<PAGE> 1
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
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Mity-Lite, Inc.
- ----------------------------------------------------------------------------
(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/ No Fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
- ----------------------------------------------------------------------------
<PAGE> 2
[MITY-LITE LOGO]
MITY-LITE, INC.
1301 West 400 North
Orem, Utah 84057
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 21, 1997
NOTICE IS HEREBY GIVEN that an Annual Meeting of Shareholders of Mity-
Lite, Inc., a Utah corporation (the "Company"), will be held at the Salt Lake
City Marriott, 75 South West Temple, Salt Lake City, Utah 84101, on Thursday,
August 21, 1997, at 2:00 p.m., local time, for the following purposes:
1. To elect four (4) directors for the ensuing year or until their
successors are elected;
2. To approve the adoption of the Company's 1997 Stock Incentive Plan;
and
3. To transact such other business as may properly come before the
meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on June 20, 1997,
as the record date for determining shareholders entitled to notice of, and to
vote at, the annual meeting and any postponement or adjournments thereof.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE
AS PROMPTLY AS POSSIBLE. ANY SHAREHOLDER ATTENDING THE MEETING MAY VOTE IN
PERSON EVEN IF SUCH SHAREHOLDER HAS PREVIOUSLY RETURNED A PROXY.
By Order of the Board of Directors
Stanley L. Pool
Corporate Secretary
Orem, Utah, July 11, 1997
<PAGE> 3
MITY-LITE, INC.
1301 West 400 North
Orem, Utah 84057
--------------------------
PROXY STATEMENT
Information Concerning Solicitation and Voting
General
The enclosed Proxy is solicited on behalf of Mity-Lite, Inc. (the
"Company") for use at its Annual Meeting of Shareholders to be held Thursday,
August 21, 1997, at 2:00 p.m. local time, or at any adjournment(s) thereof.
The purposes of the meeting are set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at
the Salt Lake City Marriott, 75 South West Temple, Salt Lake City, Utah 84101.
The Company will bear the cost of this solicitation.
Record Date
Shareholders of record at the close of business on June 20, 1997, are
entitled to notice of and to vote at the meeting. At the record date,
3,190,198 shares of the Company's Common Stock, $.01 par value, were issued
and outstanding and entitled to be voted at the meeting.
Revocation of Proxies
Shareholders may revoke any appointment of proxy given pursuant to this
solicitation by delivering to the Company a written notice of revocation or a
duly executed proxy bearing a later date or by attending the meeting and
voting in person. An appointment of proxy is revoked upon the death or
incapacity of the shareholder if the Secretary or other officer of the Company
authorized to tabulate votes receives notice of such death or incapacity
before the proxy exercises its authority under the appointment.
Voting and Solicitation
Each shareholder will be entitled to one vote for each share of Common
Stock held at the record date. Assuming a quorum is present, a plurality of
votes cast by the shares entitled to vote in the election of directors will be
required to elect each director. It is estimated that the proxy materials
will be mailed to shareholders of record on or about July 11, 1997. The
principal executive offices of the Company are located at 1301 West 400 North,
Orem, Utah 84057. The Company will bear the cost of solicitation of proxies.
In addition to the use of the mail, proxies may be solicited personally, by
telephone, or by facsimile, and the Company may reimburse brokerage firms and
other persons holding shares of the Company's Common Stock in their names or
those of their nominees for their reasonable expenses in forwarding soliciting
materials to the beneficial owners.
<PAGE> 4
Deadline for Receipt of Shareholder Proposals
Shareholders of the Company who intend to present proposals at the
Company's 1998 annual meeting of shareholders must deliver such proposals to
the Company no later than March 11, 1998, in order to be included in the proxy
statement and form of proxy relating to the 1998 annual meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
The Company's Board of Directors currently consists of four directors.
It is contemplated that four directors will be elected at the meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for management's four nominees, namely Gregory L. Wilson, Ralph E. Crump, C.
Lewis Wilson and Peter Najar, all of whom are presently directors of the
Company. In the event that any director nominee is unable or declines to
serve as a director at the time of the annual meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will ensure the election of as
many of the referenced nominees as possible. It is not expected that any
nominee will be unable or will decline to serve as a director. The term of
office of each person elected as a director will continue until the next
annual meeting of shareholders, or until such person's successor has been
elected and qualified. Officers are appointed by the Board of Directors and
serve at the discretion of the Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH
OF THE FOUR NOMINEES TO THE COMPANY'S BOARD OF DIRECTORS. ASSUMING A QUORUM
IS PRESENT, A PLURALITY OF VOTES CAST BY THE SHARES ENTITLED TO VOTE IN THE
ELECTION OF DIRECTORS WILL BE REQUIRED TO ELECT EACH DIRECTOR.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings
during the fiscal year ended March 31, 1997. The Audit Committee of the Board
of Directors, consisting of directors Crump, Najar and C. Wilson, met three
times during the last fiscal year. The Audit Committee is primarily
responsible for reviewing the services performed by the Company's independent
public accountants and internal accounting department and evaluating the
Company's accounting principles and its system of internal accounting
controls. The Compensation Committee of the Board of Directors, consisting of
directors Crump, Najar and C. Wilson, met three times during the last fiscal
year. The Compensation Committee is primarily responsible for reviewing
compensation of executive officers and overseeing the granting of stock
options. All members of the Board of Directors attended at least 75 percent
of all meetings of the Board and all Board Committee members attended at least
75 percent of all Committee meetings held during the fiscal year ended March
<PAGE> 5
31, 1997, except Mr. Najar, who attended 2 of the 3 Audit Committee and
Compensation Committee meetings.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
director nominees and executive officers of the Company.
Director or Officer
Name Age Position with the Company
- --------------------- --- ------------------------------------
Gregory L. Wilson 49 Chairman of the Board, President,
and Chief Executive Officer
Brent R. Bonham 41 Vice President - Product Development
V. Douglas Johnson 59 Treasurer
Kenneth A. Law 48 Vice President - Manufacturing
Bradley T Nielson 35 Vice President - Finance and Chief
Financial Officer
Stanley L. Pool 47 Vice President - Marketing and
Sales and Corporate Secretary
Ralph E. Crump(1) 73 Director
Peter Najar(1) 47 Director
C. Lewis Wilson(1) 57 Director
- ---------------------------------------
(1) Member of Compensation and Audit Committees.
Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
shareholders or until his successor has been duly elected and qualified.
Gregory L. Wilson and C. Lewis Wilson are brothers. Ralph E. Crump is the
father-in-law of Peter Najar. All executive officers of the Company devote
full time to their duties. Non-management directors devote such time as is
necessary to carry out their responsibilities.
The following is a description of the business experience of each of the
director nominees and each of the executive officers of the Company.
GREGORY L. WILSON is the founder of the Company and has been the
President, Chief Executive Officer and a director since the Company's
inception in September 1987. He has served as Chairman of the Board since
March 1988. Mr. Wilson also served as the Treasurer from September 1993 to
August 1995. From 1982 until 1987, Mr. Wilson was President of Church
Furnishings, Inc., in Provo, Utah. He is a director of Stratasys, Inc.
(Nasdaq). He earned a Bachelor of Arts Degree in Economics from Brigham Young
University in 1971 and a Masters of Business Administration Degree from
Indiana University in 1973.
<PAGE> 6
STANLEY L. POOL has been Vice President - Marketing and Sales since
August 1988 and Corporate Secretary since September 1993. From September 1987
until August 1988, Mr. Pool served as the Company's Sales and Marketing
Manager. He earned a Bachelor of Arts Degree in Marketing from Brigham Young
University in 1977.
KENNETH A. LAW has been Vice President - Manufacturing since September
1993. From April 1988 until September 1993, Mr. Law served as the Company's
Production Manager. From September 1987 to September 1988 he was a production
foreman for the Company. Mr. Law holds an Associate Degree in Business
Management from Utah Valley Technical College.
BRENT R. BONHAM became the Vice President - Product Development in
February 1994. From September 1987 until February 1994, he served as a
technical consultant to the Company on various research and development
projects. Mr. Bonham has been instrumental in developing many of the Company's
product and manufacturing innovations.
BRADLEY T NIELSON became the Company's Vice President - Finance and Chief
Financial Officer in March 1994. From August 1992 to March 1994, Mr. Nielson
was the Vice President - Finance for Pinnacle Micro, Inc. From January 1991
to August 1992, he was a management consultant for Price Waterhouse's National
Manufacturing Management Consulting Group. He was employed by Ernst & Young
from June 1985 to January 1991. Mr. Nielson graduated with a Bachelor of
Science Degree in Accounting from Brigham Young University. He is a Certified
Public Accountant and a Certified Management Accountant.
V. DOUGLAS JOHNSON became the Company's Treasurer in August 1995. He
joined the Company in May 1990 and served as the Controller prior to being
name Treasurer. He has 25 years experience as a self-employed Certified
Public Accountant. Mr. Johnson graduated from Brigham Young University with a
Master of Accountancy Degree in 1964.
RALPH E. CRUMP has been a director since March 1988. Mr. Crump is
President of Crump Industrial Group, an investment firm located in Trumbull,
Connecticut. For a short time in 1988, Mr. Crump served as the Company's
Treasurer. Mr. Crump is also a founder and director of Osmonics, Inc.
(Nasdaq), IMTEC, Inc. (Nasdaq), Stratasys, Inc. (Nasdaq) and Structural
Instrumentation, Inc. (Nasdaq). From 1962 until 1987, Mr. Crump was the
President and Chairman of Frigitronics, Inc. (NYSE). Mr. Crump is also a
Trustee of the Alumni Foundation of the University of California at Los
Angeles and a member of the Board of Overseers for the Thayer Engineering
School at Dartmouth College. He received a Bachelor of Science Degree in
Chemical Engineering in 1950 from the University of California at Los Angeles
and a Bachelor of Science Degree in Marine Engineering from the U. S. Merchant
Marine Academy. Mr. Crump is a licensed professional engineer.
PETER NAJAR has been a director since March 1988. From August 1988 until
September 1993 he served as the Assistant Treasurer and Assistant Corporate
Secretary. Mr. Najar has been a sales engineer employed by Lange Sales, Inc.
in Littleton, Colorado from November 1981 to the present. From 1977 to 1981,
Mr. Najar was the National Technical Director for Head Ski Co.
<PAGE> 7
C. LEWIS WILSON has been a director since May 1991. From September 1987
to the present, Mr. Wilson, a licensed professional engineer, has been the
President of Heath Engineering Company, a consulting engineering firm in Salt
Lake City, Utah. He received a Bachelor of Engineering Sciences Degree in
Mechanical Engineering from Brigham Young University in 1966 and a Masters of
Mechanical Engineering Degree from Purdue University in 1968. Mr. Wilson is a
published technical author and has been an Adjunct Professor of Mechanical
Engineering at the University of New Mexico, Brigham Young University and the
University of Utah.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and persons who own beneficially
more than 10 percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission and Nasdaq initial reports
of ownership and reports of changes in ownership of the Company's equity
securities. Officers, directors and greater than 10 percent beneficial owners
are required to furnish the Company with copies of all Section 16(a) reports
they file.
Based on the Company's information, the directors and officers have
timely filed all necessary Forms 3, 4 and 5, for the fiscal year ended March
31, 1997, except for Gregory L. Wilson and Stanley L. Pool. Mr. Wilson did
not file on a timely basis a Form 4 relating to the sale of 5,000 shares of
Common Stock. Mr. Pool did not file on a timely basis a Form 4 relating to
the sale of 8,311 shares of Common Stock. Both Mr. Wilson and Mr. Pool have
subsequently filed the required forms.
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth security ownership information as of May
23, 1997 (i) for persons known by the Company to own beneficially more than 5
percent of the Company's Common Stock, (ii) for each director or director
nominee, and (iii) for all officers and directors of the Company as a group:
<PAGE> 8
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS(1) OWNED(2) OF CLASS(3)
- --------------------------------- ------------ -----------
Gregory L. Wilson(4) 908,974 27.17%
Peter Najar(5) 466,031 13.93
Ralph E. Crump(6) 387,434 11.58
Wellington Management Company, LLP(7) 188,000 5.61
Stanley L. Pool(8) 150,463 4.50
Brent R. Bonham(9) 70,580 2.11
Kenneth A. Law(10) 52,056 1.56
Bradley T Nielson(11) 50,666 1.51
C. Lewis Wilson(12) 35,391 1.06
V. Douglas Johnson (13) 30,510 0.91
All officers and directors as a
group (9 persons) 2,152,105 64.33
- --------------------------------------------------
(1) The address for Gregory L. Wilson, Stanley L. Pool, Kenneth A. Law, Brent
R. Bonham, Bradley T Nielson and V. Douglas Johnson is 1301 West 400
North, Orem, Utah 84057. The address for Ralph E. Crump is 28 Twisted
Oak Circle, Trumbull, Connecticut 06611. The address of Wellington
Management Company LLP is 75 State Street, Boston, Massachusetts 02109.
The address for Peter Najar is 9900 Phillips Road, Lafayette, Colorado
80026. The address for C. Lewis Wilson is 377 West 800 North, Salt Lake
City, Utah 84103.
(2) The number of shares beneficially owned includes shares of the Company's
Common Stock for which the persons set forth in this table have or share
either investment or voting power. The number of shares beneficially
owned also includes shares that any of the named persons has the right to
acquire within 60 days of May 23, 1997, upon exercise of the stock
options granted to them under the Company's 1990 Stock Option Plan.
(3) All percentages have been calculated to include 3,164,026 shares of
Common Stock outstanding on May 23, 1997, plus options exercisable within
60 days following May 23, 1997 to purchase 181,314 shares.
(4) Includes 439,759 shares owned individually by Mr. Wilson, 450,622 shares
owned individually by his wife, Kathleen Wilson, and 18,493 shares held
by Kathleen Wilson as the custodian for the Wilson children. Gregory and
Kathleen Wilson disclaim beneficial ownership of the shares held by
Kathleen Wilson as custodian for their children.
<PAGE> 9
(5) Includes 213,283 shares owned individually by Constance Crump, the wife
of Mr. Najar, and 39,465 shares held by Constance Crump as custodian for
certain minor-aged relatives. Mr. Najar disclaims beneficial ownership
of the shares held by Constance Crump as custodian.
(6) Includes 193,717 shares owned individually by Marjorie Crump, the wife of
Mr. Crump.
(7) Includes 188,000 shares owned beneficially by Wellington Management
Company LLP as reported in its Schedule 13G dated December 31, 1996 filed
with the Securities and Exchange Commission.
(8) Includes 76,136 shares owned individually by Mr. Pool, 73,927 shares
owned by Karen Pool, the wife of Mr. Pool, and 400 shares held by Mr.
Pool as custodian for the Pool children.
(9) Comprises 70,580 shares that Mr. Bonham had the right to acquire within
60 days following May 23, 1997 upon exercise of options granted to him.
(10) Includes 10,287 shares owned individually by Mr. Law, 7,198 shares owned
individually by Fern Law, his wife, and 34,571 shares that Mr. Law had
the right to acquire within 60 days following May 23, 1997 upon exercise
of stock options granted to him.
(11) Includes 1,000 shares owned individually by Mr. Nielson, 1,200 shares
owned jointly by Mr. Nielson and his wife, Kellie J. Nielson, and 48,466
shares that Mr. Nielson had the right to acquire within 60 days following
May 23, 1997 upon exercise of options granted to him.
(12) Includes 27,467 shares owned jointly by C. Lewis Wilson and his wife,
Grace Wilson, 3,662 shares owned individually by Grace Wilson, 3,662
shares owned individually by Mr. Wilson and 600 shares held by Mr. Wilson
as custodian for the Wilson children.
(13) Includes 24,049 shares owned jointly by Mr. Johnson and his wife, Cheryl
Johnson, 250 shares owned individually by Cheryl Johnson, 5,458 shares
that Mr. Johnson had the right to acquire within 60 days following May
31, 1997 upon exercise of options granted to him and 753 shares held by
Mr. Johnson as custodian for the Johnson children.
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the annual
and long-term compensation awards to the President of the Company and other
executive officers receiving more than $100,000 in annual salary and bonus
compensation for services in all capacities to the Company for the fiscal
years ended March 31, 1995, March 31, 1996 and March 31, 1997.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING
FISCAL OPTIONS/ ALL OTHER
YEAR SALARY BONUS(1) SARs (#) COMP.(2)
------ ------ -------- ---------- ---------
Gregory L. Wilson, 1997 $67,900 $75,300 -- $3,300
Chairman, President, and 1996 60,000 75,700 -- 1,900
Chief Executive Officer 1995 50,500 76,900 -- 100
Bradley T Nielson, Vice 1997 65,300 43,500 -- 2,500
President Finance, Chief 1996 60,000 33,700 20,000(3) 1,300
Financial Officer 1995 53,900 30,800 -- 300
Kenneth A. Law, Vice 1997 66,000 35,800 -- 2,500
President Manufacturing 1996 60,000 33,800 20,000(3) 1,300
1995 53,100 28,900 -- 300
- --------------------------------------
(1) During the reported periods, bonuses were awarded annually at the
discretion of the Board of Directors to the named executive officers and
certain other officers and Company personnel. No formal bonus plan
exists. The Board is not obligated to award bonuses.
(2) During fiscal 1995, the Company adopted a 401(k) defined contribution
plan. Amounts under the column heading "All Other Compensation"
represent matching contributions made by the Company under the plan.
(3) Options vest over a three-year period commencing in 1997, one-third of
the options vesting per year.
1990 STOCK OPTION PLAN. As of May 23, 1997, options to purchase 499,470
shares of the Company's Common Stock had been granted under the Company's 1990
Incentive Stock Option Plan (the "1990 Option Plan"), which expires by its own
terms in May 2000. Of the total 499,470 options granted as of May 23, 1997,
389,760 had been granted to executive officers of the Company. Of the total
options granted, 414,361 were vested and had either been exercised or were
immediately exercisable as of May 23, 1997. As of May 23, 1997, the Company
had 530 shares reserved for issuance upon exercise of options that could still
be granted under the 1990 Option Plan.
<PAGE> 11
The 1990 Option Plan provides for the grant of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, and non-qualified stock options to employees and non-employee
directors of the Company. Incentive stock options may be granted only to
employees. The Option Plan is administered by the Compensation Committee of
the Board of Directors, which determines the terms of options granted
including the exercise price, the number of shares subject to the option, and
the exercisability of the option.
The term of the 1990 Option Plan is ten years. With respect to any
participant who owns stock representing more than 10 percent of the voting
rights of the Company's outstanding capital stock, the exercise price of any
option must be at least equal to 110 percent of the fair market value on the
date of grant. Otherwise, the exercise price for options intended to be
incentive stock options is the fair market value on the date of grant. The
exercise price of any non-qualified stock option is determined by the
Compensation Committee, in its absolute discretion after taking into
consideration factors it deems relevant.
Shown below is information with respect to exercises of stock options
during the last completed fiscal year by each of the executive officers named
in the summary compensation table and the fiscal year-end value of unexercised
options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs at March 31,
March 31, 1997 (#) 1997 ($)(1)
Shares
Acquired on Value Exercisable/ Exercisable/
Exercise (#) Realized($) Unexercisable Unexercisable
------------ -------------- --------------- ---------------
Gregory L. Wilson,
Chairman, Presi-
dent, and Chief
Executive Officer -- -- -- --
Bradley T Nielson,
Vice President
Finance, Chief
Financial Officer 2,200 20,000 48,466/13,334 516,000/112,000
Kenneth A. Law,
Vice President
Manufacturing -- -- 34,571/14,272 368,000/ 86,000
(1) Value is based on market price of the Company's Common Stock (closing
price of $14.50 per share on the Nasdaq National Market on March 31,
1997) less exercise price.
<PAGE> 12
401(k) PLAN. In January 1995, the Board of Directors of the Company
adopted a Defined Contribution 401(k) Plan and Trust (the "401(k) Plan"). The
401(k) Plan allows the Board to determine the amount of the Company
contribution. The Board adopted a contribution formula specifying that such
discretionary employer matching contributions would equal 25 percent of the
participating employee's contribution to the 401(k) Plan up to a maximum
discretionary employer contribution of 3 percent of a participating employee's
compensation, as defined by the 401(k) Plan. In addition, the Board at its
discretion can provide for additional employer matching. For the 401(k) Plan
year ended December 31, 1995, the Board provided for additional matching
contributions that would equal 25 percent of the participating employee's
contribution to the 401(k) Plan up to a maximum 3 percent of a participating
employee's compensation, as defined by the 401(k) Plan. For the 401(k) Plan
year ended December 31, 1996, the Board provided for additional matching
contributions that would equal 37.5 percent of the participating employee's
contribution to the 401(k) Plan up to a maximum 3 percent of a participating
employee's compensation, as defined by the 401(k) Plan. The 401(k) Plan
allows the Board to utilize either Common Stock of the Company or cash as a
matching contribution. To date, all matching contributions have been in cash.
The Board has approved the reservation of 25,000 shares of Common Stock for
issuance under the Company's 401(k). These shares may be issued to satisfy
all or a portion of the Company's matching contribution under the 401(k) Plan
or issued as a result of a participant's election to acquire shares of the
Company's Common Stock as an investment option under the 401(k) Plan. If such
investment option is elected by plan participants, the shares will be issued
at a price per share which is the lower of 85 percent of the fair market value
of a share of Common Stock on the commencement of the applicable quarterly
election period or 85 percent of the fair market value of a share of Common
Stock on the last day of the applicable quarterly election period. As of May
23, 1997, 3,742 shares have been issued to the 401(k) Plan. All employees who
have completed at least six months of service with the Company and who satisfy
other requirements are eligible to participate in the 401(k) Plan.
EMPLOYMENT AGREEMENTS. The Company has entered into employment
agreements effective May 21, 1993, with Gregory L. Wilson, the Company's
Chairman and President, Stanley L. Pool, the Company's Vice President-Marketing
and Sales and Corporate Secretary, and Kenneth A. Law, the Company's
Vice President-Manufacturing, each for a term ending May 21, 1998. The Company
entered into an employment agreement effective February 16, 1994 with Brent R.
Bonham, Vice President - Product Development, with a term ending February 16,
1999. The Company entered into an employment agreement effective March 9,
1994 with Bradley T Nielson, Chief Financial Officer, with a term ending March
9, 1999. Mr. Wilson is currently paid an annual base salary of $75,000.
Messrs. Pool, Law, Bonham and Nielson are each paid an annual base salary of
$70,000. Mr. Johnson is paid an annual base salary of $55,000. Each
employment agreement provides that compensation will be determined annually by
the Compensation Committee of the Board of Directors. Each employment
agreement contains a non-compete clause covering the term of the agreement and
three years thereafter. Each employment agreement can be terminated by the
Company without cause entitling the terminated employee to two months salary
as severance.
<PAGE> 13
DIRECTOR COMPENSATION. The Company's directors receive no compensation
for attendance at Board meetings. However, the directors are reimbursed for
their expenses related to attending Board meetings.
CERTAIN TRANSACTIONS
The Company leases its production and office facility for a five-year
term from a trust of which Gregory L. Wilson's uncle is a trustee. The fixed
base monthly rent for the term of the lease is $17,100. The Company pays
maintenance costs, taxes and insurance costs under the lease. The Company
believes that the terms of the lease are no less favorable to the Company than
could be obtained from an unrelated third party. No independent appraisal or
evaluation of the lease terms has been obtained.
The Company has entered into indemnification agreements with each of its
officers and directors. The Company has adopted policies that any loans to
officers, directors and 5 percent or more stockholders ("affiliates") are
subject to approval by a majority of the disinterested directors and that any
transactions with affiliates will be on terms no less favorable than could be
obtained from unaffiliated parties.
PROPOSAL TWO
APPROVAL OF 1997 STOCK INCENTIVE PLAN
The Board of Directors proposes that the stockholders approve the
adoption of the 1997 Stock Incentive Plan. The Company has heretofore utilized
most of the shares available for grant under its 1990 Stock Incentive Plan.
The Board believes that approval of the 1997 Stock Option Plan will provide it
with a valuable tool for attracting, retaining, and motivating qualified
personnel at all levels for the Company and its affiliates.
1997 STOCK INCENTIVE PLAN
The Board of Directors has adopted the 1997 Stock Incentive Plan, subject
to the approval of the Company's stockholders being solicited by this proxy
statement. A summary of the principal features of the 1997 Stock Option Plan
is set forth below, but is qualified in its entirety by reference to the full
text of the 1997 Stock Option Plan, a copy of which is attached to this Proxy
Statement as Appendix A. All defined terms used below have the meanings set
forth in the 1997 Stock Incentive Plan unless otherwise indicated.
As of May 23, 1997, options to purchase 172,000 shares of the Company's
Common Stock had been granted under the Company's 1997 Stock Incentive Plan
(the "1997 Stock Incentive Plan"), which expires by its own terms in March
2007. Of the total 172,000 options granted as of May 23, 1997, 10,000 had
been granted to an executive officer of the Company and 135,000 options had
been granted to executive officers of the Company's affiliate, DO Group, Inc.
Of the total options granted, none were vested nor were exercisable as of May
<PAGE> 14
23, 1997. As of May 23, 1997, the Company had 128,000 shares reserved for
issuance upon exercise of options that could still be granted under the 1997
Stock Incentive Plan.
SUMMARY OF THE 1997 STOCK INCENTIVE PLAN
GENERAL. The 1997 Stock Incentive Plan provides for the grant to
directors, officers, consultants and employees of the Company and its
affiliates of incentive stock options ("ISO's"), non-qualified stock options
("NQSO's"), awards of Company stock ("Awards"), and direct purchases of
Company stock ("Purchases"), for up to an aggregate of 300,000 shares of
Common Stock. To the extent options granted under the 1997 Stock Option Plan
are canceled or expire prior to exercise, or are surrendered, the shares
covered thereby again become available for option grants.
ADMINISTRATION. The 1997 Stock Incentive Plan will be administered by
the Compensation Committee or such other committee as the Board may designate
for such purpose. The Committee is responsible for making all other
determinations with respect to administration of the 1997 Stock Incentive
Plan.
PARTICIPATION. Options may be granted under the 1997 Stock Incentive
Plan to directors, officers consultants, and employees of the Company and its
affiliates. The Board or a committee designated by the Board is authorized in
its discretion to designate persons who are to be granted options under the
1997 Stock Incentive Plan.
AWARDS. The grant of options under the 1997 Stock Incentive Plan, and
the terms of such options, is determined by the Board or a committee
designated by the board for that purpose. Options may be either incentive
stock options (ISO's) or nonqualified stock options (NQSO's). The aggregate
fair market value as of the date of grant of the Common Stock for which any
ISO granted under the 1997 Stock Incentive Plan may first become exercisable
in any calendar year shall not exceed $100,000.
PRICE OF OPTION SHARES. The purchase price for Common Stock acquired upon
exercise of an option is determined by the Board or a committee designated by
the Board, at the time the option is granted, but in the case of ISO's may not
be less than the fair market value of such Common Stock on the date of grant
of the option, or in the case of ISO's granted to a Ten Percent Stockholder
(as defined in the Internal Revenue Code), 110 percent of the fair market
value on the date of grant. Upon exercise of an option, the purchase price
will be paid in cash, promissory note, or common stock already owned (or a
combination thereof) or, in the discretion of the Committee, in the form of
other consideration (including the relinquishment of a portion of the option)
having a fair market value equal to the purchase price.
EXERCISE. The exercise period of options granted under the 1997 Stock
Incentive Plan is ten years, provided that the exercise period for ISO's
granted to a Ten Percent Stockholder will be five years. The 1997 Stock
Incentive Plan provides that vested options will remain exercisable until the
earliest to occur of (i) the expiration of the term for which it was granted
<PAGE> 15
and (ii) three months after the participant's retirement or involuntary
termination of employment (other than due to death or disability). Upon the
death or total disability of an employee participant prior to the termination
of employment, vested options continue to be exercisable for a period of one
year after the participant's death or total disability. The period may by
varied at the time of the grant, but may not be extended beyond the expiration
date of the option.
NOTIFICATION OF SALE. The 1997 Stock Incentive Plan provides that
employees who sell Common Stock received upon exercise of an ISO before the
later of two years from the date the option is granted and one year from the
date of the exercise of such option must notify the Company of any such sale.
See "Federal Income Tax Treatment of Stock Options," below.
ADJUSTMENTS. The 1997 Stock Incentive Plan provides for appropriate
adjustments in the number and kind of shares subject to outstanding options,
and in the price of shares with respect to which such options have been
granted, in the case of changes in the Company's outstanding Common Stock by
reason of stock dividends, stock splits, recapitalizations and the like. In
certain circumstances, including a change of control of the Company, the Board
of Directors, with the consent of the optionees, may provide that (i) all
outstanding options will become immediately exercisable and (ii) the Company
may pay cash to a participant in exchange for the cancellation of outstanding
options.
TRANSFERABILITY DURING LIFETIME. During the lifetime of a participant
to whom an option is granted, only the participant, or the participant's legal
representative, may exercise an option.
TERMINATION AND AMENDMENT. The Board of Directors may in its discretion
amend or terminate the 1997 Stock Incentive Plan.
FEDERAL INCOME TAX TREATMENT OF STOCK OPTIONS
The rules governing the tax treatment of stock options are complex, and
the following discussion is necessarily a general discussion of current
Federal income tax consequences and does not purport to be complete.
Statutory provision, and interpretations thereof, are subject to change.
INCENTIVE STOCK OPTIONS. The participant recognizes no taxable gain or
loss when an ISO is granted or exercised, although upon exercise the spread
between the fair market value and the exercise price generally is an item of
tax preference for purposes of the participant's alternative minimum tax. If
the shares acquired upon the exercise of an ISO are held for at least one year
after exercise and two years after grant (the "Holding Periods"), the
participant recognizes any gain or loss realized upon such sale as long-term
capital gain or loss and the Company is not entitled to a deduction. If the
shares are not held for the Holding Periods, the gain is ordinary income to
the participant to the extent of the difference between the exercise price and
the fair market value of Common Stock on the date the option is exercised.
Any difference between the ultimate sale price of the acquired Common Stock
and the fair market value of such Common Stock on the date of exercise will be
treated as capital gain or capital loss, as the case may be. Also, in such
<PAGE> 16
circumstances, the Company receives a deduction equal to the amount of any
ordinary income recognized by the participant, to the extent qualified under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
as applicable. The 1997 Stock Incentive Plan requires that the employee
notify the Company of any sale of Common Stock received upon exercise of an
ISO during such Holding Periods.
NON-QUALIFIED STOCK OPTION. The participant recognizes no taxable income
and the Company receives no deduction when an NQSO is granted. Upon exercise
of an NQSO, the participant recognizes ordinary income and the Company
receives a deduction equal to the difference between the exercise price and
the fair market value of the shares on the date of exercise, to the extent
qualified under Section 162(m) of the Code, as applicable. Gain or loss
recognized on a disposition of the shares is treated as a capital gain or
loss.
SECTION 162(M). Under Section 162(m) of the Code and regulations
thereunder (referred to collectively as Section "162(m)" or the "Code"), the
amount of compensation paid by a publicly held corporation to its chief
executive officer and the four other most highly compensated executive
officers during any year which may be deductible for federal income tax
purposes is limited to $1,000,000 per person per year. Compensation which
qualifies as performance-based is excluded from this limit on the amount of
deductible compensation. The 1997 Stock Incentive Plan has been structured to
permit the grant of Options under the Plan that, when exercised, will or may
result in compensation to the optionee that qualifies as performance-based
compensation that is excluded from the limit imposed by Section 162(m);
however, the Plan also permits the grant of options that, when exercised,
would result in compensation that would be subject to the deductibility limits
of Section 162(m).
RECOMMENDATION OF BOARD OF DIRECTORS:
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE 1997 STOCK INCENTIVE
PLAN AND RECOMMENDS THAT THE STOCKHOLDER VOTE "FOR" THE PROPOSAL. ASSUMING A
QUORUM IS PRESENT, A MAJORITY OF VOTES CAST BY THE SHARES ENTITLED TO VOTE FOR
APPROVAL OF THE 1997 STOCK INCENTIVE PLAN WILL BE REQUIRED TO APPROVE THE 1997
STOCK INCENTIVE PLAN.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of proxy to vote the shares they represent
as the Company may recommend.
<PAGE> 17
ANNUAL REPORT TO SECURITIES AND EXCHANGE COMMISSION
A copy of the Company's Annual Report on Form 10-KSB as filed with the
Securities and Exchange Commission may be obtained by shareholders without
charge by written request to Bradley T Nielson, Chief Financial Officer, Mity-
Lite, Inc., 1301 West 400 North, Orem, Utah, 84057.
By the Order of Board of Directors
Stanley L. Pool, Corporate Secretary
DATED: July 11, 1997
<PAGE> 18
FORM OF PROXY:
MITY-LITE, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
August 21, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MITY-
LITE, INC.
The undersigned common shareholder of Mity-Lite, Inc., a Utah
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders, to be held on August 21, 1997, 2:00 p.m. local time at the Salt
Lake City Marriott, 75 South West Temple, Salt Lake City, Utah, and hereby
appoints Gregory L. Wilson and Stanley L. Pool, or either of them, each with
the power of substitution, as proxies to vote at said Annual Meeting of
Shareholders and at all adjournments thereof, all shares of common stock which
the undersigned would be entitled to vote on the matters set forth below, if
personally present.
1. ELECTION OF DIRECTOR NOMINEES: Gregory L. Wilson, Ralph E. Crump, C.
Lewis Wilson and Peter Najar.
[ ] FOR all nominees listed (except [ ] WITHHOLD AUTHORITY to vote
as marked to the contrary below) for all nominees listed
Instruction: To withhold authority for an individual nominee, write
that nominee's name here:
---------------------------------------------------------------------
(Continued and to be signed on other side)
<PAGE> 19
2. APPROVE THE ADOPTION OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY
DIRECTION IS INDICATED, WILL BE VOTED FOR PROPOSAL 1 AND PROPOSAL 2. In their
discretion, the proxies are authorized to vote upon such other matters as may
properly come before the meeting or any adjournment(s) thereof.
Dated: , 1997
--------------
-----------------------------------------
Signature
(This proxy should be marked, dated, signed
by each shareholder exactly as such
shareholder's name appears hereon and
returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held by
joint tenants or as community property, both
should sign. If a corporation, please sign
in full corporation name by the President or
by an authorized corporate officer. If a
partnership, please sign in partnership
name by an authorized person).
<PAGE> 20
APPENDIX A
MITY-LITE, INC.
1997 STOCK INCENTIVE PLAN
ADOPTED AS OF MARCH 4, 1997
1. PURPOSE. This 1997 Stock Incentive Plan (the "Plan") is intended to
provide incentives: (a) to the officers and other employees of Mity-Lite,
Inc., a Utah corporation (the "Company"), and any present or future 49.9
percent or more owned subsidiaries of the Company (individually a "Related
Corporation" and collectively "Related Corporations") by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder that qualify as "incentive stock options" under Section 422A(b) of
the Internal Revenue Code of 1986, as amended and the regulations thereunder
(the "Code") (individually an "ISO" and collectively "ISOs"); (b) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in the
Company pursuant to options granted hereunder that do not qualify as ISOs
(individually a "Non-Qualified Option" and collectively "Non-Qualified
Options"); (c) to directors, officers, employees and consultants of the
Company and Related Corporations by providing them with awards of stock in the
Company ("Awards"); and (d) to directors, officers, employees and consultants
of the Company and Related Corporations by providing them with opportunities
to make direct purchases of stock in the Company ("Purchases"). Both ISOs and
Non-Qualified Options are referred to hereinafter individually as an "Option"
and collectively as "Options". Options, Awards and authorizations to make
Purchases are referred to hereinafter collectively as "Stock Rights". As used
herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation", respectively, as those terms are defined in Section
425 of the Code.
2. ADMINISTRATION OF PLAN.
(a) BOARD OR COMMITTEE ADMINISTRATION. This Plan shall be
administered solely by the Company's Board of Directors (the "Board") or by a
Compensation Committee (the "Committee") consisting of not less than two (2)
members of the Board. Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed. Subject
to ratification of the grant or authorization of each Stock Right by the
Board, and subject to the terms of this Plan, the Committee shall have the
authority to (i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible under Section 3 below
to receive ISOs) to whom ISOs may be granted, and to determine (from among the
class of individuals and entities eligible under Section 3 below to receive
Non-Qualified Options and Awards and to make Purchases) to whom Non-Qualified
Options, Awards and authorizations to make Purchases may be granted;
(ii) determine the time or times at which Options or Awards may be granted or
Purchases made; (iii) determine the option price of shares subject to each
Option, which price shall not be less than the minimum price specified in
<PAGE> 21
Section 6 below, and the purchase price of shares subject to each Purchase;
(iv) determine whether each Option granted shall be an ISO or a Non-Qualified
Option; (v) determine (subject to Section 7 below) the time or times when each
Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases and the nature of
such restrictions, if any; and (vii) interpret this Plan and prescribe and
rescind rules and regulations relating to this Plan. If the Committee
determines to issue a Non-Qualified Option, the Committee shall take whatever
actions it deems necessary under Section 422A of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO.
The interpretation and construction by the Committee of any provisions of this
Plan or of any Stock Right granted under this Plan shall be final unless
otherwise determined by the Board. The Committee may from time-to-time adopt
such rules and regulations for carrying out this Plan as it may deem
appropriate. No member of the Board or of the Committee shall be liable for
any action or determination made in good faith with respect to this Plan or
any Stock Right granted under this Plan.
(b) COMMITTEE ACTIONS. The Committee may select one of its members
as its chairman, and shall hold meetings at such times and places as it may
determine. Except as otherwise provided by the Company's Bylaws, acts by a
majority of the Committee, or acts reduced to or approved in writing by
unanimous consent of the members of the Committee, shall be the valid acts of
the Committee. From time-to-time the Board may increase the size of the
Committee and appoint additional members thereof, may remove members (with or
without cause) and may appoint new members in substitution therefor, fill
vacancies (however caused), or remove all members of the Committee and
thereafter directly administer this Plan.
(c) GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
granted to members of the Board, but any such grant shall be made and approved
in accordance with Section 2(d) below, if applicable. All grants of Stock
Rights to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Members of the Board who are either (i) eligible for Stock Rights
pursuant to this Plan or (ii) have been granted Stock Rights, may vote on any
matters affecting the administration of this Plan or the grant of any Stock
Rights pursuant to this Plan, except that no such member shall act upon the
granting to himself or herself of Stock Rights, but any such member may be
counted in determining the existence of a quorum at any meeting of the Board
during which action is taken with respect to the granting to him or her of
Stock Rights.
(d) COMPLIANCE WITH FEDERAL AND STATE SECURITIES AND TAX LAWS AND
STATE CORPORATE LAW. Various restrictions apply to officers and directors and
others who may be deemed insiders under federal and state securities laws and
state corporate law. These laws impose certain restrictions on insiders. Any
Stock Right granted to any director is subject to those restrictions. Holders
of Stock Rights should consult with their legal and tax advisors regarding the
securities law, tax law, corporate law and other effects of transactions under
this Plan. These restrictions relate to holding periods, alternative minimum
tax calculations and other matters and should be clearly understood by the
<PAGE> 22
holders of Stock Rights. The granting of Stock Rights is subject to any
applicable restrictions under state corporate law, including without
limitation, restrictions applicable to conflicting interest transactions
involving directors.
(e) PURPOSE AND INTENT OF PLAN. The purpose of this Plan is to
advance the interest of the Company and its Related Corporations by
stimulating the efforts of employees on behalf of the Company and Related
Corporations, and heightening the desire of employees to continue employment
with the Company and Related Corporations, assisting the Company and Related
Corporations in competing effectively with other enterprises for the services
of new employees necessary for the continued improvement of operations, and to
attract and retain the best available personnel for service as directors to
the Company and Related Corporations and for service as consultants to the
Company and Related Corporations. This Plan is intended to be an "employee
benefit plan" under Rule 16b-3 promulgated under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). This Plan is
also intended to be a "compensatory benefit plan" under Rule 701 promulgated
under the Securities Act of 1933, as amended. Transactions under this Plan
are intended to comply with Rule 16b-3 and Rule 701. To the extent any
provisions of this Plan or any action by the Committee or the Board fails to
comply with such Rules and to the extent any provisions of this Plan or any
action by the Committee or the Board fails to comply with the requirements of
the Code (for options intended to be ISOs hereunder), each such provision(s)
and action(s) shall be deemed to be null and void, to the extent permitted by
applicable law and as deemed advisable by the Committee or the Board.
(f) SHAREHOLDER APPROVAL. Grants of ISOs hereunder shall be subject
to shareholder approval of this Plan within twelve (12) months following the
date this Plan is approved and adopted by the Board.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted to any employee
of the Company or any Related Corporation. Any officer or director of the
Company who is not also an employee of the Company may not be granted ISOs
under this Plan. Non-Qualified Options, Awards and authorizations to make
Purchases may be granted to any employee, officer or director (whether or not
such person is also an employee of the Company) or to any consultant to the
Company or to any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO, a Non-Qualified Option, an Award or an authorization to make a
Purchase. The granting of a Stock Right to any individual or entity shall
neither entitle that individual or entity to, nor disqualify that individual
or entity from, participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common Stock of the Company (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner.
Subject to the foregoing, the aggregate maximum number of shares of Common
Stock that may be issued pursuant to this Plan is 300,000 subject to
adjustment as provided below in this Section 4 and in Section 13. Any such
shares may be issued as ISOs, Non-Qualified Options or Awards or to
individuals or entities making Purchases, so long as the number of shares so
<PAGE> 23
issued does not exceed such number, as adjusted. If any Option granted under
this Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or
in part, or if the Company shall reacquire any unvested shares issued pursuant
to Awards or Purchases, the unpurchased shares subject to such Options and any
unvested shares so reacquired by the Company shall again be available for
grants of Stock Rights under this Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under this
Plan at any time until ten (10) years after the date of the approval and
adoption of this Plan by the Board. The date of grant of a Stock Right under
this Plan will be the date specified by the Committee at the time it grants
the Stock Right; provided, however, that such date shall not be prior to the
date on which the Committee acts to approve the grant. The Committee shall
have the right, with the consent of the optionee, to convert an ISO granted
under this Plan into a Non-Qualified Option pursuant to Section 17 below.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
(a) PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option granted under
this Plan shall in no event be less than the lesser of (i) the book value per
share of the Common Stock as of the end of the fiscal year of the Company
immediately preceding the date of such grant or (ii) fifty percent (50
percent) of the fair market value per share of the Common Stock on the date of
such grant. Subject to the foregoing sentence, the exercise price for Non-
Qualified Options granted hereunder shall be determined by the Committee or
the Board in its sole discretion, taking into account factors it deems
relevant.
(b) PRICE FOR ISOs. The exercise price per share specified in the
agreement relating to each ISO granted under this Plan shall not be less than
the fair market value per share of the Common Stock on the date of such grant.
In the case of an ISO to be granted to an employee owning stock possessing
more than ten percent (10 percent) of the total combined voting power of all
classes of stock of the Company or of any Related Corporation, the price per
share specified in the agreement relating to such ISO shall not be less than
one hundred ten percent (110 percent) of the fair market value per share of
the Common Stock on the date of grant.
(c) $100,000 ANNUAL LIMITATION ON ISOs. Each eligible employee may
be granted ISOs only to the extent that (in the aggregate under this Plan and
all incentive stock option plans of the Company and any Related Corporation),
such ISOs do not become exercisable for the first time by such employee during
any calendar year in a manner that would entitle the employee to purchase more
than $100,000 in fair market value (determined at the time the ISOs were
granted) of the Common Stock in that calendar year. Any options granted to an
employee in excess of that amount will be granted as Non-Qualified Options.
(d) AWARDS AND PURCHASES. Awards and Purchases under this Plan shall
be made at prices equal to the fair market value of the Common Stock on the
date of such Award or Purchase. Fair market value shall be determined by the
Committee or the Board in its sole discretion in accordance with Section 6(e)
<PAGE> 24
below. Shares of Common Stock may be issued in Award and Purchase
transactions for any lawful consideration determined by the Committee or the
Board in its sole discretion.
(e) DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under this Plan, the Company's Common Stock is publicly-traded, "fair
market value" shall be determined as of the last business day for which the
prices or quotes discussed in this sentence are available prior to the date
such Option is granted and shall mean (i) the closing price on that date of
the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then-traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of
the Common Stock on the NASDAQ National Market, if the Common Stock is not
then traded on a national securities exchange; or (iii) the closing bid price
(or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the NASDAQ National Market. However, if the Common Stock is not
publicly-traded at the time an Option is granted under this Plan, "fair market
value" shall be deemed to be the fair value of the Common Stock as determined
by the Committee or the Board in its sole discretion, after taking into
consideration all factors that it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
Sections 9 and 10 below, each Option shall expire on the date specified by the
Committee or the Board, but not more than (i) ten (10) years and one (1) day
from the date of grant in the case of Non-Qualified Options, (ii) ten (10)
years from the date of grant in the case of ISOs generally and (iii) five (5)
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10 percent) of the total combined
voting power of all classes of stock of the Company or of any Related
Corporation. Subject to earlier termination as provided in Sections 9 and 10
below, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to Section 17 below.
8. EXERCISE OF OPTIONS. Subject to the provisions of Sections 9 through
12 below, each Option granted under this Plan shall be exercisable as follows:
(a) VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such installments as
the Committee or Board may specify.
(b) FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee or the Board.
(c) PARTIAL EXERCISE. Each Option or installment may be exercised at
any time or from time-to-time, in whole or in part, for up to the total number
of shares with respect to which it is then exercisable.
<PAGE> 25
(d) ACCELERATION OF VESTING. The Committee or the Board shall have
the right to accelerate the date of exercise of any installment of any Option;
provided, however, that the Committee or the Board shall not, without the
consent of the optionee, accelerate the exercise date of any installment of
any Option granted to any employee as an ISO (and not previously converted
into a Non-Qualified Option pursuant to Section 17 below) if such acceleration
would violate the annual vesting limitation contained in the Code, as
described in Section 6(c) above.
9. TERMINATION OF EMPLOYMENT. Unless otherwise provided in any
instrument evidencing the grant of a Stock Right hereunder, if an ISO optionee
ceases to be employed by the Company or any Related Corporation other than by
reason of death or disability as defined in Section 10 below, no further
installments of such optionee's ISOs shall become exercisable, and such
optionee's vested ISOs shall terminate after the passage of ninety (90) days
from the date of termination of such optionee's employment, but in no event
later than on their specified expiration date(s), except to the extent that
such ISOs (or the unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to Section 17 below. To the extent permitted
under the Code, with respect to ISOs, employment shall be considered as
continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, missionary service, military obligations or
governmental service). A bona fide leave of absence with the written approval
of the Committee or the Board shall not be considered an interruption of
employment under this Plan, provided that such written approval contractually
obligates the Company or any Related Corporation to continue the employment of
the optionee after the approved period of absence. ISOs granted under this
Plan shall not be affected by any change of employment within or among the
Company and any Related Corporations, so long as the optionee continues to be
an employee of the Company or any Related Corporation. Nothing in this Plan
shall be deemed to give any grantee of any Stock Right the right to be
retained in employment or other service by the Company or any Related
Corporation for any period of time.
10. DEATH; DISABILITY.
(a) DEATH. If an ISO optionee ceases to be employed by the Company
or any Related Corporation by reason of such optionee's death, any ISO of such
optionee may be exercised, to the extent of the number of shares with respect
to which the optionee could have exercised on the date of the optionee's
death, by the optionee's estate, personal representative or beneficiary who
has acquired the ISO by will or by the laws of descent and distribution, at
any time prior to the earlier of the specified expiration date of the ISO or
one year from the date of the optionee's death.
(b) DISABILITY. If an ISO optionee ceases to be employed by the
Company or any Related Corporation by reason of disability, such optionee (or
such optionee's custodian) shall have the right to exercise any ISO held by
such optionee on the date of termination of employment, to the extent of the
number of shares with respect to which the optionee could have exercised on
that date, at any time prior to the earlier of the specified expiration date
of the ISO or one year from the date of the termination of the optionee's
employment. For purposes of this Plan, the term "disability" shall mean
<PAGE> 26
"permanent and total disability" as defined in Section 22(e)(3) of the Code or
any successor statute.
11. ASSIGNABILITY. No Option or Derivative Security (as that term is
defined in Rule 16b-3 under the 1934 Act) shall be assignable or transferable
by the optionee except as permitted under Rule 16b-3 under the 1934 Act or by
will or by the laws of descent and distribution, and during the lifetime of
the optionee each Option shall be exercisable only by the optionee. No ISO
shall be transferable except as permitted by the Code.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such form as the Committee or the
Board may from time-to-time approve. Such instruments shall conform to the
terms and conditions set forth in Sections 6 through 11 above and may contain
such other provisions as the Committee or the Board deems advisable, which are
not inconsistent with this Plan, including, without limitation, restrictions
applicable to shares of the Company's Common Stock issuable upon exercise of
Options. In granting Non-Qualified Options, the Committee or the Board may
specify that Non-Qualified Options shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and
cancellation provisions as the Committee or the Board may determine. The
Committee or the Board may from time-to-time confer authority and
responsibility on one or more of its members and/or one or more officers of
the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary
or advisable from time-to-time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to the optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company
regarding such Option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of the Company's
Common Stock shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be appropriately increased or
decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
(b) MERGER; CONSOLIDATION; SALE OF ASSETS. Unless otherwise
specified in the instrument evidencing the grant of any Stock Right hereunder,
in the event of a consolidation of the Company, a merger in which the Company
is not the surviving entity, or the sale of all or substantially all of the
Company's assets, the exercisability of any or all outstanding Options shall
automatically be accelerated so that such Options would be exercisable in full
immediately prior to the effective date of such consolidation, merger or asset
sale. However, no such acceleration shall occur if and to the extent any
outstanding Options are, in connection with such consolidation, merger, or
asset sale, either to be assumed by the successor corporation (or parent
thereof or to be replaced with a comparable option to purchase shares of the
<PAGE> 27
capital stock of the successor corporation (or a parent thereof). The
determination of such option comparability shall be made by the Committee or
the Board, and such determination shall be final, binding and conclusive.
Immediately following any such consolidation, merger or asset sale, all
Options, to the extent not previously exercised, shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof) in connection with such consolidation, merger or asset sale.
If any outstanding Option hereunder is assumed in connection with any such
consolidation, merger or asset sale, then such Option shall be appropriately
adjusted, immediately after such consolidation, merger or asset sale, to apply
to the number and class of securities which would have been issuable to the
optionee upon consummation of such consolidation, merger or asset sale if the
Options had been exercised immediately prior to any such transaction, and
appropriate adjustment shall also be made to the exercise price for such
Options, provided the aggregate exercise price shall remain the same. This
Plan shall not in any way affect the right of the Company to adjust,
reclassify, reorganize or otherwise change capital or business structure or to
merge, consolidate, dissolve, liquidate, or sell or transfer any part of its
business or assets.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in Section 13(b) above) pursuant to which securities of the Company
or of another entity are issued with respect to the outstanding shares of
Common Stock, an optionee, upon exercising an Option, shall be entitled to
receive for the purchase price paid upon such exercise the securities the
optionee would have received if the optionee had exercised the Option prior to
such recapitalization or reorganization.
(d) MODIFICATION OF ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to Sections 13(a), (b) or (c) above with respect to
ISOs shall be made only after the Committee or the Board, after consulting
with counsel for the Company, determines whether such adjustments would
constitute a "modification" of such ISOs (as that term is defined in Section
425 of the Code) or would cause any adverse tax consequences for the holders
of such ISOs. If the Committee or the Board determines that such adjustments
made with respect to ISOs would constitute a modification of such ISOs, it may
refrain from making such adjustments.
(e) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or of 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
subject to Options. No adjustments shall be made for dividends paid in cash
or in property other than securities of the Company.
(f) FRACTIONAL SHARES. No fractional shares shall be issued under
this Plan and each optionee shall receive from the Company cash in lieu of
such fractional shares.
(g) ADJUSTMENTS. Upon the happening of any of the events described
in Section 13(a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 4 above that are subject to Stock Rights that previously
<PAGE> 28
have been or subsequently may be granted under this Plan shall also be
appropriately adjusted to reflect the events described in such Sections. The
Committee or Board shall determine the specific adjustments to be made under
this Section 13 and, subject to Section 2 above, its determination shall be
conclusive.
If any person or entity owning restricted Common Stock obtained by exercise of
a Stock Right hereunder receives shares or securities in connection with a
corporate transaction described in Sections 13(a), (b) or (c) above as a
result of owning such restricted Common Stock, such shares or securities shall
be subject to all of the conditions and restrictions applicable to the
restricted Common Stock with respect to which such shares or securities or
cash were issued, unless otherwise determined by the Committee or Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
installment thereof) shall be exercised by giving written notice to the
Company at its principal office address. Such notice shall (i) identify the
Stock Right being exercised, (ii) specify the number of shares as to which
such Stock Right is being exercised and (iii) contain such representations and
agreements as may be necessary to comply with applicable securities laws,
accompanied by full payment of the purchase price. Payment for the Stock
Right may be made (i) in cash (by check), (ii) by surrender of shares of
Common Stock of the Company having a fair market value equal to the exercise
price of the Stock Right, (iii) where permitted by applicable law and approved
by the Committee in its sole discretion, by tender of a full recourse
promissory note having such terms as may be approved by the Committee, (iv)
where permitted by applicable law, through a "same-day-sale" commitment from
optionee and a broker-dealer that is a member in good standing of the National
Association of Securities Dealers (an "NASD Dealer") whereby optionee
irrevocably elects to exercise the Stock Right and to sell a portion of the
Common Stock so purchased to pay for the exercise price and whereby the NASD
Dealer irrevocably commits upon receipt of such Common Stock to forward the
exercise price directly to the Company, (v) where permitted by applicable law,
through a "margin" commitment from optionee and an NASD Dealer whereby
optionee irrevocably elects to exercise the Stock Right and to pledge the
Common Stock so purchased to the NASD Dealer in a margin account as security
for a loan from the NASD Dealer in the amount of the exercise price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Common Stock
to forward the exercise price directly to the Company, (vi) as permitted by
applicable law, by surrender of the right to acquire shares of Common Stock
underlying the Stock Right having a fair market value equal to the exercise
price in what is commonly referred to as an "immaculate exercise" or (vii) by
any combination of the foregoing, or by any other legal consideration or
means, where approved by the Committee in its sole discretion. The holder of
a Stock Right shall not have the rights of a shareholder with respect to the
shares covered by his, her or its Stock Right until the date of issuance of a
stock certificate for such shares. Except as expressly provided in Section 13
above with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
15. COMPLIANCE WITH LAWS. The grant of Stock Rights and the issuance of
Common Stock upon exercise of any Stock Right shall be subject to and
<PAGE> 29
conditioned upon compliance with all applicable requirements of law, including
without limitation compliance with the Securities Act of 1933 as amended,
compliance with all other applicable state securities laws and compliance with
the requirements of any stock exchange or market on which the Common Stock may
be listed.
16. TERM AND AMENDMENT OF PLAN. This Plan was approved and adopted by
the Board on March 4, 1997, subject (with respect to the validation of ISOs
granted under this Plan) to approval of this Plan by the stockholders of the
Company. If the approval of this Plan by the Company's stockholders is not
obtained by March 4, 1998, any grants of ISOs under this Plan made prior to
that date will be rescinded. This Plan shall expire on March 3, 2007 (except
as to Options outstanding on that date). Subject to the provisions of Section
5 above, Stock Rights may be granted under this Plan prior to the date of
stockholder approval of this Plan. The Board may terminate or amend this Plan
in any respect at any time; provided, however, that the Board may not amend
this Plan in any of the following respects without the approval of the
Company's stockholders obtained within twelve (12) months before or after the
Board adopts a resolution authorizing any of the following actions: (a) the
total number of shares that may be issued under this Plan may not be increased
(except by adjustment pursuant to Section 13 above); (b) the provisions of
Section 3 above regarding eligibility for grants of ISOs may not be modified;
(c) the provisions of Section 6(b) above regarding the exercise price at which
shares may be offered pursuant to ISOs may not be modified (except by
adjustment pursuant to Section 13 above); and (d) the expiration date of this
Plan may not be extended. Except as otherwise provided in this Section 16, in
no event may action of the Board or the stockholders alter or impair the
rights of a grantee, without such grantee's consent, under any Stock Right
previously granted to such grantee. The Committee or the Board may amend the
terms of any Stock Right granted if such amendment is agreed to by the
recipient of such Stock Right.
17. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
The Committee or the Board, at the written request of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's
ISOs (or any installments or portions of installments thereof) that have not
been exercised on the date of conversion into Non-Qualified Options at any
time prior to the expiration of such ISOs, regardless of whether the optionee
is an employee of the Company or a Related Corporation at the time of such
conversion. Such actions may include, but shall not be limited to, extending
the exercise period or reducing the exercise price of the appropriate
installments of such Options. At the time of such conversion, the Committee
or the Board (with the consent of the optionee) may impose such conditions on
the exercise of the resulting Non-Qualified Options as the Committee or the
Board in its discretion may determine, provided that such conditions shall not
be inconsistent with this Plan. Nothing in this Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into Non-
Qualified Options, and no such conversion shall occur until and unless the
Committee or the Board takes appropriate action. The Committee or the Board,
with the consent of the optionee, may also terminate any portion of any ISO
that has not been exercised at the time of such termination.
<PAGE> 30
18. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under this
Plan shall be used for general corporate purposes.
19. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
20. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as that term is defined in Section 21 below) or the vesting of
restricted Common Stock acquired upon the exercise of a Stock Right hereunder,
the Company, in accordance with Section 3402(a) of the Code, may require the
optionee, Award recipient or purchaser to pay additional withholding taxes in
respect of the amount that is considered compensation includable in such
individual's gross income. The Committee or the Board in its discretion may
condition (i) the exercise of an Option, (ii) the grant of an Award, (iii) the
making of a Purchase of Common Stock for less than its fair market value or
(iv) the vesting of restricted Common Stock acquired by exercising a Stock
Right, on the grantee's payment of such additional withholding taxes.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any shares of the Company's
Common Stock acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such Common Stock
before the later of (a) two (2) years after the date the employee was granted
the ISO and (b) one (1) year after the date the employee acquired the Common
Stock by exercising the ISO. If the employee dies before such shares of
Common Stock are sold, these holding period requirements do not apply and no
Disqualifying Disposition can occur thereafter.
22. GOVERNING LAW; CONSTRUCTION. The validity and construction of this
Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the State of Utah, or the laws of any jurisdiction in which the Company or
its successors in interest may be organized. In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, unless the context otherwise requires.
