<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
INTERNATIONAL COMFORT PRODUCTS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[ICP LOGO]
INTERNATIONAL COMFORT PRODUCTS CORPORATION
NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
AND
MANAGEMENT PROXY CIRCULAR
MEETING TO BE HELD AT 10:00 A.M. (LOCAL TIME)
WEDNESDAY, MAY 13, 1998
AT
TORONTO HILTON HOTEL
TORONTO I BALLROOM
145 RICHMOND STREET WEST
TORONTO, ONTARIO, CANADA
<PAGE> 3
A MESSAGE TO SHAREHOLDERS
April 9, 1998
Dear Shareholder:
Your Company has completed a very successful year, nearly doubling net
income in a time of a weather related slow down in the residential heating,
ventilation and air conditioning industry. ICP's performance is detailed in the
1997 Annual Report which accompanies this proxy circular. I am sure you agree
that the Company is now poised for growth in North America and overseas from a
position of considerable strength.
Management will provide the latest news on the Company's progress at the
annual shareholders' meeting in Toronto on Wednesday, May 13. At that time, you
will have an opportunity to learn more about ICP's plans to become an
increasingly global company.
The quality of the management team and its commitment to performance has
encouraged the Board to recommend a new stock option plan to supplement and
eventually replace the plan that will expire in 1999. The new plan empowers the
Board to issue stock options to management and other key employees when the
Board deems it appropriate to do so. We ask for your support of the new plan
because it continues to align the interests of management with your interests as
a shareholder.
We are also asking for your support in reelecting the current slate of
directors in addition to electing Richard C. Barnett as a new director. Both
Mike Clevy and I have had the pleasure of knowing Mr. Barnett for more than 20
years and greatly admire the leadership he provided from 1978 to 1992 as
President and General Manager of York International Corporation's Unitary
Division, one of ICP's competitors. With deep experience in all facets of our
industry, Mr. Barnett will add considerable strength to your Board. Mr. Barnett
is currently Vice President and General Manager of Tyler Pipe Company located in
Tyler, Texas.
We look forward to seeing you on May 13 and hearing your questions and
comments. If you are unable to attend the meeting in person, please complete and
return the enclosed proxy so that your wishes may be known and your votes
recorded.
Sincerely yours,
/s/ RICHARD W. SNYDER
Richard W. Snyder
Chairman
<PAGE> 4
NOTICE OF ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the annual and special meeting of the
shareholders of International Comfort Products Corporation (the "Company") will
be held at the Toronto Hilton Hotel, Toronto I Ballroom, 145 Richmond Street
West, Toronto, Ontario, Canada on Wednesday, May 13, 1998 at 10:00 a.m. (local
time) (the "Meeting") for the following purposes:
1. to receive the Company's annual report, including the consolidated
financial statements of the Company for the year ended December 31, 1997,
together with the auditors' report on such financial statements;
2. to elect a Board of twelve directors to serve until the 1999 annual
meeting of shareholders or until their respective successors shall have
been duly appointed;
3. to reappoint Arthur Andersen & Co. as auditors of the Company;
4. to consider and, if thought advisable, to pass a resolution
authorizing and approving the Company's 1998 Stock Option Plan as set forth
and described in the attached Proxy Circular; and
5. to transact such other business as may properly come before the
Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Meeting. TO ENSURE
YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE AND PROMPTLY MAIL YOUR PROXY
IN THE RETURN ENVELOPE PROVIDED. This will not prevent you from voting in
person, should you so desire, but will help to secure a quorum and avoid added
solicitation costs. In order for proxies to be used at the Meeting, proxies must
be deposited with Montreal Trust Company of Canada not later than the close of
business on May 11, 1998, or if the Meeting is adjourned, 48 hours (excluding
Saturdays and holidays) before any adjournment of the Meeting.
DATED at Toronto, Ontario, Canada this 9th day of April, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DAVID P. CAIN
DAVID P. CAIN
Senior Vice President,
General Counsel and Secretary
<PAGE> 5
MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES
GENERAL, COSTS AND REVOCABILITY
The enclosed proxy is solicited by and on behalf of management of
International Comfort Products Corporation (the "Company" or "ICP") from holders
of the Company's ordinary shares (the "Shares") to be voted at the Company's
annual and special meeting of shareholders to be held at the Toronto Hilton
Hotel, Toronto I Ballroom, 145 Richmond Street West, Toronto, Ontario, Canada on
Wednesday, May 13, 1998, at 10:00 a.m. (local time), and at all adjournments
thereof (the "Meeting"). The Board of Directors of the Company (the "Board") has
fixed the close of business on April 8, 1998, as the record date (the "Record
Date") for the determination of shareholders entitled to notice of and to attend
and vote at the Meeting, except to the extent that (a) a person has transferred
ownership of any Shares after the Record Date; and (b) the transferee of those
Shares, (i) produces properly endorsed share certificates, or (ii) otherwise
establishes that the transferee owns the Shares, and demands, not later than ten
days prior to the Meeting, that the transferee's name be included in the list of
persons entitled to vote at the Meeting, in which case the transferee will be
entitled to vote the transferred Shares at the Meeting. On the Record Date,
39,887,225 Shares were outstanding. The Company has no other voting securities
issued and outstanding.
The approximate date on which this Proxy Circular and the accompanying
proxy are first being sent to shareholders is April 16, 1998.
ALL EXPENSES OF THIS SOLICITATION, INCLUDING THE COST OF PREPARING AND
MAILING THIS PROXY CIRCULAR, WILL BE BORNE BY THE COMPANY. In addition to
solicitation by mail, proxies may be solicited by directors, officers, and
employees of the Company in person or by telephone or other means of
communication. Such directors, officers, and employees will not be additionally
compensated, but may be reimbursed for out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with custodians, nominees, and
fiduciaries for forwarding of proxy solicitation material to beneficial owners
of Shares held of record by such persons, and the Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
As a shareholder, you can revoke your proxy for the Meeting or any
adjournment of the Meeting in any manner permitted by law. This includes
depositing a written statement signed by you (or signed by your attorney,
authorized in writing) either (i) at the registered office of the Company c/o
Osler, Hoskin & Harcourt, 66th Floor, P.O. Box 50, 1 First Canadian Place,
Toronto, Ontario, Canada, M5X 1B8 Attention: Mr. John H. Macfarlane, at any time
up to and including the last business day before the Meeting, or any adjournment
thereof, at which the proxy is to be used, or (ii) with the Chairman of the
Meeting prior to the commencement of the Meeting on the day of the Meeting, or
any adjournment thereof.
The Company's principal executive offices are located at 501 Corporate
Centre Drive, Suite 200, Franklin, Tennessee, USA 37067.
Except as otherwise stated, all dollar amounts are expressed in United
States dollars.
VOTING, QUORUM, USE
Each shareholder is entitled to one vote per Share held of record on the
Record Date, except to the extent that the shareholder has transferred any of
such Shares after the Record Date and the transferee has both established the
transferee's ownership of the transferred Shares and demanded, not later than
ten days prior to the Meeting, that the Company recognize the transferee as the
person entitled to vote the transferred Shares at the Meeting.
The holders of at least 33 1/3 percent of the Shares issued and outstanding
on the Record Date are required to be present in person or by properly executed
proxies to constitute a quorum in order to transact business at the Meeting.
<PAGE> 6
ALL SHARES REPRESENTED AT THE MEETING BY PROPERLY EXECUTED PROXIES RECEIVED
BY MONTREAL TRUST COMPANY OF CANADA NOT LATER THAN THE CLOSE OF BUSINESS ON MAY
11, 1998, OR IF THE MEETING IS ADJOURNED, 48 HOURS (EXCLUDING SATURDAYS AND
HOLIDAYS) BEFORE ANY ADJOURNMENT OF THE MEETING AND NOT PROPERLY REVOKED WILL BE
VOTED AT THE MEETING IN ACCORDANCE WITH THE INSTRUCTIONS INDICATED IN SUCH
PROXIES.
The persons named in the enclosed form of proxy are representatives of
management of the Company and are directors and/or officers of the Company. ANY
SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER)
OTHER THAN THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY TO ATTEND, ACT OR
VOTE FOR SUCH SHAREHOLDER AND ON SUCH SHAREHOLDER'S BEHALF AT THE MEETING. To
exercise such right, a shareholder should insert such other person's name in the
blank space provided in the proxy or substitute another proper form of proxy.
In voting by proxy in regard to the election of directors to serve until
the 1999 annual meeting of shareholders or until their respective successors are
duly appointed, shareholders may vote in favor of all nominees, or withhold
their votes as to all nominees, or withhold their votes as to specific nominees.
In voting by proxy in regard to all other items, shareholders may vote in favor
of the proposal, against (or in the case of the proposed reappointment of Arthur
Andersen & Co., withhold their votes with respect to) the proposal or may
abstain from voting. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS, FOR THE REAPPOINTMENT OF
ARTHUR ANDERSEN & CO. AS THE COMPANY'S AUDITORS AND FOR THE RESOLUTION
CONFIRMING THE ADOPTION OF THE COMPANY'S 1998 STOCK OPTION PLAN. The
accompanying proxy gives the persons named in it the discretionary authority to
act on amendments to matters identified in the Notice of Annual and Special
Meeting or any additional matters that may properly be brought before the
Meeting or any adjournment thereof. At the date of this Proxy Circular,
management of the Company is not aware of any such amendments or additional
matters to be presented for action at the Meeting.
All items to be submitted at the Meeting for shareholder approval will
require the affirmative vote of a majority of those Shares present and voting on
that item, except for approval of the adoption of the 1998 Stock Option Plan in
respect of which the affirmative vote of a majority of those Shares present and
voting on such item, excluding insiders of the Company to whom Shares may be
issued pursuant to the 1998 Stock Option Plan and their associates, is required.
NO SPECIFIC PROVISIONS OF THE CANADA BUSINESS CORPORATIONS ACT, THE
COMPANY'S ARTICLES OR THE COMPANY'S BY-LAWS ADDRESS THE ISSUE OF ABSTENTIONS OR
BROKER NON-VOTES. ABSTENTIONS AND BROKER NON-VOTES WILL BE TREATED AS SHARES
THAT ARE PRESENT AND ENTITLED TO VOTE FOR PURPOSES OF DETERMINING THE PRESENCE
OF A QUORUM FOR THE TRANSACTION OF BUSINESS. ABSTENTIONS AND BROKER NON-VOTES
WILL NOT, HOWEVER, BE COUNTED AS VOTES EITHER IN FAVOR OF OR AGAINST A
PARTICULAR PROPOSAL. FOR PURPOSES OF DETERMINING THE NUMBER OF SHARES VOTING ON
A PARTICULAR PROPOSAL, ABSTENTIONS ARE COUNTED AS SHARES VOTING, WHEREAS BROKER
NON-VOTES ARE NOT COUNTED AS SHARES VOTING. MONTREAL TRUST COMPANY OF CANADA
WILL ACT AS SCRUTINEERS AND TABULATE THE VOTES.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Except as set forth in the following table, the Company is not aware of any
person who, as of the Record Date, was the beneficial owner of 5% or more of the
Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------------------------ -------------------- ----------------
<S> <C> <C>
Ontario Teachers' Pension Plan Board...................... 7,912,504 19.84%
5650 Yonge Street, 5th Floor
North York, Ontario M2M 4H5
Ravine Partners, Ltd...................................... 7,957,698(1) 19.95%
3219 McKinney Avenue
Dallas, Texas 75204
</TABLE>
- ---------------
(1) Includes 67,828 Shares owned by Richard W. Snyder, a director of the
Company, who is a general partner of Ravine Partners, Ltd.
2
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Shares, as of the Record Date, by all directors, director nominees,
by each of the executive officers named in the Summary Compensation Table
beginning on page 6 and by all directors, director nominees and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF CLASS(2)
- ------------------------ -------------------- -------------------
<S> <C> <C>
Richard C. Barnett..................................... 500 *
Stanley M. Beck, Q.C................................... 1,776 *
W. Michael Clevy....................................... 346,515(3) *
The Honourable William G. Davis, P.C., C.C., Q.C....... 1,765 *
John F. Fraser, O.C.................................... 3,718 *
Roy T. Graydon......................................... 7,915,504(4) 19.84%
Marvin G. Marshall..................................... 15,679 *
Ernest C. Mercier...................................... 8,035 *
David H. Morris........................................ 2,394 *
David A. Rattee........................................ 20,887(5) *
Richard W. Snyder...................................... 7,957,698(6) 19.95%
William A. Wilson...................................... 9,631 *
David P. Cain.......................................... 93,370(3) *
Stephen L. Clanton..................................... 47,244(3) *
Augusto H. Millan...................................... 114,045(3) *
James R. Wiese......................................... 126,505(3) *
All directors, director nominees and executive officers
as a group (24 persons).............................. 17,010,928(3) 42.65%
</TABLE>
- ---------------
(1) Includes Shares that any person has the right to acquire within 60 days of
the Record Date. Ownership is direct unless otherwise noted.
(2) An asterisk (*) in this column denotes ownership of less than one percent of
the outstanding Shares as of the Record Date.
(3) Includes Shares subject to options that currently are exercisable as
follows: Mr. Clevy (316,000); Mr. Cain (67,000); Mr. Clanton (38,000); Mr.
Millan (67,000); Mr. Wiese (67,000); all executive officers as a group
(816,000).
(4) Includes 7,912,504 Shares owned by the Ontario Teachers' Pension Plan Board,
of which Mr. Graydon is an employee. Mr. Graydon disclaims any beneficial
interest in these Shares.
(5) Includes 6,125 Shares owned by Mr. Rattee's spouse.
(6) Includes 7,889,870 Shares owned by Ravine Partners, Ltd., of which Mr.
Snyder is a general partner.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the Shares
are required to report their ownership of the Shares and any changes in that
ownership to the United States Securities and Exchange Commission ("SEC") and
the American Stock Exchange ("AMEX"). These persons also are required by SEC
regulations to furnish the Company with copies of these reports. Specific due
dates for these reports have been established and the Company is required to
report in this Proxy Circular any failure to file such reports by these dates
during the Company's 1997 fiscal year. Based solely on a review of the reports
furnished to the Company and written representations from the Company's
directors and executive officers, the Company believes that all of these filing
requirements were satisfied by the Company's directors, executive officers, and
ten percent holders during 1997.
3
<PAGE> 8
ELECTION OF DIRECTORS
INFORMATION REGARDING NOMINEES
The Company's Articles provide that the Board shall consist of not less
than three nor more than 13 directors. The Board has determined that, effective
as of the date of the Meeting, the Board shall consist of 12 directors. The
terms of all current directors will expire upon the election of new directors at
the Meeting. The Board proposes the election of the nominees listed below to
serve until the 1999 annual meeting of shareholders or until their respective
successors are duly appointed. Eleven of the 12 nominees listed below currently
are directors of the Company and were elected at the 1997 meeting of
shareholders. Unless contrary written instructions are received, it is intended
that the Shares represented by proxies solicited by management of the Company
will be voted in favor of the election of all named nominees as directors. If
for any reason any nominee is unable to serve, the persons named in the proxy
have advised that they will vote for a substitute nominee as proposed by the
Board. Each nominee has consented to act as a director, if elected, and the
Board has no reason to expect that any nominee will fail to be a candidate at
the Meeting. Therefore, it does not at this time have any substitute nominees
under consideration. The information relating to the 12 nominees set forth below
has been furnished to the Company by the named individuals.
The 12 nominees, their principal occupations, their period(s) of service as
a director of the Company, and their ages are as follows:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION(1) SERVED AS DIRECTOR FROM AGE
- ---- ----------------------- ----------------------- ---
<S> <C> <C> <C>
Richard C. Barnett................. Vice President and General Manager of Tyler Pipe -- 59
Company (valve and fitting manufacturer)
Stanley M. Beck, Q.C............... Arbitrator June 1991 63
W. Michael Clevy................... President and Chief Executive Officer of the September 1995 49
Company
The Honourable William G. Davis,
P.C., C.C., Q.C.................. Counsel for Tory Tory DesLauriers & Binnington, August 1985 to April 1990 68
Barristers & Solicitors(2) and from June 1992
John F. Fraser, O.C................ Chairman of Air Canada (airline company)(3) May 1985 to April 1990 67
and from June 1992
Roy T. Graydon..................... Portfolio Manager, Ontario Teachers' Pension June 1997 37
Plan Board (pension administrator)
Marvin G. Marshall................. President and Chief Executive Officer of August 1994 60
Remington Capital Investments Limited (real
estate and related ventures)
Ernest C. Mercier.................. Corporate Director August 1994 65
David H. Morris.................... Corporate Director(4) August 1994 56
David A. Rattee.................... President and Chief Executive Officer of CIGL June 1993 55
Holdings Limited (insurance and financial
services company)(5)
Richard W. Snyder.................. Chairman, SnyderCapital Corporation (investment June 1996 59
company)
William A. Wilson.................. President and Chief Executive Officer, ICC June 1996 64
Technologies, Inc. (developer of air
conditioning technology)
</TABLE>
- ---------------
(1) All of the directors and nominees have had the principal occupation listed
above for the previous five years except as follows: Mr. Clevy joined the
Company as President and Chief Operating Officer of the Company's U.S.
operating subsidiary, International Comfort Products Corporation (USA) ("ICP
USA"), in September 1994. He was appointed President and Chief Executive
Officer of the Company in December 1995. Prior to joining the Company, he
was Vice President of Manufacturing and Technology of Carrier Corporation
(HVAC manufacturer); Mr. Fraser, from 1995 to 1997, was Vice-Chairman of
Russel Metals Inc. (metals distribution and processing company). Prior to
that time, Mr. Fraser had served as Chairman of Federal Industries Ltd.
(transportation and distribution company) from May 1992 to May 1995; Mr.
Graydon was Vice President and Director, Mergers & Acquisitions and
Corporate Finance with Toronto-Dominion Securities Inc. (investment bank)
from 1989 until June 1995; Mr. Marshall served as Chairman of the Board of
the Company from December 1995 to June 1997. He also previously served as
President and Chief Executive Officer of Bramalea Inc. (real estate
developer); Mr. Morris, until his retirement in 1995, served as President
and Chief Operating Officer of The Toro Company (outdoor power equipment
manufacturer), a position he had held since 1988; Mr. Rattee also is
Chairman, President and Chief Executive Officer of The Mortgage Insurance
Company of Canada (insurance and financial services company).
(2) Also serves as a director of The Seagram Company Ltd., Magna International
Inc., Corel Corporation, The First American Financial Corporation, and First
American Title Insurance Company.
(3) Also serves as a director of America West Holdings Corporation and the Bank
of Montreal.
(4) Also serves as a director of Alamo Group Inc.
(5) Also serves as a director of Derlan Industries Limited.
4
<PAGE> 9
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
Compensation of Directors -- Standard Arrangements. Each director who is
not a full-time employee of the Company is paid a fee of $1,000 per Board
meeting attended and $1,000 per committee meeting attended, as well as an annual
retainer of $20,000. In addition, the Chairman of each committee is paid an
additional annual retainer of $4,000. Directors also are reimbursed for any
out-of-pocket expenses incurred in attending meetings of the Board or committees
of the Board. Pursuant to the Company's Share Compensation Arrangement for
Non-Employee Directors, at least 20 percent, or at an individual director's
election, up to 100 percent of a director's fees, less taxes, is to be paid in
Shares, rather than cash.
Compensation of Directors -- Other Arrangements. Through October 31, 1997,
Mr. Marshall was paid consulting fees of $10,000 per month pursuant to an
agreement between the Company and Remington Capital Investments Limited. Under
the terms of this agreement, Mr. Marshall was not entitled to receive any fees
(excluding expenses) that were otherwise due by virtue of his serving as
Chairman or a director of the Company. Effective November 1, 1997, Mr. Snyder is
paid $10,000 per month, but receives no other fees (excluding expenses) for
serving as Chairman.
Board of Directors. The Board met nine times during 1997.
Audit Committee. The Audit Committee, which currently is comprised of
Messrs. Fraser, Graydon and Rattee, reviews the Company's financial statements,
accounting practices and business and financial controls. It also recommends to
the Board the external auditors to be appointed by the shareholders at each
meeting, reviews their audit work plan and approves their fees. The Audit
Committee met five times in 1997.
Compensation and Pension Committee. The Compensation and Pension
Committee, which currently is comprised of Messrs. Beck, Davis and Morris,
reviews and makes recommendations to the Board in respect of the overall
compensation philosophy of the Company and specific compensation policies,
programs and plans. The Compensation and Pension Committee met nine times in
1997.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee, which currently is comprised of Messrs. Beck,
Marshall, Rattee and Wilson, recommends to the Board nominees for election as
directors of the Company and makes recommendations on other matters relating to
corporate governance policy. Although the Committee does not solicit suggestions
for nominees for the Board, suggestions for nominees accompanied by biographical
data will be considered if sent to the Company's Secretary. The Nominating and
Corporate Governance Committee met four times in 1997.
Strategic Planning Committee. The Strategic Planning Committee, which
currently is comprised of Messrs. Clevy, Mercier, Morris, Snyder and Wilson,
assists in the development and updating of strategic plans for the Company's
existing businesses and reviews and considers alternative plans for growth and
diversification opportunities. The Strategic Planning Committee met four times
in 1997.
Finance Committee. The Finance Committee, which currently is comprised of
Messrs. Clevy, Fraser, Graydon and Mercier, assists in the development of the
capitalization strategy for the Company to finance its long-term strategic plan.
The Finance Committee met two times in 1997.
During 1997, all directors attended at least 75 percent of the meetings of
the Board and the committees of the Board of which they were members.
5
<PAGE> 10
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation received in 1997 and, where
applicable, the two prior financial years by (i) the Chief Executive Officer of
the Company, and (ii) each of the Company's four most highly compensated
executive officers, other than the Chief Executive Officer, who continued to
serve as of December 31, 1997 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS(1)
ANNUAL COMPENSATION ------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDER ALL OTHER
SALARY BONUS COMPENSATION(2) OPTIONS/SARS COMPENSATION
NAME AND OCCUPATION YEAR ($) ($) ($) GRANTED(#) ($)
- ------------------- ---- -------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
W. Michael Clevy............ 1997 $425,000 $405,500 -- 200,000 --
President and Chief 1996 385,000 250,101 -- 200,000 $206,038
Executive Officer 1995 285,000 -- $44,327(4) -- 63,307
David P. Cain............... 1997 $175,008 $ 70,000 -- 50,000 --
Senior Vice President, 1996 150,000 60,101 -- 45,000 --
General Counsel and 1995 140,000 -- -- -- --
Secretary
Stephen L. Clanton(3)....... 1997 $196,305 $ 75,000 -- 50,000 --
Senior Vice President, 1996 81,843 60,101 -- 45,000 $ 63,416
Chief Financial Officer
and Treasurer
Augusto H. Millan........... 1997 $180,908 $ 70,000 -- 50,000 --
Senior Vice President 1996 150,000 60,101 -- 45,000 --
and General Manager, 1995 140,000 -- $36,913(5) -- --
International Sales and
General Manager,
Aftermarket Sales
James R. Wiese.............. 1997 $175,289 $ 70,000 -- 50,000 --
Senior Vice President 1996 145,000 60,101 -- 45,000 --
and General Manager, 1995 132,500 -- -- -- --
Residential Products
Group
</TABLE>
- ---------------
(1) During the periods indicated, the Company has made no Restricted Stock
Awards or Long-Term Incentive Plan ("LTIP") Payouts to the Named Executive
Officers.
(2) For 1997, 1996, and 1995, other than as reported, perquisites and other
personal benefits did not exceed the lesser of $50,000 and 10 percent of the
total salary and bonus for each of the Named Executive Officers.
(3) Mr. Clanton joined the Company on July 19, 1996.
(4) Comprised of payments in respect of club membership (initiation and fees of
$39,215), automobile ($3,546) and group life insurance expenses ($1,566).
(5) Comprised of payments in respect of club membership (initiation and fees of
$34,842), automobile ($1,271) and group life insurance expenses ($800).
6
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets out the particulars of all grants of stock
options(1) to the Named Executive Officers during the Company's fiscal year
ended December 31, 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PERCENT OF PRICE APPRECIATION
TOTAL FOR OPTION TERM
NUMBER OF OPTIONS GRANTED EXERCISE (CDN. $)(2)
SECURITIES UNDER TO EMPLOYEES OR BASE PRICE EXPIRATION ----------------------
NAME OPTIONS GRANTED (#) IN FISCAL YEAR (CDN. $/SHARE) DATE 5% 10%
- ---- ------------------- --------------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Clevy............ 200,000 26.0% $7.05 04-29-04 $574,012 $1,337,691
Mr. Cain............. 50,000 6.5 7.05 04-29-04 143,503 334,423
Mr. Clanton.......... 50,000 6.5 7.05 04-29-04 143,503 334,423
Mr. Millan........... 50,000 6.5 7.05 04-29-04 143,503 334,423
Mr. Wiese............ 50,000 6.5 7.05 04-29-04 143,503 334,423
</TABLE>
- ---------------
(1) The exercise price of each option is equal to 100% of the fair market value
of the Shares on the date of the grant. Fair market value for the purposes
of option grants means the closing market price of the Shares on The Toronto
Stock Exchange (the "TSE") on the last trading day preceding the date of the
grant. Each option is exercisable immediately as to 20% of the Shares
covered thereby and in cumulative increments of 20% per year thereafter.
(2) The dollar amounts under these columns are the result of calculations at 5%
and 10% rates set by the SEC and, therefore, are not intended to forecast
possible future appreciation, if any, in the price of the Shares. No benefit
to the option holder is possible without an increase in the price of the
Shares. In order to realize the values set forth in the 5% and 10% columns,
the per share price would be Cdn. $9.92 and Cdn. $13.74, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information regarding outstanding
stock options held by each of the Named Executive Officers as at December 31,
1997. No options were exercised by the Named Executive Officers during the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END (CDN. $)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. Clevy....................................... 236,000 309,000 $1,886,600 $2,071,650
Mr. Cain........................................ 48,000 72,000 381,100 472,900
Mr. Clanton..................................... 28,000 67,000 188,300 399,950
Mr. Millan...................................... 48,000 72,000 381,100 472,900
Mr. Wiese....................................... 48,000 72,000 381,100 472,900
</TABLE>
7
<PAGE> 12
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR(1)
The following table provides information on long-term incentive plan awards
based on a targeted level in fiscal 1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
PERFORMANCE OR OTHER
NUMBER OF SHARES, UNITS PERIOD UNTIL MATURATION
NAME OR OTHER RIGHTS(#) OR PAYOUT
- ---- ----------------------- ---------------------------
<S> <C> <C>
Mr. Clevy(2)....................................... 50,000 December 31, 1999
Mr. Cain........................................... 22,500 December 31, 1999
Mr. Clanton........................................ 20,000 December 31, 1999
Mr. Millan......................................... 22,500 December 31, 1999
Mr. Wiese.......................................... 20,000 December 31, 1999
</TABLE>
- ---------------
(1) Effective April 29, 1997, the Company adopted the 1997 Long-Term Incentive
Plan (the "1997 Plan") to provide deferred cash compensation opportunities
to certain senior managers of the Company. The 1997 Plan provides for the
awarding of Performance Units, the value of which is equal to the
appreciation in the value of an equivalent number of Shares. The 1997 Plan
is comprised of (i) Three year Performance Units which are awarded, valued
and paid at the end of a three calendar year period (the "Performance
Period") as designated by the Compensation and Pension Committee of the
Board of Directors, and (ii) Long-term Performance Units which are awarded
at the end of the Performance Period, but paid upon retirement, according to
a vesting schedule. The initial grant price of the Performance Units is the
value established by the Compensation and Pension Committee at the beginning
of the Performance Period, to which the future Share price shall be compared
to determine the appreciation in value for purposes of determining the value
of Performance Units attributable to that Performance Period. At the end of
the Performance Period, the number of Performance Units earned, if any, will
be based on the extent to which the established objectives of average three
year earnings per share goals have been achieved. If the threshold objective
is not met, no Performance Units are earned. If the target objective is
exceeded, additional Performance Units can be earned, up to a predetermined
maximum level.
(2) The Compensation and Pension Committee declared Mr. Clevy ineligible to
receive Long-term Performance Units due to his participation in a
supplemental pension plan (see page 9).
PENSION PLANS
The Named Executive Officers participate in the salaried pension plan of
ICP USA (the "Pension Plan"). Pension benefits are not reduced by a
participant's social security benefits. Earnings for the purposes of the Pension
Plan benefit formula consist of the participant's average monthly base rate of
pay.
The following table sets forth the estimated annual benefits payable upon
retirement at age 65 to participants, based upon the 60 consecutive months of
highest average earnings within 120 months of the date of determining benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------
REMUNERATION 5 10 15 20 25 30+
- ------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000................................. $10,000 $20,000 $30,000 $40,000 $50,000 $60,000
125,000................................. 12,500 25,000 37,500 50,000 62,500 75,000
160,000+................................ 16,000 32,000 48,000 64,000 80,000 96,000
</TABLE>
The maximum amount of a participant's earnings that may be taken into
account in any year is limited to an amount specified in the United States
Internal Revenue Code of 1986, as amended (the "Code"), as adjusted annually for
cost-of-living increases (such amount is $160,000 for 1997).
As at December 31, 1997, Messrs. Clevy, Cain, Clanton, Millan and Wiese had
3.3, 21.0, 1.5, 3.2 and 9.4 years of credited service, respectively, under the
Pension Plan.
8
<PAGE> 13
In addition, Mr. Clevy has a supplemental pension plan with ICP USA which
will provide a maximum pension on retirement equal to 3 1/3% of Mr. Clevy's
average annual earnings (salary and bonus), based on three consecutive years of
highest earnings, for each year of service up to a maximum of 15 such years,
plus an additional 1% for each additional year of service up to a maximum of 20
such additional years, less the amount payable under the Pension Plan. Sixty
percent of Mr. Clevy's pension will continue to his spouse on his death.
The following table sets forth estimated annual amounts payable under a
supplemental pension plan before reduction for amounts payable under the Pension
Plan, if applicable.
SUPPLEMENTAL PENSION PLAN TABLE (CLEVY)
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------
HIGHEST AVERAGE EARNINGS 5 10 15 20 25 30 35
- ------------------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$400,000................. $ 66,667 $133,333 $200,000 $220,000 $240,000 $260,000 $280,000
500,000................. 83,333 166,667 250,000 275,000 300,000 325,000 350,000
600,000................. 100,000 200,000 300,000 330,000 360,000 390,000 420,000
700,000................. 116,667 233,333 350,000 385,000 420,000 455,000 490,000
800,000................. 133,333 266,667 400,000 440,000 480,000 520,000 560,000
900,000................. 150,000 300,000 450,000 495,000 540,000 585,000 630,000
</TABLE>
As at December 31, 1997, Mr. Clevy had 3.3 years of credited service under
his supplemental pension plan.
TERMINATION AND CHANGE IN CONTROL AGREEMENTS
Mr. Clevy has an agreement with ICP USA which provides that upon
termination of his employment with the Company (as defined therein), he will
continue to be entitled to receive his annual salary and other benefits he was
receiving at the time of termination for 24 months (or, at his option, he may
receive a lump sum payment equal to the aggregate face value of these amounts).
Each of Messrs. Cain, Millan and Wiese has an agreement with the Company
which provides that upon change in control of the Company (as defined therein),
he will continue to be entitled to receive his annual salary and other benefits
he was receiving at the time of termination for 12 months (or, at his option, he
may receive a lump sum payment equal to the aggregate face value of these
amounts).
Mr. Clanton has an agreement with ICP USA which provides that upon
termination of his employment with the Company (as defined therein), he will
continue to be entitled to receive his annual salary and other benefits he was
receiving at the time of termination for 12 months (or, at his option, he may
receive a lump sum payment equal to the aggregate face value of these amounts).
COMPENSATION AND PENSION COMMITTEE INTERLOCKS AND INSIDE PARTICIPATION
The following individuals served as members of the Compensation and Pension
Committee during 1997: Prior to June 6, 1997, the Hon. William G. Davis, P.C.,
C.C., Q.C., John F. Fraser, O.C., Marvin G. Marshall, and Ernest C. Mercier;
after June 6, 1997, the Hon. William G. Davis, P.C., C.C., Q.C., Stanley M.
Beck, Q.C., and David H. Morris. None of the directors who served as members of
the Committee during 1997 is, or has ever been, an officer or an employee of the
Company or any of its subsidiaries.
9
<PAGE> 14
REPORT OF THE COMPENSATION AND PENSION COMMITTEE
The Compensation and Pension Committee of the Board of Directors (the
"Committee") reviews and makes recommendations to the Board in respect of the
overall compensation philosophy of the Company and specific compensation
policies, programs and plans. The Committee also reviews and makes
recommendations to the Board in respect of the compensation to be paid to the
Chief Executive Officer and, after considering the recommendations of the Chief
Executive Officer, to the other officers of the Company and its principal
operating subsidiaries, ICP USA and International Comfort Products Corporation
(Canada) ("ICP Canada"). The Committee retains the services of independent
consultants to advise it on such matters as the structuring of compensation
arrangements, design of compensation and benefit plans and competitive
benchmarking. The Committee retained the services of a consultant from Deloitte
& Touche to advise it with respect to executive compensation matters in 1997.
When determining the appropriate levels of executive compensation to be
recommended to the Board for approval, the Committee utilizes various
information sources, including data prepared by independent consultants. The
Committee also considers the Company's performance, viability, the integrity of
its assets, future outlook, ethical standards related to its role as a worldwide
corporate citizen and applicable tax, securities and other regulations affecting
the Company. As the Company's business is carried on principally in the United
States, pay levels and practices for executives resident in the United States or
with significant North American responsibilities are established with reference
to those of U.S. industrial companies of similar size and complexity but are
paid in the currency of the country in which the executive is resident without
taking currency exchange rates into account. Pay levels and practices in respect
of executives resident in Canada who do not have broader geographical
responsibilities are established with reference to a similar sample of Canadian
organizations. In each case, the comparator groups were selected by the
Committee as they are considered to be the prime sources of management resources
for the Company as well as the principal competitors for management talent.
GENERAL STRATEGY
The executive compensation strategy is a guideline for policy formulation
and decision-making that aligns ICP's human resources and business strategies.
The Company believes that effective compensation plans must be
performance-based, cost-effective and must maximize long-term shareholder value.
The Committee reviews ICP's compensation strategy, market-competitiveness and
plan effectiveness annually at minimum.
BASE SALARY
ICP base salaries are generally competitive with the market median,
relative to similar job scope and company size. The relative significance of ICP
base salaries is subordinate to variable, performance-based compensation
components. Therefore, when base salary increases are granted, they typically
consist of competitive market and internal equity adjustments. Adjustments are
not necessarily made at set intervals, but are made when significant variance
from the market exists.
ICP may also award lump sum base salary increases based on the achievement
of previously determined corporate and individual Performance Management Program
goals. Lump-sum increases, when awarded, do not change the individual's rate of
base salary.
INCENTIVE COMPENSATION
ICP pays total cash compensation levels (base salaries plus annual
incentives) and total direct compensation levels (total cash plus long-term
incentives) which are market competitive when budgeted expectations are met, and
highly competitive when expectations are exceeded. No incentive compensation is
paid when performance results fall below a pre-established threshold level.
The Committee recommends to the Board target, threshold and maximum
incentive performance and award levels for all participants. Once approved by
the Board, these levels are communicated for each position, level or group. ICP
may also recognize extraordinary achievement through discretionary incentive
awards.
10
<PAGE> 15
Annual Incentive Compensation
ICP's short-term incentive plan for executives is a simple formula-based
design that rewards executives for the achievement of short-term goals which
create growth and profitability. Short-term incentives for other managers and
salaried employees take the form of annual incentive plans, lump-sum salary
increases, sales commissions and the like, that best reflect and motivate each
position's contribution to the achievement of short-term goals and objectives.
Long-Term Incentives
ICP's long-term incentive plans reward the achievement of long-term growth,
profitability, shareholder value and stock price appreciation; reward team
effort; and serve to closely align shareholder interests and organizational
success with the executive's personal, financial and career interests. ICP
provides long-term compensation opportunities in the form of stock options or
stock grants and deferred cash compensation. Plan designs enhance the retention
of executive talent and discourage behavior that does not further the overall
long-term good of the organization. As such, long-term awards are subject to
vesting or other long-term capital accumulation restrictions.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer's compensation program has the same components
as those described for the other members of the executive officer group: base
salary, annual incentive and long-term incentive; however, as noted previously,
Mr. Clevy was declared ineligible to receive Long-term Performance Units due to
his participation in a supplemental pension plan. The Chief Executive Officer's
compensation program is established with reference to the comparator groups
described above. The Committee makes recommendations to the Board regarding the
Chief Executive Officer's compensation on the same performance-related basis as
for the other executive officers.
Section 162(m) of the Code limits to $1 million per year the compensation
expense deduction the Company may take for non-performance-based compensation
paid to a person who is "highly-compensated" for purposes of the Code
(generally, the CEO and other named executive officers). In making its decisions
about compensation for Mr. Clevy and other officers likely to be named executive
officers, the Committee considers Section 162(m). Although the Company's
compensation levels have not historically resulted in total compensation in
excess of $1 million (excluding the spread on stock option exercises which
generally should qualify for deductibility under Section 162(m)) for named
executive officers other than Mr. Clevy, it is generally the policy of the
Company that the components of executive compensation that are inherently
performance-based should qualify for exclusion from the deduction limitation
under Section 162(m).
The Committee believes, however, that while tax deductibility is an
important factor, it is not the sole factor to be considered in setting
executive compensation policy, and accordingly reserves the right, in
appropriate circumstances, to pay amounts, in addition to base salary, that
might not be deductible. If non-performance-based compensation in excess of $1
million should become payable to a person who is "highly-compensated" for
purposes of the Code and regulations, the Committee will consider requiring that
individual to defer any amounts earned in excess of the cap to a tax year
following the year in which the individual leaves the employment of the Company.
Submitted by the Compensation and Pension
Committee of the Board:
The Hon. William G. Davis, P.C., C.C., Q.C.
(Chairman)
Stanley M. Beck, Q.C.
David H. Morris
11
<PAGE> 16
PERFORMANCE GRAPHS
The following graph provides a five year comparison of cumulative total
return performance of an initial investment in Shares on December 31, 1992, of
Cdn. $100, versus the cumulative total return of the TSE 300 Composite Index.
The year-end values of each investment shown on the graph are based on share
price appreciation or depreciation plus, in the case of the TSE 300 Composite
Index, dividend re-investment.
<TABLE>
<CAPTION>
Measurement Period International Comfort TSE 300 Composite
(Fiscal Year Covered) Products Index
<S> <C> <C>
12/31/92 100 100
12/31/93 62 132
12/31/94 47 132
12/31/95 23 152
12/31/96 57 194
12/31/97 165 224
</TABLE>
The following graph provides a five year comparison of cumulative total
return performance of an initial investment in Shares on December 31, 1992, of
U.S. $100, versus the cumulative total return of the Standard and Poor's (the
"S&P") Midcap 400 Index, and the Industrial Component of the S&P Midcap 400
Index. The year-end values of each investment shown on the graph are based on
share price appreciation or depreciation plus, in the case of each index,
dividend re-investment.
<TABLE>
<CAPTION>
Industrial
Measurement Period International S&P Midcap 400 Component of S&P
(Fiscal Year Covered) Comfort Products Index Midcap 400 Index
<S> <C> <C> <C>
12/31/92 100 100 100
12/31/93 59 114 116
12/31/94 41 110 115
12/31/95 22 144 144
12/31/96 52 171 172
12/31/97 152 227 216
</TABLE>
12
<PAGE> 17
REAPPOINTMENT OF AUDITORS
The Board recommends that the shareholders vote FOR the reappointment of
Arthur Andersen & Co. as the Company's auditors to hold office until the close
of the next annual meeting of shareholders. Arthur Andersen & Co. have served as
auditors of the Company since June 1997. At that time, Arthur Andersen & Co.
succeeded Coopers & Lybrand as the independent auditors of the Company. The
decision to replace Coopers & Lybrand with Arthur Andersen & Co. was recommended
and approved by the Audit Committee and the Board. During the two fiscal years
ended December 31, 1995 and December 31, 1996, there were no disagreements with
Coopers & Lybrand on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure nor did Coopers & Lybrand's
reports on the Company's consolidated financial statements contain any adverse
opinion, disclaimer of opinion, qualification or modification as to uncertainty,
audit scope or accounting principle. In connection with the filing of this Proxy
Circular, Coopers & Lybrand was provided a copy of this disclosure and has
advised the Company that it does not disagree with the foregoing statement.
Representatives of Arthur Andersen & Co. have been requested to attend the
Meeting. Such representatives will have the opportunity to make a statement if
they so desire and are expected to be available to respond to appropriate
questions.
APPROVAL OF THE 1998 STOCK OPTION PLAN
The Board adopted the International Comfort Products Corporation 1998 Stock
Option Plan (the "Stock Option Plan") on February 12, 1998. The rules of the TSE
require that shareholder approval be obtained for the adoption of the Stock
Option Plan. Approval of the Stock Option Plan requires the affirmative vote of
the holders of a majority of the Shares present, in person or by proxy, at the
Meeting and entitled to vote, excluding insiders of the Company to whom shares
may be issued pursuant to the Stock Option Plan and their associates. A copy of
the Stock Option Plan is attached to this Proxy Circular as Schedule A.
The Stock Option Plan is intended to attract and retain selected officers
and key employees (collectively, the "Eligible Individuals") and to motivate
them to exercise their best efforts on behalf of the Company and any subsidiary
of the Company (a "Related Company").
If the Stock Option Plan had been in effect during the last completed
fiscal year, the Eligible Individuals who are Named Executive Officers would
have received substantially the same benefits that they received pursuant to the
option plan that was in effect during that year.
Options granted under the Stock Option Plan may be "incentive stock
options" ("ISOs") within the meaning of Section 422 of the Code, or may be
options not intended to be ISOs ("Non-Qualified Stock Options").
The Company's Compensation and Pension Committee shall have authority,
under the terms of the Stock Option Plan, to determine and designate from time
to time those employees of the Company or any subsidiary of the Company to whom
options are to be granted and the number of Shares to be optioned to each such
employee. No director of the Company who is not also an employee of the Company
or a subsidiary of the Company shall be entitled to receive any options under
the Stock Option Plan. The maximum number of Shares that may be issued under the
Stock Option Plan is 1,500,000.
The following description of the Stock Option Plan is intended merely as a
summary of its principal features and is qualified in its entirety by reference
to the provisions of the Stock Option Plan itself:
1. Number of Shares. The aggregate maximum number of Shares for which
options may be granted under the Stock Option Plan is 1,500,000 Shares. This
number is subject to adjustment in the event of a stock split, stock dividend or
share combination or any recapitalization of the Company.
2. Administration. The Stock Option Plan is administered by the
Compensation and Pension Committee (the "Committee"), whose members are
designated by the Board. The Committee currently consists of three directors.
Under the terms of the Stock Option Plan, the Committee must consist of at least
two directors. It is intended (although not required) that each member of the
Committee administering the Plan be a "non-employee" director within the meaning
of Rule 16b-3 under the United States Securities Exchange
13
<PAGE> 18
Act of 1934, as amended (the "Exchange Act"), and an "outside director" within
the meaning of United States Treasury Regulation sec.1.162-27(e)(3) or any
successor provision. If the Committee does not consist solely of two or more
non-employee directors (within the meaning of Rule 16b-3), each option must be
approved by the full Board.
3. Eligibility. Only employees of the Company and/or a Related Company are
eligible to receive options under the Stock Option Plan (an Eligible Individual
who receives an option grant is hereinafter referred to as an "Optionee"). As of
December 31, 1997, approximately 35 employees, including management and certain
key employees of the Company, were eligible to receive options under the Stock
Option Plan.
4. Annual and Aggregate Limitation. The aggregate fair market value
(determined as of the time the option is granted) of the stock with respect to
which ISOs are exercisable for the first time by any individual during any
calendar year (under the Stock Option Plan as well as any other plan of the
Company and any Subsidiary of the Company) may not exceed One Hundred Thousand
Dollars ($100,000). In addition, no Eligible Individual may be granted options
for more than 300,000 Shares during any fiscal year of the Company and there may
not be, at any time, reserved for issuance to any one Eligible Individual
pursuant to options granted under the Stock Option Plan more than 5% of the
outstanding Shares.
5. Term of Stock Option Plan. No option may be granted under the Stock
Option Plan after December 31, 2007, although options outstanding on December
31, 2007, may continue to be exercised after that date.
6. Term of Option. All options terminate upon the expiration of the term
specified in the option document, which may not exceed ten years (five years, in
the case of an ISO if the Optionee on the date of grant owns, directly or by
attribution, Shares possessing more than 10% of the total combined voting power
of all classes of stock of the Company).
7. Option Price. The option price for an option may not be less than 100%
of the fair market value of the Shares subject to the option on the date that
the option is granted. For the purposes of the Stock Option Plan, "fair market
value" means the closing market price of the Shares on the TSE (or such other
stock exchange designated from time to time by the Committee as the principal
trading market for the Company's securities) on the last trading date preceding
the date of grant. If an ISO is granted to an employee who then owns, directly
or by attribution under the Code, Shares possessing more than 10% of the total
combined voting power of all classes of Shares of the Company, the option price
must be at least 110% of the fair market value of the Shares on the date that
the option is granted.
8. Period of Exercise of Options. The Committee shall set the schedule
pursuant to which an option granted under the Stock Option Plan vests (becomes
exercisable), which shall not be at a rate exceeding cumulative increments of
thirty-three and one-third percent (33 1/3%) per year for three (3) years, at
which time the option may be exercised as to all of the Shares covered
thereunder.
9. Option Document; Restriction on Transferability. All options will be
evidenced by a written option document containing provisions consistent with the
Stock Option Plan and such other provisions as the Committee deems appropriate.
No option granted under the Stock Option Plan may be transferred, except by will
or the laws of descent and distribution. If the Optionee is married at the time
of exercise, and if the Optionee requests at the time of exercise, the
certificate will be registered in the name of the Optionee and his or her
spouse, jointly, with right of survivorship.
10. Termination of Employment. If any Optionee's employment terminates,
except when such termination of employment is caused by the death or disability
of the Optionee, the options granted to such Optionee shall terminate on the
earlier of (a) the passage of three months after the date of termination of his
or her employment, or (b) the expiration date(s) of the option(s) held by the
Optionee. If an Optionee's employment terminates by reason of his or her death,
any ISOs owned by such Optionee may be exercised, to the extent otherwise
exercisable on the date of the death, by the estate, personal representative or
beneficiary who has acquired the ISOs by will or by the laws of descent and
distribution, until the earlier of (i) the specified expiration date of the
ISOs, or (ii) 180 days from the date of the Optionee's death. If an Optionee's
employment terminates by reason of his or her disability, such Optionee shall
have the right to exercise any
14
<PAGE> 19
ISOs held by him or her on the date of termination of employment, to the extent
of the number of Shares with respect to which he or she could have exercised it
on that date, until the earlier of (i) the specified expiration date of the
ISOs, or (ii) one year from the date of the termination of the Optionee's
employment.
11. Amendments to Options and the Stock Option Plan; Discontinuance of the
Stock Option Plan. Subject to the provisions of the Stock Option Plan, the
Committee may not amend an option document without an Optionee's consent if the
amendment is unfavorable to the Optionee. The Board of Directors may terminate
or amend the Stock Option Plan in any respect at any time, provided that (a) no
action of the Board or the shareholders may alter or impair a Participant's
rights under any outstanding option without the Participant's consent, (b)
without the approval of the shareholders, the total number of Shares that may be
optioned and sold under the Stock Option Plan may not be increased (except by
adjustments as described in paragraph 1 above), the provisions regarding
eligibility may not be modified, the price at which Shares may be purchased
pursuant to options granted under the Stock Option Plan may not be reduced, the
expiration date of the Stock Option Plan may not be extended, and the provisions
of the Stock Option Plan regarding amendments may not be changed, and (c) any
such amendment to the Stock Option Plan is subject to the approval of the TSE or
such other stock exchange(s) on which the Shares may be listed from time to
time.
12. Tax Aspects of the Stock Option Plan. Based on the advice of counsel,
the Company believes that, under present United States federal tax laws and
regulations, the principal United States federal income tax consequences to the
Company and to the Optionees receiving ISOs and Non-Qualified Stock Options
pursuant to the Stock Option Plan are as follows:
If an option is an ISO, the Optionee will recognize no income upon grant or
exercise of the option unless the alternative minimum tax rules apply. Upon an
Optionee's sale of his or her Shares (assuming that the sale occurs no earlier
than two years after grant of the option and one year after exercise of the
option), any gain will be taxed to the Optionee as capital gains, which will
either be mid-term (if at least 12 months have elapsed since exercise) or
long-term (if at least 18 months have elapsed since exercise). Currently, the
maximum mid-term tax rate is 28% and the maximum long-term tax rate is 20%. If
the Optionee disposes of his or her Shares prior to the expiration of the above
holding period, the Optionee generally will recognize ordinary income in an
amount measured as the difference between the exercise price and the lower of
the fair market value of the Shares at the exercise date or the sale price of
the Shares. Any gain or loss recognized on such a disposition of the Shares in
excess of the amount treated as ordinary income will be characterized as capital
gain or loss. The Company will be allowed a business expense deduction to the
extent the Optionee recognizes ordinary income.
An Optionee will not recognize any taxable income at the time the Optionee
is granted a Non-Qualified Stock Option. However, upon exercise of the option,
the Optionee will recognize ordinary income for United States federal income tax
purposes in an amount generally measured as the excess of the then fair market
value of the Shares over the exercise price, and the Company will be entitled to
a deduction in the same amount at the time of exercise. Upon an Optionee's sale
of such Shares, any difference between the sale price and fair market value of
such Shares on the date of exercise will be treated as capital gain or loss and
will qualify for mid-term or long-term capital gain or loss treatment if the
Shares have been held for more than 12 months or 18 months, respectively.
As described in the Report of the Compensation and Pension Committee at
pages 10 to 11 of this Proxy Circular, Section 162(m) of the Code, subject to
certain exceptions, limits the deductibility of the compensation paid to the
Named Executive Officers in excess of $1,000,000 in a calendar year. The Stock
Option Plan is designed to qualify for an exemption that will allow the Company
to deduct, for United States federal income tax purposes, any compensation
realized by employees in excess of $1,000,000 in any one year that results from
the exercise of options granted under the Stock Option Plan. The Stock Option
Plan, as adopted by the Board, provides annual limitations (described in
paragraph 4 above) with respect to the number of Shares with respect to which
options may be granted to any one employee. In addition, the Stock Option Plan
is administered by the Compensation and Pension Committee, which consists of at
least three directors, all of whom are "outside directors" within the meaning of
Treasury Regulation sec.1.162-27(e)(3). Approval by the shareholders is required
in order for options granted under the Stock Option Plan to qualify
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<PAGE> 20
for the exemption and allow any compensation realized by employees in excess of
$1,000,000 in any one year that results from the exercise of options granted
under the Stock Option Plan to be deducted.
Based on the advice of counsel, the Company believes that, under present
Canadian federal tax laws and regulations, the principal Canadian federal income
tax consequences to the Company and to the Optionees receiving ISOs and
Non-Qualified Stock Options pursuant to the Stock Option Plan who, for the
purposes of the Income Tax Act (Canada) (the "ITA"), will hold the Shares as
capital property and deal at arm's length with the Company, are as follows:
An Optionee will not recognize any income upon the grant of an option. Upon
the exercise of the option, however, a Canadian resident Optionee generally will
be deemed to have received an employment benefit in an amount equal to the
excess of the fair market value of the Shares on the date of exercise over the
option price. Such employment benefit will be included in the Optionee's income
under the ITA for the year in which he acquires the Shares. The amount of the
benefit included in income is added to the cost to the Optionee of the Shares
acquired upon the exercise of an option for purposes of determining any
subsequent capital gain (or loss). Such Optionee generally will be entitled to a
deduction in computing taxable income equal to one-quarter of the amount of that
benefit included in income, provided that the option price is not less than the
fair market value of the Shares at the date of grant of the option. Similar
rules may apply to U.S. resident Optionees to the extent that the benefits
arising out of the exercise of the option are considered to be earned in Canada.
Upon the disposition of Shares, a Canadian resident Optionee generally will
recognize a capital gain (or loss) to the extent that the proceeds of
disposition exceed (or are exceeded by) the sum of the adjusted cost base of the
Shares and the cost of disposition. Generally, the adjusted cost base of each
Share will be determined by reference to the average cost of all Shares held by
the Optionee. Three quarters of any capital gains, net of capital losses will be
included in computing the Optionee's income. Any capital loss realized by the
Optionee may be offset against capital gains realized in the year. Any excess
capital loss may generally be carried back three taxation years and carried
forward to future years to offset capital gains realized in those years, until
the capital loss is fully utilized. In general, a U.S. resident Optionee will
not be subject to tax under the ITA on any gain realized on the disposition of
Shares.
The ITA denies a deduction to the Company or any Related Company in respect
of any benefits deemed to be received in an issue of Shares to employees or
officers.
The foregoing does not purport to be a complete summary of the effect of
United States or Canadian federal income taxation upon holders of options or
upon the Company. It also does not reflect provisions of the income tax laws of
any municipality, state, province or foreign country in which an Optionee may
reside.
13. Registration Statement on Form S-8. If the proposal to approve the
Stock Option Plan is approved, the Company intends to file with the SEC a
Registration Statement on Form S-8 relating to the Stock Option Plan.
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<PAGE> 21
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Strong corporate governance practices are essential to the Company's
success and its ability to create shareholder value. This statement of corporate
governance practices is made pursuant to the requirements of the TSE relating to
the disclosure of corporate governance practices. As a public company whose
Shares trade on the TSE, the Company complies with the corporate governance
guidelines issued by the TSE in the December 1994, Report of the TSE Committee
on Corporate Governance in Canada.
BOARD MANDATE
In December 1995, the Board separated the functions of chairman and chief
executive officer. This separation articulates the Board's view that the
chairman should represent the interests of shareholders and the chief executive
officer should represent the views of management, which is accountable to the
Board. The directors provide oversight and a policy framework that ensure
management acts in the best interests of the shareholders.
In 1996 and 1997, governance practices and expectations of management were
improved through several initiatives that included:
- a strengthening of the Board and its committees through the addition of
independent directors;
- a new long-term strategic planning process, resulting in a three-year
strategic plan;
- the appointment of internal auditors;
- the linking of management compensation to measurable operational and
profit performance targets;
- the partial or, at a director's option, entire payment of director's fees
(less applicable taxes) in Shares of the Company; and
- a new communications policy to provide shareholders and other
stakeholders with comprehensive and timely information.
BOARD MEMBERSHIP
The Board currently has 11 members, of whom one is a related director (the
Company's Chief Executive Officer) and 10 are directors unrelated to either the
management or the business of the Company. The Company does not have a
controlling shareholder, although the current Chairman, Richard W. Snyder,
controls 19.95% of the Company's outstanding Shares and another director, Roy T.
Graydon, is a portfolio manager of the Merchant Banking Group of Ontario
Teachers' Pension Plan Board, the holder of 19.84% of the Company's outstanding
Shares.
In 1996, the Company's shareholders approved a substantial change in the
composition of the Board to include American residents with specific knowledge
of the U.S. heating, ventilation and air conditioning industry and the markets
in which the Company competes. In 1997, the Company derived approximately 84
percent of its revenue from U.S. sales. The corporate head office and corporate
management functions are located in Franklin, Tennessee and virtually all of the
Company's manufacturing operations are located in Lewisburg, Tennessee.
The composition of the Board has been influenced by the need to ensure that
the Company has the appropriate complement of skills, knowledge and experience
required to implement the Company's long-term strategic plan.
The current Board was elected in June 1997.
BOARD COMMITTEES
The Board has five standing committees, each of which is comprised of a
majority of independent directors. The functions and current membership of each
of the Company's Audit Committee, Compensation
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and Pension Committee, Nominating and Corporate Governance Committee, Strategic
Planning Committee and Finance Committee are described elsewhere in this Proxy
Circular.
DECISIONS REQUIRING BOARD APPROVAL
In addition to those matters which must by law be approved by the Board,
management is also required to seek the approval of the Board for:
- acquisitions of, or investments in, new businesses above $3 million;
- changes in the nature of the Company's existing business;
- hiring of senior management;
- annual business plan and budgets; and
- any other matter considered "material" to the business and affairs of the
Company.
BOARD PERFORMANCE
It is the responsibility of the Chairman of the Board of Directors to
ensure the effective operation of the Board. The Chairman consults on an ongoing
basis with the independent directors to discuss the effectiveness of the process
the Board follows to receive information from management. The Chairman also
consults on an ongoing basis with individual members of the Board to discuss
each director's contribution to the Board and committee meetings and any other
matters which the individual directors wish to raise with the Chairman.
SHAREHOLDER FEEDBACK
The Company's shareholder communications policy is one of timely public
dissemination of material information. At the Company's annual meeting, a full
opportunity is afforded for shareholders to ask questions concerning the
Company's activities. In addition, Stephen L. Clanton, Senior Vice President,
Chief Financial Officer and Treasurer is responsible for investor relations and
Karla G. Smith, Vice President, Corporate Communications is responsible for
communications and public relations. Investor concerns are reviewed to ensure
that every inquiry receives a full and timely response from the appropriate
officer.
EXPECTATIONS OF MANAGEMENT
The information which management provides to the Board is critical.
Directors must have confidence in the analysis, operational and reporting
functions of management. The Company's Strategic Planning Committee and the
Nominating and Corporate Governance Committee work closely with management to
ensure that management is effective in identifying problems and opportunities
for the Company.
CERTAIN TRANSACTIONS
During the 1997 fiscal year, except as disclosed above under "Executive
Compensation," and except as set forth below, the Company's executive officers,
directors and director nominees did not have significant business relations with
the Company requiring disclosure under applicable regulations and no such
transactions are anticipated during fiscal year 1998.
H. David Tayler, Senior Vice President, Canadian Operations has outstanding
an unsecured, non-interest bearing loan from the Company that was incurred in
connection with a home purchase assistance loan. The loan originally was in the
amount of Cdn. $50,000 and, during fiscal year 1997, the largest amount
outstanding was Cdn. $21,539.
Mr. Snyder is a general partner of Ravine Partners, Ltd. ("Ravine"), a
Texas limited partnership. On April 30, 1996, Mr. Snyder, Ravine and Roberta W.
Snyder, a general partner of Ravine, (collectively, the "Snyder Group") entered
into an agreement (the "Snyder Group Agreement") with the Company relating to
the Snyder Group's shareholdings which provides for, among other things, a
prohibition on the acquisition by
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the Snyder Group of in excess of 20 percent of the outstanding Shares or the
sale by the Snyder Group of any Shares to a buyer who after such sale would own
in excess of 20 percent of the outstanding Shares, without first having offered
the Shares to the Company or a third party buyer arranged by the Company. The
Snyder Group Agreement was amended in July 1997 to provide for an exception to
the prohibition of the acquisition by the Snyder Group of more than 20 percent
of the outstanding Shares in the circumstances of the issuance of Shares to Mr.
Snyder in his capacity as a director or Chairman of the Company pursuant to the
Company's Share Compensation Arrangement for Non-Employee Directors.
SHAREHOLDER PROPOSALS FOR 1999 PROXY MATERIALS
The Board will make provision for presentation of proposals by shareholders
at the 1999 annual meeting of shareholders provided such proposals are submitted
by eligible shareholders who have complied with the relevant requirements of the
SEC and the Canada Business Corporations Act. In order for any such proposals to
be included in the proxy materials for consideration at the 1999 annual meeting,
the proposals should be mailed to David P. Cain, Senior Vice President, General
Counsel and Secretary, International Comfort Products Corporation, 501 Corporate
Centre Drive, Suite 200, Franklin, Tennessee, USA 37067. Such proposals must be
received not later than February 12, 1999, under the Canada Business
Corporations Act and not later than December 10, 1998, under the Exchange Act.
APPROVAL OF DIRECTORS
The Board has approved the contents of this Circular and the sending
thereof to the shareholders of the Company.
/s/ DAVID P. CAIN
DAVID P. CAIN
Senior Vice President,
General Counsel and Secretary
Toronto, Ontario, Canada
April 9, 1998
10-K AVAILABLE
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE
SHARES ENTITLED TO VOTE AT THE MEETING, THE COMPANY, WITHOUT CHARGE, WILL
PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997, TOGETHER WITH FINANCIAL STATEMENTS AND SCHEDULES, AS FILED
WITH THE SEC. REQUESTS SHOULD BE MAILED TO DAVID P. CAIN, SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY, INTERNATIONAL COMFORT PRODUCTS CORPORATION, 501
CORPORATE CENTRE DRIVE, SUITE 200, FRANKLIN, TENNESSEE, USA 37067.
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SCHEDULE A
INTERNATIONAL COMFORT PRODUCTS CORPORATION
1998 STOCK OPTION PLAN
PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended to promote the interests of
International Comfort Products Corporation (the "Company") and its shareholders
by encouraging employees who the Company's Board of Directors feel will be
responsible for the future growth and continued development of the Company and
its Subsidiaries, as hereinafter defined, to own, and to increase their
ownership of, the Company's stock, thereby giving them, as shareholders, an
increased personal interest in, and a greater concern for, the Company's
continued success and progress.
STATEMENT OF THE PLAN
1. Name. The Plan shall be known as the International Comfort Products
Corporation 1998 Stock Option Plan.
2. Definition of Terms. In addition to words and terms that may be defined
elsewhere in the Plan, the following words and terms as used in the Plan shall
have the following meanings unless the context or use fairly indicates another
or different meaning or intent, which definitions shall be equally applicable to
both the singular and plural forms of such words and terms:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Incentive Option" shall mean an option which qualifies as an
incentive stock option within the meaning of section 422 of the Code.
"Nonqualified Option" shall mean an option which does not qualify
under section 422 of the Code as an incentive stock option.
"Ordinary Shares" shall mean the no par value ordinary shares of the
Company.
"Outstanding Issue" means, at any time, the number of Ordinary Shares
outstanding on a non-diluted basis.
"Participant" shall mean an employee of the Company or any of its
Subsidiaries to whom an option is granted under the Plan.
"Subsidiary" shall mean any corporation which at the time qualifies as
a subsidiary of the Company under the definition of "subsidiary
corporation" contained in section 424(f) of the Code.
3. Administration. The Plan shall be administered by the Board's
Compensation and Pension Committee (the "Committee"), which shall consist of not
less than two members. The Committee shall be appointed by the Board from its
membership. Members of the Committee shall not be eligible to participate in the
Plan.
The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it deems
necessary or desirable for the administration of the Plan and the protection of
the Company except as otherwise reserved to the Board or the shareholders of the
Company. Without limiting the generality of the foregoing, the Committee, in its
discretion, may treat all or any part of any period during which a Participant
is on military duty or on an approved leave of absence from the Company or a
Subsidiary as a period of employment of such Participant by the Company or
Subsidiary, as the case may be, for purposes of accrual of the Participant's
rights under the option. Any interpretation, determination, or other action made
or taken by the Committee shall be final, binding, and conclusive.
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No member of the Committee shall be liable for any action taken or omitted
or determination made in good faith with respect to the Plan or any option
granted under the Plan.
4. Shares Subject to Plan. Options may be granted by the Company from time
to time to purchase up to an aggregate of 1,500,000 Ordinary Shares, subject to
adjustment as provided in section 9. If any option granted under the Plan shall
terminate, expire, or, with the consent of the Participant, be cancelled as to
any shares, new options may thereafter be granted covering any such shares.
5. Eligibility. Options may be granted to those employees of the Company
(including officers, whether or not they are directors) who have and exercise
key management functions and responsibilities for the Company or any Subsidiary.
The granting of an option to any employee shall neither entitle such employee
to, nor disqualify such employee from, participation in any other grant of
options.
6. Grant of Options. The Committee shall have the authority, subject to
the terms of the Plan, to: (a) determine and designate from time to time those
employees of the Company or any Subsidiary to whom options are to be granted and
the number of shares to be optioned to each such employee, provided that no
director of the Company who is not also an employee of the Company or of a
Subsidiary shall be entitled to receive any option under the Plan; (b) authorize
the granting of Incentive Options, Nonqualified Options, or combinations of
Incentive Options and Nonqualified Options; and to require, if it so determines,
that if an Incentive Option and a Nonqualified Option are granted to the same
Participant, then to the extent one option is exercised the other option shall
not be exercised and shall terminate; (c) determine the number of shares subject
to each option; and (d) determine the schedule and duration of the exercise
period for any option. The date of grant of an option under the Plan will be the
date on which the option is awarded by the Committee.
7. Terms and Conditions of Options. Each option granted under the Plan
shall be evidenced by an agreement, in a form approved by the Committee, and
shall be subject to the terms and conditions contained in sections 7.1 through
7.8 and to such other terms and conditions as the Committee may deem appropriate
and which are in compliance with applicable laws and the rules and regulations
of the stock exchanges on which the Ordinary Shares are listed from time to
time; provided, however, that no Incentive Option shall be subject to any
condition that is inconsistent with the provisions of section 422 of the Code.
In the event that any condition imposed hereunder on an Incentive Option is at
any time determined by the Internal Revenue Service or a court of competent
jurisdiction to be inconsistent with section 422 of the Code, then each
Incentive Option shall be deemed to have been granted without such condition but
shall continue in effect under such remaining terms and conditions as may be
applicable as if the invalid condition had not been included.
7.1 Option Period. Each option agreement shall specify the period during
which the option thereunder is exercisable (which shall not exceed ten (10)
years from the date of grant) and shall provide that the option shall expire at
the end of such period.
7.2 Option Price. The option price per share shall be determined by the
Committee at the time any option is granted, and shall not be less than one
hundred percent (100%) of the fair market value of the Ordinary Shares subject
to the option, which shall be equal to the closing market price of the Ordinary
Shares on The Toronto Stock Exchange on the last trading day preceding the date
of the grant. In the event the Ordinary Shares are not listed on The Toronto
Stock Exchange, the option price shall be determined based upon the trading
prices of the Ordinary Shares on any Canadian or U. S. stock exchange on which
the Ordinary Shares are then listed. Such price shall be subject to adjustment
as provided in section 9.
7.3 Nontransferability. The options granted hereunder shall not be
transferable by the Participant otherwise than by will or the laws of descent
and distribution, and shall not be exercisable by anyone other than the
Participant during his lifetime.
7.4 Ten Percent Shareholders. Incentive Options shall not be granted to
any employee who, immediately before the option is granted, owns stock
possessing more than ten percent (10%) of the total combined
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voting power of all classes of stock of the Company or of its parent or
Subsidiaries; provided, however, that this prohibition shall not apply if at the
time such option is granted the option price is at least one hundred ten percent
(110%) of the fair market value of the Ordinary Shares and such option is not
exercisable after the expiration of five (5) years from the date such option is
granted.
7.5 Five Percent Restriction. The number of Ordinary Shares reserved for
issuance to any one person pursuant to options granted under the Plan or
otherwise shall not exceed 5% of the Outstanding Issue.
7.6 Annual Limitation. The aggregate fair market value (determined as of
the time the option is granted) of the stock with respect to which Incentive
Options are exercisable for the first time by any individual during any calendar
year (under the Plan as well as any other plan of the Company and any parent and
Subsidiary of the Company) shall not exceed One Hundred Thousand Dollars
($100,000). Notwithstanding the limitation set forth in the preceding sentence,
no employee may be granted options for more than Three Hundred Thousand
(300,000) Ordinary Shares during any fiscal year of the Company.
7.7 Termination of Employment. If any Participant shall cease to be an
employee of either the Company, a parent, or Subsidiary of the Company, or a
corporation or a parent or subsidiary corporation of such corporation issuing or
assuming a stock option in a transaction to which section 424(a) of the Code
applies, except when such cessation of employment is caused by the death or
disability of the Participant, the options granted to such Participant shall
terminate on the earlier of (a) the passage of three months after the date of
termination of his or her employment, or (b) the expiration dates. For purposes
of this section 7.7, employment shall be considered as continuing uninterrupted
during any bona fide leave of absence (such as those attributable to illness,
military obligations or governmental service) provided that the period of such
leave does not exceed 90 days or, if longer, any period during which such
Participant's right to reemployment is guaranteed by statute or contract. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under this section 7.7, provided that
such written approval contractually obligates the Company, a parent or
Subsidiary of the Company to continue the employment of the Participant after
the approved period of absence. Incentive Options granted under the Plan shall
not be affected by any change of employment within or among the Company, a
parent or Subsidiary of the Company, so long as the Participant continues to be
an employee of the Company, a parent or Subsidiary of the Company. If a
Participant ceases to be employed by the Company, a parent or Subsidiary of the
Company by reason of his or her death, any Incentive Option owned by such
Participant may be exercised, to the extent otherwise exercisable on the date of
death, by the estate, personal representative or beneficiary who has acquired
the Incentive Option by will or by the laws of descent and distribution, until
the earlier of (i) the specified expiration date of the Incentive Option, or
(ii) 180 days from the date of the Participant's death. If a Participant ceases
to be employed by the Company, a parent or Subsidiary of the Company by reason
of his or her disability, such Participant shall have the right to exercise any
Incentive Option held by him or her on the date of termination of employment, to
the extent of the number of shares with respect to which he or she could have
exercised it on that date, until the earlier of (i) the specified expiration
date of the Incentive Option, or (ii) one year from the date of the termination
of the Participant's employment. For purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or any successor statute. Nothing in the Plan shall be construed as
imposing any obligation on the Company to continue the employment of any
Participant.
7.8 Period of Exercise of Options. Any option granted hereunder, may,
prior to its expiration or termination, be exercised from time to time, in whole
or in part, up to the total number of shares with respect to which it shall have
then become exercisable. An option granted hereunder shall become exercisable in
such installments as are specified in the option agreement, the rate of which
shall not be at a rate exceeding the following schedule:
(a) After one year from the date the option is granted, it may be
exercised as to not more than thirty-three and 1/3 percent (33 1/3%) of the
shares covered thereunder.
(b) After two years from the date the option is granted, it may be
exercised as to not more than an additional thirty-three and 1/3 percent
(33 1/3%), or a total of sixty-six and 2/3 percent (66 2/3%), of the shares
covered thereunder.
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(c) After three years from the date the option is granted, it may be
exercised as to all of the shares covered thereunder.
8. Exercise of Option. The exercise of any option under the Plan shall be
subject to the provisions of sections 8.1 through 8.3.
8.1 Method of Exercising Option. Any option granted hereunder may be
exercised by the Participant by delivering to the Company at its main office
(attention of its Secretary) written notice of the number of shares with respect
to which the option rights are being exercised and by paying the purchase price
of the shares purchased in full, in exchange for the issuance and delivery of a
certificate therefore to or on the order of the Participant, subject to the
provisions of section 7.6 when applicable.
8.2 Payment of Purchase Price. The purchase price of the shares as to
which an option is exercised shall be paid in full to the Company at the time of
exercise.
8.3 Withholding. The Company's obligation to deliver shares on the
exercise of any option shall be subject to satisfaction of any applicable United
States or Canadian federal, state, provincial and local tax withholding
requirements.
9. Capital Adjustments. The number and price of Ordinary Shares covered by
each option and the total number of shares that may be optioned and sold under
the Plan shall be proportionately adjusted to reflect any stock dividend, stock
split or share combination of the Ordinary Shares or any recapitalization of the
Company. In the event of any merger, consolidation, reorganization, liquidation
or dissolution of the Company, or any exchange of shares involving the Ordinary
Shares, any option granted under the Plan shall automatically be deemed to
pertain to the securities and other property to which a holder of the number of
Ordinary Shares covered by the option would have been entitled to receive in
connection with any such event. The Committee shall have the sole discretion to
make all interpretations and determinations required under this section to the
extent it deems equitable and appropriate.
10. Reservation and Delivery of Shares. The Company, during the term of
any options granted hereunder, will at all times reserve and keep available, and
will seek to obtain from any regulatory body having jurisdiction any requisite
authority in order to issue and sell, such number of Ordinary Shares as shall be
sufficient to satisfy the requirements of the options granted under the Plan. If
in the opinion of its counsel, the issuance or sale of any shares of its stock
hereunder shall not be lawful for any reason, including the inability of the
Company to obtain from any regulatory body having jurisdiction authority deemed
by such counsel to be necessary for such issuance or sale, the Company shall not
be obligated to issue or sell any such shares.
11. Event of Defeasance. Any options granted hereunder are specifically
made subject to defeasance by the failure of the shareholders of the Company to
approve the Plan within a period of twelve months from the date the Plan is
adopted by the Board.
12. Compliance with Laws. No options shall be granted and no Ordinary
Shares shall be issued or sold upon the exercise of any option unless and until
the then applicable requirements of Canadian and United States securities laws
and the rules and regulations of applicable securities regulatory authorities
and any other regulatory agencies and laws having jurisdiction over or
applicability to the Company, and the rules and regulations of any stock
exchange on which the Ordinary Shares may be listed, shall have been fully
complied with and satisfied. With respect to U. S. Participants, upon the
exercise of an option at a time when there is not in effect under the Securities
Act of 1933, a current registration statement relating to the Ordinary Shares to
be received upon such exercise, the U. S. Participant shall represent and
warrant in writing to the Company that the shares purchased are being acquired
for investment and not with a view to the distribution thereof and shall agree
to the imposition of a legend on the certificate or certificates representing
said shares evidencing the restrictions on transfer under the Securities Act of
1933 and the issuance of stop-transfer instructions by the Company to its
transfer agent with respect thereto.
13. Additional Approvals. This Plan shall be subject to acceptance by The
Toronto Stock Exchange in compliance with all conditions imposed by The Toronto
Stock Exchange. Any options granted prior to such
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acceptance shall be conditional upon such acceptance being given and any
conditions complied with and no such options may be exercised unless such
acceptance is given and such conditions are complied with.
14. No Rights as Shareholder. A Participant shall not have any rights as a
shareholder with respect to any shares covered by any option granted hereunder
until the issuance of such shares pursuant to the terms of this Plan. No
adjustment shall be made on the issuance of a stock certificate to a Participant
as to any dividends or other rights for which the record date occurred prior to
the issuance of such certificate.
15. Indemnification and Exculpation. Each person who is or shall have been
a member of the Board or of the Committee shall be indemnified and held harmless
by the Company against and from any and all loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by him/her in connection with or
resulting from any claim, action, suit, or proceeding to which he/she may be or
become involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him/her in settlement thereof
(with the Company's written approval) or paid by him/her in satisfaction of a
judgment in any such action, suit, or proceeding, except a judgment in favor of
the Company based upon a finding of his lack of good faith; subject, however, to
the condition that upon the institution of any claim, action, suit, or
proceeding against him/her, he/she shall in writing give the Company an
opportunity, at its expense, to handle and defend the same before he/she
undertakes to handle and defend it on his/her own behalf. The foregoing right of
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law or otherwise, or any power that the Company
may have to indemnify him/her or hold him/her harmless. Each member of the Board
or of the Committee, and each officer and employee of the Company shall be fully
justified in relying or acting in good faith upon any information furnished in
connection with the administration of the Plan by any appropriate person or
persons other than himself/herself. In no event shall any person who is or shall
have been a member of the Board or of the Committee, or an officer or employee
of the Company, be held liable for any determination made, or other action
taken, or any omission to act in reliance upon any such information as referred
to in the preceding sentence, or for any action (including the furnishing of
information) taken or any omission to act, when any such determination, action,
or omission is made in good faith.
16. Use of Proceeds. Proceeds from the sale of stock pursuant to options
granted under the Plan shall constitute general funds of the Company.
17. Amendment and Discontinuance. The Board may terminate or amend the
Plan in any respect at any time, provided that (a) no action of the Board or the
shareholders may alter or impair a Participant's rights under any outstanding
option without the Participant's consent, (b) without the approval of the
shareholders, the total number of shares that may be optioned and sold under the
Plan may not be increased (except by adjustment pursuant to section 9), the
provisions of section 5 regarding eligibility may not be modified, the price at
which shares may be purchased pursuant to options granted hereunder may not be
reduced (except by adjustment pursuant to section 9), the expiration date of the
Plan may not be extended, and the provisions of this section 17 may not be
changed, and (c) any such amendment to this Plan is subject to the approval of
The Toronto Stock Exchange or such other stock exchanges on which the Ordinary
Shares may be listed from time to time and may require the approval of the
Company's shareholders.
18. Term of Plan. Subject to the provisions of section 11, the Plan shall
be effective as of the date of the adoption of the Plan by the Board and shall
expire on December 31, 2007 (except as to options outstanding on that date), and
no option shall be granted under the Plan on or after such expiration date.
19. General. Except as the same may be governed by the Code and any
applicable United States federal securities laws, the Plan and any options
granted hereunder shall be governed by and construed in accordance with the laws
of the Province of Ontario and the federal laws of Canada applicable therein. As
herein used, the singular number shall include the plural, the plural the
singular, and the use of any gender shall be applicable to all genders, unless
the context or use shall fairly require a different construction. Section or
paragraph headings are employed herein solely for convenience of reference, and
such headings shall not affect the validity, meaning, or enforceability of any
provision of the Plan. All references herein to "section" or "paragraph" shall
mean the appropriately numbered section or paragraph of the Plan except where
reference is made to the Code of any other specified law or instrument.
A-5
<PAGE> 29
APPENDIX A
PROXY
INTERNATIONAL COMFORT PRODUCTS CORPORATION
FOR USE AT THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON MAY 13, 1998.
THIS PROXY IS SOLICITED BY AND ON BEHALF OF MANAGEMENT OF THE COMPANY.
The undersigned holder of Ordinary Shares ("Shares") of International Comfort
Products Corporation (the "Company") hereby appoints Richard W. Snyder, or
failing him, David P. Cain, or instead of either of the foregoing,
, as proxy for the undersigned to attend, vote and
act for and on behalf of the undersigned AT THE ANNUAL AND SPECIAL MEETING OF
SHAREHOLDERS OF THE COMPANY TO BE HELD AT THE TORONTO HILTON HOTEL, TORONTO 1
BALLROOM, 145 RICHMOND STREET WEST, TORONTO, ONTARIO, CANADA ON WEDNESDAY, MAY
13, 1998 (THE "MEETING") AT 10:00 A.M. (LOCAL TIME), and at any adjournments
thereof, and hereby revokes any proxy previously given by the undersigned.
1. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON WHO NEED NOT BE A
SHAREHOLDER, TO REPRESENT HIM AND TO ATTEND AND ACT ON HIS BEHALF AT THE
MEETING, OTHER THAN THE NOMINEES DESIGNATED ABOVE, AND MAY EXERCISE SUCH
RIGHT BY INSERTING THE NAME OF HIS NOMINEE IN THE SPACE PROVIDED ABOVE FOR
THAT PURPOSE.
2. The Shares represented by this proxy will be voted in accordance with any
choice specified in this proxy. IF NO SPECIFICATION IS MADE, THE PERSONS
NAMED ABOVE WILL VOTE SUCH SHARES FOR THE ELECTION OF THE DIRECTORS NAMED
IN THIS PROXY, FOR THE REAPPOINTMENT OF ARTHUR ANDERSEN & CO. AS AUDITORS
OF THE COMPANY AND FOR THE RESOLUTION CONFIRMING THE ADOPTION OF THE
COMPANY'S 1998 STOCK OPTION PLAN.
3. If this proxy is not dated, it shall be deemed to be dated on the date on
which this proxy was mailed by the Company.
Without limiting the general powers hereby conferred, the Shares represented by
this proxy are to be:
1. [ ] VOTED FOR the election as directors of all nominees listed below
(except as marked to the contrary below), or
[ ] WITHHELD FROM VOTING for all nominees listed below.
INSTRUCTIONS: To withhold authority to vote
for any individual nominee, strike a line
through the nominee's name in the list
below.
<TABLE>
<S> <C> <C>
Richard C. Barnett Stanley M. Beck W. Michael Clevy
William G. Davis John F. Fraser Roy T. Graydon
Marvin G. Marshall Ernest C. Mercier David H. Morris
David A. Rattee Richard W. Snyder William A. Wilson
</TABLE>
2. Voted FOR [ ], or WITHHELD FROM VOTING
[ ], or ABSTAIN FROM VOTING [ ] on, the
reappointment of Arthur Andersen & Co.
as auditors of the Company.
3. Voted FOR [ ], or AGAINST [ ], or
ABSTAIN FROM VOTING [ ] on, the
resolution confirming the adoption of
the International Comfort Products
Corporation 1998 Stock Option Plan.
4. Voted, in their discretion:
(a) on any variation of or amendments to
the foregoing matters proposed at
the Meeting or any adjournment
thereof; and
(b) on any other matters may properly
come before the Meeting or any
adjournment thereof.
Dated: ________________ day of
________________, 1998.
---------------------------------------------
Name of Shareholder (please print)
---------------------------------------------
Signature of Shareholder
This proxy must be signed by the
shareholder or such shareholder's
attorney, duly authorized in writing or,
if the shareholder is a corporation, by an
officer or attorney thereof duly
authorized. Signatures should correspond
with the name imprinted hereon. Where two
or more persons are named, all should
sign.
