means the average of the closing bid and asked prices for a
share of common stock on the last trading day preceding the day of the
transaction, as reported by the American Stock Exchange. If the price of a share
of common stock is not so reported, the fair market value of a share of common
stock shall be determined by the Committee in its absolute discretion.
Exercisability and Termination
At the time of grant, the Committee in its sole discretion will determine
when Options are exercisable and when they expire.
Restricted Stock
Restricted Stock consists of shares which are transferred or sold by the
Company to a Participant, but are subject to substantial risk of forfeiture and
to restrictions on their sale or other transfer by the Participant. The
Committee determines the eligible Participants to whom, and the time or times at
which, grants of Restricted Stock will be made, the number of shares to be
granted, the price to be paid, if any, the time or times within which the shares
covered by such grants will be subject to forfeiture, the time or times at which
the restrictions will terminate, and all other terms and conditions of the
grants. Restrictions or conditions could include, but are not limited to, the
attainment of performance goals (as described below), continuous service with
the Company, the passage of time or other restrictions or conditions.
Phantom Stock
Phantom stock represents the right to receive in cash the fair market value
of a share of common stock of the Company and the aggregate amount of cash
dividends paid with respect to a share of common stock of the Company during the
period commencing on the date on which the share of phantom stock was granted
and terminating on the date on which such share vests. Share of phantom stock
shall vest at a future date in accordance with the terms of such grant or upon
the attainment of performance goals as may be specified by the Committee at the
time of the grant of shares of phantom stock.
Performance Goals
Incentive Awards granted under the 2004 Plan may be made subject to the
attainment of performance goals relating to one or more business criteria within
the meaning of Section 162(m) of the Code, including, but not limited to: cash
flow; cost; ratio of debt to debt plus equity; profit before tax; earnings
before interest and taxes; earnings before interest, taxes, depreciation and
amortization; earnings per share; operating earnings; economic value added;
ratio of operating earnings to capital spending; free cash flow; net profit; net
sales; price of the common stock; return on net assets, equity, or stockholders'
equity; market share; or total return to stockholders ("Performance Criteria").
Any Performance Criteria may be used to measure the performance of the
Company as a whole or any business unit of the Company, and any Performance
Criteria may be adjusted to include or exclude extraordinary items.
19
Stock Bonuses
The Committee may award shares of common stock to Participants without
payment therefore, as additional compensation for service to the Company or a
subsidiary. Stock bonuses may be subject to other terms and conditions, which
may vary from time to time and among employees, as the Committee determines to
be appropriate.
Cash Bonuses
A cash bonus consists of a monetary payment made by the Company to an
employee as additional compensation for his or her services to the Company and
made in tandem with another Incentive Award. Such cash bonuses will be payable
promptly after the date on which the Participant is required to recognize for
federal income tax purposes in connection with such Incentive Award, in such
amounts as the Committee shall determine from time to time; provided, however,
that in no event shall the amount of a cash bonus exceed the fair market value
of the related Incentive Award. Cash awards may be subject to other terms and
conditions, which may vary from time to time and among employees, as the
Committee determines to be appropriate.
AMENDMENT OR TERMINATION OF THE 2004 PLAN
The Board of Directors may at any time suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that without
approval of the shareholders, no revision or amendment shall (i) except as
otherwise provided in the Plan, increase the number of shares of common stock
that may be issued as Incentive Options under the Plan, (ii) materially increase
the benefits accruing to individuals holding Incentive Awards granted pursuant
to the Plan or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
COMMITTEE'S RIGHT TO MODIFY BENEFITS
Any benefit granted may be converted, modified, forfeited, or canceled, in
whole or in part, by the Committee if and to the extent permitted in the 2004
Plan, or applicable agreement entered into in connection with a benefit grant or
with the consent of the Participant to whom such benefit was granted. The
Committee may grant Benefits on terms and conditions different than those
specified in the 2004 Plan to comply with the laws and regulations of any
foreign jurisdiction, or to make the Benefits more effective under such laws and
regulations.
CHANGE IN CONTROL
Stock options
Upon the occurrence of a Change in Control, and termination of employment
of Participant within one year of such Change in Control, each stock option
outstanding on the date on which the Change in Control occurs will immediately
become exercisable in full.
Restricted Stock
Upon the occurrence of a Change in Control, and termination of employment
of Participant within one year of such Change in Control, all shares of
Restricted Stock which have not theretofore vested (including those with respect
to which the Issue Date has not yet occurred) shall immediately vest.
20
Phantom Stock
Upon the occurrence of a Change in Control, and termination of employment
of Participant within one year of such Change in Control, all shares of Phantom
Stock which have not theretofore vested shall immediately vest.
For purposes of the 2004 Plan, the term "Change in Control" shall mean a
"change in control" of the Company, as that term is contemplated in the federal
securities laws; or the occurrence of any of the following events: (A) any
Person becomes, after the effective date of this Plan the "beneficial owner" (as
defined in Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of securities of the Company representing 50.1% or more of the
combined voting power of the Company's then outstanding securities;
provided, that the acquisition of additional voting securities, after the
effective date of this Plan, by any Person who is, as of the effective date
of this Plan, the beneficial owner, directly or indirectly, of 50.1% or more of
the combined voting power of the Company's then outstanding securities,
shall not constitute a "Change in Control" of the Company for purposes of this
Section 2(d); (B) a majority of individuals who are nominated by the board of
directors for election to the board of directors on any date, fail to be elected
to the board of directors as a direct or indirect result of any proxy fight or
contested election for positions on the board of directors; or (C) the sale,
lease, transfer or other disposition of all or substantially all of the assets
of the Company (other than to a wholly owned subsidiary of the Company).
ADJUSTMENTS
If there is any change in the common stock by reason of any stock split,
stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination, or exchange of shares, the total
number of shares available for Benefits, the maximum number of shares which may
be subject to an award in any calendar year and the number of shares subject to
outstanding Benefits, and the price of each of the foregoing, as applicable,
will be equitably adjusted by the Committee in its discretion.
Subject to the Change-in-Control provisions, without affecting the number
of shares reserved or available hereunder, either the board or the committee may
authorize the issuance or assumption of Benefits in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such
terms and conditions as it deems appropriate.
In the event of any merger, consolidation, or reorganization in which the
Company is not the continuing corporation, there shall be substituted on an
equitable basis as determined by the Committee, for each share of common stock
subject to a Benefit, the number and kind of shares of stock, other securities,
cash, or other property to which holders of common stock of the Company are
entitled pursuant to the transaction.
Reusage
If a stock option granted under the 2004 Plan expires or is terminated,
surrendered or canceled without having been fully exercised or if Restricted
Stock or Phantom Stock, granted under the 2004 Plan are forfeited or terminated
without the issuance of all of the shares subject thereto, the shares covered by
such Benefits will again be available for use under the 2004 Plan. Shares
covered by a Benefit granted under the 2004 Plan would not be counted as used
unless and until they are actually issued and delivered to a Participant. The
number of shares which are transferred to the
21
Company by a Participant to pay the exercise or purchase price of a Benefit will
be subtracted from the number of shares issued with respect to such Benefit for
the purpose of counting shares used. Shares withheld to pay withholding taxes in
connection with the exercise or payment of a Benefit will not be counted as
used. Shares covered by a Benefit granted under the 2004 Plan that is settled in
cash will not be counted as used.
FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised by counsel that the federal income tax
consequences as they relate to Benefits are as follows:
ISOs
An Optionee does not generally recognize taxable income upon the grant or
upon the exercise of an ISO. Upon the sale of ISO shares, the Optionee
recognizes income in an amount equal to the difference, if any, between the
exercise price of the ISO shares and the fair market value of those shares on
the date of sale. The income is taxed at long-term capital gains rates if the
Optionee has not disposed of the stock within two years after the date of the
grant of the ISO and has held the shares for at least one year after the date of
exercise and the Company is not entitled to a federal income tax deduction. The
holding period requirements are waived when an Optionee dies.
The exercise of an ISO may in some cases trigger liability for the
alternative minimum tax.
If an Optionee sells ISO shares before having held them for at least one
year after the date of exercise and two years after the date of grant, the
Optionee recognizes ordinary income to the extent of the lesser of: (i) the gain
realized upon the sale; or (ii) the difference between the exercise price and
the fair market value of the shares on the date of exercise. Any additional gain
is treated as long-term or short-term capital gain depending upon how long the
Optionee has held the ISO shares prior to disposition. In the year of
disposition, the Company receives a federal income tax deduction in an amount
equal to the ordinary income which the Optionee recognizes as a result of the
disposition.
NSOs
An Optionee does not recognize taxable income upon the grant of an NSO.
Upon the exercise of such a stock option, the Optionee recognizes ordinary
income to the extent the fair market value of the shares received upon exercise
of the NSO on the date of exercise exceeds the exercise price. The Company
receives an income tax deduction in an amount equal to the ordinary income that
the Optionee recognizes upon the exercise of the stock option.
Restricted Stock
A Participant who receives an award of Restricted Stock does not generally
recognize taxable income at the time of the award. Instead, the Participant
recognizes ordinary income in the first taxable year in which his or her
interest in the shares becomes either: (i) freely transferable; or (ii) no
longer subject to substantial risk of forfeiture. The amount of taxable income
is equal to the fair market value of the shares less the cash, if any, paid for
the shares.
A Participant may elect to recognize income at the time he or she receives
Restricted Stock in an amount equal to the fair market value of the Restricted
Stock (less any cash paid for the shares) on the date of the award.
22
The Company receives a compensation expense deduction in an amount equal to
the ordinary income recognized by the Participant in the taxable year in which
restrictions lapse (or in the taxable year of the award if, at that time, the
Participant had filed a timely election to accelerate recognition of income).
Other Benefits
In the case of an exercise of a Phantom Stock, or common stock or cash, the
Participant will generally recognize ordinary income in an amount equal to any
cash received and the fair market value of any shares received on the date of
payment or delivery. In that taxable year, the Company will receive a federal
income tax deduction in an amount equal to the ordinary income which the
Participant has recognized.
MILLION DOLLAR DEDUCTION LIMIT
The Company may not deduct compensation of more than $1,000,000 that is
paid to an individual who, on the last day of the taxable year, is either the
Company's chief executive officer or is among one of the four other most
highly-compensated officers for that taxable year. The limitation on deductions
does not apply to certain types of compensation, including qualified
performance-based compensation. The Company believes that Benefits in the form
of stock options and Restricted Stock constitute qualified performance-based
compensation and, as such, will be exempt from the $1,000,000 limitation on
deductible compensation.
MISCELLANEOUS
A new benefits table is not provided because no grants have been made under
the 2004 Plan and all Benefits are discretionary. On March 25, 2004, the closing
price of the common stock was $1.45.
APPROVAL BY STOCKHOLDERS
In order to be adopted, the 2004 Plan must be approved by the affirmative
vote of a majority of the outstanding shares represented at the meeting and
entitled to vote.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE COMPANY'S 2004
---
LONG-TERM INCENTIVE PLAN. UNLESS OTHERWISE INDICATED ON THE PROXY, THE SHARES
WILL BE VOTED FOR ADOPTION OF THE COPMANY'S 2004 LONG-TERM INCENTIVE PLAN.
---
PROPOSAL III:
APPROVAL OF AMENDMENT TO THE
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
The Nonemployee Director Stock Option Plan (the "Director Option Plan") was
adopted by the Board of Directors of the Company and approved by the
stockholders of the Company at the 1997 annual meeting of stockholders. At the
2004 annual meeting, the Company's stockholders are being asked to approve an
amendment to the Director Option Plan to (i) increase the initial automatic
grant
23
of stock option awards to newly elected Nonemployee Directors from 3,750 to
100,000 shares of common stock, (ii) award a one-time stock option grant to each
incumbent Nonemployee Director to purchase 100,000 shares of common stock and
(iii) to increase the number of shares of common stock authorized for issuance
under the Director Option Plan from 37,500 shares to 600,000 shares (an increase
of 562,500 shares). The Board of Directors unanimously adopted this amendment on
March 24, 2004, subject to stockholder approval at the annual meeting.
As of April 8, 2004 no shares remain available for grant under the Director
Option Plan, without giving effect to the plan amendment. The Board believes
that the increase in shares available for issuance is necessary to establish a
reserve of shares that would enable the automatic grant of stock options to
nonemployee directors to continue throughout the term of the plan, which expires
in 2007. In addition, the Board believes that the amendment to the Director
Option Plan is necessary to ensure that the Company will continue to retain,
motivate and attract qualified nonemployee directors.
The following is a summary of the principal features of the Director Option
Plan (without giving effect to the proposed amendment). The summary does not
purport to be a complete description of all provisions of the Director Option
Plan and is qualified in its entirety by the text of the Director Option Plan, a
copy of which is attached to this proxy statement as Appendix B. Capitalized
terms not otherwise defined below have the meanings ascribed to them in the
Director Option Plan.
GENERAL
The Director Option Plan authorizes the issuance of up to 37,500 shares of
common stock of the Company. Any shares of common stock allocable to the
unexercised portion of an option that expires or terminates will again be
available for the purposes of the Director Option Plan. The Director Option
Plan contains provisions providing for the adjustment of the number of shares
available for option and subject to unexercised options in the event of stock
splits, dividends payable in common stock, combinations or certain other events.
ADMINISTRATION
The Director Option Plan is administered by a committee of the Board of
Directors, a majority of which shall not be nonemployee directors. The
committee has no authority, discretion or power to select the participants who
will receive options pursuant to the Director Option Plan, to set the number of
shares of common stock to be covered by each option, to set the exercise price
or the period within which the options may be exercised or to alter any other
terms or conditions specified therein, except in the sense of administering the
Director Option Plan subject to the express provisions of the Director Option
Plan and except as set forth below under "Stock Options" and "Amendment of the
Plan."
24
STOCK OPTIONS
The Director Option Plan provides that options shall be granted to new
nonemployee directors at the time of their election to the Board of Directors of
the Company. The grant of options pursuant to the Director Option Plan shall be
referred to hereinafter as the "grant date" of such option. Thereafter, options
shall be granted automatically to the nonemployee directors serving the Company
on each anniversary of his or her initial grant date.
Each new nonemployee director of the Company will be granted an option to
purchase 3,750 shares of common stock upon election to the Board of Directors.
Each incumbent nonemployee director of the Company will be automatically granted
an option to purchase 3,750 shares of common stock on each anniversary of his or
her initial grant date.
The price at which each share of common stock covered by an option may be
purchased upon exercise of such option pursuant to the Director Option Plan is
the fair market value of the share on the grant date of such option. The period
within which a nonemployee director's option may be exercised commences on the
first anniversary of the grant date of such option and ends upon the expiration
of five (5) years from the grant date, unless terminated sooner due to
termination of service or death, or unless such option is fully exercised prior
to the end of such five-year period.
If a nonemployee director dies during his tenure, or under certain
circumstances within one year after this tenure, his estate would have one (1)
year from the date of death to exercise the option, provided that such option
had been exercisable at the time of his termination and that the date of
exercise would otherwise be within the option period. The options are not
transferable except by will or by the laws of descent and distribution.
AMENDMENT OF THE PLAN
Subject to the provisions of Rule 16b-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the committee may from time to time
amend, modify, suspend or terminate the Director Option Plan, provided that no
such amendment, modification, suspension or termination shall adversely affect
the rights of an Optionee under a previously granted option without the consent
of such Optionee.
TERMINATION
Unless previously terminated by the committee, the Director Option Plan
will terminate at the close of business on November 12, 2007, after which time
no further grants may be made under the Director Option Plan.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary is based upon an analysis of the Code, existing laws,
judicial decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change. Moreover, the following is only
a summary of United States federal income tax consequences and such consequences
may be either more or less favorable than those described below depending on an
employee's particular circumstances.
25
All options granted under the Director Option Plan are non-statutory
options not entitled to special tax treatment under Section 422 of the Code.
The Director Option Plan is also not qualified under Section 401(a) of the Code
and is not subject to the provisions of the Employee Retirement Income Security
Act of 1974.
No income will be recognized by an optionee for federal income tax purposes
upon the grant of an option. Except as described below in the case of an
"insider" subject to Section 16(b) of the Exchange Act who exercises his or her
option less than six (6) months from the date of grant, upon exercise of an
option, the optionee will recognize ordinary income in an amount equal to the
excess of the fair market value of the shares on the date of exercise over the
option price of such shares. In the absence of an election pursuant to Section
83(b) of the Code, an "insider" subject to Section 16(b) of the Exchange Act who
exercises an option less than six (6) months from the date the option was
granted will recognize income on the date six (6) months from the date of the
grant in an amount equal to the excess of the fair market value of the shares on
such date over the option price of such shares. An optionee subject to Section
16(b) of the Exchange Act can avoid such deferral by making an election,
pursuant to Section 83(b) of the Code, no later than 30 days after the date of
such exercise. Directors of the Company generally are considered to be
"insiders" for purposes of Section 16(b) of the Exchange Act.
The Company will be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee at the time of such recognition by the
optionee. The basis of shares transferred to an optionee pursuant to exercise
of an option is the price paid for such shares plus an amount equal to any
income recognized by the optionee as a result of the exercise of such option.
If the optionee thereafter sells shares acquired upon exercise of an option, any
amount realized over the basis of such shares will constitute capital gain to
such optionee for federal income tax purposes.
APPROVAL BY STOCKHOLDERS
The amendment to the Director Option Plan must be approved by the
affirmative vote of a majority of the outstanding shares represented at the
meeting and entitled to vote.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
---
AMENDMENT TO THE COMPANY'S NONEMPLOYEE DIRECTOR STOCK OPTION PLAN. UNLESS
OTHERWISE INDICATED ON THE PROXY, THE SHARES WILL BE VOTED FOR APPROVAL OF THE
---
PROPOSED AMENDMENT TO THE COMPANY'S NONEMPLOYEE DIRECTOR STOCK OPTION PLAN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Based upon a review of the Company's internal records from March 31, 2004
to the date of this Proxy Statement, there have not been any transactions and
there are currently no proposed transactions between the Company and any
executive officer, director, 5% beneficial owner of the Company's common stock,
or member of the immediate family of the foregoing persons in which one of the
foregoing individuals or entities had a direct or indirect material interest.
26
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for action at the 2005 annual
meeting of Stockholders should submit their proposals in writing to the
Secretary of the Company at the address of the Company set forth on the first
page of this proxy statement. Proposals must be received by the Company no later
than December 15, 2004 for inclusion in next year's proxy statement and proxy
card.
ANNUAL REPORT
The Company has provided without charge to each person whose proxy is
solicited hereby a copy of the 2003 Annual Report of the Company, which includes
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2003 (including the consolidated financial statements) filed with the SEC.
Additional copies of the Annual Report may be obtained without charge upon
written request to Vollmer, 808 Travis, Suite 501, Houston, Texas 77002,
Attention: Jennifer Tweeton.
HOUSEHOLDING
The SEC allows us to deliver a single proxy statement and annual report to
an address shared by two or more of our stockholders. This delivery method,
referred to as "householding," can result in significant cost savings for the
Company. In order to take advantage of this opportunity, the Company and banks
and brokerage firms that hold your shares have delivered only one proxy
statement and annual report to multiple stockholders who share an address unless
the Company has received contrary instructions from one or more of the
stockholders. The Company will deliver promptly, upon written or oral request,
a separate copy of the proxy statement and annual report to a stockholder at a
shared address to which a single copy of the documents was delivered. A
stockholder who wishes to receive a separate copy of the proxy statement and
annual report, now or in the future, may obtain one, without charge, by
addressing a request to. Vollmer, 808 Travis, Suite 501, Houston, Texas 77002,
Attention: Jennifer Tweeton. You may also obtain a copy of the proxy statement
and annual report from the SEC's website at www.sec.gov. Stockholders sharing
an address who are receiving multiple copies of proxy materials and annual
reports and wish to receive a single copy of such materials in the future should
submit their request by contacting Vollmer Public Relations in the same manner.
If you are a beneficial owner, but not the record holder, of the Company's
shares and wish to receive only one copy of the proxy statement and annual
report in the future, you will need to contact your broker, bank or other
nominee to request that only a single copy of each document be mailed to all
stockholders ant the shared address in the future.
OTHER MATTERS
The board of directors does not intend to present any other matters at the
meeting and knows of no other matters that will be presented; however, if any
other matter properly comes before the meeting, the persons named in the
enclosed proxy intend to vote thereon according to their best judgment.
27
By Order of the Board of Directors
/s/ Brian Keith
---------------------------------------
Brian Keith, Corporate Secretary
28
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
2004 LONG TERM INCENTIVE PLAN
1. PURPOSE OF THE PLAN
This 2004 Long Term Incentive Plan is intended to promote the interests of
Boots & Coots International Well Control, Inc., a Delaware corporation (the
"Company"), by providing the employees and long term consultants of the
Company largely responsible for the management, growth and protection of the
business of the Company, with an ownership stake in the Company.
2. DEFINITIONS
As used in the Plan, the following definitions apply to the terms indicated
below:
(a) "Board of Directors" shall mean the Board of Directors of the Company.
(b) "Cause," when used in connection with the termination of a
Participant's employment or service (in the case of a consultant) with the
Company, shall mean the termination of the Participant's employment or
service by the Company by reason of (i) the conviction of the Participant
by a court of competent jurisdiction as to which no further appeal can be
taken of a crime involving moral turpitude; (ii) the proven commission by
the Participant of an act of fraud upon the Company; (iii) the proven
misappropriation of any funds or property of the Company by the
Participant; (iv) the willful, continued and unreasonable failure by the
Participant to perform duties assigned to him and appropriate for his
position; (v) the knowing engagement by the Participant in any direct,
material conflict of interest with the Company without compliance with the
Company's conflict of interest policy, if any, then in effect; (vi) the
knowing engagement by the Participant, without the written approval of the
Board of Directors, in any activity which competes with the business of the
Company or which would result in a material injury to the Company; or (vii)
the knowing engagement in any activity which would constitute a material
violation of the provisions of the Company's Policies and Procedures
Manual, if any, then in effect.
(c) "Cash Bonus" shall mean an award of a bonus payable in cash pursuant
to Section 10 hereof.
(d) "Change in Control" shall mean:
(i) a "change in control" of the Company, as that term is
contemplated in the federal securities laws; or
(ii) the occurrence of any of the following events:
(A) any Person becomes, after the effective date of this Plan the
"beneficial owner" (as defined in Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of securities of the
Company representing 50.1% or more of the combined voting power
of the Company's then outstanding securities; provided, that the
acquisition of additional voting securities, after the effective
date of this Plan, by any Person who is, as of the effective date
of this Plan, the beneficial owner, directly or indirectly, of
50.1% or more of the combined voting power of the Company's then
outstanding securities, shall not constitute a "Change in
Control" of the Company for purposes of this Section 2(d);
(B) a majority of individuals who are nominated by the Board of
Directors for election to the Board of Directors on any date,
fail to be elected to the Board of Directors as a direct or
indirect result of any proxy fight or contested election for
positions on the Board of Directors; or
(C) the sale, lease, transfer or other disposition of all or
substantially all of the assets of the Company (other than to a
wholly-owned subsidiary of the Company).
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" shall mean the Compensation Committee of the Board of
Directors or such other committee as the Board of Directors shall appoint
from time to time to administer the Plan.
(g) "Common Stock" shall mean the Company's Common Stock, par value
$.00001 per share.
(h) "Company" shall mean Boots & Coots International Well Control, Inc., a
Delaware corporation, each of its Subsidiaries, and its successors.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(j) The "Fair Market Value" of a share of Common Stock on any date shall
be (i) the closing sale price on the immediately preceding business day of
a share of Common Stock as reported on the principal securities exchange on
which shares of Common Stock are then listed or admitted to trading or (ii)
if not so reported, the average of the closing bid and asked prices for a
share of Common Stock on the immediately preceding business day as quoted
on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or (iii) if not quoted on NASDAQ, the average of the
closing bid and asked prices for a share of Common Stock as quoted by the
National Quotation Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If the price of a share of
Common Stock shall not be so reported, the Fair Market Value of a share of
Common Stock shall be determined by the Committee in its absolute
discretion.
(k) "Incentive Award" shall mean an Option, a share of Restricted Stock, a
share of Phantom Stock, a Stock Bonus or Cash Bonus granted pursuant to the
terms of the Plan.
(l) "Incentive Stock Option" shall mean an Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and which is
identified as an Incentive Stock Option in the agreement by which it is
evidenced.
(m) "Issue Date" shall mean the date established by the Committee on which
certificates representing shares of Restricted Stock shall be issued by the
Company pursuant to the terms of Section 7(d) hereof.
(n) "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(o) "Option" shall mean an option to purchase shares of Common Stock of
the Company granted pursuant to Section 6 hereof. Each Option shall be
identified as either an Incentive Stock Option or a Non-Qualified Stock
Option in the agreement by which it is evidenced.
(p) "Participant" shall mean a full-time employee or a consultant (whether
full or part time) of the Company who is eligible to participate in the
Plan and to whom an Incentive Award is granted pursuant to the Plan.
(q) "Person" shall mean a "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act, and the rules and regulations in effect from
time to time thereunder.
(r) A share of "Phantom Stock" shall represent the right to receive in
cash the Fair Market Value of a share of Common Stock of the Company, which
right is granted pursuant to Section 8 hereof and subject to the terms and
conditions contained therein.
(s) "Plan" shall mean the Boots & Coots International Well Control, Inc.
2004 Long Term Incentive Plan as amended from time to time.
(t) "Qualified Domestic Relations Order" shall mean a qualified domestic
relations order as defined in the Code, in Title I of the Employee
Retirement Income Security Act, or in the rules and regulations as may be
in effect from time to time thereunder.
(u) A share of "Restricted Stock" shall mean a share of Common Stock
which is granted pursuant to the terms of Section 7 hereof and which is
subject to the restrictions set forth in Section 7(c) hereof for so long as
such restrictions continue to apply to such share.
(v) "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
(w) "Stock Bonus" shall mean a grant of a bonus payable in shares of
Common Stock pursuant to Section 9 hereof.
(x) "Subsidiary" or "Subsidiaries" shall mean any and all corporations in
which at the pertinent time the Company owns, directly or indirectly, stock
vested with 50% or more of the total combined voting power of all classes
of stock of such corporations within the meaning of Section 424(f) of the
Code.
(y) "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest.
3. STOCK SUBJECT TO THE PLAN
Under the Plan, the Committee may grant to Participants (i) Options, (ii)
shares of Restricted Stock, (iii) shares of Phantom Stock, (iv) Stock Bonuses
and (v) Cash Bonuses.
The Committee may grant Options, shares of Restricted Stock, shares of
Phantom Stock and Stock Bonuses under the Plan with respect to a number of
shares of Common Stock that in the aggregate at any time does not exceed
6,000,000 shares of Common Stock; provided, however, that the maximum number of
shares of Common Stock for which Options may be granted under the Plan to any
one Participant during a calendar year shall be 1,000,000.
The grant of a Cash Bonus shall not reduce the number of shares of Common
Stock with respect to which Options, shares of Restricted Stock, shares of
Phantom Stock or Stock Bonuses may be granted pursuant to the Plan.
If any outstanding Option expires, terminates or is canceled for any
reason, the shares of Common Stock subject to the unexercised portion of such
Option shall again be available for grant under the Plan. If any shares of
Restricted Stock or Phantom Stock, or any shares of Common Stock granted in a
Stock Bonus are forfeited or canceled for any reason, such shares shall again be
available for grant under the Plan.
Shares of Common Stock issued under the Plan may be either newly issued or
treasury shares, at the discretion of the Committee.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Committee of the Board of Directors
consisting of two or more persons, all of whom shall be both (i) a "Non-Employee
Director" within the meaning of Rule 16b-3 promulgated under the Exchange Act
and (ii) an "outside director" within the meaning of the definition of such term
as contained in Treasury Regulation Section 1.162-27(e)(3) interpreting Section
162(m) of the Code, or any successor definitions that may be adopted. The
members of the Committee shall be appointed from time to time by, and shall
serve at the discretion of, the Board of Directors. The Committee shall from
time to time designate the employees and consultants of the Company who shall be
granted Incentive Awards and the amount and type of such Incentive Awards.
The Committee shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and the terms of
any Incentive Award issued under it and to adopt such rules and regulations for
administering the Plan as it may deem necessary. Decisions of the Committee
shall be final and binding on all parties.
The Committee may, in its absolute discretion (i) accelerate the date on
which any Option granted under the Plan becomes exercisable, (ii) extend the
date on which any Option granted under the Plan ceases to be exercisable, (iii)
accelerate the Vesting Date or Issue Date, or waive any condition imposed
pursuant to Section 7(b) hereof, with respect to any share of Restricted Stock
granted under the Plan and (iv) accelerate the Vesting Date or waive any
condition imposed pursuant to Section 8 hereof, with respect to any share of
Phantom Stock granted under the Plan.
In addition, the Committee may, in its absolute discretion, grant Incentive
Awards to Participants on the condition that such Participants surrender to the
Committee for cancellation such other Incentive Awards (including, without
limitation, Incentive Awards with higher exercise prices) as the Committee
specifies. Notwithstanding Section 3 hereof, Incentive Awards granted on the
condition of surrender of outstanding Incentive Awards shall not count against
the limits set forth in such Section 3 until such time as such Incentive Awards
are surrendered.
Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment or service shall
be determined by the Committee in its absolute discretion.
No member of the Committee shall be liable for any action, omission, or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.
5. ELIGIBILITY
The persons who shall be eligible to receive Incentive Awards pursuant to
the Plan shall be such full-time employees and consultants (whether full or part
time) of the Company as the Committee, in its absolute discretion, shall select
from time to time. Notwithstanding the generality of the foregoing, no employee
or
consultant of the Company shall be eligible to receive Incentive Awards pursuant
to this Plan if such person is also entitled to receive an Incentive Award under
the terms of his employment or consulting agreement with the Company, or any
specialty long term incentive plan or incentive stock plan adopted after the
date hereof, unless such employment or consulting agreement or specialty plan
expressly provides otherwise.
6. OPTIONS
The Committee may grant Options pursuant to the Plan, which Options shall
be evidenced by agreements in such form as the Committee shall from time to time
approve. Options shall comply with and be subject to the following terms and
conditions:
(a) Identification of Options
All Options granted under the Plan shall be clearly identified in the
agreement evidencing such Options as either Incentive Stock Options or as
Non-Qualified Stock Options. Consultants shall not be entitled to receive
Incentive Stock Options.
(b) Exercise Price
The exercise price of any Non-Qualified Stock Option granted under the
Plan shall be such price as the Committee shall determine on the date on
which such Non-Qualified Stock Option is granted; provided, that such price
may not be less than the greater of (i) 50% of the Fair Market Value of a
share of common Stock on the date on which such Non-Qualified Stock Option
is granted or (ii) the minimum price required by law. Except as provided in
Section 6(d) hereof, the exercise price of any Incentive Stock Option
granted under the Plan shall be not less than 100% of the Fair Market Value
of a share of Common Stock on the date on which such Incentive Stock Option
is granted.
(c) Term and Exercise of Options
(1) Each Option shall be exercisable on such date or dates, during
such period and for such number of shares of Common Stock as
shall be determined by the Committee on the day on which such
Option is granted and set forth in the agreement evidencing the
Option; provided, however, that no Option shall be exercisable
after the expiration of ten years from the date such Option was
granted; and, provided, further, that each Option shall be
subject to earlier termination, expiration or cancellation as
provided in the Plan.
(2) Each Option shall be exercisable in whole or in part with respect
to whole shares of Common Stock. The partial exercise of an
Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof. Upon the partial
exercise of an Option, the agreement evidencing such Option shall
be returned to the Participant exercising such Option together
with the delivery of the certificates described in Section
6(c)(5) hereof.
(3) An Option shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary, no
fewer than five business days in advance of the effective date of
the proposed exercise. Such notice shall be accompanied by the
agreement evidencing the Option, shall specify the number of
shares of Common Stock with respect to which the Option is being
exercised and the effective date of the proposed exercise, and
shall be signed by the Participant. The Participant may withdraw
such notice at any time prior to the close of business on the
business day immediately preceding the effective date of the
proposed exercise, in which case such agreement shall be returned
to the Participant. Payment for shares of Common Stock purchased
upon the exercise of an Option shall be made on the effective
date of such exercise either (i) in cash, by certified check,
bank cashier's check or wire transfer or (ii) subject to the
approval of the Committee, by tendering previously acquired
nonforfeitable, unrestricted shares of Common Stock that have
been held by the Participant for at least six months and that
have an aggregate Fair Market Value at the time of exercise equal
to the total exercise price (including an actual or deemed
multiple series of exchanges of such shares), or (iii) partly in
shares of Common Stock with the balance in cash, by certified
check, bank cashier's check or wire transfer. Any payment in
shares of Common Stock shall be effected by the delivery of such
shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with
any other documents and evidences as the Secretary of the Company
shall require from time to time.
(4) Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the Company a
duly endorsed agreement evidencing such Option and instructions
signed by the Participant requesting the Company to deliver the
shares of Common Stock subject to such Option to the
broker-dealer on behalf of the Participant and specifying the
account into which such shares should be deposited, (ii) adequate
provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (iii) the
broker-dealer and the Participant have otherwise complied with
Section 220.3(e)(4) of Regulation T, 12 CFR Part 220.
(5) Certificates for shares of Common Stock purchased upon the
exercise of an Option shall be issued in the name of the
Participant and delivered to the Participant as soon as
practicable following the effective date on which the Option is
exercised; provided, however, that such delivery shall be
effected for all purposes when a stock transfer agent of the
Company shall have deposited such certificates in the United
States mail, addressed to the Participant.
(6) During the lifetime of a Participant each Option granted to him
shall be exercisable only by him. No Option shall be assignable
or transferable otherwise than by will or by the laws of descent
and distribution.
(d) Limitations on Grant of Incentive Stock Options
(1) The aggregate Fair Market Value of shares of Common Stock with
respect to which "incentive stock options" (within the meaning of
Section 422, without regard to Section 422(d) of the Code) are
exercisable for the first time by a Participant during any
calendar year under the Plan (and any other stock option plan of
the Company, or any subsidiary of the Company) shall not exceed
$100,000. Such Fair Market Value shall be determined as of the
date on which each such Incentive Stock Option is granted. If
such aggregate Fair Market Value of shares of Common Stock
underlying such Incentive Stock Options exceeds $100,000, then
Incentive Stock Options granted hereunder to such Participant
shall, to the extent and in the order required by Regulations
promulgated under the Code (or any other authority having the
force of Regulations), automatically be deemed to be
Non-Qualified Stock Options, but all other terms and provisions
of such Incentive Stock Options shall remain unchanged. In the
absence of such Regulations (and authority), or if such
Regulations (or authority) require or permit a designation of the
options which shall cease to constitute Incentive Stock Options,
Incentive Stock Options shall, to the extent of such excess and
in the order in which they were granted, automatically be deemed
to be Non-Qualified Stock Options, but all other terms and
provisions of such Incentive Stock Options shall remain
unchanged.
(2) No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns, directly or
indirectly (based on the attribution rules in Section 424(d) of
the Code) stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or
any of its subsidiaries, unless (i) the exercise price of such
Incentive Stock Option is at least 110% of the Fair Market Value
of a share of Common Stock at the time such Incentive Stock
Option is granted and (ii) such Incentive
Stock Option is not exercisable after the expiration of five
years from the date such Incentive Stock Option is granted.
(e) Effect of Termination of Employment or Service
(1) If the employment or service of a Participant with the Company
shall terminate for any reason other than Cause, "permanent and total
disability" (within the meaning of Section 22(e)(3) of the Code), the
voluntary retirement of an employee in accordance with the Company's
retirement policy as then in effect, the death of the Participant,
then (i) Options granted to such Participant, to the extent that they
were exercisable at the time of such termination, shall remain
exercisable until the expiration of one month after such termination,
on which date they shall expire, and (ii) Options granted to such
Participant, to the extent that they were not exercisable at the time
of such termination, shall expire at the close of business on the date
of such termination; provided, however, that no Option shall be
exercisable after the expiration of its term.
(2) If the employment or service of a Participant with the Company
shall terminate as a result of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of the
Participant, the voluntary retirement of an employee in accordance
with the Company's retirement policy as then in effect, or the death
of the Participant, then (i) Options granted to such Participant, to
the extent that they were exercisable at the time of such termination,
shall remain exercisable until the expiration of one year after such
termination, on which date they shall expire, and (ii) Options granted
to such Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of business on
the date of such termination; provided, however, that no Option shall
be exercisable after the expiration of its term.
(3) In the event of the termination of a Participant's employment or
service for Cause, all outstanding Options granted to such Participant
shall expire at the commencement of business on the date of such
termination.
(f) Acceleration of Exercise Date Upon Change in Control
Upon the occurrence of a Change in Control and termination of
employment of Participant within one year of such Change in Control,
each Option granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain exercisable
until its expiration, termination or cancellation pursuant to the
terms of the Plan.
7. RESTRICTED STOCK
The Committee may grant shares of Restricted Stock pursuant to the Plan.
Each grant of shares of Restricted Stock shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Each grant of shares
of Restricted Stock shall comply with and be subject to the following terms and
conditions:
(a) Issue Date and Vesting Date
At the time of the grant of shares of Restricted Stock, the Committee
shall establish an Issue Date or Issue Dates and a Vesting Date or
Vesting Dates with respect to such shares. The Committee may divide
such shares into classes and assign a different Issue Date and/or
Vesting Date for each class. Except as provided in Sections 7(c) and
7(f) hereof, upon the occurrence of the Issue Date with respect to a
share of Restricted Stock, a share of Restricted Stock shall be issued
in accordance with the
provisions of Section 7(d) hereof. Provided that all conditions to the
vesting of a share of Restricted Stock imposed pursuant to Section
7(b) hereof are satisfied, and except as provided in Sections 7(c) and
7(f) hereof, upon the occurrence of the Vesting Date with respect to a
share of Restricted Stock, such share shall vest and the restrictions
of Section 7(c) hereof shall cease to apply to such share.
(b) Conditions to Vesting
At the time of the grant of shares of Restricted Stock, the Committee
may impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it in its absolute
discretion deems appropriate. By way of example and not by way of
limitation, the Committee may require, as a condition to the vesting
of any class or classes of shares of Restricted Stock, that the
Participant or the Company achieve certain performance criteria, such
criteria to be specified by the Committee at the time of the grant of
such shares.
(c) Restrictions on Transfer Prior to Vesting
Prior to the vesting of a share of Restricted Stock, no transfer of a
Participant's rights with respect to such share, whether voluntary or
involuntary, by operation of law or otherwise, shall vest the
transferee with any interest or right in or with respect to such
share, but immediately upon any attempt to transfer such rights, such
share, and all of the rights related thereto, shall be forfeited by
the Participant and the transfer shall be of no force or effect.
(d) Issuance of Certificates
(1) Except as provided in Sections 7(c) or 7(f) hereof, reasonably
promptly after the Issue Date with respect to shares of Restricted
Stock, the Company shall cause to be issued a stock certificate,
registered in the name of the Participant to whom such shares were
granted, evidencing such shares; provided, however, that the Company
shall not cause to be issued such a stock certificates unless it has
received a stock power duly endorsed in blank with respect to such
shares. Each such stock certificate shall bear the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture and restrictions against
transfer) contained in the Boots & Coots International Well
Control, Inc.--2004 Long Term Incentive Plan and an Agreement
entered into between the registered owner of such shares and
Boots & Coots International Well Control, Inc. A copy of the Plan
and Agreement is on file in the office of the Secretary of Boots
& Coots International Well Control, Inc., 11615 N. Houston
Rosslyn Road, Houston, Texas 77086.
Such legend shall not be removed from the certificate evidencing such
shares until such shares vest pursuant to the terms hereof.
(2) Each certificate issued pursuant to Paragraph 7 (d)(1) hereof,
together with the stock powers relating to the shares of Restricted
Stock evidenced by such certificate, shall be held by the Company. The
Company shall issue to the Participant a receipt evidencing the
certificates held by it which are registered in the name of the
Participant.
(e) Consequences Upon Vesting
Upon the vesting of a share of Restricted Stock pursuant to the terms
hereof, the restrictions of Section 7(c) hereof shall cease to apply
to such share. Reasonably promptly after a share of Restricted Stock
vests pursuant to the terms hereof, the Company shall cause to be
issued and delivered to the Participant to whom such shares were
granted, a certificate evidencing such share, free of the legend set
forth in Paragraph 7 (d)(1) hereof, together with any other property
of the Participant held by Company pursuant to Section 7(d) hereof;
provided, however, that such delivery shall be effected for all
purposes when the Company shall have deposited such certificate and
other property in the United States mail, addressed to the
Participant.
(f) Effect of Termination of Employment or Service
(1) If the employment or service of a Participant with the Company
shall terminate for any reason other than Cause prior to the vesting
of shares of Restricted Stock granted to such Participant, a portion
of such shares, to the extent not forfeited or canceled on or prior to
such termination pursuant to any provision hereof, shall vest on the
date of such termination. The portion referred to in the preceding
sentence shall be determined by the Committee at the time of the grant
of such shares of Restricted Stock and may be based on the achievement
of any conditions imposed by the Committee with respect to such shares
pursuant to Section 7(b). Such portion may equal zero.
(2) In the event of the termination of a Participant's employment or
service for Cause, all shares of Restricted Stock granted to such
Participant which have not vested as of the date of such termination
shall immediately be forfeited.
(g) Effect of Change in Control
Upon the occurrence of a Change in Control and termination of
employment of Participant within one year of such Change in Control,
all shares of Restricted Stock which have not theretofore vested
(including those with respect to which the Issue Date has not yet
occurred) shall immediately vest.
8. PHANTOM STOCK
The Committee may grant shares of Phantom Stock pursuant to the Plan. Each
grant of shares of Phantom Stock shall be evidenced by an agreement in such form
as the Committee shall from time to time approve. Each grant of shares of
Phantom Stock shall comply with and be subject to the following terms and
conditions:
(a) Vesting Date
At the time of the grant of shares of Phantom Stock, the Committee
shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign a
different Vesting Date for each class. Provided that all conditions to the
vesting of a share of Phantom Stock imposed pursuant to Section 8(c) hereof
are satisfied, and except as provided in Section 8(d) hereof, upon the
occurrence of the Vesting Date with respect to a share of Phantom Stock,
such share shall vest.
(b) Benefit Upon Vesting
Upon the vesting of a share of Phantom Stock, a Participant shall be
entitled to receive in cash, within 90 days of the date on which such share
vests, an amount in cash in a lump sum equal to the sum of (i) the Fair
Market Value of a share of Common Stock of the Company on the date on which
such share of Phantom Stock vests and (ii) the aggregate amount of cash
dividends paid with respect to a share of Common Stock of the Company
during the period commencing on the date on which the share of Phantom
Stock was granted and terminating on the date on which such share vests.
(c) Conditions to Vesting
At the time of the grant of shares of Phantom Stock, the Committee may
impose such restrictions or conditions, not inconsistent with the
provisions hereof, to the vesting of such shares as it, in its absolute
discretion deems appropriate. By way of example and not by way of
imitation, the Committee may require, as a condition to the vesting of any
class or classes of shares of Phantom Stock, that the Participant or the
Company achieve certain performance criteria, such criteria to be specified
by the Committee at the time of the grant of such shares.
(d) Effect of Termination of Employment or Service
(1) If the employment or service of a Participant with the Company
shall terminate for any reason other than Cause prior to the vesting
of shares of Phantom Stock granted to such Participant a portion of
such shares, to the extent not forfeited or canceled on or prior to
such termination pursuant to any provision hereof, shall vest on the
date of such termination. The portion referred to in the preceding
sentence shall be determined by the Committee at the time of the grant
of such shares of Phantom Stock and may be based on the achievement of
any conditions imposed by the Committee with respect to such shares
pursuant to Section 8(c). Such portion may equal zero.
(2) In the event of the termination of a Participant's employment or
service for Cause, all shares of Phantom Stock granted to such
Participant which have not vested as of the date of such termination
shall immediately be forfeited.
(e) Effect of Change in Control
Upon the occurrence of a Change in Control and termination of
employment of Participant within one year of Change in Control, all
shares of Phantom Stock which have not theretofore vested shall
immediately vest.
9. STOCK BONUSES
The Committee may, in its absolute discretion, grant Stock Bonuses in such
amounts as it shall determine from time to time. A Stock Bonus shall be paid at
such time and subject to such conditions as the Committee shall determine at the
time of the grant of such Stock Bonus. Certificates for shares of Common Stock
granted as a Stock Bonus shall be issued in the name of the Participant to whom
such grant was made and delivered to such Participant as soon as practicable
after the date on which such Stock Bonus is required to be paid.
10. CASH BONUSES
The Committee may, in its absolute discretion, grant in connection with any
grant of Restricted Stock or Stock Bonus or at any time thereafter, a cash
bonus, payable promptly after the date on which the Participant is required to
recognize income for federal income tax purposes in connection with such
Restricted Stock or Stock Bonus, in such amounts as the Committee shall
determine from time to time; provided, however, that in no event shall the
amount of a Cash Bonus exceed the Fair Market Value of the related shares of
Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to
such conditions as the Committee shall determine at the time of the grant of
such Cash Bonus.
11. ADJUSTMENT UPON CHANGES IN COMMON STOCK
(a) Outstanding Restricted Stock and Phantom Stock
Unless the Committee in its absolute discretion otherwise determines,
if a Participant receives any securities or other property (including
dividends paid in cash) with respect to a share of Restricted Stock, the
Issue Date with respect to which occurs prior to such event, but which has
not vested as of the date of such event, as a result of any dividend, stock
split recapitalization, merger, consolidation, combination, exchange of
shares or otherwise, such securities or other property will not vest until
such share of Restricted Stock vests, and shall be held by the Company
pursuant to Paragraph 7 (d) (2) hereof. The Committee may, in its absolute
discretion, adjust any grant of shares of Restricted Stock, the Issue Date
with respect to which has not occurred as of the date of the occurrence of
any of the following events, or any grant of shares of Phantom Stock, to
reflect any dividend, stock split, recapitalization, merger, consolidation,
combination, exchange of shares or similar corporate change as the
Committee may deem appropriate to prevent the enlargement or dilution of
rights of Participants under the grant.
(b) Outstanding Options, Increase or Decrease in Issued Shares Without
Consideration.
Subject to any required action by the shareholders of the Company, in
the event of any increase or decrease in the number of issued shares of
Common Stock resulting from a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend (but only on the shares of
Common Stock), or any other increase or decrease in the number of such
shares effected without receipt of consideration by the Company, the
Committee shall proportionally adjust the number of shares and the exercise
price per share of Common Stock subject to each outstanding Option.
(c) Outstanding Options, Certain Mergers
Subject to any required action by the shareholders of the Company, if
the Company shall be the surviving corporation in any merger or
consolidation (except a merger of consolidation as a result of which the
holders of shares of Common Stock receive securities of another
corporation), each Option outstanding on the date of such merger or
consolidation shall entitle the Participant to acquire upon exercise the
securities which a holder of the number of shares of Common Stock subject
to such Option would have received in such merger or consolidation.
(d) Outstanding Options, Certain Other Transactions
In the event of a dissolution or liquidation of the Company, a sale of
all or substantially all of the Company's assets, a merger or consolidation
involving the Company in which the Company is not the surviving corporation
or a merger or consolidation involving the Company in which the Company is
the surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash,
the Committee shall, in its absolute discretion, have the power to:
(1) cancel, effective immediately prior to the occurrence of such
event, each Option outstanding immediately prior to such event
(whether or not then exercisable), and, in full consideration of
such cancellation, pay to the Participant to whom such Option was
granted an amount in cash, for each share of Common Stock subject
to such Option equal to the excess of (A) the value, as
determined by the Committee in its absolute discretion, of the
property (including cash) received by the holder of a share of
Common Stock as a result of such event over (B) the exercise
price of such Option; or
(2) provide for the exchange of each Option outstanding immediately
prior to such event (whether or not then exercisable) for an
option on some or all of the property for which such Option is
exchanged and, incident thereto, make an equitable adjustment as
determined by the Committee in its absolute discretion in the
exercise price of the option, or the number of shares or amount
of property subject to the option or, if appropriate, provide for
a cash payment to the Participant to whom such Option was granted
in partial consideration for the exchange of the Option.
(e) Outstanding Options/Other Changes
In the event of any change in the capitalization of the Company or
corporate change other than those specifically referred to in Sections
11(b), (c) or (d) hereof, the Committee may, in its absolute discretion,
make such adjustments in the number and class of shares subject to Options
outstanding on the date on which such change occurs and in the per share
exercise price of each such Option as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
(f) No Other Rights
Except as expressly provided in the Plan, no Participant shall have
any rights by reason of any subdivision or consolidation of shares of stock
of any class, the payment of any dividend, any increase or decrease in the
number of shares of stock of any class or any dissolution, liquidation,
merger or consolidation of the Company or any other corporation. Except as
expressly provided in the Plan, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Common Stock subject to an Incentive
Award or the exercise price of any Option.
12. RIGHTS AS A SHAREHOLDER
No person shall have any rights as a shareholder with respect to any shares
of Common Stock covered by or relating to any Incentive Award granted pursuant
to this Plan until the date of the issuance of a stock certificate with respect
to such shares. Except as otherwise expressly provided in Section 11 hereof, no
adjustment to any Incentive Award shall be made for dividends or other rights
for which the record date occurs prior to the date such stock certificate is
issued.
13. NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO INCENTIVE AWARD
Nothing contained in the Plan or any Incentive Award shall confer upon any
Participant any right with respect to the continuation of his employment or
service by the Company or interfere in any way with the right of the Company,
subject to the terms of any separate employment or consulting agreement to the
contrary, at any time to terminate such employment or service or to increase or
decrease the compensation of the Participant from the rate in existence at the
time of the grant of an Incentive Award.
No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a Participant at
any time shall neither require the Committee to grant an Incentive Award to such
Participant or any other Participant or other person at any time nor preclude
the Committee from making subsequent grants to such Participant or any other
Participant or other person.
14. SECURITIES MATTERS
(a) The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be issued
hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to
be issued or delivered any certificates evidencing shares of Common Stock
pursuant to the Plan unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in compliance with
all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition of the issuance and
delivery of certificates evidencing shares of Common Stock pursuant to the
terms hereof, that the recipient of such shares make such covenants,
agreements and representations, and that such certificates bear such
legends, as the Committee, in its sole discretion, deems necessary or
desirable.
(b) The exercise of any Option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such exercise
is in compliance with all applicable laws, regulations of governmental
authorities and the requirements of any securities exchange on which shares
of Common Stock are traded. The Company may, in its sole discretion, defer
the effectiveness of any exercise of an Option granted hereunder in order
to allow the issuance of shares of Common Stock pursuant thereto to be made
pursuant to registration or an exemption from registration or other methods
for compliance available under federal or state securities laws. The
Company shall inform the Participant in writing of its decision to defer
the effectiveness of the exercise of an Option granted hereunder. During
the period that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw such exercise
and obtain the refund of any amount paid with respect thereto.
15. WITHHOLDING TAXES
Whenever shares of Common Stock are to be issued upon the exercise of an
Option, the occurrence of the Issue Date or Vesting Date with respect to a share
of Restricted Stock or the payment of a Stock Bonus, the Company shall have the
right to require the Participant to remit to the Company in cash an amount
sufficient to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the delivery
of any certificate or certificates for such shares. In addition, upon the grant
of a Cash Bonus or the making of a payment with respect to a share of Phantom
Stock, the Company shall have the right to withhold from any cash payment
required to be made pursuant thereto an amount sufficient to satisfy the
federal, state and local withholding tax requirements, if any, attributable to
such exercise or grant. No payment shall be made and no shares of Common Stock
shall be issued pursuant to any Incentive Award unless and until the applicable
tax withholding obligations have been satisfied.
16. AMENDMENT OF THE PLAN
The Board of Directors may at any time suspend or discontinue the Plan or
revise or amend it in any respect whatsoever; provided, however, that without
approval of the shareholders no revision or amendment shall (i) except as
provided in Section 11 hereof, increase the number of shares of Common Stock
that may be issued as Incentive Options under the Plan, (ii) materially increase
the benefits accruing to individuals holding Incentive Awards granted pursuant
to the Plan or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
17. NO OBLIGATION TO EXERCISE
The grant to a Participant of an Option shall impose no obligation upon
such Participant to exercise such Option.
18. TRANSFERS UPON DEATH
Upon the death of a Participant, outstanding Incentive Awards granted to
such Participant may be exercised only by the executors or administrators of the
Participant's estate or by any person or persons who shall have acquired such
right to exercise by will or by the laws of descent and distribution. No
transfer by will or the laws of descent and distribution of any Incentive Award,
or the right to exercise any Incentive Award, shall be effective to bind the
Company unless the Committee shall have been furnished with (a) written notice
thereof and with a copy of the will and/or such evidence as the Committee may
deem necessary to establish the validity of the transfer and (b) an agreement by
the transferee to comply with all the terms and conditions of the Incentive
Award that are or would have been applicable to the Participant and to be bound
by the acknowledgments made by the Participant in connection with the grant of
the Incentive Award.
19. EXPENSES AND RECEIPTS
The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be used for
general corporate purposes.
20. FAILURE TO COMPLY
In addition to the remedies of the Company elsewhere provided for herein,
failure by a Participant to comply with any of the terms and conditions of the
Plan or the agreement executed by such Participant evidencing an Incentive
Award, unless such failure is remedied by such Participant within ten days after
having been notified of such failure by the Committee, shall be grounds for the
cancellation and forfeiture of such Incentive Award, in whole or in part as the
Committee, in its absolute discretion, may determine.
21. EFFECTIVE DATE AND TERM OF PLAN
The Plan was adopted by the Board of Directors effective March 25, 2004,
subject to approval by the shareholders of the Company in accordance with
applicable law, the requirements of Sections 162(m) and 422 of the Code, and the
requirements of Rule 16b-3 under Section 16(b) of the Exchange Act. No
Incentive Award may be granted under the Plan after March 24, 2014. Incentive
Awards may be granted under the Plan at any time prior to the receipt of such
shareholder approval; provided, however, that each such grant shall be subject
to such approval. Without limitation on the foregoing, no Option may be
exercised prior to the receipt of such approval, no share certificate shall be
issued pursuant to a grant of Restricted Stock or Stock Bonus prior to the
receipt of such approval and no Cash Bonus or payment with respect to a share of
Phantom Stock shall be paid prior to the receipt of such approval. If the Plan
is not approved by the Company's shareholders, then the Plan and all Incentive
Awards then outstanding hereunder shall forthwith automatically terminate and be
of no force and effect.
IN WITNESS WHEREOF, this Plan has been executed in Houston, Texas this 24th
day of March, 2004.
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
By: /S/ Jerry Winchester
-----------------------------------------
Name: Jerry Winchester
-----------------------------------------
Title: President and Chief Executive Officer
-----------------------------------------
BOOTS & COOTS INTERNATIONAL WELL CONTROL, INC.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
(AS AMENDED THROUGH MAY 19, 2004)
Section 1. Purpose. It is the purpose of the Plan to promote the
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interests of Boots & Coots International Well Control, Inc., a Delaware
corporation (the "Company"), and its stockholders by attracting and retaining
qualified Nonemployee Directors by giving them the opportunity to acquire a
proprietary interest in the Company and an increased personal interest in its
continued success and progress. The Options granted under the Plan will not be
treated as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
Section 2. Definitions. As used herein the following terms have the
-----------
following meanings:
(a) "Affiliate" means any parent or subsidiary corporation of the
Company within the meaning of Rule 12b-2 under the Securities Exchange Act
of 1934, as amended; provided, however, that an entity shall not be deemed
a parent of the Company unless such entity owns at least 50% of the
outstanding voting securities of the Company.
(b) "Board" means the Board of Directors of the Company.
(c) "Committee" means the Nonemployee Directors Stock Option
Committee described in Section 4 hereof.
(d) "Common Stock" means the Common Stock, par value $.00001 per
share, of the Company.
(e) "Effective Date" shall have the meaning given to that term in
Section 10.
(f) "The Fair Market Value" of a share of Common Stock on any date
shall be (i) the closing sale price on the immediately preceding business
day of a share of Common Stock as reported on the principal securities
exchange on which shares of Common Stock are then listed or admitted to
trading (as of April 8, 2004, the principal securities exchange is the
American Stock Exchange ("AMEX")or (ii) if not so reported, the average of
the closing bid and asked prices for a share of Common Stock on the
immediately preceding business day as quoted on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or (iii) if not
quoted on NASDAQ, the average of the closing bid and asked prices for a
share of Common Stock as quoted by the National Quotation Bureau Pink
Sheets or the National Association of Securities DealersSec. OTC Bulletin
Board System. If the price of a share of Common Stock shall not be so
reported, the Fair Market Value of a share of Common Stock shall be
determined by the Committee in its absolute discretion.
(g) "Grant Date" means, with respect to any Option granted under
the Plan, the date of grant of such Option as provided in Section 5(a) and
(b).
(h) "Nonemployee Director" means an individual who (i) is now, or
hereafter becomes, a member of the Board of Directors of the Company, and
(ii) is neither an employee nor an officer of the Company or of an
Affiliate of the Company. For purposes of this Plan, "employee" shall mean
an individual whose wages are subject to the withholding of federal income
tax under Section 3401 of the Code, and "officer" shall mean an individual
elected or appointed by the Board of Directors or chosen in such other
manner as may be prescribed in the Bylaws of the Company or an Affiliate to
serve as such.
(i) "Option" means any option to purchase shares of Common Stock
granted pursuant to the provisions of the Plan.
(j) "Optionee" means a Nonemployee Director who has been granted
an Option under the Plan.
(k) "Plan" means this Boots & Coots International Well Control,
Inc. Nonemployee Director Stock Option Plan.
Section 3. Number of Shares. Options may be granted by the Company under
----------------
the Plan to purchase an aggregate of 600,000 shares of Common Stock, except as
such number of shares shall be adjusted after the Effective Date in accordance
with the provisions of Section 6 hereof. If an Option expires or terminates for
any reason without having been exercised in full, the unpurchased shares subject
to such expired or terminated Option shall again be available for purposes of
the Plan. The shares may be authorized but unissued or reacquired shares of
Common Stock.
Section 4. Administration of the Plan. The Plan shall be administered by
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a Nonemployee Directors Stock Option Committee which shall consist of two or
more members of the Board, a majority of which shall not be Nonemployee
Directors. Each member of the Committee shall be appointed by and shall serve
at the pleasure of the Board. The Board shall have the sole continuing
authority to appoint members of the Committee both in substitution for members
previously appointed and to fill vacancies however caused. The following
provisions shall apply to the administration of the Plan:
(a) The Committee shall designate one of its members as Chairman
and shall hold meetings at such times and places as it may determine. Each
member of the Committee shall be notified in writing of the time and place
of any meeting of the Committee at least two days prior to such meeting,
provided that such notice may be waived by a Committee member. A majority
of the members of the Committee shall constitute a quorum and any action
taken by a majority of the members of the Committee present at any duly
called meeting at which a quorum is present (as well as any action
unanimously approved in writing) shall constitute action by the Committee.
(b) The Committee may appoint a Secretary (who need not be a
member of the Committee) who shall keep minutes of its meetings. The
Committee may make such rules and regulations for the conduct of its
business as it may determine.
(c) The Committee shall have no authority, discretion or power to
select the participants who will receive Options, to set the number of
shares to be covered by any Option, to set the exercise price of any Option
or to set the period within which Options may be exercised, or to alter any
other terms or conditions specified herein, except in the sense of
administering the Plan. Subject to the foregoing limitations, the Committee
shall have full authority subject to the express provisions of the Plan to
interpret the Plan and any Option granted hereunder, to provide, modify and
rescind rules and regulations relating to the Plan and to make all other
determinations and perform such actions as the Committee deems necessary or
advisable to administer the Plan. In making such determinations, the
Committee may take into account such facts as the Committee in its
discretion shall deem appropriate to carry out the purposes of the Plan.
(d) No member of the Committee or the Board shall be liable for
any action taken or determination made in good faith with respect to the
Plan or any Option granted hereunder.
Section 5. Terms and Conditions of Options.
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(a) Automatic Option Grants. Commencing on the Effective Date of
------------------------
the Plan:
(i) An Option shall be granted automatically under
the Plan to each individual who is a Nonemployee Director as
of the Effective Date. The Grant Date of such an Option
shall be the Effective Date. An Option shall be granted
automatically under the Plan to each Nonemployee Director
who is newly elected to the Board after the Effective Date.
The Grant Date of such an Option shall be the date of such
personSec.s initial election or appointment as a director of
the Company. For purposes of this Section, the term "newly
elected to the Board" shall mean that the Nonemployee
Director was not serving as a director of the Company
immediately prior to the time of his or her election or
appointment in respect of which such Option is granted.
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(ii) Each Nonemployee Director to whom an Option
has been granted under (i) above shall, for so long as such
person remains a Nonemployee Director, automatically be
granted additional Options under the Plan on each
anniversary of the Grant Date of his or her initial Option
under (i) above.
(b) Additional Option Grants. On March 24, 2004, each Nonemployee
------------------------
Director serving the Company as a director shall receive a
one-time Option grant. The Grant Date of such an Option shall be
effective September 30, 2003.
(c) Number of Shares. Each Nonemployee Director serving the
------------------
Company as a director as of the Effective Date shall be granted, as of the
Grant Date, an Option to purchase a number of shares of Common Stock equal
to 3,750 shares. After the Effective Date through September 28, 2003, each
newly elected Nonemployee Director shall be granted an Option to purchase
3,750 shares of Common Stock upon election or appointment to the Board of
Directors as a director. As of and after September 30, 2003, each newly
elected Nonemployee Director shall be granted an Option to purchase 100,000
shares of Common Stock upon election or appointment to the Board of
Directors as a director. On each anniversary of a Nonemployee Director's
initial Option Grant Date, each then current Nonemployee Director shall be
granted an Option to purchase 3,750 shares of Common Stock. Each
Nonemployee Director serving the Company as a director as of September 30,
2003 shall receive a one-time grant of an Option to purchase 100,000 shares
of Common Stock. All Option grants shall be in accordance with the terms of
such Option and the Plan, and are subject to adjustment in accordance with
Section 6 hereof.
(d) Price. The price at which each share of Common Stock covered
-----
by an Option may be purchased pursuant to the Plan shall be 100% of the
Fair Market Value of a share of Common Stock on the Grant Date of the
Option.
(e) Option Period. The period within which each Option may be
--------------
exercised shall commence on the first anniversary of the Grant Date of the
Option and shall expire on the fifth anniversary of such Grant Date (the
"Option Period"), unless terminated sooner pursuant to Section 5(f) hereof.
(f) Termination of Service, Death, Etc. The following provisions
-----------------------------------
shall apply with respect to the exercise of an Option granted hereunder in
the event that the Optionee thereof ceases to be a director of the Company
for the reasons described in this Section 5(f):
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(i) If the directorship of the Optionee is terminated
prior to the beginning of the Option Period, the Option shall
automatically terminate as of the date of such termination;
(ii) If the Optionee dies during the Option Period while
he is a director of the Company (or during the additional
one-year period provided by paragraph (iii) of this Section
5(f)), the Option may be exercised within one year after such
death (if within the Option Period), but not thereafter, by the
executor or administrator of the estate of the Optionee, or by
the person or persons who shall have acquired the Option directly
from the Optionee by bequest or inheritance; or
(iii) If the directorship of the Optionee is terminated
for any reason (other than the circumstances specified in
paragraphs (i) and (ii) of this Section 5(f)) within the Option
Period, including a failure by the stockholders of the Company to
reelect the Optionee as a director, the Option may be exercised
within one
(g) Transferability. An Option granted under the Plan shall not
---------------
be transferable by the Optionee, otherwise than by will or pursuant to the
laws of descent and distribution, and during the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee or his or her guardian
or legal representative.
(h) Requirement of Directorship. Except as provided in Section
-----------------------------
5(f) hereof, an Option may not be exercised unless the Optionee is at the
time of exercise serving as a director of the Company, and, except as
provided in Section 5(f) hereof, such Option shall terminate upon
termination of the OptioneeSec.s service as a director of the Company.
(i) Manner of Exercise. Each Option granted hereunder may be
--------------------
exercised, in whole or in part, by the Optionee thereof at any time or
(with respect to partial exercises) from time to time during the Option
Period, subject to the provisions of the Plan and the stock option
agreement evidencing such Option, and the method for exercising an Option
shall be by the personal delivery to the Secretary of the Company of, or by
the sending by United States registered or certified mail, postage prepaid,
addressed to the Company (to the attention of its Secretary), of, written
notice signed by the Optionee specifying the number of shares of Common
Stock with respect to which such Option is being exercised. Such notice
shall be accompanied by the full amount of the purchase price of such
shares as provided in Section 5(j) hereof. Any such notice shall be deemed
to have been given on the date of receipt thereof (in the case of personal
delivery as above-stated). In addition to the foregoing, promptly after
demand by the Company, the exercising Optionee shall pay to the Company an
amount equal to applicable withholding taxes, if any, due in connection
with such exercise. No shares of Common Stock shall be issued upon exercise
of an Option until full payment therefor and for all applicable withholding
taxes has been made, and a Optionee shall have none of the rights of a
stockholder until shares of Common Stock are issued to such Optionee.
(j) Payment of Purchase Price. The purchase price of an Option
---------------------------
shall be paid in full in cash or by the following methods: (i) by personal
check of the Optionee; (ii) by means of a broker-assisted exercise whereby
the Optionee delivers to the Company, together with a properly executed
exercise notice, such other documentation as the Committee and the broker
assisting in the transaction shall require to effect an exercise of the
Option, a sale of the shares of Common Stock acquired upon exercise and the
delivery to the Company of the proceeds of such sale in full payment of the
exercise price; or (iii) any combination of the foregoing methods of
payment. The proceeds of a sale of Common Stock upon exercise of an Option
shall constitute general funds of the Company.
Section 6. Adjustments Upon Changes in Common Stock. In the event the
-------------------------------------------
Company shall effect a split of the Common Stock or dividend payable in Common
Stock, or in the event the outstanding
4
Common Stock shall be combined into a smaller number of shares, the maximum
number of shares as to which Options may be granted under the Plan shall be
decreased or increased proportionately. In the event that before delivery by the
Company of all of the shares of Common Stock for which any Option has been
granted under the Plan, the Company shall have effected such a split, dividend
or combination, the shares still subject to such Option shall be increased or
decreased proportionately and the purchase price per share shall be decreased or
increased proportionately so that the aggregate purchase price for all of the
shares then subject to such Option shall remain the same as immediately prior to
such split, dividend or combination.
In the event of a reclassification of Common Stock not covered by the
foregoing, or in the event of a liquidation or reorganization (including a
merger, consolidation, spinoff or sale of assets) of the Company, including a
transaction in which the Company is not the survivor, the Board shall make such
adjustments, if any, as it may deem appropriate in the number, purchase price
and kind of shares covered by the unexercised portions of Options theretofore
granted under the Plan. The provisions of this Section shall only be applicable
if, and only to the extent that, the application thereof does not conflict with
any valid governmental statute, regulation or rule.
Section 7. Amendment and Termination of the Plan. Subject to the right of
-------------------------------------
the Board to terminate the Plan prior thereto, the Plan shall terminate at the
expiration of ten years from November 12, 1997, the date of adoption of the Plan
by the Board. No Options may be granted after termination of the Plan. The
Board may alter or amend the Plan in any respect, except that no termination or
amendment of the Plan shall adversely affect the rights of an Optionee under a
previously granted Option, except with the consent of such Optionee.
Section 8. Requirements of Law. The granting of Options and the issuance
-------------------
of Common Stock upon the exercise of an Option shall be subject to all
applicable laws, rules and regulations and to such approval by governmental
agencies as may be required.
Section 9. Investment Letter. If the Company so elects, the CompanySec.s
-----------------
obligation to deliver Common Stock with respect to an Option shall be
conditioned upon its receipt from the Optionee to whom such Common Stock is to
be delivered of an executed investment letter containing such representations
and agreements as the Committee may determine to be necessary or advisable in
order to enable the Company to issue and deliver such Common Stock to such
Optionee in compliance with the Securities Act of 1933 and other applicable
federal, state or local securities laws or regulations.
Section 10. Effective Date of the Plan. The Plan as originally adopted by
--------------------------
the Board of Directors on November 12, 1997, was approved by the stockholders of
the Company on November 24, 1997, to be effective as of that date (the
"Effective Date"). The Plan was amended by the Board of Directors on March 24,
2004, subject to the approval of such amendment by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock present in
person or by proxy entitled to vote at the 2004 annual meeting of stockholders
of the Company. If not so approved, the amendment to the Plan adopted by the
Board of Directors on March 24, 2004, shall become null and void and of no
further force or effect, and all outstanding Options and any Options that are
subsequently granted under the Plan will be governed by the provisions of the
Plan as in effect prior to said amendment.
5