1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Champion Enterprises Inc.
- - -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Champion Enterprises Inc.
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(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:
- - --------------------------------------------------------------------------------
2
CORPORATE HEADQUARTERS
AUBURN HILLS, MICHIGAN 48326
Champion logo (248) 340-9090
March 10, 1998
Dear Shareholder:
It is my pleasure to invite you to attend the 1998 Annual Meeting of
Shareholders of Champion Enterprises, Inc. on Tuesday, April 28, 1998 at 10:00
a.m. The meeting will be held at the Grand Hyatt Hotel, Park Avenue and Grand
Central Station, New York, New York 10017.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting and the nominees for
election as directors.
Your vote is important. Whether you plan to attend the meeting or not, we
urge you to complete, sign and return your Proxy as soon as possible in the
envelope provided. This will ensure representation of your shares in the event
you are unable to attend. You may, of course, revoke your Proxy and vote in
person at the meeting if you desire.
Sincerely,
Walter Young Jr. Sig.
Walter R. Young, Jr.
Chairman of the Board of Directors,
President
and Chief Executive Officer
3
CHAMPION ENTERPRISES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1998
- - --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of Champion Enterprises, Inc., a
Michigan corporation, will be held on Tuesday, April 28, 1998, at 10:00 a.m., at
the Grand Hyatt Hotel, Park Avenue and Grand Central Station, New York, New York
10017. The purposes of the Annual Meeting are to:
1. elect a Board of Directors;
2. vote on a proposal to amend the 1995 Stock Option and Incentive Plan;
and
3. conduct any other business that is properly raised at the meeting.
Only shareholders of record at the close of business on March 5, 1998 are
entitled to notice of and to vote at the meeting.
If you are a participant in the Champion Enterprises, Inc. Savings Plan,
your Proxy will also be considered to be voting instructions to the Trustee of
the Savings Plan concerning shares held in your account.
By Order of the Board
March 10, 1998 John J. Collins, Jr.
Secretary
- - --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED.
4
CHAMPION ENTERPRISES, INC.
2701 UNIVERSITY DRIVE, SUITE 300
AUBURN HILLS, MICHIGAN 48326
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 28, 1998
SOLICITATION OF PROXIES
This Proxy Statement and the accompanying Proxy are being distributed to
shareholders of Champion Enterprises, Inc. (the "Company") in connection with
the solicitation of proxies to be used at the 1998 Annual Meeting of
Shareholders of the Company. The Annual Meeting will be held at the Grand Hyatt
Hotel, Park Avenue and Grand Central Station, New York, New York 10017 on
Tuesday, April 28, 1998 at 10:00 a.m. The enclosed Proxy is solicited by the
Board of Directors of the Company. This Proxy Statement and the enclosed Proxy
were mailed to shareholders beginning on March 10, 1998. The Company's 1997
Annual Report to Shareholders is also enclosed with this Proxy Statement.
The Company will pay the entire cost of soliciting proxies. The Company
will arrange with brokerage houses, nominees, custodians and other fiduciaries
to send proxy soliciting materials to beneficial owners of the Common Stock at
the Company's expense. In addition to solicitation by mail, officers and other
employees of the Company may solicit proxies personally, by telephone or by fax.
The Company also has retained Morrow & Co., Inc., a proxy solicitation firm, to
assist in soliciting proxies. The fees and expenses of that firm for their
services are expected to be approximately $6,000.
REVOKING A PROXY
Any person giving a Proxy has the power to revoke it at any time before it
is voted. There are three ways to revoke your Proxy. You may deliver a written
notice of revocation, which is dated after the date of the Proxy, to the
Secretary of the Company at or before the Annual Meeting. You may deliver a
later-dated Proxy to the Secretary of the Company at or before the Annual
Meeting. You may attend the Annual Meeting in person and vote your shares by
ballot.
RECORD DATE
The record date for determining shareholders entitled to vote at the Annual
Meeting is March 5, 1998. Each of the 46,600,000 shares of Common Stock of the
Company issued and outstanding on that date is entitled to one vote on any
matter voted on at the Annual Meeting. Abstention votes and votes withheld by
brokers on non-routine proposals in the absence of instructions from beneficial
owners ("broker non-votes") will be counted as present at the Annual Meeting to
determine whether a quorum exists.
1
5
1. ELECTION OF DIRECTORS
Eight Directors will be elected at the Annual Meeting. Each Director will
hold office until the next Annual Meeting of Shareholders, or until a successor
is elected and qualified. Unless proxy votes have been withheld, each Proxy
received will be voted to elect Robert W. Anestis, Frank J. Feraco, Selwyn
Isakow, George R. Mrkonic, Johnson S. Savary, Robert L. Stark, Carl L.
Valdiserri and Walter R. Young, Jr. as Directors. If any nominee is unable or
declines to serve, Proxies will be voted for the balance of the nominees and for
such additional person as designated by the Board of Directors to replace such
nominee. However, the Board of Directors does not anticipate that this will
occur.
Persons receiving a plurality of the votes cast at the Annual Meeting in
person or by proxy will be elected as Directors. "Plurality" means that the
nominees who receive the largest number of votes cast are elected as Directors.
Shares not voted (whether by abstention, broker non-votes or otherwise) have no
effect on the election.
Information about the nominees for election as Directors appears below. All
of the nominees are currently Directors of the Company and were elected at the
1997 Annual Meeting of Shareholders.
PHOTO ROBERT W. ANESTIS. Mr. Anestis, age 52, has served as a
director of the Company since 1991. He is President of
Anestis & Company, an investment banking and financial
advisory firm located in Westport, Connecticut.
Mr. Anestis, who has been in the industry ten years, brings
merger and acquisition expertise, strategic planning and
policy experience with a strong legal and financial
background to the Board.
PHOTO FRANK J. FERACO. Mr. Feraco, age 51, has served as a
director of the Company since November 1996. He is
President/Sector Executive of Kohler Company, located in
Kohler, Wisconsin, which manufactures and markets plumbing
products worldwide. From April 1994 to March 1996, Mr.
Feraco was President of Danaher Tool Group of Danaher
Corporation, which manufactures hand tools for industrial
and consumer use. From 1991 to 1994, Mr. Feraco was
President and Chief Executive Officer of the Sterling
Plumbing Group, a subsidiary of Kohler Company. Mr. Feraco
is a former director of Redman Industries, Inc.
Champion's Board benefits from Mr. Feraco's over 30 years
experience as an operating executive, including areas of
sales, marketing and manufacturing with three major U.S.
corporations.
2
6
PHOTO SELWYN ISAKOW. Mr. Isakow, age 46, has served as a director
of the Company since 1991. He is President of The Oxford
Investment Group, Inc., a merchant banking and corporate
development firm located in Bloomfield Hills, Michigan. Mr.
Isakow is also a director of Ramco-Gershenson Properties
Trust and Oxford Automotive, Inc.
Mr. Isakow brings expertise in the areas of mergers and
acquisitions, strategic planning, accounting and finance in
multiple manufacturing and distribution industries.
PHOTO GEORGE R. MRKONIC. Mr. Mrkonic, age 45, has served as a
director of the Company since 1994. He is Vice Chairman of
Borders Group, Inc., a retailer of books and music located
in Ann Arbor, Michigan. From November 1994 to January 1997,
Mr. Mrkonic was also the President of Borders Group, Inc.
From November 1990 to November 1994, Mr. Mrkonic was
Executive Vice President, Specialty Retail Group at Kmart
Corporation, Troy, Michigan. Mr. Mrkonic is also a director
of Syntel, Inc. and Borders Group, Inc.
Strengths that Mr. Mrkonic brings to Champion's Board
include strategic vision, an operating mentality and a sense
of urgency.
PHOTO JOHNSON S. SAVARY. Mr. Savary, age 69, has served as a
director of the Company since 1979. He is Of Counsel at
Abel, Band, Russell, Collier, Pitchford & Gordon, Chartered,
attorneys, Sarasota, Florida. From July 1986 to November
1992, Mr. Savary was a partner of the law firm Dykema
Gossett, which provided legal services to the Company during
the past year.
Mr. Savary has 19 years of knowledge and experience as a
Director of Champion and brings a legal perspective to the
Board.
3
7
PHOTO ROBERT L. STARK. Mr. Stark, age 64, has served as a director
of the Company since November 1996. In 1997 he retired as
the Dean of the University of Kansas Regents Center,
Overland Park, Kansas. From 1958 until his retirement in
March 1993, Mr. Stark served in various executive capacities
at Hallmark Cards, Inc., a worldwide manufacturer of
greeting cards and related products. Mr. Stark is a director
of Mercantile Bancorporation and Payless Shoe Source, Inc.
and a former director of Redman Industries, Inc.
Mr. Stark brings over 35 years of broad-based business
experience to Champion's Board including experience as Chief
Operating Officer of a multi-billion dollar corporation.
PHOTO CARL L. VALDISERRI. Mr. Valdiserri, age 61, has served as a
director of the Company since 1995. He is Chairman and Chief
Executive Officer of Rouge Industries, Inc., an integrated
steel manufacturer located in Dearborn, Michigan. Mr.
Valdiserri is also a director of Rouge Industries, Inc.
Mr. Valdiserri brings to the Board operating management
perspective and experience that was acquired through 39
years of progressively challenging assignments at several
integrated steel companies.
PHOTO WALTER R. YOUNG, JR. Mr. Young, age 53, has served as a
director of the Company since 1990. He is Chairman of the
Board of Directors, President and Chief Executive Officer of
the Company. Mr. Young was named President and Chief
Executive Officer in 1990 and became the Chairman of the
Board in 1992.
For 30 years in a variety of industries, Mr. Young has been
a performance-driven leader, who faces issues and is a
change catalyst and manager.
4
8
COMPENSATION OF DIRECTORS
ANNUAL STOCK RETAINER. Each Director who is not an employee of the Company
receives an annual retainer of 4,800 shares of the Company's Common Stock. A
non-employee Director who also serves as chairperson of a Board Committee
receives an additional annual retainer of 400 shares, for a total annual
retainer of 5,200 shares. The annual retainer is paid on the date of the Annual
Meeting when the non-employee Director is elected or re-elected. Non-employee
Directors do not receive any cash compensation for their services except for the
reimbursement of expenses to attend Board and Committee meetings and business
travel insurance purchased by the Company. The current stock retainer program
for non-employee Directors will continue through the Annual Meeting in 2000.
Directors who are employees of the Company receive no compensation for serving
as a Director other than their compensation for services as an employee.
STOCK OPTIONS. Each new non-employee Director receives a stock option grant
the first time he or she is elected at an Annual Meeting. The grant consists of
a 60-day right to purchase 8,000 shares of the Company's Common Stock and a
stock option to purchase 24,000 additional shares. The purchase right must be
exercised in full within 60 days after the grant date in order for the
non-employee Director to be eligible to exercise the stock option.
The exercise price of the purchase right is the higher of $0.50 per share
or 40% of the fair market value of the Common Stock on the grant date. The
exercise price of the option is one-third higher than the closing price of the
Common Stock on the New York Stock Exchange on the grant date. Shares received
by exercising the purchase right may not be transferred for two years after the
date of purchase. Once the purchase right is properly exercised, the stock
option becomes exercisable at the rate of 6,000 shares on each of the next four
anniversaries of the grant date. The option remains exercisable for 10 years
from the date of grant even if the non-employee Director is no longer serving as
a Director.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company meets regularly, at least once each
quarter. During 1997, the Board of Directors held seven meetings. The standing
committees established by the Board of Directors are described below. The Board
of Directors does not have a nominating committee.
AUDIT COMMITTEE. The primary function of the Audit Committee is to assist
the Board in fulfilling its oversight responsibilities by reviewing the
financial information provided to shareholders, the corporate accounting and
financial reporting practices, the systems of internal controls which management
and the Board have established and the audit process. The Committee also
recommends to the Board the selection of an independent auditor and reviews the
scope of the audit and related fees for audit services. The Audit Committee met
three times during 1997. The members of the Audit Committee are Robert W.
Anestis (Committee Chairman), Selwyn Isakow and Robert L. Stark.
COMPENSATION COMMITTEE. The primary function of the Compensation Committee
is to consider and make recommendations to the Board concerning the compensation
programs, benefits and awards for all elected officers of the Company, including
the Chief Executive Officer. The Compensation Committee develops and monitors
the executive compensation policies of the Company. The Committee also
recommends to the Board of Directors the nature and amount of compensation for
executive officers and senior
5
9
operating management of the Company and administers the Company's stock option
plans and programs. The Compensation Committee met seven times during 1997. The
members of the Compensation Committee are George R. Mrkonic (Committee
Chairman), Frank J. Feraco, Johnson S. Savary and Carl L. Valdiserri.
2. PROPOSAL TO AMEND THE 1995 STOCK OPTION
AND INCENTIVE PLAN
PROPOSED AMENDMENT
The Champion Enterprises, Inc. 1995 Stock Option and Incentive Plan ("1995
Plan") was approved by shareholders in 1995. As of February 28, 1998 there were
250,000 shares of Common Stock available for additional stock option grants,
stock awards and stock appreciation rights under the 1995 Plan. The Board of
Directors proposes that the number of shares available for issuance under the
1995 Plan be increased by 1,900,000 shares.
REASONS FOR PROPOSED AMENDMENT
The Board has determined that additional shares need to be available for
grants and awards under the 1995 Plan. These grants and awards will be used for
incentives for executive and middle management employees and as inducements for
employment in connection with acquisitions, particularly in connection with the
Company's retail expansion program. The Board believes that these grants and
awards will help to attract, retain and reward key employees.
The Company has historically compensated executives and middle management
employees with stock options and awards, thus encouraging ownership in the
Company and aligning the interests of its employees with the interests of its
shareholders. Employees will only benefit from awards under the 1995 Plan to the
extent that shareholders also benefit. Base salaries of the Company's executives
and middle management employees have generally been slightly below the mean of
salaries for executives and middle management employees of comparable companies
in the industry and stock grants and awards are a significant portion of overall
compensation. Historically, stock options have been the most common type of
award under the 1995 Plan. As a policy, the Company has significantly limited
the use of restricted stock awards and does not reprice options once the
exercise price is determined. The Company uses discounted options in a manner
which it believes better aligns management's interest with that of the
shareholders by requiring that management employees make a substantial personal
investment in the Company through the exercise of discounted options.
In addition, the Company has only a limited number of shares available to
be granted under other plans. Grants may no longer be made under the 1987 Stock
Option Plan, which expired during 1997. The other stock plans available are the
1990 Nonqualified Stock Option Program and the 1993 Middle Management Stock
Option Plan, which combined have only 170,000 shares reserved for future grants.
SUMMARY OF THE 1995 PLAN
The 1995 Plan is an incentive compensation plan which provides for the
granting of stock options, stock appreciation rights ("SARs"), restricted stock,
performance share awards and annual incentive awards to key employees of the
Company. The annual
6
10
incentive awards are based on pre-established objective performance goals. The
1995 Plan is administered by the Compensation Committee of the Board of
Directors.
STOCK OPTIONS, SARS, RESTRICTED STOCK AND PERFORMANCE SHARES. Stock options
granted under the 1995 Plan may be either incentive stock options under Code
Section 422 or nonqualified options. The exercise price for incentive stock
options must be at least the fair market value of the shares on the grant date.
The exercise price for nonqualified options may be less than fair market value.
The 1995 Plan also provides for the discretionary grant of SARs in tandem with
stock options. The Compensation Committee is also authorized to grant
performance share awards and shares of restricted Common Stock upon such terms
and conditions as the Committee may determine.
ANNUAL PERFORMANCE INCENTIVE AWARDS. Each year, the Compensation Committee
will (i) identify the executive officers who will be eligible to receive annual
incentive awards ("Eligible Employees"), (ii) determine a performance period,
and (iii) determine target levels of Company performance that must be achieved
by the Company for annual incentive awards ("Annual Incentive Awards") to be
paid under the 1995 Plan. At the end of each year, the Compensation Committee
will certify, in writing, the degree of achievement by the Company of the
performance targets and the amount of Annual Incentive Award which may be paid
to each Eligible Employee. If the Company fails to achieve a threshold
performance target applicable to an Eligible Employee, no Annual Incentive Award
will be paid to such Eligible Employee under the 1995 Plan for such year. Annual
Incentive Awards will be paid in cash and/or shares of Common Stock of the
Company, as determined by the Compensation Committee.
CODE SECTION 162(M). Section 162(m) of the Code denies a federal income tax
deduction for certain compensation in excess of $1,000,000 per year paid to the
Chief Executive Officer and the four other most highly-paid executive officers
of a publicly-traded corporation (the "Named Executive Officers"). Certain types
of compensation, including compensation based on performance goals, are excluded
from this deduction limit. All awards under the 1995 Plan paid to the Named
Executive Officers are intended to be deductible by the Company as performance
based compensation.
BOARD RECOMMENDATION
THE BOARD RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
7
11
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
Compensation policies for executive officers and senior operating
management are developed and monitored by the Compensation Committee of the
Board of Directors. The Committee recommends to the Board of Directors the
nature and amount of compensation for all executive officers. This Committee
consists of four independent directors who are neither officers nor employees of
the Company.
COMPENSATION POLICIES
The Company's executive compensation policies are designed to encourage and
reward executive efforts which create shareholder value through achievement of
corporate objectives and performance goals and, as a result, to align the
interests of executives with those of shareholders. More specifically, the
Company's compensation policies can be summarized as:
(a) annual base salaries should be targeted to be competitive, but slightly
below the mean of other companies of comparable size;
(b) annual incentive-based (at-risk) compensation should provide
opportunity for significant additional compensation based on improved
Company performance; and
(c) long-term incentive-based (at-risk) compensation should be used to
further link executive performance to shareholder interests, encourage
stock ownership in the Company and provide an incentive to create
long-term shareholder value.
The Committee from time to time uses an independent consultant to assist in
its review of compensation policies and to make recommendations. The consultant
has provided the Committee and the Board with nationwide compensation study
information covering senior executive officers from general manufacturing
companies with sales in a range comparable to those of the Company. This survey
includes several hundred companies throughout the United States. The Committee
also considers the executive compensation levels for a group of comparable
manufactured housing companies consisting of Clayton Homes, Inc., Fleetwood
Enterprises, Inc., and Oakwood Home Corporation.
Each component of compensation (annual base salary, annual performance
incentives and long-term performance incentives) is described more fully below.
ANNUAL BASE SALARIES
Executive salaries are based on level of job responsibility, individual
performance and compensation data for comparable companies obtained from
consultant surveys and market surveys. Our objective is to target base salaries
to be competitive, but slightly below the mean of comparable companies.
ANNUAL PERFORMANCE INCENTIVES
Annual incentive-based compensation is provided primarily through cash
bonuses. Prior to each fiscal year, the Committee reviews and establishes
performance levels for executive officers. Bonus determinations for executive
officers are based upon achieving
8
12
pre-determined levels of earnings per share of the Company. The pre-determined
earnings per share levels are reviewed each year and adjusted as appropriate.
LONG-TERM PERFORMANCE INCENTIVES
Generally, stock options granted to executive officers as long-term
performance incentives are granted at exercise prices that are either equal to
or above fair market value on the date of grant. In some circumstances, a
portion of the stock options granted to an executive officer (generally 20% of
the grant) may be granted at an exercise price below fair market value. The
value of stock options is dependent upon increases in the Company's share value.
Stock options reward executive officers to the extent that shareholders have
also benefited. The number of shares included in these awards is determined by
the Compensation Committee primarily based upon formulas provided by an
independent consultant. The formulas are derived from a nationwide data base and
present executive officer stock option award levels that are consistent with
general industry practices. The formulas are based upon the expected future
value of the option stock over a seven-year period at several assumed rates of
stock price appreciation.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the U.S. Internal Revenue Code limits to $1 million the
corporate tax deduction for compensation paid to certain executive officers
unless the compensation is based on non-discretionary, pre-established
performance goals. The Committee believes that both annual incentive bonuses and
stock options granted as long-term performance incentives meet the requirements
for fully deductible compensation under Section 162(m).
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee believes that the compensation of Walter R. Young, Jr.,
Chairman of the Board of Directors, President and Chief Executive Officer of the
Company, should be heavily influenced by Company performance. Both the annual
incentive and the long-term incentive components of his compensation are based
on achieving specified performance targets. The current CEO compensation program
was recommended by the Committee and approved by the Board of Directors in
August 1995 as an incentive for Mr. Young to remain with the Company through
August 2000. The program was developed with the assistance of an independent
consultant.
Mr. Young's base salary was $400,000 in 1997 and will increase to $450,000
in 1999. Based on the achievement of pre-determined 1997 earnings per share
targets Mr. Young received a cash bonus of $400,000 in February 1998 for 1997
fiscal year performance.
In 1995, as a long-term incentive, Mr. Young received options to purchase
1.5 million shares of Company Common Stock and a grant of 100,000 performance
shares of Common Stock. These stock awards are conditioned upon Mr. Young
remaining employed with the Company through August 2000 and keeping on deposit
with the Company 500,000 shares of Common Stock which he owns. Mr. Young is not
permitted to transfer the deposited shares until the respective stock awards
vest or expire or his employment is terminated, although he retains full
ownership and voting rights for the deposited shares.
Mr. Young is also not eligible to receive other long-term performance
incentives through August 2000.
9
13
The exercise price for the options is $8.50 per share, which was the fair
market value of the Common Stock on August 31, 1995 (after adjustment for the
Company's May 1996 stock split). The options do not vest unless Mr. Young
remains employed by the Company through August 2000, although one-half of the
options may vest on either August 31, 1998 or August 31, 1999 if specified stock
price appreciation targets are achieved within 60 days prior to such dates. The
options expire eight years after the grant date or three years after vesting,
whichever occurs first. The performance shares may not be transferred by Mr.
Young unless the Company's earnings per share grow at a rate at least equal to
the median of specified comparable companies during the period beginning January
1, 1996 and ending December 31, 1999. The specified companies are Clayton Homes,
Inc., Fleetwood Enterprises, Inc., Oakwood Home Corporation, Skyline
Corporation, Cavalier Homes, Inc., Schult Homes Corporation, Liberty Homes, Inc.
and Supreme Industries, Inc.
George R. Mrkonic, Chairman
Frank J. Feraco
Johnson S. Savary
Carl L. Valdiserri
10
14
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation of the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company for the last three years:
Long-Term
Annual Compensation Compensation
--------------------------------- ------------
Securities All Other
Fiscal Underlying Compensation
Name and Principal Position Year Salary Bonus(3) Options(#) (8)
- - --------------------------------------------------------------------------------------------------------------
Walter R. Young, Jr. 1997 $400,000 $400,000 -- $ 2,100
Chairman, President and 1996 350,000 814,000 -- 1,373
Chief Executive Officer 1995 350,000 679,710 1,500,000 1,300
A. Jacqueline Dout 1997 240,000 120,000 -- 2,882
Executive Vice President 1996 226,668 279,120 -- 2,100
and Chief Financial Officer 1995 200,000 194,203 -- 817
Philip C. Surles 1997 185,250 259,305(4) 200,000(6) 11,268
Chief Operating Officer 1996 101,000 348,843 32,400 11,707
1995 75,375 203,711(4) 12,400 7,490
John J. Collins,Jr. 1997 158,340(1) 100,000(5) 100,000(7) --
Vice President, General 1996 -- -- -- --
Counsel and Secretary 1995 -- -- -- --
Richard P. Hevelhorst 1997 117,596(2) 81,406 -- 2,672
Controller 1996 104,331 82,888 -- 463
1995 65,385 32,175 20,000 --
- - -------------------------
(1) Mr. Collins joined the Company on March 3, 1997.
(2) Mr. Hevelhorst joined the Company on May 8, 1995.
(3) Bonus amounts are paid generally in February or March of the year following
the fiscal year in which they are earned.
(4) Mr. Surles' compensation amounts for 1996 and 1995 were as an executive
officer of Redman Industries, Inc. Mr. Surles' bonuses for 1995 and 1996
were paid quarterly.
(5) Includes $50,000 paid to Mr. Collins as a cash incentive to join the Company
in March 1997.
(6) Includes an option grant for 200,000 shares awarded to Mr. Surles upon his
appointment to the position of Chief Operating Officer in May 1997.
(7) Includes an option grant awarded to Mr. Collins as an inducement to join the
Company in March 1997.
(8) Reflects the contributions of the Company to the accounts of the named
executive officers under the Company's Saving Plan and, with respect to Mr.
Surles, contributions under the Savings and Retirement Plan for Employees of
Redman Industries and the Redman Restorative Plan. The Company has no
pension program nor does the Company provide vehicles for its executives.
11
15
OPTION GRANTS IN LAST FISCAL PERIOD
The following table provides information about stock options granted to the
persons named in the Summary Compensation Table during the last fiscal year. The
table also shows projected hypothetical gains for the options over the full
option term, based on assumed annual compound rates of stock price appreciation
of 0%, 5% and 10%.
Potential Realizable
Value at
Assumed Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------------- --------------------------------
% of Total
Number of Options
Securities Granted To Market
Underlying Employees Exercise Price on
Options in Fiscal Price Grant Date Expiration
Name Granted(#) Year ($/Share) ($/Share) Date 0% 5% 10%
- - ----------------------------------------------------------------------------------- --------------------------------
Philip C. Surles 20,000 2% $ 5.80 $14.50 8/12/97 $174,000 $176,384 $ 178,767
Philip C. Surles 20,000 2% 5.80 14.50 6/13/07 174,000 356,379 696,185
Philip C. Surles 160,000 17% 14.50 14.50 6/13/07 -- 719,036 2,957,483
John J. Collins, Jr. 10,000 1% 5.80 14.50 5/26/97 87,000 88,192 89,384
John J. Collins, Jr. 10,000 1% 5.80 14.50 3/27/07 87,000 178,190 348,093
John J. Collins, Jr. 80,000 8% 14.50 14.50 3/27/07 -- 359,518 1,478,741
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the pretax value
realized from the exercise of stock options during the last fiscal year and the
value of unexercised in-the-money options held at the end of the last fiscal
year by the persons named in the Summary Compensation Table.
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired Fiscal Year-End(#) at Fiscal Year-End($)(1)
On Exercise Value --------------------------- ---------------------------
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
Walter R. Young, Jr. 112,000 $735,000 -- 1,500,000 $ -- $18,375,000
A. Jacqueline Dout -- -- 240,000 120,000 3,692,250 1,732,500
Philip C. Surles 24,000 253,350 41,800 172,800 488,075 1,000,000
John J. Collins, Jr. 10,000 82,000 10,000 80,000 149,500 500,000
Richard P. Hevelhorst 1,000 6,313 5,400 9,600 70,538 125,400
- - -------------------------
(1) Assumes a market price of $20 3/4 per share, which was the last sale price
on the last trading day prior to the fiscal year-end.
12
16
PERFORMANCE GRAPH
The graph below compares the cumulative, five-year shareholder returns on
the Company's Common Stock to the cumulative, five-year shareholder returns for
(i) the S&P 500 Stock Index, (ii) an index of current peer companies selected by
the Company, and (iii) an index of former peer companies selected by the Company
for use in its Proxy Statement for the 1997 Annual Meeting of Shareholders. The
current peer group is composed of seven publicly-held manufactured housing
companies. These companies were selected based on similarities in their products
and their competitive position in the industry. The companies comprising the
current peer group are American Homestar Corp., Cavalier Homes, Inc., Clayton
Homes, Inc., Fleetwood Enterprises, Inc., Oakwood Home Corporation, Palm Harbor
Homes, Inc., and Skyline Corporation. The companies comprising the former peer
group are Cavalier Homes, Inc., Clayton Homes, Inc., Fleetwood Homes, Inc.,
Liberty Homes, Inc., Oakwood Home Corporation, Skyline Corporation, and Supreme
Industries, Inc. Changes were made in the composition of the peer group because
of consolidation in the industry resulting in certain companies becoming smaller
or being acquired and other companies expanding and becoming more comparable to
the Company. In addition, the Company is no longer active in the commercial
vehicle business.
CHAMPION CURRENT FORMER
Measurement Period ENTERPRISES, S&P 500 PEER PEER
(Fiscal Year Covered) INC INDEX GROUP GROUP
12/92 100 100 100 100
12/93 167.85 110.08 111.29 111.35
12/94 290.48 111.53 93.33 93.86
12/95 588.08 153.45 146.57 145.86
12/96 742.86 188.68 149.79 143.32
12/97 783.31 251.63 207.39 198.67
13
17
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The Company has Change in Control Severance Agreements with each of Ms.
Dout and Messrs. Surles and Collins. Under each agreement, the executive will
receive a cash severance payment if his or her employment is terminated
following a "change in control" of the Company, as defined in the agreement. The
severance payment would be not less than 18 months salary at the time of
termination or an amount in excess of that as determined by the Board of
Directors.
EMPLOYMENT AGREEMENTS
MR. YOUNG. The Company has an Employment Agreement with Mr. Young which
terminates on April 30, 2000. Under this agreement, Mr. Young received an annual
salary of $350,000 in 1996, which increased to $400,000 in 1997 and will
increase to $450,000 in 1999. Mr. Young is also entitled to participate in all
benefit and incentive plans maintained by the Company.
If Mr. Young becomes physically or mentally unable to perform his duties
for six consecutive months, the Company may suspend payment of his salary until
he is able to resume his duties again. If Mr. Young is terminated without cause,
he is entitled to receive his salary for the remaining term of the agreement. If
Mr. Young terminates his employment upon a sale or a merger of the Company, he
is entitled to receive the amount of his annual salary in effect at the time of
termination. Upon termination of his employment, Mr. Young has the right to
require the Company to purchase his outstanding stock options on terms described
in his Employment Agreement. Upon termination of his employment, other than
termination by the Company without cause, Mr. Young is prohibited from competing
with the Company for two years after the date of termination.
MS. DOUT. The Company has a letter agreement with Ms. Dout relating to her
employment. Under the letter agreement, Ms. Dout is entitled to participate in
all benefit and incentive plans maintained by the Company.
ADDITIONAL INFORMATION
PRINCIPAL SHAREHOLDERS
The following table provides information about any person known by
management of the Company to have been the beneficial owner of more than five
percent of the Company's outstanding Common Stock as of January 3, 1998.
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- ----------
Bankers Trust New York Corporation 6,997,719(1) 14.94%
One Bankers Trust Plaza
New York, New York, 10060
Pioneering Management Corporation 4,710,000(2) 10.7%
60 State Street
Boston, MA 02109
Brinson Partners, Inc. 4,079,500(3) 8.7%
209 South LaSalle Street
Chicago, IL 60604
- - -------------------------
(1) As reported in the Schedule 13G, dated February 17, 1998, of Bankers Trust
New York Corporation received by the Company which reported beneficial
ownership of 438,616 shares, and the Schedule 13G, Dated February 12, 1998,
of Alex. Brown Investment Management, LP, which is 50% indirectly owned by
Bankers Trust New York Corporation received by the Company which reported
beneficial ownership of 6,559,103 shares.
(2) As reported in the Schedule 13G, dated January 5, 1998, received by the
Company.
(3) As reported in the Schedule 13G, dated February 11, 1998, received by the
Company.
14
18
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information about the beneficial ownership of
the Company's Common Stock by the Directors and executive officers of the
Company.
As of January 3, 1998
----------------------------------
Number of
Shares
Beneficially Percent of
Owned(1) Class
------------ ----------
Robert W. Anestis 95,600 *
Frank J. Feraco 26,265 *
Selwyn Isakow 174,260(2) *
George R. Mrkonic 52,450 *
Johnson S. Savary 108,400(3) *
Robert L. Stark 34,745 *
Carl L. Valdiserri 34,400 *
Walter R. Young, Jr 1,145,795(4) 2.46%
A. Jacqueline Dout 260,000 *
Philip C. Surles 65,800 *
John J. Collins, Jr 26,000 *
Richard P. Hevelhorst 10,400 *
All (12 persons) 2,034,115 4.33%
- - -------------------------
* Less than 1%
(1) The number of shares shown in the table includes the following number of
shares which the person specified may acquire by exercising options which
were unexercised on January 3, 1998: Mr. Anestis, 48,000, Mr. Isakow,
48,000; Mr. Mrkonic, 18,000; Mr. Savary, 48,000; Mr. Valdiserri, 12,000; Ms.
Dout, 240,000; Mr. Surles, 41,800; Mr. Collins, 10,000; Mr. Hevelhorst,
5,400; and all directors and executive officers as a group, 471,200.
(2) Does not include 1,860 shares held by Mr. Isakow's children or 620 shares
held by The Isakow Foundation (a charitable foundation), of which voting and
investment power is shared by Mr. Isakow as a Trustee. Mr. Isakow disclaims
beneficial ownership of the shares held by his children and The Isakow
Foundation.
(3) Does not include 420,000 shares held by the Walter W. Clark Revocable Trust,
the voting power of which is shared by Mr. Savary as co-trustee. Mr. Savary
disclaims beneficial ownership of the shares held by such trust. Includes
3,000 shares held by Mr. Savary's wife as Trustee of the Savary Children's
Trust. Mr. Savary disclaims beneficial ownership of the shares held by his
wife as Trustee.
(4) Does not include 81,200 shares held by The Young Foundation (a charitable
foundation), the voting power of which is shared by Mr. Young as its
President. Mr. Young disclaims beneficial ownership of the shares held by
The Young Foundation.
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the New York Stock Exchange. Officers, directors and greater
than ten percent shareholders are required by regulations of the SEC to furnish
the Company copies of all Section 16(a) forms they file.
Based solely on the Company's review of copies of such forms received by
it, or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that its officers,
directors and greater than ten percent beneficial owners met all applicable
filing requirements during the last fiscal year.
15
19
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has served as independent accountants for the Company
since 1961. Price Waterhouse LLP was selected by the Board of Directors to serve
as the Company's independent accountants for the current fiscal year (ending
January 2, 1999). It is anticipated that a representative of Price Waterhouse
LLP will be present at the meeting, will have an opportunity to make a
statement, and will respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals to be presented at the 1999 Annual Meeting must be
received by the Company not later than November 22, 1998 if they are to be
included in the Company's Proxy Statement for the 1999 Annual Meeting. Such
proposals should be addressed to the Secretary at the Company's executive
offices. Shareholder proposals to be presented at the 1999 Annual Meeting or any
Special Meeting which are not to be included in the Company's Proxy Statement
for that meeting must be received by the Company not less than 60 nor more than
90 days before the date of the meeting or no later than 10 days after the day of
the public announcement of the date of the meeting in accordance with the
procedures contained in the Company's Bylaws.
OTHER MATTERS
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the Annual Meeting other than the matters
described in this Proxy Statement. However, if any other matters should come
before the meeting, the persons named in the proxy card intend to vote the proxy
in accordance with their judgment on such matters.
By Order of the Board of Directors,
John J. Collins, Jr.
Secretary
March 10, 1998
16
20
CHAMPION ENTERPRISES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CHAMPION ENTERPRISES, INC.
The undersigned hereby appoints Walter R. Young, Jr., and Johnson S. Savary, or
either of them, attorneys and proxies with power of substitution, to vote all
of the Common Stock of the undersigned in Champion Enterprises, Inc. at the
Annual Meeting of Shareholders of Champion Enterprises, Inc., to be held on
Tuesday, April 28, 1998 and at any adjournments thereof, as specified on the
reverse side of this proxy.
The undersigned acknowledges receipt of the Proxy Statement dated March 10,
1998 and the Annual Report for the fiscal year ended January 3, 1998, ratifies
everything that the proxies (or either of them or their substitutes) may
lawfully do or cause to be done under this proxy, and revokes all former
proxies.
If you are a participant in the Champion Enterprises, Inc. Savings Plan, this
proxy card will serve as a direction to the trustee under the plan as to how
the shares held for your account in the plan are to be voted.
IF YOU SIGN THIS PROXY WITHOUT MARKING ANY OVALS, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES, FOR THE PROPOSAL AND IN THE DISCRETION OF THE PROXIES ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
PLEASE DO NOT FOLD, STAPLE OR MUTILATE
21
CHAMPION ENTERPRISES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /x/
1. The election as directors of all nominees listed (except as
marked to the contrary below) Vote For All
Robert W. Anestis, Frank J. Feraco, Selwyn Isakow, For Withheld Except
George R. Mrkonic, Johnson S. Savary, Robert L. Stark, / / / / / /
Carl L. Valdiserri and Walter R. Young, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.)
- - ------------------------------------------------------------------------
2. Proposal to amend the 1995 Stock Option and Incentive Plan For Against Abstain
(the "1995 Plan") to increase the number of shares of Common / / / / / /
Stock available for issuance under the 1995 Plan by 1,900,000 shares.
The Board of Directors recommends a vote FOR the Proposal.
3. In their discretion upon the transaction of such other business
as may properly come before the meeting.
Please sign this Proxy exactly as your name
appears hereon, date it, and return it
in the enclosed envelope. Joint owners should
each sign. If you are signing as guardian,
trustee, executor, administrator or attorney-
in-fact, please so indicate. Please also note
any address correction above.
_____________________________________________
(Signature)
_____________________________________________
(Signature)
Dated: ________________________________, 1998