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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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ART’S-WAY
MANUFACTURING CO., INC.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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ý
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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Persons
who are to respond to the collection of information contained in
this form
are not required to respond unless the form displays a currently
valid OMB
control number.
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5556
Highway 9
Armstrong,
Iowa, 50514-0288
Ph:
(712) 864-3131
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON THURSDAY, APRIL 24, 2008
To
our
Stockholders:
The
2008
Annual Meeting of the Stockholders (the "2008 Annual Meeting") of Art’s-Way
Manufacturing Co., Inc. (the "Company") will be held on Thursday, April 24,
2008, at the AmericInn Lodge & Suites, 130 S. Main St., Prairie du Chien,
Wisconsin, 53821. Registration for the 2008 Annual Meeting will begin at 9:45
a.m. Central Daylight Savings Time (“CDST”). The 2008 Annual Meeting will
commence at approximately 10:00 a.m. CDST. The purposes of the 2008 Annual
Meeting are to:
| (1) |
Elect
seven directors to our Board of Directors to serve until the next
annual
meeting of stockholders
or until such time as their successor are elected and qualified;
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| (2) |
To
consider and vote upon a proposal to approve the 2007 Non-Employee
Directors’ Stock Option Plan;
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| (3) |
To
consider and vote upon a proposal to ratify the appointment of
Eide Bailly
LLP as independent public accountants of the Company for the
2008 fiscal
year; and
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(4)
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Transact
such other business as may properly come before the 2008 Annual Meeting
or
any adjournments
thereof.
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Any
action may be taken on any one of the foregoing proposals at the 2008 Annual
Meeting on the date specified above, or on any date or dates to which the 2008
Annual Meeting may be adjourned. The Board of Directors is not aware of any
other business to come before the 2008 Annual Meeting. The foregoing proposals
are described more fully in the enclosed Proxy Statement. If
you have any questions regarding the information contained in the Proxy
Statement or regarding the completion of the enclosed proxy card, please call
the Company at (712) 864-3131.
Only
stockholders that were listed on the Company's records at the close of business
on Monday, March 24, 2008, the record date set by the Board of Directors for
the
meeting, are entitled to notice of the 2008 Annual Meeting and to vote at the
2008 Annual Meeting and any adjournments thereof. The stock transfer books
of
the Company will not be closed.
All
stockholders of record are cordially invited to attend the 2008 Annual Meeting
in person. However, to assure the presence of a quorum, the Board of Directors
requests that you promptly complete, sign, date and return the enclosed proxy
card, which is solicited by the Board of Directors, whether or not you plan
to
attend the 2008 Annual Meeting. The proxy is revocable and will not be used
if
you attend and vote at the 2008 Annual Meeting in person or otherwise provide
notice of your revocation. Please mail your executed proxy card to the Company’s
stock transfer agent in the enclosed envelope.
By
order
of the Board of Directors,
J.
Ward McConnell, Jr.
Executive
Chairman of the Board and Director
Armstrong,
Iowa
March
28,
2008
IMPORTANT:
THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. AN ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES
2
ART’S-WAY
MANUFACTURING CO., INC.
5556
Highway 9
Armstrong,
Iowa, 50514-0288
Ph:
(712)
864-3131
Proxy
Statement
2008
Annual Meeting of Stockholders
Thursday,
April 24, 2008
10:00
a.m. CDST
This
Proxy Statement is furnished in connection with the solicitation of proxies
by
the Board of Directors of Art’s-Way Manufacturing Co., Inc., a Delaware
corporation (the “Company” or “Art’s-Way”), for use at the 2008 Annual Meeting
of stockholders of the Company to be held on Thursday, April 24, 2008 (the
“2008
Annual Meeting”), and at any adjournment thereof. The 2008 Annual Meeting will
be held at the AmericInn Lodge & Suites, 130 S. Main St., Prairie du Chien,
Wisconsin, 53821. Registration for the 2008 Annual Meeting will begin at
approximately 9:45 a.m. Central Daylight Savings Time (CDST). The 2008 Annual
Meeting will commence at approximately 10:00 a.m. CDST. This solicitation is
being made by mail, however, the Company may also use its officers, directors,
and employees (without providing them with additional compensation) to solicit
proxies from stockholders in person or by telephone, facsimile or letter. The
Company has retained American Stock Transfer and Trust Company of New York
City,
New York, to assist in the solicitation of proxies at a cost of approximately
$1,800. Distribution of this Proxy Statement and the proxy card via U.S. Mail
is
scheduled to begin on or about March 28, 2008.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
| Q: |
Why
did I receive this proxy
statement?
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A:
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The
Company is soliciting your proxy vote at the 2008 Annual Meeting
because
you owned of record one or more shares of common stock of the Company
at
the close of business on Monday, March 24, 2008, the record date
for the
meeting, and are therefore entitled to vote at the 2008 Annual
Meeting.
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| Q: |
What
is a proxy?
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A:
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A
proxy is your legal designation of another person or persons (the
“proxy”
or “proxies”, respectively) to vote on your behalf. By completing and
returning the enclosed proxy card, you are giving J. Ward McConnell,
Jr.
and David R. Castle, the proxies, the authority to vote your shares
of
common stock at the 2008 Annual Meeting in the manner you indicate
on your
proxy card.
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| Q: |
When
and where is the 2008 Annual
Meeting?
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| A: |
The
2008 Annual Meeting will be held on Thursday, April 24, 2008 at the
AmericInn Lodge & Suites, 130 S. Main St., Prairie du Chien,
Wisconsin, 53821. Registration for the meeting will begin at approximately
9:45 a.m. CDST. The 2008 Annual Meeting will commence at approximately
10:00 a.m. CDST.
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3
| Q: |
What
am I voting on?
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A:
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You
are voting on the following
matters:
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·
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Proposal
1 —
The election of seven (7)
directors;
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·
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Proposal
2—
The approval of the 2007 Non-Employee Directors’ Stock Option Plan;
and
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·
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Proposal
3—
The ratification of the appointment of Eide Bailly LLP as the Company’s
independent public accountants for the 2008 fiscal
year.
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Q: What
does the Board recommend?
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A:
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The
Board recommends a vote:
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·
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FOR
the election
of its seven director nominees (see Proposal
1);
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·
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FOR
the
approval of the 2007 Non-Employee Directors’ Stock Option Plan (see
Proposal 2); and
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·
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FOR
the
ratification of the appointment of Eide Bailly LLP as the Company’s
independent public accountants for the 2008 fiscal year (see Proposal
3).
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| Q: |
How
many votes do I have?
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A:
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On
any matter which may properly come before the 2008 Annual Meeting,
each
stockholder entitled to vote thereon will have one (1) vote for each
share
of common stock owned of record by such stockholder as of the close
of
business on Monday, March 24, 2008.
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| Q: |
How
many shares of common stock may vote at the 2008 Annual
Meeting?
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| A: |
At
the close of business on Monday, March 24, 2008, there were 1,985,176
outstanding shares of common stock. This means that there may be
1,985,176
votes on any matter presented at the 2008 Annual Meeting.
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| Q: |
What
vote is required to approve each of the
Proposals?
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A:
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Proposal
1 – Election of Directors — With
respect to the election of directors, the seven (7) nominees receiving
the
greatest number of votes relative to the votes cast for the other
nominees
will be elected, regardless of whether an individual nominee receives
votes from a majority of the quorum of shares represented (in person
or by
proxy) at the 2008 Annual Meeting. Although directors are only elected
by
plurality vote, the presence (in person or by proxy) of stockholders
representing an aggregate of at least a majority of the issued and
outstanding shares of common stock is required to constitute a quorum
for
the election of directors.
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Stockholders
do not have cumulative voting rights with respect to the election
of
directors or any other matter, which means that stockholders will
not be
able to cast all of their votes for a single director nominee. The
cumulative voting method would entitle a stockholder to multiply
the
number of shares owned of record by such stockholder by the number
of
director positions being voted upon and then cast a number of votes
equal
to such total for only one nominee. Instead, stockholders will only
be
able to cast one vote per share owned of record for each director
nominee
(up to seven nominees) at the 2008 Annual Meeting. Accordingly, a
holder
of 100 shares will only be able to cast 100 shares for each nominee
(up to
the number of directorships up for election) and will not instead
be able
to cast 700 shares for a single nominee (or distribute votes in any
other
manner).
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Proposals
2 –
Approval
of the 2007 Non-Employee Directors’ Stock Option Plan
--
Provided a quorum of at least a majority of the issued and outstanding
stock is present (in person or by proxy), the affirmative vote of
the
holders of a majority of the shares of common stock represented at
the
2008 Annual Meeting (whether in person or by proxy) and entitled
to vote
on the matter will result in the stockholders’ approval of the 2007
Non-Employee Directors’ Stock Option
Plan.
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4
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Proposal
3 –
Ratification
of the Appointment of Eide Bailly LLP as the Company’s Independent Public
Accountants
--
Provided a quorum of at least a majority of the issued and outstanding
stock is present (in person or by proxy), the affirmative vote of
the
holders of a majority of the shares of common stock represented at
the
2008 Annual Meeting (whether in person or by proxy) and entitled
to vote
on the matter will result in the stockholders’ ratification of the
appointment of Eide Bailly LLP as the Company’s independent public
accountants for the 2008 fiscal
year.
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Q:
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What
constitutes a quorum?
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A:
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Transaction
of business may occur at the 2008 Annual Meeting if a quorum is present.
The presence in person or by proxy of shareholders holding at least
a
majority of the issued and outstanding shares of common stock is
required
to constitute a quorum. On Monday, March 24, 2008, the Company had
1,985,176 issued and outstanding shares of common stock and, therefore,
the presence of 992,589 shares will constitute a quorum for the
transaction of business on Proposals 1, 2, and 3. If you submit a
proxy,
vote in person at the meeting or otherwise abstain from voting, your
shares will be counted in determining whether a quorum is present
at the
2008 Annual Meeting.
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| Q: |
What
is the effect of broker non-votes and
abstentions?
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A:
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Shares
that are held by stock brokers in “street name” may be voted by the stock
broker on “routine” matters and only with stockholder direction on other
matters. When the stock broker does not vote the shares, the stock
broker’s abstention is referred to as a “broker non-vote.”
|
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Abstentions
and broker non-votes will be counted for purposes of determining
whether a
sufficient number of the outstanding shares of common stock are
represented to establish a quorum at the 2008 Annual Meeting. Under
applicable law, abstentions and broker non-votes will have the same
effect
as a vote against
any proposal other than the election of directors. Abstentions and
broker
non-votes will not be counted for purposes of determining the number
of
votes cast in the election of
directors.
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| Q: |
How
do I vote my shares?
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A:
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Shares
of common stock can be voted only if the stockholder of record is
present
at the 2008 Annual Meeting, either in person or by proxy. Stockholders
of
record may vote using either of the following
methods:
|
| · |
Proxy
Card.
The enclosed proxy card is a means by which a stockholder may authorize
the voting of his, her, its or their shares of common stock at the
2008
Annual Meeting. The shares of common stock represented by each properly
executed proxy card will be voted at the 2008 Annual Meeting in accordance
with the stockholder’s directions. The Company urges you to specify your
choices by marking the appropriate boxes on the enclosed proxy card.
After
you have marked your choices, please sign and date the proxy card
and mail
the proxy card to the Company’s stock transfer agent, American Stock
Transfer and Trust Company, in the enclosed envelope. If you sign
and
return the proxy card without specifying your choices, your shares
will be
voted FOR
the Board of Director’s nominees for directors, FOR
the approval of the 2007 Non-Employee Directors’ Stock Option Plan, and
FOR
the ratification of the appointment of Eide Bailly LLP as the Company’s
independent public accountants for the 2008 fiscal year.
|
| · |
In
person at the 2008 Annual Meeting.
All stockholders of record as of Monday, March 24, 2008 may vote
in person
at the 2008 Annual Meeting.
|
5
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You
are a “street name” holder rather than a “stockholder of record" if your
shares are held in the name of a stock broker, bank, trust or other
nominee as a custodian.
|
| Q: |
Can
I change my vote after I have mailed in my proxy
card?
|
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A:
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Proxies
solicited by the Board of Directors may be revoked at any time prior
to
the 2008 Annual Meeting. No specific form of revocation is required.
You
may revoke your proxy by:
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| · |
Voting
in person at the 2008 Annual
Meeting;
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| · |
Returning
a later-dated signed proxy card; or
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| · |
Giving
personal or written notice of the revocation to the Company's President
and CEO, Carrie Majeski, at the commencement of the 2008 Annual Meeting.
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If
your
shares are held in “street name” through a broker or other nominee, you will
need to contact that nominee
if you wish to change your voting instructions.
|
Q:
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How
will my shares be voted if I do not specify how they should be voted
or if
I vote for too few or too many choices on the proxy
card?
|
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A:
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If
you do not mark any choices for the election of directors on the
proxy
card, then the proxies solicited by the Board of Directors will be
voted
FOR
the nominees recommended for election by the Board of Directors.
You may
wish to vote for less than seven (7) director candidates. In such
case,
your shares will only be voted for the director candidate(s) you
have
selected. If you mark contradicting choices on the proxy card, such
as
both for and against a director candidate, your shares will not be
voted
with respect to the director candidate for which you marked contradicting
choices.
|
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If
you do not mark a choice with respect to the approval of any proposal
other than the election of directors, then the proxies solicited
by the
Board of Directors will be voted FOR
the approval of such proposal. If you mark contradicting choices
on your
proxy card, such as a mark both for and against the approval of a
proposal, then your shares will not
be
counted either for or against the proposal for which you have marked
contradicting choices.
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| Q: |
Who
can attend the 2008 Annual
Meeting?
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A:
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All
stockholders of record as of the close of business on Monday, March
24,
2008 may attend the 2008 Annual
Meeting.
|
6
| Q: |
What
is the record date for the 2008 Annual
Meeting?
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| A: |
The
Board of Directors has fixed Monday, March 24, 2008 as the record
date.
|
| Q: |
Who
will count the votes?
|
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A:
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All
proxies submitted to the Company will be tabulated by our stock transfer
agent, American Stock Transfer and Trust Company. All shares voted
by
stockholders of record present in person at the 2008 Annual Meeting
will
be tabulated by the Company’s controller, Amber Murra.
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Q:
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Who
is paying for this proxy
solicitation?
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A:
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The
entire cost of this proxy solicitation will be borne by the Company.
The
cost will include the cost of supplying necessary additional copies
of the
solicitation materials for beneficial owners of shares held of record
by
brokers, dealers, banks and voting trustees and their nominees and,
upon
request, the reasonable expenses of such record holders for completing
the
mailing of such materials to such beneficial
owners.
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Q:
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How
do I nominate a candidate for election as a director at next year's
Annual
Meeting?
|
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A:
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Seven
directors will stand for election at the 2009 Annual Meeting of
stockholders. Nominations for director are made by the Board of Directors.
In addition, a stockholder may nominate a candidate for director
by
following the procedures explained below in this Proxy Statement
under
“BOARD
OF DIRECTOR MEETINGS AND COMMITTEES - Selection of Director
Nominees”
and contained in Section 12 of Article II of the Company’s Bylaws, as may
be amended from time to time. Section 12 of Article II of the Company’s
Bylaws generally requires that written notice of a stockholder’s intent to
nominate an individual for director must be delivered to the Secretary
of
the Company not less than 60 days nor more than 90 days prior to
the first
anniversary of the preceding year’s annual meeting. This means that
nominations for directors for the 2009 Annual Meeting need to be
submitted
to the Company not later than February 23, 2009 but not before January
24,
2009.
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Q:
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What
is a stockholder proposal?
|
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A:
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A
stockholder proposal is your recommendation or requirement that the
Company and/or the Board of Directors take action, which you intend
to
present at a meeting of the stockholders. Your proposal should state
as
clearly as possible the course of action that you believe the Company
should follow. If your proposal is included in the Company's proxy
statement, then the Company must also provide the means for stockholders
to vote on the matter via the proxy card. The deadlines and procedures
for
submitting stockholder proposals for the 2009 Annual Meeting are
explained
in the following question and answer. The Company reserves the right
to
reject, rule out of order, or take appropriate action with respect
to any
proposal that does not comply with these and other applicable
requirements.
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Q:
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When
are stockholder proposals and director nominations due for the 2009
Annual
Meeting?
|
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A:
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In
order to be considered for inclusion in next year's proxy statement,
stockholder proposals must be submitted in writing to the Company
by no
later than November 28, 2008 (approximately 120 days prior to the
one year
anniversary of the mailing of this proxy statement). The Company
suggests
that proposals for the 2009 Annual Meeting of stockholders be submitted
by
certified mail, return receipt requested. The proposal must be in
accordance with the provision of Rule 14a-8 promulgated by the Securities
and Exchange Commission under the Exchange Act of 1934.
|
7
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Stockholders
who intend to present a proposal at the 2009 Annual Meeting of
stockholders without including such proposal in the Company's proxy
statement must provide the Company notice of such proposal no later
than
February 11, 2009 (approximately 45 days prior to the one year anniversary
of the mailing of this proxy statement). The Company reserves the
right to
reject, rule out of order, or take appropriate action with respect
to any
proposal that does not comply with these and other applicable
requirements.
|
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If
the Company does not receive notice of a stockholder proposal intended
to
be submitted to the 2009 Annual Meeting of stockholders by February
11,
2009, the persons named on the proxy card accompanying the notice
of
meeting may vote on any such proposal in their discretion only if
the
Company includes in its proxy statement an explanation of its intention
with respect to voting on the proposal.
|
8
PROPOSALS
TO BE VOTED UPON
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board
of Directors is currently composed of seven directors. Seven directors will
be
elected at the 2008 Annual Meeting to hold office until the 2009 Annual Meeting
of stockholders or until the successor of each shall be elected and qualified
in
accordance with the Company’s Bylaws. All seven of the nominees named herein are
presently serving as members of the Board of Directors. The Company has no
reason to believe that any of the director nominees named below will be unable
or unwilling to serve as director if elected. If for any reason any nominee
withdraws or is unable to serve as director (neither of which is expected at
this time), the shares represented by all valid proxies will be voted for the
election of a substitute nominee recommended by the Board of Directors or the
Board of Directors may reduce the size of the Board of Directors.
The
seven
nominees receiving the highest number of affirmative votes cast will be elected
as directors. Except as otherwise directed on the proxy cards, the proxies
will
vote all valid proxies for the seven nominees identified below.
Nominees
for Election as Directors at the 2008 Annual Meeting
The
Board
of Directors has recommended the following persons as nominees for election
as
directors at the 2008 Annual Meeting:
|
Nominee
Name
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Age
|
Year First
Became a
Director
|
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J.
Ward McConnell, Jr.
|
76
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1996
|
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Marc
H. McConnell
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29
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2001
|
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Thomas
E. Buffamante
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55
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2003
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David
R. Castle
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58
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2000
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Fred
W. Krahmer
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37
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2006
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James
Lynch
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62
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2006
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Douglas
McClellan
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57
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1987
|
Certain
biographical information relating to each of the director nominees is set forth
below:
J.
WARD McCONNELL,
JR., Executive
Chairman of the Board, Director, Age 76. Mr.
McConnell has been a private investor for more than eight years. Mr. McConnell
was a director from 1996 to 2001 and returned and has served since February
2002. Our Executive Vice Chairman and director, Marc H. McConnell, is the son
of
Mr. McConnell. Mr. McConnell has been the Executive Chairman of the Board of
Directors since 2001 and currently resides in Fort Myers, Florida.
MARC
H. McCONNELL,
Executive
Vice Chairman of the Board, Director, Age 29. Mr.
McConnell has served as President of Babcock Co., Inc., of Bath, New York since
July 2001. He has also served as President of Bauer Corporation of Wooster,
Ohio
since 2004 and as a director of Mountain Aircraft Services of Kinston, North
Carolina since 2003. He has served as a director of the American Ladder
Institute since 2004 and was named president of the American Ladder Institute
in
2006. Mr. McConnell was also named a director of the Farm Equipment
Manufacturers Association in October 2007. Mr. McConnell was appointed to the
Board of Directors in July 2001 and has served as Executive Vice Chairman of
the
Board of Directors since January of 2008. He is the son of our Executive
Chairman and director, J. Ward McConnell, Jr., and currently resides in
Greenville, North Carolina.
THOMAS
E. BUFFAMANTE,
Director, Age 55. Mr.
Buffamante is a Certified Public Accountant and President of Buffamante Whipple
Buttafaro, P.C., where he has been a director and shareholder of the firm since
1981. Mr. Buffamante has been a director since 2003 and currently resides in
Great Valley, New York.
9
DAVID
R. CASTLE, Director,
Age 58.
Mr.
Castle is the retired Director of Operations Worldwide for Avery Weigh-Tronix.
Mr. Castle serves as the Chairman of our Compensation and Stock Option Committee
and Chairman of the Audit Committee. Mr. Castle has been a director since 2000
and currently resides in Ontario, Canada.
FRED
W. KRAHMER,
Director,
Age 37. Mr.
Krahmer has been a practicing attorney with Krahmer & Nielsen, PA since
1997, specializing in agricultural, real estate and estate planning law. He
is
also active in managing his family's farming operations based in Martin County,
Minnesota. Mr. Krahmer is a director of Profinium Financial, a banking
institution based in Southern, Minnesota. He is also a member of our
Compensation and Stock Option Committee and Audit Committee. Mr. Krahmer has
been a director since 2006 and currently resides in Fairmont,
Minnesota.
JAMES
LYNCH,
Director, Age 62.
Mr.
Lynch
served as the Chief Executive Officer and General Manager of Rydell Chevrolet
from 1989 through 1998. He was named President of Rydell Enterprises in 1999
and
became Secretary-Treasurer of Rydell Development in 2001. He is an owner of
automobile dealerships in the midwest and west coast. Mr. Lynch has been a
director since 2006 and currently resides in Chatsworth,
California.
DOUGLAS
McCLELLAN,
Director, Age 57.
Mr.
McClellan currently serves as President of Filtration Unlimited of Akron, New
York, where he has held various positions for over six years. He is a member
of
our Compensation and Stock Option Committee and Audit Committee. Mr. McClellan
has been a director since 1987 and currently resides in Clarence, New
York.
Required
Vote and Board Recommendation
If
a
quorum is present, the affirmative vote of a plurality of the shares of common
stock present at the 2008 Annual Meeting, represented in person or by proxy,
and
entitled to vote on the matter is required to elect a nominee to the position
of
director. The seven nominees receiving the greatest number of votes will be
elected as directors.
THE
BOARD HAS DETERMINED THAT EACH NOMINEE IS QUALIFIED TO SERVE AS A DIRECTOR
AND
RECOMMENDS A VOTE FOR
THE ELECTION OF ITS NOMINEES FOR DIRECTORS.
PROPOSAL
2
APPROVAL
OF THE 2007 NON-EMPLOYEE
DIRECTORS’
STOCK OPTION PLAN
On
January 25, 2007, the Board of Directors approved the 2007 Non-Employee
Directors’ Stock Option Plan (the “Plan”). The purpose of the Plan is to enable
the Company to provide to its non-employee directors certain incentives that
are
linked directly to increases in stockholder value in order to encourage
directors to serve on our Board and to exert their best efforts on behalf of
and
in the best interests of the Company. The Board believes that a non-employee
stock option plan, such as this Plan, is important to provide a mechanism to
offer non-employee directors the ability to participate in the long-term growth
of the Company and to motivate directors to act in the best interests of our
stockholders. Following the Board’s approval of the Plan on January 25, 2007, a
total of 7,000 non-qualified stock options were granted to our directors on
April 26, 2007. Because none of our directors were employees of the Company,
all
seven of our directors were eligible to participate in the Plan. One of our
directors, Marc H. McConnell, exercised a total of 1,000 of such stock options
during the 2007 fiscal year.
The
NASDAQ Marketplace Rules require an issuer to obtain stockholder approval of
the
establishment of a stock option plan pursuant to which stock may be acquired
by
directors. The Company inadvertently failed to obtain the requisite stockholder
approval prior to establishing and issuing stock options pursuant to the Plan.
Accordingly, the Board is currently seeking the stockholders’ ratification of
the Plan to remedy its non-compliance with applicable NASDAQ rules. The Board
does not believe that rescission of the Plan is practicable or appropriate
under
the circumstances, as stock options have already been issued and exercised
under
the Plan. Failure to obtain stockholder ratification of the Plan could
jeopardize our listing on the NASDAQ Capital Market.
10
Summary
of the Terms of the 2007 Non-Employee Directors’ Stock Option
Plan
The
principal provisions of the Plan are summarized below. This summary is not
a
complete description of all of the Plan’s provisions and is qualified in its
entirety by reference to the Plan which is attached to this Proxy Statement
as
Appendix 1. Capitalized terms in this summary not defined in this Proxy
Statement have the meanings set forth in the Plan.
Purpose.
The
purpose of the Plan is to enable the Company to provide incentives to our
non-employee directors that are directly linked to increase in stockholder
value
in order to encourage such directors to serve on our Board and to put forth
their best efforts on behalf of the Company while serving as director. Under
the
Plan, non-qualified stock options (“NQSOs”) may be granted to non-employee
directors to purchase shares of the Company’s common stock at a price not less
than fair market value at the date the NQSOs are granted.
Administration.
The
Plan is administered by the Board of Directors. The Board of Directors has
the
sole and absolute discretion to grant NQSOs under the Plan, to determine the
number of shares subject to the NQSOs and to determine the price at which each
share covered by a NQSO may be purchased under the Plan. No Board members will
be liable for any action or determination made in good faith by the Board with
respect to the Plan or the grant or exercise of a NQSO pursuant to the Plan.
The
Company maintains separate accounts for each non-employee director granted
NQSOs
under the Plan which are appropriately credited or debited whenever a NQSO
is
granted to or exercised by such non-employee director.
Eligibility.
Non-employee
directors are eligible to participate in the Plan. A non-employee director
is an
individual that is currently, or hereafter becomes, a member of the Board of
Directors and is not an employee of the Company or of any subsidiary or
affiliate of the Company on the date of the grant of the NQSO.
Grant
of NQSOs.
On
the
beginning date of each year of the Plan, which is marked by the date of such
year’s annual stockholder meeting, each non-employee director is automatically
granted NQSOs to purchase 1,000 shares of common stock. With respect to a
non-employee director who first becomes a director after the beginning date
of
the year of the plan, NQSOs to purchase 1,000 shares are granted automatically
on the next business day following his or her election. Additional NQSOs may
be
granted to any non-employee director by the Board of Directors in its sole
discretion. A non-employee director participant will not acquire any rights
as a
stockholder in the Company by virtue of having been granted an NQSO under the
plan, except with respect to such shares that have been issued to such
participant under the Plan. NQSOs for the purchase of a total of 7,000 shares
were granted during our 2007 fiscal year under the Plan, 1,000 of which have
already been exercised. The maximum aggregate number of shares that may be
issued under the plan is 100,000 shares, subject to adjustment for changes
in
the Company’s capital structure or similar events as described in the
Plan.
Exercise
and Exercise Price.
Non-employee
director participants must submit a written election to the Company in order
to
exercise a NQSO, at which time one hundred percent of the exercise price must
be
paid in full. The price at which a director may purchase a share upon exercise
of an NQSO will be the fair market value of such share on the day on which
the
NQSO was granted. The fair market value for purposes of the Plan is the average
of the high and low bid prices for the Company’s common stock on the date the
NQSOs are granted or the next reporting date. The exercise price for the options
outstanding under the Non-Employee Directors’ Stock Option Plan is $7.68.
Vesting
of NQSOs.
All
NQSOs that are automatically granted at the beginning of each plan year
immediately vest with the non-employee director participant and are exercisable
at the time they are granted. Any NQSOs granted pursuant to the Board of
Director’s discretion will vest as determined by the Board on the date of grant
of such NQSOs.
Term
of NQSOs and the Plan.
The
term
of each NQSO is five years from the date of its grant, unless terminated
earlier. The NQSOs cannot be granted under the Plan on or after January 25,
2017; provided, however, that NQSOs granted before January 25, 2017 may extend
beyond this date.
Expiration
of NQSOs.
In
the
event that a non-employee director is removed from the Board of Directors for
cause, all unexercised NQSOs will immediately expire. In the event that a
non-employee director ceases to be a member of the Board for any other reason,
or a non-employee director becomes an officer or employee of Art’s-Way or one of
its subsidiaries, all NQSOs which have vested prior to such time will expire
12
months thereafter unless they would otherwise expire sooner by their terms.
11
Transfer
and Assignment.
NQSOs
cannot be transferred, assigned, pledged or otherwise hypothecated by a
non-employee director participant except upon his or her death, in which case
any exercise of the NQSOs following the death of such non-employee director
must
occur before the earlier of (i) one year from the date of death or (ii) the
expiration of the term of the NQSO.
Stock
Option Agreements.
All
NQSOs
granted pursuant to the Plan shall be evidenced by a stock option agreement
approved by the Board of Directors, subject to the terms and conditions of
the
Plan and such other terms and conditions determined by the Board in its sole
discretion which are not inconsistent with the terms of the Plan. Each stock
option agreement will not be required to be identical for each NQSO or
non-employee director participant.
Amendment
and Termination of Plan.
With
respect to any shares that are not at the time subject to NQSOs, the Board
of
Directors has the discretion to suspend or terminate the Plan and to revise
or
amend the Plan. However, unless provided otherwise by the Board of Directors,
any amendment or revision to the Plan that would cause the Plan to fail to
comply with Rule 16b-3 under the Securities and Exchange of 1934 or any other
applicable law or regulation if such amendment or revision were not approved
by
the Company’s stockholders shall not be effective unless and until such approval
is obtained from the stockholders.
Recapitalization.
The
existence of the Plan and the NQSOs granted thereunder will not affect or
restrict in any way the right or power of the Board of Directors or the
stockholders of the Company to make or authorize any recapitalization,
reorganization or other change in the Company’s capital structure or its
business. In the event of a change in capitalization affecting the Company’s
common stock, and subject to any required action by the stockholders, the Board
of Directors will make proportionate adjustments with respect to the number
of
Shares eligible for issuance under the Plan and subject to each grant under
the
Plan, the number and exercise price of Shares subject to outstanding NQSOs
and
other changes that are appropriate under the circumstances.
Option
Grants & New Plan Benefits
It
is not
presently possible to determine the benefits or amounts to be received by or
allocated to particular persons or groups pursuant to the Plan. All non-employee
directors will annually automatically acquire 1,000 NQSOs. Each NQSO may be
exercised to acquire one share of common stock. However, additional NQSOs may
be
granted to non-employee directors at the discretion of the Board of Directors.
The market price of our common stock as of March 4, 2008 was $17.16 per
share.
We
will
rely on the exemption from registration contained in Section 4(2) of the
Securities Act of 1933 with respect to the shares to be issued upon the exercise
of the NQSOs, as the issuance of such shares will be a transaction by an issuer
not involving a public offering.
The
table
below indicates the number and value of the NQSOs allocated to the following
persons or groups of persons under the Plan as of the 2007 fiscal year end.
|
2007 Non-Employee Directors’ Stock Option Plan
|
|||||||
|
Name and Position
|
Number of Options
|
Dollar Value
|
|||||
|
Carrie
Majeski, President and CEO
|
n/a
|
n/a
|
|||||
|
E.W.
Muelhausen, Former President and CEO
|
n/a
|
n/a
|
|||||
|
Executive
Officers as a Group
|
n/a
|
n/a
|
|||||
|
Non-Executive
Officer Directors as a Group
|
7,000
|
(1
|
)
|
||||
|
Non-Executive
Officer Employees as a Group
|
n/a
|
n/a
|
|||||
|
(1)
|
The
value of the options will depend upon the difference between the
exercise
price of such options and the market price of our common stock on
the date
of exercise of an option. The exercise price of the options granted
to the
non-employee directors, as identified above, is $7.68 per share.
Accordingly, the value to the recipient is not determinable until
the
recipient’s options are exercised.
|
12
Tax
Treatment of Non-Qualified Stock Options
No
taxable income will be recognized by an option holder upon receipt of a NQSO,
and the Company will not be entitled to a tax deduction for such grant. Upon
the
exercise of a NQSO, the option holder will include in taxable income, for
federal income tax purposes, the excess in value on the date of exercise of
the
shares acquired pursuant to the NQSO over the exercise price. Upon a subsequent
sale of the shares, the option holder will derive short-term or long-term gain
or loss, depending on the option holder’s holding period for the shares
(commencing upon the exercise of the option) and upon the subsequent
appreciation or depreciation in the value of the shares. We may be entitled
to a
corresponding deduction at the time that the participant is required to include
the value of the shares (less the exercise price) in his income.
Required
Vote and Board Recommendation
If
a
quorum is present, the affirmative vote of the stockholders holding a majority
of the shares of common stock represented at the 2008 Annual Meeting, whether
in
person or by proxy, and entitled to vote on the matter is required to approve
the Plan.
THE
BOARD OF DIRECTORS HAS APPROVED THIE PLAN AND RECOMMENDS A VOTE
FOR
THE APPROVAL OF THE 2007 NON-EMPLOYEE DIRECTORS’ STOCK OPTION
PLAN.
PROPOSAL
3
RATIFICATION
OF THE APPOINTMENT OF EIDE BAILLY LLP AS THE COMPANY’S
INDEPENDENT
PUBLIC ACCOUNTANTS
The
Board
of Directors, acting on the recommendation of the Company’s Audit Committee, has
selected Eide Bailly LLP as the Company’s independent public accountants
(independent auditors) for the fiscal year ending November 30, 2008 (the “2008
fiscal year”). Although stockholder ratification of the appointment of Eide
Bailly LLP as the Company’s independent auditors is not required, our Board of
Directors is submitting this proposal to the stockholders for ratification
as a
matter of good corporate practice. Eide Bailly LLP has been the Company’s
independent auditor since July 2006. The firm has advised the Company that
it
has no relationship to the Company except that of independent public
accountant.
A
representative of Eide Bailly LLP is expected to be present at the 2008 Annual
Meeting of stockholders. Such representative will have an opportunity to make
a
statement if he or she desires to do so, and will be available to respond to
appropriate questions regarding preparation of the financial
statements.
Audit
Fees
The
following table presents fees for professional services billed by Eide Bailly
LLP, the Company’s independent auditors, to the Company for the audit of the
Company’s annual financial statements, the review of the Company’s interim
financial statements, and related services for the fiscal years ended November
30, 2007 and November 30, 2006.
|
Category
|
Fiscal Year
|
Fees
|
|||||
|
Audit
Fees (1)
|
2007
|
$
|
80,115
|
||||
|
2006
|
61,815
|
||||||
|
Audit-Related
Fees
|
2007
|
$
|
0
|
||||
|
2006
|
0
|
||||||
|
|
|
||||||
|
Tax
Fees(2)
|
2007
|
$
|
16,775
|
||||
|
2006
|
0
|
||||||
|
All
Other Fees
|
2007
|
$
|
0
|
||||
|
2006
|
0
|
||||||
13
|
(1)
|
Audit
fees represent fees billed for each of the last two fiscal years
for
professional services provided for the audit of the Company’s annual
financial statements and review of the Company’s quarterly financial
statements in connection with the filing of current and periodic
reports.
|
|
(2)
|
Tax
fees represent fees billed for each of the least two fiscal years
for tax
compliance, tax advice and tax planning which included preparation
of tax
returns.
|
Audit
Committee Pre-Approval Policies and Procedures
Prior
to
engagement of Eide Bailly LLP as the Company’s principal independent public
accountant to perform audit services for the Company, the principal accountant
was pre-approved by the Audit Committee. The Audit Committee pre-approves all
auditing services and permitted non-audit services, including the fees and
terms
of those services, to be performed for the Company by its independent auditors
prior to engagement. One hundred percent (100%) of the audit services and
tax-related services referenced above were pre-approved by our Audit Committee.
Required
Vote and Board Recommendation
If
a
quorum is present, the affirmative vote of the stockholders holding a majority
of the shares of common stock represented at the 2008 Annual Meeting, whether
in
person or by proxy, and entitled to vote on the matter is required to ratify
the
selection of the independent public accountants.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF EIDE BAILLY LLP AS THE COMPANY’S
INDEPENDENT PUBLIC ACCOUNTS.
BOARD
OF DIRECTOR MEETINGS AND COMMITTEES
Our
Board
of Directors has seven members, who are Thomas E. Buffamante, David R. Castle,
Fred W. Krahmer, James Lynch, Douglas McClellan, J. Ward McConnell, Jr. and
Marc
H. McConnell. All of our Directors are “independent” within the definition
provided by NASDAQ Rule 4200, with the exception of J. Ward McConnell, Jr.
and
Marc H. McConnell. The Board has determined that J. Ward McConnell, Jr. is
not
independent due to his previous receipt of payments from the Company as
compensation for the personal guarantees executed by Mr. McConnell in connection
with the Company’s credit facilities with West Bank of West Des Moines, Iowa,
and due to the nature of the business transactions entered into between Adamson
Global, a business owned and operated by Mr. McConnell, and Art’s-Way Vessels,
Inc., one of the Company’s wholly-owned subsidiaries. The Board further
determined that Marc H. McConnell is not independent due to his familial
relationship with J. Ward McConnell, Jr.
The
Board
of Directors held six meetings during the 2007 fiscal year, four of which were
regular meetings and two of which were special meetings held via teleconference.
Each director attended at least 75% of the total number of Board meetings held
while the director served during the 2007 fiscal year. Each director also
attended at least 75% of the total number of meetings held by all committees
of
the Board of Directors on which the director served, if any, during the 2007
fiscal year. The Board of Directors encourages all directors to attend the
Company’s annual meetings, but does not have a formal attendance policy. The
Company’s last annual meeting of the stockholders held on April 26, 2007 was
attended by all of our directors.
The
Board
of Directors has an Audit Committee and a Compensation and Stock Option
Committee. The Board of Directors as a whole functions as the Company’s
Nominating Committee.
14
Audit
Committee
The
principal functions of the Audit Committee are to evaluate and review the
Company’s financial reporting process and systems of internal controls. The
Audit Committee evaluates the independence of the Company’s independent
auditors, recommends selection of the Company’s independent auditors to the
Board of Directors, approves fees to be paid to independent auditors, and
reviews the Company’s financial statements with management and the independent
auditors. The Audit Committee has recommended to the Board of Directors the
appointment of Eide Bailly LLP to serve as the Company’s independent auditors
for the 2008 fiscal year.
The
Audit
Committee operates under a written charter approved and adopted by the Board
of
Directors, a copy of which is attached as Appendix 2 to this Proxy Statement.
The charter was recently amended to require the Audit Committee to establish
procedures for the receipt and treatment of complaints received by the Company
regarding accounting, internal controls and auditing matters, and for the
submission by employees of concerns regarding questionable accounting or
auditing matters. Under the charter, the Audit Committee must be comprised
of
not less than three members of the Board of Directors and its composition must
otherwise satisfy NASDAQ requirements applicable to audit committees. The
Company’s Audit Committee is comprised of David R. Castle, Douglas McClellan and
Fred W. Krahmer, all of whom have been determined by the Board of Directors
to
be independent under the definition of “independence” provided by NASDAQ Rules
4200 and 4350(d). The Board has determined that Mr. Castle is an “audit
committee financial expert” as defined by applicable SEC regulations. The Audit
Committee held six meetings during the 2007 fiscal year.
Report
of the Audit Committee
The
following report of the Audit Committee shall not be deemed to be filed with
the
Securities and Exchange Commission (“SEC”) or incorporated by reference in any
previous or future documents filed by the Company with the SEC under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates the reference in any such
document.
The
Audit
Committee reviews the Company's financial reporting process on behalf of the
Board of Directors. Management has the primary responsibility for the financial
statements and the reporting process. The Company's independent registered
public accounting firm is responsible for performing an independent audit of
the
Company’s financial statements and to express an opinion on the conformity of
the audited financial statements to generally accepted accounting principles.
The
Audit
Committee has reviewed and discussed with management the Company's audited
financial statements as of and for the fiscal year ended November 30, 2007.
The
Audit Committee has discussed with Eide Bailly LLP, the Company’s independent
auditors, the matters required to be discussed by Statement on Auditing
Standards (“SAS”) No. 61, as amended, relating to communication with audit
committees, as adopted by the Public Company Accounting Oversight Board in
Rule
3200T. The Audit Committee has received and reviewed the written disclosures
and
the letter to management from the independent accountant, Eide Bailly LLP,
as
required by Independence Standards Board Standard No. 1, as adopted by the
Public Company Accounting Oversight Board in Rule 3600T, and has discussed
with
such independent accountant the independent accountant’s independence. The Audit
Committee has considered whether the provision of services by Eide
Bailly not
related to the audit of the financial statements referred to above and to the
reviews of the interim financial statements included in the Company's Form
10-QSB are compatible with maintaining Eide Bailly LLP’s
independence.
Based
on
the reviews and discussions referred to above, the Audit Committee recommended
to the Board of Directors that the audited financial statements referred to
above should be included in our Annual Report on Form 10-KSB accompanying this
Proxy Statement and filed with the Securities and Exchange Commission for the
fiscal year ended November 30, 2007.
Audit
Committee
David
R. Castle, Chairman
Fred
W. Krahmer
Douglas
McClellan
15
Change
in Independent Public Accountant
On
July
19, 2006, McGladrey & Pullen, LLP, the Company’s independent accountant
previously engaged to audit the Company’s financial statements for the 2004 and
2005 fiscal years, informed the chairperson of the Company’s Audit Committee
that it did not desire to be re-appointed as the Company’s independent
accountant. McGladrey & Pullen, LLP’s report during those two past fiscal
years did not contain an adverse opinion or disclaimer of opinion, or was
qualified or modified as to uncertainty, audit scope, or accounting principles.
There were no disagreements with McGladrey & Pullen, LLP, whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved
to
McGladrey & Pullen, LLP’s satisfaction, would have caused McGladrey &
Pullen, LLP to make reference to the subject matter of the disagreement in
connection with its report.
The
Audit
Committee recommended to the Board of Directors the appointment of Eide Bailly
LLP to serve as the Company’s independent public accountant for the 2006 fiscal
year. Prior to the engagement, the Company had not previously consulted with
Eide Bailly LLP on any matters.
Compensation
and Stock Option Committee
The
members of the Compensation and Stock Option Committee are David R. Castle,
Fred
W. Krahmer and Douglas McClellan, all of whom are independent within the
definition of “independence” provided by NASDAQ’s Corporate Governance Rule
4200. It does not operate under a charter. The Compensation and Stock Option
Committee has the responsibility to review and advise management on a broad
range of compensation policies, such as salary ranges and incentive programs,
for executive officers. It is also responsible for recommending to the Board
of
Directors the base salaries, salary increases and other benefits for executive
officers. Additionally, the Compensation and Stock Option Committee administers
the Company’s 2007 Employee Stock Option Plan and grants stock options pursuant
to such plan. Neither the Compensation and Stock Option Committee nor the Board
of Directors engages compensation consultants to assist in determining or
recommending the amount or form of compensation for executive officers or
directors. Because the Compensation and Stock Option Committee and the Board
are
comprised entirely of non-employee directors, executive officers do not have
any
role in determining or recommending the amount or form of executive officer
or
director compensation. The Compensation and Stock Option Committee had two
meetings during the 2007 fiscal year. The report of the Compensation and Stock
Option Committee is contained below under “EXECUTIVE
COMPENSATION.”
Nominating
Committee
The
Board
of Directors as a whole performs the functions of a Nominating Committee. The
Board of Directors, acting as the Company’s Nominating Committee, operates under
a written charter approved and adopted by the Board of Directors, a copy of
which was attached as Appendix 2 to the Company’s proxy statement for the 2007
Annual Meeting. Under the charter, the Board of Directors as a whole may act
as
the Nominating Committee in lieu of appointing a separate committee so long
as
it acts in compliance with applicable SEC and NASDAQ corporate governance rules.
Each of our directors has been determined by the Board of Directors to be
independent under the definition of “independence” provided by NASDAQ’s
Corporate Governance Rules 4200, with the exception of J. Ward McConnell, Jr.
and Marc H. McConnell for the reasons identified above. Because the Board of
Directors is comprised solely of persons who are not employees or officers
of
the Company and a majority of our directors are independent, the Board does
not
deem it necessary to have a separate Nominating Committee. In accordance with
NASDAQ requirements, all seven of the director nominees for the 2008 Annual
Meeting were approved by a majority of the independent directors. The Board
of
Directors met once during the 2007 fiscal year for the purpose of evaluating
candidates for director nominees.
The
principal purpose of the Board of Directors, acting as the Nominating Committee,
is to identify and evaluate qualified individuals for membership on the Board
of
Directors. The Board of Directors annually considers the size, composition
and
needs of the Board in evaluating director candidates and recommends director
nominees for election at each annual meeting of stockholders.
16
Selection
of Director Nominees
The
Board
of Directors will consider director candidates recommended by holders of the
Company’s common stock in accordance with Article II, Section 12 of the
Company’s Bylaws. Any candidate submitted by stockholders will be considered on
the same basis as any other candidate submitted for consideration as a nominee.
In order for a candidate to be considered for nomination by the Board of
Directors, a stockholder must submit to the Secretary of the Company certain
information on the proposed candidate not less than 60, nor more than 90 days
prior to the first anniversary of the preceding year’s annual meeting. For the
2009 Annual Meeting of stockholders, a nomination would need to be received
not
later than February 23, 2009, but not before January 24, 2009.
A
nomination submitted by a stockholder to the Board of Directors must include
the
following information:
|
(1)
|
the
full name and address of the stockholder submitting the
recommendation;
|
|
(2)
|
the
number of shares of common stock of the Company owned by the stockholder
submitting the recommendation;
|
| (3) |
the
full name and address of the director
candidate;
|
| (4) |
the
age of the director candidate;
|
| (5) |
a
five-year business history of the director
candidate;
|
| (6) |
the
amount of common stock of the Company owned by the director
candidate;
|
| (7) |
any
family relationships between the director candidate and any executive
officer or current director of the
Company;
|
| (8) |
any
business transactions between the director candidate or the candidate’s
business and the Company; and
|
| (9) |
a
written consent of the director candidate to be named in the Company’s
proxy statement and to serve as a director if
elected.
|
Additionally,
any holder of common stock nominating a candidate is encouraged to set forth
any
other qualifications which he or she believes the candidate has to serve as
director of the Company and the reasons why the holder believes the candidate
should be elected to the Board of Directors of the Company. In the event a
stockholder does not comply with the nomination process described above, and
as
more specifically described in the Company’s bylaws, the proposed nomination may
be declared defective and disregarded.
In
selecting nominees for directors, the Board of Directors, acting as the
Company’s nominating committee, will consider all candidates submitted,
including incumbent Board members, based upon the qualifications of the
candidates, the business and financial experience of the candidates, the
experience of the candidates serving on public company boards of directors,
and
other skills sets deemed appropriate by the Board of Directors to enact the
mission and business purposes of the Company. Currently, the Company does not
engage any third parties, for a fee or otherwise, to identify or evaluate
potential nominees. No nominations for candidates were received from any holders
of common stock for the 2008 Annual Meeting.
SECURITY
HOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS
Any
holder of common stock wishing to communicate with the Board of Directors about
any matter involving the business or operations of the Company should send
the
communication, in written form, to the CEO of the Company at the Company’s
principal place of business at 5556 Highway 9, Armstrong, Iowa 50514. The CEO
of
the Company will promptly send the communication to each member of the Board
of
Directors.
17
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The
following table sets forth the name and address of the persons known to the
Company who beneficially own more than 5% of the issued and outstanding shares
of common stock of the Company as of February 15, 2008.
|
Title of Class
|
Name of and Address of
Beneficial Owner
|
Amount and Nature of
Nature of Beneficial
Ownership(1)
|
Percent of
Class(2)
|
|||||||
|
Common
Stock
|
J.
Ward McConnell, Jr.
4309
Mariner Way
Town
River Condo #108
Fort
Myers, Florida 33919
|
767,500
shares(3)
|
|
38.66
|
%
|
|||||
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules and generally
includes holding, voting and investment power with respect to the
securities.
|
|
(2)
|
Based
on 1,985,176 shares issued and outstanding.
|
|
(3)
|
Includes
1,000 shares which can be purchased within 60 days of February 15,
2008
pursuant to stock options granted and exercisable under the 2007
Non-Employee Directors’ Stock Option
Plan.
|
SECURITY
OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The
following table shows certain information with respect to the Company’s common
stock beneficially owned by directors and executive officers of the Company
as
of February 15, 2008. The shares shown as beneficially owned include shares
which executive officers and directors are entitled to acquire pursuant to
outstanding stock options exercisable within 60 days of February 15,
2008.
|
Title
of Class
|
Name
of
Beneficial
Owner
|
Position
|
Amount
and Nature of
Beneficial
Ownership(1)
|
Percent
of
Class(2)
|
|||||||||
|
Common
Stock
|
Thomas E. Buffamante | Director |
6,500
shares(3) (4)
|
|
|
*
|
|||||||
|
Common
Stock
|
David R. Castle | Director |
3,000
shares(3)
|
|
|
*
|
|||||||
|
Common
Stock
|
Fred W. Krahmer | Director |
1,793
shares(3)
|
|
|
*
|
|||||||
|
Common
Stock
|
James Lynch | Director |
3,300
shares(3)
|
|
|
*
|
|||||||
|
Common
Stock
|
Douglas McClellan | Director |
21,500
shares(3)
|
|
1.08
|
%
|
|||||||
|
Common
Stock
|
J. Ward McConnell, Jr. | Executive Chairman of the Board and Director |
767,500
shares(3)
|
|
38.66
|
%
|
|||||||
|
Common
Stock
|
Marc H. McConnell | Executive Vice Chairman of the Board and Director |
6,300
shares
|
|
*
|
||||||||
|
Common
Stock
|
Carrie Majeski | President and CEO |
5,500
shares(5)
|
|
|
*
|
|||||||
| Directors and Executive Officers as a Group |
815,393
shares
|
41.07
|
%
|
||||||||||
|
*
|
Less
than 1%
|
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules and generally
includes holding, voting and investment power with respect to the
securities.
|
|
(2)
|
Based
on 1,985,176 shares issued and outstanding.
|
|
(3)
|
Includes
1,000 shares which can be purchased within 60 days of February 15,
2008
pursuant to stock options granted and exercisable under the 2007
Non-Employee Directors’ Stock Option Plan.
|
|
(4)
|
Includes
5,000 shares which can be purchased within 60 days of February 15,
2008
pursuant to stock options granted and exercisable under the 2001
Directors’ Stock Option Plan.
|
|
(5)
|
Includes
5,500 shares which can be purchased within 60 days of February 15,
2008
pursuant to stock options granted and exercisable under the 2007
Employee
Stock Option Plan.
|
18
EXECUTIVE
OFFICERS
Carrie
Majeski, age 32, is currently serving as our President and Chief Executive
Officer (“CEO”). Ms. Majeski was appointed President and Chief Executive Officer
of the Company on October 18, 2007 following the retirement of our former
President and CEO, E.W. Muelhausen, who continues to serve the Company in an
advisory capacity with respect to special projects. From July 2004 through
October 18, 2007, Ms. Majeski served as our Chief Financial Officer. From 2001
to 2004, Ms. Majeski was responsible for all of the functions of a controller
at
Tyco Plastics of Fairmont, Minnesota.
We
do not
currently have a Chief Financial Officer (“CFO”) because Carrie Majeski, our
previous CFO, was appointed President and CEO of the Company effective as of
October 18, 2007. The duties of the CFO continue to be performed by our CEO,
Carrie Majeski, and also our controller, Amber Murra.
EXECUTIVE
COMPENSATION
Compensation
and Stock Option Committee Report on Executive
Compensation
The
compensation philosophy of the Company is to provide a compensation package
to
executive officers that will maximize long-term stockholder value. The
components of executive officer compensation are base salary, incentive
compensation and stock options. We do not currently have any employment
agreements with our executive officers.
The
Company’s policy is to pay base salaries that are at, or near, the average base
salary for similar companies. Salary increases are considered annually and
are
based on the executive officer’s current salary and his or her individual
performance during the past year. Our Compensation and Stock Option Committee
recommends to the Board of Directors salary increases for the Company’s
President and CEO. Executive compensation is generally reviewed annually;
however, no adjustments to the current executive compensation package, including
base salary, have been made for the 2008 fiscal year at this time.
The
incentive compensation plan for executive officers is a performance driven
bonus
plan to promote the objectives of the Company. Company profitability is the
underlying factor in the determination of the annual bonus plan. Each year
the
Compensation and Stock Option Committee recommends to the Board of Directors
the
specific bonus plan for executive officers.
Stock
options have historically been the third component of the Company’s compensation
package for executive officers. Stock options are awarded to provide long-term
incentives to align the objectives of executive officers with the interests
of
stockholders in maximizing long-term growth. We have established separate stock
option plans applicable to our executive officers and our non-employee
directors. The Board of Directors approved, and the stockholders previously
adopted, the 2007 Employee Stock Option Plan at the 2007 Annual Meeting held
on
April 26, 2007. Pursuant to the 2007 Employee Stock Option Plan, in October
2007, our President and CEO, Carrie Majeski, was granted options to acquire
8,000 shares of common stock that will vest over a two-year period.
Additionally, in February 2008 Ms. Majeski was awarded additional stock options
to purchase 6,000 shares of common stock that will vest over a two-year period.
The Board of Directors previously approved, and is currently recommending to
stockholders the approval of, the 2007 Non-Employee Directors’ Stock Option
Plan. Pursuant to the 2007 Non-Employee Directors’ Stock Option Plan, on April
26, 2007 each director was granted non-qualified stock options to purchase
1,000
shares of common stock. All such options vested immediately upon their grant.
Each director will continue to be automatically granted non-qualified stock
options to purchase 1,000 shares of common stock each year on the date of each
Annual Meeting of stockholders.
The
Company also has a 401(k) Savings Plan which covers substantially all full-time
employees, including executive officers. Participating employees contribute
to
the 401(k) Savings Plan through salary reductions. The Company contributes
a
discretionary percentage of the 401(k) Savings Plan participants’ salary
deferrals. Management of the 401(k) Savings Plan assets is currently vested
with
American United Life of Indianapolis, Indiana. Vesting of participants is 20%
per year of employment until 100% vested after six years. The Company matches
25% for every 1% that an employee contributes up to 1%.
19
Compensation
and Stock Option Committee
David
R. Castle, Chairman
Fred
W. Krahmer
Douglas
McClellan
Summary
Compensation Table
The
following table sets forth all compensation paid or payable by the Company
during the last two fiscal years to Carrie Majeski, who has served as our
President and Chief Executive Officer (“CEO”) since October 18, 2007 and
previously served as our Chief Financial Officer (“CFO”) from July of 2004 until
her appointment as President and CEO. The following table also sets forth all
compensation paid or payable by the Company during the last two fiscal years
to
E.W. Muelhausen, who served as our President and CEO from October 30, 2006
until
his retirement on October 18, 2007. No other executive officer earned over
$100,000 during the 2006 or 2007 fiscal year.
|
Name
and
Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Option
Awards
($)
|
All
Other
Compensation
($)
|
Total
Compensation
($)
|
|||||||||||||
|
Carrie
Majeski,
|
2007
|
80,008
|
6,000
|
51,920
|
(1)
|
0
|
137,928
|
||||||||||||
| President and CEO |
2006
|
60,000
|
8,000
|
0
|
0
|
68,000
|
|||||||||||||
|
E.W.
Muelhausen,
|
2007
|
120,016
|
0
|
0
|
0
|
120,016
|
|||||||||||||
|
Former
President and CEO
|
2006
|
10,000
|
0
|
0
|
0
|
10,000
|
|||||||||||||
(1)
Includes 8,000 options granted pursuant to the Company’s 2007 Employee Stock
Option Plan. Please refer to Note 10 of the financial statements included in
our
2007 Annual Report on Form 10K-SB for a discussion of the assumptions made
in
the valuation of these stock options.
Outstanding
Equity Awards at 2007 Fiscal Year-End
As
of the
fiscal year ended November 30, 2007, our President and CEO, Carrie Majeski,
held
outstanding stock options to purchase a total of 8,000 shares of common stock
of
the Company. Such options will vest over a two-year period from the date of
grant. These options were granted on October 1, 2007 pursuant to the 2007
Employee Stock Option Plan. The following table sets forth the number of shares
underlying these outstanding stock options and the exercise price and expiration
date of such options:
|
OPTION
AWARDS
|
|||||||||||||
|
Name
and Position
|
Number of Securities
Underlying
Unexercised Options,
Number Exercisable
(#)
|
Number Of Securities
Underlying
Unexercised Options,
Number
Unexercisable (#)
|
Option Exercise
Price ($)
|
Option Expiration
Date
|
|||||||||
|
Carrie
Majeski,
President
& CEO
|
2,000
|
(1)
|
6,000
|
(2)
|
21.14
|
October
1, 2017
|
|||||||
(1)
These
exercisable options vested immediately upon their grant on October 1,
2007.
20
(2)
These
unexercisable options have vested, or will vest, as follows: 2,000 options
vested and became exercisable on April 1, 2008; 2,000 options will vest and
become exercisable October 1, 2008; and the remaining 2,000 options will vest
and become exercisable on April 1, 2009.
DIRECTOR
COMPENSATION
Our
directors are compensated pursuant to a compensation policy adopted by the
Board
of Directors on April 26, 2006. Each director receives annual compensation
for
his service as a director, with no committee or attendance fees. This
compensation is paid quarterly, except with respect to our Executive Chairman
and Executive Vice Chairman, who are paid monthly. In addition, each director
is
reimbursed for out-of-pocket expenses to attend all Board meetings. Our
Executive Chairman of the Board is also eligible for a discretionary bonus
in an
amount determined by the Board of Directors. Director compensation is generally
reviewed annually and adjustments may be adopted by the Board of Directors.
For
fiscal year 2007, each director, other than the Executive Chairman of the Board,
received annual compensation totaling $20,000. Our Executive Chairman of the
Board, J. Ward McConnell, Jr., received annual compensation totaling $84,000
for
fiscal year 2007. Additionally, the Board of Directors reviewed Mr. McConnell’s
efforts and contributions for fiscal year 2007 and awarded him a discretionary
bonus of $140,000.
Effective
as of February 1, 2008, the Board of Directors determined that our Executive
Chairman of the Board, J. Ward McConnell, Jr., will receive $150,000 for fiscal
year 2008 and will continue to be eligible to receive a discretionary bonus.
Additionally, Marc H. McConnell, who was named Executive Vice Chairman in
January 2008, will receive $48,000 for fiscal year 2008. No other adjustments
to
the current director compensation policy have been made for fiscal year 2008
at
this time.
Director
Compensation Table for Fiscal Year 2007
Our
directors received the following compensation during the 2007 fiscal
year:
|
Director
Name
|
Fees Earned or
Paid in Cash
($)
|
Stock Option
Awards(1)
($)
|
Additional
Compensation
($)
|
Total
Compensation
($)
|
|||||||||
|
Thomas
E. Buffamante
|
20,000
|
1,650
|
0
|
21,650
|
|||||||||
|
David
R. Castle
|
20,000
|
1,650
|
0
|
21,650
|
|||||||||
|
Fred
W. Krahmer
|
20,000
|
1,650
|
0
|
21,650
|
|||||||||
|
James
Lynch
|
20,000
|
1,650
|
0
|
21,650
|
|||||||||
|
Douglas
McClellan
|
20,000
|
1,650
|
0
|
21,650
|
|||||||||
|
J.
Ward McConnell, Jr.
|
84,000
|
1,650
|
140,000
|
(2)
|
225,650
|
||||||||
|
Marc
H. McConnell
|
20,000
|
1,650
|
0
|
21,650
|
|||||||||
(1)
Includes
1,000 stock options granted to each director pursuant to the 2007 Non-Employee
Directors’ Stock Option Plan. Please refer to Note 10 of the financial
statements included in our 2007 Annual Report on Form 10K-SB for a discussion
of
the assumptions made in the valuation of the stock options.
(2)
Includes
a $140,000 discretionary bonus awarded by the Board of Directors.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
In
2003,
J. Ward McConnell, Jr. was required to personally guarantee each of the
Company’s four credit facilities with West Bank of West Des Moines, Iowa. The
guarantees were reduced after the first three years to a percentage representing
his ownership interest in the Company. His guarantees would have been removed
from the credit facilities in the event that his ownership interest in the
Company was reduced to a level less than 20% after the first three years of
the
loans. The Company compensated Mr. McConnell for his personal guarantees at
an
annual percentage rate of 2% of the outstanding balance borrowed under the
credit facilities, paid monthly. The Company paid Mr. McConnell approximately
$30,000, $60,000 and $56,000 for fiscal years 2007, 2006 and 2005,
respectively.
21
PERFORMANCE
GRAPH
COMPARISON
OF FIVE YEAR CUMULATIVE TOTAL RETURN
The
following graph compares the cumulative 5-year total return attained by
stockholders on Arts-Way Manufacturing Co., Inc.'s common stock relative to
the
cumulative total returns of the NASDAQ Composite Index and the S&P
Construction & Farm Machinery & Heavy Trucks Index. The graph tracks the
performance of a $100 investment in our common stock and in each of the indexes
(with the reinvestment of all dividends) from 10/31/2002 to 10/31/2007.
|
|
11/02
|
11/03
|
11/04
|
11/05
|
11/06
|
11/07
|
|||||||||||||
|
Art's-Way
Manufacturing Co., Inc.
|
100.00
|
130.67
|
162.67
|
130.68
|
172.87
|
643.59
|
|||||||||||||
|
NASDAQ
Composite
|
100.00
|
131.29
|
143.07
|
152.68
|
169.28
|
185.62
|
|||||||||||||
|
S&P
Construction & Farm Machinery & Heavy
Trucks
|
100.00
|
146.21
|
184.99
|
205.68
|
253.62
|
349.59
|
|||||||||||||
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires our officers and directors, and persons who own more than 10% of a
registered class of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Officers, directors and greater than 10% beneficial owners are required by
SEC
regulations to furnish us with copies of all Section 16(a) forms they file.
To
our knowledge, and based solely on a review of the copies of such reports
furnished to us and written representations from our officers and directors,
all
Section 16(a) filing requirements were complied with during the fiscal year
ended November 30, 2007.
22
OTHER
INFORMATION
Management
knows of no other matters which may be brought before the 2008 Annual Meeting.
If any other matters are presented at the meeting on which a vote may properly
be taken, the persons named as proxy holders in the enclosed proxy card will
vote thereon in accordance with their best judgment.
ANNUAL
REPORT AND FINANCIAL STATEMENTS
The
Company's 2007 Annual Report to security holders on Form 10-KSB, including
the
Company’s financial statements and the notes thereto for the fiscal year ended
November 30, 2007, accompanies the delivery of this Proxy Statement. The 2007
Annual Report is not part of the soliciting material.
We
will provide a copy of Exhibits to the 10-KSB upon written request and payment
of specified fees. The written request for such Form 10-KSB and/or Exhibits
should be directed to Carrie Majeski, President of Art’s-Way Manufacturing Co.,
Inc. at 5556 Highway 9, Armstrong, Iowa 50514. Such request must set forth
a
good faith representation that the requesting party was a holder of record
or a
beneficial owner of common stock in the Company on March 24, 2008. The 2007
Annual Report on Form 10-KSB complete with exhibits and the Proxy Statement
are
also available at no cost through the EDGAR database available from the SEC’s
internet site (www.sec.gov).
23
APPENDIX
1
ART’S
WAY MANUFACTURING CO., INC.
2007
NON-EMPLOYEE DIRECTORS’
STOCK
OPTION PLAN
|
1.
|
NAME.
|
The
name
of this Plan is the Art’s Way Manufacturing Co., Inc., 2007 Non-Employee
Directors’ Stock Option Plan.
| 2. |
DEFINITIONS.
|
For
the
purposes of the Plan, the following terms shall be defined as set forth
below:
(a) “Affiliate”
means any partnership, corporation, firm, joint venture, association, trust,
limited liability company, unincorporated organization, or other entity (other
than a Subsidiary) that, directly or indirectly through one or more
intermediaries, is controlled by the Company, where the term “controlled by”
means the possession, direct or indirect, of the power to cause the direction
of
the management and policies of such entity, whether through the ownership of
voting interests or voting securities, as the case may be, by contract or
otherwise.
(b) “Board”
means the Board of Directors of the Company.
(c) “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and
the
Treasury regulations promulgated thereunder.
(d) “Common
Stock” means the common stock, $.01 par value per share, of the Company or any
security of the Company identified by the Board as having been issued in
substitution or exchange therefor or in lieu thereof.
(e) “Company”
means Art’s Way Manufacturing Co., Inc., a Delaware corporation.
(f) “Effective
Date” means January 25, 2007.
(g) “Employee”
means an individual whose wages are subject to the withholding of federal income
tax under Section 3401 of the Code.
(h) “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time, or
any successor statute.
(i) (i)
“Fair
Market Value” of a Share as of a specified date means the average of the highest
and lowest market prices of a Share as quoted on the OTC Bulletin Board on
such
date, or, if no trading of Common Stock is reported for that day, the next
preceding day on which trading was reported. In the event the Common Stock
is
not then quoted on the OTC Bulletin Board, the Fair Market Value of a Share
shall be determined by reference to the principal market or exchange on which
the Shares are then traded.
i
(j) “Non-Employee
Director” means an individual who (i) is now or hereafter becomes a member of
the Board, and (ii) is not an Employee of the Company or of any Subsidiary
or
Affiliate on the date of the grant of the NQSO.
(k) “NQSO”
means a stock option that is not qualified under Section 422 of the
Code.
(l) “Officer”
means an individual elected or appointed by the Board or by the board of
directors of a Subsidiary, or chosen in such other manner as may be prescribed
by the bylaws of the Company or a Subsidiary, as the case may be, to serve
as
such.
(m) “Participant”
means a Non-Employee Director who is granted an NQSO under the
Plan.
(n) “Plan”
means this 2007 Non-Employee Directors’ Stock Option Plan.
(o) “Rule
16b-3” means Rule 16b-3 promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor or replacement rule adopted by the
Securities and Exchange Commission.
(p) “Share”
means one share of Common Stock, adjusted in accordance with Section 9(b),
if
applicable.
(q) “Stock
Option Agreement” means the written agreement between the Company and the
Participant that contains the terms and conditions pertaining to the
NQSO.
(r)
“Subsidiary” means any corporation or entity of which the Company, directly or
indirectly, is the beneficial owner of fifty percent (50%) or more of the total
voting power of all classes of its stock having voting power, unless the Board
shall determine that any such corporation or entity shall be excluded hereunder
from the definition of the term Subsidiary.
| 3. |
PURPOSE.
|
The
purpose of the Plan is to enable the Company to provide incentives, which are
linked directly to increases in stockholder value, to Non-Employee Directors
so
that they will be encouraged to serve on the Board and exert their best efforts
on behalf of the Company.
ii
| 4. |
ADMINISTRATION.
|
| (a) |
Board
of Directors.
|
The
Plan
shall be administered by the Board of Directors, which shall have the authority
to administer the Plan in its sole and absolute discretion to grant NQSOs,
and
to determine the number of Shares subject to NQSOs and the price at which each
Share covered by an NQSO may be purchased pursuant to the Plan, all as set
forth
in Section 8. To this end, the Board of Directors is authorized to construe
and
interpret the Plan and to make all other determinations necessary or advisable
for the administration of the Plan. Subject to the foregoing, any determination,
decision or action of the Board of Directors in connection with the
construction, interpretation, administration or application of the Plan shall
be
final, conclusive and binding upon all Participants and any person validly
claiming under or through a Participant.
| (b) |
Liability
of Board Members.
|
No
member
of the Board will be liable for any action or determination made in good faith
by the Board with respect to the Plan or any grant or exercise of an NQSO
thereunder.
| (c) |
NQSO
Accounts.
|
The
Company shall maintain a journal in which a separate account for each
Participant shall be established. Whenever NQSOs are granted to or exercised
by
a Participant, the Participant’s account shall be appropriately credited or
debited. Appropriate adjustment shall also be made in the journal with respect
to each account in the event of an adjustment pursuant to Section
9(b).
| 5. |
EFFECTIVE
DATE OF THE PLAN; TERM; PLAN
YEAR.
|
| (a) |
Effective
Date of the Plan.
|
The
Plan
was adopted by the Board and became effective on January 25, 2007.
| (b) |
Term
of the Plan.
|
No
NQSO
shall be granted pursuant to the Plan on or after January 25, 2017, but NQSOs
theretofore granted may extend beyond that date.
| (c) |
Plan
Year.
|
The
initial Plan Year begins on the date of the 2007 annual meeting of stockholders
and ends on the day prior to the 2008 annual meeting of the stockholders.
Subsequent Plan Years begin on the date of the annual meeting of stockholders
of
each year and end on the day prior to the meeting of the following
year.
iii
| 6. |
SHARES
SUBJECT TO THE PLAN.
|
The
maximum aggregate number of Shares which may be subject to NQSOs granted to
Non-Employee Directors under the Plan shall be One Hundred Thousand (100,000).
The limitation on the number of Shares which may be subject to NQSOs under
the
Plan shall be subject to adjustment as provided in Section 9(b).
If
any
NQSO granted under the Plan expires, or is terminated for any reason without
having been exercised in full, the Shares allocable to the unexercised portion
of such NQSO shall again become available for grant pursuant to the Plan. At
all
times during the term of the Plan, the Company shall reserve and keep available
for issuance such number of shares as the Company is obligated to issue upon
the
exercise of all then outstanding NQSOs.
| 7. |
SOURCE
OF SHARES ISSUED UNDER THE
PLAN.
|
Common
Stock issued under the Plan shall be authorized and unissued Shares. No
fractional Shares shall be issued under the Plan.
| 8. |
NON-QUALIFIED
STOCK OPTIONS.
|
| (a) |
Grant
of NQSOs.
|
On
the
beginning date of each Plan Year, NQSOs to purchase One Thousand (1,000) Shares
shall be granted automatically to each Non-Employee Director. With respect
to
any Non-Employee Director who first becomes a member of the Board after the
beginning date of a Plan Year, NQSOs to purchase One Thousand (1,000) Shares
shall be granted automatically on the next succeeding business day following
his
or her election to the Board. Additional NQSOs may be granted to any
Non-Employee Director by the Board in its sole and absolute
discretion.
| (b) |
The
Exercise Price.
|
The
exercise price of a Share shall be the Fair Market Value of such Share on the
first day of the Plan Year for which the options are granted (or the next
business day if such date falls on a weekend or holiday), or if granted on
another day then the date of such grant.
| (c) |
Terms
and Conditions.
|
All
NQSOs
granted pursuant to the Plan shall be evidenced by a Stock Option Agreement
(which need not be the same for each Participant or NQSO), approved by the
Board, which shall be subject to the following express terms and conditions
and
to the other terms and conditions specified in this Section 8, and to such
other
terms and conditions as shall be determined by the Board in its sole and
absolute discretion which are not inconsistent with the terms of the
Plan:
iv
(i) all
NQSOs
automatically granted to a Participant shall vest and become first exercisable
immediately upon grant; those NQSO’s granted pursuant to the Board’s discretion
shall vest as provided by the Board on the date of such grant;
(ii) the
failure of an NQSO to vest for any reason whatsoever shall cause the NQSO to
expire and be of no further force or effect;
(iii)
unless
terminated earlier pursuant to this Plan, the term of each NQSO shall be five
(5) years from the date of grant;
(iv)
NQSOs
shall not be transferable by the Participant otherwise than by will or by the
laws of descent and distribution, and shall be exercisable during the lifetime
of the Participant only by him or her, or by his or her guardian or legal
representative, and after death of the Participant pursuant to will or
applicable law provided, however, that any exercise after death of the
Participant shall occur within one (1) year of the date of death or prior to
the
expiration of the term of the NQSO, whichever is sooner;
(v)
no
NQSO
or interest therein may be transferred, assigned, pledged or hypothecated by
the
Participant during his or her lifetime whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process; and
(vi)
payment
for the Shares to be received upon exercise of an NQSO may be made in cash,
in
Shares (determined with reference to their Fair Market Value on the date of
exercise) or any combination thereof.
| (d) |
Additional
Means of Payment.
|
Any
Stock
Option Agreement may, in the sole and absolute discretion of the Board, permit
payment by any other form of legal consideration consistent with applicable
law
and any rules and regulations relating thereto.
| (e) |
Exercise.
|
The
holder of an NQSO may exercise the same by filing with the Corporate Secretary
of the Company a written election, in such form as the Board may determine,
specifying the number of Shares with respect to which such NQSO is being
exercised. Such notice shall be accompanied by payment in full of the exercise
price for such Shares. Notwithstanding the foregoing, the Board may specify
a
reasonable minimum number of Shares that may be purchased on any exercise of
an
option, provided that such minimum number will not prevent the holder from
exercising the option with respect to the full number of Shares as to which
the
option is then exercisable.
| (f) |
Termination
of NQSOs.
|
NQSOs
granted under the Plan shall be subject to the following events of
termination:
v
(i) in
the
event a Participant is removed from the Board for cause (as contemplated by
the
Company’s bylaws), all unexercised NQSOs held by such Participant on the date of
such removal (whether or not vested) will expire immediately;
(ii) in
the
event a Participant is no longer a member of the Board, other than by reason
of
removal for cause, all NQSOs which have vested prior to such time shall expire
twelve (12) months thereafter unless by their terms they expire sooner;
and
(iii) in
the
event a Participant becomes an Officer or Employee of the Company or a
Subsidiary (whether or not such Participant remains a member of the Board)
all
NQSOs which have vested prior to such time shall expire twelve (12) months
thereafter unless by their terms they expire sooner.
| 9. |
RECAPITALIZATION.
|
| (a) |
Corporate
Flexibility.
|
The
existence of the Plan and the NQSOs granted hereunder shall not affect or
restrict in any way the right or power of the Board or the stockholders of
the
Company, in their sole and absolute discretion, to make, authorize or consummate
any adjustment, recapitalization, reorganization or other change in the
Company’s capital structure or its business, any merger or consolidation of the
Company, any issue of bonds, debentures, common stock, preferred or prior
preference stocks ahead of or affecting the Company’s capital stock or the
rights thereof, the dissolution or liquidation of the Company, or any sale
or
transfer of all or any part of its assets or business, or any other grant of
rights, issuance of securities, transaction, corporate act or proceeding,
notwithstanding the fact that any such activity, proceedings, action,
transaction or other event may have, or be expected to have, an impact (whether
positive or negative) on the value of any NQSO.
| (b) |
Adjustments
Upon Changes in Capitalization.
|
Except
as
otherwise provided in Section 10 below and subject to any required action by
the
stockholders of the Company, in the event of any change in capitalization
affecting the Common Stock of the Company, such as a stock dividend, stock
split
or recapitalization, the Board shall make proportionate adjustments with respect
to:
(i) the
aggregate number of Shares available for issuance under the Plan;
(ii) the
number of Shares subject to each grant under the Plan;
(iii) the
number and exercise price of Shares subject to outstanding NQSOs;
and
(iv) such
other matters as shall be appropriate in light of the circumstances; provided,
however, that the number of Shares subject to any NQSO shall always be a whole
number and that no such adjustment shall be made if the adjustment would cause
the Plan to fail to comply with the “formula award” exception, as set forth in
Rule 1 6b-3(c)(2)(ii) of the Exchange Act, for grants of NQSOs to Non-Employee
Directors.
vi
| 10. |
CHANGE
OF CONTROL.
|
In
the
event of a Change of Control (as defined below), all options not vested on
or
prior to the effective time of any such Change of Control shall immediately
vest
as of such effective time. The Board in its discretion may make provisions
for
the assumption of outstanding options, or the substitution for outstanding
options of new incentive awards covering the stock of a successor corporation
or
a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices so as to prevent dilution or enlargement of
rights; provided, however, that no such adjustment shall be made if the
adjustment would cause the Plan to fail to comply with the “formula award”
exception, as set forth in Rule 16b-3(c)(2)(ii) of the Exchange Act, for grants
of NQSOs to Non-Employee Directors.
A
“Change
of Control” will be deemed to occur on the date any of the following events
occur:
(a) any
person or persons acting together which would constitute a “group” for the
purpose of Section 13(d) of the Exchange Act (other than the Company, any
Subsidiary and any entity beneficiary owned by any of the foregoing),
beneficially owns (as defined in Rule 1 3d-3 under the Exchange Act) without
Board approval, directly or indirectly, at least 30% of the total voting power
of the Company entitled to vote generally in the election of the
Board;
(b) either
(i) the Current Directors (as herein defined) cease for any reason to constitute
at least a majority of the members of the Board (for these purposes, a Current
Director means any member of the Board as of January 25, 2007, and any successor
of a Current Director, and any additional director filling a vacancy created
by
an expansion of the size of the Board, whose election, or nomination for
election by the Company’s shareholders, was approved by at least a majority of
the Current Directors then on the Board), or (ii) at any meeting of the
stockholders of the Company called for the purpose of electing directors, a
majority of the persons nominated by the Board for election as directors fail
to
be elected;
(c) the
stockholders of the Company approve (i) a plan of complete liquidation of the
Company, or (ii) an agreement providing for the merger or consolidation of
the
Company (A) in which the Company is not the continuing or surviving corporation
(other than consolidation or merger with a wholly-owned subsidiary of the
Company in which all Shares outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same consideration), or (B)
pursuant to which the Shares are converted into cash, securities or other
property, except a consolidation or merger of the Company in which the holders
of the Shares immediately prior to the consolidation or merger have, directly
or
indirectly, at least a majority of the common stock of the continuing or
surviving corporation immediately after such consolidation or merger, or in
which the Board immediately prior to the merger or consolidation would,
immediately after the merger or consolidation, constitute a majority of the
board of directors of the continuing or surviving corporation; or
vii
(d) the
stockholders of the Company approve an agreement (or agreements) providing
for
the sale or other disposition (in one transaction or a series of transactions)
of all or substantially all of the assets of the Company.
| 11. |
SECURITIES
LAW REQUIREMENTS.
|
No
Shares
shall be issued under the Plan unless and until: (i) the Company and the
Participant have taken all actions required to register the Shares under the
Securities Act of 1933, as amended, or perfect an exemption from the
registration requirements thereof; (ii) any applicable requirement of Nasdaq
or
any stock exchange on which the Common Stock is listed has been satisfied;
and
(iii) any other applicable provisions of state or federal law have been
satisfied. The Company shall be under no obligation to register the Shares
under
the Securities Act of 1933, as amended, or to effect compliance with the
registration or qualification requirements of any state securities
laws.
| 12. |
AMENDMENT
AND TERMINATION.
|
| (a) |
Modifications
to the Plan.
|
The
Board
may, insofar as permitted by law, from time to time, with respect to any Shares
at the time not subject to NQSOs, suspend or terminate the Plan or, subject
to
Sections 8(a) through 8(c), revise or amend the Plan in any respect whatsoever.
However, unless the Board specifically otherwise provides, any revision or
amendment that would cause the Plan to fail to comply with Rule l6b-3 or any
other requirement of applicable law or regulation if such amendment were not
approved by the stockholders of the Company, shall not be effective unless
and
until such approval is obtained.
| (b) |
Rights
of Participant.
|
No
amendment, suspension or termination of the Plan that would adversely affect
the
right of any Participant with respect to an NQSO previously granted under the
Plan will be effective without the written consent of the affected
Participant.
| 13. |
MISCELLANEOUS.
|
| (a) |
Stockholders’
Rights.
|
Neither
a
Participant, nor a beneficiary, nor other person claiming under or through
such
Participant shall acquire any rights as a stockholder of the Company by virtue
of such Participant having been granted an NQSO under the Plan. No Participant
and no beneficiary or other person claiming under or through such Participant
will have any right, title or interest in or to any Shares allocated or reserved
under the Plan or subject to any NQSO except as to Shares, if any, that have
been issued or transferred to such Participant. No adjustment shall be made
for
cash dividends for which the record date is prior to the date of
exercise.
viii
| (b) |
Other
Compensation Arrangements.
|
Nothing
contained in the Plan shall prevent the Board from adopting other compensation
arrangements, subject to stockholder approval if such approval is required.
Such
other arrangements may be either generally applicable or applicable only in
specific cases.
| (c) |
Treatment
of Proceeds.
|
Proceeds
realized from the exercise of NQSOs under the Plan shall constitute general
funds of the Company.
| (d) |
Costs
of the Plan.
|
The
costs
and expenses of administering the Plan shall be borne by the
Company.
| (e) |
No
Right to Continue as Director.
|
Nothing
contained in the Plan or in any instrument executed pursuant to the Plan will
confer upon any Participant any right to continue as a member of the Board
or
affect the right of the Company, the Board or the stockholders of the Company
to
terminate the directorship of any Participant at any time with or without
cause.
| (f) |
Severability.
|
The
provisions of the Plan shall be deemed severable and the validity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.
| (g) |
Binding
Effect of Plan.
|
The
Plan
shall inure to the benefit of the Company, its successors and
assigns.
| (h) |
No
Waiver of Breach.
|
No
waiver
by any party hereto at any time of any breach by another party hereto of, or
compliance with, any condition or provision of the Plan to be performed by
such
other party shall be deemed a waiver of the same, any similar or any dissimilar
provisions of conditions at the same or at any prior or subsequent
time.
ix
| (i) |
Governing
Law.
|
The
Plan
and all actions taken thereunder shall be enforced, governed and construed
by
and interpreted under the laws of the State of Delaware applicable to contracts
made and to be performed wholly within such State without giving effect to
the
principles of conflict of laws thereof.
| (j) |
Headings.
|
The
headings contained in the Plan are for reference purposes only and shall not
affect in any way the meaning or interpretation of the Plan.
| 14. |
EXECUTION.
|
To
record
the adoption of the Plan to read as set forth herein, the Company has caused
the
Plan to be signed by its Chief financial Officer and Secretary as of January
25,
2007.
|
ART’S
WAY MANUFACTURING CO., INC., a
Delaware
corporation
|
||
| |
|
|
| By: | /s/ Carrie Majeski | |
|
|
||
|
Carrie
L. Majeski
Chief
Financial Officer and Secretary
|
||
x
APPENDIX
2
CHARTER
of
the
AUDIT
COMMITTEE
Of
ART’S-WAY
MANUFACTURING CO., INC.
Last
Updated March 4, 2008
The
Board
of Directors of Art’s-Way Manufacturing Co., Inc. (the “Company”) has adopted
and approved this Charter, setting forth the purpose, responsibilities,
activities and membership requirements of its Audit Committee.
Purpose
The
primary purpose of the Audit Committee (the “Committee”) is to assist the Board
of Directors, (the “Board”) in fulfilling its responsibility to oversee
management’s maintenance of the Company’s accounting policies and financial
reporting practices. This oversight shall include management’s preparation of
financial reports and other financial information provided by the Company to
any
governmental or regulatory body, the public or other users thereof, the
Company’s systems of internal accounting and financial controls, and the annual
independent audit of the Company’s financial statements.
In
discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and the power to retain outside counsel,
auditors or other experts for this purpose. The Board and the Committee are
in
place to represent the Company’s stockholders. Accordingly, the outside auditors
are ultimately accountable to the Board and Committee.
The
Committee shall review the adequacy of this Charter on an annual basis.
Key
Responsibilities
The
Committee’s job is one of oversight and it recognizes that the Company’s
management is responsible for preparing the Company’s financial statements and
that the outside auditors are responsible for auditing those financial
statements. Additionally, the Committee recognizes that the Company’s financial
management, as well as the Company’s outside auditors, have more time, knowledge
and detailed information about the Company than do Committee members.
Consequently, in carrying out its oversight responsibilities, the Committee
is
not providing any expert or special assurance as to the Company’s financial
statements or any professional certification as to the outside auditor’s
work.
The
following functions shall be the common recurring activities of the Committee
in
carrying out its oversight function. These functions are set forth as a guide
with the understanding that the Committee may diverge from this guide as
appropriate given circumstances.
i
|
1.
|
The
Committee will review management’s plans for engaging the independent
auditor to perform all audit and non-audit services during the year.
The
engagement of the independent auditor to perform any audit or non-audit
services will be subject to prior approval of the Committee. The
Committee
will take appropriate actions to ensure that the independent auditor
has
not been engaged to perform any non-audit services that are prohibited
under applicable statutes, rules and regulations. The Committee shall
have
the power to terminate the independent
accountant.
|
|
2.
|
The
Committee shall review annually the scope and general extent of the
independent auditors’ engagement with management prior to the commencement
of the annual audit. This process shall also include a recommendation
to
the Board of the independent audit firm to be
engaged.
|
|
3.
|
The
Committee shall review with the management and the outside auditors
the
audited financial statements to be included in the Company’s Annual Report
to Stockholders and Annual Report on Form 10-K and review and consider
with the outside auditors the matters required to be discussed by
Statement of Auditing Standards (“SAS”) No.
61.
|
|
4.
|
The
Committee shall approve the fees and other significant compensation
to be
paid to the independent auditors.
|
|
5.
|
As
a whole, or through the Committee chair, the Committee shall review
with
the outside auditors the Company’s interim financial results to be
included in the Company’s quarterly reports to be filed with the
Securities and Exchange Commission and the matters required to be
discussed by SAS No. 61. This review will occur prior to the Company’s
filing of each Quarterly Report on Form
10-Q.
|
|
6.
|
The
Committee shall discuss with management and the outside auditors
the
quality and adequacy of the Company’s internal
controls.
|
|
7.
|
The
Committee shall:
|
|
a.
|
request
from the outside auditors annually a formal written statement delineating
all relationships between the auditors and the Company consistent
with
Independence Standards Board Standard Number
1;
|
|
b.
|
discuss
with the outside auditors any such disclosed relationships and their
impact on the outside auditors’ objectivity and independence;
and
|
|
c.
|
recommend
that the Board take appropriate action in response to the outside
auditors’ report to satisfy itself of the auditors’
independence.
|
|
8.
|
The
Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the outside
auditors.
|
|
9.
|
The
Committee shall review and approve any reports of the Committee to
be
included in any public filings, including the Company’s proxy
statement.
|
ii
|
10.
|
The
Committee shall establish procedures for: (i) the receipt, retention
and
treatment of complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters; and (ii) the
confidential, anonymous submission by employees of the Company of
concerns
regarding questionable accounting or auditing
matters.
|
|
11.
|
The
Committee shall maintain minutes of Committee meetings and periodically
report to the Board on significant results of Committee
activities.
|
|
12.
|
The
Committee shall periodically perform self-assessment of Committee
performance.
|
Membership
The
Committee shall be comprised of not less than three members of the Board. The
Committee’s composition will meet the requirements of the Audit Committee Policy
of NASDAQ, as may be amended from time to time, including standards of
independence, financial literacy and, in the case of at least one member of
the
Committee, accounting or related financial management expertise.
iii