SCHEDULE 14A(Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of the Filed by the Registrant [X] Check the appropriate box: |
[_] Preliminary Proxy Statement | [_] Soliciting Material Under Rule 14a-12 |
[_] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
[X] Definitive Proxy Statement |
[_] Definitive Additional Materials |
Hughes Supply, Inc. —————————————————————————————— Payment of Filing Fee (Check the appropriate box): |
[X] | No fee required. |
[_] | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
(1) | Title of each class of securities to which transaction applies: ——————————————————————————————————————— |
(2) | Aggregate number of securities to which transaction applies: ——————————————————————————————————————— |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ——————————————————————————————————————— |
(4) | Proposed maximum aggregate value of transaction: ——————————————————————————————————————— |
(5) | Total fee paid: ——————————————————————————————————————— |
[_] | Fee paid previously with preliminary materials: |
[_] | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: ——————————————————————————————————————— |
(2) | Form, Schedule or Registration Statement No.: ——————————————————————————————————————— |
(3) | Filing Party: ——————————————————————————————————————— |
(4) | Date Filed: ——————————————————————————————————————— |
————————— NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERSTO BE HELD MAY 20, 2003————————— Dear Shareholders: The 2003 Annual Meeting of Shareholders of Hughes Supply, Inc. will be held on Tuesday, May 20, 2003, at 10:00 a.m., local time, at our principal executive offices at 20 North Orange Avenue, Suite 200, Orlando, Florida 32801. We are holding this meeting to: |
• | Elect three directors to serve until the Annual Meeting of Shareholders in 2006; |
• | Amend and restate the Hughes Supply, Inc. 1997 Executive Stock Plan; and |
• | Consider and take action upon any other matters that may properly come before the meeting or any adjournment thereof. |
Your Board of Directors has fixed the close of business on March 26, 2003 as the record date for the determination of the shareholders entitled to notice of and to vote at the meeting. |
By Order of the Board of Directors ![]() BENJAMIN P. BUTTERFIELD General Counsel and Secretary |
Orlando, Florida WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, OR VOTE VIA TELEPHONE OR THE INTERNET, IN ORDER THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. NO POSTAGE IS NEEDED IF MAILED IN THE UNITED STATES. |
HUGHES SUPPLY, INC. |
Q: | WHY DID YOU SEND ME THIS PROXY STATEMENT? |
A: | We sent you this proxy statement and the enclosed proxy card because the Board of Directors of Hughes Supply, Inc., is soliciting your proxy to vote at the 2003 Annual Meeting of Shareholders. This proxy statement summarizes information that is intended to assist you in making an informed vote at the meeting. This proxy statement and the enclosed proxy card were first mailed to shareholders on or about April 17, 2003. Our Annual Report to Shareholders for the fiscal year ended January 31, 2003 accompanies this proxy statement. |
Q: | WHERE AND WHEN IS THE ANNUAL MEETING? |
A: | The annual meeting will be held on Tuesday, May 20, 2003, at 10:00 a.m., local time, at our principal executive offices at 20 North Orange Avenue, Suite 200, Orlando, Florida 32801. |
Q: | WHAT MAY I VOTE ON? |
A: | At the annual meeting, you may vote to: |
• | elect three directors to serve until the Annual Meeting of Shareholders in 2006; |
• | amend and restate the Hughes Supply, Inc. 1997 Executive Stock Plan to, among other things, increase by 1,000,000 the number of shares available for use under the plan and add non-employee directors as eligible participants under the plan; and |
• | consider and take action upon any other matters that may properly come before the meeting or any adjournment thereof. |
Q: | HOW DOES HUGHES SUPPLY’S BOARD OF DIRECTORS RECOMMEND THAT I VOTE? |
A: | The Board recommends that you vote FOR the election of each of the nominees and FOR the proposal to amend and restate the 1997 Executive Stock Plan. |
Q: | WHO IS ENTITLED TO VOTE? |
A: | You may vote if you owned Hughes Supply common stock at the close of business on Wednesday, March 26, 2003, the record date for the annual meeting. |
Q: | HOW MANY SHARES CAN VOTE? HOW MANY VOTES DO I HAVE? |
A: | As of March 26, 2003, we had 23,432,164 common shares outstanding. You are entitled to one vote for each common share held by you on the record date. Common shares held in our treasury are not considered outstanding or entitled to vote and will not be considered present at the meeting. |
Q: | HOW MANY SHARES MUST BE PRESENT TO CONDUCT THE MEETING? |
A: | We must have a “quorum” present in person or by proxy to hold the annual meeting. A quorum is a majority of the outstanding common shares entitled to vote. Abstentions and “broker non-votes” (described below) will be counted for the purpose of determining the existence of a quorum. |
Q: | HOW DO I VOTE BY PROXY BEFORE THE MEETING? |
A: | You may vote your shares in the following three ways before the meeting: |
• | by mail by completing, signing and returning the enclosed proxy card; |
• | by telephone at the number shown on your proxy card; or |
• | through the Internet at the address shown on the proxy card. |
Q: | MAY I VOTE AT THE MEETING? |
A: | Yes, you may vote your shares at the meeting if you attend in person. |
Q: | MAY I CHANGE MY VOTE? |
A: | Yes, you may change your vote or revoke your proxy at any time before the vote at the meeting. You may change your vote by: |
• | executing a proxy bearing a later date and delivering it to us prior to the meeting; |
• | voting your shares in person at the meeting; or |
• | voting again by telephone or through the Internet prior to the meeting. |
You may also revoke your proxy without voting by giving written notice of revocation to us, c/o Benjamin P. Butterfield, General Counsel and Secretary, at the address shown above. |
Q: | HOW ARE MY SHARES VOTED IF I SUBMIT A PROXY BUT DO NOT SPECIFY HOW I WANT TO VOTE? |
A: | If you submit a properly executed proxy card or complete the telephone or Internet voting procedures but do not specify how you want to vote, your shares will be voted FOR the election of each of the nominees for director, FOR the proposal to amend and restate the 1997 Executive Stock Plan and in the discretion of the persons named as proxies on all other matters that may be brought before the meeting. |
Q: | HOW DO I VOTE IF MY BROKER HOLDS MY SHARES IN “STREET NAME”? |
A: | Shares held in “street name” are held in the name of your bank or broker. If your shares are held in a brokerage account in street name they are not included in the total number of shares listed as owned by you on the enclosed proxy card. Your bank or broker will send you instructions on how to vote those shares. |
Q: | HOW WILL VOTING BE CONDUCTED FOR DIRECTORS? |
A: | The three nominees for election as directors who receive the highest number of “FOR” votes will be elected as directors. This number is a plurality. Abstentions and broker non-votes will have no effect on the outcome of the voting to elect directors. Unless you submit a properly executed proxy card or use telephone or Internet prompts to indicate “WITHHOLD AUTHORITY” or “FOR all nominees EXCEPT,” the proxy will be voted FOR each of the nominees for director. |
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Q: | HOW WILL VOTING BE CONDUCTED ON THE PROPOSALS TO AMEND AND RESTATE THE 1997 EXECUTIVE STOCK PLAN? |
A: | For approval of this proposal, under the rules of the New York Stock Exchange the proposal must receive the “FOR” vote of a majority of all votes cast on the proposal, and the total number of votes cast on the proposal must represent more than 50% of all shares entitled to vote. Abstentions will be treated as shares entitled to vote and as votes cast. Accordingly, if you submit a properly executed proxy card or use telephone or Internet voting to indicate “ABSTAIN” with respect to this proposal, your vote will have the effect of a vote “AGAINST” the proposal. |
Broker non-votes will be treated as shares entitled to vote but not as votes cast. Accordingly, broker non-votes will have no effect on the outcome of the voting to amend and restate the 1997 Executive Stock Plan (except that broker non-votes will not count towards the 50% of all shares entitled to vote on the proposal that must be cast for the proposal to be approved in accordance with the rules of the New York Stock Exchange). |
Q: | HOW WILL VOTING BE CONDUCTED ON ANY OTHER BUSINESS? |
A: | We have not received any notice of any other business to be conducted at the meeting. If any other business is properly presented at the meeting, the proxies will be voted on those matters as determined by the proxy holders in their discretion. |
Q: | WHAT IS A BROKER NON-VOTE? |
A: | When shares are held in street name, a broker non-vote may occur when a bank or brokerage firm does not vote on a proposal because it does not have discretionary voting power and has not received instructions from the beneficial owner of the shares. A broker non-vote is counted for the purpose of determining whether a quorum is present. Under the current rules of the New York Stock Exchange, your broker is permitted to vote your shares on routine matters, such as the election of directors, even if you do not instruct the broker how to vote. However, your broker is not permitted to vote your shares on non-routine matters, such as the amendment and restatement of the 1997 Executive Stock Plan, without receiving instructions from you. |
Broker non-votes will affect the outcome of the voting as described above under “HOW WILL VOTING BE CONDUCTED FOR DIRECTORS?” and “HOW WILL VOTING BE CONDUCTED ON THE PROPOSALS TO AMEND AND RESTATE THE 1997 EXECUTIVE STOCK PLAN?” |
Q: | WHO PAYS FOR THE SOLICITATION OF PROXIES? |
A: | We will bear the costs of preparing and mailing this proxy statement and proxy card and any other material that may be sent to shareholders in connection with this solicitation. In addition to solicitations by mail, our officers and other employees may solicit proxies personally or by telephone or telegram. |
Q: | WHEN ARE PROPOSALS DUE FOR THE NEXT ANNUAL MEETING OF SHAREHOLDERS? |
A: | If you wish to submit a proposal for consideration at the 2004 Annual Meeting, you should submit the proposal in writing to us at the address set forth on page 1 of this proxy statement. You are required to have been a record or beneficial owner of at least 1% or $2,000 in market value of our common shares for a period of at least one year and you must continue to own such shares through the date on which the 2004 Annual Meeting is held. Proposals must be received by us on or before December 19, 2003 for inclusion in next year’s proxy materials. |
If you intend to present a proposal at the 2004 Annual Meeting without inclusion of the proposal in our proxy materials, you are required to provide notice of the proposal to us in accordance with our By-Laws no later than January 21, 2004. If you submit a proposal you must, in all other respects, comply with Rule 14a-8 under the Securities Exchange Act of 1934. |
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Directors and Named Executives | Amount and Nature of Beneficial Ownership(1) | Approximate Percent of Class(2) | ||||||
---|---|---|---|---|---|---|---|---|
John D. Baker II | 48,088 | (3) | * | |||||
Robert N. Blackford | 59,864 | (3) | * | |||||
H. Corbin Day | 28,838 | (3)(4) | * | |||||
Clyde E. Hughes III | 108,995 | (5) | * | |||||
David H. Hughes | 615,001 | (6)(7)(8)(9) | 2.62 | % | ||||
Vincent S. Hughes | 344,973 | (7)(8)(9)(10) | 1.47 | % | ||||
Toni Jennings | 5,202 | (3)(11) | * | |||||
William P. Kennedy | 40,250 | (3)(12) | * | |||||
Amos R. McMullian | 6,000 | (3) | * | |||||
Thomas I. Morgan | 55,723 | (13) | * | |||||
Michael L. Stanwood | 60,000 | (14) | * | |||||
Gradie E. Winstead, Jr. | 98,396 | (15) | * | |||||
All Directors and Executive Officers as a Group (23 persons) | 1,763,665 | (16) | 7.38 | %(17) | ||||
5% Shareholders | ||||||||
AXA Financial Inc.(18) | 1,852,230 | 7.90 | % | |||||
1290 Avenue of the Americas | ||||||||
New York, NY 10104 | ||||||||
Barclays Global Investors, NA.(19) | 1,564,403 | 6.68 | % | |||||
45 Fremont Street, 17th Floor | ||||||||
San Francisco, CA 94105 | ||||||||
Dimensional Fund Advisors, Inc.(20) | 1,384,550 | 5.91 | % | |||||
1299 Ocean Avenue, 11th Floor | ||||||||
Santa Monica, CA 90401 | ||||||||
National Rural Electric Cooperative Association(21) | 1,232,975 | 5.26 | % | |||||
4301 Wilson Blvd | ||||||||
Arlington, VA 22203 |
* | Less than 1%. |
(1) | Under the rules of the SEC, you are deemed to be a beneficial owner of shares if you have or share the power to vote or direct the voting of the shares or the power to dispose of or direct the disposition of the shares. You are also deemed to be a beneficial owner of shares if you have the right to acquire beneficial ownership of the shares within 60 days. Accordingly, more than one person may be deemed to be a beneficial owner of the same shares. Unless otherwise indicated by footnote, the persons named in the table have sole voting and investment power with respect to the shares beneficially owned. |
(2) | These percentages have been calculated on the basis of 23,432,164 common shares outstanding as of March 26, 2003 and, with respect to each of the persons noted in the table above: |
• | the shares subject to options exercisable within 60 days granted to such person; and |
• | the shares subject to restricted share grants under our 1997 Executive Stock Plan, pursuant to which such person has the power to vote or direct the voting of the shares. |
4 |
Numbers shown in the table on page 4 are only for those persons whose beneficial ownership of shares exceeds 1% of the common shares outstanding or deemed to be outstanding for this calculation. |
(3) | Includes the number of shares subject to options granted under the Directors’ Stock Option Plan for non-employee directors as follows: John D. Baker II, 40,088; Robert N. Blackford, 40,088; H. Corbin Day, 28,838; Toni Jennings, 4,445; William P. Kennedy, 20,000; and Amos R. McMullian, 5,000. |
(4) | 450,000 common shares are owned of record by Jemison Investment Co., Inc. Mr. Day is the Chairman of the Board of Directors of Jemison, and he and members of his immediate family own an equity interest in Jemison. Mr. Day disclaims beneficial ownership of these shares. |
(5) | Includes 46,400 shares subject to options under the 1988 Stock Option Plan or the 1997 Executive Stock Plan which are exercisable within 60 days and 48,148 shares represented by restricted share grants under the 1997 Executive Stock Plan. Mr. Hughes is considered to have sole voting power with respect to 105,595 shares, sole investment power with respect to 57,447 shares, and shared voting and investment power with respect to 3,400 shares. |
(6) | Includes 72,900 shares subject to options under the 1988 Stock Option Plan or the 1997 Executive Stock Plan that are exercisable within 60 days, 76,296 shares represented by restricted share grants under the 1997 Executive Stock Plan and 3,477 shares owned of record by Mr. Hughes’s spouse. Mr. Hughes is considered to have sole voting power with respect to 443,980 shares, sole investment power with respect to 367,684 shares, and shared voting and investment power with respect to 171,021 shares. |
(7) | Each of the indicated directors is an executive officer and director of, and owns a one-third equity interest in, Hughes, Inc., a corporation to which we make payments for the lease of certain properties. See “Certain Transactions with Management.” |
(8) | Includes 43,216 shares held by Hughes, Inc., the corporation described in footnote (7) above. David H. Hughes and Vincent S. Hughes are considered to share voting and investment power with respect to such shares and all such shares are reported in the table above as beneficially owned by each of David H. Hughes and Vincent S. Hughes. David H. Hughes and Vincent S. Hughes are brothers. |
(9) | Includes 124,328 shares held by three trusts of which David H. Hughes and Vincent S. Hughes are co-trustees. All of the shares held by these trusts are included in the table above as beneficially owned by each of David H. Hughes and Vincent S. Hughes. |
(10) | Includes 24,821 shares owned of record by Mr. Hughes’s spouse. Mr. Hughes is considered to have sole voting and investment power with respect to 152,608 shares and shared voting and investment power with respect to 192,365 shares. |
(11) | Includes 757 shares held through the Toni Jennings Revocable Trust. Ms. Jennings is considered to have sole investment and voting power with respect to 4,445 shares and shared voting power with respect to 757 shares. |
(12) | Includes 4,250 shares held through Vital Support Charitable Foundation, for which Mr. Kennedy acts as Chairman, 500 shares held through the Ashley E. Kennedy Trust and 500 shares held through the Courtney B. Kennedy Trust. Mr. Kennedy acts as Trustee for both of these trusts. Mr. Kennedy is considered to have sole investment and voting power with respect to 36,000 shares and shared voting and investment power with respect to 4,250 shares. |
(13) | Includes 3,000 shares subject to options under the 1997 Executive Stock Plan that are exercisable within 60 days and 50,000 shares represented by restricted share grants under the 1997 Executive Stock Plan. Mr. Morgan is considered to have sole voting power with respect to 55,723 shares and sole investment power with respect to 5,723 shares. |
(14) | Includes 15,000 shares subject to options under the 1988 Stock Option Plan or the 1997 Executive Stock Plan which are exercisable within 60 days and 45,000 shares represented by restricted share grants under the 1997 Executive Stock Plan. Mr. Stanwood is considered to have sole voting power with respect to 60,000 shares and sole investment power with respect to 15,000 shares. |
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(15) | Includes 48,900 shares subject to options under the 1988 Stock Option Plan or the 1997 Executive Stock Plan which are exercisable within 60 days and 48,148 shares represented by restricted share grants under the 1997 Executive Stock Plan. Mr. Winstead is considered to have sole voting power with respect to 97,048 shares, sole investment power with respect to 48,900 shares, and shared voting and investment power with respect to 1,348 shares. |
(16) | Includes an aggregate of 337,350 shares subject to options under the 1988 Stock Option Plan or the 1997 Executive Stock Plan and exercisable within 60 days and 551,924 shares subject to restricted share grants under the 1997 Executive Stock Plan held by our executive officers as a group, and 138,459 shares subject to unexercised stock options under the Directors’ Stock Option Plan held by our non-employee directors as a group. Directors and executive officers hold sole voting power with respect to 1,419,524 shares, sole investment power with respect to 867,600 of shares and shared investment power with respect to 205,682 shares. |
(17) | Calculated on the basis of 23,907,973 shares, including 23,432,164 shares outstanding and 475,809 shares subject to options. The shares subject to stock options have been deemed outstanding for the purpose of computing such percentage. |
(18) | This information is based upon a Schedule 13G filed with the Commission dated February 12, 2003. |
(19) | This information is based upon a Schedule 13G filed with the Commission dated February 13, 2003. |
(20) | This information is based upon a Schedule 13G filed with the Commission dated February 10, 2003. |
(21) | This information is based upon a Schedule 13G filed with the Commission dated February 14, 2003. |
Name | Age | Position | |||
David H. Hughes | 59 | Chairman of the Board and Chief Executive Officer since November 1986. | |||
Thomas I. Morgan | 49 | President and Chief Operating Officer since April 2001. Previously, Mr. Morgan was Chief Executive Officer of enfoTrust Networks from February 2000 to March 2001, Chief Executive Officer of Value America from February 1999 to November 1999 and Chief Executive Officer of U.S. Office Products from November 1997 to January 1999. On August 11, 2000, Value America filed for protection under Chapter 11 of the U.S. Bankruptcy Code. | |||
David Bearman | 57 | Executive Vice President and Chief Financial Officer since March 2003. Previously Mr. Bearman served as Chief Financial Officer of NCR Corporation (a technology product and services company) from September 1998 until his retirement in September 2001, and as Chief Financial Officer of Cardinal Health, Inc. (a medical products distributor and services provider) from October 1989 to August 1998. | |||
Clyde E. Hughes III | 55 | Group President since February 2000. Vice President from June 1994 to February 2000. | |||
Gradie E. Winstead, Jr. | 53 | Group President since February 2000. Vice President from June 1994 to February 2000. | |||
Michael L. Stanwood | 50 | Group President since February 2000. Previously, Mr. Stanwood served as President of a subsidiary operation since May 1996. | |||
Jasper L. Holland, Jr. | 61 | Senior Vice President of Customer Development since June 2001. Group President from February 2000 to May 2001. Vice President from June 1994 to May 2001. | |||
J. Stephen Zepf | 53 | Senior Vice President of Strategic Development/Mergers and Acquisitions since March 2003. Chief Financial Officer from April 1984 to March 2003. Treasurer from April 1984 to March 2002. | |||
Laura L. Wright | 43 | Senior Vice President of Human Resources since July 2002. Vice President of Human Resources from June 2001 to July 2002. Director of Human Resources from January 1999 to June 2001 and Senior Manager of Human Resources from February 1997 to January 1999. | |||
John A. Steele | 47 | Senior Vice President of Operations since June 2001. Previously, Mr. Steele served as Chief Operating Officer of Value America from November 1999 to August 2000 and as Senior Vice President — Operations from April 1999 to October 1999 and as Executive Vice President — Operations from October 1999 to November 1999. From October 1993 to April 1999, Mr. Steele served as Vice President — Operations Support for Genuine Parts Company. On August 11, 2000, Value America filed for protection under Chapter 11 of the U.S. Bankruptcy Code. | |||
Thomas J. Starnes | 43 | Senior Vice President of Sales and Marketing since June 2001. Previously, Mr. Starnes served as Chief Marketing Officer of Value America from December 1999 to August 2000 and as Executive Vice President from April 1999 to December 1999. From September 1997 to April 1999, he served as Senior Vice President of Sales and Marketing and Senior Vice President of Business Development of U.S. Office Products. On August 11, 2000, Value America filed for protection under Chapter 11 of the U.S. Bankruptcy Code. |
7 |
Name | Age | Position | |||
Thomas M. Ward II | 45 | Senior Vice President and Chief Information Officer since November 1999. Chief of Information Technology from September 1998 to November 1999. Previously, Mr. Ward served as Director of Information Technology for JLK Direct Distribution, Inc. from March 1998 to September 1998 and Director of Information Systems for Ferguson Enterprises, Inc. from 1990 to March 1998. | |||
Robert A. Machaby | 52 | Senior Vice President of Vendor Development since June 2001. Group President from February 2000 to June 2001. District Manager from April 1996 to February 2000. | |||
Benjamin P. Butterfield | 43 | General Counsel since March 1996. Secretary since May 1997. Assistant Secretary from March 1996 to May 1997. | |||
James E. Whitney | 43 | Vice President of Finance and Corporate Controller since March 2002. Controller from May 1994 to March 2002. | |||
Jeffrey S. Leonard | 35 | Treasurer since March 2002. Assistant Controller from May 1999 to March 2002. Previously, Mr. Leonard was corporate controller for Planet Hollywood International, Inc. from September 1996 to April 1999. |
While the Senior Executives’ Long-Term Bonus Plan was limited to a small number of executive officers, and payments thereunder were based on achievement of earnings per share goals, the stock performance plan under the 1997 Executive Stock Plan includes more members of the executive management group and provides for awards based on increases in shareholder value as reflected by the company’s stock price. As a result, the Compensation Committee believes that the stock performance plan more closely aligns the interests of the executive management group with the interests of shareholders in increasing shareholder value. Stock Plan The 1997 Executive Stock Plan is intended to act as an incentive to enhance shareholder value by providing to plan participants an opportunity to benefit from increases in the value of our common shares. Participation under the 1997 Executive Stock Plan is limited to executive officers and other selected key employees (including certain outside consultants) of the company. The company granted an aggregate of 642,200 options under the 1997 Executive Stock Plan during fiscal 2003 and an aggregate of 145,000 restricted share grants during fiscal 2003, including 125,000 performance-based restricted shares. Retirement Plans The retirement plans in the company’s executive compensation program, including the Supplemental Executive Retirement Plan and the Profit Sharing Plan, are intended to encourage and reward long-term employment with the company. The Supplemental Executive Retirement Plan was adopted on September 30, 1986. All of the executive officers other than Messrs. Jeffrey S. Leonard and James E. Whitney are participants under the Supplemental Executive Retirement Plan. The Profit Sharing Plan is a contributory plan for the benefit of substantially all employees of the company. Each of the executive officers is a participant under the Profit Sharing Plan. Participants may make limited contributions under the Profit Sharing Plan by salary reduction. Contributions by the company under the Profit Sharing Plan include those required to match a portion of a participant’s contribution and may include limited additional contributions within the discretion of the Board of Directors. The company did not make a discretionary contribution to the Profit Sharing Plan for the last fiscal year. A Non-Qualified Deferred Compensation Plan was established on March 1, 2002 and allows eligible employees to defer up to 90% of their cash compensation through the plan. The company does not match employee contributions under the plan. All of the executive officers other than Messrs. Jeffrey S. Leonard and James E. Whitney are participants under the plan. 10 |
Compensation of the Chief Executive Officer Mr. David H. Hughes, the company’s Chairman of the Board and Chief Executive Officer, is eligible to participate in the same components of the executive officers’ compensation program available to the other executive officers described above, and the determination of the Compensation Committee with respect to Section 162(m) Section 162(m) of the Internal Revenue Code provides that compensation in excess of $1 million paid for any year to a corporation’s chief executive officer and the four other highest paid executive officers at the end of such year will not be deductible for federal income tax purposes unless certain conditions are met. One such condition is that the compensation qualify as “performance-based compensation.” The company intends that stock option awards to covered executive officers under the 1997 Executive Stock Plan qualify as performance-based compensation within the meaning of Section 162(m). Certain grants of restricted shares under the 1997 Executive Stock Plan prior to May 2002 may not qualify as performance-based compensation. Performance-based restricted share awards thereunder granted after May 2002 will qualify as performance-based compensation under Section 162(m). However, the Compensation Committee believes that in order to attract, retain and reward the executive management team, loss of a tax deduction may be necessary and appropriate in some circumstances, and retains its discretion to grants awards that are not exempt from the Section 162(m) limitations on deductions. Conclusion The Compensation Committee believes that the policies articulated above will continue to ensure that the interests of the company’s executive management group are tied to the interests of the company’s shareholders. Submitted by the Compensation Committee of the Board of Directors. H. Corbin Day, Chairman 11 |
Summary Compensation TableThe following table sets forth the annual, long-term and other compensation for our Chief Executive Officer and each of the other four most highly compensated executive officers during the last fiscal year, as well as the total annual compensation for each such individual for the two previous fiscal years. |
Annual Compensation | Long-Term Compensation | |||||||||||||||||
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Other Annual Compensation ($)(1) | Restricted Share Awards ($)(2) | Securities Underlying Options/ SAR Awards | LTIP Payouts ($) | All Other Compen- sation ($)(3) | ||||||||||
David H. Hughes | 2003 | 425,000 | 340,000 | — | 0 | 12,000 | 0 | 14,331 | ||||||||||
Chairman of the | 2002 | 370,000 | 200,000 | — | 0 | 0 | 0 | 5,515 | ||||||||||
Board and Chief | 2001 | 340,000 | 0 | — | 0 | 22,500 | 142,432 | (4) | 5,345 | |||||||||
Executive Officer | ||||||||||||||||||
Thomas I. Morgan(5) | 2003 | 400,000 | 320,000 | 137,095 | (6) | 0 | 12,000 | 0 | 9,178 | |||||||||
President and Chief | 2002 | 291,667 | 175,000 | 82,705 | (7) | 0 | 22,500 | 0 | 752 | |||||||||
Operating Officer | 2001 | — | — | — | — | — | — | — | ||||||||||
Clyde E. Hughes III | 2003 | 250,000 | 300,000 | — | 0 | 6,000 | 0 | 10,184 | ||||||||||
Group President | 2002 | 200,000 | 125,000 | — | 0 | 0 | 0 | 5,994 | ||||||||||
2001 | 185,000 | 143,375 | — | 0 | 20,000 | 0 | 4,190 | |||||||||||
Gradie E. Winstead, Jr. | 2003 | 250,000 | 275,000 | — | 0 | 6,000 | 0 | 10,244 | ||||||||||
Group President | 2002 | 225,000 | 100,000 | — | 0 | 0 | 0 | 6,094 | ||||||||||
2001 | 200,000 | 160,000 | — | 0 | 20,000 | 0 | 3,871 | |||||||||||
Michael L. Stanwood | 2003 | 220,000 | 220,000 | — | 0 | 6,000 | 0 | 8,640 | ||||||||||
Group President | 2002 | 200,000 | 200,000 | — | 0 | 0 | 0 | 6,230 | ||||||||||
2001 | 200,000 | 200,000 | — | 0 | 20,000 | 0 | 5,265 |
(1) | In this column, unless otherwise indicated, the aggregate amount of perquisites and other personal benefits did not exceed the lesser of $50,000 or 10% of the executive’s salary and bonus, and the executive had no other compensation reportable under this category. |
(2) | This column does not include restricted shares intended as long-term incentive compensation granted as performance-based restricted shares pursuant to the 1997 Executive Stock Plan; instead, these restricted shares are reported in the “Long-Term Incentive Plans — Awards in Last Fiscal Year” table elsewhere in this proxy statement. The aggregate number and value of restricted shares held by each of these individuals at January 31, 2003 (excluding those granted, but not yet awarded, as long-term incentive compensation in fiscal year 2003) is set forth below: |
Name | Aggregate Number of Restricted Shares | Aggregate Value of Restricted Shares† | |||||||
---|---|---|---|---|---|---|---|---|---|
David H. Hughes | 76,296 | $1,893,667 | |||||||
Thomas I. Morgan | 50,000 | 1,241,000 | |||||||
Clyde E. Hughes III | 48,148 | 1,195,033 | |||||||
Gradie E. Winstead, Jr. | 48,148 | 1,195,033 | |||||||
Michael L. Stanwood | 45,000 | 1,116,900 |
† | Calculated by multiplying the aggregate number of restricted shares held by the named individual on January 31, 2003 by $24.82, the closing price of our common stock on such date as reported by the New York Stock Exchange. The individuals named above will receive any dividends declared with regard to the restricted shares received by them. |
12 |
(3) | Includes the amounts indicated below for the past three fiscal years: (i) the cost of premiums paid by us for life insurance provided to the named executive; and (ii) matching contributions made to the accounts of the named executive in the Profit Sharing Plan. |
Executive | 2003 Insurance Premium | 2002 Insurance Premium | 2001 Insurance Premium | 2003 Matching Contribution | 2002 Matching Contribution | 2001 Matching Contribution | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David H. Hughes | $ | 1,654 | $ | 1,505 | $ | 2,762 | $ | 5,172 | $ | 4,010 | $ | 2,583 | ||||||
Thomas I. Morgan | 1,654 | 752 | — | 1,030 | 0 | — | ||||||||||||
Clyde E. Hughes III | 1,233 | 899 | 1,640 | 6,149 | 5,095 | 2,550 | ||||||||||||
Gradie E. Winstead, Jr. | 1,233 | 999 | 1,321 | 6,147 | 5,095 | 2,550 | ||||||||||||
Michael L. Stanwood | 1,127 | 980 | 1,688 | 5,779 | 5,250 | 3,577 |
Commencing with most recent fiscal year, this also includes the following costs of premiums paid by us for supplemental long-term disability coverage provided to the named executives: David H. Hughes, $7,505; Thomas I. Morgan, $6,494; Clyde E. Hughes III, $2,802; Gradie E. Winstead, Jr., $2,864; and Michael L. Stanwood, $1,734. |
(4) | Bonus payments under the Senior Executives’ Long-Term Incentive Bonus Plan for the three fiscal year performance period ended January 26, 2001. |
(5) | Mr. Morgan became our President and Chief Operating Officer in April 2001. |
(6) | Includes $79,300 in home sale assistance in connection with Mr. Morgan’s relocation to our headquarters in Orlando and $56,500 as gross-up for taxes in connection with the foregoing. |
(7) | Includes $35,352 in reimbursement for housing expenses following Mr. Morgan’s hire and subsequent relocation to our headquarters in Orlando and $24,113 as gross-up for taxes in connection with the foregoing. |
The following table provides information concerning restricted share grants to our Chief Executive Officer and our other participants among our executive officers named in the Summary Compensation Table under the stock performance plan adopted in fiscal year 2003. Long-Term Incentive Plans — Awards in Last Fiscal Year |
Name | Number of Shares or Other Rights (#) | Performance or Other Period Until Maturation of Payout | Estimated Future Payouts Under Non-Stock Price-Based Plans | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David H. Hughes | 15,000 shares | 5 years(1) | — | — | — | |||||||||
Thomas I. Morgan | 15,000 shares | 5 years(1) | — | — | — | |||||||||
Clyde E. Hughes III | 10,000 shares | 5 years(1) | — | — | — | |||||||||
Gradie E. Winstead | 10,000 shares | 5 years(1) | — | — | — | |||||||||
Michael L. Stanwood | 10,000 shares | 5 years(1) | — | — | — |
(1) | These restricted shares were granted on August 21, 2002, on which date our stock price was $31.25. These will be awarded to each of these participants in 20% increments if our average stock price exceeds $40.58, $47.34, $54.11, $60.87 and $67.64 for a period of twenty consecutive trading days within the 5-year period after the date of grant. None of these targets were achieved during fiscal year 2003, so none of these restricted shares were awarded to these participants. Once awarded, performance-based restricted shares become vested if the participant remains employed by the company for five years after the award date or if there is a change-in-control of the company or the participant dies, becomes disabled or reaches age 65. |
Equity Compensation Plan InformationThe following table provides details regarding our common shares issuable upon the exercise of outstanding options, warrants and rights granted under the company’s equity compensation plans (including individual equity compensation arrangements) as of the end of the last fiscal year. |
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)(1) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(a) | (b) | (c) | ||||||||||||||
Equity compensation plans approved by security holders | 1,489,777 | $ | 27.94 | (2) | 61,986 | |||||||||||
Equity compensation plans not approved by security holders | 0 | — | 0 | |||||||||||||
Total | 1,489,777 | $ | 27.94 | (2) | 61,986 |
(1) | These amounts do not include the additional common shares proposed to be reserved for use pursuant to the 1997 Executive Stock Option Plan under Proposal Two below. |
(2) | This calculation does not include 125,000 performance-based restricted shares that have been granted but not yet awarded. |
Option Grants in Last Fiscal YearThe following table sets forth information concerning options granted to our executive officers named in the Summary Compensation Table during the fiscal year ended January 31, 2003: |
Individual Grants(1) | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term(2) | |||||||||||||||||||
Name | Number of Securities Underlying Options Granted | Percent of Total Options Granted to Employees in Fiscal Year | Exercise Price ($/Sh) | Expiration Date | 5%($) | 10%($) | ||||||||||||||
David H. Hughes | 12,000 | 1.87 | % | 32.57 | 8/21/12 | 245,797 | 622,898 | |||||||||||||
Thomas I. Morgan | 12,000 | 1.87 | % | 32.57 | 8/21/12 | 245,797 | 622,898 | |||||||||||||
Clyde E. Hughes III | 6,000 | 0.93 | % | 32.57 | 8/21/12 | 122,899 | 311,449 | |||||||||||||
Gradie E. Winstead, Jr. | 6,000 | 0.93 | % | 32.57 | 8/21/12 | 122,899 | 311,449 | |||||||||||||
Michael L. Stanwood | 6,000 | 0.93 | % | 32.57 | 8/21/12 | 122,899 | 311,449 |
(1) | Each of these options was granted pursuant to the 1997 Executive Stock Plan and is subject to the terms of such plan. One-third of these options will vest on each of August 21, 2003, August 21, 2004 and August 21, 2005. |
(2) | Potential gains are calculated net of the exercise price but before taxes associated with the exercise. These amounts represent hypothetical gains that could be achieved for the options if they were exercised at the end of the option term. The assumed 5% and 10% rates of stock appreciation are based on appreciation from the exercise price per share. These rates are provided in accordance with the rules of the SEC and do not represent our estimate or projection of our future common stock price. Actual gains, if any, on stock option exercises are dependent on our future financial performance, overall stock market conditions and the option holders’ continued employment through the vesting period. |
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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option ValuesThe following table summarizes options exercised by our executive officers named in the Summary Compensation Table during the fiscal year ended January 31, 2003 and presents the value of unexercised options held by our executive officers named in the Summary Compensation Table at fiscal year end: |
Number of Securities Underlying Unexercised Options at January 31, 2003(#) | Value of Unexercised In-the-Money Options at January 31, 2003($)(1) | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Shares Acquired on Exercise(#) | Value Realized($) | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||||||||||||
David H. Hughes | — | — | 55,400 | 29,500 | 505,633 | 299,688 | |||||||||||||||||||
Thomas I. Morgan | 2,000 | 27,880 | 3,000 | 29,500 | 46,050 | 268,625 | |||||||||||||||||||
Clyde E. Hughes III | — | — | 31,400 | 21,000 | 288,125 | 256,875 | |||||||||||||||||||
Gradie E. Winstead, Jr. | — | — | 33,900 | 21,000 | 299,781 | 256,875 | |||||||||||||||||||
Michael L. Stanwood | 13,900 | 331,862 | 0 | 21,000 | 0 | 256,875 |
(1) | The value of unexercised in-the-money options represents the aggregate amount of the excess of $24.82, the closing price for our common stock on January 31, 2003, over the exercise price of all options held on such date. |
We lease certain buildings and properties from JEM-Realty, LLC, SJ Limited Partnership, Stanwood Interests Limited Partnership, SWS-GA Realty, Inc., and SWS-TX Realty, Inc. JEM-Realty, LLC is a wholly-owned subsidiary of Jemison Investment Co., Inc. of which Michael L. Stanwood is a director. Michael L. Stanwood is a limited partner of SJ Limited Partnership and Stanreal, LLC, the general partner of Stanwood Interests Limited partnership. H. Corbin Day and Michael L. Stanwood are the sole shareholders of SWS-GA Realty, Inc. and SWS-TX Realty, Inc. During the last fiscal year, nine such leases were in effect with respect to seven locations in Texas, one location in Georgia, and one location in North Carolina. Five of these leases were entered into in May 1996, one in July 1998, one in April 1999, one in May 2000 and one in June 2002. Three of these leases expire in May 2004, three will expire in May 2005, and three will expire in April 2010. These leases relate to branch facilities ranging in size from approximately 10,000 to 44,500 square feet, together with outside storage and parking, with the exception of one lease which is solely for vacant land used for outside storage. During the fiscal year ended January 31, 2003, we made rental payments to JEM-Realty, LLC, SJ Limited Partnership, Stanreal, LLC (for the benefit of Stanwood Interests Limited Partnership), SWS-GA Realty, Inc., and SWS-TX Realty, Inc. totaling in the aggregate $711,094, and paid real estate taxes and building insurance totaling in the aggregate $108,982 and $3,158, respectively. We also paid for maintenance and repairs, other than structural repairs, pursuant to the requirements of these leases, but the amounts paid by us during the last fiscal year for such items were not substantial and were, in the opinion of our management, normal for the types of properties leased. We believe that the terms of the transactions described above are at least as favorable to us as those which could have been obtained from unrelated parties. Robert N. Blackford, a director, was a member of the law firm of Holland & Knight LLP until January 1, 2002. Holland & Knight LLP served as counsel to us during the fiscal year ended January 31, 2003. 19 |
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* | $100 invested on January 31, 1998 in stock or index-including reinvestment of dividends. Fiscal year ending January 31. |
Peer Group 20 |
H. Corbin Day Mr. Day has served as a director since October 1996. Mr. Day currently serves as Chairman of Jemison Investment Co., Inc. Mr. Day serves as a member of the Compensation, Long-Term Incentive Plan, Directors’ Stock Option Plan and Nominating Committees. Mr. Day is also a member of the Board of Directors of Protective Life Corporation, Blount International, Inc. and European Investors. Mr. Day’s term as a director expires at the 2003 Annual Meeting. Thomas I. Morgan Mr. Morgan has served as our President and Chief Operating Officer since April 2001 and as a director since May 2001. Mr. Morgan is a member of the Executive Committee. Previously Mr. Morgan was Chief Executive Officer of enfoTrust Networks from February 2000 to March 2001, Chief Executive Officer of Value America from February 1999 to November 1999 and Chief Executive Officer of U.S. Office Products from November 1997 to January 1999. Mr. Morgan’s term as a director expires at the 2003 Annual Meeting. Directors Whose Terms Extend Beyond the Annual MeetingJohn D. Baker II Mr. Baker has served as a director since March 1994. Mr. Baker also serves as a member of the Nominating and Audit Committees. Mr. Baker currently serves as President, Chief Executive Officer and director of Florida Rock Industries, Inc. Mr. Baker also serves as a director of Patriot Transportation Holding, Inc., and Wachovia Bank, Inc. Mr. Baker’s term as a director expires at the 2004 Annual Meeting. David H. Hughes Mr. Hughes has served as our Chairman of the Board and Chief Executive Officer since November 1986 and as a director since August 1968. Mr. Hughes also serves as a member of the Executive Committee. Mr. Hughes served as our President from June 1972 to March 1994. Mr. Hughes is also a director of SunTrust Banks, Inc., Brown & Brown, Inc., and Darden Restaurants, Inc. Mr. Hughes’s term as a director expires at the 2005 Annual Meeting. Vincent S. Hughes Mr. Hughes served as one of our Vice Presidents from April 1972 until November 2001 and as a director since April 1966. Mr. Hughes also serves as a member of the Executive Committee. Mr. Hughes’s term as a director expires at the 2005 Annual Meeting. 23 |
• | An increase in the number of common shares reserved for use under the plan from 2,250,000 to 3,250,000 and an increase in the number of such shares which may, but need not, be granted as restricted shares from 1,125,000 to 1,625,000, following which 1,028,676 common shares would be available for use under the plan, representing 4.39% of our outstanding common shares as of March 26, 2003; |
• | The addition of non-employee directors as eligible participants under the plan; |
• | An increase in the percentage ownership of voting shares triggering the plan’s “change-in-control” provisions from 30% to 50%; |
24 |
• | An increase in the number of common shares with respect to which a key employee may be granted, in any calendar year, one or more options, or one or more stock appreciation rights, or one or more options and stock appreciation rights in any combination, from 22,500 to 50,000; |
• | In the event of a change-in-control, the Board will have the authority, at its discretion, to cancel each outstanding option and stock appreciation right in exchange for a cash payment equal to the excess of the highest price paid for common shares within 60 days prior to the change-in-control (or the highest price paid or offered in a transaction related to the change-in-control) over the exercise price of such option or stock appreciation right. |
The proposed amendment and restatement is contingent on shareholder approval. The number of options, stock appreciation rights and restricted shares that would be awarded to our chief executive officer and other four most highly compensated executive officers under the plan is not currently determinable. The Board has determined that the current Directors’ Stock Option Plan will terminate immediately if the shareholders approve the amendment and restatement of the 1997 Executive Stock Plan and, in connection with the termination, the Compensation Committee intends to grant to non-employee directors options to purchase 5,000 shares under the Amended and Restated 1997 Executive Stock Plan at its meeting following the annual meeting of the shareholders. The following general summary of the plan as proposed to be amended and restated is not intended to be complete, and is qualified in its entirety by reference to the Amended and Restated 1997 Executive Stock Plan set forth in Exhibit A to this proxy statement. Summary of Amended and Restated 1997 Executive Stock PlanGrants The 1997 Executive Stock Plan provides for grants of options to purchase common shares, awards of restricted shares, and grants of stock appreciation rights (entitling the grantee to receive the difference in value between the underlying common shares on the date of exercise and the greater of the value of such common shares on the date of grant or the exercise price established by the Compensation Committee on the date of grant), which may be either freestanding or granted in tandem with an option. Options to purchase common shares may be either incentive stock options, which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code, or nonqualified stock options. Shares There are currently 2,250,000 common shares reserved for use under the plan, of which up to 1,125,000 may, but need not, be granted as restricted shares. Any shares subject to an option that remain unissued after the cancellation, expiration or exchange of an option and any restricted shares which are forfeited will again become available for use under the plan. Any shares which are surrendered for cash or common shares or a combination thereof, and any common shares used to satisfy a withholding obligation, shall not again become available for use under the plan. As of April 1, 2003, there were available an aggregate of 28,676 common shares under the plan, all of whichcould be granted as restricted shares. The proposed amendment and restatement would make an additional 1,000,000 shares available for use under the plan. The proposed amendment and restatement also would increase by 500,000 the number of shares which may, but need not, be granted as restricted shares. If the proposed amendment and restatement is approved by shareholders, 1,028,676 common shares would be available for use under the plan, which would represent 4.39% of our outstanding common shares as of March 26, 2003. Administration of the Plan The plan is administered by the Compensation Committee, which has the sole authority to grant options, stock appreciation rights and restricted shares. The committee must consist of at least two directors, each of whom shall be an “outside director” for purposes of Section 162(m) of the Code. The Board has authorized the committee to interpret and administer the plan, and to determine the key employees to receive grants, the number of options, stock appreciation rights and/or restricted shares to be granted, the terms of option grants, stock appreciation rights and restricted shares, the provisions of the respective option, restricted share and stock appreciation right agreements (which need not be identical), and to take such other actions in the administration and operation of the plan as the committee deems equitable under the circumstances. The Board, however, has reserved to itself the right to act with respect to any matters concerning: 25 |
• | certain corporate transactions in which there is a change-in-control with no assumption or substitution of options, stock appreciation rights or restricted shares granted under the plan (in which case: (1) options and stock appreciation rights may be cancelled unilaterally by us in exchange for a payment of whole common shares, and cash in lieu of fractional shares, if any, which the holder would have received if on the date set by the Board he or she had exercised his or her stock appreciation right in full or if he or she had exercised a right to surrender his or her outstanding option in full; (2) options and stock appreciation rights may be cancelled unilaterally by us in exchange for a cash payment equal to the excess of the highest price paid for common shares within 60 days prior to the change-in-control (or the highest price paid or offered in a transaction related to the change-in-control) over the exercise price of such option or stock appreciation right; (3) options and stock appreciation rights may be cancelled unilaterally by us if the option price or stock appreciation right share value at grant equals or exceeds the fair market value of a common share on such date; and (4) the grant and forfeiture conditions on restricted shares may be deemed satisfied); or |
• | any adjustment in the number of shares reserved for issuance under the plan, in the number of restricted shares granted and any related restrictions, the number of common shares subject to options, the option price, the stock appreciation right grant value and the number of common shares related to any stock appreciation right to equitably reflect any change in our capitalization, including, but not limited to common share dividends or common share splits or to reflect certain corporate transactions; or |
• | the amendment or termination of the plan. However, the committee may condition an amendment on the approval of our shareholders if the committee determines such approval is necessary and desirable for compliance with applicable law, rule or regulation, including requirements of the New York Stock Exchange. |
Performance-Based Restricted Shares The Compensation Committee may make grants of performance-based restricted shares to key employees. The committee has absolute discretion to establish the performance criteria that will be applicable to each grant and to determine the percentage of shares that will be granted upon various levels of attainment of the performance criteria. To comply with Section 162(m) of the Code, the establishment of the performance criteria and the determination of the grant formula must be made at the time of grant, but in no event later than ninety days after the commencement of the performance measurement period. The committee selects the performance criteria that will be applicable to a grant of performance-based restricted shares from the following list: |
• | the price of our common shares; |
• | average annual growth in earnings per share; |
• | increase in shareholder value; |
• | earnings per share; |
• | net income; |
• | return on assets; |
• | return on shareholders' equity; |
• | increase in cash flow; |
• | operating profit or operating margins; |
• | our revenue growth; and |
• | operating expenses. |
The related performance-based restricted share agreement sets forth the applicable performance criteria and the deadline for satisfying the performance criteria. No grant of performance-based restricted shares is effective until the committee certifies that the applicable conditions (including performance criteria) have been timely satisfied. The committee may also make grants of performance-based restricted shares subject to one or more objective employment, performance or other forfeiture conditions applicable generally or to a key employee in particular, as established by the committee at the time of grant and as set forth in the related performance-based restricted share agreement. The performance-based restricted share agreement sets forth the conditions, if any, under which the key employee’s interest in the performance-based restricted shares will be forfeited. If the grant or forfeiture conditions with respect to performance-based restricted shares are not satisfied, the shares are forfeited and again become available under the plan. To enforce the restrictions, all performance-based restricted shares will be held by us until the conditions are satisfied. As soon as practicable after a grant has become effective, the shares are registered to or for the benefit of the employee, but subject to any forfeiture conditions established by the committee. The performance-based restricted share agreement states whether the employee has the right to receive any cash dividends paid with respect to the performance-based restricted shares. If the employee has no right to receive cash dividends, the agreement may give the employee the right to receive a cash payment in the future in lieu of the dividend payments, provided certain conditions are met. Common share dividends declared on the performance-based restricted shares after grant but before the shares are forfeited or become nonforfeitable are treated as part of the grant of the related restricted shares. An employee has the right to vote the performance-based restricted shares after grant until they are forfeited or become nonforfeitable. 28 |
• | The Audit Committee reviewed and discussed the audited financial statements with management; |
• | The Audit Committee discussed with the independent auditors the material required to be discussed by SAS 61; and |
• | The Audit Committee reviewed the written disclosures and the letter from the independent auditors required by the Independence Standards Board Standard No. 1 and discussed with the auditors any relationships that may impact their objectivity and independence and satisfied itself as to the auditors’ independence. |
Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors of the company that the audited financial statements be included in the Annual Report for the year ended January 31, 2003. Submitted by the Audit Committee of the Board of Directors. John D. Baker II 30 |
By Order of the Board of Directors![]() BENJAMIN P. BUTTERFIELD General Counsel and Secretary |
Orlando, Florida IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY; THEREFORE, IF YOU DO NOT EXPECT TO ATTEND THE 2003 ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND RETURN THE PROXY FORM OR VOTE VIA TELEPHONE OR THE INTERNET AS SOON AS POSSIBLE. 31 |
2.3 Change in Control Price – means, as determined by the Board, (a) the highest Fair Market Value of a share of Stock within the 60-day period immediately preceding the date of determination of the Change in Control Price by the Board (the “60-Day Period”); or (b) the highest price paid or offered per share of Stock, as determined by the Board, in any bona fide transaction or bona fide offer related to the Change in Control, at any time within the 60-Day Period; or (c) some lower price as the Board, in its discretion, determines to be a reasonable estimate of the Fair Market Value of a share of Stock. 2.4 Code – means the Internal Revenue Code of 1986, as amended. 2.5 Committee – means the Compensation Committee of the Board to which the responsibility to administer this Plan is delegated by the Board and which shall consist of at least two members of the Board all of whom are “outside directors” within the meaning of Code Section 162(m). 2.6 Company – means Hughes Supply, Inc., a Florida company, and any successor to such corporation. 2.7 Disability – has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or, if applicable, any affiliate of the Company for the Grantee. If no long-term disability plan or policy was ever maintained on behalf of the Grantee or, if the determination of Disability relates to an ISO, Disability shall mean that condition described in Code Section 22(e)(3), as amended from time to time. In the event of a dispute, the determination of Disability shall be made by the Board and shall be supported by advice of a physician competent in the area to which such Disability relates. 2.8 Exchange Act – means the Securities Exchange Act of 1934, as amended. 2.9 Fair Market Value – refers to the determination of value of a share of Stock. If the Stock is actively traded on any national securities exchange or any Nasdaq quotation or market system, Fair Market Value shall mean the closing price at which sales of Stock shall have been sold on the most recent trading date immediately prior to the date of determination, as reported by any such exchange or system selected by the Committee on which the shares of Stock are then traded. If the shares of Stock are not actively traded on any such exchange or system, Fair Market Value shall mean the arithmetic mean of the bid and asked prices for the shares of Stock on the most recent trading date within a reasonable period prior to the determination date as reported by such exchange or system. If there are no bid and asked prices within a reasonable period orif the shares of Stock are not traded on any exchange or system as of the determination date, Fair Market Value shall mean the fair market value of a share of Stock as determined by the Committee taking into account such facts and circumstances deemed to be material by the Committee to the value of the Stock in the hands of the Grantee; provided that, for purposes of granting awards other than ISOs, Fair Market Value of a share of Stock may be determined by the Committee by reference to the average market value determined over a period certain or as of specified dates, to a tender offer price for the shares of Stock (if settlement of an award is triggered by such an event) or to any other reasonable measure of fair market value and provided further that, for purposes of granting ISOs, Fair Market Value of a share of Stock shall be determined in accordance with the valuation principles described in the regulations promulgated under Code Section 422. 2.10 Family Member – means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, brother-in-law, or sister-in-law of the Grantee, including adoptive relationships, any person sharing the Grantee’s household (other than a tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Grantee) control the management of assets, and any other entity in which these persons (or the Grantee) own more than fifty percent of the voting interests. A-2 |
2.11 Grantee – means a Key Employee or Non-Employee Director who receives a grant of an Option, a SAR or Restricted Stock. 2.12 ISO – means an option granted under this Plan to purchase Stock which is evidenced by an Option Agreement which provides that the option is intended to satisfy the requirements for an incentive stock option under Section 422 of the Code. 2.13 Key Employee – means any employee of the Company or any Subsidiary, or any Outside Consultant, who, in the judgment of the Committee acting in its absolute discretion, is a key to the success of the Company or such Subsidiary. 2.14 Non-Employee Director – means a member of the Board who, on the date of determination, is not an employee of the Company. 2.15 NQO – means an option granted under this Plan to purchase Stock which is evidenced by an Option Agreement which provides that the option shall not be treated as an incentive stock option under Section 422 of the Code. 2.16 Option – means an ISO or a NQO. 2.17 Option Agreement – means the written agreement or instrument which sets forth the terms of an Option granted to a Grantee under Section 7 of this Plan. 2.18 Option Price – means the price which shall be paid to purchase one share of Stock upon the exercise of an Option granted under this Plan. 2.19 Outside Consultant– means an independent contractor that regularly performs services for, provides goods to, or purchases goods or services from, the Company or any Subsidiary. 2.20 Parent Corporation – means any corporation which is a parent of the Company within the meaning of Section 424(e) of the Code. 2.21 Performance-Based Restricted Stock – means Stock granted to a Grantee under Section 8.2 of this Plan. 2.22 Plan – means this Hughes Supply, Inc. 1997 Executive Stock Plan, as amended from time to time. 2.23 Restricted Stock – means Stock granted to a Grantee under Section 8 of this Plan, including Performance-Based Restricted Stock. 2.24 Restricted Stock Agreement – means the written agreement or instrument which sets forth the terms of a Restricted Stock grant to a Grantee under Section 8 of this Plan. 2.25 Rule 16b-3 – means the exemption under Rule 16b-3 to Section 16(b) of the Exchange Act or any successor to such rule. 2.26Stock – means the One Dollar ($1.00) par value common stock of the Company. 2.27 SAR – means a right which is granted pursuant to the terms of Section 7 of this Plan to the appreciation in the Fair Market Value of a share of Stock in excess of the SAR Share Value for such a share. 2.28 SAR Agreement – means the written agreement or instrument which sets forth the terms of a SAR granted to a Grantee under Section 7 of this Plan. 2.29 SAR Share Value – means the figure which is set forth in each SAR Agreement and which is no less than the Fair Market Value of a share of Stock on the date the related SAR is granted. A-3 |
7.2 $100,000 Limit. The aggregate Fair Market Value of ISOs granted to a Key Employee under this Plan and incentive stock options granted to such Key Employee under any other stock option plan adopted by the Company, a Subsidiary or a Parent Corporation which first become exercisable in any calendar year shall not exceed $100,000; provided, however, that if the limitation is exceeded, the ISOs which cause the limitation to be exceeded will be treated as NQOs. Such Fair Market Value figure shall be determined by the Committee on the date the ISO or other incentive stock option is granted, and the Committee shall interpret and administer the limitation set forth in this Section 7.2 in accordance with Section 422(d) of the Code. 7.3 Share Limitation. A Key Employee or Non-Employee Director may be granted in any calendar year one or more Options, or one or more SARs, or one or more Options and SARs in any combination which, individually or in the aggregate, relate to no more than 50,000 shares of Stock. 7.4 Option Price. Subject to adjustment in accordance with Section 11, the Option Price for each share of Stock subject to an Option must be set forth in the applicable Option Agreement. In no event shall the Option Price for each share of Stock subject to an ISO be less than the Fair Market Value of a share of Stock on the date the Option ISO is granted. With respect to each grant of an ISO to a Key Employee who is a Ten Percent Shareholder, the Option Price must not be less than 110% of the Fair Market Value of a share of Stock as of the date the Option is granted. With respect to each grant of a NQO, the Committee is authorized to establish any Option Price, in its sole discretion.The Option Price may not be amended or modified after the grant of the Option, and an Option may not be surrendered in consideration of or exchanged for a grant of a new Option having an Option Price below that of the Option which was surrendered or exchanged. 7.5 Payment. The Option Price shall be payable in full upon the exercise of any Option, and an Option Agreement at the discretion of the Committee can provide for the payment of the Option Price: (a) in cash or by a check acceptable to the Committee; (b) in Stock which has been held by the Grantee for a period acceptable to the Committee and which Stock is otherwise acceptable to the Committee; (c) through a broker facilitated exercise procedure acceptable to the Committee; or (d) in any combination of the three methods described in this Section 7.5 which is acceptable to the Committee. Any payment made inStock shall be treated as equal to the Fair Market Value of such Stock on the date the properly endorsed certificate for such Stock is delivered to the Committee. 7.6 Exercise Period. Any ISO granted to a Key Employee who is not a Ten Percent Shareholder is not exercisable after the expiration of ten (10) years after the date the Option is granted. Any ISO granted to a Key Employee who is a Ten Percent Shareholder is not exercisable after the expiration of five (5) years after the date the Option is granted. The term of any NQO must be specified in the applicable Option Agreement. The date an Option is granted is the date on which the Committee has approved the terms and conditions of the Option and has determined the recipient of the Option and the number of Shares of Stock covered by the Option. 7.7 Conditions to Exercise of an Option. Each Option granted under the Plan is exercisable by whom, at such time or times, or upon the occurrence of such event or events, and in such amounts as the Committee shall specify in the Option Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of the Option, may accelerate the time or times at which such Option may be exercised in whole or in part, including, without limitation, upon a Change in Control and may permit the Grantee or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option term, notwithstanding any provisions in the Option Agreement to the contrary. 7.8 Termination of an ISO. With respect to an ISO, in the event of termination of employment of a Key Employee, the Option or portion thereof held by the Key Employee which is unexercised will expire, terminate, and become exercisable no later than the expiration of three (3) months after the date of termination of employment; provided, however, that in the case of a holder whose termination of employment is due to death or Disability, one (1) year shall be substituted for such three (3) month period. For purposes of this Section 7.8, termination of employment by the Key Employee will not be deemed to have occurred if the Key Employee is employed by another corporation (or a parent or subsidiary corporation of such other corporation) which has assumed the ISO of the Key Employee in a transaction to which Code Section 424(a) is applicable. A-5 |
(b) If a Stock dividend is declared on such a share of Stock after the grant is effective but before the Grantee’s interest in such Stock has been forfeited or has become nonforfeitable, such Stock dividend shall be treated as part of the grant of the related Restricted Stock, and a Grantee’s interest in such Stock dividend shall be forfeited or shall become nonforfeitable at the same time as the Stock with respect to which the Stock dividend was paid is forfeited or becomes nonforfeitable; (c) If a dividend is paid other than in cash or Stock, the disposition of such dividend shall be made in accordance with such rules as the Committee shall adopt with respect to each such dividend; (d) A Grantee shall have the right to vote the Stock related to his or her Restricted Stock grant after the grant is effective with respect to such Stock but before his or her interest in such Stock has been forfeited or has become nonforfeitable. 8.5 Satisfaction of Forfeiture Conditions. A share of Stock shall cease to be Restricted Stock at such time as a Grantee’s interest in such Stock becomes nonforfeitable under this Plan, and the certificate representing such share shall be reissued as soon as practicable thereafter without any further restrictions related to Section 8.2 or Section 8.3 and shall be transferred to the Grantee. 8.6 Transferability. To the extent authorized by the Committee in its sole discretion, Restricted Stock granted under this Plan may be transferred or assigned to one or more Family Members of the Grantee, provided any such transfer or assignment is made without consideration to the Grantee. The Family Member or Family Members to whom Restricted Stock is transferred thereafter shall be treated as the Grantee under this Plan. SECTION 9. SECURITIES REGISTRATION AND ESCROW OF SHARES9.1 Securities Registration. Each Option Agreement, SAR Agreement and Restricted Stock Agreement shall provide that, upon the receipt of shares of Stock as a result of the exercise of an Option (or any related surrender right) or a SAR or the satisfaction of the forfeiture conditions under a Restricted Stock Agreement, the Grantee shall, if so requested by the Company, hold such shares of Stock for investment and not with a view of resale or distribution to the public and, if so requested by the Company, shall deliver to the Company a written statement satisfactory to the Company to that effect. As for Stock issued pursuant to this Plan, the Company at its expense shall take such action as it deems necessary or appropriate to register the original issuance of such Stock to a Grantee under the Securities Act of 1933, as amended, or under any other applicable securities laws or to qualify such Stock for an exemption under any such laws prior to the issuance of such Stock to a Grantee; however, the Company shall have no obligation whatsoever to take any such action in connection with the transfer, resale or other disposition of such Stock by a Grantee. 9.2 Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan shall be issued in the Grantee’s name, but, if the applicable Option Agreement, SAR Agreement or Restricted Stock Agreement (the “Agreement”) so provides, the shares of Stock will be held by a custodian designated by the Committee (the “Custodian”). Each applicable Agreement providing for the transfer of shares of Stock to the Custodian shall appoint the Custodian as attorney-in-fact for the Grantee for the term specified in the applicable Agreement, with full power and authority in the Grantee’s name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Grantee, if the Grantee forfeits the shares of Stock under the terms of the applicable Agreement. During the period that the Custodian holds the shares subject to this Section, the Grantee will be entitled to all rights, except as provided in the applicable Agreement, applicable to shares of Stock not so held. Subject to Section 8.4 of this Plan, any dividends declared on shares of Stock held by the Custodian will, as the Committee may provide on the applicable Agreement, be paid directly to the Grantee or, in the alternative, be retained by the Custodian or by the Company until the expiration of the term specified in the applicable Agreement and will then be delivered, together with any proceeds, with the shares of Stock to the Grantee or to the Company, as applicable. A-9 |
SECTION 10. LIFE OF PLANNo Option or SAR or Restricted Stock shall be granted under this Plan after December 31, 2006, after which this Plan otherwise thereafter shall continue in effect until all outstanding Options (and any related surrender rights) and SAR have been exercised in full or no longer are exercisable and all Restricted Stock grants under this Plan have been forfeited or the forfeiture conditions on the related Stock have been satisfied in full. SECTION 11. ADJUSTMENTThe number of shares of Stock reserved under Section 3 of this Plan, the number of shares of Stock related to Restricted Stock grants under this Plan and any related grant conditions and forfeiture conditions, the number of shares of Stock subject to Options granted under this Plan and the Option Price of such Options and the SAR Grant Value and the number of shares of Stock related to any SAR all shall be adjusted by the Board in an equitable manner to reflect any change in the capitalization of the Company, including, but not limited to, such changes as stock dividends or stock splits. Furthermore, the Board shall have the right to adjust (in a manner which satisfies the requirements of Section 424(a) of the Code) the number of shares of Stock reserved under Section 3 of this Plan, the number of shares of Stock related to Restricted Stock grants under this Plan and any related grant conditions and forfeiture conditions, the number of shares subject to Options granted under this Plan and the Option Price of such Options and the SAR Grant Value and the number of shares of Stock related to any SAR in the event of any corporate transaction described in Section 424(a) of the Code which provides for the substitution or assumption of such Options, SARs or Restricted Stock grants. If any adjustment under this Section 11 would create a fractional share of Stock or a right to acquire a fractional share of Stock, such fractional share shall be disregarded and the number of shares of Stock reserved under this Plan and the number subject to any Options or related to any SARs or Restricted Stock grants under this Plan shall be the next lower number of shares of Stock, rounding all fractions downward. An adjustment made under this Section 11 by the Board shall be conclusive and binding on all affected persons. SECTION 12. CHANGE IN CONTROLIf there is a Change in Control and the Board determines that no adequate provision has been made as part of such Change in Control for either the assumption of the Options, SARs and Restricted Stock grants outstanding under this Plan or for the granting of comparable, substitute stock options, stock appreciation rights and restricted stock grants, (1) each outstanding Option and SAR at the direction and discretion of the Board: (a) may (subject to such conditions, if any, as the Board deems appropriate under the circumstances) be cancelled unilaterally by the Company in exchange for the number of whole shares of Stock (and cash in lieu of a fractional share), if any, which each Grantee would have received if on the date set by the Board he or she had exercised his or her SAR in full or if he or she had exercised a right to surrender his or her outstanding Option in full under Section 7.11 of this Plan; or (b) may (subject to such conditions, if any, as the Board deems appropriate under the circumstances) be cancelled unilaterally by the Company in exchange for a cash payment equal to the Change in Control Price (reduced by the exercise price applicable to such Options or SARs); or (c) may be cancelled unilaterally by the Company if the Option Price or SAR Share Value equals or exceeds the Fair Market Value of a share of Stock on such date; and (2) the grant conditions, if any, and forfeiture conditions on all outstanding Restricted Stock grants may be deemed completely satisfied on the date set by the Board. A-10 |
SECTION 13. AMENDMENT OR TERMINATIONThis Plan may be amended by the Board from time to time to the extent that the Board deems necessary or appropriate; provided, however, that any such amendment may be conditioned on shareholder approval if the Committee determines such approval is necessary and desirable for compliance with Section 422 of the Code or Rule 16b-3 under the Exchange Act or with any other applicable law, rule or regulation, including requirements of any exchange or quotation system on which the Stock is listed or quoted. The Board also may suspend the granting of Options, SARs and Restricted Stock under this Plan at any time and may terminate this Plan at any time; provided, however, the Company shall not have the right to modify, amend or cancel any Option, SAR or Restricted Stock granted before such suspension or termination unless (1) the Grantee consents in writing to such modification, amendment or cancellation or (2) there is a dissolution or liquidation of the Company or a transaction described in Section 11 or Section 12 of this Plan. SECTION 14. MISCELLANEOUS14.1 Shareholder Rights. No Grantee shall have any rights as a shareholder of the Company as a result of the grant of an Option or a SAR under this Plan or his or her exercise of such Option or SAR pending the actual delivery of the Stock subject to such Option to such Grantee. Subject to Section 8, a Grantee’s rights as a shareholder in the shares of Stock related to a Restricted Stock grant which is effective shall be set forth in the related Restricted Stock Agreement. 14.2 No Contract of Employment or Service. The grant of an Option, SAR or Restricted Stock to a Grantee under this Plan shall not constitute a contract of employment or service and shall not confer on a Grantee any rights upon termination of his or her employment or service with the Company in addition to those rights, if any, expressly set forth in the Option Agreement which evidences his or her Option, the SAR Agreement which evidences his or her SAR or the Restricted Stock Agreement related to his or her Restricted Stock. 14.3 Withholding. The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issue or transfer shares of Stock under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. A Grantee may pay the withholding tax in cash, or, if the applicable Option Agreement, SAR Agreement or Restricted Stock Agreement provides, a Grantee may elect to have the number of shares of Stock he is to receive reduced by the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as of the Tax Date (defined below), is sufficient to satisfy federal, state and local, if any, withholding taxes arising from exercise or payment of a grant under this Plan (a “Withholding Election”). A Grantee may make a Withholding Election only if the Withholding Election is made on or prior to the date on which the amount of tax required to be withheld is determined (the “Tax Date”) by executing and delivering to the Company a properly completed notice of Withholding Election as prescribed by the Committee. The Committee may in its sole discretion disapprove and give no effect to the Withholding Election. 14.4 Construction. This Plan shall be construed under the laws of the State of Florida, to the extent not preempted by federal law, without reference to the principles of conflict of laws. 14.5 Compliance with Code. All ISOs to be granted hereunder are intended to comply with Code Section 422, and all provisions of the Plan and all ISOs granted hereunder shall be construed in such manner as to effectuate that intent. A-11 |
14.6 Non-alienation of Benefits. Other than as specifically provided herein, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt by the Grantee, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of the Grantee. 14.7 Listing and Legal Compliance. The Committee may suspend the exercise or payment of any incentive granted under this Plan so long as it determines that securities exchange listing or registration or qualification under any securities laws is required in connection therewith and has not been completed on terms acceptable to the Committee. |
HUGHES SUPPLY, INC. By: /s/ David H. Hughes —————————————————— Title: Chairman and Chief Executive Officer —————————————————– |
ATTEST: [CORPORATE SEAL] A-12 |
HUGHES SUPPLY, INC. |
ANNUAL MEETING OF SHAREHOLDERSHUGHES SUPPLY, INC.May 20, 2003PROXY VOTING INSTRUCTIONSCompany # ______________ |
1. | Election of Directors to serve until the Annual Meeting of Shareholders in 2006. |
|_| | FOR ALL NOMINEES |
|_| | WITHHOLD AUTHORITY FOR ALL NOMINEES |
|_| | FOR ALL EXCEPT (See instructions below) |
Nominees: Thomas I. Morgan ( ) Robert N. Blackford ( ) H. Corbin Day ( ) (INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: (X) To change the address on your account, please check the box at the right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. |_| |
2. | Approval of amendment to and restatement of the 1997 Executive Stock Plan. |
FOR | AGAINST | ABSTAIN | |||
|_| | |_| | |_| |
3. | In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting. |
PLEASE COMPLETE, DATE AND SIGN AND RETURN THIS PROXY PROMPTLY. |
This Proxy, when properly executed, will be voted in accordance with the directions given by the undersigned shareholder. If no direction is made, it will be voted in favor of Proposals 1 and 2. The proxies may vote in their discretion as to other matters that may properly come before the meeting.SIGNATURE OF SHAREHOLDER: __________________ Dated: ______________ SIGNATURE OF SHAREHOLDER: __________________ Dated: ______________ NOTE: Please sign exactly as your name(s) appear hereon. When signing as executor, administrator, attorney, trustee or guardian, please give your full title as such. If the signatory is a corporation, please sign the full corporate name by a duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |