<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive revised proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Champion Enterprises Inc.
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(Name of Registrant as Specified in Its Charter)
Champion Enterprises Inc.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
CORPORATE HEADQUARTERS
AUBURN HILLS, MICHIGAN 48326
[CHAMPION LOGO] (248) 340-9090
March 10, 1998
Dear Shareholder:
It is my pleasure to invite you to attend the 1998 Annual Meeting of
Shareholders of Champion Enterprises, Inc. on Tuesday, April 28, 1998 at 10:00
a.m. The meeting will be held at the Grand Hyatt Hotel, Park Avenue and Grand
Central Station, New York, New York 10017.
The following pages contain the formal Notice of the Annual Meeting and the
Proxy Statement. You will want to review this material for information
concerning the business to be conducted at the meeting and the nominees for
election as directors.
Your vote is important. Whether you plan to attend the meeting or not, we
urge you to complete, sign and return your Proxy as soon as possible in the
envelope provided. This will ensure representation of your shares in the event
you are unable to attend. You may, of course, revoke your Proxy and vote in
person at the meeting if you desire.
Sincerely,
Walter Young Jr. Sig.
Walter R. Young, Jr.
Chairman of the Board of Directors,
President
and Chief Executive Officer
<PAGE> 3
CHAMPION ENTERPRISES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 28, 1998
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The Annual Meeting of Shareholders of Champion Enterprises, Inc., a
Michigan corporation, will be held on Tuesday, April 28, 1998, at 10:00 a.m., at
the Grand Hyatt Hotel, Park Avenue and Grand Central Station, New York, New York
10017. The purposes of the Annual Meeting are to:
1. elect a Board of Directors;
2. vote on a proposal to amend the 1995 Stock Option and Incentive Plan;
and
3. conduct any other business that is properly raised at the meeting.
Only shareholders of record at the close of business on March 5, 1998 are
entitled to notice of and to vote at the meeting.
If you are a participant in the Champion Enterprises, Inc. Savings Plan,
your Proxy will also be considered to be voting instructions to the Trustee of
the Savings Plan concerning shares held in your account.
By Order of the Board
March 10, 1998 John J. Collins, Jr.
Secretary
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WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE> 4
CHAMPION ENTERPRISES, INC.
2701 UNIVERSITY DRIVE, SUITE 300
AUBURN HILLS, MICHIGAN 48326
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, APRIL 28, 1998
SOLICITATION OF PROXIES
This Proxy Statement and the accompanying Proxy are being distributed to
shareholders of Champion Enterprises, Inc. (the "Company") in connection with
the solicitation of proxies to be used at the 1998 Annual Meeting of
Shareholders of the Company. The Annual Meeting will be held at the Grand Hyatt
Hotel, Park Avenue and Grand Central Station, New York, New York 10017 on
Tuesday, April 28, 1998 at 10:00 a.m. The enclosed Proxy is solicited by the
Board of Directors of the Company. This Proxy Statement and the enclosed Proxy
were mailed to shareholders beginning on March 10, 1998. The Company's 1997
Annual Report to Shareholders is also enclosed with this Proxy Statement.
The Company will pay the entire cost of soliciting proxies. The Company
will arrange with brokerage houses, nominees, custodians and other fiduciaries
to send proxy soliciting materials to beneficial owners of the Common Stock at
the Company's expense. In addition to solicitation by mail, officers and other
employees of the Company may solicit proxies personally, by telephone or by fax.
The Company also has retained Morrow & Co., Inc., a proxy solicitation firm, to
assist in soliciting proxies. The fees and expenses of that firm for their
services are expected to be approximately $6,500.
REVOKING A PROXY
Any person giving a Proxy has the power to revoke it at any time before it
is voted. There are three ways to revoke your Proxy. You may deliver a written
notice of revocation, which is dated after the date of the Proxy, to the
Secretary of the Company at or before the Annual Meeting. You may deliver a
later-dated Proxy to the Secretary of the Company at or before the Annual
Meeting. You may attend the Annual Meeting in person and vote your shares by
ballot.
RECORD DATE
The record date for determining shareholders entitled to vote at the Annual
Meeting is March 5, 1998. Each of the 47,340,618 shares of Common Stock of the
Company issued and outstanding on that date is entitled to one vote on any
matter voted on at the Annual Meeting. Abstention votes and votes withheld by
brokers on non-routine proposals in the absence of instructions from beneficial
owners ("broker non-votes") will be counted as present at the Annual Meeting to
determine whether a quorum exists.
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<PAGE> 5
1. ELECTION OF DIRECTORS
Eight Directors will be elected at the Annual Meeting. Each Director will
hold office until the next Annual Meeting of Shareholders, or until a successor
is elected and qualified. Unless proxy votes have been withheld, each Proxy
received will be voted to elect Robert W. Anestis, Frank J. Feraco, Selwyn
Isakow, George R. Mrkonic, Johnson S. Savary, Robert L. Stark, Carl L.
Valdiserri and Walter R. Young, Jr. as Directors. If any nominee is unable or
declines to serve, Proxies will be voted for the balance of the nominees and for
such additional person as designated by the Board of Directors to replace such
nominee. However, the Board of Directors does not anticipate that this will
occur.
Persons receiving a plurality of the votes cast at the Annual Meeting in
person or by proxy will be elected as Directors. "Plurality" means that the
nominees who receive the largest number of votes cast are elected as Directors.
Shares not voted (whether by abstention, broker non-votes or otherwise) have no
effect on the election.
Information about the nominees for election as Directors appears below. All
of the nominees are currently Directors of the Company and were elected at the
1997 Annual Meeting of Shareholders.
<TABLE>
<C> <S>
PHOTO ROBERT W. ANESTIS. Mr. Anestis, age 52, has served as a
director of the Company since 1991. He is President of
Anestis & Company, an investment banking and financial
advisory firm located in Westport, Connecticut.
Mr. Anestis, who has been in the industry ten years, brings
merger and acquisition expertise, strategic planning and
policy experience with a strong legal and financial
background to the Board.
PHOTO FRANK J. FERACO. Mr. Feraco, age 51, has served as a
director of the Company since November 1996. He is
President/Sector Executive of Kohler Company, located in
Kohler, Wisconsin, which manufactures and markets plumbing
products worldwide. From April 1994 to March 1996, Mr.
Feraco was President of Danaher Tool Group of Danaher
Corporation, which manufactures hand tools for industrial
and consumer use. From 1991 to 1994, Mr. Feraco was
President and Chief Executive Officer of the Sterling
Plumbing Group, a subsidiary of Kohler Company. Mr. Feraco
is a former director of Redman Industries, Inc.
Champion's Board benefits from Mr. Feraco's over 30 years
experience as an operating executive, including areas of
sales, marketing and manufacturing with three major U.S.
corporations.
</TABLE>
2
<PAGE> 6
<TABLE>
<C> <S>
PHOTO SELWYN ISAKOW. Mr. Isakow, age 46, has served as a director
of the Company since 1991. He is President of The Oxford
Investment Group, Inc., a merchant banking and corporate
development firm located in Bloomfield Hills, Michigan. Mr.
Isakow is also a director of Ramco-Gershenson Properties
Trust and Oxford Automotive, Inc.
Mr. Isakow brings expertise in the areas of mergers and
acquisitions, strategic planning, accounting and finance in
multiple manufacturing and distribution industries.
PHOTO GEORGE R. MRKONIC. Mr. Mrkonic, age 45, has served as a
director of the Company since 1994. He is Vice Chairman of
Borders Group, Inc., a retailer of books and music located
in Ann Arbor, Michigan. From November 1994 to January 1997,
Mr. Mrkonic was also the President of Borders Group, Inc.
From November 1990 to November 1994, Mr. Mrkonic was
Executive Vice President, Specialty Retail Group at Kmart
Corporation, Troy, Michigan. Mr. Mrkonic is also a director
of Syntel, Inc. and Borders Group, Inc.
Strengths that Mr. Mrkonic brings to Champion's Board
include strategic vision, an operating mentality and a sense
of urgency.
PHOTO JOHNSON S. SAVARY. Mr. Savary, age 69, has served as a
director of the Company since 1979. He is Of Counsel at
Abel, Band, Russell, Collier, Pitchford & Gordon, Chartered,
attorneys, Sarasota, Florida. From July 1986 to November
1992, Mr. Savary was a partner of the law firm Dykema
Gossett, which provided legal services to the Company during
the past year.
Mr. Savary has 19 years of knowledge and experience as a
director of Champion and brings a legal perspective to the
Board.
</TABLE>
3
<PAGE> 7
<TABLE>
<C> <S>
PHOTO ROBERT L. STARK. Mr. Stark, age 64, has served as a director
of the Company since November 1996. In 1997 he retired as
the Dean of the University of Kansas Regents Center,
Overland Park, Kansas. From 1958 until his retirement in
March 1993, Mr. Stark served in various executive capacities
at Hallmark Cards, Inc., a worldwide manufacturer of
greeting cards and related products. Mr. Stark is a director
of Mercantile Bancorporation and Payless Shoe Source, Inc.
and a former director of Redman Industries, Inc.
Mr. Stark brings over 35 years of broad-based business
experience to Champion's Board including experience as Chief
Operating Officer of a multi-billion dollar corporation.
PHOTO CARL L. VALDISERRI. Mr. Valdiserri, age 61, has served as a
director of the Company since 1995. He is Chairman and Chief
Executive Officer of Rouge Industries, Inc., an integrated
steel manufacturer located in Dearborn, Michigan. Mr.
Valdiserri is also a director of Rouge Industries, Inc.
Mr. Valdiserri brings to the Board operating management
perspective and experience that was acquired through 39
years of progressively challenging assignments at several
integrated steel companies.
PHOTO WALTER R. YOUNG, JR. Mr. Young, age 53, has served as a
director of the Company since 1990. He is Chairman of the
Board of Directors, President and Chief Executive Officer of
the Company. Mr. Young was named President and Chief
Executive Officer in 1990 and became the Chairman of the
Board in 1992.
For 30 years in a variety of industries, Mr. Young has been
a performance-driven leader, who faces issues and is a
change catalyst and manager.
</TABLE>
4
<PAGE> 8
COMPENSATION OF DIRECTORS
ANNUAL STOCK RETAINER. Each Director who is not an employee of the Company
receives an annual retainer of 4,800 shares of the Company's Common Stock. A
non-employee Director who also serves as chairperson of a Board Committee
receives an additional annual retainer of 400 shares, for a total annual
retainer of 5,200 shares. The annual retainer is paid on the date of the Annual
Meeting when the non-employee Director is elected or re-elected. Non-employee
Directors do not receive any cash compensation for their services except for the
reimbursement of expenses to attend Board and Committee meetings and business
travel insurance purchased by the Company. The current stock retainer program
for non-employee Directors will continue through the Annual Meeting in 2000.
Directors who are employees of the Company receive no compensation for serving
as a Director other than their compensation for services as an employee.
STOCK OPTIONS. Each new non-employee Director receives a stock option grant
the first time he or she is elected at an Annual Meeting. The grant consists of
a 60-day right to purchase 8,000 shares of the Company's Common Stock and a
stock option to purchase 24,000 additional shares. The purchase right must be
exercised in full within 60 days after the grant date in order for the
non-employee Director to be eligible to exercise the stock option.
The exercise price of the purchase right is the higher of $0.50 per share
or 40% of the fair market value of the Common Stock on the grant date. The
exercise price of the option is one-third higher than the closing price of the
Common Stock on the New York Stock Exchange on the grant date. Shares received
by exercising the purchase right may not be transferred for two years after the
date of purchase. Once the purchase right is properly exercised, the stock
option becomes exercisable at the rate of 6,000 shares on each of the next four
annual meeting dates. The option remains exercisable for 10 years from the date
of grant even if the non-employee Director is no longer serving as a Director.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company meets regularly, at least once each
quarter. During 1997, the Board of Directors held seven meetings. The standing
committees established by the Board of Directors are described below. The Board
of Directors does not have a nominating committee.
AUDIT COMMITTEE. The primary function of the Audit Committee is to assist
the Board in fulfilling its oversight responsibilities by reviewing the
financial information provided to shareholders, the corporate accounting and
financial reporting practices, the systems of internal controls which management
and the Board have established and the audit process. The Committee also
recommends to the Board the selection of an independent auditor and reviews the
scope of the audit and related fees for audit services. The Audit Committee met
three times during 1997. The members of the Audit Committee are Robert W.
Anestis (Committee Chairman), Selwyn Isakow and Robert L. Stark.
COMPENSATION COMMITTEE. The primary function of the Compensation Committee
is to consider and make recommendations to the Board concerning the compensation
programs, benefits and awards for all elected officers of the Company, including
the Chief Executive Officer. The Compensation Committee develops and monitors
the executive compensation policies of the Company. The Committee also
recommends to the Board of Directors the nature and amount of compensation for
executive officers and senior
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<PAGE> 9
operating management of the Company and administers the Company's stock option
plans and programs. The Compensation Committee met seven times during 1997. The
members of the Compensation Committee are George R. Mrkonic (Committee
Chairman), Frank J. Feraco, Johnson S. Savary and Carl L. Valdiserri.
2. PROPOSAL TO AMEND THE 1995 STOCK OPTION
AND INCENTIVE PLAN
PROPOSED AMENDMENT
The Champion Enterprises, Inc. 1995 Stock Option and Incentive Plan ("1995
Plan") was approved by shareholders in 1995. As of February 28, 1998 there were
147,000 shares of Common Stock available for additional stock option grants,
stock awards and stock appreciation rights under the 1995 Plan. The Board of
Directors proposes that the number of shares available for issuance under the
1995 Plan be increased by an additional 1,900,000 shares.
REASONS FOR PROPOSED AMENDMENT
The Board has determined that additional shares need to be available for
grants and awards under the 1995 Plan. These grants and awards will be used for
incentives for executives and middle management employees and as inducements for
employment in connection with acquisitions, particularly in connection with the
Company's retail expansion program. The Board believes that these grants and
awards will help to attract, retain and reward key employees.
The Company has historically compensated executives and middle management
employees with stock options and awards, thus encouraging ownership in the
Company and aligning the interests of its employees with the interests of its
shareholders. Generally, employees will only benefit from awards under the 1995
Plan to the extent that shareholders also benefit. Base salaries of the
Company's executives and middle management employees have been slightly below
the mean of salaries for executives and middle management employees of
comparable companies in the industry and stock grants and awards are a
significant portion of overall compensation. Historically, stock options have
been the most common type of award under the 1995 Plan. As a policy, the Company
has significantly limited the use of restricted stock awards and does not
reprice options once the exercise price is determined. The Company uses
discounted options in a manner which it believes better aligns management's
interest with that of the shareholders by requiring that management employees
make a substantial personal investment in the Company through the exercise of
discounted options before the majority of the remaining options vest.
In addition, the Company has only a limited number of shares available to
be granted under other plans. Grants may no longer be made under the 1987 Stock
Option Plan, which expired during 1997. The other stock plans available for
employees are the 1990 Nonqualified Stock Option Program and the 1993 Middle
Management Stock Option Plan, which combined have only 234,000 shares reserved
for future grants.
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<PAGE> 10
SUMMARY OF THE 1995 PLAN
The 1995 Plan is an incentive compensation plan which provides for the
granting of stock options, stock appreciation rights ("SARs"), restricted stock,
performance share awards and annual incentive awards to key salaried employees
of the Company. The annual incentive awards are based on pre-established
objective performance goals. The 1995 Plan is administered by the Compensation
Committee of the Board of Directors. If the proposed amendment to the 1995 Plan
is approved, there will be 4,650,000 shares of Common Stock authorized under the
1995 Plan.
STOCK OPTIONS, SARS, RESTRICTED STOCK AND PERFORMANCE SHARES. Stock options
granted under the 1995 Plan may be either incentive stock options under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonqualified options. The exercise price for incentive stock options must be at
least the fair market value of the shares on the grant date. The exercise price
for nonqualified options may be less than fair market value. The 1995 Plan also
provides for the discretionary grant of SARs in tandem with stock options. The
Compensation Committee is also authorized to grant performance share awards and
shares of restricted Common Stock upon such terms and conditions as the
Committee may determine.
ANNUAL PERFORMANCE INCENTIVE AWARDS. Each year, the Compensation Committee
will (i) identify the executive officers who will be eligible to receive annual
incentive awards ("Eligible Employees"), (ii) determine a performance period,
and (iii) determine target levels of Company performance that must be achieved
by the Company for annual incentive awards ("Annual Incentive Awards") to be
paid under the 1995 Plan. At the end of each year, the Compensation Committee
will certify, in writing, the degree of achievement by the Company of the
performance targets and the amount of Annual Incentive Award which may be paid
to each Eligible Employee. If the Company fails to achieve a threshold
performance target applicable to an Eligible Employee, no Annual Incentive Award
will be paid to such Eligible Employee under the 1995 Plan for such year. Annual
Incentive Awards will be paid in cash and/or shares of Common Stock of the
Company, as determined by the Compensation Committee.
CODE SECTION 162(M). Section 162(m) of the Code denies a federal income tax
deduction for certain compensation in excess of $1,000,000 per year paid to the
Chief Executive Officer and the four other most highly-paid executive officers
of a publicly-traded corporation (the "Named Executive Officers"). Certain types
of compensation, including compensation based on performance goals, are excluded
from this deduction limit. All awards under the 1995 Plan paid to the Named
Executive Officers are intended to be deductible by the Company as performance
based compensation.
FEDERAL INCOME TAX CONSEQUENCES
Under the Code as now in effect, at the time an incentive stock option is
granted or exercised the optionee will not be deemed to receive any income and
the Company will not be entitled to any deduction. However, the difference
between the exercise price and the fair market value of the shares of the Common
Stock on the date of exercise is a tax preference item, which may subject the
optionee to the alternative minimum tax in the year of exercise. The holder of
an incentive stock option generally will be accorded capital gain or loss
treatment on the disposition of the Common Stock acquired by exercise of an
incentive stock option, provided the disposition occurs more than two years
after the date
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<PAGE> 11
of grant and more than one year after exercise. An optionee who disposes of
shares acquired upon exercise of an incentive stock option prior to the
expiration of the foregoing holding periods realizes ordinary income upon the
disposition equal to the difference between the exercise price and the lesser of
the fair market value of the shares on the date of exercise or the disposition
price. To the extent ordinary income is recognized by the optionee, the Company
may deduct a corresponding amount as compensation expense. Payment of the
exercise price by surrendering shares of Company Common Stock generally will not
result in the recognition of a capital gain or loss of the shares surrendered.
Upon the exercise of a nonqualified stock option, an optionee will
recognize ordinary income equal to the difference between the exercise price and
the fair market value of the Common Stock acquired at the time of exercise and
the Company will receive a corresponding deduction. Payment of the exercise
price by surrendering shares of Company Common Stock generally will not result
in the recognition of a capital gain or loss on the shares surrendered. When the
optionee disposes of the shares acquired by the exercise of the option, any
difference from the fair market value of the shares on the date of exercise will
be treated as capital gain or loss.
BOARD RECOMMENDATION
THE BOARD RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
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REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
Compensation policies for executive officers and senior operating
management are developed and monitored by the Compensation Committee of the
Board of Directors. The Committee recommends to the Board of Directors the
nature and amount of compensation for all executive officers. This Committee
consists of four independent directors who are neither officers nor employees of
the Company.
COMPENSATION POLICIES
The Company's executive compensation policies are designed to encourage and
reward executive efforts which create shareholder value through achievement of
corporate objectives and performance goals and, as a result, to align the
interests of executives with those of shareholders. More specifically, the
Company's compensation policies can be summarized as:
(a) annual base salaries should be targeted to be competitive, but slightly
below the mean of other companies of comparable size;
(b) annual incentive-based (at-risk) compensation should provide
opportunity for significant additional compensation based on improved
Company performance; and
(c) long-term incentive-based (at-risk) compensation should be used to
further link executive performance to shareholder interests, encourage
stock ownership in the Company and provide an incentive to create
long-term shareholder value.
The Committee from time to time uses an independent consultant to assist in
its review of compensation policies and to make recommendations. The consultant
has provided the Committee and the Board with nationwide compensation study
information covering senior executive officers from general manufacturing
companies with sales in a range comparable to those of the Company. This survey
includes several hundred companies throughout the United States. The Committee
also considers the executive compensation levels for a group of comparable
manufactured housing companies consisting of Clayton Homes, Inc., Fleetwood
Enterprises, Inc., and Oakwood Homes Corporation.
Each component of compensation (annual base salary, annual performance
incentives and long-term performance incentives) is described more fully below.
ANNUAL BASE SALARIES
Executive salaries are based on level of job responsibility, individual
performance and compensation data for comparable companies obtained from
consultant surveys and market surveys. Our objective is to target base salaries
to be competitive, but slightly below the mean of comparable companies.
ANNUAL PERFORMANCE INCENTIVES
Annual incentive-based compensation is provided primarily through cash
bonuses. Prior to each fiscal year, the Committee reviews and establishes
performance levels for executive officers. Bonus determinations for executive
officers are based upon achieving
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<PAGE> 13
pre-determined levels of earnings per share of the Company. The pre-determined
earnings per share levels are reviewed each year and adjusted as appropriate.
LONG-TERM PERFORMANCE INCENTIVES
Generally, stock options granted to executive officers as long-term
performance incentives are granted at exercise prices equal to fair market value
on the date of grant. In some circumstances, a portion of the stock options
granted to an executive officer (generally 20% of the grant) may be granted at
an exercise price below fair market value. The value of stock options is
dependent upon increases in the Company's share value. Stock options reward
executive officers to the extent that shareholders have also benefited. The
number of shares included in these awards is determined by the Compensation
Committee primarily based upon formulas provided by an independent consultant.
The formulas are derived from a nationwide data base and present executive
officer stock option award levels that are consistent with general industry
practices. The formulas are based upon the expected future value of the option
stock over a seven-year period at several assumed rates of stock price
appreciation.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Code limits to $1 million the corporate tax deduction
for compensation paid to certain executive officers unless the compensation is
based on non-discretionary, pre-established performance goals. The Committee
believes that both annual incentive bonuses and stock options granted as
long-term performance incentives meet the requirements for fully deductible
compensation under Section 162(m).
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee believes that the compensation of Walter R. Young, Jr.,
Chairman of the Board of Directors, President and Chief Executive Officer of the
Company, should be heavily influenced by Company performance. Both the annual
incentive and the long-term incentive components of his compensation are based
on achieving specified performance targets. The current CEO compensation program
was recommended by the Committee and approved by the Board of Directors in
August 1995 as an incentive for Mr. Young to remain with the Company through
August 2000. The program was developed with the assistance of an independent
consultant.
Mr. Young's base salary was $400,000 in 1997 and will increase to $450,000
in 1999. Based on the achievement of pre-determined 1997 earnings per share
targets Mr. Young received a cash bonus of $400,000 in February 1998 for 1997
fiscal year performance.
In 1995, as a long-term incentive, Mr. Young received options to purchase
1.5 million shares of Company Common Stock and a grant of 100,000 performance
shares of Common Stock. These stock awards are conditioned upon Mr. Young
remaining employed with the Company through August 2000 and keeping on deposit
with the Company 500,000 shares of Common Stock which he owns. Mr. Young is not
permitted to transfer the deposited shares until the respective stock awards
vest or expire or his employment is terminated, although he retains full
ownership and voting rights for the deposited shares.
Mr. Young is also not eligible to receive other long-term performance
incentives through August 2000.
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<PAGE> 14
The exercise price for the options is $8.50 per share, which was the fair
market value of the Common Stock on August 31, 1995 (after adjustment for the
Company's May 1996 stock split). The options do not vest unless Mr. Young
remains employed by the Company through August 2000, although one-half of the
options may vest on either August 31, 1998 or August 31, 1999 if specified stock
price appreciation targets are achieved within 60 days prior to such dates. The
options expire eight years after the grant date or three years after vesting,
whichever occurs first. The performance shares may not be transferred by Mr.
Young unless the Company's earnings per share grow at a rate at least equal to
the median of specified comparable companies during the period beginning January
1, 1996 and ending December 31, 1999. The specified companies are Clayton Homes,
Inc., Fleetwood Enterprises, Inc., Oakwood Homes Corporation, Skyline
Corporation, Cavalier Homes, Inc., Schult Homes Corporation, Liberty Homes, Inc.
and Supreme Industries, Inc.
George R. Mrkonic, Chairman
Frank J. Feraco
Johnson S. Savary
Carl L. Valdiserri
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<PAGE> 15
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning the
compensation of the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company for the last three years:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------- ------------
Securities All Other
Fiscal Underlying Compensation
Name and Principal Position Year Salary Bonus(3) Options(#) (8)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Walter R. Young, Jr. 1997 $400,000 $400,000 -- $ 2,100
Chairman, President and 1996 350,000 814,100 -- 1,373
Chief Executive Officer 1995 350,000 679,710 1,500,000 1,300
A. Jacqueline Dout 1997 240,000 120,000 -- 2,882
Executive Vice President 1996 226,668 279,120 -- 2,100
and Chief Financial Officer 1995 200,000 194,203 -- 817
Philip C. Surles 1997 185,250 259,305 200,000(6) 11,268
Chief Operating Officer 1996 101,000 348,843(4) 32,400 11,707
1995 75,375 203,711(4) 12,400 7,940
John J. Collins, Jr. 1997 158,340(1) 100,000(5) 100,000(7) --
Vice President, General 1996 -- -- -- --
Counsel and Secretary 1995 -- -- -- --
Richard P. Hevelhorst 1997 117,596 81,406 -- 2,672
Controller 1996 104,331 82,888 -- 463
1995 65,385(2) 32,175 20,000 --
</TABLE>
- -------------------------
(1) Mr. Collins joined the Company on March 3, 1997.
(2) Mr. Hevelhorst joined the Company on May 8, 1995.
(3) Bonus amounts are paid generally in February or March of the year following
the fiscal year in which they are earned.
(4) Mr. Surles' compensation amounts for 1995 and 1996 were as an executive
officer of Redman Industries, Inc. Mr. Surles' bonuses for 1995 and 1996
were paid quarterly.
(5) Includes $50,000 paid to Mr. Collins as a cash incentive to join the Company
in March 1997.
(6) Reflects options granted to Mr. Surles upon his appointment to the position
of Chief Operating Officer in May 1997.
(7) Reflects options granted to Mr. Collins as an inducement to join the Company
in March 1997.
(8) Reflects the contributions of the Company to the accounts of the named
executive officers under the Company's Saving Plan and, with respect to Mr.
Surles, contributions under the Savings and Retirement Plan for Employees of
Redman Industries and the Redman Restorative Plan. The Company has no
pension program nor does the Company provide vehicles for its executives.
12
<PAGE> 16
OPTION GRANTS IN LAST FISCAL PERIOD
The following table provides information about stock options granted to the
persons named in the Summary Compensation Table during the last fiscal year. The
table also shows projected hypothetical gains for the options over the full
option term, based on assumed annual compound rates of stock price appreciation
of 0%, 5% and 10%.
<TABLE>
<CAPTION>
Potential Realizable
Value at
Assumed Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------------- ----------------------------------
% of Total
Number of Options
Securities Granted To Market
Underlying Employees Exercise Price on
Options in Fiscal Price Grant Date Expiration
Name Granted(#) Year ($/Share) ($/Share) Date 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------- ----------------------------------
Philip C. Surles 20,000 3% $ 5.80 $14.50 8/12/97 $174,000 $ 176,384 $ 178,767
Philip C. Surles 20,000 3% 5.80 14.50 6/13/07 174,000 356,379 636,185
Philip C. Surles 160,000 22% 14.50 14.50 6/13/07 -- 1,459,036 3,697,483
John J. Collins, Jr. 10,000 1% 5.80 14.50 5/26/97 87,000 88,192 89,384
John J. Collins, Jr. 10,000 1% 5.80 14.50 3/27/07 87,000 178,190 318,093
John J. Collins, Jr. 80,000 11% 14.50 14.50 3/27/07 -- 729,518 1,848,741
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the pretax value
realized from the exercise of stock options during the last fiscal year and the
value of unexercised in-the-money options held at the end of the last fiscal
year by the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired Fiscal Year-End(#) at Fiscal Year-End($)(1)
On Exercise Value --------------------------- ---------------------------
Name (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter R. Young, Jr. 112,000 $735,000 -- 1,500,000 $ -- $18,375,000
A. Jacqueline Dout -- -- 240,000 120,000 3,692,250 1,732,500
Philip C. Surles 24,000 253,350 41,800 172,800 488,075 1,000,000
John J. Collins, Jr. 10,000 82,000 10,000 80,000 149,500 500,000
Richard P. Hevelhorst 1,000 6,313 5,400 9,600 70,538 125,400
</TABLE>
- -------------------------
(1) Assumes a market price of $20 3/4 per share, which was the last sale price
on the last trading day prior to the fiscal year-end.
13
<PAGE> 17
PERFORMANCE GRAPH
The graph below compares the cumulative, five-year shareholder returns on
the Company's Common Stock to the cumulative, five-year shareholder returns for
(i) the S&P 500 Stock Index, (ii) an index of current peer companies selected by
the Company, and (iii) an index of former peer companies selected by the Company
for use in its Proxy Statement for the 1997 Annual Meeting of Shareholders. The
current peer group is composed of seven publicly-held manufactured housing
companies. These companies were selected based on similarities in their products
and their competitive position in the industry. The companies comprising the
current peer group are American Homestar Corporation, Cavalier Homes, Inc.,
Clayton Homes, Inc., Fleetwood Enterprises, Inc., Oakwood Homes Corporation,
Palm Harbor Homes, Inc., and Skyline Corporation. The companies comprising the
former peer group are Cavalier Homes, Inc., Clayton Homes, Inc., Fleetwood
Homes, Inc., Liberty Homes, Inc., Oakwood Homes Corporation, Schult Homes
Corporation, Skyline Corporation, and Supreme Industries, Inc. Changes were made
in the composition of the peer group because of consolidation in the industry
resulting in certain companies becoming smaller or being acquired and other
companies expanding and becoming more comparable to the Company. In addition,
the Company is no longer active in the commercial vehicles business.
COMPARISON OF FIVE YEAR CUMULATIVE RETURNS*
AMONG CHAMPION ENTERPRISES, INC., S&P 500 INDEX AND PEER GROUP INDICES
<TABLE>
<CAPTION>
CHAMPION CURRENT FORMER
MEASUREMENT PERIOD ENTERPRISES, S&P 500 PEER PEER
(FISCAL YEAR COVERED) INC INDEX GROUP GROUP
<S> <C> <C> <C> <C>
12/92 100 100 100 100
12/93 167.85 110.08 111.29 111.35
12/94 290.48 111.53 93.33 93.86
12/95 588.08 153.45 146.57 145.86
12/96 742.86 188.68 149.79 143.32
12/97 783.31 251.63 207.39 198.67
</TABLE>
- -------------------------
* Assumes that the value of the investment in Champion Common Stock and each
index was $100 on December 31, 1992 and that all dividends were reinvested.
14
<PAGE> 18
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The Company has Change in Control Severance Agreements with each of Ms.
Dout and Messrs. Surles and Collins. Under each agreement, the executive will
receive a cash severance payment if his or her employment is terminated
following a "change in control" of the Company, as defined in the agreement. The
severance payment would be not less than 18 months salary at the time of
termination or an amount in excess of that as determined by the Board of
Directors.
EMPLOYMENT AGREEMENTS
MR. YOUNG. The Company has an Employment Agreement with Mr. Young which
terminates on April 30, 2001. Under this agreement, Mr. Young received an annual
salary of $350,000 in 1996, which increased to $400,000 in 1997 and will
increase to $450,000 in 1999. Mr. Young is also entitled to participate in all
benefit and incentive plans maintained by the Company.
If Mr. Young becomes physically or mentally unable to perform his duties
for six consecutive months, the Company may suspend payment of his salary until
he is able to resume his duties again. If Mr. Young is terminated without cause,
he is entitled to receive his salary for the remaining term of the agreement. If
Mr. Young terminates his employment upon a sale or a merger of the Company, he
is entitled to receive the amount of his annual salary in effect at the time of
termination. Upon termination of his employment, Mr. Young has the right to
require the Company to purchase his outstanding stock options on terms described
in his Employment Agreement. Upon termination of his employment, other than
termination by the Company without cause, Mr. Young is prohibited from competing
with the Company for two years after the date of termination.
MESSRS. SURLES AND COLLINS. The Company has letter agreements, dated May 1,
1997 and February 12, 1997, respectively, relating to the employment of Messrs.
Surles and Collins. The letter agreements provide for an initial annual salary
of $240,000 for Mr. Surles and $190,000 for Mr. Collins. Each of the executives
is entitled to participate in all benefit and incentive plans maintained by the
Company. The letter agreements also provide severance payments to each of the
executives in the event the Company terminates their respective employment
during the first three years of employment. The severance payment would be base
salary (including benefits) for 18 months or the number of months remaining
during such three year period if less than 18 months.
15
<PAGE> 19
ADDITIONAL INFORMATION
PRINCIPAL SHAREHOLDERS
The following table provides information about any person known by
management of the Company to have been the beneficial owner of more than five
percent of the Company's outstanding Common Stock as of January 3, 1998.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- ----------
<S> <C> <C>
Bankers Trust New York Corporation 6,997,719(1) 14.9%
One Bankers Trust Plaza
New York, New York 10006
Pioneering Management Corporation 4,710,000(2) 10.1%
60 State Street
Boston, MA 02109
Brinson Partners, Inc. 4,079,500(3) 8.7%
209 South LaSalle Street
Chicago, IL 60604
</TABLE>
- -------------------------
(1) As reported in the Schedule 13G, dated February 17, 1998, of Bankers Trust
New York Corporation received by the Company which reported beneficial
ownership of 438,616 shares, and the Schedule 13G, dated February 10, 1998,
of Alex. Brown Investment Management, LP, which is 50% indirectly owned by
Bankers Trust New York Corporation received by the Company which reported
beneficial ownership of 6,559,103 shares.
(2) As reported in the Schedule 13G, dated January 5, 1998, received by the
Company.
(3) As reported in the Schedule 13G, dated February 11, 1998, received by the
Company.
16
<PAGE> 20
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information about the beneficial ownership of
the Company's Common Stock by the Directors and executive officers of the
Company.
<TABLE>
<CAPTION>
As of January 3, 1998
----------------------------------
Number of
Shares
Beneficially Percent of
Owned(1) Class
------------ ----------
<S> <C> <C>
Robert W. Anestis........................................... 95,600 *
Frank J. Feraco............................................. 26,265 *
Selwyn Isakow............................................... 174,260(2) *
George R. Mrkonic........................................... 52,450 *
Johnson S. Savary........................................... 108,400(3) *
Robert L. Stark............................................. 34,745 *
Carl L. Valdiserri.......................................... 34,400 *
Walter R. Young, Jr......................................... 1,145,795(4) 2.46%
A. Jacqueline Dout.......................................... 260,000 *
Philip C. Surles............................................ 65,800 *
John J. Collins, Jr......................................... 26,000 *
Richard P. Hevelhorst....................................... 10,400 *
All (12 persons)............................................ 2,034,115 4.32%
</TABLE>
- -------------------------
* Less than 1%
(1) The number of shares shown in the table includes the following number of
shares which the person specified may acquire by exercising options which
were unexercised on January 3, 1998: Mr. Anestis, 48,000; Mr. Isakow,
48,000; Mr. Mrkonic, 18,000; Mr. Savary, 48,000; Mr. Valdiserri, 12,000; Ms.
Dout, 240,000; Mr. Surles, 41,800; Mr. Collins, 10,000; Mr. Hevelhorst,
5,400; and all directors and executive officers as a group, 471,200.
(2) Does not include 1,860 shares held by Mr. Isakow's children or 620 shares
held by The Isakow Foundation (a charitable foundation), of which voting and
investment power is shared by Mr. Isakow as a Trustee. Mr. Isakow disclaims
beneficial ownership of the shares held by his children and The Isakow
Foundation.
(3) Does not include 420,000 shares held by the Walter W. Clark Revocable Trust,
the voting power of which is shared by Mr. Savary as co-trustee. Mr. Savary
disclaims beneficial ownership of the shares held by such trust. Includes
3,000 shares held by Mr. Savary's wife as Trustee of the Savary Children's
Trust. Mr. Savary disclaims beneficial ownership of the shares held by his
wife as Trustee.
(4) Does not include 81,200 shares held by The Young Foundation (a charitable
foundation), the voting power of which is shared by Mr. Young as its
President. Mr. Young disclaims beneficial ownership of the shares held by
The Young Foundation.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the New York Stock Exchange. Officers, directors and greater
than ten percent shareholders are required by regulations of the SEC to furnish
the Company copies of all Section 16(a) forms they file.
Based solely on the Company's review of copies of such forms received by
it, or written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that its officers,
directors and greater than ten percent beneficial owners met all applicable
filing requirements during the last fiscal year.
17
<PAGE> 21
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has served as independent accountants for the Company
since 1961. Price Waterhouse LLP was selected by the Board of Directors to serve
as the Company's independent accountants for the current fiscal year (ending
January 2, 1999). It is anticipated that a representative of Price Waterhouse
LLP will be present at the meeting, will have an opportunity to make a
statement, and will respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Shareholder proposals to be presented at the 1999 Annual Meeting must be
received by the Company not later than November 22, 1998 if they are to be
included in the Company's Proxy Statement for the 1999 Annual Meeting. Such
proposals should be addressed to the Secretary at the Company's executive
offices. Shareholder proposals to be presented at the 1999 Annual Meeting or any
Special Meeting which are not to be included in the Company's Proxy Statement
for that meeting must be received by the Company not less than 60 nor more than
90 days before the date of the meeting or no later than 10 days after the day of
the public announcement of the date of the meeting in accordance with the
procedures contained in the Company's Bylaws.
OTHER MATTERS
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the Annual Meeting other than the matters
described in this Proxy Statement. However, if any other matters should come
before the meeting, the persons named in the proxy card intend to vote the proxy
in accordance with their judgment on such matters.
By Order of the Board of Directors,
John J. Collins, Jr.
Secretary
March 10, 1998
18
<PAGE> 22
Appendix - 1
CHAMPION ENTERPRISES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF CHAMPION ENTERPRISES, INC.
The undersigned hereby appoints Walter R. Young, Jr., and Johnson S. Savary, or
either of them, attorneys and proxies with power of substitution, to vote all
of the Common Stock of the undersigned in Champion Enterprises, Inc. at the
Annual Meeting of Shareholders of Champion Enterprises, Inc., to be held on
Tuesday, April 28, 1998 and at any adjournments thereof, as specified on the
reverse side of this proxy.
The undersigned acknowledges receipt of the Proxy Statement dated March 10,
1998 and the Annual Report for the fiscal year ended January 3, 1998, ratifies
everything that the proxies (or either of them or their substitutes) may
lawfully do or cause to be done under this proxy, and revokes all former
proxies.
If you are a participant in the Champion Enterprises, Inc. Savings Plan, this
proxy card will serve as a direction to the trustee under the plan as to how
the shares held for your account in the plan are to be voted.
IF YOU SIGN THIS PROXY WITHOUT MARKING ANY OVALS, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES, FOR THE PROPOSAL AND IN THE DISCRETION OF THE PROXIES ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
PLEASE DO NOT FOLD, STAPLE OR MUTILATE
<PAGE> 23
<TABLE>
CHAMPION ENTERPRISES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /x/
<S><C>
1. The election as directors of all nominees listed (except as
marked to the contrary below) Vote For All
Robert W. Anestis, Frank J. Feraco, Selwyn Isakow, For Withheld Except
George R. Mrkonic, Johnson S. Savary, Robert L. Stark, / / / / / /
Carl L. Valdiserri and Walter R. Young, Jr.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.)
- ------------------------------------------------------------------------
2. Proposal to amend the 1995 Stock Option and Incentive Plan For Against Abstain
(the "1995 Plan") to increase the number of shares of Common / / / / / /
Stock available for issuance under the 1995 Plan by 1,900,000 shares.
The Board of Directors recommends a vote FOR the Proposal.
3. In their discretion upon the transaction of such other business
as may properly come before the meeting.
Please sign this Proxy exactly as your name
appears hereon, date it, and return it
in the enclosed envelope. Joint owners should
each sign. If you are signing as guardian,
trustee, executor, administrator or attorney-
in-fact, please so indicate. Please also note
any address correction above.
_____________________________________________
(Signature)
_____________________________________________
(Signature)
Dated: ________________________________, 1998
</TABLE>
<PAGE> 24
APPENDIX-2
CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
I. GENERAL PROVISIONS
1.1 Establishment. On November 29, 1994, the Board of Directors
("Board") of Champion Enterprises, Inc. ("Corporation") adopted the Champion
Enterprises, Inc. 1995 Stock Option and Incentive Plan ("Plan"), subject to the
approval of shareholders at the Corporation's Annual Meeting on May 1, 1995.
1.2 Purpose. The purpose of the Plan is to promote the best interests
of the Corporation and its shareholders by encouraging Employees of the
Corporation and its Subsidiaries to acquire an ownership interest in the
Corporation through Options, Stock Appreciation Rights, Restricted Stock,
Performance Share Awards and Annual Incentive Awards, thus identifying their
interests with those of shareholders. It is the further purpose of the Plan to
permit the granting of Nonqualified Stock Options, Stock Appreciation Rights and
Annual Incentive Awards that will constitute performance based compensation, as
described in Section 162(m) of the Code, and regulations promulgated thereunder.
1.3 Definitions. As used in this Plan, the following terms have the
meaning described below:
(a) "Agreement" means the written agreement that sets forth the
terms of a Participant's Option, Stock Appreciation Right, Restricted Stock
Grant, Performance Share
Award or Annual Incentive Award.
(b) "Annual Incentive Award" means an award that is granted in
accordance with Article VI of the Plan.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Change in Control" means the occurrence of any of the
following events: (i) the acquisition of ownership by a person, firm or
corporation, or a group acting in concert, of fifty-one percent, or more, of the
outstanding Common Stock of the Corporation in a single transaction or a series
of related transactions within a one-year period; (ii) a sale of all or
substantially all of the assets of the Corporation to any person, firm or
corporation; or (iii) a merger or similar transaction between the Corporation
and another entity if shareholders of the Corporation do not own a majority of
the voting stock of the corporation surviving the transaction and a majority in
value of the total outstanding stock of such surviving corporation after the
transaction.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
1
<PAGE> 25
(f) "Committee" means the Compensation Committee of the
Corporation, which shall be comprised of two or more members of the Board.
(g) "Common Stock" means shares of the Corporation's authorized
common stock.
(h) "Corporation" means Champion Enterprises,
Inc., a Michigan corporation.
(i) "Disability" means total and permanent disability, as defined
in Code Section 22(e).
(j) "Employee" means a key salaried employee of the Corporation or
Subsidiary, who has an "employment relationship" with the Corporation or a
Subsidiary, as defined in Treasury Regulation 1.421-7(h), and the term
"employment" means employment with the Corporation, or a Subsidiary of the
Corporation.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time and any successor thereto.
(l) "Fair Market Value" means for purposes of determining the
value of Common Stock on the Grant Date, the Stock Exchange closing price of the
Corporation's Common Stock as reported in The Wall Street Journal for the Grant
Date. In the event that there were no Common Stock transactions on such date,
the Fair Market Value shall be determined as of the immediately preceding date
on which there were Common Stock transactions. Unless otherwise specified in the
Plan, "Fair Market Value" for purposes of determining the value of Common Stock
on the date of exercise means the Stock Exchange closing price of the
Corporation's Common Stock on the last date preceding the exercise on which
there were Common Stock transactions, as reported in The Wall Street Journal.
(m) "Grant Date" means, except as provided by the following
sentence, the date on which the Committee authorizes an individual Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award, or such later date as shall be designated by the Committee.
(n) "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code.
(o) "Nonqualified Stock Option" means an Option that is not
intended to constitute an Incentive Stock Option.
(p) "Option" means either an Incentive Stock Option or a
Nonqualified Stock Option.
(q) "Participant" means an Employee designated by the Committee
to participate in the Plan.
(r) "Performance Share Award" means a performance share award
that is granted in accordance with
2
<PAGE> 26
Article V of the plan.
(s) "Plan" means the Champion Enterprises, Inc.
1995 Stock Option and Incentive Plan, the terms of which are set
forth herein, and amendments thereto.
(t) "Restriction Period" means the period of time during which a
Participant's Restricted Stock grant is subject to restrictions and is
nontransferable.
(u) "Restricted Stock" means Common Stock that is subject to
restrictions.
(v) "Retirement" means termination of employment on or after the
attainment of age 65.
(w) "Stock Appreciation Right" means the right to receive a cash
or Common Stock payment from the Corporation upon the surrender of a tandem
Option, in accordance with Article III of the Plan.
(x) "Stock Exchange" means the New York Stock Exchange or, if the
Common Stock is not listed for trading on the New York Stock Exchange, such
other national securities exchange on which the largest number of shares of
Common Stock have been traded in the aggregate during the last 20 days before a
Grant Date or date on which an Option is exercised, whichever is applicable.
(y) "Subsidiary" means a corporation defined in Code Section
424(f).
1.4 Administration.
(a) The Plan shall be administered by the Committee. It is
intended that the directors appointed to serve on the Committee shall be
"disinterested persons" (within the meaning of Rule 16b-3 promulgated under the
Exchange Act) and "outside directors" (within the meaning of Code Section
162(m)); however, the mere fact that a Committee member shall fail to qualify
under either of these requirements shall not invalidate any award made by the
Committee if the award is otherwise validly made under the Plan. The members of
the Committee shall be appointed by, and may be changed at any time and from
time to time, at the discretion of the Board.
(b) The Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or its
administration with respect to any Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award granted under the
Plan shall be final and binding upon all Participants. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any grant or award hereunder.
1.5 Participants. Participants in the Plan shall be such Employees
(including Employees who are directors) of the
3
<PAGE> 27
Corporation and its Subsidiaries as the Committee in its sole discretion may
select from time to time. The Committee may grant Options, Stock Appreciation
Rights, Restricted Stock, Performance Share Awards and Annual Incentive Awards
to an individual upon the condition that the individual become an Employee of
the Corporation or of a Subsidiary, provided that the Option, Stock Appreciation
Right, Restricted Stock, Performance Share Award or Annual Incentive Award shall
be deemed to be granted only on the date that the individual becomes an
Employee.
1.6 Stock. The Corporation has reserved 325,000 shares of the
Corporation's Common Stock for issuance under the Plan. Shares subject to any
unexercised portion of a terminated, cancelled or expired Option, Stock
Appreciation Right, Restricted Stock grant or Performance Share Award granted
hereunder, and pursuant to which a Participant never acquired benefits of
ownership, including payment of a stock dividend (but excluding voting rights),
may again be subjected to grants and awards under the Plan, but shares
surrendered pursuant to the exercise of a Stock Appreciation Right are not
available for future grants and awards. All provisions in this Section 1.6 shall
be adjusted, as applicable, in accordance with Article VIII.
II. STOCK OPTIONS
2.1 Grant of Options. The Committee, at any time and from time to time,
subject to Section 9.7, may grant Options to such Employees and for such number
of shares of Common Stock as it shall designate. Provided, however, that no
Employee may be granted Options and Stock Appreciation Rights during any one
fiscal year to purchase more than 100,000 shares of Common Stock. Any
Participant may hold more than one Option under the Plan and any other Plan of
the Corporation or Subsidiary. The Committee shall determine the general terms
and conditions of exercise, including any applicable vesting requirements, which
shall be set forth in a Participant's Option Agreement. No Option granted
hereunder may be exercised after the tenth anniversary of the Grant Date. The
Committee may designate any Option granted as either an Incentive Stock Option
or a Nonqualified Stock Option, or the Committee may designate a portion of an
Option as an Incentive Stock Option or a Nonqualified Stock Option. At the
discretion of the Committee, an Option may be granted in tandem with a Stock
Appreciation Right. Nonqualified Stock Options are intended to satisfy the
requirements of Code Section 162(m) and the regulations promulgated hereunder.
2.2 Incentive Stock Options. Any Option intended to constitute an
Incentive Stock Option shall comply with the requirements of this Section 2.2 No
Incentive Stock Option shall be granted with an exercise price below its Fair
Market Value on the Grant Date or with an exercise term that extends beyond 10
years from the Grant Date. An Incentive Stock Option shall not be granted to any
Participant who owns (within the meaning of Code Section 424(d)) stock of the
Corporation or any Subsidiary possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation or a Subsidiary
4
<PAGE> 28
unless, at the Grant Date, the exercise price for the Option is at least 110% of
the Fair Market Value of the shares subject to the Option and the Option, by its
terms, is not exercisable more than 5 years after the Grant Date. The aggregate
Fair Market Value of the underlying Common Stock (determined at the Grant Date)
as to which Incentive Stock Options granted under the Plan (including a plan of
a Subsidiary) may first be exercised by a Participant in any one calendar year
shall not exceed $100,000. To the extent that an Option intended to constitute
an Incentive Stock Option shall violate the foregoing $100,000 limitation (or
any other limitation set forth in Code Section 422), the portion of the Option
that exceeds the $100,000 limitation (or violates any other Code Section 422
limitation) shall be deemed to constitute a Nonqualified Stock Option.
2.3 Option Price. The Committee shall determine the per share exercise
price for each Option granted under the Plan. The Committee, at its discretion,
may grant Nonqualified Stock Options with an exercise price below 100% of the
Fair Market Value of Common Stock on the Grant Date.
2.4 Payment for Option Shares.
(a) The purchase price for shares of Common Stock to be acquired
upon exercise of an Option granted hereunder shall be paid in full in cash or by
personal check, bank draft or money order at the time of exercise; provided,
however, that in lieu of such form of payment a Participant may pay such
purchase price in whole or in part by tendering shares of Common Stock, which
are freely owned and held by the Participant independent of any restrictions,
hypothecations or other encumbrances, duly endorsed for transfer (or with duly
executed stock powers attached), or in any combination of the above. Shares of
Common Stock surrendered upon exercise shall be valued at the Stock Exchange
closing price for the Corporation's Common Stock on the day prior to exercise,
as reported in The Wall Street Journal, and the certificate(s) for such shares,
duly endorsed for transfer or accompanied by appropriate stock powers, shall be
surrendered to the Corporation. Participants who are subject to short swing
profit restrictions under the Exchange Act and who exercise an Option by
tendering previously-acquired shares shall do so only in accordance with the
provisions of Rule 16b-3 of the Exchange Act.
(b) At the discretion of the Committee, as set forth in a
Participant's Option Agreement, any Option granted hereunder may be deemed
exercised by delivery to the Corporation of a properly executed exercise notice,
acceptable to the Corporation, together with irrevocable instructions to the
Participant's broker to deliver to the Corporation sufficient cash to pay the
exercise price and any applicable income and employment withholding taxes, in
accordance with a written agreement between the Corporation and the brokerage
firm ("cashless exercise procedure").
III. STOCK APPRECIATION RIGHTS
3.1 Grant of Stock Appreciation Rights. Stock
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Appreciation Rights may be granted, held and exercised in such form as set by
the Committee on an individual basis. A Stock Appreciation Right may be granted
to a Participant with respect to such number of shares of Common Stock of the
Corporation as the Committee may determine. The number of shares covered by the
Stock Appreciation Right shall not exceed the number of shares of stock which
the Participant could purchase upon the exercise of the related Option. Stock
Appreciation Rights are intended to satisfy the requirements of Code Section
162(m) and the regulations promulgated thereunder.
3.2 Exercise of Stock Appreciation Rights. A Stock Appreciation Right
shall be deemed exercised upon receipt by the Corporation of written notice of
exercise from the Participant. Except as permitted under Rule 16b-3, notice of
exercise of a Stock Appreciation Right by a participant subject to the insider
trading restrictions of Section 16(b) of the Securities Exchange Act of 1934,
shall be limited to the period beginning on the third day following the release
of the Corporation's quarterly or annual summary of earnings and ending on the
12th business day after such release. The exercise term of each Stock
Appreciation Right shall be limited to 10 years from its Grant Date or such
earlier period as set by the related Option. A Stock Appreciation Right shall be
exercisable only at such times and in such amounts as the related Option may be
exercised. A Stock Appreciation Right granted to a Participant subject to the
insider trading restrictions shall not be exercisable in whole or part during
the first six months of its term, unless the Participant dies or becomes
disabled during such six-month period.
3.3 Stock Appreciation Right Entitlement.
(a) Upon exercise of a Stock Appreciation Right, a Participant
shall be entitled to payment from the Corporation, in cash, shares, or partly in
each (as determined by the Committee in accordance with any applicable terms of
the Agreement), of an amount equal to the difference between--
(1) the Fair Market Value of the number of shares subject
to the Stock Appreciation Right on the exercise date, and
(2) the Option price of the associated Option multiplied by
the number of shares available under the Option.
(b) Notwithstanding paragraph (a) of this Section, upon exercise
of a Stock Appreciation Right the Participant shall be required to surrender the
associated Option.
3.4 Maximum Stock Appreciation Right Amount Per Share. The Committee
may, at its sole discretion, establish (at the time of grant) a maximum amount
per share which shall be payable upon the exercise of a Stock Appreciation
Right, expressed as a dollar amount or as a percentage or multiple of the Option
price of a related Option.
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IV. RESTRICTED STOCK
4.1 Grant of Restricted Stock. Subject to the terms and conditions of
the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under this Plan to such Employees and in such amounts as it
shall determine.
4.2 Restricted Stock Agreement. Each grant of Restricted Stock shall be
evidenced by a Restricted Stock Agreement that shall specify the terms of the
restrictions, including the restriction period, or periods, the number of
Restricted Stock shares subject to the grant, and such other provisions,
including performance goals, as the Committee shall determine.
4.3 Transferability. Except as provided in this Article IV of the Plan,
the shares of Restricted Stock granted hereunder may not be transferred,
pledged, assigned, or otherwise alienated or hypothecated until the termination
of the applicable Restriction Period or for such period of time as shall be
established by the Committee and as shall be specified in the Restricted Stock
Agreement, or upon the earlier satisfaction of other conditions as specified by
the Committee in its sole discretion and as set forth in the Restricted Stock
Agreement. All rights with respect to the Restricted Stock granted to an
Employee shall be exercisable during a Participant's lifetime only by the
Participant or the Participant's legal representative.
4.4 Other Restrictions. The Committee shall impose such other
restrictions on any shares of Restricted Stock granted under the Plan as it may
deem advisable including, without limitation, restrictions under applicable
Federal or State securities laws, and may legend the certificates representing
Restricted Stock to give appropriate notice of such restrictions.
4.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Sections 4.3 and 4.4, each certificate representing
shares of Restricted Stock shall bear the following legend:
The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law, is
subject to certain restrictions on transfer set forth in the Champion
Enterprises, Inc. 1995 Stock Option and Incentive Plan ("Plan"), rules
and administrative guidelines adopted pursuant to such Plan and a
Restricted Stock Agreement dated , . A copy of the Plan, such rules and
such Restricted Stock Agreement may be obtained from the General
Counsel of Champion Enterprises, Inc.
4.7 Removal of Restrictions. Except as otherwise provided in this
Article IV of the Plan, and subject to applicable federal and state securities
laws, shares covered by each Restricted Stock grant made under the Plan shall
become freely transferable by the Participant after the last day of the
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Restriction Period. Once the shares are released from the restrictions, the
Participant shall be entitled to have the legend required by Section 4.5 of the
Plan removed from the applicable Common Stock certificate. Provided further, the
Committee shall have the discretion to waive the applicable Restriction Period
with respect to all or any part of a Restricted Stock grant.
4.8 Voting Rights. During the Restriction Period, Participants holding
shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to the Restricted Stock.
4.9 Dividends and Other Distributions. During the Restriction Period, a
Participant shall be entitled to receive all dividends and other distributions
paid with respect to shares of Restricted Stock. If any dividends or
distributions are paid in shares of Common Stock during the Restriction Period,
the dividend or other distribution shares shall be subject to the same
restrictions on transferability as the shares of Restricted Stock with respect
to which they were paid.
V. PERFORMANCE SHARE AWARDS
5.1 Grant of Performance Share Awards. The Committee, at its
discretion, may grant Performance Share Awards to Employees of the Corporation
and its Subsidiaries and may determine, on an individual or group basis, the
performance goals to be attained pursuant to each Performance Share Award.
5.2 Terms of Performance Share Awards. In general, Performance Share
Awards shall consist of rights to receive cash, Common Stock or a combination of
each, if designated performance goals are achieved. The terms of a Participant's
Performance Share Award shall be set forth in his individual Performance Share
Agreement. Each Agreement shall specify the performance goals applicable to a
particular Employee or group of Employees, the period over which the targeted
goals are to be attained, the payment schedule if the goals are attained, and
any other terms, conditions and restrictions applicable to an individual
Performance Share Award and not inconsistent with the provisions of the Plan.
The Committee, at its discretion, may waive all or part of the conditions, goals
and restrictions applicable to the receipt of full or partial payment of a
Performance Share Award.
VI. ANNUAL INCENTIVE AWARDS
6.1 Grant of Annual Incentive Awards.
(a) The Committee, at its discretion, may grant Annual Incentive
Awards to such Employees as it may designate from time to time. Annual Incentive
Awards shall be based upon pre-established, objective performance goals that are
intended to satisfy the performance-based compensation requirements of Code
Section 162(m) and the regulations promulgated thereunder.
(b) The determination of Annual Incentive
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Awards for a given year shall be based upon the attainment of specified levels
of Corporation or Subsidiary performance as measured by any or all of the
following: earnings (as measured by net income, net income per share, operating
income or operating income per share), sales growth and market capitalization.
(c) For each fiscal year of the Corporation, the Committee shall
(i) select those Employees who shall be eligible to receive an Annual Incentive
Award, (ii) determine the performance period, which may be a one, two or three
fiscal year period, (iii) determine target levels of Corporation performance,
and (iv) determine the level of Annual Incentive Award to be paid to each
selected Employee upon the achievement of each performance level as provided
below. The target levels shall consist of a threshold level and, in such
instances as determined by the Committee, first, second and third target levels.
The Committee shall make the foregoing determinations prior to the commencement
of services to which an Annual Incentive Award relates (or within the
permissible time-period established under Code Section 162(m)) and while the
outcome of the performance goals and targets is uncertain.
(d) A Participant who is transferred, promoted or hired into a
position with the Corporation or a Subsidiary during a fiscal year who replaces
an Employee who was selected to receive an Annual Incentive Award automatically
shall receive an Annual Incentive Award that is prorated, based on the
Participant's full months of employment in such position during the fiscal year.
6.3 Attainment of Performance Targets.
(a) For each fiscal year, the Committee shall certify, in
writing: (i) the degree to which the Corporation has attained the performance
targets, and (ii) the amount of the Annual Incentive Award to be paid to each
selected Employee.
(b) Notwithstanding anything to the contrary herein, the
Committee may, in its discretion, reduce any Annual Incentive Award based on
such factors as may be determined by the Committee, including, without
limitation, a determination by the Committee that such a reduction is
appropriate: (i) in light of pay practices of competitors; or (ii) in light of
the Corporation's, a Subsidiary's or a selected Employee's:
(1) performance relative to competitors;
and
(2) performance with respect to the Corporation's strategic
business goals.
6.4 Payment of Annual Incentive Awards. An Annual Incentive Award shall
be paid only if (i) shareholders approve both the Plan and the preestablished
formula determined by the Committee; (ii) the Corporation achieves at least the
threshold performance level; and (iii) the Committee makes the certification
described in Section 6.3.
6.5 Annual Incentive Award Payment Forms.
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(a) Annual Incentive Awards shall be paid in cash and/or shares
of Common Stock of the Corporation, at the discretion of the Committee. Payments
shall be made within 30 days following (i) a certification by the Committee that
the performance targets were attained, and (ii) a determination by the Committee
that the amount of an Annual Incentive Award shall not be decreased in
accordance with Section 6.3. The aggregate maximum Annual Incentive Award that
may be earned by any Participant on behalf of any one fiscal year (calculated as
of the last day of the fiscal year for which the Annual Incentive Award is
earned) may not exceed the lesser of five times the Participant's base salary
for the fiscal year or $2,000,000.
(b) The amount of an Annual Incentive Award to be paid upon the
attainment of each targeted level of performance shall equal a percentage of
each Participant's base salary for the fiscal year, as determined by the
Committee.
VIII. TERMINATION OF EMPLOYMENT
7.1. Options and Stock Appreciation Rights.
(a) If, prior to the date that an Option or Stock Appreciation
Right first becomes exercisable, a Participant's employment is terminated for
any reason other than a Change in Control, the Participant's right to exercise
the Option or Stock Appreciation Right shall terminate and all rights thereunder
shall cease.
(b) If, on or after the date that an Option or Stock Appreciation
Right first becomes exercisable, a Participant's employment is terminated for
any reason other than death or Disability, the Participant shall have the right,
within the earlier of (i) the expiration of the Option or Stock Appreciation
Right, and (ii) three months after termination of employment, to exercise the
Option or Stock Appreciation Right to the extent that it was exercisable and
unexercised on the date of the Participant's termination of employment, subject
to any other limitation on the exercise of the Option or Stock Appreciation
Right in effect on the date of exercise. The Committee may designate in a
Participant's Agreement that an Option or Stock Appreciation Right shall
terminate at an earlier time than set forth above.
(c) If, on or after the date that an Option or Stock Appreciation
Right first becomes exercisable, a Participant dies while an Option or Stock
Appreciation Right is still exercisable, the person or persons to whom the
Option or Stock Appreciation Right shall have been transferred by will or by the
laws of descent and distribution, shall have the right within the exercise
period specified in the Participant's Agreement to exercise the Option or Stock
Appreciation Right to the extent that it was exercisable and unexercised on the
Participant's date of death, subject to any other limitation on exercise in
effect on the date of exercise. Provided, however, that the beneficial tax
treatment of an Incentive Stock Option may be forfeited if the Option is
exercised more than one year after a Participant's date of death.
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(d) If, on or after the date that an Option or Stock Appreciation
Right first becomes exercisable, a Participant terminates employment due to
Disability, the Participant shall have the right, within the earlier of (i) the
expiration of the Option or Stock Appreciation Right, and (ii) one year after
termination of employment, to exercise the Option or Stock Appreciation Right to
the extent that it was exercisable and unexercised on the date of the
Participant's termination of employment, subject to any other limitation on the
exercise of the Option or Stock Appreciation Right in effect on the date of
exercise. If the Participant dies after termination of employment while the
Option or Stock Appreciation Right is still exercisable, the Option or Stock
Appreciation Right shall be exercisable in accordance with the terms of
Subsection (c), above.
(e) The Committee, at the time of a Participant's termination of
employment, may accelerate a Participant's right to exercise an Option or extend
the exercise period of an Option or Stock Appreciation Right; provided, however
that the extension of the exercise period for an Incentive Stock Option may
cause such Option to forfeit its preferential tax treatment.
(f) Shares subject to Options and Stock Appreciation Rights that
are not exercised in accordance with the provisions of (a) through (f) above
shall expire and be forfeited by the Participant as of their expiration date and
shall become available for new grants and awards under the Plan as of such date.
7.2 Restricted Stock. If a Participant terminates employment for any
reason other than a Change in Control, the Participant's shares of Restricted
Stock still subject to the Restriction Period automatically shall expire and be
forfeited by the Participant and, subject to Section 1.6, shall be available for
new grants and awards under the Plan as of such termination date; provided,
however, that the Committee, in its sole discretion, may waive the restrictions
remaining on any or all shares of Restricted Stock and add such new restrictions
to such shares of Restricted Stock as it deems appropriate.
7.3 Performance Shares. Performance Share Awards shall expire and be
forfeited by a Participant upon the Participant's termination of employment for
any reason other than a Change in Control and such shares shall be available for
new grants and awards under the Plan as of such termination date; provided,
however, that the Committee, in its discretion, may waive all or part of the
conditions, goals and restrictions applicable to the receipt of full or partial
payment of a Performance Share Award.
7.4 Annual Incentive Awards.
(a) A Participant who has been granted an Annual Incentive Award
and terminates employment due to Retirement, Disability or death prior to the
end of the Corporation's fiscal year shall be entitled to a prorated payment of
the Annual Incentive Award, based on the number of
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full months of employment during the fiscal year. Any such prorated Annual
Incentive Award shall be paid at the same time as regular Annual Incentive
Awards or, in the event of the Participant's death, to the beneficiary
designated by the Participant.
(b) A Participant who has been granted an Annual Incentive Award
and resigns or is terminated for any reason (other than Retirement, Disability
or death), before the end of the Corporation's fiscal year for which the Annual
Incentive Award is to be paid, shall forfeit the right to an Annual Incentive
Award payment for that fiscal year.
7.5 Other Provisions. The transfer of an Employee from one corporation
to another among the Corporation and any of its Subsidiaries, or a leave of
absence under the leave policy of the Corporation or any of its Subsidiaries
shall not be a termination of employment for purposes of the Plan.
VIII. ADJUSTMENTS AND CHANGE IN CONTROL
8.1 Adjustments.
(a) The total amount of Common Stock for which Options, Stock
Appreciation Rights, Restricted Stock, Performance Share Awards and Annual
Incentive Awards may be issued under the Plan, and the number of shares subject
to any such grants or awards (both as to the number of shares of Common Stock
and the Option price), shall be adjusted pro rata for any increase or decrease
in the number of outstanding shares of Common Stock resulting from payment of a
stock dividend on Common Stock, a subdivision or combination of shares of Common
Stock, or a reclassification of Common Stock.
(b) The foregoing adjustments shall be made by the Committee. Any
such adjustment shall provide for the elimination of any fractional share which
might otherwise become subject to an Option, Stock Appreciation Right,
Restricted Stock grant, Performance Share Award or Annual Incentive Award.
8.2 Change in Control. Notwithstanding anything contained herein to the
contrary, upon a Change in Control, (i) any outstanding Option or Stock
Appreciation Right granted hereunder immediately shall become exercisable in
full, regardless of any installment provision applicable to such Option or Stock
Appreciation Right; (ii) the remaining Restriction Period on any Restricted
Stock granted hereunder immediately shall lapse and the shares shall become
fully transferable, subject to any applicable federal or state securities laws;
(iii) all performance goals and conditions shall be deemed to have been
satisfied and all restrictions shall lapse on any outstanding Performance Share
Awards, which immediately shall become payable in full; and (iv) for purposes of
Annual Incentive Awards, the determination of whether the performance targets
have been achieved shall be made as of the date of the Change in Control and
payments due should become immediately payable.
IX. MISCELLANEOUS
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9.1 Partial Exercise/Fractional Shares. The Committee may permit, and
shall establish procedures for, the partial exercise of Options and Stock
Appreciation Rights granted under the Plan. No fractional shares shall be issued
in connection with the exercise of a Stock Appreciation Right or payment of a
Performance Share Award or Annual Incentive Award; instead, the Fair Market
Value of the fractional shares shall be paid in cash, or at the discretion of
the Committee, the number of shares shall be rounded down to the nearest whole
number of shares and any fractional shares shall be disregarded.
9.2 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on the exercise of an Option or
Stock Appreciation Right (including, without limitation, the payment of the
right of the Committee to limit the time of exercise to specified periods), or
the grant of Restricted Stock or the payment of a Performance Share Award or
Annual Incentive Award, as may be required to satisfy the requirements of Rule
16b-3 of the Exchange Act.
9.3 Rights Prior to Issuance of Shares. No Participant shall have any
rights as a shareholder with respect to shares covered by an Option, Stock
Appreciation Right, Restricted Stock grant, Performance Share Award or Annual
Incentive Award until the issuance of a stock certificate for such shares. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date the certificate is issued.
9.4 Non-Assignability. No Option, Stock Appreciation Right, Restricted
Stock grant, Performance Share Award or Annual Incentive Award shall be
transferable by a Participant except by will or the laws of descent and
distribution. During the lifetime of a Participant, an Option or Stock
Appreciation Right shall be exercised only by the Participant. No transfer of an
Option, Stock Appreciation Right, Restricted Stock grant, Performance Share
Award or Annual Incentive Award by will or the laws of descent and distribution
shall be effective to bind the Corporation unless the Corporation shall have
been furnished with written notice thereof and a copy of the will or such
evidence as the Corporation may deem necessary to establish the validity of the
transfer and the acceptance by the transferee of the terms and conditions of the
Option, Stock Appreciation Right, Restricted Stock grant, Performance Share
Award or Annual Incentive Award.
9.5. Securities Laws.
(a) Anything to the contrary herein notwithstanding, the
Corporation's obligation to sell and deliver Common Stock pursuant to the
exercise of an Option or Stock Appreciation Right or deliver Common Stock
pursuant to a Restricted Stock grant, Performance Share Award or Annual
Incentive Award is subject to such compliance with federal and state laws, rules
and regulations applying to the authorization, issuance or sale of securities as
the Corporation deems necessary or advisable. The Corporation shall not be
required
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<PAGE> 37
to sell and deliver or issue Common Stock unless and until it receives
satisfactory assurance that the issuance or transfer of such shares shall not
violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934, or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or those of the Stock Exchange or any stock
exchange on which the Common Stock may be listed, the provisions of any state
laws governing the sale of securities, or that there has been compliance with
the provisions of such acts, rules, regulations and laws.
(b) The Committee may impose such restrictions on any shares of
Common Stock acquired pursuant to the exercise of an Option or Stock
Appreciation Right or the grant of Restricted Stock or the payment of a
Performance Share Award or Annual Incentive Award under the Plan as it may deem
advisable, including, without limitation, restrictions (i) under applicable
federal securities laws, (ii) under the requirements of the Stock Exchange or
any stock exchange or other recognized trading market upon which such shares of
Common Stock are then listed or traded, and (iii) under any blue sky or state
securities laws applicable to such shares. No shares shall be issued until
counsel for the Corporation has determined that the Corporation has complied
with all requirements under appropriate securities laws.
9.6 Withholding Taxes.
(a) The Corporation shall have the right to withhold from a
Participant's compensation or require a Participant to remit sufficient funds to
satisfy applicable withholding for income and employment taxes upon the exercise
of an Option or Stock Appreciation Right or the lapse of the Restriction Period
on a Restricted Stock grant or the payment of a Performance Share Award or
Annual Incentive Award. A Participant may make a written election to tender
previously-acquired shares of Common Stock or have shares of stock withheld from
the exercise, provided that the shares have an aggregate Fair Market Value
sufficient to satisfy in whole or in part the applicable withholding taxes. The
cashless exercise procedure of Section 2.4 may be utilized to satisfy the
withholding requirements related to the exercise of an Option. At no point shall
the Corporation withhold from the exercise an Option more shares than are
necessary to meet the established tax withholding requirements of federal, state
and local obligations.
(b) Except as permitted under Rule 16b-3 of the Exchange Act, a
Participant subject to the insider trading restrictions of Section 16(b) of the
Exchange Act may use Common Stock to satisfy the applicable withholding
requirements only if notice of election to exercise is given to the Committee
within the 10-day "window periods" set forth in Rule 16b-3, or such election is
made at least six months prior to the date on which the exercise of the Option
or Stock Appreciation Right, or the receipt of the Restricted Stock grant,
Performance Share Award or Annual Incentive Award becomes taxable. Any election
by a Participant to utilize Common Stock for withholding purposes is subject to
the discretion of the Committee.
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9.7 Termination and Amendment.
(a) The Board may terminate the Plan, or the granting of Options,
Stock Appreciation Rights, Restricted Stock, Performance Share Awards or Annual
Incentive Awards under the Plan, at any time. No new grants or awards shall be
made under the Plan after November 28, 2004.
(b) The Board may amend or modify the Plan at any time and from
time to time, but no amendment or modification, without the approval of the
shareholders of the Corporation, shall (i) materially increase the benefits
accruing to Participants under the Plan; (ii) increase the amount of Common
Stock for which grants and awards may be made under the Plan, except as
permitted under Sections 1.6 and 8.1; or (iii) change the provisions relating to
the eligibility of individuals to whom grants and awards may be made under the
Plan.
(c) No amendment, modification, or termination of the Plan shall
in any manner affect any Option, Stock Appreciation Right, Restricted Stock
Grant, Performance Share Award or Annual Incentive Award granted under the Plan
without the consent of the Participant holding the Option, Stock Appreciation
Right, Restricted Stock Grant, Performance Share Award or Annual Incentive
Award.
9.8 Effect on Employment. Neither the adoption of the Plan nor the
granting of any Option, Stock Appreciation Right, Restricted Stock, Performance
Share Award or Annual Incentive Award pursuant to the Plan shall be deemed to
create any right in any individual to be retained or continued in the employment
of the Corporation or a Subsidiary.
9.9 Use of Proceeds. The proceeds received from the sale of Common
Stock pursuant to the Plan will be used for general corporate purposes of the
Corporation.
9.10 Approval of Plan. The Plan shall be subject to the approval of the
holders of at least a majority of the Common Stock of the Corporation present
and entitled to vote at a meeting of shareholders of the Corporation held within
12 months after adoption of the Plan by the Board. No Option, Stock Appreciation
Right, Restricted Stock grant, Performance Share Award or Annual Incentive Award
granted under the Plan may be exercised in whole or in part unless the Plan has
been approved by the shareholders as provided herein. If not approved by
shareholders within 12 months after approval by the Board, the Plan and any
Options, Stock Appreciation Rights, Restricted Stock, Performance Share Awards
and Annual Incentive Awards granted under the Plan shall be rescinded.
IN WITNESS WHEREOF, this 1995 Stock Option and Incentive Plan has been
executed on behalf of the Corporation on this the day of , 1995.
CHAMPION ENTERPRISES, INC.
By:
Walter R. Young, Jr.
Chairman of the Board of Directors,
President and Chief Executive
Officer
BOARD APPROVAL: 11/29/94
SHAREHOLDER APPROVAL: 5/1/95
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FIRST AMENDMENT TO THE
CHAMPION ENTERPRISES, INC.
1995 STOCK OPTION AND INCENTIVE PLAN
Pursuant to resolutions adopted by the Board of Directors of Champion
Enterprises, Inc. ("Company") on August 11, 1995, and subject to shareholder
approval at the Company's next annual meeting, the 1995 Stock Option and
Incentive Plan ("Plan") is hereby amended effective August 31, 1995 as follows:
1. An additional 725,000 shares of the Company's Common Stock shall be
reserved for issuance under the Plan, and the first sentence of Section 1.6
"Stock," shall be amended and restated in its entirety to read as follows:
The Corporation has reserved 1,375,000 shares of the Corporation's Common
Stock for issuance under the Plan.
2. The annual cap on option shares that may be granted under the Plan shall
be increased to 750,000 shares, and the second sentence in Section 2.1 "Grant of
Options" shall be amended and restated in its entirety to read as follows:
Provided, however, that no Employee may be granted Options and Stock
Appreciation Rights during any one fiscal year to purchase more than
750,000 shares of Common Stock.
3. Article V, "Performance Share Awards is amended by the addition of
Section 5.3 "Performance Share Awards Granted Under Code Section 162(m)" to read
as follows:
5.3 Performance Share Awards Granted Under Code Section
162(m).
5.3 Performance Share Awards Granted Under Code Section 162(m). The
Committee, at its discretion, may designate certain Performance Share
Awards as granted pursuant to Code Section 162(m). Such Performance Share
Awards must comply with the following additional requirements, which
override any other provision set forth in this Article V:
5.3 Grant of Performance Share Awards.
(a) The Committee, at its discretion, may grant Code Section
162(m) Performance Share Awards based upon pre-established, objective
performance goals that are intended to satisfy the performance-based
compensation requirements of Code Section 162(m) and the regulations
promulgated thereunder. Further, at the discretion of the Committee, a
Performance Share Award also may be subject to goals and restrictions in
addition to the performance requirements.
(b) Each Code Section 162(m) Performance Share Award shall be
based upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or
all of the following: earnings (as measured by net income, net income per
share, operating income or operating income per share), sales growth and
market capitalization.
(c) For each designated performance period, the Committee shall
(i) select those Employees who shall be eligible to receive a Code Section
162(m) Performance Share Award, (ii) determine the performance period,
which may be a three, four, or five fiscal year period, (iii) determine the
target levels of Corporation or Subsidiary performance, and (iv) determine
the Performance Award to be paid to each selected Employee. The Committee
shall make the foregoing determinations prior to the commencement of
services to which a Performance Share Award relates (or within the
permissible time-period established under Code Section 162(m)) and while
the outcome of the performance goals and targets is uncertain.
(d) For each performance period, the Committee shall certify, in
writing: (i) if the Corporation has attained the performance targets, and
(ii) the cash or number of
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shares (or combination thereof) pursuant to the Performance Share Award
that shall be paid to each selected Employee (or the number of shares that
are to become freely transferable, if a Performance Share Award is granted
subject to attainment of the designated performance goals). The Committee,
may not waive all or part of the conditions, goals and restrictions
applicable to the receipt of full or partial payment of a Performance
Share Award.
(e) Code Section 162(m) Performance Share Awards may be granted in
two different forms, at the discretion of the Committee. Under one form,
the Employee shall receive a Performance Share Award that consists of a
legended certificate of Common Stock, restricted from transfer prior to the
satisfaction of the designated performance goals and restrictions, as
determined by the Committee and specified in the Employee's Agreement.
Prior to satisfaction of the performance goals and restrictions, the
Employee shall be entitled to vote the Performance Shares. Further, any
dividends paid on such shares during the performance/restriction period
automatically shall be reinvested on behalf of the Employee in additional
performance shares under the Plan, and such additional shares shall be
subject to the same performance goals and restrictions as the other shares
under the Performance Share Award. No shares under a Performance Share
Award shall become transferable until the Committee certifies in writing
that the performance goals and restrictions have been satisfied.
(f) Under the second form, the Employee shall receive an Agreement
from the Committee that specifies the performance goals and restrictions
that must be satisfied before the Company shall issue the payment, which
may be cash, a designated number of shares of Common Stock or a
combination of the two. Any certificate for shares under such form
of Performance Share Award shall be issued only after the Committee
certifies in writing that the performance goals and restrictions have
been satisfied.
(g) No Employee, in any one fiscal year of the Company, shall be
granted a Performance Share Award to receive more than 50,000 shares of
Common Stock.
(h) Except as provided in this Article V of the Plan, the shares
pursuant to a Performance Share Award granted hereunder may not be
transferred, pledged, assigned, or otherwise alienated or hypothecated
until the applicable performance targets and other restrictions are
satisfied, as shall be certified in writing by the Committee. All rights
with respect to a Performance Share Award granted hereunder shall apply
only to such Employee or the Employee's legal representative.
(i) In addition to any legends placed on certificates pursuant to
paragraph (h), each certificate representing shares under a Performance
Share Award shall bear the following legend:
The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary or by operation of law,
is subject to certain restrictions on transfer set forth in the
Champion Enterprises, Inc. 1995 Stock Option and Incentive Plan
("Plan"), rules and administrative guidelines adopted pursuant to
such Plan and a Performance Share Agreement dated A copy of the
Plan, such rules and such Performance Share Agreement may be obtained
from the General Counsel of Champion Enterprises, Inc.
(j) Except as otherwise provided in this Article V of the Plan, and
subject to applicable federal and state securities laws, shares covered by
each Performance Share Award made under the Plan shall become freely
transferable by the Employee after the Compensation Committee has certified
that the applicable performance targets and restrictions have been
satisfied. Once the shares are released from the restrictions, the Employee
shall be entitled to have the legend required by paragraph (i) removed from
the applicable Common Stock certificate.
4. Article IV, "Restricted Stock" is amended by the addition of Section
4.10 "Restricted Stock Awards granted Under Code Section 162(m)" to read as
follows:
4.10 Restricted Stock Awards Granted Under Code Section 162(m). The
Committee, at its discretion, may designate certain Restricted Stock Awards
as granted pursuant to Code Section 162(m). Such Restricted Stock Awards
must comply with the following additional requirements, which override any
other provision set forth in this Article IV:
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<PAGE> 41
(a) Each Code Section 162(m) Restricted Stock Award shall be based
upon pre-established, objective performance goals that are intended to
satisfy the performance-based compensation requirements of Code Section
162(m) and the regulations promulgated thereunder. Further, at the
discretion of the Committee, a Restricted Stock Award also may be subject
to goals and restrictions in addition to the performance requirements.
(b) Each Code Section 162(m) Restricted Stock Award shall be based
upon the attainment of specified levels of Corporation or Subsidiary
performance during a specified performance period, as measured by any or
all of the following: earnings (as measured by net income, net income per
share, operating income or operating income per share), sales growth and
market capitalization.
(c) For each designated performance period, the Committee shall (i)
select those Employees who shall be eligible to receive a Restricted Stock
Award, (ii) determine the performance period, which may be a three, four,
or five fiscal year period, (iii) determine the target levels of
Corporation or Subsidiary performance, and (iv) determine the number of
shares subject to a Restricted Stock Award to be paid to each selected
Employee. The Committee shall make the foregoing determinations prior to
the commencement of services to which a Restricted Stock Award relates (or
within the permissible time-period established under Code Section 162(m))
and while the outcome of the performance goals and targets is uncertain.
(d) For each performance period, the Committee shall certify, in
writing: (i) if the Corporation has attained the performance targets, and
(ii) the number of shares pursuant to the Restricted Stock Award that are
to become freely transferable. The Committee shall have no discretion to
waive all or part of the conditions, goals and restrictions applicable to
the receipt of full or partial payment of a Restricted Stock Award.
(e) Any dividends paid during the Restriction Period automatically
shall be reinvested on behalf of the Employee in additional shares of
Restricted Stock under the Plan, and such additional shares shall be
subject to the same performance goals and restrictions as the other shares
under the Restricted Stock Award. No shares under a Code Section 162(m)
Restricted Stock Award shall become transferable until the Committee
certifies in writing that the performance goals and restrictions have been
satisfied.
(f) No Employee, in any one fiscal year of the Company, shall be
granted a Code Section 162(m) Restricted Stock Award for more than 50,000
shares of Common Stock.
(g) Except as provided in this Article IV of the Plan, the shares
pursuant to a Restricted Stock Award granted hereunder may not be
transferred, pledged, assigned, or otherwise alienated or hypothecated
until the applicable performance targets and other restrictions are
satisfied, as shall be certified in writing by the Committee. All rights
with respect to a Performance Share Award granted hereunder shall apply
only to such Employee or the Employee's legal representative.
(h) Except as otherwise provided in this Article IV of the Plan, and
subject to applicable federal and state securities laws, shares covered by
each Restricted Stock Award made under the Plan shall become freely
transferable by the Employee after the Compensation Committee has certified
that the applicable performance targets and restrictions have been
satisfied. Once the shares are released from the restrictions, the Employee
shall be entitled to have the legend required by Section 4.5 of the Plan
removed from the applicable Common Stock certificate.
5. Section 7.2 of the Plan, entitled "Restricted Stock," shall be amended
with the addition of the following provision at the end of Section 7.2:
Notwithstanding the foregoing, the Committee shall not waive any
restrictions on a Code Section 162(m) Restricted Stock Grant, but the
Committee may include a provision in an Employee's Code Section 162(m)
Restricted Stock Agreement stating that upon the Employee's termination of
employment due to (i) death, (ii) Disability, or (iii) involuntary
termination by the Company without Cause prior to the attainment of the
associated performance goals and the termination of the Restriction Period,
that the performance goals and restrictions shall be deemed to have been
satisfied on a pro rata basis, so that the number of shares that become
freely transferable shall be based on the Employee's full number of months
of employment during the Restriction Period, and the Employee shall forfeit
the
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<PAGE> 42
remaining shares and his rights to such forefited shares shall
terminate in full.
6. Section 7.3 of the Plan shall be amended by the addition of the
following language at the end of Section 7.3:
Notwithstanding the foregoing, the Committee shall not waive any
restrictions on a Code Section 162(m) Performance Share Award, but the
Committee may include a provision in an Employee's Code Section 162(m)
Performance Share Award Agreement stating that upon the Employee's
termination of employment due to (i) death, (ii) Disability, or (iii)
involuntary termination by the Company without Cause prior to the
attainment of the associated performance goals and restrictions, that the
performance goals and restrictions shall be deemed to have been satisfied
on a pro rata basis, so that the number of shares that become freely
transferable shall be based on the Employee's full number of months of
employment during the employment period, and the Employee shall forfeit the
remaining shares and his rights to such forfeited shares shall terminate in
full.
7. Section 7.5 of the Plan shall be amended and restated in its entirety to
read as follows:
7.5 Other Provisions. The transfer of an Employee from one
corporation to another among the Corporation and any of its Subsidiaries,
or a leave of absence under the leave policy of the Corporation or any of
its Subsidiaries shall not be a termination of employment for purposes of
the Plan, unless a provision to the contrary is expressly stated by the
Committee in a Participant's Agreement issued under the Plan.
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