<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
YOUNG INNOVATIONS, 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.
<PAGE> 2
[ ] 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> 3
YOUNG INNOVATIONS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on
May 10, 1999
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of Young Innovations, Inc. (the
"Company") will be held in the Penthouse Ballroom of the Renaissance Hotel, 9801
Natural Bridge Road, Berkeley, Missouri 63134, on May 10, 1999, at 6:30 P.M.,
St. Louis time, for the following purposes:
1. To elect eight Directors to serve until the Annual Meeting of
Shareholders in 2000 or until their successors are duly elected and
qualified;
2. To consider and act upon ratification of the selection of Arthur
Andersen LLP as independent accountants for 1999;
3. To approve an amendment to the Company's 1997 Stock Option Plan to
increase the number of shares of Common Stock available under the Stock Plan
from 350,000 to 650,000; and
4. To transact such other business as may properly come before the
meeting.
Only shareholders whose names appear of record at the Company's close of
business on March 19, 1999 are entitled to receive notice of and to vote at the
Annual Meeting or any adjournments thereof.
By Order of the Board of Directors,
Richard G. Richmond
Secretary
April 2, 1999
Earth City, Missouri
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. WHETHER OR
NOT YOU INTEND TO BE PRESENT, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY CARD IN THE STAMPED AND ADDRESSED ENVELOPE ENCLOSED FOR YOUR
CONVENIENCE. SHAREHOLDERS CAN HELP THE COMPANY AVOID UNNECESSARY EXPENSE AND
DELAY BY PROMPTLY RETURNING THE ENCLOSED PROXY CARD. THE PRESENCE, IN PERSON OR
BY PROPERLY EXECUTED PROXY, OF A MAJORITY OF THE COMMON STOCK OUTSTANDING ON THE
RECORD DATE IS NECESSARY TO CONSTITUTE A QUORUM AT THE ANNUAL MEETING.
<PAGE> 4
YOUNG INNOVATIONS, INC.
13705 Shoreline Court East
Earth City, Missouri 63045
PROXY STATEMENT
Annual Meeting of Shareholders
to be held May 10, 1999
This Proxy Statement is being furnished to the common shareholders of Young
Innovations, Inc. (the "Company") on or about April 2, 1999 in connection with
the solicitation of proxies on behalf of the Board of Directors of the Company
for use at the annual meeting of shareholders (the "Annual Meeting") to be held
on May 10, 1999 at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting, and at any adjournment or postponement of
that meeting.
Holders of shares of common stock, par value $0.01 per share ("Shares" or
the "Common Stock"), of the Company at its close of business on March 19, 1999
(the "Record Date") will be entitled to receive notice of and vote at the Annual
Meeting. On the Record Date, 6,722,796 shares of Common Stock were outstanding.
Holders of Common Stock (the "Shareholders") are entitled to one vote per share
of Common Stock they held of record on the Record Date on each matter that may
properly come before the Annual Meeting.
A plurality of the votes of Shareholders cast at the Annual Meeting is
required for the election of each director. Ratification of the selection of
independent accountants and for the approval of the amendment to the Company's
1997 Stock Option Plan require the affirmative vote of holders of a majority of
the Shares voted on the proposal. Abstentions and broker non-votes are counted
in the number of shares present in person or represented by proxy for purposes
of determining whether a quorum is present, but not for purposes of election of
directors, approving the amendment to the Company's 1997 Stock Option Plan or
ratification of the selection of independent accountants.
Management of the Company ("Management"), together with members of the Board
of Directors of the Company, in the aggregate, directly or indirectly controlled
approximately 59.7% of the Shares outstanding on the Record Date.
Shareholders of record on the Record Date are entitled to cast their votes
in person or by properly executed proxy at the Annual Meeting. The presence, in
person or by properly executed proxy, of a majority of the Common Stock
outstanding on the Record Date is necessary to constitute a quorum at the Annual
Meeting. If a quorum is not present at the time the Annual Meeting is convened,
the Company may adjourn or postpone the Annual Meeting.
All Common Stock represented at the Annual Meeting by properly executed
proxies received prior to or at the Annual Meeting and not properly revoked will
be voted at the Annual Meeting in accordance with the instructions indicated in
such proxies. If no instructions are indicated, such proxies will be voted FOR
Proposal 1 for the election of the Board's director nominees, FOR Proposal 2 for
the ratification of the recommended independent accountants and FOR Proposal 3
for the amendment to the Company's 1997 Stock Option Plan. The Board of
Directors of the Company does not know of any matters, other than the matters
described in the Notice of Annual Meeting attached to this Proxy Statement, that
will come before the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the Annual Meeting, a written
notice of revocation bearing a date later than the date of the proxy, (ii) duly
executing and dating a subsequent proxy relating to the Common Stock and
delivering it to the Secretary of the Company at or before the Annual Meeting,
or (iii) attending the Annual Meeting and voting in person (although attendance
at the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to: Corporate
Secretary, Young Innovations, Inc., 13705 Shoreline Court East, Earth City,
Missouri 63045 (telephone number (314) 344-0010).
<PAGE> 5
The proxies are solicited by the Board of Directors of the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or facsimile transmission, by directors, officers or regular employees
of the Company or persons employed by the Company for the purpose of soliciting
proxies. It is contemplated that brokerage houses, custodians, nominees and
fiduciaries will be requested to forward the soliciting material to the
beneficial owners of Common Stock held of record by such persons, and will be
reimbursed for expenses incurred therewith. The cost of solicitation of proxies
will be borne by the Company.
---------------
The date of this Proxy Statement is April 2, 1999.
2
<PAGE> 6
PROPOSAL 1: ELECTION OF DIRECTORS
Pursuant to the By-laws of the Company, the Company's Directors are elected
annually and hold office until their successors are duly elected and qualified.
The following table sets forth the names, ages, principal occupations and
other information respecting the director nominees, each of whom is a current
director of the Company:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
DIRECTOR AGE DURING PAST 5 YEARS
<S> <C> <C>
George E. Richmond...... 65 President of Young Dental Manufacturing Company
("Young Dental") (predecessor to the Company) from
1961 until 1997. Chief Executive Officer
and a Director of the Company since its organization
in 1995 and Chairman of the Board since 1997. Director
of UMB Bank of St. Louis, National Association.
Alfred E. Brennan....... 46 President since July 1998, Chief Operating Officer of the
Company since October 1997, and Director of the Company
since August 1997. Senior Associate of Dewar
Sloan from 1995 until October 1997. President of the
Dental Instrument Division of DENTSPLY International,
Inc. from 1991 to 1994. Director of Unico Systems Inc.
Arthur L. Herbst, Jr (1). 35 Chief Financial Officer since February 1999, Executive Vice
President of Strategic Planning since October 1998 and a
Director of the Company since November
1997. Vice President and Portfolio Manager with Roberts, Glore
& Co. since September 1995. Director of Corporate Finance of
DENTSPLY International, Inc. from May 1993 through August 1995.
Treasurer of GENDEX Corp. From
November 1990 to June 1993.
Richard G. Richmond..... 44 Vice President since February 1999, Secretary and a
Director of the Company since 1995, President of Young Dental
since July 1997 and a Director of Young Dental since June 1989.
Mr. Richmond is George Richmond's son.
Richard P. Conerly(2)(3) 74 Director of the Company since August 1997. Retired
since 1994. Chairman and Chief Executive Officer of
Orion Capital Inc., a private investment company, from
1987 to 1994. Director of LaBarge, Inc. ("LaBarge").
Craig E. LaBarge(2)..... 48 Director of the Company since August 1997. Chief
Executive Officer of LaBarge since 1991 and President
of LaBarge since 1986. Director of LaBarge and TALX
Corporation.
Connie H. Drisko, DDS(3) 58 Director of the Company since January 1998. Professor
and Chairperson of the Department of Periodontics,
Endodontics and Dental Hygiene at the University of
Louisville School of Dentistry since September 1993;
held teaching position in Periodontic Department,
University of Missouri Kansas City for ten years prior.
James R. O'Brien(2)..... 58 Director of the Company since October 1998. Managing
Director of The Wellston Group since 1995. President and Chief
Operating Officer of Swingster Company from 1994 through 1995.
President of multiple divisions of FIGGIE International, a
Fortune 500 company, from 1986
through 1994.
</TABLE>
- ----------
(1) Mr. Herbst's title was Executive Vice President of Strategic Planning and
Corporate Development at December 31, 1998.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 1 TO
APPROVE THE BOARD OF DIRECTORS' SLATE OF NOMINEES STANDING FOR ELECTION.
3
<PAGE> 7
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met six times during 1998. All directors
attended at least 75% of the meetings of the Board and of the committees upon
which they served.
COMPENSATION OF DIRECTORS
Full-time employees of the Company who serve as directors receive only
reimbursement of expenses incurred in attending meetings. Effective November
1997, the Company adopted its 1997 Stock Option Plan pursuant to which each
non-employee Director of the Company received a grant of an option to purchase
up to 5,000 shares of the Company's common stock.
COMMITTEES
The Board of Directors has had standing Audit and Compensation Committees
since November 1997.
The Audit Committee met twice during 1998. The Committee is composed of
Richard P. Conerly, Chairman, Craig E. LaBarge, and James R. O'Brien. The
Committee's responsibilities include evaluation of significant matters relating
to the audit and internal controls of the Company and review of the scope and
results of audits by the independent auditors.
The Compensation Committee met one time during 1998. The Committee is
composed of Richard P. Conerly, Chairman and Connie H. Drisko. The Committee
reviews the Company's remuneration policies and practices, including executive
salaries, compensation and other employee benefits, and administers the
Company's 1997 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, non-employee directors Richard P. Conerly and Connie H.
Drisko served as members of the Compensation Committee. None of the Compensation
Committee members or named Executive Officers have any relationship that must be
disclosed under this caption.
EXECUTIVE OFFICERS
The executive officers of the Company, their ages as of March 31, 1999 and
their positions with the Company are set forth below All officers serve at the
pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
George E. Richmond... 65 Chairman of the Board, Chief
Executive Officer and Director
Alfred E. Brennan.... 46 President, Chief Operating
Officer and Director
Arthur L. Herbst, Jr. 35 Executive Vice President of Strategic Planning,
Chief Financial Officer and Director
Richard G. Richmond.. 44 Vice President, Secretary and Director; President of Young
Dental
Eric R. Stetzel...... 43 Vice President since February 1999, President of Young
Acquisitions
Company since February 1998, President of Panoramic Rental
Corp since April 1998
</TABLE>
4
<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation earned
or awarded to the Company's Chief Executive Officer and each of the Company's
five other most highly compensated executive officers for the last three fiscal
years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
SECURITIES
ANNUAL UNDERLYING
COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUSES(1)
<S> <C> <C> <C> <C>
George E. Richmond 1998 $214,400 $ 70,720
Chief Executive Officer 1997 214,400 15,218
1996 213,812 23,191
Alfred E. Brennan 1998 $217,115 $ 60,000
President and Chief 1997 101,065 915 60,000
Operating Officer(2)
Arthur L. Herbst, Jr.(3) 1998 $ 42,404 $ 12,000 75,000
Executive Vice President of
Strategic Planning and Chief
Financial Officer
Richard G. Richmond 1998 $150,000 $ 49,742
Secretary 1997 111,488 11,421 32,000
1996 92,818 10,741
Michael W. Eggleston(4) 1998 $115,679 $ 0
1997 111,488 7,913 32,000
1996 92,818 10,641
Eric R. Stetzel(5) 1998 $ 140,000 $ 60,000 16,000
</TABLE>
(1) Annual bonus amounts were earned and accrued during the fiscal years
indicated and paid in the following years.
(2) Mr. Brennan became an employee of the Company in October 1997. Amounts
indicated for 1997 include payments made by the Company for consulting
services prior to Mr. Brennan's employment.
(3) Mr. Herbst became an employee of the Company in October 1998. Mr. Herbst's
title was Executive Vice President of Strategic Planning and Development at
December 31, 1998.
(4) Mr. Eggleston was Vice President, Treasurer, and Chief Financial Officer
until leaving the Company in January 1999.
(5) Mr. Stetzel joined the Company in February 1998 as President of Young
Acquisitions Company and became a Vice President of the Company in
February 1999.
5
<PAGE> 9
OPTIONS/SAR GRANTS
The following table sets forth certain information with respect to options
to purchase Common Stock granted during the fiscal year ended December 31, 1998
to each of the named executive officers who received option grants.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/ Potential Realizable
Underlying SAR'sGranted to Exercise Value at Assumed
Options/ Employees Price Price Appreciation
SAR's in Fiscal Per Expiration for Option Term(2)
Name Granted #(1) Year Share Date 5%($)(3) 10%($)(4)
<S> <C> <C> <C> <C> <C> <C>
Arthur L. Herbst Jr. 27,000 20.3% $ 13.00 12/02/08 $ 220,860 $ 559,440
48,000 36.1% $ 13.875 10/02/08 $ 418,800 $1,061,520
Eric R. Stetzel 16,000 12.0% $ 17.00 02/27/08 $ 171,040 $ 433,440
</TABLE>
(1) No stock appreciation rights ("SAR's") were granted in 1998.
(2) The values shown are based on the indicated assumed annual rates of
appreciation compounded annually. Actual gains realized, if any, on stock
option exercises and Common Stock holdings are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the values shown in this table will be achieved.
(3) Represents an assumed market price per share of Common Stock of $21.18 for
options expiring 12/2/08, $22.60 for options expiring 10/2/08, and $27.69
for options expiring 2/27/08.
(4) Represents an assumed market price per share of Common Stock of $33.72 for
options expiring 12/2/08, $35.99 for options expiring 10/2/08, and $44.09
for options expiring 2/27/08.
Option/SAR Exercises
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the year ended December 31,
1998, and the unexercised options held and the value thereof at that date, by
each of the named executive officers.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Securities Underlying In-the-Money
Acquired Value Unexercised Options SAR's at Options SAR's at Fiscal
on Exercise Realized Fiscal Year-end(#) Year-end ($)(1)
----------------------------- ---------------
Name # $ Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred E. Brennan... 0 0 15,000 45,000 $16,875 $ 50,625
Richard G. Richmond. 0 0 0 32,000 0 $ 36,000
Michael W. Eggleston 0 0 0 32,000 0 $ 36,000
Arthur L. Herbst Jr. 0 0 18,750 56,250 844 $ 2,531
Eric R. Stetzel. . . . 0 0 0 16,000 0 $ 0
</TABLE>
- ----------
(1) Based on the closing price of the Company's stock as quoted on the NASDAQ
National Market as of December 31, 1998, of $13.125.
6
<PAGE> 10
EMPLOYMENT AGREEMENTS
In October 1997, the Company entered into an employment agreement with
Alfred E. Brennan pursuant to which Mr. Brennan agreed to serve as the Company's
Senior Vice President and Chief Operating Officer. The employment agreement
initially expired December 31, 1998, was renewed for a one year term commencing
January 1, 1999, and is automatically renewable thereafter for an indefinite
number of successive one year terms until cancelled by either party. Mr.
Brennan's minimum annual base salary under the agreement is $180,000.
REPORT ON EXECUTIVE COMPENSATION
Executive compensation for 1998 was fixed by the Compensation Committee
of the Company's Board of Directors. In developing the Company's executive
compensation policies, the Committee has two principal objectives: 1)
attracting, rewarding and retaining officers who possess outstanding talent,
and 2) motivating the officers to achieve short-term and long-term corporate
objectives that enhance shareholder value. Following annual reviews the
Committee authorizes appropriate changes as determined by the three primary
components of executive compensation, which are: a) base salary, b)
performance-based annual incentive bonus and c) long-term stock-based awards.
In evaluating and setting the three components of compensation for
executive officers, including the Chief Executive Officer of the Company, the
Committee considers: individual responsibilities, including changes which may
have occurred since the prior review; individual performance in fulfilling
responsibilities and achieving the Company's financial goals for the year;
relative contributions of the individual to the results of operations; the
impact of operating conditions; the effect of economic changes on salary
structure; comparisons with compensation paid to individuals with similar skills
and experience; and, comparisons with compensation paid by similarly situated
companies. Such considerations are subjective, and specific measures are not
used in the review process.
Richard P. Conerly, Chairman
Connie H. Drisko
PERFORMANCE GRAPH
The following graph and table compare the cumulative total shareholder
return on the Company's Common Stock from November 4, 1997, the date of the
initial public offering of the Common Stock, through December 31, 1998, with the
Russell 2000 Index, the NASDAQ Stock Market Composite Index for United States
Companies, an old industry peer group and a new industry peer group. In its
Proxy Statement for its 1997 Annual Meeting of Shareholders, the Company used
comparisons only to the NASDAQ Index and the old industry peer group. The
Company believes the comparisons to the Russell 2000 Index and the new industry
peer group provide more meaningful comparisons than the NASDAQ Index and the old
industry peer group because they are more reflective of companies with
comparable market capitalizations to that of the Company. The comparisons
reflected in the table and graph, however, are not intended to forecast the
future performance of the Common Stock and may not be indicative of such future
performance. The table and graph assume an investment of $100 in the Common
Stock and in each index on November 4, 1997 and the reinvestment of all
dividends; the beginning price for the Company's Common Stock is $12, the price
at which Shares were sold in its initial public offering.
7
<PAGE> 11
[GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------------------------------
11/4/97 12/97 3/98 6/98 9/98 12/98
<S> <C> <C> <C> <C> <C> <C>
YOUNG INNOVATIONS, INC. 100 150 129 128 117 109
NEW PEER GROUP(1) 100 108 118 105 84 111
OLD PEER GROUP(2) 100 107 117 116 96 123
NASDAQ STOCK MARKET (U.S.) 100 99 116 119 108 139
RUSSELL 2000 100 101 111 108 86 100
</TABLE>
- ----------
(1) Comparable New Peer Group Composite is a weighted average index based on
market capitalization. The Composite includes Dentsply International, Inc.,
Sybron International Corporation, American Dental Technologies, Inc., Zila,
Inc. and Schick Technologies, Inc.
(2) Comparable Old Peer Group Composite is a weighted average index based on
market capitalization. The Composite includes Dentsply International, Inc.,
Sybron International Corporation, Patterson Dental Company and Henry Schein,
Inc.
8
<PAGE> 12
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Solutions in 3D, Inc. ("3D"), a manufacturer of plastic resin
prototypes, leases space from the Company at its premises in Earth City at a
rental of $750 per month. George Richmond and Michael Eggleston own 52.5%
and 15.0%, respectively, of the outstanding common stock of 3D. The Company
has, from time to time, loaned money to 3D which, as of December 31, 1998,
aggregated $48,000 with interest payable monthly at the prime rate of a
local bank; the note evidencing the loan has no maturity date and is
unsecured. The highest principal balance of the loan at any time during 1998
was $48,000. 3D's business is primarily with unrelated third parties. In
1998, the Company paid an aggregate of $13,982 for plastic resin prototyping
services provided to the Company. 3D leases space from the Company and the
Company may continue to loan 3D money from time to time and purchase
services from 3D.
George Richmond is a 40% minority shareholder and former officer and
director of Earth City Technologies ("Technologies"), a company located in
Fenton, Missouri. Technologies repairs damaged scalers for the Company
returned by its customers and sells scaler parts. Total amounts paid to
Technologies for repairs/parts in 1998 were $6,734. Technologies purchases
certain products and components from the Company from time to time. Total
amounts billed to Technologies in 1998 were $53,761. Mr. Richmond is
currently not an officer, director or employee of Technologies and plays no
role in its management. The Company believes that arrangements with
Technologies are on terms to the Company as favorable as could be obtained
from unaffiliated third parties.
The Company has adopted a policy that all transactions between the
Company and any affiliated party will be approved by a majority of all
members of the Company's Board of Directors and by a majority of the
independent and disinterested Directors and will continue to be on terms no
less favorable to the Company than terms the Company believes would be
available from unaffiliated third parties.
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following tabulation sets forth information as of March 19, 1999,
concerning the ownership of Common Stock by each Director, each of the
executive officers named in the Summary Compensation Table included in this
Proxy Statement, all Directors and executive officers as a group, and all
persons known by the Company to be the beneficial owners of five percent or
more of the Common Stock. On March 19, 1999, there were 6,722,796 shares of
Common Stock issued and outstanding. The address of each Director and
executive officer listed below is Young Innovations, Inc., 13705 Shoreline
Court East, Earth City, Missouri 63045.
<TABLE>
<CAPTION>
AMOUNT OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED(1) OF CLASS
<S> <C> <C>
George E. Richmond(2) 3,295,065 48.3%
Richard G. Richmond(3)(4) 625,994 9.2
Alfred E. Brennan(5) 30,000 *
Richard P. Conerly(6) 10,000 *
Craig E. LaBarge(7) 5,000 *
Arthur L. Herbst, Jr.(8) 46,800 *
Connie H. Drisko (7) 5,000 *
James R. O'Brien(7) 5,000 *
Eric R. Stetzel (9) 50,000 *
All directors and executive officers 4,072,859 59.7
as a group (9 persons)
Charles M. Royce (10) 377,000 5.6
Royce & Associates, Inc.
Royce Management Company
1414 Avenue of the Americas
New York, NY 10019
Wasatch Advisors Inc. (10) 384,500 5.7
150 Social Hall Avenue
Salt Lake City, UT 84111
</TABLE>
----------
* Less than 1.0%.
9
<PAGE> 13
(1) Beneficial ownership of shares, as determined in accordance with applicable
Securities and Exchange Commission rules, includes shares as to which a
person has or shares sole voting power and/or investment power. Except as
otherwise indicated, all shares are held of record with sole voting and
investment power. Pursuant to the rules of the Securities and Exchange
Commission, certain shares of the Company's Common Stock which a person has
the right to acquire within 60 days pursuant to the exercise of stock
options and warrants are deemed to be outstanding for the purpose of
computing beneficial ownership and the percentage ownership of that person,
but are not deemed outstanding for purposes of computing the percentage
ownership of any other person. All directors and executive officers as a
group hold options to purchase an aggregate of 104,500 shares of Common
Stock.
(2) Includes 2,388,285 shares held in a revocable trust as to which Mr. Richmond
has sole voting and dispositive power and 906,780 shares held in a trust as
to which Mr. Richmond is a co-trustee and has sole voting power and shared
dispositive power. Excludes 1,735 shares owned by Mr. Richmond's spouse.
(3) Includes 87,549 shares owned directly by Mr. Richard Richmond, 176,815
shares held in a trust for his benefit of which Mr. Richmond is a co-trustee
and has shared voting and dispositive powers, and 353,630 shares held in two
other trusts in which Mr. Richmond is not a beneficiary but is a co-trustee,
and has shared voting and dispositive powers. Mr. Richmond disclaims
beneficial ownership in the 353,630 shares held in the trusts in which he is
not a beneficiary.
(4) Includes 8,000 shares of Common Stock issuable to Mr. Richmond upon exercise
of stock options currently exercisable. Excludes 24,000 shares of Common
Stock subject to stock options issued to Mr. Richard Richmond which will
become exercisable ratably over the next three years.
(5) Includes 30,000 shares of Common Stock issuable to Mr. Brennan upon exercise
of stock options currently exercisable. Excludes 30,000 shares of Common
Stock subject to stock options which will become exercisable ratably over
the next two years.
(6) Includes 5,000 shares owned directly by Mr. Conerly and 5,000 shares of
Common Stock issuable to Mr. Conerly upon exercise of stock options.
(7) Includes 5,000 shares of Common Stock issuable to Messrs. LaBarge and
O'Brien and Ms. Drisko upon exercise of stock options.
(8) Includes 3,300 shares owned directly by Mr. Herbst, 5,000 shares of
Common Stock issuable upon exercise of stock options
originally issued to Mr. Herbst as a non-employee Director, 37,500 shares of
Common Stock issuable to Mr. Herbst as an employee upon exercise of stock
options currently exercisable and 1,000 shares owned by Mr. Herbst's
daughters over which Mr. Herbst has voting and dispositive powers. Excludes
1,250 shares owned by Mr. Herbst's spouse and 37,500 shares of Common Stock
subject to stock options which will become exercisable ratably over the next
two years.
(9) Includes 46,000 shares owned directly by Mr. Stetzel and 4,000 shares of
Common Stock issuable to Mr. Stetzel upon exercise of stock options
currently exercisable. Excludes 12,000 shares of Common Stock subject to
stock options issued to Mr. Stezel which will become exercisable ratably
over the next three years.
(10) Based solely upon information contained in Schedule 13G filed with the
Securities and Exchange Commission.
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 beneficially own more than ten
percent (10%) of the Company's common stock, to file initial reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes that all forms were filed in a timely manner during fiscal
1998.
PROPOSAL 2: APPOINTMENT OF INDEPENDENT AUDITORS
Arthur Andersen LLP has been appointed to serve as the independent auditors
for the Company and its subsidiary corporations for the fiscal year ending
December 31, 1999. The appointment is being submitted to the shareholders for
ratification.
Arthur Andersen LLP has served as the independent auditors for the Company
and its predecessor since 1994.
Representatives of Arthur Andersen LLP are expected to be present at the
Annual Meeting to respond to shareholders' questions and to have the opportunity
to make any statements they consider appropriate.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 2
FOR THE RATIFICATION OF ITS SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS TO AUDIT THE ACCOUNTS OF THE COMPANY AND ITS SUBSIDIARIES FOR 1999.
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PROPOSAL 3: AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN
On May 25, 1998, the Board of Directors of the Company adopted an amendment
to the Company's 1997 Stock Option Plan and directed that the Stock Plan as
amended be submitted to the shareholders of the Company for their approval. The
amendment provides for an increase in the number of shares available under the
Stock Plan by 300,000 shares. The amendment will become effective upon approval
by holders of at least a majority of the shares of Common Stock voting at the
Annual Meeting. The Stock Plan as amended is attached as Exhibit A to this Proxy
Statement and the following summary of provisions of the Stock Plan is qualified
by reference to such Stock Plan.
GENERAL
The purpose of the Stock Plan is to promote the best interests of the
Company and its shareholders by (i) attracting and retaining exceptional
employees; (ii) motivating employees by aligning their interests with those of
the Company's shareholders and allowing the employees to acquire a proprietary
interest in the Company through the grant and exercise of options; and (iii)
providing employees with a greater personal interest in the success of the
Company. The purpose of the proposed amendment to the Stock Plan is to increase
the number of available shares so as to enable the Company to continue the Stock
Plan in future years. The Stock Plan became effective on November 4, 1997. The
maximum number of shares that may be issued under the plan is now 350,000 shares
of Common Stock. As of March 19, 1999, 348,400 shares of Common Stock had been
issued or had been reserved for issuance under the Stock Plan. The shares
currently authorized have been and, if Proposal 3 is approved, the additional
shares will be registered under the Securities Act of 1933, as amended. The
closing price of the Company's Common Stock on March 19, 1999 on the Nasdaq
National Market was $12.00 per share.
The Compensation Committee of the Board of Directors serves as the
administrator of the Stock Plan and has the exclusive authority to determine the
type of options awarded (incentive stock options ("ISO") or non-qualified stock
options ("NQSO"). With the exception of options granted to members of the
Compensation Committee or non-employee directors, the Compensation Committee
also has the exclusive authority to (i) determine the selection of participants
in the Stock Plan; (ii) make decisions concerning the timing, pricing, vesting,
other restrictions, and amount of any grant of options under the Stock Plan;
(iii) interpret the Stock Plan and prescribe, amend and rescind rules and
regulations relating to the Stock Plan; and (iv) make all other determinations
which it deems necessary or advisable for Stock Plan administration.
OPTIONS
Participants in the Stock Plan are those employees of the Company or its
subsidiaries as may be selected from time to time by the Compensation Committee
and those members of the Compensation Committee or non-employee directors of the
Company as the Company's Board of Directors may select from time to time.
Options entitle a participant to purchase shares of Common Stock at a price
per share not less than the market value of the Common Stock on the date the
option is granted. However, if an ISO is granted and the participant receiving
the ISO owns more than 10% of the total combined voting power of all classes of
stock of the Company, the purchase price shall not be less than one hundred and
ten percent of the market value of the Common Stock on the date the ISO is
granted.
Unless otherwise determined by the Compensation Committee or provided in
the stock option agreement relating to a particular option, employee options
terminate upon the participant's termination of employment to the extent not
then exercisable, and options that have become exercisable on or prior to the
date of termination of employment terminate at the earlier of: (i) the 10th
annual anniversary date of the granting of the option, or, if and when an ISO is
granted participant owns more than 10% of the total combined voting power of all
classes of stock of the Company, then on the 5th such anniversary; or (ii) the
date of expiration of the option determined by the Compensation Committee at the
time the option is granted and specified in such option; or (iii) where such
termination of employement is by the Company for cause, as defined in the Stock
Plan, the time of such termination; or (iv) where such termination occurs as a
result of death or disability, one year after termination of employment; or (v)
where such termination occurs other than as a result of termination for cause or
death or disability, three months after termination of employment. Unless
otherwise determined by the Committee, options granted under the Stock Plan will
become exercisable in full in the event of a change in control, as defined in
the Stock Plan. All other
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<PAGE> 15
terms, including the time or times at which an option becomes exercisable, are
determined by the Committee in its discretion.
Options are exercisable on the terms determined by the Compensation
Committee at the time of the grant. The option price is payable in full upon
exercise of an option and may be paid in cash, certified check, bank draft or
money order, or, if permitted by the Compensation Committee, by tendering shares
of Common Stock of the Company already owned by the participant. Options granted
under the Stock Plan are nontransferable and nonassignable by a participant
other than by will or by the laws of descent and distribution, and, unless
determined otherwise by the Compensation Committee, are exercisable during the
participant's lifetime only by the participant.
CHANGE OF CONTROL
The Stock Plan provides for the accelerated exercisability of options,
unless otherwise determined by the Compensation Committee, in the event of: (i)
a merger or consolidation of the Company into another entity unless after such
event a majority of the voting power of the surviving or resulting entity is
beneficially owned by persons who beneficially own a majority of the voting
power of the Company immediately prior to such event; or (ii) the sale of all or
substantially all of the assets of the Company; or (iii) the dissolution of the
Company; or (iv) a change in the identity of a majority of the members of the
Company's Board of Directors within any twelve-month period, which change or
changes are not recommended by the incumbent directors determined immediately
prior to any such change or changes.
AMENDMENT; TERMINATION
The Board of Directors may amend or modify the Stock Plan at any time,
except that no amendment or modification may in any manner affect any then
outstanding option granted under the Stock Plan without the consent of the
participant holding such option.
The Board of Directors may terminate or suspend the Stock Plan at any time,
except that no termination may in any manner affect any then outstanding option
granted under the Stock Plan without the consent of the participant holding such
option. The Stock Plan currently will terminate automatically on November 3,
2007. No options may be awarded under the Stock Plan after its termination.
Termination of the Stock Plan will not alter or impair any rights or obligations
under options previously granted under the Stock Plan.
FEDERAL TAX CONSEQUENCES
Incentive Stock Options. A participant who exercises an ISO while employed
by the Company or within the 3 month (1 year for disability) period after
termination of employment, will not recognize any ordinary income at that time.
If the shares acquired upon the exercise are not disposed of until more than 1
year after the date of the exercise, and more than 2 years after the date the
ISOs were granted, the excess of the sale proceeds over the aggregate option
price of such shares will be treated as long-term capital gain to the
participant. If the shares acquired on exercise of the ISOs are disposed of
prior to such dates (a "disqualifying disposition"), the excess of the fair
market value of the shares at the time of exercise over the aggregate option
price (but not more than the gain on the disposition if the disposition is a
transaction on which a loss, if realized, would be recognized) will be ordinary
income to the participant at the time of such disqualifying disposition. The
Company will be entitled to a federal tax deduction in a like amount, subject to
the limitation on deductions discussed below. If an ISO is exercised more than 3
months (1 year for disability) after termination of employment, the participant
will recognize ordinary income equal to the difference between the option price
and the fair market value of the stock received on the date of exercise. The
Company would be allowed a deduction for a like amount in such case, subject to
the limitation on deductions discussed below.
For purpose of the alternative minimum tax on individuals, on exercise of
an ISO, the difference between the fair market value of the stock on the date of
exercise and the amount paid for the stock will be treated as taxable.
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<PAGE> 16
A participant does not recognize any taxable income on the grant for
exercise of an ISO. However, if there is a disqualifying disposition of stock
received on the exercise of an ISO, the Company may deduct from income in the
year of the disqualifying disposition an amount equal to the amount that the
participant recognizes as ordinary income due to the disqualifying disposition,
subject to the limitation on deductions discussed below.
Nonqualified Stock Options. A participant will not realize any income at
the time an NQSO is granted, nor will the Company be entitled to a deduction at
that time. Upon exercise of an NQSO, the participant will recognize ordinary
income (whether the NQSO price is paid in cash or by the surrender of previously
owned common stock) in an amount equal to the difference between the option
price and the fair market value of the shares to which the NQSO pertains. The
Company will be entitled to a tax deduction in an amount equal to the amount of
ordinary income realized by the participant, subject to the limitation on
deductions discussed below.
Limitation on Deductions. Section 162(m) of the Internal Revenue Code of
1986, as amended, limits to $1 million per year the federal income tax deduction
available to a public company for compensation paid to its chief executive
officer or any of its other four highest paid officers unless certain
requirements are met. The Stock Plan does not meet the requirements of Section
162(m) and it is possible that certain compensation paid under the Stock Plan
would not be deductible in the future. However, the Company currently believes
that all amounts under the Stock Plan will be deductible because the
compensation of the officers will either not exceed the limit under Section
162(m) or part of the compensation will be paid under other plans which meet the
requirements of Section 162(m).
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR PROPOSAL 3 TO
AMEND THE COMPANY'S 1997 STOCK OPTION PLAN.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2000 Annual Meeting of
Shareholders of the Company must be received by the Company at its address
stated above by December 11, 1999 to be considered for inclusion in the
Company's Proxy Statement and Proxy relating to such meeting. Upon receipt of
any such proposal, the Company will determine whether or not to include such
proposal in the proxy statement and proxy in accordance with regulations
governing the solicitation of proxies.
In order for a Shareholder to bring other business before the 2000 Annual
Meeting of Shareholders, timely notice must be given to the Company within the
time limits set forth above. Such notice must include a description of the
proposed business and the reasons therefor. The Board or the presiding officer
at the Annual Meeting may reject any such proposals that are not made in
accordance with these procedures or that are not a proper subject for
Shareholder action in accordance with applicable law. These requirements are
separate from the procedural requirements a Shareholder must meet to have a
proposal included in the Company's proxy statement.
In each case the notice must be provided to the Company at its principal
office in St. Louis, Missouri. Any Shareholder desiring a copy of the Company's
Bylaws will be furnished a copy without charge upon the submission of a written
request to the Company.
If the date of the 2000 Annual Meeting of Shareholders is advanced or
delayed by more than 30 calendar days from the date of the 1999 Annual Meeting
of Shareholders, the Company will make a timely disclosure of such date change
and the impact of such date change on the submission deadlines set forth above
in its first quarterly report on Form 10-Q following such date change, or, if
impracticable, by any means reasonably calculated to inform shareholders.
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<PAGE> 17
OTHER MATTERS
The Board of Directors does not intend to present to the Annual Meeting any
business other than the items stated in the "Notice of Meeting of Shareholders"
and does not know of any other matters to be brought before or voted upon at the
meeting other than those referred to above. If any other matters properly come
before the meeting, it is the intention of the proxies named in the enclosed
Proxy to vote the shares represented thereby with respect to such matters in
accordance with their best judgment.
By Order of the Board of Directors
Arthur L. Herbst, Jr.
Chief Financial Officer
The Company will furnish without charge to each person whose proxy is solicited,
and to each person representing that as of the record date for the meeting he or
she was a beneficial owner of shares entitled to be voted at the meeting, on
written request, a copy of the Company's 1999 Annual Report on Form 10-K to the
Securities and Exchange Commission, including the financial statements and
schedules thereto. Such written request should be directed to Young Innovations,
Inc., Attention: Mr. Arthur L. Herbst, Jr., Chief Financial Officer, 13705
Shoreline Court East, Earth City, Missouri 63045.
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<PAGE> 18
EXHIBIT A
YOUNG INNOVATIONS, INC.
1997 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE.
The Plan has been established to promote the best interests of the
Company and its shareholders by: 1) attracting and retaining exceptional
Employees; 2) motivating Employees by aligning their interests with those of the
Company's shareholders and allowing the Employees to acquire a proprietary
interest in the Company through the grant and exercise of options; and 3)
providing Employees with a greater personal interest in the success of the
Company.
2. ADMINISTRATION.
(a) Except as set forth in paragraph 2(c), the Plan shall be
administered by the Compensation Committee. The selection of participants in the
Plan and decisions concerning the timing, pricing, vesting, other restrictions,
and amount of any grant of options under the Plan shall be made by the
Compensation Committee. Except as set forth in paragraph 2(c), the Compensation
Committee shall interpret the Plan, prescribe, amend, and rescind rules and
regulations relating to the Plan, and make all other determinations which it
deems necessary or advisable for its administration. The decision of the
Compensation Committee on any question concerning the interpretation of the Plan
or any option granted under the Plan shall be final, conclusive and binding upon
all participants.
(b) The Compensation Committee may delegate to one or more
Representatives the authority, subject to such terms and limitations as the
Compensation Committee shall determine, to grant options to, or to cancel,
modify, waive rights with respect to, alter, discontinue or terminate options
held by participants who are not officers or directors of the Company for
purposes of Section 16 of the Exchange Act.
(c) With respect to any options granted to members of the
Compensation Committee or to Non-Employee Directors, all authority of the
Compensation Committee, including without limitation the grant of options and
the administration and interpretation of the Plan, shall be exercised by the
Board.
3. PARTICIPANTS.
Participants in the Plan shall be such Employees as the Compensation
Committee may select from time to time and such Non-Employee Directors as the
Board may select from time to time. The Compensation Committee may grant options
to an individual upon the condition that the individual become an Employee,
provided that the option shall be deemed to be granted only on the date the
individual becomes an Employee.
4. STOCK.
The stock available for grants of options under the Plan shall be the
Common Stock, and may be either authorized and unissued shares or treasury
shares held by the Company. The total number of shares of Common Stock subject
to options which may be granted under the Plan shall not exceed 650,000 shares,
subject to adjustment in accordance with Section 10. No participant shall be
granted, in any fiscal year of the Company, options to purchase more than
500,000 shares of Common Stock, subject to adjustment in accordance with Section
10. Shares subject to any unexercised portion of a terminated, cancelled,
expired or forfeited option granted under the Plan may again be subjected to
grants or awards under the Plan.
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5. GRANT OF OPTIONS.
(a) General. Subject to the limitations set forth in the Plan,
the Compensation Committee from time to time may grant options to such
participants and for such number of shares of Common Stock and upon such other
terms (including, without limitation, the exercise price, the times at which the
option may be exercised, any applicable vesting requirements, and any
restrictions on or repurchase rights with respect to the Common Stock issuable
upon exercise) as it shall designate. Each option shall be evidenced by a stock
option agreement or other contract in such form and containing such provisions
as the Compensation Committee shall deem appropriate, provided that such terms
shall not be inconsistent with the Plan. The Compensation Committee may
designate any option granted as either an Incentive Stock Option or a
Nonqualified Stock Option, or the Compensation Committee may designate a portion
of an option as an Incentive Stock Option or a Nonqualified Stock Option. Any
participant may hold more than one option under the Plan and any other stock
option plan of the Company. The date on which an option is granted shall be the
date of the authorization of the option grant by the Compensation Committee or
any Representative, provided that such option is evidenced by a written
agreement duly executed on behalf of the Company and on behalf of the optionee
within a reasonable time after the date of such Compensation committee or
Representative authorization.
(b) Incentive Stock Options. Any option intended to constitute
an Incentive Stock Option shall comply with the following requirements in
addition to the other requirements of the Plan.
(i) The exercise price per share for each Incentive
Stock Option granted under the Plan shall not be less than the
Fair Market Value per share of Common Stock on the date the
option is granted; provided that no Incentive Stock Option
shall be granted to any participant who owns (within the
meaning of Section 424(d) of the Code) stock of the Company,
or any Parent or Subsidiary, possessing more than 10% of the
total combined voting power of all classes of stock of such
Company, Parent or Subsidiary unless, at the date of grant of
an option to such participant, the exercise price for the
option is at least 110% of the Fair Market Value of the shares
subject to option and the option, by its terms, is not
exercisable more than five years after the date of grant;
(ii) The aggregate Fair Market Value of the
underlying Common Stock at the time of grant as to which
Incentive Stock Options under the Plan (or a plan of a
Subsidiary) may first be exercised by a participant in any
calendar year shall not exceed $100,000 (to the extent that an
option intended to constitute an Incentive Stock Option shall
exceed the $100,000 limitation, the portion of the option that
exceeds such limitation shall be deemed to constitute a
Nonqualified Stock Option); and
(iii) An Incentive Stock Option shall not be
exercisable after the tenth anniversary of the date of grant
or such lesser period as the Compensation Committee may
specify from time to time.
(c) Nonqualified Stock Options. A Nonqualified Stock Option
shall be exercisable for a term not to exceed 10 years, or such lesser period as
the Compensation Committee shall determine, and shall be on such other terms and
conditions as the Compensation Committee shall determine.
6. PAYMENT FOR SHARES.
The purchase price for shares of Common stock to be acquired upon
exercise of an option granted hereunder shall be paid in full, at the time of
exercise, in any of the following ways:
(i) In cash; or
(ii) By certified check, bank draft or money
order; or
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(iii) If the Compensation Committee so approves at
the time of exercise, by tendering to the Company shares of
Common Stock then owned by the participant, duly endorsed for
transfer or with duly executed stock power attached, which
shares shall be valued at their Fair Market Value as of the
date of such exercise and payment; or
(iv) If the Compensation Committee so approves at the
time of exercise, by delivery to the Company of a properly
executed exercise notice, acceptable to the Company, together
with irrevocable instructions to the participant's broker to
deliver to the Company a sufficient amount of cash to pay the
exercise price and any applicable income and employment
withholding taxes, in accordance with a written agreement
between the Company and the brokerage firm ("Cashless
Exercise") if, at the time of exercise, the Company has
entered into such an agreement.
7. WITHHOLDING TAXES.
(a) The Company shall have the right to withhold from a
participant's compensation or require a participant to remit sufficient funds to
satisfy applicable withholding for income and employment taxes upon the exercise
of an option. If the Compensation Committee so approves at the time of such
exercise, 1) a participant may make an election, notice of which shall be in
writing and promptly delivered to the Compensation Committee, to tender
previously-acquired shares of Common Stock or have shares of Common Stock
withheld from the exercise of an option, provided that the shares have an
aggregate Fair Market Value on the date of such exercise sufficient to satisfy
in whole or in part the applicable withholding taxes, or 2) the Cashless
Exercise procedure described in Section 6 may be utilized to satisfy the
withholding requirement.
(b) Except as permitted under Rule 16b-3 promulgated under the
Exchange Act, a participant subject to the insider trading restrictions of
Section 16(b) of the Exchange Act may use Common Stock to satisfy the applicable
withholding requirements only if such election is made at least six months prior
to the date of the exercise.
8. NON-ASSIGNABILITY.
Unless determined otherwise by the Committee, no Incentive Stock Option
or Nonqualified Stock Option (or any rights or obligations related thereto)
shall be transferable by a participant except by a Will or by the laws of
descent and distribution. Unless determined otherwise by the Committee, during
the lifetime of a participant, an option shall be exercised only by the
participant.
9. TERMINATION OF EMPLOYMENT.
Unless otherwise determined by the Compensation Committee or provided
in the stock option agreement relating to a particular grant of an option:
(i) If, prior to the date that such option or any
portion thereof shall first become exercisable, the
participant's Employment shall be terminated for any reason,
with or without Cause, including by the voluntary act, death,
Disability, or retirement of the participant, the
participant's right to exercise the option or any portion
thereof shall terminate and all rights thereunder shall cease;
(ii) If, on or after the date that such option or any
portion thereof shall first become exercisable, a
participant's Employment shall be 'terminated by the Company
for Cause, the participant's right to exercise the option or
any portion thereof shall terminate and all rights thereunder
shall cease;
(iii) If, on or after the date that such option shall
first become exercisable, a participant's Employment shall be
terminated due to death or Disability, the participant or the
executor or administrator of the estate of the participant or
the person or persons to whom the option shall have been
transferred by will or by the laws of descent and distribution
(as the case may be) , shall have the right, prior to the
earlier of (i) the expiration of the option or (ii) one year
from the
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date of the participant's death or termination due to such
Disability, to exercise the option to the extent that it was
exercisable and unexercised on the date of death or
Disability, subject to any other limitation on the exercise of
the option in effect on the date of exercise; and
(iv) If, on or after the date that such option shall
first become exercisable, a participant's Employment shall be
terminated for any reason other than for Cause or due to the
participant's death or Disability, the participant shall have
the right, prior to the earlier of (i) the expiration of the
option or (ii) three months after such termination of
Employment, to exercise the option to the extent that it was
exercisable and is unexercised on the date of such termination
of Employment, subject to any other limitation on the exercise
of the option in effect on the date of exercise; and
The provisions of the preceding clauses (iii) and (iv) shall not apply to the
extent that the shares subject to the option are subject to forfeiture or
repurchase by the Company as a result of the termination of the participant's
employment.
10. ADJUSTMENTS.
(a) In the event that the Compensation Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property) , recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-up,
spin-off, combination, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Compensation Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Compensation Committee shall, in such
manner as it may deem equitable, adjust any or all of 3 the number and type of
shares of Common Stock which thereafter may be made the subject of options, 4
the number and type of shares of Common Stock subject to outstanding options,
and 5 the exercise price with respect to any option, or, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding option;
provided, however, in each case, that with respect to Incentive Stock Options no
such adjustment shall be authorized to the extent that such authority would
cause the Plan to violate Section 422 of the Code or any successor provision
thereto; and provided further, however, that the number of shares of Common
Stock subject to any option shall always be a whole number.
(b) In the event of a Change in Control, unless otherwise
determined by the Compensation Committee, all outstanding options under the Plan
immediately shall become exercisable in full, regardless, of any installment
provision applicable to such option.
11. RIGHTS PRIOR TO ISSUANCE OF SHARES.
No participant shall have any rights as a shareholder with respect to
any shares covered by an option grant until the issuance of a stock certificate
to the participant for such shares. No adjustment shall be made for dividends or
other rights with respect to such shares for which the record date is prior to
the date such certificate is issued.
12. TERMINATION AND AMENDMENT.
(a) The Board may terminate the Plan, or the granting of
options, at any time. No options shall be granted under the Plan after the tenth
(10th) anniversary of the date of the adoption of this Plan by the Board.
Termination of the Plan shall not affect the rights of the holders of any
options previously granted.
(b) The Board may amend or modify the Plan at any time and
from time to time. No amendment, modification, or termination of the Plan shall
in any manner affect any then outstanding option granted under the Plan without
the consent of the participant holding same.
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13. EFFECT ON EMPLOYMENT.
Neither the adoption of the Plan nor the granting of any option
pursuant to it shall be deemed to create any right in any individual to be
retained as an Employee.
14. COMPLIANCE WITH SECURITIES, TAX AND OTHER LAWS.
Notwithstanding anything contained herein to the contrary, the
Company's obligation to sell and deliver Common Stock pursuant to the exercise
of an option is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities or
such other laws or regulations as the Company deems necessary or advisable. As a
condition to the delivery of any Common Stock pursuant to the exercise of an
option, the Company may require a participant, or any person acquiring the
rights with respect to such option, to make any representation or warranty that
the Company deems to be necessary under any applicable securities, tax, or other
law or regulation.
15. CERTAIN DEFINITIONS.
"Board" means the Board of Directors of- the Company.
"Cause" with -respect to any participant has the meaning set forth in
the participant's written employment agreement with the Company, or if no such
agreement exists or if "Cause" is not defined in such agreement, then "Cause"
means 6 the participant's conviction (including a plea of nolo contenders) of a
felony or any other crime involving moral turpitude, unethical business conduct,
or dishonesty involving the Company or persons having business dealings with the
Company, or 7 any dishonest or unethical conduct by the participant which in the
judgment of a majority of the Board (with the participant not voting) may
reasonably be expected to materially adversely affect the Company's business, or
8 the participant's inability, for any reason, to fully perform the
participant's normal employment duties for a period of ninety (90) consecutive
calendar days or for a total of thirty (30) business days in any six (6) month
period, or 9 such other reason as constitutes "cause" under the common law of
Missouri as then in effect.
"Change in Control" means 1 a merger or consolidation of the Company
with or into any other entity unless after such event at: least a majority of
the voting power of the surviving or resulting entity is beneficially owned by
persons who beneficially own a majority of the voting power of the Company
immediately prior to such event, or 2 the sale of all or substantially all the
assets of the Company, or 3 the dissolution of the Company, or 4 a change in the
identity of a majority of the members of the Company's Board of Directors within
any twelve-month period, which change or changes are not recommended by the
incumbent directors determined immediately prior to any such change or changes.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock of the Company, par value $0.01
per share.
"Company" means Young Innovations, Inc., a Missouri corporation.
"Compensation Committee" means the Compensation Committee of the Board,
or with respect to any time when there is no such committee, the Board.
"Disabled" or "Disability" means permanently disabled as defined in
Section 22(e)(3) of the Code.
"Employee" means an individual with an "employment relationship" with
the Company, or any Parent or Subsidiary, as defined in Regulation 1.421-7(h)
promulgated under the Code, and shall include, without limitation, employees who
are directors of the Company, or any Parent or Subsidiary.
"Employment" means the state of being an Employee.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means the average of the high and low sale prices,
or the average of the closing bid and asked prices, as the case may be, per
share of the Common Stock reported in the Wall Street Journal for the last
preceding day on which the Common Stock was traded prior to the date with
respect to which Fair Market Value is to be determined, as determined by the
Compensation Committee in its sole discretion.
"Incentive Stock Option" means an option intended to meet the
requirements of Section 422 of the Code.
"Non-Employee Director" has the meaning set forth in Rule 16b-3.
"Nonqualified Stock Option" means an option granted under the Plan
other than an incentive Stock Option.
"Parent" means any "parent corporation" of the Company as defined in
Section 424(e) of the Code.
"Plan" means this 1997 Stock Option Plan, as amended.
"Representatives" means one or more directors, officers or managers of
the Company, or a committee of such directors, officers or managers, to whom the
Compensation Committee has delegated any of its authority to act under the Plan.
"Rule 16b-3" means Securities and Exchange Commission Rule 16b-3
promulgated under the Exchange Act.
"Subsidiary" means any "subsidiary corporation" of the Company as
defined in Section 424(f) of the Code.
A-6
<PAGE> 24
YOUNG INNOVATIONS, INC.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS - MAY 10, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of YOUNG INNOVATIONS, INC. a Missouri
corporation (the "Company"), hereby constitutes and appoints George E. Richmond
and Richard G. Richmond, and each of them, his Attorneys and Proxies (with full
power of substitution in each), and authorizes them to represent the undersigned
at the Annual Meeting of Shareholders of the Company to be held on May 10, 1999,
at 6:30 P.M. and at any adjournment thereof, and to vote the common stock of the
Company held by the undersigned as designated below on proposals 1 and 2, and in
their discretion on all other matters coming before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY
THE SHAREHOLDER, BUT IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
<TABLE>
<CAPTION>
<S><C>
1. ELECTION OF DIRECTORS:
| | FOR all nominees listed (except as marked below) | | WITHHOLD AUTHORITY
to vote for all nominees listed below
George E. Richmond, Alfred E. Brennan, Arthur L. Herbst, Jr., Richard G. Richmond,
Richard P. Conerly, Craig E. LaBarge, Connie H. Drisko, and James R. O'Brien
(INSTRUCTION) To withhold authority to vote for any individual nominee(s), print such nominee's(s) name(s) in the space provided
below:
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2. TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR
THE COMPANY:
| | FOR | | AGAINST | | ABSTAIN
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE STOCK PLAN FROM
350,000 TO 660,000:
| | FOR | | AGAINST | | ABSTAIN
(To be signed on reverse side)
<PAGE> 25
PLEASE MARK (ON REVERSE SIDE), SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, trustee or other
representative capacity, please give full title as such. If a corporation,
please sign in full corporate name by President or other authorized officer.
The signer hereby revokes all proxies heretofore given to vote at said meeting
or any adjournment thereof.
-----------------------------------------
Signature of Shareholder
-----------------------------------------
Signature of Shareholder
DATED:
----------------------------, 1999
