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G r a y b a R
[logo]
ELECTRIC COMPANY, INC.
INFORMATION STATEMENT
MAY 11, 2001
GRAYBAR ELECTRIC COMPANY, INC.
34 NORTH MERAMEC AVENUE
CLAYTON, MISSOURI 63105
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INFORMATION STATEMENT
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This Information Statement is furnished to each holder of record of
Common Stock of Graybar Electric Company, Inc. (the "Company") and each
holder of a Voting Trust Certificate issued under the Voting Trust Agreement
referred to below in connection with the Annual Meeting of Shareholders of
the Company to be held at 9:30 A.M. on June 14, 2001 at 8000 Forsyth
Boulevard, Clayton, Missouri 63105.
The record holders of Common Stock outstanding at the close of
business on April 20, 2001 will be entitled to attend and to vote at the
meeting. On April 20, 2001, there were outstanding 5,899,115 shares of
Common Stock. Each share is entitled to one vote.
On April 20, 2001, 94% or 5,563,691 of the issued and outstanding
shares of Common Stock of the Company were held of record in the names of D.
E. DeSousa, G. W. Harper, R. D. Offenbacher, R. A. Reynolds, Jr. and C. R.
Udell, all of 34 North Meramec Avenue, Clayton, Missouri 63105, as Voting
Trustees under a Voting Trust Agreement dated as of April 1, 1997, relating
to the Common Stock of the Company. The Voting Trustees as a group possess
the voting power associated with the shares held of record under the Voting
Trust Agreement but do not have the power of disposition as to such shares.
Such voting power is sufficient to assure election of the persons nominated
by the Board of Directors for election as directors and approval of the
Common Stock Purchase Plan as described herein and approval of any other
matters brought before the meeting. The Voting Trustees have indicated as a
group that they will vote the shares of Common Stock held by them in favor
of the persons nominated by the Board of Directors for election as
directors and for approval of the Common Stock Purchase Plan. The Voting
Trust Agreement terminates on March 31, 2007, unless sooner terminated by
the vote of a majority of the Voting Trustees or the vote of the holders
of Voting Trust Certificates representing at least seventy-five percent
of the number of shares of Common Stock deposited thereunder.
This Information Statement will be sent to holders of Common Stock
and holders of Voting Trust Certificates on or about May 11, 2001.
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
- -----------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS
NOMINEES FOR ELECTION AS DIRECTORS
Thirteen directors are to be elected to serve until the next Annual
Meeting of Shareholders and until their successors have been elected and
qualified. The persons nominated by the Board of Directors for election as
directors are named in the table below and are presently directors of the
Company. Certain additional information concerning them is set forth in the
table.
NUMBER OF
SHARES OF
COMMON STOCK
YEAR IN BENEFICIALLY
WHICH OWNED ON
BECAME A APRIL 20,
NAME AGE BUSINESS EXPERIENCE LAST FIVE YEARS DIRECTOR 2001(1)(2)
- ---- --- ----------------------------------- -------- ------------
R. A. Cole 51 Employed by Company in 1972; District Vice 1998 3,261
President 1995 to present.
D. E. DeSousa 42 Employed by Company in 1981; Area Manager 1995 2000 123
to 1996; Manager, Comm/Data Sales 1996 to 1998;
Vice President, Comm/Data Marketing 1998 to
2000; Senior Vice President-Comm/Data Business
2000 to present.
T. F. Dowd 57 Employed by Company in 1997; Vice President, 1997 1,353
Secretary and General Counsel September
1997 to present; Partner, Bryan Cave (law
firm) 1989 to 1997.
T. S. Gurganous 51 Employed by Company in 1973; District Vice 1995 4,615
President 1995 to present.
G. W. Harper 64 Employed by Company in 1957; Vice President- 1990 8,398
Operations 1990 to present.
J. H. Hinshaw 56 Employed by Company in May 2000; Senior Vice 2000 -0-
President and Chief Financial Officer 2000 to
present; Vice President and Treasurer, Monsanto
Company 1984 to 1999. Ms. Hinshaw is a director
of Insituform Technologies, Inc.
G. D. Hodges 58 Employed by Company in 1963; District Vice 2000 6,266
President 1995 to present.
2
NUMBER OF
SHARES OF
COMMON STOCK
YEAR IN BENEFICIALLY
WHICH OWNED ON
BECAME A APRIL 20,
NAME AGE BUSINESS EXPERIENCE LAST FIVE YEARS DIRECTOR 2001(1)(2)
- ---- --- ----------------------------------- -------- ------------
J. C. Loff 51 Employed by Company in 1980; District Vice 1998 3,292
President 1995 to present.
G. J. McCrea 61 Employed by Company in 1963; District Vice 1995 6,623
President 1995 to present.
R. D. Offenbacher 50 Employed by Company in 1968; District Vice 1994 5,658
President 1995 to present.
R. A. Reynolds, Jr. 52 Employed by Company in 1972; Senior Vice 1993 6,382
President-Comm/Data Business 1995 to 2000;
President 2000 to present; Chairman of the Board
2001 to present.
C. R. Udell 56 Employed by Company in 1965; Vice President- 1996 6,644
Electrical Marketing 1993 to 2000; Senior
Vice President-Electrical Business 2000
to present.
J. F. Van Pelt 62 Employed by Company in 1985; Vice President- 1986 6,967
Human Resources 1986 to present.
<FN>
- --------------------------
(1) All the shares of Common Stock listed are held of record by the Voting
Trustees under the Voting Trust Agreement dated as of April 1, 1997. On
April 20, 2001, no single director owned beneficially more than 1% of
the outstanding Common Stock or Voting Trust Certificates except for
the Voting Trustees who, as a group, possessed the voting power
associated with approximately 94% of the outstanding shares of Common
Stock but who possessed no power of disposition with respect to such
shares.
(2) On April 20, 2001, all officers and directors as a group, including
those individuals listed above, with the exception of J. H. Hinshaw (42
persons), owned Voting Trust Certificates representing 150,425 shares
of Common Stock (approximately 3% of the outstanding). No officer or
director owns shares of Common Stock of record. In addition, at such
date, C. L. Hall, who retired as an officer and director on April 1,
2001, owned Voting Trust Certificates representing 11,313 shares of
Common Stock, and R. H. Haney, who retired as an officer and director
on August 1, 2000, owned Voting Trust Certificates representing 8,195
shares of Common Stock.
3
COMMITTEES
The Company has an Audit Committee, which met two times in 2000,
and a Compensation Committee, which met 13 times in 2000. The Company has no
nominating committee.
Messrs. McCrea, Cole, Hodges and Loff are the current members of
the Audit Committee. The Audit Committee is governed by a written charter
approved by the Board of Directors. A copy of this charter is included in
Exhibit B. The members of the Audit Committee are not independent within the
definition of independence in the listing standards of the New York Stock
Exchange, the American Stock Exchange or the National Association of
Securities Dealers because they are employees of the Company.
Ms. Hinshaw and Messrs. DeSousa, Harper, Udell, Van Pelt and J. H.
Kipper, who is Vice President and Comptroller, serve on the Compensation
Committee which in consultation with independent compensation specialists
reviews the Company's compensation policy and makes recommendations to the
President with respect to program changes.
BOARD AND COMMITTEE ATTENDANCE
The Board of Directors met four times in 2000. All incumbent
directors attended more than 75% of the total number of meetings of the
Board and all committees of which they were members.
DIRECTOR COMPENSATION
Directors are paid a meeting fee of $300 for each Board meeting
attended.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting
process on behalf of the Board of Directors. Management has the primary
responsibility for the financial statements and the reporting process
including the systems of internal controls. In fulfilling its oversight
responsibilities, the Committee reviewed the audited financial statements in
the Annual Report with management including a discussion of the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in the financial
statements.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee under SAS 61 (codification of Statements on Auditing
Standards), as modified and supplemented. In addition, the Committee has
discussed with the independent auditors the auditors' independence from
management and the Company including the matters in the written disclosures
and letter from the independent auditors required by the Independence
Standards Board Standard No. 1, Independence Discussions with Audit
Committees, and has considered the compatibility of nonaudit services with
the auditors' independence.
4
The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The
Committee meets with the internal and independent auditors to discuss the
results of their examinations, their evaluations of the Company's internal
controls and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2000 for filing with the Securities and Exchange Commission.
The Board approved such inclusion.
G. J. McCrea, Chairman
R. A. Cole
G. D. Hodges
J. C. Loff
EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the
Chairman of the Board, the President and Chief Executive Officer and the four
other most highly compensated executive officers of the Company for fiscal
year 2000, as well as the total compensation paid to each such individual
for the Company's two previous fiscal years.
5
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal ---------------------------------------- All Other (3)
Position Year Salary(1) Bonus(1)(2) Compensation
--------------------------------- ---------- ---------------------------------------- -----------------
C. L. Hall, 2000 $417,270 $500,724 $82,332
Chairman of the Board 1999 370,488 406,054 73,692
of Directors (4) 1998 336,798 366,436 88,364
R. A. Reynolds, Jr., 2000 $273,308 $301,235 $45,067
President and Chief 1999 199,172 177,363 35,866
Executive Officer 1998 180,418 159,490 42,461
G. W. Harper, 2000 $178,688 $174,222 $32,829
Vice President 1999 168,000 149,604 30,284
1998 152,536 134,841 36,797
J. F. Van Pelt, 2000 $178,548 $160,694 $31,832
Vice President 1999 170,040 139,773 30,221
1998 161,976 132,173 37,902
R. H. Haney, 2000 $217,503 $119,352 $30,067
Senior Vice President (5) 1999 199,172 177,363 35,866
1998 180,418 159,490 42,461
C. R. Udell, 2000 $168,777 $157,079 $28,720
Senior Vice President 1999 144,070 118,426 25,066
1998 130,623 106,589 30,874
<FN>
(1) Includes amounts accrued and deferred pursuant to deferred compensation
agreements with certain employees who were not eligible to participate
in the employee contribution portion of the Profit Sharing and Savings
Plan. These agreements provide for deferral of from 2% to 15% of salary
in 1998, 1999, 2000 and 2001 and 2% to 25% of bonus payments in 1998,
1999, 2000 and 2001. Payment of sums deferred will generally be made in
five or ten annual installments commencing on retirement or in a lump
sum on termination of service other than by retirement. Interest is
credited to sums deferred at the rate applicable to the fixed income
account of the Profit Sharing and Savings Plan at the end of each
calendar quarter.
(2) Bonus paid on March 15th each year under the Company's Management
Incentive Plan with respect to services rendered during the prior year.
The Company's Management Incentive Plan covers all officers of the
Company and other management employees. In accordance with this Plan,
each participant has a guideline incentive, ranging from 20% to 80% of
base salary. This guideline is subject to a year-end adjustment based
on performance against Plan goals. The adjustments are based on
objective
6
measurements, such as sales and profits, but may be varied at
the discretion of the president and district vice presidents.
Participants may earn a maximum of 150% of the applicable guideline.
(3) Profit sharing contributions accrued for the years indicated. The
profit sharing contribution for 1998 was made on March 31, 1999, the
profit sharing contribution for 1999 was made on April 3, 2000 and the
profit sharing contribution for 2000 was made on April 2, 2001.
Contributions by the Company under the Profit Sharing and Savings Plan
are made at the discretion of the Board of Directors for eligible
employees and, subject to certain exceptions, are made in proportion to
their annual compensation. Except as otherwise provided in the Profit
Sharing and Savings Plan and the related Trust Agreement, the monies
held in trust thereunder are paid to employees upon termination of
employment for any reason including their retirement or, in the event
of their death prior to the complete distribution of their interests,
are paid to their estates or designated beneficiaries. In addition, the
column headed "All Other Compensation" also includes payments made to
the deferred compensation accounts of the respective individuals based
on contribution limitations contained in Sections 401 and 415 of the
Internal Revenue Code. For 2000, $48,921 was credited to Mr. Hall's
deferred compensation account in this regard. Similarly, $19,533,
$13,743, $8,659, $6,783 and $7,915 were credited to the deferred
compensation accounts of Messrs. Reynolds, Harper, Van Pelt, Haney and
Udell, respectively.
(4) Retired as an officer and director effective April 1, 2001.
(5) Retired as an officer and director effective August 1, 2000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At December 31, 2000, the members of the Compensation Committee of
the Board of Directors were Ms. Hinshaw and Messrs. DeSousa, Harper, Kipper,
Udell and Van Pelt, all of whom were officers and employees of the Company.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee establishes the general compensation
policies of the Company and makes specific recommendations to the Board of
Directors with respect to such policies and compensation, including the
chief executive officer's salary.
The chief executive officer's salary and salary range, as well as
the salaries and ranges for all other employees, including those officers
identified in the Summary Compensation Table, are established in
consultation with retained professional compensation consultants after
consideration of data developed by the Company's Human Resources Department.
The data examined includes information collected from federal and state
agencies, trade associations, compensation specialists, employment
consultants and marketplace observations.
7
The chief executive officer's bonus, as well as bonuses for all
other exempt employees including those listed in the Summary Compensation
Table, are determined by reference to the Management Incentive Plan which
has been an integral part of the Company's compensation practice for over
twenty-five years. The Plan provides that employees can earn as much as 30%
of salary as a bonus at the lower end of the exempt salary scale to 120% of
salary as a bonus at the level of president and chief executive officer. The
specific bonus level is determined by each operating unit's performance
measured against objectives established at the beginning of each year. The
chief executive officer's bonus, as well as the bonuses of the other
officers named in the Summary Compensation Table, are determined by
aggregating the performance of all operating units and measuring this total
against the aggregated objectives. Performance measures included in the Plan
are a percentage of budget attainment (for sales, gross margin and net
profit) and return on sales.
J. F. Van Pelt, Chairman
D. E. DeSousa
G. W. Harper
J. H. Hinshaw
J. H. Kipper
C. R. Udell
PENSION PLAN
The Company has a qualified defined benefit pension plan covering
all eligible employees. Employees become fully vested after 5 years of
service. Generally, employees may retire and begin receiving pensions at the
age of 65, or earlier under the following conditions: at age 55 with 20
years or more of Company service, at age 50 with 25 years of Company service
or any age with 30 years of Company service under the plan. Prior to the
September 1, 2000 plan change, employees without 15 years of service between
January 1, 1993 and August 31, 2000 were eligible for their pension benefit
upon attaining age 60 with 20 years of Company service.
The following table sets forth annual benefits which would become
payable under the Company's pension plan or supplemental benefits plan based
on certain assumptions as to covered compensation and years of Company
Service without giving effect to any applicable Social Security offset.
PENSION PLAN TABLE
Years of Service
Covered -------------------------------------------------------------------------------
Compensation 20 25 30 35 40
- ------------ -------- -------- -------- -------- --------
$ 300,000 $ 60,000 $ 75,000 $ 90,000 $105,000 $120,000
$ 400,000 $ 80,000 $100,000 $120,000 $140,000 $160,000
$ 600,000 $120,000 $150,000 $180,000 $210,000 $240,000
$ 800,000 $160,000 $200,000 $240,000 $280,000 $320,000
$1,000,000 $200,000 $250,000 $300,000 $350,000 $400,000
$1,200,000 $240,000 $300,000 $360,000 $420,000 $480,000
8
An employee's annual pension income is based on the employee's
average covered compensation during the sixty consecutive months preceding
retirement in which earnings were highest, multiplied by one percent for
each year of Company Service and offset by an amount which cannot exceed
limitations imposed by the Internal Revenue Code. As of December 31, 2000,
the years of credited service for the executive officers named in the
Summary Compensation Table were as follows: C. L. Hall - 41, R. A. Reynolds,
Jr. - 28, G. W. Harper - 43, J. F. Van Pelt - 15, R. H. Haney - 38 and C. R.
Udell - 35. The amounts of salary and bonus in the Summary Compensation
Table are substantially equivalent to covered compensation under the plan.
To the extent that annual benefits exceed limitations imposed by the
Internal Revenue Code of 1986, as amended, such benefits will be paid out of
the general revenues of the Company by means of a supplemental benefits
plan.
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for the Company, the Standard & Poor's 500 Composite Stock Index,
the Standard & Poor's Electrical Equipment Index and, for the first time, an
index of companies selected by the Company as being more representative of
the Company's line of business than the predominantly manufacturing
companies included in the S&P Electrical Equipment Index. The Company does
not intend to continue to show the S&P Electrical Equipment Index in the
future. The companies included in the S&P Electrical Equipment Index are
American Power Conversion, Cooper Industries, Inc., Emerson Electric Co.,
General Electric Company, W. W. Grainger, Inc., Molex Incorporated,
Power-One, Sanmina, Solectron Corporation, Symbol Technologies and Thomas &
Betts Corp. The companies included in the Comparable Company Index are
Anixter International Inc., Applied Industrial Technologies, Inc., Building
Materials Holding Corporation, W. W. Grainger, Inc., Hughes Supply, Inc.,
Noland Company, Owens & Minor, Inc., Park-Ohio Holdings Corp., SCP Pool
Corporation and Watsco, Inc. The market value of Graybar stock, in the
absence of a public market, assumes continuation of the Company's practice
of repurchasing offered securities at $20.00 per share.
9
[GRAPH]
==================================================================================================================
1995 1996 1997 1998 1999 2000
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Graybar Electric Company, Inc. $100.00 $110.32 $127.48 $153.97 $177.91 $205.58
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S&P 500 Index $100.00 $122.94 $163.95 $211.08 $255.16 $231.93
------------------------------------------------------------------------------------------------------------------
S&P Electrical Equipment Index $100.00 $134.96 $193.15 $260.40 $391.10 $364.88
------------------------------------------------------------------------------------------------------------------
Comparable Company Index $100.00 $114.14 $136.85 $125.18 $128.76 $119.76
==================================================================================================================
Assumes $100 invested on December 31, 1995 and reinvestment of
dividends (including the $1.10 cash dividend paid by the Company on January
2, 1996).
10
APPROVAL OF COMMON STOCK PURCHASE PLAN
The Board of Directors will submit to the Annual Meeting of
Shareholders for shareholder approval the Common Stock Purchase Plan (the
"Plan") pursuant to which the Company proposes to offer to eligible
employees, including officers, of the Company the right to subscribe for up
to 1,300,000 shares of Common Stock of the Company at a price of $20 per
share. The offering will afford an opportunity to eligible employees of the
Company to purchase shares of Common Stock in accordance with the policy
formulated when the Company became an employee-owned company through
acquisition by its then employees of all of its Common Stock from Western
Electric Company, Incorporated. Because holders of Common Stock or Voting
Trust Certificates who are not active employees of the Company will not be
entitled to participate in the Plan, with the exception of employees who
retire on a pension (except a deferred pension) on or after March 31, 2001
and prior to October 1, 2001, the percentage of the outstanding shares of
Common Stock of the Company beneficially owned by employees will increase
as a result of the Plan.
It is presently contemplated that the subscription period under the
Plan will run from October 8, 2001 to December 7, 2001. Subscribers will
have the option of paying in full on or before January 18, 2002 for all
shares subscribed for, or agreeing to make payments for all or a portion of
the shares subscribed for in monthly installments through payroll deductions
(or direct monthly payments in certain cases where subscribers are no longer
on the Company's regular payroll) over a 34-month period. Shares paid for in
full will be issued as of January 18, 2002. Shares paid for in installments
will be issued quarterly to the extent they have been fully paid for.
Details with respect to the terms of the offering and the number of
shares for which each eligible employee of the Company will be entitled to
subscribe are set forth in the Plan, a copy of which is annexed to this
Information Statement as Exhibit A. The Plan was unanimously approved by the
Board of Directors of the Company on March 8, 2001.
Shares of Common Stock which are subscribed for by eligible
employees pursuant to the terms of the Plan will upon issuance be deposited
in the Voting Trust established by the Voting Trust Agreement and Voting
Trust Certificates will be issued in respect thereof, except that eligible
employees who are already shareholders and who have not elected to participate
in the Voting Trust Agreement will receive stock certificates representing the
shares for which they subscribed.
All shares of Common Stock of the Company will be issued and held
subject to all the terms, provisions, restrictions and qualifications set
forth in the Restated Certificate of Incorporation of the Company, as
amended, which provides, among other things, for options to the Company to
repurchase shares of its Common Stock at the price at which such shares were
issued, with appropriate adjustment for current dividends, in the event any
holder of Common Stock shall desire to sell, transfer or otherwise dispose
of any of his shares of such Common Stock, or in the event of his death or
in the event of termination of his employment other than by retirement on a
pension (except a deferred pension). The Voting Trust Certificates issued
and to be issued under the Voting Trust Agreement provide, in substance,
that every Voting Trust Certificate is issued and held upon and subject to
the same terms and conditions upon which Common Stock of the Company is
issued and held. Each subscriber by executing a Subscription Agreement will
specifically agree to be bound by the provisions of the Restated Certificate of
11
Incorporation and will agree that all Common Stock or Voting Trust
Certificates held by such subscriber shall be subject to such provisions.
The entire consideration to be received for the shares of Common
Stock sold pursuant to the Plan is to be credited to the treasury stock
account in the case of shares held in the treasury of the Company and to the
common stock account in the case of unissued shares. As and when payments
are made under subscriptions, they will be placed in the general funds of
the Company.
The Plan provides that no corporate action which would result in a
distribution of Common Stock or other assets of the Company to its
shareholders (except the payment of cash dividends or the issuance of shares
of Common Stock pursuant to the installment payment method) will be taken
after January 18, 2002 without first giving notice of such proposed action
to subscribers who shall not then have completed their installment payments
on the Common Stock for which they have subscribed. Such subscribers shall
thereupon have 20 days to accelerate their payments on such Common Stock in
order that they may obtain the benefits of such action. Subscribers who have
not completed their installment payments have the right at any time (except
during the first ten days of March, June, September and December) to pay the
full amount due, and upon any such accelerated payment, certificates will be
issued representing the fully paid shares.
It is anticipated that each of the nominees for director will acquire
a beneficial interest in all or a part of the shares of the Common Stock of
the Company for which he or she will be entitled to subscribe pursuant to the
Plan. The number of shares for which each of the nominees and all nominees and
officers as a group will be entitled to subscribe under the Plan will not
exceed the following to any significant degree.
NUMBER NUMBER
OF OF
NAME SHARES NAME SHARES
- ---- ------ ---- ------
R. A. Cole 783 G. J. McCrea 822
D. E. DeSousa 1,197 R. D. Offenbacher 915
T. F. Dowd 1,200 R. A. Reynolds, Jr. 2,400
T. S. Gurganous 816 C. R. Udell 1,209
G. W. Harper 1,215 J. F. Van Pelt 1,284
J. H. Hinshaw 1,494
G. D. Hodges 1,095 All directors, nominees and officers as
J. C. Loff 888 a group (44 Persons) 37,631
12
The last Common Stock Purchase Plan of the Company, in connection
with which 778,202 shares of Common Stock were subscribed for, ran from
October 12, 1998 to December 11, 1998. Under such plan, each of the nominees
who were entitled to participate in such plan and all nominees and officers
as a group who were so entitled purchased the number of shares set forth
below:
NUMBER NUMBER
OF OF
NAME SHARES NAME SHARES
- ---- ------ ---- ------
R. A. Cole 801 G. J. McCrea 894
D. E. DeSousa 100 R. D. Offenbacher 960
T. F. Dowd 1,224 R. A. Reynolds, Jr. 1,536
T. S. Gurganous 864 C. R. Udell 1,056
G. W. Harper 1,290 J. F. Van Pelt 1,386
G. D. Hodges 1,026
J. C. Loff 855 All directors, nominees and officers as
a group (42 Persons) 30,852
The affirmative vote of the holders of at least a majority of the
issued and outstanding shares of Common Stock is required to approve the
Plan. The Voting Trustees have indicated they will vote the shares of Common
Stock held by them in favor of, and thereby approve, the Plan. Upon
shareholder approval, the Company and the Voting Trustees intend to file a
Registration Statement with the Securities and Exchange Commission with
respect to the shares of Common Stock to be offered under the Plan and the
Voting Trust Certificates to be issued in respect thereof. The offering will
be made pursuant to such Registration Statement, as amended, after it has
been declared effective by the Commission. The expenses of the offering will
be paid by the Company.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP audited the financial statements of the Company
and its subsidiaries in 2000 and will be considered for reappointment by the
Board of Directors in June, 2001. Fees for the last annual audit were
$293,250 and all other fees were $948,978, including audit related services
of $139,585 and nonaudit services of $809,393. A representative of Ernst &
Young LLP is not expected to be present at the Annual Meeting of
Shareholders.
13
MISCELLANEOUS
Effective October 1, 2000, the Company renewed insurance from the
Federal Insurance Company (a member of the Chubb Group), a portion of which
insures employees including directors and officers against liabilities
imposed on them as a result of their employment with the Company at an
annual cost to the Company through September 30, 2001 of $108,129.
The management of the Company knows of no other matters to be
brought before the meeting.
By Order of the Board of Directors
THOMAS F. DOWD
Secretary
May 11, 2001
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K FOR THE YEAR 2000 WILL BE MADE AVAILABLE
UPON WRITTEN REQUEST ADDRESSED TO THE SECRETARY OF THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES.
14
EXHIBIT A
COMMON STOCK PURCHASE PLAN
DATED AS OF OCTOBER 8, 2001
RELATING TO SHARES OF COMMON STOCK OF
GRAYBAR ELECTRIC COMPANY, INC.
---------------------------
1. EMPLOYEES ENTITLED TO SUBSCRIBE.
Each person who on September 30, 2001 was an employee of Graybar
Electric Company, Inc. (the "Company") and had been employed by the Company
since March 31, 2001, and each person who on March 31, 2001 was an employee
of the Company and who retired on a pension (except a deferred pension) on
or after March 31, 2001 and prior to October 1, 2001, is entitled to
subscribe for the number of shares of the Company's common stock, par value
$1.00 per share with a stated value of $20.00 per share (the "Common
Stock"), determined pursuant to Section 3, at the price of $20.00 per share.
Such persons are sometimes referred to as "eligible employees" and after
executing a Subscription Agreement are referred to as "subscribers";
provided, however, that the term "eligible employees" shall not be deemed to
include: (a) those who receive pensions (other than persons who on March 31,
2001 were employees who retired on a pension [except a deferred pension] on
or after March 31, 2001 and prior to October 1, 2001), or retainers, whether
or not currently employed, (b) those who are employed solely on a contract
basis or who by written agreement have released all stock subscription
rights, or (c) those included in a collective bargaining unit represented by
a labor organization where the agreement between the Company and the labor
organization excludes such persons from subscribing for Common Stock of the
Company.
2. PERIOD FOR AND METHOD OF MAKING SUBSCRIPTION.
Any eligible employee desiring to subscribe for shares of Common
Stock shall sign a Subscription Agreement in the form approved for such
purpose and file it, on or before December 7, 2001, with the Secretary at
the executive offices of the Company, P.O. Box 7231, St. Louis, Missouri
63177. No subscription shall be effective and binding unless and until
accepted by the Company at its executive offices. No subscription will be
accepted after the close of business on December 7, 2001.
3. DETERMINATION OF NUMBER OF SHARES FOR WHICH AN ELIGIBLE EMPLOYEE
IS ENTITLED TO SUBSCRIBE.
The maximum number of shares for which an eligible employee may
subscribe shall be determined as hereinafter provided:
3.1. The Subscription Right of each eligible employee, subject to
increase as provided in Section 3.2 and reduction as provided in Section
3.3, shall be one share for each $450 of his annual salary rate in effect on
March 31, 2001. Fractional shares resulting from this computation shall be
disregarded.
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3.2. The number of shares determined in accordance with Section 3.1
shall, in the case of eligible employees who on March 31, 2001 were in the
grade classifications listed below, be increased by the following
percentages:
3.2.1. Eligible Employees in Grade 20 or above--200%;
3.2.2. Eligible Employees in Grades 17, 18 and 19--150%;
3.2.3. Eligible Employees in Grades 15 and 16--125%;
3.2.4. Eligible Employees in Grades N and O--85%;
3.2.5. Eligible Employees in Grade 14 or below who are covered
either by the Management Incentive Plan or the Sales
Incentive Plan--75%;
3.2.6. Eligible Employees in Grades J, K, L and M--50%; and
3.2.7. All other Eligible Employees--25%.
Fractional shares resulting from the above computations shall be
disregarded.
3.3. In the event the aggregate number of shares subscribed for by
all eligible employees exceeds 1,300,000, the number of shares which each
eligible employee will be entitled to purchase shall be reduced to a number
determined by multiplying the number of shares such eligible employee has
subscribed for (but in no event more than the number to which such employee
is entitled to subscribe under this Section) by a fraction, the numerator of
which is 1,300,000 and the denominator of which is the aggregate number of
shares subscribed for by all eligible employees. Fractional shares resulting
from such computation shall be disregarded.
4. PAYMENTS FOR ISSUANCE OF STOCK.
Payments for shares subscribed for may be made pursuant to either
or both of the following methods:
4.1. Method A--payment in full on or before January 18, 2002 for
all or a portion of the shares subscribed for, in which case the shares paid
for will be issued as of January 18, 2002.
4.2. Method B--payments in monthly installments, at the rate of
$.59 for each share subscribed for and paid for under Method B in each of
the 33 months commencing January, 2002, and at the rate of $.53 for each
such share in the 34th month, in which case the Company shall issue as of
the tenth day of March, June, September and December of each year, beginning
in March, 2002, a share certificate to the Voting Trustees or
Non-Participating Shareholders (as such terms are defined in Section 5.2),
whichever is appropriate, for such number of full shares of Common Stock as
have been fully paid for as of the last day of the preceding month.
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4.2.1. Payments under Method B shall be made, in the case
of a subscriber on the Company's payroll, through payroll deductions
authorized by the subscriber and, in the case of a subscriber who is no
longer on the Company's payroll but whose subscription has not been
cancelled in accordance with Section 5.4, through pension deductions
authorized by the subscriber or monthly payments made directly by such
person to the Treasurer of the Company on or before the last day of each
month. Except as provided in Section 5.4, subscriptions made under Method B
and the obligations of subscribers to make full payment for all shares
subscribed for (including any authorization to the Company to make payroll
deductions) shall be irrevocable.
4.2.2. No interest shall be paid on amounts deducted from
a participant's salary or pension or paid directly to the Treasurer under
Method B.
4.2.3. A subscriber under Method B, at his option
exercised at any time except during the first ten days of March, June,
September or December, may pay the balance due on all or any portion of the
number of shares subscribed for pursuant to Method B, and upon such payment
a share certificate shall be issued for the number of shares for which
payment is so made.
5. CONDITIONS OF SUBSCRIPTION.
Each subscription for shares of Common Stock hereunder is expressly
conditioned, among other things, upon the following terms, to all of which
every subscriber by executing a Subscription Agreement agrees:
5.1. Right to receive stock not transferable.
No subscriber may sell, pledge or in any manner alienate or suffer
to be alienated his right to receive Voting Trust Certificates or stock
certificates representing the shares of Common Stock subscribed for by him.
A violation of this provision shall constitute a withdrawal by the
subscriber from his Subscription Agreement, in which event the only right of
the subscriber or his assignee shall be to have the Company return to the
person entitled thereto the total amount paid under said Subscription
Agreement. Such return shall operate as a cancellation and satisfaction of
all rights under the Subscription Agreement.
5.2. Issuance of stock certificates and Voting Trust Certificates.
A stock certificate or certificates representing the shares
subscribed for and purchased pursuant to this Plan by subscribers who are or
who, upon executing a Subscription Agreement, become parties to the Voting
Trust Agreement (the "Voting Trust Agreement") dated as of April 1, 1997,
relating to shares of Common Stock of the Company, shall be issued to, and
deposited by the Company with, the Voting Trustees thereunder (the "Voting
Trustees") in accordance with the provisions of Section 4.05 of the Voting
Trust Agreement. The Voting Trustees will issue Voting Trust Certificates to
such subscribers representing the number of shares subscribed for and
purchased by them. Stock certificates representing the shares subscribed for
and purchased pursuant to this Plan by subscribers who are shareholders
prior to such
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subscription and who are not parties to the Voting Trust Agreement ("Non-
Participating Shareholders") shall be issued and delivered directly to such
subscribers.
5.3. Subscribers bound by provisions in Restated Certificate of
Incorporation, as amended.
All shares of Common Stock subscribed for shall be issued and held
subject to all the terms, provisions, restrictions and qualifications set
forth in the Restated Certificate of Incorporation, as amended, of the
Company, which provides, among other things, that the Company has the option
to repurchase outstanding shares of Common Stock at the price at which such
shares were issued with appropriate adjustment for current dividends in the
event any shareholder shall desire to sell, transfer or otherwise dispose of
any of his shares, or in the event of his death (in which case the option is
exercisable beginning one year after the date of death) or in the event of
termination of his employment other than by retirement on a pension.
Eligibility for or entitlement to a deferred pension under the Graybar
Electric Company, Inc. Pension Plan does not constitute a retirement on a
pension for purposes of this Section 5.3 or for purposes of the Restated
Certificate of Incorporation. The Voting Trust Certificates issued and to be
issued under the Voting Trust Agreement provide, in substance, that every
Voting Trust Certificate is issued and held upon and subject to the same
terms and conditions upon which shares of Common Stock are issued and held.
Each subscriber by executing a Subscription Agreement specifically agrees to
be bound by all provisions of this Section 5.3 and agrees that all stock
certificates or Voting Trust Certificates owned by such subscriber shall be
subject to such provisions.
5.4. Cancellation of subscription on termination of employment.
In the event of the death of a subscriber or the termination of his
employment other than by retirement on a pension (except a deferred pension)
before any or all of the shares of Common Stock subscribed for by him are
issued, his subscription shall be cancelled as to shares not then issued,
and he or his estate shall be entitled to receive the total amount of the
purchase price, if any, then held by the Company for his account for
unissued shares under this Plan, without interest. Payment of such amount by
the Company shall operate as a cancellation and satisfaction of all rights
under his Subscription Agreement. Refund of any balance due employees who
terminate service shall be made in the quarter following termination.
Eligibility for or entitlement to a deferred pension under the Graybar
Electric Company, Inc. Pension Plan does not constitute a retirement on a
pension for purposes of this Section 5.4.
5.5. Determination of Board of Directors to control.
The determination of the Board of Directors of the Company or the
Executive Committee thereof upon any question concerning the application or
interpretation of any of the provisions of this Plan or of the Subscription
Agreement shall be final, and no director shall incur any responsibility by
reason of any error of fact or of law or of any matter or thing done or
suffered or omitted to be done in connection with any such determination or
interpretation or otherwise, except for his own willful misconduct.
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6. CERTAIN CORPORATE ACTION NOT TO BE TAKEN WITHOUT NOTICE.
The Company will not take any action after January 18, 2002 which
would result in a distribution to its shareholders of shares of Common Stock
or other assets (except the payment of cash dividends on shares of Common
Stock or the issuance of shares of Common Stock pursuant to installment
payments made under Section 4.2) without first giving notice of such
proposed action to all subscribers who shall not then have paid their
subscriptions in full and granting such subscribers an opportunity within
such time (not to be less than 20 days) and in such manner as the Board of
Directors may determine to be reasonable, to complete their payments on all
shares subscribed for by them and thereby to become shareholders entitled to
the benefit of and subject to such action.
7. RIGHT OF THE COMPANY TO ISSUE AND SELL ADDITIONAL SHARES OF COMMON
STOCK.
Nothing in this Plan shall be construed to limit or restrict in any
way the right of the Company from time to time hereafter to sell any of the
shares offered pursuant to this Plan and not issued pursuant to
subscriptions made hereunder or any shares that may now or hereafter be
authorized or may now or hereafter be reacquired by the Company upon
exercise of the repurchase option described in Section 5.3 or otherwise.
Set forth below is the form of the Subscription Agreement approved
for use in connection with the Plan:
SUBSCRIPTION AGREEMENT
1. I hereby subscribe to purchase shares of common stock,
------
par value $1.00 per share with a stated value of $20.00 per share (the
"Common Stock"), of Graybar Electric Company, Inc., a New York corporation
(the "Company"), under and pursuant to the terms and conditions stated below
and of the Common Stock Purchase Plan dated as of October 8, 2001 of the
Company (the "Plan"). I agree to pay $20.00 for each such share as follows:
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NUMBER OF SHARES
----------------
Method A -- Payment in full on or before January 18, 2002
----------------
Method B -- Payment in monthly installments. Upon acceptance of this
subscription, (i) I direct that, during such time as I
shall be on the Company's payroll, periodic deductions
shall be made from my salary in accordance with the Plan
and applied to the purchase price of the shares
subscribed for until such shares are fully paid for or
until my subscription is cancelled in accordance with
Section 5.4 of the Plan; and (ii) I promise that during
such time as I shall no longer be on the Company's
payroll I will make monthly payments either through
authorized pension deductions or directly to the
Treasurer of the Company in accordance with the Plan, to
be applied to the purchase price of the shares
subscribed for by me, until such shares are fully paid
for or until my subscription is cancelled in accordance
with Section 5.4 of the Plan
----------------
Total shares subscribed for
================
2. I understand that the number of shares I hereby subscribe for
may be reduced as provided in Section 3.3 of the Plan.
3. If I am a party to the Voting Trust Agreement dated as of April
1, 1997 (the "Voting Trust Agreement") relating to shares of Common Stock of
the Company, or if I become a party to the Voting Trust Agreement pursuant
to Section 4 of this Subscription Agreement, I agree and direct that
certificates for the shares of Common Stock purchased by me pursuant hereto,
when issuable pursuant to the Plan, be issued to and deposited with the
Voting Trustees under the Voting Trust Agreement who will issue Voting Trust
Certificates in my name for the certificates so deposited.
4. This provision does not apply to subscribers who presently are
parties to the Voting Trust Agreement or to subscribers who presently are
shareholders of record of Common Stock and are not parties to the Voting
Trust Agreement.
(a) I hereby represent and warrant that I have received a
copy of the Voting Trust Agreement, that I am familiar
with its terms and provisions and that I desire to
become a party to the Voting Trust Agreement and be
bound thereby.
(b) I hereby authorize J. H. Kipper or C. B. Temple as my
attorney-in-fact, both with full power of substitution,
to execute and deliver the Voting Trust Agreement on my
behalf.
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(c) I recognize that this power of attorney constitutes an
election to participate in the Voting Trust Agreement,
which is given in consideration of a similar election
made by other employees of the Company and is therefore
irrevocable.
5. I have read the Plan and, for the considerations stated therein
and for the privilege of subscribing for such shares of Common Stock, I
agree to be bound by all of the provisions of the Plan, including without
limitation the provisions of Section 5 of the Plan.
6. I request and direct that any Voting Trust Certificates or stock
certificates issued in my name pursuant to this subscription be issued as
follows:
-----------------------------------------
(PLEASE PRINT OR TYPE FIRST NAME IN FULL,
MIDDLE INITIAL AND SURNAME)
-----------------------------------------
SIGNATURE OF SUBSCRIBER
Dated , 2001
----------------------
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EXHIBIT B
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the Audit Committee. The Committee
shall review and reassess the charter at least annually and obtain the
approval of the Board of Directors. The Committee shall be appointed by the
Board of Directors and comprised of at least four directors.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors
in fulfilling its oversight responsibility to the shareholders and others
relating to the Company's financial statements and the financial reporting
process, the systems of internal accounting and financial controls, the
internal audit function, the annual independent audit of the Company's
financial statements, and the legal compliance and ethics programs as
established by management and the Board. In so doing, it is the
responsibility of the Committee to maintain free and open communication
between the Committee, independent auditors, the internal auditors and
management of the Company. In discharging its oversight role, the Committee
is empowered to investigate any matter brought to its attention with full
access to all books, records, facilities, and personnel of the Company.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Audit Committee is to oversee the
Company's financial reporting process on behalf of the Board and report the
results of its activities to the Board. Management is responsible for
preparing the Company's financial statements, and the independent auditors
are responsible for auditing those financial statements. The Committee, in
carrying out its responsibilities, believes its policies and procedures
should remain flexible, in order to best react to changing conditions and
circumstances. The Committee should take the appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business
risk practices, and ethical behavior.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are
set forth as a guide with the understanding that the Committee may
supplement or modify them as appropriate.
The Committee shall have a clear understanding with management and
the independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Company's shareholders. The Committee shall have complete authority and
responsibility to evaluate and, where appropriate, recommend the replacement
of the independent auditors. The Committee shall discuss with the auditors
their independence from management and the Company including the matters in
the written disclosures required by the Independence Standards Board and
shall consider the compatibility of
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nonaudit services with the auditors' independence. Annually, the
Committee shall review and recommend to the Board the selection of the
Company's independent auditors, subject to shareholders' approval.
The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including
the adequacy of staffing and compensation. Also, the Committee shall discuss
with management, the internal auditors, and the independent auditors the
adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and
legal and ethical compliance programs. Further, the Committee shall meet
separately with the internal auditors and the independent auditors to
discuss the results of their examinations.
The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the Company's
Quarterly Report on Form 10-Q. Also, the Committee shall discuss the results of
the quarterly review and any other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards. The chair of the Committee may represent the entire Committee for
the purposes of this review.
The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on Form
10-K (or the Annual Report to Shareholders if distributed prior to the
filing of Form 10-K), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the Committee shall discuss the results of the annual audit and any
other matters required to be communicated to the Committee by the
independent auditors under generally accepted auditing standards.
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APPENDIX
Page 10 of the Information Statement contains a Total Shareholders'
Returns performance graph. The information contained in the graph appears
in a tabular format immediately following the graph.