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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UNIVERSAL FOREST PRODUCTS
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(Name of Registrant as Specified in Its Charter)
UNIVERSAL FOREST PRODUCTS
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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UNIVERSAL FOREST PRODUCTS, INC.
NOTICE OF ANNUAL MEETING
UNIVERSAL FOREST PRODUCTS, INC. 2801 East Beltline NE Grand Rapids, MI 49525
March 24, 1999
The Annual Meeting of Shareholders of Universal Forest Products, Inc. will be
held in the Vandenberg Room at the Amway Grand Plaza Hotel, 187 Monroe NW, Grand
Rapids, Michigan, on Wednesday, April 28, 1999, at 8:30 a.m. local time
(registration begins at 8:00 a.m.) for the following purposes:
(1) Election of three directors for three-year terms expiring in 2002.
(2) Consider and act upon a proposal to approve a Long Term Stock Incentive
Plan.
(3) Consider and act upon a proposal to approve the Performance Bonus Plan.
(4) The transaction of such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 1, 1999, are entitled
to notice of, and to vote at the meeting.
A copy of the Annual Report to Shareholders for the year ended December 26,
1998, is being mailed to you concurrently with this Notice.
By Order of the Board of Directors
Matthew J. Missad, Secretary
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.
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ANNUAL MEETING OF SHAREHOLDERS
UNIVERSAL FOREST PRODUCTS, INC. 2801 East Beltline NE Grand Rapids, Michigan
49525
March 24, 1999
PROXY STATEMENT
SOLICITATION OF PROXIES. This Proxy Statement and the enclosed Proxy are being
furnished to holders of Common Stock, no par value, of Universal Forest
Products, Inc. (the "Company"). The Board of Directors is soliciting proxies for
use at the Annual Meeting of Shareholders to be held on April 28, 1999, and at
any adjournment of that meeting. The annual meeting will be held in the
Vandenberg Room of the Amway Grand Plaza Hotel, 187 Monroe NW, Grand Rapids,
Michigan, at 8:30 a.m. local time. Registration for the meeting begins at 8:00
a.m.
If a Proxy in the enclosed form is properly executed and returned to the
Company, the shares represented by the Proxy will be voted at the annual meeting
and at any adjournment thereof. If a shareholder specifies a choice, the Proxy
will be voted as specified. If no choice is specified, the shares represented by
the Proxy will be voted for the election of all nominees named in the Proxy
Statement, for the proposal to approve a Long Term Stock Incentive Plan, for the
proposal to approve the Performance Bonus Plan, and in accordance with the
judgment of the persons named as proxies with respect to any other matter which
may come before the meeting. A Proxy may be revoked at any time before it is
exercised, by written notice delivered to the Secretary of the Company, by
executing a subsequent Proxy or by attending the annual meeting and voting in
person.
The cost of the solicitation of Proxies will be paid by the Company. In addition
to the use of the mails, Proxies may be solicited personally or by telephone or
facsimile by regular employees of the Company who will not receive additional
compensation. The Company does not intend to pay any compensation for the
solicitation of Proxies, except that brokers, nominees, custodians, and other
fiduciaries will be reimbursed by the Company for their expenses in connection
with sending proxy materials to beneficial owners and obtaining their Proxies.
VOTING SECURITIES. Holders of record of Common Stock at the close of business on
March 1, 1999, will be entitled to vote at the annual meeting. As of March 1,
1999, there were 20,715,500 shares of Common Stock outstanding. A shareholder is
entitled to one vote for each share of Common Stock registered in the
shareholder's name at the close of business on March 1, 1999. Votes cast at the
meeting or submitted by Proxy will be counted by inspectors of the meeting who
will be appointed by the Company.
ELECTION OF DIRECTORS.
The Company's Articles of Incorporation provide that the Board of Directors,
which consists of eight members, shall be divided into three classes, as equal
in number as possible, with the classes to hold office for staggered terms of
three years each. In accordance with the recommendation of the Nominating
Committee, the Board of Directors has nominated incumbent
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directors John C. Canepa, Carroll M. Shoffner and Louis A. Smith for re-election
as directors for three-year terms expiring at the 2002 annual meeting.
Unless otherwise directed by a shareholder's Proxy, the persons named as proxy
holders in the accompanying Proxy will vote for the above-named nominees. If a
nominee is not available for election as a director at the time of the annual
meeting (a situation which is not now anticipated), the Board of Directors may
designate a substitute nominee, in which case the accompanying Proxy will be
voted for the substituted nominee.
A vote of the shareholders holding a plurality of the shares present in person
or represented by proxy is required to elect directors. Accordingly, the three
individuals who receive the greatest number of votes cast at the meeting will be
elected as directors. For purposes of counting votes on the election of
directors, abstentions, broker non-votes, and shares otherwise withheld from
voting will not be counted as shares cast at the meeting, and will not have a
bearing on the outcome of the election.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL PERSONS
NOMINATED BY THE BOARD.
The following table provides certain biographical information for each person
who is nominated for election as a director at the annual meeting and for each
person who is continuing as an incumbent director.
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NAMES, (AGES), POSITIONS AND BACKGROUNDS OF
DIRECTORS AND NOMINEES SERVICE AS A DIRECTOR
------------------------------------------- ---------------------
Nominees for Terms Expiring in 2002
LOUIS A. SMITH (59) is a Partner in the law firm of Director since 1993.
Smith and Johnson, Attorneys, P.C., of Traverse City, Chairman of Audit Committee.
Michigan. Mr. Smith also serves as a director of Empire
National Bank, and as a Trustee for the Interlochen
Center for the Arts
JOHN C. CANEPA (68) is a Consulting Principal for Crowe Director since 1996.
Chizek and Company, LLP, of Grand Rapids, Michigan. Mr. Member of Compensation
Canepa retired as Chairman of the Board of Old Kent Committee.
Financial Corporation on November 1, 1995, with whom he
had been affiliated since its formation in 1972. Mr.
Canepa also serves on the board of Foremost Corporation
of America
CARROLL M. SHOFFNER (66) is the Chairman of Shoffner Director since 1998.
Industries, LLC of Burlington, North Carolina, which he
began in 1964. Mr. Shoffner also serves on the boards of
Mid Carolina Bank of Burlington and Southern University
at Collegedale, Tennessee
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NAMES, (AGES), POSITIONS AND BACKGROUNDS OF
DIRECTORS AND NOMINEES SERVICE AS A DIRECTOR
------------------------------------------- ---------------------
Incumbent Directors -- Terms Expiring in 2000
PETER F. SECCHIA (61) joined the Company in 1962, and Director since 1967.
has been the Chairman of the Board since January of Chairman of Nominating
1993. From 1971 until 1989, Mr. Secchia was the Committee.
President, Chief Executive Officer, and Chairman of the
Company. From 1989 until January of 1993, Mr. Secchia
served as U.S. Ambassador to Italy. Mr. Secchia also
serves as a director of Old Kent Financial Corporation,
and on the board of John Cabot University of Rome.
RICHARD M. DEVOS (73) is a Co-Founder and former Director since 1993.
President of Amway Corporation, and its affiliates, in Member of Compensation
Ada, Michigan, and principal owner of RDV Sports, Inc. Committee.
JOHN W. GARSIDE (59) is the President and Treasurer of Director since 1993.
Woodruff Coal Company of Kalamazoo, Michigan. Mr. Chairman of Compensation
Garside also serves as a director of Arcadia Bank and Committee.
Trust Company, and a director of PRAB, Inc.
Incumbent Directors -- Terms Expiring in 2001
WILLIAM G. CURRIE (51) is the President and Chief Director since 1978.
Executive Officer of the Company. He joined the Company
in 1971, serving as a Salesman, General Manager, Vice
President, and Executive Vice President from 1971 to
1983. From 1983 to 1990, Mr. Currie was President of
Universal Forest Products, Inc., and since 1989 has been
the Chief Executive Officer of the Company.
PHILIP M. NOVELL (60) is a consultant with the Compass Director since 1993.
Group of Birmingham, Michigan. Mr. Novell retired as Member of Audit Committee.
General Sales Manager for the Ford Division of Ford
Motor Company on December 31, 1998, with whom he had
been affiliated since 1961. Mr. Novell also serves on
the Board of Directors of the Detroit Visitors Council
................................................................................
The Board of Directors has an Audit Committee that recommends to the Board of
Directors the selection of independent accountants; approves the nature and
scope of services to be performed by the independent accountants and reviews the
range of fees for such services; confers with the independent accountants and
reviews the results of the annual audit; reviews with the independent
accountants the Company's internal auditing, accounting and financial controls;
and reviews policies and practices regarding compliance with laws and conflicts
of interest. During 1998, the Audit Committee held two formal meetings.
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The Board of Directors has a Nominating Committee that is responsible for
recommending to the Board suitable candidates for nomination for positions on
the Board of Directors and committees of the Board of Directors. During 1998,
the Nominating Committee held one meeting. The Nominating Committee will
consider nominees recommended by shareholders, provided that a recommendation is
submitted in writing to the Chairman of the Nominating Committee at the address
of the Company, on or before the 30th day preceding the date of the annual
meeting, and includes a description of the proposed nominee, his or her consent
to serve as a director, and other information regarding the proposed nominee as
would be required to be included in a proxy statement filed under the Securities
Exchange Act.
The Board of Directors has a Compensation Committee, consisting entirely of
outside directors, that is responsible for reviewing and recommending to the
Board of Directors the timing and amount of compensation for key employees,
including salaries, bonuses, and other benefits. The Compensation Committee also
is responsible for administering the Company's stock option and other
equity-based incentive plans, recommending retainer and attendance fees for non-
employee directors, reviewing compensation plans and awards as they relate to
key employees, and administering the Company's retirement plans. During 1998,
the Compensation Committee held one meeting.
During the Company's last fiscal year, there were four regular meetings of the
Board of Directors, and the Board took action by unanimous written consent on
two occasions. Each of the directors attended 75% or more of the aggregate
number of meetings of the Board of Directors and meetings of committees on which
they were eligible to attend.
COMPENSATION OF DIRECTORS. Directors who are also employees of the Company
receive no annual retainer and are not compensated for attendance at Board or
committee meetings. Directors who are not employees of the Company receive a
$10,000.00 annual retainer fee, plus $500.00 for attendance at each regular and
special meeting of the Board of Directors and each committee meeting held on a
day other than the day of a Board meeting. Directors receive no compensation for
attendance at a committee meeting held on the day of a Board meeting.
Beginning in 1997, the Company instituted a Directors' Stock Grant Program. In
lieu of a cash increase in the amount of the Directors' fees, each outside
Director is granted 100 shares of stock for each Board meeting attended, up to a
maximum of 400 shares per year. These shares will be issued from the authorized
but unissued shares of the Company.
Each outside Director has the opportunity to participate in the Director
Retainer Stock Plan. The Director Retainer Stock Plan, approved by shareholders
in April 1994, provides that each Director may elect to receive Company stock,
on a deferred basis, in lieu of cash compensation for such Director's retainer
and meeting fees. In addition, Directors receive reimbursement of ordinary and
necessary expenses to attend meetings. The Chairmen of the Audit, Compensation,
and Nominating Committees do not receive additional compensation.
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PROPOSAL TO APPROVE THE UNIVERSAL FOREST PRODUCTS, INC.
1999 LONG TERM STOCK INCENTIVE PLAN
On January 20, 1999, the Board of Directors adopted the Universal Forest
Products, Inc. 1999 Long Term Stock Incentive Plan (the "Plan"), subject to
approval by the Company's shareholders. If approved, the Plan will succeed the
Company's 1997 Long Term Stock Incentive Plan; as of March 1, 1999, 406,029
shares are still available for issue under that plan. The following summary of
the Plan is subject to the specific provisions contained in the complete text of
the Plan set forth in Appendix A to this Proxy Statement.
Purpose. The purpose of the Plan is to promote the long-term success of the
Company for the benefit of its shareholders through stock-based compensation, by
aligning the personal interests of the Company's key employees with those of its
shareholders. The Plan is designed to allow key employees to participate in the
Company's future, as well as to enable the Company to attract, retain, and
reward such employees.
Administration. The Plan will be administered by the Compensation Committee as
designated by the Board of Directors (the "Committee"), composed of two or more
"Nonemployee Directors" within the meaning of Rule 16b-3 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended. Subject
to the Company's Articles of Incorporation, Bylaws, and the provisions of the
Plan, the Committee has the authority to select key employees to whom Awards may
be awarded; the type of Awards (or combination thereof) to be granted; the
number of shares of Common Stock to be covered by each Award; and the terms and
conditions of any Award, such as conditions of forfeiture, transfer
restrictions, and vesting requirements.
The Plan provides for the granting of a variety of stock-based Awards, described
in more detail below, such as Stock Options, including Incentive Stock Options,
as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), Reload Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, and other Stock-Based Awards. The term of the Plan is ten
(10) years; no Awards may be granted under the Plan after January 31, 2009. The
closing sale price of the Company's Common Stock as quoted in the Nasdaq
National Market on March 1, 1999, was $20.125 per share. No Awards have been
granted under the Plan as of the date of this Proxy Statement.
Types of Awards. The following types of Awards may be granted under the Plan:
An "Option" is a contractual right to purchase a number of shares at a price
determined at the date the Option is granted. Options include Incentive Stock
Options, as defined in Section 422 of the Code, as well as Nonqualified Stock
Options. The exercise price included in both Incentive Stock Options and
Nonqualified Stock Options must equal at least 100% of the fair market value of
the stock at the date of grant. Awards of certain Options may also include
Reload Options. A Reload Option is an Option to purchase shares equal to the
number of shares of Common Stock delivered in payment of the exercise price
(including, in the discretion of the Committee, the number of shares tendered to
the Company to satisfy any withholding tax liability arising upon exercise) and
is deemed to be granted upon such delivery without further action by the
Committee. A Reload Option is subject to the same terms of the original option,
including the
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term thereof; however, the exercise price of the Reload Option must equal the
fair market value of the Company's Common Stock on the date of grant of the
Reload Option.
A "Stock Appreciation Right" is an Award of the right to receive stock or cash
of an equivalent value in an amount equal to the difference between the price
specified in the Stock Appreciation Right and the prevailing market price of the
Company's Common Stock at the time of exercise. Stock Appreciation Rights may be
granted only in tandem with Options.
"Restricted Stock Grants" are shares of Common Stock granted to an employee for
no or nominal consideration. Title to the shares passes to the employee at the
time of the grant; however, the ability to sell or otherwise dispose of the
shares is subject to restrictions and conditions determined by the Committee.
"Performance Shares" are an Award of the right to receive stock or cash of an
equivalent value at the end of the specified performance period upon the
attainment of specified performance goals.
An "Other Stock-Based Award" is any other Award that may be granted under the
Plan that is valued in whole or in part by reference to or is payable in or
otherwise based on Common Stock.
Shares Subject to Plan. The shares of the Company's Common Stock reserved for
issuance will be available for distribution under the terms of the Plan. The
maximum aggregate number of shares of Company Common Stock that may be issued
under the Plan is 1,000,000 shares, plus 406,029 shares remaining under the 1997
Plan, plus an annual increase will be added on the date of the annual meeting of
shareholders of the Company, beginning with the annual meeting in the year 2000,
equal to the lesser of (i) 200,000 shares, (ii) 1% of the sum of (1) the
outstanding shares, plus (2) the number of shares subject to outstanding options
issued by the Company under this Plan and predecessor plans, or (iii) an amount
determined by the Board of Directors.
The number of shares that may be issued under the Plan and the number of shares
subject to Options are subject to adjustments in the event of a merger,
reorganization, consolidation, recapitalization, dividend (other than ordinary
cash dividends), stock split, or other change in corporate structure affecting
the Common Stock. Subject to certain restrictions, unexercised Options, lapsed
shares of Restricted Stock, and shares surrendered in payment for exercising
Options may be reissued under the Plan.
Termination or Amendment of the Plan. The Board may at any time amend,
discontinue, or terminate this Plan or any part thereof; however, unless
otherwise required by law, after shareholder approval, the rights of a
participant may not be impaired without the consent of such participant. In
addition, without the approval of the Company's shareholders, no amendment may
be made which would increase the aggregate number of shares of Common Stock that
may be issued under the Plan, or decrease the Option price of any Option to less
than 100% of the fair market value on the date of grant.
Eligibility. Key employees of the Company and its subsidiaries are eligible to
be granted Awards under the Plan. Eligibility is determined by the Committee. At
present, no employees have been granted Awards or are otherwise participating in
the Plan. It is not possible to predict the number
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or identity of future participants or, except as set forth in the Plan, to
describe the restrictions that may be included in Award agreements. The Plan
provides that no more than 25% of the total shares subject to issuance under the
Plan may be awarded to any one employee.
Participation and Assignability. Neither the Plan nor any Award agreement
granted under the Plan entitles any participant or other employee to any right
to continued employment by the Company or any subsidiary. Generally, no Award,
Option, or other benefit payable under the Plan may, except as otherwise
specifically provided by law, be subject in any manner to assignment, transfer,
or encumbrance. However, Nonqualified Stock Options may be transferred without
consideration to (i) an immediate family member of the optionee, (ii) a trust
for the benefit of an immediate family member of the optionee, or (iii) a
partnership or a limited liability company whose only partners or members are
immediate family members, if the option holder satisfies certain conditions as
may be required by the Committee.
Federal Tax Consequences. The following summarizes the consequences of the grant
and acquisition of Awards under the Plan for federal income tax purposes, based
on management's understanding of existing federal income tax laws. This summary
is necessarily general in nature and does not purport to be complete. Also,
state and local income tax consequences are not discussed, and may vary from
locality to locality.
Options. Plan participants will not recognize taxable income at the time an
Option is granted under the Plan unless the Option has a readily ascertainable
market value at the time of grant. Management understands that Options to be
granted under the Plan will not have a readily ascertainable market value;
therefore, income will not be recognized by participants before the time of
exercise of an Option. For Nonqualified Stock Options, the difference between
the fair market value of the shares at the time an Option is exercised and the
Option price generally will be treated as ordinary income to the optionee, in
which case the Company will be entitled to a deduction equal to the amount of
the optionee's ordinary income. With respect to Incentive Stock Options,
participants will not realize income for federal income tax purposes as a result
of the exercise of such Options. In addition, if Common Stock acquired as a
result of the exercise of an Incentive Stock Option is disposed of more than two
years after the date the Option is granted and more than one year after the date
the Option was exercised, the entire gain, if any, realized upon disposition of
such Common Stock will be treated for federal income tax purposes as capital
gain. Under these circumstances, no deduction will be allowable to the Company
in connection with either the grant or exercise of an Incentive Stock Option.
Exceptions to the general rules apply in the case of a "disqualifying
disposition."
If a participant disposes of shares of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option before the expiration of one year after
the date of exercise or two years after the date of grant, the sale of such
stock will be treated as "disqualifying disposition." As a result, such a
participant would recognize ordinary income and the Company would be entitled to
a deduction in the year in which such disposition occurred. The amount of the
deduction and the ordinary income recognized upon a disqualifying disposition
would generally be equal to the lesser of: (a) the sale price of the shares sold
minus the Option price, or (b) the fair market value of the shares at the time
of exercise minus the Option price. If the disposition is to a related party
(such as a spouse, brother, sister, lineal descendant, or certain trusts or
business entities in
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which the seller holds a direct or indirect interest), the ordinary income
recognized generally is equal to the excess of the fair market value of the
shares at the time of exercise over the exercise price. Any additional gain
recognized upon disposition, in excess of the ordinary income, will be taxable
as capital gain. In addition, the exercise of Incentive Stock Options may result
in an alternative minimum tax liability.
Reload Stock Options. Participants will recognize no income on the grant of any
Reload Option. The tax consequences to the participant and the Company are the
same as that for a Stock Option.
Stock Appreciation Rights. Upon the grant of a Stock Appreciation Right, the
participant will realize no taxable income and the Company will receive no
deduction. A participant will realize income at the time of exercise if the
Award becomes vested and is no longer subject to forfeiture and the participant
is entitled to receive the value of the Award. The Company will receive a
deduction of an equal amount in the same year the participant recognizes income.
Restricted Stock. Recipients of shares of Restricted Stock that are not
"transferable" and are subject to "substantial risks of forfeiture" at the time
of grant will not be subject to federal income taxes until the lapse or release
of the restrictions or sale of the shares, unless the recipient files a specific
election under the Code to be taxed at the time of grant. The recipient's income
and the Company's deduction will be equal to the excess of the then fair market
value (or sale price) of the shares less any purchase price.
Performance Shares. Participants are not taxed upon the grant of Performance
Shares. Upon receipt of the underlying shares or cash, a participant will be
taxed at ordinary income tax rates (subject to withholding) on the amount of
cash received and/or the current fair market value of stock received, and the
Company will be entitled to a corresponding deduction. The participant's basis
in any Performance Shares received will be equal to the amount of ordinary
income on which he or she was taxed and, upon subsequent disposition, any gain
or loss will be capital gain or loss.
Required Vote for Approval. The affirmative vote of a majority of the Company's
Common Stock voted at the Annual Meeting, by person or by proxy, is required to
approve the Plan. While broker nonvotes will not be treated as votes cast on the
approval of this Plan, shares voted as abstentions will be counted as votes
cast. Since a majority of the votes cast is required for approval, the sum of
any negative votes and abstentions will necessitate offsetting affirmative votes
to assure approval. Unless otherwise directed by marking the accompanying proxy,
the proxy holders named therein will vote for the approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSED PLAN.
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PROPOSAL TO APPROVE THE PERFORMANCE BONUS PLAN.
The Compensation Committee of the Board of Directors has approved a performance
bonus plan for the CEO and top executives of the Company. In accordance with
section 162(m) of the Internal Revenue Code of 1986, as amended, (the "Code"),
the Company is seeking shareholder approval of the Performance Bonus Plan.
The summary of the Performance Bonus Plan (the "Plan") is as follows, which is
qualified in its entirety by reference to the complete text of the Plan set
forth in Appendix B to this Proxy Statement.
Eligibility. All salaried employees who are employed with the Company for the
entire fiscal year are eligible to participate in the Plan.
Performance Objectives. Any bonuses payable under the Plan are subject to the
achievement of certain performance objectives as determined by the Compensation
Committee of the Board of Directors from time to time. Current performance under
the Plan is linked to targeted return on investment ("ROI") levels for the
operating division in which the participant works, or in the case of the CEO and
corporate staff, for the Company in total.
Bonus Calculation. For the Named Executives other than the CEO, the bonus pool
is calculated by multiplying the ROI bonus rate by the operating profit for the
respective operating division. In the case of the CEO, the bonus pool is
calculated by multiplying the ROI bonus rate by the operating profit for the
Company in total.
The ROI bonus factor is a percentage which begins when the ROI reaches a floor
of 7%, and increases until the ROI reaches a ceiling of 23%. Each year the bonus
rate schedule is reviewed and approved by the Compensation Committee.
The CEO and the other Named Executives receive a predetermined percentage of the
bonus pool as calculated above. For 1999, the Compensation Committee has
allocated a fixed percentage of the Corporate bonus pool for the CEO.
Limitations. This performance bonus is capped at a maximum of 200% of the
subsequent year's base salary, which is generally determined prior to
calculation of final bonus amounts. In addition, any bonus in excess of 100% of
the recipient's subsequent year base salary is required to be invested in the
Company's Common Stock until such recipient owns a specified amount of Company
stock.
Results of Non-Approval. If the Plan is not approved by the shareholders, the
performance bonus when coupled with the base salary may not exceed the maximum
amount of compensation that would be deductible by the Company as an expense
under Section 162 of the Code for any of the Named Executives.
Termination or Amendment of the Plan. The Board of Directors may amend,
discontinue or terminate the Plan at any time. The Compensation Committee or the
Board may also change individual percentage allocations for Plan participants.
However, no amendment, discontinuance or termination may alter or otherwise
affect any bonuses earned through the date of termination. In addition, without
the approval of the Company's shareholders, no amendment to the Plan may
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be made which would increase the maximum bonus rate, eliminate the cap on
maximum bonus or replace the ROI performance criteria for determining
performance-based compensation.
Plan Benefits. Since the amounts to be paid under the proposed Plan are subject
to future performance, the Company cannot determine the benefits to be paid for
1999. However, the table below sets forth the amounts which would have been paid
in 1998 using the terms of the Plan. A total of approximately 590 participants,
excluding any Shoffner Industries, L.L.C. employees, would have been eligible to
participate in the Plan in 1998.
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NEW PLAN BENEFITS
Performance Bonus Plan
NAME AND POSITION DOLLAR VALUE ($)
----------------- ----------------
William G. Currie, CEO $ 682,000(1)
Peter F. Secchia, Chairman 341,000(1)
James H. Ward, President, Universal Forest Products Eastern
Division, Inc. 493,000(1)
Michael B. Glenn, President, Universal Forest Products
Western Division, Inc. 493,000(1)
Gary A. Wright, President, Shoffner Industries, L.L.C. 500,000(2)
Executive Group in Total 3,693,000
Salaried Employees, Excluding Executive Officers 8,132,310(2)
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(1) Amounts calculated for 1998 were based on the proposed Plan, but amounts
actually paid, as shown under the caption "Executive Compensation" herein, were
reduced from the calculated amounts by the Compensation Committee at the
recommendation of the Chairman and the CEO.
(2) Shoffner Industries, L.L.C. employees have continued their existing bonus
plan and therefore are not presently subject to the Plan. The amount listed
represents estimated amounts which would have been earned by Shoffner employees
under the Plan.
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Federal Tax Consequences. The following summarizes the federal income tax
consequences of the payment of bonuses under the Plan, based on management's
understanding of existing federal income tax laws.
Upon payment of a bonus to a Plan participant, the participant will recognize
ordinary income in the amount of the bonus paid. The Company will be entitled to
a deduction in the year in which the bonus is earned, provided that the bonus is
paid within two and one-half months after the close of the calendar year.
Required Vote for Approval. The affirmative vote of a majority of the Company's
Common Stock voted at the Annual Meeting, by person or by proxy, is required to
approve the Plan. While broker nonvotes will not be treated as votes cast on the
approval of this Plan, shares voted as abstentions will be counted as votes
cast. Since a majority of votes cast is required for approval, the sum of any
negative votes and abstentions will necessitate offsetting affirmative votes to
insure approval. Unless otherwise directed by the accompanying proxy, the proxy
holders named therein will vote for the approval of the Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THIS PLAN.
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OWNERSHIP OF COMMON STOCK. The following table sets forth information as to each
shareholder known to the Company to have been the beneficial owner of more than
five percent (5%) of the Company's outstanding shares of Common Stock as of
March 1, 1999:
................................................................................
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
------------------- ----------------------- -----------
Peter F. Secchia 4,008,224(3) 19.2%
2801 East Beltline NE
Grand Rapids, MI 49525
Carroll M. Shoffner 2,596,500(4) 12.4%
5631 S. NC 62
Burlington, NC 27215
J.P. Morgan & Co. Incorporated 1,307,200(5) 6.3%
60 Wall Street
New York, NY 10260
- ------------------
(1) Except as otherwise indicated by footnote, each named person has sole voting
and investment power with respect to the shares indicated.
(2) Shares outstanding for this calculation include 120,000 shares which are
subject to options exercisable in 60 days, 15,759 shares which are subject to
issuance under the Director Retainer Stock Plan, and 10,728 shares which are
subject to issuance under a Deferred Compensation Plan.
(3) Includes 50,000 shares owned by Mr. Secchia's wife. Includes 376,268 shares
held by a family Limited Liability Company of which Mr. Secchia is a member.
Includes 1,488,438 shares held by a family limited partnership of which Mr.
Secchia is a partner. Includes 100,000 shares held by a family foundation. Also
includes 25,000 shares which may be acquired by Mr. Secchia pursuant to options
exercisable within 60 days.
(4) Includes 600,000 shares held by a charitable remainder unitrust of which Mr.
Shoffner and his spouse are lifetime beneficiaries.
(5) Includes 247,400 which the named person does not have the power to vote, but
does have the power to dispose.
................................................................................
SECURITIES OWNERSHIP OF MANAGEMENT. The following table contains information
with respect to ownership of the Company's Common Stock by all directors,
nominees for election as director, executive officers named in the tables under
the caption "Executive Compensation," and all executive officers and directors
as a group. The information in this table was furnished by the Company's
officers, directors, and nominees for election of directors, and represents the
Company's understanding of circumstances in existence as of March 1, 1999.
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................................................................................
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS(2)
------------------------ ----------------------- -----------
Peter F. Secchia 4,008,224(3) 19.2%
Carroll M. Shoffner 2,596,500(7) 12.4%
William G. Currie 921,947(4)(5)(6) 4.4%
Michael B. Glenn 492,349(4)(6) 2.4%
James H. Ward 364,000(4) 1.7%
Gary A. Wright 150,000 *
Richard M. DeVos 25,300 *
John W. Garside 23,950 *
Louis A. Smith 17,734(8) *
John C. Canepa 10,327(8) *
Philip M. Novell 8,089(8) *
All directors and executive officers as a group
(18 persons) 8,343,727(2)(4)(8) 40.0%
- ------------------
* Less than one percent (1%).
(1) Except as otherwise indicated by footnote, each named person has sole voting
and investment power with respect to the shares indicated.
(2) Shares outstanding for this calculation include 120,000 shares which are
subject to options exercisable in 60 days, 15,759 shares which are subject to
issuance under the Director Retainer Stock Plan, and 10,728 shares which are
subject to issuance under a Deferred Compensation Plan.
(3) Includes 50,000 shares owned by Mr. Secchia's wife. Includes 376,268 shares
held by a family Limited Liability Company of which Mr. Secchia is a member.
Includes 1,488,438 shares held by a family limited partnership of which Mr.
Secchia is a partner. Includes 100,000 shares held by a family foundation. Also
includes 25,000 shares which may be acquired by Mr. Secchia pursuant to options
exercisable within 60 days.
(4) Twenty-three current and former employees of the Company, including Messrs.
Currie, Ward, and Glenn, along with other executive officers of the Company, are
partners of a general partnership that owns 300,000 shares of the Company's
Common Stock. The terms of this Partnership Agreement provide that Mr. Currie
has the authority to vote all the shares held by the partnership. Each partner
is deemed to have beneficial ownership of all the shares held by this
partnership.
(5) Includes 32,888 shares held by a partnership of which Mr. Currie is a
general partner. The Partnership Agreement provides that Mr. Currie has the
authority to vote all of the shares held by the partnership. Each partner is
deemed to have beneficial ownership of all the shares held by this partnership.
Excludes shares held by the Company's Profit Sharing Trust, except for 91,770
shares allocated to Mr. Currie's account. Mr. Currie, as a Trustee, disclaims
beneficial ownership of all other shares held by the Trust.
(6) Includes 50,000 shares which may be acquired by Mr. Currie, and 10,000
shares which may be acquired by Mr. Glenn, pursuant to options exercisable
within 60 days.
(7) Includes 600,000 shares held by a charitable remainder unitrust of which Mr.
Shoffner and his spouse are lifetime beneficiaries.
(8) Includes shares obtained through the Company's Director Retainer Stock Plan
for Mr. Smith, Mr. Novell, and Mr. Canepa who hold 6,934 shares, 6,298 shares,
and 2,527 shares through such plan, respectively.
................................................................................
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following Summary Compensation Table shows
certain information concerning the compensation for the Chief Executive Officer
and each of the Company's four most highly compensated executive officers for
fiscal 1998 (the "Named Executives"), and their compensation for 1997 and 1996:
................................................................................
LONG TERM COMPENSATION
AWARDS
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS OPTIONS/SARS COMPENSATION(3)
------------------ ---- --------- -------- ---------- ------------ ---------------
Peter F. Secchia 1998 $302,229 $250,000 -0- -0- 9,645
Chairman of the Board 1997 326,333 350,000 -0- -0- 9,288
1996 320,750 400,000 -0- -0- 12,299
William G. Currie 1998 366,333 637,000 -0- -0- 9,645
Chief Executive Officer 1997 360,500 418,000 -0- -0- 9,288
and Director 1996 345,751 450,000 -0- -0- 12,367
James H. Ward 1998 235,000 477,750 -0- -0- 9,645
President 1997 201,791 239,251 -0- -0- 9,288
Universal Forest Products 1996 193,166 268,814 -0- -0- 12,367
Eastern Division, Inc.
Michael B. Glenn 1998 231,666 477,726 -0- -0- 9,645
President 1997 194,333 474,871 -0- -0- 9,288
Universal Forest Products 1996 186,000 469,111 -0- -0- 12,367
Western Division, Inc.
Gary A. Wright 1998 199,520(4) 342,597 -0- 50,000 -0-
President
Shoffner Industries, Inc.
- ------------------
(1) Includes amounts deferred by Named Executives, including amounts deferred
under the Company's 401k Plan.
(2) Includes annual bonus payments under a performance-based bonus plan tied to
the Company's return on investment, which covers substantially all salaried
employees. The bonus amounts herein represent the amounts earned in each
respective year, which are paid in the subsequent year.
(3) The amounts set forth in this column represent Company contributions to the
Company's Profit Sharing and 401(k) Plan. Subject to certain age and service
requirements, all employees of the Company and its subsidiaries are eligible to
participate in the Plan. A subsidiary acquired during 1998 may not yet be
eligible to participate in the Plan, or may have a separate retirement plan.
(4) As a result of the Company's merger with Shoffner Industries, Inc., Mr.
Wright became an employee of the Company on March 30, 1998.
................................................................................
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OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth information
regarding stock options granted to the Named Executives during the preceding
fiscal year:
................................................................................
INDIVIDUAL GRANTS
PERCENT OF
NUMBER OF OPTIONS GRANTED GRANT DATE
SECURITIES UNDERLYING TO ALL EMPLOYEES EXERCISE EXPIRATION PRESENT
EXECUTIVE OPTIONS GRANTED(#)(1) IN FISCAL YEAR PRICE($/SH)(2) DATE VALUE(3)
--------- --------------------- ---------------- -------------- ---------- ----------
Gary A. Wright 5,000 1.1% $17.4375 04/30/2001 $ 23,073
10,000 2.2% $20.1800 04/30/2004 $ 58,872
15,000 3.2% $23.3600 04/30/2007 $102,219
20,000 4.3% $27.0400 04/30/2010 $150,933
- ------------------
(1) The options granted under this plan may be exercised beginning in 2001.
(2) The exercise price equals or exceeds the fair market value of the Company
stock as of the grant date, April 22, 1998.
(3) Based on the binomial option valuation model assuming volatility is 20%,
risk-free rate of return is 5.4%, dividend yield is .6%, and time of exercise is
30 days prior to expiration of option. The binomial model is an alternative
suggested by the Securities and Exchange Commission, and the Company neither
endorses this particular model, nor necessarily agrees with this method for
valuing options. The actual value of the options, if any, will depend on the
market value of the Company's Common Stock subsequent to the date the options
become exercisable.
................................................................................
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES. The following table sets forth information regarding the number and
value of exercised and unexercised options held by the Named Executives at
December 26, 1998.
................................................................................
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT IN-THE-MONEY OPTIONS
ON VALUE DECEMBER 26, 1998(#) AT DECEMBER 26, 1998($)(1)
EXECUTIVE EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- ----------- -------------- ----------- ------------- ----------- -------------
Peter F. Secchia 0 0 0 62,500 $0 $ 981,250
William G. Currie 0 0 0 125,000 0 1,962,500
James H. Ward 0 0 0 45,000 0 670,000
Michael B. Glenn 0 0 0 45,000 0 670,000
Gary A. Wright 0 0 0 50,000 0 12,812
- ------------------
(1) Values based on the difference between the closing market price of the
Company's stock as of December 26, 1998 ($20.00) and the exercise price of the
options.
................................................................................
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COMPENSATION COMMITTEE REPORT. The Compensation Committee of the Board of
Directors has furnished the following report on executive compensation:
During 1998, the Company maintained its compensation program in accordance
with the Compensation Committee goals which are designed to align the
financial interests of its officers and key executives with those of its
shareholders. The focus of the Committee has been to tie executive
compensation to the creation of shareholder value, both short and long
term.
The Committee believes executives should be rewarded for achieving Company
objectives, with the major emphasis on providing a return on invested
capital. By increasing the Company's return on investment, the value of the
Company is dramatically increased, and each shareholder will benefit. In
addition, a major initiative for 1998 was profitable sales growth and other
objectives tied to the Company's Performance 2002 initiative. The Committee
has determined that the following combination of base salary, bonus and
benefits will best motivate Company executives to achieve the Company's
goals.
Base Salaries. Annual base salaries are based on past and present corporate
and individual performance, with reference to base salary data of
similar-sized corporations and industry competitors so such salaries are
generally competitive in the market place. Salary comparisons with peer
group companies are reviewed and analyzed to account for differences in
size and business complexity among peer companies.
The Committee has complete discretion in determining base salary amounts
(including the grant and amount of any annual discretionary incentive
payments or stock option awards), regardless of whether corporate or
individual performance goals are achieved. The Committee exercised its
complete discretion in setting base salaries for 1998.
Each year the Committee reviews, with the Chief Executive Officer, and
approves, with such modifications as it may deem appropriate, an annual
salary adjustment target for executives for the ensuing February 1 to
January 31, based on current available survey data, cost of living factors,
and performance judgments as to the past and expected future contributions
of the individual officers.
Incentive Compensation. The Company relies heavily on annual discretionary
incentive compensation to attract and retain Company officers and other key
employees of outstanding abilities, and to motivate them to perform to the
full extent of their abilities. The Company's incentive compensation system
in 1998 focused on Return on Investment (ROI). For Messrs. Ward and Glenn,
1998 bonuses are based on the ROI of their respective operations, with
adjustments to the bonus based on attainment of certain Company and
Divisional goals. For Mr. Wright, bonus is based on the pretax operating
profit of Shoffner Industries, Inc. (now known as Shoffner Industries,
L.L.C.) which was the method utilized by Shoffner Industries prior to its
acquisition by the Company in March of 1998. For Messrs. Currie and
Secchia, incentive compensation is based entirely on the ROI of the Company
as a whole.
Chief Executive. The Committee annually reviews and establishes the
discretionary component of the base salary of the Chief Executive Officer.
His salary is based on comparable
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compensation data, the Committee's assessment of his past performance and
its expectation as to his future contributions in leading the Company and
its businesses. The Chief Executive Officer's base salary fell within the
middle-range of the salaries of comparable executives. When compared with
the new peer group of the Company (as discussed under "Stock Performance
Graphs"), the Chief Executive Officer's base salary fell in the upper
quartile of the peer group. The Committee has complete discretion in
setting base salary for Mr. Currie (who does not have an employment
agreement with the Company).
The Chief Executive Officer's incentive bonus amount for 1998 was based
upon performance determined under the Performance Bonus Plan described
above. The Chief Executive Officer's bonus for 1998 reflects the Company's
overall performance, including record net earnings achieved in 1998. While
overall Company ROI decreased slightly from 1997, the substantial increase
in net earnings resulted in an increased total bonus amount.
Incentive Bonus Program. For fiscal 1999, the Company will continue to use
the ROI based Performance Bonus Plan described above. By basing the
individual's incentive compensation on the ROI generated by the profit
center, the individual is rewarded for properly managing assets, increasing
cash flow, and obtaining higher net margins. A discretionary bonus
component, limited to 5% of the greater of the actual improvement or the
operating profit, is available for salaried personnel at operations which
have not yet hit the ROI target, but which demonstrate improvement over the
previous year.
For the Chief Executive and the other Named Executives, incentive
compensation will be paid as provided in the Performance Bonus Plan, as
approved by the Committee.
The Company's policy is to pay all earned compensation regardless of
whether it exceeds the One Million Dollar ($1,000,000.00) limitation on
compensation deductions set forth in Section 162(m) of the Internal Revenue
Code. However, to ensure the maximum tax deductibility for the Company, the
Company has elected to request shareholder approval of the existing
incentive compensation plan. A description of this Plan appears above under
the caption "Proposal to Approve the Performance Bonus Plan."
This report has been furnished by the members of the Board of Directors'
Compensation Committee.
John W. Garside, Chairman
John C. Canepa
Richard M. DeVos
The report of the Compensation Committee shall not be deemed incorporated by
reference in any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
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STOCK PERFORMANCE GRAPHS. The following graphs depict the cumulative total
return on the Company's Common Stock compared to the cumulative total return on
the indices for The NASDAQ Stock Market(SM) (all U.S. companies) and an industry
peer group selected by the Company. The graph assumes an investment of $100.00
on November 10, 1993, the first day of public trading of the Company's stock,
and reinvestment of dividends in all cases.
In 1998, the Company selected a new peer group which it believes more accurately
reflects the Company's business compared with the business of its peers.
The former peer group was established in 1993 at the time of the Company's
initial public offering, and includes companies which have merged (e.g. Plygem
merged into Nortek, Inc., ABTCo merged into Louisiana Pacific Corporation) as
well as companies whose growth patterns have differed dramatically from the
Company (Weyerhaeuser). Therefore, the Company has selected a new peer group
which consists of entities whose businesses consist of value added building
materials and/or products made of wood.
Both the new peer group and the former peer group are listed below.
NEW PEER GROUP
PERFORMANCE GRAPH
UNIVERSAL FOREST NASDAQ STOCK MARKET SELF-DETERMINED PEER
PRODUCTS, INC. (U.S. COMPANIES) GROUP
---------------- ------------------- --------------------
'12/27/93' 100.00 100.00 100.00
'12/27/94' 63.30 99.20 88.40
'12/27/95' 99.40 140.80 90.30
'12/27/96' 139.40 174.00 95.20
'12/26/97' 137.30 204.90 96.60
'12/24/98' 212.10 295.80 91.50
12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
M Universal Forest Products, Inc. 100.0 63.3 99.4 139.4 137.3 212.1
O Nasdaq Stock Market (US Companies) 100.0 99.2 140.8 174.0 204.9 295.8
K Self-Determined Peer Group 100.0 88.4 90.3 95.2 96.6 91.5
The companies included in the Company's new self-determined industry peer group
are as follows:
Armstrong World Industries, Inc. Louisiana Pacific Corp.
Building Materials Holding Co. Patrick Industries
Georgia Pacific Corp. TJ International, Inc.
Kevco Inc.
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FORMER PEER GROUP
OLD PEER GROUP LINE GRAPH
UNIVERSAL FOREST NASDAQ STOCK MARKET SELF-DETERMINED PEER
PRODUCTS, INC. (U.S. COMPANIES) GROUP
---------------- ------------------- --------------------
'12/27/93' 102.60 100.40 101.70
'12/27/94' 64.90 99.50 90.20
'12/27/95' 102.00 141.30 96.90
'12/27/96' 143.00 174.60 105.30
'12/26/97' 141.00 205.60 108.60
'12/24/98' 217.70 296.90 109.80
12/1993 12/1994 12/1995 12/1996 12/1997 12/1998
M Universal Forest Products, Inc. 102.6 64.9 102.0 143.0 141.0 217.7
O Nasdaq Stock Market (US Companies) 100.4 99.5 141.3 174.6 205.6 296.9
K Self-Determined Peer Group 101.7 90.2 96.9 105.3 108.6 109.8
The companies included in the Company's former peer group are as follows:
ABT Building Products Corp. Nortek, Inc. (acquired by PlyGem
Armstrong World Industries, Inc. Industries, Inc.)
Georgia Pacific Corp. Triangle Pacific Corp.
Louisiana Pacific Corp. Weyerhaeuser Corp.
Morgan Products Ltd.
The returns of each company included in the self-determined peer group are
weighted according to each respective company's stock market capitalization at
the beginning of each period presented in the graph above.
................................................................................
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the
Exchange Act requires directors, executive officers and greater than 10%
beneficial owners to file reports of ownership and changes in ownership of
shares of Common Stock with the Securities and Exchange Commission, and
applicable regulations require them to furnish the Company with copies of all
Section 16(a) reports they file. Based solely upon review of the copies of such
reports furnished to the Company, or written representations that no such
reports were required, all Section 16(a) filing requirements applicable to the
reporting persons were complied with, except for Mr. Higgs who filed one late
Form 4 report covering one transaction.
INDEPENDENT PUBLIC ACCOUNTANTS. Deloitte & Touche LLP, certified public
accountants, have audited the financial statements of the Company and its
subsidiaries for the fiscal year ended December 26, 1998, and management intends
to recommend the reappointment of the firm of Deloitte & Touche LLP as
independent auditors of the Company for the current fiscal year. Representatives
of Deloitte & Touche LLP are expected to be present at the annual meeting, will
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21
have an opportunity to make a statement and are expected to be able to respond
to appropriate questions from the shareholders.
AVAILABILITY OF FORM 10-K. Shares of the Company's stock are traded under the
symbol UFPI on The NASDAQ Stock Market(sm). The Company's 10-K Report filed with
the Securities and Exchange Commission will be provided free of charge to any
shareholder upon written request. Other significant financial information is
available on the Company's web site at www.ufpinc.com. For more information,
contact the Investor Relations Department, 2801 East Beltline NE, Grand Rapids,
Michigan 49525.
SHAREHOLDER PROPOSALS. Shareholder proposals intended to be presented at the
2000 Annual Meeting of Shareholders must be received by the Company no later
than November 18, 1999, to be considered for inclusion in the proxy materials
relating to that meeting. Proposals of shareholders should be addressed to the
attention of Secretary, 2801 East Beltline NE, Grand Rapids, Michigan 49525. If
the Company receives notice of a shareholder proposal after February 8, 2000,
the persons named as proxies for the 2000 Annual Meeting of Shareholders will
have discretionary voting authority to vote on that proposal at the meeting.
FUTURE PROXY SOLICITATION. In the future, the Company would like to utilize the
Internet to solicit proxies from its shareholders. We will also accept voting by
telephone or via the Internet. If, in the future, you are interested in
accepting proxy solicitations via the Internet, please visit our web site at
www.ufpinc.com, and request to be put on our e-mail list by clicking on the
"Info Request" icon.
By Order of the Board of Directors,
Matthew J. Missad, Secretary
March 24, 1999
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APPENDIX A
UNIVERSAL FOREST PRODUCTS, INC.
1999 LONG TERM STOCK
INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE OF THE PLAN
1.1 Establishment of the Plan. Universal Forest Product, Inc., a Michigan
corporation (the "Company"), hereby establishes an incentive compensation plan
to be known as the "Universal Forest Products, Inc. 1999 Long Term Stock
Incentive Plan" (the "Plan"), as set forth in this document. The Plan permits
the granting of stock options, stock appreciation rights, restricted stock, and
other stock-based awards to key employees of the Company and its Subsidiaries.
Upon approval by the Board of Directors of the Company, subject to ratification
by the affirmative vote of holders of a majority of shares of the Company's
Common Stock present and entitled to vote at the 1999 Annual Meeting of
Shareholders, the Plan shall become effective as of April 28, 1999 (the
"Effective Date").
1.2 Purpose of the Plan. The purpose of the Plan is to promote the long-term
success of the Company for the benefit of the Company's shareholders, through
stock-based compensation, by aligning the personal interests of the Company's
key employees with those of its shareholders. The Plan is also designed to allow
key employees to participate in the Company's future, as well as to enable the
Company to attract, retain and award such employees. The Plan supersedes and
replaces the Company's Long Term Inventive Plan, adopted by the Company's
shareholders in 1997.
1.3 Term of Plan. No Awards shall be granted pursuant to the Plan on or after
the tenth anniversary of the Effective Date ("Termination Date"), provided that
Awards granted prior to the Termination Date may extend beyond that date, and
Cash Payment Rights and Reload Options may be effected pursuant to the terms of
Awards granted prior to the Termination Date.
ARTICLE 2
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings set forth
below:
2.1 "Award" shall mean any award under this Plan of any Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares or Other Stock-Based
Award.
2.2 "Award Agreement" shall mean an agreement evidencing the grant of an Award
under this Plan. Awards under the Plan shall be evidenced by Award Agreements
that set forth the details, conditions and limitations for each Award, as
established by the Committee and shall be subject to the terms and conditions of
the Plan.
2.3 "Award Date" shall mean the date that an Award is made, as specified in an
Award Agreement.
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23
2.4 "Board" shall mean the Board of Directors of the Company.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Committee" shall mean the Committee, as specified in Article 3, appointed
by the Board to administer the Plan.
2.7 "Common Stock" shall mean the Common Stock of the Company.
2.8 "Disability" shall mean permanent and total disability as determined under
the rules and guidelines established by the Committee for purposes of the Plan.
2.9 "Fair Market Value" shall be the mean between the highest and lowest sales
prices per share of the Common Stock for such date on the National Association
of Securities Dealers Automated Quotation System or any successor system then in
use ("NASDAQ"). If no sale of shares of Common Stock is reflected on the NASDAQ
on a date, "Fair Market Value" shall be determined on the next preceding day on
which there was a sale of shares of Common Stock reflected on NASDAQ.
2.10 "Incentive Stock Option" or "ISO" shall mean an option to purchase shares
of Common Stock granted under Article 6, which is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the
Code.
2.11 "Insider" shall mean an employee who is an officer (as defined in Rule
16a-1(f) of the Exchange Act) or director of the Company, or holder of more than
ten percent (10%) of its outstanding shares of Common Stock.
2.12 "Nonemployee Director" shall have the meaning set forth in Rule
16b-3(b)(3), as promulgated by the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934 (the "Exchange Act"), or any
successor definition adopted by the SEC.
2.13 "Nonqualified Stock Option" or "NQSO" shall mean an option to purchase
shares of Common Stock, granted under Article 6, which is not an Incentive Stock
Option.
2.14 "Option" means an Incentive Stock Option, a Nonqualified Stock Option, or a
Reload Option.
2.15 "Option Price" shall mean the price at which a share of Common Stock may be
purchased by a Participant pursuant to an Option, as determined by the
Committee.
2.16 "Other Stock-Based Award" shall mean an Award under Article 10 of this Plan
that is valued in whole or in part by reference to, or is payable in or
otherwise based on, Common Stock.
2.17 "Participant" shall mean an employee of the Company or a Subsidiary who
holds an outstanding Award granted under the Plan.
2.18 "Performance Shares" shall mean an Award granted under Article 9 of this
Plan evidencing the right to receive Common Stock or cash of an equivalent value
at the end of a specified performance period.
2.19 "Permitted Transferee" means (i) the spouse, children or grandchildren of a
Participant (each an "Immediate Family Member"), (ii) a trust or trusts for the
exclusive benefit of the
A-2
24
Participant and/or one or more Immediate Family Members, or (iii) a partnership
or limited liability company whose only partners or members are the Participant
and/or one or more Immediate Family Members.
2.20 "Reload Option" shall mean an Option that is awarded under the conditions
of Section 6.5 of the Plan.
2.21 "Retirement" shall mean the termination of a Participant's employment with
the Company or a Subsidiary after the Participant attains normal retirement age
as established by the Committee at the time an Award is made.
2.22 "Restricted Stock" shall mean an Award granted to a Participant under
Article 8 of this Plan.
2.23 "Stock Appreciation Right" or "SAR" shall mean an Award granted to a
Participant under Article 7 of this Plan.
2.24 "Subsidiary" shall mean any corporation in which the Company owns directly,
or indirectly through subsidiaries, at least fifty percent (50%) of the total
combined voting power of all classes of stock, or any other entity (including,
but not limited to, partnerships and joint ventures) in which the Company owns
at least fifty percent (50%) of the combined equity thereof.
2.25 "Termination of Employment" shall mean the termination of a Participant's
employment with the Company or a Subsidiary. A Participant employed by a
Subsidiary shall also be deemed to incur a Termination of Employment if the
Subsidiary ceases to be a Subsidiary and the Participant does not immediately
thereafter become an employee of the Company or another Subsidiary.
ARTICLE 3
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a Committee designated by
the Board consisting of not less than two (2) directors who shall be appointed
from time to time by the Board, each of whom shall qualify as a Nonemployee
Director.
3.2 Committee Authority. Subject to the Company's Articles of Incorporation,
Bylaws and the provisions of this Plan, the Committee shall have full authority
to grant Awards to key employees of the Company or a Subsidiary. Awards may be
granted singly, in combination, or in tandem. The authority of the Committee
shall include the following:
(a) To select the key employees of the Company or a Subsidiary to whom
Awards may be granted under the Plan;
(b) To determine whether and to what extent Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares and Other Stock-Based Awards,
or any combination thereof are to be granted under the Plan;
(c) To determine the number of shares of Common Stock to be covered by each
Award;
(d) To determine the terms and conditions of any Award Agreement,
including, but not limited to, the Option Price, any vesting restriction or
limitation, any vesting schedule or acceleration thereof, or any forfeiture
restrictions or waiver thereof, regarding any Award and
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the shares of Common Stock relating thereto, based on such factors as the
Committee shall determine in its sole discretion;
(e) To determine whether, to what extent and under what circumstances
grants of Awards are to operate on a tandem basis and/or in conjunction
with or apart from other cash compensation arrangement made by the Company
other than under the terms of this Plan;
(f) To determine under what circumstances an Award may be settled in cash,
Common Stock, or a combination thereof; and
(g) To determine to what extent and under what circumstances shares of
Common Stock and other amounts payable with respect to an Award shall be
deferred.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (including any Award Agreement) and to
otherwise supervise the administration of the Plan. A majority of the Committee
shall constitute a quorum, and the acts of a majority of a quorum at any
meeting, or acts reduced to or approved in writing by a majority of the members
of the Committee, shall be the valid acts of the Committee. The interpretation
and construction by the Committee of any provisions of the Plan or any Award
granted under the Plan shall be final and binding upon the Company, the Board
and Participants, including their respective heirs, executors and assigns. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or an Award granted
hereunder.
ARTICLE 4
COMMON STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 13.1, the maximum aggregate number
of shares of Common Stock which may be issued under this Plan, which may be
either unauthorized and unissued Common Stock or issued Common Stock reacquired
by the Company ("Plan Shares"), shall be:
(a) 1,000,000 Shares; plus
(b) shares approved but not covered by options or other stock rights
granted under the 1997 Long Term Incentive Plan.
(c) an annual increase in the number of Shares determined and to be
effective on the date of each annual meeting of the Company's shareholders
(commencing with the annual meeting in the year 2000), equal to the lesser
of (i) 200,000 Shares, (ii) one percent (1.0%) of the sum of (1) the
outstanding Shares, plus (2) the number of Shares subject to outstanding
options issues under the Plan on such date, or (iii) such number of Shares
as determined by the Board.
Determinations as to the number of Plan Shares that remain available for
issuance under the Plan shall be made in accordance with such rules and
procedures as the Committee shall determine from time to time. If an Award
expires unexercised or is forfeited, canceled, terminated or settled in cash in
lieu of Common Stock, the shares of Common Stock that were theretofore subject
(or
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potentially subject) to such Award may again be made subject to an Award
Agreement. In addition, Shares from the following sources shall be added to the
number of Plan Shares available for issuance under the Plan: (1) any Shares of
the Company's Common Stock surrendered in payment of the exercise price of
Options or to pay the tax withholding obligations incurred upon the exercise of
Options; and (2) Options withheld to pay the exercise price or tax withholding
obligations incurred upon the exercise of Options.
ARTICLE 5
ELIGIBILITY
The persons who shall be eligible to receive Awards under the Plan shall be such
key employees of the Company or a Subsidiary as the Committee shall select from
time to time. In making such selections, the Committee shall consider the nature
of the services rendered by such employees, their present and potential
contribution to the Company's success and the success of the particular
Subsidiary or division of the Company by which they are employed, and such other
factors as the Committee in its discretion shall deem relevant. Participants may
hold more than one Award, but only on the terms and subject to the restrictions
set forth in the Plan and their respective Award Agreements. No participant may
receive Awards under the Plan covering more than twenty-five percent (25%) of
Plan Shares.
ARTICLE 6
STOCK OPTIONS
6.1 Options. Options may be granted alone or in addition to other Awards granted
under this Plan. Each Option granted under this Plan shall be either an
Incentive Stock Option (ISO) or a Nonqualified Stock Option (NQSO).
6.2 Grants. The Committee shall have the authority to grant to any Participant
one or more Incentive Stock Options, Nonqualified Stock Options, or both types
of Options. To the extent that any Option does not qualify as an Incentive Stock
Option (whether because of its provisions or the time or manner of its exercise
or otherwise), such Option or the portion thereof which does not qualify shall
constitute a separate Nonqualified Stock Option.
6.3 Incentive Stock Options. No term of this Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the Plan
under Section 422 of the Code, or, without the consent of the Participants
affected, to disqualify any Incentive Stock Option under such Section 422. The
aggregate Fair Market Value, determined on the Award Date of the shares of
Common Stock with respect to which one or more Incentive Stock Options (or other
incentive stock options within the meaning of Section 422 of the Code, under all
other option plans of the Company) that are exercisable for the first time by a
Participant during any calendar year shall not exceed the $100,000 limitation
imposed by Section 422(d) of the Code.
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6.4 Terms of Options. Options granted under the Plan shall be evidenced by Award
Agreements in such form as the Committee shall from time to time approve. Each
Agreement shall comply with and be subject to the following terms and
conditions:
(a) Participant's Agreement. Each Participant shall agree to remain in the
continuous employ of the Company for a period of at least twelve (12)
months from the Award Date or until Retirement, if Retirement occurs prior
to twelve (12) months from the date of the Option. Such Agreement shall not
impose upon the Company any obligation to retain the Participant in its
employ for any period.
(b) Option Price. The Option Price per share of Common Stock purchasable
under an Option shall be determined by the Committee at the time of grant
but shall be not less than one hundred percent (100%) of the Fair Market
Value of the Common Stock at the Award Date, provided that the Option Price
per share of Common Stock subject to an Incentive Stock Option granted to
an Insider shall be no less than 110 percent of the Fair Market Value of
the shares of Common Stock on the Award Date.
(c) Option Term. The term of each Option shall be fixed by the Committee,
but no Option which is designated as an ISO shall be exercisable more than
ten (10) years after the date the ISO is granted, provided that the term of
any Incentive Stock Option granted to an Insider shall not exceed five (5)
years.
(d) Exercisability. Except as provided in Section 13.2, no Option shall be
exercisable either in whole or in part prior to the first anniversary of
the Award Date. Thereafter, an Option shall be exercisable at such time or
times and subject to such terms and conditions (including but not limited
to vesting provisions) as shall be determined by the Committee and set
forth in the Award Agreement. If the Committee provides that any Option is
exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors
as the Committee may determine.
(e) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (d) above, Options may be
exercised in whole or in part at any time during the term of the Option, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in full
of the purchase price in such form as the Committee may accept.
Notwithstanding the foregoing, an Option shall not be exercisable with
respect to less than 100 shares of Common Stock unless the remaining shares
covered by an Option are fewer than 100 shares. If and to the extent
determined by the Committee in its sole discretion at or after grant,
payment in full or in part may also be made in the form of Common Stock
owned by the Participant (and for which the Participant has good title free
and clear of any liens and encumbrances and with respect to any shares of
Common Stock acquired upon the exercise of an Option, has been held by the
Optionee for a period of at least six (6) consecutive months) or Restricted
Stock, or by reduction in the number of shares issuable upon such exercise
based, in each case, on the Fair Market Value of the Common Stock on the
last trading date preceding payment as determined by the Committee (without
regard to any forfeiture restrictions applicable to Restricted Stock). No
shares of stock shall be issued until payment has been made. A Participant
shall generally
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have the rights to dividends or other rights of a shareholder with respect
to shares subject to the Option when the person exercising such option has
given written notice of exercise, has paid for such shares as provided
herein, and, if requested, has given the representation described in
Section 14.1 of the Plan. Notwithstanding the foregoing, if payment in full
or in part has been made in the form of Restricted Stock, an equivalent
number of shares of Common Stock issued on exercise of the Option shall be
subject to the same restrictions and conditions, and during the remainder
of the Restriction Period [as defined in Section 8.3(a)], applicable to the
shares of Restricted Stock surrendered therefor.
(f) Transferability of Options. No Option may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution, provided, however, the
Committee may, in its discretion, authorize all or a portion of a
Nonqualified Stock Option to be granted to an optionee to be on terms which
permit transfer by such optionee to a Permitted Transferee, provided that
(i) there may be no consideration for any such transfer (other than the
receipt of or interest in a family partnership or limited liability
company), (ii) the stock option agreement pursuant to which such options
are granted must be approved by the Committee, and must expressly provide
for transferability in a manner consistent with this Section 6.4(f), and
(iii) subsequent transfers of transferred options shall be prohibited
except those in accordance with Section 6.4(i). Following transfer, any
such options shall continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer. The events of termination
of service of Sections 6.4(g), (h) and (i) hereof, and the tax withholding
obligations of Section 13.3 shall continue to be applied with respect to
the original optionee, following which the options shall be exercisable by
the Permitted Transferee only to the extent, and for the periods specified
in Sections 6(g), (h), and (i). The Company shall not be obligated to
notify Permitted Transferee(s) of the expiration or termination of any
option. Further, all Options shall be exercisable during the Participant's
lifetime only by such Participant and, in the case of a Nonqualified Stock
Option, by a Permitted Transferee. The designation of a person entitled to
exercise an Option after a person's death will not be deemed a transfer.
(g) Termination of Employment for Reasons other than Disability or
Death. Upon Termination of Employment for any reason other than on account
of Disability or death, each Option held by the Participant shall, to the
extent rights to purchase shares under such Option have accrued at the date
of such Termination of Employment and shall not have been fully exercised,
be exercisable, in whole or in part, at any time within a period of three
(3) months following Termination of Employment, subject, however, to prior
expiration of the term of such Options and any other limitations on the
exercise of such Options in effect at the date of exercise. Whether an
authorized leave of absence or absence because of military or governmental
service shall constitute Termination of Employment for such purposes shall
be determined by the Committee, which determination shall be final and
conclusive.
(h) Termination of Employment for Disability. Upon Termination of
Employment by reason of Disability, each Option held by such Participant
shall, to the extent rights to purchase shares under the Option have
accrued at the date of such Retirement or Disability and shall not have
been fully exercised, remain exercisable in whole or in part, for a period
of one (1) year
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following such Termination of Employment, subject, however, to prior
expiration according to its terms and other limitations imposed by the
Plan. If the Participant dies after such Retirement or Disability, the
Participant's Options shall be exercisable in accordance with Section
6.4(i) below.
(i) Termination of Employment for Death. Upon Termination of Employment due
to death, each Option held by such Participant or Permitted Transferee
shall, to the extent rights to purchase shares under the Options have
accrued at the date of death and shall not have been fully exercised, be
exercisable, in whole or in part, by the personal representative of the
estate of the Participant or Permitted Transferee or by any person or
persons who shall have acquired the Option directly from the Participant or
Permitted Transferee by bequest or inheritance only under the following
circumstances and during the following periods: (i) if the Participant dies
while employed by the Company or a Subsidiary, at any time within one (1)
year after his or her death, or (ii) if the Participant dies during the
extended exercise period following Termination of Employment specified in
Section 6.4(h), at any time within the longer of such extended period or
three (3) months after death, subject, however, in any case, to the prior
expiration of the term of the Option and any other limitation on the
exercise of such Option in effect at the date of exercise.
(j) Termination of Options. Any Option that is not exercised within
whichever of the exercise periods specified in Sections 6.4(g), (h) or (i)
is applicable shall terminate upon expiration of such exercise period.
(k) Purchase and Settlement Provisions. The Committee may at any time offer
to purchase an Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made. In addition, if an Award
Agreement so provides at the Award Date or is thereafter amended to so
provide, the Committee may require that all or part of the shares of Common
Stock to be issued with respect to the exercise of an Option, in an amount
not greater than the Fair Market Value of the shares that is in excess of
the aggregate Option Price, take the form of Performance Shares or
Restricted Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value of such Performance Shares or Restricted
Stock determined without regard to the deferral limitations and/or
forfeiture restrictions involved.
6.5 Reload Options. Without in any way limiting the authority of the Committee
to make grants hereunder, and in order to induce employees to retain ownership
of shares of Common Stock, the Committee shall have the authority (but not an
obligation) to include within any Award Agreement a provision entitling the
Participant to a further Option (a "Reload Option") in the event the Participant
exercises the Option evidenced by the Award Agreement, in whole or in part, by
surrendering shares of Common Stock previously owned by the Participant, in
accordance with this Plan and the terms and conditions of the Award Agreement. A
Reload Option shall entitle a Participant to purchase a number of shares of
Common Stock equal to the number of such shares so delivered upon exercise of
the original Option and, in the discretion of the Committee, the number of
shares, if any, tendered to the Company to satisfy any withholding tax liability
arising in connection with the exercise of the original Option. A Reload Option
shall: (a) have an Option Price of not less than one hundred percent (100%) of
the per share Fair Market Value of
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the Common Stock on the date of grant of such Reload Option; (b) have a term not
longer than the remaining term of the original Option at the time of exercise
thereof; (c) become exercisable in the event the shares acquired upon exercise
of the original Option are held for a minimum period of time established by the
Committee; and (d) be subject to such other terms and conditions as the
Committee may determine.
ARTICLE 7
STOCK APPRECIATION RIGHTS
7.1 Grant of SARs. The Committee may approve the grant of Stock Appreciation
Rights ("SARs") that are related to Options only. A SAR may be granted only at
the time of grant of the related Option. A SAR will entitle the holder of the
related Option, upon exercise of the SAR, to surrender such Option, or any
portion thereof to the extent unexercised, with respect to the number of shares
as to which such SAR is exercised, and to receive payment of an amount computed
pursuant to Section 7.2. Such Option will, to the extent surrendered, then cease
to be exercisable. A SAR granted hereunder will be exercisable at such time or
times, and only to the extent that a related Option is exercisable, and will not
be transferable except to the extent that such related Option may be
transferable.
7.2 Payment of SAR Amount. Upon the exercise of a SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying (i) the difference between the Fair Market Value of a share of
Common Stock on the date of exercise over the Option Price, by (ii) the number
of shares of Common Stock with respect to which the SAR is exercised. At the
discretion of the Committee, the payment upon SAR exercise may be in cash, in
shares of Common Stock of equivalent value, or in some combination thereof.
ARTICLE 8
RESTRICTED STOCK
8.1 Awards of Restricted Stock. Shares of Restricted Stock may be issued either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the eligible persons to whom, and the time or times at which, grants
of Restricted Stock will be made, the number of shares to be awarded, the price
(if any) to be paid by the Participant, the time or times within which such
Awards may be subject to forfeiture, the vesting schedule and rights to
acceleration thereof, and all other terms and conditions of the Awards. The
Committee may condition the grant of Restricted Stock upon the achievement of
specific business objectives, measurements of individual or business unit or
Company performances, or such other factors as the Committee may determine. The
provisions of Restricted Stock awards need not be the same with respect to each
Participant, and such Awards to individual Participants need not be the same in
subsequent years.
8.2 Awards and Certificates. A prospective Participant selected to receive a
Restricted Stock shall not have any rights with respect to such Award, unless
and until such Participant has executed an Award Agreement evidencing the Award
and has delivered a fully executed copy
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thereof to the Company, and has otherwise complied with the applicable terms and
conditions of such Award. Further, such Award shall be subject to the following
conditions:
(a) Acceptance. Awards of Restricted Stock must be accepted within a period
of 20 days (or such shorter period as the Committee may specify at grant)
after the Award Date, by executing an Award Agreement and by paying
whatever price (if any) the Committee has designated for such shares of
Restricted Stock.
(b) Legend. Each Participant receiving a Restricted Stock Award shall be
issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of such Participant, and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Universal Forest Products, Inc. Long Term Stock
Incentive Plan and related Award Agreement entered into between the
registered owner and the Company, dated . Copies of such
Plan and Agreement are on file in the offices of the Company, 2801 East
Beltline NE, Grand Rapids, Michigan 49525."
(c) Custody. The Committee may require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
award of Restricted Stock, the Participant shall have delivered a duly
signed stock power, endorsed in blank, relating to the Common Stock covered
by such Award.
8.3 Restrictions and Conditions. The shares of Restricted Stock awarded pursuant
to this Plan shall be subject to the following restrictions and conditions:
(a) Restriction Period. Subject to the provisions of this Plan and the
Award Agreement, during a period set by the Committee commencing with the
Award Date and expiring not less than twelve (12) consecutive months
thereafter (the "Restriction Period"), the Participant shall not be
permitted to sell, transfer, pledge, or assign shares of Restricted Stock
awarded under this Plan. Subject to these limits, the Committee, in its
sole discretion, may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions in whole or in
part, based on service, performance and/or such other factors or criteria
as the Committee may determine.
(b) Rights as Shareholder. Except as provided in this subsection (b) and
subsection (a) above, the Participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a holder of shares of
Common Stock of the Company including the right to receive any dividends.
The Committee, in its sole discretion, as determined at the time of Award,
may permit or require the payment of dividends to be deferred. If any
dividends or other distributions are paid in shares of Common Stock, such
shares shall be subject to the same restrictions on transferability and
forfeitability as the shares of Restricted Stock with respect to which they
were paid.
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(c) Termination of Employment. Subject to the applicable provisions of the
Award Agreement and this Article 8, upon Termination of Employment for any
reason during the Restriction Period, all Restricted Shares still subject
to restriction will vest or be forfeited in accordance with the terms and
conditions established by the Committee as specified in the Award
Agreement.
(d) Lapse of Restrictions. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock, the certificates for
such shares shall be delivered to the Participant.
ARTICLE 9
PERFORMANCE SHARES
9.1 Award of Performance Shares. Performance Shares may be awarded either alone
or in addition to other Awards granted under this Plan. The Committee shall
determine the eligible persons to whom and the time or times at which
Performance Shares shall be awarded, the number of Performance Shares to be
awarded to any person, the duration of the period (the "Performance Period")
during which, and the conditions under which, receipt of the Performance Shares
will be deferred, and the other terms and conditions of the Award in addition to
those set forth in Section 9.2, as specified in the Award Agreement. The
Committee may condition the grant of Performance Shares upon the achievement of
specific business objectives, measurements of individual or business unit or
Company performance, or such other factors or criteria as the Committee shall
determine. The provisions of the award of Performance Shares need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
9.2 Terms and Conditions. Performance Shares awarded pursuant to this Article 9
shall be subject to the following terms and conditions:
(a) Nontransferability. Subject to the provisions of this Plan and the
related Award Agreement, Performance Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Performance Period.
At the expiration of the Performance Period, share certificates or cash of
an equivalent value (as the Committee may determine in its sole discretion)
shall be delivered to the Participant, or his legal representative, in a
number equal to the shares covered by the Award Agreement.
(b) Dividends. Unless otherwise determined by the Committee at the time of
Award, amounts equal to any cash dividends declared during the Performance
Period with respect to the number of shares of Common Stock covered by a
Performance Share Award will not be paid to the Participant.
(c) Termination of Employment. Subject to the provisions of the Award
Agreement and this Article 9, upon Termination of Employment for any reason
during the Performance Period for a given Award, the Performance Shares in
question will vest or be forfeited in accordance with the terms and
conditions established by the Committee at or after grant.
(d) Accelerated Vesting. Based on service, performance and/or such other
factors or criteria as the Committee may determine and set forth in the
Award Agreement, the Committee
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may, at or after grant, accelerate the vesting of all or any part of any
award of Performance Shares and/or waive the deferral limitations for all
or any part of such Award.
ARTICLE 10
OTHER STOCK-BASED AWARDS
10.1 Other Awards. Other Awards of Common Stock and other Awards that are valued
in whole or in part by reference to, or are payable in or otherwise based on,
Common Stock ("Other Stock-Based Awards"), may be granted either alone or in
addition to or in tandem with Options, SARs, Restricted Stock or Performance
Shares. Subject to the provisions of this Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
Awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such awards, and all other conditions of the Awards. The Committee
may also provide for the grant of Common Stock under such Awards upon the
completion of a specified performance period. The provisions of Other
Stock-Based Awards need not be the same with respect to each Participant and
such Awards to individual Participants need not be the same in subsequent years.
10.2 Terms and Conditions. Other Stock-Based Awards made pursuant to this
Article 10 shall be set forth in an Award Agreement and shall be subject to the
following terms and conditions:
(a) Nontransferability. Subject to the provisions of this Plan and the
Award Agreement, shares of Common Stock subject to Awards made under this
Article 10 may not be sold, assigned, transferred, pledged, or otherwise
encumbered prior to the date on which the shares are issued, or, if later,
the date on which any applicable restriction, performance or deferral
period lapses.
(b) Dividends. Unless otherwise determined by the Committee at the time of
Award, subject to the provisions of this Plan and the Award Agreement, the
recipient of an Award under this Article 10 shall be entitled to receive,
currently or on a deferred stock basis, dividends or other distributions
with respect to the number of shares of Common Stock covered by the Award.
(c) Vesting. Any Award under this Article 10 and any Common Stock covered
by any such Award shall vest or be forfeited to the extent so provided in
the Award Agreement, as determined by the Committee, in its sole
discretion.
(d) Waiver of Limitation. In the event of the Participant's Retirement,
Disability or death, or in cases of special circumstances, the Committee
may, in its sole discretion, waive in whole or in part any or all of the
limitations imposed hereunder (if any) with respect to any or all of an
Award under this Article 10.
(e) Price. Common Stock issued or sold under this Article 10 may be issued
or sold for no cash consideration or such consideration as the Committee
shall determine and specify in the Award Agreement.
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ARTICLE 11
TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time amend, discontinue or terminate this Plan or any part
thereof (including any amendment deemed necessary to ensure that the Company may
comply with any applicable regulatory requirement); provided, however, that,
unless otherwise required by law, the rights of a Participant with respect to
Awards granted prior to such amendment, discontinuance or termination, may not
be impaired without the consent of such Participant and, provided further,
without the approval of the Company's shareholders, no amendment may be made
which would (i) increase the aggregate number of shares of Common Stock that may
be issued under this Plan (except by operation of Article 4 or by Section 13.1);
or (ii) decrease the option price of any Option to less than one hundred percent
(100%) of the Fair Market Value on the date of grant for an Option. Awards may
not be granted under the Plan after the Termination Date, but Awards granted
prior to such date shall remain in effect or become exercisable pursuant to
their respective terms and the terms of this Plan.
ARTICLE 12
UNFUNDED PLAN
This Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payment not yet made to a Participant
by the Company, nothing contained herein shall give any such Participant any
rights that are greater than those of a general creditor of the Company.
ARTICLE 13
ADJUSTMENT PROVISIONS
13.1 Antidilution. Subject to the provisions of this Article 13, if the
outstanding shares of Common Stock are increased, decreased, or exchanged for a
different number or kind of shares or other securities, or if additional shares
or new or different shares or other securities are distributed with respect to
such shares of Common Stock or other securities, through merger, consolidation,
sale of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other distribution with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i) the
maximum number and kind of shares provided in Article 4 of the Plan, (ii) the
number and kind of shares or other securities subject to the then outstanding
Awards, and (iii) the price for each share or other unit of any other securities
subject to the then outstanding Awards.
13.2 Change in Control. Notwithstanding Section 13.1, upon dissolution or
liquidation of the Company, or upon a reorganization, merger, or consolidation
of the Company with one or more corporations as a result of which the Company is
not the surviving corporation, or upon the sale of all or substantially all the
assets of the Company, all Awards then outstanding under the Plan will be fully
vested and exercisable and all restrictions will immediately cease, unless
provisions are made in connection with such transaction for the continuance of
the Plan and the assumption of or the substitution for such Awards of new Awards
covering the stock of a
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successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices.
13.3 Adjustments by Committee. Any adjustments pursuant to this Article 13 will
be made by the Committee, whose determination as to what adjustments will be
made and the extent thereof will be final, binding, and conclusive. No
fractional interest will be issued under the Plan on account of any such
adjustments. Only cash payments will be made in lieu of fractional shares.
ARTICLE 14
GENERAL PROVISIONS
14.1 Legend. The Committee may require each person purchasing shares pursuant to
an Award under the Plan to represent to and agree with the Company in writing
that the Participant is acquiring the shares without a view to distribution
thereof. In addition to any legend required by this Plan, the certificates for
such shares may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer.
All certificates for shares of Common Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, any applicable Federal or state securities law, and any applicable
corporate law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
14.2 No Right to Employment. Neither this Plan nor the grant of any Award
hereunder shall give any Participant or other employee any right with respect to
continuance of employment by the Company or any Subsidiary, nor shall there be a
limitation in any way on the right of the Company or any Subsidiary by which an
employee is employed to terminate his or her employment at any time.
14.3 Withholding of Taxes. The Company shall have the right to deduct from any
payment to be made pursuant to this Plan, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld. Unless otherwise prohibited by the Committee,
each Participant may satisfy any such withholding tax obligation by any of the
following means or by a combination of such means: (a) tendering a cash payment;
(b) authorizing the Company to withhold from the shares otherwise issuable to
the Participant a number of shares having a Fair Market Value as of the "Tax
Date", less than or equal to the amount of the withholding tax obligation; or
(c) delivering to the Company unencumbered shares owned by the Participant
having a Fair Market Value, as of the Tax Date, less than or equal to the amount
of the withholding tax obligation. The "Tax Date" shall be the date that the
amount of tax to be withheld is determined.
14.4 No Assignment of Benefits. No Option, Award or other benefit payable under
this Plan shall, except as otherwise specifically transfer, provided by law, be
subject in any manner to anticipation, alienation, attachment, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to anticipate,
alienate, attach, sell, transfer, assign, pledge, encumber or charge,
A-14
36
any such benefits shall be void, and any such benefit shall not in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person who shall be entitled to such benefit, nor shall it be subject to
attachment or legal process for or against such person.
14.5 Governing Law. This Plan and actions taken in connection herewith shall be
governed and construed in accordance with the laws and in the courts of the
state of Michigan.
14.6 Application of Funds. The proceeds received by the Company from the sale of
shares of Common Stock pursuant to Awards granted under this Plan will be used
for general corporate purposes.
14.7 Rights as a Shareholder. Except as otherwise provided in an Award
Agreement, a Participant shall have no rights as a shareholder of the Company
until he or she becomes the holder of record of Common Stock.
CERTIFICATION. The foregoing Plan was duly adopted by the Board of Directors on
the 20th day of January, 1999, subject to approval by the Company's
shareholders.
Matthew J. Missad, Secretary
Universal Forest Products, Inc.
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37
APPENDIX B
UNIVERSAL FOREST PRODUCTS, INC.
PERFORMANCE BONUS PLAN
1. PURPOSE
The purpose of the Performance Bonus Plan (the "Plan") is to align the interests
of the salaried employees with the interests of the Company's shareholders. The
plan is designed to promote the efficient use of capital and to maximize the
Company's return on investment, while still encouraging sales growth.
2. DEFINITIONS
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of Directors of the
Company. The Committee shall consist of two or more members of the Board, each
of whom shall be an outside director as that term is used in Section 162(m) of
the Code.
"Company" means Universal Forest Products, Inc., and its subsidiaries which
participate in the Plan.
"Plan" means this Performance Bonus Plan.
"ROI" means the Pre-Bonus Return on Investment as calculated by the Company. ROI
is calculated by taking pre-bonus operating profit less income taxes, divided by
average monthly investment. Average investment is defined as Inventory plus
Accounts Receivable plus net Property, Plant and Equipment plus Purchasing
Department investment allocation plus Goodwill less Accounts Payable. The
Average Investment is based on the twelve months of the fiscal year.
3. ELIGIBILITY REQUIREMENTS
A participant must be a salaried employee and be employed by the Company at the
beginning of the new calendar year in order to be allocated a fixed percentage
of a bonus pool under the Plan.
4. ADMINISTRATION
The Plan shall be reviewed annually by the Committee. The Committee shall have
the full power to interpret the Plan and adopt such rules, regulations and
guidelines for administering the Plan as the Committee deems proper. The
Committee may utilize such professionals as it deems necessary or advisable.
5. ANNUAL CERTIFICATION
Each year prior to payment of the performance bonuses under the Plan, the
Committee shall certify that the performance requirements of the Plan have been
satisfied in accordance with the Plan and Section 162(m) of the Code.
In addition, the Committee shall review and approve the ROI bonus rate schedule
for the next fiscal year.
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38
6. BONUS CALCULATION
A. Bonuses under the Plan are awarded based on the ROI achieved. The bonus pool
for each participant group is determined by the operating results of all the
operations within the group.
B. The bonus is calculated using an ROI rate table approved by the Committee.
The bonus rate increases as ROI increases. For 1999, the bonus rate ranges from
a low of 5.3% of pre-bonus operating profit to a maximum of 27.2% of pre-bonus
operating profit. The maximum bonus rate is only achieved for ROI of 23% or
more.
C. An improvement bonus is available only for those plants that improve their
ROI from one year to the next but do not have a high enough ROI to get on the
Bonus Rate Table.
7. BONUS LIMITATIONS
Under the ROI bonus plan, a participant may not receive a bonus which exceeds
two times the base salary (the "Maximum Bonus Amount") for the subsequent year.
A bonus which exceeds one times the base salary but is less than the Maximum
Bonus Amount is called the "Excess Bonus." An Excess Bonus is required to be
invested in the Common Stock of the Company until certain ownership requirements
are met.
8. SEPARATION FROM SERVICE
A. Terminated Participants. A participant terminated by the Company receives
one-half of the bonus earned, prorated for the time employed, at 1/12th for each
full month of service in the fiscal year.
B. Voluntary Terminations. A participant who resigns and leaves before bonuses
are distributed forfeits the entire bonus.
C. Leave of Absence or Other Absence. If a participant leaves employment due to
retirement, death, or authorized leave of absence, the Committee shall determine
the appropriate adjustment to the bonus calculation, if any, for such
participant.
9. GENERAL
A. No Right to Employment. No participant or other person shall have any claim
or right to be retained in the employment of the Company or a Subsidiary by
reason of the Plan or any Earned Bonus or Bonus Reserve Account.
B. Plan Expenses. The expenses of the Plan and its administration shall be borne
by the Company.
C. Plan Not Funded. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Earned Bonus or Bonus Reserve
Account under the Plan.
D. Reports. The appropriate officers of the Company shall cause to be filed any
reports, returns, or other information regarding the Plan, as may be required by
any applicable statute, rule, or regulation.
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39
E. Governing Law. The validity, construction, and effect of the Plan, and any
actions relating to the Plan, shall be determined in accordance with the laws of
the state of Michigan and applicable federal law.
10. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, from time to time, amend the Plan in any respect, or may
discontinue or terminate the Plan at any time, provided that:
A. No amendment, discontinuance or termination of the Plan shall alter or
otherwise affect the amount of a bonus earned through the date of termination;
and
B. No amendment to the Plan may be made which would increase the maximum bonus
rate, eliminate the cap on the Maximum Bonus Amount or replace the ROI
performance criteria for determining performance-based compensation without
approval of the Company's shareholders.
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40
UNIVERSAL FOREST PRODUCTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned herby appoints William G. Currie and Matthew J. Missad
as Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side, all the shares
of Common Stock of Universal Forest Products, Inc. held of record by the
undersigned on March 1, 1999 at the Annual Meeting of Shareholders to be held
April 28, 1999, and at any adjournment thereof.
(TO BE SIGNED ON REVERSE SIDE)
41
Please mark your
|X| votes as in this
example
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1, AND "FOR" PROPOSALS 2 AND 3.
FOR WITHHELD FOR AGAINST ABSTAIN
1.Directors to be | | | | (Instruction: To withhold authority 2.Proposal to approve a Long Term | | | | | |
Elected by Holders to vote for any individual nominee, Stock Incentive Plan.
of Common Stock strike a line through the nominee's
name in the list below.)
John C. Canepa, Carroll M. Shoffner,
Louis A. Smith
3.Proposal to approve the | | | | | |
Performance Bonus Plan.
4.In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before
the meeting.
SIGNATURE(S) DATE
----------------------------------------------- -----------
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARE ARE GIVE BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME
BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
