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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
HUFFY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
HUFFY CORPORATION
(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:
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HUFFY CORPORATION LOGO
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000
To our Shareholders:
It is a pleasure to invite you to attend your Company's 2000 Annual Meeting
of Shareholders which will be held this year on Thursday, April 27, 2000, at
10:00 a.m., Eastern Daylight Time, in the Daytonian Ballroom of the Doubletree
Hotel, 11 South Ludlow Street, Dayton, Ohio.
I hope you will be able to join us. Prior to and immediately following the
meeting, various company products and services will be exhibited. For your
convenience, a map of the area and directions to the meeting are enclosed.
If you plan to attend the meeting an admission ticket will be required and
is attached to the proxy card. Please indicate the number attending from your
immediate family. If your shares are held in the name of a broker or other
nominee and you do not have an admission ticket, please bring with you a proxy
or letter from the broker, trustee, bank or nominee confirming your beneficial
ownership of the shares.
Formal Notice of the Meeting and Proxy Statement accompany this letter.
Whether or not you plan to be at the meeting, it is important to exercise your
right to vote. Please vote your preferences on the enclosed proxy card and sign,
date and return it promptly in the envelope provided so that your shares will be
represented. I look forward to seeing you at the meeting.
Sincerely,
/s/ Don R. Graber
Don R. Graber
Chairman of the Board
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HUFFY CORPORATION LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000
The Annual Meeting of Shareholders of Huffy Corporation (the "Company"), an
Ohio corporation, will be held in the Daytonian Ballroom of the Doubletree
Hotel, 11 South Ludlow Street, Dayton, Ohio on Thursday, April 27, 2000, at
10:00 a.m. Eastern Daylight Time for the following purposes:
1. To elect three Directors to serve for terms of three years;
2. To approve an amended and restated Code of Regulations of the
Corporation to (i) permit the electronic and telephonic solicitation,
delivery and appointment of proxies in accordance with and to the extent
permitted under Ohio law, and (ii) permit the Board of Directors to
establish the number of directors at not less than four but no more than
fourteen;
3. To ratify the appointment of KPMG LLP as independent public accountants
for 2000;
4. To consider one shareholder proposal that has been presented to the
Company for consideration by shareholders as properly may be brought
before the Annual Meeting; and
5. To transact such other business as properly may be brought before the
Annual Meeting or any adjournment(s) thereof.
Shareholders of record at the close of business on February 29, 2000, are
entitled to vote at the meeting or any adjournment(s) thereof.
By Order of the Board of
Directors
/s/ Nancy A. Michaud
Nancy A. Michaud
Secretary
Dayton, Ohio
March 8, 2000
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER YOU
EXPECT TO ATTEND OR NOT, PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL
IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE TO SAVE THE COMPANY THE
EXPENSE OF FOLLOW-UP LETTERS AND TELEPHONE CALLS.
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HUFFY CORPORATION
225 BYERS ROAD
MIAMISBURG, OHIO 45342
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000
MARCH 8, 2000
GENERAL INFORMATION
PERSONS MAKING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Huffy Corporation (the "Company") to be
used at the Annual Meeting of Shareholders to be held on April 27, 2000, and any
adjournment(s) of such meeting. This Proxy Statement and the accompanying proxy
card were first mailed to Shareholders on or about March 8, 2000. The Company
will bear the cost of soliciting proxies and will, upon request, reimburse
banks, brokerage houses and other institutions for their expenses in forwarding
proxy materials to their principals. Directors, Officers and employees of the
Company may solicit proxies personally from some Shareholders if proxies are not
received promptly. In addition, the Company has retained Morrow & Co. to assist
in the solicitation of proxies for which the Company will pay fees estimated to
total $5,500.
VOTING SECURITIES
The authorized voting capital stock of the Company consists of 60,000,000
shares of Common Stock, $1.00 par value, of which there were 10,164,583 shares
issued and outstanding as of February 29, 2000, which is the record date for the
determination of the holders of Common Stock entitled to receive notice of and
to vote at the Annual Meeting. Each share of Common Stock entitles the holder to
one vote.
ACTIONS TO BE TAKEN BY HOLDERS OF PROXIES
Unless otherwise directed by the person giving the proxy, all properly
executed proxies will be voted: (1) for the election of W. Anthony Huffman,
Donald K. Miller and Joseph P. Viviano for three year terms expiring in the year
2003; (2) in favor of approving amendments to the Corporation's Code of
Regulations to (i) permit the electronic and telephonic solicitation, delivery
and appointment of proxies in accordance with and to the extent permitted under
Ohio law, (ii) permit the Board of Directors to establish the number of
directors at not less than four but no more than fourteen; (3) in favor of
ratification of the appointment of KPMG LLP as independent public accountants
for the Company for 2000; (4) against the shareholder proposal; and (5) at the
discretion of the holders of the proxies, in the transaction of such other
business as may properly come before the Annual Meeting or any adjournment(s)
thereof.
The holders of the proxies may, in their discretion, vote for substitute
nominee(s) designated by the Board of Directors, or take other legally
permissible action in the event that any nominee becomes unable to serve for any
reason presently unknown.
A proxy may be revoked at any time before exercise by written notice to the
Company bearing a later date than the proxy, by submission of a later dated
proxy, or by voting in person in open meeting (although presence at the Annual
Meeting will not in and of itself constitute revocation of the proxy). Any
written notice revoking a proxy should be sent to Huffy Corporation, 225 Byers
Road, Miamisburg, Ohio 45342, Attention: Nancy A. Michaud, Secretary.
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ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes. The Board
of Directors of the Company recommends that three Directors be elected each for
a three year term expiring in 2003. The Board of Directors of the Company
currently has nine Directors: three whose terms expire in 2000, three whose
terms expire in 2001, and three whose terms expire in 2002. W. Anthony Huffman,
Donald K. Miller and Joseph P. Viviano, whose terms expire in 2000, have each
been recommended by the Nominating and Governance Committee of the Board of
Directors and nominated by the Board of Directors for election to the Board of
Directors for a three year term expiring in 2003.
Under Ohio law, if a Shareholder gives written notice to the President, a
Vice President or the Secretary of the Company, not less than 48 hours before
the time fixed for the Annual Meeting, that such Shareholder desires the voting
at the election of Directors to be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the meeting by the chairman
or secretary of the meeting or by or on behalf of the Shareholder giving such
notice, then the Directors will be elected by cumulative voting. In such event,
each Shareholder has the right to give one candidate a number of votes equal to
the number of Directors then being elected multiplied by the number of such
Shareholder's shares, or to distribute such Shareholder's votes on the same
principle among two or more candidates. In the event that Directors are elected
by cumulative voting and cumulated votes represented by proxies solicited hereby
are insufficient to elect all the nominees, then the holders of the proxies
intend to vote such proxies cumulatively for the election of as many of such
nominees as possible and in such order as the holders may determine. Votes will
be counted by LaSalle Bank, N.A. acting as the inspector of elections.
Under Ohio law and the Company's Code of Regulations, the three nominees
receiving the greatest number of votes shall be elected as Directors. Shares as
to which authority to vote is withheld, abstentions and shares not voted by
brokers and other entities holding shares on behalf of beneficial owners will
not be counted and will have no effect on the outcome of the election.
The following table sets forth certain information as to each nominee for
Director and each other person whose term of office as Director will continue
after this Annual Meeting:
SERVED AS
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR THE PAST FIVE YEARS(1) AGE SINCE
- ------------------------------------------------------------ --- ---------
NOMINEES FOR TERMS EXPIRING IN 2003
W. Anthony Huffman, retired from the Company and currently 57 1997
President of Huffman Travel Limited (engaged in travel
services) since 1997; prior thereto Vice
President-Corporate Affairs of the Company from 1994 to
1995
Donald K. Miller, Chairman of Axiom International Investors, 68 1988
LLC (engaged in international equity asset management)
since 1999; currently President of Presbar Corporation
(engaged in private equity investing and investment
banking) since 1986; prior thereto Chairman of Greylock
Financial Inc. since 1992; and Chairman and Chief
Executive Officer of Thomson Advisory Group L.P. (now
PIMCO Advisors Holdings L.P.) from 1990-1993 and Vice
Chairman from 1993-1994(2)
Joseph P. Viviano, Vice Chairman of Hershey Foods 61 1996
Corporation (engaged in the manufacture, distribution and
sale of consumer food products) since 1999; prior thereto
President and Chief Operating Officer of such company
since 1994(3)
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SERVED AS
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR THE PAST FIVE YEARS(1) AGE SINCE
- ------------------------------------------------------------ --- ---------
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Don R. Graber, Chairman of the Board, President and Chief 56 1996
Executive Officer of the Company since December, 1997;
prior thereto President and Chief Operating Officer of the
Company since July, 1996; prior thereto President of
Worldwide Household Products Group and Group Vice
President of The Black & Decker Corporation (engaged in
the marketing and manufacture of products used in and
around the home and for commercial applications) since
1993(4)
Linda B. Keene, Vice President-Market Development of 48 1993
American Express Financial Advisors since 1994 (engaged in
financial advising services)(5)
Thomas C. Sullivan, Chairman and Chief Executive Officer of 62 1995
RPM, Inc. (manufacturer of specialty chemicals and
coatings)(6)
DIRECTORS WHOSE TERMS EXPIRE IN 2002
Jack D. Michaels, Chairman, President and Chief Executive 62 1993
Officer of HON INDUSTRIES Inc. (manufacturer and marketer
of metal and wood office furniture and pre-fabricated
fireplaces/stoves) since 1995; prior thereto President and
Chief Executive Officer of such company(7)
James F. Robeson, Vice Chairman of Roberds, Inc. (retailer 63 1994
of a broad range of home furnishing products) since 1998;
prior thereto Chief Executive Officer and President of
Roberds, Inc. (retailer of a broad range of home
furnishing products) from 1997 to 1998 and consultant to
various distribution companies since 1993; prior thereto
Herbert E. Markley Visiting Scholar in Business at Miami
University since 1995(8)
Patrick W. Rooney, Chairman of the Board and Chief Executive 64 1995
Officer of Cooper Tire & Rubber Company (manufacturer of
tires and inner tubes for the automotive aftermarket, and
engineered rubber products for the O.E.M. automotive
industry) since 1998; prior thereto Chairman of the Board,
President and Chief Executive Officer of such company
since 1994(9)
- ---------------
(1) Except as disclosed herein, no information is included in this Proxy
Statement for any portion of a period in which a Director did not hold
office as a Director of the Company.
(2) Mr. Miller is a Director of Layne Christensen Company and RPM, Inc.
(3) Mr. Viviano is a Director of Chesapeake Corporation, Hershey Foods
Corporation, Harsco Corporation and R.J. Reynolds Tobacco Holdings, Inc.
(4) Mr. Graber is a Director of Precision Castparts Corporation.
(5) Ms. Keene is a Director of Scholastic Corporation.
(6) Mr. Sullivan is a Director of Pioneer-Standard Electronics, Inc., RPM, Inc.,
Kaydon Corporation, and National City Bank.
(7) Mr. Michaels is a Director of HON INDUSTRIES Inc. and Snap-On Incorporated.
(8) Mr. Robeson is a Director of Roberds, Inc. and Moto Photo, Inc.
(9) Mr. Rooney is a Director of Alltrista Corporation, Cooper Tire & Rubber
Company, and Sky Financial Group, Inc.
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MEETINGS BY, AND CERTAIN COMMITTEES OF, THE COMPANY'S BOARD OF DIRECTORS
James F. Robeson (Chairman), Linda B. Keene and Donald K. Miller comprise
the Audit Committee of the Board of Directors. The Audit Committee meets with
the Company's independent public accountants, internal auditors, and financial
management executives and reviews the scope and results of audits as well as
recommendations made by the Company's auditors and executives with respect to
internal accounting controls. During the last fiscal year, the Audit Committee
met two times.
Thomas C. Sullivan (Chairman), Patrick W. Rooney and Joseph P. Viviano
comprise the Compensation Committee of the Board of Directors. The Compensation
Committee sets salary and benefits policy, and determines compensation and
benefit levels for the Company's Officers and certain other key employees.
During the last fiscal year, the Compensation Committee met four times.
Jack D. Michaels (Chairman), W. Anthony Huffman and Linda B. Keene comprise
the Nominating and Governance Committee. This Committee seeks out and reviews
the qualifications of possible candidates for Board membership. Shareholders may
submit nominee recommendations, complete with qualifications, to any member of
the Nominating and Governance Committee at any time. The Committee recommends to
the Board of Directors candidates for election as Directors at annual meetings,
candidates to fill vacancies on the Board, and candidates for Committees of the
Board. The Committee also conducts the annual Chief Executive Officer and Board
assessments. During the last fiscal year, the Nominating and Governance
Committee met two times.
During the last fiscal year, the Board of Directors met 12 times. No
Director attended fewer than 75 percent of the aggregate number of meetings of
the Board of Directors and meetings of Committees thereof during the time such
person was a Director and member of any such Committee.
COMPENSATION OF DIRECTORS
In 1999, the Company's non-employee Directors ("Outside Directors")
received annual base compensation of $22,500. All Directors received additional
compensation of $1,000 per Board meeting attended. The Chairmen of the Audit
Committee, the Compensation Committee, and the Nominating and Governance
Committee received additional compensation of $3,000 per year. Each Committee
member (including the Chairman of the Committee) received $1,000 for each
Committee meeting attended. Additionally, Directors received consulting fees of
$500 for each half day of service provided outside their normal duties as
Directors when such services were provided at the request of management of the
Company and $500 for Board of Directors' visits to Company operation sites.
Directors received $2,500 for attendance at Board of Directors' retreat meetings
but such fee was in lieu of all meeting fees for Board and Committee meetings
held during such retreat. No Director who is an employee of the Company receives
any compensation for services as a Director.
DIRECTOR PLANS
Pursuant to the Company's 1998 Director Stock Option Plan (the "1998
Directors Plan"), Outside Directors may elect to defer payment of their fees or
take part or all of their annual base fees in the form of stock options. The
1998 Directors Plan provides for the automatic grant of options to purchase
2,000 shares of the Company's Common Stock on the second business day after each
Annual Meeting of Shareholders. Options are granted to Outside Directors at a
purchase price equal to 100 percent of the fair market value of the Common Stock
on the date of grant.
In addition to options granted automatically every year, if an Outside
Director files an irrevocable election with the Secretary of the Company prior
to May 1 of any year and on such other date(s) as may be designated from time to
time electing not to receive all or a portion of his or her annual base
compensation to be earned in the following 12 month period beginning May 1 and
ending April 30, then the Company shall grant options automatically on May 1 or
such other dates, if applicable, to such Outside Director. The Company's policy
is to encourage stock ownership and thus the formula used to determine the
number of shares for which an option may be granted pursuant to such an election
pro-
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vides a premium for such deferrals and such
formula is as follows:
Portion of Annual Base
Compensation Not Received x 1.5 = Number of Shares
- -------------------------
Fair Market
Value minus $1.00
For the 12 month period beginning May 1, 1999, and ending April 30, 2000,
Outside Directors have elected not to receive, in the aggregate, $147,500 of
their annual base compensation and the Company granted options to them based on
such elections in accordance with the 1998 Directors Plan. The option price per
share of the Common Stock covered by such options is $1.00.
No options may be exercised until six months following the date upon which
it was granted, except upon a change in control (as defined in the 1998
Directors Plan), or due to retirement from the Board of Directors because of
total and permanent disability, expiration of a Director's term of office, or
otherwise in accordance with the current Board of Directors' policy or upon the
death of the option holder. A notice to exercise an option must be accompanied
by full payment of the purchase price for the Common Stock being purchased. The
1998 Directors Plan is administered by a Committee consisting of not less than
three Officers of the Company who are not entitled to participate in the 1998
Directors Plan.
In February, 1996, the Board of Directors discontinued the Directors'
Retirement Plan, freezing retirement benefits for those Board members vested in
such Plan through their current term. Under the Directors' Retirement Plan, each
Outside Director who served as a member of the Board of Directors five years or
more earned an annual retirement benefit of $5,000 plus $1,000 for each year of
service as an Outside Director (prorated for partial years) in excess of five
years service, not to exceed a maximum annual benefit of $10,000. Only one
Outside Director has vested retirement benefits under such plan.
The Board of Directors approved a policy on Director Ownership of Huffy
Common Stock, effective April 17, 1998. This policy requires Outside Directors
to acquire periodically and own up to 3,200 shares of Common Stock of the
Corporation. Such ownership amounts are determined on the anniversary date of
such Director's nomination to the Board of Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Company's shares
of Common Stock reported to the Company as of January 2, 2000, for each Director
and Nominee and for each of the Executive Officers named in the Summary
Compensation Table (the "Named Executive Officers"), and for all Directors,
Nominees and Executive Officers as a group. For purposes of the table, a person
is considered to "beneficially own" any shares of Common Stock (i) over which
the person exercises sole or shared voting or investment power or (ii) of which
the person has the right to acquire beneficial ownership at any time within 60
days after January 2, 2000.
AMOUNT AND
NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)
- ------------------------------ -------------
Stanley H. Davis.............. 15,209(3)
Thomas A. Frederick........... 57,999(4)
Don R. Graber................. 277,795(5)
Timothy G. Howard............. 69,272(6)
W. Anthony Huffman............ 178,681(7)
Linda B. Keene................ 20,355(8)
Jack D. Michaels.............. 19,303(9)
Nancy A. Michaud.............. 51,403(10)
Donald K. Miller.............. 213,756(11)
James F. Robeson.............. 23,856(12)
Patrick W. Rooney............. 15,845(13)
Thomas C. Sullivan............ 24,188(14)
Joseph P. Viviano............. 27,890(15)
All Directors, Nominees and
Executive Officers,
including Named Executive
Officers, as a Group (13
persons).................... 995,552
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(1) All shares are held with sole voting and sole investment power unless
otherwise indicated in the footnotes below.
(2) Except for Don R. Graber, W. Anthony Huffman and Donald K. Miller whose
Common Stock ownership is 2.7 percent, 1.8 percent, and 2.1 percent,
respectively, no such beneficial owner owns more than one percent of the
issued and outstanding shares of Common Stock of the Company. All
Directors, Nominees and Executive Officers as a group own 9.8 percent of
the issued and outstanding shares of Common Stock of the Company as of
January 2, 2000.
(3) Mr. Davis has shared investment power with respect to 100 shares held by
his spouse. The total amount also includes 10,758 shares as to which Mr.
Davis holds options exercisable within 60 days.
(4) Mr. Frederick has shared voting and shared investment power with respect to
7,833 shares held jointly with his spouse. The total amount also includes
45,384 shares as to which Mr. Frederick holds options exercisable within 60
days.
(5) Mr. Graber has shared investment power with respect to 1,000 shares held by
his spouse. The total amount also includes 236,250 shares as to which Mr.
Graber holds options exercisable within 60 days.
(6) Mr. Howard has shared voting and shared investment power with respect to
8,772 shares held jointly with his spouse. The total amount also includes
48,682 shares as to which Mr. Howard holds options exercisable within 60
days.
(7) Mr. Huffman has sole voting and sole investment power with respect to
117,180 shares, of which 20,930 shares are held by him as custodian for his
children. Mr. Huffman has shared investment power with respect to 975
shares held by his spouse. The total amount also includes 39,596 shares as
to which Mr. Huffman holds options exercisable within 60 days.
(8) Ms. Keene has shared voting and shared investment power with respect to
3,886 shares held jointly with her spouse. The total amount also includes
16,469 shares as to which Ms. Keene holds options exercisable within 60
days.
(9) The total amount also includes 15,860 shares as to which Mr. Michaels holds
options exercisable within 60 days.
(10) Ms. Michaud has shared investment power with respect to 2,278 shares held
by her spouse as trustee. The total also includes 40,998 shares as to which
Ms. Michaud holds options exercisable within 60 days.
(11) Mr. Miller has sole voting and sole investment power with respect to
187,102 shares, of which 40,000 shares are held by him as custodian for his
children. Mr. Miller has shared investment power with respect to 4,475
shares held by his spouse. The total amount also includes 26,654 shares as
to which Mr. Miller holds options exercisable within 60 days.
(12) Mr. Robeson has shared investment power with respect to 1,000 shares held
by his spouse. The total amount also includes 21,029 shares as to which Mr.
Robeson holds options exercisable within 60 days.
(13) The total amount includes 13,602 shares as to which Mr. Rooney holds
options exercisable within 60 days.
(14) The total amount includes 16,938 shares as to which Mr. Sullivan holds
options exercisable within 60 days.
(15) Mr. Viviano has shared voting and shared investment power with respect to
500 shares held jointly with his spouse. The total amount also includes
14,590 shares as to which Mr. Viviano holds options exercisable within 60
days.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to Shareholders
known to the Company to be beneficial owners of more than five percent of the
Company's Common Stock.
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AMOUNT
AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS(4)
- -------------------------- ---------- ----------
David L. Babson and
Company, Inc.(1)
One Memorial Drive
Cambridge, Massachusetts
02142-1300 1,206,200 11.87%
Neuberger Berman, LLC(2)
605 Third Avenue
New York, New York
10158-3698 697,500 6.87%
Dimensional Fund
Advisors Inc.(3)
1299 Ocean Avenue,
11th Floor
Santa Monica, California
96401 844,650 8.31%
- ---------------
(1) This information is taken from the Schedule 13G, dated January 27, 2000,
filed by David L. Babson and Company, Inc. with the Securities and Exchange
Commission, which disclosed David L. Babson and Company, Inc. has sole
voting power with respect to 1,206,200 shares, shared voting power with
respect to 0 shares, sole investment power with respect to 1,206,200 shares,
and shared investment power with respect to 0 shares.
(2) This information is taken from the Schedule 13G, dated January 28, 2000,
filed by Neuberger Berman, LLC with the Securities and Exchange Commission,
which disclosed Neuberger Berman, LLC has sole voting power with respect to
380,200 shares, shared voting power with respect to 0 shares, sole
investment power with respect to 0 shares, and shared investment power with
respect to 697,500 shares.
(3) This information is taken from the Schedule 13G, dated February 4, 2000,
filed by Dimensional Fund Advisors Inc. with the Securities and Exchange
Commission which disclosed Dimensional Fund Advisors Inc. has sole voting
power with respect to 844,650 shares, shared voting power with respect to 0
shares, sole investment power with respect to 844,650 shares, and shared
investment power with respect to 0 shares.
(4) Percentages listed are those disclosed in the referenced Schedules 13G and
are not verified by the Company.
REPORT OF COMPENSATION COMMITTEE
Decisions on compensation and stock options of the Company's Executive
Officers are made by the Compensation Committee of the Board of Directors (the
"Committee") which is comprised of non-employee Directors.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Company's executive compensation program is designed to tie a
significant portion of executive compensation to the Company's success in
meeting specified performance goals and to appreciation in the price of the
Company's Common Stock. This strategy is designed to attract and retain the best
possible executive talent, to motivate these executives to achieve the Company's
goals, to link executive and Shareholder interests, and to provide a
compensation package that recognizes individual contributions as well as overall
business results. In reviewing the individual performance of the Named Executive
Officers whose compensation is detailed in this Proxy Statement, other than that
of Mr. Don R. Graber, the Chief Executive Officer, the Committee takes into
account the views of Mr. Graber.
The Committee compares the Company's executive compensation structure
against those of other manufacturing businesses and retail service providers
whose size is adjusted to that of the Company. The Committee believes that such
manufacturing businesses and service providers generally represent the Company's
most direct competitors for executive talent. The Committee's policy is to
evaluate competitive base salary ranges and total compensation based on the 50th
percentile level of total compensation paid by manufacturing businesses and
service providers for comparable positions. The Company's actual overall
executive compensation levels are generally below such 50th percentile levels.
The Committee reviews competitive pay practices on an annual basis.
The key elements of the Company's 1999 executive compensation program
consist of Base Salary, the Annual Performance Incentive Plan, the Long-Term
Incentive Plan and Stock Options. In addition, while the elements of
compensation described below are considered separately, the Committee takes into
account the full compensation package afforded by the Company to the individual,
including pension benefits, supplemental retirement benefits, severance plans,
in-
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surance and other benefits, as well as the programs described below. The
Committee has reviewed Section 162(m) of the Internal Revenue Code of 1986, as
amended, which limits the deduction for certain executive compensation and,
based on present levels of compensation, does not anticipate the loss of
deductibility for any compensation paid over the next year.
BASE SALARY
Base salary ranges for Executive Officers are determined by periodic
recommendations (most recently in 1999) by an independent compensation
consultant who evaluates the responsibilities of each such position, and
compares the Company's salary level for the position to comparable positions at
other manufacturing businesses and retail service providers nationwide. The
Company's policy is to generally pay competitive base salaries by using the 50th
percentile levels at manufacturing businesses and service providers for
comparable positions as guidelines, and to review such salary levels annually.
Annual salary adjustments within such base salary ranges are determined by
evaluating the performance of the Executive Officer and the Executive Officer's
current base salary as compared to 50th percentile competitive pay practices and
the Company's overall annual salary increase budget. Performance of an Executive
Officer is evaluated based upon the employee's accomplishment of his or her
duties, objectives established by his or her supervisor (in the case of Mr.
Graber by the Board of Directors), and general management abilities. Elected
Chairman, President and Chief Executive Officer, in December 1997, Mr. Graber's
base salary was increased, effective January 1, 1999, to $540,000.
ANNUAL PERFORMANCE INCENTIVE PLAN
Executive Officers may receive an annual bonus under the Annual Performance
Incentive Plan based upon corporate and individual performance objectives
established at the beginning of each year. The corporate performance measure for
bonus payments in 1999 approved by the Committee and by the Board of Directors
was based equally on return on average net assets ("RONA") and on earnings per
share ("EPS"). For 1999, threshold level bonus would have been achieved on
corporate performance when RONA was at 9.6 percent, and when EPS was at $1.46.
Individual performance is based on achievement of personal objectives. Personal
objectives are both qualitative, such as certain business strategy development
and/or implementation, improved customer satisfaction, management effectiveness
and personal development, and quantitative, such as achieving cost reduction,
production and sales goals. In 1999, the Company reported an EPS of $(3.13).
RONA was negative. Based on these results, none of the Executive Officers,
including Mr. Graber, was awarded a bonus for Corporate on individual
performance.
LONG-TERM INCENTIVE PLAN
The Executive Officers participate in the Company's Long-Term Incentive
Plan which is based on the Company's EPS, RONA and Total Shareholder Return
("TSR") during the period as compared to targets for each established by the
Compensation Committee prior to the commencement of the award period. Under this
plan, in 1999, Executive Officers were each eligible to earn awards ranging from
12.5 to 25 percent (25 percent for Mr. Graber) of their annual base salaries for
threshold awards. For 1999, threshold level awards required an EPS of $1.46,
RONA of 9.6 percent, and TSR of 14.4 percent. For 1999, EPS was $(3.13). RONA
and TSR were negative. As a result, for the award cycle ending December 31,
1999, no Executive Officers earned awards. For the award period beginning
January 1, 1997 (which is payable in three installments), based on 1997 EPS of
$.78 (including discontinued operations), Mr. Graber received the last one-third
of a target award payment of $66,667.
STOCK OPTIONS
Under the Company's 1998 Key Employee Stock Plan ("1998 Plan"), stock
options may be granted by the Committee to the Company's Executive Officers and
other key managers. The Committee sets guidelines for the size and frequency of
stock option grants which grants are based upon the Executive Officers'
performance and results achieved. Stock options are granted to Executive
Officers with an exercise price equal to the closing market price of the Common
Stock on the date of grant and become exercisable in four equal, annual
installments commencing one
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year from the date of grant. This approach is designed to motivate the creation
of Shareholder value over the long term since the full benefit of the
compensation package cannot be realized unless Common Stock price appreciation
occurs. In February 1999, the Committee awarded Mr. Graber 30,000 options at
$13.875 per share. No other Executive Officers were granted options in 1999. As
of January 2, 2000, Mr. Graber beneficially owned 277,795 shares of Common
Stock.
Through the programs described above, a significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance and returns to Shareholders, a policy the Committee intends to
continue.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS(1)
Patrick W. Rooney, Thomas C. Sullivan and Joseph P. Viviano
- ---------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, this report
and the graphs set forth on page 13 shall not be incorporated by reference
into any such filings.
CERTAIN RELATIONSHIPS AND OTHER RELATED TRANSACTIONS
Thomas C. Sullivan, a Director, is also a director of National City Bank, a
national banking association, which is one of the Company's lenders pursuant to
a Credit Agreement, Restructuring Agreement, and Intercreditor and Subordination
Agreement, each dated January 26, 2000, pursuant to which the Company is
indebted in the total amount of approximately $67 million (excluding certain
real estate leases), of which approximately $2.8 million is comprised of
indebtedness to National City Bank. The loans provided to the Company were
provided as a result of arms-length negotiations which management of the Company
believes to be on terms and conditions competitive with those offered to other
borrowers of National City Bank similarly situated with the Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for 1999 were Patrick W. Rooney,
Thomas C. Sullivan, and Joseph P. Viviano, none of whom is or was a current or
former officer or employee of the Company or any of its subsidiaries. No
Executive Officer of the Company serves as a Director or as a member of a
Committee of any company of which any of the Company's Directors are executive
officers.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER INFORMATION
The following table shows, for the fiscal years ended December 31, 1997,
1998 and 1999, the cash compensation paid by the Company as well as certain
other compensation paid or accrued for those years, to each of the five most
highly compensated Executive Officers, including Don R. Graber, the Chairman,
President and Chief Executive Officer of the Company, in all capacities in which
they served:
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ---------------------- ----------
OTHER NUMBER
ANNUAL RESTRICTED OF ALL OTHER
NAME AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) SATION(2) AWARD(S)(3) SARS(4) PAYOUTS(5) SATION(6)
- ---------------------------- ---- --------- -------- --------- ----------- -------- ---------- ---------
Don R. Graber 1999 $540,000 $ 0 $ 1,245 $112,947 30,000 $ 66,667 $20,232
Chairman of the Board 1998 519,236 311,600 13,186 94,380 155,000 131,611 22,838
President and Chief 1997 407,693 396,000 5,073 111,916 0 66,667 16,321
Executive Officer
Thomas A. Frederick 1999 $208,385 $ 0 $ 2,036 $ 9,487 0 $ 10,383 $ 8,971
Vice President-Finance, 1998 202,442 71,525 8,841 13,147 13,000 32,155 9,887
Chief Financial Officer 1997 181,692 105,750 2,578 41,594 12,503 18,841 15,222
and Treasurer
Nancy A. Michaud 1999 $186,400 $ 0 $ 905 $ 7,731 0 $ 9,100 $ 8,637
Vice President-General 1998 179,254 63,625 2,657 10,340 16,500 29,670 9,363
Counsel and Secretary 1997 159,692 92,875 2,347 33,670 11,055 17,850 15,370
Stanley H. Davis 1999 $185,708 $ 0 $ 3,882 $ 8,994 0 $ 10,208 $ 8,206
Vice President-Human 1998 184,469 64,600 1,427 0 10,000 22,093 8,107
Resources and 1997 77,404 90,675 41,456 0 11,516 10,208 1,548
Organization Development
Timothy G. Howard 1999 $175,708 $ 0 $ 3,061 $ 34,802 0 $ 9,100 $ 8,788
Vice President-Controller 1998 173,388 60,950 3,083 23,016 10,000 28,618 9,602
1997 158,462 93,600 3,461 63,378 10,792 17,383 8,636
- ---------------
(1) "Salary" and "Bonus" include amounts that would have been payable currently,
but were deferred at an election of an Executive Officer, such as through
the Company's 401(k) Savings Plan.
(2) No perquisites were provided or other personal benefits paid to a Named
Executive Officer in 1999 which exceeded the lesser of $50,000 or ten
percent of the total annual salary and bonus reported for such Named
Executive Officer.
(3) The 1998 Restricted Share Plan replaces a portion of the cash retirement
benefits accrued under the Company's Supplemental/Excess Benefit Plan (the
"Benefit Plan") with the Company's Common Stock granted as restricted
shares. The Benefit Plan provides that each recipient will be entitled to an
annual grant of restricted shares in an amount having a fair market value
equal to one-half of the total dollar amount of such recipient's then
accrued and unfunded benefit under the Benefit Plan as determined by the
Company's actuary. There were a total of 13,647 restricted shares awarded to
Named Executive Officers on June 10, 1999, which vest, following a six month
period upon the earlier of death, disability, retirement or vesting under
the Company's Benefit Plan in accordance with the terms of the 1998
Restricted Share Plan and which have a value, in the aggregate at December
31, 1999 of $71,646.75. Dividends, when declared and payable, will be paid
on the restricted stock from date of grant for all the grants made in 1999.
(4) These numbers represent options for shares of the Company's Common Stock
granted pursuant to the Company's 1988 Stock Option Plan and Restricted
Share Plan and the 1998 Key Employee Stock Plan. See next table labeled
"Option Grants in Last Fiscal Year" for more detailed information on such
options.
(5) Long Term Incentive Pay consists of amounts paid to each of the Named
Executive Officers under the Company's Long-Term Incentive Plan discussed
later in this Proxy Statement under the table labeled "Long Term Incentive
Plans."
(6) "All Other Compensation" includes (i) Company contributions to the Company's
401(k) Savings Plan in the amount of $3,200 for Don R. Graber, Thomas A.
Frederick, Stanley H. Davis, Nancy A. Michaud, and Timothy G. Howard to
match 1999 pre-tax elective deferral contributions (included under "Salary"
and "Bonus") made by each Named Executive Officer to such plan; (ii) accrued
interest of $173, $436, and $855 (being interest earned in excess of 120
percent of the applicable federal long term rate provided under Section
1274(d) of the Internal Revenue Code of 1986, as amended), by Thomas A.
Frederick, Nancy A. Michaud, and Timothy G. Howard, respectively, on the
Company's Capital Accumulation Plan (Timothy G. Howard deferred salary in
1986, and Thomas A. Frederick and Nancy A. Michaud deferred salary in 1987
pursuant to such plan); and (iii) the principal amounts of $17,032, $5,598,
$5,001, $5,006, and $4,733 credited by the Company for Don R. Graber, Thomas
A. Frederick, Nancy A. Michaud, Stanley H. Davis, and Timothy G. Howard,
respectively, pursuant to the Company's Special Deferred Compensation
Agreements. Refer to "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" later in this Proxy Statement for
descriptions of such special deferred compensation agreements.
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STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1998 Key Employee Stock Plan ("1998 Plan") to the
Named Executive Officers for the year ended December 31, 1999, all of which are
reflected in the Company's Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------
% OF POTENTIAL REALIZABLE VALUE
NUMBER TOTAL AT ASSUMED ANNUAL RATES
OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION RATES
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM(4)
OPTIONS IN FISCAL PRICE PER EXPIRATION --------------------------
NAME GRANTED(1) YEAR SHARE(2) DATE 0% 5% 10%
---- ---------- ---------- --------- ---------- ---- -------- --------
Don R. Graber................ 30,000 14.85% $13.8750(3) 2/11/09 -- $261,777 $663,395
Thomas A. Frederick.......... -- -- -- -- -- -- --
Stanley H. Davis............. -- -- -- -- -- -- --
Nancy A. Michaud............. -- -- -- -- -- -- --
Timothy G. Howard............ -- -- -- -- -- -- --
- ---------------
(1) The options were granted pursuant to the Company's 1998 Plan. All options
granted under the 1998 Plan in 1999 are non-qualified stock options. No
stock appreciation rights were granted under the 1998 Plan in 1999.
(2) Upon a change in control (as defined in the 1998 Plan), all options then
outstanding become fully and immediately exercisable and the then
outstanding option of an employee whose employment is terminated, except for
cause, within twenty-four months of such change in control, or if more than
one of the events leading to a change in control occurs, then within
twenty-four months after the last event to occur, shall remain exercisable
for three months from the date of such termination, but not after the
expiration of the exercise period. Those employees who terminate employment
due to disability or retirement may exercise non-qualified stock options
after such termination of employment until five years after such retirement
or disability. Under the 1998 Plan, upon the death of an employee or a
retired or disabled former employee, all options under the 1998 Plan shall
remain exercisable for six months following the date of death. Except as set
forth above, upon termination of employment, all options terminate.
(3) For the grant of options to Don R. Graber, the Common Stock closing market
price on date of grant was $13.8750. The exercise price may be paid in cash
or in shares of Common Stock valued at fair market value on the date of
delivery or by a combination of cash and Common Stock. The options become
exercisable ratably over a four-year period beginning in 2000.
(4) For the grant of options to Don R. Graber, the options are calculated on
option terms of ten years beginning February 11, 1999 through February 11,
2009. The dollar amounts under these columns are the result of calculations
at the zero percent, the five percent and the ten percent rates set by the
Securities and Exchange Commission and therefore are not intended to
forecast possible future appreciation of the Company's Common Stock. The
Company did not use an alternative formula for a grant date valuation, as
the Company is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
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OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the year ended
December 31, 1999, and unexercised options held as of December 31, 1999:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF VALUE REALIZED OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS
SHARES (MARKET PRICE AT END(1) AT FISCAL YEAR-END(1)(2)
ACQUIRED EXERCISE LESS --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------------- ----------- ------------- ----------- -------------
Don R. Graber...................... 0 $ 0 236,250 138,750 472,500 0
Thomas A. Frederick................ 0 0 45,384 30,249 0 0
Stanley H. Davis................... 0 0 10,758 15,758 0 0
Nancy A. Michaud................... 0 0 40,998 31,572 0 0
Timothy G. Howard.................. 3,714 9,445 48,682 38,751 0 0
- ---------------
(1) The number of unexercised options includes options granted under the
Company's 1988 Stock Option Plan and Restricted Share Plan (the "1988 Plan")
and the Company's 1998 Plan. No SARs were issued or outstanding as of
December 31, 1999 under the 1988 Plan or 1998 Plan.
(2) The value of "in-the-money" options is calculated on a per share basis as
the amount by which the fair market value of a share of the underlying
Common Stock represented by an option exceeds, as of December 31, 1999, the
per share exercise price of the option.
LONG-TERM INCENTIVE PLANS
The following table provides information concerning awards made to the
Named Executive Officers during the last fiscal year under the Company's
Long-Term Incentive Plan ("LTIP"). Payments made under the LTIP in the year
ended December 31, 1999 are included in the Summary Compensation Table.
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
NUMBER OF ESTIMATED FUTURE PAYOUTS UNDER
SHARES PERFORMANCE OR NON-STOCK PRICED BASE PLAN
UNITS OTHER PERIOD UNTIL -------------------------------
NAME OTHER RIGHTS MATURATION OR PAYMENT THRESHOLD TARGET MAXIMUM
---- ------------ ----------------------- --------- -------- --------
Don R. Graber.................... (1) 3 years ending 12/31/02 $135,000 $270,000 $540,000
Thomas A. Frederick.............. (1) 3 years ending 12/31/02 26,875 53,750 107,500
Stanley H. Davis................. (1) 3 years ending 12/31/02 23,875 47,750 95,500
Nancy A. Michaud................. (1) 3 years ending 12/31/02 24,375 48,750 97,500
Timothy G. Howard................ (1) 3 years ending 12/31/02 22,625 45,250 90,500
- ---------------
(1) Awards earned under the Company's 2000 Long-Term Incentive Plan ("Plan")
cycle are payable during the year following the end of a three-year award
cycle in 2003. For the Named Executive Officers, the Plan is based one-
third on earnings per share, one-third on return on net assets, and
one-third on total shareholder return over the performance period compared
to targets approved by the Compensation Committee at the beginning of the
performance period.
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PERFORMANCE GRAPHS
Set forth below is a line graph comparing the yearly percentage change in
the Company's cumulative total Shareholder return on its Common Stock with the
Standard & Poor's 500 Composite Stock Index ("S&P 500") and the Standard &
Poor's Leisure Time Products Index ("Leisure Index"). The performance graph is
for the five-year period ended December 31, 1999:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
HUFFY CORPORATION, S&P 500, AND LEISURE TIME PRODUCTS INDEX*
HUFFY S&P 500 LEISURE TIME PRODUCTS
----- ------- ---------------------
'1994' 100.00 100.00 100.00
'1995' 69.77 137.11 133.31
'1996' 101.35 166.50 167.30
'1997' 97.61 219.84 216.67
'1998' 121.78 282.14 166.40
'1999' 41.27 339.11 111.47
* Assumes $100 invested on December 31, 1994 in Company Common Stock, the S&P
500 and the Leisure Time Products Index and the reinvestment of dividends.
PENSION PLAN TABLE
The Company's Salaried Employees' Retirement Plan (the "Retirement Plan")
is a defined benefit pension plan which provides benefits to salaried employees
not otherwise covered under another pension plan of the Company. The following
table shows the estimated annual benefits (assuming payments made on the normal
life annuity with 12 months certain) payable upon retirement at age 65 to an
employee in specified compensation and years of service classifications.(1)
YEARS OF SERVICE
---------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ --------- --------- --------- --------- ---------
$ 100,000 $ 20,701 $ 26,768 $ 32,835 $ 38,902 $ 38,902
250,000 54,451 71,768 89,085 106,402 106,402
500,000 110,701 146,768 182,835 218,902 218,902
750,000 166,951 221,768 276,585 331,402 331,402
1,000,000 223,201 296,768 370,335 443,902 443,902
1,250,000 279,451 371,768 464,085 556,402 556,402
1,500,000 335,701 446,768 557,835 668,902 668,902
- ---------------
(1) The Internal Revenue Code of 1986, as amended (the "Code"), places certain
limitations on the annual pension benefits which can be paid from the
Retirement Plan. Such limitations are not reflected in the table. This table
reflects the total aggregate benefits payable annually upon retirement
represented by the combination of benefits under the Retirement Plan, the
Restricted Share Plan, and the Company's Supplemental/Excess Benefit Plan
("Benefit Plan"), which is discussed below. The Benefit Plan requires an
offset of one-half of the Social Security primary insurance amount ("PIA"),
and such amount has been deducted from the figures in the table. The PIA
amount used in developing the above figures is $17,196. Thus, the offset is
$8,598 for a person with 30 or more years of service.
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Monthly benefits upon normal retirement (age 65) are the sum of (i) 0.9
percent of final average monthly compensation (as defined under the Retirement
Plan to include salary, incentive compensation, commissions and overtime pay and
based upon the highest three consecutive years in the last ten) up to the
monthly Social Security Covered Compensation Amount, plus 1.3 percent of the
amount by which final average monthly compensation exceeds the monthly Social
Security Covered Compensation Amount, times years of service (to a maximum of 30
years) and (ii) .075 percent of final average monthly compensation (to a maximum
of $4,166.67) times years of service (to a maximum of 20 years). Additional
provisions for early retirement are included. Mr. Graber has 11 years of
credited service, Mr. Frederick has 13 years of credited service, Mr. Davis has
2 years of credited service, Ms. Michaud has 13 years of credited service, and
Mr. Howard has 26 years of credited service. The 1999 compensation covered under
the Retirement Plan, Restricted Share Plan, and Benefit Plan for Mr. Graber was
$606,667.
The Company has established the Benefit Plan which provides additional
benefits to participants in the Retirement Plan whose benefits are reduced by
limitations imposed under Sections 415 and 401(a)(17) of the Code and Section
2004 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Under the Benefit Plan, Executive Officers and certain key employees
will receive at the same time and in the same form as benefits paid under the
Retirement Plan, additional benefits in a monthly amount which, when added to
the benefits paid to the participant under the Retirement Plan, will equal the
benefit amount such participant would have earned but for the limitations
imposed by the Code and ERISA to the extent such limitations apply, and the
amount by which the sum of 45 percent of final average monthly compensation (as
defined under the Benefit Plan to include salary and bonus and based upon the
highest three years in the last ten) less 50 percent of the monthly PIA payable
under Social Security, with the difference prorated for less than 30 years of
service, plus $2,500 per year, exceeds benefits payable only under the
Retirement Plan, less the portion of such participant's benefit which has been
replaced by benefits under the Restricted Share Plan, as described in footnote 3
to the Summary Compensation Table. The Benefit Plan also provides that Executive
Officers and certain key employees will be provided benefits beginning at age
58, in an amount equal to such participants' then accrued benefits without
actuarial reduction for early commencement in the event of (i) a
"change-in-control" of the Company, as defined in the Benefit Plan, and (ii)
subsequent termination of employment. Except as noted in the preceding sentence,
benefits under the Benefit Plan will be reduced to an actuarial equivalent to
reflect early distribution in the same manner as benefits under the Retirement
Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment contracts between the Company and any Executive
Officers of the Company.
The Named Executive Officers and certain other key employees of the Company
each have a Special Deferred Compensation Agreement pursuant to which on each
January 1 the Company credits to an account for such employee an amount equal to
two percent of the aggregate of the base salary paid in the preceding calendar
year and bonus paid or credited to such employee under the Profit Sharing Bonus
Plan for preceding calendar year results. The aggregate amount in such account
is to be paid to the employee, subject to certain forfeitures, following
termination of employment. Such amounts for calendar year 1999 have been
included in the Summary Compensation Table.
Named Executive Officers, except for Don R. Graber and Stanley H. Davis,
have deferred compensation and receive benefits under the Company's Capital
Accumulation Plan (the "Capital Accumulation Plan") adopted in 1985. No current
compensation is being deferred by Named Executive Officers under the Capital
Accumulation Plan. Based upon the amount of such compensation deferred in 1985,
1986, and 1987, the Company has agreed to pay certain annual amounts generally
beginning at age 65 or upon retirement, whichever occurs later, to each such
participant or to designated beneficiaries upon such participant's death after
retirement, until
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such participant reaches (or would have reached) age 80. These annual amortized
amounts will be calculated on the basis of attributing from 19 to 24 percent per
annum interest to the deferrals. A lump sum benefit equal to any remaining
balance of deferred amounts, with annual interest at the rate noted below, will
be paid in lieu of any annual benefits if (i) a participant terminates
employment with the Company other than by death or disability prior to
retirement (10 percent interest) or the Company terminates the participant's
employment for certain reasons other than cause or competing with the Company
(20 percent interest); (ii) a participant dies prior to retirement (20 percent
interest); or (iii) the Capital Accumulation Plan is terminated by the Company
because a change in federal or state laws, or judicial or administrative
interpretation thereof, has materially affected its cost to the Company (20
percent interest). The Company will make supplemental pension payments to
persons participating in the Capital Accumulation Plan to the extent pension
benefits are reduced due to participation in such plan. Distributions made and
interest accrued in excess of 120 percent of the applicable federal long term
interest rate provided under Section 1274(d) of the Code for the benefit of the
Named Executive Officers have been included in the Summary Compensation Table.
The Named Executive Officers have each entered into a severance agreement
with the Company pursuant to which the Company has agreed to provide an
irrevocable letter of credit from a commercial bank (or to fund an escrow
account if such letter of credit cannot be promptly issued) in the event a
change-in-control (as defined in the agreements) of the Company is threatened.
The letter of credit is to be for an amount equal to three times the sum of each
such person's current annual salary, bonus award at the target level, and
long-term incentive compensation plan award at the target level, plus two times
the Company's cost of current benefits for three years (unless the Company
agrees to provide the same), and a gross up amount for applicable excise taxes,
if any. In addition, such Officers will be vested in and receive thirty-six
months of credited service under the Benefit Plan. If the employment of said
person terminates, for any reason other than disability, retirement or death,
within two years after a change-in-control of the Company occurs, the person or
the person's beneficiaries shall be entitled to the above described amount in a
lump sum payment. If proper demand for such payment is not made within two years
from the date of the change-in-control event, the Company may terminate the
letter of credit or withdraw the funds in the escrow account. If such person's
employment is terminated prior to the occurrence of a change in control of the
Company, payment under the severance agreement is forfeited.
Generally, a "change-of-control" or "change-in-control", with respect to
the above-referenced plans and agreements, is the acquisition by another person
or persons other than directly from the Company of more than 20 percent of the
Company's outstanding shares of Common Stock; a merger, consolidation or other
combination of the Company with one or more corporations as a result of which
more than 49 percent of the voting stock of the merged, consolidated or combined
corporation is held by former shareholders of the corporations other than the
Company; a tender offer for, or a request for invitations for the tender of,
shares of Common Stock of the Company by any person; or the election to the
Board of Directors of the Company by the Shareholders of two or more persons not
nominated as candidates for the Board of Directors in proxy statements furnished
during such period on behalf of the Board of Directors of the Company.
PROPOSAL TO AMEND CODE
OF REGULATIONS
On December 9, 1999, the Board of Directors unanimously approved a proposal
to amend and restate the Company's Code of Regulations, in the form set forth in
Appendix A, and directed that the following resolution be submitted to the
Shareholders for their approval:
RESOLVED, that the amended and restated Code of Regulations of Huffy
Corporation set forth in Appendix A to the Proxy Statement for this meeting
is hereby adopted to supersede the existing Code of Regulations in its
entirety.
YOUR DIRECTORS RECOMMEND A VOTE "FOR" THE PROPOSAL TO AMEND THE COMPANY'S
CODE OF REGULATIONS. The proposed changes to the Code of Regula-
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tions are set forth in Appendix A hereto, with the language to be changed or
added indicated by underlining and with existing language to be deleted lined
out.
Adoption of this proposal would accomplish two changes. First, the Code
would be amended to permit the electronic and telephonic solicitation, delivery
and appointment of proxies in accordance with and to the extent permitted by
Ohio law.
Second, it would permit the Board of Directors to establish the number of
directors at not less than four but no more than fourteen. Current Article II,
Section B requires not less than nine nor more than 14 directors. The Board of
Directors has proposed to decrease the minimum number allowed to four. The
minimum number permitted by law and stock exchange rules is three. (A
corresponding change would be made to Article II, Section C, paragraph 1, to
permit fewer than three classes of directors when there are fewer than nine
authorized directors. The minimum number of directors per class permitted by
Ohio law is three.) Although the Board of Directors has no current intention to
reduce the size of the Board of Directors, the Board of Directors believes it is
in the best interest of the Company and the Shareholders to ensure that the
Board of Directors continues to be able to perform in an efficient manner.
Reducing to four the number of directors constituting the permitted minimum
number allows the Board of Directors greater flexibility in performing its role,
thus benefitting the Company and its Shareholders. Furthermore, the Board of
Directors believes that the Company and its Shareholders are best served by an
independent board comprised of talented, experienced directors. Providing the
Board of Directors the flexibility to reduce its size enables it to limit
membership on the Board to only those individuals meeting such high standards,
while continuing to be an independent Board with only one representative from
management. Finally, allowing the Board of Directors to reduce its size allows
it to reduce the expenses and compensation associated with meetings and other
service by its members.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS
PROPOSAL. Adoption of the proposed resolution requires the affirmative vote of
the holders of at least two-thirds of the company's outstanding shares of common
stock. Proxies received in response to this solicitation will be voted in favor
of the proposal unless the shareholder otherwise instructs. Abstentions and
shares not voted by brokers and other entities holding shares on behalf of
beneficial owners will have the same effect as votes cast against the
resolution.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of KPMG LLP as independent public accountants for the Company
for calendar year 2000, subject to ratification by the Shareholders and any
future contingencies that may require reconsideration. The firm of KPMG LLP has
served as independent public accountants for the Company since 1962. The Board
of Directors recommends ratification of this appointment although it is not
required by law. One or more members of KPMG LLP will attend the Annual Meeting
with an opportunity to make a statement if they desire to do so and to respond
to such appropriate questions as may be asked by Shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. The proposal to
ratify the appointment of KPMG LLP requires the affirmative vote of the holders
of the majority of the shares of Common Stock present in person or represented
by proxy at the meeting. Abstentions and shares not voted by brokers and other
entities holding shares on behalf of beneficial owners will have the same effect
as votes cast against the resolution, provided such shares are properly present
at the meeting in person or by proxy.
SHAREHOLDER PROPOSAL
Trillium Asset Management Corporation, 711 Atlantic Avenue, Boston,
Massachusetts 02111, submitted the following proposal on behalf of Margaret
Seeger, beneficial owner of 256 shares of Huffy Corporation Common Stock:
"A SHAREHOLDER RESOLUTION ON EXECUTIVE PAY AND DOWNSIZING
WHEREAS, despite record profitability in the 1990s, U.S. corporations have
laid off record
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numbers of workers, arguing that cost-cutting is one key to long-term
competitiveness and increased profitability;
WHEREAS, only 44% of firms that downsized employees saw a rise in operating
profits, according to a 1992 study by the American Management Association.
The same study found that only 31% of corporate downsizers experienced
productivity gains following the layoffs while 77% experienced
deterioration in employee morale. A second study of 1,000 large companies
conducted by the Wyatt Company found that less than one-third of the
companies surveyed hit profit targets projected at the time of the
restructuring.
WHEREAS, in July, 1998 Huffy Corporation closed its Celina, Ohio plant,
eliminating the jobs of 975 employees, many of whom had decades of services
with the company. The company justified this plant closing by explaining
the need to cut costs. Yet while cost cutting on the factory floor was
disrupting the lives of workers, costs in the executive suite rose
handsomely. For the year 1998, Huffy's CEO saw his cash compensation rise
nearly 11.4% over 1997;
WHEREAS, as a consumer products company, Huffy is dependent on its
customers having both sufficient disposable income to purchase its products
and sufficient leisure time to enjoy its products. Widespread downsizing
has played a significant role in two important trends: 1) the average
manufacturing worker in America has received an inflation-adjusted wage
increase of just 5.5% since 1990; 2) the average employee worked 83 more
hours in 1998 than in 1980 -- a loss of more than two weeks of leisure
time.
WHEREAS, since the Celina plant closing, Huffy's profits have continued to
wither. Two additional bicycle plants have been closed, resulting in job
loss for 600 additional Huffy employees. Shareholders have also suffered.
Huffy's stock price declined 41% from the date of the Celina plant closing
through October 19, 1999. During this same period, the S&P 500 stock index
rose more than 12%;
WHEREAS, we believe that asking employees to sacrifice, while at the same
time rewarding executives, sends a mixed message to employees, suppliers
and shareholders. We believe that business success over the long term is
enhanced when business is viewed as a shared enterprise in which both the
rewards and sacrifices are equitably shared among all employees;
WHEREAS, corporate leaders should have a long-term view when making
management decisions. If decisions to cut costs are in the long-term best
interest of the company, executives should be willing to defer their
rewards until positive results are demonstrated. Rewarding cost-cutting
executives for potentially good future performance is in conflict with
standards of good corporate governance.
RESOLVED, shareholders request that the Board adopt an executive
compensation policy that freezes the pay of corporate officers during
periods of downsizing in which the lesser of 5% of the company's workforce
or 200 workers lose their jobs. This pay freeze shall continue for a
one-year period following the completion of the layoffs."
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The
Compensation Committee has always and continues to perform an analysis of Chief
Executive Officer and Officer compensation relative to the Company's financial
performance and competitive comparable positions (see Report of Compensation
Committee, pages 7 to 9 in this Proxy Statement). The Compensation Committee's
regular practice is to review annually with an outside consultant the executive
compensation program from a number of perspectives, including competitive
analysis of pay level, linkage of program design to results of operations,
strategic goals, and consistency with compensation trends. These considerations
helped to shape the design of various aspects of the 1999 compensation program
and were important factors in the 1999 compensation awards to the Chairman,
President and Chief Executive Officer and other officers. Your Directors believe
that executive compensation levels should not be fixed by pre-determined
policies, but instead should reflect the competitive dynamics of the
marketplace. It
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would not be in the shareholders' best interest to constrain the Company's
ability to attract and retain executive talent when other firms competing for
executive talent do not adhere to such constraints.
In addition, your Directors do not believe it is in the Company's best
interest to discourage its officers from making difficult decisions to downsize,
which decisions historically have been related to the Company's bicycle business
to increase profitability. Officers must be free to exercise their best judgment
in making difficult decisions for the overall, long-term benefit of the Company
and the Shareholders. Your Directors believe the adoption of this proposal could
create a conflict for officers seeking to take appropriate action to reduce
Company costs and increase overall Company profitability because they will be
negatively impacted despite acting in accordance with their fiduciary duties to
the Company and the Shareholders. Imposing a freeze on increases in executive
compensation under these circumstances would negatively affect the ability of
the Company's officers to exercise their best judgment, while adding little or
no benefit to the Company or the Shareholders.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST
THIS PROPOSAL. The affirmative vote of a majority of shares participating in the
voting on this proposal is required for adoption of this proposal. Proxies will
be voted AGAINST the proposal unless instructed otherwise. Abstentions indicated
on such a proxy card will not be counted as either "for" or "against" this
proposal. "Broker non-votes" specified on proxies returned by brokers holding
shares for beneficial owners who have not provided instructions as to voting on
this issue will be treated as not present for voting on this issue.
OTHER MATTERS
Proposals of Shareholders intended to be presented at the 2001 Annual
Meeting of Shareholders must be received by the Company by November 9, 2000 for
inclusion in the Company's Proxy Statement and proxy relating to the 2001 Annual
Meeting of Shareholders.
The Company may use its discretion in voting proxies with respect to
shareholder proposals not included in the Proxy Statement for the fiscal year
ended December 31, 2000, unless the Company receives notice of such proposals
prior to January 21, 2001.
The Board of Directors does not intend to present to the meeting any
matters other than those mentioned herein. It does not know of anything that
will be presented by other parties, other than those mentioned herein. However,
if any other matters shall properly come before the meeting, it is the intention
of the persons named in the enclosed form of proxy to vote thereon according to
their discretion and best judgment.
By order of the Board of Directors
/s/ Nancy A. Michaud
Nancy A. Michaud
Secretary
Dayton, Ohio
March 8, 2000
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APPENDIX A
AMENDED CODE OF REGULATIONS
CODE OF REGULATIONS
OF
HUFFY CORPORATION
INDEX
ARTICLE I SHAREHOLDERS
Section A. Annual Meeting
B. Special Meetings
C. Notice of Meetings
D. Proxies
E. Quorum -- Adjournment
F. Financial Reports
G. Notice of Shareholder Nominees
H. Approval and Ratification of Acts of Board of Directors and
of Officers
I. Certificates for Shares of Stock
ARTICLE II BOARD OF DIRECTORS
Section A. Powers of the Board
B. Number of Directors
C. Term of Office, Removal and Vacancies
D. Meetings of the Board
E. Action Without a Meeting
F. Committees
G. Compensation
H. Fiscal Year
I. Retirement of Directors
ARTICLE III OFFICERS
Section A. Designation, Election and Term of Office
B. Chairman of the Board
C. President
D. Vice Presidents
E. Secretary
F. Treasurer
G. Other Officers
H. Compensation -- Officers and Employees
ARTICLE IV MISCELLANEOUS
Section A. Seal
B. Indemnification of Directors and Officers
C. Amendments
23
CODE OF REGULATIONS
OF
HUFFY CORPORATION
ARTICLE I -- SHAREHOLDERS
SECTION A. ANNUAL MEETING
1. The annual meeting of the shareholders of the Corporation for the
election of directors and the transaction of such other business as may
be specified in the notice shall be held within 120 days following the
close of the Corporation's Fiscal Year.
2. The date, hour, place and city, either within or without the State of
Ohio, will be designated by the Board of Directors and will be set forth
in the notice of the meeting.
3. Either the Chairman, Vice Chairman or President shall preside at all
meetings of the shareholders, depending on individual availability in
that order.
SECTION B. SPECIAL MEETINGS
1. Special meetings of the shareholders may be called by:
a. The Chairman of the Board, or
b. The President, or
c. The Vice President authorized to exercise the authority of the
President, in case of the latter's absence, death, or disability, or
d. The Board of Directors acting at a meeting, or
e. Not less than 50% of the Directors acting without a meeting, or
f. The shareholders holding of record 50% or more of all the shares
outstanding and entitled to vote thereat.
2. Any such request for a special meeting of shareholders shall state the
purpose or purposes of the meeting.
3. Upon request in writing delivered either in person or by registered mail
to the President or the Secretary by any person or persons entitled to
call a meeting of shareholders, such officer shall forthwith cause to be
given to the shareholders entitled thereto notice of a meeting to be
held on a date not more than sixty days nor less than ten days after the
receipt of such request, as such officer may fix.
4. Special meetings of the shareholders may be held at such time and place,
either within or without the State of Ohio, as may be designated in the
notice thereof.
SECTION C. NOTICE OF MEETINGS
1. Unless waived as provided by law, a written or printed notice of each
annual or special meeting stating the time and place and the purpose or
purposes thereof shall be directed to each shareholder of record
entitled to vote thereat.
2. Such notice shall be given by personal delivery or shall be mailed
postage prepaid not more than sixty days nor less than ten days before
any meeting. It shall be addressed to the shareholder at his or her
address as it appears upon the records of the Corporation.
3. Notice of adjournment of a meeting need not be given if the time and
place to which it is adjourned are fixed and announced at such meeting.
24
LANGUAGE INDICATED AS BEING SHOWN WITH AN UNDERLINE IN THE TYPESET DOCUMENT IS
ENCLOSED IN ANGLE BRACKETS "<" and ">" IN THE ELECTRONIC FORMAT.
SECTION D. PROXIES
1. Persons entitled to vote, share or to act with respect to shares at a
meeting of shareholders may be represented and vote or act thereat by
proxy appointed through an instrument in writing and submitted to the
Secretary at or before any shareholders' meeting.
2. The person appointed as proxy need not be a shareholder.
3. Notice to the Corporation, in writing or in open meeting, by the person
having appointed a proxy, of the revocation of the appointment of a
proxy shall not affect any vote or act previously taken or authorized at
a meeting.
<4. The electronic and telephonic solicitation, delivery and appointment of
proxies is permitted in accordance with and to the extent permitted
under Ohio law.>
SECTION E. QUORUM -- ADJOURNMENT
1. The holders of record of shares entitled to exercise not less than fifty
percent (50%) of the voting power of the Corporation present in person
or by proxy at any meeting of shareholders shall constitute a quorum.
2. The holders of a majority of the voting shares present in person or by
proxy at any meeting of shareholders, whether or not a quorum is
present, may adjourn such meeting from time to time.
SECTION F. FINANCIAL REPORTS
1. The financial statement shall be presented at annual shareholders'
meetings or to individual shareholders, as required by law.
2. The financial statement shall have appended thereto a certificate, as
required by law.
SECTION G. NOTICE OF SHAREHOLDER NOMINEES
1. Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of shareholders by or at the
direction of the Board of Directors or by any shareholder of the
Corporation entitled to vote for the election of Directors at the
meeting who complies with the notice procedures set forth in this
Section. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a
shareholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than fifty (50)
days nor more than ninety (90) days prior to the meeting; provided,
however, that in the event that less than sixty (60) days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be so received
not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Such shareholder's notice shall set
forth (a) as to each person whom the shareholder proposes to nominate
for election or re-election as a Director, (i) the name, age, business
address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of
shares of the Corporation which are beneficially owned by such person
and (iv) any other information relating to such person that is required
to be disclosed in solicitations of proxies for election of Directors,
or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (including without
limitation such person's written consent to serving as a Director if
elected); and (b) as to the shareholder giving notice (i) the name and
address, as they appear on the Corporation's books, of such shareholder
and (ii) the class and number of shares of the Corporation which are
beneficially owned by such shareholder. At the request of the Board of
Directors any person nominated by the Board of Directors for election as
a Director shall furnish to the Secretary of the Corporation that
informa-
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25
tion required to be set forth in a shareholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election
as a Director of the Corporation unless nominated in accordance with the
procedures set forth in this Section. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed in
this Section, and if he or she should so determine, he or she shall so
declare to the meeting and the defective nomination shall be
disregarded.
SECTION H. APPROVAL AND RATIFICATION OF ACTS OF BOARD OF DIRECTORS AND OF
OFFICERS
1. Except as otherwise provided by law, any contract, act, or transaction,
prospective or past, of the Corporation, or of the Board of Directors,
or of the Officers may be approved or ratified by the affirmative vote
at a meeting of the shareholders, or by the written consent, with or
without a meeting, of the holders of record of shares entitling them to
exercise a majority of the voting power of the Corporation, and such
approval or ratification shall be as valid and binding as though
affirmatively voted for or consented to by every shareholder of the
Corporation.
SECTION I. CERTIFICATES FOR SHARES OF STOCK
1. The interest of each shareholder of the Corporation shall be evidenced
by a certificate or certificates for shares in such form as the Board of
Directors may from time to time prescribe.
2. Each certificate shall bear:
a. A distinguishing number, and
b. The signature of the President and Secretary, and
c. The seal of the Corporation, and
d. Such recitals as may be required by law.
3. The certificates shall be issued in numerical order and a record kept
for that purpose as required by law.
4. Shares of the Corporation shall be transferable on the books of the
Corporation by the holder thereof in person or by his or her attorney,
upon surrender for cancellation of a certificate or certificates for the
same number of shares, with an assignment and power of transfer endorsed
thereon or attached thereto, duly executed, and with such proof of the
authenticity of the signature as the Corporation or its agent may
reasonably require.
5. The Corporation may issue a new certificate for shares in place of any
certificate theretofore issued by it and alleged to have been lost,
stolen, or destroyed, and the Board of Directors may, in its discretion
require the owner, or his or her legal representatives, to give the
Corporation a bond containing such terms as the Board of Directors may
require to protect the Corporation or any person injured by the
execution and delivery of a new certificate.
6. Upon the taking of a record date of shareholders for the purposes of
declaring dividends, for the purposes of determining those shareholders
entitled to vote at any meeting or for any other purposes, the stock
transfer books of the Corporation shall not be closed, but shall remain
open for the purposes of recording the issuing, transfer or other
transactions in connection with the stock of the Corporation.
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26
LANGUAGE INDICATED AS BEING SHOWN BY STRIKEOUT IN THE TYPESET DOCUMENT IS
ENCLOSED IN BRACKETS "[" and "]" IN THE ELECTRONIC FORMAT. LANGUAGE INDICATED AS
BEING SHOWN WITH AN UNDERLINE IN THE TYPESET DOCUMENT IS ENCLOSED IN ANGLE
BRACKETS "<" and ">" IN THE ELECTRONIC FORMAT.
ARTICLE II -- BOARD OF DIRECTORS
SECTION A. POWERS OF THE BOARD
1. Except as otherwise provided by law, all the capacity of the Corporation
shall be vested in and all its authority shall be exercised by the Board
of Directors.
SECTION B. NUMBER OF DIRECTORS
1. There shall be such number of Directors, not less than [nine]<four> nor
more than fourteen as may be fixed or changed from time to time (a) by
the shareholders at a meeting called for such purpose at which a quorum
is present, by the affirmative votes of the holders of a majority of the
shares which are present, in person or by proxy, at the meeting and
entitled to vote on such proposal or (b) by the Directors at a meeting
at which a quorum is present, by the affirmative vote of a majority of
the Directors which are present at the meeting, or by action taken
without a meeting in a writing or writings signed by all of the
Directors. No reduction in the number of Directors shall of itself have
the effect of shortening the term of any incumbent Director.
SECTION C. TERM OF OFFICE, REMOVAL AND VACANCIES
1. A Director's term of office shall be three (3) years, except that, in
order to provide for rotation of members, initially or whenever
necessary a Director may be elected for a shorter term. <The Board of
Directors shall be divided into classes as follows: (i) if the Board of
Directors has at least nine authorized members, then it shall be divided
into three classes of not less than three Directors each, with the term
of office of one class expiring each year, (ii) if the Board of
Directors has at least six authorized members but less than nine
authorized members, then it shall be divided into two classes of not
less than three Directors each, or a larger number of classes to the
extent permitted by law, with the term of office of each class expiring
as determined by the Board of Directors, or (iii) if the Board of
Directors has less than six authorized members, then it shall be divided
into classes to the extent permitted by law. Any vacancy occurring as a
result of a Director not completing his or her term shall not affect the
number of classes into which the Board of Directors is divided and shall
be filled in accordance with Article II, Section C, paragraph 2 below.>
[The Board of Directors shall be divided into three classes of not less
than three Directors each, with the term of office of one class expiring
each year.] A Director shall hold office until the annual shareholders'
meeting next succeeding the termination of the term for which he or she
was elected and until his or her successor is elected and qualified.
2. A vacancy or vacancies (including without limitation any vacancy or
vacancies created by action of the Directors increasing the number of
Directors) may be filled by a majority vote of the remaining Directors
for that period of time to the next shareholders' meeting at which
meeting the shareholders will elect a Director to fill the unexpired
portion of any term of office.
SECTION D. MEETINGS OF THE BOARD
1. The regular meetings of the Board of Directors shall be held immediately
after the annual meeting of the shareholders and at such other times as
may be fixed by the Board of Directors, and such meetings may be held
without further notice.
2. Special meetings of the Board of Directors may be held at any time upon
call of:
a. The Chairman of the Board, or
b. The President, or
c. The Vice-President authorized to exercise the authority of the
President in case of latter's absence, death or disability, or
d. Two of the duly elected or appointed and qualified Directors.
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27
Notice of the time and place of special meetings shall be served upon or
telephoned to each Director at least twenty-four hours, or mailed or faxed to
each Director at his or her address as shown by the books of the Corporation at
least forty-eight hours, prior to the time of the meeting, which notice need not
specify the purposes of the meeting. Such notice may be waived as provided by
law.
3. Meetings of the Board of Directors, whether regular or special, may be
held at any place either within or without the State of Ohio.
4. Not less than 50% of the duly elected or appointed and qualified
Directors of the Corporation shall constitute a quorum for the
transaction of business. The act of a majority of Directors present at a
meeting, at which a quorum is present shall be the act of Directors.
5. The majority of the Directors present at any meeting, whether or not a
quorum is present, may adjourn the meeting from time to time without
notice other than announcement at the meeting, until a quorum shall
attend.
SECTION E. ACTION WITHOUT A MEETING
1. Any action which may be authorized or taken at a meeting of the Board of
Directors may be authorized or taken without a meeting in a writing or
writings signed by all of the Directors, which writing or writings shall
be filed with or entered upon the records of the Corporation.
SECTION F. COMMITTEES
1. The Board of Directors may from time to time appoint three or more
Directors to constitute an Executive Committee and one or more other
committees of Directors. The resolution establishing each such committee
shall specify a designation by which it shall be known and shall fix its
powers and authority. The Board of Directors may delegate to any such
committee any of the authority of the Board of Directors, however,
conferred, other than that of filling vacancies among the Directors or
in any committee of the Directors.
2. The Board of Directors may likewise appoint one or more Directors as
alternate members of any such committee, who may take the place of any
absent member or members at any meeting of such committee.
3. Each such committee shall serve at the pleasure of the Board of
Directors, shall act only at the intervals between meetings of the Board
of Directors, and shall be subject to the control and direction of the
Board of Directors.
4. An act or authorization of an act by any such committee within the
authority delegated to it by the resolution establishing it shall be
effective for all purposes as the act or authorization of the Board of
Directors.
5. In every case the affirmative vote of a majority in meeting or the
consent in writing of all the members of any such committee shall be
necessary for the approval of any action.
6. Each committee shall keep written records of all meetings and actions.
SECTION G. COMPENSATION
1. The Board of Directors is empowered to fix the amount of and authorize
the payment of compensation to the Directors and of the Executive
Committee and other committees for services rendered to the Corporation
and of reimbursement for traveling expenses incurred in attending
meetings.
SECTION H. FISCAL YEAR
1. The fiscal year of the Corporation shall end on the last day of December
in each year, or on such other day as may be fixed from time to time by
the Board of Directors.
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SECTION I. RETIREMENT OF DIRECTORS
1. Non-Employee Directors
a. A non-employee Director who reaches the age of seventy (70) years
during his or her term of office as a Director, shall retire from the
board, effective the next quarterly Directors' meeting following the
date on which he or she attained the age of seventy (70) years.
Thereafter such Director shall, during his or her lifetime, have the
title of Director Emeritus.
2. Employee Directors
a. A Director, other than the President or Chairman of the Board, who is
an employee of the Corporation shall retire as a Director as of the
date he or she terminates his or her active employment with the
Corporation and shall thereafter, during his or her lifetime, have
the title of Director Emeritus.
b. A Director who has served the Corporation as President and/or
Chairman of the Board at the time of his or her retirement from
active employment shall not be nominated for a term of office as
Director, the election for which would be held after he or she has
attained the age of seventy (70). A Director who is not re-nominated
for office by virtue of this covenant shall thereafter, during his or
her lifetime, have the title of Director Emeritus.
3. If the Board of Directors shall be confronted with an unusual situation
that to it seems to require relaxation of any of the foregoing rules,
the Board of Directors shall have power, by resolution, to establish or
re-establish the retirement age, or otherwise waive the age limitation
of any Director or former Director, so as to qualify him or her to serve
longer, or again, as a Director.
ARTICLE III -- OFFICERS
SECTION A. DESIGNATION, ELECTION AND TERM OF OFFICE
1. The Corporation may have a Chairman of the Board, and shall have a
President, one or more Vice Presidents, a Secretary, a Treasurer, and
such other officers as the Board of Directors may from time to time
determine.
2. The Chairman of the Board and the President shall be Directors, but no
one of the other officers need be a Director.
3. Any two or more offices may be held by one person. However, no officer
shall execute, acknowledge, or verify any instrument in more than one
capacity if such instrument is required by law or by these regulations
to be executed, acknowledged, or verified by two or more officers.
4. If there be more than one Vice President, the Board of Directors may
designate their seniority through the method it selects and/or the
particular department or function of the Corporation over which they
shall have charge.
5. All officers of the Corporation shall be elected by the Board of
Directors.
6. Each officer shall hold office until his or her successor is chosen and
qualified, unless otherwise specified by the Board of Directors.
7. The Board of Directors may fill any vacancy in any office occurring from
whatever reason.
SECTION B. CHAIRMAN OF THE BOARD
1. The Chairman of the Board shall preside at all meetings of the Board of
Directors and shall have such other authority and duties as may be
delegated by the Board of Directors.
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SECTION C. PRESIDENT
1. The President shall preside at all meetings of Board of Directors,
except for meetings of the Board of Directors at which the Chairman of
the Board presides in accordance with the preceding Section.
2. Subject to the direction of the Board of Directors, the President shall
have the general executive supervision over the property, business, and
affairs of the Corporation.
3. The President shall have such other duties and powers as may be assigned
to or invested in him or her by the Board of Directors.
SECTION D. VICE PRESIDENTS
1. The Vice Presidents, in the order of their seniority by designation
shall perform the duties of the President in his or her absence or
during his or her disability to act. The Vice Presidents shall have such
other duties and powers as may be assigned to or invested in them by the
Board of Directors or by the President.
SECTION E. SECRETARY
1. The Secretary shall issue notices of all meetings for which notices
require to be given, shall keep the minutes of the meetings, shall have
charge of the corporate seal and corporate record books and shall have
other duties and powers as may be assigned to or invested in him or her
by the Board of Directors or by the President.
SECTION F. TREASURER
1. The Treasurer shall have charge of all moneys and securities of the
Corporation.
2. The Treasurer shall cause to be kept adequate and correct account of the
Corporation's business transactions and shall have general charge and
supervision of financial reports.
3. The Treasurer shall have such other duties and powers as may be assigned
to or invested in him or her by the Board of Directors or by the
President.
SECTION G. OTHER OFFICERS
1. Other officers of the Corporation shall have such duties and powers as
may be assigned to or invested in them by the Board of Directors or by
the President.
SECTION H. COMPENSATION -- OFFICERS AND EMPLOYEES
1. The compensation of officers and employees of the Corporation, or the
method of fixing such compensation, shall be determined by or pursuant
to authority conferred by the Board of Directors or any committee of the
Board of Directors.
2. Such compensation may include retirement, disability, and death
benefits, and may be by way of fixed salary, or on the basis of earnings
of the Corporation, or any combination thereof, or otherwise, as may be
determined or authorized from time to time by the Board of Directors or
any committee of the Board of Directors.
ARTICLE IV -- MISCELLANEOUS
SECTION A. SEAL
1. The seal of the Corporation shall be circular with the words "HUFFY
CORPORATION" and "DAYTON, O." surrounding the word "SEAL" .
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30
SECTION B. INDEMNIFICATION OF DIRECTORS AND OFFICERS
1. The Corporation shall, and hereby agrees to, indemnify any person who
served or serves as a director, officer, employee or agent of the
Corporation, or who served or serves at the request of the Corporation
as a director, trustee, officer, employee or agent of another
Corporation, domestic or foreign, non-profit or for profit, partnership,
joint venture, trust, or other enterprise, against any and all losses,
liabilities, damages, and expenses, including attorney's fees,
judgments, fines, Employee Retirement Income Security Act excise taxes
or penalties and amounts paid in settlement, incurred by such person, in
connection with any claim, action, suit, or proceeding, including any
action or suit by or in the right of the Corporation (whether
threatened, pending or completed and whether civil, criminal,
administrative, or investigative, including appeals), by reason of any
act or omission to act as such director, trustee, officer, employee or
agent, to the full extent permitted by Ohio law including, without
limitation, the provisions of Section 1701.13 of the Ohio Revised Code,
as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment).
Further, unless at the time of a Director's act or omission to act that is
the subject of an action, suit, or proceeding referred to in this Section
B of Article IV, the Articles of Incorporation or the Code of Regulations
of this Corporation state by specific reference to Section
1701.13(E)(5)(a) of the Ohio Revised Code that the provisions of Section
1701.13(E)(5)(a) do not apply to the Corporation, and unless the only
liability asserted against a Director in an action, suit or proceeding
referred to in this Section B of Article IV is pursuant to Section 1701.95
of the Ohio Revised Code, then all expenses, including attorney's fees,
incurred by a Director in defending the action, suit or proceeding shall
be paid by the Corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding upon receipt of an
undertaking by or on behalf of the Director in which he or she agrees to
do both of the following:
a. Repay such amount if it is proved by clear and convincing evidence in
a court of competent jurisdiction that his or her action or failure
to act involved an act or omission undertaken with deliberate intent
to cause injury to the Corporation or undertaken with reckless
disregard for the best interests of the Corporation;
b. Reasonably cooperate with the Corporation concerning the action,
suit, or proceeding.
The indemnification authorized by this Article IV shall not be exclusive
of, and shall be in addition to, any other rights granted to any person seeking
indemnification under the Articles of Incorporation, this Code of Regulations or
any agreement, vote of shareholders or disinterested Directors, or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, trustee, officer, employee or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
The Corporation may purchase and maintain insurance, or furnish similar
protection, including but not limited to trust funds, letters of credit or self
insurance, on behalf of or for any person who is or was a director, officer,
employee, or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, non-profit or for profit, partnership, joint
venture, trust, or other enterprise, against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under Ohio law. Insurance may be
purchased from or maintained with a person in which the Corporation has a
financial interest.
A-8
31
SECTION C. AMENDMENTS
1. This Code of Regulations may be amended or repealed only by the
affirmative vote of the holders of shares entitling them to exercise
two-thirds of the voting power of the Corporation, at a meeting of the
shareholders held for such purpose, or without a meeting by the
unanimous written consent of all of the shareholders of the Corporation.
A-9
32
HUFFY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
- --------------------------------------------------------------------- ---------------------------------------------------------
Your Board of Directors recommends a vote For Withheld For All Your Board of Directors recommends a vote AGAINST
FOR the following: All All Except the following: For Against Abstain
1. Election of Directors: [ ] [ ] [ ] 4. Shareholder Proposal 1. [ ] [ ] [ ]
Nominees: W. Anthony Huffman,
Donald K. Miller, ---------------------------------------------------------
Joseph P. Viviano
Will Attend Annual Meeting [ ]
- ------------------------------------------
(Except nominees written above) Please indicate number attending:
----
2. Approval of amended and restated Code For Against Abstain Change of Address [ ]
of Regulations of the Corporation [ ] [ ] [ ]
to (i) permit the electronic and Mark here for address and
telephone solicitation, delivery and revise pre-printed address
appointment of proxies in accordance as necessary.
with and to the extent permitted under
Ohio law, and (ii) permit the Board of
Directors to establish the number of
directors at not less than four but no
more than fourteen.
3. Ratification of appointment of KPMG For Against Abstain
LLP as independent public accountants [ ] [ ] [ ]
for 2000. Signature(s) Date: 2000
- ------------------------------------------- ---------------------- ----------,
Signature(s) Date: 2000
---------------------- ----------,
IMPORTANT: PLEASE SIGN AND RETURN PROMPTLY. Please sign
exactly as name appears. If signing in fiduciary or
representative capacity, please give full title as such.
If shares are registered in more than one name, all
holders must sign. If signature is for a corporation,
the handwritten signature and title of an authorized
officer is required, together with the full corporate
name.
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
HUFFY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
ADMISSION TICKET
April 27, 2000, 10:00 a.m.
Daytonian Ballroom
Doubletree Hotel
11 South Ludlow Street
Dayton, Ohio 45402
If you plan to attend the meeting, please check the box above and indicate the
number attending on the proxy form above. Please detach this card and bring it
with you to the meeting for presentation at the meeting.
33
PROXY
HUFFY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 27, 2000
The undersigned hereby appoints Don R. Graber, Linda B. Keene, and Thomas C.
Sullivan, and each of them, his or her proxies, with power of substitution, to
vote all shares of Common Stock of HUFFY CORPORATION, an Ohio corporation, which
he or she may be entitled to vote at the Annual Meeting of Shareholders of said
Corporation to be held April 27, 2000, and at any adjournment(s) thereof, on the
following matters, all of which are described in the Proxy Statement, receipt of
which is hereby acknowledged:
ELECTION OF DIRECTORS, NOMINEES
(For a term of three years)
W. Anthony Huffman
Donald K. Miller
Joseph P. Viviano
This proxy will be voted as directed. If no choice is specified, this proxy will
be voted (a) FOR the nominated directors, (B) FOR the approval of the amended
and restated Code of Regulations of the Corporation, (C) FOR the appointment of
the auditors, and (D) AGAINST the shareholder proposal. Except for the matters
listed on the reverse side of this card, the board of directors at present knows
of no business other than of a routine nature to be brought before the meeting.
If any other business is brought before the meeting, this proxy will be voted
according to the appointed proxies discretion and best judgment. If cumulative
voting is elected for the election of directors, votes cast pursuant to this
proxy will be distributed among the above nominees at the discretion of said
proxies. [see reverse side]
-----------------------------------------------------
[MAP]
Key
*DOUBLETREE
1. The Dayton Art Institute
2. Victoria Threatre
3. Convention Center
4. University of Dayton
-----------------------------------------------------
DIRECTIONS TO DOUBLETREE HOTEL
- Take the Third Street Exit 53A off
of I-75 (northbound or southbound).
- Turn right onto Ludlow Street.
- The parking garage is on the right.