UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14c of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant: [X]
Filed by a Party other than the Registrant: [_]
Check the appropriate box:
[_] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14c-5(d)(2))
[X] Definitive Information Statement
[_] Definitive Additional Materials
Graybar Electric Company, Inc.
(Name of Registrant as Specified In Its Charter)
(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 14c-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:
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[Graybar logo]
INFORMATION STATEMENT
MAY 10, 2004
GRAYBAR ELECTRIC COMPANY, INC.
34 NORTH MERAMEC AVENUE
CLAYTON, MISSOURI 63105
--------------------
INFORMATION STATEMENT
--------------------
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 10, 2004 at 8000 Forsyth
Boulevard, Clayton, Missouri 63105.
The record holders of Common Stock outstanding at the close of
business on April 19, 2004 will be entitled to attend and to vote at the
meeting. On April 19, 2004, there were outstanding 5,773,599 shares of
Common Stock. Each share is entitled to one vote.
On April 19, 2004, 5,493,774 of the issued and outstanding shares
of Common Stock of the Company, constituting 95% of the total outstanding,
were held of record in the names of the Voting Trustees under the Voting
Trust Agreement referred to below under "Beneficial Ownership of More Than
5% of the Outstanding Common Stock". The Voting Trustees as a group possess
the voting power associated with the shares held of record under the Voting
Trust Agreement, and such voting power is sufficient to assure the taking of
the following actions, all as more fully described herein:
(1) Election of the persons nominated by the Board of Directors
for election as directors;
(2) Approval of amendments of the Restated Certificate of
Incorporation
(a) to increase the authorized shares of Common Stock from
7,500,000 to 15,000,000; and
(b) to create a new class of "Delegated Authority" Preferred
Stock to consist of 10,000,000 shares and to eliminate
the authority to issue the class of Preferred Stock
currently authorized; and
(3) Approval of a three-year Common Stock Purchase Plan.
The Voting Trustees have indicated as a group that they presently
intend to vote the shares of Common Stock held by them FOR the persons
nominated by the Board of Directors for election as directors, FOR the
amendments of the Restated Certificate of Incorporation, and FOR approval of
the Common Stock Purchase Plan. In addition, the Voting Trustees are
authorized to vote in their discretion with respect to such other matters as
may properly come before the meeting. 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 (75%) 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 10, 2004.
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WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
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BENEFICIAL OWNERSHIP OF MORE THAN 5%
OF THE OUTSTANDING COMMON STOCK
The following table sets forth certain information as of April 19,
2004, with respect to the beneficial ownership of the only person known to
the Company to be the beneficial owner of more than 5% of the outstanding
shares of Common Stock. Such beneficial ownership relates solely to voting
power because the Voting Trustees do not have any power to dispose of or
direct the disposition of such shares under the Voting Trust Agreement.
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------------------ ---------------- ----------------
D. E. DeSousa, L. R. Giglio, T. S. Gurganous, R. D.
Offenbacher, and R. A. Reynolds, Jr. as Voting Trustees
under a Voting Trust Agreement dated as of April 1, 1997
34 North Meramec Avenue
Clayton, Missouri 63105 5,493,774 95%
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the
ownership of Voting Trust Certificates representing shares of Common Stock
as of April 19, 2004 by the persons nominated by the Board of Directors for
election as directors, all of whom are presently directors of the Company,
and all executive officers and directors of the Company as a group. On April
19, 2004, no single director or executive officer owned beneficially more
than 1% of the Voting Trust Certificates. No director or executive officer
owns shares of Common Stock of record. The Voting Trustees, when acting in
that capacity, as a group possess the voting power associated with
approximately 95% of the outstanding shares of Common Stock but possess no
power of disposition with respect to such shares as discussed under
"Beneficial Ownership of More Than 5% of the Outstanding Common Stock".
NAME NUMBER OF SHARES NAME NUMBER OF SHARES
- ---- ---------------- ---- ----------------
R. A. Cole.............................. 4,044 J. C. Loff................................ 4,180
D. B. D'Alessandro...................... 2,406 K. M. Mazzarella.......................... 2,094
D. E. DeSousa........................... 1,320 R. D. Offenbacher......................... 6,573
T. F. Dowd.............................. 2,553 R. A. Reynolds, Jr........................ 8,782
L. R. Giglio............................ 4,283 K. B. Sparks.............................. 6,584
T. S. Gurganous......................... 5,431
J. H. Hinshaw........................... 1,494 Executive officers and directors
G. D. Hodges............................ 7,361 as a group (15 persons)................... 64,660 (1%)
DIRECTORS
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 all are presently employees and
directors of the Company. Accordingly, for purposes of serving on the Board
or any committee, none of the directors are
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deemed to be independent within the meaning of the listing standards of the
New York Stock Exchange, which the Board has elected to use for purposes of
determining independence. Certain additional information concerning them is
set forth in the table.
YEAR IN
WHICH
BECAME A
NAME AGE BUSINESS EXPERIENCE LAST FIVE YEARS DIRECTOR
- ---- --- ----------------------------------- --------
R. A. Cole 54 Employed by Company in 1972; District Vice President March 1995 to 1998
November 2001; Group Vice President November 2001 to July 2003;
District Vice President July 2003 to present.
D. B. D'Alessandro 43 Employed by Company in 1983; Director of Strategic Planning and 2004
Development December 1998 to June 2001; Vice President-IT Strategy
Project June 2001 to February 2003; Vice President and Chief
Information Officer February 2003 to present.
D. E. DeSousa 45 Employed by Company in 1981; Vice President-Comm/Data Marketing 2000
June 1998 to July 2000; Senior Vice President-Comm/Data Business
July 2000 to November 2001; Senior Vice President-Sales and
Marketing November 2001 to January 2003; Senior Vice
President-Comm/Data Business January 2003 to June 2003; Senior
Vice President-Sales and Distribution June 2003 to present.
T. F. Dowd 60 Employed by Company in 1997; Vice President, Secretary and General 1997
Counsel September 1997 to present.
L. R. Giglio 49 Employed by Company in 1978; District Vice President March 1995 to 2002
April 2001; Vice President, Investment and Inventory Management
April 2001 to April 2002; Senior Vice President-Operations April
2002 to present.
T. S. Gurganous 54 Employed by Company in 1973; District Vice President March 1995 to 1995
November 2001; Group Vice President November 2001 to July 2003;
District Vice President July 2003 to present.
J. H. Hinshaw 59 Employed by Company in May 2000; Senior Vice President and Chief 2000
Financial Officer May 2000 to present; Vice President and
Treasurer, Monsanto Company 1984 to 1999. Ms. Hinshaw is a
director of Insituform Technologies, Inc. and IPSCO, Inc.
G. D. Hodges 61 Employed by Company in 1963; District Vice President March 1995 to 2000
November 2001; Group Vice President November 2001 to July 2003;
District Vice President July 2003 to present.
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YEAR IN
WHICH
BECAME A
NAME AGE BUSINESS EXPERIENCE LAST FIVE YEARS DIRECTOR
- ---- --- ----------------------------------- --------
J. C. Loff 54 Employed by Company in 1980; District Vice President March 1995 to 1998
November 2001; Group Vice President November 2001 to July 2003;
District Vice President July 2003 to present.
K. M. Mazzarella 44 Employed by Company in 1980; Vice President-Comm/Data National 2004
Accounts June 1998 to June 1999; Vice President-Corporate Accounts
June 1999 to June 2001; Vice President-Strategic Planning June
2001 to January 2004; Vice President-Human Resources and Strategic
Planning January 2004 to present.
R. D. Offenbacher 53 Employed by Company in 1968; District Vice President March 1995 to 1994
January 2001; District Vice President-Comm/Data January 2001 to
November 2001; Group Vice President November 2001 to June 2003;
Senior Vice President-Comm/Data Business June 2003 to February
2004; Senior Vice President-Sales and Marketing February 2004 to
present.
R. A. Reynolds, Jr. 55 Employed by Company in 1972; Senior Vice President-Comm/Data 1993
Business October 1995 to July 2000; Senior Vice President-
Electrical Business July 2000; President and Chief Executive
Officer July 2000 to present; Chairman of the Board April 2001
to present.
K. B. Sparks 58 Employed by Company in 1968; District Vice President March 1995 to 2001
November 2001; Group Vice President November 2001 to July 2003;
District Vice President July 2003 to present.
COMMITTEES
The Board of Directors has designated an Executive Committee
consisting of Ms. Hinshaw, Ms. Mazzarella and Messrs. D'Alessandro, DeSousa,
Dowd, Giglio, Offenbacher and Reynolds. Except as otherwise provided by law
and the Company's Certificate of Incorporation, the Executive Committee has
all the authority of the Board.
The Company has an Audit Committee which met six times in 2003.
Messrs. Cole, D'Alessandro, Gurganous, Hodges, Loff and Sparks are the
current members of the Audit Committee. The Audit Committee is governed by a
written charter approved by the Board of Directors. The Audit Committee and
the Board of Directors review and assess the adequacy of the charter at
least annually. None of the members of the Audit Committee is an audit
committee financial expert as that term is defined in the rules promulgated
by the Securities and Exchange Commission. Ms. Hinshaw, the only director
who would qualify as such an expert, is the Chief Financial Officer of the
Company. The Board of Directors determined that it is not appropriate for a
director in that position to serve on the Audit Committee. The Board
believes that Mr. D'Alessandro, while not meeting the technical definition
of a financial expert, is generally capable of
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performing that function in his role as a member of the Audit Committee by
reason of his education, general financial and accounting expertise and
business experience.
The Board of Directors has designated a Compensation Committee
which met fourteen times in 2003. Ms. Hinshaw, Ms. Mazzarella and Messrs.
DeSousa, Giglio, Offenbacher and J. H. Kipper, who is Vice President and
Controller, currently serve on the Compensation Committee that, in
consultation with independent compensation specialists, reviews the
Company's compensation policy and makes recommendations to the President and
the Board of Directors with respect to program changes.
The Company has no nominating committee. The Board of Directors has
determined that it is appropriate for the entire Board to participate in the
consideration of director nominees, all of whom historically have been
employees of the Company with a broad range of management experience within
the Company. When identifying an employee to fill a vacancy or new position
on the Board, the directors consider the recommendation of the Chief
Executive Officer, the background and reputation of the candidate in terms
of character, personal and professional integrity, his or her business
experience, including the positions held as an employee of the Company, and
how the person would complement the other directors in terms of expertise
and experience. The Board of Directors does not have a policy with regard to
consideration of potential candidates recommended for consideration by
holders of Common Stock and Voting Trust Certificates. The Board of
Directors believes that the procedure used traditionally, which has been for
the Board to select employees who have been promoted throughout their
careers until they reach a relatively senior management position either in
the field or at corporate headquarters, has served the Company and its
employee-shareholders well.
BOARD AND COMMITTEE ATTENDANCE
The Board of Directors met five times in 2003. All incumbent
directors attended more than 75% of the total number of meetings of the
Board and all committees of which they were members. A meeting of the Board
of Directors is typically scheduled in conjunction with the annual meeting
of shareholders, and it is expected that all directors will attend the
annual meeting absent a schedule conflict or other valid reason. Twelve of
the directors in office at the time attended the 2003 Annual Meeting.
DIRECTOR COMPENSATION
Directors are paid a meeting fee of $300.00 for each regular 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 control over financial reporting. 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 used, the reasonableness of the significant judgments made and
the clarity of the disclosures contained 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 by Statement on Auditing Standards No. 61, as amended by
Statement on Auditing Standards No. 90 (Communications with Audit
Committees). In
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addition, the Committee has discussed with the independent auditors the
auditors' independence from management and the Company, including the
matters in the written disclosures required by the Independence Standards
Board Standard No. 1, and has considered the compatibility of non-audit
services with the auditors' independence.
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, 2003 for filing with the Securities and Exchange Commission.
The Board approved such inclusion.
J. C. Loff, Chairman
R. A. Cole
D. B. D'Alessandro
T. S. Gurganous
G. D. Hodges
K. B. Sparks
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At December 31, 2003, the members of the Compensation Committee
were Ms. Hinshaw, Ms. Mazzarella and Messrs. DeSousa, Giglio, Kipper,
Offenbacher, Udell and Van Pelt, all of whom were officers and employees of
the Company and, with the exception of Ms. Mazzarella (who became a director
in January 2004) and Mr. Kipper, were directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee advises the Board of Directors
on matters related to compensation policy, incentive plans and other Human
Resources issues.
To carry out this responsibility, the Compensation Committee
regularly reviews salary and incentive plans, analyzes potential plan
changes, and makes recommendations to the Board on compensation issues. The
Compensation Committee is supported by the Human Resources staff and uses an
independent consulting firm to advise on matters of employee and executive
compensation. In 2002, the Committee engaged the services of Watson Wyatt, a
nationally recognized firm of compensation experts, specifically for this
purpose.
Compensation Philosophy and Strategy
The Company's compensation philosophy is to offer base
pay, incentives and benefits to attract, retain and motivate
employees to help the Company achieve its profit objectives. The
Company's pay-for-performance philosophy places a strong emphasis
on rewarding employees for achieving company, district and branch
goals.
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Overall, the same principles that direct the compensation
of all employees also apply to the compensation of the Company's
executives. The Compensation Committee uses the following
guidelines to evaluate and determine compensation:
o All employees, including executives, should have
market-competitive total compensation. (Total
compensation refers to base salary combined with
incentive payments and benefit plans.) In the case of
executives, the process of determining market
competitiveness includes a thorough and ongoing review
of executive compensation as compared to similar
companies.
o A significant and meaningful portion of executive
compensation should be at risk, tied to business
performance and each individual's contribution to that
performance.
Executive Compensation Elements
Using the guidelines above as a foundation, the
Compensation Committee has established a total compensation program
for executives that consists of three main elements: salary, bonus
(commonly known as the Management Incentive Plan or MIP), and other
compensation in the form of Profit Sharing.
Combined Salary and Bonus: The 2002 Watson Wyatt study
reviewed the Company's executive base salaries combined with the
target annual incentive payouts and concluded that the Company's
target total cash compensation of the Company executives named in
the Summary Compensation Table when achieved would be generally at
or below median market benchmarks.
Salary: Executive salaries, including that of the Chief
Executive Officer, are determined based on a number of factors,
including the value given these positions in the relevant labor
markets, the relative difficulty of the position within the
Company, the position's effect on profitability, and the
executive's achievement of performance and development objectives.
The Compensation Committee reviews employee salaries, including
executive salaries, on a yearly basis with the help of its outside
compensation consultants and makes recommendations to the Board of
Directors regarding changes. In the 2002 study, Watson Wyatt
determined that the Company's salaries of the executives named in
the Summary Compensation Table are generally below competitive
market practices and, in the case of the Chief Executive Officer
and certain others, below the 25th percentile of the competitive
market.
Bonus (Management Incentive Plan): In 2003, approximately
1,500 persons participated in the Company's Management Incentive
Plan, including all officers. This plan has been an integral part
of the Company's compensation program for many years. It is
structured in such a way that management employees at higher levels
of the organization have a greater percentage of their total
compensation at risk than managers at the lower end of the exempt
salary scale. This bonus is paid on or before March 15 each year,
based on the Company's performance for the previous year against
targets established at the beginning of that year. Management
Incentive Plan payments made to participants for 2003 were
significantly higher than in the preceding year because the
Company's performance relative to the gross margin and net income
targets improved substantially.
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In their study of the Company's executive compensation,
Watson Wyatt found that, in general, the Company's target annual
incentive opportunities are above typical market incentive
opportunities. This means that the Company's executives have the
potential to receive higher than industry average bonuses in very
good years, but this also means that they have a greater portion of
their total compensation at risk.
Other Compensation: The Company's executives are included
in the Company's Profit Sharing and Savings Plan. Company
contributions to this plan vary based on the performance of the
Company, and when Profit Sharing is paid, executives receive the
same payout percentage as all other eligible employees.
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, in the years when a
profit sharing contribution is made, payments are made to the
deferred compensation accounts of certain executives based on
contribution limitations contained in Sections 401 and 415 of the
Internal Revenue Code. There was no profit sharing contribution for
2001, 2002 or 2003.
J. F. Van Pelt, Chairman
D. E. DeSousa
L. R. Giglio
J. H. Hinshaw
J. H. Kipper
K. M. Mazzarella
R. D. Offenbacher
C. R. Udell
GENERAL
The following table summarizes the total compensation of the
Chairman of the Board, President and Chief Executive Officer and the four
other most highly compensated executive officers of the Company for fiscal
year 2003, as well as the total compensation paid to each such individual
for the Company's two previous fiscal years.
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SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(1)(2)(3)
- --------------------------------------------------------- --------- -------------------- -------------------
R. A. Reynolds, Jr., 2003 $458,910 $278,852
Chairman of the Board, 2002 433,440 128,298
President and Chief Executive Officer 2001 381,600 137,376
J. H. Hinshaw, 2003 $249,142 $122,788
Senior Vice President and Chief Financial Officer 2002 237,490 57,117
2001 221,000 64,643
J. F. Van Pelt, 2003 $221,742 $111,390
Vice President-Human Resources 2002 206,340 49,625
2001 192,828 56,402
C. R. Udell, 2003 $215,777 $106,336
Senior Vice President-Electrical Business 2002 209,628 50,415
2001 189,212 55,345
D. E. DeSousa, 2003 $215,668 $106,372
Senior Vice President-Sales and Distribution 2002 208,366 50,112
2001 187,448 54,829
<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 2001, 2002 and 2003 and 2% to 25% of bonus payments in 2001, 2002
and 2003. 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 in March of each year under the Company's Management
Incentive Plan with respect to services rendered during the prior year.
In 2003, approximately 1,500 persons participated in the Company's
Management Incentive Plan, including all officers of the Company. 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 measurements, such as sales, gross
margin and net 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) There was no profit sharing contribution for 2001, 2002 or 2003.
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PENSION PLAN
The Company has a qualified defined benefit pension plan covering
all eligible employees. Employees become fully vested after five 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.
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 45
- ------------ -------- -------- -------- -------- -------- --------
$ 300,000 $ 60,000 $ 75,000 $ 90,000 $105,000 $120,000 $135,000
$ 400,000 $ 80,000 $100,000 $120,000 $140,000 $160,000 $180,000
$ 600,000 $120,000 $150,000 $180,000 $210,000 $240,000 $270,000
$ 800,000 $160,000 $200,000 $240,000 $280,000 $320,000 $360,000
$1,000,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000
$1,200,000 $240,000 $300,000 $360,000 $420,000 $480,000 $540,000
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, 2003,
the years of credited service for the executive officers named in the
Summary Compensation Table were as follows: R. A. Reynolds, Jr. (31), J. H.
Hinshaw (3), J. F. Van Pelt (18), C. R. Udell (38), and D. E. DeSousa (23).
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 and a Comparable Company Index of companies selected by the Company as
being representative of the Company's line of business. 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 the Company stock, in the absence of a
public market, assumes continuation of the Company's practice of
repurchasing offered securities at $20.00 per share.
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[GRAPH]
- -------------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
- -------------------------------------------------------------------------------------------------------------------
Graybar Electric Company, Inc. $100.00 $115.55 $133.51 $154.27 $170.19 $187.75
- -------------------------------------------------------------------------------------------------------------------
S&P 500 Index $100.00 $120.89 $109.97 $ 96.94 $ 75.64 $ 97.09
- -------------------------------------------------------------------------------------------------------------------
Comparable Company Index $100.00 $102.86 $ 95.77 $125.54 $128.88 $149.39
- -------------------------------------------------------------------------------------------------------------------
Assumes $100.00 invested on December 31, 1998 and reinvestment of
dividends (including the $1.10 cash dividend paid by the Company on January
4, 1999).
AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has recommended that action be taken by the
shareholders to amend the Restated Certificate of Incorporation to increase
the authorized shares of Common Stock that the Company shall have authority
to issue from 7,500,000 to 15,000,000 shares. As of April 19, 2004, the
Company had 5,773,599 shares of Common Stock outstanding and 131,894 shares
of Common Stock were held by the Company as treasury stock.
The Company has no present plans to issue the additional shares of
Common Stock that would become authorized if the proposed amendment is
adopted, except as described herein. The Company intends to continue the
practice of offering Common Stock to active, full-time employees at regular
intervals (annually under the three-year Common Stock Purchase Plan
described below) and, at such times as the Board of Directors deems
appropriate, issuing stock dividends, and will need additional Common Shares
for those purposes. Such shares will be available for general corporate
purposes such as the foregoing without (except as otherwise required by law)
further authorization by the shareholders. Shareholders presently have no
preemptive rights and would have none in respect of the proposed
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additional shares. The proposed additional shares of Common Stock will have
the same voting, dividend and other rights as the presently authorized
Common Stock.
The affirmative vote of the holders of at least a majority of the
issued and outstanding shares of Common Stock is required to adopt the
amendment to the Restated Certificate of Incorporation to increase the
authorized Common Stock to 15,000,000 shares. The Voting Trustees have
indicated they presently intend to vote the shares of Common Stock held by
them in favor of, and thereby adopt, the amendment.
AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION
TO AUTHORIZE 10,000,000 SHARES OF
"DELEGATED AUTHORITY" PREFERRED STOCK AND
ELIMINATE AUTHORITY TO ISSUE EXISTING PREFERRED STOCK
The Board of Directors has recommended that action be taken by the
shareholders to amend the Restated Certificate of Incorporation to authorize
10,000,000 shares of a new class of "Delegated Authority" Preferred Stock
(the "Delegated Authority Preferred"). The term "Delegated Authority" refers
to preferred stock, the creation and issuance of which is authorized in
advance by the shareholders and the terms, rights and limitations of which
are determined by the Board of Directors of the Company upon issuance.
Upon effectiveness of this amendment to the Company's Restated
Certificate of Incorporation, the Board of Directors will be empowered to
authorize and issue shares of Delegated Authority Preferred from time to
time in one or more series. Subject to the other provisions of the Company's
Restated Certificate of Incorporation and any limitation prescribed by law,
the Board of Directors will be expressly authorized, at its discretion, to
adopt resolutions to issue shares of Delegated Authority Preferred, to fix
the number of shares and to change the number of shares constituting any
series and to provide for or change the designations, relative rights,
preferences and limitations thereof, including in each case voting rights,
dividend rights (and whether the dividends are cumulative), dividend rates,
terms of redemption (including sinking fund provisions), redemption prices,
conversion rights (including convertibility into Common Stock) and
liquidation preferences of the shares constituting any series of the
Delegated Authority Preferred, all without any further action or vote by the
shareholders. The Board of Directors will be required to make any
determination to issue shares of Delegated Authority Preferred based on its
judgment at the time as to the best interests of the Company and its
shareholders. The Executive Committee of the Board will have the authority
to take any action the complete Board of Directors may take.
The Company currently has no arrangements, understandings,
agreements or commitments with respect to the issuance of any shares of
Delegated Authority Preferred, and the Company may never issue any Delegated
Authority Preferred.
If the resolutions adopted by the Board of Directors so provide,
the holders of Delegated Authority Preferred may have voting rights, and
shares of Delegated Authority Preferred may not be subject to the provisions
of the Restated Certificate of Incorporation providing that holders of
Common Stock may not sell, transfer or otherwise dispose of shares without
offering the Company the option to purchase them.
The Board of Directors believes that the creation of the Delegated
Authority Preferred is advisable and in the best interests of the Company
and its shareholders for several reasons. The new class of Delegated
Authority Preferred will provide the Company with increased flexibility in
meeting future financial and operating requirements because it will be
available for issuance from time to time for any proper
- 12 -
corporate purpose with such features as determined by the Board of Directors
or the Executive Committee of the Board at that time. Such purposes would
include, if market conditions warrant, issuance of Delegated Authority
Preferred for cash to obtain equity capital for use by the Company.
It should be noted that any issuance of Delegated Authority
Preferred with voting rights might, under certain circumstances, have the
effect of delaying or preventing a change in control of the Company by
increasing the number of outstanding shares entitled to vote and by
increasing the number of votes required to approve a change in control of
the Company. Also, shares of voting or convertible Preferred Stock, or
rights to purchase such shares, could be issued to render more difficult or
discourage an attempt to obtain control of the Company by means of a tender
offer, proxy contest, merger or otherwise. The ability of the Board of
Directors to issue such additional shares of Delegated Authority Preferred,
with the rights and preferences it deems advisable, could discourage an
attempt by a party to acquire control of the Company by tender offer or
other means. However, the creation of the Delegated Authority Preferred is
not intended to be an anti-takeover measure and the Company is not aware of
any third party plans to attempt to gain control of the Company.
The actual effect of the issuance of shares of Delegated Authority
Preferred upon the rights of holders of the Common Stock cannot be stated
until the Board of Directors or the Executive Committee of the Board
determines the specific rights of the holders of such Delegated Authority
Preferred. However, the effects might include, among other things,
restricting priority of dividends on the Common Stock, diluting the voting
power of the Common Stock, reducing the book value of the Common Stock, or
impairing the liquidation rights of the Common Stock. Holders of Common
Stock will not have preemptive rights with respect to the Delegated
Authority Preferred.
The Board of Directors believes that the financial and operating
flexibility offered by the Delegated Authority Preferred outweighs any
potential disadvantages. The existence of the authorized Delegated Authority
Preferred will enable the Company to respond promptly and take advantage of
financial market conditions to raise equity and take advantage of other
favorable opportunities without incurring the delay and expense associated
with calling a special shareholders' meeting to approve a contemplated stock
issuance.
The affirmative vote of the holders of at least a majority of the
issued and outstanding shares of Common Stock is required to adopt the
proposed amendment to the Restated Certificate of Incorporation authorizing
the 10,000,000 shares of Delegated Authority Preferred and eliminating the
authorization of the Existing Preferred. The Voting Trustees have indicated
they presently intend to vote the shares of Common Stock held by them in
favor of, and thereby adopt, the proposed amendment.
The authorized capital stock of the Company currently includes
300,000 shares of Preferred Stock, par value $20.00 per share, of which
2,042 are outstanding (the "Existing Preferred"). The Company has given
notice of redemption of the outstanding shares of Existing Preferred for
$20.00 per share plus accrued dividends. After the redemption, there will be
no outstanding shares of Existing Preferred. Authority to issue any further
shares of the Existing Preferred will be eliminated from the Restated
Certificate of Incorporation by the same amendment that creates the
Delegated Authority Preferred.
- 13 -
APPROVAL OF THREE-YEAR COMMON STOCK PURCHASE PLAN
The Board of Directors will submit to the Annual Meeting of
Shareholders for shareholder approval a Common Stock Purchase Plan (the
"Plan") pursuant to which the Company proposes to offer to eligible
employees, including officers, of the Company and its wholly owned
subsidiary, Commonwealth Controls Corporation, the right to subscribe for
shares of Common Stock of the Company at a price of $20.00 per share in each
of the years 2004, 2005 and 2006. The maximum number of shares that may be
issued pursuant to the Plan is two million (2,000,000). The Plan was
unanimously approved by the Board of Directors of the Company on March 11,
2004. Each annual offering will afford eligible active, full-time employees
of the Company and Commonwealth Controls Corporation, and certain eligible
retirees who were active, full-time employees of the Company or Commonwealth
Controls Corporation on March 31, 2004, an opportunity to purchase shares of
Common Stock. The eligibility conforms with the policy initially adopted
when the Company's active employees acquired all of its Common Stock from
Western Electric Company and followed continuously since then. Accordingly,
holders of Common Stock or Voting Trust Certificates who are not active,
full-time employees of the Company or Commonwealth Controls Corporation will
not be entitled to participate in the Plan, with the exception of (a)
employees who retire on a pension (except a deferred pension) on or after
March 31 and prior to October 1 of the year in which the offering is made,
and (b) in order to permit a transition to annual offerings, persons who
were active, full-time employees at March 31, 2004 and who retired on a
pension (other than a deferred pension) prior to October 1 of the applicable
Plan year will also be eligible to participate in the offerings made in 2005
or 2006. If the Plan is approved, the Company plans to offer to sell up to
450,000 shares of Common Stock in 2004. The number of shares of Common Stock
to be offered in subsequent years will be determined by the Board of
Directors. It is contemplated that the terms of such subsequent offerings
will be substantially the same as those described below for the offering to
be made in 2004.
It is presently contemplated that the subscription period for the
2004 offering under the Plan would run from October 18, 2004 to December 10,
2004. Subscribers would have the option of paying in full on or before
January 20, 2005 for all or a portion of shares subscribed for or agreeing
to make payments for all or a portion of the shares subscribed for in equal
installments through payroll deductions (or direct monthly payments in
certain cases where subscribers are no longer on the Company's or
Commonwealth Controls Corporation's regular payroll). Installment payments
would commence with the second payroll payment date in January 2005 and end
with the last payroll payment date in November 2005. Shares paid for in full
will be issued as of January 20, 2005. Shares paid for in installments will
be issued of record by the tenth day of March, June and September and the
fifteenth day of December 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 or Commonwealth
Controls Corporation 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 total purchase price to be paid will equal that number of shares
multiplied by $20.00. It is anticipated that the number of shares to be
offered to each eligible employee or retiree of the Company in 2004 will be
determined by dividing the base salary of that employee or retiree at March
31 by $1,000.00 and multiplying that amount by the applicable multiplier
shown in the following table.
- 14 -
GRADE/BAND CLASSIFICATIONS MULTIPLIER
-------------------------- ----------
Executives EX1 through EX5 3.00
Grades 17, 18, 19 and 20 and Band M1 2.50
Grades 15 and 16 and Band M2 2.25
Grades P and Q 1.90
Grades N and O 1.85
Grade 14 or below covered either by the
Management Incentive Plan or the
Sales Incentive Plan and Band M3 1.75
Grades J, K, L and M 1.50
All others 1.25
The Board of Directors will determine the appropriate number of shares to be
offered to each eligible employee and eligible retiree of Commonwealth
Controls Corporation using salary classifications comparable to those listed
in the table above.
Shares of Common Stock subscribed for 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 subscribers who prior to the offering are
already shareholders of record who elected not to participate in the Voting
Trust Agreement will receive stock certificates representing the shares for
which they subscribe.
All subscribed shares of Common Stock will be issued and held
subject to the terms, provisions, restrictions and qualifications set forth
in the Restated Certificate of Incorporation of the Company, as amended,
which, among other things, provide the Company the option 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 wants to sell, transfer or otherwise dispose of any of his
or her shares of such Common Stock, or in the event of his or her death or
in the event of termination of his or her employment other than by
retirement on a pension (except a deferred pension). The Voting Trust
Certificates to be issued under the Voting Trust Agreement will provide, in
substance, that every Voting Trust Certificate is issued and held upon and
subject to the same terms and conditions (including all restrictions) 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 Incorporation and will agree
that all Common Stock or Voting Trust Certificates held by such subscriber
shall be subject to these provisions.
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 20, 2005 without first giving notice of such proposed action
to subscribers who have not then completed their installment payments on the
Common Stock for which they have subscribed. Such subscribers will be
granted twenty (20) days to accelerate their payments on such Common Stock
in order that they may obtain the benefits of such action. Subscribers who
elected to use payroll deduction have the right at any time (except during
the first ten days of March, June, September and December) to pay the full
remaining amount due, and upon any such accelerated payment, certificates
will be issued representing the fully paid shares and the payroll deduction
will no longer apply.
- 15 -
As and when payments are received from subscriptions, they will be
added to the general funds of the Company.
In the case of the offering to be made in 2004 under the Plan upon
approval, each of the directors presently intends to purchase all shares of
the Common Stock allocated to him or her, which will not exceed the
estimated number shown below to any significant degree, all of which will be
deposited in the Voting Trust.
NAME NUMBER OF SHARES NAME NUMBER OF SHARES
- ---- ---------------- ---- ----------------
R. A. Cole............................. 408 J. C. Loff................................ 459
D. B. D'Alessandro..................... 390 K. M. Mazzarella.......................... 447
D. E. DeSousa.......................... 672 R. D. Offenbacher......................... 609
T. F. Dowd............................. 630 R. A. Reynolds, Jr........................ 1,410
L. R. Giglio........................... 582 K. B. Sparks.............................. 489
T. S. Gurganous........................ 480
J. H. Hinshaw.......................... 786 All directors and officers as a group
G. D. Hodges........................... 546 (15 persons).............................. 8,790
The last Common Stock Purchase Plan of the Company, in connection
with which 813,251 shares of Common Stock were subscribed for, ran from
October 8, 2001 to December 7, 2001. Under that plan, each of the directors
who was entitled to participate and all directors and officers as a group
who were so entitled purchased the number of shares set forth below:
NAME NUMBER OF SHARES NAME NUMBER OF SHARES
- ---- ---------------- ---- ----------------
R. A. Cole............................. 783 J. C. Loff................................ 888
D. B. D'Alessandro..................... 588 K. M. Mazzarella.......................... 365
D. E. DeSousa.......................... 1,197 R. D. Offenbacher......................... 915
T. F. Dowd............................. 1,200 R. A. Reynolds, Jr........................ 2,400
L. R. Giglio........................... 879 K. B. Sparks.............................. 972
T. S. Gurganous........................ 816
J. H. Hinshaw.......................... 1,494 All directors and officers as a group
G. D. Hodges........................... 1,095 (15 persons).............................. 15,332
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 presently intend to 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 or Statements with the Securities and
Exchange Commission with respect to the shares of Common Stock to be offered
in 2004 under the Plan and the Voting Trust Certificates to be issued in
respect thereof and the offering will be made pursuant thereto, as amended,
after being declared effective by the Commission. The expenses of the
offering will be paid by the Company.
- 16 -
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP audited the financial statements of the Company
and its subsidiaries in 2003 and will be considered for reappointment by the
Board of Directors in June 2004. Ernst & Young LLP has advised the Company
that neither the firm nor any of its members or associates has any direct
financial interest or any material indirect financial interest in the
Company or any of its affiliates other than as accountants. No
representative of Ernst & Young LLP is expected to attend the Annual Meeting
of Shareholders.
The fees billed to the Company by Ernst & Young LLP with respect to
the years 2003 and 2002 were as follows:
2003 2002
---- ----
Audit Fees................................. $724,158 $443,900
Audit-Related Fees......................... $107,290 $235,900
Tax Fees................................... $487,259 $487,000
All Other Fees............................. -- --
Audit Fees include amounts billed for the audit of the Company's
annual consolidated financial statements, the timely review of the financial
statements included in the Forms 10-Q filed by the Company during each year
and international statutory audits. Audit-Related Fees include audits of the
Company's employee benefit plans, general consultations on accounting or
disclosure matters and assessment of internal accounting controls related to
the Company's Enterprise Resource Planning project. Tax Fees include
consulting on tax compliance and planning. It is expected that Ernst & Young
LLP will provide similar non-audit services during the year 2004. In
connection with its review and evaluation of non-audit services, the Audit
Committee has considered and concluded that the provision of the non-audit
services is compatible with maintaining the independence of Ernst & Young
LLP.
The Audit Committee has established procedures for the pre-approval
of all audit and non-audit services to be performed by the independent
auditor retained to audit the Company's financial statements. Under these
procedures, types of services and an estimated range of fees are established
and pre-approved annually. Invoices for pre-approved services that are
within the pre-approved range may be paid by the Senior Vice President and
Chief Financial Officer and the Vice President and Controller. If the fees
for any type of service are expected to exceed the pre-approved limit, a
request must be submitted to the Audit Committee Chairman. Services other
than those included in the annual pre-approval must be considered and
authorized in advance by the Audit Committee on an engagement-by-engagement
basis.
MISCELLANEOUS
Effective October 1, 2003, the Company renewed insurance from the
Federal Insurance Company (a member of the Chubb Group), a portion of which
insures directors and officers and certain other employees against
liabilities imposed on them as a result of their employment with the Company
at an annual cost to the Company through September 30, 2004 of $232,605.
Holders of Common Stock and Voting Trust Certificates may
communicate directly with the Board of Directors by mail at Graybar Board of
Directors, 34 North Meramec Avenue, Clayton, Missouri 63105. All such
communications will be received directly by the Chairman of the Board and
the Vice President, Secretary and General Counsel and reviewed with the
other directors as they deem appropriate.
- 17 -
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 10, 2004
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K FOR THE YEAR 2003 WILL BE MADE AVAILABLE
UPON WRITTEN REQUEST ADDRESSED TO THE SECRETARY OF THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICES.
- 18 -
EXHIBIT A
COMMON STOCK PURCHASE PLAN
DATED AS OF JUNE 10, 2004
RELATING TO UP TO 2,000,000 SHARES OF COMMON STOCK OF
GRAYBAR ELECTRIC COMPANY, INC.
---------------------------
1. GENERAL; EMPLOYEES ENTITLED TO SUBSCRIBE.
1.1 This Plan provides for offerings in each of the years 2004,
2005 and 2006 (each, an "Applicable Year") to eligible employees, including
officers, of Graybar Electric Company, Inc. (the "Company"), and its wholly
owned subsidiary, Commonwealth Controls Corporation, and, in order to effect
a transition, retirees who were active, full-time employees of the Company
or Commonwealth Controls Corporation on March 31, 2004, of the right to
subscribe for 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"), at a
price of $20.00 per share. The aggregate number of shares of Common Stock to
be offered in each year and the terms of such offering shall be determined
by the Board of Directors. The maximum number of shares of Common Stock that
may be issued pursuant to this Plan is two million (2,000,000). This Plan
shall remain in effect until January 31, 2007 unless terminated prior
thereto by the Board of Directors of the Company, and thereafter insofar as
the provisions relate to shares of Common Stock subscribed for under Method
B as described in Section 4.2.
1.2 Each person who on September 30 of the year in which an
offering is conducted (the "Applicable Year") is (a) an active, full-time
employee of the Company or Commonwealth Controls Corporation continuously
employed by the Company or Commonwealth Controls Corporation since March 31
of the Applicable Year, (b) a person who on March 31 of the Applicable Year
is an active, full-time employee of the Company or Commonwealth Controls
Corporation and who retires on a pension (except a deferred pension) after
March 31 and prior to October 1 of the Applicable Year, or (c) a person who
on March 31, 2004 was an active, full-time employee of the Company or
Commonwealth Controls Corporation and who retired prior to October 1 of the
Applicable Year on a pension (other than a deferred pension) (a "Qualified
Retiree") will be entitled to subscribe at the price of $20.00 per share for
the number of shares of the Company's Common Stock determined pursuant to
Section 3. Such persons are sometimes referred to as "eligible participants"
or "Qualified Retirees" and after executing a Subscription Agreement are
referred to as "subscribers"; provided, however, that the term "eligible
participants" shall not be deemed to include in any Applicable Year: any
person (a) who receives a pension (unless he or she is an active, full-time
employee on March 31, 2004 or March 31 of a subsequent Applicable Year and
retired on a pension (except a deferred pension) after said March 31 and
prior to October 1 of the Applicable Year), (b) who is employed solely on a
contract basis or who by written agreement has released all stock
subscription rights, or (c) who is included in a collective bargaining unit
represented by a labor organization where the agreement between the Company
and the labor organization excludes such person from subscribing for Common
Stock of the Company.
2. PERIOD FOR AND METHOD OF MAKING SUBSCRIPTION.
Any eligible participant desiring to subscribe for shares of Common
Stock offered for sale under this Plan shall sign a Subscription Agreement
substantially in the form set forth herein, or otherwise
A-1
approved by the Board of Directors for such purpose for an offering to be
made in an Applicable Year, and file it, on or before the date specified for
each Applicable Year, with the Controller at the executive offices of the
Company, 34 North Meramec Avenue, Clayton, Missouri 63105. 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 the date specified in the applicable Subscription Agreement.
3. DETERMINATION OF NUMBER OF SHARES FOR WHICH AN ELIGIBLE PARTICIPANT
IS ENTITLED TO SUBSCRIBE.
The maximum number of shares for which an eligible participant may
subscribe shall be determined as hereinafter provided:
3.1. The Subscription Right of each eligible participant, subject
to increase as provided in Section 3.2 and reduction as provided in Section
3.3, shall be one (1) share for each $1,000.00 of his or her annual salary
rate in effect on March 31 of the Applicable Year (or March 31 of the year
of retirement in the case of a Qualified Retiree) (or such other dollar
amount or other ratio as may hereafter be established with respect to an
offering of shares for an Applicable Year by the Board of Directors).
Fractional shares resulting from this computation shall be disregarded.
3.2. The number of shares determined in accordance with Section 3.1
shall, in the case of eligible participants who on March 31 of the
Applicable Year (or March 31 of the year of retirement in the case of a
Qualified Retiree) were in the salary classifications listed below, be
multiplied as follows (or using such other multiple as hereafter may be
established with respect to an offering of shares by the Board of
Directors):
3.2.1. Eligible Company participants in Executive
classifications EX 1 through EX 5 -- 3.00 times;
3.2.2. Eligible Company participants in Grades 17 through 20
and Band M1 -- 2.50 times;
3.2.3. Eligible Company participants in Grades 15 and 16 and
Band M2 -- 2.25 times;
3.2.4. Eligible Company participants in Grades P and Q --
1.90 times;
3.2.5. Eligible Company participants in Grades N and O --
1.85 times;
3.2.6. Eligible Company participants in Grade 14 or below
who are covered either by the Management Incentive
Plan or the Sales Incentive Plan and Band M3 -- 1.75
times;
3.2.7. Eligible Company participants in Grades J, K, L and M
-- 1.50 times;
3.2.8. All other eligible Company participants -- 1.25
times; and
3.2.9. Eligible participants who are employees of Commonwealth
Controls Corporation -- As determined by the Board of
Directors for each participant using the closest
comparable salary classification then in effect at
Commonwealth Controls Corporation.
A-2
Fractional shares resulting from the above computations shall be
disregarded.
3.3. In the unlikely event the aggregate number of shares subscribed
for by all eligible participants in an offering for an Applicable Year were
to exceed the number of shares that the Board of Directors determines shall
be offered in such Applicable Year, the number of shares which each eligible
participant would be entitled to purchase shall be reduced to a number
determined by multiplying the number of shares for which such eligible
participant has subscribed (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 the number of shares being offered and the
denominator of which is the aggregate number of shares subscribed for by all
eligible participants. 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 (or such other method as hereafter may be
established by the Board of Directors with respect to any offering):
4.1. Method A: Payment in full for all or a portion of the shares
subscribed for on or before the date in January of the year following the
Applicable Year set by the Board of Directors, in which case the shares paid
for will be issued as of that date.
4.2. Method B: Payments in equal installments made at each of the
regular pay periods commencing with the second pay period in January of the
year following the Applicable Year and ending with the last pay period in
November of that year. The Company shall issue no later than the tenth day
of March, June and September and the fifteenth day of December of the
Applicable Year 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 prior to such issue date.
4.2.1. Payments under Method B shall be made, in the case
of a subscriber on the Company's or Commonwealth Controls
Corporation's payroll, through payroll deductions authorized by the
subscriber and, in the case of a subscriber who is no longer on the
Company's or Commonwealth Controls Corporation'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 or
Commonwealth Controls Corporation 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 or her 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
evidencing ownership of the number of shares for which payment is
so made.
A-3
5. CONDITIONS OF SUBSCRIPTION.
Each subscription for shares of Common Stock hereunder is expressly
subject to, among other things, the following terms, and every subscriber
shall agree to all of them by executing a Subscription Agreement:
5.1. Right to receive stock not transferable.
No subscriber may sell, pledge or in any manner alienate or suffer
to be alienated his or her right to purchase Common Stock under the Plan,
including the right to receive Voting Trust Certificates or stock
certificates representing shares of Common Stock. A violation of this
provision shall constitute a withdrawal by the subscriber from his or her
Subscription Agreement, in which event the only right of the subscriber or
his or her 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 and deposited in the Voting Trust. Stock certificates
representing the shares subscribed for and purchased pursuant to this Plan
by subscribers who are shareholders prior to such 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 or her shares, or in the event of his or her death (in
which case the option is exercisable beginning one year after the date of
death) or in the event of termination of his or her 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.
A-4
5.4. Cancellation of subscription on termination of employment.
In the event of the death of a subscriber or the termination of his
or her employment other than by retirement on a pension (except a deferred
pension) before any or all of the shares of Common Stock subscribed for are
issued, his or her subscription shall be cancelled as to shares not then
issued, and the subscriber or the subscriber's estate shall be entitled to
receive the total amount of the purchase price, if any, then held by the
Company 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 or her 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. Interpretation and implementation; amendment.
The determination of the Board of Directors of the Company upon any
question concerning the application or interpretation of any of the
provisions of this Plan or, of the Subscription Agreement or any offering
conducted under this Plan shall be final, and no director shall incur any
liability or obligation 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 any
attributable to that director's own willful misconduct. This Plan may be
amended, in whole or in part, by the Board of Directors, provided, however
that, any amendment to Section 1 or Section 6 shall require the consent of
the Shareholders of the Company. The Executive Committee of the Board of
Directors shall have the power to exercise all authority granted to the
Board of Directors by the Plan and to take any action the Board of Directors
may take under or with respect to the Plan.
6. CERTAIN CORPORATE ACTION NOT TO BE TAKEN WITHOUT NOTICE.
The Company will not take any action that 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 elected Method B and have not then 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:
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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 June 10, 2004 of the
Company (the "Plan"). I agree to pay $20.00 for each such share as follows:
NUMBER OF SHARES
----------------
Method A: Payment in full on or before January ___, 200___
------------------
Method B: Payment in __________ (__) equal installments payable by payroll deduction at
each regular payroll date commencing in January ________. Upon acceptance of
this subscription, (i) I direct that, during such time as I shall be on the
Company's or Commonwealth Controls Corporation's payroll, I hereby authorize
periodic payroll deductions to be made from my salary in accordance with this
Agreement and 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 or
Commonwealth Controls Corporation'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 Section 4 does not apply to subscribers who prior to
signing this Agreement are already parties to the Voting Trust Agreement or
to subscribers who prior to signing this Agreement are already 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.
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(b) I hereby authorize __________ or __________ as my
attorney-in-fact, both with full power of substitution,
to execute and deliver the Voting Trust Agreement on my
behalf.
(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 or Commonwealth
Controls Corporation 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 all the terms set forth in 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: , 200
--------------------------- ---
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APPENDIX
Page 11 of the proxy statement contains a Total Shareholders'
Return graph. The information contained within the graph is presented in a
tabular format immediately following the graph.