<PAGE> 1
SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
Genuine Parts Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
GENUINE PARTS COMPANY
2999 CIRCLE 75 PARKWAY
ATLANTA, GEORGIA 30339
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 20, 1998
---------------------
TO THE SHAREHOLDERS OF GENUINE PARTS COMPANY:
Notice is hereby given that the Annual Meeting of Shareholders of Genuine
Parts Company (the "Company") will be held at 2999 Circle 75 Parkway, Atlanta,
Georgia, on the 20th day of April, 1998, at 10:00 a.m., for the following
purposes:
(1) To elect three Class III directors and two Class II directors;
(2) To consider and vote upon a proposal to ratify the selection of
Ernst & Young LLP as independent auditors of the Company for the fiscal
year ending December 31, 1998; and
(3) To act upon such other matters as may properly come before the
meeting or any reconvened meeting following any adjournment thereof.
Only holders of record of Common Stock at the close of business on February
12, 1998 will be entitled to vote at the meeting. The transfer books will not be
closed. A complete list of the shareholders entitled to vote at the meeting will
be available for inspection by shareholders at the offices of the Company
immediately prior to the meeting.
The Annual Meeting may be adjourned from time to time without notice other
than announcement at the Annual Meeting, and any business for which notice of
the Annual Meeting is hereby given may be transacted at a reconvened meeting
following such adjournment.
By Order of the Board of Directors,
/s/ Carol B. Yancey
CAROL B. YANCEY
Corporate Secretary
Atlanta, Georgia
March 2, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON, PLEASE
VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS
REPLY ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND
VOTE IN PERSON.
<PAGE> 3
GENUINE PARTS COMPANY
2999 CIRCLE 75 PARKWAY
ATLANTA, GEORGIA 30339
---------------------
PROXY STATEMENT
ANNUAL MEETING -- APRIL 20, 1998
This Proxy Statement is being furnished to the shareholders of Genuine
Parts Company (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the Company's Annual Meeting of
Shareholders to be held on April 20, 1998, at 10:00 a.m. local time, and at any
reconvened meeting following any adjournment thereof. This proxy statement and
the accompanying proxy are first being mailed to shareholders on or about March
2, 1998.
All proxies received by the Company will be voted in accordance with
instructions appearing on such proxies. A shareholder who submits a proxy
pursuant to this solicitation may revoke it at any time prior to its exercise at
the Annual Meeting. Such revocation may be by delivery of written notice to the
Corporate Secretary of the Company, by delivery of a proxy bearing a later date,
or by voting in person at the Annual Meeting. The mailing address of the
executive offices of the Company is 2999 Circle 75 Parkway, Atlanta, Georgia
30339.
An annual report to the shareholders, including financial statements for
the year ended December 31, 1997, is enclosed herewith.
At the close of business on the record date for the Annual Meeting, which
was February 12, 1998, the Company had outstanding and entitled to vote at the
Annual Meeting 178,803,145 shares of Common Stock.
Each shareholder is entitled to one vote on each proposal per share of
Common Stock held as of the record date. A quorum for the purposes of all
matters to be voted on shall consist of shareholders representing, in person or
by proxy, a majority of the outstanding shares of Common Stock entitled to vote
at the Annual Meeting.
The vote required for the election of directors and the selection of
independent auditors is a majority of the shares of Common Stock represented and
entitled to vote at the Annual Meeting. Consequently, with respect to the
election of directors, withholding authority to vote with respect to one or more
nominees and broker "non-votes" will be counted as present for purposes of
determining the existence of a quorum and as part of the base number of votes to
be used in determining if the proposal has received the requisite number of
votes for approval, and will have the same effect as a vote "against" such
proposal. With respect to the selection of independent auditors, abstentions and
broker "non-votes" will be counted as present for purposes of determining the
existence of a quorum and as part of the base number of votes to be used in
determining if the proposal has received the requisite number of votes for
approval, and will have the same effect as a vote "against" such proposal. A
broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal because the nominee does not have
discretionary voting power with respect to that proposal and has not received
instructions from the beneficial owner.
1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of ten
directorships, divided into two classes of four directors each and one class of
two directors (Mr. Scalley, formerly a director in the latter class, retired as
a director on February 16, 1998), with the terms of office of each class ending
in successive years. The terms of directors in Class III expire on the date of
this Annual Meeting. The current directors in Class I and Class II will continue
in office, with the exception of Mr. Parker, who will retire as a director on
the date of the Annual Meeting. In order to make the number of directors in each
class as nearly equal as possible, Class III
<PAGE> 4
(which currently has four directors) will be reduced by one director and Class
II (which currently has two directors) will be increased by one director.
The shareholders are being asked to vote on the election of the three
nominees for director in Class III and the two nominees for director in Class
II. The Class III nominees will serve for terms of three years each and the
Class II nominees will serve for two years each (and, in each case, until their
successors are duly elected and qualified or until their earlier resignation,
retirement, disqualification, removal from office or death). All of the nominees
are presently directors, except Richard W. Courts, II, a nominee for Class II.
In the absence of contrary instructions, the proxy will be voted for the
election of the five nominees whose names appear below. In the event that any
nominee is unable to serve (which is not anticipated), the persons designated as
proxies will cast votes for the election of the remaining nominees and for the
election of such other persons as they may select.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ELECTION
OF ALL OF THE NOMINEES. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
The following tables and information below set forth the name of each
nominee and each director continuing in office, their ages, principal
occupations and the year each of them first joined the Board. For information
concerning membership on committees of the Board of Directors, see "Other
Information about the Board and its Committees" below.
NOMINEES FOR DIRECTOR
CLASS III
FOR A THREE-YEAR TERM EXPIRING ON THE DATE OF THE 2001 ANNUAL MEETING
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR
---- --- ------------------------- ----------------
<S> <C> <C> <C>
Jean Douville 54 Director 1992
J. Hicks Lanier 57 Director 1995
Alana S. Shepherd 67 Director 1993
</TABLE>
Mr. Douville has been President and a director of UAP Inc. since 1981,
Chief Executive Officer of UAP Inc. since 1982, and Chairman of the Board of UAP
Inc. since 1994. UAP Inc. is a distributor of automotive replacement parts
headquartered in Montreal, Quebec, Canada. The Company, through a wholly owned
subsidiary, has an approximately 23% ownership interest in UAP Inc. Mr. Douville
is a director of A.L. Van Houtte Ltd., Banque Nationale du Canada and
Sodisco/Howden Group Inc.
Mr. Lanier has been President of Oxford Industries, Inc. since 1977, Chief
Executive Officer and Chairman of the Board of Oxford Industries, Inc. since
1981 and a director of Oxford Industries, Inc. since 1969. Oxford Industries,
Inc. is an apparel manufacturer headquartered in Atlanta, Georgia. Mr. Lanier is
also a director of Crawford & Company, Shaw Industries, Inc. and SunTrust Banks
of Georgia, Inc.
Ms. Shepherd is Secretary of the Board of Directors of The Shepherd Center,
a position she has held since 1974. Ms. Shepherd is a director emeritus of
Wachovia Bank of Georgia.
2
<PAGE> 5
CLASS II
FOR A TWO-YEAR TERM EXPIRING ON THE DATE OF THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR
- ---- --- ------------------------- ----------------
<S> <C> <C> <C>
Richard W. Courts, II 62 Director First time nominee
Larry L. Prince 59 Chairman of the Board, Chief 1979
Executive Officer and Director
</TABLE>
Mr. Courts is Chairman of the Board of Directors of Atlantic Investment
Company, a position he has held since 1992, following his service as President
since 1970. Atlantic Investment Company is headquartered in Atlanta, Georgia and
is engaged in the business of real estate and capital investments. Mr. Courts is
also a director of SunTrust Banks of Georgia, Inc., SunTrust Bank, Atlanta,
Southern Mills, Inc. and Cousins Properties, Inc.
Mr. Prince is Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Prince has been Chairman of the Board since 1990,
and Chief Executive Officer since 1989. He is also a director of Crawford &
Company, Equifax Inc., John H. Harland Co., Southern Mills, Inc., SunTrust
Banks, Inc. and UAP Inc.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
CLASS I
TERM EXPIRING ON THE DATE OF THE 1999 ANNUAL MEETING
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR
- ---- --- ------------------------- ----------------
<S> <C> <C> <C>
Bradley Currey, Jr. 67 Director 1990
Robert P. Forrestal 66 Director 1996
Thomas C. Gallagher 50 President, Chief Operating 1990
Officer and Director, and
Chairman of the Board of
Directors and Chief Executive
Officer of S.P. Richards
Company, a wholly owned
subsidiary of the Company
Lawrence G. Steiner 59 Director 1972
</TABLE>
Mr. Currey is Chairman of the Board of Directors and Chief Executive
Officer of Rock-Tenn Company, a manufacturer and distributor of paperboard and
packaging products located in Norcross, Georgia. He has held the position of
Chief Executive Officer since 1989 and the position of Chairman of the Board
since 1993. Mr. Currey was President of Rock-Tenn Company from 1978 to 1995. Mr.
Currey is a director of Poe & Brown, Inc.
Mr. Forrestal is a partner in the law firm of Smith, Gambrell & Russell in
Atlanta, Georgia, a position he has held since early 1996. Mr. Forrestal was
President and Chief Executive Officer of the Federal Reserve Bank of Atlanta
from 1983 to 1995. Mr. Forrestal is a director of Equifax Inc. and ING North
America Company.
Mr. Gallagher has been President and Chief Operating Officer of the Company
since 1990, and Chairman of the Board of Directors and Chief Executive Officer
of S.P. Richards Company since 1988. Mr. Gallagher is a director of Oxford
Industries, Inc. and National Service Industries, Inc.
3
<PAGE> 6
Mr. Steiner is Chairman of the Board and President of Ameripride Services
Inc. (formerly known as American Linen Supply Company). Mr. Steiner has been
President of Ameripride Services Inc. since 1979, and Chairman of the Board
since 1992. Ameripride Services Inc. is headquartered in Minneapolis, Minnesota,
and is engaged in the business of linen and garment rental.
CLASS II
TERM EXPIRING ON THE DATE OF THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR
---- --- ------------------------- ----------------
<S> <C> <C> <C>
James B. Williams 64 Director 1980
</TABLE>
Mr. Williams is Chairman of the Board and Chief Executive Officer of
SunTrust Banks, Inc., positions he has held since 1991 and 1990, respectively.
Mr. Williams has been a member of the Board of Directors of SunTrust Banks, Inc.
since 1984. He served as President of SunTrust Banks, Inc. from 1990 to 1991.
Mr. Williams is also a director of The Coca-Cola Company, Georgia-Pacific
Corporation, Rollins, Inc., RPC, Inc. and Sonat Inc.
OTHER INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
During 1997, the Board of Directors held four meetings. All of the
directors attended at least 75% of the aggregate total number of meetings of the
Board of Directors and meetings of Committees of the Board on which they served,
except that Mr. Steiner attended 50% of the Audit Committee meetings and 75% of
the meetings of the Board of Directors held in 1997. The Board presently has
three standing committees. Certain information regarding the functions of the
Board's committees, their present membership and the number of meetings held by
each committee during 1997 is described below:
Executive Committee. The Executive Committee is authorized, to the
extent permitted by law, to act on behalf of the Board of Directors on all
matters that may arise between regular meetings of the Board upon which the
Board of Directors would be authorized to act. The current members of the
Executive Committee are Larry L. Prince (Chairman), Thomas C. Gallagher,
Bradley Currey, Jr. and James B. Williams. John J. Scalley, now retired,
served as a member of the Executive Committee throughout 1997. During 1997,
this committee held seven meetings.
Audit Committee. The Audit Committee annually reviews and recommends
to the Board the firm to be engaged as independent auditors for the Company
for the next fiscal year, reviews with the independent auditors the plan
and results of the audit engagement, reviews the scope and results of the
Company's procedures for internal auditing and inquires as to the adequacy
of the Company's internal accounting controls. The current members of the
Audit Committee are James B. Williams (Chairman), Robert P. Forrestal,
Alana S. Shepherd and Lawrence G. Steiner. During 1997, the Audit Committee
held two meetings.
Compensation and Stock Option Committee. The Compensation and Stock
Option Committee is authorized to fix the compensation of senior officers
of the Company, to administer the Company's 1988 Stock Option Plan and 1992
Stock Option and Incentive Plan, and to amend certain other benefit plans
of the Company. The current members of the Compensation and Stock Option
Committee are William A. Parker, Jr. (Chairman), Bradley Currey, Jr., J.
Hicks Lanier and James B. Williams. Mr. Parker will retire as a director at
the date of the Annual Meeting, at which time Mr. Lanier will become
Chairman. During 1997, the Compensation and Stock Option Committee held two
meetings.
The Company's Board of Directors does not have a nominating committee.
Compensation of Directors. During 1997, directors who were not
full-time employees of the Company or its subsidiaries were paid $6,250 per
fiscal quarter plus $925 per meeting attended, except the Chairmen of the
Audit Committee and the Compensation and Stock Option Committee who were
paid $7,000 per fiscal quarter plus $925 per meeting attended.
4
<PAGE> 7
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of February 12, 1998, as to
persons or groups known to the Company to be beneficial owners of more than five
percent of the outstanding Common Stock of the Company.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNED(1) OF CLASS
-------------- ------------------- ------------ --------
<S> <C> <C> <C>
Common Stock, The Capital Group Companies, Inc., as 12,673,960(2) 7.1%
$1.00 par value parent holding company on behalf of
certain subsidiaries, including Capital
Research and Management Company
333 South Hope Street
Los Angeles, California 90071
</TABLE>
- ---------------
(1) This information is based upon information included in a Schedule 13G
jointly filed by The Capital Group Companies, Inc. and Capital Research and
Management Company, which was received by the Company on February 19, 1998.
(2) Includes 12,672,500 shares beneficially owned by Capital Research and
Management Company. The Capital Group Companies, Inc. disclaims beneficial
ownership of these shares.
COMMON STOCK OWNERSHIP OF MANAGEMENT
Based on available information, the Company believes that set forth in the
table below is information in connection with the beneficial ownership of Common
Stock of the Company by the Company's directors, the Named Executive Officers
(as defined herein) and the directors, nominees for director and executive
officers of the Company as a group (17 persons) as of February 12, 1998:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF DIRECTOR, NOMINEE SHARES OF COMMON STOCK COMMON STOCK
TITLE OF CLASS OR NAMED EXECUTIVE OFFICER BENEFICIALLY OWNED(1) OUTSTANDING(2)
- -------------- -------------------------- ---------------------- --------------
<S> <C> <C> <C>
Common Stock, Robert J. Breci 91,517(3) *
$1.00 par
value Richard W. Courts, II 198,415(4) *
Bradley Currey, Jr. 31,094(5) *
Jean Douville 3,194(6) *
Robert P. Forrestal 1,500(7) *
Thomas C. Gallagher 1,342,348(8) *
George W. Kalafut 1,994,114(9) 1.1%
J. Hicks Lanier 40,881(10) *
William A. Parker, Jr. 2,218,074(11) 1.2%
Larry L. Prince 535,529(12) *
John J. Scalley 1,278,617(13) *
Alana S. Shepherd 2,217 *
Lawrence G. Steiner 6,520(14) *
James B. Williams 31,249(15) *
Directors, Nominees and 5,580,967(16) 3.1%
Executive Officers as a Group
</TABLE>
- ---------------
* Less than 1%.
(1) Information relating to the beneficial ownership of Common Stock by
directors, nominees for director and Named Executive Officers is based upon
information furnished by each such individual using "beneficial ownership"
concepts set forth in rules promulgated by the Securities and Exchange
Commission under Section 13 (d) of the Securities Exchange Act of 1934.
Except as indicated in other footnotes to this table, directors, nominees
and Named Executive Officers possessed sole voting and investment power
with respect to all shares set forth by their names. The table includes, in
some
5
<PAGE> 8
instances, shares in which members of a director's, nominee's or executive
officer's immediate family have a beneficial interest, and as to which such
shares the director, nominee or executive officer disclaims beneficial
ownership. All share amounts reflect the three-for-two stock split effected
in the form of a 50% stock dividend on April 14, 1997.
(2) Unless indicated in the table, the number of shares included in the table
as beneficially owned by a director, nominee or Named Executive Officer
does not exceed one percent of the outstanding Common Stock of the Company.
(3) Includes 29,847 shares subject to exercisable stock options.
(4) Includes 1,350 shares held by a profit-sharing trust for which Mr. Courts
is sole trustee and 196,065 shares held by certain charitable foundations
for which Mr. Courts is a trustee and thereby has shared voting and
investment power. (Mr. Courts disclaims beneficial ownership as to the
shares held by such trust and foundations.) Also includes 250 shares owned
by Mr. Courts' wife and 750 shares (250 shares each) held by his three sons
(as to which shares held by his wife and sons Mr. Courts disclaims
beneficial ownership).
(5) Includes 1,094 shares of Common Stock equivalents held in Mr. Currey's
stock account under the Directors' Deferred Compensation Plan. See
"Compensation Pursuant to Plans."
(6) Includes 919 shares of Common Stock equivalents held in Mr. Douville's
stock account under the Directors' Deferred Compensation Plan. See
"Compensation Pursuant to Plans."
(7) All 1,500 shares are owned jointly by Mr. Forrestal and his wife.
(8) Includes 126,657 shares subject to exercisable stock options and 946 shares
owned jointly by Mr. Gallagher and his wife. Also includes 1,088,532 shares
held in a benefit fund for Company employees, of which Mr. Gallagher is one
of four trustees. Mr. Gallagher disclaims beneficial ownership as to all
such shares held in trust.
(9) Includes 41,742 shares subject to exercisable options. Also includes
1,088,532 shares held in a benefit fund for Company employees, of which Mr.
Kalafut is one of four trustees, and 839,174 shares held in trust for the
Company's Pension Plan, of which Mr. Kalafut is one of four trustees.
Including the shares held in such trusts, Mr. Kalafut's beneficial
ownership was 1.1% of the Common Stock outstanding on February 12, 1998.
Mr. Kalafut disclaims beneficial ownership as to all such shares held in
both trusts.
(10) Includes 2,400 shares held by a trust for the benefit of Mr. Lanier as to
which Mr. Lanier has sole voting power and has the ability to veto
investment decisions made by the trustee. Also includes 2,250 shares owned
by Oxford Industries, Inc., as to which Mr. Lanier has shared voting and
investment power (as to which shares Mr. Lanier disclaims beneficial
ownership). Also includes 24,831 shares held by a charitable foundation for
which Mr. Lanier is one of six trustees and thereby has shared voting and
shared investment power for such shares (as to which shares Mr. Lanier
disclaims beneficial ownership). Also includes 9,900 shares held in four
trusts for the benefit of Mr. Lanier's siblings for which Mr. Lanier has
sole voting power and has the ability to veto investment decisions made by
the trustees. Mr. Lanier disclaims beneficial ownership as to these 9,900
shares.
(11) Includes 406,662 shares owned by Mr. Parker's wife and 1,233,922 shares
held by trusts for Mr. Parker's children with Mrs. Parker as co-trustee (as
to which shares held by his wife and in trust for his children Mr. Parker
disclaims beneficial ownership). Also includes 104,940 shares held by a
trust for which Mr. Parker is co-trustee and 11,250 shares held by a
charitable foundation for which Mr. Parker is a trustee and thereby has
shared voting and investment power (Mr. Parker disclaims beneficial
ownership as to the shares held by such trust and foundation).
(12) Includes 242,818 shares subject to exercisable stock options, and includes
91,125 shares held by a charitable foundation for which Mr. Prince is a
trustee and thereby has shared voting and investment power for such shares.
Mr. Prince disclaims beneficial ownership as to such shares held in trust.
(13) Includes 56,670 shares subject to exercisable stock options and 502 shares
owned by Mr. Scalley's wife, as to which shares Mr. Scalley disclaims
beneficial ownership. Also includes 1,088,532 shares held in a benefit fund
for Company employees, of which Mr. Scalley is one of four trustees. Mr.
Scalley disclaims beneficial ownership as to all such shares held in trust.
(14) Includes 1,113 shares owned by Mr. Steiner's wife as to which such shares
Mr. Steiner disclaims beneficial ownership.
6
<PAGE> 9
(15) Includes 1,250 shares of Common Stock equivalents held in Mr. Williams'
stock account under the Directors' Deferred Compensation Plan. See
"Compensation Pursuant to Plans."
(16) Includes 518,690 shares issuable to certain executive officers upon the
exercise of options that are presently exercisable under the Company's 1988
Stock Option Plan and 1992 Stock Option and Incentive Plan, 1,088,532
shares held in a benefit fund for Company employees, 839,174 shares held in
trust for the Company's Pension Plan, and 3,263 shares held as Common Stock
equivalents under the Directors' Deferred Compensation Plan. The individual
totals for Mr. Courts and Mr. Parker each include 104,940 shares held by
the same trust of which each of the foregoing individuals is a trustee;
such shares have been included only once in calculating this figure. The
individual totals for Mr. Courts and Mr. Prince each include 91,125 shares
held by the same charitable foundation of which each of the foregoing
individuals is a trustee; such shares have been included only once in
calculating this figure. The individual totals for Messrs. Gallagher,
Kalafut and Scalley each include 1,088,532 shares held in a benefit fund
for Company employees of which each of the foregoing individuals is a
trustee; such shares have been included only once in calculating this
figure.
EXECUTIVE COMPENSATION AND OTHER BENEFITS
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for fiscal years
ending December 31, 1997, 1996 and 1995, of (i) the Chief Executive Officer as
of December 31, 1997, and (ii) the other four most highly compensated executive
officers of the Company as of December 31, 1997 (for the purposes of this and
the following tables and discussion concerning executive compensation, such five
executive officers shall be referred to as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------------
--------------------------------------- RESTRICTED SECURITIES ALL
OTHER ANNUAL STOCK UNDERLYING OTHER
SALARY BONUS COMPENSATION AWARDS(S) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#)(2) ($)(3)
- --------------------------- ---- ------- ------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry L. Prince 1997 540,000 658,800 -- 504,375(4) 150,000 1,900
Chairman of the 1996 500,000 621,000 -- 791,900(4) -- 1,900
Board, Chief Executive 1995 465,000 546,950 -- 357,000(4) 90,000 1,848
Officer and Director
Thomas C. Gallagher 1997 390,000 452,400 -- 252,188(4) 125,000 1,900
President, Chief 1996 360,000 426,420 -- 395,950(4) -- 1,900
Operating Officer and 1995 335,000 375,870 -- 178,500(4) 45,000 1,848
Director
John J. Scalley 1997 320,000 438,400 -- -- 25,000 1,900
Executive Vice 1996 305,000 427,915 -- -- -- 1,900
President 1995 290,000 371,250 -- -- 15,000 1,848
George W. Kalafut 1997 225,000 249,750 -- -- 25,000 1,900
Executive Vice 1996 214,000 241,178 -- -- -- 1,900
President -- 1995 200,000 211,750 -- -- 22,500 1,848
Finance &
Administration
Robert J. Breci 1997 248,000 205,840 -- -- 25,000 1,900
Executive Vice 1996 237,000 196,236 -- -- -- 1,900
President 1995 225,000 166,834 -- -- 15,000 1,848
</TABLE>
- ---------------
(1) For 1997, 1996 and 1995, no amounts of "Other Annual Compensation" were paid
to any Named Executive Officer, except for perquisites and other personal
benefits, securities or properties which for each Named Executive Officer
during any such year did not exceed the lesser of $50,000 or 10% of such
individual's salary plus annual bonus.
7
<PAGE> 10
(2) Share amounts prior to 1997 have been restated to reflect the three-for-two
stock split effected in the form of 50% stock dividend on April 14, 1997.
(3) For 1997, 1996 and 1995, amounts of "All Other Compensation" reflect Company
matching contributions pursuant to the Genuine Partnership Plan (a qualified
salary deferral plan under Section 401(k) of the Internal Revenue Code of
1986, as amended (the "Code")).
(4) On March 31, 1994, the Company entered into separate Restricted Stock
Agreements with Mr. Prince and Mr. Gallagher whereby the Company agreed to
make certain grants of restricted stock to such officers (up to an aggregate
maximum of 150,000 shares for Mr. Prince and 75,000 shares for Mr.
Gallagher) if the Company achieves certain annual earnings per share and
certain price per share targets. Once such awards of restricted stock are
granted, dividends on such restricted shares will be paid to the grantee and
such restricted shares will vest on March 31, 2004 provided that the grantee
remains employed by the Company until that date (unless the grantee is
terminated prior to March 31, 2004 by reason of a change in control, death,
disability or retirement, or the Compensation and Stock Option Committee
accelerates the vesting of restricted stock granted under these Restricted
Stock Agreements). For 1995, 1996 and 1997, the amounts specified in
"Restricted Stock Awards" reflect grants under the Restricted Stock
Agreements discussed above made on (and valued as of) February 15, 1996 and
February 13, 1997, and January 29, 1996 and May 12, 1997, respectively, in
connection with the Company's achievement of the earnings per share target
for 1995 and 1996 and the first and second price per share targets as set
forth in the agreements. The value of all restricted stock held by Mr.
Prince and Mr. Gallagher as of December 31, 1997 was $2,341,688 and
$1,170,844, respectively (such value is calculated by multiplying the number
of restricted stock shares held by $33.9375, which was the closing price of
the Company's Common Stock on December 31, 1997).
OPTION GRANTS IN FISCAL YEAR 1997
The following table contains information about option awards made to the
Named Executive Officers on June 26, 1997 under the 1992 Stock Option and
Incentive Plan. See "Compensation and Stock Option Committee Report on Executive
Compensation" below.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE PRESENT VALUE
NAME GRANTED(#) FISCAL YEAR ($/SHARE) EXPIRATION DATE ($)(1)
- ---- ----------- ------------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Larry L. Prince 150,000(2) 8.4% 34.6875 June 26, 2007 1,254,000
Thomas C. Gallagher 125,000(2) 7.0% 34.6875 June 26, 2007 1,045,000
John J. Scalley 25,000(2) 1.4% 34.6875 June 26, 2007 209,000
George W. Kalafut 25,000(2) 1.4% 34.6875 June 26, 2007 209,000
Robert J. Breci 25,000(2) 1.4% 34.6875 June 26, 2007 209,000
</TABLE>
- ---------------
(1) Based on the Black-Scholes option pricing model for use in valuing executive
stock options. The Company does not advocate or necessarily agree that the
Black-Scholes model can properly determine the value of an option. The
actual value, if any, a Named Executive Officer may realize will depend on
the excess of the stock price over the exercise price on the date the option
is exercised, so that there is no assurance the value realized by a Named
Executive Officer will be at or near the value estimated by the
Black-Scholes model. The value calculations for the options listed above are
based on the following assumptions: interest rate (based on the ask yield to
maturity on a U.S. Treasury strip with a maturity equal to the term of the
relevant option) of 6.54% for ten year options granted on June 26, 1997;
annual dividend yield of 2.5%, the average annual dividend yield on a share
of Common Stock during the past four fiscal quarters; volatility of 12.1%
based upon annualized standard deviation of quarterly returns of the Common
Stock over the 32 quarters ending March 31, 1997; and a date of exercise no
sooner than the date first exercisable under the terms of the option, and no
later than the expiration date of the option.
(2) Nonqualified stock options which vest completely and may be exercised twelve
months after the date of the grant, but no later than the expiration date.
The exercise price for each nonqualified stock option is
8
<PAGE> 11
the fair market value on the date granted. These options may be exercised no
later than the expiration date and accelerated by the Compensation and Stock
Option Committee upon certain "changes in control" of the Company as defined
in the Company's 1992 Stock Option and Incentive Plan.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND FISCAL YEAR-END OPTION VALUES
Shown below is information with respect to options exercised by the Named
Executive Officers during 1997 and the unexercised options to purchase the
Company's Common Stock granted in fiscal 1997 and prior years under the 1988
Stock Option Plan and the 1992 Stock Option and Incentive Plan to the Named
Executive Officers and held by them as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry L. Prince 150,000 1,975,005 242,818 175,890 2,433,821 379,902
Thomas C. Gallagher 75,000 987,502 126,657 147,893 1,243,754 278,885
John J. Scalley -- -- 56,670 25,000 612,657 --
George W. Kalafut 9,825 99,040 41,742 52,258 409,145 326,542
Robert J. Breci 11,832 133,110 29,847 52,321 290,462 329,032
</TABLE>
- ---------------
(1) The Value Realized represents the amount equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price.
(2) Represents the fair market value as of December 31, 1997 ($33.9375 per share
closing stock price) of the option shares less the exercise price of the
options.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
OVERVIEW
The Compensation and Stock Option Committee of the Company's Board of
Directors (the "Committee") is composed entirely of individuals who are outside
directors. The Committee is responsible for making decisions with respect to the
Company's executive compensation policies. In addition, pursuant to authority
granted by the Board of Directors, the Committee determines on an annual basis
the compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Company. In making decisions regarding executive
compensation, the Committee has attempted to implement a policy that serves the
financial interests of the Company's shareholders while providing appropriate
incentives to its executive officers.
POLICY RELATIVE TO CODE SECTION 162(M)
The Omnibus Budget Reconciliation Act of 1993 (OBRA) disallows the
deduction for certain annual compensation in excess of $1,000,000 paid to
certain executive officers of the Company, unless the compensation qualifies as
"performance-based" under Code Section 162(m). Compensation payable under the
Company's annual bonus program for its executive officers, which was approved by
the Company's shareholders at the 1995 annual meeting of shareholders, is
designed to qualify as "performance-based" and therefore to be fully deductible
by the Company. It is the Committee's intent to maximize the deductibility of
executive compensation while retaining the discretion necessary to compensate
executive officers in a manner commensurate with performance and the competitive
market of executive talent.
9
<PAGE> 12
ELEMENTS OF EXECUTIVE COMPENSATION
The Company's executive officers receive compensation comprised of base
salaries, annual incentive bonuses, long-term incentive compensation in the form
of stock options and restricted stock, and various benefits, including medical
and pension plans.
Base Salary
The Committee sets base salaries for the Company's executive officers at
levels generally below what it believes to be competitive salary levels in order
to maintain an emphasis on incentive compensation. The Committee sets the base
salary of the Chief Executive Officer based on (i) the Chief Executive Officer's
base salary in the prior year; (ii) increases in the cost of living; (iii)
increased responsibilities; (iv) the levels of Chief Executive Officer
compensation granted by the other companies that are included in the Peer Index
(as defined on page 18 of this Proxy Statement); and (v) the past performance
(including the achievement in the prior fiscal year of certain Goals, as
described below) and specific skills of the Chief Executive Officer as they
relate to the needs of the Company. The Committee's review of the foregoing
factors was subjective and the Committee assigned no fixed value or weight to
any of the factors when making its decisions regarding base salary. The
Committee and the Chief Executive Officer set the base salary of every other
executive officer of the Company based upon the same criteria.
Annual Bonuses
In order to maximize the interests of the Company's shareholders and its
management, the Committee makes extensive use of annual bonuses based on the
performance factors set forth below as a part of each executive's compensation.
Pursuant to the Company's Annual Incentive Bonus Plan (the "Plan"), the
Committee sets annual bonuses such that an executive officer's annual bonus,
assuming the Company achieves certain targets or goals, is approximately 51% of
total annual compensation. However, if the Company's performance fluctuates
markedly from the targets established by the Company, the executive officer may
receive no bonus, or may receive an annual bonus that constitutes as much as 58%
of total annual compensation, depending upon the extent and direction of such
fluctuations.
Each fiscal year, including 1997, the Committee sets the level of annual
bonuses to be awarded to the Chief Executive Officer and other executive
officers under the Plan, based upon goals (the "Goals") set by the Company. The
Goals set by the Company for projected pre-tax return (expressed as a
percentage) on the Company's shareholders' equity as of the beginning of the
fiscal year (the "Profit Goals") receive the most emphasis in calculating annual
bonuses by the Committee since these Goals most forcefully tie the interests of
the Company's shareholders and its executive officers together. If the Company
meets a specified Profit Goal, the Company's executive officers are eligible to
receive additional bonuses if the Company also attains certain (i) sales targets
(the "Sales Goals"), and (ii) inventory management targets (the "Inventory
Management Goals").
The Company's Goals are determined by aggregating all of the Profit, Sales
and Inventory Management Goals established at the lower levels of the Company
and its subsidiaries (the "base goals"). Each base goal is set based upon (i)
the prior year's performance by a particular jobbing store, branch or
distribution center, (ii) the overall economic outlook of the region served by
the particular jobbing store, branch or distribution center setting the base
goal, and (iii) specific market opportunities. The formulation of the base goals
is influenced to a degree by the Company's management which often attempts to
set the tone and emphasis of base goals based on its interpretations of the
above factors.
Once the base goals have been compiled into the Company's Goals, the
Committee reviews and ratifies their content, then sets the annual bonus
schedule for the Company's Named Executive Officers based upon the Company's
Goals. The annual bonuses for certain other executive officers of the Company
are based on the aggregate base goals for the division or divisions of the
Company for which they are responsible.
10
<PAGE> 13
For fiscal year 1997, Larry L. Prince, the Company's Chief Executive
Officer, earned a bonus equal to 55% of his total annual compensation. The
annual bonus awarded in connection with the Profit Goal constituted 100% of Mr.
Prince's 1997 bonus.
Stock Options and Restricted Stock
During 1997, the Committee provided long term compensation to the Company's
executive officers in the form of stock options under the 1992 Stock Option and
Incentive Plan (the "1992 Plan"). The Committee believes that stock option
grants are an effective way for the Company to align the interest of the
Company's executives with its shareholders.
In granting stock options under the 1992 Plan, the Committee considered (i)
the recipient's level of responsibility; (ii) the recipient's specific function
within the Company's overall organization; (iii) the profitability of the
Company (for top executive officers such as the Chief Executive Officer), or
other subdivision of the Company, as is appropriate in connection with the
recipient's position(s); (iv) the number of options granted to executive
officers by the other companies that are included in the Peer Index; and (v) the
amount of options currently held by the executive officer. The Committee's
review of the foregoing factors was subjective and the Committee assigned no
fixed value or weight to any of the factors when making its decisions regarding
stock option grants. In 1997, the Committee granted options to purchase an
aggregate of 1,790,000 shares of Common Stock at fair market value on the date
of grant to 299 key employees, including each of the Named Executive Officers.
The grants ranged in size from 2,000 to 150,000 shares, with Larry L. Prince,
the Company's Chief Executive Officer, receiving the largest such grant.
During 1994 the Committee provided long term compensation to Mr. Prince and
Thomas C. Gallagher, the Company's President and Chief Operating Officer, in the
form of restricted stock agreements under the 1992 Plan. Such agreements commit
the Company to make future grants of restricted stock awards (up to a certain
maximum number of shares) based upon (i) increases in the Company's Common Stock
price to certain levels specified in the agreements (the "Stock Price Goals"),
and (ii) the Company's achievement of certain earnings per share targets for
each year from 1994 to 1998 as set forth in the agreements (the "Earnings
Goals"). In determining whether to enter into a restricted stock agreement with
a particular executive officer, the Committee reviewed the same criteria it
considered when making stock option grants as set forth above. Such agreements
committed the Company to make awards of up to a maximum of 150,000 shares of
restricted stock to Mr. Prince and awards of up to a maximum of 75,000 shares to
Mr. Gallagher. The Company met the second Stock Price Goal in 1997 and,
therefore, awarded 15,000 shares of restricted stock to Mr. Prince and 7,500 to
Mr. Gallagher in 1997. In addition, the Company met the Earnings Goal for 1996
and awarded 12,000 and 6,000 shares of restricted stock to Mr. Prince and Mr.
Gallagher, respectively, in 1997.
Benefits
The Company provides medical and other similar benefits to its executive
officers that are generally available to the Company's employees.
Members of the Compensation and Stock
Option Committee in 1997
William A. Parker, Jr. (Chairman)
Bradley Currey, Jr.
J. Hicks Lanier
James B. Williams
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors served on the Compensation and Stock
Option Committee during 1997: William A. Parker, Jr., Bradley Currey, Jr., J.
Hicks Lanier and James B. Williams. Mr. Parker will
11
<PAGE> 14
retire as a director of the Company on the date of the Annual Meeting. He was
the general manager of Beck & Gregg, the former hardware division of the
Company, from 1969 to 1977. Mr. Lanier is Chief Executive Officer, Chairman of
the Board and President of Oxford Industries, Inc., one of whose directors is
the Company's President and Chief Operating Officer, Thomas C. Gallagher. Mr.
Williams is Chairman of the Board and Chief Executive Officer of SunTrust Banks,
Inc., one of whose directors, Larry L. Prince, is the Chairman of the Board and
Chief Executive Officer of the Company. As of December 31, 1997, the Company had
outstanding indebtedness to SunTrust Bank of approximately $250.7 million.
COMPENSATION PURSUANT TO PLANS
RETIREMENT PLANS
PENSION PLAN TABLE
The following table illustrates the combined (total) benefits payable
annually under the Company's Pension Plan and the Supplemental Retirement Plan
to a participant with certain years of credited service and with certain final
average earnings, assuming (i) retirement at age 65, (ii) the estimated maximum
Social Security benefit payable to a participant retiring on December 31, 1997,
and (iii) the benefit is paid as a single life annuity.
YEARS OF CREDITED SERVICE
<TABLE>
<CAPTION>
FINAL AVERAGE
ANNUAL
EARNINGS 15 20 25 30 35 40 45
- ------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 125,000 $ 42,200 $ 45,300 $ 48,500 $ 51,600 $ 54,700 $ 57,800 $ 61,000
150,000 52,200 56,000 59,700 63,500 67,200 71,000 74,700
175,000 62,200 66,600 71,000 75,300 79,700 84,100 88,500
200,000 72,200 77,200 82,200 87,200 92,200 97,200 102,200
225,000 82,200 87,800 93,500 99,100 104,700 110,300 116,000
250,000 92,200 98,500 104,700 111,000 117,200 123,500 129,700
300,000 112,200 119,700 127,200 134,700 142,200 149,700 157,200
400,000 152,200 162,200 172,200 182,200 192,200 202,200 212,200
450,000 172,200 183,500 194,700 206,000 217,200 228,500 239,700
500,000 192,200 204,700 217,200 229,700 242,200 254,700 267,200
600,000 232,200 247,200 262,200 277,200 292,200 307,200 322,200
700,000 272,200 289,700 307,200 324,700 342,200 359,700 377,200
800,000 312,200 332,200 352,200 372,200 392,200 412,200 432,200
900,000 352,200 374,700 397,200 419,700 442,200 464,700 487,200
1,000,000 392,200 417,200 442,200 467,200 492,200 517,200 542,200
1,100,000 432,200 459,700 487,200 514,700 542,200 569,700 597,200
1,200,000 472,200 502,200 532,200 562,200 592,200 622,200 652,200
1,300,000 512,200 544,700 577,200 609,700 642,200 674,700 707,200
1,400,000 552,200 587,200 622,200 657,200 692,200 727,200 762,200
1,500,000 592,200 629,700 667,000 704,700 742,200 779,700 817,200
</TABLE>
The Pension Plan Table above covers retirement benefits payable to the
Named Executive Officers pursuant to (i) a noncontributory tax qualified pension
plan (the "Pension Plan") providing monthly benefits upon retirement to eligible
employees (employees become eligible to participate in the Pension Plan after
attaining age 21 and completing twelve months of service and 1,000 hours of
service during such twelve months), and (ii) a "Supplemental Retirement Plan"
maintained solely for the purpose of providing retirement benefits for key
employees in excess of the limitations on Pension Plan benefits imposed by the
Code.
12
<PAGE> 15
Each year the Company contributes an amount to the Pension Plan that is
actuarially determined. Retirement benefits are based on a participant's years
of service and average monthly pay during the participant's five highest paid
years out of the participant's last ten years of service prior to termination of
employment, and benefits may be reduced by 50% of the participant's Social
Security benefits. Normal retirement age is 65; early retirement can be taken at
age 55 with 15 years of credited service.
The Code limits the amount of the annual benefits that may be payable under
the Pension Plan. For 1997, this limit was $125,000 per year. Such amounts
payable under the Pension Plan would be reduced by any other benefit payable to
a participant under any collectively bargained pension or pension plan to which
the Company has contributed.
The Supplemental Retirement Plan is nonqualified, noncontributory and
unfunded, and is intended to be exempt from the participation, vesting, funding
and fiduciary requirements of the Employee Retirement Income Security Act of
1974. Only persons whose annual, regular earnings are expected to be equal to or
greater than the compensation limitation of Code Section 401(a)(17) ($160,000 in
1997) or such other dollar limitations as may be imposed by the Compensation and
Stock Option Committee of the Company's Board of Directors may participate in
the Supplemental Retirement Plan. The Compensation and Stock Option Committee
reserves the right, however, to exclude an otherwise eligible employee from
participating in the Supplemental Retirement Plan. All of the Named Executive
Officers are participants in the Supplemental Retirement Plan. The Supplemental
Retirement Plan provides that each participant will receive for the remainder of
his or her life an additional payment equal to the difference between (i) the
amount the executive received under the Pension Plan and (ii) the full
retirement income which the executive would have been entitled to receive under
the Pension Plan had such Pension Plan income not been limited by the Code.
For the Named Executive Officers, the sum of the amounts shown in the
columns of the Summary Compensation Table labeled "Salary" and "Bonus"
approximates the compensation used to calculate combined (total) retirement
benefits under the Pension Plan and the Supplemental Retirement Plan. The Named
Executive Officers have the following number of years of credited service to the
Company for purposes of calculating retirement benefits: Larry L. Prince -- 39
years; Thomas C. Gallagher -- 27 years; John J. Scalley -- 46 years; George W.
Kalafut -- 14 years; and Robert J. Breci -- 34 years.
The Supplemental Retirement Plan provides that in the event of a "change of
control" of the Company (as defined therein) (i) any participant whose
employment is terminated without cause during the 24-month period following the
change of control, and who has seven or more years of credited service for
vesting purposes, shall be entitled to receive a lump sum payment equal to the
actuarially determined value of the supplemental retirement income accrued by
the participant as of the date of his or her termination; and (ii) any
participant who has commenced receiving supplemental retirement income under the
Supplemental Retirement Plan at the time of the change of control shall receive
a lump sum payment equal to the actuarially determined value of his or her
remaining supplemental retirement income. For purposes of these provisions, the
Supplemental Retirement Plan states that actuarial equivalents shall be
determined using an interest assumption of 6%.
1988 STOCK OPTION PLAN AND 1992 STOCK OPTION AND INCENTIVE PLAN
The Company's 1988 Stock Option Plan (the "1988 Plan"), was approved by the
shareholders at the 1988 Annual Meeting held on April 18, 1988 and will expire
by its terms on May 1, 1998. Upon expiration of the 1988 Plan, no further awards
may be granted thereunder. The Company's 1992 Stock Option and Incentive Plan
(the "1992 Plan"), was approved by the shareholders at the 1992 Annual Meeting
held on April 20, 1992. The 1992 Plan provides for the granting of options to
purchase shares of the Company's Common Stock to key employees of the Company
and its subsidiaries. The purchase price for shares of the Company's Common
Stock subject to an option granted under the 1992 Plan may not be less than the
fair market value of such shares on the date of grant of the option.
The 1992 Plan provides for the granting of restricted stock to key
employees of the Company. Restricted stock grants under the 1992 Plan may not be
disposed of by the recipient until restrictions specified in the grant expire.
Such restrictions may be based on a period of continuous employment, or
contingent upon the
13
<PAGE> 16
attainment of certain business objectives or other quantitative or qualitative
criteria. A holder of restricted stock has all of the rights of a shareholder of
the Company, including the right to vote the restricted shares and the right to
receive cash dividends.
GENUINE PARTNERSHIP PLAN
The Company established, effective July 1, 1988, a qualified salary
deferral plan pursuant to Section 401(k) of the Internal Revenue Code (the
"Partnership Plan"). The Partnership Plan is open to all employees, including
executive officers, on the first day of the month coinciding with or following
the date on which the employee attains age 21 and completes twelve months of
service and 1,000 hours of service during such twelve months ("Year of
Service"). Effective January 1, 1998, employees who are normally scheduled to
work 24 or more hours per week may participate in the 401(k) payroll deduction
portion of the Partnership Plan on the first day of the month after the eligible
employee completes three months of employment and attain age 18. Employees who
are normally scheduled to work fewer than 24 hours per week may participate
after attaining age 21 and completing a Year of Service. All Employees must
still complete a Year of Service and attain age 21 before becoming eligible for
a Company matching contribution. Pursuant to the Partnership Plan, each
participating employee is permitted to authorize payroll deductions of up to 6%
of his or her total compensation during the calendar year (the "Basic
Contributions"), and is permitted to make supplemental contributions of up to
10% of his or her total compensation during the calendar year (the "Supplemental
Contributions"). An employee's aggregate contributions are subject to limits set
by law. The Company makes matching contributions in cash or the Company's Common
Stock equal to 20% of each participant's Basic Contributions. Participants
become vested in the Company's matching contributions after completing three
years of service. Participants are always 100% vested in their Basic and
Supplemental Contributions.
EXECUTIVE DEFERRED COMPENSATION AGREEMENTS
The Company has deferred compensation agreements with certain of the
Company's executive officers under which each executive has agreed to reduce his
salary in exchange for annual benefits upon retirement. The Company has
purchased insurance policies out of its general assets to provide sufficient
funds to pay the annual retirement benefits promised under the agreements. The
Company is the owner and sole beneficiary of such policies. Amounts of
compensation deferred pursuant to the deferred compensation agreements are
included in the salaries of the Named Executive Officers disclosed in the
Summary Compensation Table in the year such compensation is earned. Such
compensation will not be included in such individuals' salary in the Summary
Compensation Table in the later year in which he actually receives such
compensation. The Named Executive Officers are entitled to the following amounts
upon retirement or attaining age 65 under such deferred compensation agreements:
Larry L. Prince -- $35,000 annually with such amount guaranteed for 10 years;
Thomas C. Gallagher -- $40,000 annually with such amount guaranteed for 10
years; John J. Scalley -- $30,000 annually with such amount guaranteed for 10
years; and Robert J. Breci -- $40,000 annually with such amount guaranteed for
10 years. Mr. Scalley turned 65 in August 1995 and began receiving the amount of
deferred compensation set forth above at such time.
Each of the deferred compensation agreements provide that in the event of a
change of control of the Company (as defined in the agreements), the officer (i)
if he has not yet qualified for early retirement benefits, shall have the right
to demand his withdrawal benefits (which is an amount approximately equal to the
amount of salary deferred under the agreement by the officer) in a single lump
sum payment, or (ii) if he has qualified for early retirement benefits or has
begun receiving a retirement benefit under his deferred compensation agreement,
shall have the right to demand his benefits in a single lump sum payment in an
amount equal to the annual amount to which the officer is entitled times the
number of years remaining in his life expectancy based on the actuarial
assumptions used in connection with the Company's Pension Plan at that time,
reduced to present value using 6% per annum.
TAX DEFERRED SAVINGS PLAN
The Company established, effective as of January 1, 1993, a nonqualified,
unfunded deferred compensation plan known as The Genuine Parts Company
Tax-Deferred Savings Plan (the "Deferred Savings Plan").
14
<PAGE> 17
The Deferred Savings Plan is open to all executive officers and certain other
key employees. The Deferred Savings Plan permits participants to defer the
receipt of bonuses until a specified date which must be at least two calendar
years following the date the bonus would ordinarily be paid. Participants may
defer up to 100% of their 1997 bonuses (to be received during 1998). Amounts of
compensation deferred pursuant to the Deferred Savings Plan are included in the
amounts disclosed in the Summary Compensation Table in the year such
compensation is earned.
DIRECTORS' DEFERRED COMPENSATION PLAN
The Company established, effective as of November 1, 1996, a nonqualified,
unfunded deferred compensation plan known as the Genuine Parts Company
Directors' Deferred Compensation Plan (the "Directors' Deferred Compensation
Plan"). The Directors' Deferred Compensation Plan is open to all non-employee
directors of the Company and permits participants to defer the receipt of all of
their director fees and/or meeting fees until a specified date, which must be at
least two calendar years following the date of the election to defer.
Participants may elect to have the deferred amounts allocated to an interest
bearing account or an account that is credited with Common Stock equivalents.
Each participant may elect to receive payment of the deferred amounts in cash or
shares of Common Stock.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Effective February 13, 1989 (August 22, 1991 with respect to Mr. Kalafut),
the Company entered into identical agreements ("Severance Pay Agreements") with
certain executive officers, including Larry L. Prince, Thomas C. Gallagher, John
J. Scalley, George W. Kalafut and Robert J. Breci. Each Severance Pay Agreement
provides that following a change in the control of the Company (as defined in
the agreements), if the executive officer's employment with the Company
terminates, voluntarily or involuntarily, for any reason or for no reason,
within two years after the change of control (but prior to the executive
officer's reaching age 65), the executive officer will be entitled to receive
the following severance payment:
(1) If the executive officer is younger than age 62 at the time of
termination of his employment, the executive officer shall receive an
amount equal to one dollar less than a sum equal to three times his average
annual compensation for the five full taxable years ending before the date
of the change of control (the "Base Severance Amount"), or
(2) If the officer is age 62 or older at the time of termination of
his employment, he shall receive an amount computed by dividing the Base
Severance Amount by 36, and multiplying the result of that division by the
number of whole months between the date of termination of employment and
the date the executive officer reaches age 65.
In addition, if an executive officer incurs a federal excise tax with
respect to any part or all of the amounts received pursuant to his Severance Pay
Agreement, the Company is required to pay the executive officer a sum equal to
such excise tax so incurred by the executive officer plus all excise taxes and
federal, state and local income taxes incurred by the executive officer with
respect to receipt of this additional payment. Furthermore, the Company has
agreed to pay all legal fees and expenses incurred by an executive officer in
the pursuit of the rights and benefits provided by his Severance Pay Agreement.
These Severance Pay Agreements will remain in effect as long as each such
executive officer remains employed by the Company.
15
<PAGE> 18
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return ("shareholder return") on the Company's
Common Stock against the shareholder return of the S&P's 500 Stock Index and a
Peer Group Composite Index (structured by the Company as set forth below) for
the five year period commencing December 31, 1992 and ended December 31, 1997.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
GENUINE PARTS COMPANY, S&P 500 INDEX & PEER GROUP COMPOSITE INDEX**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GENUINE PARTS
(FISCAL YEAR COVERED) COMPANY S&P 500 PEER INDEX
<S> <C> <C> <C>
1992 100 100 100
1993 113.92 110.08 117.45
1994 112.57 111.54 110.30
1995 132.33 153.45 181.20
1996 148.04 188.69 174.26
1997 174.40 251.64 282.19
</TABLE>
Assumes $100 invested on December 31, 1992 in Genuine Parts Company Common
Stock, S&P's 500 Stock Index (the Company is a member of the S&P 500 and its
individual shareholder return went into calculating the S&P 500 results set
forth in this performance graph), and a Peer Group Composite Index constructed
by the Company as set forth below.
- ---------------
* Total return assumes reinvestment of dividends.
** Fiscal year ending December 31.
In constructing the Peer Group Composite Index ("Peer Index") for use in
the performance graph above, the Company used the shareholder returns of various
publicly held companies (weighted in accordance with each such company's stock
market capitalization at December 31, 1992 and including reinvestment of
dividends) that compete with the Company in its three industry segments:
automotive parts, industrial parts and office products (each group of companies
included in the Peer Index as competing with the Company in a separate industry
segment are hereinafter referred to as a "Peer Group"). Included in the
automotive parts Peer Group are those companies making up the Dow Jones
Automotive Parts & Equipment Industry Group (the Company is a member of such
industry group and its individual shareholder return was included when
calculating the Peer Index results set forth in this performance graph).
Included in the industrial parts Peer Group are Applied Industrial Technologies,
Inc. (formerly Bearings, Inc.) and Kaman Corporation, and included in the office
products Peer Group is United Stationers Inc.
16
<PAGE> 19
In determining the Peer Index, each Peer Group for each industry segment
was weighted to reflect the Company's annual net sales in each industry segment.
Each industry segment of the Company comprised the following percentages of the
Company's net sales for the fiscal years shown:
<TABLE>
<CAPTION>
INDUSTRY SEGMENT 1993 1994 1995 1996 1997
- ---------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Automotive Parts 56.63% 55.45% 53.29% 52.58% 51.14%
Industrial Parts 26.36% 27.12% 28.69% 29.34% 30.86%
Office Products 17.01% 17.43% 18.02% 18.08% 18.00%
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Directors, executive
officers and greater than ten percent shareholders are required by SEC
regulation to furnish the Company the copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to directors, executive officers
and greater than ten percent beneficial owners were complied with by such
persons, except that Keith A. Bealmer made three late filings on Form 4 with
respect to the exercises of stock options occurring in March, June and August
1997, and Albert T. Donnon, Jr. made one late filing on Form 4 with respect to
the exercise of a stock option in June 1997.
2. RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected Ernst & Young LLP as auditors for the
Company for the current fiscal year ending December 31, 1998, subject to
ratification by the shareholders. Ernst & Young LLP served as independent
auditors for the Company for the fiscal year ended December 31, 1997, and
representatives of that firm of independent accountants are expected to be
present at the Annual Meeting of Shareholders. Ernst & Young LLP will have an
opportunity to make a statement if they desire to do so and respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER
31, 1998. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. The Company
has retained Corporate Investor Communications, Inc. to assist in the
solicitation of proxies for a fee of approximately $8,000 and reimbursement of
certain expenses, and officers and regular employees of the Company, at no
additional compensation, may also assist in the solicitation. Solicitation will
be by mail, telephone or personal contact.
OTHER MATTERS
Management does not know of any matters to be brought before the meeting
other than those referred to above. If any matters which are not specifically
set forth in the form of proxy and this proxy statement properly come before the
meeting, the persons designated as proxies will vote thereon in accordance with
their best judgment.
17
<PAGE> 20
Whether or not you expect to be present at the meeting in person, please
vote, sign, date and return the enclosed proxy promptly in the enclosed business
reply envelope. No postage is necessary if mailed in the United States.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company intended to be presented for
consideration at the 1999 Annual Meeting of Shareholders of the Company must be
received by the Company at its principal executive offices on or before November
2, 1998, in order to be included in the Company's proxy statement and form of
proxy relating to the 1999 Annual Meeting of Shareholders.
18
<PAGE> 21
APPENDIX
GENUINE PARTS COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF GENUINE PARTS COMPANY FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 20, 1998
The undersigned hereby appoints LARRY L. PRINCE and THOMAS C. GALLAGHER, or
either of them, with the individual power of substitution, proxies to vote all
shares of Common Stock of Genuine Parts Company which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders to be held in Atlanta,
Georgia on April 20, 1998 and at any reconvened Meeting following any
adjournment thereof. Said proxies will vote on the proposals set forth in the
Notice of Annual Meeting and Proxy Statement as specified on this card, and are
authorized to vote in their discretion as to any other matters that may
properly come before the meeting.
(Continued and to be signed on reverse side)
- FOLD AND DETACH HERE -
<PAGE> 22
<TABLE>
<S> <C>
Please mark
your votes as [X]
indicated in
this example
1. Election of the following three nominees as Class III directors and
two nominees as Class II directors of Genuine Parts Company:
IF A VOTE IS NOT SPECIFIED, THE PROXIES WILL VOTE "FOR" PROPOSAL 1.
FOR all nominees WITHHOLD Nominees: Class III - Jean Douville, J. Hicks Lanier and Alana S. Shepherd,
listed to the right AUTHORITY Class II - Richard W. Courts II and Larry L. Prince To withhold authority
(except as marked to the to vote for all nominees to vote for any individual nominee, write that nominee's name on the
contrary) listed to the right following line.
[ ] [ ] ---------------------------------------------------------------------------
2. Ratification of the selection of Ernst & Young LLP as the Company's independent auditors for the fiscal year
ending December 31, 1998. IF A VOTE IS NOT SPECIFIED, THE PROXIES WILL VOTE "FOR" PROPOSAL 2.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] IMPORTANT: Please sign this Proxy exactly as your name
or names appear below. When shares are held by joint
tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please
sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
SHARES.
PLEASE VOTE, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
Date: , 1998
------------------------------------------
------------------------------------------------------
Signature
------------------------------------------------------
Signature if held jointly
FOLD AND DETACH HERE
</TABLE>
