SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Dakotah, Incorporated
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a06(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DAKOTAH, INCORPORATED
ONE NORTH PARK LANE
WEBSTER, SOUTH DAKOTA 57274-0120
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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to be held
JUNE 12, 1996
TO THE STOCKHOLDERS OF DAKOTAH, INCORPORATED
You are cordially invited to attend the Annual Meeting of stockholders
of Dakotah, Incorporated, which will be held on Wednesday, June 12, 1996 at
Webster High School, Webster, South Dakota at 5:30 p.m., for the following
purposes:
1. Electing three directors to hold office for a three year term
and one director for a one year term as described in the Proxy
Statement dated May 12, 1996.
2. Approving adoption of the 1995 Stock Option Plan.
3. Approving adoption of the 1996 Stock Option Plan for
Directors.
4. Ratifying the appointment of Grant Thornton LLP as independent
auditors for the current year.
5. Transacting such other business as may properly come before
the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice.
Stockholders of record as of the close of business on May 9, 1996 are
entitled to vote at the Annual Meeting and any adjournment thereof. Please
contact the Company at (605) 345-4646 to obtain a map and/or directions to
Webster High School if you plan on attending the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. EVEN IF YOU PLAN TO
ATTEND THE MEETING, WE URGE YOU TO SIGN, DATE, AND RETURN THE PROXY AT ONCE IN
THE ENCLOSED ENVELOPE.
By the Order of the Board of Directors,
Troy Jones, Jr.
Chief Executive Officer
May 13, 1996
DAKOTAH, INCORPORATED
ONE NORTH PARK LANE
WEBSTER, SOUTH DAKOTA 57274-0120
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PROXY STATEMENT
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Annual Meeting of Stockholders
to be held
June 12, 1996
INFORMATION CONCERNING PROXY SOLICITATION
This proxy statement and accompanying proxy are being furnished to stockholders
of Dakotah, Incorporated (the "Company") on or about May 13, 1996 in connection
with the solicitation by the Board of Directors of proxies for use at the Annual
Meeting of stockholders ("Annual Meeting") to be held at Webster High School,
Webster, South Dakota on Wednesday, June 12, 1996 at 5:30 p.m. Central Time, and
all adjournments thereof, for the purposes set forth in the Notice of Meeting.
The enclosed proxy is solicited by the Board of Directors of the Company. Such
solicitation is being made by mail and may also be made by directors, officers,
and regular employees of the Company personally or by telephone. Any proxy given
pursuant to such a solicitation may be revoked by the stockholder at any time
prior to the voting thereof by filing written notice of the termination of
appointment with an officer of the Company, by appearing in person at the
meeting and voting in person or by filing a new written appointment of Proxy
with an officer of the Company. Shares represented by proxies will be voted as
specified in such proxies, and if no choice is specified, will be voted (1) in
favor of the Board of Directors' nominees named in this proxy statement, (2) in
favor of adoption of the 1995 Stock Option Plan, (3) in favor of the adoption of
the 1996 Stock Option Plan for Directors and (4) in favor of ratifying the
appointment of Grant Thornton LLP as independent auditors for the current year.
Shares represented by proxies may also be voted, in the sole discretion of the
individual(s) appointed as attorneys, agents and proxies, on any other matters
as may properly come before the meeting.
OUTSTANDING SHARES AND VOTING RIGHTS
Common Stock, $.01 par value per share, of which there were 3,499,755 shares
outstanding on the record date, constitutes the only class of outstanding voting
securities issued by the Company. Each stockholder will be entitled to cast one
vote in person or by proxy for each share of Common Stock held by the
stockholder, but in connection with the cumulative voting right applicable to
the election of directors, each stockholder is entitled to as many votes as
shall equal the number of shares held by such person as of the record date,
multiplied by the number of directors to be elected. A stockholder may cast all
of such votes for a single nominee or may apportion such votes among two or more
nominees. For example, (at the Annual Meeting, three directors are up for
election for three year terms, one director for a one year term) a holder of 100
shares may cast 400 votes for a single nominee, or apportion 400 votes in any
other manner by so noting on the accompanying form of proxy. Only stockholders
of record at the close of business on May 9, 1996, will be entitled to vote at
the meeting.
A quorum is achieved when a majority of the outstanding shares are present in
person or by proxy at the Annual Meeting. Except where the right of cumulative
voting is exercised, the affirmative vote of the majority of shares present in
person or represented by proxy is required to elect each director and to approve
the other proposals. If the right of cumulative voting is exercised, the
candidates for particular Board seats receiving the most votes shall be elected.
Shares voted as abstentions (or a "withhold authority" vote as to directors) are
considered present at the meeting for purposes of determining a quorum and,
except when the right of cumulative voting is exercised, have the effect of a
negative vote. When cumulative voting is exercised, abstentions and withhold
authority votes are not counted in determining which candidates received the
most votes. If a broker submits a "non-vote" proxy, indicating that the broker
does not have discretionary authority to vote certain shares on a particular
matter, those shares will be counted as present for purposes of determining a
quorum, but will not be considered present and entitled to vote for purposes of
calculating the vote with respect to such matter.
ELECTION OF DIRECTORS
(PROPOSAL #1)
The Bylaws of the Company provide for the number of directors to be nine and
also for three classes of directors with terms staggered so as to require the
election of only one class of directors each year. At the stockholders' Meeting,
three members are to be elected to hold office for three year terms until the
1999 Annual Meeting, or until successors are elected and have qualified.
Shares represented by executed proxies will be voted, if authority to do so is
not withheld, for, and, if necessary, exercise cumulative voting rights to
secure, the election of the nominees named herein, unless one or more of such
nominees should become unavailable for election, in which event such shares
shall be voted for the election of such substitute nominees as the Board of
Directors may propose. Each person nominated has agreed to serve if elected, and
the Company knows of no reason why any of the listed nominees would be
unavailable to serve. Following is information about the nominees and all other
directors of the Company:
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR
FOR PAST FIVE (5) YEARS SINCE
<S> <C> <C> <C>
DIRECTORS TO BE RE-ELECTED IN 1996 FOR A THREE YEAR TERM ENDING 1999:
James D. Becker 34 For more than five years, Mr. Becker has been a sewing 1988
machine mechanic for the Company.
Linda J. Laskowski 45 Ms. Laskowski has been with U.S. West Communications since 1994
1987, as Vice President and General Manager of Information
Provider Market until October 1991, as Chief Executive
Officer of CLM Associates ( a joint venture between U.S.
West Communications and France Telecom) from October 1991
to January 1994, and as Vice President - South Dakota
since March 1994.
Lee A. Schoenbeck(1,2) 36 For more than five years, Mr. Schoenbeck has been an 1994
attorney in private practice in Webster, South Dakota. He
had previously served on the Board of Directors of the
Company from July 1985 through July 1991.
DIRECTOR TO BE RE-ELECTED IN 1996 FOR A ONE YEAR TERM ENDING 1997:
Leo T. Reynolds 50 For more than five years, Mr. Reynolds has been President 1995
of Electronic Systems, Inc., an electronics manufacturing
company.
DIRECTORS ELECTED IN 1994 FOR A THREE YEAR TERM ENDING 1997:
Troy Jones, Jr.(1) 34 Mr. Jones has been Chief Executive Officer of the Company 1994
since January 1995. He served as President of Orion
Financial Corp. of South Dakota, a South Dakota
corporation, since July 1993. For more than six years
prior to that, he was Director of Finance in the South
Dakota Governor's Office of Economic Development.
Michael G. Grosek(1,2,3) 39 Mr. Grosek has been the mayor of Webster, South Dakota 1991
since 1984, and for more than five years has owned and
operated Mike's Jack & Jill, a supermarket in Webster,
South Dakota.
DIRECTORS ELECTED IN 1995 FOR A THREE YEAR TERM ENDING 1998:
George C. Whyte(1) 45 Mr. Whyte is a founder of the Company and has been its 1980
Chairman of the Board of Directors since June 1988. He
also has served as President from April 1991 to the
present. Mr. Whyte was Chief Executive Officer of the
Company from June 1988 to January 1995.
Dorothy A. Benson 49 From July 1994 to the present, Ms. Benson has been a 1986
Product Development Specialist for the Company. She has
been a Company Associate for more than five years, working
in other positions including Pattern Maker and Data Design
Specialist.
Gary L. Conradi(1,2,3) 56 Mr. Conradi is currently Vice Chairman of the Board of 1984
Directors. For more than five years, he has served as the
Vice President of Corporate Services for Raven Industries,
Inc., a manufacturer of specialized plastics,
electronics and apparel.
</TABLE>
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(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Board of Directors of the Company has standing executive, audit,
and compensation committees which have a current membership as indicated in the
foregoing section. The Board of Directors has no standing nominating committee.
The executive committee may exercise all of the powers and authority of
the Board of Directors, except as otherwise provided under the South Dakota
Business Corporation Act. During fiscal 1995, the executive committee met once.
The audit committee makes recommendations as to the selection of
auditors and their compensation, and reviews with the auditors the scope of the
annual audit, matters of internal control and procedure, the audit results and
reports and other general matters relating to the Company's accounts, records,
controls and financial reporting. The audit committee held two meetings during
fiscal 1995.
The compensation committee reviews and recommends to the Board of
Directors the compensation guidelines for executive officers and other key
employees and the composition and levels of participation in incentive
compensation plans. The compensation committee administers the Company's 1995
Stock Option Plan including determining the participants, the number of shares
subject to option and the terms and conditions of exercise. During fiscal 1995,
the compensation committee held two meetings.
During fiscal 1995 the Board of Directors of the Company met ten times.
All directors attended over 75% of the aggregate of the total number of meetings
of the Board of Directors and all committees of the Board of Directors on which
they served.
DIRECTOR COMPENSATION
Effective January 1, 1995, a new directors' compensation plan was
approved by the Executive Committee of the Board of Directors which provides
that each director who is not employed by the Company will receive $550 per
Board or committee meeting held in person, will receive $300 for any such
meeting held by telephone conference, and will receive an annual retainer of
either $1,500 (for executive committee members) or $1,000 (for other outside
directors). The retainer for 1994 was prorated to May 1, 1995 and thereafter was
or will be payable semi-annually on May 1 and November 1. Each employee director
who is not an officer receives $150 per Board or committee meeting. In addition,
all directors who are not officers of the Company received a stock option
effective May 1, 1995. The options bear an exercise price of $3.625 per share
and have a term of five years and vest in full on December 31, 1995. Pursuant to
this grant of options, the executive committee outside directors received an
option to purchase 2,000 shares, the other outside directors received an option
to purchase 1,000 shares and directors who are employees but not officers
received an option to purchase 500 shares.
Effective May 9, 1996, the Board of Directors adopted the Stock Option
Plan for Directors which provides an automatic grant of 4,000 shares to each
current director who is an officer of the Company at the time this Plan is
approved by the stockholders. Newly elected directors in the future will also
receive an initial grant of 4,000 shares at the time they become a director. At
each subsequent annual meeting of stockholders, each director then elected will
receive an additional option to purchase 2,000 shares. The exercise price will
be the closing sale price of the Common Stock on the date of the annual meeting
of stockholders and will be immediately exercisable. The options will have a
term of five years.
CERTAIN FILINGS
On May 1, 1991, comprehensive new rules promulgated by the Securities
and Exchange Commission relating to the reporting of securities transactions by
directors and officers became effective. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal
year ended December 31, 1995, all required reports were timely filed, except
that due to administrative oversight, George C. Whyte filed one late Form 4.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the Company's
fiscal years ended December 31, 1993, 1994 and 1995 regarding compensation
earned by or awarded to the Company's chief executive officer and the other
executive officers whose total annual salary and bonus exceeded $100,000 (the
"Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION ($)
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LONG-TERM
FISCAL OTHER ANNUAL COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION OPTION COMPENSATION
- - --------------------------- ---- ------ -------- ------------ AWARDS(#) ($)
--------- ------------
<S> <C> <C> <C> <C> <C> <C>
George C. Whyte(1) 1995 141,000 58,000 -0- 25,000 2,485(5,7)
President and Chairman 1994 136,650 -0- -0- 184,300 309,333(6)
of the Board 1993 129,000 66,500 120,000(3) -0- 306,000(6)
Troy Jones, Jr.(4) 1995 -0- -0- 200,000 100,000 -0-
Chief Executive Officer
Terry G. Sampson 1995 70,200 -0- -0- -0- 95,718(5,7,8)
Former Executive Vice 1994 91,800 -0- -0- 92,150 154,667(6)
President, Secretary 1993 87,500 36,000 -0- -0- 153,000(6)
and Treasurer
</TABLE>
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(1) George Whyte was also Chief Executive Officer until January 1995. Troy
Jones was elected to the position of Chief Executive Officer at that
time.
(2) Cash bonuses have been included as compensation for the year earned,
calculated in accordance with the terms of the individual's incentive
compensation plan, even though actually paid in the subsequent year.
See "Incentive Compensation Plan."
(3) Consists of the value of 55,290 shares of Common Stock issued in 1993
as deferred compensation, earned in an earlier period.
(4) All compensation for Mr. Jones' service to the Company is paid to Orion
Financial Corp. of South Dakota, a South Dakota corporation ("Orion").
The Company has engaged Orion to provide such services. Mr. Jones is
the President and controlling shareholder of Orion.
(5) Includes the value of the cash contributions to the Company's Profit
Sharing Plan allocated to the executive officer .
(6) Includes the amount earned on stock appreciation rights granted
pursuant to deferred compensation agreements. See "Stock Appreciation
Rights Plan."
(7) For 1995 the Company contributed a total of $50,000 for all employees
to the Company's Profit Sharing Plan. As of the date of filing this
report this contribution had not been allocated and accordingly no
portion of this contribution is included herein.
(8) In September, 1995, Mr. Sampson resigned as an employee, officer and
director of the Company. The Company retained Mr. Sampson as a
consultant and advisor to the Company through March 1996. This amount
includes payment of $93,600 in the fourth quarter of 1995, and reflects
the total compensation paid for such consulting services under a
separation agreement.
OPTIONS GRANTED DURING FISCAL 1995
The following table provides information relating to options granted to
the Named Executive Officers during the Company's fiscal year ended December 31,
1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------------------
OPTIONS PERCENT OF TOTAL EXERCISE
GRANTED OPTIONS GRANTED IN PRICE EXPIRATION
NAME (#)(1) FISCAL YEAR (#/SH) ($)(2) DATE
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George C. Whyte ........... 25,000 15.3% $3.625 3/23/99
Terry G. Sampson........... -- -- -- --
Troy Jones, Jr.(3)......... 100,000 61.3% $3.625 2/1/98
</TABLE>
(1) The number indicated is the number of common shares that can be
acquired upon exercise of the option. The Company has not granted any
stock appreciation rights. Each option is non-transferable and
immediately exercisable.
(2) Exercise prices are equal to the fair market value at the date of
grant.
(3) These options are issued in the name of Orion Financial Corp. of South
Dakota, a South Dakota corporation, of which Mr. Jones is President and
controlling shareholder.
AGGREGATED OPTION EXERCISES DURING FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to the number and
value of options held by the Named Executive Officers as of December 31, 1995.
The Company does not have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED YEAR-END (#) FISCAL YEAR-END ($)(2)
NAME EXERCISE (#)(1) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George C. Whyte -0- -0- 209,300/-- 6,250/--
Terry G. Sampson -0- -0- -0-/-- -0-/--
Troy Jones, Jr. (3) -0- -0- 100,000/-- 25,000/--
</TABLE>
(1) See "Stock Appreciation Right Plan" for a description of the
termination of certain stock appreciation rights.
(2) Options are "in-the-money" if the fair market value of the underlying
shares at fiscal year end is greater than the exercise price.
(3) These options are issued in the name of Orion.
INCENTIVE COMPENSATION PLAN
During 1995, the Executive Committee of the Board of Directors approved
individual 1995 Incentive Compensation Plans (the "Bonus Plans") for George C.
Whyte, President, Georgie Olson Harper, National Sales Manager, Belinda Kuecker,
Manufacturing Manager, and Marci Cohen, Creative Services Director. Under the
Bonus Plans, the named associates could earn a bonus of a specified percentage
of their salaries if certain individualized sales, profitability, production and
expense limitation goals were achieved in 1995. In addition to certain other
terms and conditions of the Bonus Plans, the named associates must have been
employed by the Company on December 31, 1995 to be eligible for payment under
the Bonus Plans. The Company paid bonuses under each of the Bonus Plans.
STOCK APPRECIATION RIGHTS PLAN
Effective January 19, 1990, the Company entered into deferred
compensation agreements with George C. Whyte and Terry G. Sampson providing for
the award of stock appreciation rights ("SARs"). In general, Messrs. Whyte and
Sampson were entitled to the appreciation in the value of the Common Stock on
the date of exercise of the SARs over the value of the Common Stock on the date
of award. The SARs were two-thirds vested as of December 31, 1993 and would have
been fully vested as of December 31, 1994.
The Company entered into agreements with Messrs. Whyte and Sampson to
terminate these deferred compensation agreements effective upon the date of the
Company's public offering which was March 23, 1994. The agreements provided that
the SARs were fully vested as of the date of the public offering and fixed the
amounts earned under the SARs based on the initial public offering price of
$5.125.
As a result of the agreements fixing the amount owed pursuant to the
SARs, Messrs. Whyte and Sampson were issued, effective upon the date of the
public offering, promissory notes in the principal amount of $878,666 and
$439,334, respectively. The indebtedness bears interest at six percent per annum
and is payable in varying installments through January 1998. The termination
agreements also provide for the grant of options, with terms of five years and
exercise prices of $5.125 per share, to purchase 184,300 shares and 92,150
shares of Common Stock to Messrs. Whyte and Sampson, respectively. The option
held by Mr. Sampson has terminated.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with George C.
Whyte. The Agreement provides for an initial term of employment ending on
December 31, 1996, annual compensation and participation in bonus and benefit
plans of the Company in effect from time to time. The Agreement terminates
automatically upon the death of the employee and the Company may terminate the
agreement only for cause (as defined in the agreement). Subject to certain
conditions and exceptions, the Agreement provides that Mr. Whyte may not compete
with the Company in the United States for a period of one year following
termination of his employment.
Under the terms of a separation agreement with the Company, Mr. Sampson
resigned effective September 30, 1995. In consideration for payments totaling
$93,600 paid in the fourth quarter of 1995, Mr. Sampson agreed to consult with
the Company through March 1996. The separation agreement also includes certain
noncompete, indemnification, release and confidentiality agreements by Mr.
Sampson, the Company's release of Mr. Sampson and the accelerated payment of
certain amounts due Mr. Sampson under the agreements terminating the SARs.
EMPLOYEE PROFIT SHARING PLAN
Effective January 1, 1988, the Company adopted the Dakotah,
Incorporated Employee Profit Sharing Plan (the "Plan"). In general, all
employees who are not covered by a collective bargaining agreement are eligible
to participate in the Plan after completing one year of service as defined in
the Plan. Plan benefits are 100% vested at the completion of five years of
service. Prior to the completion of five years of service there is no vesting.
The Plan also provides for 100% vesting at the normal retirement date or upon
death or disability of the participant.
Contributions to the Plan are determined each year by the Board of
Directors at its discretion, but are limited to maximum permissible amounts as
defined in the Plan. Contributions to the Plan may be made in the form of shares
of the Company's Common Stock, valued at their fair market value, or cash. The
Company may direct that contributions made in cash will be used to purchase
Company Stock in the open market. Contributions to the Plan are allocated among
eligible participants in the proportion of each participant's salary to the
total salaries of all participants for the year in which the contribution was
made, and are held in trust until each participant's retirement, disability,
death or other termination of employment. All future distributions shall be made
in Common Stock, unless the recipient elects to receive cash. The Company
administers the Plan. First American Trust is the Trustee of the Plan.
A $75,000 cash contribution was made for the year ended December 31,
1994. For 1995, a $50,000 cash contribution was made which the Company directed
be used to purchase the Company's issued and outstanding Common Stock.
APPROVAL OF ADOPTION OF THE 1995 STOCK OPTION PLAN
(PROPOSAL #2)
BACKGROUND AND PURPOSE
On December 19, 1995, the Board of Directors adopted, subject to
stockholder approval, the 1995 Stock Option Plan ("1995 plan"). The purpose of
the 1995 Plan is to provide a means to attract and retain competent personnel
and to provide to participating officers and other key employees and consultants
long-term incentive for high levels of performance and for unusual efforts to
improve the financial performance of the Company. The 1995 Plan provides for the
grant to employees and consultants of either incentive or nonqualified options.
The Board believes that it is in the Company's and its stockholders' best
interest to provide to key employees and consultants, through the granting of
stock options, an opportunity to participate in the appreciation and value of
the Common Stock of the Company. THE OPTION PRICE PER SHARE FOR OPTIONS MUST NOT
BE LESS THAN THE FAIR MARKET VALUE PER SHARE OF THE COMMON STOCK ON THE DATE OF
GRANT.
ELIGIBILITY AND ADMINISTRATION
All employees and consultants of the Company, including officers and
directors, are eligible to receive options granted under the 1995 Plan. As of
April 30, 1996, there were approximately 480 full-time employees and consultants
of the Company who are eligible to receive option grants under the 1995 Plan.
The 1995 Plan authorizes the granting of options to purchase up to 800,000
shares of Common Stock. The shares subject to the options will generally be made
from authorized but unissued shares.
The 1995 Plan will be administered by a committee ("Committee") of the
Board of Directors. The Committee has full authority to award options under the
1995 Plan, to establish the terms of the option agreements and to take all other
action deemed appropriate for administration of the Plan.
INCENTIVE AND NONQUALIFIED OPTIONS
The 1995 Plan provides both for incentive stock options ("Incentive
Options") specifically tailored to the provisions of the Internal Revenue Code
of 1986 ("Code") and for options not qualifying as Incentive Options
("Nonqualified Options"). Options are designated as Incentive Options or
Nonqualified Options by the Committee when granted. The use of the term "option"
herein shall mean both Incentive Options and Nonqualified Options.
To obtain certain tax benefits, the 1995 Plan establishes special rules
for Incentive Options, including the requirement that such Incentive Options may
be granted to an individual only for shares having a maximum aggregate fair
market value not exceeding $100,000 (valued at the time of grant) for any year
in which such shares first become available for purchase through the exercise of
such Incentive Options.
Some restrictions also apply to Nonqualified Options granted under the
1995 Plan as a result of the application of newly enacted tax rules limiting the
deductibility of certain compensation paid to "named executive officers." These
rules are discussed more fully below in the section entitled Federal Income Tax
Consequences. In order to comply with these rules, all Nonqualified Options
granted under the 1995 Plan will have an exercise price equal to the fair market
value of Common Stock at date of grant. In addition, no employee may receive
Nonqualified Options for more than 250,000 shares in any fiscal year.
SHARES SUBJECT TO OPTIONS
Except for the terms described above, Options to be granted under the
1995 Plan are discretionary with the Committee. To date, subject to approval of
the 1995 Plan by stockholders, the only grant under the 1995 Plan is a
Nonqualfied Option to Orion Financial Corp. of South Dakota, a South Dakota
corporation ("Orion"), to purchase up to 242,745 shares at an exercise price per
share of $3.875, the fair market value of the shares on the date of grant. The
option is granted in connection with Orion providing the services of Mr. Troy
Jones, Jr., as Chief Executive Officer to the Company. The option vests over
three years on the anniversaries of the January 1, 1996 effective grant date.
The term of this option is five years and will terminate prior to five years
only in the event Mr. Jones' position as Chief Executive Officer is terminated
voluntarily by Mr. Jones or is terminated by the Company for cause. On May 8,
1996, the closing price of the Common Stock on the NASDAQ National Market System
was $4.00 per share.
TERMS AND CONDITIONS OF OPTIONS
Except as described above, the 1995 Plan generally does not specify the
terms and conditions of options to be granted under the Plan. Options granted
under the 1995 Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each instance approve.
Under the 1995 Plan, no option may be exercised later than 10 years from the
date of the grant. Payment for shares purchased upon the exercise of an option
must be made in cash, in shares of the outstanding Common Stock if acceptable to
the Committee, or in a combination of cash and shares. The right to be able to
use the market appreciation of previously owned shares may, subject to such
holding period requirements as the Committee may impose, permit the optionees to
use shares acquired by successive exercises of options. Shares will not be
issued upon the exercise of any option unless the optionee has satisfied any
withholding tax obligation by depositing with the Company cash in the amount
thereof at the time of the exercise. Alternatively, the optionee may elect, with
the Committee's consent, to have withheld from the number of shares to be issued
that number of shares the fair market value of which equals the amount of
withholding tax.
Unless otherwise determined by the Committee, (i) options granted under
the 1995 Plan may not be assigned and, during the lifetime of the optionee, may
be exercised only by him or her, (ii) if an optionee ceases to be employed or
retained by the Company for any reason other than death, disability or for
cause, the option may be exercised, subject to the expiration date of the
option, for three months after such termination, but only to the extent it was
exercisable on the date of termination, and (iii) if employment or retention is
terminated because of death or disability, the option may be exercised (subject
to the expiration date of the option) for up to one year after such termination,
but only to the extent it was exercisable on the date of death or disability. If
employment or retention is terminated for cause, all unexercised options shall
terminate immediately.
MODIFICATION AND TERMINATION
The 1995 Plan provides for adjustment in the number and class of shares
subject to the 1995 Plan and to the option rights and the exercise prices of
such option rights granted thereunder, in the event of stock dividends, stock
splits, reverse stock splits, recapitalization, reorganization, certain mergers,
consolidation, acquisition, or other change in the capital structure of the
Company.
The 1995 Plan will terminate on December 18, 2005. In addition, the
Board of Directors may, at any time, terminate the 1995 Plan or amend it except
with respect to certain matters for which stockholder approval is required under
the Code or Securities and Exchange Commission rules applicable to the 1995
Plan. No amendment or termination of the 1995 Plan by the Board of Directors may
adversely affect any option previously granted under the 1995 Plan without the
consent of the optionee.
MERGER, CONSOLIDATION AND CHANGE IN CONTROL
The 1995 Plan provides that in the event of a Company dissolution or
liquidation or a merger or consolidation in which the Company is not the
surviving Corporation, the options will terminate. In the event of such a merger
or consolidation, the optionee must be offered either a substitute option with
terms and conditions which will substantially retain the optionee's rights or
the right to fully exercise the option prior to the merger or consolidation. The
1995 Plan further provides that upon the occurrence of certain "acceleration
events" the options will become fully vested. An acceleration event occurs (i)
when a person, or group of persons acting together, becomes the beneficial owner
of 30 percent or more of the Company's outstanding shares; (ii) when a change in
majority of the Board occurs without the approval of at least 60% of the prior
Board; or (iii) the approval by stockholders of a sale of all or substantially
all the assets or of a liquidation or dissolution of the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to awards under the
1995 Plan. This summary is not intended to be exhaustive and, among other
things, does not describe state or local tax consequences.
In general, an optionee will be subject to tax at the time a
Nonqualified Option is exercised (but not at the time of grant), and he or she
will include in ordinary income in the taxable year in which he or she exercises
a Nonqualified Option an amount equal to the difference between the exercise
price and the fair market value of the shares acquired on the date of exercise,
and the Company will generally be entitled to deduct such amount for federal
income tax purposes except as such deductions may be limited by the Revenue
Reconciliation Act of 1993 ("1993 Tax Act"), described below. Upon disposition
of shares, the appreciation (or depreciation) after the date of exercise will be
treated by the optionee as either short-term or long-term capital gain or loss
depending on whether the shares have been held for the then-required holding
period.
In general, an optionee will not be subject to tax at the time an
Incentive Option is granted or exercised. Upon disposition of the shares
acquired upon exercise of an Incentive Option, long-term capital gain or loss
will be recognized in an amount equal to the difference between the disposition
price and the exercise price, provided that the optionee has not disposed of the
shares within two years of the date of grant or within one year from the date of
exercise. If the optionee disposes of the shares without satisfying both holding
period requirements (a "Disqualifying Disposition"), the optionee will recognize
ordinary income at the time of such Disqualifying Disposition to the extent of
the difference between the exercise price and the lesser of the fair market
value of the share on the date the Incentive Option was exercised or the date of
sale. Any remaining gain or loss is treated as short-term or long-term capital
gain or loss depending upon how long the shares have been held. The Company is
not entitled to a tax deduction upon either the exercise of an Incentive Option
or upon disposition of the shares acquired pursuant to such exercise, except to
the extent that the optionee recognizes ordinary income in a Disqualifying
Disposition and then only to the extent that such deduction is not limited by
the 1993 Tax Act.
If the optionee pays the exercise price, in full or in part, with
previously acquired shares, the exchange will not affect the tax treatment of
the exercise. However, if such exercise is effected using shares previously
acquired through the exercise of an Incentive Option, the exchange of the
previously acquired shares will be considered a disposition of such shares for
the purpose of determining whether a Disqualifying Disposition has occurred.
The federal income tax deduction that the Company may take for
otherwise deductible compensation payable to executive officers whom, on the
last day of the fiscal year, are treated as "named executive officers" in the
Company's Proxy Statement for such year is limited by the 1993 Tax Act to
$1,000,000. Under the provisions of the 1993 Tax Act, the deduction limit on
compensation will apply to all compensation, except compensation deemed under
the 1993 Tax Act to be "performance-based" and certain compensation related to
retirement and other employee benefit plans. The determination of whether
compensation related to the 1995 Plan is performance-based for purposes of the
1993 Tax Act will be dependent upon a number of factors, including stockholder
approval of the 1995 Plan, and the exercise price at which options are granted.
The 1993 Tax Act also prescribes certain limitations and procedural requirements
in order for compensation to qualify as performance-based, including rules which
require that in the case of compensation paid in the form of stock options, the
option price be no less than the fair market value of the stock at date of grant
and that the plan under which the options are granted states the maximum number
of shares with respect to which options may be granted during a specified period
to any employee. Although the options granted to Mr. Jones will not be entitled
to the benefits of an exemption from the 1993 Tax Act deductibility limitation,
the Company has structured the 1995 Plan to satisfy the requirements of the 1993
Tax Act with regard to its "performance-based" criteria for future options
granted under the Plan. There is no assurance, however, that awards under the
Plan will so satisfy such requirements, and accordingly, the Company may be
limited in the deductions it may take with respect to future awards under the
1995 Plan.
APPROVAL OF THE 1995 PLAN
Approval of the 1995 Plan requires the favorable vote of a majority of
the shares present or represented and entitled to vote at the Annual Meeting.
Unless otherwise instructed by the stockholder, the shares represented by the
enclosed proxy will be voted for approval of the 1995 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE 1995 PLAN.
APPROVAL OF ADOPTION OF
1996 STOCK OPTION PLAN FOR DIRECTORS
(PROPOSAL #3)
BACKGROUND AND PURPOSE
Effective May 9, 1996, the Board of Directors of the Company adopted,
subject to approval by the stockholders, the 1996 Stock Option Plan for
Directors ("Director Plan"). The Director Plan, which reserves a total of
100,000 shares of Common Stock for issuance to directors of the Company who are
not also officers of the Company, was adopted by the Board to enhance the
Company's ability to attract, reward and retain highly qualified directors and
to increase their proprietary interest in the Company's success.
TERMS AND CONDITIONS OF OPTIONS
The Director Plan provides that upon approval of the Plan by the
stockholders each director who is not an officer of the Company will receive an
option to purchase 4,000 shares. For purposes of the Director Plan, a director
who is also the Secretary of the Company is not considered an "officer." A
person not currently a member of the Board of Directors will receive an option
to purchase 4,000 shares upon his or her initial election as a director. On the
date of each subsequent annual meeting of stockholders, each director will
receive an additional option to purchase 2,000 shares; provided that such
director has received no other option under the Director Plan during the
immediately preceding six month period.
The exercise price of all options under the Director Plan is equal to
the fair market value on the date of grant, and each option will be fully vested
on the date of grant. The option shall terminate on the fifth anniversary of the
date of grant. No options have been granted under the Director Plan.
Payment for shares purchased upon the exercise of an option must be
made in cash, in shares of the Company's outstanding Common Stock if acceptable
to the Committee, or in a combination of cash and shares. The right to be able
to use the market appreciation of previously owned shares may, subject to such
holding period requirements as the Committee may impose, permit the optionees to
use shares acquired by successive exercises of options. Shares will not be
issued upon the exercise of any option unless the optionee has satisfied any
withholding tax obligation by depositing with the Company cash in the amount
thereof at the time of the exercise. Alternatively, the optionee may elect, with
the Committee's consent, to have withheld from the number of shares to be issued
that number of shares the fair market value of which equals the amount of
withholding tax.
Options granted under the Director Plan may not be assigned and, during
the lifetime of the optionee, may be exercised only by him or her. If an
optionee ceases to serve as a director of the Company for any reason other than
death, disability or for cause, the option may be exercised, subject to the
expiration date of the option, for three months after such termination, but only
to the extent it was exercisable on the date of termination. If the director is
terminated because of death or disability, the option my be exercised (subject
to the expiration date of the option) for up to one year after such termination.
If the director is terminated for cause, all unexercised options shall terminate
immediately.
MODIFICATION AND TERMINATION
The Director Plan provides for adjustment in the number and class of
shares subject to the Director Plan and to the option rights and the exercise
prices of such option rights granted thereunder, in the event of a stock
dividend, stock split, reverse stock split, recapitalization, reorganization,
certain mergers, consolidation, acquisition, or other change in the capital
structure of the Company.
The Director Plan will terminate on May 8, 2006. In addition, the Board
of Directors may, at any time, terminate the Director Plan or amend it except
with respect to certain matters for which stockholder approval is required under
Securities and Exchange Commission rules applicable to the Director Plan. No
amendment or termination of the Director Plan by the Board of Directors may
adversely affect any option previously granted under the Director Plan without
the consent of the optionee.
MERGER, CONSOLIDATION AND CHANGE IN CONTROL
The Director Plan provides that in the event of a Company dissolution
or liquidation or a merger or consolidation in which the Company is not the
surviving Corporation, the options will terminate. In the event of such a merger
or consolidation, the optionee must be offered a substitute option with terms
and conditions which will substantially retain the optionee's rights.
FEDERAL INCOME TAX CONSEQUENCES
The options granted under the Director Plan are not intended to be
Incentive Stock Options. At the time an option is granted, no income will be
realized by the optionee, and no deduction will be allowable to the Company.
Upon the exercise of the option, the excess of the fair market value of the
shares acquired on the date of exercise over the exercise price paid will be
ordinary income to the optionee and deductible by the Company, to the extent
such amount satisfies the general rules concerning deductibility of compensation
and the Revenue Reconciliation Act of 1993 ("1993 Tax Act"), described above.
Upon disposition of shares, the appreciation (or depreciation) after the date of
exercise will be treated by the optionee as either short-term or long-term
capital gain or loss depending on whether the shares have been held for the
then-required holding period.
APPROVAL OF DIRECTOR PLAN
Approval of the Director Plan requires the favorable vote of a majority
of the shares present or represented and entitled to vote at the Annual Meeting.
Unless otherwise instructed by the stockholder, the shares represented by the
enclosed proxy will be voted for approval of the Director Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE DIRECTOR PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL #4)
Based on the recommendation of the Audit Committee, the Board of
Directors has appointed Grant Thornton LLP to serve as independent auditors for
the Company for fiscal year 1996 and is submitting its appointment to the
stockholders for ratification. Grant Thornton LLP has served as the Company's
independent auditors since 1981. If the appointment is not ratified, the Board
of Directors will reconsider its selection. Representatives of Grant Thornton
LLP will be present at the meeting, will have the opportunity to make a
statement and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT AUDITORS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Common Stock
beneficially owned by: (i) each person or entity known by the Company to own 5%
or more of the Company's Common Stock; (ii) each director of the Company; (iii)
each current Named Executive Officer; and (iv) all executive officers and
directors as a group. All persons named in the table have sole voting and
investment power with respect to all shares of Common Stock owned unless
otherwise noted. The number of shares listed is as of March 25, 1996, unless
otherwise noted.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING SHARES
---------------- ------------------ ------------------
<S> <C> <C>
Dakotah Incorporated Employee Profit Sharing Plan 1,853,722 53.0%
First American Trust, Trustee
One North Park Lane
Webster, South Dakota 57274
George C. Whyte(1,2) 400,207 10.8%
One North Park Lane
Webster, South Dakota 57274
Troy Jones, Jr.(3) 100,000 2.8%
One North Park Lane
Webster, South Dakota 57274
James D. Becker(1,4) 5,268 .2%
One North Park Lane
Webster, South Dakota 57274
Dorothy A. Benson(1,5) 9,434 .3%
One North Park Lane
Webster, South Dakota 57274
Gary L. Conradi(6) 3,200 *
205 East Sixth
Sioux Falls, South Dakota 57102
Michael G. Grosek(7) 2,000 *
P.O. Box 543
Webster, South Dakota 57274
Linda J. Laskowski(8) 2,000 *
One North Park Lane
Webster, South Dakota 57274
Leo T. Reynolds -0- -0-
One North Park Lane
Webster, South Dakota 57274
Lee A. Schoenbeck(9) 13,000 .4%
One North Park Lane
Webster, South Dakota 57274
All executive officers and directors as a group 614,200 15.9%
(11 persons)(1,2,3,4,5,6,7,8,9)
</TABLE>
- - --------------------
* Less than 1/10 of 1%.
(1) Includes shares allocated to the person's or group's account in the
Employee Profit Sharing Plan.
(2) Includes 204,300 shares issuable upon exercise of outstanding options,
57,700 shares allocated to Mr. Whyte in the Employee Profit Sharing
Plan, 2,233 shares owned directly by Mr. Whyte's wife and 25,229 shares
allocated to Mr. Whyte's wife in the Employee Profit Sharing Plan.
(3) Includes 100,000 shares issuable upon exercise of an outstanding
option. Does not include an option to purchase 242,745 shares, granted
to Mr. Jones effective January 1, 1996 and vesting one third on the
next three anniversaries of the date of the grant, and which is subject
to shareholder approval.
(4) Includes 500 shares issuable upon exercise of an outstanding option,
and 4,691 shares allocated to Mr. Becker in the Employee Profit Sharing
Plan.
(5) Includes 500 shares issuable upon exercise of an outstanding option,
and 7,781 shares allocated to Ms. Benson in the Employee Profit Sharing
Plan.
(6) Includes 2,000 shares issuable upon exercise of an outstanding option.
(7) Includes 2,000 shares issuable upon exercise of an outstanding option.
(8) Includes 1,000 shares issuable upon exercise of an outstanding option.
(9) Includes 2,000 shares issuable upon exercise of an outstanding option,
8,000 shares held in Mr. Schoenbeck's IRA and 200 shares
SHAREHOLDER PROPOSALS
The Company will consider any shareholder proposals for inclusion in
the proxy materials for the 1997 Annual Meeting of stockholders if such
proposals are received by the Company no later than February 11, 1997.
Proposals must also comply with all applicable statutes and regulations.
ANNUAL REPORTS
The Company's 1995 Annual Report, including financial statements, is
being mailed with this proxy statement to shareholders entitled to notice of the
Annual Meeting. THE COMPANY WILL FURNISH WITHOUT CHARGE TO SHAREHOLDERS A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR FISCAL YEAR 1995, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION UPON RECEIPT OF WRITTEN REQUEST
ADDRESSED TO: CORPORATE SECRETARY, DAKOTAH, INCORPORATED, ONE NORTH PARK LANE,
WEBSTER, SOUTH DAKOTA 57274-0120.
OTHER MATTERS
At the date of this Proxy Statement, management has no knowledge of any
business other than that described herein that will be presented for
consideration at the meeting. In the event any other business is presented at
the meeting, it is intended that the persons named in the enclosed proxy will
have authority to vote such proxy in accordance with their judgment on such
business.
Please sign and return promptly the enclosed proxy in the envelope
provided. The signing of a proxy does not prevent your attending the meeting and
terminating such proxy by voting in person.
By Order of the Board of Directors
Troy Jones, Jr.
Chief Executive Officer
Dated May 13, 1996
Webster, South Dakota
APPENDIX
DAKOTAH, INCORPORATED
1995 STOCK OPTION PLAN
Article I. Establishment and Purpose
1.1 Establishment. Dakotah, Incorporated, a South Dakota corporation
("Company"), hereby establishes a stock option plan for employees and others
providing services to the Company, as described herein, which shall be known as
the "1995 STOCK OPTION PLAN" ("Plan"). The Plan permits the granting of
Nonstatutory Stock Options and Incentive Stock Options.
1.2 Purpose. The purposes of this Plan are to enhance shareholder
investment by attracting, retaining, and motivating key employees and
consultants of the Company and to encourage stock ownership by such employees
and consultants by providing them with a means to acquire a proprietary interest
in the Company's success.
Article II. Definitions
2.1 Definitions. Unless the context clearly requires otherwise, the
following terms shall have the respective meanings set forth below, and when
said meaning is intended, the term shall be capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee, as specified in Article
IV hereof, appointed by the Board to administer the Plan.
(d) "Company" means Dakotah, Incorporated, a South Dakota
corporation (including any and all subsidiaries).
(e) "Consultant" means any person or entity, including an officer
or director of the company who provides services (other than
as an Employee) to the Company.
(f) "Date of Exercise" means the date the Company receives notice
by an Optionee of the exercise of an Option pursuant to
Section 8.1 of this Plan. Such notice shall indicate the
number of shares of Stock as to which the Optionee intends to
exercise an Option.
(g) "Employee" means any person, including an officer or director
of the Company, who is employed by the Company.
(h) "Exchange Act" means the Securities and Exchange Act of 1934,
as amended.
(i) "Fair Market Value" means the closing price of the Stock as
reported by NASDAQ on the applicable day, or if there has been
no sale on that date, on the last preceding date on which a
sale occurred, or such other value of the Stock as shall be
specified by the Board.
(j) "Incentive Stock Option" means an Option granted under this
Plan which is designated as an Incentive Stock Option and is
intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Code.
(k) "Insider" means a person who is, at the time of an Option
grant hereunder, an officer, director or holder of more than
ten percent of the outstanding shares of the Stock, as defined
in Section 16 of the Exchange Act.
(l) "Nonstatutory Option" means an Option granted under this Plan
which is not intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code. Except as
otherwise specified herein, Nonstatutory Options may be
granted at such times and subject to such restrictions as the
Board shall determine without conforming to the statutory
rules of Section 422 of the Code applicable to incentive stock
options.
(m) "Option" means the right, granted under this Plan, to purchase
Stock of the Company at the option price for a specified
period of time. For purposes of this Plan, an Option may be
either an Incentive Stock Option or a Nonstatutory Option.
(n) "Optionee" means a person to whom an Option has been granted
under the Plan.
(o) "Parent Corporation" shall have the meaning set forth in
Section 424(e) of the Code with the Company being treated as
the employer corporation for purposes of this definition.
(p) "Subsidiary Corporation" shall have the meaning set forth in
Section 424(f) of the Code with the Company being treated as
the employer corporation for purposes of this definition.
(q) "Significant Shareholder" means an individual who, within the
meaning of Section 422(b)(6)of the Code, owns Stock possessing
more than ten percent of the total combined voting power of
all classes of stock of the Company or of any Parent
Corporation or Subsidiary Corporation of the Company. In
determining whether an individual is a Significant
Shareholder, an individual shall be treated as owning Stock
owned by certain relatives of the individual and certain Stock
owned by corporations in which the individual is a
shareholder, partnerships in which the individual is a
partner, and estates or trusts of which the individual is a
beneficiary, all as provided in Section 424(d) of the Code.
(r) "Stock" means the common stock of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context,
any masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
Article III. Eligibility and Participation
3.1 Eligibility. All Employees are eligible to participate in this Plan
and receive Incentive Stock Options and/or Nonstatutory Options hereunder. All
Consultants are eligible to participate in this Plan and receive Nonstatutory
Options hereunder.
3.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all Employees and Consultants
those to whom Options shall be granted and shall determine the nature of and
number of shares of Stock subject to each such Option.
Article IV. Administration
4.1 The Committee. The Plan shall be administered by a Committee
appointed by the Board consisting of not fewer than two Directors who shall be
appointed from time to time by, and shall serve at the discretion of, the Board.
Unless otherwise determined by the Board, no member of the Committee shall
receive any Option pursuant to the Plan or any similar plan of the Company or
any of its subsidiaries while serving on the Committee, or shall have received
any such Option at any time within one year prior to his or her service on the
Committee, or, if different, for the time period just necessary to fulfill the
then current Rule 16b-3 requirements under the Exchange Act, except for Options
granted pursuant to a formula plan meeting the conditions of Rule
16b-3(c)(2)(ii). If for any reason the Committee does not qualify to administer
the Plan disinterestedly as contemplated by Rule 16b-3 of the Exchange Act, or
as may be required under applicable tax law to permit a deduction with respect
to certain Options issued under the Plan, the Board of Directors may appoint a
new Committee so as to comply with the disinterested administration requirements
of Rule 16b-3 and such tax law.
4.2 Authority of the Committee. The Committee shall have full power
except as limited by law or by the Articles of Incorporation or Bylaws of the
Company, and subject to the provisions herein, to determine the size and types
of Options; to determine the terms and conditions of such Options in a manner
consistent with the Plan; to construe and interpret the Plan and any agreement
or instrument entered into under the Plan; to establish, amend, or waive rules
and regulations for the Plan's administration; and (subject to the provisions of
Article 12 herein) to amend the terms and conditions of any outstanding Option
to the extent such terms and conditions are within the discretion of the
Committee as provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of the
Plan. As permitted by law, the Committee may delegate its authorities as
identified hereunder.
The discretion of the Committee shall be limited to the extent
necessary to retain the status of the Committee members as "disinterested
persons" pursuant to Rule 16b-3 of the Exchange Act.
4.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its shareholders, Employees, Consultants,
Optionees, and their respective successors.
Article V. Stock Subject to the Plan
5.1 Number. Subject to adjustment as provided in Section 5.3 herein,
the total number of shares of Stock hereby made available for grant and reserved
for issuance under the Plan shall be 800,000. The aggregate number of shares of
Stock available under this Plan shall be subject to adjustment as provided in
Section 5.3. The total number of shares of Stock may be authorized but unissued
shares of Stock, or shares acquired by purchase as directed by the Board from
time to time in its discretion, to be used for issuance upon exercise of Options
granted hereunder.
5.2 Lapsed Options. If an Option shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares of Stock
subject thereto shall (unless the Plan shall have terminated) become available
for other Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change, the
aggregate number of shares of Stock set forth in Section 5.1 shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive; provided, however, that fractional shares shall be rounded to the
nearest whole share. In any such case, the number and kind of shares that are
subject to any Option (including any Option outstanding after termination of
employment) and the Option price per share shall be proportionately and
appropriately adjusted without any change in the aggregate Option price to be
paid therefor upon exercise of the Option.
Article VI. Duration of the Plan
6.1 Duration of the Plan. Subject to shareholder approval, the Plan
shall be in effect for ten years from the date of its adoption by the Board. Any
Options outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of said
period if all Stock subject to it has been purchased pursuant to the exercise of
Options granted under the Plan.
Article VII. Terms of Stock Options
7.1 Grant of Options. Subject to Section 5.1, Options may be granted to
Employees or Consultants at any time and from time to time as determined by the
Committee; provided, however, that Consultants may receive only Nonstatutory
Options, and may not receive Incentive Stock Options. The Committee shall have
complete discretion in determining the number of shares of Stock subject to an
Option and the number of Options granted to each Optionee. In making such
determinations, the Committee may take into account the nature of services
rendered by such Employees or Consultants, their present and potential
contributions to the Company, and such other factors as the Committee in its
discretion shall deem relevant. The Committee also shall determine whether an
Option is to be an Incentive Stock Option or a Nonstatutory Option.
The aggregate Fair Market Value (determined at the date of grant) of
shares of Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Optionee during any calendar year under all plans of
the Company under which Incentive Stock Options may be granted (and all such
plans of any Parent Corporations and any Subsidiary Corporations of the Company)
shall not exceed $100,000.
Nothing in this Article VII of the Plan shall be deemed to prevent the
grant of Options in excess of the maximums established by the preceding
paragraph where such excess amount is treated as a Nonstatutory Option. In no
event, however, shall the number of shares of Stock with respect to which
Nonstatutory Stock Options may be granted to any Employee exceed 250,000 in any
fiscal year.
The Committee is expressly given the authority to issue amended Options
with respect to shares of Stock subject to an Option previously granted
hereunder. An amended Option amends the terms of an Option previously granted
and thereby supersedes the previous Option.
7.2 No Tandem Options. Where an Option granted under this Plan is
intended to be an Incentive Stock Option, the Option shall not contain terms
pursuant to which the exercise of the Option would affect the Optionee's right
to exercise another Option, or vice versa, such that the Option intended to be
an Incentive Stock Option would be deemed a tandem stock option within the
meaning of the regulations under Section 422 of the Code.
7.3 Option Agreement. As determined by the Committee on the date of
grant, each Option shall be evidenced by an Option agreement (the "Option
Agreement") that includes the nontransferability provisions of Section 10.2
hereof and specifies: whether the Option is an Incentive Stock Option or a
Nonstatutory Option; the Option price; the duration of the Option; the number of
shares of Stock to which the Option applies; any vesting or serial exercise
restrictions which the Committee may impose; and any other terms or conditions
which the Committee may impose.
All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 Option Price. No Incentive Stock Option granted pursuant to this
Plan shall have an Option price that is less than the Fair Market Value of Stock
on the date the Option is granted. Incentive Stock Options granted to
Significant Shareholders shall have an Option price of not less than 110 percent
of the Fair Market Value of Stock on the date of grant. The Option price for
Nonstatutory Options shall be equal to the Fair Market Value of Stock on the
date the Option is granted and shall not be subject to the restrictions
applicable to Incentive Stock Options.
7.5 Term of Options. Each Option shall expire at such time as the
Committee shall determine when it is granted, provided however that no Option
shall be exercisable later than the tenth anniversary date of its grant. By its
terms, an Incentive Stock Option granted to a Significant Shareholder shall not
be exercisable after five years from the date of grant.
7.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for all
Optionees.
7.7 Payment. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Committee, in Stock having a Fair Market Value at the
time of the exercise equal to the exercise price (provided that, in the case of
an Insider, the Stock that is tendered as payment upon exercise of the Option
has been held by the Optionee for at least six months prior to its tender), or
in some other form, including a combination of the above; provided, however, in
the case of an Incentive Stock Option, that said other form of payment does not
prevent the Option from qualifying for treatment as an "incentive stock option"
within the meaning of the Code. In addition, the Company may establish a
cashless exercise program in accordance with Federal Reserve Board Regulation T.
Article VIII. Written Notice, Issuance of
Stock Certificates, Shareholder Privileges
8.1 Written Notice. An Optionee wishing to exercise an Option shall
give written notice to the Chief Financial Officer of the Company, in the form
and manner prescribed by the Committee. Except for approved "cashless
exercises," full payment for the shares exercised pursuant to the Option must
accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
or to a nominee of the Optionee a certificate or certificates for the requisite
number of shares of Stock. Such certificate may bear a legend restricting
transfer thereof.
8.3 Privileges of a Shareholder. An Optionee or any other person
entitled to exercise an Option under this Plan shall not have shareholder
privileges with respect to any Stock covered by the Option until the date of
issuance of a stock certificate for such stock.
Article IX. Termination of Employment
9.1 Death. Unless otherwise determined by the Committee, if an
Optionee's employment in the case of an Employee, or provision of services as a
Consultant, in the case of a Consultant, terminates by reason of death, the
Option may thereafter be exercised at any time prior to the expiration date of
the Option or within 12 months after the date of such death, whichever period is
the shorter, by the person or persons entitled to do so under the Optionee's
will or, if the Optionee shall fail to make a testamentary disposition of an
Option or shall die intestate, the Optionee's legal representative or
representatives. Unless otherwise determined by the Committee, the Option shall
be exercisable only to the extent that such Option was exercisable as of the
date of death.
9.2 Termination Other Than For Cause Or Due to Death. Unless otherwise
determined by the Committee, in the event of an Optionee's termination of
employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, other than by reason of
death or for cause, the Optionee may exercise such portion of his Option as was
exercisable by him at the date of such termination (the "Termination Date") at
any time within three (3) months of the Termination Date; provided, however,
that where the Optionee is an Employee, and is terminated due to disability
within the meaning of Code Section 422(c)(6), such Optionee may exercise such
portion of any Option as was exercisable by such Optionee on his or her
Termination Date within one year of such Termination Date. In any event, the
Option cannot be exercised after the expiration of the term of the Option.
Unless otherwise determined by the Committee, Options not exercised within the
applicable period specified above shall terminate.
In the case of an Employee, a change of duties or position within the
Company or an assignment of employment in a Subsidiary Corporation or Parent
Corporation of the Company, if any, or from such a corporation to the Company,
shall not be considered a termination of employment for purposes of this Plan.
The Option Agreements may contain such provisions as the Committee shall approve
with reference to the effect of approved leaves of absence upon termination of
employment.
9.3 Termination for Cause. In the event of an Optionee's termination of
employment, in the case of an Employee, or termination of the provision of
services as a Consultant in the case of a Consultant, which termination is by
the Company for cause, any Option or Options held by such Optionee under the
Plan, to the extent not exercised before such termination, shall terminate
immediately. "Cause" shall be determined by the Committee in its sole
discretion.
Article X. Rights of Optionees
10.1 Service. Nothing in this Plan shall interfere with or limit in any
way the right of the Company to terminate any Employee's employment, or any
Consultant's services, at any time, nor confer upon any Employee any right to
continue in the employ of the Company, or upon any Consultant any right to
continue to provide services to the Company.
10.2 Nontransferability. Except as otherwise determined by the
Committee in the case of Nonstatutory Options, all Options granted under this
Plan shall be nontransferable by the Optionee, other than by will or the laws of
descent and distribution, and shall be exercisable during the Optionee's
lifetime only by the Optionee.
Article XI. Optionee-Employee's
Transfer or Leave of Absence
11.1 Optionee-Employee's Transfer or Leave of Absence. For Plan
purposes--
(a) A transfer of an Optionee who is an Employee from the Company
to a Subsidiary Corporation or Parent Corporation, or from one
such corporation to another, or
(b) a leave of absence for such an Optionee (i) which is duly
authorized in writing by the Company, and (ii) if the Optionee
holds an Incentive Stock Option, which qualifies under the
applicable regulations under the Code which apply in the case
of incentive stock options,
shall not be deemed a termination of employment. However, under no circumstances
may an Optionee exercise an Option during any leave of absence, unless
authorized by the Committee.
Article XII. Amendment,
Modification, and Termination of the Plan
12.1 Amendment, Modification, and Termination of the Plan. The Board
may at any time terminate, and from time to time may amend or modify the Plan,
provided, however, that
(a) no such action of the Board, without approval of the
shareholders, may --
(i) increase the total amount of Stock that may be
purchased through Options granted under the Plan,
except as provided in Section 5.1; or
(ii) change the class of Employees or Consultants eligible
to receive Options; and
(b) without the approval of the shareholders of the Company (as
may be required by the Code, by Section 16 of the Exchange
Act, by any national securities exchange or system on which
the Stock is then listed or reported, or by a regulatory body
having jurisdiction with respect hereto) no such termination,
amendment, or modification may:
(i) materially increase the total number of shares that
may be granted to Insiders under this Plan;
(ii) materially modify the requirements as to eligibility
for Insiders to participate in the Plan;
(iii) materially increase the benefits to Insiders under
the Plan.
12.2 Options Previously Granted. No amendment, modification, or
termination of the Plan shall in any manner adversely affect any outstanding
Option under the Plan without the consent of the Optionee holding the Option.
Article XIII. Merger, Consolidation or Acceleration Event
13.1 Merger, Consolidation.
(a) Subject to any required action by the shareholders, if the
Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to
and apply to the securities to which a holder of the number of
shares of Stock subject to the Option would have been entitled
in such merger or consolidation.
(b) A dissolution or a liquidation of the Company or a merger and
consolidation in which the Company is not the surviving
corporation shall cause every Option outstanding hereunder to
terminate as of the effective date of such dissolution,
liquidation, merger or consolidation. However, the Optionee
either (i) shall be offered a firm commitment whereby the
resulting or surviving corporation in a merger or
consolidation will tender to the Optionee an option (the
"Substitute Option") to purchase its shares on terms and
conditions both as to number of shares and otherwise, which
will substantially preserve to the Optionee the rights and
benefits of the Option outstanding hereunder granted by the
Company, or (ii) shall have the right immediately prior to
such merger, or consolidation to exercise any unexercised
Options whether or not then exercisable, subject to the
provisions of this Plan. The Board shall have absolute and
uncontrolled discretion to determine whether the Optionee has
been offered a firm commitment and whether the tendered
Substitute Option will substantially preserve to the Optionee
the rights and benefits of the Option outstanding hereunder.
In any event, any Substitute Option for an Incentive Stock
Option shall comply with the requirements of Code Section
424(a).
13.2 Impact of Acceleration Event. All options granted hereunder will
become fully exercisable and vested in the event of a "Acceleration Event" as
defined in Section 13.3 or a "Potential Acceleration Event" as defined in
Section 13.4.
13.3 Definition of "Acceleration Event." For purposes of Section 13.2,
an "Acceleration Event" means the happening of any of the following:
(a) When any "person" as defined in Section 3(a) (9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the
Exchange Act, but excluding the Company or any subsidiary or
parent or any employee benefit plan sponsored or maintained by
the Company or any subsidiary or parent (including any trustee
of such plan acting as trustee), directly or indirectly,
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act, as amended from time to time), of securities
of the Company representing 30 percent or more of the combined
voting power of the Company's then outstanding securities;
(b) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning
of such period, constitute the Board ("Incumbent Directors")
cease for any reason other than death to constitute at least a
majority thereof; provided, however, that a Director who was
not a Director at the beginning of such 24-month period will
be deemed to have satisfied such 24-month requirement (and be
an Incumbent Director) if such Director was elected by, or on
the recommendation or, or with the approval of, at least 60%
of the Directors who then qualified as Incumbent Directors
either actually (because they were Directors at the beginning
of such 24-month period) or by prior operation of this Section
13.3(b); or
(c) The approval by the shareholders of any sale, lease, exchange,
or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company or the adoption of any plan or proposal for the
liquidation or dissolution of the Company.
13.4 Definition of "Potential Acceleration Event." For purposes of
Section 13.2, a "Potential Acceleration Event" means the approval by the Board
of an agreement by the Company the consummation of which would result in an
Acceleration Event of the Company as defined in Section 13.3.
Article XIV. Securities Registration
14.1 Securities Registration. In the event that the Company shall deem
it necessary or desirable to register under the Securities Act of 1933, as
amended, or any other applicable statute, any Options or any Stock with respect
to which an Option may be or shall have been granted or exercised, or to qualify
any such Options or Stock under the Securities Act of 1933, as amended, or any
other statute, then the Optionee shall cooperate with the Company and take such
action as is necessary to permit registration or qualification of such Options
or Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing (a) that he or she is
acquiring such shares for his or her own account for investment and not with a
view to, or for sale in connection with, the distribution of any part thereof,
(b) that before any transfer in connection with the resale of such shares, he or
she will obtain the written opinion of counsel for the Company, or other counsel
acceptable to the Company, that such shares may be transferred. The Company may
also require that the certificates representing such shares contain legends
reflecting the foregoing.
Article XV. Tax Withholding
15.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require an Optionee to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the Optionee's
FICA obligation) required by law to be withheld with respect to any grant,
exercise, or payment made under or as a result of the Plan.
15.2 Share Withholding. With respect to withholding required upon the
exercise of Options, or upon any other taxable event hereunder, Optionees may
elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold shares having a
Fair Market Value, on the date the tax is to be determined, equal to the minimum
marginal tax which could be imposed on the transaction.
Share withholding upon the exercise of an Option will be done if the
Optionee makes a signed, written election and either of the following occurs:
(a) The Option exercise occurs during a "window period" and the
election to use such share withholding is made at any time
prior to exercise. For this purpose, "window period" means the
period beginning on the third business day following the date
of public release of the Company's quarterly financial
information and ending after the twelfth business day
following such date. An earlier election can be revoked up
until the exercise of the Option during the window period; or
(b) An election to withhold shares is made at least six months
before the Option is exercised. If this election is made, then
the Option can be exercised and shares may be withheld outside
of the window period.
Article XVI. Indemnification
16.1 Indemnification. To the extent permitted by law, each person who
is or shall have been a member of the Committee or of the Board shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan and against and from
any and all amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of judgment in any such action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
articles of incorporation or bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
Article XVII. Requirements of Law
17.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
17.2 Governing Law. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of South Dakota.
17.3 Compliance with the Code. Incentive Stock Options granted
hereunder are intended to qualify as "incentive stock options" under Code
Section 422. If any provision of this Plan is susceptible to more than one
interpretation, such interpretation shall be given thereto as is consistent with
Incentive Stock Options granted under this Plan being treated as incentive stock
options under the Code.
Article XVIII. Effective Date of Plan
18.1 Effective Date. Subject to ratification by an affirmative vote of
holders of a majority of shares present and entitled to vote at the 1996 Annual
Meeting, the Plan shall be effective as of December 19, 1995, the date of its
adoption by the Board.
Article XIX. No Obligation to Exercise Option
19.1 No Obligation to Exercise. The granting of an Option shall impose
no obligation upon the holder thereof to exercise such Option.
Article XX. Nonexclusivity of the Plan
20.1 Nonexclusivity of the Plan. The adoption of this Plan will not be
construed as limiting the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including the granting of stock options
otherwise than under this Plan. Such arrangements may be either generally
applicable or applicable only in specific cases.
DAKOTAH, INCORPORATED
By /s/ Troy Jones, Jr.
Its Chief Executive Officer
APPENDIX
DAKOTAH, INCORPORATED
1996 STOCK OPTION PLAN FOR DIRECTORS
Article I. Establishment and Purpose
1.1 Establishment. Dakotah, Incorporated, a South Dakota Corporation
("Company"), hereby establishes a stock option plan for members of its Board of
Directors, as described herein, which shall be known as the "1996 STOCK OPTION
PLAN FOR DIRECTORS" ("Plan").
1.2 Purpose. The purposes of this Plan are to enhance shareholder
investment by attracting, retaining, and motivating Directors of the Company who
are not officers of the Company and to encourage stock ownership by such
Directors by providing them with a means to acquire a proprietary interest in
the Company's success.
Article II. Definitions
2.1 Definitions. Unless the context clearly requires otherwise, the
following terms shall have the respective meanings set forth below, and when
said meaning is intended, the term shall be capitalized.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee, as specified in Article
IV hereof, appointed by the Board to administer the Plan.
(d) "Company" means Dakotah, Incorporated, a South Dakota
corporation (including any and all subsidiaries).
(e) "Date of Exercise" means the date the Company receives notice,
by an Optionee, of the exercise of an Option pursuant to
Section 8.1 of this Plan. Such notice shall indicate the
number of shares of Stock as to which the Optionee intends to
exercise an Option.
(f) "Director" means any person, excluding any officer of the
Company, who has been elected to the Board of Directors of the
Company and is currently serving on the Board.
(g) "Exchange Act" means the Securities and Exchange Act of 1934,
as amended.
(h) "Fair Market Value" means the close price of the Stock as
reported by NASDAQ on the applicable day, or if there has been
no sale on that date, on the last preceding date on which a
sale occurred, or such other value of the Stock as shall be
specified by the Board.
(i) "Option" means the right, granted under this Plan, to purchase
Stock of the Company at the option price for a specified
period of time. For purposes of this Plan, an Option is a
nonstatutory option and is not intended to qualify as an
incentive stock option within the meaning of Section 422 of
the Code.
(j) "Optionee" means a person to whom an Option has been granted
under the Plan.
(k) "Option Price" means the exercise price per share of Stock
purchasable under an Option.
(l) "Option Shares" means the total number of shares of Stock to
which an Option applies.
(m) "Stock" means the Common Stock of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context,
any masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular shall also include
the plural.
2.3 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
Article III. Eligibility and Participation
3.1 Eligibility. Options will be granted only to persons who at the
time of the grant are Directors but not officers of the Company. For purposes of
this Plan, a director who is also the Secretary of the Company is not considered
an "officer."
Article IV. Administration
4.1 The Committee. The Plan shall be administered by a Committee
consisting of such persons as are appointed by the Board from time to time, and
such persons shall serve at the discretion of the Board of Directors.
4.2 Authority of the Committee. The Committee will have full authority
to interpret the Plan, to promulgate such rules and regulations with respect to
the Plan as it deems desirable, and to make all other determinations necessary
or appropriate for the administration of the Plan. Such determinations will be
final and binding upon all persons having an interest in the Plan.
4.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive, and binding on
all persons, including the Company, its shareholders, directors, Optionees, and
their respective successors.
Article V. Stock Subject to the Plan
5.1 Number. Subject to adjustment as provided in Section 5.3 herein,
the total number of shares of Stock hereby made available for grant and reserved
for issuance under the Plan shall be 100,000. The aggregate number of shares of
Stock available under this Plan shall be subject to adjustment as provided in
Section 5.3. The total number of shares of Stock may be authorized but unissued
shares of Stock, or shares acquired by purchase as directed by the Board from
time to time in its discretion, to be used for issuance upon exercise of Options
granted hereunder.
5.2 Lapsed Options. If an Option shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares of Stock
subject thereto shall (unless the Plan shall have terminated) become available
for other Options under the Plan.
5.3 Adjustment in Capitalization. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change, the
aggregate number of shares of Stock set forth in Section 5.1 shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive; provided, however, that fractional shares shall be rounded to the
nearest whole share. In any such case, the number and kind of shares that are
subject to any Option (including any Option outstanding after termination of
service as a Director) and the Option price per share shall be proportionately
and appropriately adjusted without any change in the aggregate Option price to
be paid therefor upon exercise of the Option.
Article VI. Duration of the Plan
6.1 Duration of the Plan. Subject to shareholder approval, the Plan
shall be in effect for ten years from the date of its adoption by the Board. Any
Options outstanding at the end of said period shall remain in effect in
accordance with their terms. The Plan shall terminate before the end of said
period if all Stock subject to it has been purchased pursuant to the exercise of
Options granted under the Plan.
Article VII. Terms of Stock Options
7.1 Grant of Options. Pursuant to this Plan, upon approval of the Plan
by the Company's shareholders each person serving as a Director will be granted
an Option to purchase Four Thousand (4,000) shares of Stock. Except as otherwise
may be provided herein, and without any further action, (i) an Option to
purchase Four Thousand (4,000) shares of Stock shall be granted to each
additional director upon his or her first election to the Board, as of the date
of their election to the Board (whether by Board vote or shareholder vote); and
(ii) an Option to purchase an additional Two Thousand shares of Stock will be
granted to each Director as of the date of each subsequent annual meeting of the
Company's shareholders; provided, however, that the Director has received no
other Option under the Plan during the immediately preceding six month period.
All options granted hereunder will be subject to all terms of this Plan and will
vest on the date of the grant of the Option.
7.2 Option Agreement. As determined by the Committee on the date of
grant, each Option shall be evidenced by an Option agreement which shall
incorporate the terms of this Plan by reference.
7.3 Option Price. The Option Price of an Option granted pursuant to
Section 7.1 is the Fair Market Value on the day the Option is granted to the
Optionee.
7.4 Exercise of Options. Options granted under the Plan shall be
exercisable in accordance with the terms of this Plan. Notwithstanding any other
provision of the Plan, however, in no event may any Option granted under this
Plan become exercisable prior to six months following the date of its grant, or
following the date upon which the Plan is ratified, whichever is later.
7.5 Term of Options. Each Option shall expire on the fifth anniversary
date of its grant.
7.6 Payment. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Committee, in Stock having a Fair Market Value at the
time of the exercise equal to the exercise price (provided that the Stock that
is tendered as payment upon exercise of the Option has been held by the Optionee
for at least six months prior to its tender), or in some other form, including a
combination of the above. In addition, the Company may establish a cashless
exercise program in accordance with Federal Reserve Board Regulation T.
Article VIII. Written Notice, Issuance of
Stock Certificates, Shareholder Privileges
8.1 Written Notice. An Optionee wishing to exercise an Option shall
give written notice to the Chief Financial Officer of the Company, in the form
and manner prescribed by the Committee. Except for approved "cashless
exercises," full payment for the shares exercised pursuant to the Option must
accompany the written notice.
8.2 Issuance of Stock Certificates. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
or to a nominee of the Optionee a certificate or certificates for the requisite
number of shares of Stock. Such certificate may bear a legend restricting
transfer thereof.
8.3 Privileges of a Shareholder. An Optionee or any other person
entitled to exercise an Option under this Plan shall not have shareholder
privileges with respect to any Stock covered by the Option until the date of
issuance of a stock certificate for such stock.
Article IX. Termination of Service as Director
9.1 Death. If an Optionee's service on the Board terminates by reason
of death, the Option may thereafter be exercised at any time prior to the
expiration date of the Option or within 12 months after the date of such death,
whichever period is the shorter, by the person or persons entitled to do so
under the Optionee's will or, if the Optionee shall fail to make a testamentary
disposition of an Option or shall die intestate, the Optionee's legal
representative or representatives. The Option shall be exercisable only to the
extent that such Option was exercisable as of the date of death.
9.2 Termination Other Than For Cause Or Due to Death. In the event of
an Optionee's termination of service on the Board, in the case of a Director,
other than by reason of death or for cause, the Optionee may exercise such
portion of his Option as was exercisable by him at the date of such termination
(the "Termination Date") at any time within three (3) months of the Termination
Date; provided, however, that where the Optionee is a Director, and is
terminated due to disability within the meaning of Code Section 422(c)(6), such
Optionee may exercise such portion of any Option as was exercisable by such
Optionee on his or her Termination Date within one year of such Termination
Date. In any event, the Option cannot be exercised after the expiration of the
term of the Option. Options not exercised within the applicable period specified
above shall terminate.
9.3 Termination for Cause. In the event of an Optionee's termination of
service on the Board, in the case of a Director, which termination is by the
Company for cause, any Option or Options held by such Optionee under the Plan,
to the extent not exercised before such termination, shall terminate
immediately.
Article X. Rights of Optionees
10.1 Service. Nothing in this Plan shall interfere with or limit in any
way the right of the Company to terminate any Optionee's services as a director,
at any time, nor confer upon any Optionee any right to continue as a director of
the Company.
10.2 Nontransferability. Except as otherwise determined by the
Committee in the case of Nonstatutory Options, all Options granted under this
Plan shall be nontransferable by the Optionee, other than by will or the laws of
descent and distribution, and shall be exercisable during the Optionee's
lifetime only by the Optionee.
Article XI. Amendment,
Modification, and Termination of the Plan
The Board may suspend or terminate the Plan or any portion thereof at
any time, and the Board may amend the Plan from time to time as may be deemed to
be in the best interests of the Company; provided, however, that no such
amendment, alteration, or discontinuation will be made (a) that would impair the
rights of a Director with respect to an Option previously awarded, without such
person's consent, or (b) without the approval of the shareholders, if such
approval is necessary to comply with any legal, tax, or regulatory requirement,
including any approval requirement that is a prerequisite for exemptive relief
from Section 16(b) of the Exchange Act. No amendment will be made that will
change the terms of the Options to be granted hereunder with regard to amount,
exercise price, vesting or date of grant more than once every six months other
than to comport to changes in the Code, Employee Retirement Income Security Act,
or the rules thereunder.
Article XII. Merger or Consolidation
12.1 Merger or Consolidation.
(a) Subject to any required action by the shareholders, if the
Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to
and apply to the securities to which a holder of the number of
shares of Stock subject to the Option would have been entitled
in such merger or consolidation.
(b) A dissolution or a liquidation of the Company or a merger and
consolidation in which the Company is not the surviving
corporation shall cause every Option outstanding hereunder to
terminate as of the effective date of such dissolution,
liquidation, merger or consolidation. However, the Optionee
either (i) shall be offered a firm commitment whereby the
resulting or surviving corporation in a merger or
consolidation will tender to the Optionee an option (the
"Substitute Option") to purchase its shares on terms and
conditions both as to number of shares and otherwise, which
will substantially preserve to the Optionee the rights and
benefits of the Option outstanding hereunder granted by the
Company, or (ii) shall have the right immediately prior to
such merger, or consolidation to exercise any unexercised
Options, subject to the provisions of this Plan. The Board
shall have absolute and uncontrolled discretion to determine
whether the Optionee has been offered a firm commitment and
whether the tendered Substitute Option will substantially
preserve to the Optionee the rights and benefits of the Option
outstanding hereunder.
Article XIII. Securities Registration
13.1 Securities Registration. In the event that the Company shall deem
it necessary or desirable to register under the Securities Act of 1933, as
amended, or any other applicable statute, any Options or any Stock with respect
to which an Option may be or shall have been granted or exercised, or to qualify
any such Options or Stock under the Securities Act of 1933, as amended, or any
other statute, then the Optionee shall cooperate with the Company and take such
action as is necessary to permit registration or qualification of such Options
or Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing (a) that he or she is
acquiring such shares for his or her own account for investment and not with a
view to, or for sale in connection with, the distribution of any part thereof,
(b) that before any transfer in connection with the resale of such shares, he or
she will obtain the written opinion of counsel for the Company, or other counsel
acceptable to the Company, that such shares may be transferred. The Company may
also require that the certificates representing such shares contain legends
reflecting the foregoing.
Article XIV. Tax Withholding
14.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require an Optionee to remit to the Company, an amount
sufficient to satisfy Federal, state, and local taxes (including the Optionee's
FICA obligation, if any, required by law to be withheld with respect to any
grant, exercise, or payment made under or as a result of the Plan.
14.2 Share Withholding. With respect to withholding required upon the
exercise of Options, or upon any other taxable event hereunder, Optionees may
elect, subject to the approval of the Committee, to satisfy the withholding
requirement, in whole or in part, by having the Company withhold shares having a
Fair Market Value, on the date the tax is to be determined, equal to the minimum
marginal tax which could be imposed on the transaction.
Share withholding upon the exercise of an Option will be done if the
Optionee makes a signed, written election and either of the following occurs:
(a) The Option exercise occurs during a "window period" and
the election to use such share withholding is made at any time prior to
exercise. For this purpose, "window period" means the period beginning
on the third (3rd) business day following the date of public release of
the Company's quarterly financial information and ending after the
twelfth (12th) business day following such date. An earlier election
can be revoked up until the exercise of the Option during the window
period; or
(b) An election to withhold shares is made at least six months
before the Option is exercised. If this election is made, then the
Option can be exercised and shares may be withheld outside of the
window period.
Article XV. Indemnification
15.1 Indemnification. To the extent permitted by law, each person who
is or shall have been a member of the Committee or of the Board shall be
indemnified and held harmless by the Company against and from any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan and against and from
any and all amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of judgment in any such action,
suit, or proceeding against him or her, provided he or she shall give the
Company an opportunity, at its own expense, to handle and defend the same before
he or she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
articles of incorporation or bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
Article XVI. Requirements of Law
16.1 Requirements of Law. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or national securities exchanges as may be required.
16.2 Governing Law. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of South Dakota.
Article XVII. Effective Date of Plan
17.1 Effective Date. Subject to ratification by an affirmative vote of
holders of a majority of shares present and entitled to vote at the 1996 Annual
Meeting, the Plan shall be effective as of May 9, 1996, the date of its adoption
by the Board.
Article XVIII. No Obligation to Exercise Option
18.1 No Obligation to Exercise. The granting of an Option shall impose
no obligation upon the holder thereof to exercise such Option.
Article XIX. Nonexclusivity of the Plan
19.1 Nonexclusivity of the Plan. The adoption of this Plan will not be
construed as limiting the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including the granting of stock options
otherwise than under this Plan. Such arrangements may be either generally
applicable or applicable only in specific cases.
DAKOTAH, INCORPORATED
By /s/ Troy Jones, Jr.
Its Chief Executive Officer
- - --------------------------------------------------------------------------------
PROXY
DAKOTAH, INCORPORATED
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS -- JUNE 12, 1996
The undersigned stockholder of Dakotah, Incorporated (the "Company") hereby
appoints Troy Jones, Jr. and George C. Whyte, or either of them, as agents,
attorneys and proxies of the undersigned with full power of substitution in each
of them, to vote, as designated below, in the name and on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held on
June 12, 1996 at 5:30 p.m. at Webster High School, Webster, South Dakota, and at
all adjournments thereof, all of the shares of Common Stock of the Company which
the undersigned would be entitled to vote if personally present, with all powers
the undersigned would possess if personally present.
Item 1. Authority to vote for the election of the following nominees as
directors: James D. Becker, Linda J. Laskowski and Lee A. Schoenbeck
for three year terms and Leo T. Reynolds for a one year term. YOU MAY
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE BY STRIKING A
LINE THROUGH THE NOMINEE'S NAME. TO CUMULATE VOTES AS TO A PARTICULAR
NOMINEE(S) AS EXPLAINED IN THE PROXY STATEMENT DATED MAY 13, 1996,
INDICATE THE NAME(S) AND NUMBER OF VOTES TO BE GIVEN TO SUCH
NOMINEE(S).
[ ] GRANT [ ] WITHHOLD
Item 2. Approve adoption of the 1995 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 3. Approve adoption of the 1996 Stock Option Plan for Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 4. Ratifying the appointment of Grant Thornton LLP as independent
auditors for the current fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Item 5. In their discretion upon such other business as may properly come
before the meeting.
All as described in the Notice of Annual Meeting of Stockholders and Proxy
Statement, receipt of which is hereby acknowledged.
(Continued, and to be completed and signed on the other side)
(continued from other side)
ALL SHARES WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THE SHARES
WILL BE VOTED FOR THE NOMINEES, TO APPROVE ADOPTION OF THE 1995 STOCK OPTION
PLAN, TO APPROVE ADOPTION OF THE 1996 STOCK OPTION PLAN FOR DIRECTORS, TO
APPROVE THE APPOINTMENT OF GRANT THORNTON LLP AND IN ACCORDANCE WITH THE
PROXIES' DISCRETION IN CONNECTION WITH SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING. Either of said attorneys or their substitutes who shall be
present and act, or if only one shall attend, then that one, shall have and may
exercise all the powers of said attorneys hereunder.
Dated: ______________________________, 1996
___________________________________________
Print Name(s) of Shareholder(s)
___________________________________________
Signature of Shareholder
___________________________________________
Signature of Joint Owner
(Signature should agree with stenciled
name(s).) When signing as attorney,
guardian, executor, administrator or
trustee, please give title. EACH joint owner
must sign. If the signer is a corporation,
give full corporate name and sign by duly
authorized officer, showing officer's title.
PLEASE EXECUTE AND RETURN THIS PROXY PROMPTLY.
YOUR COOPERATION IS SINCERELY APPRECIATED.
