SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SWIFT TRANSPORATION CO., INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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<PAGE>
SWIFT TRANSPORTATION CO., INC.
1455 HULDA WAY
SPARKS, NEVADA 89431
---------------------------------
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
---------------------------------
To Our Stockholders:
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of Swift
Transportation Co., Inc. (the "Company") will be held at 10:00 a.m., Arizona
Time, on Thursday, May 22, 1997, at the Company's headquarters facility at 2200
South 75th Avenue, Phoenix, Arizona 85043, for the following purposes:
1. To elect two Class I directors to serve for three-year terms;
2. To amend the Swift Transportation Co., Inc. Stock Option Plan
to increase the number of shares authorized for issuance
thereunder from 2,300,000 to 2,550,000; and
3. To transact such other business as may properly come before
the Annual Meeting. Management is presently aware of no other
business to come before the meeting.
Each outstanding share of the Company's Common Stock entitles the
holder of record at the close of business on March 26, 1997 to receive notice of
and to vote at the Annual Meeting or any adjournment thereof (the "Record
Date"). Shares of Common Stock can be voted at the Annual Meeting only if the
holder is present in person or by valid proxy. A copy of the Company's 1996
Annual Report to Stockholders, which includes certified financial statements, is
enclosed. Management cordially invites you to attend the Annual Meeting.
By Order of the Board of Directors
/s/ Jerry C. Moyes
Phoenix, Arizona Jerry C. Moyes
April 22, 1997 Chairman of the Board, President
and Chief Executive Officer
IMPORTANT
STOCKHOLDERS ARE REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY. A
POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED STATES.
<PAGE>
SWIFT TRANSPORTATION CO., INC.
1455 HULDA WAY
SPARKS, NEVADA 89431
---------------------------
PROXY STATEMENT
---------------------------
This Proxy Statement is furnished to the stockholders of Swift
Transportation Co., Inc. (the "Company") in connection with the solicitation of
proxies to be used in voting at the Annual Meeting of Stockholders to be held on
May 22, 1997. The enclosed proxy is solicited by the Board of Directors of the
Company. The proxy materials relating to the Annual Meeting are first being
mailed on or about April 22, 1997 to stockholders of record at the close of
business on March 26, 1997 (the "Record Date"). A person giving the enclosed
proxy has the power to revoke it at any time before it is exercised by: (i)
attending the Annual Meeting and voting in person; (ii) duly executing and
delivering a proxy bearing a later date; or (iii) sending written notice of
revocation to the Secretary of the Company at P.O. Box 29243, Phoenix, Arizona,
85038-9243.
The Company will bear the cost of solicitation of proxies, including
the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of the outstanding Common Stock of
the Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone or telegraph.
VOTING SECURITIES OUTSTANDING
As of the Record Date, there were 27,973,284 shares of the Company's
Common Stock outstanding. Stockholders are entitled to one vote for each share
held of record on each matter of business to be considered at the Annual
Meeting. Only holders of record of Common Stock at the close of business on the
Record Date will be entitled to vote at the Annual Meeting, either in person or
by valid proxy. Ballots cast at the Annual Meeting will be counted by the
Inspector of Elections and determinations of whether a quorum exists and whether
the proposals are approved will be announced at the Annual Meeting. The
Inspector of Elections will treat abstentions and broker non-votes received as
shares that are present and entitled to vote for purposes of determining a
quorum, but as unvoted for purposes of determining the approval of any matter.
If a broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
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ACTION TO BE TAKEN UNDER THE PROXIES
A properly executed proxy in the enclosed form will be voted in
accordance with the instructions thereon. If no instructions are given with
respect to the matters to be acted on, the persons acting under the proxies will
vote the shares represented thereby in favor of the election of the nominees for
directors named herein and at their discretion as to such other business as may
come before the meeting or any adjournment thereof. The Board of Directors is
not aware of any other business to be brought before the meeting. If other
proper matters or matters of which the Board is not aware a reasonable time
prior to the meeting are introduced, then, to the extent permissible by law, the
persons named in the enclosed proxy will vote the shares they represent in
accordance with their judgment.
The information included herein should be reviewed in conjunction with
the consolidated financial statements, notes to consolidated financial
statements, independent auditors' reports and other information included in the
Company's 1996 Annual Report to Stockholders that was mailed with this Proxy
Statement to all stockholders of record on the Record Date.
ELECTION OF DIRECTORS
(Proposal No. 1)
The Articles of Incorporation of the Company divides the Board of
Directors into three classes serving staggered terms. One class of directors is
elected each year for a term of three years. The term of office of directors in
Class I will expire at the Annual Meeting. At the Annual Meeting, stockholders
will be asked to elect two directors to Class I for terms that will expire at
the close of the Annual Meeting of Stockholders held in 2000. The Board of
Directors has nominated Rodney K. Sartor and Earl H. Scudder, Jr. as nominees
for election to Class I. Messrs. Sartor and Scudder are the incumbent Class I
directors. Unless otherwise noted thereon, the shares represented by the
enclosed proxy will be voted for the election of Messrs. Sartor and Scudder as
directors of the Company. If any of them become unavailable for any reason or if
a vacancy should occur before election (which events are not anticipated), the
shares represented by the enclosed proxy may be voted for such other person or
persons as may be determined by the holders of such proxy. Election of the
director nominees will require the affirmative vote of a majority of the
outstanding Common Stock represented at the Annual Meeting. Each director
elected will serve for three years and until his successor is duly elected and
qualified.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ELECTION OF
THE CLASS I DIRECTOR NOMINEES.
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INFORMATION CONCERNING DIRECTORS, NOMINEES AND OFFICERS
Information concerning the names, ages, terms, positions with the
Company and business experience of the Company's current directors, director
nominees and executive officers is set forth below.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
Jerry C. Moyes(1)(2) 53 Chairman of the Board, Class III - 1999
President and Chief
Executive Officer
William F. Riley, III 50 Executive Vice President, Class III - 1999
Chief Financial Officer,
Secretary and Director
Rodney K. Sartor 42 Executive Vice President Class I - 1997
and Director
Alphonse E. Frei(1)(2) 58 Director Class II - 1998
Lou A. Edwards(2) 83 Director Class III - 1999
Earl H. Scudder, Jr.(1) 54 Director Class I - 1997
Kevin H. Jensen 43 Executive Vice President
- ------------------------------------
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Jerry C. Moyes has served as the Chairman of the Board, President and
Chief Executive Officer of the Company since 1984. Mr. Moyes joined the Company
in 1966 as a Vice President and served in that capacity until 1984. Mr. Moyes
was President of the Arizona Motor Transport Association from 1987 to 1988.
William F. Riley, III has served as an Executive Vice President, Chief
Financial Officer, Secretary and a Director of the Company since March 1990 and
as a Vice President of Cooper Motor Lines and Swift Leasing Co., Inc. since
April 1988 and May 1986, respectively. Prior to joining Swift in February 1986,
Mr. Riley was employed by Armour Food Co. from 1978 to January 1986, serving in
various transportation and distribution assignments, principally Manager of
Business Planning of Armour Food Express, its truckload motor carrier.
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Rodney K. Sartor has served as an Executive Vice President and a
Director of the Company since May 1990. Mr. Sartor joined Swift in May 1979. He
served as Director of Operations from May 1982 until August 1988 and as a
Regional Vice President from August 1988 until May 1990.
Alphonse E. Frei has served as a Director of the Company since May
1990. Mr. Frei served in various capacities, including Chief Financial Officer,
with America West Airlines from 1983 to 1994 and served as a director of America
West Airlines from 1986 to September 1993. Mr. Frei has served in various
executive capacities or as a consultant to a number of business organizations.
Lou A. Edwards has served as a Director of the Company since May 1990.
Mr. Edwards is the President of Sundance Truck Centers, a truck dealership,
which he founded in 1975, and has 40 years of experience in the trucking
industry.
Earl H. Scudder, Jr. has served as a Director of the Company since May
1993. Mr. Scudder has been President of the Scudder Law Firm, P.C. in Lincoln,
Nebraska since February 1990, and has engaged in the private practice of law
since 1966. Mr. Scudder also served as a director of Heartland Express, Inc. a
publicly-held trucking company, until 1996, and serves as a director of Transcom
Technologies, Inc., a telecommunications company.
Kevin H. Jensen was named an executive officer of the Company in
October 1996, and has served as an Executive Vice President of the Company since
December 1994. Mr. Jensen joined the Company in December 1986 and served the
Company in various capacities, including Director of Operations - Eastern
Division and Vice President - Eastern Division, prior to his promotion to
Executive Vice President in December 1994.
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MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES
Board of Directors. During the year ended December 31, 1996, the Board
of Directors of the Company met on four occasions. Each of the directors
attended all of the meetings of the Board of Directors and all of the meetings
held by committees of the Board on which he served.
Compensation Committee. The Compensation Committee of the Board of
Directors, which met once during 1996, reviews all aspects of compensation of
executive officers of the Company and makes recommendations on such matters to
the full Board of Directors. The Report of the Compensation Committee for 1996
is set forth below.
Audit Committee. The Audit Committee, which met once during 1996, makes
recommendations to the Board concerning the selection of outside auditors,
reviews the financial statements of the Company and considers such other matters
in relation to the external audit of the financial affairs of the Company as may
be necessary or appropriate in order to facilitate accurate and timely financial
reporting. The Audit Committee also reviews proposals for major transactions.
Other Committees. The Company does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors consists of Jerry C. Moyes,
Alphonse E. Frei and Lou A. Edwards. Mr. Moyes also serves as the President and
Chief Executive Officer of the Company.
The Company leases various properties from entities owned by or
affiliated with Jerry C. Moyes. For the year ended December 31, 1996, the
Company expended an aggregate of $968,000 in rental payments on such leases.
Interstate Equipment Leasing, Inc. ("Interstate Leasing"), a
corporation wholly-owned by Jerry C. Moyes, leases tractors to some of the
Company's owner operators. In connection with this program, during 1996 the
Company acquired $13,200,000 of new revenue equipment on behalf of Interstate
Leasing, for which the Company recognized fee income of $855,000. During 1996,
the Company also sold used revenue equipment to Interstate Leasing totaling
$700,000 and recognized gains of $114,000.
Interstate Leasing also provides air transportation services to the
Company. The Company paid Interstate Leasing $450,000 for air transportation
services for the year ended December 31, 1996. At December 31, 1996, $40,000 was
owed to Interstate Leasing for air transportation services.
In 1995, Interstate Leasing invested in a regional less-than-truckload
carrier Jaguar Fast Freight. In 1996, the Company sold Interstate Leasing double
trailer configurations and related
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dollies for $45,000 at no gain or loss to the Company. The Company also provides
repair and maintenance services to Jaguar equipment and bills Interstate Leasing
for such services. In 1996, such services totaled $8,000.
During 1996, the Company provided transportation services to SME
Industries, Inc. ("SME"), a steel fabrication company owned by Jerry C. Moyes.
For the year ended December 31, 1996, the Company recognized $167,000 in
operating revenue from SME.
During 1996, the Company acquired a substantial amount of revenue
equipment from Freightliner Corporation. Although the Company negotiated
directly with Freightliner, pursuant to Freightliner's marketing policy of
selling only through dealers, the transactions are invoiced through Sundance
Truck Centers ("Sundance"), of which Lou A. Edwards, a director of the Company,
is the President and sole stockholder. In consideration therefor, Freightliner
permits Sundance to retain a fee of less than one percent of the acquisition
price for the equipment. In 1996, the Company acquired $101,816,000 of
Freightliner equipment that was delivered through Sundance and Sundance received
approximately $716,000 in connection with such acquisitions. In 1996, the
Company purchased parts and services from Sundance totaling $2,379,000.
All of the foregoing arrangements were approved by the independent
members of the Board of Directors. The Company believes that the terms of the
foregoing transactions with entities affiliated with Compensation Committee
members were as favorable to the Company as those which would have been
available from an independent third party.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive an annual
retainer of $3,000, plus $500 per meeting of the Board of Directors attended by
the director. Pursuant to the Company's Non-Employee Director's Stock Option
Plan, non-employee directors also receive an annual grant of an option to
purchase 1,000 shares of the Company's Common Stock at an exercise price equal
to 85% of the fair market value of such stock on the date of grant and which
vest immediately upon the date of grant. These options are granted to the
non-employee directors on the last trading day in May.
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EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1996, 1995 and 1994, of those persons who were,
at December 31, 1996 (i) the Chief Executive Officer and (ii) the other four
executive officers of the Company (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
All Other
Name and Principal Position Year Salary Bonus Compensation(1)
--------------------------- ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Jerry C. Moyes 1996 $270,371 $366,161 $160,376
Chairman of the Board & President 1995 310,370 329,026 161,907
1994 270,371 343,954 155,114
William F. Riley III 1996 $162,225 $366,161 $19,553
Executive Vice President & 1995 162,225 329,026 20,519
Chief Financial Officer 1994 162,226 343,954 13,743
Robert W. Cunningham 1996 $162,225 $366,161 $18,937
Executive Vice President(2) 1995 162,225 329,026 19,296
1994 162,226 343,954 13,284
Rodney K. Sartor 1996 $162,225 $366,161 $14,953
Executive Vice President 1995 162,225 329,026 15,581
1994 162,226 343,954 8,253
Kevin H. Jensen 1996 $162,225 $187,775 $11,928
Executive Vice President(3)
</TABLE>
- ------------------------------
(1) "All Other Compensation" for each of the Named Officers included
Company contributions in the amount of $11,928 for 1996, $13,276 for
1995 and $6,288 for 1994, pursuant to the Swift Transportation Co.,
Inc. Retirement Plan, a 401(k) profit sharing plan (the "401(k) Plan").
The balance of compensation included in "All Other Compensation" for
each of the Named Officers during each of the identified periods
represents Company payments of term life and disability insurance
premiums on behalf of the respective Named Officers. The amount of such
insurance premiums paid on behalf of Mr. Riley during 1996, 1995 and
1994 was $7,625, $7,243 and $7,455, respectively. The amount of such
insurance premiums paid on behalf of Mr. Cunningham during 1996, 1995
and 1994 was $7,009, $6,020 and $6,996, respectively. The amount of
such insurance premiums paid on behalf of Mr. Sartor during 1996, 1995
and 1994 was $3,025, $2,305 and $1,965, respectively. The Company does
not pay such premiums for Mr. Jensen. The Company procured two term
life insurance policies with a combined face amount of $20 million for
the benefit of Jerry C. Moyes and his spouse. The aggregate annual
premiums paid by the Company for these polices were $ 148,448, $148,631
and $148,826 in 1996, 1995 and 1994, respectively. The Company's
purpose in maintaining these policies is to ensure that, in the event
of the Moyes' deaths, their estate would be able to satisfy estate
taxes without having to sell a large block of the Company's Common
Stock, which might adversely affect the market for the Common Stock.
(2) Mr. Cunningham resigned his positions with the Company in April 1997.
(3) Mr. Jensen was named an executive officer of the Company in October
1996.
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OPTION GRANTS IN LAST FISCAL YEAR
The Company made no grants of stock options to the Named Officers
during the year ended December 31, 1996.
The table below sets forth information with respect to the exercise of
stock options during the fiscal year ended December 31, 1996, by the Named
Officers. The Company does not have a long-term incentive plan or a defined
benefit or actuarial plan and has never issued any stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUE AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Value of Unexercised In-the-
Number of Unexercised Options Money Options at Fiscal Year
at Fiscal Year End (#) End ($)
Shares
Acquired on
Name Exercise (#)(1) Value Realized ($)(2) Exercisable Unexercisable(3) Exercisable Unexercisable(4)
<S> <C> <C> <C> <C> <C> <C>
Jerry C. Moyes -- -- -- -- -- --
President & Chief Executive
Officer(5)
William F. Riley III 36,000 $601,500 -- 108,000 -- $2,236,500
Executive Vice President &
Chief Financial Officer
Robert W. Cunningham -- -- 36,000 108,000 $745,500 $2,236,500
Executive Vice President(6)
Rodney K. Sartor 36,000 $529,500 -- 108,000 -- $2,236,500
Executive Vice President
Kevin H. Jensen -- -- -- 50,000 -- $743,625
Executive Vice President(7)
============================ ============== =================== ============= ================ ============= =================
</TABLE>
- ----------------------
(1) Represents shares of Common Stock acquired pursuant to exercise of
options under the Company's Stock Option Plan. The exercise price for
such shares was $2.79 per share.
(2) Based on the $19.50 and $17.50 last reported sales price of the
Company's Common Stock on August 21, 1996 and April 10, 1996,
respectively, for Messrs. Riley and Sartor, respectively.
(3) All outstanding options, other than Mr. Jensen's, were granted in 1990
and one-fifth of the shares underlying such options first became
exercisable in March 1995. Thereafter, one-fifth of the options become
exercisable in each successive year. The exercise price of the options
is $2.79 per share. The number of options and the option exercise price
reflect a 3-for-2 stock split treated as a dividend of one share of
Common Stock for every two shares of Common Stock outstanding effected
on November 18, 1993 and a 2-for-1 stock split treated as a dividend of
one share of Common Stock outstanding effected on November 18, 1994.
The options will terminate in September 2000.
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<PAGE>
(4) Based on the $23.50 last reported sales price of the Company's Common
Stock on December 31, 1996.
(5) Mr. Moyes has not been awarded any stock options and is not eligible to
participate in the Company's Stock Option Plan or Employee Stock
Purchase Plan. See "Compensation Committee Report on Executive
Compensation" below.
(6) Mr. Cunningham resigned his positions with the Company in April 1997.
(7) Mr. Jensen was granted options in 1992 and 1994 covering 30,000 and
20,000 shares of the Company's Common Stock, respectively. The exercise
price for each of Mr. Jensen's options is $7.08 and $10.94,
respectively. One-fifth of the shares underlying Mr. Jensen's options
will become exercisable in December 1997 and February 1999,
respectively, with one-fifth of the shares underlying such options
becoming exercisable each successive year thereafter.
EMPLOYMENT AGREEMENTS
The Company currently does not have any employment contracts or
severance agreements with any of its executive officers.
CHANGE OF CONTROL ARRANGEMENTS
In the event the Company sells all or substantially all of its assets,
or merges with or into another corporation, stock options outstanding are
required to be assumed or equivalent options are required to be substituted by
such successor corporation or a parent or subsidiary of such successor
corporation, unless the Company's Board of Directors determines, in the exercise
of its sole discretion and in lieu of such assumption or substitution, that the
option holder shall have the right to exercise his or her option, including
shares as to which such option would not otherwise be exercisable. If the Board
makes options fully exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Board must notify the option holder
that the option is fully exercisable for a period of thirty (30) days from the
date of such notice (but not later than the expiration of the term of the
option) and the option will terminate upon the expiration of such period.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies and
programs which seek to enhance the profitability of the Company and thus
shareholder value by aligning the interests of senior management with those of
its shareholders. The Company compensates senior management through a mix of
short-term and long-term compensation programs. The three principal components
of executive compensation are base salary, annual bonus awards and stock
options. Jerry C. Moyes does not participate in the Compensation Committee's
deliberations concerning his compensation.
Base Salary. In setting base salaries of senior management for 1996,
including the salary of Jerry C. Moyes, the Company's Chief Executive Officer,
the Compensation Committee reviewed and considered (i) compensation information
disclosed by similar publicly held truckload motor carriers (all of which
carriers are included in the Nasdaq Trucking and Transportation Stocks Index);
(ii) the financial performance of the Company, as well as the role and
contribution of the particular executive with respect to such performance; and
(iii) nonfinancial performance related to the individual executive's
contributions. The Compensation Committee believes that the annual salaries of
the Company's Chief Executive Officer and its Executive Vice Presidents are at
or slightly below median levels paid by other publicly held truckload motor
carriers of comparable size. However, the Committee believes that, when the base
salary and annual bonus for the Company's executives are aggregated, its
compensation package is competitive with those provided to similarly situated
executives in the truckload motor carrier industry. The Committee has taken
particular note of management's success in assimilating the operations of
acquired carriers into the Company's operations, growing the Company in terms of
revenue, net earnings and earnings per share, and managing the growth
experienced by the Company during the last fiscal year.
Annual Bonus. The Compensation Committee establishes a formula for
determining the bonus pool for the top executive officers. For 1996, the
Compensation Committee determined that the pool for executive bonuses would be
equal to 3.5% of the Company's pre-tax income for the year. The Compensation
Committee believes that this policy properly motivates the executive officers to
perform to the greatest extent of their abilities to generate the highest
attainable profits for the Company. The Compensation Committee decides the
allocation of the bonus pool among the top executive officers on an annual
basis.
Stock Options. The Company believes that it is important for executives
to have an equity stake in the Company in order to encourage them to focus on
long-term prospects. Toward this end, the Company makes option grants to the
Executive Vice Presidents from time to time pursuant to the Company's Stock
Option Plan. In making option grants to the Executive Vice Presidents, the
Compensation Committee evaluates the individual officer's past and expected
future contributions to the Company's achievement of its long-term performance
goals. Because Jerry Moyes is the largest beneficial stockholder of the Company,
the Compensation Committee
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has not awarded any stock options to Mr. Moyes, and Mr. Moyes is not eligible to
participate in the Company's Stock Option Plan or Employee Stock Purchase Plan.
In 1990, the Company awarded options to purchase 180,000 shares of Common Stock
(adjusted for the Company's 3-for- 2 stock split effected in November 1993 and
adjusted for the Company's 2-for-1 stock split effected in November 1994) to
each of the then existing Executive Vice Presidents. In light of these
substantial grants, the Company has not granted any options to those Executive
Vice Presidents since 1990 (although other employees have received option grants
during these years).
Chief Executive Officer. The two members of the Compensation Committee
other than Mr. Moyes evaluate the Chief Executive Officer's performance and
recommend his salary and bonus to the Board of Directors. As noted above, due to
Mr. Moyes' substantial stock ownership of the Company, the Committee has not
included stock options as a component of Mr. Moyes' overall compensation. Due in
part to this omission of option grants, and primarily due to his significant
contributions to the Company and the Company's dependence on Mr. Moyes, Mr.
Moyes' base salary is set significantly above the base salaries for the other
executive officers. The Committee believes that Mr. Moyes' total compensation is
appropriate compared to the total compensation paid to CEOs of comparable
publicly held truckload motor carriers, especially in light of the Company's
operating results and the increase in stockholder value in 1996.
COMPENSATION COMMITTEE
Jerry C. Moyes Alphonse E. Frei Lou A. Edwards
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STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Company, the
Nasdaq Stock Market (U.S.) Index and the Nasdaq Trucking and Transportation
Stocks Index from December 31, 1991 to December 31, 1996. The graph assumes that
$100 was invested on December 31, 1991, and any dividends were reinvested.
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
Nasdaq Stock Market (US) $100 $116.378 $133.595 $130.587 $187.674 $227.164
Swift Transportation Co., Inc. $100 $197.059 $252.941 $482.353 $358.824 $552.941
Nasdaq Trucking & Transportation Index $100 $122.375 $148.676 $134.816 $157.209 $173.495
</TABLE>
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than 10% stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely upon a review of the copies of such forms furnished to
the Company, or written representations that no Forms 5 were required, the
Company believes that during the Company's preceding fiscal year all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with, except (i) Jerry C. Moyes filed a late
Form 4 relating to the sale of 1,000,000 shares of Common Stock in December 1996
pursuant to an underwritten public offering for which a registration statement
on Form S-3 was filed, and (ii) Kevin H. Jensen filed a late Form 3 relating to
his appointment as an executive officer of the Company in October 1996 and a
late Form 5 relating to his purchase of 151 shares of Common Stock in December
1996 pursuant to the Company's Employee Stock Purchase Plan.
14
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth, as of February 28, 1997, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Officer of the Company and by all Directors and Named
Officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner(1) Shares Beneficially Owned Percent Owned
- ------------------------------------ ------------------------- -------------
<S> <C> <C>
Jerry C. Moyes 7,847,152(2) 28.05%
Ronald G. Moyes 4,008,157(2) 14.33%
Lou A. Edwards 174,500 *
William F. Riley III 104,142 *
Robert W. Cunningham(3) 85,242 *
Rodney K. Sartor 67,212 *
Alphonse E. Frei 8,500(4) *
Earl H. Scudder, Jr. 7,000 *
Kevin H. Jensen 666 *
FMR Corporation 2,498,100 8.93%
All Directors and Named 8,294,414(5) 29.53%
Officers as a group
(8 persons)
</TABLE>
- ---------------------------------------
* Represents less than 1% of the Company's outstanding Common Stock.
(1) The address of each officer, director and Ronald G. Moyes is 1455 Hulda
Way, Sparks, Nevada 89431. The address of FMR Corporation is 82 Devonshire
Street, Boston, Massachusetts 02109. Information with respect to FMR
Corporation is based upon a Schedule 13G filed by FMR Corporation with the
Securities and Exchange Commission.
(2) The shares beneficially owned by Jerry C. Moyes are held by him, as
follows: (i) 7,702,152 shares are held as a co-trustee of the Jerry and
Vickie Moyes Family Trust, (ii) 15,000 shares are held by a limited
liability company of which Mr. Moyes has controlling interest, and (iii)
130,000 shares are held by SME Industries, Inc. of which Jerry C. Moyes is
the majority shareholder. The shares shown for Jerry C. Moyes do not
include the 4,008,157 shares held by seven irrevocable trusts for the
benefit of six children of Jerry and Vickie Moyes and by an irrevocable
trust for the benefit of Jerry and Vickie Moyes and six of their children,
the sole trustee of each of which is Ronald Moyes, who has sole investment
and voting power over the trusts. The shares shown for Jerry C. Moyes also
do not include 160,000 shares held by an irrevocable trust for the
children of Jerry and Vickie Moyes, the sole trustee of which is Gerald F.
Ehrlich, who has sole investment and voting power. Of the shares held by
the Jerry and Vickie Moyes Family Trust, 7,599,627 shares have been
pledged to secure loans with lending institutions.
(3) Mr. Cunningham resigned his positions with the Company in April 1997.
(4) Includes options to purchase 4,000 shares of Common Stock granted pursuant
to the Company's Non-Employee Director's Stock Option Plan. 2,000, 1,000
and 1,000 of such options became exercisable on the grant dates of May 27,
1994, May 31, 1995 and May 31, 1996, respectively. Also includes options
to purchase 3,000 shares of Common Stock, which options became exercisable
on June 3, 1993, the date of grant.
(5) Includes 7,000 shares of Common Stock immediately issuable upon exercise
of stock options issued to the Company's non-employee directors. See Note
3 above.
15
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS
During 1996, the Company incurred fees for legal services to the
Scudder Law Firm in the amount of $114,000. Mr. Earl H. Scudder, Jr., a director
of the Company, is a member of the Scudder Law Firm. The Company believes that
the terms of the foregoing transactions were as favorable to the Company as
those which would have been available from an independent third party. See
"Compensation Committee Interlocks and Insider Participation" above for a
description of certain transactions between the Company and members of the
Compensation Committee.
AMENDMENT TO SWIFT TRANSPORTATION CO., INC. STOCK OPTION PLAN
(Proposal No. 2)
General
At the Annual Meeting, the Company will seek stockholder approval of an
amendment (the "Amendment") to the Swift Transportation Co., Inc. Stock Option
Plan (the "Plan") to increase the number of shares authorized for issuance
thereunder from 2,300,000 to 2,550,000. The Plan provides employees with an
incentive to actively direct and contribute to the Company's growth by enabling
them to acquire a proprietary interest in the Company. The Company's Board of
Directors has approved the Amendment to the Plan and has directed that the
Amendment be submitted as a proposal for stockholder approval at the Annual
Meeting. The Plan was originally adopted in 1990.
Current Plan Provisions
The Plan authorizes grants of incentive stock options ("ISOs") and
non-qualified stock options ("NQSOs") to employees of the Company. All of the
Company's employees, except Jerry C. Moyes, are eligible to participate in the
Plan.
The Board of Directors believes that use of stock options authorized
under the Plan is beneficial to the Company as a means of promoting the success
and enhancing the value of the Company by linking the personal interests of its
employees and others to those of its stockholders and by providing employees and
others with an incentive for outstanding performance. These incentives also
provide the Company flexibility in its ability to attract and retain the
services of employees and others upon whose judgment, interest and special
effort the successful conduct of the Company's operation is largely dependent.
The Plan is administered by a committee appointed by the Board
consisting of at least two (2) non-employee directors (the "Committee"). The
Committee has the exclusive authority to administer the Plan, including the
power to determine eligibility, the types and sizes of options and the timing of
options.
16
<PAGE>
Generally, options issued under the Plan have been subject to vesting
over a nine-year period, with 20% of the options becoming exercisable by the
holder thereof on the fifth anniversary of the date of grant and 20% becoming
exercisable on each successive anniversary date of the grant. To date, the
exercise price of options granted under the Plan has been equal to 85% of the
fair market value of the Common Stock on the date of the grant. On March 26,
1997, the last reported sale price of the Common Stock on the Nasdaq National
Market was $26.50 per share.
Incentive Stock Options. An ISO is a stock option that satisfies the
requirements specified in Section 422 of the Internal Revenue Code (the "Code").
Under the Code, ISOs may only be granted to employees. In order for an option to
qualify as an ISO, the price payable to exercise the option must equal or exceed
the fair market value of the stock at the date of the grant, the option must
lapse no later than 10 years from the date of the grant, and the stock subject
to ISOs that are first exercisable by an employee in any calendar year must not
have a value of more than $100,000 as of the date of grant. Certain other
requirements must also be met. The Committee determines the consideration to be
paid to the Company upon exercise of any options. The form of payment may
include cash, Common Stock, or other property.
An optionee is not treated as receiving taxable income upon either the
grant of an ISO or upon the exercise of an ISO. However, the difference between
the exercise price and the fair market value on the date of exercise is an item
of tax preference at the time of exercise in determining liability for the
alternative minimum tax, assuming that the Common Stock is either transferable
or is not subject to a substantial risk of forfeiture under Section 83 of the
Code. If at the time of exercise, the Common Stock is both nontransferable and
is subject to a substantial risk of forfeiture, the difference between the
exercise price and the fair market value of the Common Stock (determined at the
time the Common Stock becomes either transferable or not subject to a
substantial risk of forfeiture) will be a tax preference item in the year in
which the Common Stock becomes either transferable or not subject to a
substantial risk of forfeiture.
If Common Stock acquired by the exercise of an ISO is not sold or
otherwise disposed of within two years from the date of its grant and is held
for at least one year after the date such Common Stock is transferred to the
optionee upon exercise, any gain or loss resulting from its disposition is
treated as long-term capital gain or loss. If such Common Stock is disposed of
before the expiration of the above-mentioned holding periods, a "disqualifying
disposition" occurs. If a disqualifying disposition occurs, the optionee
realizes ordinary income in the year of the disposition in an amount equal to
the difference between the fair market value of the Common Stock on the date of
exercise and the exercise price, or the selling price of the Common Stock and
the exercise price, whichever is less. The balance of the optionee's gain on a
disqualifying disposition, if any, is taxed as capital gain.
The Company is not entitled to any tax deduction as a result of the
grant or exercise of an ISO, or on a later disposition of the Common Stock
received, except that in the event of a
17
<PAGE>
disqualifying disposition, the Company is entitled to a deduction equal to the
amount of ordinary income realized by the optionee.
Non-Qualified Stock Options. A NQSO is any stock option other than an
ISO. Such options are referred to as "non-qualified" because they do not meet
the requirements of, and are not eligible for, the favorable tax treatment
provided by Section 422 of the Code.
No taxable income is realized by an optionee upon the grant of a NQSO,
nor is the Company entitled to a tax deduction by reason of such grant. Upon the
exercise of a NQSO, the optionee realizes ordinary income in an amount equal to
the excess of the fair market value of the Common Stock on the date of exercise
over the exercise price and the Company is entitled to a corresponding tax
deduction.
Upon a subsequent sale or other disposition of Common Stock acquired
through exercise of a NQSO, the optionee realizes a short-term or long-term
capital gain or loss to the extent of any intervening appreciation or
depreciation. Such a resale by the optionee has no tax consequence to the
Company.
The following table sets forth grants of options made under the Plan
during 1996 to (i) each of the executive officers named on page three; (ii) all
current executive officers, as a group; (iii) all current directors who are not
executive officers, as a group; and (iv) all employees, including all current
officers who are not executive officers, as a group. Grants under the Plan are
made at the discretion of the Committee. Accordingly, future grants under the
Plan are not yet determinable.
18
<PAGE>
PLAN BENEFITS
Stock Option Plan
Number of Shares Weighted Average
Subject to Options Exercise Price
Name and Position Granted (#) Per Share ($/sh)
- ----------------- ------------- -----------------
Jerry C. Moyes -- --
Chairman of the Board
& President
William F. Riley III -- --
Executive Vice President &
Chief Financial Officer
Robert W. Cunningham -- --
Executive Vice President(1)
Rodney K. Sartor -- --
Executive Vice President
Kevin H. Jensen -- --
Executive Vice President
Executive Officer Group -- --
Director Group -- --
Employee Group 47,000 $16.60
- ------------------------------
(1) Mr. Cunningham resigned his positions with the Company in April 1997.
Amendments to Plan
The Board of Directors has reviewed the options currently remaining in
the option pool for the Plan and has determined that it is appropriate to
increase the number of shares authorized for issuance under the Plan. As of
March 14,1997, (i) 520,500 shares have been issued upon exercise of options and
are included in the total number of shares of outstanding Common Stock and (ii)
option grants representing 1,521,500 shares were outstanding under the Plan. The
Board believes that an increase in the number of authorized shares is necessary
for the continued optimal use of the Plan. Therefore, the Board is proposing the
Amendment to the Plan that would increase the number of shares authorized for
issuance under the Plan from 2,300,000 to 2,550,000.
19
<PAGE>
Required Vote
Approval of the Amendment to the Plan requires the affirmative vote of
a majority of shares of Common Stock present at the Annual Meeting in person or
by proxy. Abstentions are considered present for this proposal, so they will
have the same effect as votes against the Amendment. Broker non-votes are not
considered present for this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AMENDMENT TO THE SWIFT TRANSPORTATION CO., INC. STOCK OPTION
PLAN.
RELATIONSHIP WITH
INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the
Company during the fiscal year ended December 31, 1996 was KPMG Peat Marwick
LLP, independent certified public accountants (the "Auditors"). It is presently
contemplated that the Auditors will be retained as the principal accounting firm
to be utilized by the Company during the current fiscal year. A representative
of the Auditors will attend the Annual Meeting for the purpose of responding to
appropriate questions and will be afforded an opportunity to make a statement if
the Auditors so desire.
STOCKHOLDER PROPOSALS
Stockholder proposals for the 1998 Annual Meeting must be received at
the principal executive offices of the Company by December 19, 1997 to be
considered for inclusion in the Company's proxy materials relating to such
meeting.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting
any matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
SWIFT TRANSPORTATION CO., INC.
/s/ Jerry C. Moyes
Jerry C. Moyes
Chairman of the Board, President
and Chief Executive Officer
April 22, 1997
20
<PAGE>
SWIFT TRANSPORTATION CO., INC.
Annual Meeting of Stockholders
May 22, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerry C. Moyes and William F. Riley
III, and each of them individually, as proxy with full power of substitution,
and hereby authorizes them to represent and to vote, as designated below, all
shares of Common Stock of Swift Transportation Co., Inc. held of record by the
undersigned on March 26, 1997, at the Annual Meeting of Stockholders to be held
on May 22, 1997, and any adjournments thereof.
(Continued, and to be marked, dated and signed, on the other side)
<PAGE>
The Board of Directors reccommends a vote FOR Proposal I
Proposal 1 - ELECTION OF TWO DIRECTORS TO CLASS 1 OF THE BOARD OF DIRECTORS
Rodney K. Sartor
Earl H. Scudder, Jr.
WITHHELD FOR:(Write that nominee's name in the space provided below).
WITHHELD
FOR FOR ALL
[ ] [ ]
- -------------------
The Board of Directors recommend a vote FOR Proposal 2
Proposal 2 - Approval of amendment to Stock Option Plan to increase authorized
shares from 2,300,000 to 2,550,000.
FOR AGAINST
[ ] [ ]
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is given, this
proxy will be voted for the two director nominees named in proposal 1 for the
increase in the number of shares authorized under the Company's Stock Option
Plan, and at the discretion of the proxies on such other matters as may properly
come before the meeting or any adjournments thereof.
Signature(s)___________________________________________________Date_____________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
<PAGE>
Appendix A
<PAGE>
SWIFT TRANSPORTATION CO., INC.
STOCK OPTION PLAN
(as amended through November 18, 1994)
1. Purpose of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility to provide successful management of the Company's business, to
provide additional incentive to certain key employees of the Company, and to
promote the success of the Company's business through the grant of options to
purchase shares of the Company's Common Stock.
Options granted hereunder may be either "Incentive Stock Options," as
defined in Section 422A of the Code, or "Non-Statutory Stock Options," at the
discretion of the Board and as reflected in the terms of the written option
agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company
or the Committee, if one has been appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
(c) "Common Stock" shall mean the common stock of the Company
described in the Company's Certificate of Incorporation, as amended.
(d) "Company" shall mean a Delaware corporation, and shall
include any parent or subsidiary corporation of the Company as defined
in Sections 425(e) and (f), respectively, of the Code.
(e) "Committee" shall mean the Committee appointed by the
Board in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed.
(f) "Employee" shall mean any person, including officers and
directors, employed by the Company. The payment of a director's fee by
the Company shall not be sufficient to constitute "employment" by the
Company.
(g) "Exchange Act" shall mean the Securities and Exchange Act
of 1934, as amended.
(h) "Fair Market Value" shall mean, with respect to the date a
given Option is granted or exercised, the value of the Common Stock
determined by the Board in such manner as it may deem equitable for
Plan purposes but, in the case of an Incentive Stock Option, no less
than is required by applicable laws or
1
<PAGE>
regulations; provided, however, that where there is a public market for
the Common Stock, the Fair Market Value per Share shall be the mean of
the bid and asked prices of the Common Stock on the date of grant, as
reported in the Wall Street Journal (or, if not reported, as otherwise
reported by the National Association of Securities Dealers Automated
Quotation System) or, in the event the Common Stock is listed on the
New York Stock Exchange or the American Stock exchange. the Fair Market
Value per Share shall be the closing price on such exchange on the date
of grant of the Option, as reported in the Wall Street Journal. If
Options are granted concurrently with an initial public offering of the
Company's Common Stock, the Fair Market Value shall be presumed to be
the price at which the shares are priced to the public through the
offering.
(i) "Incentive Stock Option" shall mean an Option which is
intended to qualify as an incentive stock option within the meaning of
Section 422A of the Code.
(j) "Option" shall mean a stock option granted under the Plan.
(k) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(l) "Optionee" shall mean an Employee of the Company who has
been granted one or more Options.
(m) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 425(e) of the Code.
(n) "Plan" shall mean this Stock Option Plan.
(o) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(p) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 425(f) of the
Code.
(q) "Tax Date" shall mean the date an Optionee is required to
pay the Company an amount with respect to tax withholding obligations
in connection with the exercise of an option.
3. Common Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan the maximum aggregate number of shares which may be
optioned and sold under the Plan is 2,300,000 Shares of Common Stock. The Shares
may be authorized, but unissued, or previously issued Shares acquired or to be
acquired by the Company and held in treasury.
2
<PAGE>
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares covered by such
Option shall, unless the Plan shall have been terminated,. be available for
future grants of Options.
4. Administration of the Plan.
(a) Procedure.
(i) The Plan shall be administered by the Board in
accordance with Securities and Exchange Commission Rule 16b-3
("Rule 16b-3"); provided. however, that the Board may appoint
a Committee to Administer the Plan at any time or from time to
time and, provided further, that if a majority of the Board is
eligible to be granted Options or is otherwise not
"disinterested" within the meaning of Securities and Exchange
Commission Rule 16b-3, then any participation by directors in
the Plan must be administered by a Committee appointed by the
Board.
(ii) The Committee shall consist of at least three
(3) persons, who may, but need not, be members of the Board,
none of whom is eligible to be granted Options or is otherwise
not "disinterested" within the meaning of Securities and
Exchange Commission Rule 16b-3 to administer the Plan on
behalf of the Board, subject to such terms and conditions as
the Board may prescribe. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with
or without cause), and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan;
provided, however, that at no time may any director who is
eligible to be granted Options serve on the Committee nor
shall a Committee of less than three (3) members administer
the Plan.
(b) Powers of the Board. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion: (i) to
grant Incentive Stock Options, in accordance with Section 422A of the
Code, and to grant "nonstatutory stock options;" (ii) to determine,
upon review of relevant information and in accordance with Section 2 of
the Plan, the Fair Market Value of the Common Stock; (iii) to determine
the exercise price per Share of Options to be granted, which exercise
price shall be determined in accordance with Section 8(a) of the Plan;
(iv) to determine the Employees to whom, and the time or times at which
Options shall be granted and the number of shares to be represented by
each Option; (v) to interpret the Plan; (vi) to prescribe, amend and
rescind rules and regulations relating to the Plan; (vii) to determine
the terms and provisions of each
3
<PAGE>
Option granted (which need not be identical) and, with the consent of
the Optionee thereof, modify or amend each Option; (viii) to accelerate
or defer (with the consent of the Optionee) the exercise date of any
Option; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option
previously granted by the Board; (x) to accept or reject the election
made by an Optionee pursuant to Section 17 of the Plan; and (xi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations
and interpretations of the Board shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan.
5. Eligibility.
(a) Consistent with the Plan's purposes, Options may be
granted only to key Employees of the Company as determined by the
Board. An Employee who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
Incentive Stock Options may be granted only to those Employees who meet
the requirements applicable under Section 422A of the Code.
Notwithstanding anything contained herein to the contrary, Jerry Moyes
shall not be eligible to participate in this Plan.
(b) With respect to incentive Stock Options granted under the
Plan, the aggregate fair market value (determined at the time the
Incentive Stock Option is granted) of the Common Stock with respect to
which Incentive Stock Options are exercisable for the first time by the
employee during any calendar year (under all plans of the Company and
its parent and subsidiary corporations) shall not exceed One Hundred
Thousand Dollars ($100,000).
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment with the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.
6. Shareholder Approval and Effective Dates. The Plan shall take effect
on May 17, 1990, the date on which the Board and all stockholders approved the
Plan. No Option may be granted after May 1, 2000 (ten years from the effective
date of the Plan); provided, however, that the Plan and all outstanding Options
shall remain in effect until such Options have expired or until such Options are
canceled.
7. Term of Option. Unless otherwise provided in the Stock Option
Agreement, the term of each Incentive Stock Option shall be five (5) years from
the date of grant thereof. In no case shall the term of any Incentive Stock
Option exceed ten (10) years from the date of grant
4
<PAGE>
thereof. Unless otherwise provided in the Stock Option Agreement, the term of
each Option which is not an Incentive Stock Option shall be eleven years from
the date of grant. Notwithstanding the above, in the case of an Incentive Stock
Option granted to an Employee who, at the time the Incentive Stock Option is
granted, owns ten percent (10%) or more of the Common Stock as such amount is
calculated under Section 422A(b)(6) of the Code ("Ten Percent Shareholder"), the
term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the Stock Option
Agreement.
8. Exercise Price and Payment.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be
determined by the Board, but in the case of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market
Value per Share on the date of grant; provided, further, that in the
case of an Incentive Stock Option granted to an Employee who, at the
time of the grant of such Incentive Stock Option, is a Ten Percent
Shareholder, the per Share exercise price shall be no less than one
hundred ten percent (110%) of the Fair Market Value per Share on the
date of grant. In no event may the exercise price in the case of a
nonstatutory stock option be less than eighty-five (85%) of the Fair
Market Value per share on the date of grant.
(b) Payment. The price of an exercised Option and any taxes
attributable to the delivery of Common Stock under the Plan, or portion
thereof, shall be paid:
(i) In United States dollars in cash or by check,
bank draft or money order payable to the order of the Company;
or
(ii) At the discretion of the Board, through the
delivery of shares of Common Stock, with an aggregate Fair
Market Value, equal to the option price; or
(iii) By a combination of (i) and (ii) above.
The Board shall determine acceptable methods for tendering Common Stock
as payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate, with respect to nonstatutory options, at the election of the
Optionee pursuant to Section 17, the Company may satisfy its withholding
obligations by retaining such number of shares of Common Stock subject to the
exercised Option which have an aggregate Fair Market value on the exercise date
equal to the Company's aggregate federal, state, local and foreign tax
withholding and FICA and FUTA obligations with respect to income generated by
the exercise of the Option by Optionee.
5
<PAGE>
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Board, including performance
criteria with respect to the Company and/or the Optionee, and as shall
be permissible under the terms of the Plan. Unless other-wise
determined by the Board at the time of grant, an Option may be
exercised in whole or in part. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is
exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of
payment allowable under Section 8(b) of the Plan. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect
to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option by the number of
Shares as to which the Option is exercised.
Notwithstanding anything contained in this Plan to the
contrary, the Board may establish certain restrictions on the times at
which an Option may be exercised after a number of elapsed years
together with cumulative exercise rights and may retain certain rights
with respect to a fixed repurchase price for the Option Stock if the
Employee voluntarily terminates his employment with the Company within
a certain period of time after exercising the Option or whose
employment is involuntarily terminated for gross misconduct, fraud,
embezzlement, theft, breach of any fiduciary duty owed to the Company
or for nonperformance of duties.
6
<PAGE>
(b) Termination of Status as an Employee. Unless otherwise
provided in an Option Agreement relating to an Option that is not an
Incentive Stock Option, if an Employee's employment by the Company is
terminated, except if such termination is voluntary or occurs due to
retirement with the consent of the Board, death or disability, the
Option, to the extent not exercised, shall cease on the date on which
Employee's employment by the Company is terminated. If an Employee's
termination is voluntary or occurs due to retirement with the consent
of the Board, then the Employee may, but only within thirty (30) days
(or such other period of time not exceeding three (3) months as is
determined by the Board) after the date he ceases to be an Employee of
the Company, exercise his Option to the extent that he was entitled to
exercise it at the date of such termination. To the extent that he was
not entitled to exercise the Option at the date of such termination, or
if he does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.
(c) Disability. Unless otherwise provided in an Option
Agreement relating to an Option that is not an Incentive Stock Option,
notwithstanding the provisions of Section 9(b) above, in the event an
Employee is unable to continue his employment with the Company as a
result of his permanent and total disability (as defined in Section
22(e)(3) of the Code), he may, but only within three (3) months (or
such other period of time not exceeding twelve (12) months as it is
determined by the Board) from the date of termination, exercise his
Option to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the
Option at the date of termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein. the Option shall terminate.
(d) Death of Optionee. Unless otherwise provided in an Option
Agreement relating to an Option that is not an Incentive Stock Option,
if Optionee dies during the term of the Option and is at the time of
his death an Employee of the Company who shall have been in continuous
status as an Employee since the date of grant of the Option, the Option
may be exercised at any time within one (1) year following the date of
death (or such other period of time as is determined by the Board), by
the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent that
Optionee was entitled to exercise the Option on the date of death. To
the extent that decedent was not entitled to exercise the Option on the
date of death, or if the Optionee's estate, or person who acquired the
right to exercise the Option by bequest or inheritance, does not
exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
10. Non-Transferability of Option. An Option may not be sold, pledged,
assigned, hypothecated, transferred. or disposed of in any manner other than by
will or by the laws of
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descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellations or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the common stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class
shall affect, and no adjustment by reason thereof, shall be made with respect to
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice
(but not later than the expiration of the term of the Option under the Option
Agreement), and the Option will terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee to whom
an Option is so granted within a reasonable time after the date of such grant.
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13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respect as the Board may
deem advisable; provided, however, that the following revisions or
amendments shall require approval of the holder of a majority of the
outstanding Shares of the Company entitled to vote:
(i) Any increase in the number of Shares subject to
the Plan, other than in connection with an adjustment under
Section 11 of the Plan;
(ii) Any change in the designation of the class of
employees eligible to be granted Options; or
(iii) If the Company has a class of equity security
registered under Section 12 of the Exchange Act at the time of
such revision or amendment, any material increase in the
benefits accruing to participants under the Plan.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and
such Options shall remain in full force and effect as if this Plan had
not been amended or terminated, unless mutually agreed otherwise
between the Optionee and the Board, which agreement must be in writing
and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Optionee unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Share may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
In the case of an Incentive Stock Option, any Optionee who disposes of
Shares of Common Stock acquired on the exercise of an Option by sale or exchange
(a) either within two (2) years after the date of the grant of the Option under
which the Common Stock was acquired
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or (b) within one (1) year after the acquisition of such Shares of Common Stock
shall notify the Company of such disposition and of the amount realized upon
such disposition.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
agreement in such form as the Board shall approve.
17. Withholding Taxes. Subject to Section 4(b)(x) of the Plan and prior
to the Tax Date, the Optionee may make an irrevocable election to have the
Company withhold from those Shares that would otherwise be received upon the
exercise of any nonstatutory stock option, a number of Shares having a Fair
Market Value equal to the minimum amount necessary to satisfy the Company's
federal, state, local and foreign tax withholding obligations and FICA and FUTA
obligations with respect to the exercise of such Option by the Optionee.
An Optionee who is also an officer of the Company must make the
above-described election:
(a) at least six months after the date of grant of the Option
(except in the event of death or disability); and
(b) either:
(i) six months prior to the Tax Date, or
(ii) prior to the Tax Date and during the period
beginning on the third business day following the date of the
Company releases its quarterly or annual statement of sales
and earnings and ending on the twelfth business day following
such date.
18. Miscellaneous Provisions.
(a) Plan Expenses. Any expenses of administering this Plan
shall be gone by the Company.
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(b) Use of Exercise Proceeds. The payment received from
Optionees from the exercise of Options shall be used for the general
corporate purposes of the Company.
(c) Construction of Plan. The place of administration of the
Plan shall be in the State of Arizona, and the validity, construction,
interpretation. administration and effect of the Plan and of its rules
and regulations, and rights relating to the Plan, shall be determined
in accordance with the laws of the State of Arizona and where
applicable, in the State of Delaware and in accordance with the Code.
(d) Taxes. The Company shall be entitled if necessary or
desirable to pay or withhold the amount of any tax attributable to the
delivery of Common Stock under the Plan from other amounts payable to
the Employee after giving the person entitled to receive such Common
Stock notice as far in advance as practical, and the Company may defer
making delivery of such Common Stock if any such tax may be pending
unless and until indemnified to its satisfaction.
(e) Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board, the members
of the Board shall be indemnified by the Company against all costs and
expenses reasonably incurred by them in connection with any action,
suit or proceeding to which they or any of them may be a party by
reason of any action taken or failure to act under or in connection
with the Plan or any Option, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction
of a judgment in any such action. suit or proceeding, except a judgment
based upon a finding of bad faith; provided that upon the institution
of any such action, suit or proceeding a Board member shall, in writing
give the Company notice thereof and an opportunity, at its own expense,
to handle and defend the same before such Board member undertakes to
handle and defend it on her or his own behalf.
(f) Gender. For purposes of this Plan, words used in the
masculine gender shall include the feminine and neuter, and the
singular shall include the plural and vice versa, as appropriate.
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TABLE OF CONTENTS
Page
Purpose of the Plan...................................................1
Definitions...........................................................1
Board ....................................................1
Code ....................................................1
Common Stock.................................................1
Company ....................................................1
Committee....................................................1
Employee ....................................................1
Exchange Act.................................................1
Fair Market Value............................................1
Incentive Stock Option.......................................2
Option ....................................................2
Optioned Stock...............................................2
Optionee ....................................................2
Parent ....................................................2
Plan ....................................................2
Share ....................................................2
Subsidiary...................................................2
Tax Date ....................................................2
Common Stock Subject to the Plan......................................2
Administration of the Plan............................................3
Procedure....................................................3
Powers of the Board..........................................3
Effect of Board's Decision...................................4
Eligibility...........................................................4
Shareholder Approval and Effective Dates..............................4
Term of Option........................................................4
Exercise Price and Payment............................................5
Exercise Price...............................................5
Payment ....................................................5
Exercise of Option....................................................6
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Procedure for Exercise; Rights as a Shareholder..............6
Termination of Status as an Employee.........................7
Disability...................................................7
Death of Optionee............................................7
Non-Transferability of Option.........................................7
Adjustments Upon Changes in Capitalization or Merger..................8
Time of Granting Options..............................................8
Amendment and Termination of the Plan.................................9
Amendment and Termination....................................9
Effect of Amendment or Termination...........................9
Conditions Upon Issuance of Shares....................................9
Reservation of Shares................................................10
Option Agreement.....................................................10
Withholding Taxes....................................................10
Miscellaneous Provisions.............................................10
Plan Expenses...............................................10
Use of Exercise Proceeds....................................11
Construction of Plan........................................11
Taxes ...................................................11
Indemnification.............................................11
Gender ...................................................11
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