NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Lifschultz Industries, Inc., a Delaware corporation (the "Company"), will be
held at the Company's Utah offices, 799 East Utah Valley Drive, American Fork,
Utah 84003-9775 at 10:00 a.m., mountain standard time, on Monday, December 14,
1998 (the "Annual Meeting").
At the Annual Meeting, the shareholders will be asked to (i) consider and
vote for the election of directors, (ii) approve the re-appointment of the
firm of Grant Thornton LLP, independent certified public accountants, as the
Company's auditors, and (iii) any other business that may be lawfully brought
before the Annual Meeting. The foregoing items of business are more fully
described in the Proxy Statement accompanying this Notice. Only shareholders
of record at the close of business on Monday, October 29, 1998 (the record
date), are entitled to notice of and to vote at the Annual Meeting, or at any
continuance(s) or adjournment(s) thereof.
The election of directors will be determined by plurality vote. Approval
of the re-appointment of the Company's auditors, and any other matter lawfully
brought before the annual meeting, will require the affirmative vote of a
majority of the voting shares of Lifschultz Industries, Inc. stock,
represented in person or by proxy, which are cast at the Annual Meeting.
By Order of the Board of Directors
DENNIS R. HUNTER
-----------------------------------
DENNIS R. HUNTER, President
November 2, 1998
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PLEASE NOTE: YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. EVEN
IF YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN, DATE, SIGN,
AND MAIL PROMPTLY THE ENCLOSED PROXY TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE ANNUAL MEETING. IF YOU ATTEND THE ANNUAL MEETING IN
PERSON, YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO EVEN THOUGH YOU HAVE
PREVIOUSLY SENT IN YOUR PROXY. PLEASE MAIL YOUR PROXY PROMPTLY AND SAVE THE
COMPANY THE EXPENSE OF ADDITIONAL REQUESTS FOR PROXIES.
LIFSCHULTZ INDUSTRIES, INC.
641 WEST 59TH STREET
NEW YORK, NY 10019
(212) 397-7788
PROXY STATEMENT
-----------------------------------
GENERAL
- -------
This Proxy Statement is furnished to shareholders of Lifschultz
Industries, Inc., a Delaware corporation (the "Company"), in connection with
the solicitation of proxies to be voted at the 1998 Annual Meeting of
Shareholders. The Annual Meeting will be held on December 14, 1998 at 10:00
a.m., mountain standard time, at the Company's Utah offices at 799 East Utah
Valley Drive, American Fork, Utah 84003-9775. The accompanying proxy is being
solicited on behalf of the Board of Directors of the Company. This Proxy
Statement was first mailed on or about November 6, 1998 to shareholders of
record of the Company as of Thursday, October 29, 1998, accompanied by the
Company's 1998 Annual Report to Shareholders.
At the meeting, the following matters will be considered and voted on:
1. PROPOSAL NO. 1. Election of Sidney B. Lifschultz, David K.
Lifschultz, Dennis R. Hunter, Joseph C. Fatony and James E. Solomon as
directors to hold office until the 1999 Annual Meeting of Shareholders or
until their successors shall have been duly elected and qualified (see
"PROPOSAL ONE - ELECTION OF DIRECTORS");
2. PROPOSAL NO. 2. Appointment of Grant Thornton LLP as the
Company's independent certified public accountants for the 1999 fiscal year
(see "PROPOSAL TWO - INDEPENDENT PUBLIC ACCOUNTANTS"); and
3. GENERAL. Such other business as may properly come before the
Annual Meeting.
The Board of Directors recommends that shareholders vote FOR all nominees
for director listed in Proposal No. 1, and FOR Proposal No. 2.
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INFORMATION CONCERNING PROXY SOLICITATION AND VOTING
VOTING RIGHTS
- -------------
The outstanding voting securities of the Company on October 7, 1998 were
(i) 1,117,519 shares of common stock, par value $0.001 per share ("Common
Stock"); (ii) 5,200 shares of Series A Convertible Preferred Stock, par value
$0.01 per share ("Series A Shares"); and (iii) 21,231 shares of Series E
Convertible Preferred Stock, par value $0.01 per share ("Series E Shares").
Holders of Common Stock at the close of business on October 29, 1998 (the
"Record Date") will be entitled to one vote at the Annual Meeting for each
share of Common Stock held of record by them. Holders of Series A Shares at
the close of business on the Record Date will be entitled to one-fifty of one
vote at the Annual Meeting for each Series A Share held of record by them.
Holders of Series E Shares at the close of business on the Record Date will be
entitled to one-fifth of one vote at the Annual Meeting for each Series E
share held of record by them. The holders of Series A Shares and Series E
Shares are entitled to vote with the holders of Common Stock on all matters
presented at the Annual Meeting.
VOTING AND REVOCATION OF PROXIES
- --------------------------------
By completing and returning the accompanying proxy form, the shareholder
authorizes David K. Lifschultz and Dennis R. Hunter, as designated on the face
of the proxy form (the "Proxy Holders"), to vote all shares for the
shareholder. All returned proxies that are properly signed and dated will be
voted by the Proxy Holders as the shareholder directs. If no direction is
given, valid proxies will be voted by the Proxy Holders FOR the election of
the persons nominated as directors and FOR the appointment of Grant Thornton
LLP as the Company's independent certified public accountants for the fiscal
year ending July 31, 1999. Additionally, the shares represented by a valid
proxy will be voted by the Proxy Holders, in their discretion, on any other
matters that may properly come before the Annual Meeting. The Board of
Directors does not know of any matters to be considered at the Annual Meeting
other than the proposals described above. In the event that any director
nominee is unable to serve, the Proxies will be voted for a substitute
nominee, if any, to be designated by the Board of Directors. The Board of
Directors currently has no reason to believe that any nominee will be
unavailable or unwilling to serve.
A proxy may be revoked by (i) delivering a written statement to the
President of the Company stating that the proxy is revoked, (ii) by
delivering to the President of the Company or presenting at the Annual Meeting
a new proxy executed on a later date by or on behalf of the person or entity
executing the prior proxy, or (iii) by voting in person at the Annual Meeting.
A revoked proxy will not be voted.
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QUORUM AND VOTING REQUIREMENTS
- ------------------------------
A quorum of the voting shares of the Company must be present at the
Annual Meeting for a vote to be taken. Under Delaware law and the Company's
Certificate of Incorporation and Bylaws, a quorum will be present if a
majority of the voting shares outstanding and entitled to vote at the meeting
are present in person or by proxy. Under Delaware law and the Company's
Certificate of Incorporation and Bylaws, abstentions and broker non-votes will
be counted for the purposes of determining whether a quorum is present at the
Annual Meeting. With regard to Proposal No. 1, directors are elected by a
plurality of the shares present in person or by proxy and voting at the Annual
Meeting. With regard to the election of directors, votes may be cast in favor
or withheld; votes that are withheld will be excluded entirely from the vote
and will have no effect. The appointment of auditors under Proposal No. 2
requires the affirmative vote of a majority of the votes cast at the Annual
Meeting. With regard to Proposal No. 2, abstentions and broker non-votes are
not counted for purposes of determining whether a proposal has been approved.
ADJOURNMENT OF ANNUAL MEETING
- -----------------------------
In the event that Proxies representing sufficient votes to constitute a
quorum are not received by the date of the Annual Meeting, the Proxy Holders
may propose one or more adjournments of the Annual Meeting to permit further
solicitation of proxies. At such adjournments the proxies will continue to be
valid and, once a quorum is present in person or by proxy, directors may be
elected by plurality vote and other proposals can be approved by the
affirmative vote of the holders of a majority of the Company's voting shares
present in person or by proxy. The Proxy Holders will vote in favor of any
such proposed adjournments.
SOLICITATION
- ------------
The solicitation of proxies pursuant to this Proxy Statement will be made
primarily by mail. In addition, officers, employees, and representatives of
the Company may solicit proxies by telephone, mail, or personal interviews,
and arrangements will be made with banks, brokerage firms, and others to
forward solicitation materials to the beneficial owners of shares held of
record by them.
The total cost of all such solicitation efforts, including reimbursement
of the expenses of brokers and other nominees, will be borne by the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------
The following table sets forth certain information as of October 7, 1998,
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with respect to (i) each person who is known to the Company to beneficially
own more than five percent of the outstanding shares of Common Stock or a
class of Preferred Stock, (ii) the beneficial ownership of such securities by
each executive officer and director of the Company, and (iii) the beneficial
ownership of all such securities by all of the Company's directors and
executive officers as a group. Stock is considered "beneficially owned" by a
person if such person, directly or indirectly, through any contract,
arrangement, understanding or otherwise, has or shares: (i) voting power for
the stock; and/or (ii) investment power for the stock (including the power to
dispose of the stock). Such "beneficial ownership" also includes stock that a
person has the right to acquire within 60 days of October 7, 1998. Unless
otherwise indicated, the persons or entities named in the table have sole
voting and investment power with respect to all shares of stock beneficially
owned by them, subject to applicable community property laws. The percentage
ownership for each person is calculated assuming that all the stock that could
be acquired by that person within 60 days, by option exercise or otherwise,
has in fact been acquired and that no other shareholder has exercised a
similar right to acquire additional shares.
Amount and
Nature of
Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
- ----- ---------------- --------- --------
Common David K. Lifschultz 498,984(1) 42.9%
641 West 59th Street
New York, NY 10019
Common Charlotte K. Lifschultz 207,815(2) 18.6%
641 West 59th Street
New York, NY 10019
Common Hudson Waterfront 89,992(3) 8.1%
Associates, L.P.
725 Fifth Ave.
New York, NY 10022
Common Dennis R. Hunter 56,262(4) 4.9%
515 East 1860 South
Provo, UT 84606
Common Michael Hirst 46,149(5) 4.1%
799 E. Utah Valley Drive
American Fork, UT 84003
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Common James C. Triplett 30,481(6) 2.7%
799 E. Utah Valley Drive
American Fork, UT 84003
Common James Solomon 20,481(7) 1.8%
1455 West Center
Orem, UT 84058
Common Sidney B. Lifschultz 14,042(8) 1.3%
641 West 59th Street
New York, NY 10019
Common J. Randall Owen 1,000(9) *
799 E. Utah Valley Drive
American Fork, UT 84003
Common Joseph C. Fatony -0-(10) -0-
888 Seventh Ave., #402
New York, NY 10106
Common All directors and 605,917(1,4,5,6,7,8,9,10) 50.1%
executive officers
(8 persons) as a Group
Series E Reboul, MacMurray, 20,679 97.4%
Hewitt & Kristol
45 Rockefeller Plaza
New York, NY 10111
Series E All directors and -0- -0-
executive officers
(8 persons) as a Group
Series A John G. Bartol 5,200 100%
645 W. Rockford Drive
Tempe, AZ 85281
Series A All directors and -0- -0-
executive officers
(8 persons) as a Group
* Less than one percent.
(1) Chairman and Chief Executive Officer of the Company. Includes: (i)
200,477 shares held directly; (ii) 45,000 shares of common stock underlying
employee stock options that are currently exercisable; (iii) 205,455 shares
held by the Sidney B. Lifschultz 1992 Family Trust for which David Lifschultz
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is a co-trustee with his mother, Charlotte Lifschultz; (iv) 47,892 shares of
stock held by a corporation for which David K. Lifschultz is an officer and
director; and (v) 160 shares held by subsidiary, Lifschultz Fast Freight,
Inc., for which David Lifschultz shares voting and investment power as an
officer and director of Lifschultz Fast Freight.
(2) Beneficial owner of 5% of the class shares indicated. Includes: (i)
205,454 shares held by the Sidney B. Lifschultz 1992 Family Trust for which
Charlotte Lifschultz (wife of Sidney Lifschultz) is a co-trustee with David
Lifschultz; and (ii) 2,361 shares held by trusts for the benefit of certain
family members for which Charlotte Lifschultz is a trustee. Note that
205,454 of the shares shown for Charlotte Lifschultz are also reported for
David Lifschultz as they are co-trustees for the Sidney B. Lifschultz 1992
Family Trust.
(3) Beneficial owner of 5% of the class of shares indicated. Includes
89,992 shares held directly.
(4) President, Chief Financial Officer and director of the Company.
Includes: (i) 35,781 shares underlying employee stock options held by Dennis
Hunter that are currently exercisable; and (ii) 20,481 shares held by
subsidiary, Hart Scientific, Inc., for which Dennis Hunter shares voting and
investment power as a director of Hart Scientific. Excludes: 2,500 shares
underlying employee stock options held by Dennis Hunter that become
exercisable only upon the stock price exceeding $100 per share for ten days.
(5) Vice President and director of Hart Scientific. Includes: (i)
23,668 shares held directly; (ii) 2,000 shares of common stock underlying
employee stock options that are currently exercisable; and (iii) 20,481 shares
held by Hart Scientific for which Michael Hirst shares voting and investment
power as a director of Hart Scientific.
(6) Chairman and Chief Executive Officer of Hart Scientific. Includes:
(i) 10,000 shares underlying employee stock options held by James C. Triplett
that are currently exercisable; and (ii) 20,481 shares held by Hart Scientific
for which James Triplett shares voting and investment power as an officer and
director of Hart Scientific. Excludes: 40,000 shares underlying employee
stock options held by James Triplett that become exercisable only upon the
stock price reaching $12 per share. While Mr. Triplett shares voting rights
for the 20,481 shares held by Hart Scientific, he does not currently have the
right to acquire those shares at any time in the future.
(7) Director of the Company and Hart Scientific. Includes: 20,481
shares held by Hart Scientific for which James Solomon shares voting and
investment power as a director of Hart Scientific.
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(8) Director of the Company. Includes: (i) 10,900 shares held directly;
and (ii) 3,142 shares held by trusts for certain family members for which
Sidney Lifschultz is co-trustee.
(9) President and Chief Operating Officer of Hart Scientific. Includes:
1,000 shares of common stock held directly.
(10) Director of the Company.
As of October 7, 1998, there are only two holders of Series E Preferred
Stock and one holder of Series A Preferred Stock.
The Company knows of no arrangements, including any pledge by any person
of securities of the Company, the operation of which may, at a subsequent
date, result in a change in control of the Company.
PROPOSAL ONE - ELECTION OF DIRECTORS
------------------------------------
NOMINEES
- --------
The five current directors, David K. Lifschultz, Sidney B. Lifschultz,
Dennis R. Hunter, Joseph C. Fatony, and James E. Solomon, are proposed to be
re-elected at the Annual Meeting. In the event any nominee is unable to
serve, the proxies will be voted for a substitute nominee, if any, to be
designated by the Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
- -----------------------------------------------
The following table sets forth certain information concerning directors
and executive officers of the Company and certain officers/directors of
subsidiaries of the Company, Lifschultz Fast Freight, Inc. ("LFF") and Hart
Scientific, Inc. ("Hart"), and Hart's subsidiary, Calorimetry Sciences
Corporation ("CSC"):
BEGAN SERVICE
AS AN OFFICER
NAME AGE POSITONS HELD OR DIRECTOR
- ------------------- --- ----------------------- -------------
David K. Lifschultz 52 Chairman and CEO of the 1991
Company (also President
and director of LFF)
Dennis R. Hunter 47 President, director, and 1988
CFO of the Company, (also
CEO, President, and Chairman
of CSC and director of Hart)
Sidney B. Lifschultz 86 Director of the Company 1991
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Joseph C. Fatony 51 Director of the Company 1998
James E. Solomon 48 Director of the Company and Hart 1995
James C. Triplett 48 Chairman and CEO of Hart 1988
J. Randall Owen 40 President and COO of Hart 1994
Michael Hirst 49 Vice President and director 1988
of Hart
David K. Lifschultz is the son of Sidney B. Lifschultz. No other family
relationship exists among any of the directors or officers. All directors
hold office until the next Annual Meeting of shareholders or until their
successors are duly elected and qualified. Officers serve at the pleasure of
the Board of Directors.
The Company's Board of Directors formed this last year an Audit Committee
and a Compensation Committee. The members of both committees are David
Lifschultz, Joseph Fatony and James Solomon. The Audit Committee, in addition
to such other duties and responsibilities as determined from time to time by
the Board of Directors, advises the Board with regard to each external audit,
any related management letter, management's responses to recommendations made
by the external auditor, the Company's annual financial statements, and any
significant disputes between management and the external auditor that arise in
connection with the preparation of the financial statements. The Audit
Committee held no meetings during last the fiscal year. The Compensation
Committee advises the Board of Directors on the compensation of executive
officers of the Company. The Compensation Committee held two meetings during
the last fiscal year. The Board of Directors held three meetings during the
last fiscal year, which were attended by all of the directors in office at the
time of the meeting.
The principal occupations of the executive officers and directors named
above for at least the past five (5) years are as follows:
DAVID K. LIFSCHULTZ has been employed as the Chairman and Chief Executive
Officer of the Company and President and a director of LFF for more than the
past five years. Mr. Lifschultz studied at New York University.
DENNIS R. HUNTER has been employed as the President and Chief Financial
Officer of the Company for more than the past five years. He is also a
director of Hart and the President, Chief Executive Officer, and Chairman of
CSC. Prior to joining Hart in 1988, Mr. Hunter held positions as Vice
President of Marketing for Diser, Inc. and Vice President of Business
Development and Product Planning for Modtech International. He received his
M.B.A. from Brigham Young University in 1977.
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SIDNEY B. LIFSCHULTZ, retired, received a B.S. degree in Engineering from
the University of Illinois in 1933 and an M.B.A. degree from Harvard
University in 1935. Mr. Lifschultz previously served as Chairman of the Board
of LFF for more than five years.
JOSEPH C. FATONY currently is a managing director for AFC Realty Capital
Inc., a New York real estate investment banking firm. Prior to joining AFC
Realty Capital, Mr. Fatony was a principal and founder of SRF Builders Capital
Corp., a New York State mortgage bank. During the past 25 years, he has held
several executive positions in the banking industry, including Vice President
with The Bank of New York for over 20 years. He is an adjunct professor of
finance and marketing at Long Island University and a Trustee and Chairman of
the Board of American Investment Services. Mr. Fatony earned an M.B.A. from
Long Island University in 1978 and a B.A. from L.I.U. in 1973.
JAMES E. SOLOMON has served as a director of Hart since 1995. Since
August 1997, Mr. Solomon has been the President and CEO of Paragraphics, a
manufacturer of engraving equipment with annual sales of approximately $4
million. From January 1996 to March 1997 he was the President of the Burges
Lamont Company, a distributor of consumer goods with over $30 million in
annual sales and 130 employees. During the past five years, Mr. Solomon owned
or co-owned various businesses, and has served as an adjunct professor at the
University of Utah College of Business. He has a B.S. degree in finance from
the University of Utah and has been a Certified Public Accountant since 1975.
JAMES C. TRIPLETT has served as an officer and director of Hart for more
than the past five years. Mr. Triplett is a former director of Technovest
Corporation and has served as a Managing General Partner of Technovest
Management Group, both of which were engaged in venture capital and investment
activities. He was also employed by Crown Zellerbach Corporation, Alcan
Aluminum Corporation, and Northwest Pipeline Corporation in various
engineering and management positions. He has a B.S. degree in engineering and
an M.B.A.
J. RANDALL OWEN joined Hart in 1987 with responsibility for the sales and
marketing of Hart's temperature calibration products. He previously owned and
operated a company that manufactured and marketed industrial thermometers.
Prior to that he was employed in the engineering departments of Watkins
Johnson Corporation, Veeco Macronetics, and the Farinon Corporation. Mr. Owen
attended Brigham Young University where he studied business and international
relations.
MICHAEL HIRST has served in various capacities with the original Hart
company since he co-founded Hart's business in 1979, prior to its acquisition
by the Company in 1988. He currently serves with Hart as a director, Vice
President, and Secretary. Mr. Hirst has a B.S. degree in Design Technology
from Brigham Young University.
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SIGNIFICANT EMPLOYEES
- ---------------------
EDWIN A. LEWIS, age 50, serves as Vice President, Secretary, and Chief
Scientist of CSC. Previously, Dr. Lewis was a research professor at Brigham
Young University from 1981 until 1992, during which time he worked for Hart as
a consultant. He joined Hart on a full time basis in 1992. Dr. Lewis
received his Ph.D. in physical chemistry from the University of New Mexico in
1972.
EXECUTIVE COMPENSATION
- ----------------------
SUMMARY COMPENSATION
--------------------
The following table sets forth the compensation of the Chief Executive
Officer of the Company and certain other highly compensated executive officers
of the Company for each of the Company's last three fiscal years whose total
salary and bonus for the year ended July 31, 1998 exceeded $100,000 for
services rendered in all capacities to the Company during such fiscal years.
Other than the 401(k) plans of the Company and its subsidiaries, the
Company and its subsidiaries have no pension or retirement plan for its
executive officers. The Company prefers to pay higher cash compensation in
lieu of making substantial pension plan contributions. The Company and its
subsidiaries have adopted informal, unwritten bonus plans for its employees
and executive officers. Under the plans, each company's Board of Directors
typically evaluates the company's productivity and allocates bonuses twice a
year based primarily on such productivity and the employee's performance.
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<TABLE>
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation Long Term Compensation
------------------------
Awards Payouts
---------------------------------------- ---------------- -------
<C> <S> <S> <S> <S> <S> <S> <S> <S>
Other Restric-
Annual ted LTIP All Other
Name and Compen- Stock Options Pay- Compen-
Position Year Salary Bonus sation Awards /SARs outs sation
- --------------------------------- -------- -------- ------- -------- ------- ----- ---------
David K. Lifschultz, Fiscal 1998 $319,491 $103,000 -0- -0- 10,000 -0- $4,750
CEO and Chairman ------------------------------------------------------------------------------
of the Company Fiscal 1997 $229,408 $72,000 -0- -0- -0- -0- $ 0
------------------------------------------------------------------------------
Fiscal 1996 $209,779 $66,500 -0- -0- -0- -0- $ 0
- ----------------------------------------------------------------------------------------------------
Dennis R. Hunter, Fiscal 1998 $220,158 $74,200 -0- -0- 5,000 -0- $26,224
President, ------------------------------------------------------------------------------
director, and CFO Fiscal 1997 $174,138 $27,715 -0- -0- -0- -0- $7,750
of the Company ------------------------------------------------------------------------------
Fiscal 1996 $154,790 $114,057 -0- -0- -0- -0- $7,025
- ----------------------------------------------------------------------------------------------------
James C. Triplett Fiscal 1998 $285,928 $172,621 -0- -0- 50,000 -0- $9,921
Chairman and CEO of ------------------------------------------------------------------------------
Hart Fiscal 1997 $225,909 $176,829 -0- -0- -0- -0- $8,750
------------------------------------------------------------------------------
Fiscal 1996 $182,735 $148,208 -0- -0- -0- -0- $5,900
- ----------------------------------------------------------------------------------------------------
J. Randall Owen Fiscal 1998 $226,728 $108,716 -0- -0- -0- -0- $5,394
President and COO ------------------------------------------------------------------------------
of Hart Fiscal 1997 $175,705 $115,058 -0- -0- -0- -0- $5,538
------------------------------------------------------------------------------
Fiscal 1996 $135,547 $ 92,719 -0- -0- -0- -0- $4,957
- ----------------------------------------------------------------------------------------------------
Michael Hirst Fiscal 1998 $168,697 $ 64,221 -0- -0- -0- -0- $6,078
Vice President and ------------------------------------------------------------------------------
director of Hart Fiscal 1997 $136,074 $ 71,705 -0- -0- -0- -0- $4,754
------------------------------------------------------------------------------
Fiscal 1996 $105,219 $ 57,898 -0- -0- -0- -0- $2,788----
- -----------------------------------------------------------------------------------------------
</TABLE>
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(1) Includes amounts paid by the Company or its subsidiaries into
401(k) plans and term life insurance premiums for the benefit of the named
officer:
401(k) Contribution Insurance Premium
------------------- -----------------
David K. Lifschultz 1998 $ 4,750 $ 0
1997 $ 0 $ 0
1996 $ 0 $ 0
Dennis R. Hunter 1998 $ 4,750 $ 21,474
1997 $ 4,750 $ 3,000
1996 $ 4,625 $ 2,400
James C. Triplett 1998 $ 4,750 $ 5,171
1997 $ 4,750 $ 4,000
1996 $ 4,625 $ 1,275
J. Randall Owen 1998 $ 4,750 $ 644
1997 $ 4,750 $ 788
1996 $ 4,625 $ 332
Michael Hirst 1998 $ 4,750 $ 1,328
1997 $ 3,200 $ 1,554
1996 $ 2,400 $ 388
STOCK OPTIONS/SARS
- ------------------
The following table sets forth the option and stock appreciation rights
("SARs") granted to the named executive officers in the last fiscal year:
OPTION/SAR GRANTS IN FISCAL YEAR ENDED JULY 31, 1998
INDIVIDUAL GRANTS
----------------------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Exp.
Name Granted (#)(1) Fiscal Year Price ($/Sh) Date
- -------------------------------------------------------------------------
David K. Lifschultz 10,000 14.3% $3.125 12/7/12
- -------------------------------------------------------------------------
Dennis R. Hunter 5,000 7.1% $3.125 12/7/12
- -------------------------------------------------------------------------
James C. Triplett 10,000 71.4% $3.125 12/7/12
40,000 $4.625 2/24/13
- -------------------------------------------------------------------------
(1) All options are exercisable for Common Stock.
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AGGREGATED STOCK OPTION/SAR EXERCISES
- -------------------------------------
The following table sets forth the aggregated Common Stock options
exercised by the named executive officers in the last fiscal year and the year
end value of unexercised options:
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR ENDED JULY 31, 1998
AND FISCAL YEAR-END OPTION VALUES
------------------------------------------------------------------
Value Value of
realized Number of unexercised in-
($) unexercised the-money
Shares options/SARs options/SARs
acquired Value at FY-end (#) at FY-end ($)
on exercise realized exercisable/ exercisable/
Name (#) ($) unexercisable unexercisable(7)
- -------------------------------------------------------------------------
David K. -0- -0- 45,000(1)/ $181,500/
Lifschultz -0- -0-
- -------------------------------------------------------------------------
Dennis R. Hunter -0- -0- 35,781(2)/ $147,562/
2,500(3) $-0-
- -------------------------------------------------------------------------
James C. -0- -0- 10,000(4)/ $30,000/
Triplett 40,000(5) $60,000
- -------------------------------------------------------------------------
Michael W. Hirst -0- -0- 2,000(6)/ $9,120/
-0- -0-
- -------------------------------------------------------------------------
(1) Includes: (i) options for 30,000 shares of Common Stock
exercisable at $1.565 per share which expire August 1, 2007; (ii) options for
5,000 shares of Common Stock exercisable at $3.125 per share which expire May
5, 2010; and (iii) options for 10,000 shares of Common Stock exercisable at
$3.125 per shares, which expire December 7, 2012.
(2) Includes: (i) options for 25,781 shares of Common Stock
exercisable at $1.565 per share which expire August 1, 2007; (ii) options for
5,000 shares Common Stock exercisable at $3.125 per share which expire May 5,
2010; and (iii) options for 5,000 shares of Common Stock exercisable at $3.125
per share, which expire December 7, 2012.
(3) Includes: options for 2,500 shares of Common Stock that become
exercisable at $1.565 per share when the average closing price of the
Company's stock exceeds $100.00 per share for ten consecutive days and expire
August 1, 2007.
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(4) Includes: options for 10,000 shares of Common Stock exercisable
at $3.125 per share, which expire December 7, 2012.
(5) Includes: options for 40,000 shares of Common Stock that become
exercisable at $4.625 per share when the price of the Company's stock reaches
$12.00 per share and expire February 24, 2013.
(6) Includes options for 2,000 shares of Common Stock exercisable at
$1.565 per share, which expire February 8, 2003.
(7) The value per share of option stock is calculated by subtracting
the exercise price from the closing sales price on The Nasdaq SmallCap Market
on July 31, 1998 ($6.125).
DIRECTOR COMPENSATION
- ---------------------
For their services as non-employee directors of the Company, the Company
compensates Joseph Fatony $10,000 per year and James Solomon and Sidney
Lifschultz $5,000 per year each. Hart separately compensates James Solomon,
for his services as a director of Hart, at a rate of $2,500 per year and
allows him to participate in the informal Hart bonus plan described above.
Under that bonus plan, Hart awarded a bonus of $7,000 for fiscal year 1998.
The Company does not separately compensate directors of the Company that are
also employees of the Company or CSC for their service as directors. The
Company may in the future establish separate compensation for service for such
employee directors.
EMPLOYMENT AGREEMENTS
- ---------------------
DENNIS R. HUNTER
----------------
On August 1, 1998, CSC entered into a new employment agreement with
Dennis R. Hunter. The term of the agreement is five years, with a temporary
extension of up to one year if CSC determines not to offer Mr. Hunter a new
employment agreement at the end of five years. Under the agreement, for his
services as Chairman, President and CEO of CSC, Mr. Hunter receives a base
salary of $231,000 with a minimum 5% increase each year. Annual increases may
be set at a higher level at the discretion of CSC's Board of Directors. If
CSC terminates Mr. Hunter's employment without cause, or Mr. Hunter terminates
employment for certain good reasons, he will be paid 50% of his remaining base
compensation under the agreement or one year's base compensation, whichever is
greater, plus certain medical insurance benefits. Failure by a successor of
the Company to fully assume Mr. Hunter's contract will require the same
payment.
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Under his employment agreement, Mr. Hunter has a put option with respect
to certain stock options that he holds. He may exercise the put option over a
three-year period following termination or expiration of the agreement, other
than termination by CSC for certain defined causes or termination by Mr.
Hunter without certain defined reasons. Under the put option, Mr. Hunter may
require CSC to repurchase up his stock options for up to 5,260 shares of
Company stock per year at a price of $5.94 per share (plus any exercise price
if previously paid by Mr. Hunter). The employment agreement further contains
provisions regarding assignment of inventions by Mr. Hunter, a two-year
covenant not to compete by Mr. Hunter, and indemnification by CSC.
JAMES C. TRIPLETT
-----------------
On August 25, 1997, Hart entered into a new employment agreement with
James C. Triplett for a term of ten years. For his services as Chairman and
Chief Executive Officer of Hart, he receives an annual base salary of
$285,0000, subject to reduction in certain circumstances. He will receive
annual increases of at least 5% as set by the Board of Directors. If Mr.
Triplett's employment is terminated without cause before the end of the
agreement, he is to be paid 50% of his remaining base compensation under the
agreement or one year's salary, whichever is greater. Mr. Triplett may
terminate the agreement upon 90 days notice or otherwise for "Good Reason" as
defined in the agreement. Failure by a successor of the Company to fully
assume Mr. Triplett's employment agreement will require the immediate payment
of all yet to be paid compensation under the agreement. The agreement further
contains provisions regarding assignment of inventions by Mr. Triplett, a two
year covenant not to compete by Mr. Triplett, and indemnification by Hart.
J. RANDALL OWEN
---------------
Hart entered into a new agreement with J. Randall Owen on August 25,
1997. The agreement has a term of two years, with a provision for three one
year renewal periods upon mutual agreement of the parties. Under the
agreement, for his services as president of Hart, Mr. Owen receives a base
salary of $226,000, subject to reduction in certain circumstances. If the
agreement is terminated by Hart "for cause," Mr. Owen is entitled to three
months' severance pay. If Hart otherwise terminates the agreement before the
end of the term, Mr. Owen is entitled to 50% of his base compensation yet to
be paid under the agreement. Failure by a successor of Hart to fully assume
Mr. Owen's contract will require the immediate payment of all yet to be paid
compensation under the agreement. The agreement further contains a provision
requiring assignment of inventions by Mr. Owen and a two-year covenant not to
compete.
MICHAEL W. HIRST
----------------
Hart entered into an agreement with Michael W. Hirst on August 1, 1993.
The agreement has a term of ten years. Under the agreement, for his services
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as vice president of Hart, Mr. Hirst receives a base salary of $82,000.
Annual increases are set at the discretion of Hart's Board of Directors.
Additionally, after ten years and cessation of full-time employment, Hart
agrees to employ Mr. Hirst as a part-time consultant for five years at 25% of
the Agreement's sixth-year base compensation, for a maximum of 500 hours of
consultation per year.
If Hart terminates the agreement before the end of the term without
"cause", Mr. Hirst is entitled to 50% of his remaining base compensation or
one year's salary, whichever is greater. Failure by a successor of Hart to
fully assume Mr. Hirst's contract will require the immediate payment of all
yet to be paid compensation and an additional $200,000 in compensation to Mr.
Hirst. Mr. Hirst may terminate the agreement without cause upon 90 days
notice after July 31, 1998. The agreement further contains provision
regarding assignment of inventions by Mr. Hirst, a two-year covenant not to
compete by Mr. Hirst, and indemnification by Hart.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
Section 16(a) of the Securities and Exchange Act of 1934 requires that
the Company's executive officers and directors, and persons who beneficially
own more than ten percent of the Company's common stock, file initial reports
of stock ownership and reports of changes in stock ownership with the
Securities and Exchange Commission. Officers, directors, and greater than
ten-percent owners are required by applicable regulations to furnish the
Company with copies of all Section 16(a) forms that they file.
Based solely on a review of the copies of such forms furnished to the
Company or written representations from certain persons, the Company believes
that during the Company's 1998 fiscal year, all filing requirements applicable
to its officers, directors and ten-percent owners of the Company were met by
such persons except as follows: Dennis R. Hunter filed late one Form 4
reporting one grant of a stock option by the Company and Michael W. Hirst
filed late one Form 4 reporting one open market purchase of Company Common
Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ----------------------------------------------
As indicated in the discussion above, David K. Lifschultz and Dennis R.
Hunter have stock option agreements with the Company. Also as explained
above, Dennis R. Hunter, J. Randall Owen, James C. Triplett, and Michael W.
Hirst have employment agreements with either the Company, Hart, or CSC.
During fiscal year 1998 Hart purchased approximately $103,000 in
instrument components from Owen Instruments. Owen Instruments is owned and
operated by Suzette Owen, the wife of J. Randall Owen, President and Chief
Operating Officer of Hart. The business relationship between Hart and Owen
Instruments continues one that predates Mr. Owen's association with Hart.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF ALL
NOMINEES TO THE BOARD OF DIRECTORS NAMED ON THE ACCOMPANYING PROXY FORM.
PROPOSAL TWO - APPOINTMENT OF AUDITORS
--------------------------------------
Grant Thornton LLP has been the Company's independent auditors since July
1994. Proposal No. 2 is to reappoint Grant Thornton LLP as the Company's
independent public accountants for the fiscal year ending July 31, 1999. No
representative of Grant Thornton LLP is expected to be present at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPOINTMENT OF
GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING JULY 31, 1999.
OTHER ITEMS
-----------
ANNUAL REPORT TO SHAREHOLDERS
- -----------------------------
The Annual Report of the Company to its shareholders for the fiscal year
ended July 31, 1998, including audited financial statements, accompanies this
Proxy Statement.
ANNUAL REPORT ON FORM 10-KSB
- ----------------------------
The Company will provide without charge, at the written request of any
record beneficial shareholder as of October 29, 1998, a copy of the Company's
Annual Report on Form 10-KSB, as filed with the Securities and Exchange
Commission, except exhibits thereto. The Company will provide copies of the
exhibits, should they be requested by eligible shareholders, and the Company
may impose a reasonable fee for providing such exhibits. Requests for copies
of the Company's Form 10-KSB should be mailed to:
LIFSCHULTZ INDUSTRIES, INC.
799 East Utah Valley Drive
American Fork, Utah 84003-9775
Attn: Dennis R. Hunter
SHAREHOLDER PROPOSALS
- ---------------------
Any shareholder desiring to submit a proposal for inclusion in the
Company's Proxy Statement and form of proxy for the Company's 1999 Annual
Meeting, must deliver such proposal to the Utah offices of the Company, 799
East Utah Valley Drive, American Fork, Utah 84003-9775, Attention: Dennis R.
Hunter, on or before July 9, 1999. If the Company does not receive notice of
any other shareholder proposal on or before September 22, 1999, the persons
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serving as proxies will have the discretion to vote on such matter at 1999
Annual Meeting without any discussion of such proposal in the Proxy Statement
for such meeting.
By Order of the Board of Directors
DENNIS R. HUNTER
--------------------------------------
DENNIS R. HUNTER, President
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LIFSCHULTZ PROXY
INDUSTRIES, INC. This Proxy is Solicited on Behalf of
799 East Utah Valley Drive the Board of Directors
American Fork, Utah 84003-9775
The undersigned shareholder hereby appoints David K. Lifschultz and
Dennis R. Hunter as Proxies, each with the power to appoint his substitute,
and hereby authorizes them, or either of them, to represent and to vote, as
designated below, all the shares of common stock of Lifschultz Industries,
Inc. held of record by the undersigned and/or all of the votes to which the
undersigned is entitled pursuant to the terms of the Series A or Series E
Preferred Stock, held by the undersigned on October 29, 1998 (the record
date), at the Annual Meeting of Shareholders to be held on
- ----------------------------------- December 14, 1998 or at any
continuation(s) or adjournment(s) thereof. The proposals listed below are
made by the Board of Directors.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for all
to the contrary below) nominees listed below
(To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list below.)
Sidney B. Lifschultz David K. Lifschultz Dennis R. Hunter
Joseph C. Fatony James E. Solomon
2. APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING JULY 31, 1999
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The Proxies are authorized to vote, in their discretion, upon such other
business as may properly come before the meeting.
This Proxy, when properly executed, will be voted in the manner directed
by the undersigned shareholder. If no direction is given, then this Proxy
will be voted FOR all nominees for director listed in Proposal 1 and FOR
Proposal 2.
Please sign exactly as your name appears on the records of the Company's
transfer agent. When shares are held by joint tenants, both should sign.
When signing as attorney, or as executor, administrator, trustee, or guardian,
please give your full title as such. If a corporation, please sign in the
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full corporate name by the President or other authorized officer. If a
partnership, please sign in the partnership name by an authorized person.
Please mark, sign, date and return this Proxy promptly. By signing below, the
undersigned alos acknowledges receipt of the Company's Proxy Statement and
Annual Report accompanying this proxy.
DATED:
----------------------------- ---------------------------------
Name of entity which owns the
shares if other than an individual
By:
- ------------------------------------ ------------------------------
Signature (if signing individually) Signature of authorized signer
- ------------------------------------ ---------------------------------
Additional signature if held jointly Title of authorized signer
