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:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Featherlite Mfg., 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>
(Insert Logo)
FEATHERLITE MFG., INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held
May 6, 1998
The Annual Meeting of Shareholders of Featherlite Mfg., Inc. will be held
at the Company's offices, Highways 63 and 9, Cresco, Iowa, on Wednesday, May 6,
1998, at 7:00 p.m. (Central Daylight Time), for the following purposes:
1. To set the number of members of the Board of Directors at seven (7).
2. To elect directors of the Company for the ensuing year.
3. To amend the Articles of Incorporation to change the name of the
Company to Featherlite, Inc.
4. To amend the 1994 Stock Option Plan to increase the number of shares
of Common Stock reserved for issuance as options from 550,000 shares
to 1,100,000 shares.
5. To take action upon any other business that may properly come before
the meeting or any adjournment thereof.
Only shareholders of record shown on the books of the Company at the close
of business on March 20, 1998, will be entitled to vote at the meeting or any
adjournment thereof. Each shareholder is entitled to one vote per share on all
matters to be voted on at the meeting.
You are cordially invited to attend the meeting. Whether or not you plan to
attend the meeting, please sign, date and return your Proxy in the return
envelope provided as soon as possible. Your cooperation in promptly signing and
returning the Proxy will help avoid further solicitation expense to the Company.
This Notice, the Proxy Statement and the enclosed Proxy are sent to you by
order of the Board of Directors.
Gary H. Ihrke,
Secretary
Dated: March 27, 1998
Cresco, Iowa
<PAGE>
FEATHERLITE MFG., INC.
PROXY STATEMENT
for
Annual Meeting of Shareholders
to be held May 6, 1998
INTRODUCTION
Your Proxy is solicited by the Board of Directors of Featherlite Mfg., Inc.
(the "Company") for use at the Annual Meeting of Shareholders to be held on May
6, 1998, and at any adjournment thereof, for the purposes set forth in the
attached Notice of Annual Meeting.
The cost of soliciting Proxies, including preparing, assembling and mailing
the Proxies and soliciting material, will be borne by the Company. Directors,
officers and regular employees of the Company may, without compensation other
than their regular compensation, solicit Proxies personally or by telephone.
Any shareholder giving a Proxy may revoke it at any time prior to its use
at the meeting by giving written notice of such revocation to the Secretary or
other officer of the Company or by filing a new written Proxy with an officer of
the Company. Personal attendance at the meeting is not, by itself, sufficient to
revoke a Proxy unless written notice of the revocation or a subsequent Proxy is
delivered to an officer before the revoked or superseded Proxy is used at the
meeting.
Proxies not revoked will be voted in accordance with the choice specified
by shareholders by means of the ballot provided on the Proxy for that purpose.
Proxies which are signed but which lack any such specification will, subject to
the following, be voted in favor of the proposals set forth in the Notice of
Meeting and in favor of the number and slate of directors proposed by the Board
of Directors and listed herein. If a shareholder abstains from voting as to any
matter, then the shares held by such shareholder shall be deemed present at the
meeting for purposes of determining a quorum and for purposes of calculating the
vote with respect to such matter, but shall not be deemed to have been voted in
favor of such matter. Abstentions, therefore, as to any proposal will have the
same effect as votes against such proposal. If a broker returns a "non-vote"
proxy, indicating a lack of voting instruction by the beneficial holder of the
shares and a lack of discretionary authority on the part of the broker to vote
on a particular matter, then the shares covered by such non-vote shall be deemed
present at the meeting for purposes of determining a quorum but shall not be
deemed to be represented at the meeting for purposes of calculating the vote
required for approval of such matter.
The mailing address of the Company's principal executive office is Highways
63 and 9, P.O. Box 320, Cresco, Iowa 52136. The Company expects that this Proxy
Statement and the related Proxy and Notice of Annual Meeting will first be
mailed to shareholders on or about March 27, 1998.
OUTSTANDING SHARES AND VOTING RIGHTS
The Board of Directors of the Company has fixed March 20, 1998, as the
record date for determining shareholders entitled to vote at the Annual Meeting.
Persons who were not shareholders on such date will not be allowed to vote at
the Annual Meeting. At the close of business on March 20, 1998, 6,255,000 shares
of the Company's Common Stock were issued and outstanding. Such Common Stock is
the only outstanding class of stock of the Company. Each share of Common Stock
is entitled to one vote on each matter to be voted upon at the meeting. Holders
of the Common Stock are not entitled to cumulative voting rights in the election
of directors.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table provides information concerning the only persons known
to the Company to be the beneficial owners of more than five percent (5%) of the
Company's outstanding Common Stock as of March 20, 1998:
Amount and
Name and Address Nature of Shares Percent
of Beneficial Owner Beneficially Owned(1) of Class
Conrad D. Clement(2) 1,600,000 25.6%
Tracy J. Clement(2) 1,000,000 16.0%
Larry D. Clement(2) 1,000,000 16.0%
Becker Capital Management, Inc. (3) 434,400 6.9%
Eric P. Clement(2) 400,000 6.4%
(1) Unless otherwise indicated, the person listed as the beneficial owner
of the shares has sole voting and sole investment power over the
shares.
(2) Address: Highways 63 and 9, P.O. Box 320, Cresco, Iowa 54136.
(3) Address: 1211 SW Fifth Avenue, Suite 2185, Portland, OR 97204.
Ownership is as reported in Schedule 13G filed February 12, 1998. These
securities are beneficially owned by advisory clients of Becker Capital
Management, Inc., an investment advisor. Becker Capital Management,
Inc. disclaims beneficial ownership of such shares.
MANAGEMENT SHAREHOLDINGS
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of March 20, 1998, by each executive officer of the
Company named in the Summary Compensation Table, by each director who is a
nominee for reelection and by all directors and executive officers (including
the named individuals) as a group:
Name of Director or Officer or Number of Shares Percent
Identity of Group Beneficially Owned(1) of Class(2)
- ------------------------------- --------------------- -----------
Conrad D. Clement 1,600,000 25.6%
Tracy J. Clement 1,000,000 16.0%
Eric P. Clement 400,000 6.4%
Jeffery A. Mason 80,000(3) 1.3%
Gary H. Ihrke 80,000(3) 1.3%
Donald R. Brattain 39,720(4)(5) *
Thomas J. Winkel 10,720(4)(5) *
Kenneth D. Larson 15,720(4)(5) *
John H. Thomson 13,720(4)(5) *
Officers and Directors
as a group (12 persons) 4,257,380(6) 65.7%
* Less than 1%
(1) See Note (1) to preceding table.
(2) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person to acquire them as of March 20, 1998, or within sixty
days of such date are treated as outstanding only when determining the
percent owned by such individual and when determining the percent owned
by the group.
(3) Such shares are not currently outstanding but may be purchased upon
exercise of currently exercisable options.
(4) Includes 9,720 shares which may be purchased upon exercise of currently
exercisable options.
(5) Does not include shares subject to an option which will be granted to
and become purchasable by such individual on the date of the Annual
Meeting pursuant to an automatic grant under the Company's 1994 Stock
Option Plan.
(6) Includes 211,380 shares which may be purchased upon exercise of
currently exercisable options.
<PAGE>
ELECTION OF DIRECTORS
(Proposals #1 and #2)
General Information
The Bylaws of the Company provide that the number of directors shall be
determined by the shareholders at each annual meeting. The Board of Directors
recommends that the number of directors be set at seven. Under applicable
Minnesota law, approval of the proposal to set the number of directors at seven
requires the affirmative vote of the holders of the greater of (1) a majority of
the voting power of the shares represented in person or by proxy at the Annual
Meeting with authority to vote on such matter or (2) a majority of the voting
power of the minimum number of shares that would constitute a quorum for the
transaction of business at the Annual Meeting.
In the election of directors, each Proxy will be voted for each of the
nominees listed below unless the Proxy withholds a vote for one or more of the
nominees. Each person elected as a director shall serve for a term of one year
or until his successor is duly elected and qualified. All of the nominees are
members of the present Board of Directors. If any of the nominees should be
unable to serve as a director by reason of death, incapacity or other unexpected
occurrence, the Proxies solicited by the Board of Directors shall be voted by
the proxy representatives for such substitute nominee as is selected by the
Board, or, in the absence of such selection, for such fewer number of directors
as results from such death, incapacity or other unexpected occurrence. The
election of each nominee requires the affirmative vote of a majority of the
shares represented in person or by proxy at the Annual Meeting.
The following table provides certain information with respect to the
nominees for director.
Name Age Positions Held
Conrad D. Clement 54 President, Chief Executive Officer
and Director
Jeffery A. Mason 57 Chief Financial Officer and Director
Tracy J. Clement 31 Executive Vice President and Director
Donald R. Brattain 57 Director
Thomas J. Winkel 55 Director
Kenneth D. Larson 57 Director
John H. Thomson 70 Director
Conrad D. Clement has been the Chairman, President and Chief Executive
Officer and a director of the Company since its inception in 1988. From 1969 to
1988, Mr. Clement was the President and principal owner of several farm
equipment and agricultural businesses. Mr. Clement is also the President and
Chief Executive Officer and a shareholder of Featherlite Credit Corporation, an
affiliate of the Company ("Featherlite Credit"). See "Certain Transactions". Mr.
Clement is the brother of Larry D. Clement and the father of Tracy J. Clement
and Eric P. Clement.
Jeffery A. Mason has been the Chief Financial Officer and Controller of the
Company since August 1989 and has been a director of the Company since June
1993. From 1969 to 1989, Mr. Mason served in various financial management
capacities with several companies, including Arthur Andersen & Co. and Carlson
Companies. Mr. Mason is a certified public accountant.
Tracy J. Clement has been Executive Vice President and a director of the
Company since 1988. Prior to 1988, Mr. Clement was a shareholder and manager of
several farm equipment and agricultural businesses with his father, Conrad D.
Clement. Mr. Clement is also an officer and shareholder of Featherlite Credit.
See "Certain Transactions."
Donald R. Brattain, a director of the Company since August 1994, is the
President of Brattain & Associates, LLC, a private investment company
established in 1981. In addition, Mr. Brattain currently serves as a director of
the following companies: Everest Medical, Inc., Harmony Brook, Inc. (merger with
Culligan is to be effective March 13, 1998) and Sunrise International Leasing
Corporation.
Thomas J. Winkel, a director of the Company since August 1994, has been a
financial and management consultant in St. Paul, Minnesota since January 1,
1994. Mr. Winkel also serves as the interim President and CEO of Advanced
Bionics, Inc., a start-up medical device company. From 1990 to 1994, Mr. Winkel
was Chairman, President and Chief Executive Officer of Road Rescue, Inc., a
manufacturer of emergency response vehicles. From 1967 to 1990, Mr. Winkel
served in various professional capacities with Arthur Andersen & Co., the last
five years as Managing Partner of its St. Paul office.
<PAGE>
Kenneth D. Larson, a director of the Company since August 1994, joined
Polaris Industries in September 1988 as Executive Vice President/Operating
Officer and was named President and Chief Operating Officer in July 1989. Mr.
Larson was formerly Executive Vice President of the Toro Company. Prior to
starting with Toro in 1975, he held a number of positions with Allis-Chalmers
Corp., General Electric Co. and the Gehl Company. Mr. Larson is a director of
Polaris Industries, Inc.
John H. Thomson, a director of the Company since August 1994, is the
Chairman of Cresco Union Savings Bank. See "Certain Transactions." Mr. Thomson
has 41 years of experience in the banking industry.
Committee and Board Meetings
The Company's Board of Directors has two standing Committees, the Audit
Committee and the Compensation Committee. The Audit Committee, whose members are
Messrs. Winkel, Brattain, Thomson and Larson, is responsible for reviewing the
Company's internal audit procedures, the quarterly and annual financial
statements of the Company and, with the Company's independent accountants, the
results of the annual audit. The Audit Committee met twice during fiscal 1997.
The Compensation Committee, whose members are Messrs. Brattain, Winkel, Larson
and Thomson, recommends compensation of officers of the Company. The
Compensation Committee met once during fiscal year 1997. The Board does not have
a nominating committee.
During fiscal 1997, the Board held four meetings. Each director attended
75% or more of the total number of meetings of the Board and of Committees of
which he was a member.
Directors' Fees
Directors who are not employees of the Company are compensated at the rate
of $2,000 per Board meeting plus $1,000 per quarter. In addition, pursuant to
the Company's 1994 Stock Option Plan, as amended, nonemployee directors will
receive automatic grants of 3,000 shares of nonqualified stock options upon
their initial election to the Board and upon their re-election by the
shareholders. The exercise price shall be 100% of the Common Stock's current
fair market value as of the date of grant. Each nonqualified stock option
granted to nonemployee directors shall be immediately exercisable and shall
expire five (5) years after the date of grant. As of May 7, 1997, the date of
the 1997 Annual Meeting, Messrs. Donald R. Brattain, Thomas J. Winkel, Kenneth
D. Larson and John H. Thomson each received an option for the purchase of 3,000
shares at an exercise price of $6.875 per share.
CERTAIN TRANSACTIONS
Featherlite Credit Corporation ("Featherlite Credit"), which provides
retail financing to customers of the Company's dealers, is wholly-owned by the
following officers and directors of the Company: Conrad D. Clement (40%), Tracy
J. Clement (25%), Larry D. Clement (25%), and Eric P. Clement (10%).
In 1996, the Company entered into an agreement with Featherlite Credit
Corporation (Credit) to pay Credit a fee for services Credit provides in
connection with financing transactions related to the sale or lease of
Featherlite trailers and other related matters such as development of the
Featherlite Master Lease program. Credit agreed to reimburse the Company for
costs and expenses directly related to Credit which are paid by the Company,
such as wages and related costs of Credit employees. The Company paid or accrued
$42,000 for Credit in 1997 and Credit paid or accrued $96,000 for the Company.
This program was terminated in May, 1997.
Featherlite Credit leases trailers and coaches to outside parties under
operating leases with terms varying from three to six years. It buys trailers
and coaches from Featherlite dealers and in some cases, directly from the
Company at normal selling prices and pays for the trailers at the time the lease
is signed. Aggregate trailer sales of $1,080,000 were made by the Company to
Credit in 1997.
<PAGE>
Clement Auto and Truck, Inc. ("CATI"), which is wholly-owned by Larry D.
Clement, is an authorized FEATHERLITE(R) dealer located in Fort Dodge, Iowa.
Sales to CATI were $1,246,000 in 1997. All such sales were on terms and
conditions comparable to those available to other Company dealers. CATI was
indebted to the Company for transactions related to such sales in the amount of
$38,000 at December 31, 1997.
During March 1993, the Company entered into a four-year lease agreement
with Conrad D. Clement, Tracy J. Clement and Eric P. Clement for three truck
tractors, each owned one-third by such individuals. Such lease requires monthly
payments of $5,625 over the lease term, which expired in February 1997. In 1997,
payments under this lease totaled $33,750.
During May 1994, the Company entered into a five-year lease agreement with
Conrad D. Clement, Tracy J. Clement and Eric P. Clement, each equal owners of a
loader. Aggregate payments under this lease will total $118,500 over the lease
term. In addition, the Company insures the loader and pays all ordinary
maintenance and expenses related to the loader. In 1997, payments under this
lease totaled $23,712.
John H. Thomson, a director of the Company, is the Chairman and President
of Cresco Union Savings Bank in Cresco, Iowa. At December 31, 1996 the Company
was indebted to Cresco Union Savings Bank in the aggregate amount of $385,000.
During 1997, this indebtedness was repaid as part of new financing provided by
Firstar Bank, N.A.
EXECUTIVE COMPENSATION
Compensation Committee Report on Executive Compensation
Compensation Committee Interlocks and Insider Participation. The
Compensation Committee of the Board of Directors of the Company is composed of
directors Donald R. Brattain, Thomas J. Winkel, Kenneth D. Larson and John H.
Thomson. None of the members of the Committee is or ever has been an employee or
an officer of the Company and none is affiliated with any entity (other than the
Company) with which an executive officer of the Company is affiliated.
Compensation Plan. The executive compensation plan adopted by the
Compensation Committee is comprised of base salaries, annual performance
bonuses, long-term incentive compensation in the form of stock options (at least
for officers who are not already principal shareholders of the Company), and
various benefits in which all qualified employees of the Company participate. In
addition, the Compensation Committee from time to time may award special cash
bonuses or stock options related to non-recurring, extraordinary performance.
The Compensation Committee adopted an approach of paying annual base
salaries which are on the moderate side of being competitive in its industry,
taking into account particular positive and negative aspects of the Company's
location in rural Iowa, and of awarding cash bonuses based on achievement of
specific annual goals. The goals are established annually by the Compensation
Committee. Options are currently being determined on an individual basis.
Generally, if the Company achieves its sales, income before taxes and
return on assets objectives for the year, each executive officer will accrue a
bonus which is equal to 50 percent of the officer's base pay. If the Company's
performance is no more than 10 percent below its objectives, each officer will
accrue a bonus equal to 25 percent of base pay and if the performance is 105
percent or more of each objective, each officer accrues a bonus of 55 percent of
base pay. Bonuses are prorated for Company performance which falls between these
achievement percentages. Each of the objectives is weighted as a percentage of
the total and may be achieved on a stand-alone basis. Bonuses are paid in the
calendar year following the year in which they are earned by the officers.
In 1997, the Company achieved 92 percent of the sales objective, 101
percent of the income before tax objective and 107 percent of the return on
assets objective, so each executive officer accrued a bonus equal to 44 percent
of base pay. Bonuses accrued in 1997 for each named officer appear under the
caption "Bonus" in the Summary Compensation table.
<PAGE>
Compensation in 1997. The Compensation Committee made adjustments in the
base annual salaries of officers to reflect changes in levels of
responsibilities and individual performance. Bonuses of $399,942 were earned for
achievement of the goals established under the compensation plan. For 1998, base
salaries for executive officers named in the compensation table below are as
follows: Conrad D. Clement - $339,000; Tracy J. Clement - $212,000; Jeffery A.
Mason - $140,000; Gary Ihrke - $140,000; and Eric Clement - $121,000.
Chief Executive Officer Compensation. Conrad D. Clement served as the
Company's Chief Executive Officer in 1997. His compensation was $295,000 and he
earned a bonus of $130,390 for achieving the defined goals under the
compensation plan. For 1998, the Compensation Committee has established a base
salary of $339,000 and Mr. Clement is eligible for a cash bonus on the same
basis as other officers as described above.
Donald R. Brattain
Thomas J. Winkel
John H. Thomson
Kenneth D. Larson
Members of the
Compensation Committee
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's
Executive Officer and to the Company's other executive officers whose salary and
bonus for fiscal 1997 exceeded $100,000:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------------------
Name and Fiscal Salary ($) Bonus ($) Other Securities All Other
Principal Position Year Underlying Compen-
Options/ sation ($)
SARs(#)
- ------------------------ ------------ -------------------- -------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Conrad D. Clement, 1997 285,500 130,390 1,141(1) -0- 9,500(2)
President and Chief 1996 286,000 61,950 3,649(1) -0- 9,000
Executive Officer 1995 286,000 -0- 3,638(1) -0- 9,000
- ------------------------ ------------ -------------------- -------------- ------------- --------------- -----------------
Tracy J. Clement, 1997 175,500 82,212 10,141(1) -0- 9,500(2)
Executive Vice 1996 176,000 38,850 2,191(1) -0- 9,000
President 1995 176,000 -0- 9,678(1) -0- 9,000
- ------------------------ ------------ -------------------- -------------- ------------- --------------- -----------------
Jeffery A. Mason, 1997 114,680 53,924 5,655(1) -0- 7,320(2)
Chief Financial Officer 1996 114,680 25,620 7,320(1) 40,000 7,320
1995 114,680 -0- 5,723(1) -0- 7,320
- ------------------------ ------------ -------------------- -------------- ------------- --------------- -----------------
Gary H. Ihrke 1997 108,100 50,830 -0- -0- 6,900(2)
Vice President of 1996 107,723 24,150 -0- 40,000 6,865
Operations & Secretary 1995 79,996 -0- -0- -0- 5,100
- ------------------------ ------------ -------------------- -------------- ------------- --------------- -----------------
Eric P. Clement 1997 90,240 42,432 7,822(1) -0- 5,760(2)
Vice President of Sales 1996 89,951 20,160 4,929(1) -0- 5,742
1995 75,200 -0- 7,248(1) -0- 4,800
- ------------------------ ------------ -------------------- -------------- ------------- --------------- -----------------
</TABLE>
(1) Related to automobiles only.
(2) Company contribution to 401(k) Plan.
<PAGE>
Option/SAR Grants During 1997 Fiscal Year
There were no options granted to the named executive officers during fiscal
1997. The Company has not granted any stock appreciation rights.
Option/SAR Exercises During 1997 Fiscal Year and Fiscal Year End Option/SAR
Values
The following table provides information related to options exercised by
the named executive officers during the 1997 fiscal year and the number and
value of options held at fiscal year end.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares FY-End (#) FY-End ($)(1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Conrad D. Clement -0- -0- -0- --
Tracy J. Clement -0- -0- -0- --
Jeffery A. Mason -0- -0- 80,000/20,000 131,250/37,500
Gary H. Ihrke -0- -0- 80,000/20,000 131,250/37,500
Eric P. Clement -0- -0- -0- --
</TABLE>
(1) Based on the difference between $7.875 (the closing price of the
Company's Common Stock on December 31, 1997 as reported by Nasdaq) and the
option exercise price.
Stock Performance Chart
The following chart compares the cumulative total shareholder return on the
Company's Common Stock with the S&P 500 Index and an index of peer companies
selected by the Company (the "Peer Group Index"). The comparison assumes $100
was invested on September 28, 1994 (the date the Company's Common Stock began
trading) in the Company's Common Stock and in each of the foregoing indices and
assumes reinvestment of dividends.
The Peer Group Index includes the following companies: Arctco, Inc., Harley
Davidson, Inc., Miller Industries, Inc., Polaris Industries, Inc., Spartan
Motors, Inc., Dorsey Trailers, Inc. and Wabash National Corp.
<PAGE>
AMENDMENT OF ARTICLES OF INCORPORATION
TO CHANGE CORPORATION NAME
(Proposal # 3)
At the Annual Meeting, shareholders will be asked to approve an amendment
to the Company's Articles of Incorporation to change the name of the Company
from "Featherlite Mfg., Inc." to "Featherlite, Inc." "Featherlite, Inc." more
broadly describes the scope of the Company's business. Accordingly, the Board of
Directors has adopted and recommends for shareholder approval an amendment to
the Articles of Incorporation of the Company which would change the name of the
Company to "Featherlite, Inc."
Vote Required
Adoption of the amendment to the Company's Articles of Incorporation to
change the Company's name requires the affirmative vote of the holders of the
greater of (1) a majority of the voting power of the shares represented in
person or by proxy at the Annual Meeting with authority to vote on such matter
or (2) a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the Annual Meeting.
<PAGE>
APPROVAL OF INCREASE IN SHARES RESERVED FOR 1994 STOCK OPTION PLAN
(Proposal No. 4)
General
The Board of Directors has adopted, subject to shareholder approval, an
increase in the number shares of the Company's Common Stock reserved for
issuance under the Company's 1994 Stock Option Plan (the "Plan") from 550,000 to
1,100,000.
A general description of the Plan is set forth below, but such
description is qualified in its entirety by reference to the full text of the
Plan, a copy of which may be obtained without charge upon written request to the
Company's Chief Financial Officer.
Description of Plan
Purpose. The purpose of the Plan is to promote the success of the
Company by facilitating the employment and retention of competent personnel and
by furnishing incentive to directors, officers, employees and key consultants
upon whose efforts the success of the Company will depend to a large degree.
Term. Incentive stock options may be granted under the Plan for a
period of ten years from the date of adoption of the Plan by the Board of
Directors. Nonqualified stock options may be granted pursuant to the Plan until
the Plan is discontinued or terminated by the Board.
Administration. The Plan may be administered by the Board of Directors
or a Committee of the Board of Directors (the "Committee"). The Plan gives broad
powers to the Committee to administer and interpret the Plan, including the
authority to select the individuals to be granted options and to prescribe the
particular form and conditions of each option granted.
Eligibility. All employees of the Company or any subsidiary are
eligible to receive incentive stock options pursuant to the Plan. All employees,
directors and officers of, and consultants and advisors to, the Company or any
subsidiary are eligible to receive nonqualified stock options. As of March 9,
1998, the Company had approximately 1431 employees (of which eight are officers)
and four directors who are not employees.
Options. When an option is granted under the Plan, the Committee at its
discretion specifies the option price, the type of option (either "incentive" or
"nonqualified") to be granted, and the number of shares of Common Stock which
may be purchased upon exercise of the option. The exercise price of an incentive
stock option may not be less than 100% of the fair market value of the Company's
Common Stock and, unless otherwise determined by the Committee, the option price
of a nonqualified option will not be less than 100% of the fair market value of
the Company's Common Stock on the date of grant. The market value per share of
the Company's Common Stock on March 9, 1998 was $8.19. The term during which the
option may be exercised and whether the option will be exercisable immediately,
in stages or otherwise are set by the Committee, but the term of an incentive
stock option may not exceed ten years from the date of grant. Optionees may pay
for shares upon exercise of options with cash, certified check or Common Stock
of the Company valued at the stock's then fair market value. Each incentive
stock option granted under the Plan is nontransferable during the lifetime of
the optionee. Each outstanding option under the Plan may terminate earlier than
its stated expiration date in the event of the optionee's termination of
employment or other relationship with the Company.
Automatic Grants to Directors. The Plan provides for the automatic
grant of a nonqualified stock option to each nonemployee director upon his or
her initial election to the Board and upon each re-election by the shareholders.
The exercise price of each such option must be 100% of the Common Stock's fair
market value as of the date of grant. Each nonqualified stock option granted to
nonemployee directors is immediately exercisable and expires five years after
the date of grant. If the nonemployee director's membership on the Board
terminates for any reason other than death, the nonemployee director will have
thirty days to exercise the options, unless the options otherwise expire prior
to the end of that thirty-day period. In the event of the nonemployee director's
death, his or her estate will have six months from the date of death to exercise
the options, unless the options expire prior to the end of that six-month
period.
<PAGE>
Amendment. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, (i) no such
revision or amendment may impair the terms and conditions of any outstanding
option to the material detriment of the optionee without the consent of the
optionee except as authorized in the event of merger, consolidation or
liquidation of the Company, (ii) the Plan may not, without the approval of the
shareholders, be amended in any manner that will (a) materially increase the
number of shares subject to the Plan except as provided in the case of stock
splits, consolidations, stock dividends or similar events; (b) change the
designation of the class of employees eligible to receive options; (c) decrease
the price at which options will be granted; or (d) materially increase the
benefits accruing to optionees under the Plan, and (iii) the provisions relating
to the nonqualified stock options granted to nonemployee directors may not be
amended more frequently than once every six months, unless the amendment is
required to comply with changes in the Internal Revenue Code or the Employee
Retirement Income Security Act of 1974, as amended.
Federal Income Tax Consequences of the Plan. Under present law, an
optionee will not realize any taxable income on the date a nonqualified option
is granted pursuant to the Plan. Upon exercise of the option, however, the
optionee must recognize, in the year of exercise, ordinary income equal to the
difference between the option price and the fair market value of the Company's
Common Stock on the date of exercise. Upon the sale of the shares, any resulting
gain or loss will be treated as capital gain or loss. The Company will receive
an income tax deduction in its fiscal year in which nonqualified options are
exercised, equal to the amount of ordinary income recognized by those optionees
exercising options, and must withhold income and other employment-related taxes
on such ordinary income.
Incentive stock options granted under the Plan are intended to qualify
for favorable tax treatment under Section 422 of the Internal Revenue Code.
Under Section 422, an optionee recognizes no taxable income when the option is
granted. Further, the optionee generally will not recognize any taxable income
when the option is exercised if he or she has at all times from the date of the
option's grant until three months before the date of exercise been an employee
of the Company. The Company ordinarily is not entitled to any income tax
deduction upon the grant or exercise of an incentive stock option. Certain other
favorable tax consequences may be available to the optionee if he or she does
not dispose of the shares acquired upon the exercise of an incentive stock
option for a period of two years from the granting of the option and one year
from the receipt of the shares.
Plan Benefits. The table below shows the total number of stock options
that have been received by the following individuals and groups under the Plan:
Total Number of
Name and Position/Group Options Received(1)
Conrad D. Clement, President and Chief
Executive Officer 0
Tracy J. Clement, Executive Vice President 0
Jeffery A. Mason, Chief Financial Officer 100,000
Gary H. Ihrke, Vice President of Operations 100,000
Eric P. Clement, Vice President of Sales 0
Current Executive Officer Group 212,500
Current Non-executive Officer Director Group 38,880
Current Non-executive Officer Employee Group 60,000
(1) This table reflects only the total stock options granted as of March 9,
1998, without taking into account exercises or cancellations. Because
future grants of stock options are subject to the discretion of the
Committee, the future benefits that may be received by these individuals or
groups under the Plan cannot be determined at this time, except for the
automatic grants to nonemployee directors as described above.
Vote Required; Recommendation
The Board of Directors recommends that the shareholders approve the
increase in the shares reserved for the 1994 Stock Option Plan. Approval of the
increase requires the affirmative vote of the greater of (i) a majority of the
shares represented at the meeting with authority to vote on such matter or (ii)
a majority of the voting power of the minimum number of shares that would
constitute a quorum for the transaction of business at the meeting.
<PAGE>
INDEPENDENT AUDITORS
McGladrey & Pullen, LLP acted as the Company's independent auditors for the
1997 fiscal year, and the Company has selected McGladrey & Pullen, LLP as its
independent auditors for the current fiscal year ending December 31, 1998.
A representative of McGladrey & Pullen, LLP is expected to be present at
the Annual Meeting, will have the opportunity to make any desired comments, and
will be available to respond to appropriate questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10 percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
10% shareholders ("Insiders") are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such reports
furnished to the Company, during fiscal year ended December 31, 1997 all Section
16(a) filing requirements applicable to Insiders were complied with.
SHAREHOLDER PROPOSALS
Any appropriate proposal submitted by a shareholder of the Company and
intended to be presented at the 1998 Annual Meeting must be received by the
Company at its offices by November 28, 1998 to be considered for inclusion in
the Company's proxy statement and related proxy for the 1999 Annual Meeting.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the
meeting. If any other matter does properly come before the meeting, the
appointees named in the Proxies will vote the Proxies in accordance with their
best judgment.
ANNUAL REPORT
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1997, including financial statements, accompanies this Notice
of Annual Meeting and Proxy Statement. No portion of the Annual Report is
incorporated herein or is to be considered proxy soliciting material.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, TO ANY SHAREHOLDER OF THE
COMPANY UPON WRITTEN REQUEST. REQUESTS SHOULD BE SENT TO CHIEF FINANCIAL
OFFICER, FEATHERLITE MFG., INC., HIGHWAYS 63 AND 9, BOX 320, CRESCO, IOWA 52136.
Dated: March 27, 1998
Cresco, Iowa
<PAGE>
FEATHERLITE MFG., INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Conrad D. Clement and Tracy J. Clement, or
either of them acting alone, with full power of substitution, as proxies to
represent and vote, as designated below, all shares of Common Stock of
Featherlite Mfg., Inc. registered in the name of the undersigned, at the Annual
Meeting of the Shareholders to be held on Wednesday, May 6, 1998, at 7:00 p.m.
Central Daylight Time, at the Company's offices, Highway 63 and 9, Cresco, Iowa,
and at all adjournments of such meeting. The undersigned hereby revokes all
proxies previously granted with respect to such meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN FOR A PARTICULAR PROPOSAL, WILL BE VOTED FOR SUCH PROPOSAL.
DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED
<TABLE>
<S><C>
FEATHERLITE MFG., INC. ANNUAL MEETING
The Board of Directors recommends that you vote "FOR" the following proposals:
1. SET NUMBER OF DIRECTORS AT SEVEN: [ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS:
1-Conrad D. Clement 2-Jeffery A. Mason 3-Tracy J. Clement [ ] FOR all nominees [ ] WITHHOLD AUTHORITY
4-Donald R. Brattain 5-Thomas J. Winkel 6-Kenneth D. Larson listed to the left (except) to vote for all nominees
7-John H. Thomson as specified below). listed to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write the
number(s) of the nominee(s) in the box provided to the right.) -----------------------------------
3. To amend the Articles of Incorporation to change the name of the Company to
Featherlite, Inc. [ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To amend the 1994 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuances as options from 550,000 shares to 1,100,000 shares. [ ] FOR [ ] AGAINST [ ] ABSTAIN
5. OTHER MATERS: In their discretion, the appointed proxies are authorized to vote upon such other business as may properly come
before the Meeting or any adjournment.
Check appropriate box Date NO. OF SHARES
Indicate changes below: -----------------
Address Change? [ ] Name Change? [ ]
-------------------------------------------
Signature(s) in Box
PLEASE DATE AND SIGN ABOVE exactly as name appears
at the left, indicating, where appropriate, official
position or representative capacity. If stock is
held in joint tenancy, each joint owner should sign.
</TABLE>
<PAGE>
FEATHERLITE MFG., INC.
1994 STOCK OPTION PLAN
(As Amended through March 10, 1998)
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Affiliates" shall mean a Parent or Subsidiary of the Company.
(b) "Committee" shall mean a Committee of two or more
directors who shall be appointed by and serve at the pleasure of the
Board. In the event the Company's securities are registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, each of
the members of the Committee shall be a "disinterested" person within
the meaning of Rule 16b-3, or any successor provision, as then in
effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934 as amended. As of the effective date of the Plan,
a "disinterested" person under Rule 16b-3 generally means a person who,
among other things, has not been, at any time within one year prior to
his or her appointment to the Committee (or, if shorter, during the
period beginning with the initial registration of the Company's equity
securities under Section 12 of the Securities Exchange Act of 1934, as
amended, and ending with the director's appointment to the Committee)
and who will not be, while serving on such Committee, granted or
awarded options under the Plan, or under any other plan of the Company
or any of its Affiliates entitling participants to acquire stock, stock
options, stock appreciation rights or similar rights that have an
exercise or conversion privilege or a value derived from equity
securities issued by the Company or its Affiliate, except to the extent
permitted by Rule 16b-3, or any successor provision.
(c) The "Company" shall mean FEATHERLITE MFG., INC., a Minnesota
corporation.
(d) The "Internal Revenue Code" is the Internal Revenue Code of 1986,
as amended from time to time.
(e) "Option Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 12) reserved for options pursuant to
this Plan.
(f) The "Optionee" for purposes of Section 9 is an employee of the
Company or any Subsidiary to whom an incentive stock option has been
granted under the Plan. For purposes of Section 10, the "Optionee" is
the consultant or advisor to or director (other than an Outside
Director), employee or officer of the Company or any Subsidiary to whom
a nonqualified stock option has been granted.
<PAGE>
(g) "Outside Director" shall mean a member of the Board of Directors of
the Company who is not an employee of the Company or any of its
Affiliates.
(h) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company's outstanding stock.
(i) The "Plan" means the Featherlite Mfg., Inc. 1994 Stock Option Plan,
as amended hereafter from time to time, including the form of Option
Agreements as they may be modified by the Board from time to time.
(j) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned,
directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
its Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers, directors, employees,
consultants, and advisors upon whose efforts the success of the Company and its
Subsidiaries will depend to a large degree.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, or any successor
provision, and through the granting of "nonqualified stock options" pursuant to
Section 10 of this Plan. Adoption of this Plan shall be and is expressly subject
to the condition of approval by the shareholders of the Company within twelve
(12) months after the adoption of the Plan by the Board of Directors. In no
event shall any stock options be exercisable prior to the date this Plan is
approved by the shareholders of the Company. If shareholder approval of this
Plan is not obtained within twelve (12) months after the adoption of the Plan by
the Board of Directors, any stock options previously granted shall be revoked.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective upon its adoption by the Board of Directors
of the Company, subject to approval by the shareholders of the Company as
required in Section 2.
<PAGE>
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time. The Board or the Committee, as the
case may be, shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to exclusive authority (where applicable and
within the limitations described herein) to determine, in its sole discretion,
whether an incentive stock option or nonqualified stock option shall be granted,
the individuals to whom, and the time or times at which, options shall be
granted, the number of shares subject to each option and the option price and
terms and conditions of each option. The Board, or the Committee, shall have
full power and authority to administer and interpret the Plan, to make and amend
rules, regulations and guidelines for administering the Plan, to prescribe the
form and conditions of the respective stock option agreements (which may vary
from Optionee to Optionee) evidencing each option and to make all other
determinations necessary or advisable for the administration of the Plan. The
Board's, or the Committee's, interpretation of the Plan, and all actions taken
and determinations made by the Board or the Committee pursuant to the power
vested in it hereunder, shall be conclusive and binding on all parties
concerned. No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith in connection with the
administration of the Plan.
In the event the Board appoints a Committee as provided hereunder, any
action of the Committee with respect to the administration of the Plan shall be
taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Board or the Committee, as the case may be, shall from time to
time, at its discretion and without approval of the shareholders, designate
those employees, directors, officers, consultants, and advisors of the Company
or of any Subsidiary to whom nonqualified stock options shall be granted under
this Plan; provided, however, that consultants or advisors shall not be eligible
to receive stock options hereunder unless such consultant or advisor renders
bona fide services to the Company or Subsidiary and such services are not in
connection with the offer or sale of securities in a capital raising
transaction. The Board or the Committee, as the case may be, shall, from time to
time, at its discretion and without approval of the shareholders, designate
those employees of the Company or any Subsidiary to whom incentive stock options
shall be granted under this Plan. The Board or the Committee may grant
additional incentive stock options or nonqualified stock options under this Plan
to some or all participants then holding options or may grant options solely or
partially to new participants. In designating participants, the Board or the
Committee shall also determine the number of shares to be optioned to each such
participant. The Board may from time to time designate individuals as being
ineligible to participate in the Plan.
<PAGE>
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Option Stock. One Million One Hundred Thousand
(1,100,000) shares of Option Stock shall be reserved and available for options
under the Plan; provided, however, that the total number of shares of Option
Stock reserved for options under this Plan shall be subject to adjustment as
provided in Section 12 of the Plan. In the event that any outstanding option
under the Plan for any reason expires or is terminated prior to the exercise
thereof, the shares of Option Stock allocable to the unexercised portion of such
option shall continue to be reserved for options under the Plan and may be
optioned hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date as defined in
the Plan. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board.
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, certified check, Common Stock of the Company valued at
such stock's then "fair market value" as defined in Section 9(d) below, or such
other form of payment as may be authorized by the Board or the Committee. The
Board or the Committee may, in its sole discretion, limit the forms of payment
available to the Optionee and may exercise such discretion any time prior to the
termination of the Option granted to the Optionee or upon any exercise of the
Option by the Optionee.
<PAGE>
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to the Plan shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Board or Committee and may vary from Optionee to Optionee; provided,
however, that each Optionee and each Option Agreement shall comply with and be
subject to the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement
shall state the total number of shares covered by the incentive stock
option. To the extent required to qualify the Option as an incentive
stock option under Section 422 of the Internal Revenue Code, or any
successor provision, the option price per share shall not be less than
one hundred percent (100%) of the fair market value of the Common Stock
per share on the date the Board or the Committee, as the case may be,
grants the option; provided, however, that if an Optionee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any
Subsidiary, the option price per share of an incentive stock option
granted to such Optionee shall not be less than one hundred ten percent
(110%) of the fair market value of the Common Stock per share on the
date of the grant of the option. The Board or the Committee, as the
case may be, shall have full authority and discretion in establishing
the option price and shall be fully protected in so doing.
(b) Term and Exercisability of Incentive Stock Option. The
term during which any incentive stock option granted under the Plan may
be exercised shall be established in each case by the Board or the
Committee, as the case may be. To the extent required to qualify the
Option as an incentive stock option under Section 422 of the Internal
Revenue Code, or any successor provision, in no event shall any
incentive stock option be exercisable during a term of more than ten
(10) years after the date on which it is granted; provided, however,
that if an Optionee owns stock possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the
Company or of its parent or any Subsidiary, the incentive stock option
granted to such Optionee shall be exercisable during a term of not more
than five (5) years after the date on which it is granted. The Option
Agreement shall state when the incentive stock option becomes
exercisable and shall also state the maximum term during which the
option may be exercised. In the event an incentive stock option is
exercisable immediately, the manner of exercise of the option in the
event it is not exercised in full immediately shall be specified in the
Option Agreement. The Board or the Committee, as the case may be, may
accelerate the exercise date of any incentive stock option granted
hereunder which is not immediately exercisable as of the date of grant.
(c) Other Provisions. The Option Agreement authorized under
this Section 9 shall contain such other provisions as the Board or the
Committee, as the case may be, shall deem advisable. Any such Option
Agreement shall contain such limitations and restrictions upon the
exercise of the option as shall be necessary to ensure that such option
will be considered an "incentive stock option" as defined in Section
422 of the Internal Revenue Code or to conform to any change therein.
<PAGE>
(d) For purposes hereof, the "fair market value" of the
Company's Common Stock as of any applicable date shall mean: (i) if
such stock is reported in the national market system or is listed upon
an established exchange or exchanges, the reported closing price of
such stock in such national market system or on such stock exchange or
exchanges on the date the option is granted or, if no sale of such
stock shall have occurred on that date, on the next preceding day on
which there was a sale of stock; (ii) if such stock is not so reported
in the national market system or listed upon an exchange, the average
of the closing "bid" and "asked" prices quoted by a recognized
specialist in the Common Stock of the Company on the date the option is
granted, or if there are no quoted "bid" and "asked" prices on such
date, on the next preceding date for which there are such quotes; or
(iii) if such stock is not publicly traded as of the date the option is
granted, the per share value as determined by the Board, or the
Committee, in its sole discretion by applying principles of valuation
with respect to all such options.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to the Plan shall be
evidenced by a written Option Agreement. The Option Agreement shall be in such
form as may be approved from time to time by the Board or the Committee and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares and Option Price. The Option Agreement
shall state the total number of shares covered by the nonqualified
stock option. Unless otherwise determined by the Board or the
Committee, as the case may be, the option price per share shall be one
hundred percent (100%) of the fair market value of the Common Stock per
share on the date the Board or the Committee grants the option. For
purposes hereof, the "fair market value" of a share of Common Stock
shall have the same meaning as set forth under Section 9(d) herein.
(b) Term and Exercisability of Nonqualified Stock Option. The
term during which any nonqualified stock option granted under the Plan
may be exercised shall be established in each case by the Board or the
Committee, as the case may be. The Option Agreement shall state when
the nonqualified stock option becomes exercisable and shall also state
the maximum term during which the option may be exercised. In the event
a nonqualified stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the stock option agreement. The Board
or the Committee, as the case may be, may accelerate the exercise date
of any nonqualified stock option granted hereunder which is not
immediately exercisable as of the date of grant.
<PAGE>
(c) Withholding. The Company or its Subsidiary shall be
entitled to withhold and deduct from future wages of the Optionee all
legally required amounts necessary to satisfy any and all federal,
state and local withholding and employment-related taxes attributable
to the Optionee's exercise of a nonqualified stock option. In the event
the Optionee is required under the Option Agreement to pay the Company,
or make arrangements satisfactory to the Company respecting payment of,
such federal, state and local withholding and employment-related taxes,
the Board or the Committee, as the case may be, may, in its discretion
and pursuant to such rules as it may adopt, permit the Optionee to
satisfy such obligation, in whole or in part, by electing to have the
Company withhold shares of Common Stock otherwise issuable to the
Optionee as a result of the option's exercise equal to the amount
required to be withheld for tax purposes. Any stock elected to be
withheld shall be valued at its "fair market value," as provided under
Section 9(d) hereof, as of the date the amount of tax to be withheld is
determined under applicable tax law. The Optionee's election to have
shares withheld for this purpose shall be made on or before the date
the option is exercised or, if later, the date that the amount of tax
to be withheld is determined under applicable tax law. Such election
shall also comply with such rules as may be adopted by the Board or the
Committee to assure compliance with Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations
under the Securities Exchange Act of 1934, if applicable.
(d) Other Provisions. The Option Agreement authorized under
this Section 10 shall contain such other provisions as the Board, or
the Committee, as the case may be, shall deem advisable.
SECTION 11
TRANSFER OF OPTION
No option shall be transferable, in whole or in part, by the Optionee
other than by will or by the laws of descent and distribution and, during the
Optionee's lifetime, the option may be exercised only by the Optionee. If the
Optionee shall attempt any transfer of any option granted under the Plan during
the Optionee's lifetime, such transfer shall be void and the option, to the
extent not fully exercised, shall terminate.
<PAGE>
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Option Stock reserved under Section 6 hereof and the
number of shares of Option Stock covered by each outstanding option and the
price per share thereof shall be adjusted by the Board to reflect such change.
Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to
which the adjustment relates.
Unless otherwise provided in the stock option agreement, in the event
of the sale by the Company of substantially all of its assets and the consequent
discontinuance of its business, or in the event of a merger, consolidation,
exchange, reorganization, reclassification, extraordinary dividend, divestiture
(including a spin-off) or liquidation of the Company (collectively referred to
as a "transaction"), the Board may, in connection with the Board's adoption of
the plan for such transaction, provide for one or more of the following: (i) the
equitable acceleration of the exercisability of any outstanding options
hereunder; (ii) the complete termination of this Plan and cancellation of
outstanding options not exercised prior to a date specified by the Board (which
date shall give Optionees a reasonable period of time in which to exercise the
options prior to the effectiveness of such transaction) and (iii) the
continuance of the Plan with respect to the exercise of options which were
outstanding as of the date of adoption by the Board of such plan for such
transaction and provide to Optionees holding such options the right to exercise
their respective options as to an equivalent number of shares of stock of the
corporation succeeding the Company by reason of such transaction. The grant of
an option pursuant to the Plan shall not limit in any way the right or power of
the Company to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge, exchange or consolidate or to
dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 13.
INVESTMENT PURPOSE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation, those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Option Stock to Optionee, the Board or the Committee may require
Optionee to (a) represent that the shares of Option Stock are being acquired for
investment and not resale and to make such other representations as the Board,
or the Committee, as the case may be, shall deem necessary or appropriate to
qualify the issuance of the shares as exempt from the Securities Act of 1933 and
any other applicable securities laws, and (b) represent that Optionee shall not
dispose of the shares of Option Stock in violation of the Securities Act of 1933
or any other applicable securities laws. The Company reserves the right to place
a legend on any stock certificate issued upon exercise of an option granted
pursuant to the Plan to assure compliance with this Section 13.
<PAGE>
SECTION 14.
RIGHTS AS A SHAREHOLDER
An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 12 of the Plan).
SECTION 15.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 12, shall
impair the terms and conditions of any option which is outstanding on the date
of such revision or amendment to the material detriment of the Optionee without
the consent of the Optionee. Notwithstanding the foregoing, no such revision or
amendment shall (i) materially increase the number of shares subject to the Plan
except as provided in Section 12 hereof, (ii) change the designation of the
class of employees eligible to receive options, (iii) decrease the price at
which options may be granted, or (iv) materially increase the benefits accruing
to Optionees under the Plan, unless such revision or amendment is approved by
the shareholders of the Company. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause incentive
stock options to fail to meet the requirements of Section 422 of the Internal
Revenue Code. In no event shall the Board or the Committee, either directly or
indirectly, amend the provisions of Section 17 relating to nonqualified stock
options that are granted to Outside Directors more frequently than once every
six (6) months, unless such amendment is required to comply with changes in the
Employee Retirement Income Security Act of 1974, as amended, and the regulations
thereunder, or with the Internal Revenue Code of 1986, and the regulations
thereunder.
<PAGE>
SECTION 16.
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ for any period.
SECTION 17
NONQUALIFIED STOCK OPTIONS FOR OUTSIDE DIRECTORS
(a) Grant of Nonqualified Stock Options. All grants of nonqualified
stock options to Outside Directors under this Section 17 shall be
automatic and nondiscretionary and shall be made strictly in accordance
with the following provisions:
(1) No person shall have any discretion to select the
Outside Directors that shall be eligible for
nonqualified stock options pursuant to this Section
17 or to determine the number of shares of Common
Stock to be subject to such options, the option price
per share or the date of grant
(2) Initial Grants. Each Outside Director who becomes a
member of the Board of Directors of the Company after
[May 14, 1996] shall, on the date such Outside
Director is first elected to the Board of Directors
by the shareholders of the Company, be granted a
nonqualified stock option to purchase 3,000 shares of
Common Stock of the Company.
(3) Annual Grants. Each Outside Director shall, on the
date of each annual meeting of the shareholders of
the Company, be granted a nonqualified stock option
to purchase 3,000 shares of Common Stock of the
Company so long as such Outside Director continues to
serve on the Board.
(b) Option Price. The option price per share for all nonqualified
stock options granted pursuant to Section 17(a) above shall be one
hundred percent (100%) of the fair market value of a share of Common
Stock on the date the nonqualified stock option is granted.
(c) Duration and Exercise of Options.
(1) Duration of Options. Except as otherwise provided in
this Plan, the period during which any nonqualified
stock option granted to Outside Directors under this
Section 17 may be exercised shall be five (5) years
after the date that the option is granted.
<PAGE>
(2) Exercisability of Nonqualified Stock Options.
a. In no event shall any nonqualified stock
options granted to Outside Directors be
exercisable prior to the date that the Plan
is approved by the shareholders of the
Company. If shareholder approval of the Plan
is not obtained within twelve (12) months
following its adoption by the Board, any
nonqualified stock options previously
granted to Outside Directors shall be
revoked.
b. All nonqualified stock options granted to
Outside Directors pursuant to Section 17(a)
shall be fully exercisable on the date that
the option is granted. If the Outside
Director does not purchase in any year the
full number of shares which the Outside
Director is entitled to purchase in that
year, the Outside Director shall be entitled
to purchase in any subsequent year such
previously unpurchased shares, subject to
the expiration of such nonqualified stock
option as specified in Section 17(c)(1)
above.
(d) Payment of Option Price. Upon the exercise of any nonqualified
stock option granted to an Outside Director pursuant to this Section
17, the purchase price for such shares of Common Stock subject to such
option shall be paid in cash or certified check, by the transfer from
the Outside Director to the Company of previously acquired shares of
Common Stock, or any combination thereof. Any Common Stock so
transferred shall be valued at its fair market value. For purposes of
this Section 17(d), "previously acquired shares of Common Stock" shall
include shares of Common Stock that are already owned by the Outside
Director at the time of exercise.
(e) Rights as a Shareholder. The Outside Director shall have no rights
as a shareholder with respect to any shares of Common Stock subject to
a nonqualified stock option until the Outside Director becomes the
holder of record of such shares. Except as provided in Section 12, no
adjustments shall be made for dividends or other cash distributions or
for other rights that have a record date preceding the date the Outside
Director becomes the holder of record of such shares of Stock.
(f) Compliance with Rule 16b-3. All nonqualified stock options granted
to Outside Directors must comply with the applicable provisions of Rule
16b-3, or its successor, of the General Rules and Regulations of the
Securities Exchange Act of 1934, as amended.
(g) Termination of Status as a Director. In the event that an Outside
Director's membership on the Board terminates, the following provisions
shall apply:
<PAGE>
(1) If the Outside Director's membership on the Board
terminates for any reason other than the Outside
Director's death, the Outside Director shall be
entitled to exercise any nonqualified stock option
granted to such Outside Director pursuant to this
Section 17 until the earlier of (i) the close of
business on the three-month anniversary date of such
termination, and (ii) the expiration of the option as
provided in Section 17(c)(1) above. To the extent
that the Outside Director does not exercise such
Option within the period specified in this Section
17(g)(1), all rights of the Outside Director under
such Option shall be forfeited.
(2) If the Outside Director dies (i) while a member of
the Board, or (ii) within the three-month period
following the termination of the Outside Director's
membership on the Board as provided in Section
17(g)(1) above, any nonqualified stock option granted
to such Outside Director may be exercised by the
Outside Director's estate or any person who acquired
the right to exercise any nonqualified stock option
granted to such Outside Director pursuant to this
Section 17 by bequest or inheritance until the
expiration of the option as provided in Section
17(c)(1) above.
(h) For purposes of this Section 17, "fair market value" shall be
determined in accordance with Section 9(d) herein.
