SECURITY NATIONAL FINANCIAL CORPORATION
September 27, 1996
Dear Stockholder:
On behalf of the Board of Directors, it is my pleasure to
invite you to attend the Annual Meeting of Stockholders of
Security National Financial Corporation (the "Company") to be
held on November 7, 1996 at 12:00 noon, Mountain Standard Time,
at 5258 Pinemont Drive, Suite B, Salt Lake City, Utah.
The matters to be addressed at the meeting will include the
election of nine directors, the approval of the proposed
amendments to the Company's Articles of Incorporation, and the
approval of the proposed amendments to the Company's 1993 Stock
Option Plan. I will also report on the business activities of
the Company and answer any stockholder questions.
Your vote is very important. We hope you will take a few
minutes to review the Proxy Statement and complete, sign, and
return your Proxy Card in the envelope provided, even if you plan
to attend the meeting. Please note that sending us your Proxy
will not prevent you from voting in person at the meeting, should
you wish to do so.
Thank you for your support of Security National Financial
Corporation. We look forward to seeing you at the Annual
Stockholders Meeting.
Sincerely yours,
SECURITY NATIONAL
FINANCIAL CORPORATION
s/s George R. Quist
George R. Quist,
Chairman of the Board,
President and Chief
Executive Officer
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 310
Salt Lake City, Utah 84123
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of Security National Financial Corporation (the
"Company"), a Utah corporation, will be held on November 7, 1996,
at 5258 Pinemont Drive, Suite B, Salt Lake City, Utah, at 12:00
noon, Mountain Standard Time, to consider and act upon the
following:
1. To elect a Board of Directors consisting of nine directors
(three directors to be elected exclusively by the Class A
common stockholders voting separately as a class and the
remaining six directors to be elected by the Class A and
Class C common stockholders voting together) to serve until
the next Annual Meeting of Stockholders or until their
successors are elected and qualified;
2. To amend the Company's Articles of Incorporation as
follows: (i) to provide for a two-for-one stock split
involving only Class C Common Stock; (ii) to reduce the par
value of Class C Common Stock from $.40 par value to $.20 par
value; (iii) to reduce the exchange rate for converting Class
C Common Stock to Class A Common Stock from five shares to
ten shares of Class C Common Stock for each share of Class A
Common Stock; (iv) to reduce the cash dividends received by
Class C shares from 18% to 9% of the per share cash dividends
received by Class A shares; (v) to reduce the distributions
to Class C Shares in the event of a liquidation from 18% to
9% of the per share distributions received by Class A shares;
and (vi) to provide for the issuance of shares of Class C
Common Stock under a stock option plan;
3. To amend the Company's 1993 Stock Option Plan as follows:
(i) to increase the number of shares of Class A Common Stock
reserved for issuance under the plan from 300,000 Class A
shares to 600,000 Class A shares; and (ii) to provide that
the stock subject to options, awards and purchases may
include Class C Common Stock; and
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
The foregoing items of business are more fully described in
the Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on
October 4, 1996, as the record date for the determination of
stockholders entitled to notice of and to vote at the annual
meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. A
PROXY STATEMENT AND PROXY CARD ARE ENCLOSED HEREWITH. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN
THE PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE SO THAT YOUR
SHARES MAY BE VOTED AT THE MEETING. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE
MEETING.
By Order of the Board of Directors
s/s William C. Sargent
William C. Sargent, Senior Vice President
and Secretary
Salt Lake City, Utah, September 27, 1996
<PAGE>
SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 310
Salt Lake City, Utah 84123
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on November 7, 1996
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Security
National Financial Corporation (the "Company") for use at the
Annual Meeting of Stockholders to be held on November 7, 1996, at
5259 Pinemont Drive, Suite B, Salt Lake City, Utah, at 12:00
noon, Mountain Standard Time, or at any adjournment or
postponements thereof (the "Annual Meeting"). The shares covered
by the enclosed Proxy, if such is properly executed and received
by the Board of Directors prior to the meeting, will be voted in
favor of the proposals to be considered at the Annual Meeting,
and in favor of the election of the nominees to the Board of
Directors (three nominees to be elected by the Class A common
stockholders voting separately as a class and six nominees to be
elected by the Class A and Class C common stockholders voting
together) as listed unless such Proxy specifies otherwise, or the
authority to vote in the election of directors is withheld. A
Proxy may be revoked at any time before it is exercised by giving
written notice to the Secretary of the Company at its above
address. Stockholders may vote their shares in person if they
attend the Annual Meeting, even if they have executed and
returned a Proxy. This Proxy Statement and accompanying Proxy
Card were mailed to stockholders on or about September 27, 1996.
Your vote is important. Please complete and return the Proxy
Card so your shares can be represented at the Annual Meeting,
even if you plan to attend in person.
If a shareholder wishes to assign a proxy to someone other
than the Directors' Proxy Committee, all three names appearing on
the Proxy Card must be crossed out and the name(s) of another
person or persons (not more than three) inserted. The signed
card must be presented at the meeting by the person(s)
representing the shareholder.
The cost of this solicitation will be borne by the Company.
The Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners.
Proxies may also be solicited by certain of the Company's
directors, officers, and regular employees, without additional
compensation.
The matters to be brought before the Annual Meeting are (1)
the election of directors to serve for the ensuing year, (2) the
approval of the proposed amendments to the Company's Articles of
Incorporation, (3) the approval of the proposed amendments to the
Company's 1993 Stock Option Plan, and (4) any other business as
may properly come before the Annual Meeting.
<PAGE>
VOTING SECURITIES
Only holders of record of Common Stock at the close of
business on October 4, 1996, will be entitled to vote at the
Annual Meeting. As of June 30, 1996, there were issued and
outstanding 3,256,905 shares of Class A Common Stock, $2.00 par
value per share, and 2,354,791 shares of Class C Common Stock
$.40 par value per share resulting in a total of 5,611,696 shares
of both Class A and Class C Common Stock outstanding. A majority
of the outstanding shares (2,805,849) of Common Stock will
constitute a quorum for the transaction of business at the
meeting.
The holders of either class of Common Stock of the Company are
entitled to one vote per share. Cumulative voting is not
permitted in the election of directors.
The Company's Articles of Incorporation provide that the Class
A common stockholders and Class C common stockholders have
different voting rights in the election of directors. The Class
A common stockholders voting separately as a class will be
entitled to vote for three of the nine directors to be elected
(the nominees to be voted upon by the Class A stockholders
separately consist of Messrs. Scott M. Quist, Charles L.
Crittenden and Sherman B. Lowe). The remaining six directors
will be elected by the Class A and Class C common stockholders
voting together (the nominees to be so voted upon consist of
Messrs. George R. Quist, William C. Sargent, R.A.F. McCormick, H.
Craig Moody, W. Lowell Steen, and Nathan H. Wagstaff). For the
other business to be conducted at the Annual Meeting, the Class
A and Class C common stockholders will vote together, one vote
per share. Class A common stockholders will receive a different
form of Proxy than the Class C common stockholders.
ELECTION OF DIRECTORS
There are three committees of the Board of Directors which
meet periodically during the year: the Audit Committee, the
Compensation Committee, and the Executive Committee. The Board
of Directors does not have a Nominating Committee.
The Compensation Committee is responsible for recommending to
the Board of Directors for approval the annual compensation of
each executive officer of the Company and the executive officers
of the Company's subsidiaries, developing policy in the areas of
compensation and fringe benefits, contributions under the
Employee Stock Ownership Plan, granting of options under the
stock option plans and creating other employee compensation
plans. The Compensation Committee consists of Messrs. Charles L.
Crittenden, Sherman B. Lowe, George R. Quist and W. Lowell Steen.
During 1995 the Compensation Committee met on two occasions.
The Audit Committee directs the auditing activities of the
Company's internal auditors and outside public accounting firm
and approves the services of the outside public accounting firm.
The Audit Committee consists of Messrs. Charles L. Crittenden,
Sherman B. Lowe, and Nathan H. Wagstaff. During 1995 the Audit
Committee met on one occasion.
The Executive Committee reviews Company policy, major
investment activities and other pertinent transactions of the
Company. The Executive Committee consists of Messrs. George R.
Quist, Scott M. Quist, and William C. Sargent. During 1995 the
Executive Committee met on four occasions.
<PAGE>
During 1995 there were six meetings of the Company's Board of
Directors.
The Company's By-laws provide that the Board of Directors
shall consist of not less than three nor more than eleven
members. The term of office of each director is for a period of
one year or until the election and qualification of his
successor. Directors need not be a resident of the State of Utah
but must be a stockholder of the Company.
The size of the Board of Directors of the Company for the
coming year is nine members. Unless authority is withheld by
your Proxy, it is intended that the Common Stock represented by
your Proxy will be voted for the respective nominees listed
below. If any nominee should not serve for any reason, the Proxy
will be voted for such person as shall be designated by the Board
of Directors to replace such nominee. The Board of Directors has
no reason to expect that any nominee will be unable to serve.
There is no arrangement between any of the nominees and any other
person or persons pursuant to which he was or is to be selected
as a director. There is no family relationship between or among
any of the nominees, except that Scott M. Quist is the son of
George R. Quist.
<PAGE>
<TABLE>
<CAPTION>
The Nominees
The nominees to be elected by the holders of Class A Common
Stock are as follows:
Position(s)
Name Age Director Since with the Company
- ----------------- ---- --------------- ---------------------
<S> <C> <C> <C>
Scott M. Quist 42 May 1986 First Vice President,
General Counsel,
Treasurer and Director
Charles L.
Crittenden 76 October 1979 Director
Sherman B. Lowe 81 October 1979 Director
</TABLE>
The nominees for election by the holders of Class A and Class
C Common Stock, voting together, are as follows:
<TABLE>
<CAPTION>
Position(s)
Name Age Director Since with the Company
- ----------------- ---- --------------- -----------------------
<S> <C> <C> <C>
George R. Quist 75 October 1979 Chairman of the Board,
President and Chief
Executive Officer
William C.
Sargent 67 February 1980 Senior Vice President,
Secretary and Director
R.A.F. McCormick 82 October 1979 Director
H. Craig Moody 42 September 1995 Director
W. Lowell Steen 81 October 1979 Director
Nathan H.
Wagstaff 75 October 1979 Director
</TABLE>
<PAGE>
The following is a description of the business experience of each of the
nominees and directors.
George R. Quist, age 75, has been Chairman of the Board of
Directors, President and Chief Executive Officer of the Company
since October 1979. From 1946 to 1960, he was an agent, District
Manager and Associate General Agent for various insurance
companies. From 1960 to 1964, he was Treasurer and Executive
Vice President of Pacific Guardian Life Insurance Company. Mr.
Quist also served from 1981 to 1982 as the President of The
National Association of Life Companies, a trade association of
642 life insurance companies, and from 1982 to 1983 as its
Chairman of the Board.
William C. Sargent, age 67, has been Senior Vice President of
the Company since 1980, Secretary since October 1993, and a
director since February 1980. Prior to that time, he was
employed by Security National as a salesman and agency
superintendent.
Scott M. Quist, age 42, has been the Company's General Counsel
since 1982, a Vice President since 1983, the Treasurer since
October 1993, and a director since May 1986. From 1980 to 1982,
Mr. Quist was a tax specialist with Peat, Marwick, Main, & Co.,
in Dallas, Texas. Since 1986 he has been a director of The
National Association of Life Companies, a trade association of
642 insurance companies and its Treasurer until its merger with
the American Council of Life Companies. Mr. Quist is currently
a member of the Board of Governors of the Forum 500 Section
(representing small companies) of the American Council of Life
Insurance. Mr. Quist has also been a director since November
1993 of Key Bank of Utah.
Charles L. Crittenden, age 76, has been a director of the
Company since October 1979. Mr. Crittenden is sole stockholder
of Crittenden Paint & Glass Company since 1958. He is a 50%
stockholder of Crittenden Enterprises, a real estate development
company and Chairman of the Board of Linco, Inc.
Sherman B. Lowe, age 81, has been a director of the Company
since October 1979. Mr. Lowe was formerly President and Manager
of Lowe's Pharmacy located in Salt Lake City, Utah, for the past
30 years. He is now retired. He is a one-third owner of
Burton-Lowe Ranches, a general partnership.
R.A.F. McCormick, age 82, has been a director of the Company
since October 1979. He is the past Vice President of Sales for
Cloverclub Foods, a food processing company. He is now retired.
H. Craig Moody, age 42, was elected a director of the Company
on September 25, 1995. Mr. Moody is owner of Moody & Associates,
a company which is involved in political consulting and real
estate. He is a former Speaker and Majority Leader of the House
of Representatives of the State of Utah.
W. Lowell Steen, age 81, has been a director of the Company
since October 1979. He has been a real estate investment broker
for the last 13 years. Prior to that time, he was a large-scale
rancher and food processor. Currently, he is President and sole
stockholder of Lowell Steen, Inc., a real estate company.
Nathan H. Wagstaff, age 76, has been a director of the Company
since October, 1979. He has served as President and Chairman of
the Board of Directors of Nate Wagstaff Company, Inc., since
1975. He has also served as President and General Manager of
<PAGE>
Western States Distribution Company, Highland Petroleum Company,
Inc., and Holiday Oil Company. Mr. Wagstaff is the sole
stockholder of Nate Wagstaff Company, Inc., an oil distribution
company.
Executive Officers
The following table sets forth certain information with
respect to the executive officers of the Company (the business
biographies for the first three individuals are set forth above):
<TABLE>
<CAPTION>
Name Age Title
---------------- ----- ----------------------------------
<S> <C> <S>
George R. Quist1 75 Chairman of the Board, President
and Chief Executive Officer
Scott M. Quist1 42 First Vice President, General
Counsel and Treasurer
William C. Sargent 67 Senior Vice President and Secretary
1George R. Quist is the father of Scott M. Quist.
</TABLE>
The Board of Directors of the Company has a written procedure
which requires disclosure to the Board of any material interest
or any affiliation on the part of any of its officers, directors
or employees which is in conflict or may be in conflict with the
interests of the Company.
No director, officer or 5% stockholder of the Company or its
subsidiaries, or any affiliate thereof has had any transactions
with the Company or its subsidiaries during 1995 or 1994 other
than employment arrangements or as described above.
None of the Directors are board members of any other company
having a class of equity securities registered under the
Securities Exchange Act of 1934, as amended, or any company
registered as an investment company under the Investment Company
Act of 1940, as amended, with the exception of Scott M. Quist,
who is a director of Key Bank of Utah. All directors of the
Company hold office until the next annual meeting of
stockholders, until their successors have been elected and
qualified, or until their earlier resignation or removal.
PRINCIPAL STOCKHOLDERS AND STOCK HOLDINGS OF MANAGEMENT
The following table sets forth security ownership information of the
Company's Class A and Class C Common Stock as of June 30, 1996, (i) for
persons who own beneficially more than 5% of the Company's outstanding
Class A or Class C Common Stock, (ii) each director of the Company, and (iii)
for all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Class A
Class A Class C and Class C
Common Stock Common Stock Common Stock
Name and
Address of Amount Amount Amount
Beneficial Beneficially Percent Beneficially Percent Beneficially Percent
Owner Owned of Class Owned of Class Owned of Class
- ----------- ----------- -------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
George R. Quist (1)(2)
4491 Wander Lane
Salt Lake City,
Utah 84117 233,758 7.2 1,168,682 49.6 1,402,440 25.0
William C. Sargent (1)(2)
4974 Holladay Blvd.
Salt Lake City,
Utah 84117 63,903 2.0 139,252 5.9 203,155 3.6
Employee Stock
Ownership Plan(3)
5300 South 360 West
Suite 310
Salt Lake City,
Utah 84123 623,358 19.1 496,300 21.1 1,119,658 20.0
Charles L. Crittenden
248 - 24th Street
Ogden, Utah 84404 -0- -0- 77,232 3.3 77,232 1.4
Sherman B. Lowe
2197 South 2100 East
Salt Lake City,
Utah 84109 18,361 * 84,404 3.6 102,765 1.8
R.A.F. McCormick (1)
400 East
Crestwood Road
Kaysville,
Utah 84037 8,806 * 44,035 1.9 52,841 *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class A
Class A Class C and Class C
Common Stock Common Stock Common Stock
Name and ------------- ------------ ------------
Address of Amount Amount Amount
Beneficial Beneficially Percent Beneficially Percent Beneficially Percent
Owner Owned of Class Owned of Class Owned of Class
- ---------- ------------ -------- ------------ -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
H. Craig Moody
1782 East
Faunsdale Dr.
Sandy,
Utah 84092 106 * -0- -0- 106 *
Scott M. Quist
7 Wanderwood Way
Sandy,
Utah 84094 68,127 2.1 23,348 1.0 91,475 1.6
W. Lowell Steen
12705 SE River Rd.
Apt. 402S
Portland,
Oregon 97222 210 * 767 * 977 *
Nathan H. Wagstaff
2131 King Street
Salt Lake City,
Utah 84109 21,993 * 82,809 3.5 104,802 1.9
Associated
Investors(4)
5300 So. 360 W.
Suite 310
Salt Lake City,
Utah 84123 65,347 2.0 211,306 9.0 276,653 4.9
All directors
and executive
officers
(9 persons) 415,264 12.8 1,620,529 68.8 2,035,793 36.3
* Less than one percent
</TABLE>
(1) Does not include 623,358 shares of Class A Common Stock
and 496,300 shares of Class C Common Stock owned by the
Company's Employee Stock Ownership Plan (ESOP), of which
George R. Quist, William C. Sargent and R.A.F. McCormick
are the trustees and accordingly, exercise shared voting
and investment powers with respect to such shares.
(2) The number of shares shown in the table for George R.
Quist and William C. Sargent does not include 65,347
shares of Class A Common Stock and 211,306 shares of
Class C Common Stock owned by Associated Investors, a
Utah general partnership, of which these individuals are
the managing partners and, accordingly, exercise shared
voting and investment powers with respect to such shares.
(3) The trustees of the Employee Stock Ownership Plan (ESOP)
are George R. Quist, William C. Sargent and R.A.F.
McCormick, who exercise shared voting and investment
powers.
(4) The managing partners of Associated Investors are George
R. Quist and William C. Sargent, who exercise shared
voting and investment powers.
The Company's officers and directors, as a group, own
beneficially approximately 36.2% of the outstanding shares of the
Company's Class A and Class C Common Stock.
Executive Compensation
The following table discloses compensation received by the
Company's Chief Executive Officer and the three other most highly
compensated executive officers who were serving as executive
officers at December 31, 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
- ------------------- Other
Annual
Name and Compen-
Principal Position Year Salary Bonus sation(2)
- ------------------ ----- -------- ------ ---------
<S> <C> <C> <C> <C>
George R. Quist(1)
Chairman of the
Board, President 1995 $104,469 $15,303 $2,400
and Chief 1994 102,245 15,303 2,400
Executive Officer 1993 101,223 15,303 2,400
William C. Sargent
Senior Vice
President, 1995 77,538 11,725 4,500
Secrtary and 1994 82,777 10,725 4,500
Director 1993 79,842 7,725 4,500
Scott M. Quist(1)
First Vice
President, General 1995 84,871 13,000 7,200
Counsel, Treasurer 1994 82,502 12,000 7,200
and Director 1993 73,518 9,246 7,200
</TABLE>
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Awards Payouts
------- ------- All
Stock Other
Name and Options Incentive Compen-
Principal Position Year (Shares) Payouts sation(3)
- ------------------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C>
George R. Quist(1) 1995 2,625 0 5,937
Chairman of the 1994 2,500 0 8,263
Board, President 1993 50,000 0 14,600
and Chief
Executive Officer
William C. Sargent 1995 2,100 0 2,100
Senior Vice 1994 2,000 0 4,020
President, 1993 40,000 0 8,608
Secretary and
Director
Scott M. Quist(1) 1995 3,149 0 2,206
First Vice 1994 3,000 0 3,924
President, 1993 2,856 0 7,422
General Counsel
Treasurer and
Director
_____________________________
</TABLE>
(1) George R. Quist is the father of Scott M. Quist.
(2) The amounts indicated under "Other Annual Compensation"
for 1995 consist of payments related to the operation of
automobiles by the named executive officers. However
such payments do not include the furnishing of an
automobile by the Company to George R. Quist, William C.
Sargent and Scott M. Quist nor the payment of insurance
and property taxes with respect to the automobiles
operated by the named executive officers.
(3) The amounts indicated under "All Other Compensation" for
1995 consist of (a) amounts contributed by the Company
into a trust for the benefit of the named executive
officers under the Employee Stock Ownership Plan (George
R. Quist, $1,200; William C. Sargent, $893; and Scott M.
Quist, $991); (b) insurance premiums paid by the Company
with respect to a group life insurance plan for the
benefit of the named executive officers ($2,522 for all
named executive officers as a group, or $92 for George
R. Quist, $1,215 for William C. Sargent and Scott M.
Quist, and $1,215 for each individual officer); and (c)
life insurance premiums paid by the Company for the
benefit of the family of Mr. George R. Quist ($4,645).
The Company's Board of Directors has a written procedure which
requires disclosure to the Board of any material interest or any
affiliation on the part of any of its officers, directors or
employees which is in conflict or may be in conflict with the
interests of the Company.
No director, officer or 5% stockholder of the Company or its
subsidiaries, or any affiliate thereof, has engaged in any
business transactions with the Company or its subsidiaries during
1994 or 1995 other than as described herein.
<PAGE>
Retirement Plans
George R. Quist, who has been Chairman, President and Chief
Executive Officer of the Company since 1979, has a Deferred
Compensation Agreement, dated December 8, 1988, with the Company
(the "Compensation Agreement"). This Compensation Agreement
provides upon Mr. Quist's retirement the Company shall pay him
$50,000 per year as an annual retirement benefit for a period of
10 years from the date of retirement; and upon his death, the
remainder of such annual payments shall be payable to his wife,
if she survives him.
The Compensation Agreement further provides that the Board of
Directors may elect to pay the entire amount of deferred
compensation in the form of a single lump-sum payment or other
installment payments, so long as the term of such payments do not
exceed 10 years. However, in the event Mr. Quist's employment
with the Company is terminated for any reason other than
retirement, death or disability, the entire deferred compensation
shall be forfeited by him.
Director's Fees
Directors of the Company (but not including directors who are
employees) are paid a director's fee of $7,200 per year by the
Company and are reimbursed for any travel expenses incurred in
attending Board meetings. No additional amounts are paid by the
Company for committee participation or special assignments.
Employee Stock Ownership Plan
Effective January 1, 1980, the Company adopted an employee
stock ownership plan (the "Ownership Plan") for the benefit of
career employees of the Company and its subsidiaries. The
following is a description of the Ownership Plan, and is
qualified in its entirety by the Ownership Plan, a copy of which
is available for inspection at the Company's offices.
Under the Ownership Plan, the Company has discretionary power
to make contributions on behalf of all eligible employees into a
trust created under the Ownership Plan. Employees become
eligible to participate in the Ownership Plan when they have
attained the age of 19 and have completed one year of service (a
twelve-month period in which the Employee completes at least
1,040 hours of service). The Company's contributions under the
Ownership Plan are allocated to eligible employees on the same
ratio that each eligible employee's compensation bears to total
compensation for all eligible employees during each year. To
date, the Ownership Plan has approximately 95 participants and
had contributions payable to the Plan in 1995 of $21,914.
Benefits under the Ownership Plan vest as follows: 20% after the
<PAGE>
third year of eligible service by an employee, an additional 20%
in the fourth, fifth, sixth and seventh years of eligible service
by an employee. Benefits under the Ownership Plan will be paid
out in one lump sum or in installments in the event the employee
becomes disabled, reaches the age of 65, or is terminated by the
Company and demonstrates financial hardship. The Ownership Plan
Committee, however, retains discretion to determine the final
method of payment. Finally, the Company reserves the right to
amend or terminate the Ownership Plan at any time. The trustees
of the trust fund under the Ownership Plan are Messrs. R.A.F.
McCormick, George R. Quist, and William C. Sargent, all directors
of the Company.
1987 Incentive Stock Option Plan
In 1987, the Company adopted the 1987 Incentive Stock Option
Plan (the 1987 Plan). The 1987 Plan provides that shares of the
Class A Common Stock of the Company may be optioned to certain
officers and key employees of the Company. The Plan establishes
a Stock Option Plan Committee which selects the employees to whom
the options will be granted and determines the price of the
stock. The Plan establishes the minimum purchase price of the
stock at an amount which is not less than 100% of the fair market
value of the stock (110% for employees owning more than 10% of
the total combined voting power of all classes of stock). The
Plan provides that if additional shares of Class A Common Stock
are issued pursuant to a stock split or a stock dividend, the
number of shares of Class A Common Stock then covered by each
outstanding option granted hereunder shall be increased
proportionately with no increase in the total purchase price of
the shares then so covered, and the number of shares of Class A
Common Stock reserved for the purpose of the Plan shall be
increased by the same proportion. In the event that the shares
of Class A Common Stock of the Company from time to time issued
and outstanding are reduced by a combination of shares, the
number of shares of Class A Common Stock then covered by each
outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the
shares then so covered, and the number of shares of Class A
Common Stock reserved for the purposes of the Plan shall be
reduced by the same proportion. The Plan terminates ten years
from its effective date and options granted are non-transferable.
The Plan also includes a Stock Appreciation Right which permits
the holder of the option to elect to receive cash, amounting to
the difference between the option price and the fair market value
of the stock at the time of the exercise, or a lesser amount of
stock without payment, upon exercise of the option.
<TABLE>
<CAPTION>
YEAR-END VALUES OF STOCK OPTIONS
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
------------------------------ ----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Scott M.
Quist 66,134 0 $191,449 0
All executive
officers and key
employee option
recipients as
a group
(4 persons) 119,603 0 $354,657 0
</TABLE>
(1) The value of options equals the market value of Security
National Financial Corporation common stock at December 31,
1995 ($5.38 per share), minus the exercise price of options,
and includes only those options the exercise price of which
was less than market value at year-end.
1993 Stock Option Plan
On June 21, 1993, the Company adopted the Security National
Financial Corporation 1993 Stock Incentive Plan (the "1993
Plan"), which reserves shares of Class A Common Stock for
issuance thereunder. The 1993 Plan was approved at the annual
meeting of the stockholders held on June 21, 1993. The 1993 Plan
allows the Company to grant options and issue shares as a means
of providing equity incentives to key personnel, giving them a
proprietary interest in the Company and its success and progress.
The 1993 Plan provides for the grant of options and the award
or sale of stock to officers, directors, and employees of the
Company. Both "incentive stock options," as defined under
Section 422A of the Internal Revenue Code of 1986 (the "Code"),
and "non-qualified options" may be granted pursuant to the 1993
Plan. The exercise prices for the options granted are equal to
or greater than the fair market value of the stock subject to
such options as of the date of grant, as determined by the
Company's Board of Directors.
The options granted on April 29, 1993, were to reward certain
officers and key employees who have been employed by the Company
for a number of years and to help the Company retain these
officers by providing them with an additional incentive to
contribute to the success of the Company.
The 1993 Plan is to be administered by the Board of Directors
or by a committee designated by the Board. The terms of options
granted or stock awards or sales effected under the 1993 Plan are
to be determined by the Board of Directors or its committee. The
Plan provides that if the shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares
or if the Company shall issue any shares of Common Stock as a
stock dividend on its outstanding Common Stock, the number of
shares of Common Stock deliverable upon the exercise of Options
shall be increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to
reflect such subdivision, combination or stock dividend. No
options may be exercised for a term of more than ten years from
the date of grant. Options intended as incentive stock options
may be issued only to employees, and must meet certain conditions
imposed by the code, including a requirement that the option
exercise price be no less than the fair market value of the
option shares on the date of grant. The 1993 Plan provides that
the exercise price for non-qualified options will be not less
than at least 50% of the fair market value of the stock subject
to such option as of the date of grant of such options, as
determined by the Company's Board of Directors.
The 1993 Plan has a term of ten years. The Board of
Directors may amend or terminate the 1993 Plan at any time.
<TABLE>
<CAPTION>
YEAR-END VALUES OF STOCK OPTIONS
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
------------------------------- -----------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------- ------------ ------------- ----------- --------------
<S> <C> <C> <C> <C>
George R.
Quist 139,125 0 $224,492 0
William C.
Sargent 68,985 0 $151,139 0
</TABLE>
(1) The value of options equals the market value of Security
National Financial Corporation common stock at December 31,
1995 ($5.38 per share), minus the exercise price of
options, and includes only those options with an exercise
price less than market value at year-end.
PROPOSED AMENDMENTS TO THE ARTICLES OF INCORPORATION
The proposed amendments would revise the Articles of
Incorporation to provide for a two-for-one forward stock split
involving only Class C Common Stock. This amendment would
increase the number of outstanding shares of Class C Common Stock
from 2,354,791 shares to 4,709,582 shares. There are currently
outstanding 3,256,905 shares of Class A Common Stock. In 1987,
prior to the Company's public offering of Class A Common Stock,
there were outstanding 1,297,763 shares of Class A Common Stock
and 1,793,357 shares of Class C Common Stock. This ratio of
Class A shares to Class C shares has been significantly altered
since 1987 primarily due to the issuance of additional Class A
shares by the Company in connection with the Company's public
offering in 1987 and a number of acquisitions the Company has
completed since 1987 in which Class A shares were issued as part
of the consideration for such acquisitions.
On account of the proposed amendment providing for a two-for-
one stock split of Class C Common Stock, amendments to the
Articles of Incorporation have also been proposed to reduce the
par value of Class C Common Stock from a $.40 par value to a $.20
par value and to reduce the exchange rate for converting Class C
Common Stock to Class A Common Stock from five shares to ten
shares of Class C Common Stock for each share of Class A Common
Stock. Further, the two-for-one stock split requires the
Articles of Incorporation to be amended to reduce the cash
dividends received by Class C shares in the event the Company
pays a cash dividend from 18% to 9% of the per share cash
dividends received by Class A shares, and to reduce the
distributions to Class C shares in the event of a liquidation
from 15% to 9% of the per share distributions received by Class
A shares.
Finally, the proposed amendments to the Articles of
Incorporation provide for the issuance of shares of Class C
Common Stock under a stock option plan. Currently, only shares
of Class A Common Stock can be issued under a stock option plan.
The Board of Directors recommends a vote "for" the amendments
to the Articles of Incorporation as follows: (i) to provide for
a two-for-one stock split involving only Class C Common Stock;
(ii) to reduce the par value of Class C Common Stock from $.40
par value to $.20 par value; (iii) to reduce the exchange rate
for converting Class C Common Stock to Class A Common Stock from
five shares to ten shares of Class C Common Stock for each share
of Class A Common Stock; (iv) to reduce the cash dividends
received by Class C shares from 18% to 9% of the per share cash
<PAGE>
dividends received by Class A shares; (v) to reduce the
distributions to Class C Shares in the event of a liquidation
from 18% to 9% of the per share distributions received by Class
A shares; and (vi) to provide for the issuance of shares of Class
C Common Stock under a stock option plan.
PROPOSED AMENDMENTS TO THE 1993 STOCK OPTION PLAN
The proposed amendments would revise the 1993 Stock Option
Plan (the "Option Plan") to provide that the stock subject to
options, awards and purchases thereunder would include Class C
Common Stock. The Option Plan currently only allows the issuance
of Class A Common Stock in connection with options, awards and
purchases. The proposed amendments would also increase the
number of shares of Class A Common Stock reserved for insurance
under the Option Plan from 300,000 Class A shares to 600,000
Class A shares. Of the 300,000 shares of Class A Common Stock
currently reserved for issuance under the Option Plan, the Board
of Directors has granted options to certain officers of the
Company to purchase 208,110 Class A shares.
The Board of Directors recommends a vote "for" the amendments
to the 1993 Stock Option Plan to provide that the stock subject
to options, awards and purchases thereunder shall include Class
C Common Stock and to increase the number of shares of Class A
Common Stock reserved for issuance thereunder by 300,000 Class A
shares. The Board of Directors believes that these amendments
will further assist the Company in attracting and retaining the
best available persons for positions of substantial
responsibility by providing its officers and key employees with
additional incentives to contribute to the Company's success.
OTHER MATTERS
The Company knows of no other matters to be brought before the
Annual Meeting; but if other matters properly come before the
meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent in accordance
with their judgment.
ANNUAL REPORT AND FINANCIAL STATEMENTS
You are referred to the Company's annual report, including
financial statements, for the fiscal year ended December 31,
1995. The annual report is incorporated in this Proxy Statement
and is not to be considered part of the soliciting material. The
Company will provide, without charge to each stockholder upon
written request, a copy of the Company's Annual Report Form 10-K
as filed with the Securities and Exchange Commission for the
fiscal year ended December 31, 1995. Such requests should be
directed to Mr. William C. Sargent, Senior Vice President and
Secretary, at P.O. Box 57250, Salt Lake City, Utah 84157-0250.
DEADLINE FOR RECEIPT OF STOCKHOLDER'S PROPOSALS FOR ANNUAL
MEETING TO BE HELD IN JULY, 1997
Any proposal by a stockholder to be presented at the Company's
next Annual Meeting expected to be held in July, 1997, must be
received at the offices of the Company, P.O. Box 57250, Salt Lake
City, Utah 84157-0250, no later than December 31, 1996.
<PAGE>
PROXY - SECURITY NATIONAL FINANCIAL CORPORATION - PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
CLASS C COMMON STOCK
The undersigned Class C common stockholder of Security
National Financial Corporation acknowledges receipt of the Notice
of Annual Meeting of the Stockholders to be held on November 7,
1996, at 5258 Pinemont Drive, Suite B, Salt Lake City, Utah, at
12:00 noon Mountain Standard Time, and hereby appoints Messrs.
George R. Quist, William C. Sargent and Scott M. Quist, or any of
them, each with full power of substitution, as Attorneys and
Proxies to vote all the shares of the undersigned at said Annual
Meeting of stockholders and at all adjournments or postponements
thereof, hereby ratify and confirm all that said Attorneys and
Proxies may do or cause to be done by virtue hereof. The
above-named Attorneys and Proxies are instructed to vote all of
the undersigned's shares as follows:
1. Election of six of the nine directors to be voted upon by
Class A and Class C common stockholders together:
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
below.
(INSTRUCTION: to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list
below.)
George R. Quist, William C. Sargent, R.A.F. McCormick,
H.Craig Moody, W. Lowell Steen, Nathan H. Wagstaff,
2. To amend the Articles of Incorporation as follows: (i) to
provide for a two-for-one stock split involving only Class C
Common Stock; (ii) to reduce the par value of Class C Common
Stock from $.40 par value to $.20 par value; (iii) to reduce the
exchange rate for converting Class C Common Stock to Class A
Common Stock from five shares to ten shares of Class C Common
Stock for each share of Class a Common Stock; (iv) to reduce the
cash dividends received by Class C shares from 18% to 9% of the
per share cash dividends received by Class A shares; (v) to
reduce the distributions to Class C Shares in the event of a
liquidation from 18% to 9% of the per share distributions
received by Class A shares; and (vi) to provide for the issuance
of shares of Class C Common Stock under a stock option plan;
3. To amend the 1993 Stock Option Plan as follows: (i) to
increase the number of shares of Class A Common Stock reserved
for issuance under the plan from 300,000 Class A shares to
600,000 Class A shares; and (ii) to provide that the stock
subject to options, awards and purchases shall include Class C
Common Stock; and
4. To transact such other business as may properly come before
the meeting or any adjournment thereof.
(Continued on Other Side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1
ABOVE AND FOR PROPOSAL 2.
Dated this day of , 1996
- ---------------------------------------------------------------------------
Signature
- ---------------------------------------------------------------------------
Signature
Please sign your name exactly as it appears on your share
certificate. If shares are held jointly, each holder should
sign. Executors, trustees, and other fiduciaries should so
indicate when signing. Please sign, date, and return this Proxy
Card immediately.
NOTE: Securities Dealers or other representatives please state
the number of shares voted by this Proxy.
<PAGE>
PROXY - SECURITY NATIONAL FINANCIAL CORPORATION - PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
CLASS A COMMON STOCK
The undersigned Class A common stockholder of Security
National Financial Corporation acknowledges receipt of the Notice
of Annual Meeting of the Stockholders to be held on November 7,
1996, at 5258 Pinemont Drive, Suite B, Salt Lake City, Utah, at
12:00 noon, Mountain Standard Time, and hereby appoints Messrs.
George R. Quist, William C. Sargent and Scott M. Quist, or any of
them, each with full power of substitution, as Attorneys and
Proxies to vote all the shares of the undersigned at said Annual
Meeting of stockholders and at all adjournments or postponements
thereof, hereby ratify and confirming all that said Attorneys and
Proxies may do or cause to be done by virtue hereof. The
above-named Attorneys and Proxies are instructed to vote all of
the undersigned's shares as follows:
1. Election of three directors by Class A common stockholders
voting separately as a class:
[ ] FOR all nominees listed below (except as marked to
the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
below
(INSTRUCTION: to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list
below.)
Scott M. Quist, Charles L. Crittenden, Sherman B. Lowe
2. Election of the remaining six directors to be voted upon by
Class A and Class C common stockholders together:
[ ] FOR all nominees listed below (except as marked to
the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
below
(INSTRUCTION: to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list
below.)
George R. Quist, William C. Sargent, R.A.F. McCormick,
H. Craig Moody, W. Lowell Steen, Nathan H. Wagstaff
3. To amend the Articles of Incorporation as follows: (i) to
provide for a two-for-one stock split involving only Class C
Common Stock; (ii) to reduce the par value of Class C Common
Stock from $.40 par value to $.20 par value; (iii) to reduce the
exchange rate for converting Class C Common Stock to Class A
Common Stock from five shares to ten shares of Class C Common
Stock for each share of Class A Common Stock; (iv) to reduce the
cash dividends received by Class C shares from 18% to 9% of the
per share cash dividends received by Class A shares; (v) to
reduce the distributions to Class C Shares in the event of a
liquidation from 18% to 9% of the per share distributions
received by Class A shares; and (vi) to provide for the issuance
of shares of Class C Common Stock under a stock option plan;
<PAGE>
4. To amend the 1993 Stock Option Plan as follows: (i) to
increase the number of shares of Class A Common Stock reserved
for issuance under the plan from 300,000 Class A shares to
500,000 Class A shares; and (ii) to provide that the stock
subject to options, awards and purchases shall include Class C
Common Stock; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
(Continued on Other Side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1
and 2 ABOVE AND FOR PROPOSAL 3.
Dated this day of , 1996
- -------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------
Signature
Please sign your name exactly as it appears on your share
certificate. If shares are held jointly, each holder should
sign. Executors, trustees, and other fiduciaries should so
indicate when signing. Please sign, date, and return this Proxy
Card immediately.
NOTE: Securities Dealers or other representatives please state
the number of shares voted by this Proxy.
<PAGE>
EXHIBIT 1
TEXT OF ARTICLES IV AND V
AFTER APPROVAL OF PROPOSED AMENDMENTS
TO
ARTICLES OF INCORPORATION
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall
consist of 27,500,000 shares divided into 10,000,000 shares of
$2.00 par value Common Stock, 5,000,000 shares of $1.00 par value
Common Stock, 7,500,000 shares of $0.20 par value Common Stock,
and 5,000,000 shares of $1.00 par value Preferred Stock. The
Common Stock which the Corporation is authorized to issue is
divided as follows:
Ten Million (10,000,000) shares of $2.00 par value
Class A Common Stock;
Five Million (5,000,000) shares of $1.00 par value
Class B Common Stock;
Seven Million Five Hundred Thousand (7,500,000)
shares of $0.20 par value Class C Common Stock; and
Five Million (5,000,000) shares of $1.00 par value
Preferred Stock. The Preferred Stock may be issued:
(a) Subject to the right of the Corporation to
redeem any of such shares at a price not less than the par value
thereof;
(b) Entitling the holders thereof to cumulative,
non-cumulative or partially cumulative dividends;
(c) Having preference over any other class or
series of shares as to payment of dividends;
(d) Having preference in the assets of the
Corporation over any other class or classes of shares upon the
voluntary or involuntary liquidation of the Corporation;
(e) Being convertible into shares of any other
class or into shares of any series of the same or any other
class, except a class having prior or superior rights and
preferences as to dividends or distribution of assets upon
liquidation.
The Board of Directors shall have authority to divide and
issue the Preferred Stock in series and to establish variations
in relative rights and preferences between such series as
provided by the Utah Business Corporation Act. All shares of
Preferred Stock shall be identical except as to any variations
established by the Board of Directors pursuant to the preceding
sentence. Except as may be provided for by law, the Preferred
Stock shall be non-voting stock and the holders of such stock
shall not be entitled to any voice in the management of the
Corporation, nor to any voting powers at any stockholders'
meeting, by virtue thereof.
<PAGE>
ARTICLE V
Preferences, Limitations and Relative
Rights Of Common Stock
No share of the Common Stock authorized in Article IV shall
have any preference over or limitation in respect to any other
share of such Common Stock except as set forth in this Article V.
Except as set forth in this Article V, all shares of the Common
Stock authorized in Article IV shall have equal rights and
privileges, including the following:
1. All outstanding shares of Common Stock shall
share equally in dividends, except that in the event of cash
dividends, the Class C common shares shall in no event receive
per share cash dividends in excess of 9% of the per share cash
dividends received by the Class A and/or Class B common shares;
and further provided that with respect to liquidating dividends
and distributions on the Common Stock, the Class C common shares
shall in no event receive per share distribution in excess of 9%
of the per share distributions received by the Class A and/or
Class B common shares; and further provided that with respect to
all other distributions on the Common Stock, not including cash
dividends and liquidating dividends and distributions, the Class
C common shares shall in no event receive per share distributions
in excess of 9% of the per share distributions received by the
Class A and/or Class B common shares. Neither the purchase or
redemption by the Corporation of stock of any class, in any
manner permitted by law, nor the merger, consolidation, or other
business combinations of the Corporation or any of its
subsidiaries with or into any other corporation or corporations,
nor the sale or transfer by the Corporation of all or any part of
its properties or assets shall be deemed to be liquidating
dividends and distributions for purposes of this Article V. No
holder of Class C Common Stock shall be entitled to receive any
amounts with respect thereto upon liquidation, dissolution, or
winding up of the Corporation other than the amounts provided for
in this Article V.
The classes of Common Stock shall share equally in
stock dividends declared which shall be payable in Common Stock
of each common stockholder's particular class (for example, if a
10% stock dividend is declared for the Class A Common Stock,
there shall also be declared a 10% stock dividend for the Class
B and C Common Stock, and a Class A common stockholder would
receive 10% additional shares of Class A Common Stock, a Class B
common stockholder and a Class C common stockholder would receive
10% additional shares of Class B or C Common Stock respectively).
Except for a two-for-one forward stock split effective as of
November 7, 1996 involving only Class C Common Stock, stock
splits shall be administered among the classes of Common Stock
similarly to stock dividends. Dividends with respect to all
common shares shall be payable at the discretion of the Board of
Directors of the Corporation at such times and in such amounts as
it deems advisable subject to the provisions of any applicable
law. However, any dividends may be declared by the Board of
Directors of the Corporation as may be permitted by the Utah
Business Corporation Act. In addition, the Board of Directors of
the Corporation, from time to time, may distribute to
stockholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of the assets, in
cash or property, subject to the following provisions:
<PAGE>
(a) No such distribution shall be made at a
time when the Corporation is insolvent or when such distribution
would render the Corporation insolvent.
(b) Each such distribution when made, shall be
identified as a distribution in partial liquidation and the
amount per share disclosed to the stockholders receiving the same
concurrently with the distribution thereof.
(c) No distribution shall be made to the
holders of any class of shares unless all cumulative dividends
accrued on all preferred shares entitled to preferential
dividends shall have been fully paid.
(d) No such distribution shall be made to the
holders of any class of shares which would reduce the remaining
net assets of the Corporation below the aggregate preferential
amount, if any, payable in the event of voluntary liquidation to
the holders of shares having preferential rights to the assets of
the Corporation in the event of liquidation.
2. The Class B Common Stock shall be non-voting
stock, and the holders of such stock shall not be entitled to any
voice in the management of the Corporation, nor to any voting
powers at any stockholders' meeting by virtue thereof, except as
set forth herein. Holders of Class B Common Stock shall have the
right to vote as a class upon any proposed amendment to the
Articles of Incorporation of this Corporation which would:
(a) Increase or decrease the aggregate number
of authorized shares of the Class B Common Stock;
(b) Increase or decrease the par value of the
shares of the Class B Common Stock;
(c) Effect any exchange, reclassification or
cancellation of all or part of the shares of the Class B Common
Stock;
(d) Effect an exchange, or create a right of
exchange, of all or any part of the shares of another class into
the shares of the Class B Common Stock;
(e) Change the designations, preferences,
limitations or relative rights of the shares of the Class B
Common Stock;
(f) Change the shares of Class B Common Stock
into the same or a different number of shares, either with or
without par value, of the same class or another class or classes;
(g) Create a new class of shares having rights
and preferences prior and superior to the shares of the Class B
Common Stock, or increase the right and preferences of any class
having rights and preferences prior or superior to the shares of
the Class B Common Stock; or
(h) Cancel or otherwise affect dividends on
the shares of Class B Common Stock which have accrued but have
not been declared.
<PAGE>
In addition, holders of Class B Common Stock shall be
entitled to such further voting rights, as a class, as are set
forth in the Utah Business Corporation Act.
3. Each outstanding share of Class A Common Stock
shall be entitled to one vote at stockholders' meetings, either
in person or by proxy. Class C Common Stock shall have one vote
per share at stockholders' meetings, provided, however, that at
every meeting of the stockholders called for the election of
directors, the holders of Class A Common Stock, voting separately
as a class, shall be entitled to elect one-third (1/3) of the
number of directors to be elected at such meeting and if
one-third (1/3) of such number of directors is not a whole
number, then the holders of Class A Common Stock, voting
separately as a class, shall be entitled to elect the next higher
whole number of directors to be elected at such meeting. In the
election of the remaining directors to be elected and for all
other proper corporate matters, each outstanding share of Class
A Common Stock shall have one vote, either in person or proxy.
4. (a) No person holding shares of Class C Common
Stock (hereinafter called a "Class C Holder") may transfer, and
the Corporation shall not register the transfer of, such shares
of Class C Common Stock, whether by sale, assignment, gift,
bequest, appointment or otherwise, except to a "Permitted
Transferee" of such Class C Holder, which term shall have the
following meanings:
(i) In the case of a Class C Holder who is a
natural person holding record and beneficial ownership of the
shares of Class C Common Stock in question, "Permitted
Transferee" means:
(A) the spouse of such Class C Holder;
(B) a lineal descendant of a grandparent
of such Class C Holder;
(C) the trustee of a trust (including a
voting trust) for the benefit of:
(1) one or more of such Class C
Holders;
(2) other lineal descendants of a
grandparent of such Class C Holder;
(3) the spouse of such Class C
Holder; or
(4) any organization contributions
to which are deductible for federal income, estate or gift tax
purposes (hereinafter called a "Charitable Organization"), and
for the benefit of no other person;
provided that such trust may grant a general or special
power of appointment to the spouse of a Class C Holder and may
permit trust assets to be used to pay taxes, legacies and other
obligations of the trust or the estate of such Class C Holder
payable by reason of the death of such Class C Holder, and
<PAGE>
provided, that such trust must prohibit transfer of shares of
Class C Common Stock to persons other than Permitted Transferee
as defined in this clause (i);
(D) a Charitable Organization
established by such Class C Holder, such Class C Holder's spouse,
or a lineal descendant of a grandparent of such Class C Holder;
(E) a corporation, all of the
outstanding capital stock of which is owned by, or partnership or
joint venture all of the partners or venturers of which are, one
or more of such Class C Holders, other lineal descendants of a
grandparent of such Class C Holder, and the spouse of such Class
C Holder; provided, that if any share of capital stock of such a
corporation (or of any survivor of a merger or consolidation of
such a corporation), or any partnership interest in such a
partnership, is acquired by any person who is not within such
class of persons, all shares of Class C Common Stock then held by
such corporation or partnership, as the case may be, shall be
deemed without further act on anyone's part to be converted into
shares of Class A Common Stock on the basis of five (5) shares of
Class C Common Stock for one (1) share of Class A Common Stock
and shall thereupon and thereafter be deemed to represent the
appropriate number of shares of Class A Common Stock.
(ii) In the case of a Class C Holder holding
shares of Class C Common Stock as trustee pursuant to a trust
which was irrevocable on the record date for determining the
persons to whom the Class C Common Stock is first distributed by
the Corporation (hereinafter in this paragraph (4) called the
"Record Date"), "Permitted Transferee" means any person to whom
or for whose benefit principal may be distributed either during
or at the end of the term of such trust whether by power of
appointment or otherwise.
(iii) In the case of a Class C Holder holding
shares of Class C Common Stock as trustee pursuant to a trust
other than a trust described in clause (ii) above, "Permitted
Transferee" means the persons who established such trust, and
Permitted Transferee determined pursuant to clause (i) above.
(iv) In the case of a Class C Holder holding
record (but not beneficial) ownership of the shares of Class C
Common Stock in question as nominee for the person who was the
beneficial owner thereof on the Record Date, "Permitted
Transferee" means such beneficial owner thereof on the Record
Date, such beneficial owner determined pursuant to clauses (i),
(iii), or (v) hereof, as the case may be.
(v) In the case of a Class C Holder which is
a corporation (other than a charitable organization described in
subclause (C) of clause (i) above) holding record and beneficial
ownership of the shares of Class C Common Stock in question,
"Permitted Transferee" means any stockholder of such corporation
receiving shares of Class C Common Stock through a dividend or
through a distribution made upon liquidation of such
corporations, and the surviving corporation of a merger or
consolidation of such corporation.
<PAGE>
(vi) In the case of a Class C Holder which is
the estate of a deceased Class C Holder or which is the estate of
a bankrupt or insolvent Class C Holder, and provided such
deceased, bankrupt or insolvent Class C Holder, as the case may
be, held record and beneficial ownership of the Shares of Class
C Common Stock in question, "Permitted Transferee" means a
Permitted Transferee of such deceased, bankrupt or insolvent
Class C Holder as determined pursuant to this Paragraph 4.
(vii) In the case of a Class C Holder which is
a partnership or joint venture holding shares of Class C Common
Stock, "Permitted Transferee" means any one of the partners of
venturers; provided that if any partnership or joint venture
interest is acquired by any persons not a partner or venturer of
such partnership or joint venture or of a "Permitted Transferee"
of such partner or venturer, all shares of Class C Common Stock
then held by such partnership or joint venture shall be deemed,
without further act on anyone's part, to be converted into shares
of Class A Common Stock and shall thereupon be deemed to
represent the like number of shares of Class A Common Stock.
(viii) In the case of a Class C Holder which
is a corporation in bankruptcy holding shares of Class C Common
Stock, "Permitted Transferee" means any other Class C Holder or
"Permitted Transferee" of any Class C Holder.
(b) Notwithstanding the provisions of this Paragraph
4, a holder of record of a share of Class A Common Stock, which
share meets all of the following criteria, shall be entitled to
exchange said Class A Common Stock for Class C Common Stock on
the basis of ten (10) shares of Class C Common Stock for each
share of the Class A Common Stock so owned by such holder of
record; provided, however, such stockholder converts his Class A
Common Stock into Class C Common Stock within the 45 day period
following the conclusion of a holding period of the Class A
Common Stock of 48 continuous months. Shares not converted
within such 45 day period shall thereafter be Class A common
shares with no further conversion rights into Class C common
shares.
(i) The Class A common shares were obtained by
a transfer of Class C common shares to a Non-Permitted Transferee
which converted the Class C common shares to Class A common
shares pursuant to the provisions of this paragraph 4.
(ii) Such shares of Class A Common Stock have
had the same record and beneficial owner for a continuous period
of 48 months.
(iii) For purposes of this subparagraph (b),
any shares of Class A or Class C Common Stock acquired by the
beneficial owner as a direct result of a stock split, stock
dividend or other type of distribution of shares with respect to
existing shares ("dividend shares") will be deemed to have been
acquired and held continuously from the date on which the shares
with regard to which the dividend shares were issued were
acquired.
<PAGE>
(iv) For purposes of this subparagraph (b),
any share of the Class A Common Stock held in "street" or
"nominee" name shall be presumed to have been acquired by the
beneficial owner subsequent to February 4, 1986 and to have had
the same beneficial owner for a continuous period of less than 48
months prior thereto. This presumption shall be rebuttable by
presentation to the Corporation by such beneficial owner of
satisfactory evidence to the contrary. Any disputes arising in
respect of this subclause shall be definitely resolved by a
determination of the Board of Directors made in good faith.
(c) Notwithstanding anything to the contrary herein,
any Class C Holder may pledge such Holder's shares of Class C
Common Stock to a pledgee pursuant to a bona fide pledge of such
shares as collateral security for indebtedness due to the
pledgee, provided that such shares shall not be transferred to or
registered in the name of the pledgee and shall remain subject to
the provisions of this paragraph 4.
In the event of foreclosure or other similar action
by the pledgee, such pledged shares of Class C Common Stock may
only be transferred to a Permitted Transferee of the pledgor or
converted into shares of Class A Common Stock, as the pledgee may
elect.
(d) For purposes of this paragraph 4:
(i) The relationship of any person that is
derived by or through legal adoption shall be considered a
natural one.
(ii) Each joint owner of shares of Class C
common stock shall be considered a "Class C Holder" of such
shares.
(iii) A minor for whom shares of Class C
Common Stock are held pursuant to a Uniform Gifts to Minors Act
or similar law shall be considered a Class C Holder of such
shares.
(iv) Unless otherwise specified, the term
"person" means both natural persons and legal entities.
(e) Any purported transfer of shares of Class C
Common Stock not permitted hereunder shall have the effect of
converting the shares so transferred into Class A common shares
on the basis of ten (10) shares of Class C Common Stock for one
(1) share of Class A Common Stock. The Corporation may, as a
condition to the transfer or the registration of transfer of
shares of Class C Common Stock to a purported Permitted
Transferee, require the furnishing of such affidavits or other
proof as it deems necessary to establish that such transferee is
a Permitted Transferee. The Corporation must note on the
certificates for shares of Class C Common Stock the restrictions
on transfer and registration of transfer imposed by this
paragraph 4. The Corporation must also note on the certificates
for shares of Class A Common Stock obtained by a transfer of
Class C common shares to a Non-Permitted Transferee that such
shares may be converted to Class C Common Stock on the basis of
ten (10) shares of Class C Common Stock for one (1) share of
<PAGE>
Class A Common Stock, if the conditions of Article V, paragraph
4, subparagraph (b) are complied with, including a continuous
holding period of 48 months with a following 45 day conversion
period, or such conversion right will be forfeited.
5. (a) Each ten (10) shares of Class C Common Stock
may at any time be converted into one (1) fully paid and
non-assessable share of Class A Common Stock, except following a
stockholder vote approving a plan of complete liquidation or
dissolution of the Corporation when the conversion ratio shall be
at the reduced rate of eleven and .1112 shares of Class C Common
Stock to one share of Class A Common Stock, provided that upon
abandonment of a plan of liquidation or dissolution the
conversion rate will revert to ten (10) shares of Class C stock
for one share of Class A stock. Such right shall be exercised by
the surrender of the certificate representing such shares of
Class C Common Stock to be converted to the Corporation at any
time during normal business hours at the principal executive
offices of the Corporation, or if an agent for the registration
or transfer of shares of Class C Common Stock is then duly
appointed and acting (said agent being hereinafter called the
"Transfer Agent") then at the office of the Transfer Agent,
accompanied by a written notice of the election by the holder
thereof to convert and (if so required by the Corporation or the
Transfer Agent) by instruments of transfer, in form satisfactory
to the Corporation and to the Transfer Agent, duly executed by
such holder or his duly authorized attorney, and transfer tax
stamps or funds therefore, if required pursuant to subparagraph
(e).
(b) As promptly as practicable after the surrender
for conversion of a certificate representing shares of Class C
Common Stock in the manner provided in subparagraph (a) above and
the payment in cash of any amount required by the provisions of
subparagraphs (a) and (e), the Corporation will deliver or cause
to be delivered at the office of the Transfer Agent to or upon
the written order of the holder of such certificate, a
certificate or certificates representing the number of full
shares of Class A Common Stock issuable upon such conversion,
issued in such name or names as such holder may direct. Such
conversion shall be deemed to have been made immediately prior to
the close of business on the date of the surrender of the
certificate representing shares of Class C Common Stock, and all
rights of the holder of such shares as such holder shall cease at
such time and the person or person in whose name or names the
certificate or certificates representing the shares of Class A
Common Stock are to be issued shall be treated for all purposes
as having become the record holder or holders of such shares of
Class A Common Stock at such time; provided, however, that any
such surrender and payment on any date when the stock transfer
books of the Corporation shall be closed shall constitute the
person or persons in whose name or names the certificate or
certificates representing shares of Class A Common Stock are to
be issued as the record holder or holders thereof for all
purposes immediately prior to the close of business in the next
succeeding day on which such stock transfer books are open.
(c) No adjustments in respect of dividends shall be
made upon the conversion of any share of Class C Common Stock
into Class A Common Stock; provided, however, that if a share be
converted subsequent to the record date for the payment of a
<PAGE>
dividend or other distribution on shares of Class C Common Stock
but prior to such payment, the registered holder of such share at
the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on such share
on such date notwithstanding the conversion thereof or the
Corporation's default in payment of the dividend on such date.
(d) The Corporation shall at all times reserve and
keep available, solely for the purpose of issue upon conversion
of the outstanding shares of Class C Common Stock, such number of
shares of Class A Common Stock as shall be issuable upon the
conversion of all such outstanding shares, and the Corporation
shall also at all times reserve and keep available for the
purpose of issue upon conversion of the Class A Common Stock such
number of shares of Class C Common Stock as may be issuable upon
possible conversion of appropriate shares, provided that nothing
contained herein shall be construed to preclude the Corporation
from satisfying its obligations in respect of the conversion of
the outstanding shares of Class A or Class C Common Stock by
delivery of purchased shares of Class A or Class C Common Stock
which are held in the treasury of the Corporation. If any shares
of Class A or Class C Common stock, required to be reserved for
purposes of conversion hereunder, require registration with or
approval of any governmental authority under any federal or state
law before such share of Class A or Class C Common Stock may be
issued upon conversion, the Corporation will cause such shares to
be duly registered or approved, as the case may be. All shares
of Class A or Class C Common Stock which shall be issued upon
conversion of the shares of Class A or Class C Common Stock,
will, upon issuance, be fully paid and nonassessable.
(e) The issuance of certificates of shares of Class
A Common Stock upon conversion of shares of Class C Common Stock
shall be made without charge for any stamp or other similar tax
in respect of such issuance. However, if any such certificate is
to be issued in a name other than that of the holder of the share
or shares of Class C Common Stock converted, the person or
persons requesting the issuance thereof shall pay to the
Corporation the amount of any tax which may be payable in respect
of any transfer involved in such issuance or shall establish to
the satisfaction of the Corporation that such tax has been paid.
6. Except as otherwise provided in paragraphs 1 and
5 above or pursuant to shares of Class C Common Stock issued
under a stock option plan, and except to the extent stockholders
of the 1982 Series 1 Preferred Stock elect or have a right to
convert their shares into Class C Common Stock, the Corporation
shall not issue additional shares of Class C Common Stock after
the date shares of Class C Common Stock surrendered for
conversion shall be retired, unless otherwise approved by the
affirmative vote of the holders of a majority of the outstanding
shares of stock of the Corporation entitled to vote thereon.
Holders of the 1982 Series 1 Preferred Stock electing to receive
Class C shares shall receive ten (10) shares of Class C Common
Stock for every one (1) share of Class A Common Stock received.
7. No stockholder of the Corporation shall be
entitled as of right to subscribe for, purchase or receive any
part of any new or additional issue of stock of any class,
whether now or hereafter authorized, or of bonds, debentures or
<PAGE>
other securities convertible into or exchangeable for stock, but
all such additional shares of stock of any class, or bonds,
debentures or other securities convertible into or exchangeable
for stock, may be issued and disposed of by the Board of
Directors on such terms and for such consideration, so far as may
be permitted by law, and to such persons, as the Board of
Directors in its absolute discretion may deem advisable.
8. Cumulative voting shall not be allowed in
elections of directors or for any other purpose.
9. All shares of Common Stock when issued, shall be
fully paid and nonassessable. No fractional shares of Common
Stock shall be issued.
10. The Board of Directors may restrict the transfer
of any of the Corporation's shares of Class A, Class B or Class
C Common Stock issued by giving the Corporation or any
stockholder "first right of refusal to purchase" the stock,
making the stock redeemable, or by restricting the transfer of
the stock under such terms and in such manner as the directors
may deem necessary and as are not inconsistent with the laws of
the State of Utah. Any stock so restricted must carry a
conspicuous legend noting the restriction and the place where
such restriction may be found in the records of the Corporation.
11. The judgment of the Board of Directors as to the
adequacy of any consideration received or to be received for any
shares of Class A, Class B, or Class C Common Stock, options in
respect thereof, or any other securities which the Corporation at
any time may be authorized to issue or sell or otherwise dispose
of shall be conclusive in the absence of fraud, subject to the
provisions of these Articles of Incorporation and any applicable
law.
