<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HUFFY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Robert R. Wieland
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
[Table omitted as inapplicable.]
/ / 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. [Information omitted as
inapplicable.]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO HERE]
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 1994
To our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Huffy Corporation which will be held this year on Friday, April 15, 1994, at
10:00 a.m., Eastern Daylight Time, at the Dayton Marriott Hotel, 1414 South
Patterson Boulevard, Dayton, Ohio.
Formal Notice of the Meeting and Proxy Statement accompany this letter.
Please sign and return the enclosed proxy card in the envelope provided as soon
as possible so that your shares will be represented at the meeting. We hope you
will be present at the meeting.
Very truly yours,
/s/ Harry A. Shaw III
- ---------------------------
Harry A. Shaw III
Chairman of the Board
<PAGE> 3
[LOGO HERE]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 1994
The Annual Meeting of Shareholders of Huffy Corporation, an Ohio
corporation, will be held at the Dayton Marriott Hotel, 1414 South Patterson
Boulevard, Dayton, Ohio, on Friday, April 15, 1994, at 10:00 a.m., Eastern
Daylight Time, for the following purposes:
1. To elect five Directors to serve for terms of three years, two Directors
to serve for terms of two years, and one Director to serve for a term of
one year.
2. To ratify the appointment of independent public accountants.
3. To transact such other business as properly may be brought before the
Annual Meeting or any adjournment(s) thereof.
Shareholders of record at the close of business on February 18, 1994, are
entitled to vote at the meeting or any adjournment(s) thereof.
By Order of the Board of Directors
/s/ Robert R. Wieland
---------------------------------
Robert R. Wieland
Secretary
Dayton, Ohio
March 8, 1994
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. WHETHER YOU
EXPECT TO ATTEND OR NOT, PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL
IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
POST OFFICE ADDRESS:
HUFFY CORPORATION
P.O. BOX 1204
DAYTON, OHIO 45401
<PAGE> 4
HUFFY CORPORATION
P.O. BOX 1204
DAYTON, OHIO 45401
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 15, 1994
March 8, 1994
GENERAL INFORMATION
PERSONS MAKING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Huffy Corporation (the "Company") to be
used at the Annual Meeting of Shareholders to be held on April 15, 1994, and any
adjournment(s) thereof. This Proxy Statement and the accompanying proxy card
were first mailed to Shareholders on or about March 8, 1994. The Company will
bear the cost of soliciting proxies and will, upon request, reimburse banks,
brokerage houses and other institutions for their expenses in forwarding proxy
materials to their principals. Directors, Officers and employees of the Company
may solicit proxies personally from some Shareholders if proxies are not
received promptly. In addition, the Company may retain Morrow & Co., Inc. to
assist in the solicitation of proxies, for which the Company will pay fees
estimated to total $3,500.
VOTING SECURITIES
The authorized capital stock of the Company carrying current voting rights
consists of 60,000,000 shares of Common Stock, $1.00 par value, of which there
were 14,676,036 shares issued and outstanding as of February 18, 1994. The close
of business on February 18, 1994, has been fixed as the record date for the
determination of the holders of Common Stock entitled to receive notice of and
to vote at the Annual Meeting. Each share of Common Stock entitles the holder
thereof to one vote.
ACTIONS TO BE TAKEN BY HOLDERS OF PROXIES
Unless otherwise directed by the person giving the proxy, all properly
executed proxies will be voted for the election of William K. Hall, Stephen P.
Huffman, Linda B. Keene, Jack D. Michaels, Donald K. Miller, Richard L. Molen,
James F. Robeson and Fred G. Wall as Directors of the Company; in favor of
ratification of the appointment of KPMG Peat Marwick as independent public
accountants for the Company for 1994; and, at the discretion of the holders of
the proxies, in the transaction of such other business as may properly come
before the meeting or any adjournment(s) thereof.
1
<PAGE> 5
The holders of the proxies may, in their discretion, vote for substitute
nominee(s) designated by the Board of Directors, or take action to reduce the
number of Directors, in the event that any nominee becomes unable to serve for
any reason presently unknown.
A proxy may be revoked at any time before exercise by written notice to the
Company bearing a later date than the proxy, by submission of a later dated
proxy, or by voting in person in open meeting (although presence at the Annual
Meeting will not in and of itself constitute revocation of the proxy). Any
written notice revoking a proxy should be sent to Huffy Corporation, P.O. Box
1204, Dayton, Ohio 45401, Attention: Robert R. Wieland, Secretary.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, and one
class is elected at each Annual Meeting. The Board of Directors of the Company
recommends that five Directors be elected each for a three year term expiring in
1997. In addition, the Board of Directors of the Company recommends that two
Directors be elected each for a two year term expiring in 1996, and one Director
be elected for a one year term expiring in 1995. In 1993, in accordance with
Ohio law and the Company's Code of Regulations, the Board of Directors increased
the number of Directors constituting the full Board to 13. Linda B. Keene and
Jack D. Michaels were elected in 1993 by the Board of Directors to fill the
vacancies created by increasing the number of Directors constituting the Board.
The Board of Directors of the Company currently has 13 Directors: six whose
terms expire in 1994, four whose terms expire in 1995, and three whose terms
expire in 1996. William K. Hall, Stephen P. Huffman, Donald K. Miller, Richard
L. Molen and Fred G. Wall, whose terms expire in 1994, have each been
recommended by the Nominating Committee of the Board of Directors and nominated
by the Board of Directors for election to the Board of Directors for a three
year term expiring in 1997. Jack D. Michaels has been recommended by the
Nominating Committee of the Board of Directors and nominated by the Board of
Directors for election to complete the unexpired portion of his term ending in
1996. Linda B. Keene has been recommended by the Nominating Committee of the
Board of Directors and nominated by the Board of Directors for election to
complete the unexpired portion of her term ending in 1995. James F. Robeson has
also been recommended by the Nominating Committee of the Board of Directors and
nominated by the Board of Directors for election to the Board of Directors for a
two year term expiring in 1996. Stuart J. Northrop, whose term also expires in
1994, is retiring from the Board of Directors after 22 years of loyal and
dedicated service in accordance with the provisions of the Company's Director
Retirement Policy.
Under Ohio law, if a Shareholder gives written notice to the President, a
Vice President or the Secretary of the Company, not less than 48 hours before
the time fixed for the Annual Meeting, that such Shareholder desires the voting
at the election of Directors to be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the meeting by the chairman
or secretary of the meeting or by or on behalf of the Shareholder giving such
notice, then the Directors will be elected by cumulative voting. In such event,
each Shareholder has the right to give one candidate a number of votes equal to
the number of Directors then being elected multiplied by the
2
<PAGE> 6
number of such Shareholder's shares, or to distribute such Shareholder's votes
on the same principle among two or more candidates. In the event that Directors
are elected by cumulative voting and cumulated votes represented by proxies
solicited hereby are insufficient to elect all the nominees, then the holders of
the proxies intend to vote such proxies cumulatively for the election of as many
of such nominees as possible and in such order as the holders may determine.
Votes will be counted by Bank One, Indianapolis, National Association acting as
the inspector of elections.
UNDER OHIO LAW AND THE COMPANY'S CODE OF REGULATIONS, THE EIGHT NOMINEES
RECEIVING THE GREATEST NUMBER OF VOTES SHALL BE ELECTED AS DIRECTORS. SHARES AS
TO WHICH THE AUTHORITY TO VOTE IS WITHHELD AND BROKER NON-VOTES ARE NOT COUNTED
TOWARD THE ELECTION OF DIRECTORS, OR TOWARD THE ELECTION OF THE INDIVIDUAL
NOMINEES SPECIFIED ON THE PROXY CARD.
The following table sets forth certain information as to each nominee for
Director and each other person whose term of office as Director will continue
after this Annual Meeting of Shareholders:
<TABLE>
<CAPTION>
Served as
Name and Principal Occupation Director
For the Past Five Years(1) Age Since
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
NOMINEES FOR TERM EXPIRING IN 1997
William K. Hall, Chief Executive Officer and President of Eagle 50 1980(3)
Industries, Inc. (manufacturer of air handling, building, process
industry and utility products) since 1990; prior thereto President
and Chief Operating Officer of such company since 1988(2)
Stephen P. Huffman, Vice President - Planning and Human Resources of 54 1984
Blue Diamond Growers (an agricultural cooperative) since 1993; prior
thereto Vice President - Administration of such company(4)
Donald K. Miller, Chairman of Greylock Financial Inc. (engaged in the 62 1988
financing of management and leveraged buyouts) since 1992 and also
Vice Chairman of Thomson Advisory Group L.P. (engaged in the
management of institutional and individual fund assets) since 1993;
prior thereto Managing Partner of Greylock Financial Partnership (now
Greylock Financial Inc.) since 1986 and Chairman and Chief Executive
Officer of Thomson Advisory Group L.P. since 1990(5)
Richard L. Molen, President and Chief Executive Officer of the Company 53 1985
since 1993; prior thereto President and Chief Operating Officer of
the Company(6)
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
Served as
Name and Principal Occupation Director
For the Past Five Years(1) Age Since
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
Fred G. Wall, Chairman of Madsen Wire Products, Inc. (manufacturer of 59 1978
fabricated wire products) since 1988; prior thereto and currently
consultant to various manufacturing companies
NOMINEES FOR TERMS EXPIRING IN 1996
Jack D. Michaels, President and Chief Executive Officer of HON 56 1993
INDUSTRIES Inc. (manufacturer of metal and wood office furniture,
office products and pre-fabricated fireplaces) since 1991; prior
thereto President of such company since 1990; prior thereto President
and Chief Executive Officer of Hussman Corporation, a subsidiary of
Whitman Corporation (manufacturer of refrigeration display
equipment)(7)
James F. Robeson, Senior Director of Coopers & Lybrand (national 57 --
accounting firm) since 1993; prior thereto Dean of the Richard T.
Farmer School of Business Administration at Miami University(8)
NOMINEE FOR TERM EXPIRING IN 1995
Linda B. Keene, Vice President - Marketing Services of The Pillsbury 42 1993
Company (multi-national food company) since 1992; prior thereto Vice
President and General Manager, Desserts and Specialty Products at
such company since 1991; prior thereto Vice President, Market
Development and Strategic Planning, Baked Goods Division of such
company since 1990; prior thereto Vice President of Marketing,
Desserts and Flour Products of such company
DIRECTORS WHOSE TERMS EXPIRE IN 1995
Boake A. Sells, private investor since 1992; prior thereto Chairman and 56 1992
Chief Executive Officer of Revco D.S., Inc. (retail drugstore
chain)(9)
Geoffrey W. Smith, Vice President of LTI Ventures Leasing Corporation 48 1986
(engaged in the financing of high-tech office automation equipment)
since 1993; prior thereto Director of U.S. Multinational Division of
The First National Bank of Boston since 1991; prior thereto Director
- New England Credit Administration of such bank since 1990; prior
thereto Division Executive of National Banking Group of such bank
since 1989; prior thereto Division Executive of Health Care Division
of such bank
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
Served as
Name and Principal Occupation Director
For the Past Five Years(1) Age Since
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
Robin B. Smith, President and Chief Executive Officer of Publishers 54 1990
Clearing House (direct mail marketer and magazine subscription
company) since 1989; prior thereto President of such company(10)
DIRECTORS WHOSE TERMS EXPIRE IN 1996
Thomas D. Gleason, Vice Chairman of Wolverine World Wide, Inc. 58 1980
(manufacturer of shoes and leather goods) since 1993; prior thereto
Chairman and Chief Executive Officer of such company(11)
Harry A. Shaw III, Chairman of the Board of the Company since 1993; 56 1979
prior thereto Chairman of the Board and Chief Executive Officer of
the Company(12)
</TABLE>
- ---------------
<TABLE>
<S><C> <C>
(1) Except as disclosed herein, no information is included in this Proxy Statement
for any portion of a period in which a Director did not hold office as a
Director of the Company.
(2) Mr. Hall is a Director of A.M. Castle & Co.
(3) Mr. Hall has served on the Company's Board of Directors from 1980 through 1989,
and since 1991.
(4) Stephen P. Huffman and W. Anthony Huffman, Vice President - Corporate Affairs
of the Company, are brothers.
(5) Mr. Miller is a Director of RPM Inc. and Thomson Advisory Group L.P. and
Trustee of Thomson Fund Group and Thomson Cash Accumulation Trust.
(6) Mr. Molen is a Director of Alltrista Corporation.
(7) Mr. Michaels is a Director of HON INDUSTRIES Inc.
(8) Mr. Robeson is a Director of Roberds, Inc.
(9) Mr. Sells is a Director of Promus Corporation.
(10) Ms. Smith is a Director of Omnicom Group, Texaco Inc., Target Portfolio Trust,
Prudential Institutional Liquidity Portfolio, The High Yield Income Fund, The
High Yield Plus Fund, First Financial Fund, Global Yield Fund, The Global
Utility Fund, and Springs Industries, Inc.
(11) Mr. Gleason is a Director of Foremost Corp. of America and Wolverine World
Wide, Inc.
(12) Mr. Shaw is a Director of The Duriron Company, Inc., GenCorp Inc., Outboard
Marine Corporation, Society Corporation, and Baldwin Piano and Organ Company.
</TABLE>
5
<PAGE> 9
MEETINGS BY, AND CERTAIN COMMITTEES OF, THE COMPANY'S BOARD OF DIRECTORS
Thomas D. Gleason (Chairman), William K. Hall, Robin B. Smith, and Fred G.
Wall comprise the Nominating Committee of the Board of Directors. The Nominating
Committee seeks out and reviews the qualifications of possible candidates for
Board membership. Shareholders may submit nominee recommendations, complete with
qualifications, to any member of the Nominating Committee at any time. The
Nominating Committee recommends to the Board of Directors candidates for
election as Directors at annual meetings, candidates to fill vacancies on the
Board, and candidates for Committees of the Board. During the last fiscal year,
the Nominating Committee met seven times.
Donald K. Miller (Chairman), Stephen P. Huffman, Boake A. Sells, and
Geoffrey W. Smith comprise the Audit Committee of the Board of Directors. The
Audit Committee meets with the Company's independent public accountants,
internal auditors, and financial management executives. The Audit Committee
reviews the scope and results of audits as well as recommendations made by the
Company's auditors and executives with respect to internal accounting controls.
During the last fiscal year, the Audit Committee met two times.
Fred G. Wall (Chairman), Thomas D. Gleason, and William K. Hall comprise
the Compensation Committee of the Board of Directors. The Compensation Committee
sets salary and benefits policy, and determines compensation and benefit levels
for the Company's Officers and certain other key employees. During the last
fiscal year, the Compensation Committee met ten times.
The Board of Directors also has an Executive Committee comprised of Stuart
J. Northrop (Chairman), Thomas D. Gleason, Donald K. Miller, Richard L. Molen,
Harry A. Shaw III, and Fred G. Wall. During the last fiscal year, the Executive
Committee met four times.
During the last fiscal year, the Board of Directors met seven times. No
Director attended fewer than 75 percent of the aggregate number of meetings of
the Board of Directors and meetings of Committees thereof during the time such
person was a Director and member of any such Committee.
COMPENSATION OF DIRECTORS
The Company has a standard arrangement with its non-employee Directors
(other than the Vice Chairman of the Board) for payment of an annual base
compensation of $15,000, plus additional compensation of $900 per Board meeting
attended. The members of the Executive Committee (excluding the Chairman of the
Executive Committee) receive additional compensation of $1,250 per year and $900
per meeting attended. The Chairman of the Compensation Committee receives
additional compensation of $3,000 per year. The Chairmen of the Audit and
Nominating Committees each receive additional compensation of $1,500 per year.
Except for the Executive Committee, each Committee member (including the
Chairman of the Committee) receives $700 per Committee meeting attended.
Additionally, Directors receive consulting fees of $500 for each half day of
service provided outside their normal duties as Directors when such services are
provided at the request of management of the Company and $500 for Board of
Directors'
6
<PAGE> 10
visits to Company plant sites. Directors receive $2,500 for attendance at Board
of Directors' retreat meetings but such fee is in lieu of all meeting fees for
Board and Committee meetings held during such retreat. The Vice Chairman of the
Board receives annual base compensation of $15,000 plus additional compensation
of $45,000 per annum for his services as Vice Chairman of the Board and Chairman
of the Executive Committee, for serving as liaison between the Chief Executive
Officer and the Board, and as an ex-officio member of the Audit, Compensation
and Nominating Committees of the Board, as a member of the Corporate Benefits
Advisory Committee, and as a trustee of The Huffy Foundation, Inc., such amounts
being in lieu of all other Director's compensation and fees. No Director who is
an employee of the Company receives any compensation for services as a Director.
DIRECTOR PLANS
Non-employee Directors who wish to do so may elect to defer payment of
Directors' fees or take part of their Directors' fees in the form of stock
options, pursuant to the Company's 1987 Director Stock Option Plan (the "1987
Plan"). The 1987 Plan provides for the automatic grant of options to purchase
5,625 shares (adjusted for stock splits) of the Company's Common Stock every
third year, commencing in 1988, on the second business day after the Annual
Meeting of Shareholders. No such options were granted in 1993. Options are
granted to members of the Board of Directors of the Company who are not
employees of the Company or any of its subsidiaries ("Outside Directors"). The
purchase price of the Common Stock is 100 percent of the fair market value of
the Common Stock on the date of grant.
In addition to options granted automatically every three years, if an
Outside Director files an irrevocable election with the Secretary of the Company
at least six months prior to July 1 of any year electing not to receive all or a
portion of his or her annual base compensation, which is currently $15,000 per
year, to be earned in the following 12 month period beginning July 1 and ending
June 30, then the Company shall grant options automatically on July 1 or, if
July 1 is not a business day, on the next business day to such Outside Director.
The number of shares of Common Stock for which options will be granted will be
the nearest number of whole shares of Common Stock determined in accordance with
the following formula:
<TABLE>
<S> <C> <C> <C>
Portion of Annual Base Compensation Not Received
------------------------------------------------
Fair Market Value minus $1.00 = Number of Shares
</TABLE>
For the 12 month period beginning July 1, 1994, and ending June 30, 1995,
Outside Directors have elected not to receive, in the aggregate, $70,000 of
their annual base compensation and to have the Company grant options to them on
July 1, 1994, based on such elections in accordance with the 1987 Plan. The
option price per share of the Common Stock covered by such options will be
$1.00.
No options may be exercised before the second Annual Meeting of
Shareholders of the Company following the date they were granted, except upon a
change in control (as defined in the 1987 Plan), or due to retirement from the
Board of Directors because of total and permanent disability, expiration of a
Director's term of office, or otherwise in
7
<PAGE> 11
accordance with the current Board of Directors' policy or upon the death of the
option holder. A notice to exercise an option must be accompanied by full
payment of the purchase price for the Common Stock being purchased. The 1987
Plan, which is effective for ten years, is administered by a Committee
consisting of three Officers of the Company not entitled to participate in the
1987 Plan.
In 1990, the Company adopted a Directors' Retirement Plan whereby each non-
employee Director who has served as a member of the Board of Directors of the
Company five years or more and each former employee Director who has served as a
member of the Board of Directors of the Company five years or more after
retirement or termination as an employee of the Company will earn an annual
retirement benefit of $5,000 plus $1,000 for each year of service as a
non-employee Director (prorated for partial years) in excess of five years
service, not to exceed a maximum annual benefit of $10,000. Retirement benefits
will commence when specified by an eligible Director after retirement from the
Board of Directors, but not earlier than age 60 or later than age 70, and will
continue for a period equal to the number of full years of service as a non-
employee Director, not to exceed 12 years.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Company's Common
Stock reported to the Company as of January 1, 1994, for each Director and
nominee and for each of the Executive Officers named in the Summary Compensation
Table (the "Named Executive Officers"), and as a group of Directors and all
Executive Officers. For purposes of the table, a person is considered to
"beneficially own" any shares of Common Stock (i) over which the person
exercises sole or shared voting or investment power or (ii) of which the person
has the right to acquire beneficial ownership at any time within 60 days after
January 1, 1994.
<TABLE>
<CAPTION>
Name of Beneficial Amount and Nature of
Owner(1) Beneficial Ownership(2)
<S> <C>
- ---------------------------------------------------------
Charlton L. George 985(3)
Thomas D. Gleason 14,098(4)
William K. Hall 6,075(5)
Stephen P. Huffman 85,574(6)
W. Anthony Huffman 132,401(7)
Linda B. Keene 0
Jack D. Michaels 0
Donald K. Miller 52,050(8)
Richard L. Molen 145,253(9)
Gary E. Morin 11,595(10)
Stuart J. Northrop 15,904(11)
James F. Robeson 0
Boake A. Sells 5,000
Harry A. Shaw III 108,225(12)
Geoffrey W. Smith 50,809(13)
Robin B. Smith 6,724(14)
Fred G. Wall 14,465(15)
Robert R. Wieland 37,239(16)
All Directors, Nominees and
Executive Officers as a Group
(21 persons) 719,077(17)
</TABLE>
8
<PAGE> 12
- ---------------
<TABLE>
<S> <C>
(1) All shares are held with sole voting and sole investment power unless
otherwise indicated in the footnotes below.
(2) No such beneficial owner owns more than one percent of the issued and
outstanding shares of Common Stock of the Company. All Directors, Nominees and
Executive Officers as a group own 4.9 percent of the issued and outstanding
shares of Common Stock of the Company as of January 1, 1994.
(3) Mr. George has sole voting and sole investment power with respect to 540
shares held in his own name. Mr. George has shared voting and shared
investment power with respect to 445 shares held by his wife.
(4) The total amount also includes 11,250 shares as to which Mr. Gleason holds
options exercisable within 60 days.
(5) Mr. Hall has shared voting and shared investment power with respect to 450
shares held jointly with his wife. The total amount also includes 5,625 shares
as to which Mr. Hall holds options exercisable within 60 days.
(6) Mr. Stephen Huffman has sole voting and sole investment power with respect to
63,918 shares held in trust for the benefit of himself and his family. Mr.
Huffman has shared voting and shared investment power with respect to 2,706
shares held jointly with his wife and with respect to 7,700 shares held by his
children. The total amount also includes 11,250 shares as to which Mr. Huffman
holds options exercisable within 60 days.
(7) Mr. W. Anthony Huffman has sole voting and sole investment power with respect
to 112,610 shares, of which 19,410 shares are held by him as custodian for his
children. Mr. Huffman has shared voting and shared investment power with
respect to 675 shares held by his wife. The total amount also includes 19,116
shares as to which Mr. Huffman holds options exercisable within 60 days.
(8) Mr. Miller has sole voting and sole investment power with respect to 45,450
shares, of which 16,000 are held by him as custodian for his children. Mr.
Miller has shared voting and shared investment power with respect to 975
shares held by his wife. The total amount also includes 5,625 shares as to
which Mr. Miller holds options exercisable within 60 days.
(9) Mr. Molen has sole voting and sole investment power with respect to 51,137
shares held in his own name. Mr. Molen has shared voting and shared investment
power with respect to 15,548 shares held jointly with his wife. The total
amount includes 78,568 shares as to which Mr. Molen holds options exercisable
within 60 days.
(10) The total amount also includes 7,845 shares as to which Mr. Morin holds
options exercisable within 60 days.
(11) The total amount also includes 11,250 shares as to which Mr. Northrop holds
options exercisable within 60 days.
</TABLE>
9
<PAGE> 13
<TABLE>
<S> <C>
(12) Mr. Shaw has sole voting and sole investment power with respect to 52,886
shares held in his own name. Mr. Shaw has shared voting and shared investment
power with respect to 5,265 shares held by his wife. Mr. Shaw also has shared
voting and shared investment power with respect to 6,400 shares held by his
children. The total amount also includes 43,674 shares as to which Mr. Shaw
holds options exercisable within 60 days.
(13) Mr. Smith has sole voting and sole investment power with respect to 39,559
shares, of which 4,663 shares are held in trust for the benefit of his
children and 1,743 shares are held by him as custodian for his children. The
total amount also includes 11,250 shares as to which Mr. Smith holds options
exercisable within 60 days.
(14) The total amount also includes 6,324 shares as to which Ms. Smith holds
options exercisable within 60 days.
(15) Mr. Wall has sole voting and sole investment power with respect to 2,598
shares, of which 2,000 shares are held in trust for his benefit. The total
amount also includes 11,867 shares as to which Mr. Wall holds options
exercisable within 60 days.
(16) Mr. Wieland has shared voting and shared investment power with respect to
13,177 shares held jointly with his wife. Mr. Wieland has shared voting and
shared investment power with respect to 262 shares held by his son. The total
amount includes 23,800 shares as to which Mr. Wieland holds options
exercisable within 60 days.
(17) The total amount includes 265,376 shares of Common Stock which are subject to
options exercisable within 60 days.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information with respect to Shareholders
known to the Company to be beneficial owners of more than five percent of the
Company's Common Stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class(3)
- ------------------------------------ ----------------------- ------------------
<S> <C> <C>
Pioneering Management Corporation(1) 788,100 5.37%
60 State Street
Boston, MA 02114
Brinson Partners, Inc.(2) 744,050 5.8 %
Brinson Trust Company
Brinson Holdings, Inc.
209 South LaSalle Street
Chicago, IL 60604
</TABLE>
- ---------------
(1) This information is taken from the Schedule 13G, dated February 11, 1994,
filed by Pioneering Management Corporation with the Securities and Exchange
Commission, which disclosed Pioneering Management Corporation has sole
voting power with respect to 788,100 shares, sole investment power with
respect to 191,000 shares and shared investment power with respect to
597,100 shares.
(2) This information is taken from the Schedule 13G, dated February 11, 1994,
filed by Brinson Partners, Inc., Brinson Trust Company and Brinson Holdings,
Inc. with the Securities and Exchange Commission, which disclosed Brinson
Partners, Inc. has sole voting power and sole dispositive power with respect
to 344,526 shares and Brinson Trust Company has sole voting power and sole
dispositive power with respect to 399,524 shares. Brinson Partners, Inc. and
Brinson Trust Company are direct and indirect subsidiaries, respectively, of
Brinson Holdings, Inc.
10
<PAGE> 14
(3) Percentages listed are those disclosed in the referenced Schedules 13G and
are not verified by the Company.
REPORT OF COMPENSATION COMMITTEE OF BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are made by the three
member Compensation Committee (the "Committee") of the Board of Directors. Each
member of the Committee is a non-employee Director. Set forth below is a report
submitted by Fred G. Wall (Chairman), Thomas D. Gleason, and William K. Hall in
their capacity as the Committee addressing the Company's compensation policies
for 1993 as they affected Harry A. Shaw III, the Chairman of the Board who was
Chief Executive Officer until April 16, 1993; Richard L. Molen, the current
Chief Executive Officer; Gary E. Morin, Robert R. Wieland, Charlton L. George,
and W. Anthony Huffman, the four next most highly paid Executive Officers; and
the other three Executive Officers of the Company.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Company's executive compensation program is designed to be closely
linked to corporate performance and returns to Shareholders. To this end, the
Company has developed an overall compensation strategy and specific compensation
plans that tie a significant portion of executive compensation to the Company's
success in meeting specified performance goals and to appreciation in the price
of the Company's Common Stock. The overall objectives of this strategy are to
attract and retain the best possible executive talent, to motivate these
executives to achieve the goals inherent in the Company's business strategy, to
link executive and Shareholder interests through equity based plans, and finally
to provide a compensation package that recognizes individual contributions as
well as overall business results.
Approximately every two years and most recently in early 1994, the
Committee retained an independent compensation consultant to assess the
effectiveness of the Company's executive compensation program and to compare the
Company's executive compensation against that of other industrial corporations,
adjusted for size. These reviews permit a regular evaluation of the
competitiveness of the Company's executive compensation program and its
conformance to established compensation strategies.
The Committee determines the compensation of the 15 most highly compensated
corporate executives, including the Executive Officers whose compensation is
detailed in this Proxy Statement, and sets policy for the compensation awarded
to other management personnel. This is designed to ensure consistency in
compensation strategy throughout the Company's compensation program. In
reviewing the individual performance of the executives whose compensation is
detailed in this Proxy Statement (other than Mr. Shaw and Mr. Molen), the
Committee takes into account the views of Mr. Molen.
The key elements of the Company's 1993 executive compensation program
consist of Base Salary, the Profit Sharing Bonus Plan, the Long-Term Incentive
Plan and Stock Options, as well as the 1986 CEO Performance Unit and Performance
Share Plan (the
11
<PAGE> 15
"Performance Plan") and the Transition Compensation Agreement (the "Transition
Agreement") for Mr. Shaw and the 1993 CEO Long-Term Performance Plan (the "CEO
Plan") for Mr. Molen. In addition, while the elements of compensation described
below are considered separately, the Committee takes into account the full
compensation package afforded by the Company to the individual, including
pension benefits, supplemental retirement benefits, severance plans, insurance
and other benefits, as well as the programs described below. The recently
enacted Revenue Reconciliation Act of 1993 (the "Act") precludes the Company
from taking a deduction for certain compensation in excess of $1 million per
year paid or accrued with respect to the Chief Executive Officer and the four
other highest paid Executive Officers on and after January 1, 1994. As of the
date of this Report, neither the Committee nor the Company has taken any action
to qualify compensation (not otherwise qualified under the Act) for deduction by
the Company. Based on present levels of compensation, it does not appear that
any of the named Executive Officers' non-deductible compensation will exceed $1
million in 1994.
BASE SALARY
Base salary ranges for Executive Officers, as for all other management
personnel, are determined by periodic recommendations by an independent
compensation consultant (other than the consultant referred to above) who
evaluates the responsibilities of each such position, and compares the Company's
salary level for the position to comparable positions at other industrial
companies nationwide. The comparison is made against other industrial
corporations generally rather than just companies in the various industries in
which the Company does business because the Committee believes that industrial
corporations generally represent the Company's most direct competitors for
executive talent. The Company's policy is to establish midpoints of such base
salary ranges at the 50th percentile level of industrial midpoints for
comparable positions, and to adjust such midpoints annually to maintain that
level. Annual salary adjustments within such base salary ranges are determined
by evaluating both the performance of the Executive Officer and the Executive
Officer's current base salary as a percentage of his or her base salary range
midpoint, using a matrix which reflects the Company's overall annual salary
increase budget. Generally speaking, the higher the performance level and the
lower the percentage that current base salary represents of the base salary
range midpoint, the higher the percentage of base salary increase. Performance
of an employee is evaluated based upon the employee's accomplishment of duties
set forth in the job description for his or her position, objectives established
for the employee by his or her supervisor (in the case of Mr. Shaw while Chief
Executive Officer, and now Mr. Molen, by the Board of Directors), and general
management abilities.
Mr. Shaw relinquished his position as Chief Executive Officer on April 16,
1993, and thereafter is continuing his employment on a part-time basis until his
retirement on July 31, 1996. Mr. Shaw's annual base salary for the period
beginning January 1, 1993, through April 30, 1993, was $396,300, the same as in
1992. Pursuant to the terms of the Transition Agreement, Mr. Shaw receives as a
base salary for such part-time work for the period beginning May 1, 1993,
through April 30, 1994, an annual amount computed by multiplying his actual base
salary on May 1, 1993, after annual adjustment on the same
12
<PAGE> 16
basis as the Company adjusts the midpoints of the base salary ranges, by 80
percent. Based on such calculation, Mr. Shaw's base salary for the period
beginning May 1, 1993, through April 30, 1994, is $328,453.
In April, 1993, Mr. Molen's annual base salary was increased from $298,500
to $360,000 to reflect his promotion to Chief Executive Officer and his ongoing
contribution to the Company's performance. The Committee also considered the
longevity of Mr. Molen's service to the Company and the annual base salaries of
other similarly situated chief executive officers.
PROFIT SHARING BONUS PLAN
Bonus opportunity is extended to virtually all managerial employees of the
Company, including its Executive Officers. Individual and corporate performance
objectives are established at the beginning of each year. The corporate
performance measure for bonus payments is based on return on average net assets
("RONA"), and for 1993 the Committee determined that target level bonus would be
achieved when RONA was 11 percent, with threshold level bonus and maximum level
bonus being achieved when RONA was 9 percent and 14.2 percent, respectively.
Individual performance is based on performance of non-financial goals, which
performance is evaluated by the Committee for Mr. Shaw and Mr. Molen, and is
evaluated by Mr. Molen, subject to review by the Committee, for other Executive
Officers. The Executive Officers are eligible to earn maximum profit sharing
bonuses ranging from 60 percent to 100 percent of their annual base salaries,
depending on their position, with 80 percent of the bonus based on corporate
performance and 20 percent of the bonus based on individual performance.
In 1993, before adjustment for accounting changes and restructuring, the
Company earned a RONA of 8.6 percent. Based on these results, neither Mr. Shaw
nor Mr. Molen was awarded a bonus based on corporate performance. Mr. Shaw did
receive a bonus of $59,150 for successful performance of individual
non-financial goals and Mr. Molen a bonus of $99,275 for successful performance
of individual non-financial goals and for achieving record sales and earnings at
three Huffy Companies and record sales at a fourth Huffy Company in 1993.
LONG-TERM INCENTIVE PLAN
Each of the Executive Officers participates in the Company's Long-Term
Incentive Plan which is based on the average return on equity ("ROE") achieved
by the Company over a three-year period. Under this plan, Executive Officers are
each eligible to earn maximum awards ranging from 35 percent to 100 percent of
their average annual base salary over the three-year award cycle, depending on
position. In 1993, the Company made awards for the three-year award cycle ended
December 31, 1992. 50 percent of such award was based upon the Company's average
ROE over the three-year award cycle, compared to a ROE target of 14.5 percent
established by the Committee prior to the beginning of such three-year period.
The other 50 percent of the award was based upon the Company's average ROE over
the three-year award cycle, compared to the average ROE of the STANDARD &
POOR'S 400 INDUSTRIALS over the same period, which was
13
<PAGE> 17
10.8 percent. During the three-year award cycle ended December 31, 1992, the
Company's average ROE was 14.4 percent. As a result, in 1993, Mr. Shaw received
a payment of $237,698, and Mr. Molen received a payment of $179,060, which
represented 67.4 percent of the maximum award for such three-year award cycle.
Awards for the three-year award cycle ended December 31, 1993, will be
determined and paid in the second half of 1994 after the average ROE of the
STANDARD & POOR'S 400 INDUSTRIALS becomes available.
STOCK OPTIONS
Under the Company's 1988 Stock Option Plan and Restricted Share Plan (the
"1988 Plan"), which was approved by Shareholders, stock options are granted to
the Company's Executive Officers and other key managers. The Committee sets
guidelines for the size and frequency of awards of stock option grants which are
based upon the employee's position and base salary. All awards are made by the
Committee, which has the discretion to elect not to award option grants.
Stock options are designed to align the interests of Executive Officers
with those of the Shareholders. Stock options are granted to Executive Officers
with an exercise price equal to the closing market price of the Common Stock on
the date of grant and currently become exercisable one-third on or after three
years from the date of grant, another one-third on or after four years from the
date of grant, and the final one-third on or after five years from the date of
grant. This approach is designed to incent the creation of Shareholder value
over the long term since the full benefit of the compensation package cannot be
realized unless Common Stock price appreciation occurs over a number of years.
In 1993, Mr. Shaw and Mr. Molen received options to purchase 15,298 and
16,767 shares, respectively, of the Company's Common Stock with an exercise
price of $19.00 per share. The options become exercisable ratably over a
three-year period beginning in December, 1996. Mr. Shaw beneficially owned
108,225 shares of the Company's Common Stock as of January 1, 1994, and Mr.
Molen beneficially owned 145,253 shares of the Company's Common Stock as of such
date. The Committee believes that increasing equity interests in the Company
held by the Company's management align the interests of Shareholders and
management.
1986 CEO PERFORMANCE UNIT AND PERFORMANCE SHARE PLAN
Performance shares can be earned by Mr. Shaw under the terms of the
Performance Plan. In 1988, under the Performance Plan, Mr. Shaw was awarded by
the Committee, pursuant to the Performance Plan formula, 34,269 performance
units for the five-year award cycle beginning January 1, 1989 and ending
December 31, 1993. Under the terms of the Performance Plan, these performance
units were eligible for conversion into the same or a greater or lesser number
of performance shares, with each performance share having the average value of a
share of the Company's Common Stock on the last 13 consecutive Fridays preceding
December 31, 1993. In order to be converted into performance shares, the
Company's average ROE over the five-year award cycle must
14
<PAGE> 18
equal at least 12.5 percent, and at that level the number of performance shares
is equal to 50 percent of the performance units. To receive an equal number of
performance shares, the Company's average ROE over the five-year award cycle
must equal 15.5 percent. The maximum number of performance shares, equal to 150
percent of the performance units, is achieved if the Company's average ROE is
equal to or in excess of 18 percent. In this way, any award is directly
dependent on the Company's long term performance and the value of its Common
Stock.
The Company's average ROE for the five-year award cycle ended December 31,
1993 was 12.5 percent. Accordingly, Mr. Shaw's 34,269 performance units were
converted into 17,135 performance shares, and Mr. Shaw received a cash payment
in 1994 of $321,281 based on the value of such 17,135 performance shares.
1993 CEO LONG-TERM PERFORMANCE PLAN
Under the CEO Plan, performance awards have been established by the Company
whereby Mr. Molen may earn a cash payment if, and only if, the Company achieves
the requisite Total Shareholder Return (as defined in the CEO Plan to include
the annual rate of growth of the Common Stock and dividends paid on such stock)
on a Beginning Share Price (as defined in the CEO Plan) during the applicable
performance period. Five performance periods were established, three of which
began January 1, 1993, and end December 31, 1995, 1996, and 1997, respectively.
The fourth and fifth performance periods begin January 1, 1994, and 1995,
respectively, and end December 31, 1998, and 1999, respectively. For the
performance periods beginning January 1, 1993, the Beginning Share Price is
$16.25. If the Total Shareholder Return for any performance period beginning
January 1, 1993, is 15 percent at the end of the performance period, Mr. Molen
will receive a performance award, in cash, in the amount of $30,000 for the
performance period ending December 31, 1995; $40,000 for the performance period
ending December 31, 1996; or $50,000 for the performance period ending December
31, 1997. If the Total Shareholder Return for any such performance period is 19
percent at the end of the performance period, Mr. Molen will receive a
performance award, in cash, in the amount of $60,000 for the performance period
ending December 31, 1995; $80,000 for the performance period ending December 31,
1996; or $100,000 for the performance period ending December 31, 1997. If the
Total Shareholder Return for any such performance period is 27 percent at the
end of the performance period, Mr. Molen will receive a performance award, in
cash, in the amount of $300,000 for the performance period ending December 31,
1995; $400,000 for the performance period ending December 31, 1996; or $500,000
for the performance period ending December 31, 1997. For the performance period
beginning January 1, 1994, and ending December 31, 1998, the Beginning Share
Price is $18.50; the threshold, target and maximum performance awards for such
period are $55,000, $110,000 and $550,000, respectively. If the Total
Shareholder Return over any such performance period is less than 15 percent at
the end of the performance period, Mr. Molen will earn no performance award.
Similarly, if the Total Shareholder Return over any such performance period is
greater than 27 percent at the end of the performance period, Mr. Molen will
receive no greater amount than that stated above. The cash amount of a
performance award earned shall be determined by linear
15
<PAGE> 19
interpolation if the Total Shareholder Return is greater than 15 percent but
less than 27 percent.
CONCLUSION
Through the programs described above, a very significant portion of the
Company's executive compensation is linked directly to individual and corporate
performance and Common Stock price appreciation. In 1991, a record performance
year for the Company, the majority of the Company's executive compensation
resulted from these performance-based variable plans. In 1992, when corporate
performance deteriorated, performance-based variable compensation was
significantly reduced, and a significant portion of the performance-based
variable compensation that was actually paid in 1992 related to performance over
a three to five-year period. In 1993, when corporate performance improved over
1992 but did not meet the threshold levels of performance necessary for an award
under the Profit Sharing Bonus Plan, again a significant portion of the
performance-based variable compensation that was paid in 1993 related to
performance over the prior three to five-year period. The Committee intends to
continue the policy of linking executive compensation to corporate performance
and returns to Shareholders, recognizing that the ups and downs of the business
cycle from time to time may result in an imbalance for a particular period.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS(1)
Thomas D. Gleason, William K. Hall, and Fred G. Wall
- ---------------
(1) Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, this report
and the graph set forth on page 21 shall not be incorporated by reference
into any such filings.
CERTAIN RELATIONSHIPS AND OTHER RELATED TRANSACTIONS
The Company, in the ordinary course of business, selected Columbus Circle
Investors in 1991 as one of its four investment advisors for Company pension
funds. Mr. Donald K. Miller, a Director of the Company, is the Vice Chairman of
Thomson Advisory Group L.P., of which Columbus Circle Investors is a division.
Fees paid to Columbus Circle for services rendered in 1993 aggregated $89,688,
which fees were generally competitive with those offered by other investment
advisors providing similar services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Stuart J. Northrop, Vice Chairman of the Board of Directors and retired
Chairman and Chief Executive Officer of the Company, served during the last
fiscal year as an ex-officio member of the Compensation Committee, attending
meetings but having no vote on matters brought before the Committee.
16
<PAGE> 20
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER INFORMATION
The following table shows, for the fiscal years ended December 31, 1991,
1992, and 1993, the cash compensation paid by the Company as well as certain
other compensation paid or accrued for those years, to each of the five most
highly compensated Executive Officers, including Richard L. Molen, the current
Chief Executive Officer of the Company, and to Harry A. Shaw III, Chairman of
the Company, who retired as Chief Executive Officer in 1993, in all capacities
in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ------------------------ ----------
OTHER NUMBER
ANNUAL RESTRICTED OF
NAME AND COMPEN- STOCK OPTIONS/ LTIP
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1) SATION(2)(3) AWARD(S) SARs(4) PAYOUTS
- ------------------------------- ----- -------- -------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Molen 1993 $341,076 $ 99,275 $2,486 $ 0 16,767 $ (6)
President and 1992 292,747 49,375 1,002 0 17,499 179,060
Chief Executive Officer 1991 275,990 229,500 -- 0 13,187 250,943
Harry A. Shaw III 1993 351,939 59,150 7,558 0 15,298 525,521(5)(6)
Chairman of the Board 1992 388,648 65,550 2,843 0 23,232 813,200
1991 366,496 304,850 -- 0 17,506 1,093,961
Gary E. Morin(8) 1993 222,547 69,000 3,334 0 8,088 (6)
Executive Vice President 1992 192,369 47,825 96,343 0 6,130 0
1991 154,894 73,075 -- 0 3,941 0
Robert R. Wieland 1993 191,165 36,725 3,285 0 4,705 (6)
Vice President-Chief 1992 180,654 19,275 2,726 0 5,587 40,278
Administrative Officer and 1991 172,000 89,100 -- 0 4,184 56,231
Secretary
Charlton L. George(9) 1993 147,000 30,300 2,818 0 3,773 0
Vice President-Finance and 1992 145,000 14,800 7,579 0 4,500 0
Chief Financial Officer 1991 41,827 30,000 -- 0 6,527 0
W. Anthony Huffman 1993 143,500 27,575 2,188 0 3,575 (6)
Vice President-Corporate 1992 135,815 11,975 1,425 0 4,258 28,328
Affairs 1991 127,885 61,900 -- 0 3,162 42,319
<CAPTION>
ALL
OTHER
NAME AND COMPEN-
PRINCIPAL POSITION SATION(2)(7)
- ------------------------------- --------
<S> <C>
Richard L. Molen $90,561
President and 61,296
Chief Executive Officer --
Harry A. Shaw III 128,745
Chairman of the Board 106,745
--
Gary E. Morin(8) 8,941
Executive Vice President 7,618
--
Robert R. Wieland 66,409
Vice President-Chief 40,440
Administrative Officer and --
Secretary
Charlton L. George(9) 6,234
Vice President-Finance and 4,360
Chief Financial Officer --
W. Anthony Huffman 45,597
Vice President-Corporate 27,883
Affairs --
</TABLE>
- ---------------
(1) "Salary" and "Bonus" include amounts that would have been payable currently,
but were deferred at an election of an Executive Officer, such as through
the Company's 401(k) Savings Plan.
(2) In accordance with the transition provisions to the revised rules on
executive compensation of the Securities and Exchange Commission, amounts of
Other Annual Compensation and All Other Compensation are excluded for the
Company's 1991 fiscal year.
(3) The compensation listed represents the amounts reimbursed to the Named
Executive Officers for the payment of taxes, including those paid to Mr.
Morin in 1991 in connection with his relocation on behalf of the Company
from California to Ohio. No perquisites were provided or other personal
benefits paid to a Named Executive Officer in 1993 which exceeded the lesser
of $50,000 or ten percent of the total annual salary and bonus reported for
such Named Executive Officer.
(4) These numbers represent options for shares of the Company's Common Stock
granted pursuant to the Company's 1988 Stock Option Plan and Restricted
Share Plan. See the next table labeled "Option Grants in Last Fiscal Year"
for more detailed information on such options.
(5) Mr. Shaw received payments for the year ended December 31, 1993, pursuant to
the 1986 CEO Performance Unit and Performance Share Plan and the Special
Phantom Stock Award Agreement, both of which are described later herein
under the heading "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements."
17
<PAGE> 21
(6) Long Term Incentive Pay also consists of amounts to be paid to each of the
Named Executive Officers except Mr. George (who per such plan's terms will
be eligible to participate in any award paid for the three-year cycle
beginning January 1, 1992) under the Company's Long-Term Incentive Plan
discussed later in this Proxy Statement under the table labeled "Long Term
Incentive Plans." Awards for the three-year award cycle ended December 31,
1993, will be determined and paid in the second half of 1994 after the
average return on equity of the STANDARD & POOR'S 400 INDUSTRIALS becomes
available and will be disclosed in the subsequent fiscal year for the year
in which earned.
(7) "All Other Compensation" includes (i) Company contributions to the Company's
401(k) Savings Plan in the amount of $2,998 each for Richard L. Molen, Harry
A. Shaw III, Gary E. Morin, Robert R. Wieland, Charlton L. George, and W.
Anthony Huffman to match 1993 pre-tax elective deferral contributions
(included under "Salary" and "Bonus") made by each Named Executive Officer
to such plan; (ii) amounts distributed of $65,000, $95,000, $48,000, and
$35,000, under the Company's Capital Accumulation Plan to Richard L. Molen,
Harry A. Shaw III, Robert R. Wieland, and W. Anthony Huffman, respectively,
and accrued interest of $7,416, $9,747, $4,873 and $2,863 (being interest
earned in excess of 120 percent of the applicable federal long term rate
provided under Section 1274(d) of the Internal Revenue Code of 1986, as
amended), by Richard L. Molen, Harry A. Shaw III, Robert R. Wieland and W.
Anthony Huffman on the Company's Capital Accumulation Plan (Richard L.
Molen, Harry A. Shaw III, Robert R. Wieland, and W. Anthony Huffman deferred
salary in 1985 and 1986 pursuant to such plan); and (iii) the principal
amounts of $15,102, $21,000, $5,943, $10,538, $3,236 and $4,736 credited by
the Company for Richard L. Molen, Harry A. Shaw III, Gary E. Morin, Robert
R. Wieland, Charlton L. George, and W. Anthony Huffman, respectively,
pursuant to the Company's Special Deferred Compensation Agreements. Refer to
"Employment Contracts and Termination of Employment and Change-in-Control
Arrangements" later in this Proxy Statement for descriptions of such special
deferred compensation agreements.
(8) Mr. Morin was Vice President - Finance, Chief Financial Officer and
Treasurer of the Company in 1991, prior to accepting in such year the
position of President and General Manager of Washington Inventory Service, a
wholly owned subsidiary of the Company. Mr. Morin was named Executive Vice
President of the Company in February, 1993.
(9) Mr. George commenced his employment with the Company in September, 1991.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1988 Stock Option Plan and Restricted Share Plan
("1988 Plan") to the Named Executive Officers for the year ended December 31,
1993, all of which are reflected in the Company's Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO OR BASE PRICE APPRECIATION
UNDERLYING EMPLOYEES PRICE FOR OPTION TERM(3)
OPTIONS IN FISCAL PER EXPIRATION ---------------------
NAME GRANTED(1) YEAR SHARE(2) DATE 5% 10%
- ---------------------- --------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Molen 16,767 11.81% $19.00 12/10/03 $200,349 $507,723
Harry A. Shaw III 15,298 10.77% 19.00 12/10/03 182,796 463,240
Gary E. Morin 8,088 5.70% 19.00 12/10/03 96,643 244,914
Robert R. Wieland 4,705 3.31% 19.00 12/10/03 56,220 142,473
Charlton L. George 3,773 2.66% 19.00 12/10/03 45,084 114,251
W. Anthony Huffman 3,575 2.52% 19.00 12/10/03 42,718 108,255
</TABLE>
- ---------------
(1) The options were granted pursuant to Company's 1988 Plan which was approved
by the Shareholders. All options granted under the 1988 Plan in 1993 are
non-qualified stock options. No stock appreciation rights were granted and
no restricted shares were awarded under the 1988 Plan in 1993.
18
<PAGE> 22
(2) The Common Stock closing market price on date of grant, December 10, 1993,
was $19.00. The exercise price may be paid in cash or in shares of Common
Stock valued at fair market value on the date of delivery or by a
combination of cash and Common Stock. The options become exercisable ratably
over a three-year period beginning in 1996. Upon a change in control (as
defined in the 1988 Plan), all options then outstanding become fully and
immediately exercisable and the then outstanding option of an employee whose
employment is terminated, except for cause, within three months of such
change in control shall remain exercisable for three months from the date of
such termination, but not after the expiration of the exercise period. Those
employees who terminate employment due to disability or retirement may
exercise non-qualified stock options after such termination of employment
until the latter of (a) one year after the first exercise date for the last
shares to become exercisable under the terms of the option grant, or (b)
three years after the date of the employee's termination of employment.
Under the 1988 Plan, upon the death of an employee or a retired or disabled
former employee, all options under the 1988 Plan shall remain exercisable
for six months following the date of death. Except as set forth above, upon
termination of employment, all options terminate.
(3) Calculated on option terms of ten years beginning December 10, 1993, through
December 10, 2003, with annual compounding. The dollar amounts under these
columns are the result of calculations at the five percent and ten percent
rates set by the Securities and Exchange Commission and therefore are not
intended to forecast possible future appreciation of the Company's Common
Stock. The Company did not use an alternative formula for a grant date
valuation, as the Company is not aware of any formula which will determine
with reasonable accuracy a present value based on future unknown or volatile
factors.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the year ended
December 31, 1993, and unexercised options held as of December 31, 1993:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
VALUE REALIZED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF (MARKET PRICE OPTIONS AT IN-THE-MONEY OPTIONS
SHARES AT EXERCISE FISCAL YEAR-END(1) AT FISCAL YEAR-END(1)(2)
ACQUIRED ON LESS EXERCISE ----------------------------- -----------------------------
NAME EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Molen 0 $ 0 78,568 67,668 $ 805,305 $ 212,168
Harry A. Shaw III 59,816 909,963 43,674 82,878 373,027 281,719
Gary E. Morin 0 0 7,845 24,585 56,152 67,665
Robert R. Wieland 0 0 23,800 20,963 238,665 67,982
Charlton L. George 0 0 0 14,800 0 18,000
W. Anthony Huffman 0 0 19,116 16,154 192,396 53,466
</TABLE>
- ---------------
(1) The number of unexercised options includes options granted under the
Company's 1984 Stock Option Plan ("1984 Plan") (after December, 1987, no
further options or stock appreciation rights ("SARs") were granted under the
1984 Plan) and the 1988 Plan. No SARs were issued or outstanding in 1993,
under the 1984 Plan or 1988 Plan.
(2) The value of "in the money" options is calculated on a per share basis as
the amount, by which the fair market value of a share of the underlying
Common Stock represented by an option exceeds, as of December 31, 1993, the
per share exercise price of the option.
19
<PAGE> 23
LONG TERM INCENTIVE PLANS
The following table provides information concerning awards made to the
Named Executive Officers during the last fiscal year under the Company's 1993
CEO Long-Term Performance Plan ("CEO Plan") and the Long-Term Incentive Plan
("LTIP"). Payments made under the LTIP for the year ended December 31, 1993, are
reported in the Summary Compensation Table.
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR
OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER
UNTIL NON-STOCK PRICE BASED PLAN(3)
NUMBER OF SHARES, UNITS MATURATION OR -------------------------------------
NAME OR OTHER RIGHTS PAYOUT THRESHOLD TARGET MAXIMUM
- -------------------- ------------------------ -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Richard L. Molen (1) 3 years ending $ 30,000 $ 60,000 $300,000
12/31/95
(1) 4 years ending 40,000 80,000 400,000
12/31/96
(1) 5 years ending 50,000 100,000 500,000
12/31/97
(2) 3 years ending 83,520 167,039 334,077
12/31/95
Harry A. Shaw III (2) 3 years ending 97,675 195,350 390,699
12/31/95
Gary E. Morin (2) 3 years ending 51,816 103,633 207,265
12/31/95
Robert R. Wieland (2) 3 years ending 17,701 35,202 70,403
12/31/95
Charlton L. George (2) 3 years ending 13,775 27,393 54,784
12/31/95
W. Anthony Huffman (2) 3 years ending 12,816 25,488 50,975
12/31/95
</TABLE>
- ---------------
(1) Pursuant to the terms of the Company's CEO Plan, performance awards are paid
in cash. In order for such awards to be earned, the Total Shareholder Return
(as defined in the CEO Plan) on a Beginning Share Price (as defined in such
plan) of $16.25 for the performance periods must equal at least 15 percent
for the threshold payment, 19 percent for the target payment, and 27 percent
for the maximum payment. Additional discussion of the CEO Plan is contained
under the heading "Employment Contracts and Termination of Employment and
Changes-in-Control Arrangements" later in this Proxy Statement.
(2) Awards under the Company's LTIP are payable during the year following the
end of a three-year award cycle. Under the LTIP, awards, if any, are made to
Executive Officers based on the following criteria: 50 percent on the
average return on equity performance of the Company over the award cycle as
compared to a targeted average return on equity level established by the
Compensation Committee of the Board of Directors and 50 percent based on the
Company's average return on equity performance as compared to the STANDARD &
POOR'S 400 INDUSTRIALS average return on equity over the same three-year
period.
(3) The amounts calculated assume six percent annual base salary increases.
20
<PAGE> 24
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in the
Company's cumulative total Shareholder return on its Common Stock with the
STANDARD & POOR'S 500 COMPOSITE STOCK INDEX ("S&P 500") and the STANDARD &
POOR'S COMPOSITE LEISURE TIME INDEX ("Leisure Index") for the five-year period
ended December 31, 1993:
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
HUFFY CORPORATION, S&P 500 AND LEISURE INDEX*
<TABLE>
<CAPTION>
MEASUREMENT PERIOD HUFFY LEISURE
(FISCAL YEAR COVERED) CORPORATION INDEX S&P 500
<S> <C> <C> <C>
1988 100 100 100
1989 138 95 128
1990 115 55 130
1991 255 70 170
1992 190 90 180
1993 220 105 190
</TABLE>
* Assumes $100 invested on December 31, 1988 in Company Common Stock, the S&P
500 and the Leisure Index and the reinvestment of dividends.
21
<PAGE> 25
PENSION PLAN TABLE
The Company's Salaried Employees' Retirement Plan (the "Retirement Plan")
is a defined benefit pension plan which provides benefits to salaried employees
not otherwise covered under another pension plan of the Company. The following
table shows the estimated annual benefits (assuming payments made on the normal
life annuity with 12 months certain) payable upon retirement at age 65 to an
employee in specified compensation and years of service classifications.(1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 21,559 $ 27,912 $ 34,265 $ 40,618 $ 40,618
250,000 55,309 72,912 90,515 108,118 108,118
500,000 111,559 147,912 184,265 220,618 220,618
750,000 167,809 222,912 278,015 333,118 333,118
1,000,000 224,059 297,912 371,765 445,618 445,618
1,250,000 280,309 372,912 465,515 558,118 558,118
1,500,000 336,559 447,912 559,265 670,618 670,618
</TABLE>
- ---------------
(1) The Internal Revenue Code of 1986, as amended (the "Code"), places certain
limitations on the annual pension benefits which can be paid from the
Retirement Plan. Such limitations are not reflected in the table. This table
reflects the total aggregate benefits payable annually upon retirement under
both the Retirement Plan and the Company's Supplemental/Excess Benefit Plan
(the "Benefit Plan"), which is discussed below. The Benefit Plan requires an
offset of one-half of the Social Security primary insurance amount ("PIA"),
and such amount has been deducted from the figures in the table. The PIA
amount used in developing the above figures is $13,764. Thus, the offset is
$6,882 for a person with 30 or more years of service.
Monthly benefits upon normal retirement (age 65) are the sum of (i) 0.9
percent of final average monthly compensation (as defined under the Retirement
Plan to include salary, incentive compensation, commissions and overtime pay and
based upon the highest three consecutive years in the last ten) up to the
monthly Social Security Covered Compensation Amount, plus 1.3 percent of the
amount by which final average monthly compensation exceeds the monthly Social
Security Covered Compensation Amount, times years of service (to a maximum of 30
years) and (ii) .075 percent of final average monthly compensation (to a maximum
of $4,166.67) times years of service (to a maximum of 20 years). Additional
provisions for early retirement are included. Mr. Molen has 25 years of credited
service, Mr. Shaw has 24 years of credited service, Mr. Morin has 4 years of
credited service, Mr. Wieland has 17 years of credited service, Mr. George has 2
years of credited service, and Mr. Huffman has 19 years of credited service and
1993 annual covered compensation, to the extent determinable, for purposes of
the Retirement Plan and the Benefit Plan for Richard L. Molen, Harry A. Shaw
III, Gary E. Morin, Robert R. Wieland, Charlton L. George and W. Anthony Huffman
is $604,708, $636,008, $321,477, $264,587, $173,975 and $196,769, respectively.
The Company has also established the Benefit Plan which provides additional
benefits to participants in the Retirement Plan whose benefits are reduced by
limitations imposed under Sections 415 and 401(a)(17) of the Code and Section
2004 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Under the
22
<PAGE> 26
Benefit Plan, Executive Officers and certain key employees will receive, at the
same time and in the same form as benefits paid under the Retirement Plan,
additional benefits in a monthly amount which, when added to the benefits paid
to the participant under the Retirement Plan, will equal the benefit amount such
participant would have earned but for the limitations imposed by the Code and
ERISA to the extent such limitations apply, and the amount by which the sum of
45 percent of final average monthly compensation (as defined under the Benefit
Plan to include salary and bonus and based upon the highest three years in the
last ten) less 50 percent of the monthly PIA payable under Social Security, with
the difference prorated for less than 30 years of service, plus $2,500 per year,
exceeds benefits payable only under the Retirement Plan. The Benefit Plan also
provides that Executive Officers and certain key employees will be provided
benefits beginning at age 58, in an amount equal to such participants' then
accrued benefits without actuarial reduction for early commencement in the event
of (i) a "change-in-control" of the Company, as defined in the Benefit Plan, and
(ii) subsequent termination of employment. Except as noted in the preceding
sentence, benefits under the Benefit Plan will be reduced to an actuarial
equivalent to reflect early distribution in the same manner as benefits under
the Retirement Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment contracts between the Company and any Executive
Officers of the Company.
The Named Executive Officers and certain other key employees of the Company
each have a Special Deferred Compensation Agreement pursuant to which on each
January 1 the Company credits to an account for such employee an amount equal to
two percent of the aggregate of the base salary paid in the preceding calendar
year and bonus paid or credited to such employee under the Profit Sharing Bonus
Plan for preceding calendar year results. The aggregate amount in such account
is to be paid to the employee, subject to certain forfeitures, following
termination of employment. Such amounts for calendar year 1993 have been
included in the Summary Compensation Table.
Named Executive Officers (except for Gary E. Morin and Charlton L. George)
have deferred compensation and receive benefits under the Company's Capital
Accumulation Plan (the "Capital Accumulation Plan") adopted in 1985. No current
compensation is being deferred by Executive Officers under the Capital
Accumulation Plan at the present time. Based upon the amount of such
compensation deferred in 1985 and 1986, the Company has agreed to pay certain
annual amounts (i) on the first day of each of the eighth through eleventh years
following the deferral to each such participant and (ii) generally beginning at
age 65 or upon retirement, whichever occurs later, to each such participant or
to designated beneficiaries upon such participant's death after retirement,
until such participant reaches (or would have reached) age 80. These annual
amortized amounts will be calculated on the basis of attributing from 19 to 24
percent per annum interest to the deferrals, with each payment under clause (i)
above equalling the amount of the original deferral. A lump sum benefit equal to
any remaining balance of deferred
23
<PAGE> 27
amounts, with annual interest at the rate noted below, will be paid in lieu of
any annual benefits if (i) a participant terminates employment with the Company
other than by death or disability prior to retirement (10 percent interest) or
the Company terminates the participant's employment for certain reasons other
than cause or competing with the Company (20 percent interest); (ii) a
participant dies prior to retirement (20 percent interest); or (iii) the Capital
Accumulation Plan is terminated by the Company because a change in federal or
state laws, or judicial or administrative interpretation thereof, has materially
affected its cost to the Company (20 percent interest). The Company will make
supplemental pension payments to persons participating in the Capital
Accumulation Plan to the extent pension benefits are reduced due to
participation in such plan. Distributions made and interest accrued in excess of
120 percent of the applicable federal long term interest rate provided under
Section 1274(d) of the Code for the benefit of the Named Executive Officers has
been included in the Summary Compensation Table.
Richard L. Molen, Harry A. Shaw III, Gary E. Morin, Robert R. Wieland, and
Charlton L. George have each entered into a severance agreement with the Company
pursuant to which the Company has agreed to provide an irrevocable letter of
credit from a commercial bank (or to fund an escrow account if such letter of
credit cannot be promptly issued) in the event a change-in-control (as defined
in the agreements) of the Company is threatened. The letter of credit is to be
for an amount equal to three times the sum of each such person's current annual
salary, bonus award for the most recently completed fiscal year, and Long-Term
Incentive Compensation Plan award for the most recently completed period, plus
two times the Company's cost of current benefits for three years (unless the
Company agrees to provide the same) and a gross-up amount for applicable excise
taxes, if any. If the employment of said person terminates, for any reason other
than disability, retirement or death, within two years after a change-in-control
of the Company occurs, the person or the person's beneficiaries shall be
entitled to the above described amount in a lump sum payment. If proper demand
for such payment is not made within two years from the date of the
change-in-control event, the Company may terminate the letter of credit or
withdraw the funds in the escrow account. If such person's employment is
terminated prior to the occurrence of a change-in-control of the Company,
payment under the severance agreement is forfeited.
W. Anthony Huffman has entered into a severance agreement with the Company
which would require the Company to immediately fund an escrow account for him in
the event a change-in-control (as defined in the agreement) of the Company is
threatened. In such event, the Company must deposit into such account for the
benefit of Mr. Huffman an amount equal to two times the sum of his current
annual salary, bonus award for the most recently completed year, and the
Long-Term Incentive Compensation Plan payment awarded, or to be awarded, on the
January 1 nearest to the date of the occurrence requiring the escrow deposit. If
his employment terminates, for any reason other than disability, retirement, or
death, within two years after a change-in-control of the Company occurs, Mr.
Huffman shall be entitled to benefit payments from such escrow in the aggregate
amount described above. Payment of such escrow fund amount shall be made in 24
monthly installments. The escrow account shall terminate and all funds therein
shall be returned to the Company two years following deposit of said funds in
the escrow
24
<PAGE> 28
account if proper demand for said funds is not made by Mr. Huffman under the
terms of the severance agreement. If his employment is terminated prior to the
occurrence of a change-in-control of the Company, escrow payments are forfeited.
Mr. Molen receives benefits under a Restricted Stock Unit Program (the "COO
Program") dated January 1, 1987, whereby he received grants of 11,250 restricted
units (adjusted to reflect subsequent stock splits) on January 1, 1987, 1988,
1989, 1990, and 1991. A restricted unit is equivalent when earned to a share of
the Company's Common Stock valued at fair market value (as defined in the COO
Program). The restricted units will fully vest on January 1, 1997, 1998, 1999,
2000, and 2001, respectively, subject to (i) earlier vesting due to, among other
things, a change-in-control of the Company (as described in the COO Program),
and (ii) forfeiture due to, among other things, termination for cause. Upon
grant, the restricted units will accumulate additional restricted units equal to
dividends paid on the Company's Common Stock. Once vested, the then actual value
of each restricted unit will be paid in cash. The COO Program requires Mr. Molen
not to compete with the Company for a period of five years following termination
of his employment.
Mr. Molen also receives benefits under the 1993 CEO Long-Term Performance
Plan ("CEO Plan"), effective January 1, 1993. Under the CEO Plan, performance
awards have been established by the Company whereby Mr. Molen may earn a cash
payment if, and only if, the Company achieves the requisite Total Shareholder
Return (as defined in the CEO Plan to include the annual rate of growth of the
Common Stock and the dividends paid on such stock) on a Beginning Share Price
(as defined in the Plan) during the applicable performance period. Five
performance periods were established, three of which began January 1, 1993, and
end December 31, 1995, 1996, and 1997, respectively. The fourth and fifth
performance periods begin January 1, 1994, and 1995, respectively, and end
December 31, 1998, and 1999, respectively. For the performance periods beginning
January 1, 1993, the Beginning Share Price is $16.25. If the Total Shareholder
Return for any performance period beginning January 1, 1993, is 15 percent at
the end of the performance period, Mr. Molen will receive a performance award,
in cash, in the amount of $30,000 for the performance period ending December 31,
1995; $40,000 for the performance period ending December 31, 1996; or $50,000
for the performance period ending December 31, 1997. If the Total Shareholder
Return for any such performance period is 19 percent at the end of the
performance period, Mr. Molen will receive a performance award, in cash, in the
amount of $60,000 for the performance period ending December 31, 1995; $80,000
for the performance period ending December 31, 1996; or $100,000 for the
performance period ending December 31, 1997. If the Total Shareholder Return for
any such performance period is 27 percent at the end of the performance period,
Mr. Molen will receive a performance award, in cash, in the amount of $300,000
for the performance period ending December 31, 1995; $400,000 for the
performance period ending December 31, 1996; or $500,000 for the performance
period ending December 31, 1997. If the Total Shareholder Return over any such
performance period is less than 15 percent at the end of the performance period,
Mr. Molen will earn no performance award. Similarly, if the Total Shareholder
Return over any such performance period is greater than 27 percent at the end of
the performance period, Mr. Molen will
25
<PAGE> 29
receive no greater amount than that stated above. The cash amount of a
performance award earned shall be determined by linear interpolation if the
Total Shareholder Return is greater than 15 percent but less than 27 percent.
For the performance period beginning January 1, 1994, and ending December 31,
1998, the Beginning Share Price is $18.50; the threshold, target and maximum
performance awards for such period are $55,000, $110,000 and $550,000,
respectively.
The Compensation Committee of the Board of Directors administers the CEO
Plan. For the performance period beginning January 1, 1995, the Compensation
Committee will establish, prior to the beginning of such performance period, the
performance measurements and award levels which will assure Mr. Molen a long
term compensation opportunity which is then competitive in the marketplace. In
the event Mr. Molen ceases to be employed by the Company for any reason other
than death, permanent disability or change of control (as defined in the CEO
Plan) prior to completion of a performance period, the performance award will be
forfeited, and no payment with respect thereto shall be made to Mr. Molen unless
determined otherwise by the Compensation Committee. In the event of (a) death or
permanent disability, or (b) a change of control, subsequent to which Mr.
Molen's employment is terminated, Mr. Molen, or his estate, as the case may be,
will be entitled to receive payment with respect to the performance award(s) for
the performance period(s) ending the last day of the calendar year in which the
death, disability or change-of-control occurs.
Mr. Shaw receives benefits under a Special Phantom Stock Award Agreement
entered into as of March 28, 1980, as amended. Under such agreement, five
accounts were established for him in 1980, 1981, 1982, 1983, and 1984. Upon
establishment of each account, 10,800 units (adjusted to reflect subsequent
stock splits) were entered into each such account. Since its establishment, each
account has been credited with additional units reflecting per share dividend
equivalents for each unit. Ten years from the establishment of each account,
each account was or will be credited with (i) any increase in value of a share
of Common Stock over $5.29 per share (adjusted to reflect subsequent stock
splits) for each of the first 10,800 units in the account and (ii) the then
current value of a share of Common Stock for each unit in excess of the 10,800
units originally placed in the account. The amounts so credited are paid in
cash. If Mr. Shaw's employment with the Company is severed for cause, Mr. Shaw
will forfeit all amounts credited to each account but not paid; if the Company
merges into or is acquired by another person, or sells substantially all of its
assets and within six months following the date of such event Mr. Shaw
terminates his employment, there is no forfeiture; and if Mr. Shaw's employment
is severed after March 1, 1990, by Mr. Shaw without Company consent, Mr. Shaw
will forfeit 20 percent of all amounts thereafter payable to him.
Mr. Shaw receives benefits under the 1986 CEO Performance Unit and
Performance Share Plan ("Performance Plan"). Under the Performance Plan, Mr.
Shaw has been granted performance units in the amounts of 34,269 performance
units for the performance period beginning January 1, 1989, and ending December
31, 1993; 32,792 performance units for the performance period beginning January
1, 1990, and ending December 31, 1994; 31,454 performance units for the
performance period beginning January 1, 1991, and ending December 31, 1995; and
29,520 performance units for the performance
26
<PAGE> 30
period beginning January 1, 1992, and ending December 31, 1996. A performance
share has a cash value equal to the Share Price (as defined in the Performance
Plan). Payments for performance shares are made in cash. The measure of
performance is the Company's arithmetic average of returns on equity ("Average
ROE") for each year of the performance period. For any year of a performance
period beginning before December 31, 1989, Average ROE is calculated as the
return on the Company's beginning shareholders' equity for such year and, for
any year of a performance period beginning on or after January 1, 1990, Average
ROE is calculated as the return on the Company's average shareholders' equity
for such year. The performance periods are of five-year duration. If the Average
ROE over a performance period is less than the threshold level (12.5 percent for
performance periods beginning before December 31, 1989, or 13.5 percent for
performance periods beginning on or after January 1, 1990), Mr. Shaw will
receive nothing for such period. If the Average ROE over a performance period is
equal to or exceeds the threshold level, Mr. Shaw will receive performance
shares equal to at least 50 percent (for the threshold level) of the performance
units granted for such period up to a maximum of 150 percent (for 18 percent or
greater Average ROE for performance periods beginning before December 31, 1989,
or 20.5 percent for performance periods beginning on or after January 1, 1990)
of the performance units. The Compensation Committee of the Board of Directors
administers the Performance Plan. Mr. Shaw's right to the performance units or
shares may be forfeited (i) if Mr. Shaw is no longer employed by the Company for
reasons other than retirement, death, disability or change-in-control (as
described in the Performance Plan) or (ii) if the Compensation Committee
determines there is cause (as defined in the Performance Plan) for forfeiture.
Generally, a "change-of-control" or "change-in-control", as defined in the
above-referenced plans and agreements, is the acquisition by another person or
persons other than directly from the Company of more than 20 percent of the
Company's outstanding shares of Common Stock; a merger, consolidation or other
combination of the Company with one or more corporations as a result of which
more than 49 percent of the voting stock of the merged, consolidated or combined
corporation is held by former shareholders of the corporations other than the
Company; a tender offer for, or a request for invitations for the tender of,
shares of Common Stock of the Company by any person; or the election to the
Board of Directors of the Company by the shareholders of two or more persons not
nominated as candidates for the Board of Directors in proxy statements furnished
during such period on behalf of the Board of Directors of the Company.
Mr. Shaw has entered into an amended and restated Transition Compensation
Agreement (the "Transition Agreement"), dated February 15, 1993, with respect to
his compensation and benefits from and after April 30, 1993. The Transition
Agreement provides that Mr. Shaw will receive as a base salary for such
part-time work an annual amount computed by multiplying his actual base salary,
adjusted annually on the same basis as the Company adjusts the midpoints of its
base salary ranges, by 80 percent for the period May 1, 1993, through April 30,
1994; 60 percent for the period May 1, 1994, through April 30, 1995; and 40
percent for the period May 1, 1995, through July 31, 1996. If Mr. Shaw's
employment is involuntarily terminated for reasons other than death or permanent
disability or he is required to elect early retirement in lieu of such
involuntary
27
<PAGE> 31
termination, all compensation described above shall cease upon such termination
of employment, but the Company will provide Mr. Shaw with the same retirement
benefits as to which he would have been entitled had he retired on July 31,
1996. If Mr. Shaw shall die or be permanently disabled, all compensation
described above shall cease upon the occurrence of such event and the Company
shall provide Mr. Shaw (or his beneficiary or estate) with those benefits to
which Mr. Shaw (or his beneficiary or estate) is entitled after such death or
permanent disability under the terms of certain Company plans in which he
currently participates as well as retirement benefits as to which he (or his
beneficiary or estate) would have been entitled had he retired on July 31, 1996.
The Transition Agreement requires Mr. Shaw not to compete with the Company or
engage in any business which is a major customer of the Company or which seeks
to control the Company during the period benefits are paid to him under the
Transition Agreement and for a period of two years thereafter. Mr. Shaw will
continue to participate in the Profit Sharing Bonus Plan, the Long-Term
Incentive Plan, the Special Deferred Compensation Plan, the Performance Plan,
and the 1989 Employee Stock Purchase Plan through his July 31, 1996, retirement
date and will also be eligible to receive grants of stock options at the times
grants are made to other Executive Officers and to defer all or any of his
compensation through July 31, 1996.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of its Audit Committee, has
appointed the firm of KPMG Peat Marwick as independent public accountants for
the Company for calendar year 1994, subject to ratification by the Shareholders.
The firm of KPMG Peat Marwick has served as independent public accountants for
the Company since 1962. The Board of Directors recommends ratification of this
appointment. One or more members of KPMG Peat Marwick will attend the Annual
Meeting with an opportunity to make a statement if they desire to do so and to
respond to such appropriate questions as may be asked by Shareholders.
THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK REQUIRES THE
AFFIRMATIVE VOTE BY THE HOLDERS OF A MAJORITY OF THE COMMON STOCK PRESENT IN
PERSON OR REPRESENTED BY PROXY AT THE MEETING. SHARES AS TO WHICH THE AUTHORITY
TO VOTE IS WITHHELD AND BROKER NON-VOTES ARE NOT COUNTED TOWARD THE ELECTION OF
DIRECTORS OR TOWARD THE ELECTION OF THE INDIVIDUAL NOMINEES SPECIFIED ON THE
PROXY CARD.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be presented at the 1995 Annual
Meeting of Shareholders must be received by the Company by November 7, 1994, for
inclusion in the Company's Proxy Statement and proxy relating to the 1995 Annual
Meeting of Shareholders.
28
<PAGE> 32
OTHER MATTERS
The Board of Directors does not intend to present to the meeting any
matters other than those hereinbefore mentioned. It does not know of anything
that will be presented by other parties. However, if any other matters shall
properly come before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote thereon according to their discretion and
best judgment.
By order of the Board of
Directors
/s/ Robert R. Wieland
--------------------
Robert R. Wieland
Secretary
Dayton, Ohio
March 8, 1994
29
<PAGE> 33
HUFFY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, APRIL 15, 1994
The undersigned hereby appoints Boake A. Sells, Geoffrey W. Smith, and Robin B.
Smith, and each of them, his proxies, with power of substitution, to vote all
shares of Common Stock of HUFFY CORPORATION, an Ohio corporation, which he may
be entitled to vote at the Annual Meeting of Shareholders of said corporation to
be held April 15, 1994, and at any adjournment(s) thereof, on the following
matters, all of which are described in the Proxy Statement, receipt of which is
hereby acknowledged:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
/ / FOR the election of William K. Hall, Stephen P. / / WITHHOLD AUTHORITY for the election of William K.
Huffman, Donald K. Miller, Richard L. Molen and Fred Hall, Stephen P. Huffman, Donald K. Miller, Richard L.
G. Wall, each for a term of three years, Jack D. Molen and Fred G. Wall, each for a term of three
Michaels and James F. Robeson, each for a term of two years, Jack D. Michaels and James F. Robeson, each
years, and Linda B. Keene for a term of one year for a term of two years, and Linda B. Keene for a
(except as indicated below). term of one year.
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE BELOW)
- --------------------------------------------------------------------------------
2. RATIFICATION OF APPOINTMENT OF KPMG PEAT MARWICK AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR CALENDAR YEAR 1994
FOR / / AGAINST / / ABSTAIN / /
(Continued and to be dated and signed on other side)
THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF ANY SPECIFICATIONS TO
THE CONTRARY, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL LISTED NOMINEES
AND FOR ALL THE OTHER MATTERS LISTED ON THE REVERSE SIDE OF THIS CARD. EXCEPT
FOR THE MATTERS LISTED ON THE REVERSE SIDE OF THIS CARD, THE BOARD OF DIRECTORS
AT PRESENT KNOWS OF NO BUSINESS OTHER THAN OF A ROUTINE NATURE TO BE BROUGHT
BEFORE THE MEETING. IF ANY OTHER BUSINESS IS BROUGHT BEFORE THE MEETING, THIS
PROXY WILL BE VOTED ACCORDING TO THE APPOINTED PROXIES' DISCRETION AND BEST
JUDGMENT. IF CUMULATIVE VOTING IS ELECTED, VOTES CAST PURSUANT TO THIS PROXY
WILL BE DISTRIBUTED AMONG THE ABOVE NOMINEES AT THE DISCRETION OF SAID PROXIES.
The undersigned ratifies all that said proxies, or any of them, or their
substitute or substitutes, may lawfully do by virtue hereof, and revokes any
proxies heretofore given by the undersigned to vote at said Annual Meeting or
adjournment(s) thereof.
Dated , 1994
--------------------------------
--------------------------------
(Please sign exactly as name
appears opposite. If signing in
fiduciary or representative
capacity, please give full title
as such. If shares are
registered in more than one
name, all holders must sign. If
signature is for a corporation,
the handwritten signature and
title of an authorized officer
is required, together with the
full corporate name.)
Proxy Card
