<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BARNETT INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BARNETT INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
[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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE> 2
BARNETT INC.
3333 Lenox Avenue
Jacksonville, Florida 32254
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 3, 1998
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders (the "Annual Meeting") of Barnett Inc.
(the "Company") will be held at the Company's International Call Center, 801
West Bay Street, Jacksonville, Florida, on December 3, 1998 at 12:00 p.m.,
Eastern Standard time, to consider and act on the following matters.
1. The election of one Class 3 director of the Company to serve until
the 2001 Annual Meeting of Stockholders and until his successor is elected
and qualified;
2. The ratification of the appointment of Arthur Andersen LLP as the
independent public accountants of the Company; and
3. Such other business as may properly come before the Annual Meeting
and any adjournment thereof.
The foregoing matters are described in more detail in the Proxy Statement
which follows.
The Board of Directors has fixed the close of business on October 19, 1998
as the record date for determining stockholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments thereof. Accordingly, only
holders of record of shares of Common Stock of the Company at the close of
business on such date will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof. A copy of the Company's Annual Report for
the fiscal year ended June 30, 1998 is enclosed herewith.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING, PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN
THE RETURN STAMPED ENVELOPE PROVIDED. PROXIES ARE REVOCABLE BY WRITTEN NOTICE TO
THE SECRETARY OF THE COMPANY AT ANY TIME PRIOR TO THEIR BEING VOTED OR BY
APPEARANCE AT THE ANNUAL MEETING TO VOTE IN PERSON. YOUR PROMPT RETURN OF THE
PROXY WILL BE OF GREAT ASSISTANCE IN PREPARING FOR THE ANNUAL MEETING AND IS
THEREFORE STRONGLY REQUESTED.
By Order of the Board of Directors
ALFRED C. POINDEXTER, Secretary
October 26, 1998
<PAGE> 3
BARNETT INC.
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 3, 1998
------------------------
INTRODUCTION
This Proxy Statement is being furnished to stockholders of Barnett Inc.
(the "Company") in connection with the Annual Meeting of Stockholders of the
Company (the "Annual Meeting") to be held at 12:00 p.m., Eastern Standard time,
on Thursday, December 3, 1998, at the Company's International Call Center, 801
West Bay Street, Jacksonville, Florida, 32202. The enclosed proxy is solicited
on behalf of the Board of Directors of the Company (the "Board"), and is subject
to revocation at any time prior to the voting of the proxy as provided below.
Unless a contrary choice is indicated, all duly executed proxies received by the
Company will be voted for (i) the election of the one nominee for Class 3
director and (ii) the ratification of the appointment of Arthur Andersen LLP as
the independent public accountants of the Company. The approximate date on which
this Proxy Statement and the enclosed proxy card are first being sent to
stockholders is October 26, 1998.
VOTING
Stockholders of record at the close of business on October 19, 1998 are
entitled to notice of, and to vote at, the Annual Meeting and any adjournment
thereof. On that date, there were outstanding 16,211,891 shares of common stock,
$.01 par value, of the Company (the "Common Stock"). Each share of Common Stock
is entitled to one vote on all matters to come before the Annual Meeting.
Directors will be elected by a plurality of the votes of the shares present in
person or represented by proxy at the Annual Meeting and entitled to vote on the
election of directors. Action on the other matters scheduled to come before the
Annual Meeting will be authorized by the affirmative vote of the majority of
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on such matters. For purposes of determining whether a matter
has received a majority vote, abstentions will be included in the vote totals,
with the result that an abstention has the same effect as a negative vote. In
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned a proxy (so-called "broker
non-votes"), those shares will not be included in the vote totals, will only be
counted for purposes of determining whether a quorum is present at the Annual
Meeting and therefore will have no effect on the vote.
Shares cannot be voted at the Annual Meeting unless the holder thereof is
present or represented by proxy. When proxies in the accompanying form are
returned, properly executed, the shares represented thereby will be voted as
specified thereon. Any stockholder giving a proxy has the right to revoke it at
any time prior to its exercise, either in writing, delivered to the Secretary of
the Company at its executive offices, or in person at the Annual Meeting.
1
<PAGE> 4
COMMON STOCK OWNERSHIP
CAPITAL STOCK
The following table sets forth, as of September 30, 1998, the number of
shares of Common Stock beneficially owned by each director and executive
officer, by the directors and executive officers of the Company as a group and
by each holder of at least five percent of outstanding Common Stock known to the
Company.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
------------------------ ----------------- ------------
<S> <C> <C>
Waxman USA Inc(1)................................... 7,186,530 44.3%
Melvin Waxman(2)(3)................................. 7,260,530 44.8%
Armond Waxman(2)(3)................................. 7,261,230 44.8%
Putnam Investments, Inc.(4)......................... 1,509,008 9.3%
Sheldon Adelman(3).................................. 22,500 *
Morry Weiss(3)...................................... 28,750 *
William R. Pray(5).................................. 97,900 *
Andrea M. Luiga(5).................................. 29,150 *
Andrew S. Fournie(5)................................ 400 *
Alfred C. Poindexter(5)............................. 16,650 *
Directors and Executive Officers
as a group (8 individuals)(2)(5).................. 7,430,580 45.8%
</TABLE>
- ---------------
* less than 1%
(1) Waxman Industries, Inc. ("Waxman Industries"), of which Waxman USA Inc. is a
wholly owned subsidiary, may be deemed to be the beneficial owner of the
shares of Common Stock owned by Waxman USA Inc.
(2) Includes 7,186,530 shares of Common Stock owned by Waxman USA Inc. Each of
Messrs. Melvin and Armond Waxman may be deemed to be the beneficial owners
of such shares by virtue of their respective positions as Co-Chief Executive
Officers and Chairman of the Board and President, respectively of Waxman USA
Inc. Messrs. Armond and Melvin Waxman have disclaimed beneficial ownership
of such shares owned by Waxman USA Inc.
(3) Includes for each of Mr. Melvin Waxman, Mr. Armond Waxman, Mr. Adelman and
Mr. Weiss an aggregate of 50,000, 50,000, 12,500 and 13,750 shares of Common
Stock, respectively, which may be acquired by each of such individuals upon
the exercise of stock options issued under the Company's 1996 Non-Employee
Director Stock Option Plan.
(4) The information set forth in the table with respect to Putnam Investments,
Inc. was obtained from a Schedule 13G, dated January 16, 1998, filed with
the Securities and Exchange Commission. Such Schedule 13G reflects Putnam
Investments, Inc.'s beneficial ownership as of December 31, 1997.
(5) Includes for each of Mr. Pray, Ms. Luiga and Mr. Poindexter (x) an aggregate
of 97,500, 28,750 and 16,250 shares of Common Stock, respectively, which may
be acquired by each of such individuals upon the exercise of employee stock
options, and (y) 400 shares of restricted Common Stock granted to each of
Mr. Pray, Ms. Luiga, Mr. Fournie and Mr. Poindexter pursuant to the
Company's 1996 Omnibus Incentive Plan, which shares may be voted by such
individuals but may not be transferred for one year from the date of grant.
2
<PAGE> 5
I.
ELECTION OF DIRECTORS
One Class 3 director is to be elected at the Annual Meeting. The Board has
recommended the person named in the table below as nominee for election as a
Class 3 director. The nominee is presently a director of the Company.
Unless otherwise directed, all proxies (unless revoked or suspended) will
be voted for the election of the nominee for director set forth below. If, for
any reason, the nominee is unable to accept such nomination or to serve as a
director, an event not currently anticipated, the persons named as proxies
reserve the right to exercise their discretionary authority to substitute such
other person or persons, as the case may be, as a management nominee. The
Company is not aware of any reason why the nominee should become unavailable for
election, or, if elected, should be unable to serve as a director. Set forth
below is certain information with respect to the nominee.
The Board currently consists of five members and is divided into three
classes. The following information is derived from information supplied by the
directors and is presented with respect to the nominee for election as a
director of the Company in Class 3 to serve for a term of three years and until
the election and qualification of his successor, and for the directors in
Classes 1 and 2 whose terms expire at the annual meeting of stockholders
occurring in 1999 and 2000, respectively, and until the election and
qualification of their respective successors.
NOMINEES FOR DIRECTOR WHOSE TERM EXPIRES IN 2001
(CLASS 3)
<TABLE>
<CAPTION>
HAS BEEN A DIRECTOR OF THE
NAME OF DIRECTOR AGE COMPANY SINCE
---------------- --- --------------------------
<S> <C> <C>
William R. Pray......................................... 51 1993
</TABLE>
DIRECTORS WHOSE TERM OF OFFICE
WILL CONTINUE AFTER THE ANNUAL MEETING
Directors Whose Term Expires in 1999 (CLASS 1)
<TABLE>
<CAPTION>
HAS BEEN A DIRECTOR OF THE
NAME OF DIRECTOR AGE COMPANY SINCE
---------------- --- --------------------------
<S> <C> <C>
Melvin Waxman........................................... 64 1984
Sheldon G. Adelman...................................... 56 1996
</TABLE>
Director Whose Term Expires in 2000 (CLASS 2)
<TABLE>
<CAPTION>
HAS BEEN A DIRECTOR OF THE
NAME OF DIRECTOR AGE COMPANY SINCE
---------------- --- --------------------------
<S> <C> <C>
Armond Waxman........................................... 59 1984
Morry Weiss............................................. 58 1996
</TABLE>
MR. WILLIAM R. PRAY was elected President, Chief Executive Officer and a
director of the Company in February 1993. Mr. Pray was elected President and
Chief Operating Officer of Waxman Industries in June 1995, and resigned these
positions in April 1996 upon consummation of the initial public offering of the
Company. From February 1991 to February 1993, Mr. Pray was Senior Vice
President--President of Waxman Industries' U.S. Operations, after serving as
President of the Mail Order/Telesales Group (which included the Company) since
1989. He joined the Company in 1978 as Regional Sales Manager, became Vice
President of Sales and Marketing in 1984 and was promoted to President in 1987.
Mr. Pray is a director of Waxman Industries. Mr. Pray has been a Director of the
Company since 1993.
MR. MELVIN WAXMAN was elected Chairman of the Board of the Company in
January 1996. Mr. Waxman has been a Director of the Company since its
acquisition by Waxman Industries in 1984. Mr. Waxman was
3
<PAGE> 6
elected Co-Chief Executive Officer of Waxman Industries in May 1988, Co-Chairman
of the Board of Waxman Industries in June 1995 and Chairman of the Board of
Waxman Industries in April 1996. Mr. Waxman has been the Chief Executive Officer
of Waxman Industries for over 20 years and has been a director of Waxman
Industries since 1962. Mr. Waxman has been either Chairman or Co-Chairman of the
Board of Waxman Industries since August 1976. Mr. Waxman was a director of Ideal
Plumbing Group, Inc., a Canadian subsidiary of Waxman Industries, that was
involuntarily liquidated in 1994. Mr. Melvin Waxman is the brother of Armond
Waxman.
MR. SHELDON G. ADELMAN is the principal of Adelman Capital, a private
investment firm. From 1974 to 1997, Mr. Adelman was the Chairman of the Board
and Chief Executive Officer of Blue Coral, Inc. a multi-divisional, commercial
and consumer product manufacturer with worldwide sales to the automotive
appearance aftermarket. Mr. Adelman serves on the Board of Directors of Phoenix
Dye Works, Cleveland, Ohio and is active in many civic organizations.
MR. ARMOND WAXMAN was elected Vice-Chairman of the Board in December 1995.
Mr. Waxman has been a Director of the Company since its acquisition by Waxman
Industries in 1984. Mr. Waxman was elected Co-Chief Executive Officer of Waxman
Industries in May 1988 and was Co-Chairman of the Board of Waxman Industries
from June 1995 until April 1996. Mr. Waxman had been the President and Treasurer
of Waxman Industries from August 1976 until June 1995, and was reappointed to
the position of President in April 1996. Mr. Waxman has been a director of
Waxman Industries since 1962 and was the Chief Operating Officer of Waxman
Industries from August 1966 to May 1988. Mr. Waxman was a director of Ideal
Plumbing Group, Inc., a Canadian subsidiary of Waxman Industries, that was
involuntarily liquidated in 1994. Mr. Armond Waxman is the brother of Melvin
Waxman.
MR. MORRY WEISS is the Chairman of the Board and Chief Executive Officer of
American Greetings Corporation. Mr. Weiss joined American Greetings Corporation
in 1961. He was appointed President and Chief Operating Officer in June 1978,
Chief Executive Officer in February 1992 and Chairman of the Board in February
1992. Mr. Weiss is a director of Syratech Corp., National City Corporation and
Artistic Greetings Corporation. Mr. Weiss is also active in various community
affairs.
INFORMATION RELATING TO THE BOARD
OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD
During the fiscal year ended June 30, 1998 ("Fiscal 1998"), the Board of
Directors held five meetings and acted numerous times by written consent. All
directors attended at least 75% of all meetings of the Board and Board
committees on which they served during Fiscal 1998.
The Board has established three standing committees: an Executive
Committee, an Audit Committee and a Compensation and Stock Option Committee.
Messrs. Melvin Waxman, Armond Waxman and William Pray serve on the Executive
Committee, and Messrs. Sheldon Adelman and Morry Weiss serve on the Audit
Committee and the Compensation and Stock Option Committee. The Company does not
have a nominating or similar committee.
EXECUTIVE COMMITTEE
The Executive Committee is authorized by the resolutions establishing the
committee to handle ministerial matters requiring Board approval. The Executive
Committee may not (i) approve or adopt, or recommend to the stockholders, any
action or matter required by Delaware law to be submitted to the stockholders
for approval or (ii) adopt, amend or repeal any bylaw of the Company.
AUDIT COMMITTEE
The principal functions of the Audit Committee are acting as a liaison
between the Company's independent auditors and the Board, reviewing the scope of
the annual audit and the associated management letter, reviewing the Company's
annual and quarterly financial statements and reviewing the sufficiency of the
Company's internal accounting controls. The Audit Committee held one meeting in
Fiscal 1998.
4
<PAGE> 7
COMPENSATION AND STOCK OPTION COMMITTEE
The general functions of the Compensation and Stock Option Committee (the
"Compensation Committee") include approving (or recommending to the Board) the
compensation arrangements for senior management, directors and other key
employees, reviewing benefit plans in which officers and directors are eligible
to participate and periodically reviewing the equity compensation plans of the
Company and the grants under such plans. The Compensation Committee administers
both the 1996 Omnibus Incentive Plan and the Employee Stock Purchase Plan of the
Company. During Fiscal 1998, the Compensation Committee held no formal meetings,
but acted on several occasions by written consent.
DIRECTOR REMUNERATION
Directors who are employees of the Company receive no compensation, as
such, for service as members of the Board. Directors who are not employees of
the Company receive quarterly compensation of $4,000, plus $1,000 for each
meeting of the Board or any committee of the Board attended by them (other than
with respect to any meetings of a committee on a day on which the Board also
meets). All Directors are reimbursed for expenses incurred in connection with
attendance at meetings.
In addition to the foregoing compensation, the Company's 1996 Stock Option
Plan for Non-Employee Directors provides that each non-employee director may
elect to receive, in lieu of their annual director cash compensation, an option
exercisable to purchase 5,000 shares of Common Stock, at the fair market value
thereof on the date of grant. Mr. Weiss elected to receive such an option in
lieu of the annual cash compensation to which he would have been entitled for
calendar 1998.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid for services
rendered during the three fiscal years ended June 30, 1998 to the Chief
Executive Officer and the three other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
------------------------------------- ------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND BONUS COMPENSATION AWARD(S) OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($)(2) ($)(3) ($)(4) SARS (#) ($)(5)
------------------ ---- ---------- ------ ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William R. Pray............ 1998 300,040 51,750 3,190 8,900 50,000 59,140
President and Chief 1997 278,942 171,327 -- -- -- 58,870
Executive Officer 1996 244,423 129,760 -- -- 170,000 58,870
Andrea M. Luiga............ 1998 114,885 15,900 3,190 8,900 15,000 --
Vice President-Finance and 1997 103,884 56,001 -- -- -- --
Chief Financial Officer 1996 92,885 60,080 -- -- 50,000 --
Andrew S. Fournie(6)....... 1998 114,998 -- 3,190 8,900 15,000 --
Vice President-Marketing 1997 109,615 28,738 -- -- -- --
1996 96,923 12,000 -- -- 25,000 --
Alfred C. Poindexter....... 1998 110,461 15,300 3,190 8,900 15,000 --
Vice President-Operations 1997 101,231 26,549 -- -- -- --
1996 92,077 10,872 -- -- 25,000 --
</TABLE>
- ---------------
(1) Certain executive officers received compensation in fiscal 1996, 1997 and
1998 in the form of perquisites, the amount of which does not exceed
reporting thresholds.
(2) All bonuses were paid under the Company's Profit Incentive Plan, except
$100,000 and $90,000 received by Mr. Pray and $50,000 and $30,000 received
by Ms. Luiga as discretionary bonuses in fiscal 1996 and fiscal 1997,
respectively.
5
<PAGE> 8
(3) Other annual compensation represents amounts reimbursed for payment of taxes
on restricted stock awards.
(4) Restricted stock awards of 400 shares of the Company's common stock were
made to each of the named executives in Fiscal 1998 under the Company's
Omnibus Incentive Plan. The value of the restricted stock awards has been
calculated based upon $22.25, per share, the closing market price of the
Company's common stock on the date of grant, as reported by the NASDAQ
National Market. Awards are fully transferable on the first anniversary date
of grant. The executives are entitled to dividends and voting rights on
unvested shares.
(5) All other compensation represents premiums on split-dollar life insurance
policies.
(6) Andrew Fournie's employment with the Company terminated effective July 19,
1998.
EMPLOYMENT AGREEMENTS
William R. Pray, President and Chief Executive Officer of the Company,
entered into an employment agreement (the "Agreement") with the Company which
became effective as of July 1, 1990, was amended as of January 1, 1996 and
terminates on January 1, 2006. The Agreement provides for an annual base salary
of $260,000 which will be increased by eight percent (8%) each year until the
base salary reaches $300,000 per year, after which time the base salary
increases each year by changes in the applicable Consumer Price Index (the
"CPI"), or such greater amount as may be determined by the Board, in its
discretion. Mr. Pray's annual base salary was increased effective July 1, 1998
to $320,000. Mr. Pray is eligible to receive discretionary bonuses as determined
by the Board. In addition to certain miscellaneous benefits and perquisites, the
Company maintains a $2,000,000 split dollar life insurance policy for Mr. Pray.
The Company and Mr. Pray also have entered into a money purchase deferred
compensation agreement pursuant to which the Company established an account into
which it deposits approximately $59,000 annually. The balance in the account on
termination of employment will be paid to Mr. Pray or his beneficiaries.
If Mr. Pray's employment is terminated without Cause (as defined in the
Agreement) or in the event he terminates his employment for Good Reason (as
defined in the Agreement), he will receive a lump sum amount equal to the
present value of the product of (i) the sum of (x) the base salary (as such base
salary would have been adjusted for the remainder of the term) and (y) the
average of the bonus compensation paid to Mr. Pray with respect to the three
years preceding the termination of the new employment agreement and (ii) the
greater of (a) the remaining number of years (or portions thereof) in the term
of the Agreement and (b) two; provided, however, that if any portion of such
compensation would constitute an "excess parachute payment" under Section 280G
of the Internal Revenue Code of 1986, as amended, the amount of such
compensation will be reduced to the highest amount that would not constitute an
excess parachute payment. The employment agreement also contains provisions
which restrict Mr. Pray from competing with the Company during the term of the
Agreement and for two years following termination.
The Company has entered into Executive Employment and Change of Control
Agreements with Ms. Luiga and Mr. Poindexter. These Agreements generally provide
that, if the executive's employment is terminated by the Company without cause
within three years following a Change of Control of the Company, the Company
will pay Ms. Luiga or Mr. Poindexter, as the case may be, a lump sum amount
equal to three times and two times, respectively, his or her annual base salary
then in effect plus the prior year's bonus received by the executive and the
marginal cost to the Company of annual fringe benefits received by the
executive.
6
<PAGE> 9
STOCK OPTION AND SAR GRANTS
The following table reflects stock options granted by the Company during
Fiscal 1998 to the executive officers named in the Summary Compensation Table:
OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
NUMBER % OF APPRECIATION
OF TOTAL FOR OPTION TERM(2)
NAME OF OPTIONS OPTIONS EXERCISE PRICE EXPIRATION --------------------
EXECUTIVE OFFICER GRANTED GRANTED ($/SHARE) DATE 5%($) 10%($)
----------------- ------- ------- -------------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
William R. Pray............ 50,000 23.3% 22.00 8-1-2007 691,784 1,753,117
Andrea M. Luiga............ 15,000 7.0% 22.00 8-1-2007 207,535 525,935
Andrew S. Fournie.......... 15,000 7.0% 22.00 8-1-2007 207,535 525,935
Alfred C. Poindexter....... 15,000 7.0% 22.00 8-1-2007 207,535 525,935
</TABLE>
- ---------------
(1) There were no SARs granted to any of the executive officers named in this
table in fiscal 1998.
(2) The potential realizable values represent future opportunity and have not
been reduced to present value in 1998 dollars. The dollar amounts included
in these columns are the result of calculations at assumed rates set by the
Securities and Exchange Commission for illustration purposes, and these
rates are not intended to be a forecast of the Common Stock price and are
not necessarily indicative of the values that may be realized by the named
executive officer.
STOCK OPTION AND SAR EXERCISES
The following table sets forth information with respect to (i) the number
of options exercised by each of the executive officers named in the Summary
Compensation Table in Fiscal 1998, (ii) the numbers of unexercised options held
by the named executive officers who held options as of June 30, 1998 and (iii)
the value of unexercised in-the-money options as of June 30, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FISCAL YEAR END(#) AT FISCAL YEAR END ($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- ---------------------------
<S> <C> <C> <C> <C>
William R. Pray........ -- -- 85,000/135,000 $531,250/$531,250
Andrea M. Luiga........ -- -- 25,000/40,000 $156,250/$156,250
Andrew S. Fournie...... 12,500 51,995 --/-- --/--
Alfred C. Poindexter... -- -- 12,500/27,500 $ 78,125/$78,125
</TABLE>
- ---------------
(1) Calculated on the basis of the closing share price ($20.25) of the Common
Stock as of June 30, 1998, as reported by the Nasdaq National Market, less
the exercise price.
7
<PAGE> 10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
establishing and reviewing the Company's arrangements and programs for
compensating executive officers, including the executive officers named in the
Summary Compensation Table. The Compensation Committee is composed entirely of
non-employee Directors.
PHILOSOPHY AND POLICY
The general objective of the Compensation Committee is to assure that the
Company provides competitive compensation and benefits programs that attract and
retain capable executives who are integral to the success of the Company, reward
them for the achievement of both short-term and long-term objectives of the
Company and provide them with an economic incentive to increase stockholder
value. The Compensation Committee anticipates that the attainment of certain
targeted operating results and other short-term goals will be compensated
through annual bonuses, and long-term incentives will be provided through the
grant of stock options, SARs, and restricted stock grants under the Omnibus Plan
described below. The bonuses and stock options are in addition to annual base
salaries, which are intended to be competitive with companies which the
Compensation Committee believes are comparable to the Company.
Historically, the Compensation Committee has not established the cash
compensation of the Company's executive officers, other than the Chief Executive
Officer. The Board had delegated to the Chief Executive Officer the
responsibility for determining the salaries and bonuses payable to these
individuals.
ANNUAL COMPONENT
Base Salaries. The Compensation Committee reviews annually the base salary
of William Pray and Mr. Pray's recommendations for the base salaries of the
other executive officers. Adjustments are made as the Committee deems
appropriate based upon competitiveness with comparable companies, the current
financial condition and resources of the Company, and the evaluation of the
individual's job responsibilities, contributions and prior experience.
Profit Incentive Plan. Annual bonus payments under the Company's existing
Profit Incentive Plan are based on attainment of overall corporate earnings
targets. The earnings targets are recommended by management, established by the
Chief Executive Officer and approved by the Compensation Committee. Bonuses are
granted to participants if the target level of earnings is achieved. The size of
the bonus increases with the level of earnings growth up to a maximum level of
bonus. The percentage of salary earned as a bonus varies depending on the
employee's position with the Company.
LONG-TERM COMPONENT
Omnibus Incentive Plan. The Compensation Committee believes that, in
addition to compensating executives for the long-term performance of the
Company, the grant of stock options aligns the interest of the executives with
those of the Company's stockholders. The Compensation Committee determines the
recipients of stock option grants and the size of the grants consistent with
these principles, based on the employee's performance and position with the
Company. Contemporaneous with the Company's initial public offering in April,
1996, stock options were granted to approximately 75 employees, including
executive officers. Stock options were granted to approximately 25 employees in
fiscal 1997 and 49 employees in Fiscal 1998. In Fiscal 1998 the Company also
awarded restricted stock under the Plan to 7 employees. All stock options which
have been granted under the Omnibus Incentive Plan were not "incentive stock
options" as defined in the Internal Revenue Code, had an exercise price equal to
at least the market value of the underlying shares on the grant date and
generally vest over four years, except under limited circumstances. The amount
of stock options previously awarded and outstanding for each executive officer
is reviewed by the Committee but is not considered a critical factor in
determining the size of any executive stock option award in any year.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
William R. Pray's compensation for fiscal 1998 largely is determined by an
employment agreement amended shortly before the completion of the Company's
initial public offering in 1996. The overall compensation included in the
agreement was principally a continuation of the compensation in effect under
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<PAGE> 11
Mr. Pray's prior employment agreement with Waxman Industries. Under this
Agreement, the Board increased Mr. Pray's base salary to $320,000 per annum,
effective July 1, 1998.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally limits the annual tax deduction for applicable remuneration
paid to the Company's Chief Executive Officer and certain other highly
compensated executive officers to $1,000,000. The Compensation Committee does
not believe that the compensation which is subject to this limitation to be paid
to the Company's executives will exceed the deduction limit set by Section
162(m).
MEMBERS OF THE COMMITTEE
SHELDON G. ADELMAN
MORRY WEISS
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
the Proxy Statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), unless the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
CERTAIN RELATIONSHIPS
The Company engages in business transactions with Waxman Industries and its
subsidiaries. Products purchased for resale from Waxman Industries and its
subsidiaries totaled approximately $15.3 million in Fiscal 1998. Sales to these
entities totaled approximately $517,000 in Fiscal 1998
The Company and Waxman Industries provide to and receive from each other
certain selling, general and administrative services and reimburse each other
for out-of-pocket disbursements related to those services. In connection with
the Company's initial public offering completed in 1996, the Company and Waxman
Industries, and certain of its affiliates, entered into a New Intercorporate
Agreement. Pursuant to the new Intercorporate Agreement, Waxman Industries may
provide certain managerial, administrative and financial services to the Company
for which the Company will pay Waxman Industries the allocable cost of the
salaries and expenses of Waxman Industries' employees while they are rendering
such services. The Company also reimburses Waxman Industries for actual out of
pocket disbursements to third parties by Waxman Industries required for the
provision of such services by Waxman Industries. In addition to the services
provided by Waxman Industries to the Company pursuant to the New Intercorporate
Agreement, the Company also continues to provide certain services to U.S. Lock,
an operating division of WOC Inc., a wholly-owned indirect subsidiary of Waxman
Industries. These services include the utilization of the Company's management
information systems, financial accounting, order processing and billing and
collection services. Waxman Industries pays to the Company the allocable cost of
the salaries and expenses of the Company's employees while they are performing
such services. Waxman Industries also reimburses the Company for all actual out-
of-pocket disbursements to third parties by the Company required for the
provision of such services. The net effect of these charges is not material. The
arrangements provided in the New Intercorporate Agreement may be modified and
additional arrangements may be entered into pursuant to a written agreement
between the Company and Waxman Industries.
On July 1, 1997, the Company purchased substantially all of the business of
LeRan Gas Products, a division of WOC Inc. A Special Transaction Committee of
the Board, comprised of Messrs. Weiss and Adelman, was appointed to evaluate the
transaction. In connection with the Special Transaction Committee's evaluation
of the contemplated acquisition, the Committee received a fairness opinion from
William Blair & Company which stated that the purchase price paid by the Company
was fair to the stockholders of the Company from a financial point of view.
The Company also entered into a five-year rental agreement with Waxman
Industries in fiscal 1998 for the leasing of a warehouse facility in the normal
course of business. The Company prepaid all rent totaling $500,000.
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<PAGE> 12
PERFORMANCE GRAPH
Set forth below is a graph comparing the percentage change in the
cumulative total stockholder return of the Company's Common Stock, the Nasdaq
Composite Index and the Standard & Poor's Building Materials Index for the
period since the Company's Common Stock commenced trading on March 29, 1996 to
the fiscal year ended June 30, 1998. The graph assumes $100 was invested on
March 29, 1996 in the Company and each of the other indices.
Cumulative Total Return
----------------------------------
3/29/96 6/96 6/97 6/98
BARNETT INC. 100.00 205.36 175.00 144.64
NASDAQ STOCK MARKET (U.S.) 100.00 108.16 131.49 173.50
S & P BUILDING MATERIALS 100.00 105.51 135.80 169.05
10
<PAGE> 13
II.
APPOINTMENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
At the Annual Meeting, the stockholders of the Company will be asked to
ratify the appointment of Arthur Andersen LLP as the independent public
accountants of the Company.
The Company's financial statements for the fiscal year ended June 30, 1998
have been examined by the firm of Arthur Andersen LLP, independent certified
public accountants. Arthur Andersen LLP have been the independent certified
public accountants of the Company since 1984. Representatives of Arthur Andersen
LLP are expected to be present at the Annual Meeting to make a statement if they
so desire and they are expected to be available to respond to appropriate
questions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's 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
securities ownership and changes in such ownership with the Securities and
Exchange Commission (the "Commission"). Officers, directors and greater than
ten-percent stockholders also are required by rules promulgated by the
Commission to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no such forms were required, the
Company believes that, during the fiscal year ended June 30, 1998, its officers,
directors and greater than ten-percent beneficial owners complied with all
applicable Section 16(a) filing requirements, except that Andrew Fournie filed a
late Form 4 for June 1998 to report the exercise of in-the-money employee stock
options and the sale of the stock underlying such options.
OTHER BUSINESS
Management does not know of any other matters to come before the Annual
Meeting. If any other business properly comes before the meeting, it is the
intention of the persons designated as proxies to vote in accordance with their
best judgment on such matters. If any other matter should come before the
meeting, action on such matter will be approved by the affirmative vote of a
majority of shares present at the meeting, in person or by proxy, and entitled
to vote on the matter.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
The Annual Report to Stockholders of the Company for the year ended June
30, 1998 accompanies this Proxy Statement. Stockholders may obtain additional
copies, free of charge, by writing to: Secretary, Barnett Inc., 3333 Lenox
Avenue, Jacksonville, Florida 32254.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
The deadline for submission of stockholder proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended ("Rule 14a-8"), for
inclusion in the Company's proxy statement for its 1999 Annual Meeting of
Stockholders is June 28, 1999. Notice to the Company of a stockholder proposal
submitted otherwise other than pursuant to Rule 14a-8 will be considered
untimely if received by the Company after October 4, 1999 or before September 4,
1999, and the persons named in proxies solicited by the Company's Board of
Directors for its 1999 Annual Meeting of Stockholders may exercise discretionary
voting power with respect to any such proposal as to which the Company does not
receive timely notice.
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<PAGE> 14
EXPENSES OF SOLICITATION
All expenses relating to the solicitation of proxies will be paid by the
Company. Solicitation will be made principally by mail, but officers and regular
employees may solicit proxies by telephone or personal contact with nominal
expense to the Company. The Company will request brokers and other nominees who
hold Common Stock in their names to solicit proxies from the beneficial owners
thereof and will pay the standard charges and expenses associated therewith.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
NOMINEE TO THE BOARD OF DIRECTORS NAMED HEREIN, AND FOR THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
YOUR VOTE IS IMPORTANT, WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL
MEETING, PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN
THE RETURN STAMPED ENVELOPE PROVIDED. PROXIES ARE REVOCABLE BY WRITTEN NOTICE TO
THE SECRETARY OF THE COMPANY AT ANY TIME PRIOR TO THEIR BEING VOTED OR BY
APPEARANCE AT THE ANNUAL MEETING TO VOTE IN PERSON. YOUR PROMPT RETURN OF THE
PROXY WILL BE OF GREAT ASSISTANCE IN PREPARING FOR THE ANNUAL MEETING AND IS
THEREFORE STRONGLY REQUESTED.
By Order of the Board of Directors
ALFRED C. POINDEXTER, Secretary
October 26, 1998
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<PAGE> 15
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
BARNETT INC.
December 3, 1998
Please Detach and Mail in the Envelope Provided
/X/ Please mark your
votes as in this
example.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHOLD
Proposal 1. / / / / Nominee: Proposal 2. FOR AGAINST ABSTAIN
Nominee for William R. Pray proposal to approve Arthur Andersen LLP as / / / / / /
Class I independent public accountants for the
Director: Company.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE. IF THIS PROXY IS
EXECUTED BUT NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1
AND PROPOSAL 2.
Should any other matters requiring a vote of the shareholders arise,
including matters incident to the conduct of the meeting, the above
named proxies are authorized to vote the same in accordance with their
best judgment in the interest of the Company. The Board of Directors is
not aware of any matter which is to be presented for action at the
meeting other than the matters set forth herein.
_________________________________________ ________________________________________ DATED _______________________ , 1998
SIGNATURE STOCKHOLDER SIGNATURE IF HELD JOINTLY
NOTE: (Please sign exactly as name or names appear hereon. If the shares are held jointly, each holder should sign. When
signing as attorney, executor, administrator, trustee, guardian or as an officer signing for a corporation, please give
full title under signature.
</TABLE>
<PAGE> 16
PROXY BARNETT INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 3, 1998
The undersigned, having received the Notice of Annual Meeting and
accompanying Proxy Statement, appoints each of Melvin Waxman and William R.
Pray, each with the power to appoint his substitute, as proxies of the
undersigned, and hereby authorizes them to represent and to vote, all the
shares of Common Stock of Barnett Inc. held of record by the undersigned on
October 19, 1998, at the Annual Meeting of Stockholders of Barnett Inc. to be
held on December 3, 1998.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
