SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities and Exchange Act of
1934
Filed by Registrant X
Filed by a Party other than the Registrant o
Check the Appropriate Box:
o Preliminary Proxy Statement
X Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Materials Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SMITHWAY MOTOR XPRESS CORP.
(Name of Registrant as Specified in its Charter)
THE SMITHWAY MOTOR XPRESS CORP. BOARD OF DIRECTORS
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the Appropriate Box):
X No fee required
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies: N/A
----
(2) Aggregate number of securities to which transaction applies: N/A
----
(3) Price per unit or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: N/A
----
(4) Proposed maximum aggregate value of transaction: N/A
----
(5) Total Fee paid N/A
----
o Fee paid previously with preliminary materials N/A
----
o 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: N/A
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(2) Form, Schedule or Registration Statement No.: N/A
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(3) Filing Party: N/A
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(4) Date Filed: N/A
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SMITHWAY MOTOR XPRESS CORP.
Rural Route #5
Fort Dodge, Iowa 50501
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NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1997
-----------------------------------------------------
To Our Stockholders:
The 1997 Annual Meeting of Stockholders (the "Annual Meeting") of Smithway
Motor Xpress Corp., a Nevada Corporation (the "Company"), will be held at the
Company's headquarters located at 2031 Quail Avenue, Fort Dodge, Iowa 50501, at
9:30 a.m. Central Time, on Thursday, May 8, 1997 for the following purposes:
1. To consider and act upon a proposal to elect five (5)
directors of the Company;
2. To consider and act upon a proposal to ratify the selection of
KPMG Peat Marwick LLP, as independent public accountants for
the Company for the 1997 fiscal year; and
3. To consider and act upon such other matters as may properly
come before the meeting and any adjournment thereof.
The foregoing matters are more fully described in the accompanying
Proxy Statement.
The Board of Directors has fixed the close of business on March 10,
1997, as the record date for the determination of Stockholders entitled to
receive notice of and to vote at the Annual Meeting or any adjournment thereof.
Shares of Common Stock may be voted at the Annual Meeting only if the holder is
present at the Annual Meeting in person or by valid proxy. YOUR VOTE IS
IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, YOU ARE
REQUESTED TO PROMPTLY DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. Returning your proxy now will not interfere with your right
to attend the Annual Meeting or to vote your shares personally at the Annual
Meeting, if you wish to do so. The prompt return of your proxy may save the
Company additional expenses of solicitation.
All Stockholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ William G. Smith
Chairman of the Board
Fort Dodge, IA 50501
April 8, 1997
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SMITHWAY MOTOR XPRESS CORP.
Rural Route #5
Fort Dodge, Iowa 50501
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PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
-----------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Smithway Motor Xpress Corp., a Nevada
corporation (the "Company"), to be used at the 1997 Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), which will be held at the
Company's headquarters located at 2031 Quail Avenue, Fort Dodge, Iowa 50501, on
Thursday, May 8, 1997, at 9:30 a.m. Central Time, and any adjournment thereof.
All costs of the solicitation will be borne by the Company. The Company does not
intend to solicit proxies other than by this mailing; provided, that directors,
officers, and employees may solicit proxies by use of the mails or telephone
without compensation other than their regular compensation. The approximate date
of mailing this proxy statement and the enclosed form of proxy is April 8, 1997.
The enclosed copy of the Company's annual report for the fiscal year
ended December 31, 1996, is not incorporated into this Proxy Statement and is
not to be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Only stockholders of record at the close of business on March 10, 1997
("Stockholders"), are entitled to vote, either in person or by valid proxy, at
the Annual Meeting. Holders of Class A Common Stock are entitled to one vote for
each share held. Holders of Class B Common Stock are entitled to two votes for
each share held. On March 10, 1997, there were issued and outstanding 3,999,293
shares of Class A Common Stock, par value one cent ($.01), entitled to cast an
aggregate 3,999,293 votes on all matters subject to a vote at the Annual
Meeting, and 1,000,000 shares of Class B Common Stock, par value one cent
($.01), entitled to cast an aggregate 2,000,000 votes on all matters subject to
a vote at the Annual Meeting. The Company has a total of 4,999,293 shares of
Common Stock outstanding, entitled to cast an aggregate 5,999,293 votes on all
matters subject to a vote at the Annual Meeting. The number of issued and
outstanding shares excludes 225,000 shares of Class A Common Stock reserved for
issuance to employees under the Company's Incentive Stock Plan (the "Plan").
Options covering an aggregate of approximately 110,000 such shares have been
granted, and on March 10, 1997, approximately 46,500 of such shares were subject
to vested but unexercised options. There are 25,000 shares of Class A Common
Stock reserved for issuance under the Company's Outside Director Stock Plan. Of
those shares, 3,000 are subject to vested but unexercised options. Holders of
unexercised options are not entitled to vote at the Annual Meeting. The Company
has no other class of stock outstanding. Stockholders are not entitled to
cumulative voting in the election of directors.
Any Stockholder may be represented and may vote at the Annual Meeting
by a proxy or proxies appointed by an instrument in writing. If any such
instrument in writing designates two (2) or more persons to act as proxies, a
majority of such persons present at the meeting, or, if only one is present,
then that one may exercise all of the powers conferred by such written
instrument unless the instrument shall otherwise provide. No such proxy shall be
valid after the expiration of six (6) months from the date of its execution,
unless coupled with an interest or unless the person executing it specifies
therein the length of time for which it is to continue in force, which in no
case shall exceed seven (7) years from the date of its execution. Any
Stockholder giving a proxy may revoke it at any time prior to its use at the
Annual Meeting by filing with the Secretary of the Company a revocation of the
proxy, by delivering to the Company a duly executed proxy bearing a later date,
or by attending the meeting and voting in person.
Other than the election of Directors, which requires a plurality of the
votes cast, each matter to be submitted to the Stockholders requires the
affirmative vote of a majority of the votes cast at the meeting. For purposes of
determining the number of votes cast with respect to a particular matter, only
those cast "For" or "Against" are included. Abstentions and broker non-votes are
counted only for purposes of determining whether a quorum is present at the
meeting.
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PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, the Stockholders will elect five (5) directors
to serve as the Board of Directors until the 1998 Annual Meeting of the
Stockholders of the Company or until their successors are elected and qualified.
In the absence of contrary instructions, each proxy will be voted for the
election of William G. Smith, G. Larry Owens, Herbert D. Ihle, Robert E. Rich,
and Terry G. Christenberry, all of whom are standing for re-election to the
Board of Directors. William G. Smith, Marlys L. Smith, and G. Larry Owens, who
together are entitled to cast over 50% of the eligible votes at the Annual
Meeting, have indicated that they will vote for the named nominees, and assuming
that they do, such nominees will be elected.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Information concerning the names, ages, positions with the Company,
tenure as a director, and business experience of the Company's current directors
and other executive officers is set forth below. All references to experience
with the Company include positions with the Company's operating subsidiary,
Smithway Motor Xpress, Inc., an Iowa corporation.
<TABLE>
NAME AGE POSITION DIRECTOR
SINCE
<S> <C> <C> <C>
William G. Smith........... 57 Chairman of the Board, President, and Chief Executive Officer 1972
G. Larry Owens............. 59 Executive Vice President and Chief Financial Officer, Director 1996
Martin D. Smith............ 47 Director of Operations -
Michael E. Oleson.......... 45 Treasurer and Chief Accounting Officer -
Daniel S. O'Brion.......... 36 Director of Sales and Marketing -
Herbert D. Ihle............ 57 Director 1996
Robert E. Rich............. 65 Director 1996
Terry G. Christenberry 50 Director 1996
</TABLE>
WILLIAM G. SMITH has been employed by the Company since 1958, served as
President since 1984, and as Chairman of the Board and Chief Executive Officer
since January 1995. Prior to 1984, Mr. Smith served in various other executive
management capacities. Mr. Smith is a past Chairman of the Iowa Motor Truck
Association and currently serves on its executive committee. In addition, Mr.
Smith serves on the Board of Regents of Waldorf College in Forest City, Iowa.
G. LARRY OWENS has served as Executive Vice President and Chief
Financial Officer since joining Smithway in January 1993. Prior to joining
Smithway, Mr. Owens spent twenty-five years in the banking industry, most
recently from 1982 through 1992 as President of Boatmen's Bancshares' regional
banks in Spencer and Fort Dodge, Iowa.
MARTIN D. SMITH has served as Smithway's Director of Operations since
1989 and as Director of Administration from 1977 to 1989. Martin D. Smith is
unrelated to William G. Smith.
MICHAEL E. OLESON has served as Smithway's Controller since joining the
Company in 1980 and in January 1995 was named Treasurer and Chief Accounting
Officer. Prior to joining Smithway, Mr. Oleson was employed as an accountant
with Mallinger Truck Line, Inc., in Fort Dodge, Iowa, from 1974 to 1980.
DANIEL S. O'BRION has been Director of Sales and Marketing for Smithway
since 1990 and served as a sales representative prior to 1990.
HERBERT D. IHLE has been President and owner of Diversified Financial
Services, a Minneapolis, Minnesota, management and financial services consulting
firm, since 1989. From 1990 to 1992, Mr. Ihle served as Senior Vice President -
Finance and Controller for Northwest Airlines, and from 1963 to 1989 served in
various positions, including Executive Vice President - Finance, for Pillsbury
Co. Mr. Ihle is also a director of Lutheran Brotherhood Insurance Company and
serves as Chairman of the Board of Regents of Waldorf College in Forest City,
Iowa.
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<PAGE>
ROBERT E. RICH is a private investor and has been involved in the
management of several privately owned farming and manufacturing companies since
1978. From 1967 through 1978, Mr. Rich served as Executive Vice President and
Treasurer and a member of the Board of Directors of Iowa Southern Utilities. Mr.
Rich is a certified public accountant. Mr. Rich also serves as a director of
AmerUs Group and AmerUs Bank, Des Moines, Iowa, and Trinity Health Systems.
TERRY G. CHRISTENBERRY has been the President and a director of
Christenberry, Collet & Company, Inc. ("CCCO"), an investment banking firm
located in Kansas City, Missouri, since its incorporation in June 1994. From
September 1986 to June 1994, Mr. Christenberry was Executive Vice President and
a director of H.B. Oppenheimer & Company, Inc., also an investment banking firm
located in Kansas City, Missouri. Mr. Christenberry also serves as a director of
OTR Express, Inc., a nationwide truckload carrier with common stock traded on
the Nasdaq National Market.
MEETINGS AND COMPENSATION
BOARD OF DIRECTORS. From the Company's June 27, 1996, initial public
offering through the remainder of the fiscal year ended December 31, 1996, the
Board of Directors of the Company met on three occasions. All directors attended
in person or participated by telephone in the meetings of the Board of Directors
and all of the meetings held by committees of the Board on which they served.
Directors who are not employees of the Company receive $1,000 for each meeting
of the Board of Directors attended by such director and, effective in 1997, $250
per committee meeting attended by the director. Non-employee directors also
receive the annual option to purchase 1,000 shares of the Company's Class A
Common Stock at 85% of the market price on the date of grant and are reimbursed
for their expenses incurred in attending the meetings. See "Outside Director
Stock Plan."
COMPENSATION COMMITTEE. The Compensation Committee of the Board of
Directors was formed June 27, 1996, and did not meet during 1996. Prior to such
time, Mr. Smith made all decisions regarding executive officer compensation.
Messrs. Ihle, Rich, and Christenberry serve on the Compensation Committee. This
committee reviews all aspects of compensation of the Company's executive
officers and makes recommendations on such matters to the full Board of
Directors. The Compensation Committee had sole discretion to select
participants, grant awards, and otherwise administer the Company's Incentive
Stock Plan (the "Plan") prior to August 15, 1996, when the Plan was amended to
conform with new rules issued by the Securities and Exchange Commission. See
"Incentive Stock Plan." The Report of the Compensation Committee for 1996 is set
forth below. See "Compensation Committee Report on Executive Compensation."
AUDIT COMMITTEE. The Audit Committee, comprised of Messrs. Ihle, Rich,
and Christenberry, was formed June 27, 1996, and did not meet during 1996. The
Audit Committee makes recommendations to the Board concerning the selection of
outside auditors, reviews the Company's financial statements, and reviews and
discusses audit plans, audit work, internal controls, and the report and
recommendations of the Company's independent auditors. The Audit Committee also
considers such other matters in relation to the external audit of the financial
affairs of the Company as may be necessary or appropriate in order to facilitate
accurate and timely financial reporting.
NOMINATING COMMITTEE. The Board does not maintain a standing
nominating committee or other committee performing similar functions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Mr.
Christenberry has served on the Compensation Committee since the Company's
initial public offering on June 27, 1996. He is not an officer or employee of
the Company. Mr. Christenberry is the President and a director of CCCO, an
investment banking firm that was retained by the Company in November 1994 to
provide various financial advisory services in connection with the Company's
initial public offering. The Company paid CCCO approximately $60,000 and $30,000
in financial consulting fees during 1995 and 1996, respectively. CCCO also
received from the Company a fee of 1% of the total initial public offering
proceeds, or $183,000. CCCO had not performed services for the Company prior to
1994. See "Certain Transactions" for additional disclosure of transactions
between the Company and its directors and executive officers.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 1.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation paid to the chief executive officer and the one other
named executive officer of the Company whose total cash compensation exceeded
$100,000 (the "Named Officers"), for services in all capacities to the Company
for the fiscal years ended December 31, 1995 and 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
Restricted
Name and Principal Other Annual Stock Options LTIP All Other
Position Year Salary Bonus Compensation Award(s) (#) Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William G. Smith,
Chairman,
President, and
Chief Executive 1996 $300,000 - - - - - -
Officer 1995 $300,000(1) - - - - - -
G. Larry Owens,
Executive Vice
President and 1996 $82,000 $23,000 - - - - -
Chief Financial 1995 $75,000 $22,500 - - - - -
Officer
- ------------------------------------
<FN>
(1) Effective February 1995, Mr. Smith's salary was increased to $300,000 annually.
</FN>
</TABLE>
The Company did not grant stock options or SARS to the Named Officers
and no options were owned or exercised by the Named Officers during the fiscal
year ended December 31, 1996.
The Company does not have a long-term incentive plan or a defined
benefit or actuarial plan and has never issued any stock appreciation rights.
EMPLOYMENT AGREEMENTS
The Company currently does not have any employment contracts,
severance, or change-in-control agreements with any of its executive officers.
However, under certain circumstances in which there is a change of control,
holders of outstanding stock options granted under the Plan may be entitled to
exercise such options notwithstanding that such options may otherwise not have
been fully exercisable. Similar rights could be extended to holders of
additional awards under the Plan if any such awards were granted. See "Incentive
Stock Plan."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee believes that the Company's executive
officers, including the Named Officers, should be compensated at a level
comparable to persons holding similar positions at peer companies, taking into
account the relative size of the companies, responsibilities of the officers,
experience, geographical location, and the relative performance of the Company
and its peers, measured by stock performance, operating margin, and revenue and
net income growth rates. In addition, the Compensation Committee will consider
the attainment of specific goals that may be established for such officers from
time-to-time. Corporate performance, measured by stock appreciation, is an
important aspect of the executive officers' compensation given the stock
ownership of Messrs. Smith and Owens and the stock options held by the other
executive officers. The compensation of all executive officers, including the
Chief Executive Officer, was established prior to the Company's initial public
offering and prior to any meeting of the Compensation Committee. Accordingly,
the Compensation Committee did not establish particular performance criteria
upon which the compensation of any executive officer or the Chief Executive
Officer was based in fiscal year 1996. In 1997, the Compensation Committee
initiated the process of designing an executive bonus program. It is presently
contemplated that the bonus amount will be linked to corporate profits and all
or a portion of the award may be in the form of Company stock.
Compensation Committee:
Herbert D. Ihle
Robert E. Rich
Terry G. Christenberry
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors, and greater than 10% stockholders are required by
SEC regulation s to furnish the Company with copies of all Section 16(a) forms
they file. Based solely upon a review of the copies of such forms furnished to
the Company, or written representations that no Forms 5 were required, the
Company believes that its officers, directors, and greater than 10% beneficial
owners complied with all Section 16(a) filing requirements applicable to them
during the Company's preceding fiscal year.
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STOCK PRICE PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR SMITHWAY MOTOR XPRESS CORP.
The following graph compares the cumulative total stockholder return of
the Company's Class A Common Stock with the cumulative total stockholder return
of the Nasdaq Stock Market (U.S. Companies) and the Nasdaq Trucking &
Transportation Stocks commencing June 27, 1996, and ending December 31, 1996.
GRAPH WAS CENTERED HERE
IN PRINTED FORM
The stock performance graph assumes $100 was invested on June 27, 1996,
the date of the Company's initial public offering. The Company will not make or
endorse predictions as to future stock performance. The CRSP Index for Nasdaq
Trucking & Transportation Stocks includes all publicly held truckload motor
carriers traded on the Nasdaq Stock Market, as well as all Nasdaq companies
within the Standard Industrial Code Classifications 3700-3799, 4200-4299,
4400-4599, and 4700-4799.
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SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table sets forth, as of March 1, 1997, the number and
percentage of outstanding shares of Common Stock beneficially owned by each
person known by the Company to beneficially own more than 5% of such stock, by
each director and Named Officer of the Company, and by all directors and
executive officers of the Company as a group. All share numbers are as of March
1, 1997, except Franklin Mutual Advisers, Inc., which is as of February 12,
1997, based upon its Schedule 13G filed with the Securities and Exchange
Commission.
<TABLE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
<CAPTION>
Amount & Nature
of Beneficial
Ownership(3) Percent of(1)
Title of Class Name of Beneficial Owner(2) Class A Class B Total
<S> <C> <C> <C> <C> <C>
Class A Common 1,138,514 %
Class B Common William G. and Marlys L. Smith(4) 1,000,000 28.5% 100% 42.8%
Class A Common G. Larry Owens(5) 176,946 4.4% - 3.5%
Class A Common Martin D. Smith(6) 9,079 * - *
Class A Common Michael E. Oleson(6) (7) 11,956 * - *
Class A Common Daniel S. O'Brion(6) 10,729 * - *
Class A Common Herbert D. Ihle 1,000 * - *
Class A Common Robert E. Rich 1,000 * - *
Class A Common Terry G. Christenberry 1,000 * - *
Class A Common Franklin Mutual Advisers, Inc. 450,000 11.3% - 9.0%
Class A & Class B All directors and executive officers 2,350,224 33.8% 100% 47.0%
Common as a group (8 persons)
- ---------------------------
<FN>
* Less than one percent (1%).
(1) The Company has both Class A and Class B Common Stock outstanding. All of
the Class B Common Stock is owned by William G. and Marlys L. Smith. The
Class A and Class B Common Stock are substantially identical, except with
respect to voting rights. The Class A Common Stock is entitled to one vote
per share. The Class B Common Stock is entitled to two votes per share so
long as it is beneficially owned by William G. Smith or certain members of
his immediate family. The Class B Common Stock converts automatically into
Class A Common Stock if beneficially owned other than by such persons. The
Smiths beneficially own shares of Class A and Class B Common Stock with
52.3% of the voting power of all outstanding voting shares, including the
190,000 shares over which Melissa Osterberg is voting trustee.
(2) The business address of William G. and Marlys L. Smith is 2031 Quail
Avenue, Fort Dodge, Iowa 50501. The business address of Franklin Mutual
Advisers, Inc. ("Franklin") is 51 John F. Kennedy Parkway, Short Hills, New
Jersey 07078. A Schedule 13G was filed on behalf of Franklin and its
principal shareholders, Charles B. Johnson and Rupert A. Johnson, Jr. (the
"Principal Shareholders"), and Franklin subsidiary Franklin Resources, Inc.
The business address of the Principal Shareholders and Franklin Resources,
Inc. is 777 Mariners Island Boulevard, San Mateo, California 94404.
(3) Includes 31,245, 5,045, and 29,510 shares of Class A Common Stock allocated
to the Smiths', Mr. Owens', and other executive officers' accounts under
the Company's ESOP, which was merged into the Company's 401(k) effective
December 31, 1996.
(4) Includes 190,000 shares held in the name of Melissa Osterberg as voting
trustee for the benefit of the Smith Family Limited Partnership. Melissa
Osterberg is the daughter of William G. and Marlys L. Smith.
(5) Includes an option to purchase 25,000 shares granted to Mr. Owens under the
Company's Incentive Stock Plan, 12,500 of which vest January 1, 1998, and
12,500 of which are fully vested. Includes 200 shares held as custodian for
minor children under the Uniform Gifts to Minors Act, as to which
beneficial ownership is disclaimed.
(6) By ESOP allocation.
(7) Includes 2,254 shares granted to Mr. Oleson as a stock bonus under the
Company's Incentive Stock Plan, 1,127 of which vest January 1, 1999, 563 of
which vest January 1, 1998, and 564 of which are fully vested.
</FN>
</TABLE>
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CERTAIN TRANSACTIONS
Prior to the Company's initial public offering, William G. Smith
personally guaranteed obligations for revenue equipment. These guarantees were
released after the offering.
At December 31, 1996, William G. Smith owed the Company $22,000 and Mr.
Smith's father, Harold C. Smith, owed the Company $44,000. These amounts do not
bear interest.
For additional information concerning certain transactions involving
the Company's officers and directors, see "Compensation Committee Interlocks and
Insider Participation."
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP as
independent certified public accountants for the Company for the 1997 fiscal
year. KPMG Peat Marwick LLP has served as independent certified public
accountants for the Company since December 1994. Representatives of KPMG Peat
Marwick LLP are expected to be present at the Annual Meeting with an opportunity
to make a statement, if they desire to do so, and to respond to appropriate
questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" PROPOSAL 2 TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR THE COMPANY.
INCENTIVE STOCK PLAN
In March 1995, the Company's Board of Directors and stockholders
adopted the Plan to attract and retain employees and motivate them through
incentives that are aligned with the Company's goals of increased profitability
and stockholder value. Awards under the Plan were originally made by the
Compensation Committee of the Board of Directors, which was comprised solely of
"disinterested directors" as such term was used in former Rule 16b-3(c) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Effective August 15, 1996, the Board of Directors
voted to amend the Plan to bring it into compliance with new Section 16 rules
under the Exchange Act and rely on the new Section 16 rules as of that date.
Accordingly, the Plan is presently administered by the Board of Directors and
may be administered in the future by a committee if one is appointed by the
Board of Directors. Nonemployee directors would compromise any committee that
makes awards to executive officers, directors, or 10% stockholders. Awards may
be in the form of incentive stock options, non-qualified stock options,
restricted stock awards, or any other awards of stock consistent with the Plan's
purpose. Decisions of the administrator are binding upon the Company and all
participants. Participants in the Plan are selected by the administrator. The
only grants made under the Plan to date were on March 1, 1995. Future grants may
be made to any employees designated by the administrator.
The administrator may amend the Plan but may not, without the prior
approval of the stockholders, amend the plan to extend the period during which
the options or awards may be granted or exercised, extend the term of the Plan,
or increase the total number of reserved shares. The administrator may
substitute new stock options for previously granted options. No awards of
incentive stock options may be made after December 31, 2004.
The Company reserved 225,000 shares of Class A Common Stock for
issuance pursuant to the Plan. In 1995, the administrator awarded options
covering 85,000 of such shares to eight of the Company's executive officers and
other key employees at an exercise price of $9.50 per share. Such options become
exercisable between January 1, 1996, and January 1, 2000, at the rate of 20% per
year. In January 1997, the Company awarded an option covering 25,000 shares to a
Named Officer at an exercise price of $8.875 per share. One-half of the option
vested
7
<PAGE>
immediately and the other half vests on January 1, 1998. The price payable upon
exercise of an option may be satisfied in cash or, in the administrator's
discretion, with previously acquired shares of the Company's Class A Common
Stock or vested but unexercised options (valued at the difference between the
market price of the stock on the date of exercise and the exercise price). The
market price of the stock as of March 3, 1997, was $93/8, which results in the
stock underlying the options having a market value of approximately $1,031,250
at such date. In January 1997, the Company also granted a stock bonus of shares.
The award vests 25% immediately, 25% on January 1, 1998, and 50% on January 1,
1999. Options or awards that expire unexercised, are forfeited, or are settled
in exchange for tax withholding or in payment of the exercise price of other
options, become available again for issuance under the Plan. The administrator
may determine when and in what amounts future awards vest and options become
exercisable. Terms of awards need not be the same for all participants.
FEDERAL INCOME TAX CONSEQUENCES FOR INCENTIVE STOCK OPTIONS.
Awards may be in the form of incentive stock options, non-qualified
stock options, restricted stock awards, or any other awards of stock consistent
with the Plan's purpose. Options granted as incentive stock options ("ISOs") are
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") for special tax treatment. Neither the grant of the ISO nor
the exercise of the ISO by a participant ("Optionee") will result in the
recognition of taxable income to the Optionee. However, the exercise of an ISO
will result in an item of tax preference to an Optionee potentially subject to
the alternative minimum tax. The ultimate sale or other disposition by the
Optionee of the shares obtained upon exercise of the ISO will result in capital
gain or loss equal to the difference between the fair market value on the date
of sale and the exercise price. The Company will not have a deduction with
regard to the ISO at the time of the grant, the exercise, or the ultimate sale
of the shares.
Notwithstanding the foregoing, if an Optionee sells or disposes of the
shares prior to two years after the date of the grant of the ISO or one year
after the date of the exercise, the Optionee will recognize compensation income
on the sale to the extent the value on the date of exercise exceeded the
exercise price. The excess of the amount received on the sale over the value on
the date of exercise will be capital gain. In the case of such a disqualifying
disposition of shares, the Company may deduct the amount of income recognized as
compensation income. A person entitled to exercise the ISO after the death of an
Optionee may sell the stock obtained on the exercise of an option at any time
without regard to the normal holding requirements.
In addition to the foregoing federal tax considerations, the exercise
of an ISO and the ultimate sale or other disposition of the shares acquired
thereby will in most cases be subject to state income taxation.
FEDERAL INCOME TAX CONSEQUENCES FOR NONSTATUTORY STOCK OPTIONS.
An Optionee does not realize any compensation income upon the grant of
a Nonstatutory Stock Option ("NSO"). Additionally, the Company may not take a
tax deduction at the time of the grant. Upon exercise of an NSO, an Optionee
realizes and must report as compensation income an amount equal to the
difference between the fair market value of the securities on the date of
exercise and the exercise price. The Company is entitled to take a deduction at
the same time and in the same amount as the Optionee reports as compensation
income, provided the Company withholds federal income tax in accordance with the
Code and applicable Treasury regulations. In addition to the foregoing federal
tax considerations, the exercise of an Option and the ultimate sale or other
disposition of the shares of Class A Common Stock acquired thereby will in most
cases be subject to state income taxation.
OUTSIDE DIRECTOR STOCK PLAN
In August 1995, the Company's Board of Directors and stockholders
adopted the Outside Director Stock Plan. Commencing with the 1997 annual
meeting, and at each annual meeting thereafter, each non-employee director
receives an option to purchase 1,000 shares of the Company's Class A Common
Stock at 85% of the market price as of the meeting date (except for 1996, in
which the exercise price was 85% of the initial public offering price). The term
of each option is six years from the date of grant and each option vests on the
first anniversary of the date of grant.
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STOCKHOLDERS ARE NOT BEING ASKED TO TAKE ACTION WITH RESPECT TO THE
PLAN OR THE OUTSIDE DIRECTORS STOCK PLAN. THE SUMMARY PROVIDED HEREIN IS
INFORMATIONAL ONLY.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual
Meeting of the Stockholders of the Company must be received by the Corporate
Secretary of the Company at the Company's principal executive offices on or
before November 12, 1997, to be eligible for inclusion in the Company's proxy
material related to that meeting. The inclusion of any such proposals in such
proxy material shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended.
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting
any matters other than those described herein and does not presently know of any
matters that will be presented by other parties.
Smithway Motor Xpress Corp.
/s/ WILLIAM G. SMITH
William G. Smith
Chairman of the Board
April 8, 1997
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