SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Definitive Proxy Statement
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SOUTHERN ENERGY HOMES, 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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SOUTHERN ENERGY HOMES, INC.
Notice of 1997 Annual Meeting of Stockholders
June 4, 1997
To the Stockholders:
The 1997 Annual Meeting of the Stockholders of SOUTHERN ENERGY HOMES,
INC. will be held on Wednesday, June 4, 1997, at 10:00 A.M. at The Harbert
Center, Room C, 2019 4th Avenue North, Birmingham, Alabama, for the following
purposes:
1. To elect a Board of six Directors, to serve until the next annual
meeting of stockholders and until their successors shall be elected and qualify,
as more fully described in the accompanying Proxy Statement.
2. To consider and act upon a proposal to amend the Company's 1993
Stock Option Plan to (i) increase from 407,814 to 907,814 the number of shares
of Common Stock reserved for issuance thereunder and (ii) conform the Plan to
the provisions of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended.
3. To consider and act upon a proposal to amend the Company's
Certificate of Incorporation to increase the number of authorized shares from
21,000,000 to 41,000,000 shares.
4. To consider and act upon any other business which may properly come
before the meeting.
The Board of Directors has fixed the close of business on May 1, 1997,
as the record date for the meeting. All stockholders of record on that date are
entitled to notice of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
By order of the Board of Directors
Keith W. Brown
Secretary
Addison, Alabama
May 8, 1997
SOUTHERN ENERGY HOMES, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Southern Energy Homes, Inc. ( the
"Corporation") for use at the 1997 Annual Meeting of Stockholders to be held on
Wednesday, June 4, 1997, at the time and place set forth in the notice of the
meeting, and at any adjournments thereof. The approximate date on which this
Proxy Statement and form of proxy are first being sent to stockholders is May 8,
1997.
If the enclosed proxy is properly executed and returned, it will be
voted in the manner directed by the stockholder. If no instructions are
specified with respect to any particular matter to be acted upon, proxies will
be voted in favor thereof. Any person giving the enclosed form of proxy has the
power to revoke it by voting in person at the meeting, or by giving written
notice of revocation to the Secretary of the Corporation at any time before the
proxy is exercised.
The holders of a majority in interest of all Common Stock issued,
outstanding and entitled to vote are required to be present in person or to be
represented by proxy at the meeting in order to constitute a quorum for
transaction of business. The election of the nominees for Director will be
decided by plurality vote. The proposal to amend the Corporation's 1993 Stock
Option Plan will be decided by majority vote of the Common Stock entitled to
vote at the meeting. The proposal to amend the Corporation's Certificate of
Incorporation to increase the number of authorized shares will be decided by
majority vote of the outstanding Common Stock. Abstentions and "non-votes" are
counted as present in determining whether the quorum requirement is satisfied.
Abstentions and "non-votes" have the same effect as votes against proposals
presented to stockholders other than election of directors. Abstentions and
"non-votes" will have no effect on the election of directors. A "non-vote"
occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner.
The Corporation will bear the cost of the solicitation. It is expected
that the solicitation will be made primarily by mail, but regular employees or
representatives of the Corporation (none of whom will receive any extra
compensation for their activities) may also solicit proxies by telephone,
telegraph and in person and arrange for brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy materials to their principals
at the expense of the Corporation.
The Corporation's principal executive offices are located at Highway 41
North, Addison, Alabama 35540 and its telephone number is (205) 747-8589.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on April 25, 1997
are entitled to notice of and to vote at the meeting. On that date the
Corporation had outstanding and entitled to vote 15,439,301 shares of Common
Stock, par value $.0001 per share. Each outstanding share of the Corporation's
Common Stock entitles the record holder to one vote.
1
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Six Directors of the Corporation are to be elected to hold office until
the next annual meeting and until their successors shall be duly elected and
qualified. The persons named in the accompanying proxy will vote, unless
authority is withheld, for the election of the six nominees named below. If any
of such nominees should become unavailable for election, which is not
anticipated, the persons named in the accompanying proxy will vote for such
substitutes as management may recommend. No nominee is related to any other
nominee or to any executive officer of the Corporation or its subsidiaries,
except for Wendell L. Batchelor, who is the uncle of Keith O. Holdbrooks,
Executive Vice President and Chief Operating Officer.
Year First
Elected a Position With the Corporation or Principal
Name of Nominee Age Director Occupation During the Past Five Years
- --------------- --- -------- -------------------------------------
Wendell L. Batchelor 54 1982 Chairman of the Corporation's Board since 1996. Since 1982,
President, Chief Executive Officer and a Director of the
Corporation.
Johnny R. Long 50 1982 Since 1982, Vice President of the Corporation and a Director.
Keith W. Brown 41 1989 Chief Financial Officer of the Corporation since 1982; Treasurer
since January 1993; Secretary from 1982 to January 1993 and
from September 1993 to present; and a Director since 1989.
Jonathan O. Lee 46 1989 Chairman of the Corporation's Board of Directors from 1989 to
1996. President of a private equity investment firm, Lee Capital
Holdings, since its formation in 1980 (Now Lee Capital Holdings,
LLC). Chairman of the Board of Directors of Globe Metallurgical,
Inc., HSC Hospitality, Inc., and C Systems, LLC. Director of
First Security Services Corporation, PAR Associates, Inc. and
Hyde Athletic Industries, Inc.
Joseph J. Incandela 50 1993 Since June 1991, a Managing Director of the Thomas H. Lee
Company, a firm engaged in investment activities, and a
consultant to the Thomas H. Lee Company since November 1989.
Chairman of Amerace Corporation from 1986 to 1989 and Chief
Executive Officer of Conductron Corporation from 1983 to 1986.
Director of Equicredit Corporation, Morgan Grenfell SmallCap
Mutual Fund and Chicago Stock Tab Corporation.
Paul J. Evanson 55 1993 President of Florida Power and Light Co. (FPL) since January
1995. From 1992 through January 1995, Senior Vice President of
Finance and Chief Financial Officer of Florida Power and Light
Company and Vice President and Chief Financial Officer of FPL
Group, Inc. From 1988 to 1992, President and Chief Operating
Officer of Lynch Corporation, a diversified company with
interests in telecommunications, transportation and
manufacturing. From 1986 to 1988, Executive Vice President of
Moore McCormack Resources, Inc. Director of Lynch Corporation and
Florida Power and Light Company.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal 1996, there were four meetings of the Board of Directors
of the Corporation. All of the directors attended at least 75% of the aggregate
of (i) the total number of meetings of the Board of
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Directors and (ii) the total number of meetings held by Committees of the Board
of Directors on which they served. The Board of Directors does not have a
Nominating Committee.
The Corporation pays Jonathan O. Lee, Joseph J. Incandela and Paul J.
Evanson $12,000 per annum, in quarterly installments, for their attendance at
and participation in meetings of the Board of Directors and its Committees. The
Corporation currently has no arrangement for the compensation of any of its
other Directors for their services on the Corporation's Board of Directors or
participation in Committees of the Board of Directors. The Corporation does,
however, reimburse all Directors for any expenses which they may incur in
attending meetings of the Board of Directors or its Committees. From 1989 to
1996, the Corporation had a Management Agreement pursuant to which Lee Capital
Holdings received $150,000 per year for management and other consulting
services, plus reimbursement for certain expenses. Jonathan O. Lee, a nominee
for Director, was Chairman of the Corporation's Board of Directors and is the
President of Lee Capital Holdings, LLC.
The Board of Directors has a Compensation Committee whose members are
Jonathan O. Lee, Joseph J. Incandela and Paul J. Evanson. The Compensation
Committee recommends to the Board of Directors compensation for the
Corporation's key employees. The Compensation Committee met once in 1996.
The Board of Directors has a Stock Option Committee, whose members are
Jonathan O. Lee and Paul J. Evanson, which administers the 1993 Stock Option
Plan. The Stock Option Committee met once during 1996.
The Corporation also has an Audit Committee whose members are Jonathan
O. Lee, Joseph J. Incandela and Paul J. Evanson. The Audit Committee reviews
with the Corporation's independent accountants the scope of the audit for the
year, the results of the audit when completed and the independent accountants'
fee for services performed. The Audit Committee also recommends independent
accountants to the Board of Directors and reviews with the independent
accountants the Corporation's internal accounting controls and financial
management practices. During fiscal 1996, there was one meeting of the Audit
Committee.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 25, 1997 certain information
with respect to beneficial ownership of the Corporation's Common Stock by: (i)
each person known by the Corporation to own beneficially more than 5% of the
Corporation's Common Stock; (ii) each of the Corporation's directors, (iii) each
of the executive officers named in the Summary Compensation Table elsewhere in
this Proxy Statement; and (iv) all directors and executive officers as a group.
This information is based upon information received from or on behalf of the
named individual. Unless otherwise noted, each person identified possesses sole
voting and investment power over the shares listed.
Amount and
Nature of
Name of Beneficial Percent of
Beneficial Owner Ownership (2) Class
---------------- ------------- ----------
Lee Capital Holdings, LLC
Jonathan O. Lee (1) 347,634 2.3%
One International Place
Suite 3040
Boston, MA 02110
Wendell L. Batchelor 843,932 5.5
Johnny R. Long 780,003 5.0
Keith W. Brown 144,416 *
Keith O. Holdbrooks 45,750 *
Paul J. Evanson 12,750 *
Joseph J. Incandela 7,500 *
All executive officers and
directors as a group
(6 persons) 2,066,107 13.3
- --------------------------
* Less than one percent
(1) All of such shares are owned by Lee Capital Holdings, LLC, a Limited
Liability Company of which Mr. Lee is the Managing Member. Mr. Lee has
sole voting and investment power with respect to such shares. Lee
Capital Holdings has pledged 340,967 of its shares of Common Stock to
Fleet National Bank.
(2) Includes currently exercisable options to purchase 28,765, 18,750,
28,764, 41,250, 7,500 and 7,500 shares of common stock held by Messrs.
Batchelor, Long, Brown, Holdbrooks, Evanson, and Incandela,
respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Corporation's Compensation Committee currently consists of Messrs.
Lee, Incandela and Evanson. None of the members of the Compensation Committee is
an officer or employee of the Company or any of its subsidiaries. Mr. Lee was
formerly Chairman of the Board of Directors of the Company.
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EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by
or paid to the Corporation's Chief Executive Officer and each of the
Corporation's Executive Officers (other than the Chief Executive Officer) whose
total annual salary and bonus exceeded $100,000 for all services rendered in all
capacities to the Corporation and its subsidiaries for the Corporation's three
fiscal years ended January 3, 1997.
SUMMARY COMPENSATION TABLE
Annual Compensation
Other Long-Term All Other
Name and Year Salary Bonus Annual Compensation Compensation(4)
- -------- ---- ------ ----- ------ ------------ ---------------
Principal Position Ended ($) ($) Compensation Awards ($)
- ------------------ ----- --- --- ------------ ------- ---
Securities
underlying
options (#)(3)
--------------
Wendell L. Batchelor 01/03/97 300,769(1) 556,331 (2) 20,029 2,277
Chairman, President & CEO 12/29/95 120,000 364,506 (2) 18,750 -0-
12/30/94 120,000 272,638 None 1,114
Johnny R. Long 01/03/97 77,404 486,789 (2) None 956
Executive 12/29/95 75,000 319,021 (2) 18,750 -0-
Vice President 12/30/94 75,000 241,183 None 1,801
(2)
Keith W. Brown 01/03/97 109,904(1) 486,789 (2) 20,028 494
Executive Vice-President, 12/29/95 75,000 319,021 (2) 18,750 -0-
Chief Financial 12/30/94 75,000 241,183 (2) None 1,770
Officer, Treasurer
and Secretary
Keith O. Holdbrooks 01/03/97 75,962(1) 458,516 (2) 7,500 279
Executive Vice-President, 12/29/95 40,769 193,202 (2) None -0-
and Chief Operating 12/30/94 40,000 194,359 (2) 18,750 1,114
Officer
- ---------------
(1) Effective June 14, 1996, Mr. Batchelor's base salary was increased from
$10,000 to $36,667 per month, and Mr. Brown's base salary was increased
from $6,250 to $11,250 per month. Effective October 1, 1996, Mr.
Holdbrooks' base salary was increased from $4,167 to $12,500.
(2) The aggregate amount of perquisites and other personal benefits,
securities or property did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus for the named executive officer.
(3) Options granted to executive officers during the periods were granted
pursuant to the Corporation's 1993 Stock Option Plan, and have been
adjusted for subsequent stock splits through January 3, 1997.
(4) Includes the following for 1996: (i) matching contributions made by the
Corporation to its 401(k) plan during 1996 on behalf of each executive
officer are as follows: Messrs. Batchelor, Brown, Long and Holdbrooks,
in the amount of $285, $279, $291, and $279, respectively; (ii) $1,992,
$677, and $203, which represents the portion of the premium payment
that is attributable to term insurance coverage for Messrs. Batchelor,
Brown, and Long, respectively, as determined by tables supplied by the
Internal Revenue Service.
Stock Option Plans
The following tables set forth certain information with respect to the
stock options granted to the named executive officers during the fiscal year
ended January 3, 1997 and the
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aggregate number and value of options exercisable and unexercisable held by the
named executive officers at the end of such fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------
Potential
Realizable Value
Number of at Assumed
Securities % of Total Annual Rates of
Underlying Options Stock Price
Options Granted to 0% ($) Appreciation For
Granted Employees in Exercise Expiration Value at Option Term (2)
Price
Name (#) Fiscal Year $/Share Date Grant Date(2) 5% ($) 10%($)
- ---- --- ----------- ------- ---- ------------ ------ ------
Wendell L. Batchelor 20,029(1) 21% 6.93 3/20/06 $45,215 $161,033 338,490
Johnny R. Long None(1) 0% -- -- -- --
Keith W. Brown 20,028(1) 21% 6.93 3/20/06 45,213 161,025 338,473
Keith O. Holdbrooks 7,500(1) 8% 6.93 3/20/06 16,931 60,300 126,750
(1) Options are exercisable at the rate of fifty percent (50%) per year
over a two-year period commencing one year from the date of grant.
(2) The 0%, 5% and 10% assumed rates of annual compounded stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Shares Value Underlying Unexercised In-the-Money Options at
Acquired on Realized Options at 1/31/97(#) 1/31/97($)(2)
Name Exercise (#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ ------ ------------------------- -------------------------
Wendell L. Batchelor -0- -0- 28,765/10,015 132,736/44,517
Johnny R. Long -0- -0- 18,750/-0- 83,344/-0-
Keith W. Brown -0- -0- 28,764/10,016 127,856/44,521
Keith O. Holdbrooks -0- -0- 41,250/3,750 183,356/16,669
(1) The "value realized" reflects the appreciation on the date of exercise
(based on the excess of the fair market value of the shares on the date
of exercise over the exercise price). However, because the executive
officers may keep the shares they acquired upon the exercise of the
options (or sell them at a different price), these amounts do not
necessarily reflect cash realized upon the sale of those shares.
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(2) Based on the closing price of the Company's Common Stock on January
3, 1997 on the Nasdaq National Market of $11.38 minus the respective
option exercise prices.
EMPLOYMENT AGREEMENTS
The Corporation has entered into employment agreements, dated as of
June 8, 1989 and amended as of July 1, 1993 and June 14, 1996, with each of
Wendell L. Batchelor and Keith W. Brown. The Corporation also entered into an
employment agreement dated as of July 1, 1993 with Johnny R. Long. Mr.
Batchelor's agreement provides that he shall serve as President and Chief
Executive Officer of the Corporation at a base salary of $36,667 per month. In
addition to his base salary, Mr. Batchelor is entitled to receive monthly
incentive bonus compensation in an amount equal to 2% of the Corporation's
monthly net operating income before interest expenses, taxes and amortization
for organizational expenses, goodwill and covenants not to compete, and without
reduction for any management fees payable to Lee Capital Holdings ("Net
Income"). Such bonus was approximately $556,331 for the year ended January 3,
1997.
Mr. Long's agreement provides that he shall serve as Vice President in
charge of purchasing of the Corporation at a base salary of $6,250 per month. In
addition to his base salary, Mr. Long is entitled to receive monthly incentive
bonus compensation in an amount equal to 1.75% of the Corporation's monthly Net
Income. Such bonus was approximately $486,789 for the year ended January 3,
1997.
Mr. Brown's agreement provides that he shall serve as Chief Financial
Officer and Controller of the Corporation at a base salary of $11,250 per month.
In addition to his base salary, Mr. Brown is entitled to receive monthly bonus
compensation payable in an amount equal to 1.75% of the Corporation's monthly
Net Income. Such bonus was approximately $486,789 for the year ended January 3,
1997.
Each of the employment agreements automatically renews for successive
one-year periods unless sooner terminated by the specified executive or the
Corporation by notice not less than 90 days prior to the date of renewal or by
the Corporation immediately for "cause" or for other than "cause" upon 30 days'
prior notice. Each of the employment agreements provides for the payment of
severance of up to six months' base salary payable in six equal monthly
installments in the event the executive is terminated by the Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Since the Corporation became a public company on March 12, 1993, its
executive compensation program has been administered by the Compensation
Committee of the Board of Directors (the "Committee"). No officers of the
Corporation are members of the Committee.
Since the Corporation's Executive Officers are compensated pursuant to
employment contracts originally entered into in June 1989, the Committee's
deliberations involve a determination as to whether the contracts should be
amended to change the compensation or other terms thereof, and whether to permit
the contracts to automatically renew for successive one year periods.
The compensation paid to executive officers pursuant to the employment
contracts consists of a combination of base salaries and monthly bonuses. The
bonus compensation payable under the contracts is tied to the Corporation's "net
income" as defined under the contracts and accordingly is intended to reward the
executive officers for improvements in the Corporation's financial results. A
significant
7
component of the executive officers' compensation is the bonuses, and
accordingly their compensation is in large measure directly related to the
financial performance of the Corporation as measured by its net income, as so
defined. See "Executive Compensation - Employment Agreements."
In its deliberations with respect to the review of the employment
contracts, the Committee considered the past performance of the officers, their
level of responsibilities, and the Committee's view of the level of compensation
necessary to attract and retain talented individuals in the competitive
environment in which the Corporation operates. The Committee assigned no
particular weight to any one factor, and viewed the deliberations as an exercise
of subjective judgment on the part of the Committee. The Committee decided to
increase the base salary of Messrs. Batchelor and Brown in order to provide each
of them a minimum level of income, appropriate for their respective positions
and comparable to others within their industry peer group.
The executive officers of the Corporation are eligible to receive
options under the Corporation's 1993 Stock Option Plan. For the fiscal year
ended January 3, 1997, options to purchase 47,558 shares were issued to
executive officers of the Corporation.
COMPENSATION OF WENDELL BATCHELOR, CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
The Committee established the compensation of Wendell L. Batchelor,
President and Chief Executive Officer of the Corporation for the fiscal year
ended January 3, 1997, using the same criteria that were used to determine the
compensation of other executive officers, as described above. Mr. Batchelor
received a salary of $300,769 and a bonus of $556,331 (2% of Net Income) for the
fiscal year ended January 3, 1997, in accordance with his employment agreement.
As explained above, the Committee decided to increase the base salary of Mr.
Batchelor in order to provide him a minimum level of income, appropriate for his
position and comparable to others within their industry peer group. This bonus
was intended to reward Mr. Batchelor for his role in the achievement of improved
financial performance by the Corporation. The Corporation's net income for the
year ended January 3, 1997 increased 35.6% over net income for the year ended
December 29, 1995.
The foregoing report has been approved by all members of the Committee.
COMPENSATION COMMITTEE
Jonathan O. Lee
Joseph J. Incandela
Paul J. Evanson
COMPARATIVE PERFORMANCE GRAPH
The following performance graph and table compare the cumulative total
return to shareholders on the Corporation's Common Stock with the cumulative
total return of the Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index") and a peer group (the "Peer Group") of companies selected by the
Corporation whose primary business is manufactured housing. The Peer Group
consists of the following companies: Cavalier Homes, Inc., Cavco Industries,
Inc., Champion Enterprises, Inc., Clayton Homes, Inc., Fleetwood Enterprises,
Kit Manufacturing, Liberty Homes - Class A, Nobility Homes, Inc., Oakwood Homes
Corporation, Schult Homes Corp. and Skyline Corporation. It should be noted that
the companies in the Peer Group are not perfectly comparable to the Corporation.
Certain of the companies are either much larger or much smaller than the
Corporation; some are involved in the
8
production of manufactured housing and recreational vehicles; and some are
vertically integrated to a much greater extent than the Corporation and engage,
for instance, in retail sales and local development activities.
The graph and the table assume $100.00 was invested on March 12, 1993
in each of the Corporation's Common Stock, the S&P 500 Index and in the Peer
Group and also assumes reinvestment of dividends. The 1996 cumulative returns
were as follows: Southern Energy Homes, Inc., $165.86; S&P 500 Index, $182.68
and Peer Group, $161.79.
[PERFORMANCE GRAPH HERE]
COMPARISON OF CUMULATIVE RETURNS
Measurement Period
Base Period December December December January 3,
Company Name/Index 12 March 93 1993 1994 1995 1997
Southern Energy Homes, Inc. 100 145.19 85.57 168.27 165.86
S&P 500 Index 100 106.58 107.99 148.57 182.68
Peer Group 100 113.99 99.96 158.29 161.79
9
PROPOSAL NO. 2
PROPOSAL TO AMEND THE COMPANY'S
1993 STOCK OPTION PLAN
The purpose of the 1993 Stock Option Plan (the "1993 Plan") is to
encourage ownership of the stock of the Company by employees and advisors of the
Company and its subsidiaries, to induce qualified personnel to enter and remain
in the employ of the Company or its subsidiaries and otherwise to provide
additional incentives for option holders to promote the success of the Company's
business. The Board of Directors has approved amendments of the 1993 Plan as
follows: (i) subject to stockholder approval, to increase the number of shares
of Common Stock reserved for issuance thereunder from 407,814 to 907,814 shares,
and (ii) to conform the 1993 Plan to amendments made to Rule 16b-3 ("Rule
16b-3") promulgated under the Securities Exchange Act of 1934, as amended.
The 1993 Plan, as amended, would be administered by a committee (the
"Committee") consisting (1) solely of two or more "non-employee" directors, as
defined from time to time in Rule 16b-3, or (2) the Board of Directors of the
Company. Generally, a "non-employee" director under Rule 16b-3 means a director
who is not an employee of the issuer and who does not receive compensation from
the issuer, except as a director. This amendment to the 1993 Plan is being made
to conform the 1993 Plan to changes made to Rule 16b-3. The 1993 Plan is
currently administered exclusively by a committee consisting of two or more
members of the Board of Directors, each of whom is required to be a
"disinterested person" as that phrase was defined under Rule 16b-3. Generally, a
"disinterested person" under Rule 16b-3 was defined as a director who did not
receive a discretionary grant or award of the issuer's equity securities under a
plan of the issuer during the one year prior to service as an administrator or
while serving in that capacity. Subject to the terms of the 1993 Plan, the
Committee determines the persons to whom options are granted, the number of
shares covered by the option, the term of any option, and the time during which
any option is exercisable. The options granted under the 1993 Plan generally
vest over a period of two years.
Under the 1993 Plan, the Company may grant both incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
it may be amended from time to time ("incentive stock options"), and other
options which are not qualified as incentive stock options ("nonqualified stock
options"). Incentive stock options may only be granted to persons who are
officers and key employees of the Company or of any subsidiary. Nonqualified
stock options may be granted to persons who are officers, key employees and
advisors of the Company or of any of its subsidiaries. Under the current terms
of the 1993 Plan, members of the Board of Directors who are members of the
Committee are not eligible to participate in the 1993 Plan.
There are approximately 40 persons who the Company would consider to be
officers, key employees and advisors of the Company and therefore eligible to
participate in the 1993 Plan.
Options under the 1993 Plan may not be granted after January 13, 2003.
No option under the 1993 Plan may be exercised subsequent to ten years from the
date of grant (five years after the date of grant for incentive stock options
granted to holders of more than 10% of the Company's Common Stock).
10
No incentive stock option granted pursuant to the 1993 Plan may be
exercised more than three months after the option holder ceases to be an
employee of the Company, except that in the event of death or permanent and
total disability of the option holder, the option may be exercised for a period
of up to one year after the date of such death or permanent and total
disability.
Nonqualified stock options may be granted at an exercise price greater
or lower than the fair market value of the Common Stock on the date of grant in
the discretion of the Committee. Incentive stock options, however, may not be
granted at less than the fair market value of the Common Stock and may be
granted to holders of more than 10% of the Common Stock only at an exercise
price of at least 110% of the fair market value of the Common Stock on the date
of grant.
In order to assist an option holder in the acquisition of shares of
Common Stock pursuant to the exercise of an option granted under the 1993 Plan,
the Committee may authorize payment in cash, by delivery of shares of Common
Stock having a fair market value equal to the purchase price of the shares, or
any combination of cash and stock.
Currently, a total of 407,814 shares of Common Stock are reserved for
issuance under the 1993 Plan, subject to adjustment for recapitalization,
reclassification, stock split, stock combination, stock dividend, or certain
other corporate reorganizations. No further shares are available for issuance
under the 1993 Plan, as options to purchase all 407,814 shares reserved for
issuance thereunder have been granted. Accordingly, the Board of Directors has
approved an amendment to the 1993 Plan, subject to stockholder approval, to
increase the number of shares of Common Stock available for issuance thereunder
from 407,814 shares to 907,814 shares. Shares issued under the 1993 Plan may
include either authorized but unissued shares of Common Stock or treasury
shares. Shares subject to an option that ceases to be exercisable for any reason
will be available for subsequent option grants.
The Company has not granted any options under the 1993 Plan which are
subject to stockholder approval of the proposed amendment of the 1993 Plan.
As of April 25, 1997, options to purchase an aggregate of 407,814
shares of Common Stock have been granted under the 1993 Plan, including options
to the named executive officers as follows: 38,780 shares to Wendell L.
Batchelor, Chairman, President, Chief Executive Officer, and a nominee for
director, at an average exercise price of $6.80, 38,780 shares to Keith W.
Brown, Executive Vice President, Chief Financial Officer, Treasurer, Secretary,
and a nominee for director, at an average exercise price of $6.93, 18,750 shares
to Johnny R. Long, Executive Vice President and a nominee for director, at an
average exercise price of $6.93, and 45,000 shares to Keith O. Holdbrooks,
Executive Vice President and Chief Operating Officer, at an average exercise
price of $6.93. As of April 25, 1997, options to purchase an aggregate of
141,310 shares have been granted under the 1993 Plan to all current executive
officers as a group, no options had been granted under the 1993 Plan to
directors who are not executive officers, and options to purchase an aggregate
of 252,441 shares have been granted to all employees, including all current
officers who are not executive officers, as a group.
The closing price of the Company's Common Stock on April 25, 1997 was
$10.25.
11
Options granted under the 1993 Plan may not be assigned or transferred
except by will or the laws of descent and distribution or pursuant to a
"qualified domestic relations order" as defined by the Internal Revenue Code of
1986, as amended, or Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
The Board of Directors may amend, suspend or terminate the 1993 Plan;
provided, however, that the Board of Directors may not without stockholder
approval increase the number of shares of Common Stock for which options may be
granted, change the designation of the class of persons eligible to receive
options, or make any other change in the 1993 Plan which requires stockholder
approval under applicable law, rules, or regulations, including any approval
requirement which is a prerequisite for exemptive relief under Rule 16b-3, as it
may be amended from time to time.
Federal Income Tax Consequences of the 1993 Plan
The following general discussion of the Federal income tax consequences
of options granted under the 1993 Plan is based upon the provisions of the
Internal Revenue Code as in effect on the date hereof, current regulations
thereunder, and existing public and private administrative rulings of the
Internal Revenue Service. This discussion is not intended to be a complete
discussion of all of the Federal income tax consequences of the 1993 Plan or of
all the requirements which must be met in order to qualify for the tax treatment
described herein. Changes in the law and regulations may modify the discussion,
and in some cases, the changes may be retroactive. No information is provided as
to state tax laws. The 1993 Plan is not qualified under Section 401 of the Code,
nor is it subject to the provisions of ERISA.
Incentive Stock Options Under the 1993 Plan. An option holder generally
will not recognize taxable income upon either the grant or the exercise of an
incentive stock option. However, under certain circumstances, there may be
alternative minimum tax or other tax consequences, as discussed below.
An option holder will recognize taxable income upon the disposition of
the shares received upon exercise of an incentive stock option. Any gain
recognized upon the disposition that is not a "disqualifying disposition" (as
defined below) will be taxable as long-term capital gain.
A "disqualifying disposition" means any disposition of shares acquired
on the exercise of an incentive stock option within two years of the date the
option was granted or within one year of the date the shares were issued to the
option holder. The use of shares acquired pursuant to the exercise of an
incentive stock option to pay the option price under another incentive stock
option is treated as a disposition for this purpose. In general, if an option
holder makes a disqualifying disposition, an amount equal to the excess of (i)
the lesser of (a) the fair market value of the shares on the date of exercise,
or (b) the amount actually realized over (ii) the option exercise price will be
taxable as ordinary income and the balance of the gain recognized, if any, will
be taxable as either long-term or short-term capital gain, depending on the
optionee's holding period for the shares. In the case of gift or certain other
transfers, the amount of ordinary income taxable to the optionee is not limited
to the amount of gain which would be recognized in the case of a sale. Instead,
it is equal to the excess of fair market value of the shares on the date of
exercise over the option exercise price.
12
Officers and directors of the Company generally will be subject to
Section 16(b) of the Securities Exchange Act of 1934 ("Section 16(b)") upon the
sale of shares of Common Stock. In the case of a disqualifying disposition of
shares acquired pursuant to the exercise of an incentive stock option, the date
on which the fair market value of the shares is determined will be postponed.
The IRS regulations have not yet been amended to conform with the recently
revised rules under Section 16(b). However, it is generally anticipated that the
date of recognition (the "Recognition Date") will be the earlier of (i) six
months after the date the option was granted, or (ii) the first day on which the
sale of the shares would not subject the individual to liability under Section
16(b). It is possible that the six month period will instead run from the option
holder's most recent grant or purchase of Common Stock prior to his or her
exercise of the option. The option holder will generally recognize ordinary
taxable income on the Recognition Date in an amount equal to the excess of the
fair market value of the shares at that time over the exercise price. Despite
these general rules, if the Recognition Date is after the date of exercise, then
the option holder may make an election pursuant to Section 83(b) of the Code. In
this case, the option holder will recognize ordinary taxable income at the time
the option is exercised and not on the later date. In order to be effective, the
83(b) election must be filed with the Company and the Internal Revenue Service
within 30 days of exercise.
In general, in the year an incentive stock option is exercised, the
holder must include the excess of the fair market value of the shares issued
upon exercise over the exercise price in the calculation of alternative minimum
taxable income. The application of the alternative minimum tax rules for an
option holder subject to Section 16(b) or who receives shares that are not
"substantially divested" are more complex and may depend upon whether the holder
makes a Section 83(b) election as described above.
The Company will not be entitled to any deduction with respect to the
grant or exercise of an incentive stock option provided the holder does not make
a disqualifying disposition. If the option holder does make a disqualifying
disposition, the Company will generally be entitled to a deduction for Federal
income tax purposes in an amount equal to the taxable income recognized by the
holder, provided the Company reports the income on a Form W-2 or 1099, whichever
is applicable, that is timely provided to the option holder and filed with the
IRS.
Nonqualifying Stock Options Under the 1993 Plan. The recipient of a
nonqualifying stock option under the 1993 Plan will not recognize any taxable
income at the time the option is granted.
Upon exercise, the option holder will generally recognize ordinary
taxable income in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the option exercise price. Upon a subsequent
sale of the shares, long-term or short-term (depending on the holding period)
gain or loss will generally be recognized equal to the difference between the
amount realized and the fair market value of the shares on the date of exercise.
If shares of Common Stock are used to pay the exercise price, in whole or in
part, the option holder will recognize no gain or loss for Federal income tax
purposes on the shares surrendered, and the tax consequences will be similar to
the treatment that applies in the case of a disqualifying disposition of the
shares. To the extent the shares acquired upon exercise are equal in number to
the shares surrendered, the basis of the shares received will be equal to the
basis of the shares surrendered. The basis of shares received in excess of the
shares surrendered upon exercise will
13
be equal to the fair market value of the shares on the date of exercise, and the
holding period for the shares received will commence on that date.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the option holder, provided the Company reports the income on a Form W-2 or
1099, whichever is applicable, that is timely provided to the option holder and
filed with the IRS.
Vote Required to amend the 1993 Plan.
An affirmative vote by the holders of a majority of the outstanding
Common Stock entitled to vote at the annual meeting is required to adopt the
proposal to amend the 1993 Plan.
The Board of Directors recommends that the stockholders vote "FOR" the
proposed amendment to the 1993 Plan.
PROPOSAL NO. 3
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE
OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has approved and recommends to the Company's
stockholders that they consider and approve the proposed amendment of the
Company's Certificate of Incorporation to increase the number of authorized
shares from 21,000,000 to 41,000,000 shares, of which 40,000,000 shares will be
common stock, $.0001 par value ("Common Stock"); and 1,000,000 shares will be
preferred stock, $.0001 par value ("Preferred Stock"). If the proposed amendment
is approved by the Company's stockholders, the first paragraph of Article Fourth
of the Company's Certificate of Incorporation, as amended, would read in its
entirety as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 41,000,000, which
shares shall be divided into two classes consisting of (i)
40,000,000 shares of common stock (with $.0001 par value per
share) ("Common Stock"), and (ii) 1,000,000 shares of
preferred stock (with $.0001 par value per share) ("Preferred
Stock")."
Pursuant to Delaware corporate law, the Board of Directors is
authorized to issue from time to time any and all authorized and unissued shares
of Common Stock for any proper corporate purpose without prior stockholder
approval, except as may be required for a particular transaction by such law,
the Company's Certificate of Incorporation, or by the rules of the Nasdaq Stock
Market, or any other stock exchange on which the Company's securities may then
be listed.
As of April 25, 1997, there were 15,439,301 shares of Common Stock
outstanding. An aggregate of 838,263 shares of Common Stock are reserved for
issuance upon exercise of options granted or to be granted under the Company's
stock option plans (including an additional 500,000 shares to be reserved for
issuance under the proposed amendment of the Company's
14
1993 Stock Option Plan. See Proposal No. 2, "Proposal to Amend the Company's
1993 Stock Option Plan".)
The Board of Directors believes that the proposed increase in the
number of authorized shares of Common Stock is in the best interests of the
Company and its stockholders. The proposed increase in the number of authorized
shares of Common Stock will give the Company greater flexibility by allowing
shares of Common Stock to be issued by the Board of Directors without the delay
and expense of a special meeting of stockholders. For example, the Board of
Directors may deem it appropriate to make either a private or public offering of
the Company's Common Stock in order to raise funds for working capital or other
purposes, or the Common Stock may be issued to finance possible future
acquisitions, or for distributions to the Company's stockholders in the event of
a stock dividend or stock split or for distribution pursuant to employee benefit
plans. However, the Company does not currently have any plans to pursue any of
the foregoing, with the exception of an increase in the number of shares of
Common Stock reserved for issuance under the Company's 1993 Stock Option Plan,
as further discussed in Proposal No. 2, "Proposal to Amend the Company's 1993
Stock Option Plan."
Stockholders of the Company do not now have preemptive rights to
subscribe for or purchase additional shares of Common Stock and the stockholders
will have no preemptive rights to subscribe for or purchase any of the
additional shares authorized by the proposed amendment.
Possible Effects of the Proposal - Anti-Takeover Considerations
If the proposed amendment is adopted, the authority of the Board of
Directors to issue the newly authorized but unissued shares of Common Stock
might be considered as having the effect of discouraging an attempt by another
person or entity to effect a takeover or otherwise gain control of the Company,
because the issuance of additional shares of Common Stock would dilute the
voting power of the Common Stock then outstanding.
The Company is presently authorized to issue 1,000,000 shares of
Preferred Stock, $.0001 par value per share. No shares of the Preferred Stock of
the Company have been issued, and the Company has no present intention to issue
any such shares. The Board of Directors has the authority, without action by the
stockholders, to create one or more series of Preferred Stock and determine the
number of shares, designation, price, sinking fund terms, conversion, and voting
rights with respect to any such series. The issuance of any such series of
Preferred Stock could be used to render more difficult an unfriendly tender
offer, proxy contest, merger, or other change in control of the Company.
The authority of the Board of Directors to issue additional shares of
Common Stock or shares of Preferred Stock could be used by the Board of
Directors in a manner calculated to prevent the removal of management and make
more difficult or discourage a change in control of the Company.
The Company is not aware of any efforts to accumulate the Company's
securities or to obtain control of the Company, and the Company has no present
intention or agreement to issue any additional shares of Common Stock, other
than pursuant to employee benefit plans and outstanding options. Furthermore,
the proposal to increase the number of authorized shares of
15
Common Stock is not part of any plan by the Company to adopt a series of
anti-takeover measures, and the Company has no present intention of soliciting a
stockholder vote on any such measures or series of measures.
Vote Required to Amend the Certificate of Incorporation.
An affirmative vote by the holders of a majority of the outstanding
Common Stock entitled to vote at the annual meeting is required to adopt the
proposal to increase the number of authorized shares of Common Stock.
The Board of Directors recommends that the stockholders vote "FOR" the
proposed amendment to the Certificate of Incorporation.
CERTAIN TRANSACTIONS
In January 1993, the Corporation reincorporated as a Delaware
corporation by merging its predecessor, an Alabama corporation also known as
Southern Energy Homes, Inc. ("SEH Alabama"), into the Corporation. As the
surviving corporation, the Corporation assumed all of the obligations of SEH
Alabama.
On June 8, 1989, Lee Capital Holdings, then a Massachusetts general
partnership (now Lee Capital Holdings, LLC), and two of its employees (the "Lee
Group"), acquired 60% of the outstanding capital stock of SEH Alabama in a
leveraged buyout (the "Acquisition"). The Acquisition was effected through the
purchase of the stock of SEH Alabama by a newly formed corporation, SEH
Acquisition Corp., 60% of which was owned by the Lee Group and 40% of which was
owned by certain stockholders and members of SEH Alabama's management group.
In 1989, the Corporation entered into a Management Agreement pursuant
to which Lee Capital Holdings received, until May 1996, $150,000 per year for
management and other consulting services plus reimbursement for certain
expenses. See "Compensation Committee Interlocks and Insider Participation."
Since March 30, 1991, the Corporation has sold homes to a development
company which has developed a residential subdivision in Gardendale, Alabama.
This development company was until December, 1995 controlled by Wendell L.
Batchelor and his brother-in-law, Clinton O. Holdbrooks. In December of 1995,
Wendell L. Batchelor transferred his one-third interest in the development
company to his two children, and Clinton O. Holdbrooks transferred his one-third
interest in the development company to his two children, one of whom is Keith O.
Holdbrooks, Executive Vice President and Chief Operating Officer of the
Corporation. For the fiscal year ended January 3, 1997, sales to this
development company were approximately $691,000. Transactions with the
development company have been at prices and on terms no less favorable to the
Corporation than transactions with independent third parties.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants to examine the consolidated financial statements of the
Corporation and its subsidiaries for the fiscal year ended January 3, 1997.
16
A representative of Arthur Andersen LLP is expected to be present at
the meeting and will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions. The engagement of Arthur
Andersen LLP was approved by the Board of Directors at the recommendation of the
Audit Committee of the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors and persons owning more than 10% of the
outstanding Common Stock of the Corporation to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Officers,
Directors and greater than 10% holders of Common Stock are required by SEC
regulation to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Corporation believes
that during the year ended January 3, 1997, all Section 16(a) filing
requirements applicable to its officers, Directors and owners of greater than
10% of its Common Stock were complied with, except as follows: Wendell L.
Batchelor, Chairman, President, and Chief Executive Officer, filed a Form 5,
Annual Statement of Beneficial Ownership of Securities ("Form 5"), on February
14, 1997 to report three transactions which should have been reported on two
earlier Form 4s, Statement of Changes in Beneficial Ownership of Securities
("Form 4"); Keith W. Brown, Executive Vice President, Chief Financial Officer,
Treasurer, Secretary, and a Director, filed a Form 5 on February 14, 1997 to
report two transactions that should have been reported on an earlier Form 4;
Keith O. Holdbrooks, Executive Vice President and Chief Operating Officer, filed
a Form 3, Initial Statement of Beneficial Ownership, after the due date of such
form; Jonathan O. Lee, a Director, filed a Form 5 on February 14, 1997 with
respect to a transaction that should have been reported on an earlier Form 4;
and Johnny R. Long, Executive Vice President and a Director, filed a Form 5 on
February 14, 1997 with respect to a transaction that should have been reported
on an earlier Form 4.
DEADLINES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and Exchange Commission,
any proposal submitted for inclusion in the Corporation's Proxy Statement
relating to the Annual Meeting of Stockholders to be held in 1997 must be
received at the Corporation's principal executive offices in Addison, Alabama on
or before December 20, 1996. Receipt by the Corporation of any such proposal
from a qualified stockholder in a timely manner will not ensure its inclusion in
the proxy material because there are other requirements in the proxy rules for
such inclusion.
17
OTHER MATTERS
Management knows of no matters which may properly be and are likely to
be brought before the meeting other than the matters discussed herein. However,
if any other matters properly come before the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been or will be
specifically incorporated by reference into any filing by the Corporation under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, the sections of the Proxy Statement entitled "Compensation Committee
Report on Executive Compensation" and "Comparative Performance Graph" shall not
be deemed to be so incorporated, unless specifically otherwise provided in any
such filing.
10-K REPORT
THE CORPORATION WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES
WITH A COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE CORPORATION'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
KEITH W. BROWN, SOUTHERN ENERGY HOMES, INC., HIGHWAY 41 NORTH, ADDISON, ALABAMA
35540.
VOTING PROXIES
The Board of Directors recommends an affirmative vote on all proposals
specified. Proxies will be voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on any proposal, the shares
represented by such proxies will be voted in favor of the Board of Directors'
recommendations.
By order of the Board of Directors
Keith W. Brown, Secretary
Addison, Alabama
May 8, 1997
APPENDIX
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SOUTHERN ENERGY HOMES, INC.
1993 AMENDED AND RESTATED STOCK OPTION PLAN
1. Purpose of the Plan.
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of Southern Energy Homes, Inc. (the "Company") by employees and
advisors of the Company and its subsidiaries, to induce qualified personnel to
enter and remain in the employ of the Company or its subsidiaries and otherwise
to provide additional incentive for optionees to promote the success of its
business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
Treasury shares of the common stock, $.0001 par value, of the Company ("Common
Stock") for which options may be granted under the Plan shall not exceed Nine
Hundred Seven Thousand Eight Hundred Fourteen (907,814) shares, subject to
adjustment as provided in Section 12 hereof.
(b) If an option granted or assumed hereunder shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for subsequent option grants under the
Plan.
(c) Stock issuable upon exercise of an option granted under the Plan
may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee (as constituted and
described in Section 3 hereof).
3. Administration of the Plan.
The Plan shall be administered by the Board of Directors or by a
Committee of the Board of Directors consisting solely of two or more
"non-employee directors," as defined from time to time in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, who shall be
designated by the Board of Directors of the Company (the administering body is
hereafter referred to as the "Committee"). The Board of Directors may from time
to time appoint a member or members of the Committee in substitution for or in
addition to the member or members then in office and may fill vacancies on the
Committee however caused. The Committee shall choose one of its members as
Chairman and shall hold meetings at such times and places as it shall deem
advisable. A majority of the members of the Committee shall constitute a quorum
and any action may be taken by a majority of those present and voting at any
meeting. Any action may also be taken without the necessity of a meeting by a
written instrument signed by a majority of the Committee. The decision of the
Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any option agreement granted hereunder in the manner and to the
extent it shall deem expedient to carry the Plan into effect and shall be the
sole and final judge of such expediency. No Committee member shall be liable for
any action or determination made in good faith.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Committee of the Company and may be designated as either incentive stock
options meeting the requirements of Section 422 of the Internal Revenue Code of
1986 (the "Code") or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee.
-2-
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or "subsidiaries"), as defined in Section 424 of the
Code and the Treasury Regulations promulgated thereunder. Options designated as
non-qualified options may be granted to officers, key employees and advisors of
the Company or of any of its subsidiaries.
In determining the eligibility of an individual or person to be granted
an option, as well as in determining the number of shares to be optioned to any
individual or person, the Committee shall take into account the position and
responsibilities of the individual or person being considered, the nature and
value to the Company or its subsidiaries of his or her or its service and
accomplishments, his or her or its present and potential contribution to the
success of the Company or its subsidiaries, and such other factors as the
Committee may deem relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the voting
power or more than 10% of the value of all classes of stock of the Company or a
parent or a subsidiary, unless the purchase price for the stock under such
option shall be at least 110% of its fair market value at the time such option
is granted and the option, by its terms, shall not be exercisable more than five
years from the date it is granted. In determining the stock ownership under this
paragraph, the provisions of Section 424(d) of the Code shall be controlling. In
determining the fair market value under this paragraph, the provisions of
Section 7 hereof shall apply.
6. Option Agreement.
-3-
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Committee, provided that options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the Code. The date of grant of an option shall be as determined by the
Committee. More than one option may be granted to an individual or person.
7. Option Price.
The option price or prices of shares of the Company's Common Stock for
options designated as non-qualified stock options shall be as determined by the
Committee. The option price or prices of shares of the Company's Common Stock
for incentive stock options shall be the fair market value of such Common Stock
at the time the option is granted as determined by the Committee in accordance
with the Treasury Regulations promulgated under Section 422 of the Code. If such
shares are then listed on any national securities exchange, the fair market
value shall be the mean between the high and low sales prices, if any, on the
largest such exchange on the date of the grant of the option or, if none, shall
be determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Treasury Regulations Section 25.2512-2. If the
shares are not then listed on any such exchange, the fair market value of such
shares shall be the mean between the high and low sales prices, if any, as
reported in the National Association of Securities Dealers Automated Quotation
System National Market System ("NASDAQ/NMS") for the date of the grant of the
option, or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales on the nearest date before and the
nearest date after the date of grant in accordance with Treasury Regulations
Section 25.2512-2. If the shares are not then either listed on any such exchange
or quoted in NASDAQ/NMS, the fair market value shall be the mean between the
average of the "Bid" and the average of the "Ask" prices, if any, as reported in
the National Daily Quotation Service for the date of the grant of the option,
or, if none, shall be determined by
-4-
taking a weighted average of the means between the highest and lowest sales
prices on the nearest date before and the nearest date after the date of grant
in accordance with Treasury Regulations Section 25.2512-2. If the fair market
value cannot be determined under the preceding three sentences, it shall be
determined in good faith by the Committee.
8. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
exercise price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised, or (iii)
any combination of (i) and (ii), provided, however, that payment of the exercise
price by delivery of shares of Common Stock of the Company owned by such
optionee may be made only under such circumstances and on such terms as may from
time to time be established by the Committee. The fair market value of any
shares of the Company's Common Stock which may be delivered upon exercise of an
option shall be determined by the Committee in accordance with Section 7 hereof.
With the consent of the Committee, payment may also be made by delivery of a
properly executed exercise notice to the Company, together with a copy of
irrevocable instruments to a broker to deliver promptly to the Company the
amount of sale or
-5-
loan proceeds to pay the exercise price. To facilitate the foregoing, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, not more than thirty (30) days
from the date of receipt of the notice by the Company, as shall be designated in
such notice, or at such time, place and manner as may be agreed upon by the
Company and the person or persons exercising the option.
9. Exercise of Options.
Each option granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, be exercisable at such time or times and during such period
as shall be set forth in the Agreement; provided, however, that no option
granted under the Plan shall have a term in excess of ten (10) years from the
date of grant.
To the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less than
fifty (50) full shares of Common Stock.
10. Term of Options; Exercisability.
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(a) Term.
(1) Each option shall expire not more than ten (10) years from the date
of the granting thereof, but shall be subject to earlier termination as herein
provided.
Except as otherwise provided in this Section 10, an option granted to
any employee optionee who ceases to be an employee of the Company or one of its
subsidiaries shall terminate on the last day of the third month after the date
such optionee ceases to be an employee of the Company or one of its
subsidiaries, or on the date on which the option expires by its terms, whichever
occurs first.
(2) If such termination of employment is because of dismissal for cause
or because the employee is in breach of any employment agreement, such option
will terminate on the date the optionee ceases to be an employee of the Company
or one of its subsidiaries.
(3) If such termination of employment is because the optionee has
become permanently disabled (within the meaning of Section 22(e)(3) of the
Code), such option shall terminate on the last day of the twelfth month from the
date such optionee ceases to be an employee, or on the date on which the option
expires by its terms, whichever occurs first.
(4) In the event of the death of any optionee, any option granted to
such optionee shall terminate on the last day of the twelfth month from the date
of death, or on the date on which the option expires by its terms, whichever
occurs first.
(b) Exercisability.
(1) Except as provided below, an option granted to an employee optionee
who ceases to be an employee of the Company or one of its subsidiaries shall be
exercisable only to the extent that the right to purchase shares under such
option has accrued and is in effect on the date such optionee ceases to be an
employee of the Company or one of its subsidiaries.
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(2) An option granted to an employee optionee who ceases to be an
employee of the Company or one of its subsidiaries because he or she has become
permanently disabled, as defined above, shall be exercisable to the full number
of shares covered by such option.
(3) In the event of the death of any optionee, the option granted to
such optionee may be exercised to the full number of shares covered thereby,
whether or not under the provisions of Section 9 hereof the optionee was
entitled to do so at the date of his or her death, by the estate of such
optionee, or by any person or persons who acquired the right to exercise such
option by bequest or inheritance or by reason of the death of such optionee.
11. Options Not Transferable.
The right of any optionee to exercise any option granted to him or her
or it shall not be assignable or transferable by such optionee otherwise than by
will or the laws of descent and distribution, or (solely with respect to
non-qualified stock options) pursuant to a qualified domestic relations order,
as defined by the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder, and any such option shall be exercisable during
the lifetime of such optionee only by him, her or it. Any option granted under
the Plan shall be null and void and without effect upon the bankruptcy of the
optionee to whom the option is granted, or upon any attempted assignment or
transfer, except as herein provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, divorce, except as provided above with respect to
non-qualified stock options, trustee process or similar process, whether legal
or equitable, upon such option.
12. Recapitalizations, Reorganizations and the Like.
(a) In the event that the outstanding shares of the Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the
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Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, combination
of shares, or dividends payable in capital stock, appropriate adjustment shall
be made in the number and kind of shares as to which options may be granted
under the Plan and as to which outstanding options or portions thereof then
unexercised shall be exercisable, to the end that the proportionate interest of
the optionee shall be maintained as before the occurrence of such event; such
adjustment in outstanding options shall be made without change in the total
price applicable to the unexercised portion of such options and with a
corresponding adjustment in the option price per share.
(b) In addition, unless otherwise determined by the Committee in its
sole discretion, in the case of any (i) sale or conveyance to another entity of
all or substantially all of the property and assets of the Company or (ii)
Change in Control (as hereinafter defined) of the Company, the purchaser(s) of
the Company's assets or stock may, in his, her or its discretion, deliver to the
optionee the same kind of consideration that is delivered to the shareholders of
the Company as a result of such sale, conveyance or Change in Control, or the
Committee may cancel all outstanding options in exchange for consideration in
cash or in kind, which consideration in both cases shall be equal in value to
the value of those shares of stock or other securities the optionee would have
received had the option been exercised (to the extent then exercisable) and no
disposition of the shares acquired upon such exercise been made prior to such
sale, conveyance or Change in Control, less the option price therefor. Upon
receipt of such consideration by the optionee, his or her or its option shall
immediately terminate and be of no further force and effect. The value of the
stock or other securities the optionee would have received if the option had
been exercised shall be determined in good faith by the Committee of the
Company, and in the case of shares of the Common Stock of the Company, in
accordance with the provision of
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Section 7 hereof. The Committee shall also have the power and right to
accelerate the exercisability of any options, notwithstanding any limitations in
this Plan or in the Agreement upon such a sale, conveyance or Change in Control.
Upon such acceleration, any options or portion thereof originally designated as
incentive stock options that no longer qualify as incentive stock options under
Section 422 of the Code as a result of such acceleration shall be redesignated
as non-qualified stock options. A "Change in Control" shall be deemed to have
occurred if any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, who prior to such time owned less than
fifty percent (50%) of the then outstanding Common Stock of the Company, shall
acquire such additional shares of the Company's Common Stock in one or more
transactions, or series of transactions, such that following such transaction or
transactions, such person or group and affiliates beneficially own fifty percent
(50%) or more of the Company's Common Stock outstanding.
(c) Upon dissolution or liquidation of the Company, all options granted
under this Plan shall terminate, but each optionee shall have the right,
immediately prior to such dissolution or liquidation, to exercise his or her
option to the extent then exercisable.
(d) If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Committee
shall authorize the issuance or assumption of a stock option or stock options in
a transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Committee may grant an option or options
upon such terms and conditions as it may deem appropriate for the purpose of
assumption of the old option, or substitution of a new option for the old
option, in conformity with the provisions of such Section 424(a) of the Code and
the Treasury Regulations thereunder,
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and any such option shall not reduce the number of shares otherwise available
for issuance under the Plan.
(e) No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
13. No Special Employment Rights.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee at the
time.
14. Withholding.
The Company's obligation to deliver shares upon the exercise of any
non-qualified option granted under the Plan shall be subject to the option
holder's satisfaction of all applicable Federal, state and local income and
employment tax withholding requirements. The Company and employee may agree to
withhold shares of Common Stock purchased upon exercise of an option to satisfy
the above-mentioned withholding requirements. With the approval of the
Committee, which it shall have sole discretion to grant, and on such terms and
conditions as the Committee may impose, the option holder may satisfy the
foregoing condition by electing to
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have the Company withhold from delivery shares having a value equal to the
amount of tax to be withheld. The Committee shall also have the right to require
that shares be withheld from delivery to satisfy such condition.
15. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of Section 8, the Company may delay
the issuance of shares covered by the exercise of an option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force or as
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such shares are
exempt from registration and qualification under applicable Federal and state
securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective,
and the Company shall use its best efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
16. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
now in force or hereafter
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amended, the Company shall be under no obligation to issue any shares covered by
any option unless the person who exercises such option, in whole or in part,
shall give a written representation and undertaking to the Company which is
satisfactory in form and scope to counsel for the Company and upon which, in the
opinion of such counsel, the Company may reasonably rely, that he or she or it
is acquiring the shares issued pursuant to such exercise of the option for his
or her or its own account as an investment and not with a view to, or for sale
in connection with, the distribution of any such shares, and that he or she or
it will make no transfer of the same except in compliance with any rules and
regulations in force at the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares are issued without such
registration, a legend to this effect may be endorsed upon the securities so
issued. In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
and controlling persons from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.
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17. Loans.
The Company may not make loans to optionees to permit them to exercise
options.
18. Modification of Outstanding Options.
The Committee may authorize the amendment of any outstanding option
with the consent of the optionee when and subject to such conditions as are
deemed to be in the best interests of the Company and in accordance with the
purposes of this Plan.
19. Approval of Stockholders.
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company voting in person
or by proxy at a duly held stockholders' meeting, or by written consent of all
the stockholders, within twelve (12) months after the adoption of the Plan by
the Board of Directors and shall take effect as of the date of adoption by the
Board of Directors upon such approval. The Committee may grant options under the
Plan prior to such approval, but any such option shall become effective as of
the date of grant only upon such approval and, accordingly, no such option may
be exercisable prior to such approval.
20. Termination and Amendment.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of Directors of the Company. The Board of Directors may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 20, the Board of
Directors may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 19, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under
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the Plan, or make any other change in the Plan which requires stockholder
approval under applicable law or regulations, including any approval requirement
which is a prerequisite for exemptive relief under Section 16 of the Securities
Exchange Act of 1934. The Committee may grant options to persons subject to
Section 16(b) of the Securities and Exchange Act of 1934 after an amendment to
the Plan by the Board of Directors requiring stockholder approval under Section
20, but any such option shall become effective as of the date of grant only upon
such approval and, accordingly, no such option may be exercisable prior to such
approval. The Committee may terminate, amend or modify any outstanding option
without the consent of the option holder, provided, however, that, except as
provided in Section 12, without the consent of the optionee, the Committee shall
not change the number of shares subject to an option, nor the exercise price
thereof, nor extend the term of such option.
21. Compliance with Rule 16b-3.
It is intended that the provisions of the Plan and any option granted
thereunder to a person subject to the reporting requirements of Section 16(a) of
the Act shall comply in all respects with the terms and conditions of Rule 16b-3
under the Securities Exchange Act of 1934 (the "Act"), or any successor
provisions. Any agreement granting options shall contain such provisions as are
necessary or appropriate to assure such compliance. To the extent that any
provision hereof is found not to be in compliance with such Rule, such provision
shall be deemed to be modified so as to be in compliance with such Rule, or if
such modification is not possible, shall be deemed to be null and void, as it
relates to a recipient subject to Section 16(a) of the Act.
22. Reservation of Stock.
-15-
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
23. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
24. Notices.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.
SOUTHERN ENERGY HOMES, INC.
1997 ANNUAL MEETING OF STOCKHOLDERS - JUNE 4, 1997
The undersigned hereby appoints Wendall L. Batchelor and Jonathan O. Lee, and
each of them acting singly, with full power of substitution, proxies to
represent the undersigned at the 1997 Annual Meeting of Stockholders of SOUTHERN
ENERGY HOMES, INC. to be held June 4, 1997 at 10:00 a.m. at The Harbert Center,
Room C, 2019 4th Avenue North, Birmingham, Alabama, and at any adjournment or
adjournments thereof, to vote in the name and place of the undersigned, with all
powers which the undersigned would possess if personally present, all the shares
of SOUTHERN ENERGY HOMES, INC. standing in the name of the undersigned upon the
matters set forth in the Notice of and Proxy Statement for the Meeting in
accordance with the instructions on the reverse side and upon such other
business as may properly come before the Meeting.
THE BOARD RECOMMENDS AN AFFIRMATIVE VOTE ON ALL PROPOSALS SPECIFIED. SHARES WILL
BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED WILL
BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO THE 1993 OPTION
PLAN AND FOR THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION, ALL AS
SET FORTH IN THE PROXY STATEMENT.
PLEASE DATE AND SIGN THIS PROXY IN THE SPACE PROVIDED AND RETURN IT IN THE
ENCLOSED ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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Please sign this proxy exactly as your name(s) appear(s) on the books of the
Company. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, the signature should
be that of an authorized officer who should state his or her title.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
- -------------------------------
SOUTHERN ENERGY HOMES, INC.
- -------------------------------
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date------------------
Stockholder sign here----------------Co-owner sign here-------------
DETACH CARD
1. Election of Directors With- For All
For hold Except
Wendall L. Batchelor Joseph J. Incandela [ ] [ ] [ ]
Keith W. Brown Jonathan O. Lee [ ] [ ] [ ]
Paul J. Evanson Johnny R. Long [ ] [ ] [ ]
To withhold your vote from any particular nominee(s), mark the "For All Except"
box and strike a line through the name(s) of any nominee(s) for whom you do not
wish to vote. Your shares will be voted for the remaining nominee(s).
2. To amend the Company's 1993 Stock Option
Plan, as described in the accompanying Proxy For Against Abstain
Statement. [ ] [ ] [ ]
3. To amend the Company' Certificate of
Incorporation to increase the number of
authorized shares, as described in the
accompanying Proxy Statement. [ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Mark box at right if you plan to attend the Meeting in person [ ]
Mark box at right if an address change or comment has been noted
on the reverse side of this card [ ]
DETACH CARD
SOUTHERN ENERGY HOMES, INC.
Dear Stockholders:
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and operation
of your Company that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach if and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders to be
held on June 4, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Southern Energy Homes, Inc.