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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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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 26, 2001
To our Shareholders:
It is a pleasure to invite you to attend your Company's 2001 Annual Meeting
of Shareholders which will be held this year on Thursday, April 26, 2001, at
10:00 a.m., Eastern Daylight Time, in the Frederick C. Smith Auditorium at
Sinclair Community College, 444 West Third 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 so that your shares will be represented at the
meeting. You can vote electronically by telephone which eliminates the need to
return the proxy card, or vote on the enclosed proxy card and sign, date and
return it promptly in the envelope provided. 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 26, 2001
The Annual Meeting of Shareholders of Huffy Corporation (the "Company"), an
Ohio corporation, will be held in the Frederick C. Smith Auditorium at Sinclair
Community College, Building 12, 444 West Third Street, Dayton, Ohio 45402 on
Thursday, April 26, 2001, 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 amendment to the 1998 Key Employee Stock Plan, the 1998
Director Stock Option Plan and the 1998 Restricted Share Plan increasing
the number of shares available for the grant of options thereunder;
3. To ratify the appointment of KPMG LLP as independent public accountants
for 2001;
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 28, 2001 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 , 2001
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER YOU
EXPECT TO ATTEND OR NOT, PLEASE VOTE, SIGN AND DATE THE ENCLOSED PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED, POSTAGE PAID ENVELOPE OR VOTE ELECTRONICALLY
BY TELEPHONE WHICH ELIMINATES THE NEED TO RETURN THE PROXY CARD.
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TO VOTE BY TELEPHONE:
- Have your proxy card in hand when you call.
- On a touch-tone telephone, call toll-free 1-866-207-3912, 24 hours a day,
7 days a week.
- You will be prompted to enter your control number printed in the box
located near the top of this form.
- Follow the recorded instructions.
If you choose to vote your shares by telephone, there is no need to mail
back your proxy card.
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HUFFY CORPORATION
225 BYERS ROAD
MIAMISBURG, OHIO 45342
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 2001
MARCH , 2001
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 26, 2001, and any
adjournment(s) of such meeting. This Proxy Statement and the accompanying proxy
card were first mailed to Shareholders on or about March , 2001. 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
shares issued and outstanding as of February 28, 2001, 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 Don R. Graber, Linda B.
Keene, and Thomas C. Sullivan for three year terms expiring in the year 2004;
(2) in favor of the amendment of the 1998 Key Employee Stock Plan, the 1998
Directors Stock Option Plan and the 1998 Restricted Share Plan; (3) in favor of
ratification of the appointment of KPMG LLP as independent public accountants
for the Company for 2001; (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 2004. The Board of Directors of the Company
currently has eight Directors: three whose terms expire in 2001, two whose terms
expire in 2002, and three whose terms expire in 2003. Don R. Graber, Linda B.
Keene and Thomas C. Sullivan, whose terms expire in 2001, 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 2004. In accordance with the Company's Code of
Regulations, the Board of Directors has set the total number of Directors of the
Board, effective following the 2001 Annual Meeting of Shareholders, at seven.
Mr. Jack D. Michaels, who has served as a Director of the Company since 1993,
retired as a Director, effective December 31, 2000, in accordance with the
Company's Director retirement policy. Similarly, Mr. Patrick W. Rooney, who has
served as a Director of the Company since 1995, is also retiring as a Director
at the 2001 Annual Meeting of Shareholders in accordance with the Company's
Director retirement policy. The Company wishes to express its appreciation to
Mr. Michaels and Mr. Rooney for their many years of service.
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 2004
Don R. Graber, Chairman of the Board, President and Chief 57 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(2)
Linda B. Keene, Vice President-Market Development of 49 1993
American Express Financial Advisors since 1994 (engaged in
financial advising services)(3)
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SERVED AS
NAME AND PRINCIPAL OCCUPATION DIRECTOR
FOR THE PAST FIVE YEARS(1) AGE SINCE
- ------------------------------------------------------------ --- ---------
Thomas C. Sullivan, Chairman and Chief Executive Officer of 63 1995
RPM, Inc. (manufacturer of specialty chemicals and
coatings)(4)
DIRECTORS WHOSE TERMS EXPIRE IN 2003
W. Anthony Huffman, retired from the Company and currently 58 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, 69 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(5)
Joseph P. Viviano, retired Vice Chairman of Hershey Foods 62 1996
Corporation (engaged in the manufacture, distribution and
sale of consumer food products) since March 2000; prior
thereto Vice Chairman of such Company since 1999; prior
thereto President and Chief Operating Officer of such
company since 1994(6)
DIRECTOR WHOSE TERM EXPIRES IN 2002
James F. Robeson, Consultant to various distribution 64 1994
companies since 1993; Vice Chairman of Roberds, Inc.
(retailer of a broad range of home furnishing products)
from 1998 to 2000; prior thereto Chief Executive Officer
and President of Roberds, Inc. (retailer of a broad range
of home furnishing products) from 1997 to 1998; prior
thereto Herbert E. Markley Visiting Scholar in Business at
Miami University since 1995(7)
- ---------------
(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. Graber is a Director of Precision Castparts Corporation.
(3) Ms. Keene is a Director of Scholastic Corporation.
(4) Mr. Sullivan is a Director of Pioneer-Standard Electronics, Inc., RPM, Inc.,
Kaydon Corporation, and National City Bank.
(5) Mr. Miller is a Director of Layne Christensen Company and RPM, Inc.
(6) Mr. Viviano is a Director of Chesapeake Corporation, Harsco Corporation and
R.J. Reynolds Tobacco Holdings, Inc.
(7) Mr. Robeson is a Director of Moto Photo, Inc.
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MEETINGS BY, AND CERTAIN COMMITTEES OF, THE COMPANY'S BOARD OF DIRECTORS
During the year 2000, James F. Robeson (Chairman), Linda B. Keene and
Donald K. Miller comprised 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 nine times.
During the year 2000, Thomas C. Sullivan (Chairman), Patrick W. Rooney and
Joseph P. Viviano comprised 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 five times.
During the year 2000, Jack D. Michaels (Chairman), W. Anthony Huffman and
Linda B. Keene comprised 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 three times.
For 2001, James F. Robeson (Chairman), Linda B. Keene and Donald K. Miller
comprise the Audit Committee of the Board of Directors; Thomas C. Sullivan
(Chairman), Patrick W. Rooney and Joseph P. Viviano comprise the Compensation
Committee up to the 2001 Annual Meeting of Shareholders; thereafter, Thomas C.
Sullivan (Chairman), James F. Robeson and
Joseph P. Viviano comprise the Compensation Committee of the Board of Directors;
and Joseph P. Viviano (Chairman), Linda B. Keene and W. Anthony Huffman comprise
the Nominating and Governance Committee of the Board of Directors.
During the last fiscal year, the Board of Directors met nine 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 2000, 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
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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
provides 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, 2000, and ending April 30, 2001,
Outside Directors have elected not to receive, in the aggregate, $158,133 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, 2001, 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, 2001.
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AMOUNT AND
NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2)
- -------------------------------- ------------
Stanley H. Davis................ 24,975(3)
Don R. Graber................... 278,327(4)
Timothy G. Howard............... 83,709(5)
W. Anthony Huffman.............. 160,409(6)
Linda B. Keene.................. 28,133(7)
Robert W. Lafferty.............. 7,133(8)
Nancy A. Michaud................ 71,556(9)
Donald K. Miller................ 226,556(10)
James F. Robeson................ 36,684(11)
Thomas C. Sullivan.............. 36,988(12)
Joseph P. Viviano............... 40,190(13)
All Directors, Nominees and
Executive Officers, including
Named Executive Officers, as a
Group (11 persons)............ 994,660
(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, 1.6 percent, and 2.2 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 9.6 percent of
the issued and outstanding shares of Common Stock of the Company as of
January 2, 2001.
(3) Mr. Davis has shared investment power with respect to 100 shares held by
his spouse. The total amount also includes 17,054 shares as to which Mr.
Davis holds options exercisable within 60 days.
(4) Mr. Graber has shared investment power with respect to 1,000 shares held by
his spouse. The total amount also includes 126,667 shares as to which Mr.
Graber holds options exercisable within 60 days.
(5) Mr. Howard has shared voting and shared investment power with respect to
14,586 shares held jointly with his spouse. The total amount also includes
57,278 shares as to which Mr. Howard holds options exercisable within 60
days.
(6) Mr. Huffman has sole voting and sole investment power with respect to
114,780 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 45,629 shares as
to which Mr. Huffman holds options exercisable within 60 days.
(7) Ms. Keene has shared voting and shared investment power with respect to
3,904 shares held jointly with her spouse. The total amount also includes
24,229 shares as to which Ms. Keene holds options exercisable within 60
days.
(8) The total amount includes 5,250 shares as to which Mr. Lafferty holds
options exercisable within 60 days.
(9) Ms. Michaud has shared investment power with respect to 2,293 shares held
by her spouse as trustee. The total also includes 57,451 shares as to which
Ms. Michaud holds options exercisable within 60 days.
(10) 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 39,454 shares as
to which Mr. Miller holds options exercisable within 60 days.
(11) Mr. Robeson has shared investment power with respect to 1,000 shares held
by his spouse. The total amount also includes 33,829 shares as to which Mr.
Robeson holds options exercisable within 60 days.
(12) The total amount includes 29,738 shares as to which Mr. Sullivan holds
options exercisable within 60 days.
(13) Mr. Viviano has shared voting and shared investment power with respect to
500 shares held jointly with his spouse. The total amount also includes
27,390 shares as to which Mr. Viviano holds options exercisable within 60
days.
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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.
AMOUNT
AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS(4)
- --------------------------- ---------- ----------
David L. Babson &
Company Inc.(1)
One Memorial Drive
Cambridge, Massachusetts
02142-1300 1,021,300 10.0%
Dimensional Fund
Advisors Inc.(2)
1299 Ocean Avenue,
11th Floor
Santa Monica, California
90401 843,050 8.29%
Reich & Tang Asset
Management L.P.(3)
600 Fifth Avenue
New York, New York
10020 584,200 5.7%
- ---------------
(1) This information is taken from the Schedule 13G, dated January 31, 2001,
filed by David L. Babson & Company Inc. with the Securities and Exchange
Commission, which disclosed David L. Babson & Company Inc. has sole voting
power with respect to 1,021,300 shares, shared voting power with respect to
0 shares, sole investment power with respect to 1,021,300 shares, and shared
investment power with respect to 0 shares.
(2) This information is taken from the Schedule 13G, dated February 2, 2001,
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 843,050 shares, shared voting power with respect to 0
shares, sole investment power with respect to 843,050 shares, and shared
investment power with respect to 0 shares.
(3) This information is taken from the Schedule 13G, filed February 15, 2001,
filed by Reich & Tang Asset Management L.P. with the Securities and Exchange
Commission which disclosed Reich & Tang Asset Management L.P. has sole
voting power with respect to 0 shares, shared voting power with respect to
584,200 shares, sole investment power with respect to 0 shares, and shared
investment power with respect to 584,200 shares.
(4) Percentages listed are those disclosed in the referenced Schedules 13G and
are not verified by the Company.
REPORT OF AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors,
the Audit Committee of the Board ("Audit Committee") assists the Board in
fulfilling its responsibility for oversight of the quality and integrity of the
accounting, auditing and financial reporting practices of the Company. During
2000, the Audit Committee met nine times, and the Audit Committee chairman, as
representative of the Audit Committee, discussed the interim financial
information contained in each quarterly Form 10-Q with the Vice President
- -Controller and independent auditors prior to the filing of the Company's Form
10-Q. The Audit Committee written charter is included as Exhibit A to this Proxy
Statement.
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from the independent auditors a formal written
statement describing all relationships between the auditors and the Company that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees,"
discussed with the auditors any relationships that may impact their objectivity
and independence and satisfied itself as to the auditors' independence. The
Audit Committee also discussed with Management, the independent third party
("outside") internal auditors and the independent auditors the quality and
adequacy of the Company's internal controls and the outside internal audit
function's organization, responsibilities, budget and staffing. The Audit
Committee reviewed with both the independent auditors and the outside internal
auditors audit plans', audit scope, and identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without Management pre-
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sent, discussed and reviewed the results of the independent auditors'
examination of the financial statements. The Audit Committee also discussed the
results of the outside internal audit examinations.
The Audit Committee reviewed the audited financial statements of the
Company as of and for the fiscal year ended December 31, 2000, with Management
and the independent auditors. Management has the responsibility for the
preparation of the Company's financial statements and the independent auditors
have the responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with Management and the
independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the fiscal year ended December 31, 2000, for filing with the Securities
and Exchange Commission. The Audit Committee also recommended the reappointment
of the independent auditors and the Board concurred in such recommendation.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Linda B. Keene, Donald K. Miller, James F. Robeson (Chairman)
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 manufactured products businesses and retail service
providers whose size is adjusted to that of the Company. The Committee believes
that such manufactured products 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
manufactured products 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 2000 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,
insurance 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 a material tax
impact due to the loss of deductibility for any compensation paid over the next
year.
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BASE SALARY
Base salary ranges for Executive Officers are determined by periodic
recommendations (most recently in 2000) 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 manufactured products businesses and retail service providers nationwide.
The Company's policy is to generally pay competitive base salaries by using the
50th percentile levels at manufactured products 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
September 1, 2000, to $580,000.
ANNUAL PERFORMANCE INCENTIVE PLAN
Executive Officers may receive an annual bonus under the Annual Performance
Incentive Plan based upon corporate and individual (except for Mr. Graber who
for 2000 was assessed solely on corporate performance) performance objectives
established at the beginning of each year. The corporate performance measure for
bonus payments in 2000 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"). The Executive Officers are eligible to earn profit sharing
bonuses ranging from 30 percent to 55 percent (55 percent for Mr. Graber) of
their annual base salaries at target level and from 60 percent to 110 percent
(110 percent for Mr. Graber) of such salaries at maximum level with 80 percent
of the bonuses based on Corporate performance and 20 percent on individual
personal objectives. For 2000, target and maximum level bonus required corporate
performance, from continuing operations, including restructuring and
refinancing, with RONA at 8.0 percent and 9.6 percent, respectively, EPS at
$0.10 and $0.12, respectively, and a free cash flow goal of $3,125,000 and
$3,750,000, respectively. 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, continuous rapid improvement and
sales goals. In addition, the Compensation Committee granted a discretionary
annual bonus for 2000 to the Executive Officers and certain key employees in
recognition of their efforts in improving the Corporations liquidity and capital
structure and completing a more favorable, renewable, amended revolving credit
facility for the Company with a term through December 31, 2002. Mr. Graber
received $79,910 for the discretionary bonus. In 2000, the Company reported a
RONA of 15.4 percent, an EPS of $1.03, from continuing operations, including
restructuring and refinancing, and a free cash flow of $27,244,000. Based on
these results, Mr. Graber was awarded an annual performance bonus of $594,000.
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 three years prior to the commencement of this award
period. Under this plan, in 2000, Executive Officers were each eligible to earn
target and maximum awards ranging from 25 to 50 percent (50 percent for Mr.
Graber) and 50 to 100 percent (100 percent for Mr. Graber), of their annual base
salaries. For 2000, target level and maximum awards required an EPS of $1.78 and
$2.05, respectively, RONA of 12.0 percent and 13.8 percent, respectively, and
TSR of 16.0 percent and 18.4 percent, respectively. For 2000, EPS was $1.56,
RONA was 15.9 percent and TSR was (15.6) percent. In 2000, additional long-term
incentive payments were made to the Named Executive Officers in connection with
the Company's sale of its Wash-
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ington Inventory Service subsidiary, for which Mr. Graber received $340,743. Mr.
Graber's Long-Term Incentive Plan payment received in 2000 was $180,090.
STOCK OPTIONS AND REISSUING OF OPTIONS
Stock-based incentive programs are an important component of the Company's
compensation package which the Company has traditionally relied upon to attract
and retain high quality key employees. It has always been the policy and
practice of the Board of Directors not to reissue its outstanding employee stock
options. HOWEVER, IN MID-2000, THE 1998 KEY EMPLOYEE STOCK PLAN HAD NO REMAINING
SHARES WITH WHICH TO GRANT OPTIONS TO EMPLOYEES. AGGRAVATING THE INABILITY TO
GRANT OPTIONS WAS THE FACT THAT THE YEAR 2000 WAS AN EXTREMELY DIFFICULT YEAR
FOR THE COMPANY WITH RESPECT TO EMPLOYEE ATTRITION, PARTICULARLY AMONG ITS KEY
EMPLOYEES. THE MARKET FOR SUCH EMPLOYEES HAS BECOME INTENSELY COMPETITIVE IN
RECENT YEARS. THE COMPANY WAS FACED WITH THE PROSPECT OF LOSING
DIFFICULT-TO-REPLACE KEY EMPLOYEES IF SOME ACTION WERE NOT TAKEN IMMEDIATELY.
Because of the immediacy of the Company's attrition problem, in July 2000, the
Compensation Committee, at the request of management, undertook a review of the
outstanding options which had been granted to the Company's key employees in
prior years. The Committee recognized the fact that the Company constantly
competes with other companies to attract and thereafter retain the highly
qualified employees who are essential to the Company's success. The Committee
determined that, under all of the prevailing circumstances, most of the
Company's employees to whom options had been awarded in prior years held their
options at exercise prices that limited the options' effectiveness as a tool for
employee retention and as long-term performance incentives.
After studying what other companies had recently done under similar
circumstances and considering various possible methods of dealing with this
problem, the Committee, and subsequently the full Board of Directors, determined
that the problem was so critical to the Company's future success that it could
only be effectively addressed by means of an option exchange program which would
permit certain key employees (but not Directors) with options to exchange them
for new options at a more current exercise price in a manner that would also
restore the availability of shares for future grants. The Committee recommended
and the Directors approved the cancellation of 191,500 stock options for Common
Shares held by four Executive Officers (including 155,000 options held by Mr.
Graber at $18.25) and reissued 136,000 shares to five Executive Officers
(including 50,000 options to Mr. Graber at the closing market price of $6.0625).
A new vesting period was implemented and tied to performance objectives: options
become vested, or exercisable, in thirds on the earlier of a sale of a Company
business or July 20, 2001, the earlier of compliance with the New York Stock
Exchange Listing Requirements or July 20, 2002, and the earlier of refinancing
of the Company's debt or July 20, 2003. The balance of the cancelled options for
Common Shares were not reissued. The options expire in four years. This approach
is designed to motivate the creation of Shareholder value over the long-term
since the full benefit of the compensation package cannot be realized unless
Common Stock price appreciation occurs. As of January 2, 2001, Mr. Graber
beneficially owned 278,327 shares of Common Stock.
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TEN-YEAR OPTION REISSUING
LENGTH OF
ORIGINAL OPTION
NUMBER OF TERM
SECURITIES REMAINING AT
UNDERLYING MARKET PRICE OF EXERCISE PRICE NEW DATE OF
OPTIONS STOCK AT TIME OF AT TIME OF EXERCISE REISSUING
NAME DATE REISSUED REISSUING ($) REISSUING ($) PRICE ($) (YEARS)
- ----------------------- ------- ---------- ---------------- -------------- --------- ---------------
Don R. Graber 7/20/00 50,000 6.0625 18.25 6.0625 7.88
Nancy A. Michaud 7/20/00 34,000 6.0625 15.50 6.0625 8.39
Stanley H. Davis 7/20/00 20,000 6.0625 15.50 6.0625 8.39
Timothy G. Howard 7/20/00 20,000 6.0625 15.50 6.0625 8.39
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 (Chairman) and Joseph P. Viviano
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(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 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 was 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 was
indebted in the total amount of approximately $67 million (excluding certain
real estate leases), of which approximately $2.8 million was 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 have been on terms and conditions competitive with those offered to
other borrowers of National City Bank similarly situated with the Corporation.
The loans were repaid in their entirety on November 3, 2000.
The Company, through a wholly-owned subsidiary, provides certain services
in the ordinary course of business to RPM, Inc. and Hershey Foods Corporation.
Mr. Thomas C. Sullivan, a Director of the Company, is the Chairman and Chief
Executive Officer of RPM, Inc. During the year ended December 31, 2000, RPM,
Inc. paid $229,523 for such services which were provided on terms, conditions,
and prices competitive with those offered to other purchasers of such services.
Mr. Joseph P. Viviano, a Director of the Company, was the Vice Chairman of
Hershey Foods Corporation until March 1, 2000. During the year ended December
31, 2000, Hershey Foods Corporation paid $76,106 for such services which were
provided on terms, conditions, and prices competitive with those offered to
other purchasers of such services.
Roberds, Inc. filed for Chapter 11 bankruptcy protection on January 19,
2000. Mr. James F. Robeson, a Director of the Company, was formerly the Chief
Executive Officer and President of Roberds, Inc. He ceased to be an executive
officer of such company in July, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for 2000 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.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN
OTHER INFORMATION
The following table shows, for the fiscal years ended December 31, 1998,
1999 and 2000, 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:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ---------------------- ----------
OTHER NUMBER ALL
ANNUAL RESTRICTED OF 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 2000 $554,231 $673,910 $ 0 $ 47,497 50,000 $ 520,833 $ 6,308
Chairman of the Board 1999 540,000 0 1,245 112,947 30,000 66,667 20,232
President and Chief 1998 519,236 311,600 13,186 94,380 0 131,611 22,838
Robert W. Lafferty(7) 2000 $260,000 $169,563 $ 0 $ 5,004 17,000 $ 66,437 $ 8,600
Vice President-Finance, 1999 -- -- -- -- -- -- --
Chief Financial Officer 1998 -- -- -- -- -- -- --
and Treasurer
Nancy A. Michaud 2000 $199,962 $149,484 $ 0 $ 7,653 34,000 $ 122,381 $ 4,957
Vice President-General 1999 186,400 0 905 7,731 0 9,100 8,637
Counsel and Secretary 1998 179,254 63,625 2,657 10,340 0 29,670 9,363
Stanley H. Davis 2000 $193,646 $132,851 $ 215 $ 3,672 20,000 $ 92,484 $ 5,016
Vice President-Human 1999 185,708 0 3,882 8,994 0 10,208 8,206
Resources and 1998 184,469 64,600 1,427 0 0 22,093 8,107
Organization Development
Timothy G. Howard 2000 $182,819 $129,418 $ 0 $ 32,428 20,000 $ 131,522 $ 5,377
Vice President-Controller 1999 175,708 0 3,061 34,802 0 9,100 8,788
1998 173,388 60,950 3,083 23,016 0 28,618 9,602
- ---------------
(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 2000 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 up 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 24,873 restricted shares awarded to
Named Executive Officers on June 9, 2000, which vest, following a six month
period upon the earlier of death, disability, retirement or vesting under
the Company's Benefit Plan (hereinafter defined) in accordance with the
terms of the 1998 Restricted Share Plan and which have a value, in the
aggregate at December 31, 2000 of $161,675.
(4) These numbers represent options for shares of the Company's Common Stock
granted pursuant to the Company's 1998 Key Employee Stock Plan. See next
table labeled "Option Grants in Last Fiscal Year"; includes options
previously granted and not cancelled (see "Report of Compensation Committee"
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 regular and special long-term
incentive plans discussed later in this Proxy Statement under the table
labeled "Long-Term Incentive Plans." The payments under the special
long-term incentive plan resulted from the Company's sale of its Washington
Inventory Service subsidiary in 2000.
(6) "All Other Compensation" includes (i) Company contributions to the Company's
401(k) Savings Plan in the amount of $3,400 for Don R. Graber, Robert W.
Lafferty, Nancy A. Michaud, Stanley H. Davis and Timothy G. Howard to match
2000 pre-tax elective deferral contributions (included under "Salary" and
"Bonus") made by each Named Executive Officer to such plan; (ii) accrued
interest of $507 and $1,002 (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 Nancy A. Michaud, and
Timothy G. Howard, respectively, on the Company's Capital Accumulation Plan
(Timothy G. Howard deferred salary in 1985 and 1986, and Nancy A. Michaud
deferred salary in 1987 pursuant to such plan); and (iii) the principal
amounts of $2,908, $5,200, $1,050, $1,616 and $975 credited by the Company
for Don R. Graber, Robert W. Lafferty, 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.
(7) Mr. Lafferty joined the Company as Vice President-Finance, Chief Financial
Officer and Treasurer on January 3, 2000.
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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, 2000, 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)(3) DATE 0% 5% 10%
---- ---------- ---------- ----------- ---------- ---- --------- ---------
Don R. Graber................... 50,000 18.35% $6.0625 7/20/04 0 $190,634 $483,103
Robert W. Lafferty.............. 12,000 4.40% 6.0625 7/20/04 0 $ 45,752 $115,945
5,000 1.83% 6.00 1/03/10 0 $ 18,867 $ 47,812
Nancy A. Michaud................ 34,000 12.48% 6.0625 7/20/04 0 $129,631 $328,510
Stanley H. Davis................ 20,000 7.34% 6.0625 7/20/04 0 $ 76,253 $193,241
Timothy G. Howard............... 20,000 7.34% 6.0625 7/20/04 0 $ 76,253 $193,241
- ---------------
(1) The options were granted pursuant to the Company's 1998 Plan. All options
granted under the 1998 Plan in 2000 are non-qualified stock options. No
stock appreciation rights were granted under the 1998 Plan in 2000.
(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 to Named Executive
Officers terminate.
(3) 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, except for Mr. Lafferty's 5,000 options, become
exercisable in thirds upon the earlier of a sale of a Company business or
July 20, 2001; compliance with the New York Stock Exchange Listing
Requirements or July 20, 2002; and completion of the refinancing of the
Company's debt or July 20, 2003. The 5,000 options granted to Mr. Lafferty
become exercisable ratably over a four-year period beginning in 2001. The
Company business, Washington Inventory Service, was sold on November 3,
2000. [The refinancing of the Company's debt was completed effective as of
January 31, 2001.]
(4) The options, except for Mr. Lafferty's 5,000 options, are calculated on
option terms of four years beginning July 20, 2000 through July 20, 2004.
The 5,000 options granted to Mr. Lafferty are calculated on option terms of
ten years beginning January 3, 2000 through January 3, 2010. 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, 2000, and unexercised options held as of December 31, 2000:
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...................... 10,000 $37,263 204,166 55,834 $42,291 $14,584
Robert W. Lafferty................. 0 0 5,250 11,750 2,375 5,375
Nancy A. Michaud................... 1,000 625 57,451 25,431 4,521 9,917
Stanley H. Davis................... 2,000 875 17,054 17,463 2,041 5,834
Timothy G. Howard.................. 1,000 625 57,278 16,032 2,479 5,834
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(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, 2000 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, 2000, 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") and under a special long-term incentive plan
(in the form of Amended and Restated Retention/Severance/Non-Competition
Agreements with four of the Named Executive Officers and other key employees)
implemented to facilitate the Company's publicly announced exploration of
strategic alternatives to uncover shareholder value (the "Special LTIP").
Payments made under both the LTIP and the Special LTIP in the year ended
December 31, 2000 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 12/31/03 $145,000 $290,000 $580,000
(2) 3 years ending 11/03/00 0 340,743 0
Robert W. Lafferty............... (1) 3 years ending 12/31/03 32,500 65,000 130,000
(2) 3 years ending 11/03/00 0 52,000 0
Nancy A. Michaud................. (1) 3 years ending 12/31/03 26,250 52,500 105,000
(2) 3 years ending 11/03/00 0 89,865 0
Stanley H. Davis................. (1) 3 years ending 12/31/03 24,875 49,750 99,500
(2) 3 years ending 11/03/00 0 60,635 0
Timothy G. Howard................ (1) 3 years ending 12/31/03 23,313 46,625 93,250
(2) 3 years ending 11/03/00 0 101,340 0
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(1) Awards earned under the Company's 2001 LTIP cycle are payable during the
year following the end of a three-year award cycle in 2004 and under the
Special LTIP on or about November 3, 2000. For the Named Executive Officers,
the LTIP is based one-third on earnings per share, one-third on return on
net assets, and one-third on
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total shareholder return over the performance period compared to targets
approved by the Compensation Committee at the beginning of the performance
period.
(2) The Special LTIP provides for certain cash payments at the time of the sale
of one of the Company's principal operating businesses in exchange for the
executive's agreement not to compete with the purchaser of that business.
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, 2000:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
HUFFY CORPORATION, S&P 500, AND LEISURE TIME PRODUCTS INDEX*
HUFFY S&P 500 LEISURE TIME PRODUCTS
----- ------- ---------------------
1995 100.00 100.00 100.00
1996 145.34 121.44 125.50
1997 139.87 160.33 162.54
1998 174.41 205.77 124.82
1999 59.07 247.32 83.62
2000 73.13 222.24 75.07
* Assumes $100 invested on December 31, 1995 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
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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
- ------------ --------- --------- --------- ----------- -----------
2$50,000.... $ 54,142 $ 71,356 $ 88,570 $ 105,784 $ 105,784
500,000.... 110,392 146,356 182,320 218,284 218,284
750,000.... 166,642 221,356 276,070 330,784 330,784
1,000,000.. 222,892 296,356 369,820 443,284 443,284
1,250,000.. 279,142 371,356 463,570 555,784 555,784
1,500,000.. 335,392 446,356 557,320 668,284 668,284
2,000,000.. 447,892 596,356 744,820 893,284 893,284
2,250,000.. 504,142 671,356 838,570 1,005,784 1,005.784
2,500,000.. 560,392 746,356 932,320 1,118,284 1,118,284
- ---------------
(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 $18,432. Thus, the offset is
$9.216 for a person with 30 or more years of service.
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. As of January 3, 2001, Mr. Graber
has 14 years of credited service, Mr. Lafferty has 1 year of credited service,
Ms. Michaud has 14 years of credited service, Mr. Davis has 3 years of credited
service, and Mr. Howard has 27 years of credited service. The 2000 compensation
covered under the Retirement Plan and Benefit Plan for each of the Named
Executive Officers was as follows: $1,748,974 for Mr. Graber, $496,000 for Mr.
Lafferty, $471,827 for Ms. Michaud, $418,981 for Mr. Davis and $443,759 for Mr.
Howard.
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
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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 2000 have been
included in the Summary Compensation Table.
Two of the Named Executive Officers, Timothy G. Howard and Nancy A.
Michaud, 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 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 Company has historically provided its key executive officers with
severance benefits in the event of a change-in-control of the Company. During
2000, the Board of Directors undertook a review of the Company's outstanding
severance arrangements and determined it would be advisable to negotiate revised
and less costly arrangements with its executive officers, including four of the
Named Executive Officers, Messrs. Graber, Davis and Howard and Ms. Michaud.
Accordingly, these officers and the Company entered into Amended and Restated
Retention/Severance/Non-Competition Agreements which replaced their prior
agreements and which, among other provisions, established the maximum potential
severance benefit at 2.99 times a base amount, determined under applicable
sections of the Internal Revenue Code of 1986 (which is essentially the
executive's average annual compensation over the preceding five years),
representing a substantial reduction in cost from
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the prior arrangements. In addition, the revised agreements specify that the
severance benefit is only payable in the event the executive's employment is
involuntarily terminated, or voluntarily terminated by the executive under
certain circumstances, following the change-in-control. In consideration for
their agreement to the substantial reduction in their potential severance
benefits, these four Named Executive Officers are also entitled to certain
long-term incentive payments in the event of the possible sale of certain of the
Company's operating businesses short of an actual change-in-control (described
under "Long-Term Incentive Plans", above) in exchange for their personal
agreements to maintain the confidentiality of information and not to compete
with the purchaser, as well as additional non-competition payments in the event
of a change-in-control of the Company in amounts ranging from approximately 1.9
times to 2.9 times of the annual compensation set forth in the Summary
Compensation Table. Previously, these Named Executive Officers were not
obligated to facilitate any potential Company transactions by submitting to
personal confidentiality and/or non-compete restrictions. The other Named
Executive Officer, Mr. Lafferty, joined the Company in 2000 and therefore did
not have any prior change-in-control arrangement with the Company. In the event
of a change-in-control, Mr. Lafferty is entitled to a severance payment equal to
one times his annualized base salary. The above-described agreements
substantially reduced the costs of the prior severance agreements.
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; 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; the
approval by the shareholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company; or approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
PROPOSAL TO AMEND THE 1998 KEY
EMPLOYEE STOCK PLAN, THE 1998
DIRECTOR STOCK OPTION PLAN AND
THE 1998 RESTRICTED SHARE PLAN
Competition for key employees is intense and the use of significant stock
options for recruitment, retention and motivation of key employees and directors
is widespread. In April, 1998, following approval by the Board of Directors, the
Shareholders approved the 1998 Key Employee Stock Plan (the "1998 Plan"), the
1998 Director Stock Option Plan (the "1998 Directors Plan") and the 1998
Restricted Share Plan (collectively the "Plans") and reserved a total of 623,714
shares for potential issuance under the Plans.
As of December 31, 2000 a total of 555,694 shares have been granted under
the Plans. The 68,020 remaining shares will not be sufficient to meet the
Company's anticipated needs for employee retention and recruiting. The year 2000
was a turnaround year for the Company. In the face of a challenging retail
sector, all of the Company's businesses were profitable, particularly its
bicycle division. The Board believes that an increase in the number of shares
available for grant under the Plans is critical to enabling the Company to
recruit highly qualified new employees, promote long-term retention of key
employees, motivate high levels of performance and recognize contributions to
the success of the Company over the past year. The Board also believes that in
order to maintain the success of last year and retain the people who made such
success possible it must have the ability to effectively grant stock-based
incentives.
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PROPOSED AMENDMENT AND NUMBER OF SHARES SUBJECT TO PLANS
In December, 2000, the Board approved an amendment that would increase the
total number of shares reserved for issuance under the Plans by 500,000, an
amount that is equal to approximately 4.9% of the Company's total outstanding
Common Stock on February 28, 2000. The amendment increases the total shares
authorized by the Plans to 1,123,714 shares. The aggregate number of shares
which may be issued under the Plans, the number and class of shares subject to
each outstanding option or stock appreciation right and restricted shares still
subject to restrictions, and the price per share will be appropriately adjusted
in the event of any change in the Common Stock by reason of a merger,
consolidation, reorganization, recapitalization, stock dividend, stock split-up,
combination or exchange of shares, or other change in the corporate structure.
The shareholders are being asked to ratify and approve the amendment to the
Plans at the Annual Meeting. The affirmative vote of the holders of a majority
of the Company's Common Stock present in person or by proxy at the Annual
Meeting and entitled to vote is required to adopt the resolutions to amend the
Plans. Proxies will be voted in favor of the resolution unless otherwise
instructed by the shareholders. 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 resolutions, provided such shares are properly
present at the meeting in person or by proxy.
2000 STOCK OPTION ACTIVITY
As of December 31, 2000, options to purchase 314,558 shares were
outstanding under the Plans with exercise prices ranging from $1.00 (for options
by Directors in lieu of receipt of Director fees) to $16.25. Without taking into
account the proposed amendment to the Plans, 68,020 shares remained available
for future grant as of December 31, 2000.
PLAN ADMINISTRATION
The 1998 Key Employee Plan and the 1998 Restricted Share Plan are
administered by the Compensation Committee of the Board of Directors (the
"Committee"). The Committee consists of at least three members of the Board of
Directors of the Company who are not entitled to participate in the Plans. The
Committee has the full power and authority to construe the provisions and to
supervise the administration of such plans, and all decisions made by the
Committee will be final. The 1998 Directors Plan is to be administered by a
committee consisting of at least three officers of the Company who are not
entitled to participate in such plan to be appointed by the Board of Directors.
At the close of business on February 28, 2000, the market value of a share
of the Company's Common Stock was $ .
TAX CONSEQUENCES
Gain taxable as ordinary income to the optionee is generally deemed to be
realized at the date of exercise of a nonqualified option, the amount of gain on
each share being the difference between the market price on the date of exercise
and the option price. This amount is generally treated as a tax-deductible
expense to the Company at the time of exercise. Any appreciation in the value of
stock after the date of exercise is considered as long or short-term capital
gain, depending on the length of time the stock is held by the optionee prior to
the time of its sale.
No taxable income for federal income tax purposes results from the exercise
of an incentive option at the time of exercise. Any gain realized on the sale of
stock acquired on exercise of an incentive option is considered as long-term
capital gain for federal income tax purposes if the stock has been held at least
one year after it was acquired on exercise of the option and if at least two
years have expired after the grant of the option. Except as hereafter indicated,
the Company is not entitled to any deduction with respect to the grant or
exercise of any incentive option. If the stock is sold or otherwise disposed of
within one year after exercise or within two years after the grant, any
appreciation at the date of exercise above the option price is treated, subject
to certain limitations, as "ordinary" income for federal income tax purposes.
Any appreciation after the date of exercise is considered as long or short-term
capital gain to the optionee depending upon whether or not the stock was held
longer than one year. The amount of ordinary
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income received by the optionee generally is treated as a tax-deductible expense
to the Company.
Upon the exercise of a stock appreciation right, the holder will realize
ordinary income equal to the amount of the gain. This amount is generally
treated as a tax-deductible expense to the Company at the time of exercise.
With respect to grants of restricted shares, the recipient must recognize
ordinary income equal to the fair market value of the Common Stock at the first
time the Common Stock becomes transferable or not subject to a substantial risk
for forfeiture, whichever occurs earlier. The Company generally will be entitled
to a deduction for the same amount at the time the recipient recognizes such
income.
Under Section 162(m) of the Internal Revenue Code, corporations with a
class of securities required to be registered under Section 12 of the Securities
Exchange Act of 1934 (i.e. "public companies") are no longer permitted to
deduct, for income tax purposes, compensation paid to certain executive officers
to the extent such compensation exceeds $1 million in a tax year. However,
certain types of compensation, including generally compensation which
constitutes "performance-based" compensation, is excluded from this limitation.
In any given year, as to options exercised by an executive officer, the
difference between the exercise price and the market price on the exercise date
(the "spread") would be included as compensation for Section 162(m) purposes
unless the applicable option plan meets certain requirements contained in the
applicable regulations promulgated by the Internal Revenue Service. Such
regulations provide that in order for the spread realized upon the exercise of
an option to constitute performance-based compensation which is exempt from the
Section 162(m) deduction limitation, the stock option plan under which the
options were granted must, among other requirements, be administered by
compensation committee comprised solely of two or more "outside directors" and
must contain a specific limit on the number of options which may be granted to
any one employee participant. The 1998 Key Employee Plan is drafted with the
intention of preserving the Company's ability to deduct for federal income tax
purposes the compensation expense relating to stock options granted to Named
Executive Officers.
THE 1998 DIRECTORS PLAN
The 1998 Directors Plan provides for annual non-discretionary option
issuances to non-employee directors, of which the Company will have six
following the 2001 Annual Meeting of Shareholders. It also provides a feature by
which non-employee directors may elect to receive options in lieu of annual
retainer fees. Its stated purpose is to encourage ownership in the Company by
members of the Board of Directors of the Company who are not employees of the
Company or any of its subsidiaries and whose continued services as directors are
considered essential to the Company's continued progress.
The Board of Directors may alter or amend the 1998 Directors Plan at any
time prior to its termination, except that the Board may not, without the
approval of the shareholders, change the number of shares of Common Stock which
may be issued upon exercise of options, reduce the prices at which options may
be exercised, extend the time within which options may be granted or exercised,
change the designation of the class of directors eligible to receive options,
materially increase the benefits accruing to participants, or alter or affect to
the detriment of an option holder any option previously granted without the
consent of such option holder.
The 1998 Directors Plan provides that non-employee directors automatically
will be issued options to purchase 2,000 shares of the Company's Common Stock on
the second business day after each annual meeting of the shareholders. Options
granted under the 1998 Directors Plan are non-qualified options for federal tax
purposes. The purchase price of the Common Stock covered by such options must be
equal to the fair market value of the Common Stock on the date of grant of the
option.
The Company currently pays its non-employee directors an annual retainer in
the amount of $22,500 per year. Under the 1998 Directors Plan, non-employee
directors may elect to receive an option in lieu of all or any part of the
annual retainer to be earned in the current 1998 Director Plan Year. Such
options will be granted automatically on May 1, the first day of the 1998
Directors Plan Year, and/or on such other dates
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25
as may be designated as long as the director makes an election prior to such
dates. An election to receive an option in lieu of the retainer with respect to
any particular year is irrevocable. The purchase price of the Common Stock
covered by such options is $1.00 per share. The Board'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 provides a premium
of 150% for such deferrals, as calculated in the 1998 Directors Plan.
All options granted under the 1998 Directors Plan have a ten-year term.
Options are not exercisable for the first six months from the date of issuance,
at which time they become exercisable as to 100% of the shares covered until
termination. Shares covered by an option which is no longer exercisable with
respect to such shares will again be available for offering under the 1998
Directors Plan.
Options under the 1998 Directors Plan may not be transferred except
generally by will or the laws of descent and distribution, and during the
lifetime of the option holder, may be exercised only by the option holder or his
representative. In addition, options generally may be exercised only while the
option holder is serving as a member of the Board of Directors. However, upon
the death of a director, upon the retirement of a director because of total and
permanent disability, upon expiration of a director's term of office or
otherwise in accordance with the Board's retirement policy, or upon the
resignation of a director due to a potential conflict of interest, the former
director or his representative may, at any time during the balance of the ten
year period, purchase all or any part of the Common Stock covered by the option.
Notwithstanding the foregoing, in no event shall an option be exercised if the
former director engages or participates in any business which competes against
any of the businesses engaged in by the Company.
In the event of a change in control of the Company, all outstanding options
will become immediately and fully exercisable. Any non-employee director whose
services are terminated within twenty-four months after a change in control may
exercise outstanding options at any time during the balance of the ten-year
period.
It is impossible at the present time to indicate specifically the names of
persons to whom future options will be granted, or the aggregate number of
shares, within the limitations of the 1998 Directors Plan, to be covered by such
options. The following table sets forth options which were previously received
by or allocated to each of the listed directors under the 1998 Directors Plan.
PLAN BENEFITS
UNDERLYING
SHARES
OPTIONS
DIRECTOR NAME 1998-2000
- ------------------------------------- ----------
W. Anthony Huffman 20,013
Linda B. Keene 14,038
Donald K. Miller 21,197
James F. Robeson 21,197
Thomas C. Sullivan 21,197
Joseph P. Viviano 21,765
All Directors who are not employees
as a group 119,407
THE 1998 KEY EMPLOYEE PLAN
The 1998 Key Employee Plan provides a means for key employees to receive
options to acquire shares of the Company's Common Stock and stock appreciation
rights, and an opportunity to subscribe for shares of Common Stock subject to
certain restrictions. Its stated purpose is to provide an additional incentive
to officers and directors who are employees of the Company and its subsidiaries
to increase shareholder value and to remain in the employ of the Company or its
subsidiaries.
The Board of Directors may alter or amend the 1998 Key Employee Plan at any
time prior to its termination, except that the Board may not, without the
approval of the shareholders, increase the aggregate number of shares of Common
Stock which may be issued, reduce the prices at which options or stock
appreciation rights may be exercised, extend the time within which options or
stock appreciation rights may be granted or exercised, extend the time within
which restricted shares may be offered, permit any person while a member of the
Committee to be eligible to participate, alter or affect to the detriment of an
optionee any option or stock appreciation right previously granted without the
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consent of such optionee, or alter or affect to the detriment of a subscriber
any subscription for restricted shares without the consent of such subscriber.
Any full-time salaried employee of the Company or a subsidiary who is also
an officer and may or may not be a member of the Board of Directors, or a key
employee will be eligible to participate in the 1998 Key Employee Plan. At the
present time, the number of employees who may participate in the 1998 Key
Employee Plan is unknown. The Committee will designate the employees to whom
options and/or stock appreciation rights will be granted or to whom restricted
shares will be offered. The Chief Executive Officer of the Company, subject to
limitations, also may grant non-qualified options to employees, but not
officers, of the Company. Such grants will be subject to the same terms and
conditions of the 1998 Key Employee Plan as grants made by the Committee.
Options granted under the 1998 Key Employee Plan to a key employee may be
either non-qualified stock options or incentive stock options, or both, as
described below. To date, no incentive stock options or stock appreciation
rights have been granted under such plan.
The number of shares of Common Stock that may be subject to options granted
to an employee during any calendar year may not exceed 25% of the total number
of shares that may be issued under the 1998 Key Employee Plan. Shares covered by
an option which is no longer exercisable with respect to such shares or
restricted shares which are forfeited will again be available for offering under
the 1998 Key Employee Plan. If an option is surrendered in connection with the
exercise of a stock appreciation right, the number of shares covered by such
option less the number of shares issued in connection with the exercise of the
stock appreciation right will again be available for offering.
The purchase price of Common Stock covered by an incentive stock option may
not be less than 100% of the fair market value of such Common Stock on the date
of grant of such option. The purchase price of Common Stock covered by any other
option is determined by the Committee; provided, however, that the purchase
price may be less than $1.00 per share. Options may be exercised by payment to
the Company of the purchase price in cash or in Common Stock of the Company
already owned by the optionee or any combination thereof. No option may be
exercised until six months following the date upon which it was granted or after
ten years from such date.
In the event of a change in control of the Company, all outstanding options
will become immediately and fully exercisable. Any outstanding option of an
optionee whose employment is terminated, except by the Company for cause, within
24 months after a change in control will remain exercisable for a period of
three months from the date of such termination, but in no event after the
expiration of the exercise period.
The Committee may grant in connection with any option granted under the
1998 Key Employee Plan a stock appreciation right, whereby the option holder may
receive from the Company, upon request and in exchange for the surrender of any
outstanding option, shares of the Common Stock, cash or any combination thereof
having a value equal to the excess of the fair market value of the Common Stock
on the date of the request over the purchase price specified in such option. A
stock appreciation right may be granted only at the time of an option and is
exercisable only if the fair market value of the Common Stock on the date of the
Request exceeds the purchase price of such option.
No stock appreciation right or related stock option may be exercised during
the first six months of its term, unless the death or disability of the optionee
occurs during this period, or after ten years from the date of grant. Upon
surrender of an option in exercise of stock appreciation rights, such option
will expire. The Committee's disapproval of a request will not affect the
optionee's right to exercise the stock appreciation right at a later date or to
exercise any option granted under the 1998 Key Employee Plan.
An option or stock appreciation right may be transferred only by will or
the laws of descent and distribution or by gift to certain family members.
During the lifetime of an employee, only the employee, his representatives, or
his permitted assigns may exercise any option or stock appreciation right.
Options or stock appreciation rights may be exercised only while the option
holder is an em-
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ployee during a period of continuous employment with the Company or a subsidiary
from the date of grant and may not be exercised at any time after termination of
employment except as follows: (1) upon the termination of employment for
disability or upon retirement under any pension plan for salaried employees, a
former employee may exercise all or any part of his non-qualified options until
five years after such termination or retirement, whichever occurs first, and he
may exercise all or any part of his incentive stock options or stock
appreciation rights for a period of three months following such termination or
retirement; (2) upon termination following the disposition of a business, a
former employee may exercise all or any part of his exercisable non-qualified
options, incentive stock options, or stock appreciation rights until three
months after such termination; (3) at the discretion of the Company, upon
severance of an employee, such former employee may exercise his non-qualified
options for a period to be negotiated, not to exceed the severance pay period,
provided the former employee has executed a release and waiver; and (4) upon the
death of any employee, retired employee, or employee whose services were
terminated due to disability, his representatives may exercise his options or
stock appreciation rights for a period of six months following the date of
death. Notwithstanding the foregoing, in no event shall an option be exercised
if the former employee engages or participates in any business which competes
against any of the businesses engaged in by the Company.
The 1998 Key Employee Plan gives key employees selected by the Committee an
opportunity to subscribe for restricted shares. Such shares will be restricted
as to transferability for a period of time, not to exceed ten years, as
determined by the Committee. The purchase price of the restricted shares will be
determined by the Committee; provided, however, that in no event will the price
be less than $1.00 per share. The purchase price must be paid in full by the
subscriber on or before ten years from the date of the subscription by setting
off against such purchase price 100% of the cash dividends payable with respect
to the restricted shares plus such portion of all profit sharing or other
bonuses to which the subscriber becomes entitled as provided by the Committee
and in cash. No certificates for restricted shares will be executed and
delivered until such shares are fully paid. To date, no restrictive shares have
been granted under such plan.
Except for restrictions on transfer, an employee who subscribes for
restricted shares will have all of the rights of a shareholder of the Company,
including the right to vote the restricted shares and the right to receive
dividends, subject to provisions of the subscription agreement.
In the event a subscriber ceases to be an employee of the Company or a
subsidiary during the restricted period for any reason other than death,
disability, retirement under any pension plan, or termination by the Company
other than for cause within 24 months of a change in control, all restricted
shares will be forfeited to the Company. However, if the termination is by
action of the Company, the Committee may determine that some or all of the
restricted shares will be free of restrictions and not forfeited. If a
subscriber ceases to be an employee by reason of death, disability, retirement
under any pension plan, or within 24 months after a change in control, the
restrictions will terminate. The Committee may at any time accelerate or waive
all or any portion of the restrictions in respect of the restricted shares.
Upon termination of employment for any reason, including death or
retirement, the employee or his representative may elect to pay the purchase
price due on any portion of the restricted shares which are freed of
restrictions and not forfeited within three months after the happening of such
event. If such payment is not made, the Company will treat the failure as a
default in payment, whereby the Company will release the shares from
subscription and treat as retired the shares subject to the subscription which
have not been fully paid.
It is impossible at the present time to indicate specifically the names of
persons to whom future options, stock appreciation rights, or restricted shares
will be granted, or the aggregate number of shares, within the limitations of
the 1998 Key Employee Plan, to be covered by such grants. The following table
sets forth the options previously granted and not cancelled (see "Report of
Compensation Committee" in this Proxy Statement) under the 1998 Key Employee
Plan to the Named Executive Officers, to all executive
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officers as a group, to non-officer employees as a group and to all employees.
UNDERLYING
SHARES
OPTIONS
NAME 1998-2000
- ------------------------------------- ----------
Don R. Graber 80,000
Robert W. Lafferty 17,000
Nancy A. Michaud 34,000
Timothy G. Howard 20,000
Stanley H. Davis 20,000
Executive Officers as a group 171,000
Non-Officer employees as a group 13,000
Total for all employees 184,000
THE 1998 RESTRICTED SHARE PLAN
The 1998 Restricted Share Plan replaces a portion of the cash retirement
benefits owed to key management employees under the Benefit Plan with the
Company's Common Stock granted as restricted shares. Restricted Shares granted
under the 1998 Restricted Share Plan will directly reduce and replace a portion
of the cash amount of supplemental retirement benefits owed to participants
under the Benefit Plan. Its stated purpose is to encourage such employees to
increase overall shareholder value. The 1998 Restricted Share Plan aligns the
interests of shareholders and plan participants by awarding Common Stock to
selected executives and Huffy Company Presidents upon whose judgment, initiative
and efforts the financial success and growth of the Company largely depend,
subject to certain vesting and forfeiture restrictions (the "Restricted
Shares"), at fair market value thereby providing additional incentive for the
participants to increase the value of the Company's Common Stock. Furthermore,
since the Company will be able to take a tax deduction for the value of the
Restricted Shares awarded under the 1998 Restricted Share Plan upon the vesting
of such shares, the Company will also benefit from increases in value of the
Company's Common Stock. Conversely, the Company will realize reduced tax
deductions if the Company's Common Shares depreciate in value.
The Board of Directors may alter or amend the 1998 Restricted Share Plan at
any time prior to its termination, except that the Board may not, without the
approval of the shareholders, increase the aggregate number of shares of Common
Stock which may be issued. Further, the Board of Directors may not alter or
affect to the detriment of any recipient any outstanding restricted shares
granted pursuant to the 1998 Restricted Share Plan without the consent of such
recipient
Any Senior Executive Participant in the Benefit Plan is eligible to receive
a grant of restricted shares under the 1998 Restricted Share Plan. This class of
participants includes approximately eleven persons.
Each recipient is 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 accrued benefit under the Benefit Plan as determined by the
Company's actuary. The Committee may approve additional grants in its
discretion.
Until vested, restricted shares may not be transferred or encumbered
without the consent of the Committee. Subject to other provisions of the 1998
Restricted Share Plan and any agreement for restricted shares, each grant of
restricted shares will vest upon the earliest of the following dates: (1) the
date of the recipient's death, (2) the date on which the Committee determines
that the recipient is disabled, (3) the date on which the recipient becomes
vested in his benefit under the Benefit Plan, (4) the closing date of a change
in control, or (5) the date on which the recipient becomes eligible to commence
retirement benefits under any salaried retirement plan. However, in no event
will a recipient's restricted shares vest prior to the later of the effective
date of the approval of the 1998 Restricted Share Plan by the shareholders or as
otherwise required by federal securities laws.
Except for restrictions on transfer, an employee who receives restricted
shares has all of the rights of a shareholder of the Company, including the
right to vote the restricted shares and the right to receive dividends, subject
to provisions of the 1998 Restricted Share Plan and any grant agreement.
In the event a recipient ceases to be an employee of the Company or a
subsidiary prior to the vesting of any restricted shares, all restricted shares
which are not vested will be forfeited to the Company. However, if the
termination is by action of the Company, the Committee may de-
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termine that some or all of the restricted shares not yet vested will not be
forfeited. If restricted shares granted under the 1998 Restricted Share Plan are
later forfeited, such restricted shares will again be available for offering
under the 1998 Restricted Share Plan.
It is impossible at the present time to indicate specifically the names of
all persons to whom future restricted shares will be granted or the aggregate
number of such shares. However, the Committee has made a number of restricted
share awards under the 1998 Restricted Share Plan. The following table
summarizes awards for the Named Executive Officers.
NUMBER OF
PLAN SHARES
NAME 1998-2000
- ---------------------------------- -----------
Don R. Graber 37,148
Robert W. Lafferty 1,570
Nancy A. Michaud 6,588
Timothy G. Howard 13,198
Stanley H. Davis 1,786
Executive Officers as a group 60,290
Non-Officer employees as a group 166,810
Total for all employees 227,100
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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 2001, 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.
AUDIT FEES. The aggregate fees billed for professional services rendered
by KPMG LLP for its audit of the Company's annual financial statements for the
year ended December 31, 2000 and for its reviews of unaudited quarterly
financial statements contained in the reports on Form 10-Q filed by the Company
during the year amounted to $306,500.
ALL OTHER FEES. The aggregate fees billed for all services rendered by
KPMG LLP other than the Audit Fees described above, during the year ended
December 31, 2000 amounted to $166,450. KPMG LLP did not provide any financial
systems design or implementation fees during the year. The Company's Audit
Committee did consider whether KPMG's provision of such non-audit-related
services was compatible with maintaining the independence of KPMG LLP and
concluded that it was compatible with maintaining such independence.
SHAREHOLDER PROPOSAL
The Amalgamated Bank of New York LongView SmallCap 600 Index Fund (the
"Fund"), 11-15 Union Square, New York, NY 10003 and the beneficial owner of more
than $2,000 of the Company's Common Stock submitted the following proposal:
"RESOLVED: The shareholders of Huffy Corporation ("Huffy" or the "Company")
recommend that the Board of Directors take the steps necessary to implement
a policy of confidential voting at all meetings of the Company's
shareholders, which would include the following provisions:
1. The voting of all proxies, consents or authorizations shall be secret,
and no such document shall be available for examination, nor shall the
vote or identity of any shareholder be disclosed except to the extent
necessary to meet the legal re-
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quirements, if any, of the Company's state of incorporation; and
2. Independent election inspectors shall conduct the receipt, certification
and tabulation of such votes.
SUPPORTING STATEMENT
We believe that it is important for Huffy to establish a system of
confidential proxy voting. Confidential balloting is a basic premise of our
political electoral process as a means of ensuring the integrity of that
process. The integrity of corporate board elections and other shareholder votes
should similarly be protected against potential abuses and as a way of
protecting the shareholders' franchise.
We believe that the implementation of a confidential voting system would
enhance shareholder rights in several ways. First, by protecting the
confidentiality of the corporate voting process, shareholders would feel free to
oppose management nominees and positions on specific issues. This can be
especially important for professional money managers.
A second important benefit of confidential voting would be to invigorate
the corporate governance process at the Company. We believe that shareholder
activism would be promoted and that shareholders empowered with a free and
confidential vote could be more active in supporting shareholder resolutions and
alternative nominees for the board of directors.
Finally, it is our belief that confidential voting could change the system
whereby some shareholders "vote with their feet" by not voting their proxies
rather than oppose management nominees for the board or support shareholder
initiatives not endorsed by management and the board. In our view, confidential
voting could thus help foster a more long-term investment perspective regarding
corporate policies.
The vast majority of major corporations have already adopted confidential
voting procedures, and we believe that is time for Huffy to do the same.
We urge you to vote FOR this proposal.
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE ABOVE PROPOSAL. The Company's
current practices ensure that the voting process does not result in any improper
influence or coercion of Shareholders. The Company believes that it has
consistently conducted shareholder solicitations in a fair and equitable manner.
The Board of Directors believes that the practices in place adequately address
the concerns raised in this Shareholder proposal.
Confidentiality safeguards are already in place throughout the voting and
tabulation process. The voting and tabulation process is conducted by a third
party and is overseen by third-party election inspectors. Votes are tabulated
mechanically, except where a vote is withheld in which case it is tabulated by
hand, and the Board has full confidence in the accuracy and impartiality of the
results. Besides these precautions, however, Shareholders have the additional
option of registering their shares in the name of a bank, broker, or other
nominee. These nominee holders do not reveal the names of the holders without
their permission, thereby further protecting Shareholders privacy and the
confidentiality of their votes.
In the event of a proxy contest or other contested matters, the Company
believes that maintaining confidentiality under circumstances proposed above
could place Company management at an unfair disadvantage, since those waging the
contest would not be bound by the same policy.
The Board believes that its current practices protect the confidentiality
of Shareholder votes and that a modification of the current practice is
unwarranted.
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.
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OTHER MATTERS
Proposals of Shareholders intended to be presented at the 2002 Annual
Meeting of Shareholders must be received by the Company by November , 2001 for
inclusion in the Company's Proxy Statement and proxy relating to the 2002 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, 2001, unless the Company receives notice of such proposals
prior to January , 2002.
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 , 2001
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EXHIBIT A
AUDIT COMMITTEE CHARTER
PURPOSE AND ROLE -- The Audit Committee of the Board of Directors assists
the Board in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and reporting practices of the Corporation
and such other duties as directed by the Board. The membership of the Committee
shall consist of at least three directors who are (or will become within a
reasonable period of time) financially literate, as such is determined by the
Board of Directors, in its business judgment, one such member having accounting
or related financial expertise as the Board of Directors interprets such
qualification in its business judgment. Each member shall be free of any
relationship that would interfere with his or her individual exercise of
independent judgment. The Committee is expected to maintain free and open
communication (including private executive sessions at least annually) with the
independent accountants, the internal auditors and the management of the
Corporation. In discharging this oversight role, the Committee is empowered to
investigate any matter brought to its attention, with full power to retain
outside counsel or other experts for this purpose.
SCOPE -- The Audit Committee serves at the pleasure, and is subject to the
control and direction, of the Board of Directors.
RESPONSIBILITIES -- The primary responsibilities of the Audit Committee
include:
(a) Public Accountants.
(i) The Audit Committee shall recommend to the Board of Directors the
firm of public accountants to be selected, evaluated, and, where
appropriate, replaced by the Corporation, and verify and ensure the
independence of such firm, discussing with the Board of Directors
any relationships that may adversely affect the independence of the
auditor. The public accountant firm is ultimately accountable to
the Board of Directors and the Audit Committee.
(ii) The Audit Committee shall, prior to the annual audit of the
Corporation or any non-routine audit, meet with the auditors
conducting such audit for the purpose of discussing:
-- The scope of the audit.
-- The extent and sufficiency of internal accounting controls.
-- Coordination with and review of internal auditing work of the
Corporation.
-- The cost of the audit.
(iii) The Audit Committee shall have the authority to instruct the
auditors to expand the extent of their audit or to specify
particular areas for examination by the auditors.
(iv) Prior to the release of the financial statements contained in the
quarterly Form 10-Q, such statements will be reviewed with the
Chairman of the Audit Committee and other members of the Committee
will be notified in advance of the review date and time so as to be
afforded the opportunity to participate in such review.
(v) Following completion of the annual audit, the Audit Committee shall
meet with the auditors to review the audit and their report
thereon.
(vi) The Audit Committee shall also, following completion of the audit,
review the auditors' evaluation of:
-- The quality and adequacy of the accounting financial and internal
audit policies and procedures of the Corporation.
-- The overall internal controls of the Corporation.
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-- The impact of opinions of the Financial Accounting Standards
Board, releases of the Securities and Exchange Commission,
regulations of the New York Stock Exchange, changes in the tax
laws and any other pertinent laws or regulations that could have
an impact upon the Corporation's financial condition and
statements.
-- The adequacy of management disclosure of financial information to
the Directors.
(b) Internal Auditors. As used in this charter, Internal Auditors mean the
Corporation's internal audit department or the external audit firm hired to
fulfill the internal audit function.
(i) The Audit Committee shall meet, at least annually, with the Manager
of Internal Audit to review the internal audit program of the
Corporation. As used in this charter, "Manager of Internal Audit"
means the manager of the Corporation's internal audit department or
the manager of an external audit firm hired to fulfill the internal
audit function.
(ii) The Audit Committee shall receive periodic reports on such program,
including information on audits completed and in progress, and
audits added to or deleted from the program. Such reports shall
include a discussion of any major findings disclosed during the
course of such audits.
(c) Ensuring both the public accountants and the internal auditors will
have direct access to members of the Audit Committee.
(d) Reviewing the Certification of the Chief Financial Officer and Chief
Accounting Officer in connection with the filing of the Corporation's annual
Form 10-K Report.
(e) The Committee shall report to the Board of Directors on the auditors'
findings and shall make such recommendations to the Board of Directors on audit
matters or procedures as it may deem appropriate.
(f) The Audit Committee shall review this charter annually.
QUORUM/ATTENDEES -- The Audit Committee will be comprised of not less than
three Directors (all of whom shall be Outside Directors (defined to mean
non-employees of the Corporation)) to be nominated by the Nominating and
Governance Committee and approved by the Board of Directors for appointment in
April of each year, and other times when necessary to fill vacancies.
The membership of the Audit Committee shall be in full compliance with the
requirements of the New York Stock Exchange and other applicable laws, rules or
regulations or bodies having authority over such matters. One of such Directors
will be designated as Chairman of the Audit Committee. The duties and
responsibilities of a member of the Audit Committee are in addition to those for
a member of the Board of Directors. A majority of the duly appointed and
qualified members of the Audit Committee shall constitute a quorum for the
transaction of business.
The Audit Committee may have in attendance at its meetings such members of
management, the auditors of the Corporation or other parties as it may deem
necessary to provide the required information to carry out its responsibilities.
All members of the Committee will receive a copy of the minutes of each
meeting of the Audit Committee following such meeting.
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HUFFY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
-------------------
| |
| |
--------------------
For Withheld For All Your Board of Directors
All All Except recommends a vote AGAINST
Your Board of Directors recommends a vote FOR the following: For Against Abstain
the following: [ ] [ ] [ ]
4. Shareholder Proposal 1. [ ] [ ] [ ]
1. Election of Directors:
Nominees: (1) Don R. Graber, (2) Linda B. Will Attend Annual Meeting [ ]
Keene and (3) Thomas C. Sullivan
Please indicate number
- --------------------------------------------- attending: _____
(Except nominees written above)
2. Amendment of 1998 Key Employee Stock Plan, 1998 For Against Abstain Change of Address [ ]
Director Stock Option Plan and the 1998 Mark here for address change
Restricted Share Plan to increase the number [ ] [ ] [ ] and revise pre-printed address
of shares available under the Plans. as necessary.
3. Ratification of appointment of KPMG LLP as For Against Abstain Signature(s)_____________________Date:_______, 2001
independent public accountants for 2001.
[ ] [ ] [ ] Signature(s)_____________________Date:_______, 2001
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 -
VOTE BY TELEPHONE 24 HOURS A DAY, 7 DAYS A WEEK
TELEPHONE MAIL
--------- ----
- - 1-866-207-3912 - Mark, sign and date your proxy card
- - Have your proxy card in hand - Detach your proxy card
- - On any touch-tone telephone, call - Return your proxy card in the
toll-free 1-866-207-3912 postage-paid envelope provided
- - Enter your Control Number printed in
the box located near the top of this
form
- - Follow the simple recorded instructions
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card. If you vote your
shares by telephone, there is no need to return your proxy card.
35
HUFFY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 26, 2001
P The undersigned hereby appoints W. Anthony Huffman, Donald K. Miller
R and Joseph P. Viviano, and each of them, his or her proxies, with
O power of substitution, to vote all shares of Common Stock of HUFFY
X CORPORATION, an Ohio corporation, which he or she may be entitled to
Y vote at the Annual Meeting of Shareholders of said Corporation to be
held April 26, 2001, 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)
Don R. Graber
Linda B. Keene
Thomas C. Sullivan
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 APPOINTMENT OF AUDITORS,
(C) FOR THE AMENDMENT OF THE STOCK OPTIONS PLANS, 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 APPOINTED
PROXIES' DISCRETION AND BEST JUDGMENT. IF CUMULATIVE VOTING IS ELECTED FOR
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]
HUFFY CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
ADMISSION TICKET
April 26, 2001, 10:00 a.m. [MAP]
Frederick C. Smith Auditorium
Sinclair Community College, Building 12
444 West Third Street
Dayton, Ohio 45402
DIRECTIONS TO SINCLAIR COMMUNITY COLLEGE
- - Take the Third Street Exit (53A off of I-75)
(northbound or southbound);
- - Turn right onto Perry Street (second light);
- - Go one block to Fourth Street and turn right;
- - Underground parking garage is on the right in
the Sinclair Center.
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.