SOUTHERN ENERGY HOMES, INC.
Notice of 1998 Annual Meeting of Stockholders
May 20, 1998
To the Stockholders:
The 1998 Annual Meeting of the Stockholders of SOUTHERN ENERGY HOMES,
INC. will be held on Wednesday, May 20, 1998,at 10:00 A.M. at The Harbert
Center Library, 2019 4th Avenue North, Birmingham, Alabama,
for the following purposes:
1. To elect a Board of seven Directors, to serve
until the next annual meeting of stockholders and until
their successors shall be elected and qualified, as more
fully described in the accompanying Proxy Statement.
2. To Consider and act upon a proposal to amend the
Company's 1993 Stock Option Plan to (i) increase from
907,814 to 1,500,000 the number of shares of Common Stock
reserved for issuance thereunder and (ii) conform the Plan
to the provisions of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended.
3. To consider and act upon any other business which
may properly come before the meeting.
The Board of Directors has fixed the close of business on
April 1, 1998, as the record date for the meeting. All
stockholders of record on that date are entitled to notice
of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED WHETHER OR NOT YOU INTEND TO BE PRESENT AT
THE MEETING IN PERSON.
By order of the Board of
Directors
Keith W. Brown
Secretary
Addison, Alabama
April 20, 1998
SOUTHERN ENERGY HOMES, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with
the
solicitation of proxies by the Board of Directors of
Southern Energy Homes, Inc. ( the "Corporation")
for use at the 1998 Annual Meeting of Stockholders
to be held on Wednesday, May 20, 1998, at the time
and place set forth in the notice of the meeting,
and at any adjournments thereof. The approximate
date on which this Proxy Statement and form of proxy
are first being sent to stockholders is April 20,
1998.
If the enclosed proxy is properly executed and
returned, it will be voted in the manner directed by
the stockholder. If no instructions are specified
with respect to any particular matter to be acted
upon, proxies will be voted in favor thereof. Any
person giving the enclosed form of proxy has the
power to revoke
it by voting in person at the meeting, or by giving
written notice of revocation to the Secretary of the
Corporation at any time before the proxy is
exercised.
The holders of a majority in interest of all Common
Stock
issued, outstanding and entitled to vote are required
to be present in person or to be represented by proxy
at the meeting in order to constitute a quorum for
transaction of business. The election of the
nominees for Director will be decided by plurality
vote. Abstentions and "non-votes" are counted as
present in determining whether the quorum requirement
is satisfied. Abstentions and "non-votes" have the
same effect as votes against proposals presented to
stockholders other than election of directors.
Abstentions and "non-votes" will have no effect on
the election of directors. A "non-vote" occurs when
a nominee holding shares for a beneficial owner votes
on one proposal, but does not vote on another
proposal because the nominee does not have
discretionary voting power and has not received
instructions from the beneficial owner.
The Corporation will bear the cost of the
solicitation. It is expected that the solicitation
will be made primarily by mail, but regular employees
or representatives of the Corporation (none of whom
will receive any extra compensation for their
activities) may also solicit proxies by telephone,
telegraph and in person and arrange for brokerage
houses and other custodians, nominees and fiduciaries
to send proxies and proxy materials to their
principals at the expense of the Corporation.
The Corporation's principal executive offices
are located at Highway 41 North, Addison, Alabama
35540 and its telephone number is (205) 747-8589.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business
on
April 1, 1998 are entitled to notice of and to vote
at the meeting. On that date the Corporation had
outstanding and entitled to vote 15,573,476 shares of
Common Stock, par value $.0001 per share. Each
outstanding share of the Corporation's Common Stock
entitles the record holder to one vote.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Seven Directors of the Corporation are to be
elected to hold office until the next annual meeting
and until their successors shall be duly elected and
qualified. The persons named in the accompanying
proxy will vote, unless authority is withheld, for
the election of the seven nominees named below. If
any of such nominees should become unavailable for
election, which is not anticipated, the persons named
in the accompanying proxy will vote for such
substitutes as management may recommend. No nominee
is related to any other nominee or to any executive
officer of the Corporation or its subsidiaries,
except for Wendell L. Batchelor, who is the uncle of
Keith O. Holdbrooks, Executive Vice President and
Chief Operating Officer and Director of the
Corporation.
Year First
Elected a Position With the Corporation
Name of Nominee Age Director or Principal
Occupation During the Past Five
Years
Wendell L. Batchelor 55 1982 Chairman of the Corporation's
Board since 1996.
Since 1982,
President, Chief
Executive Officer
and a Director of
the Corporation.
Johnny R. Long 51 1982 Since 1982, Vice President of
the Corporation and a Director.
Keith O. Holdbrooks 37 1998 Director since 1998. Since
1996, Executive
Vice President and
Chief Operating
Officer of the
Corporation.
General Manager of
the Corporation's
Southern Homes
division from 1991
to 1996.
Keith W. Brown 43 1989 Chief Financial Officer of the
Corporation since
1982; Treasurer
since January 1993;
Secretary from 1982
to January 1993 and
from September 1993
to present; and a
Director since
1989.
Jonathan O. Lee 46 1989 Chairman of the Corporation's
Board of Directors
from 1989 to 1996.
President of a
private equity
investment firm,
Lee Capital
Holdings, since its
formation in 1980
(Now Lee Capital
Holdings, LLC).
Chairman of the
Board of Directors
of Globe
Metallurgical,
Inc., HSC
Hospitality, Inc.,
and Heritage
Consumer Products
LLC. Director of
First Security
Services
Corporation, PAR
Associates, Inc.,
Fesil ASA, and Hyde
Athletic
Industries, Inc.
Joseph J. Incandela 51 1993 Since June 1991, a Managing
Director of the
Thomas H. Lee
Company, a firm
engaged in
investment
activities, and a
consultant to the
Thomas H. Lee
Company since
November 1989.
Chairman of Amerace
Corporation from
1986 to 1989 and
Chief Executive
Officer of
Conductron
Corporation from
1983 to 1986.
Director of Morgan
Grenfell SmallCap
Mutual Fund.
Paul J. Evanson 56 1993 President of Florida Power and
Light Co. (FPL)
since January 1995.
From 1992 through
January 1995,
Senior Vice
President of
Finance and Chief
Financial Officer
of Florida Power
and Light Company
and Vice President
and Chief Financial
Officer of FPL
Group, Inc. From
1988 to 1992,
President and Chief
Operating Officer
of Lynch
Corporation, a
diversified
company with
interests in
telecommunications
, transportation
and manufacturing.
From 1986 to 1988,
Executive Vice
President of Moore
McCormack
Resources, Inc.
Director of Lynch
Corporation,
Florida Power and
Light Company, and
FPL Group, Inc.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During fiscal 1997, there were three meetings of the
Board
of Directors of the Corporation. All of the
directors attended at least 75% of the aggregate of
(i) the total number of meetings of the Board of
Directors and (ii) the total number of meetings held
by Committees of the Board of Directors on which they
served. The Board of Directors does not have a
Nominating Committee.
The Corporation pays Jonathan O. Lee, Joseph J.
Incandela and Paul J. Evanson $12,000 per annum, in
quarterly installments, for their attendance at and
participation in meetings of the Board of Directors
and its Committees. The Corporation currently has no
arrangement for the compensation of any of its other
Directors for their services on the Corporation's
Board of Directors or participation in Committees of
the Board of Directors. The Corporation does,
however, reimburse all Directors for any expenses
which they may incur in attending meetings of the
Board of Directors or its Committees. From 1989 to
1996, the Corporation had a Management Agreement
pursuant to which Lee Capital Holdings received
$150,000 per year for management and other consulting
services, plus reimbursement for certain expenses.
Jonathan O. Lee, a nominee for Director, was Chairman
of the Corporation's Board of Directors and is the
President of Lee Capital Holdings, LLC.
The Board of Directors has a Compensation Committee
whose
members are Jonathan O. Lee, Joseph J. Incandela and
Paul J. Evanson. The Compensation Committee
recommends to the Board of Directors compensation for
the Corporation's key employees. The Compensation
Committee met once in 1997.
The Board of Directors has a Stock Option
Committee, whose members are Jonathan O. Lee and Paul
J. Evanson, which administers the 1993 Stock Option
Plan. The Stock Option Committee met four times
during 1997.
The Corporation also has an Audit Committee whose
members
are Jonathan O. Lee, Joseph J. Incandela and Paul J.
Evanson.
The Audit Committee reviews with the Corporation's
independent accountants the scope of the audit for
the year, the results of the audit when completed and
the independent accountants' fee for services
performed. The Audit Committee also recommends
independent accountants to the Board of Directors and
reviews with the independent accountants the
Corporation's internal accounting controls and
financial management practices. During fiscal 1997,
there was one meeting of the Audit Committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth as of April 1,
1998 certain
information with respect to beneficial ownership of
the Corporation's Common Stock by: (i) each person
known by the Corporation to own beneficially more
than 5% of the Corporation's Common Stock; (ii) each
of the Corporation's directors, (iii) each of the
executive officers named in the Summary Compensation
Table elsewhere in this Proxy Statement; and (iv) all
directors and executive officers as a group. This
information is based upon information received from
or on behalf of the named individual. Unless
otherwise noted, each person identified possesses
sole voting and investment power over the shares
listed.
Amount and
Nature of
Name of Beneficial Percent of
Beneficial Owner Ownership (2) Class
Wendell L. Batchelor 893,946 5.6%
Johnny R. Long 780,003 4.9%
Lee Capital Holdings, LLC
Jonathan O. Lee (1) 355,134 2.2%
One International Place
Suite 3040
Boston, MA 02110
Keith W. Brown 194,430 1.2%
Keith O. Holdbrooks 94,501 *
Paul J. Evanson 21,500 *
Joseph J. Incandela 21,250 *
All executive officers and
directors as a group
(7 persons) 2,357,014 14.9%
__________________________
* Less than one percent
(1) All of such shares are owned by Lee
Capital Holdings,
LLC, a limited liability company of which Mr.
Lee is the Managing Member. Mr. Lee has sole
voting and investment power with respect to
such shares. Lee Capital Holdings has pledged
340,967 of its shares of Common Stock to Fleet
National Bank.
(2) Includes currently exercisable options to
purchase
78,779, 21,234, 73,216, 74,953, 11,250, 11,250
and 7,500 shares of common stock held by
Messrs. Batchelor, Long, Brown, Holdbrooks,
Evanson, Incandela, and Lee, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Corporation's Compensation Committee
currently consists of Messrs. Lee, Incandela and
Evanson. None of the members of the Compensation
Committee is an officer or employee of the Company
or any of its subsidiaries. Mr. Lee was formerly
Chairman of the Board of Directors of the Company.
EXECUTIVE COMPENSATION
The following table sets forth all compensation
awarded to, earned by or paid to the Corporation's
Chief Executive Officer
and each of the Corporation's Executive Officers
(other than the Chief Executive Officer) whose total
annual salary and bonus exceeded $100,000 for all
services rendered in all capacities to the
Corporation and its subsidiaries for the
Corporation's three fiscal years ended January 2,
1998.
SUMMARY COMPENSATION TABLE
Annual Compensation
Other Long-Term All Other
Name and Year Salary Bonus Annual Compensation Compensation
Principal Ended ($) ($) Compen Awards(4)($)
Position sation Securities
underlying
options
(#)(3)
Wendell L. 01/02/98 440,004 501,257 (2) 40,000 2,517
Batchelor
Chairman, 01/03/97 300,769(1) 556,331 (2) 20,029 2,277
President & CEO
12/29/95 120,000 364,506 (2) 18,750 -0-
Johnny R. Long
01/02/98 75,000 438,489 (2) None 770
Executive 01/03/97 77,404 486,789 (2) None 956
Vice 12/29/95 75,000 319,021 (2) 18,750 -0-
President
Keith W. Brown 01/02/98 135,000 438,809 (2) 40,000 1,202
Executive Vice- 01/03/97 109,904(1) 486,789 (2) 20,028 494
President,
Chief Financial 12/29/95 75,000 319,021 (2) 18,750 -0-
Officer,
Treasurer
and Secretary
Keith O. 01/02/98 150,000 438,809 (2) 40,000 525
Holdbrooks
Executive Vice- 01/03/97 75,962(1) 458,516 (2) 7,500 279
President,
and Chief 12/29/95 40,769 193,202 (2) 4,687 -0-
Operating
Officer
_______________
(1) Effective June 14, 1996, Mr. Batchelor's base salary was
increased from $10,000 to $36,667 per month, and Mr.
Brown's base salary was increased from $6,250 to
$11,250 per month. Effective October 1, 1996,
Mr. Holdbrooks' base salary was increased from
$4,167 to $12,500 per month.
(2) The aggregate amount of perquisites and other
personal benefits, securities or property did
not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus for the named
executive officer.
(3) Options granted to executive officers during the
periods were granted pursuant to the
Corporation's 1993 Stock Option Plan, and have
been adjusted for subsequent stock splits
through January 2, 1998.
(4) Includes the following for 1997: (i) matching
contributions made by the Corporation to its
401(k) plan during 1997 on behalf of each
executive officer as follows: Messrs.
Batchelor, Brown, Long and Holdbrooks, in the
amount of $525, $525, $525, and $525,
respectively; (ii) $1,992, $677,
and $245, which represents the portion of the
premium payment that is attributable to term
insurance coverage for Messrs. Batchelor,
Brown, and Long, respectively, as determined by
tables supplied by the Internal Revenue
Service.
Stock Option Plans
The following tables set forth certain information
with
respect to the stock options granted to the named
executive officers during the fiscal year ended
January 2, 1998 and the aggregate number and value
of options exercisable and unexercisable held by the
named executive officers at the end of such fiscal
year.
Option Grants In Last Fiscal Year
Individual Grants
Potential
Realizable Value
Number of at Assumed
Securities % of Annual Rates of
Underlying Total Stock Price
Options Options Appreciation For
Granted Granted Exercise Expiration Option Term (2)
Name to Price
(#) Fiscal $/Share Date 5%($) 10%($)
Year
Wendell L. 40,000(1) 21% 7.33 6/23/07 269,150 601,641
Batchelor
Johnny R. Long None(1) 0% -- -- -- --
Keith W. Brown 40,000(1) 21% 7.33 6/23/07 269,150 601,641
Keith O. 40,000(1) 21% 7.33 6/23/07 269,150 601,641
Holdbrooks
(1) Options are exercisable upon grant.
(2) The 0%, 5% and 10% assumed rates of annual compounded
stock price appreciation are mandated by the rules of
the Securities and Exchange Commission and do not
represent the Company's estimate or projection of
future Common Stock prices.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Value of
Shares Value Securities Unexercised In-
Acquired Realized Underlying the-Money
Name on Unexercised Options at
Exercise ($)(1) Options at 1/2/98($)(2)
(#) 1/2/98(#) Exercisable/Unex
Exercisable/ exercisable
Unexercisable
Wendell L. Batchelor -0- -0- 78,779/-0- 78,092/-0-
Johnny R. Long -0- -0- 18,750/-0- 21,234/-0-
Keith W. Brown -0- -0- 78,778/-0- 73,216/-0-
Keith O. Holdbrooks -0- -0- 84,999/-0- 80,261/-0-
(1) The "value realized" reflects the appreciation
on the date of exercise (based on the excess of
the fair market value of the shares on the date
of exercise over the exercise price). However,
because the executive officers may keep the
shares they acquired upon the exercise of the
options (or sell them at a different price),
these amounts do not necessarily reflect cash
realized upon the sale of those shares.
(2) Based on the closing price of the Company's
Common Stock on January 2, 1998 on the Nasdaq
National Market of $8.0625 minus the respective
option exercise prices.
Employment Agreements
The Corporation has entered into employment
agreements, dated as of June 8, 1989 and amended as
of July 1, 1993 and June 14, 1996, with each of
Wendell L. Batchelor and Keith W. Brown. The
Corporation also entered into an employment agreement
dated as of July 1, 1993 with Johnny R. Long. Mr.
Batchelor's agreement provides that he shall serve as
President and Chief Executive Officer of the
Corporation at a base salary of $36,667 per month. In
addition to his base salary, Mr. Batchelor is
entitled to receive monthly incentive bonus
compensation in an amount equal to 2% of the
Corporation's monthly net operating income before
interest expenses, taxes and amortization for
organizational expenses, goodwill and covenants not
to compete, and without reduction for any management
fees payable to Lee Capital Holdings ("Net Income").
Such bonus was approximately $501,257 for the year
ended January 2, 1998.
Mr. Long's agreement provides that he shall serve as
Vice
President in charge of purchasing of the Corporation
at a base salary of $6,250 per month. In addition to
his base salary, Mr. Long is entitled to receive
monthly incentive bonus compensation in an amount
equal to 1.75% of the Corporation's monthly Net
Income. Such bonus was approximately $438,489 for
the year ended January 2, 1998.
Mr. Brown's agreement provides that he shall
serve as Chief Financial Officer and Controller of
the Corporation at a base salary of $11,250 per
month. In addition to his base salary, Mr. Brown is
entitled to receive monthly bonus compensation
payable in an amount equal to 1.75% of the
Corporation's monthly Net Income. Such bonus was
approximately $438,809 for the year ended January 2,
1998.
Each of the employment agreements automatically
renews for successive one-year periods unless sooner
terminated by the specified executive or the
Corporation by notice not less than 90 days prior to
the date of renewal or by the Corporation immediately
for "cause" or for other than "cause" upon 30 days'
prior notice. Each of the employment agreements
provides for the payment of severance of up to six
months' base salary payable in six equal monthly
installments in the event the executive is terminated
by the Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
Since the Corporation became a public company on
March 12,
1993, its executive compensation program has been
administered by the Compensation Committee of the
Board of Directors (the "Committee"). No officers of
the Corporation are members of the Committee.
Since the Corporation's Executive Officers are
compensated pursuant to employment contracts, the
Committee's deliberations involve a determination as
to whether the contracts should be amended to change
the compensation or other terms thereof, and whether
to permit the contracts to automatically renew for
successive one year periods.
The compensation paid to executive officers
pursuant to the employment contracts consists of a
combination of base salaries and monthly bonuses.
The bonus compensation payable under the contracts is
tied to the Corporation's "net income" as defined
under the contracts and accordingly is intended to
reward the executive officers for improvements in the
Corporation's financial results. A significant
component of the executive officers' compensation is
the bonuses, and accordingly their compensation is in
large measure directly related to the financial
performance of the Corporation as measured by its net
income, as so defined. See "Executive Compensation -
Employment Agreements."
In its deliberations with respect to the review of
the
employment contracts, the Committee considered the
past performance of the officers, their level of
responsibilities, and the Committee's view of the
level of compensation necessary to attract and retain
talented individuals in the competitive environment
in which the Corporation operates. The Committee
assigned no particular weight to any one factor, and
viewed the deliberations as an exercise of subjective
judgment on the part of the Committee.
The executive officers of the Corporation are
eligible to
receive options under the Corporation's 1993 Stock
Option Plan. For the fiscal year ended January 2,
1998, options to purchase 120,000 shares were issued
to executive officers of the Corporation.
Compensation of Wendell Batchelor, Chairman,
President and Chief Executive Officer
The Committee established the compensation of Wendell
L.
Batchelor, President and Chief Executive Officer of
the Corporation for the fiscal year ended January 3,
1998, using the same criteria that were used to
determine the compensation of other executive
officers, as described above. Mr. Batchelor received
a salary of $440,004 and a bonus of $501,257 (2% of
Net Income) for the fiscal year ended January 2,
1998, in accordance with his employment agreement.
This bonus was intended to reward Mr. Batchelor for
his role in the performance by the Corporation. The
Corporation's net income for the year ended January
2, 1998 decreased 25% over net income for the year
ended January 3, 1997.
The foregoing report has been approved by all
members of the Committee.
COMPENSATION COMMITTEE
Jonathan O. Lee
Joseph J. Incandela
Paul J. Evanson
COMPARATIVE PERFORMANCE GRAPH
The following performance graph and table
compare the cumulative total return to shareholders
on the Corporation's Common Stock with the cumulative
total return of the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500 Index") and a peer group
(the "Peer Group") of companies selected by the
Corporation whose primary business is manufactured
housing. The Peer Group consists of the following
companies: Cavalier Homes, Inc., Cavco Industries,
Inc., Champion Enterprises, Inc., Clayton Homes,
Inc., Fleetwood Enterprises, Kit Manufacturing,
Liberty Homes - Class A, Nobility Homes, Inc.,
Oakwood Homes Corporation, Schult Homes Corp. and
Skyline Corporation. It should be noted that the
companies in the Peer Group are not perfectly
comparable to the Corporation. Certain of the
companies are either much larger or much smaller than
the Corporation; some are involved in the production
of manufactured housing and recreational vehicles;
and some are vertically integrated to a much greater
extent than the Corporation and engage, for instance,
in more significant retail sales and local
development activities.
The graph and the table assume $100.00 was
invested on March 12, 1993 in each of the
Corporation's Common Stock, the S&P 500 Index and in
the Peer Group and also assumes reinvestment of
dividends. The 1997 cumulative returns were as
follows:
Southern Energy Homes, Inc., $115.38; S&P 500 Index,
$243.63 and Peer Group, $213.91.
[COMPARATIVE GRAPH GOES HERE] COMPARISON OF CUMULATIVE RETURNS
Measurement Period
Base December December December December December
Company Name/Index Period
12 March 1993 1994 1995 1996 1997
93
Southern Energy 100 145.19 85.57 168.27 165.86 115.38
Homes, Inc.
S&P 500 Index 100 106.58 107.99 148.57 182.68 243.63
Peer Group 100 113.99 99.96 158.29 161.79 213.91
PROPOSAL NO. 2
PROPOSAL TO AMEND THE COMPANY'S
1993 STOCK OPTION PLAN
The purpose of the 1993 Stock Option Plan (the "1993
Plan")
is to encourage ownership of the stock of the Company by
employees and advisors of the Company and its
subsidiaries, to induce qualified personnel to enter
and remain in the employ of the Company or its
subsidiaries and otherwise to provide additional
incentives for option holders to promote the success
of the Company's business. The Board of Directors has
approved an amendment of the 1993 Plan, subject to
stockholder approval, to increase the number of shares
of Common Stock reserved for issuance thereunder from
907,814 to 1,500,000 shares.
The 1993 Plan, is administered by a committee
(the "Committee") consisting (1) solely of two or more
"non-employee" directors, as defined from time to time
in Rule 16b-3, or (2) the
Board of Directors of the Company. Generally, a "non-
employee" director under Rule 16b-3 means a director
who is not an employee of the issuer and who does not
receive compensation from the issuer, except as a
director. Subject to the terms of the 1993 Plan, the
Committee determines the persons to whom options are
granted, the number of shares covered by the option,
the term of any option, and the time during which any
option is exercisable. The options granted under the
1993 Plan generally vest over a period of two years to
three years.
Under the 1993 Plan, the Company may grant both
incentive
stock options intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as it may be
amended from time to time ("incentive stock options"),
and other options which are not qualified as incentive
stock options ("nonqualified stock options").
Incentive stock options may only be granted to persons
who are officers and key employees of the Company or
of any subsidiary. Nonqualified stock options may be
granted to persons who are officers, key employees and
advisors of the Company or of any of its subsidiaries.
Under the current terms of the 1993 Plan, members of
the Board of Directors who are members of the
Committee are not eligible to participate in the 1993
Plan.
There are approximately 40 persons who the Company
would
consider to be officers, key employees and advisors of
the Company and therefore eligible to participate in
the 1993 Plan.
Options under the 1993 Plan may not be granted
after January 13, 2003. No option under the 1993 Plan
may be exercised subsequent to ten years from the date
of grant (five years after the date of grant for
incentive stock options granted to holders of more
than 10% of the Company's Common Stock).
No incentive stock option granted pursuant to the
1993 Plan may be exercised more than three months
after the option holder ceases to be an employee of
the Company, except that in the event of death or
permanent and total disability of the option holder,
the option may be exercised for a period of up to one
year after the date of such death or permanent and
total disability.
Nonqualified stock options may be granted at an
exercise price greater or lower than the fair market
value of the Common Stock on the date of grant in the
discretion of the Committee. Incentive stock options,
however, may not be granted at less than the fair
market value of the Common Stock and may be granted to
holders of more than 10% of the Common Stock only at
an exercise price of at least 110% of the fair market
value of the Common Stock on the date of grant.
In order to assist an option holder in the acquisition
of
shares of Common Stock pursuant to the exercise of an
option granted under the 1993 Plan, the Committee may
authorize payment in cash, by delivery of shares of
Common Stock having a fair market value equal to the
purchase price of the shares, or any combination of
cash and stock.
Currently, a total of 907,814 shares of Common
Stock are reserved for issuance under the 1993 Plan,
subject to adjustment for recapitalization,
reclassification, stock split, stock combination,
stock dividend, or certain other corporate
reorganizations. Currently, a total of 300,869 shares
are available for issuance under the 1993 Plan, as
options to purchase 606,945 shares have previously
been granted. The Board of Directors has approved an
amendment to the 1993 Plan, subject to stockholder
approval, to increase the number of shares of
Common Stock available for issuance thereunder from
907,814 shares to 1,500,000 shares. Shares issued
under the 1993 Plan may include either authorized but
unissued shares of Common Stock or treasury shares.
Shares subject to an option that ceases to be
exercisable for any reason will be available for
subsequent option grants.
The Company has not granted any options under the
1993 Plan which are subject to stockholder approval of
the proposed amendment of the 1993 Plan.
As of April 9, 1998, options to purchase an aggregate
of
606,945 shares of Common Stock have been granted under
the 1993 Plan, including options to the named
executive officers as follows: 78,779 shares to
Wendell L. Batchelor, Chairman, President, Chief
Executive Officer, and a nominee for director, at an
average exercise price of $7.08, 78,778 shares to
Keith W. Brown, Executive Vice President, Chief
Financial Officer, Treasurer, Secretary, and a nominee
for director, at an average exercise price of $7.13,
18,750 shares to Johnny R. Long, Executive Vice
President and a nominee for director, at an average
exercise price of $6.93, and 84,999 shares to Keith 0.
Holdbrooks, Executive Vice President, Chief Operating
Officer and a nominee for director, at an average
exercise price of $7.12. As of April 9, 1998, options
to purchase an aggregate of 261,306 shares have been
granted under the 1993 Plan to all current executive
officers as a group, no options had been granted under
the 1993 Plan to directors who are not executive
officers, and options to purchase an aggregate of
345,639 shares have been granted to all employees,
including all current officers who are not executive
officers, as a group.
The closing price of the Company's Common Stock
on April 9, 1998 was $12.625.
Options granted under the 1993 Plan may not be
assigned or transferred except by will or the laws of
descent and distribution or pursuant to a "qualified
domestic relations order" as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
The Board of Directors may amend, suspend or
terminate the 1993 Plan; provided, however, that the
Board of Directors may not without stockholder
approval increase the number of shares of Common Stock
for which options may be granted, change the
designation of the class of persons eligible to
receive options, or make any other change in the 1993
Plan which requires stockholder approval under
applicable law, rules, or regulations, including any
approval requirement which is a prerequisite for
exemptive relief under Rule 16b-3, as it may be
amended from time to time.
Federal Income Tax Consequences of the 1993 Plan
The following general discussion of the Federal
income tax consequences of options granted under the
1993 Plan is based upon the provisions of the Internal
Revenue Code as in effect on the date hereof, current
regulations thereunder, and existing public and
private administrative rulings of the Internal Revenue
Service. This discussion is not intended to be a
complete discussion of all of the Federal income tax
consequences of the 1993 Plan or of all the
requirements which must be met in order to qualify for
the tax treatment described herein. Changes in the
law and regulations may modify the discussion, and in
some cases, the changes may be retroactive. No
information is
provided as to state tax laws. The 1993 Plan is not
qualified under Section 401 of the Code, nor is it
subject to the provisions of ERISA.
Incentive Stock Options Under the 1993 Plan. An
option holder generally will not recognize taxable
income upon either the grant or the exercise of an
incentive stock option. However, under certain
circumstances, there may be alternative minimum tax or
other tax consequences, as discussed below.
An option holder will recognize taxable income
upon the disposition of the shares received upon
exercise of an incentive stock option. Any gain
recognized upon the disposition that is not a
"disqualifying disposition" (as defined below) will be
taxable as long-term capital gain.
A "disqualifying disposition" means any disposition of
shares acquired on the exercise of an incentive stock
option within two years of the date the option was
granted or within one year of the date the shares were
issued to the option holder.
The use of shares acquired pursuant to the exercise of
an incentive stock option to pay the option price
under another incentive stock option is treated as a
disposition for this purpose. In general, if an
option holder makes a disqualifying disposition, an
amount equal to the excess of (i) the lesser of (a)
the fair market value of the shares on the date of
exercise, or (b) the amount actually realized over
(ii) the option exercise price will be taxable as
ordinary income and the balance of the gain
recognized, if any, will be taxable as either long-
term or short-term capital gain, depending on the
optionee's holding period for the shares. In the case
of gift or certain other transfers, the amount of
ordinary income taxable to the optionee is not limited
to the amount of gain which would be recognized in the
case of a sale. Instead, it is equal to the excess of
fair market value of the shares on the date of
exercise over the option exercise price.
Officers and directors of the Company generally
will be subject to Section 16(b) of the Securities
Exchange Act of 1934 ("Section 16(b)") upon the sale
of shares of Common Stock. In the case of a
disqualifying disposition of shares acquired pursuant
to the exercise of an incentive stock option, the date
on which the fair market value of the shares is
determined will be postponed. The IRS regulations
have not yet been amended to conform with the recently
revised rules under Section 16(b). However, it is
generally anticipated that the date of recognition
(the "Recognition Date") will be the earlier of (i)
six months after the date the option was granted, or
(ii) the first day on which the sale of the shares
would not subject the individual to liability under
Section 16(b). It is possible that the six month
period will instead run from the option holder's most
recent grant or purchase of Common Stock prior to his
or her exercise of the option. The option holder will
generally recognize ordinary taxable income on the
Recognition Date in an amount equal to the excess of
the fair market value of the shares at that time over
the exercise price. Despite these general rules, if
the Recognition Date is after the date of exercise,
then the option holder may make an election pursuant
to Section 83(b) of the Code. In this case, the
option holder will recognize ordinary taxable income
at the time the option is exercised and not on the
later date. In order to be effective, the 83(b)
election must be filed with the Company and the
Internal Revenue Service within 30 days of exercise.
In general, in the year an incentive stock option
is exercised, the holder must include the excess of
the fair market
value of the shares issued upon exercise over the
exercise price in the calculation of alternative
minimum taxable income. The application of the
alternative minimum tax rules for an option holder
subject to Section 16(b) or who receives shares that
are not "substantially divested" are more complex and
may depend upon whether the holder makes a Section
83(b) election as described above.
The Company will not be entitled to any deduction
with respect to the grant or exercise of an incentive
stock option provided the holder does not make a
disqualifying disposition.
If the option holder does make a disqualifying
disposition, the Company will generally be entitled to
a deduction for Federal income tax purposes in an
amount equal to the taxable income recognized by the
holder, provided the Company reports the income on a
Form W-2 or 1099, whichever is applicable, that is
timely provided to the option holder and filed with
the IRS.
Nonqualifying Stock Options Under the 1993 Plan.
The recipient of a nonqualifying stock option under
the 1993 Plan will not recognize any taxable income at
the time the option is granted.
Upon exercise, the option holder will generally
recognize ordinary taxable income in an amount equal
to the excess of the fair market value of the shares
on the date of exercise over the option exercise
price. Upon a subsequent sale of the shares, long-
term or short-term (depending on the holding period)
gain or loss will generally be recognized equal to the
difference between the amount realized and the fair
market value of the shares on the date of exercise.
If shares of Common Stock are used to pay the exercise
price, in whole or in part, the option holder will
recognize no gain or loss for Federal income tax
purposes on the shares surrendered, and the tax
consequences will be similar to the treatment that
applies in the case of a disqualifying disposition of
the shares. To the extent the shares acquired upon
exercise are equal in number to the shares
surrendered, the basis of the shares received will be
equal to the basis of the shares surrendered. The
basis of shares received in excess of the shares
surrendered upon exercise will be equal to the fair
market value of the shares on the date of exercise,
and the holding period for the shares received will
commence on that date.
The Company will generally be entitled to a
compensation deduction for Federal income tax purposes
in an amount equal to the taxable income recognized by
the option holder, provided the Company reports the
income on a Form W-2 or 1099, whichever is applicable,
that is timely provided to the option holder and filed
with the IRS.
Vote Required to amend the 1993 Plan.
An affirmative vote by the holders of a majority
of the outstanding Common Stock entitled to vote at
the annual meeting is required to adopt the proposal
to amend the 1993 Plan.
The Board of Directors recommends that the
stockholders vote "FOR" the proposed amendment to the
1993 Plan.
CERTAIN TRANSACTIONS
In January 1993, the Corporation reincorporated as a
Delaware corporation by merging its predecessor, an
Alabama corporation also known as Southern Energy
Homes, Inc. ("SEH
Alabama"), into the Corporation. As the surviving
corporation, the Corporation assumed all of the
obligations of SEH Alabama.
On June 8, 1989, Lee Capital Holdings, then a
Massachusetts general partnership (now Lee Capital
Holdings, LLC), and two of its employees (the "Lee
Group"), acquired 60% of the outstanding capital stock
of SEH Alabama in a leveraged buyout (the
"Acquisition"). The Acquisition was effected through
the purchase of the stock of SEH Alabama by a newly
formed corporation, SEH Acquisition Corp., 60% of
which was owned by the Lee Group and 40% of which was
owned by certain stockholders and members of SEH
Alabama's management group.
In 1989, the Corporation entered into a
Management Agreement pursuant to which Lee Capital
Holdings received, until May 1996, $150,000 per year
for management and other consulting services plus
reimbursement for certain expenses. See "Compensation
Committee Interlocks and Insider Participation."
Since March 30, 1991, the Corporation has sold
homes to a development company which has developed a
residential subdivision in Gardendale, Alabama. This
development company was until
December, 1995 controlled by Wendell L. Batchelor and
his brotherin-law, Clinton O. Holdbrooks. In December
of 1995, Wendell L. Batchelor transferred his one-
third interest in the development company to his two
children, and Clinton O. Holdbrooks
transferred his one-third interest in the development
company to his two children, one of whom is Keith O.
Holdbrooks, Executive Vice President, Chief Operating
Officer and Director of the Corporation. For the
fiscal year ended January 2, 1998, sales to this
development company were approximately $273,000.
Transactions with the development company have been
at prices and on terms no less favorable to the
Corporation than transactions with independent third
parties.
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur
Andersen LLP as independent public accountants to
examine the consolidated financial statements of the
Corporation and its subsidiaries for the fiscal year
ended January 1, 1999.
A representative of Arthur Andersen LLP is expected
to be
present at the meeting and will have the opportunity
to make a statement if he or she so desires and to
respond to appropriate questions. The engagement of
Arthur Andersen LLP was approved by the Board of
Directors at the recommendation of the Audit
Committee of the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of
1934 requires the Corporation's officers and
Directors and persons owning more than 10% of the
outstanding Common Stock of the Corporation to file
reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers,
Directors and greater than 10% holders of Common
Stock are required by SEC regulation to furnish the
Corporation with copies of all Section 16(a) forms
they file.
Based solely on copies of such forms furnished
as provided above, or written representations that no
Forms 5 were required, the Corporation believes that
during the year ended January 2, 1998, all Section
16(a) filing requirements applicable to its
officers, Directors and owners of greater than 10% of
its Common Stock were complied with, except as
follows: Keith O. Holdbrooks, Executive Vice
President and Chief Operating Officer, filed a Form
4, Statement of Changes Beneficial of Ownership of
Securities, to report three transactions which should
have been reported on an earlier Form 4.
DEADLINES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and
Exchange
Commission, any proposal submitted for inclusion in
the Corporation's Proxy Statement relating to the
Annual Meeting of Stockholders to be held in 1998
must be received at the Corporation's principal
executive offices in Addison, Alabama on or before
January 12, 1997. Receipt by the Corporation of any
such proposal from a qualified stockholder in a
timely manner will not ensure its inclusion in the
proxy material because there are other requirements
in the proxy rules for such inclusion.
OTHER MATTERS
Management knows of no matters which may
properly be and are likely to be brought before the
meeting other than the matters discussed herein.
However, if any other matters properly come before
the meeting, the persons named in the enclosed proxy
will vote in accordance with their best judgment.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement has been
or will be specifically incorporated by reference
into any filing by the Corporation under the
Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, the sections of the
Proxy Statement entitled "Compensation Committee
Report on Executive Compensation" and "Comparative
Performance Graph" shall not be deemed to be so
incorporated, unless specifically otherwise provided
in any such filing.
10-K REPORT
THE CORPORATION WILL PROVIDE EACH BENEFICIAL OWNER OF
ITS
SECURITIES WITH A COPY OF AN ANNUAL REPORT ON FORM 10-
K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES
THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION FOR THE CORPORATION'S MOST RECENT
FISCAL YEAR, WITHOUT CHARGE, UPON RECEIPT OF A
WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST
SHOULD BE SENT TO KEITH W. BROWN, SOUTHERN ENERGY
HOMES, INC., HIGHWAY 41 NORTH, ADDISON, ALABAMA
35540.
VOTING PROXIES
The Board of Directors recommends an affirmative
vote on all proposals specified. Proxies will be
voted as specified. If signed proxies are returned
without specifying an affirmative or negative vote on
any proposal, the shares represented by such proxies
will be voted in favor of the Board of Directors'
recommendations.
By order of the
Board of Directors
Keith W. Brown,
Secretary Addison, Alabama
April 20, 1998
APPENDIX 1
SOUTHERN ENERGY HOMES, INC.
1993 AMENDED AND RESTATED STOCK OPTION PLAN
1. Purpose of the Plan.
This stock option plan (the "Plan") is intended to
encourage ownership of the stock of Southern Energy
Homes, Inc. (the "Company") by employees and advisors
of the Company and its subsidiaries, to induce
qualified personnel to enter and remain in the employ
of the Company or its subsidiaries and otherwise to
provide additional incentive for optionees to promote
the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the
authorized but unissued or Treasury shares of the
common stock, $.0001 par value, of the
Company ("Common Stock") for which options may be
granted under the Plan shall not exceed One Million
Five Hundred Thousand (1,500,000) shares, subject to
adjustment as provided in Section 12 hereof.
(b) If an option granted or assumed hereunder shall
expire or terminate for any reason without having
been exercised in full, the unpurchased shares
subject thereto shall again be available for
subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option
granted under the Plan may be subject to such
restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee
(as constituted and described in Section 3 hereof).
3. Administration of the Plan.
The Plan shall be administered by the Board of
Directors or by a Committee of the Board of Directors
consisting solely of two or more "non-employee
directors," as defined from time to time in Rule 16b-
3 promulgated under the Securities Exchange Act of
1934, who shall be designated by the Board of
Directors of the Company (the administering body is
hereafter referred to as the "Committee"). The Board
of Directors may from time to time appoint a member
or members of the Committee in substitution for or in
addition to the member or members then in office and
may fill vacancies on the Committee however caused.
The Committee shall choose one of its members as
Chairman and shall hold meetings at such times and
places as it shall deem advisable. A majority of the
members of the Committee shall constitute a quorum
and any action may be taken by a majority of those
present and voting at any meeting. Any action may
also be taken without the necessity of a meeting by a
written instrument signed by a majority of the
Committee. The decision of the Committee as to all
questions of interpretation and application of the
Plan shall be final, binding and conclusive on all
persons. The Committee shall have the authority to
adopt, amend and rescind such rules and regulations
as, in its opinion, may be advisable in the
administration of the Plan. The Committee may
correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any
option agreement granted hereunder in the manner and
to the extent it shall deem expedient to carry the
Plan into effect and shall be the sole and final
judge of such expediency. No Committee member shall
be liable for any action or determination made in
good faith.
4. Type of Options.
Options granted pursuant to the Plan shall be
authorized by action of the Committee of the Company
and may be designated as either incentive stock
options meeting the requirements of Section 422 of
the Internal Revenue Code of 1986 (the "Code") or non-
qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the
designation
to be in the sole discretion of the Committee.
5. Eligibility.
Options designated as incentive stock options may be
granted only to officers and key employees of the
Company or of any subsidiary corporation (herein
called "subsidiary" or "subsidiaries"), as defined in
Section 424 of the Code and the Treasury Regulations
promulgated thereunder. Options designated as non-
qualified options may be granted to officers, key
employees and advisors of the Company or of any of
its subsidiaries.
In determining the eligibility of an individual or
person to be granted an option, as well as in
determining the number of shares to be optioned to
any individual or person, the Committee shall take
into account the position and responsibilities of the
individual or person being considered, the nature and
value to the Company or its subsidiaries of his or
her or its service and accomplishments, his or her or
its present and potential contribution to the success
of the Company or its subsidiaries, and such other
factors as the Committee may deem relevant.
No option designated as an incentive stock option
shall be granted to any employee of the Company or
any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing
more than 10% of the voting power or more than 10% of
the value of all classes of stock of the Company or a
parent or a subsidiary, unless the purchase price for
the stock under such option shall be at least 110% of
its fair market value at the time such option is
granted and the option, by its terms, shall not be
exercisable more than five years from the date it is
granted. In determining the stock ownership under
this paragraph, the provisions of Section 424(d) of
the Code shall be controlling. In determining the
fair market value under this paragraph, the
provisions of Section 7 hereof shall apply.
6. Option Agreement.
Each option shall be evidenced by an option agreement
(the "Agreement") duly executed on behalf of the
Company and by the optionee to whom such option is
granted, which Agreement shall comply with and be
subject to the terms and conditions of the Plan. The
Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the
Plan as may be determined by the Committee, provided
that options designated as incentive stock options
shall meet all of the conditions for incentive stock
options as defined in Section 422 of the Code. The
date of grant of an option shall be as determined by
the Committee. More than one option may be granted
to an individual or person.
7. Option Price.
The option price or prices of shares of the Company's
Common Stock for options designated as non-qualified
stock options shall be as determined by the
Committee. The option price or prices of shares of
the Company's Common Stock for incentive stock
options shall be the fair market value of such Common
Stock at the time the option is granted as determined
by the Committee in accordance with the Treasury
Regulations promulgated under Section 422 of the
Code. If such shares are then listed on any national
securities exchange, the fair market value shall be
the mean between the high and low sales prices, if
any, on the largest such exchange on the date of the
grant of the option or, if none, shall be determined
by taking a weighted average of the means between the
highest and lowest sales prices on the nearest date
before and the nearest date after the date of grant
in accordance with Treasury Regulations Section
25.2512-2. If the shares are not then listed on any
such exchange, the fair market value of such shares
shall be the mean between the high and low sales
prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation
System National Market System ("NASDAQ/NMS") for the
date of the grant of the option,
or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest
sales on the nearest date before and the nearest date
after the date of grant in accordance with Treasury
Regulations Section 25.2512-2. If the shares are not
then either listed on any such exchange or quoted in
NASDAQ/NMS, the fair market value shall be the mean
between the average of the "Bid" and the average of
the "Ask" prices, if any, as reported in the National
Daily Quotation Service for the date of the grant of
the option, or, if none, shall be determined by
taking a weighted average of the means between the
highest and lowest sales prices on the nearest date
before and the nearest date after the date of grant
in accordance with Treasury Regulations Section
25.2512-2. If the fair market value cannot be
determined under the preceding three sentences, it
shall be determined in good faith by the Committee.
8. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide
for the payment of the exercise price by delivery of
(i) cash or a check payable
to the order of the Company in an amount equal to the
exercise price of such options, (ii) shares of Common
Stock of the Company owned by the optionee having a
fair market value equal in amount to the exercise
price of the options being exercised, or (iii) any
combination of (i) and (ii), provided, however, that
payment of the exercise price by delivery of shares
of Common Stock of the Company owned by such optionee
may be made only under such circumstances and on such
terms as may from time to time be established by the
Committee. The fair market value of any shares of
the Company's Common Stock which may be delivered
upon exercise of an option shall be determined by the
Committee in accordance with Section 7 hereof. With
the consent of the Committee, payment may also be
made by delivery of a properly executed exercise
notice to the Company, together with a copy of
irrevocable instruments to a broker to deliver
promptly to the Company the amount of sale or loan
proceeds to pay the exercise price. To facilitate
the foregoing, the Company may enter into agreements
for coordinated procedures with one or more brokerage
firms.
(b) To the extent that the right to purchase shares
under an option has accrued and is in effect, options
may be exercised in full at one time or in part from
time to time, by giving written notice, signed by the
person or persons exercising the option, to the
Company, stating the number of shares with respect to
which the option is being exercised, accompanied by
payment in full for such shares as provided in
subparagraph (a) above. Upon such exercise, delivery
of a certificate for paid-up non-assessable shares
shall be made at the principal office of the Company
to the person or persons exercising the option at
such time, during ordinary business hours, not more
than thirty (30) days from the date of receipt of the
notice by the Company, as shall be designated in such
notice, or at such time, place and manner as may be
agreed upon by the Company and the person or persons
exercising the option.
9. Exercise of Options.
Each option granted under the Plan shall, subject to
Section 10(b) and Section 12 hereof, be exercisable
at such time or times and during such period as shall
be set forth in the Agreement; provided, however,
that no option granted under the Plan shall have a
term in excess of ten (10) years from the date of
grant. To the extent that an option to purchase
shares is not exercised by an optionee when it
becomes initially exercisable, it shall not expire
but shall be carried forward and shall be
exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial
exercise may be made for less than fifty (50) full
shares of Common Stock.
10. Term of Options; Exercisability.
(a) Term.
(1) Each option shall expire not more than ten
(10) years from the date of the granting thereof, but shall
be subject to earlier termination as herein provided.
Except as otherwise provided in this Section 10, an option
granted to any employee optionee who ceases to be an
employee of the Company or one of its subsidiaries shall
terminate on the last day of the third month after the date
such optionee ceases to be an employee of the Company or one
of its subsidiaries, or on the date on which the option
expires by its terms, whichever occurs first.
(2) If such termination of employment is because
of dismissal for cause or because the employee is in breach
of any employment agreement, such option will terminate on
the date the optionee
ceases to be an employee of the Company or one of its
subsidiaries.
(3) If such termination of employment is because the
optionee has become permanently disabled (within the
meaning of Section 22(e)(3) of the Code), such option
shall terminate on the last day of the twelfth month
from the date such optionee ceases to be an employee,
or on the date on which the option expires by its
terms, whichever occurs first.
(4) In the event of the death of any optionee, any
option granted to such optionee shall terminate on
the last day of the twelfth month from the date of
death, or on the date on which the option expires by
its terms, whichever occurs first.
(b) Exercisability.
(1) Except as provided below, an option
granted to an employee optionee who ceases to be an
employee of the Company or one of
its subsidiaries shall be exercisable only to the
extent that the right to purchase shares under such
option has accrued and is in effect on the date such
optionee ceases to be an employee of the Company or
one of its subsidiaries.
(2) An option granted to an employee optionee who
ceases to be an employee of the Company or one of its
subsidiaries because he or she has become permanently
disabled, as defined above, shall be exercisable to
the full number of shares covered by such option.
(3) In the event of the death of any optionee, the
option granted to such optionee may be exercised to
the full number of shares covered thereby, whether or
not under the provisions of Section 9 hereof the
optionee was entitled to do so at the date of his or
her death, by the estate of such optionee, or by any
person or persons who acquired the right to exercise
such option by bequest or inheritance or by reason of
the death of such optionee.
11. Options Not Transferable.
The right of any optionee to exercise any option
granted to him or her or it shall not be assignable
or transferable by such optionee otherwise than by
will or the laws of descent and distribution, or
(solely with respect to non-qualified stock options)
pursuant to a qualified domestic relations order, as
defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules
thereunder, and any such option shall be exercisable
during the lifetime of such optionee only by him, her
or it. Any option granted under the Plan shall be
null and void and without effect upon the bankruptcy
of the optionee to whom the option is granted, or
upon any attempted assignment or transfer, except as
herein provided, including without limitation any
purported assignment, whether voluntary or by
operation of law, pledge, hypothecation or other
disposition, attachment, divorce, except as provided
above with respect to non-qualified stock options,
trustee process or similar process, whether legal or
equitable, upon such option.
12. Recapitalizations, Reorganizations and the Like.
(a) In the event that the outstanding shares of
the Common Stock of the Company are changed into or
exchanged for a different
number or kind of shares or other securities of the
Company or of another corporation by reason of any
reorganization, merger, consolidation,
recapitalization, reclassification, stock splitup,
combination of shares, or dividends payable in
capital stock, appropriate adjustment shall be made
in the number and kind of shares as to which options
may be granted under the Plan and as to which
outstanding options or portions thereof then
unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be
maintained as before the occurrence of such event;
such adjustment in outstanding options shall be made
without change in the total price applicable to the
unexercised portion of such options and with a
corresponding adjustment in the option price per
share.
(b) In addition, unless otherwise determined by the
Committee in its sole discretion, in the case of any
(i) sale or conveyance to another entity of all or
substantially all of the property and assets of the
Company or (ii) Change in Control (as hereinafter
defined) of the Company, the purchaser(s) of the
Company's assets or stock may, in his, her or its
discretion, deliver to the optionee the same kind of
consideration that is delivered to the shareholders
of the Company as a result of such sale, conveyance
or Change in Control, or the Committee may cancel all
outstanding options in exchange for consideration in
cash or in kind, which consideration in both cases
shall be equal in value to the value of those shares
of stock or other securities the optionee would have
received had the option been exercised (to the extent
then exercisable) and no disposition of the shares
acquired upon such exercise been made prior to such
sale, conveyance or Change in Control, less the
option price therefor. Upon receipt of such
consideration by the optionee, his or her or its
option shall immediately terminate and be of no
further force and effect. The value of the stock or
other securities the optionee would have received if
the option had been exercised shall be determined in
good faith by the Committee of the Company, and in
the case of shares of the Common Stock of the
Company, in accordance with the provision of Section
7 hereof. The Committee shall also have the power
and right to accelerate the exercisability of any
options, notwithstanding any limitations in this Plan
or in the Agreement upon such a sale, conveyance or
Change in Control. Upon such acceleration, any
options or portion thereof originally designated as
incentive stock options that no longer qualify as
incentive stock options under Section 422 of the Code
as a result of such acceleration shall be
redesignated as non-qualified stock options. A
"Change in Control" shall be deemed to have occurred
if any person, or any two or more persons acting as a
group, and all affiliates of such person or persons,
who prior to such time owned less than fifty percent
(50%) of the then outstanding Common Stock of the
Company, shall acquire such additional shares of the
Company's Common Stock in one or more transactions,
or series of transactions, such that following such
transaction or transactions, such person or group and
affiliates beneficially own fifty percent (50%) or
more of the Company's Common Stock outstanding.
(c) Upon dissolution or liquidation of the Company,
all options granted under this Plan shall terminate,
but each optionee shall have the right, immediately
prior to such dissolution or liquidation, to exercise
his or her option to the extent then exercisable.
(d) If by reason of a corporate merger,
consolidation, acquisition of property or stock,
separation, reorganization, or liquidation, the
Committee shall authorize the issuance or assumption
of a stock option or stock options in a transaction
to which Section 424(a) of the Code applies, then,
notwithstanding any other provision of the Plan, the
Committee may grant an option or options upon such
terms and conditions as it may deem appropriate for
the purpose of assumption of the old option, or
substitution of a new option for the old option, in
conformity with the provisions of such Section 424(a)
of the Code and the Treasury Regulations thereunder,
and any such option shall not reduce the number of
shares otherwise available for issuance under the
Plan.
(e) No fraction of a share shall be purchasable or
deliverable upon the exercise of any option, but in
the event any adjustment hereunder of the number of
shares covered by the option shall cause such number
to include a fraction of a share, such fraction shall
be adjusted to the nearest smaller whole number of
shares.
13. No Special Employment Rights.
Nothing contained in the Plan or in any option
granted under the Plan shall confer upon any option
holder any right with respect to the continuation of
his or her employment by the Company (or any
subsidiary) or interfere in any way with the right of
the Company (or any subsidiary), subject to the terms
of any separate employment agreement to the contrary,
at any time to terminate such employment or to
increase or decrease the compensation of the option
holder from the rate in existence at the time of the
grant of an option. Whether an authorized leave of
absence, or absence in military or government
service, shall constitute termination of employment
shall be determined by the Committee at the time.
14. Withholding.
The Company's obligation to deliver shares upon the
exercise of any non-qualified option granted under
the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and
local income and employment tax withholding
requirements. The Company and employee may agree to
withhold shares of Common Stock purchased upon
exercise of an option to satisfy the above-mentioned
withholding requirements. With the approval of the
Committee, which it shall have sole discretion to
grant, and on such terms and conditions as the
Committee may impose, the option holder may satisfy
the foregoing condition by electing to have the
Company withhold from delivery shares having a value
equal to the amount of tax to be withheld. The
Committee shall also have the right to require that
shares be withheld from delivery to satisfy such
condition.
15. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of Section 8,
the Company may delay the issuance of shares covered by
the exercise of an option
and the delivery of a certificate for such shares until
one of
the following conditions shall be satisfied:
(i) The shares with respect to which such
option has been exercised are at the time of the issue
of such shares effectively registered or qualified under
applicable Federal and state securities acts now in
force or as hereafter amended; or
(ii) Counsel for the Company shall have given an
opinion, which opinion shall not be unreasonably
conditioned or withheld, that such shares are exempt
from registration and qualification under applicable
Federal and state securities acts now in force or as
hereafter amended.
(b) It is intended that all exercises of
options shall be effective, and the Company shall use
its best efforts to bring about compliance with the
above conditions within a reasonable time, except
that the Company shall be under no obligation to
qualify shares or to cause a registration statement
or a posteffective amendment to any registration
statement to be prepared for the purpose of covering
the issue of shares in respect of which any option
may be exercised, except as otherwise agreed to by
the Company in writing.
16. Purchase for Investment; Rights of Holder
on Subsequent Registration.
Unless the shares to be issued upon exercise of an
option granted under the Plan have been effectively
registered under the Securities Act of 1933, as now
in force or hereafter amended, the
Company shall be under no obligation to issue any
shares covered by any option unless the person who
exercises such option, in whole or in part, shall
give a written representation and undertaking to the
Company which is satisfactory in form and scope to
counsel for the Company and upon which, in the
opinion of such counsel, the Company may reasonably
rely, that he or she or it is acquiring the shares
issued pursuant to such exercise of the option for
his or her or its own account as an investment and
not with a view to, or for sale in connection with,
the distribution of any such shares, and that he or
she or it will make no transfer of the same except in
compliance with any rules and regulations in force at
the time of such transfer under the Securities Act of
1933, or any other applicable law, and that if shares
are issued without such registration, a legend to
this effect may be endorsed upon the securities so
issued. In the event that the Company shall,
nevertheless, deem it necessary or desirable to
register under the Securities Act of 1933 or other
applicable statutes any shares with respect to which
an option shall have been exercised, or to qualify
any such shares for exemption from the Securities Act
of 1933 or other applicable statutes, then the
Company may take such action and may require from
each optionee such information in writing for use in
any registration statement, supplementary
registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably
necessary for such purpose and may require reasonable
indemnity to the Company and its officers and
directors and controlling persons from such holder
against all losses, claims, damages and liabilities
arising from such use of the information so furnished
and caused by any untrue statement of any material
fact therein or caused by the omission to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in
the light of the circumstances under which they were
made.
17. Loans.
The Company may not make loans to optionees to permit
them to exercise options.
18. Modification of Outstanding Options.
The Committee may authorize the amendment of any
outstanding option with the consent of the optionee
when and subject to such conditions as are deemed to
be in the best interests of the Company and in
accordance with the purposes of this Plan.
19. Approval of Stockholders.
The Plan shall be subject to approval by the vote of
stockholders holding at least a majority of the
voting stock of the Company voting in person or by
proxy at a duly held stockholders' meeting, or by
written consent of all the stockholders, within
twelve (12) months after the adoption of the Plan by
the Board of Directors and shall take effect as of
the date of adoption by the Board of Directors upon
such approval. The Committee may grant options under
the Plan prior to such approval, but any such option
shall become effective as of the date of grant only
upon such approval and, accordingly, no such option
may be exercisable prior to such approval.
20. Termination and Amendment.
Unless sooner terminated as herein provided, the Plan
shall terminate ten (10) years from the date upon
which the Plan was duly adopted by the Board of
Directors of the Company. The Board of Directors may
at any time terminate the Plan or make such
modification or amendment thereof as it deems
advisable; provided, however, that except as provided
in this Section 20, the Board of Directors may not,
without the approval of the stockholders of the
Company obtained in the manner stated in Section 19,
increase the maximum number of shares for which
options may be granted or change the designation of
the class of persons eligible to receive options
under the Plan, or make any
other change in the Plan which requires stockholder
approval under applicable law or regulations,
including any approval requirement which is a
prerequisite for exemptive relief under Section 16 of
the Securities Exchange Act of 1934. The Committee
may grant options to persons subject to Section 16(b)
of the Securities and Exchange Act of 1934 after an
amendment to the Plan by the Board of Directors
requiring stockholder approval under Section 20, but
any such option shall become effective as of the date
of grant only upon such approval and, accordingly, no
such option may be exercisable prior to such
approval. The Committee may terminate, amend or
modify any outstanding option without the consent of
the option holder, provided, however, that, except as
provided in Section 12, without the consent of the
optionee, the Committee shall not change the number
of shares subject to an option, nor the exercise
price thereof, nor extend the term of such option.
21. Compliance with Rule 16b-3.
It is intended that the provisions of the Plan and
any option granted thereunder to a person subject to
the reporting requirements of Section 16(a) of the
Act shall comply in all respects with the terms and
conditions of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Act"), or any successor
provisions. Any agreement granting options shall
contain such provisions as are necessary or
appropriate to assure such compliance. To the extent
that any provision hereof is found not to be in
compliance with such Rule, such provision shall be
deemed to be modified so as to be in compliance with
such Rule, or if such modification is not possible,
shall be deemed to be null and void, as it relates to
a recipient subject to Section 16(a) of the Act.
22. Reservation of Stock.
The Company shall at all times during the term of the
Plan reserve and keep available such number of shares
of stock as will be sufficient to satisfy the
requirements of the Plan and shall pay all fees and
expenses necessarily incurred by the Company in
connection therewith.
23. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to
be a stockholder of the Company with respect to any
of the options except to the extent that the option
shall have been exercised with respect thereto and,
in addition, a certificate shall have been issued
theretofore and delivered to the optionee.
24. Notices.
Any communication or notice required or permitted to
be given under the Plan shall be in writing, and
mailed by registered or certified mail or delivered
by hand, if to the Company, to its principal place
of business, attention: President, and, if to an
optionee, to the address as appearing on the records
of the Company.
X Please Mark Votes
As In This Example
Southern Energy Homes, Inc.
Mark box at right if you plan to attend the meeting in person __
Mark box at right if an address change or comment has been
noted on the reverse side of this card __
1. Election of Directors For all With- For all
Nominees held except
Wendell L. Batchelor Joseph J. Incandela __ __ __
Keith W. Brown Jonathan O. Lee
Paul J. Evanson Johnny R. Long
Keith O. Holdbrooks
Note: If you do not wish your shares voted "FOR" (A) particular nominee(s).
Mark the "For all except" box and strike a line through the name(s) of such
nominee(s). Your shares will be voted for the remaining nominee(s).
For Against Abstain
2. Amendment of 1993 Stock Option Plan to increase __ __ __
from 907,814 to 1,500,000 the number of shares of
common stock reserved for issuance thereunder.
3. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
Please be sure to sign and date this Proxy.
Date
STOCKHOLDER SIGN HERE CO-OWNER SIGN HERE
April 17, 1998
Via Facsimile and EDGAR Transmission
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
Re: Southern Energy Homes, Inc.
Proxy Statement
Please find attached our Proxy Statement. Southern Energy
Homes expects to register the additional shares included in
the 1993 plan by August 20, 1998.
Very truly yours,
SOUTHERN ENERGY HOMES, INC.
By: _____________________________
Keith W. Brown
Executive Vice President
Chief Financial Officer
