<PAGE> 1
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 Section 240.14a-11(c) or Section 240.14a-2.
[ ] Confidential for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
HUGHES SUPPLY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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
[HUGHES SUPPLY, INC. LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 16, 2000
------------------------
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of
Hughes Supply, Inc., a Florida corporation (the "Company"), will be held in the
principal executive offices of the Company at 20 North Orange Avenue, Suite 200,
Orlando, Florida 32801, on Tuesday, May 16, 2000, at 10:00 a.m., local time, for
the following purposes:
(1) To elect two Directors to serve for a three-year term expiring at
the 2003 Annual Meeting of Shareholders;
(2) To consider approval of Amendment No. 1 to the 1997 Executive
Stock Plan;
(3) To consider and take action upon any other matters that may
properly come before the 2000 Annual Meeting of Shareholders or any
adjournment thereof.
The Board of Directors has fixed the close of business on March 22, 2000 as
the record date for the determination of the holders of shares of Common Stock
entitled to notice of and to vote at the 2000 Annual Meeting of Shareholders.
By Order of the
Board of Directors
/s/Benjamin Butterfield
BENJAMIN P. BUTTERFIELD
General Counsel and Secretary
Orlando, Florida
April 14, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER THAT
YOUR SHARES MAY BE REPRESENTED AT THE MEETING. NO POSTAGE IS NEEDED IF MAILED IN
THE UNITED STATES.
<PAGE> 3
HUGHES SUPPLY, INC.
20 NORTH ORANGE AVENUE
SUITE 200
ORLANDO, FLORIDA 32801
------------------------
PROXY STATEMENT
------------------------
The enclosed proxy is solicited by the Board of Directors of Hughes Supply,
Inc., a Florida corporation (the "Company"), in connection with the 2000 Annual
Meeting of Shareholders to be held in the principal executive offices of the
Company at 20 North Orange Avenue, Suite 200, Orlando, Florida 32801 on May 16,
2000, at 10:00 a.m., local time, or any adjournment thereof (the "Annual
Meeting"). The Company's Annual Report to Shareholders for the fiscal year ended
January 28, 2000 accompanies this Proxy Statement. This Proxy Statement and the
accompanying Notice of Annual Meeting of Shareholders and the enclosed proxy
card were first sent or given to shareholders of the Company on or about April
14, 2000.
Holders of record of the Company's Common Stock, $1.00 par value per share
(the "Common Stock"), as of the close of business on March 22, 2000 will be
entitled to vote at the Annual Meeting, and each holder of record of Common
Stock on such date will be entitled to one vote for each share held. As of March
22, 2000, there were 23,589,078 shares of Common Stock outstanding.
Shares of Common Stock cannot be voted at the Annual Meeting unless the
beneficial owner is present or represented by proxy. Any shareholder giving a
proxy may revoke it at any time before it is voted by giving written notice of
revocation to the Company, c/o Benjamin P. Butterfield, General Counsel and
Secretary, at the address shown above, or by executing and delivering prior to
the Annual Meeting a proxy bearing a later date. Any shareholder who attends the
Annual Meeting may revoke the proxy by voting his or her shares of Common Stock
in person.
All properly executed proxies, unless previously revoked, will be voted at
the Annual Meeting in accordance with the directions given. With respect to the
election of two Directors to serve until the 2003 Annual Meeting of Shareholders
(the "Election Proposal"), shareholders of the Company voting by proxy may vote
in favor of the nominees or may withhold their vote for the nominees. If no
specific instructions are given, shares of Common Stock represented by a
properly executed proxy will be voted FOR the Election Proposal and FOR the
proposal (the "Executive Stock Plan Proposal") approving Amendment No. 1 to the
1997 Executive Stock Plan and in the discretion of the persons named therein as
proxies on all other matters that may be brought before the Annual Meeting.
The Amended and Restated By-Laws of the Company (the "By-Laws") provide
that a majority of the outstanding shares of Common Stock entitled to vote on a
given matter must be represented in person or by proxy at the Annual Meeting in
order to constitute a quorum for the transaction of business. When a quorum is
present at the Annual Meeting, the By-Laws provide that the affirmative vote of
a majority of the Common Stock represented and entitled to vote at the Annual
Meeting will decide the corporate action taken unless a different vote is
required by Florida law, the Company's Restated Articles of Incorporation, as
amended (the "Restated Articles"), or the By-Laws. Abstentions and broker
non-votes will be counted for purposes of determining the existence of a quorum
at the Annual Meeting.
The nominees for election as Directors will be elected by the affirmative
vote of a plurality of the shares of Common Stock present in person or by proxy
and actually voting at the Annual Meeting. Abstentions and broker non-votes will
have no effect on the outcome of the voting to elect the Directors. A broker
non-vote may occur when a nominee holding shares of Common Stock for a
beneficial owner does not vote on a proposal because such nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner.
Approval of the Executive Stock Plan Proposal requires the vote of a
majority of the shares represented at the Annual Meeting and entitled to vote.
Approval of the Executive Plan Proposal is being sought in order to
<PAGE> 4
(i) comply with certain rules promulgated by the New York Stock Exchange
requiring shareholder approval in connection with the adoption of certain stock
plans and (ii) gain favorable treatment of the options, restricted stock and
other rights to be granted pursuant to the 1997 Executive Stock Plan under rules
promulgated pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Section 16 sets forth the rules governing
liability for transactions deemed to involve short-swing profits. With regard to
the Executive Stock Plan Proposal, abstentions will have the same effect as a
vote against such proposal and broker non-votes will have no effect on the
outcome of the voting to approve the Executive Stock Plan Proposal.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 22, 2000 certain information
with respect to the Common Stock, the only class of voting securities
outstanding, owned beneficially by each Director of the Company or Director
nominee, each executive officer of the Company named in the Summary Compensation
Table, all Directors, Director nominees and executive officers of the Company as
a group and any beneficial owners of more than 5% of the outstanding Common
Stock. Stock ownership information has been furnished to the Company by such
beneficial owners or is based upon information contained in filings made by such
beneficial owners with the Securities and Exchange Commission (the
"Commission").
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF APPROXIMATE PERCENT
DIRECTORS AND NAMED EXECUTIVES BENEFICIAL OWNERSHIP(1) OF CLASS(2)
- ------------------------------ ----------------------- -------------------
<S> <C> <C> <C>
David H. Hughes.................................... 556,366 (3)(4)(5)(6) 2.36%
A. Stewart Hall, Jr. .............................. 145,247 (7) *
Vincent S. Hughes.................................. 413,334 (4)(5)(6)(8) 1.75%
John D. Baker II................................... 31,088 (9) *
Robert N. Blackford................................ 44,864 (9) *
H. Corbin Day...................................... 13,838 (9)(10) *
William P. Kennedy................................. 31,000 (9)(11) *
Jasper L. Holland, Jr. ............................ 67,714 (12) *
Clyde E. Hughes III................................ 51,337 (13) *
Gradie E. Winstead, Jr. ........................... 43,979 (14) *
All Directors and Executive Officers as a Group
(19 persons)..................................... 1,398,966 (15) 5.79%(16)
5% SHAREHOLDERS
National Rural Electric Cooperative
Association(17).................................. 1,313,175 5.57%
4301 Wilson Blvd
Arlington, VA 22203
</TABLE>
- ---------------
* Less than 1%
(1) Under the rules of the Commission, a person is deemed to be a beneficial
owner of a security if such person has or shares the power to vote or
direct the voting of such security or the power to dispose of or direct the
disposition of such security. A person is also deemed to be a beneficial
owner of a security if that person has the right to acquire beneficial
ownership within 60 days. Accordingly, more than one person may be deemed
to be a beneficial owner of the same securities. Unless otherwise indicated
by footnote, the named individuals have sole voting and investment power
with respect to the shares of Common Stock beneficially owned. Messrs.
David H. Hughes, A. Stewart Hall, Jr. and Vincent S. Hughes are also
beneficiaries under the Company's Cash or Deferred Profit Sharing Plan (the
"Profit Sharing Plan") which holds 12,307 shares of Common Stock as
unallocated assets of the Profit Sharing Plan, and such persons disclaim
beneficial ownership of any of the shares held by the Profit Sharing Plan
and none of such shares are included in the table above as owned by such
persons.
(2) Calculated on the basis of 23,589,078 shares of Common Stock outstanding as
of March 22, 2000 and, with respect to each of the persons noted in the
table above, (i) the shares subject to options exercisable within 60 days
granted to such person and (ii) the shares subject to restricted stock
grants under the Hughes Supply, Inc. 1997 Executive Stock Plan (the "1997
Executive Stock Plan"), pursuant to which such person has the power to vote
or direct the voting of the shares. Figures shown only for those persons
whose beneficial ownership of shares exceeds 1% of the Common Stock
outstanding or deemed to be outstanding for this calculation.
(3) Includes 6,431 shares of Common Stock credited to the account of Mr. Hughes
under the Hughes Supply, Inc. Employee Stock Ownership Plan (the "ESOP"),
48,750 shares of Common Stock subject to options held by Mr. Hughes under
the Hughes Supply, Inc. 1988 Stock Option Plan (the "1988 Stock Option
Plan") which are exercisable within 60 days and 16,296 shares represented
by restricted
3
<PAGE> 6
stock grants under the 1997 Executive Stock Plan. Mr. Hughes is considered
to have sole voting power with respect to 362,763 shares, shared voting
power with respect to 193,603 shares, sole investment power with respect to
340,036 shares, and shared investment power with respect to 200,034 shares.
(4) Each of the indicated Directors is an executive officer and director of,
and owns a one-third equity interest in Hughes, Inc., a corporation to
which the Company makes payments for the lease of certain properties. See
"Certain Transactions with Management."
(5) Includes 60,967 shares of Common Stock held by Hughes, Inc., the
corporation described in footnote (4) above. David H. Hughes and Vincent S.
Hughes are considered to share voting and investment power with respect to
such shares and all such shares are reported in the table above as
beneficially owned by each of David H. Hughes and Vincent S. Hughes. David
H. Hughes and Vincent S. Hughes are brothers.
(6) Includes 129,759 shares of Common Stock held by three trusts of which David
H. Hughes and Vincent S. Hughes are co-trustees. All of the shares held by
these trusts are included in the table above as beneficially owned by each
of David H. Hughes and Vincent S. Hughes.
(7) Includes 3,861 shares of Common Stock held by the ESOP, 61,374 shares of
Common Stock represented by options under the 1988 Stock Option Plan which
are exercisable within 60 days and 26,296 shares represented by restricted
stock grants under the 1997 Executive Stock Plan. Mr. Hall is considered to
have sole voting power with respect to all of these shares, sole investment
power with respect to 115,090 shares, and shared investment power with
respect to 3,861 shares.
(8) Includes 4,264 shares of Common Stock held by the ESOP, 18,500 shares of
Common Stock represented by options under the 1988 Stock Option Plan which
are exercisable within 60 days and 8,148 shares represented by restricted
stock grants under the 1997 Executive Stock Plan. Mr. Hughes is considered
to have sole voting power with respect to 192,787 shares, shared voting
power with respect to 220,547 shares, sole investment power with respect to
180,375 shares, and shared investment power with respect to 224,811 shares.
(9) Includes the number of shares of Common Stock subject to options granted
under the Directors' Stock Option Plan (the "Directors' Plan") for
nonemployee Directors as follows: John D. Baker II, 25,088; Robert N.
Blackford, 25,088; H. Corbin Day, 13,838; and William P. Kennedy, 5,000.
(10) 525,117 shares of Common Stock are owned of record by Jemison Investment
Co., Inc., a Delaware corporation ("Jemison"). Mr. Day is the Chairman of
the Board of Directors of Jemison, and he and members of his immediate
family own an equity interest in Jemison. Mr. Day disclaims beneficial
ownership of these shares.
(11) Includes 10,000 shares held through Vital Support Charitable Foundation,
for which Mr. Kennedy acts as Chairman, 500 shares held through the Ashley
E. Kennedy Trust and 500 shares held through the Courtney B. Kennedy Trust.
Mr. Kennedy acts as Trustee for both of the aforementioned trusts. Mr.
Kennedy is considered to have sole voting power with respect to 21,000
shares, shared voting power with respect to 10,000 shares, sole investment
power with respect to 21,000 shares, and shared investment power with
respect to 10,000 shares.
(12) Includes 3,851 shares of Common Stock held by the ESOP, 45,000 shares of
Common Stock represented by options under the 1988 Stock Option Plan which
are exercisable within 60 days and 13,148 shares represented by restricted
stock grants under the 1997 Executive Stock Plan. Mr. Holland is considered
to have sole voting power with respect to all of these shares, sole
investment power with respect to 50,715 shares, and shared investment power
with respect to 3,851 shares.
(13) Includes 2,887 shares of Common Stock held by the ESOP, 15,000 shares of
Common Stock represented by options under the 1988 Stock Option Plan which
are exercisable within 60 days and 13,148 shares represented by restricted
stock grants under the 1997 Executive Stock Plan. Mr. Hughes is considered
to have sole voting power with respect to 44,238 shares, shared voting
power with respect to 7,099 shares, sole investment power with respect to
28,203 shares, and shared investment power with respect to 9,986 shares.
4
<PAGE> 7
(14) Includes 831 shares of Common Stock held by the ESOP, 19,848 shares of
Common Stock represented by options under the 1988 Stock Option Plan which
are exercisable within 60 days and 13,148 shares represented by restricted
stock grants under the 1997 Executive Stock Plan. Mr. Winstead is
considered to have sole voting power with respect to 33,827 shares, shared
voting power with respect to 10,152 shares, sole investment power with
respect to 19,848 shares, and shared investment power with respect to
10,983 shares.
(15) Includes an aggregate of 312,069 shares of Common Stock subject to options
under the 1988 Stock Option Plan or the 1997 Executive Stock Plan and
exercisable within 60 days and 186,521 shares of Common Stock subject to
restricted stock grants under the 1997 Executive Stock Plan held by
executive officers of the Company as a group, as well as 69,014 shares of
Common Stock subject to unexercised stock options under the Directors' Plan
held by nonemployee Directors of the Company as a group and an aggregate of
27,834 shares of Common Stock credited to the accounts of executive
officers of the Company under the ESOP. Directors and executive officers
hold sole voting power with respect to 1,171,794 shares, shared voting
power with respect to 158,159 shares, sole investment power with respect to
957,439 shares and shared investment power with respect to 185,993 shares.
(16) Calculated on the basis of 24,156,682 shares of Common Stock, including
23,589,078 shares outstanding, 381,083 shares subject to options and
186,521 shares subject to stock grants. The shares subject to stock options
and stock grants have been deemed outstanding for the purpose of computing
such percentage.
(17) The number of shares shown in this table is based upon a Schedule 13G filed
with the Commission dated February 15, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors,
executive officers and persons who beneficially own more than 10% of the Common
Stock to file with the Commission initial reports of beneficial ownership and
reports of changes in beneficial ownership of such Common Stock. Directors,
executive officers and beneficial owners of more than 10% of the Common Stock
are required by Commission rules to furnish the Company with copies of all such
reports. To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and written representations from the
Company's Directors and executive officers that no other reports were required,
the Company believes that only the following Section 16(a) filing requirements
applicable to the Company's Directors and executive officers were not timely
complied with during the fiscal year ended January 28, 2000: Mr. David H. Hughes
failed to timely report the recovery of shares of Common Stock from unclaimed
property in February 1998 until a Form 5 was filed in March 2000; and Mr. James
C. Plyler, Jr., failed to file a Form 5 reporting a change in form of beneficial
ownership of shares of Common Stock from direct to indirect during December
1999.
5
<PAGE> 8
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
Executive officers are normally elected annually by the Board of Directors
following each annual meeting of shareholders to serve for a one-year term and
until their successors are elected and qualified. The compensation of the
Company's executive officers is established by the Board of Directors after
receiving the recommendation of the Compensation Committee of the Board of
Directors (the "Compensation Committee"). The following sets forth the name of
each executive officer of the Company and the principal positions and offices he
holds with the Company. Unless otherwise indicated, each of these officers has
been employed by the Company or a subsidiary of the Company for more than five
years and has served as an executive officer of the Company for at least five
years.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David H. Hughes........................ 56 Chairman of the Board and Chief Executive Officer
since November 1986.
A. Stewart Hall, Jr.................... 57 President and Chief Operating Officer since March
1994.
Vincent S. Hughes...................... 59 Vice President since April 1972.
Jasper L. Holland, Jr.................. 58 Vice President since June 1994. Group President since
February 2000.
Clyde E. Hughes III.................... 52 Vice President since June 1994. Group President since
February 2000.
Michael L. Stanwood.................... 47 Group President since February 2000. Previously Mr.
Stanwood served as President of a subsidiary operation
since May 1996 and as President of Southwest
Stainless, Inc. from 1971 until May 1996.
Robert A. Machaby...................... 49 Group President since February 2000. Previously Mr.
Machaby served as District Manager from April 1996 to
February 2000 and as Sales Manager from August 1994 to
April 1996.
James C. Plyler, Jr.................... 56 Vice President since February 1996. Previously Mr.
Plyler served as President of a subsidiary operation.
Kenneth H. Stephens.................... 59 Vice President since June 1994.
Sidney J. Strickland, Jr............... 49 Vice President of Administration since August 1994.
Gradie E. Winstead, Jr................. 50 Vice President since June 1994. Group President since
February 2000.
John R. Clark.......................... 53 Vice President -- Corporate Credit Manager since
November 1999. Previously Mr. Clark served as
Corporate Credit Manager for the Company from May 1985
to November 1999.
Thomas M. Ward II...................... 42 Vice President -- Chief of Information Technology
since November 1999. Mr. Ward was Chief of Information
Technology from September 1998 to November 1999.
Previously Mr. Ward served as Director of Information
Technology for JLK Direct Distribution, Inc. from
March 1998 to September 1998 and Director of
Information Systems for Ferguson Enterprises, Inc.
from 1990 to March 1998.
J. Stephen Zepf........................ 50 Treasurer and Chief Financial Officer since April
1984.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Benjamin P. Butterfield................ 40 General Counsel since March 1996. Secretary since May
1997. Assistant Secretary from March 1996 to May 1997.
Previously, Mr. Butterfield was a Shareholder of the
law firm of Maguire, Voorhis & Wells, P.A.
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any previous filings
made by the Company under the Securities Act of 1933 or the Exchange Act that
might incorporate future filings, including this Proxy Statement, in whole or in
part, the following Compensation Committee Report on Executive Compensation and
the Shareholder Return Performance Graph shall not be incorporated by reference
into any of such filings.
Introduction
The compensation of the Company's executive officers is established
annually by the Board of Directors acting upon the recommendation of the
Compensation Committee. The members of the Compensation Committee are
nonemployee Directors appointed by the Board of Directors immediately following
each annual meeting of shareholders. From January 29, 1999 to May 19, 1999, the
members consisted of John D. Baker II, Robert N. Blackford, H. Corin Day, and
John B. Ellis. Immediately following the May 19, 1999 annual meeting of
shareholders, Mr. William P. Kennedy was appointed to fill the position on the
Compensation Committee which became vacant when Mr. Ellis did not stand for
re-election to the Board of Directors. During the last fiscal year, the
executive management group consisted of the executive officers of the Company.
The recommendations of the Compensation Committee with respect to executive
management compensation for the last fiscal year were made by the Compensation
Committee and adopted by the Board of Directors on January 27, 1999 and March
22, 1999.
Compensation Policy and Committee Recommendation
The goal of the Company's executive compensation policy is to attract,
retain and motivate qualified executive management under a competitive
compensation program which regards individual performance and increases
shareholder value. To achieve this goal, the Compensation Committee evaluated
the respective positions, the competitive market for the required management
skills, individual performance and potential, and the potential for motivating
Company and individual performance. Before finalizing its recommendation, the
Compensation Committee also considered the recommendation of the Company's Chief
Executive Officer with respect to the compensation of each of the other
executive officers.
Compensation Program
The main components of the Company's executive management compensation
program are base salaries, annual and long-term performance based incentive
bonus plans, stock plans and retirement plans. Each of these components is
discussed in the remainder of this report.
Information with respect to the compensation paid to the Chief Executive
Officer of the Company and the other four most highly compensated executive
officers of the Company for the last fiscal year and for each of the two
previous fiscal years, descriptions of certain of the compensation plans
referred to in this report, and a Shareholder Return Performance Graph
illustrating cumulative share return with respect to the Common Stock are set
forth elsewhere herein following this report.
Base Salaries
Base salaries are intended to establish a level of compensation which,
together with the other components of the compensation program, will help the
Company attract and retain the talent needed to meet the challenges of the
competitive industry in which it operates while maintaining an acceptable level
of fixed labor costs. The Compensation Committee's recommendation with respect
to base salaries was based upon the
7
<PAGE> 10
Compensation Committee's evaluation of the responsibility and scope of each
position, the level of pay for comparable positions in the industry and, with
respect to each of the executive officers, his performance over an extended
period of time, and the value and potential to him of other elements of the
Company's compensation program.
Annual Incentive Plans
The Company's annual incentive plans are intended to motivate and reward
short-term performance by providing cash bonus payments based upon required
performance goals defined, depending upon the particular plan, as income before
taxes measured against the Company's profit, return on investment, or return on
investment and return on sales. Upon achievement of the required performance
goal, the bonus paid to a participant is determined, depending upon the
particular plan, as a percentage of the base salary of the participant or as the
sum of a percentage of the funds available for the payment of such bonus and a
percentage of the participant's base salary up to a designated maximum
percentage of the participant's base salary. The designation of the annual
incentive plan participants, the definition of the required performance goals,
and the determination of bonuses to be paid upon the achievement of the required
performance goals are established annually by the Board of Directors upon the
recommendation of the Compensation Committee.
With respect to each specific annual incentive plan, the Compensation
Committee recommended ambitious performance goals which are sufficiently
achievable to provide a meaningful incentive for superior performance, and
recommended as participants those executive officers who are in positions most
responsible for the success of the Company. Each of the executive officers was
recommended by the Compensation Committee and designated by the Board of
Directors as a participant in a specific annual incentive plan during the last
fiscal year.
Long-Term Incentive Bonus Plans
The Company's Chief Executive Officer, President and Chief Financial
Officer also participate in certain Senior Executives' Long-Term Incentive Bonus
Plans which are intended to motivate and reward sustained performance. Under
each of these plans an incentive bonus is paid if a designated earnings per
share goal is met during the designated performance period of three or more
fiscal years. Such incentive bonus payments, in each case, are determined by
applying a percentage, based upon achievement, of the applicable earnings per
share goals, to the base salaries of the participants.
During the 2000 fiscal year, the Board of Directors, upon the
recommendation of the Long-Term Incentive Bonus Plan Committee, adopted a
performance plan under the Senior Executives' Long-Term Incentive Bonus Plan for
the three fiscal year periods up to and including the Company's fiscal year to
be ended January 25, 2002. Under this performance plan each participant would
receive a bonus equal to a percentage of his base salary for the final year of
the performance period if, and to the extent, the Company's earnings per share
during the performance period reach or exceed the required goal. Any such bonus
would be payable in cash and Common Stock. During the last fiscal year the
designated officers also participated in similar senior executives' long-term
incentive plans adopted in previous fiscal years.
Stock Plan
The 1997 Executive Stock Plan is intended to act as an incentive to enhance
shareholder value by providing to plan participants an opportunity to benefit
from increases in the value of the Common Stock.
Participation under the 1997 Executive Stock Plan is limited to executive
officers and other selected key employees of the Company and its subsidiaries.
The Company granted an aggregate of 20,500 options under the 1997 Executive
Stock Plan on March 22, 1999 and April 23, 1999, and an aggregate of 221,000
restricted stock grants on March 22, 1999, April 23, 1999, August 18, 1999 and
November 19, 1999.
8
<PAGE> 11
Retirement Plans
The retirement plans in the Company's executive compensation program,
including the Supplemental Executive Retirement Plan (the "Retirement Plan") and
the Profit Sharing Plan are intended to encourage and reward long-term
employment with the Company.
The Retirement Plan was adopted on September 30, 1986. Ten of the executive
officers, all of those who were fifty-five years of age or younger on the date
of adoption of the Retirement Plan, are participants under the Retirement Plan.
The Profit Sharing Plan is a contributory plan for the benefit of
substantially all employees of the Company. Each of the executive officers is a
participant under the Profit Sharing Plan. Participants may make limited
contributions under the Profit Sharing Plan by salary reduction. Contributions
by the Company under the Profit Sharing Plan include those required to match a
portion of a participant's contribution and may include limited additional
contributions within the discretion of the Board of Directors. The Company's
discretionary contribution to the Profit Sharing Plan for the last fiscal year
is allocated among the participants based upon the relative salaries of the
participants.
Compensation of the Chief Executive Officer
Mr. David H. Hughes, the Company's Chairman of the Board and Chief
Executive Officer, is eligible to participate in the same components of the
executive officers' compensation program available to the other executive
officers described above, and the recommendation of the Compensation Committee
with respect to Mr. Hughes' compensation was determined in the manner outlined
above with respect to the executive officers. During the last fiscal year the
Compensation Committee recommended, and the Board of Directors approved and
implemented, an increase in Mr. Hughes' base salary from $280,000 to $300,000 in
order to compensate him in a manner more consistent with his responsibilities.
The Compensation Committee believes that Mr. Hughes' base salary is conservative
in comparison to his peers in the industry. For the last fiscal year Mr. Hughes'
annual compensation was $450,000, including a bonus of $150,000 earned under the
annual incentive plan. Furthermore, Mr. Hughes earned a bonus payment under the
Senior Executives' Long-Term Incentive Bonus Plan for the three fiscal year
performance period ended January 28, 2000. During the last fiscal year, Mr.
Hughes also received an award of 10,000 shares of restricted stock pursuant to
the 1997 Executive Stock Plan.
Conclusion
The Compensation Committee believes that the policies articulated above
will continue to ensure that the interests of the Company's executive management
group are tied to the interests of the Company's shareholders.
Submitted by the Compensation Committee of the Board of Directors.
H. Corbin Day, Chairman
John D. Baker II
Robert N. Blackford
William P. Kennedy
9
<PAGE> 12
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The Company's compensation program for executive management includes base
salaries, annual and long-term performance based on incentive bonus plans, stock
plans and retirement plans. The compensation of each executive officer was
established by the Board of Directors acting upon the recommendations of the
Compensation Committee. With respect to each executive officer, base salary and
selected other components of the compensation package are integrated on an
individual basis in an effort to carry out the Company's executive compensation
policy.
The following table sets forth the annual, long-term and other compensation
for the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers (the "named executives") during the last fiscal
year, as well as the total annual compensation paid to each individual for the
two previous fiscal years.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL ----------------------------------
COMPENSATION RESTRICTED SECURITIES
----------------- STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS AWARDS OPTIONS/SAR PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) AWARDS ($) ($)(2)
--------------------------- ------ ------- ------- ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Hughes.................. 2000 300,000 150,000 390,040 0 133,536(3) 2,916
Chairman of the Board and 1999 280,000 113,075 0 0 280,000(4) 6,498
Chief Executive Officer 1998 260,000 130,000 0 27,900 260,000(5) 3,844
A. Stewart Hall, Jr. ............ 2000 260,000 130,000 390,040 0 115,732(3) 2,758
President and Chief Operating 1999 240,000 96,922 0 0 240,000(4) 4,479
Officer 1998 225,000 112,500 260,000 27,900 225,000(5) 3,692
Clyde E. Hughes III.............. 2000 165,000 187,000 195,020 0 0 2,612
Vice President and Group 1999 155,000 155,000 0 500 0 2,800
President 1998 150,000 150,000 130,000 10,900 0 3,221
Gradie E. Winstead, Jr. ......... 2000 175,000 154,584 195,020 500 0 3,050
Vice President and Group 1999 155,000 155,000 0 500 0 2,960
President 1998 145,000 145,000 130,000 12,900 0 3,106
Jasper L. Holland, Jr. .......... 2000 165,000 121,000 195,020 0 0 3,508
Vice President and Group 1999 155,000 84,518 0 0 0 5,698
President 1998 150,000 104,290 130,000 7,900 0 3,986
</TABLE>
- ---------------
(1) The amounts in this column are calculated by multiplying the number of
shares awarded by the closing price of the Common Stock on the date of grant
as reported by the New York Stock Exchange. The aggregate number and value
of restricted shares of Common Stock held by each individual appearing in
the table above at January 28, 2000 is set forth below:
<TABLE>
<CAPTION>
AGGREGATE NUMBER OF AGGREGATE VALUE OF
NAME RESTRICTED SHARES RESTRICTED SHARES+
- ---- ------------------- ------------------
<S> <C> <C>
David H. Hughes.................................. 16,296 $294,347
A. Stewart Hall, Jr. ............................ 26,296 474,972
Clyde E. Hughes III.............................. 13,148 237,486
Gradie E. Winstead, Jr. ......................... 13,148 237,486
Jasper L. Holland, Jr. .......................... 13,148 237,486
</TABLE>
- ---------------
+ Calculated by multiplying the aggregate number of shares of restricted
Common Stock held by the named individual on January 28, 2000 by $18.0625,
the closing price of the Common Stock on such date as reported by the New
York Stock Exchange. The individuals named above will receive any dividends
declared with regard to the shares of restricted stock received by them.
(2) Includes the amounts indicated below for the 1998, 1999 and 2000 fiscal
years: (i) the cost of premiums paid by the Company for life insurance
provided to the name executive; and (ii) matching contributions made to the
accounts of the named executive in the Profit Sharing Plan.
<TABLE>
<CAPTION>
2000 1999 1998 2000 1999 1998
INSURANCE INSURANCE INSURANCE MATCHING MATCHING MATCHING
EXECUTIVE PREMIUM PREMIUM PREMIUM CONTRIBUTION CONTRIBUTION CONTRIBUTION
- --------- --------- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David H. Hughes......................... $ 83 $1,823 1,444 $2,833 $4,675 $2,400
A. Stewart Hall, Jr. ................... 162 2,048 1,292 2,596 2,431 2,400
Clyde E. Hughes III..................... 212 1,250 821 2,400 1,550 2,400
Gradie E. Winstead, Jr. ................ 235 1,010 706 2,815 1,950 2,400
Jasper L. Holland, Jr. ................. 308 2,436 1,586 3,200 3,262 2,400
</TABLE>
10
<PAGE> 13
(3) Bonus payments under the Senior Executives' Long-Term Bonus Plan for the
three fiscal year performance period ended January 28, 2000.
(4) Bonus payments under the Senior Executives' Long-Term Incentive Bonus Plan
for the three fiscal year performance period ended January 29, 1999.
(5) Bonus payments under the Senior Executives' Long-Term Incentive Bonus Plan
for the three fiscal year performance period ended January 30, 1998.
BONUS PLANS
The Company has annual incentive plans for members of its executive
management, and for its sales, branch and department managers and other key
employees. Bonuses are awarded under the annual incentive plans upon achievement
of required performance goals by applying the percentage provided for under such
plans to the base salaries of members of its executive management. Individual
bonuses may also be awarded to executive management and other key employees by
the Board of Directors based upon job performance or other criteria within the
discretion of the Board of Directors.
The Company also has long-term performance based incentive bonus plans to
provide incentive compensation to reward selected key senior executives for
achieving specified Company performance goals. The Chief Executive Officer, the
President and the Chief Financial Officer are the selected participants in the
Senior Executives' Long-Term Incentive Bonus Plans for fiscal years 2000, 2001
and 2002. Each of these plans is a performance plan providing for the payment of
an incentive bonus at the end of the three fiscal year performance period if the
Company's earnings per share criteria in the plan are met.
The Senior Executives' Long-Term Incentive Bonus Plans for fiscal years
2000, 2001 and 2002 were adopted by the Board of Directors on March 18, 1997,
March 18, 1998, and March 22, 1999 respectively, and were incorporated into the
Senior Executives' Long-Term Incentive Bonus Plan approved by the shareholders
at the 1994 Annual Meeting and amended on January 25, 1996. Each such plan
provides for payments based upon cumulative growth in the Company's earnings per
share during the three fiscal year performance periods ending with January 28,
2000, January 26, 2001 and January 25, 2002, respectively. Under each of the
plans, the participants would receive a bonus of from 25% to 100% of base salary
for the final year of the performance period if the Company achieves the
required earnings per share for such performance period. Any bonus earned would
be paid in equal portions of cash and shares of Common Stock of the Company at
the fair market value on the final day of the applicable performance period.
Under the Senior Executives' Long-Term Incentive Bonus Plan for the three fiscal
year performance period ending January 28, 2000, the Company achieved the
earnings required for the payment of bonuses equal to 44.5% of the base salary
for each participant. The payouts under such plan aggregated $316,037 and, in
accordance with the plan, were paid one half in cash and one half in shares of
Common Stock of the Company valued on the fair market value of the stock on the
last day of the 2000 fiscal year.
The following table provides information concerning estimated future
payouts to the Company's Chief Executive Officer and the other participants
among the Company's other four most highly compensated executive officers under
the Senior Executives' Long-Term Incentive Bonus Plan for fiscal year 2002. If
fully diluted earnings per share falls between the minimum earnings requirement
for a bonus payment and the earnings requirement for the maximum permissible
bonus payment, the amount of the bonus payment is prorated between the minimum
("threshold") bonus payment and the maximum permissible bonus payment.
11
<PAGE> 14
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OTHER PERIOD NON-STOCK PRICE-BASED PLANS(1)
NUMBER OF UNTIL --------------------------------
RIGHTS MATURATION THRESHOLD TARGET MAXIMUM
NAME (#) OF PAYOUT ($) ($) ($)
- ---- --------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
David H. Hughes.................... 1 3 years 95,506 382,024 382,024
A. Stewart Hall, Jr................ 1 3 years 84,270 337,080 337,080
</TABLE>
- ---------------
(1) Based on estimated base salary levels for final year of performance period.
If earnings per share fall between the amount required for a threshold bonus
payment and the amount required for the maximum permissible bonus payment,
the amount of the bonus payment is prorated accordingly. The target earnings
per share level under the Senior Executives' Long-Term Incentive Bonus Plan
triggers the maximum permissible bonus payment thereunder.
Under the Senior Executives' Long-Term Incentive Bonus Plan, as amended on
January 25, 1996, the Compensation Committee, in its sole discretion, may
establish separate performance plans and designate the performance periods,
goals, participants and bonus payments to be made under such plans if the
required performance goals are achieved.
STOCK OPTION PLANS
The 1997 Executive Stock Plan authorizes the granting of incentive stock
options and non-qualified options, both of which are exercisable for shares of
Common Stock, and also permits the granting of stock appreciation rights
("SARs") either alone or in conjunction with the granting of options. The 1997
Executive Stock Plan currently authorizes the granting of options, in addition
to those currently outstanding, for the purchase of up to 124,779 shares of
Common Stock by any Key Employee (as defined in the 1997 Executive Stock Plan)
of the Company. Under the 1997 Executive Stock Plan, options may be granted at
prices not less than market value on the date of grant, but prices for incentive
stock options granted to employees who own more than 10% of the Common Stock
must be granted at least 110% of such market value. Options may be granted from
to time through the earlier of December 31, 2006 or the date upon which all of
the stock reserved under the 1997 Executive Stock Plan has been issued or no
longer is available for use under the 1997 Executive Stock Plan. Such options
may be exercisable for up to 10 years from the date of grant, except in the case
of employees owning more than 10% of the Common Stock, for whom incentive stock
options may be exercisable only up to 5 years from the date of grant. The 1997
Executive Stock Plan permits the granting of incentive stock options and other
stock options, restricted stock and the granting of SARs either alone or in
conjunction with the granting of options. Only 12,979 shares are available for
grants of restricted stock. Under the terms of the 1997 Executive Stock Plan,
the Compensation Committee of the Board of Directors has the authority, solely
within its discretion, to determine the terms of and to make grants of any
additional options under the 1997 Executive Stock Plan. The Compensation
Committee granted an aggregate of 20,500 options on March 22, 1999 and April 23,
1999. The Compensation Committee granted an aggregate of 221,000 restricted
stock grants on March 22, 1999, April 23, 1999, August 18, 1999 and November 19,
1999.
If the Executive Stock Plan Proposal is approved by the shareholders at the
Annual Meeting, the 1997 Executive Stock Plan will be amended to increase from
750,000 (adjusted to reflect the three-for-two stock split that became effective
on July 17, 1997 (the "1997 Stock Split")), to 1,750,000 the number of shares of
Common Stock reserved for use under the 1997 Executive Stock Plan and increase
from 375,000 (adjusted for the 1997 Stock Split) to 875,000 the number of shares
which may, but need not be, granted as restricted shares of Common Stock under
the 1997 Executive Stock Plan.
12
<PAGE> 15
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning options granted to
the named executives during the fiscal year ended January 28, 2000:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS(1) OPTION TERM(2)
- -------------------------------------------------------------------------------------- ---------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES IN PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- --------------- ---------------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
David H. Hughes........... 0 -- -- -- -- --
A. Stewart Hall, Jr....... 0 -- -- -- -- --
Clyde E. Hughes III....... 0 -- -- -- -- --
Gradie E. Winstead, Jr.... 500 2.4% $23.25 4/23/2009 7,311 18,527
Jasper L. Holland, Jr..... 0 -- -- -- -- --
</TABLE>
- ---------------
(1) Each of these options was granted pursuant to the Company's 1997 Executive
Stock Option Plan and is subject to the terms of such plan. As long as the
optionee maintains continuous employment with the Company, all of these
options will vest on January 1, 2002.
(2) Potential gains are net of the exercise price but before taxes associated
with the exercise. Amounts represent hypothetical gains that could be
achieved for the respective options if they were exercised at the end of the
option term. The assumed 5% and 10% rates of stock appreciation are based on
appreciation from the exercise price per share. These rates are provided in
accordance with the rules of the Securities and Exchange Commission and do
not represent the Company's estimate or projection of the future Common
Stock price. Actual gains, if any, on stock option exercises are dependent
on the future financial performance of the Company, overall stock market
conditions and the option holders' continued employment through the vesting
period.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table summarizes options exercised during the fiscal year
ended January 28, 2000 and presents the value of unexercised options held by the
named executives at fiscal year end:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES JANUARY 28, 2000(#) AT JANUARY 28, 2000($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Hughes........ 0 0 48,750 27,900 220,946 0
A. Stewart Hall,
Jr. ................. 0 0 61,374 27,900 327,202 0
Clyde E. Hughes III.... 0 0 15,000 11,400 202,500 0
Gradie E. Winstead,
Jr. ................. 0 0 19,848 13,900 243,306 0
Jasper L. Holland,
Jr. ................. 0 0 45,000 7,900 252,510 0
</TABLE>
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has Supplemental Executive Retirement Plan Agreements with
certain of its executive officers providing for the payment by the Company of
supplemental retirement compensation in addition to any compensation paid under
the Company's other benefit programs. The Company is obligated to pay
supplemental retirement compensation, pursuant to the Supplemental Retirement
Plan Agreements, to each of such officers (i) after retirement of such executive
officer from the service of the Company, or (ii) upon such officer's total
disability while in the employ of the Company, provided such disability
continues until the
13
<PAGE> 16
executive officer's normal retirement date. Supplemental retirement compensation
will be based upon the salary portion of such executive officer's annual
compensation (not including any bonus or other compensation) for the final year
of employment prior to retirement, or for the final year of employment prior to
the disability preceding disability retirement, as the case may be, ("final
salary"), and will be payable monthly following such retirement for a period of
15 years. The rate per annum of supplemental retirement compensation in the case
of retirement or disability retirement at age 65 shall be equal to 35% of final
salary or, in the case of early retirement or early disability retirement with
the approval of the Company prior to age 65 but not earlier than age 55, shall
be reduced proportionately to from 96% of 35% of final salary upon retirement at
age 64 to 60% of 35% of final salary upon retirement at age 55. Death benefits
are payable under each of the agreements in the event of death while employed by
the Company but prior to disability retirement. Death benefits are payable
monthly for a period of 10 years after death at the rate per annum equal to 35%
of final base salary. Benefits under the Supplemental Executive Retirement Plan
Agreements are totally nonvested, unfunded retirement and death benefits. Based
on their annual compensation through the end of the Company's fiscal year ended
January 28, 2000 and assuming normal retirement age has been attained, the named
executive officers would be entitled to projected annual payments under the
Supplemental Executive Retirement Plan Agreements as follows: Mr. David H.
Hughes, $105,000; Mr. A. Stewart Hall, Jr., $91,000; Mr. Clyde E. Hughes,
$57,750; Mr. Gradie E. Winstead, Jr., $61,250; and Mr. Jasper L. Holland, Jr.,
$57,750.
CASH OR DEFERRED PROFIT SHARING PLAN
The Profit Sharing Plan is for the benefit of substantially all employees
of the Company and its subsidiaries. SunTrust Bank, Inc. is trustee of the
Profit Sharing Plan. The Profit Sharing Plan is administered by an
administrative committee appointed by the Company's Board of Directors. Eligible
employees may contribute to the Profit Sharing Plan by salary reduction, and
before imposing federal income taxes, from 2% to 15% of their cash compensation
up to a maximum of $9,500 per year as adjusted for inflation ($10,500 for 2000).
On employee contributions of up to 5% (increasing to 6% in February 2001) of the
employee's cash compensation, the Company will contribute a matching
contribution of 50% of the employee's contribution. Additional discretionary
contributions by the Company, which may be either a fixed dollar amount of a
percentage of profits, may be made to the Profit Sharing Plan at the discretion
of the Company's Board of Directors, but all employee and Company contributions
may not exceed the maximum amount deductible for federal income tax purposes.
Allocations of discretionary Company contributions are made to the accounts of
active participants on the basis of their compensation. The full amounts
credited to their accounts (valued in accordance with the Profit Sharing Plan)
are distributed to participants upon their death or retirement. For participants
who cease to be employees prior to death or retirement, the amounts distributed
are 100% of the participant's contribution account and the vested percentage of
the participant's Company contribution account based upon the participant's
period of service as follows: less than 3 years, 0%; 3 years, 20%; 4 years, 40%;
5 years, 60%; 6 years, 80%; 7 years or more, 100%. The Company did not
contribute to the Profit Sharing Plan during the fiscal year ended January 28,
2000.
CHANGE-IN-CONTROL ARRANGEMENTS
In December 1999 the Company entered into agreements with each of the named
executives that provide for severance payments in the event of termination of
their employment with the Company following a "change in control" of the Company
if such termination is by the Company without cause or by the named executive
for "good reason." The agreements have a two-year term that, in the event of a
change in control of the Company during such term, extends to sixty days
following twenty-four months after the change in control. In the event of such a
termination by the named executive for good reason or by the Company without
cause during the term of the agreement and within twenty-four months following
the change in control, the named executive is entitled to receive a lump sum
severance payment within fifteen days following termination equal to the lesser
of (1) the product of three times the average annual compensation (including
base salary, bonuses, fringe benefits and deferred compensation) paid to the
named executive during the three-year period prior to the termination date (or,
if higher, in effect prior to the event constituting "good reason") or (2) one
dollar less than three times the named executive's annualized includible
compensation for income tax
14
<PAGE> 17
purposes during the five-year period preceding the change in control. In
general, a "change in control" under the agreements is defined as the
acquisition of 49% of more of the voting power of the Company's common stock,
the current Directors ceasing to be a majority of the Directors within a
twenty-four month period, or the sale of substantially all of the Company's
assets by or merger of the Company. "Good reason" for the named executives to
terminate employment under the agreements is generally any reduction in
compensation, loss of title or position, significant diminution of duties and
responsibilities or relocation requirement.
OTHER BENEFITS
The Company provides $250,000 life insurance policies for its executive
officers, and $100,000 life insurance policies for other key employees.
CASH COMPENSATION OF DIRECTORS
Nonemployee Directors of the Company receive an annual retainer of $20,000
and attendance fees of $1,000 for each Board meeting attended in person or by
telephone conference. For each meeting of a committee of the Board of Directors
such nonemployee Directors receive an attendance fee of $500 for attendance in
person or by telephone conference. Directors who are employees of the Company do
not receive directors' or committee members' fees. John D. Baker II, Robert N.
Blackford, H. Corbin Day, William P. Kennedy and John B. Ellis served as
nonemployee Directors and received nonemployee Director's fees during the fiscal
year ended January 28, 2000.
DIRECTORS' STOCK OPTION PLAN
Each of the nonemployee Directors is a participant in the Directors' Plan.
Under the Directors' Plan, options for the purchase of Common Stock are granted
to the participants on the date of each annual meeting of the Board of Directors
following each annual meeting of the shareholders. Under the Directors' Plan
approved by the shareholders in 1989, options with respect to an aggregate of
18,000 shares (adjusted to reflect the 1997 Stock Split), equally divided among
the then participants, were granted to the participants in each of the years
1989 through 1993. The Directors' Plan was amended with shareholder approval in
1994 to provide for the granting of options with respect to an aggregate of
22,500 shares (adjusted to reflect the 1997 Stock Split), equally divided among
the then participants in each of the years 1994 through 1998. The Directors'
Plan was again amended with shareholder approval in 1999 to increase to 302,500
shares the number of shares with respect to which options may be granted and to
provide for the granting of options with respect to an aggregate of 20,000
shares equally divided among the participants in each of the years 1999 forward.
Options granted under the Directors' Plan are granted for the purchase of shares
at a purchase price of 100% of the current market value of the Common Stock on
the date of the grant and expire 10 years after the date of the grant or earlier
in the event of termination of service as a nonemployee Director or under the
circumstances set forth in the Directors' Plan. Such options are not incentive
stock options within the meaning of Section 422 of the Internal Revenue Code, as
amended (the "Code"). During the last fiscal year, options with respect to an
aggregate of 20,000 shares divided equally between the four nonemployee
Directors (who served as Directors for the entire fiscal year), were granted at
a purchase price of $26.8125 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
As indicated in the Compensation Committee Report on Executive Compensation
set forth elsewhere in this Proxy Statement, David H. Hughes, the Chairman of
the Board and Chief Executive Officer of the Company, consulted with the
Compensation Committee with respect to the compensation of the executive
management group and submitted to the Compensation Committee his recommendation
for compensation of the other members of the group. Mr. Hughes, who is not a
member of the Compensation Committee, consulted with the Compensation Committee
and provided his recommendation at the Compensation Committee's request.
15
<PAGE> 18
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company and certain of its subsidiaries lease certain buildings and
properties from Hughes, Inc., a company of which David H. Hughes, Vincent S.
Hughes and Russell V. Hughes (formerly an executive officer of the Company) are
the officers and directors, and in which each owns a one-third interest. During
the last fiscal year 14 such leases were in effect in Florida. Each lease was
entered into prior to March 11, 1992 and was renewed effective as of April 1,
1998, except for one lease that was not renewed that is currently on a
month-to-month basis. Such leases typically relate to branch facilities
including buildings ranging in size from approximately 15,000 to 116,000 square
feet together with outside parking and storage areas ranging in size from
approximately 35,000 square feet to several acres. The two largest buildings
leased from Hughes, Inc. are the Orlando Electric sales branch facility which is
approximately 116,000 square feet and the Orlando Plumbing sales branch facility
which is approximately 64,000 square feet.
Under leases in effect during the fiscal year ended January 28, 2000, the
Company and its subsidiaries made rental payments to Hughes, Inc. aggregating
$1,340,580. The Company also pays real estate taxes, building insurance and
repairs, other than structural repairs, with respect to the leased properties.
During the last fiscal year the Company paid real estate taxes and building
insurance on the leased properties of $229,561 and $16,650, respectively.
Maintenance repairs paid by the Company during the last fiscal year were not
substantial and were, in the opinion of management, normal for the types of
properties leased.
The Company leases certain buildings and properties from SWS-TX Realty,
Inc. ("SWS-TX Realty"), Jem-Realty, LLC ("Jem-Realty"), SWS-GA Realty, Inc.
("SWS-GA Realty") and SJ Limited Partnership ("SJ Partnership"). H. Corbin Day
and Michael L. Stanwood are the sole shareholders of SWS-TX Realty and SWS-GA
Realty, and Jem-Realty is a wholly-owned subsidiary of Jemison. Michael L.
Stanwood is a limited partner of SJ Partnership and a director of Jemison.
During the last fiscal year, seven such leases were in effect with respect to
five locations in Texas, one location in Georgia, and one location in North
Carolina. Five of the leases except one were entered into on May 13, 1996. All
of the leases except one will expire on May 12, 2002. One of the leases pertains
to a property located in Texas and was entered into on July 1, 1998 and will
expire on June 30, 2000. The remaining lease in Texas was entered into on May 1,
1999 and will expire on April 30, 2004. Each lease typically relates to branch
facilities ranging in size from approximately 15,000 to 44,500 square feet,
together with outside storage and parking. Under leases in effect during the
fiscal year ended January 28, 2000, the Company made rental payments to SWS-TX
Realty, Jem-Realty, SWS-GA Realty and SJ Partnership aggregating $499,704.
During the last fiscal year, the Company paid aggregate real estate taxes and
building insurance on the leased properties of $77,802 and $4,606 respectively.
The Company also pays for repairs, other than structural repairs, with respect
to the leased properties. Maintenance repairs paid by the Company during the
last fiscal year were not substantial and were, in the opinion of management,
normal for the types of properties leased.
During the fiscal year ended January 28, 2000, the Company purchased
approximately $849,940 worth of merchandise from Jasper Lee Enterprises, Inc.
("Jasper Enterprises"). Jasper Enterprises sells promotional and other marketing
related items. Diane E. Holland, wife of Jasper L. Holland, Jr., a Vice
President and Group President of the Company, is the sole shareholder of Jasper
Enterprises.
During the fiscal year ended January 28, 2000, Travel Concepts received
approximately $67,896 in commission payments from the Company in connection with
travel services provided to the Company. Travel Concepts is owned jointly by
Gradie E. Winstead, a Vice President and Group President of the Company, and his
wife Tara Winstead. Mr. Winstead is also a Director and Vice President of Travel
Concepts.
The Company believes that the terms of the transactions described above are
at least as favorable to the Company as those which could have been obtained
from unrelated parties.
Robert N. Blackford, a Director of the Company, is a member of the law firm
of Holland & Knight LLP which served as counsel to the Company during the fiscal
year ended January 28, 2000.
16
<PAGE> 19
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares during the five year period ended January 28,
2000, the yearly percentage change in the cumulative total shareholder return of
the Company's Common Stock with the cumulative total return of the S&P SmallCap
600 and the cumulative total return of an industry group consisting of those
peer group companies identified in the graph which have been selected by the
Company as reporting companies whose lines of business are comparable to those
of the Company. For comparison purposes an old industry peer group has been
included; the new industry peer group includes the members of the old industry
peer group and additional peers that are more representative of the Company's
competitors.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG HUGHES SUPPLY, INC., THE S&P SMALLCAP 600 INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
HUGHES SUPPLY,
INC. NEW PEER GROUP OLD PEER GROUP S&P SMALLCAP 600
-------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
1/95 100.00 100.00 100.00 100.00
1/96 162.93 123.38 123.38 132.11
1/97 198.42 143.93 143.33 162.59
1/98 283.71 180.68 179.58 196.93
1/99 222.94 181.17 181.09 203.73
1/00 157.01 161.13 164.69 224.73
</TABLE>
* $100 INVESTED ON 1/31/95 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JANUARY 31.
<TABLE>
<CAPTION>
OLD INDUSTRY PEER GROUP NEW INDUSTRY PEER GROUP
- ----------------------- -----------------------
<S> <C>
Building Materials Holding Corp. Building Materials Holding Corp.
A.M. Castle & Co. A.M. Castle & Co.
Centex Corp. Centex Corp.
Florida Rock Industries, Inc. Florida Rock Industries, Inc.
W.W. Grainger, Inc. W.W. Grainger, Inc.
Lawson Products, Inc. Industrial Distribution Group, Inc.
Lennar Corporation Lawson Products, Inc.
Noland Company Lennar Corporation
Watsco Inc. Noland Company
SCP Pool Corp.
Watsco Inc.
Wesco International, Inc.
</TABLE>
- ---------------
* The figures in the Old Industry Peer Group have been restated to exclude
United States Filter Corporation because it was acquired during 1999 and is no
longer publicly traded.
17
<PAGE> 20
BOARD OF DIRECTORS AND COMMITTEES
BOARD OF DIRECTORS' MEETINGS AND ATTENDANCE
During the last fiscal year, the Board of Directors of the Company held a
total of seven meetings. Each member of the Board of Directors attended 100% of
the aggregate of (i) the total number of meetings of the Board of Directors, and
(ii) the total number of meetings held by all committees of the Board of
Directors on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has standing Executive, Audit,
Compensation, Long-Term Incentive Plan, and Directors' Stock Option Plan
Committees. The memberships of the standing committees of the Board of Directors
are listed in the Directors' biographies set forth below under "Election of
Directors." The Company does not have a nominating committee.
The Executive Committee met one time during the last fiscal year. At its
meetings the Executive Committee considered recommendations for outside
directors. The Executive Committee has authority to act on matters of general
corporate governance when the Board of Directors is not in session.
The Audit Committee met four times during the last fiscal year. At its
meetings, the Audit Committee considered the recommendations of the Company's
independent auditors with respect to internal accounting controls, reviewed
management's actions taken in response to such recommendations, reviewed the
reports of the Company's internal audit staff with respect to internal controls,
reviewed the professional services provided by the independent auditors together
with the range of audit and nonaudit fees, reviewed the status of the Company's
planning efforts with respect to the Year 2000 issue, considered the
recommendations of the Blue Ribbon Committee with respect to audit committees,
reviewed drafts of a written charter for the Audit Committee and reviewed the
Company's proxy statement and Form 10-K.
The Compensation Committee met four times during the last fiscal year and
reviewed and made recommendations to the Board of Directors with respect to the
compensation of members of the Company's executive management group and the
appointment of additional executive officers. It also issued restricted stock
grants under the 1997 Executive Stock Plan. Information with respect to the
Compensation Committee's recommendation for the last fiscal year is set forth
elsewhere in this Proxy Statement under "Compensation Committee Report on
Executive Compensation."
The Long-Term Incentive Plan Committee met twice during the last fiscal
year to approve pay-out under the fiscal 2000 plan, to set targets for the
fiscal 2003 plan and to consider alternatives to the existing plan. The
Long-Term Incentive Plan Committee was established on January 25, 1996, pursuant
to an amendment to the Senior Executives' Long-Term Incentive Plan, to
administer the plan and any separate performance plans adopted thereunder. It is
the duty of the Long-Term Incentive Plan Committee to interpret the plan and to
establish and administer separate performance plans under the plan, including
the designation of applicable performance periods, the selection of
participants, the establishment and application of performance goals and the
determination of performance bonus payments under such plans.
The Directors' Stock Option Plan Committee has the authority to interpret
the provisions of the Directors' Plan. The Directors' Stock Option Plan
Committee did not meet during the last fiscal year.
FAMILY RELATIONSHIPS BETWEEN CERTAIN DIRECTORS AND EXECUTIVE OFFICERS
The following family relationship exists between Directors and executive
officers of the Company:
David H. Hughes and Vincent S. Hughes are brothers.
18
<PAGE> 21
ELECTION OF DIRECTORS
(PROPOSAL ONE)
The Company's Restated Articles and Bylaws provide that the Board of
Directors of the Company shall be divided into three approximately equal classes
of Directors. The Company's Board of Directors is currently comprised of seven
Directors, two classes consisting of two Directors and one class consisting of
three Directors each. Each Director is elected for a three-year term, with one
class of Directors being elected at each annual meeting of shareholders.
The Board of Directors has nominated H. Corbin Day and Robert N. Blackford
for election as Directors at the Annual Meeting. Messrs. Day and Blackford
currently are members of the Board of Directors and have consented to serve as
Directors if elected. If elected at the Annual Meeting, Messrs. Day and
Blackford will serve until the 2003 Annual Meeting and until the election and
qualification of their respective successors or until their earlier death,
resignation or removal.
VOTING INFORMATION WITH REGARD TO THE ELECTIONS PROPOSAL
It is the intention of the persons named as proxies to vote the proxies FOR
the election to the Board of Directors of the nominees named above, unless a
shareholder directs otherwise. In the event that a vacancy (which is not
anticipated) arises prior to the Annual Meeting, the proxy may be voted for a
substitute nominee designated by the Board of Directors.
The affirmative vote of a plurality of the votes cast by the holders of
Common Stock will be required to elect the nominees as Directors of the Company
for the ensuing three year term. Abstentions and broker non-votes will have no
effect on the outcome of the voting to elect the Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
NAMED IN THIS PROPOSAL.
DIRECTOR INFORMATION
Set forth below is information concerning the nominees to be elected at the
Annual Meeting for a three-year term expiring at the 2003 Annual Meeting, as
well as certain information concerning the Directors whose terms extend beyond
the Annual Meeting. Set forth below with respect to each director or director
nominee is his name, age, principal occupation and business experience for the
past five years and length of service as a Director.
DIRECTORS TO BE ELECTED AT THE ANNUAL MEETING
ROBERT N. BLACKFORD
AGE: 63
Mr. Blackford has served as a Director since December 1970 and served as
the Company's Secretary from February 1974 to May 1997. Mr. Blackford also
serves as a member of the Company's Compensation, Directors' Stock Option Plan
and Long-Term Incentive Plan Committees. Mr. Blackford is an attorney in
Orlando, Florida with the law firm of Holland & Knight LLP, the successor to the
law firm of Maguire, Voorhis & Wells, P.A., where he has practiced since 1968.
Mr. Blackford's term as a Director of the Company expires at the 2000 Annual
Meeting.
H. CORBIN DAY
AGE: 62
Mr. Day has served as a Director of the Company since October 1996. Mr. Day
currently serves as Chairman of Jemison Investment Co., Inc. Mr. Day serves as a
member of the Company's Compensation, Directors' Stock Option Plan, Long-Term
Incentive Plan and Audit Committees. Mr. Day is also a member of the Board of
Directors of American Heritage Life Insurance, Blount International, Inc. and
Champion International. Mr. Day's term as a Director of the Company expires at
the 2000 Annual Meeting.
19
<PAGE> 22
DIRECTORS WHOSE TERMS EXTEND BEYOND THE ANNUAL MEETING
WILLIAM P. KENNEDY
AGE: 56
Mr. Kennedy has served as a Director since March 1999. Mr. Kennedy
currently serves as Chief Executive Officer of Nephron Pharmaceuticals
Incorporated, a manufacturer of sterile pharmaceutical products. Mr. Kennedy
serves as a member of the Company's Compensation, Long-Term Incentive Plan and
Audit Committees. From 1981 to 1997, Mr. Kennedy served as Chairman and Chief
Executive Officer of Rotech Medical, a home health services company. Mr.
Kennedy's term as a Director of the Company expires at the 2002 Annual Meeting.
DAVID H. HUGHES
AGE: 56
Mr. Hughes has served as the Company's Chairman of the Board and Chief
Executive Officer since November 1986, and as a Director since August 1968. Mr.
Hughes also serves as a member of the Company's Executive Committee. Mr. Hughes
served as President of the Company from June 1972 to March 1994. Mr. Hughes is
also a director of SunTrust Banks, Inc., Brown & Brown, Inc. and Lanier
Worldwide, Inc. Mr. Hughes' term as a Director of the Company expires at the
2002 Annual Meeting.
VINCENT S. HUGHES
AGE: 59
Mr. Hughes has served as Vice President of the Company since April 1972 and
as a Director since April 1966. Mr. Hughes also serves as a member of the
Company's Executive Committee. Mr. Hughes' term as a Director of the Company
expires at the 2002 Annual Meeting.
JOHN D. BAKER II
AGE: 51
Mr. Baker has served as a Director of the Company since March 1994. Mr.
Baker also serves as a member of the Company's Compensation, Directors' Stock
Option Plan, Long-Term Incentive Plan and Audit Committees. Mr. Baker currently
serves as President and Chief Executive Officer and director of Florida Rock
Industries, Inc. Mr. Baker also serves as a director of Patriot Transportation
Holding, Inc. Mr. Baker's term as a director of the Company expires at the 2001
Annual Meeting.
A. STEWART HALL, JR.
AGE: 57
Mr. Hall has served as the Company's President, Chief Operating Officer and
a Director since March 1994. Mr. Hall also serves as a member of the Company's
Executive Committee. Mr. Hall served as the Company's Executive Vice President
from January 1988 to March 1994. Mr. Hall's term as a director of the Company
expires at the 2001 Annual Meeting.
20
<PAGE> 23
APPROVAL OF AMENDMENT TO 1997 EXECUTIVE STOCK OPTION PLAN
(PROPOSAL TWO)
The Board of Directors has approved and seeks shareholder approval of
Amendment No. 1 to the 1997 Executive Stock Plan, as described herein. The 1997
Executive Stock Plan was approved by the shareholders at the 1997 Annual Meeting
as an incentive program to grant equity-based incentive compensation to key
employees of the Company. The 1997 Executive Stock Plan is intended to act as an
incentive to enhance shareholder value by providing to plan participants an
opportunity to benefit from increases in the value of the Common Stock.
The proposed amendment for approval by the shareholders at the Annual
Meeting would increase from 750,000 (adjusted for the 1997 Stock Split) to
1,750,000 the number of shares of Common Stock reserved for use under the 1997
Executive Stock Plan and increase from 375,000 (adjusted for the 1997 Stock
Split) to 875,000 the number of shares which may, but need not be, granted as
restricted shares of Common Stock ("Restricted Stock").
A general summary of the 1997 Executive Stock Plan as currently in effect
and as proposed to be amended is set forth below.
SUMMARY OF 1997 EXECUTIVE STOCK PLAN
Grants
The 1997 Executive Stock Plan provides for grants of options to purchase
Common Stock, Restricted Stock, and grants of SARs (entitling the grantee to
receive the difference in value between the underlying Common Stock on the date
of exercise and the value of such Common Stock on the date of grant), which may
be either freestanding or granted in tandem with an option. Options to purchase
Common Stock may be either incentive stock options ("ISOs"),which are intended
to satisfy the requirements of Section 422 of the Code, or options which are not
intended to satisfy the requirements of Section 422 of the Code ("NQOs").
Shares
There are currently 750,000 shares of Common Stock reserved for use under
the 1997 Executive Stock Plan, of which up to 375,000 may, but need not be,
granted as Restricted Stock. Any shares subject to an option that remain
unissued after the cancellation, expiration or exchange of an option and any
shares of Restricted Stock which are forfeited will again become available for
use under the 1997 Executive Stock Plan. Any shares which are surrendered for
cash or Common Stock or a combination thereof, and any shares of Common Stock
used to satisfy a withholding obligation shall not again become available for
use under the 1997 Executive Stock Plan. As of April 1, 2000, there were
available an aggregate of 124,779 shares of Common Stock under the 1997
Executive Stock Plan, of which 12,979 could be granted as Restricted Stock.
The proposed amendment would make an additional 1,000,000 shares available
for use under the 1997 Executive Stock Plan. The proposed amendment would also
increase by 500,000 the number of shares which may, but need not be, granted as
Restricted Stock.
Administration of 1997 Executive Stock Plan
The 1997 Executive Stock Plan is administered by the Compensation
Committee, which has the sole authority to grant options, SARs and Restricted
Stock. The Compensation Committee must consist of at least two Directors, each
of whom shall be an "outside director" for purposes of Section 162(m) of the
Code ("Section 162(m)"). The Board of Directors has authorized the Compensation
Committee to interpret the 1997 Executive Stock Plan to determine the key
employees to receive grants, the number of shares to be granted, the terms of
option grants and restrictions on shares, the provisions of the respective
option, Restricted Stock and SAR agreements (which need not be identical), and
to take such other action in the administration and operation of the 1997
Executive Stock Plan as the Compensation Committee deems equitable under the
circumstances. The Board of Directors, however, has reserved to itself the right
to act with respect to any matters concerning: (1) certain corporate
transactions in which there is a change in control (as
21
<PAGE> 24
defined in the 1997 Executive Stock Plan) with no assumption or substitution of
options, SARs or Restricted Stock granted under the 1997 Executive Stock Plan
(in which case: (i) options and SARs may be cancelled unilaterally by the
Company in exchange for a payment of whole shares of Common Stock, and cash in
lieu of fractional shares, if any, which the holder would have received if on
the date set by the Board of Directors he or she had exercised his or her SAR in
full or if he or she had exercised a right to surrender his or her outstanding
option in full; (ii) options and SARs may be cancelled unilaterally if the
option price or SAR share value at grant equals or exceeds the fair market value
of a share of Common Stock on such date; and (iii) the grant and forfeiture
conditions on Restricted Stock may be deemed satisfied); or (2) any adjustment
in the number of shares reserved for issuance under the 1997 Executive Stock
Plan, in the number of shares of Restricted Stock granted and any related
restrictions, the number of shares of Common Stock subject to options, the
option price, the SAR grant value and the number of shares of Common Stock
related to any SAR to equitably reflect any change in the capitalization of the
Company, including, but not limited to Common Stock dividends or Common Stock
splits or to reflect certain corporate transactions; or (3) the amendment or
termination of the 1997 Executive Stock Plan. However, the Compensation
Committee may condition an amendment on the approval of the Company's
shareholders to the extent the Compensation Committee determines such approval
to be necessary or advisable for securities or tax purposes.
Eligibility
The Compensation Committee selects key employees to participate in the 1997
Executive Stock Plan. A key employee means any employee of the Company or any
subsidiary, who, in the judgment of the Compensation Committee, is a key to the
success of the Company or a subsidiary.
Terms of Options
The 1997 Executive Stock Plan authorizes the grant of ISOs or NQOs, both of
which are exercisable for shares of Common Stock. The price at which an option
may be exercised for a share of Common Stock may not be less than the fair
market value of a share of Common Stock on the date the option is granted. The
"fair market value" means the closing price per share of Common Stock on the New
York Stock Exchange on the day prior to the date the option is granted, or if no
such closing price is available on such day, the closing price for the
immediately preceding business day.
The period during which an option may be exercised is determined by the
Compensation Committee at the time of option grant and may not extend more than
10 years from the date of grant for an ISO or more than 5 years from the date of
grant for an ISO granted to a key employee who is also a ten percent
shareholder. An option or portion thereof that is not exercised before
expiration of the applicable option period shall terminate. No grants will be
made after December 31, 2006.
The aggregate fair market value of ISOs granted to a key employee under the
1997 Executive Stock Plan and incentive stock options granted under any other
stock option plan adopted by the Company or a subsidiary which first becomes
exercisable in any calendar year may not exceed $100,000. Furthermore, a key
employee may be granted, in any calendar year, one or more options, or one or
more SARs, or one or more options and SARs in any combination which,
individually or in the aggregate, relate to no more than 15,000 shares of Common
Stock.
Stock Appreciation Rights
Under the 1997 Executive Stock Plan, SARs may be granted as part of an
option (a "Related Option") with respect to all or a portion of the shares of
Common Stock subject to the Related Option (a "Tandem SAR") or may be granted
separately (a "Freestanding SAR") (Tandem SARs and Freestanding SARs are
collectively referred to as "SARs"). The share value of a Freestanding SAR shall
be set forth in the related SAR agreement, and may not be less than the fair
market value of a share of Common Stock on the date of grant of the SAR. The
share value of a Tandem SAR shall be determined by the exercise price of the
Related Option, which also may not be less than the fair market value of a share
of Common Stock on the date of
22
<PAGE> 25
grant. The grant of SARs may be subject to such other terms as the Compensation
Committee deems appropriate.
When a Freestanding SAR is exercised, the key employee receives a payment
determined by calculating the difference between the share value at grant as set
forth in the SAR agreement and the fair market value of a share of Common Stock
on the date of exercise. On the exercise of a Tandem SAR, the Related Option is
deemed to be surrendered to the extent of the number of shares of Common Stock
for which the Tandem SAR is exercised, and the payment is based on the increase
in fair market value of a share of Common Stock on the exercise date over the
share value stated in the option agreement. Payment may be made in cash or
stock, or a combination of cash and stock. The form and timing of payments is
determined by the Compensation Committee.
Restricted Stock
Shares of Restricted Stock may be granted to key employees and may be
subject to one or more contractual restrictions applicable generally or to a key
employee in particular, as established by the Compensation Committee at the time
of grant and as set forth in the related Restricted Stock agreement. The
agreement sets forth the conditions, if any, which will need to be satisfied
before the grant will be effective and the conditions, if any, under which the
key employee's interest in the Restricted Stock will be forfeited. As soon as
practicable after a grant has become effective, the shares are registered to or
for the benefit of the employee. The Restricted Stock agreement states whether
the employee has the right to receive any cash dividends paid with respect to
the shares of Restricted Stock. If the employee has no right to receive cash
dividends, the agreement may give the employee the right to receive a cash
payment in the future in lieu of the dividend payments, provided certain
conditions are met. Common Stock dividends declared on the shares of Restricted
Stock after grant but before the shares are forfeited or become nonforfeitable
are treated as part of the grant of the related Restricted Stock. An employee
has the right to vote the shares of Restricted Stock after grant until they are
forfeited or become nonforfeitable.
Shares of Restricted Stock may vest in installments or in lump sum amounts
upon satisfaction of the stipulated conditions. If the restrictions are not
satisfied, the shares are forfeited back to the Company and again become
available under the 1997 Executive Stock Plan. To enforce the restrictions, all
shares of Restricted Stock will be held by the Company until the restrictions
are satisfied. The exercise or surrender of any option granted under the 1997
Executive Stock Plan and the acceptance of a Restricted Stock grant constitutes
an employee's full and complete consent to whatever actions the Compensation
Committee deems necessary to satisfy the federal and state tax withholding
requirements, if any, which the Compensation Committee in its discretion deems
applicable to such exercise or surrender of such Restricted Stock. The
Compensation Committee also can provide in an option agreement or Restricted
Stock agreement that an employee may elect to satisfy federal and state tax
withholding requirements through a reduction in the number of shares of Common
Stock actually transferred to the employee under the 1997 Executive Stock Plan,
and any such election and any such reduction shall be effected so as to satisfy
the conditions to the exemption under Rule 16b-3. Grants of Restricted Stock are
effective for periods as determined by the Compensation Committee, provided no
Restricted Stock may be granted after the earlier of December 31, 2006 or the
date on which all shares of Common Stock reserved under the 1997 Executive Stock
Plan have been issued or are unavailable for the 1997 Executive Stock Plan use,
in which event the 1997 Executive Stock Plan also shall terminate on such date.
In the case of Restricted Stock grants which vest only on the satisfaction
of performance objectives, the Compensation Committee determines the performance
objectives to be used in connection with Restricted Stock awards and the extent
to which such objectives have been met. Performance objectives may vary from
participant to participant and between groups of participants and shall be based
upon such Company and/or subsidiary performance factors and criteria as the
Compensation Committee in its sole discretion selects.
23
<PAGE> 26
Certain Federal Income Tax Consequences
The following summary generally describes the principal federal income tax
consequences of certain events under the 1997 Executive Stock Plan. The summary
is general in nature and is not intended to cover all tax consequences that may
apply to a particular employee or to the Company. The provisions of the Code and
regulations thereunder relating to these matters are complicated and their
impact in any one case may depend upon the particular circumstances.
An employee is not be subject to any federal income tax upon the grant of
an option or SAR granted pursuant to the 1997 Executive Stock Plan. Except as
specified below, an employee does not recognize income for federal income tax
purposes (and the Company will not be entitled to any federal income tax
deduction) as a result of the exercise of an ISO and the related transfer of
shares to the employee. However, the excess of the fair market value of the
shares transferred upon the exercise of an ISO over the exercise price for such
shares generally constitutes an item of alternative minimum tax adjustment to
the employee for the year in which the option is exercised. Thus certain
employees may have an increase in their federal income tax liability as a result
of the exercise of an ISO under the alternative minimum tax rules of the Code.
If the shares transferred pursuant to the exercise of an ISO are disposed
of within two years from the date the ISO is granted or within one year from the
date the ISO is exercised (the "ISO holding periods"), the employee recognizes
ordinary compensation income equal to the lesser of (i) the excess of the amount
realized on the disposition over the price paid for the shares (the "gain
realized") or (ii) the excess of the fair market value of the shares when
transferred to the employee at exercise over the exercise price for such shares.
The Company is entitled to a federal income tax deduction as a result of the
early disposition of shares prior to the end of the ISO holding period.
If the shares transferred upon the exercise of an ISO are disposed of after
the ISO holding periods have been satisfied, such disposition generally results
in long term capital gain or long term capital loss with respect to the gain or
loss realized on the disposition. The Company is not entitled to a federal
income tax deduction as a result of a disposition of such shares after the ISO
holding periods have been satisfied.
Ordinary compensation income is recognized upon exercise of an NQO.
Generally, the ordinary income realized is the excess, if any, of the fair
market value of the shares of Common Stock received upon the exercise of the NQO
over the exercise price. An employee also recognizes ordinary compensation
income upon exercising a SAR. The amount of such income is the amount of any
cash received and the fair market value of any shares of the Common Stock
received upon exercise of the SAR.
Generally, federal income tax withholding from the employee is required on
the compensation income recognized by the employee upon exercise of an NQO or a
SAR. The Company generally receives a deduction for federal income tax purposes
equal to the ordinary compensation income recognized by the employee upon
exercise of an NQO or a SAR.
Unless an employee makes a special tax election under Section 83(b) of the
Code, an employee recognizes ordinary compensation income in an amount equal to
the fair market value of the shares subject to the Restricted Stock grant at the
time the shares are no longer subject to a substantial risk of forfeiture or are
freely transferable. Dividends paid to an employee on shares of Restricted Stock
prior to the vesting of such shares are treated as ordinary income of the
employee in the year received. The Company receives a deduction for federal
income tax purposes equal to the ordinary income recognized by the employee.
All of the above-described deductions by the Company are subject to the
limitations on deductiblity described in Section 162(m).
VOTING INFORMATION WITH REGARD TO THE EXECUTIVE STOCK PLAN PROPOSAL
It is the intention of the persons named as proxies to vote FOR the
Executive Stock Plan Proposal, unless a shareholder directs otherwise.
24
<PAGE> 27
Approval of the amendment to the 1997 Executive Stock Plan requires the
affirmative vote of the holders of at least a majority of the outstanding shares
of Common Stock represented at and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE EXECUTIVE
STOCK PLAN PROPOSAL.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP served as the Company's independent auditors for
the fiscal year ended January 28, 2000. As of the date of this Proxy Statement,
the Company has not engaged its auditors for fiscal year ending January 26,
2001. Representatives of PricewaterhouseCoopers LLP are expected to be present
at the Annual Meeting where they will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholders who wish to submit a proposal for consideration at the 2001
Annual Meeting should submit the proposal in writing to the Company at the
address set forth on page 1 of this Proxy Statement. A proponent of a proposal
is required to have been a record or beneficial owner of at least 1% or $2,000
in market value of Common Stock of the Company for a period of at least one year
and must continue to own such securities through the date on which the 2001
Annual Meeting is held. The Company has the right to request documentary support
(as provided in Rule 14a-8 promulgated by the Commission pursuant to the
Exchange Act) of the proponent's ownership claim within 14 calendar days after
receipt of the proposal, and the proponent shall furnish appropriate
documentation within 14 days after receiving such request. Proposals must be
received by the Company on or before December 15, 2000 for inclusion in next
year's proxy materials. Shareholders who intend to present a proposal at the
2001 Annual Meeting without inclusion of such proposal in the Company's proxy
materials are required to provide notice of such proposal to the Company in
accordance with the By-Laws no later than January 16, 2001. Shareholders who
submit proposals must, in all other respects, comply with Rule 14a-8 under the
Exchange Act.
MISCELLANEOUS
The Board of Directors does not intend to present and knows of no other
person who intends to present any matter of business at the Annual Meeting other
than as set forth in the accompanying Notice of Annual Meeting of Shareholders.
However, if other matters properly come before the meeting, it is the intention
of the persons named on the enclosed proxy card to vote in accordance with their
best judgment.
The Company will bear the costs of preparing and mailing the Proxy
Statement, proxy card and other material that may be sent to shareholders in
connection with this solicitation. In addition to solicitations by mail,
officers and other employees of the Company may solicit proxies personally or by
telephone or telegram.
By Order of the Board of Directors
/s/Benjamin Butterfield
BENJAMIN P. BUTTERFIELD
General Counsel and Secretary
Orlando, Florida
April 14, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY; THEREFORE, SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE 2000 ANNUAL MEETING IN PERSON ARE REQUESTED TO FILL
IN, SIGN AND RETURN THE PROXY FORM AS SOON AS POSSIBLE.
25
<PAGE> 28
APPENDIX A
AMENDMENT NO. 1 TO THE
HUGHES SUPPLY, INC. 1997 EXECUTIVE STOCK PLAN
---------------------------------------------
The Hughes Supply, Inc. 1997 Executive Stock Plan ("Plan") is hereby
amended, pursuant to Section 13 thereof, as follows:
1. The first sentence of Section 3 of the Plan is deleted in its
entirety and the following new first sentence of Section 3 is substituted
therefor:
There shall be 1,750,000 shares of Stock reserved for use under this
plan.
2. The second sentence of Section 8.1 of the Plan is deleted in its
entirety and the following new second sentence of Section 8.1 is substituted
therefor:
However, no more than 875,000 shares of Stock shall be granted as
Restricted Stock from the shares otherwise available for grants under
this Plan.
3. If there shall be any inconsistency between the provisions of this
Amendment and the provisions of the Plan, this Amendment shall control. This
Amendment shall become effective upon the date this Amendment is approved by the
stockholders of the Company. Except as hereby amended, the Plan shall continue
in full force and effect.
Dated: March __, 2000
HUGHES SUPPLY, INC.
By:____________________________
Title: ________________________
ATTEST:
By: __________________________
Title: _______________________
[CORPORATE SEAL]
<PAGE> 29
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
HUGHES SUPPLY, INC.
May 16, 2000
Please Detach and Mail in the Envelope Provided
HUGHES SUPPLY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated April 14, 2000, and does
hereby appoint David H. Hughes, Benjamin P. Butterfield and Vincent S. Hughes,
and any of them, with full power of substitution, as proxy or proxies of the
undersigned, to represent the undersigned and vote all shares of Hughes Supply,
Inc. Common Stock which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of Hughes Supply, Inc. to be held
at the principal executive offices of the Company, 20 North Orange Avenue, Suite
200, Orlando, Florida, 32801, at 10:00 a.m., on May 16, 2000 and at any
adjournment(s) thereof.
TO BE SIGNED ON OTHER SIDE
<PAGE> 30
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C>
Proposal 1. Election of Directors
[ ] FOR all nominees listed at right NOMINEES: Class I
(except as marked to the contrary below) Nominees for a three-year
term expiring in 2003:
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed at right Robert N. Blackford
H. Corbin Day
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- ----------------------------------------------
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
Proposal 2. Approval of Amendment No. 1 [ ] [ ] [ ]
to the 1997 Executive Stock Plan
</TABLE>
Proposal 3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
Shares of Common Stock
- ------
PLEASE COMPLETE, DATE AND SIGN AND RETURN THIS PROXY PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, IT
WILL BE VOTED IN FAVOR OF PROPOSAL 1 AND PROPOSAL 2. THE PROXIES MAY VOTE IN
THEIR DISCRETION AS TO OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
<TABLE>
<S> <C> <C>
SIGNATURE(S): Dated: , 2000
---------------------------------- -------------------------- --------
Signature, if held jointly
</TABLE>
NOTE: Please sign exactly as your name(s) appear hereon. When signing as
attorney, executor, administrator, trustee or guardian, give your full title as
such. If the signatory is a corporation, sign the full corporate name by a duly
authorized officer.
