<PAGE>
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HASTINGS MANUFACTURING COMPANY
(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 file fee is calculated and state how it was determined):
-----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------
<PAGE>
[ ] 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.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
HASTINGS MANUFACTURING COMPANY
325 North Hanover
Hastings, Michigan 49058
Telephone No. (616) 945-2491
Facsimile No. (616) 945-4667
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 5, 1998
- ---------------------------------------------------------------------------
You are cordially invited to attend the annual shareholder meeting of
Hastings Manufacturing Company, a Michigan corporation ("Hastings"), to be
held at its principal office located at 325 North Hanover, Hastings,
Michigan, on Tuesday, the 5th day of May, 1998, at 9:00 a.m., local time,
for the following purposes:
1. To elect one (1) director for a three-year term expiring in 2001.
2. To consider and approve the Hastings Manufacturing Company
Stock Option and Restricted Stock Plan of 1997.
3. To transact any other business that may properly come before
the meeting and any adjournment thereof.
Only shareholders of record at the close of business on March 20,
1998, are entitled to notice of and to vote at the Annual Meeting of
Shareholders and any adjournments thereof.
Your attention is directed to the enclosed Proxy Statement and Proxy.
The annual report of Hastings for the year ended December 31, 1997 is also
enclosed.
ALL SHAREHOLDERS ARE URGED TO COMPLETE, DATE, SIGN AND RETURN PROMPTLY
THE ENCLOSED PROXY IN THE POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE MEETING
AND VOTE IN PERSON, THIS PROXY WILL NOT BE USED.
By Order of the Board of Directors
/s/ Monty C. Bennett
MONTY C. BENNETT
Secretary
April 10, 1998
<PAGE>
HASTINGS MANUFACTURING COMPANY
325 North Hanover
Hastings, Michigan 49058
Telephone No. (616) 945-2491
Facsimile No. (616) 945-4667
ANNUAL MEETING OF SHAREHOLDERS
MAY 5, 1998
PROXY STATEMENT
INTRODUCTION
This Proxy Statement and the enclosed Proxy are being furnished to
holders of Common Stock, $2 par value per share ("Common Stock"), of
Hastings Manufacturing Company ("Hastings" or the "Company") in connection
with the solicitation of proxies by the Board of Directors of Hastings for
use at the Annual Meeting of Shareholders and any adjournment thereof. The
Annual Meeting will be held at 9:00 a.m., local time, on May 5, 1998, at
the principal office of Hastings located at 325 North Hanover, Hastings,
Michigan, for the purposes set forth in the accompanying "Notice of Annual
Meeting of Shareholders."
If a Proxy in the enclosed form is properly executed and returned to
Hastings, the shares of Common Stock represented by the Proxy will be voted
in accordance with the wishes specified on the Proxy. If no choice is
specified, the designated proxies will vote the shares represented by the
Proxy (i) for the election of the director nominee named in this Proxy
Statement, (ii) for approval of the Hastings Manufacturing Company Stock
Option and Restricted Stock Plan of 1997 and (iii) in accordance with their
best judgment with respect to any other matter that may properly come
before the meeting and any adjournment thereof.
Any shareholder who executes and delivers a Proxy may revoke it at any
time before it is voted at the Annual Meeting by giving notice in writing
directed to the Secretary of Hastings at the address set forth above, by
submitting a Proxy bearing a later date or by attending the meeting and
voting in person. A shareholder's attendance at the Annual Meeting will
not, by itself, revoke that shareholder's proxy.
This Proxy Statement is being mailed to shareholders of Hastings on or
about April 10, 1998.
ELECTION OF DIRECTOR
The Board of Directors has nominated the following person for election
to the Board of Directors for a three-year term expiring at the Annual
Meeting of Shareholders in 2001 or until his successor is elected and
qualified:
Neil A. Gardner
-1-
<PAGE>
Seven other directors are serving terms that will expire in 1999 and
2000. The designated proxies intend to vote for the election of the
nominee named above. The nominee has consented to being named in this
Proxy Statement and to serve as a director if elected. If the nominee
should become unable or unwilling to serve, which is not contemplated, the
incumbent Board of Directors may or may not select a substitute nominee.
If a substitute nominee is selected, the shares represented by a Proxy will
be voted for the election of the substitute nominee. Proxies will not be
voted for more than the number of nominees named in this Proxy Statement.
A plurality of votes cast by the holders of shares of Common Stock
present in person or by proxy at the Annual Meeting and voting on the
election of directors is required to elect directors. For the purpose of
counting votes on the election of directors, abstentions, broker non-votes
and other shares not voted will not be counted as shares voted on the
election and the number of votes of which a plurality is required will be
reduced by the number of shares not voted.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE NOMINEE AS A DIRECTOR
APPROVAL OF THE HASTINGS MANUFACTURING COMPANY STOCK
OPTION AND RESTRICTED STOCK PLAN OF 1997
The Board of Directors believes that Hastings' long-term interests
will best be advanced by aligning the interests of its directors, corporate
and subsidiary officers and other key employees with the interests of its
shareholders. Therefore, to attract and retain directors, officers and
other key management employees of exceptional abilities, on December 9,
1997, the Board of Directors adopted, subject to shareholder approval, the
Hastings Manufacturing Company Stock Option and Restricted Stock Plan of
1997 (the "Plan"). The Board of Directors believes that the adoption and
implementation of the Plan is now advisable.
The Board of Directors contemplates that the Plan would primarily be
used to grant stock options. However, the Plan would also permit grants of
restricted stock and tax benefit rights if determined to be desirable to
advance the purposes of the Plan. These grants and awards are referred to
as "Incentive Awards." By combining in a single plan many types of
incentives commonly used in long-term incentive compensation programs, it
is intended that the Plan would provide significant flexibility to the
Compensation Committee (the "Committee") of the Board of Directors to
tailor specific long-term incentives that would best promote the objectives
of the Plan, and in turn promote the interests of Hastings' shareholders.
-2-
<PAGE>
The following is a summary of the principal features of the Plan. The
summary is qualified in its entirety by reference to the terms of the Plan,
the complete text of which is attached as APPENDIX A to this Proxy
Statement.
Persons eligible to receive Incentive Awards under the Plan (with
certain limitations discussed below) include directors (currently eight
persons), corporate officers (currently two additional persons) and other
key employees (currently nine additional persons) of Hastings. Other
individuals eligible to participate in the Plan may join Hastings in the
future. The Plan provides that a maximum of 19,000 shares of Common Stock
would be available for Incentive Awards. (This number, however, is subject
to certain antidilution adjustments. For example, as a result of the
Company's March 1998 two-for-one stock split (the "Stock Split"), the
number of shares authorized under the Plan increased to 38,000.) Because
directors, officers and key employees of Hastings and its subsidiaries may
receive awards under the Plan, they may be deemed to have an interest in
the Plan. The Plan would not be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and would not be
subject to the Employee Retirement Income Security Act of 1974, as amended.
The Plan would be administered by the Committee, which is to be
comprised of at least two nonemployee directors, as defined in Rule 16b-3
under the Securities Exchange Act of 1934. In its discretion, the Board of
Directors may also require that the members of the Committee be "outside
directors," as defined in Section 162(m) of the Code. The Committee would
make determinations, subject to the terms of the Plan, as to the persons to
receive Incentive Awards, the amount of Incentive Awards to be granted to
each person, the terms of each grant and all other determinations necessary
or advisable for administration of the Plan. The Committee could amend the
terms of Incentive Awards granted under the Plan from time to time in a
manner consistent with the Plan; provided, however, that no amendment could
be effective relating to a particular Incentive Award without the consent
of the relevant Participant, except to the extent the amendment operated
solely to the benefit of the Participant.
Under the Plan, Participants could be granted stock options. A stock
option is the right to purchase a specified number of shares of stock
issued by the Company for a stated price at specified times. Certain stock
options that could be granted to employees under the Plan may qualify as
incentive stock options as defined in Section 422(b) of the Code. Other
stock options, including all stock options that will be granted to
directors who are not employees, would not be incentive stock options
within the meaning of the Code. Stock options could be granted at any time
prior to the termination of the Plan according to its terms or by action of
the Committee.
The Committee would set forth the terms of individual grants of stock
options in stock option agreements, which would contain such terms and
-3-
<PAGE>
conditions, consistent with the provisions of the Plan, as the Committee
determined appropriate. These restrictions may include vesting
requirements to encourage long-term ownership of shares. Hastings will
receive no consideration upon the award of options. The option price per
share would be determined by the Committee and, for options intended to
qualify as incentive stock options under the Code, would be a price equal
to or higher than the "market value" of Hastings Common Stock on the date
of grant. "Market value" means the last reported sales price of shares of
Hastings Common Stock as reported on the American Stock Exchange on the
date of grant, or if no shares were traded on that date, the last preceding
date on which shares were traded. On March 20, 1998, the last reported
sales price of Hastings Common Stock on the American Stock Exchange was
$47.25 per share. When exercising all or a portion of an option, a
Participant could pay the exercise price with cash or, with the consent of
the Committee, shares of Common Stock (including Common Stock to be
received upon a simultaneous exercise).
In addition to the options that can be granted in the discretion of
the Committee, the Plan provides that options to purchase one hundred (100)
shares (prior to adjustment for the Stock Split) of Common Stock will be
automatically granted to each nonemployee director on the date of Hastings'
annual meeting of shareholders of each year. In addition, each nonemployee
director shall at the time of his or her initial election or appointment be
granted an option to purchase 100 shares (prior to adjustment for the Stock
Split) of Common Stock. Stock options granted to nonemployee directors
will not be treated as incentive stock options. The exercise price of each
option awarded to a nonemployee director will be 100% of the market value
at the date of grant.
Although the term of each stock option would be determined by the
Committee, no stock option intended to qualify as an incentive stock option
would be exercisable under the Plan after the expiration of ten (10) years
from the date it was granted. Options generally would be exercisable for
limited periods of time in the event an option holder was terminated from
employment with Hastings or its subsidiaries without cause, died or became
disabled. If an option holder was terminated for cause, the option holder
would forfeit all rights to exercise any outstanding options. Unless the
Committee consents otherwise or the terms of an option provide otherwise,
options granted to Participants under the Plan could not be transferred
except by will or by the laws of descent and distribution.
There is no specified limit on the number of options that could be
granted to any individual Participant under the Plan, except that (i)
semiannual grants to each nonemployee director are limited to the formula
as provided in the Plan; and (ii) no Participant could receive Incentive
Awards which constitute more than 10% of the total Incentive Awards granted
under the Plan. Furthermore, no option granted to any Participant who at
the time of such grant owns, together with stock attributed to such
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<PAGE>
Participant under Section 424(d) of the Code, more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company
or any of its subsidiaries may be designated as an incentive stock option,
unless the option provides an exercise price equal to at least one hundred
ten percent (110%) of the market value of the Common Stock and the exercise
of the option after the expiration of five years from the date of grant of
the option is prohibited by its terms.
In December 1997, the Compensation Committee approved grants of
options to certain individuals, subject to shareholder approval of the Plan
at the Annual Meeting. The following table sets forth the benefits that
will be received or allocated to the following persons under those grants,
if the Plan is approved by the Company's shareholders:
<TABLE>
NEW PLAN BENEFITS
STOCK OPTION AND RESTRICTED STOCK PLAN OF 1997
<CAPTION>
NAME AND POSITION DOLLAR VALUE<F1> NUMBER OF UNITS
- ----------------- ---------------- ---------------
<S> <C> <C>
Mark R. S. Johnson, Co-Chief $ 5,250 750
Executive Officer, President-
Marketing
Andrew F. Johnson, Co-Chief $ 5,250 750
Executive Officer, President-
Operations
Dale W. Koop, Vice President- $ 2,800 400
Engineering
M.C. Bennett, Vice President- $ 2,800 400
Employee Relations
Thomas J. Bellgraph, Vice $ 2,800 400
President-Finance
Executive Group<F2> $21,700 3,100
Non-Executive Director Group $ 6,300 900
Non-Executive Officer Employee $14,175 2,025
Group
- -----------------------------
-5-
<PAGE>
<FN>
<F1> The dollar value of a stock option is determined by calculating the
spread between the exercise price of the option and the current value
of the Company's Common Stock. In the table, the dollar value is
calculated as the difference between the market value of Hastings
Common Stock on the date of grant (December 19, 1997) and the market
value as of March 20, 1998. On December 19, 1997, the last reported
sale for Hastings Common Stock on the American Stock Exchange was
$40.25 per share. On March 20, 1998, the last sale was $47.25 per
share.
<F2> The Executive Group includes Messrs. Johnson, Johnson, Koop, Bennett
and Bellgraph, as well as Stephen G. Uhen, Vice President of
Information Services.
</FN>
</TABLE>
Under current federal income tax laws, no income would be realized
when an option is granted pursuant to the Plan. A Participant exercising
an incentive stock option would not recognize income at the time of the
exercise. The difference between the market value and the exercise price
would, however, be a tax preference item for the purpose of calculating
alternative minimum tax. Upon sale of the stock, so long as the
Participant held the stock for at least one year after the exercise of the
option and at least two years after the grant of the option, the
Participant's basis would equal the option price, and the Participant would
pay tax on the difference between the sale price and the option price as
capital gain, in which case Hastings would not be entitled to any deduction
for compensation income. If, prior to the expiration of either of the
above holding periods, the Participant sold shares acquired under an
incentive stock option, the tax deferral would be lost, and the Participant
would recognize compensation income equal to the difference between the
option price and the fair market value of the shares sold at the time of
exercise, but not more than the maximum amount that would not result in a
loss on the disposition (generally the difference between the option price
and the price at which the shares are sold). Hastings would then receive a
corresponding deduction for federal income tax purposes. Additional gains,
if any, would be recognized by the Participant as short- or long-term
capital gain.
If a Participant exercised stock options that were not incentive stock
options, the Participant would recognize compensation income in the year of
exercise equal to the difference between the stock option price and the
fair market value of the shares on the date of exercise. Hastings would
receive a corresponding deduction for federal income tax purposes. The
optionee's tax basis in the shares acquired would be increased by the
amount of compensation income recognized. Sale of the stock after exercise
would result in recognition of short- or long-term capital gain or loss.
-6-
<PAGE>
In addition to the authority to grant stock options under the Plan,
the Plan would allow the Committee to award restricted stock. Restricted
stock would be subject to such terms and conditions, consistent with the
provisions of the Plan, as the Committee from time to time determined. As
with stock option grants, the Committee would set forth the terms of
individual awards of restricted stock in restricted stock agreements.
Unless the Committee provided otherwise in a restricted stock agreement, if
a Participant's employment is terminated during the restricted period set
by the Committee for any reason other than death, total disability (as
defined in the Plan) or any other additional provisions determined by the
Committee pursuant to the Plan, the Participant's restricted stock would be
entirely forfeited. If the Participant's employment is terminated during
the restricted period by reason of death or total disability, the
restrictions on the Participant's shares of restricted stock would
terminate automatically.
Without Committee authorization, a recipient of restricted stock could
not sell, exchange, transfer, pledge, assign or otherwise dispose of such
stock other than to Hastings or by will or the laws of descent or
distribution. In addition, the Committee could impose other restrictions
on shares of restricted stock. However, holders of restricted stock would
enjoy all other rights of shareholders with respect to restricted stock
during the restricted period, including the right to vote restricted shares
at shareholders' meetings and the right to receive all dividends paid with
respect to restricted stock. Any securities received by a holder of
restricted stock pursuant to a stock dividend, stock split,
recapitalization or reorganization would be subject to the same terms,
conditions and restrictions applicable to the restricted stock for which
such shares are received.
Generally, a Participant would not recognize income upon the award of
restricted stock. However, a Participant would be required to recognize
compensation income on the value of restricted stock at the time the
restricted stock vested (when the restrictions lapse). At the time the
Participant recognized this compensation income, Hastings would be entitled
to a corresponding deduction for federal income tax purposes. If
restricted stock was forfeited by a Participant, the Participant would not
recognize income and Hastings would not receive a deduction. Prior to the
lapse of restrictions, dividends paid on restricted stock would be reported
as compensation income to the Participant, and Hastings would receive a
corresponding deduction.
A Participant could, within thirty days after the date of an award of
restricted stock, elect to report compensation income for the tax year in
which the award of restricted stock occurred. If the Participant made such
an election, the amount of compensation income would be the value of the
restricted stock at the time of the award. Any later appreciation in the
value of the restricted stock would be treated as capital gain and realized
-7-
<PAGE>
only upon the sale of the restricted stock. Dividends received after such
an election was made would be taxable as dividends and not treated as
additional compensation income. If, however, restricted stock was
forfeited after the Participant had made an election as described above,
the Participant would not be allowed any deduction for the amount earlier
taken into income. Upon the sale of restricted stock, a Participant would
realize capital gain (or loss) in the amount of the difference between the
sale price and the value of the stock previously reported by the
Participant as compensation income.
The Plan also permits the Committee to grant tax benefit rights, which
would be subject to such terms and conditions as the Committee determined
appropriate, in order to encourage the Participant to exercise options and
provide certain tax benefits to Hastings. A tax benefit right entitles a
Participant to receive from Hastings or a subsidiary a cash payment not to
exceed the amount calculated by multiplying the ordinary income, if any,
realized by the Participant for federal tax purposes as a result of the
exercise of a non-qualified stock option, or the disqualifying disposition
of shares acquired under an incentive stock option, by the maximum federal
income tax rate (including any surtax or similar charge or assessment) for
corporations, plus any other applicable state and local tax against which
Hastings is entitled to a deduction or credit by reason of exercise of the
option or the disqualifying disposition.
Tax benefit rights could be issued with respect to stock options
granted not only under the Plan but also with respect to existing or future
stock options awarded under any other plan of the Company that has been
approved by the shareholders as of the date of the Plan. Such rights with
respect to outstanding options shall be issued only with the consent of the
Participant if the effect would be to disqualify an incentive stock option,
change the date of grant or the exercise price or otherwise impair the
Participant's existing options. The net amount of a Tax Benefit Right,
subject to withholding, may be used to pay a portion of the option price,
unless otherwise provided by the Committee.
Whenever Incentive Awards are made under the Plan, Hastings could
withhold from any cash otherwise payable to the Participant or require the
Participant to remit to Hastings an amount sufficient to satisfy all
applicable federal, state and local withholding taxes. Withholding could
be satisfied by withholding shares of Hastings Common Stock to be received
upon exercise or by delivery to Hastings of previously owned shares of
Hastings Common Stock.
The Board of Directors could terminate the Plan at any time, and could
from time to time amend the Plan as it deemed proper and in the best
interests of Hastings, provided that no such amendment could impair any
outstanding Incentive Award without the consent of the Participant, except
according to the terms of the Incentive Award or unless the amendment
-8-
<PAGE>
operates solely to the benefit of the Participant. Subject to approval by
Hastings shareholders, the Plan would take effect as of December 9, 1997
and, unless previously terminated by the Board of Directors, no Incentive
Award could be made under the Plan after December 8, 2007.
Hastings intends to register shares covered by the Plan under the
Securities Act of 1933 before any Incentive Award would vest or become
exercisable.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE PROPOSAL
The affirmative vote of the holders of a majority of shares of
Hastings Common Stock present in person or by proxy and voting on this
proposal is required to approve the Plan. For purposes of counting votes
on this proposal, abstentions, broker non-votes and other shares not voted
will not be counted as voted on this proposal, and the number of shares of
which a majority is required will be reduced by the number of shares not
voted. The Board of Directors has determined that the Plan is in the best
interests of Hastings and its shareholders. The shares represented by
proxies received from Hastings shareholders will be voted FOR approval of
the adoption of the Plan unless a vote against such approval or to abstain
from voting is specifically indicated in the proxy.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE STOCK OPTION AND RESTRICTED STOCK PLAN OF 1997
VOTING SECURITIES
The Board of Directors fixed the close of business on Friday, March
20, 1998, as the record date for the determination of the shareholders
entitled to notice of and to vote at the Annual Meeting of Shareholders to
be held May 5, 1998, and any adjournments thereof.
At the close of business on March 20, 1998, 391,963 shares of Common
Stock were issued and outstanding. Each share of Common Stock issued and
outstanding on the record date entitles its holder to one vote in person or
by proxy on each matter presented for shareholder action. The distribution
date for the Stock Split was March 23, 1998. Accordingly, shares issued in
the Stock Split will not be entitled to vote at the Annual Meeting. In
addition, all share amounts set forth in the following tables are pre-Stock
Split figures.
-9-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons beneficially owned more than five percent of
the outstanding shares of Hastings Common Stock as of March 20, 1998:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF NATURE OF PERCENT OF
OF BENEFICIAL BENEFICIAL BENEFICIAL OUTSTANDING
OWNER OF COMMON STOCK OWNERSHIP OWNERSHIP SHARES
- --------------------- --------- --------- -----------
<S> <C> <C> <C>
Stephen I. Johnson 640 shares Sole voting and investment power 0.16%
907 West Madison 117,345 shares<F1> Shared voting and investment power 29.94%
Hastings, MI 49058
The Stephen I. Johnson 0 shares Sole voting and investment power --
Family Group <F2> 177,747 shares Shared voting and investment power 45.35%
c/o Stephen I. Johnson
907 West Madison
Hastings, MI 49058
Dimensional Fund 17,900 shares Sole voting and investment power 4.57%
Advisors Inc. <F3> 8,050 shares Shared voting and investment power 2.05%
1299 Ocean Ave.
11th Floor
Santa Monica, CA 90401
Amici Associates and 35,600 shares Sole voting and investment power 9.08%
The Collectors' Fund <F4> 0 shares Shared voting and investment power --
100 Park Avenue
New York, NY 10017
Mark R. S. Johnson <F5> 27,866 shares Sole voting and investment power 7.11%
c/o Hastings Mfg. Co. 675 shares Shared voting and investment power 0.17%
325 North Hanover
Hastings, MI 49058
- ---------------------------------
<FN>
<F1> This number does not include 14,111 shares held by Mr. Johnson
and two other persons as co-trustees of a testamentary trust established by
Mr. Johnson's father. This number includes shares held by the Stephen I.
Johnson Trust, the Isabel Sage Johnson Trust, the Anna M. Johnson Trust and
the Aben E. Johnson Trust, each for which Mr. Johnson is a trustee and
shares held by SAMCO, Inc., of which Mr. Johnson is the majority
shareholder.
-10-
<PAGE>
<F2> On October 26, 1982, the Stephen I. Johnson Family Group
("Family Group") filed a report on Schedule 13D (the "Schedule 13D") with
the Securities and Exchange Commission and the American Stock Exchange in
connection with a tender offer which terminated in January of 1983.
Amendment No. 2 to the Schedule 13D was filed with the Securities and
Exchange Commission on or about April 1, 1993, reaffirming the Family
Group's mutual belief that it is in the best interests of Hastings and its
shareholders that Hastings remain an independently owned corporation. The
Family Group consists primarily of family members and close relatives of
Stephen I. Johnson. The Schedule 13D, as amended, contains a Shareholder
Letter of Intent signed by all Family Group members. The Shareholder
Letter of Intent states that Family Group members believe it is in the best
interests of Hastings, its shareholders, its employees and the local
community that Hastings remain an independently owned corporation and
further states that Family Group members intend to oppose any takeover
attempt that would result in Hastings no longer remaining an independently
owned corporation and which is not in the best interest of Hastings, its
shareholders, its employees or the local community. Family Group members
and trusts for which such persons have or share voting power hold an
aggregate of approximately 177,747 shares representing approximately 45% of
the outstanding shares of Hastings Common Stock as of March 20, 1998.
<F3> Based on information set forth in a report on Schedule 13G dated
February 9, 1998. Dimensional Fund Advisors Inc. ("Dimensional"), a
registered investment advisor, has informed Hastings that it is deemed to
have beneficial ownership of 25,950 shares of Common Stock as of December
31, 1997, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, for all of which Dimensional serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
<F4> Based on information set forth in a report on Schedule 13D dated
February 21, 1991 as amended by amendments dated April 8, 1991 and December
6, 1995.
<F5> This number does not include shares held by SAMCO, Inc., of which
Mr. Johnson is a vice president, secretary and minority shareholder. The
shares set forth in the row entitled "Shared voting and investment power"
are shares owned by Mr. Johnson's spouse individually.
</FN>
</TABLE>
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<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of shares of
Common Stock, held as of March 20, 1998, by each director, each nominee for
election as director, each of the named executive officers (as defined in
the Summary Compensation Table) and by all directors and executive officers
of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
NAME OF BENEFICIAL NATURE OF OUTSTANDING
BENEFICIAL OWNER OWNERSHIP BENEFICIAL OWNERSHIP SHARES
- ---------------- --------- -------------------- -----------
<S> <C> <C> <C>
Mark R. S. Johnson 27,866 shares<F1> Sole voting and investment power 7.11%
675 shares<F1> Shared voting and investment power 0.17%
Andrew F. Johnson 8,383 shares Sole voting and investment power 2.14%
3,717 shares<F2> Shared voting and investment 0.95%
William R. Cook 800 shares Sole voting and investment power 0.20%
0 shares Shared voting and investment power --
Richard L. Foster 0 shares Sole voting and investment power --
100 shares Shared voting and investment power 0.03%
Monty C. Bennett 1,160 shares Sole voting and investment power 0.30%
0 shares Shared voting and investment power --
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
NAME OF BENEFICIAL NATURE OF OUTSTANDING
BENEFICIAL OWNER OWNERSHIP BENEFICIAL OWNERSHIP SHARES
- ---------------- --------- -------------------- -----------
<S> <C> <C> <C>
Dale W. Koop 1,160 shares Sole voting and investment power 0.30%
0 shares Shared voting and investment power --
Neil A. Gardner 0 shares Sole voting and investment power --
10 shares Shared voting and investment power .003%
Douglas A. DeCamp 1,000 shares Sole voting and investment power 0.26%
0 shares Shared voting and investment power --
-12-
<PAGE>
Thomas J. Bellgraph 1,060 shares Sole voting and investment power 0.27%
0 shares Shared voting and investment power --
All directors and 41,429 shares Sole voting and investment power 10.57%
executive officers 4,502 shares Shared voting and investment power 1.15%
as group
- ---------------------
<FN>
<F1> This number does not include shares held by SAMCO, Inc., of which
Mr. Johnson is a vice president, secretary and minority shareholder. The
shares set forth in the row entitled "Shared voting and investment power"
are shares owned by Mr. Johnson's spouse individually.
<F2> This number includes 2,017 shares held by Mr. Johnson's spouse in
trust for the benefit of their daughter, as well as 1,700 shares held by
Mr. Johnson's spouse individually. Mr. Johnson disclaims beneficial
ownership of those shares. This number does not include shares held by
SAMCO, Inc., of which Mr. Johnson is a vice president, treasurer and
minority shareholder.
</FN>
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows certain information concerning each
director, nominee for director and executive officer, supplied by them as
of December 31, 1997:
<TABLE>
NOMINEE TO BE ELECTED FOR A THREE-YEAR
--------------------------------------
TERM EXPIRING IN 2001
---------------------
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE OR EMPLOYMENT <F1> SINCE <F2>
- ------------ ------------------- ----------
<S> <C> <C>
Neil A. Gardner Executive Vice President of Hastings City Bank, 1983
Age 51 Hastings, Michigan, a financial institution
(since 1976)
</TABLE>
-13-
<PAGE>
<TABLE>
INCUMBENT DIRECTORS
-------------------
TERMS EXPIRING IN 2000
----------------------
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE OR EMPLOYMENT <F1> SINCE <F2>
- ------------ ------------------ ----------
<S> <C> <C>
Mark R. S. Johnson Co-CEO/President-Marketing (since 1994) 1977
Age 50 and Executive Vice President-Marketing
(1986-1994) of Hastings
Dale W. Koop Vice President-Engineering of Hastings 1982
Age 59 (since 1982)
Douglas A. DeCamp President/CEO FHI, Inc. (formerly Flexfab, Inc.), 1984
Age 60 a producer of aircraft hosing and
fiberglass products (since 1984)
</TABLE>
<TABLE>
INCUMBENT DIRECTORS
-------------------
TERMS EXPIRING IN 1999
----------------------
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE OR EMPLOYMENT <F1> SINCE <F2>
- ------------ ------------------ ----------
<S> <C> <C>
Andrew F. Johnson Co-CEO/President-Operations 1977
Age 48 (since 1994)
and Executive Vice President-Operations
(1986-1994) of Hastings
William R. Cook President of Pidgas, Inc. 1977
Age 56 Hastings, Michigan
(since 1975)
Monty C. Bennett Vice President-Employee Relations 1982
Age 60 (since 1986) and Secretary
(since 1982) of Hastings
Richard L. Foster Retired; Production Control Manager of 1984
Age 70 Hastings (1987-1988)
</TABLE>
-14-
<PAGE>
<TABLE>
EXECUTIVE OFFICERS
WHO ARE NOT DIRECTORS
---------------------
<CAPTION>
NAME AND AGE POSITIONS WITH HASTINGS
- ------------ -----------------------
<S> <C>
Thomas J. Bellgraph Vice President - Finance
Age 46 (since January 1996) and Treasurer (since 1986)
Stephen G. Uhen<F3> Vice President of Information
Age 49 Services (since December 1997)
- ---------------------
<FN>
<F1> Except as noted, each person listed above has been engaged in the
same principal occupation for more than five years.
<F2> No director or nominee for director is the director of any
company that has a class of equity securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or is subject to
Section 15(d) of that Act or any company registered as an investment
company under the Investment Company Act of 1940.
<F3> Mr. Uhen served as the Company's Information Services Manager
from November 1995 through December 1997. From 1988 through 1995, Mr. Uhen
served as Systems Programs Manager of the Company.
</FN>
</TABLE>
There are no family relationships (closer than first cousin) between
any of the above-named persons, except that Mark R. S. Johnson and Andrew
F. Johnson are brothers.
ORGANIZATION OF THE BOARD OF DIRECTORS
The Hastings Board of Directors does not have a standing committee for
nominating individuals for election as directors. The Hastings Board of
Directors selects its nominees for election to the new Board of Directors at
its first meeting each year in either January or February. The Hastings
Board of Directors will consider nominees recommended by shareholders
provided that such nominations are sent to the Secretary of Hastings on or
prior to December 1 of the year preceding the Annual Meeting of
Shareholders. Any such nominations should be in writing and state the
name, age and address of the nominee, his or her educational and employment
background, his or her present employment and a full and complete statement
as to the qualifications of the nominee to serve as a director. The Board
-15-
<PAGE>
of Directors will not consider any nomination which does not provide this
information. If a shareholder intends to make a nomination at the Annual
Meeting of Shareholders, he or she must deliver a notice to the Secretary
of the corporation setting forth certain information concerning the proposed
nominee, as described in Hastings' Bylaws, at least 120 days prior to the
date of the notice of the meeting.
The Hastings Board of Directors has a standing Audit Committee
composed of William R. Cook (Chairman), Neil A. Gardner, Mark R. S.
Johnson, Douglas A. DeCamp and Richard L. Foster. The function of the
Audit Committee is to recommend independent auditors to the Board of
Directors for the annual audit of Hastings and its subsidiaries and to
discuss the results of the audit with the independent auditors. The Audit
Committee is responsible for causing suitable examinations of the financial
records and operations of Hastings and its subsidiaries to be performed by
the internal auditor and for reviewing internal controls to insure the
objectivity of Hastings' financial statements. During 1997, the Audit
Committee met two times.
The Hastings Board of Directors has a standing Compensation
Committee composed of the following outside directors: William R. Cook,
Douglas A. DeCamp and Neil A. Gardner. The function of the Compensation
Committee is to determine if director and officer compensation by Hastings
is comparable to industry standards and to make appropriate recommendations
to the Board of Directors. The Compensation Committee met two times in
1997.
On December 12, 1995 the Board of Directors established a
Strategic Planning Committee. The function of the Strategic Planning
Committee is to consider and develop strategic policies and proposals
intended to enhance shareholder value in the long or short term and to make
recommendations to the Board of Directors with respect to any such policy
or proposal. The Committee has discretionary authority to review and
negotiate any sale or merger proposal received by Hastings and to make
recommendations to the Board of Directors with respect to any such
proposal. The members of the Committee may only consist of members of the
Board of Directors who are not and have not for a five-year period been
officers or employees of Hastings. The current members of the Committee
are William R. Cook, Richard L. Foster and Neil A. Gardner. The Strategic
Planning Committee did not meet in 1997.
During 1997, there were seven meetings of the Board of Directors.
All incumbent directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and meetings of Committees on which they
served during the year.
-16-
<PAGE>
COMPENSATION OF DIRECTORS
All directors who are not full-time employees of Hastings are
paid a fee of $675 for each regular or special meeting of the Board of
Directors and $675 for each committee meeting attended by the director.
Directors who are full-time employees do not receive additional
compensation.
EXECUTIVE COMPENSATION
Compensation on an accrual basis during 1997, 1996 and 1995, for
the Co-Chief Executive Officers of Hastings and for the four most highly
compensated executive officers, other than the Co-Chief Executive Officers,
who earned over $100,000 in salary and bonus in 1997 (the "named executive
officers") is set forth together with certain other information in the
following table. The executive officers of Hastings are appointed annually
by and serve at the pleasure of the Board of Directors.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------- --------------------------------------
AWARDS
--------------------------------------
NAME AND PRINCIPAL RESTRICTED SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS STOCK AWARDS<F1> OPTIONS<F2> COMPENSATION<F3>
- ---------------------- ---- ------ ----- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mark R.S. Johnson 1997 $192,000 $35,887 $6,023 750 $12,099
Co-Chief Executive Officer 1996 192,000 0 9,365 9,266
President-Marketing 1995 192,000 0 0 9,254
Andrew F. Johnson 1997 $192,000 $35,887 $6,023 750 $12,099
Co-Chief Executive Officer 1996 192,000 0 9,365 11,010
President-Operations 1995 192,000 0 0 10,944
Dale W. Koop 1997 $102,120 $ 9,912 $3,422 400 $ 7,273
Vice President- 1996 101,610 0 5,749 7,284
Engineering 1995 100,080 0 0 7,155
Don L. Sander 1997 $116,458 $11,364 $ 0 0 5,395
Vice-President
Manufacturing
-17-
<PAGE>
Monty C. Bennett 1997 $ 94,320 $ 9,228 $3,422 400 6,615
Vice-President 1996 93,420 0 5,749 6,593
Employee Relations 1995 99,792 0 0 6,982
Thomas J. Bellgraph 1997 $ 93,600 $ 9,143 $3,422 400 $ 4,682
Vice President-Finance 1996 93,600 0 5,749 5,204
1995 94,777 0 0 6,737
- -----------------------
<FN>
<F1> The values of restricted stock awards reported in this column are
calculated using the closing market price of Common Stock on the date
of grant. As of the end of Hastings' 1997 fiscal year, each of the
named executive officers (except for Mr. Sander) held shares of
restricted stock. Dividends will be paid on shares of restricted stock
at the same rate dividends are paid on Common Stock. The number of
shares of restricted stock held by each named individual and the
aggregate value of those shares (as represented by the closing price
of Common Stock on December 31, 1997, which was $40.00 per share) at
the end of the Company's 1997 fiscal year, without giving effect to
the diminution of value attributable to the restrictions on the stock,
are set forth below:
NUMBER AGGREGATE
OF SHARES VALUE
--------- ---------
Mark R. S. Johnson 1,240 $49,600
Andrew F. Johnson 1,240 49,600
Dale W. Koop 760 30,400
Don L. Sander 0 0
Monty C. Bennett 760 30,400
Thomas J. Bellgraph 760 30,400
See "COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION--
Restricted Stock Plan" for information concerning the vesting of
shares awarded under the Restricted Stock Plan. Performance goals
under the Restricted Stock Plan were not met in either 1996 or 1995.
<F2> The options reflected in this column were granted subject to
shareholder approval of the Plan.
<F3> All other compensation includes: (a) Company matching contributions
under the Hastings Savings Plan and (b) Company profit-sharing
contributions to the Hastings Savings Plan. The amounts included for
each factor in 1997 are:
-18-
<PAGE>
(A) (B)
------- -------
Mark R. S. Johnson 3,800 8,299
Andrew F. Johnson 3,800 8,299
Dale W. Koop 2,280 4,993
Don L. Sander 2,795 2,600
Monty C. Bennett 2,264 4,351
Thomas J. Bellgraph 374 4,308
</FN>
</TABLE>
STOCK OPTIONS
As mentioned above, in December 1997, the Compensation Committee
approved grants of options to certain individuals, subject to shareholder
approval of the Plan at the Annual Meeting. If the Plan is not approved by
the Company's shareholders, the following options will be rescinded. No
other options were granted to the following persons in 1997.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED POTENTIAL REALIZABLE VALUE AT
UNDERLYING OPTIONS TO EMPLOYEES IN ASSUMED ANNUAL RATES OF STOCK
NAME GRANTED FISCAL YEAR<F1> EXERCISE PRICE EXPIRATION DATE PRICE APPRECIATION FOR OPTION TERM
---- -------------------- ---------------- -------------- --------------- ----------------------------------
5% 10%
----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mark R. S. Johnson 750 14.6% $40.25 12/18/07 $18,983 $48,113
Andrew F. Johnson 750 14.6% $40.25 12/18/07 $18,983 $48,113
Dale W. Koop 400 7.8% $40.25 12/18/07 $10,124 $25,660
Don L. Sander 0 0.0% N/A N/A N/A N/A
Monty C. Bennett 400 7.8% $40.25 12/18/07 $10,124 $25,660
Thomas J. Bellgraph 400 7.8% $40.25 12/18/07 $10,124 $25,660
- --------------------
<FN>
<F1> The percentages in this column were based on options to purchase a
total of 5,125 shares, which excludes 900 shares granted to non-
employee directors.
</FN>
</TABLE>
-19-
<PAGE>
<TABLE>
FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END<F1>
--------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mark R. S. Johnson 0 750 $ 0 $ 0
Andrew F. Johnson 0 750 $ 0 $ 0
Dale W. Koop 0 400 $ 0 $ 0
Don L. Sander 0 0 $ 0 $ 0
Monty C. Bennett 0 400 $ 0 $ 0
Thomas J. Bellgraph 0 400 $ 0 $ 0
- ----------------------
<FN>
<F1> None of the foregoing options are considered "in the money" because
the exercise price ($40.25) was higher than the market value as of
December 31, 1997 ($40.00).
</FN>
</TABLE>
DEFERRED COMPENSATION
On June 1, 1986, Hastings adopted a defined contribution 401(k)
profit-sharing plan known as the Hastings Savings Plan. This plan is
administered by Hastings and is available to all salaried employees.
Individual accounts are maintained for contributions made on behalf of each
employee and each employee has a choice of investment options as to the
balance in his or her account. There are four types of contributions to
the plan: (1) an employee can make a voluntary contribution of the
employee's compensation which is deducted by Hastings from the employee's
normal compensation (legal limitations may restrict the maximum voluntary
contribution by an employee in any year); (2) Hastings makes matching
contributions equal to 40 percent of the amount of an employee's voluntary
contribution, but only on the first 6 percent of an employee's
compensation; (3) annually, from net profits, Hastings contributes for each
employee an amount equal to 3 percent of the employee's compensation, plus
1 percent of the employee's compensation in excess of 25 percent of the
social security wage base, plus 2 percent of the employee's compensation in
excess of 75 percent of the social security wage base; and (4) Hastings may
-20-
<PAGE>
make discretionary contributions, from net profits, which are allocated
among the participants based on the employee's annual compensation compared
to total annual compensation of all employees. Benefits are payable at age
65 (normal retirement) or upon total disability, death or early employment
termination. There are vesting requirements for Hastings' profit-sharing
and discretionary contributions (but not for an employee's voluntary or
Hastings' matching contributions). For employees who became participants
prior to January 1, 1989, the vesting schedule is 40 percent vesting after
4 years of service, with 100 percent vesting after 5 years of service. For
employees who became participants on or after January 1, 1989, the vesting
schedule is 100 percent after 5 years of service.
STOCK PERFORMANCE
The following graph compares the cumulative total shareholder
return on Hastings Common Stock to the AMEX Market Index and Peer Group
Index. The AMEX Market Index is a broad equity market index published by
the American Stock Exchange. The Peer Group Index is based upon the
cumulative total shareholder return on the common stock issued by the
selected companies in the automotive parts and accessories industry
identified in Note (1) below. The returns of each member of the Peer Group
are weighted according to the respective issuer stock market capitalization
at the beginning of each period for which a return is indicated. Both
indices assume dividend reinvestment. Cumulative total return is measured
by dividing (i) the sum of (a) the cumulative amount of dividends for the
measurement period, assuming dividend reinvestment, and (b) the difference
between the share price at the end and the beginning of the measurement
period, by (ii) the share price at the beginning of the measurement period.
The information in this Section entitled "Stock Performance" is not
incorporated by reference in the Company's Annual Report on Form 10-K or in
any other filings under the Securities Exchange Act of 1934.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN
[GRAPH]
(Assumes $100 Invested on January 1, 1992 and Reinvestment of Dividends)
-21-
<PAGE>
The table below shows dollar values for cumulative total shareholder
return plotted in the graph above.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Hastings $ 100.00 98.17 70.23 67.92 82.73 135.10
AMEX Market Index $ 100.00 140.93 121.63 129.85 163.65 208.93
Peer Group Index<F1> $ 100.00 118.81 104.95 135.28 142.74 171.76
- ------------------------
<FN>
<F1> The companies used to create the Peer Group Index are as follows:
Aftermarket Technology Corp.; Amerigon Incorporated; Arvin Industries,
Inc.; Asha Corporation; Autoliv, Inc.; Barnes Group Inc.; Bonded Motors,
Inc.; Borg Warner Automotive, Inc.; Boyds Wheels, Inc.; Breed Technologies,
Inc.; Collins Industries, Inc.; The Colonel's International, Inc.; Crager
Industries, Inc.; Dana Corp. Defiance, Inc.; Deflecta-Shield Corporation;
Delco Remy International, Inc.; Desc, S.A. de C.V.; Detroit Diesel
Corporation; Donaldson Company, Inc.; Durakon Industries, Inc.; Eaton
Corporation; Echlin Inc.; Edelbrock Corporation; Excel Industries, Inc.;
Federal-Mogul Corporation; Gentex Corporation; Glas-Aire Industries Group
Ltd.; Hastings Manufacturing Company; Hayes Lemmerz International, Inc.;
Hayes Wheels International, Inc.; Hilite Industries, Inc.; Impco
Technologies, Inc.; Jason Inc.; JPE Inc.; Kroll-O'Gara Co.; Lund
International Holdings, Inc.; Magna International Incorporated; MascoTech,
Inc.; Memtec Ltd.; Meritor Automotive, Inc.; Modine Manufacturing Company;
Monro Muffler Brake, Inc.; Motorcar Parts & Accessories, Inc.; Noble
International, Ltd.; Orbital Engine Corp. Ltd.; R & B Inc.; Safety
Components International, Inc.; Schawk, Inc.; Simpson Industries, Inc.; A O
Smith Corp.; Smith AO Corp CL A; Sparton Corporation; SPX Corporation; SRS
Labs, Inc.; Standard Motor Products, Inc.; The Standard Products Company;
Stoneridge Inc.; Superior Industries International, Inc.; Tesma
International Incorporated; Top Source Technologies, Inc.; Transpro, Inc.;
TRW Inc.; Turbodyne Technologies Inc.; Universal Manufacturing Co.; Unova,
Inc.; U S Automotive Manufacturing Inc.; Valley Forge Corporation; Wescast
Industries, Inc.; Westinghouse Air Brake Company; Williams Controls, Inc.;
and Wynn's International, Inc.
</FN>
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION <F2>
The Company's executive compensation policy is formulated and
recommended to the Board by the Compensation Committee of the Board of
Directors. The Compensation Committee also administers the Company's
-22-
<PAGE>
compensation plans. The Compensation Committee evaluates annual salaries
and incentive compensation plans for the executive officers and recommends
the salaries and compensation to the Board. The Board of Directors makes
the final decision on whether to adopt the Compensation Committee's
recommendations.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Compensation Committee's executive compensation philosophy is
intended to provide competitive levels of compensation, "tie" or "couple"
officers' compensation with the achievement of the Company's performance
objectives, reward good corporate performance, recognize individual
achievement and allow the Company to attract and retain quality executive
officers. The Compensation Committee's compensation policy provides that a
significant portion of the annual compensation of each executive officer
must relate to, and be contingent upon, the performance of the Company.
The Compensation Committee believes that this policy enhances shareholder
value by rewarding executive officers for profitable growth of the Company.
Section 162(m) of the Internal Revenue Code includes potential
limitations on the deductibility of compensation in excess of $1 million
paid to certain executive officers. The Company has examined its executive
compensation policies in light of Section 162(m) and will continue to
assess the impact of Section 162(m) and take action to assure that
appropriate levels of deductibility are maintained. It is not expected
that any portion of the Company's deduction for employee remunerations will
be disallowed in 1998.
Compensation for executive officers, including the Co-Chief Executive
Officers, is comprised of three primary components: base salary, an annual
incentive bonus and awards of restricted stock. Executive officers also
receive various fringe benefits that are offered to other employees
including health and life insurance benefits and Company contributions to
their Hastings Savings Plan accounts.
BASE SALARY
The Company seeks to attract and retain executives by providing base
salaries that are generally competitive with salaries paid for comparable
positions with companies of similar general type and size in the
marketplace. The Company obtains comparable salary information through
various surveys. The skill and experience required by the position, job
performance, accountability, length of service and current economic
conditions also affect what an officer earns as a base salary.
In general, the Company reviews the base salary of executive officers
on an annual basis. Annual salary adjustments are determined by evaluating
comparable salaries for executives at other companies, the job performance
of the officer and any increase in responsibilities of the officer.
-23-
<PAGE>
ANNUAL CASH INCENTIVE BONUS
The Company's executive officers may receive an annual cash incentive
bonus which is based on the Company's operating performance and
consolidated net income before income tax expense.
RESTRICTED STOCK PLAN
The Company also provides executive officers and certain other key
employees of the Company with incentives to increase the long-term
profitability of the Company by a restricted stock plan that was
established in 1990 (the "Restricted Stock Plan"). The Compensation
Committee believes that the Restricted Stock Plan helps to align the
interests of the Company's executive officers and key employees with those
of the Company and its shareholders by encouraging and promoting stock
ownership by management. The Compensation Committee believes that the
Restricted Stock Plan will result in better long-term performance for the
Company and its shareholders. The Company currently has no target
ownership level for equity holdings by officers.
The Restricted Stock Plan is administered by a committee (the "RSP
Committee"), consisting of three outside directors who are not eligible to
participate in the Restricted Stock Plan. Every award of Common Stock
under the Restricted Stock Plan will be subject to two types of
restriction. The first restriction is based on a continuation of
employment for five years (except in the case of retirement with prior
approval, death or disability); otherwise, the recipient forfeits the
unvested portion of any restricted stock held by him or her. Second, a
portion of each award of restricted stock is also tied to achievement of
certain performance goals established by the RSP Committee. The
performance goals may be company-wide, subsidiary-wide or division-wide or
tailored to the individual recipient. The performance goals have generally
been based on the annual net income per share performance of the Company or
the ratio of pre-tax income to net sales.
If the Company meets or exceeds the performance goals for a particular
year, then the recipient will become the owner of 20% of his or her
restricted stock award. If the Company (or the individual, if applicable)
fails to meet the performance goals, then the recipient will forfeit all
interest in 20% of his or her restricted stock award. In other words, as
long as the Company (or the individual, if applicable) meets the
performance goals, then the recipient may keep the shares of stock awarded
to him or her under the Plan.
All recommendations of the Compensation Committee relating to 1997
compensation were unanimously approved by the Board of Directors without
modification.
-24-
<PAGE>
Respectfully submitted,
William R. Cook
Douglas A. DeCamp
Neil A. Gardner
- -----------------------------
[FN]
<F2> The information in this Section entitled "Compensation Committee
Report on Executive Compensation" is not incorporated by reference in the
Company's Annual Report on Form 10-K or in any other filing under the
Securities Exchange Act of 1934.
</FN>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors were members of the Compensation Committee
during 1997: William R. Cook; Douglas A. DeCamp; and Neil A. Gardner.
During 1997 Andrew F. Johnson, Co-CEO and President-Operations of Hastings,
served as a director of Hastings City Bank, of which Neil A. Gardner is a
Executive Vice President.
INDEPENDENT AUDITORS
The Board of Directors has selected the firm of BDO Seidman, LLP,
Grand Rapids, Michigan, as independent auditors to audit the consolidated
financial statements of Hastings and its subsidiaries for the fiscal year
ending December 31, 1997. BDO Seidman has served as independent auditors
for Hastings since August 18, 1971. A representative of BDO Seidman is
expected to attend the Annual Meeting of Shareholders on May 5, 1998. The
representative will have an opportunity to make a statement if he or she so
desires and is expected to be available to respond to appropriate questions
from shareholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
Hastings' directors and officers and individuals who beneficially own more
than 10 percent of the outstanding shares of Hastings Common Stock to file
reports with the Securities and Exchange Commission concerning their
beneficial ownership and changes in their ownership of shares of Hastings
Common Stock. Such persons are required by Securities and Exchange
Commission regulations to furnish to Hastings copies of all Section 16(a)
reports they file.
Based on its review of the copies of such reports received by it or
written representations from certain reporting persons that no Forms 5 were
-25-
<PAGE>
required for those persons, Hastings believes that, with the following
exceptions, from January 1 through December 31, 1997, all Section 16
reporting and filing requirements were fulfilled.
Under the Company's Restricted Stock Plan, certain officers of the
Company have received grants of Common Stock. These grants were required
to be reported on Form 5 for the year in which they were granted. However,
Mark R. S. Johnson, Andrew F. Johnson, Dale W. Koop, Monty C. Bennett and
Thomas J. Bellgraph filed Forms 5 reporting grants of restricted Common
Stock for the years of the grants late, under the assumption that these
grants were not required to be reported until the year in which the
restrictions on the shares of Common Stock lapsed. On April 6, 1998, all
of the officers filed forms setting forth these grants. In addition,
Stephen G. Uhen, did not file a Form 3 upon his December 1997 appointment
to the executive officer position of Vice President of Information Services
of the Company. In April 1998, Mr. Uhen filed this form.
SHAREHOLDER PROPOSALS
Any proposal that a Hastings shareholder intends to present at the
Annual Meeting of Shareholders to be held in 1999 must be received by
Hastings at its principal office not later than December 11, 1998, to be
considered for inclusion in its proxy statement and form of proxy relating
to that meeting. Proposals of shareholders should be made in accordance
with Securities and Exchange Commission Rule 14a-8.
OTHER BUSINESS
The Hastings Board of Directors is not aware of any other matters that
may be presented to the shareholders for formal action at the meeting. If,
however, any other matters properly come before the meeting or any
adjournment thereof, it is the intention of the persons named in the
enclosed Proxy to vote such Proxy in accordance with their best judgment on
such matters.
-26-
<PAGE>
SOLICITATION OF PROXIES
The cost of soliciting Proxies will be borne by Hastings.
Solicitation of Proxies will be made initially by mail. Directors,
officers and employees of Hastings may solicit, without additional
compensation, Proxies in person or by telephone, telegram or oral
communication. In addition, banks, brokerage firms and other custodians,
nominees and fiduciaries may communicate with and forward soliciting
materials to beneficial owners of shares held by them to obtain
authorization for execution of Proxies and may be reimbursed by Hastings
for reasonable expenses incurred in sending proxy materials to those
beneficial holders.
It is important that your shares be represented at the meeting. To
assure your representation, please complete, date, sign and return promptly
your proxy in the enclosed postage prepaid envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Monty C. Bennett
MONTY C. BENNETT
Secretary
-27-
<PAGE>
APPENDIX A
HASTINGS MANUFACTURING COMPANY
STOCK OPTION AND RESTRICTED STOCK PLAN OF 1997
SECTION 1
ESTABLISHMENT OF PLAN; PURPOSE OF PLAN
1.1 ESTABLISHMENT OF PLAN. The Company hereby establishes the Stock
Option and Restricted Stock Plan of 1997 (the "Plan") for its directors,
corporate and Subsidiary officers and other key employees. The Plan
permits the grant or award of Options, Restricted Stock, and Tax Benefit
Rights.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to provide
directors, officers and key employees of the Company and its Subsidiaries
with an increased incentive to make significant contributions to the
long-term performance and growth of the Company and its Subsidiaries, to
join the interests of directors, officers and key employees with the
interests of the Company's shareholders through the opportunity for
increased stock ownership, and to attract and retain officers and key
employees. The Plan is further intended to provide flexibility to the
Company in structuring long-term incentive compensation to best promote the
foregoing objectives.
SECTION 2
DEFINITIONS
The following words have the following meanings unless a different
meaning is plainly required by the context:
2.1 "Act" means the Securities Exchange Act of 1934, as amended.
2.2 "Board" means the Board of Directors of the Company.
2.3 Unless otherwise defined in the grant or agreement applicable to
an Incentive Award, "Change in Control" means:
(a) the sale, lease, exchange, or other transfer of
substantially all the assets of the Company (in one transaction
or in a series of related transactions) to, or the merger or
consolidation of the Company with, a corporation that is not
controlled by the Company; or
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(b) a change in control of the Company of a nature that
would be required to be reported in a response to Item 6(e) of
Schedule 14A of Regulation 14A issued under the Act, provided
that, without limitation, such change in control shall be deemed
to have occurred if (i) any "person" (as such term is used in
Section 13(d) and 14(d)(2) of the Act) is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding
securities, or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board cease for any reason to constitute at least a majority of
the Board (unless the election or nomination for election by the
Company's shareholders of each new director was approved by a
vote of at least two-thirds (2/3) of the directors then still in
office who were directors at the beginning of the period).
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means a committee the Board shall designate to
administer the Plan. The Committee shall consist of at least two members
of the Board appointed by the Board, all of whom shall be "Non-Employee
Directors" (as defined below). The Board, in its discretion, may also
require that members of the Committee be "outside directors" as defined in
the rules issued under Section 162(m) of the Code.
2.6 "Common Stock" means the Common Stock of the Company.
2.7 "Company" means Hastings Manufacturing Company, a Michigan
corporation, and its predecessors.
2.8 "Competition" means participation, directly or indirectly, in the
ownership, management, financing or control of any business that is the
same as or similar to the present or future businesses of the Company or
any Subsidiary. Such participation may be by way of employment, consulting
services, directorship, or officership. Ownership of less than three
percent (3%) of the shares of any corporation whose shares are traded
publicly on any national or regional stock exchange or over the counter
shall not be deemed Competition.
2.9 "Consensual Severance" means the voluntary termination of all
employment by the Participant with the Company or any of its Subsidiaries
that the Committee determines to be in the best interests of the Company.
2.10 "Early Retirement" means the voluntary termination of all
employment by a Participant with the written consent of the Committee after
the Participant has attained 55 years of age and completed 10 years of
service with the Company or any of its Subsidiaries.
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2.11 "Incentive Award" means the award or grant of an Option,
Restricted Stock, or Tax Benefit Right to a Participant under the Plan.
2.12 "Market Value" of any security on any given date means if the
security is listed for trading on The Nasdaq Stock Market or one or more
national securities exchanges, the last reported sales price on the date in
question, or if such security shall not have been traded on such principal
exchange on such date, the last reported sales price on the first day prior
thereto on which such security was so traded; or if that is not applicable,
the value as determined by any means deemed fair and reasonable by the
Committee, which determination shall be final and binding on all parties.
2.13 "Non-Employee Director" shall have the meaning set forth in Rule
16b-3 under the Act as in effect from time to time.
2.14 "Normal Retirement" means the voluntary termination of all
employment by a Participant after the Participant has attained 62 years of
age, or such other age as shall be determined by the Committee in its sole
discretion or as otherwise may be set forth in the Incentive Award
agreement or other grant document with respect to a Participant and a
particular Incentive Award.
2.15 "Option" means the right to purchase Common Stock at a stated
price for a specified period of time.
2.16 "Participant" means the directors, officers and other key
employees of the Company and its Subsidiaries who are granted an Incentive
Award under the Plan.
2.17 "Restricted Period" means the period of time during which
Restricted Stock awarded under the Plan is subject to restrictions. The
Restricted Period may differ among Participants and may have different
expiration dates with respect to shares of Common Stock covered by the same
Incentive Award.
2.18 "Restricted Stock" means Common Stock awarded to a Participant
under Section 6 of the Plan.
2.19 "Subsidiary" means any corporation or other entity of which fifty
percent (50%) or more of the outstanding voting stock or voting ownership
interest is directly or indirectly owned or controlled by the Company, or
by one or more Subsidiaries of the Company.
2.20 "Tax Benefit Right" means any right granted to a Participant
under Section 7 of the Plan.
2.21 "Total Disability" means that the Participant, for physical or
mental reasons, is unable to perform the essential functions of his or her
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duties for the Company for 120 consecutive days, or 180 days during any
twelve month period.
SECTION 3
ADMINISTRATION
3.1 POWER AND AUTHORITY. The Committee shall administer the Plan.
Except as limited in this Plan, the Committee shall have full power and
authority to interpret the provisions of the Plan and Incentive Awards
granted under the Plan, to supervise the administration of the Plan and the
Incentive Awards granted under the Plan and to make all other
determinations considered necessary or advisable under the Plan. All
determinations, interpretations and selections made by the Committee
regarding the Plan shall be final and conclusive. The Committee shall hold
its meetings at such times and places as it deems advisable. Action may be
taken by a written instrument signed by all of the members of the
Committee, and any action so taken shall be fully as effective as if it had
been taken at a meeting duly called and held. The Committee may delegate
recordkeeping, calculation, payment, and other ministerial administrative
functions to individuals designated by the Committee, who may be employees
of the Company or its Subsidiaries.
3.2 GRANTS OR AWARDS TO PARTICIPANTS. In accordance with and subject
to the provisions of the Plan, the Committee shall have the authority to
determine all provisions of Incentive Awards as the Committee may deem
necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the authority to: (a) determine whether and
when Incentive Awards will be granted, the persons to be granted Incentive
Awards, the amount of Incentive Awards to be granted to each person and the
terms of the Incentive Awards to be granted; (b) determine and amend
vesting schedules, if any; (c) permit delivery or withholding of stock in
payment of the exercise price or to satisfy tax withholding obligations;
and (d) waive any restrictions or conditions applicable to any Incentive
Award. Incentive Awards shall be granted or awarded by the Committee, and
Incentive Awards may be amended by the Committee consistent with the Plan,
provided that no such amendment may become effective without the consent of
the Participant, except to the extent that the amendment operates solely to
the benefit of the Participant.
3.3 INDEMNIFICATION OF COMMITTEE MEMBERS. Neither any member or
former member of the Committee nor any individual to whom authority is or
has been delegated shall be personally responsible or liable for any act or
omission in connection with the performance of powers or duties or the
exercise of discretion or judgment in the administration and implementation
of the Plan. Each person who is or shall have been a member of the
Committee shall be indemnified and held harmless by the Company from and
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against any cost, liability or expense imposed or incurred in connection
with such person's or the Committee's taking or failing to take any action
under the Plan. Each such person shall be justified in relying on
information furnished in connection with the Plan's administration by any
appropriate person or persons.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
4.3 of the Plan, a maximum of 19,000 shares of Common Stock shall be
available for Incentive Awards under the Plan. Such shares may be
authorized but unissued shares.
4.2 LIMITATION UPON INCENTIVE AWARDS. No Participant shall be
granted, during any calendar year, Incentive Awards with respect to more
than 10% of the total number of shares of Common Stock available for
Incentive Awards under the Plan set forth in Section 4.1 of the Plan,
subject to adjustment as provided in Section 4.3 of the Plan.
4.3 ADJUSTMENTS. If the number of shares of Common Stock outstanding
changes by reason of a stock dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares or any other change
in the corporate structure or shares of the Company, the aggregate number
and class of shares available for grants or awards under the Plan, together
with the Option prices, award limits and other appropriate terms of this
Plan, shall be appropriately adjusted. No fractional shares shall be
issued pursuant to the Plan, and any fractional shares resulting from
adjustments shall be eliminated from the respective Incentive Award, with
an appropriate cash adjustment for the value of any Incentive Awards
eliminated. If an Incentive Award is canceled, surrendered, modified,
expires or is terminated during the term of the Plan but prior to the
exercise or vesting of the Incentive Award in full, the shares subject to
but not purchased or retained by the Participant under such Incentive Award
shall be available for other Incentive Awards. If shares subject to and
otherwise deliverable upon the exercise of an Incentive Award are
surrendered to the Company in connection with the exercise or vesting of an
Incentive Award, the surrendered shares subject to the Incentive Award
shall be available for other Incentive Awards.
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SECTION 5
OPTIONS
5.1 GRANT.
(a) OFFICERS AND EMPLOYEES. Except as set forth below for Non-
Employee Directors, a Participant may be granted one or more Options
under the Plan. Options shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as shall
be determined by the Committee in its sole discretion. The Committee
may vary, among Participants and among Options granted to the same
Participant, any and all of the terms and conditions of the Options
granted under the Plan. Subject to the limitation imposed by
Section 4.2 of the Plan, the Committee shall have complete discretion
in determining the number of Options granted to each Participant. The
Committee may designate whether or not an Option is to be considered
an incentive stock option as defined in Section 422(b) of the Code.
(b) NON-EMPLOYEE DIRECTORS. Subject to the limitation imposed
by Section 4.2 and the adjustments imposed by Section 4.3, an Option
to purchase 100 shares of Common Stock shall be granted automatically
on the date of the Company's 1998 Annual Meeting of shareholders and
the date of each annual meeting thereafter to each director of the
Company who is, at the close of each such annual meeting, a Non-
Employee Director. In addition, each Non-Employee Director shall at
the time of his or her initial election or appointment be granted a
Stock Option to purchase 100 shares of Common Stock. The Options
shall be granted at an option price equal to the fair market value of
the Common Stock at the date of grant of the option and shall be
subject to such terms and conditions, consistent with the other
provisions of the Plan, as may be determined by the Committee in its
sole discretion. Options granted to Non-Employee Directors shall not
be treated as incentive stock options under Section 422(b) of the
Code.
5.2 OPTION AGREEMENTS. Each Option shall be evidenced by an Option
agreement containing such terms and conditions, consistent with the
provisions of the Plan, as the Committee from time to time determines. To
the extent not covered by the Option agreement, the terms and conditions of
this Section 5 shall govern.
5.3 OPTION PRICE. The per share Option price shall be determined by
the Committee. The per Share Option Price of any Option intended to qualify
as an incentive stock option under Section 422(b) of the Code shall be
equal to or greater than 100% of the Market Value on the date of grant.
The date of grant of an Option shall be the date the Option is authorized
by the Committee or a future date specified by the Committee as the date
for issuing the Option.
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5.4 MEDIUM AND TIME OF PAYMENT. The exercise price for each share
purchased pursuant to an Option granted under the Plan shall be payable in
cash or, if the Committee consents, in shares of Common Stock (including
Common Stock to be received upon a simultaneous exercise). The time and
terms of payment may be amended before or after exercise of an Option (a)
by the Committee in its sole discretion, if the terms of such amendment are
more favorable to the Participant, or (b) in all other cases, by the
Committee with the consent of the Participant. The Committee may from time
to time authorize payment of all or a portion of the Option price in the
form of a promissory note or installments according to such terms as the
Committee may approve. The Board may restrict or suspend the power of the
Committee to permit such loans and may require that adequate security be
provided.
5.5 OPTIONS GRANTED TO TEN PERCENT SHAREHOLDERS. No Option granted
to any Participant who at the time of such grant owns, together with stock
attributed to such Participant under Section 424(d) of the Code, more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any of its Subsidiaries may be designated as an
incentive stock option, unless such Option provides an exercise price equal
to at least one hundred ten percent (110%) of the Market Value of the
Common Stock, and the exercise of the Option after the expiration of five
years from the date of grant of the Option is prohibited by its terms.
5.6 LIMITS ON EXERCISABILITY. Options shall be exercisable for such
periods as may be fixed by the Committee. Options intended to qualify as
incentive stock options shall have terms not to exceed ten years from the
grant date. The Committee may in its discretion require a Participant to
continue service with the Company and its Subsidiaries for a certain length
of time prior to an Option becoming exercisable and may eliminate such
delayed vesting provisions. The Committee may also vary, among
Participants and among Options granted to the same Participant, any and all
of the terms and conditions of Options granted under the Plan.
5.7 TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents or
unless the terms of the Option agreement provide otherwise, no
Option granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution.
(b) OTHER RESTRICTIONS. The Committee may impose such
restrictions on any shares of Common Stock acquired pursuant to
the exercise of an Option under the Plan as it deems advisable,
including, without limitation, restrictions intended to assure
compliance with applicable federal or state securities laws.
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5.8 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.
(a) GENERAL. If a Participant ceases to be employed by or a
director of the Company or one of its Subsidiaries for any reason
other than the Participant's death, Total Disability, termination
for cause, or any additional provision as determined by the
Committee, the Participant may exercise an Option for a period of
90 days after such termination of employment or directorship, but
only to the extent the Participant was entitled to exercise the
Option on the date of termination and would be entitled to
exercise the Option if employed at the date of exercise, unless
the Committee otherwise consents or the terms of the Option
agreement provide otherwise. For purposes of the Plan, the
following shall not be deemed a termination of employment: (i) a
transfer of employment among the Company and its Subsidiaries;
(ii) a leave of absence, duly authorized in writing by the
Company, for military service or for any other purpose approved
by the Company if the period of such leave does not exceed 90
days; (iii) a leave of absence in excess of 90 days, duly
authorized in writing by the Company, provided the employee's
right to reemployment is guaranteed either by statute or
contract; or (iv) a termination of employment with continued
service as an officer or director. For purposes of the Plan,
termination of employment shall be considered to occur on the
date on which the employee is no longer obligated to perform
services for the Company or any of its Subsidiaries and the
employee's right to reemployment is not guaranteed either by
statute or contract, regardless of whether the employee continues
to receive compensation from the Company or any of its
Subsidiaries after such date.
(b) DEATH. If a Participant dies either while an employee
or director of the Company or one of its Subsidiaries, or dies
after termination of employment or directorship other than for
cause and other than as a result of voluntary termination but
during the time when the Participant could have exercised an
Option under the Plan, the Option issued to such Participant
shall be exercisable by the personal representative of such
Participant or other successor to the interest of the Participant
for a period of one year after the Participant's death, but only
to the extent that the Participant was entitled to exercise the
Option on the date of death or termination of employment or
directorship, whichever first occurred, and would be entitled to
exercise the Option if employed at the date of exercise, unless
the Committee otherwise consents or the terms of the Option
agreement provide otherwise.
(c) TOTAL DISABILITY. If a Participant ceases to be an
employee or a director of the Company or one of its Subsidiaries
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due to the Participant's Total Disability, the Participant may
exercise an Option for a period of one year following such
termination of employment, but only to the extent the Participant
was entitled to exercise the Option on the date of such event,
unless the Committee otherwise consents or the terms of the
Option agreement provide otherwise.
(d) ADDITIONAL PROVISIONS IN OPTION AGREEMENTS. The
Committee may, in its sole discretion, provide by resolution or
by including provisions in any Option agreement entered into with
a Participant that the Participant may exercise any outstanding
options upon termination due to Early Retirement, Normal
Retirement or Consensual Severance for a period of time after
such termination as may be determined by the Committee, PROVIDED
that (i) such period may not extend beyond the earlier of three
(3) years after the date of termination or the date on which the
Options expire by their terms, (ii) the Participant may exercise
the Option only to the extent the Participant was entitled to
exercise the Option on the date of termination, and (iii) the
Participant shall have no further right to exercise any Options
after termination due to Early Retirement, Normal Retirement or
Consensual Severance if the Committee determines the Participant
has entered into Competition with the Company.
(e) VOLUNTARY TERMINATION. Except as provided in Section
5.8(d), if a Participant voluntarily terminates employment with
the Company or one of its Subsidiaries, the Participant shall
have no further right to exercise any Option previously granted
him, unless the terms of the Option Agreement provide otherwise.
(f) TERMINATION FOR CAUSE. If a Participant is terminated
for cause, the Participant shall have no further right to
exercise any outstanding unexercised Option issued under the
Plan.
(g) SUSPENSION OF EXERCISABILITY. If the Participant
receives notice from the Company that the Participant may be
terminated for cause, the Participant shall have no right to
exercise any Options previously granted for a period of sixty
days from the receipt of such notice. If the Participant is
terminated for cause within such sixty-day period, the
Participant shall have no further right to exercise any Option
previously granted. If the Participant is not terminated for
cause within the sixty-day period, the provisions of the Option
agreement and the Plan shall continue to apply to the
exercisability of the Participant's Options.
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SECTION 6
RESTRICTED STOCK
6.1 GRANT. A Participant may be granted Restricted Stock under the
Plan. Restricted Stock shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined by
the Committee in its sole discretion. Restricted Stock shall be awarded on
the condition that the Participant remain in the employ of the Company or
one of its Subsidiaries during the Restricted Period. Such condition shall
have no effect on the right of the Company or any Subsidiary to terminate
the Participant's employment at any time. No payment is required from a
Participant for an award of Restricted Stock.
6.2 RESTRICTED STOCK AGREEMENTS. Each award of Restricted Stock
shall be evidenced by a Restricted Stock agreement containing such terms
and conditions, consistent with the provisions of the Plan, as the
Committee from time to time determines.
6.3 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.
(a) GENERAL. If a Participant ceases to be employed by or
a director of the Company or one of its Subsidiaries for any
reason other than the Participant's death, Total Disability, or
any other additional provisions as determined by the Committee
pursuant to Section 6.3(c), then any shares of Restricted Stock
still subject to restrictions on the date of such termination
shall automatically be forfeited and returned to the Company.
For purposes of the Plan, the following shall not be deemed a
termination of employment: (i) a transfer of employment among
the Company and its Subsidiaries; (ii) a leave of absence, duly
authorized in writing by the Company, for military service or for
any other purpose approved by the Company if the period of such
leave does not exceed 90 days; (iii) a leave of absence in excess
of 90 days, duly authorized in writing by the Company, provided
the employee's right to reemployment is guaranteed either by
statute or contract; or (iv) a termination of employment with
continued service as an officer or director. For purposes of the
Plan, termination of employment shall be considered to occur on
the date on which the employee is no longer obligated to perform
services for the Company or any of its Subsidiaries and the
employee's right to reemployment is not guaranteed either by
statute or contract, regardless of whether the employee continues
to receive compensation from the Company or any of its
Subsidiaries after such date.
(b) DEATH OR TOTAL DISABILITY. Unless the terms of the
Restricted Stock agreement or grant provide otherwise, in the
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event a Participant terminates employment or directorship with
the Company or one of its Subsidiaries because of death or Total
Disability during the Restricted Period, the restrictions
applicable to the shares of Restricted Stock shall automatically
terminate and the Restricted Stock shall vest as of the date of
termination.
(c) ADDITIONAL PROVISIONS AS DETERMINED BY COMMITTEE. The
Committee may, in its sole discretion, provide provisions in any
Restricted Stock agreement permitting, or by resolution approve,
vesting of all or part of any Restricted Stock awarded to a
Participant upon termination due to Early Retirement, Normal
Retirement, Consensual Severance or a Change in Control.
6.4 RESTRICTIONS ON TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents or
unless the terms of the Restricted Stock agreement provide
otherwise, shares of Restricted Stock shall not be sold,
exchanged, transferred, pledged or otherwise disposed of by a
Participant during the Restricted Period other than to the
Company pursuant to subsection 6.3 or 6.4(b) or by will or the
laws of descent and distribution.
(b) SURRENDER TO THE COMPANY. If any sale, exchange,
transfer, pledge or other disposition, voluntary or involuntary,
of Restricted Stock that has not vested shall be made or
attempted during the Restricted Period, except as provided above
in subsections 6.3 and 6.4(a), the Participant's right to the
Restricted Stock shall immediately cease and terminate, and the
Participant shall promptly forfeit and surrender to the Company
all such Restricted Stock.
(c) OTHER RESTRICTIONS. The Committee may impose other
restrictions on any Restricted Stock as the Committee deems
advisable.
6.5 RIGHTS AS A SHAREHOLDER. During the Restricted Period, a
Participant shall have all rights of a stockholder with respect to his
Restricted Stock, including (a) the right to vote any shares at
shareholders' meetings; (b) the right to receive, without restriction, all
cash dividends paid with respect to such Restricted Stock; and (c) the
right to participate with respect to such Restricted Stock in any stock
dividend, stock split, recapitalization or other adjustment in the Common
Stock of the Company or any merger, consolidation or other reorganization
involving an increase or decrease or adjustment in the Common Stock of the
Company. Any new, additional or different shares or other security
received by the Participant pursuant to any such stock dividend, stock
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split, recapitalization or reorganization shall be subject to the same
terms, conditions and restrictions as those relating to the Restricted
Stock for which such shares were received.
6.6 DEPOSIT OF CERTIFICATES; LEGENDING OF RESTRICTED STOCK.
(a) DEPOSIT OF CERTIFICATES. Any certificates evidencing
shares of Restricted Stock awarded pursuant to the Plan shall be
registered in the name of the relevant Participant and deposited,
together with a stock power endorsed in blank, with the Company.
In the discretion of the Committee, any such certificates may be
deposited in a bank designated by the Committee or delivered to
the Participant. Certificates for shares of Restricted Stock
that have vested shall be delivered to the Participant upon
request within a reasonable period of time. The Participant
shall sign all documents necessary or appropriate to facilitate
such delivery.
(b) LEGEND. Any certificates evidencing shares of
Restricted Stock awarded pursuant to the Plan shall bear the
following legend:
This certificate is held subject to the terms and
conditions contained in a restricted stock agreement
that includes a prohibition against the sale or
transfer of the stock represented by this certificate
except in compliance with that agreement, and that
provides for forfeiture upon certain events. A copy of
that agreement is on file in the office of the
Corporation.
6.7 RESALE. The Participant shall agree not to resell or
redistribute such Restricted Stock after the Restricted Period except upon
such conditions as the Company may reasonably specify to ensure compliance
with federal and state securities laws.
SECTION 7
TAX BENEFIT RIGHTS
7.1 GRANT. A Participant may be granted Tax Benefit Rights under the
Plan to encourage a Participant to exercise Options and provide certain tax
benefits to the Company. A Tax Benefit Right entitles a Participant to
receive from the Company or a Subsidiary a cash payment not to exceed the
amount calculated by multiplying the ordinary income, if any, realized by
the Participant for federal tax purposes as a result of the exercise of a
non-qualified stock option, or the disqualifying disposition of shares
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acquired under an incentive stock option, by the maximum federal income tax
rate (including any surtax or similar charge or assessment) for
corporations, plus any other applicable state and local tax against which
the Company is entitled to a deduction or credit by reason of exercise of
the Option or the disqualifying disposition.
7.2 RESTRICTIONS. A Tax Benefit Right may be granted only with
respect to an Option issued and outstanding or to be issued under the Plan
or any other Plan of the Company or its Subsidiaries that has been approved
by the shareholders as of the effective date of the Plan and may be granted
concurrently with or after the grant of the Option. Such rights with
respect to outstanding Options shall be issued only with the consent of the
Participant if the effect would be to disqualify an incentive stock option,
change the date of grant or the exercise price, or otherwise impair the
Participant's existing Options.
7.3 TERMS AND CONDITIONS. The Committee shall determine the terms
and conditions of any Tax Benefit Rights granted and the Participants to
whom such rights will be granted with respect to Options under the Plan or
any other plan of the Company and those terms and conditions shall be set
forth in written agreements. The Committee may amend, cancel, limit the
term of, or limit the amount payable under a Tax Benefit Right at any time
prior to the exercise of the related stock option, unless otherwise
provided under the terms of the Tax Benefit Right. The net amount of a Tax
Benefit Right, subject to withholding, may be used to pay a portion of the
Option price, unless otherwise provided by the Committee.
SECTION 8
CHANGE IN CONTROL
Without in any way limiting the Committee's discretion, the Committee
may include in any Incentive Award provisions for acceleration of any
vesting or other similar requirements or for the elimination of any
restrictions upon Incentive Awards upon a Change in Control of the Company.
The Committee may also include provisions for Participants to receive cash
in lieu of outstanding Options upon a Change in Control of the Company.
SECTION 9
GENERAL PROVISIONS
9.1 NO RIGHTS TO AWARDS. No Participant or other person shall have
any claim to be granted any Incentive Award, and there is no obligation of
uniformity of treatment of employees, Participants or holders or
beneficiaries of Incentive Awards. The terms and conditions of the
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Incentive Awards of the same type and the determination of the Committee to
grant a waiver or modification of any Incentive Award and the terms and
conditions thereof need not be the same with respect to each Participant.
9.2 WITHHOLDING. The Company or a Subsidiary shall be entitled to
(a) withhold and deduct from future wages of a Participant (or from other
amounts that may be due and owing to a Participant from the Company or a
Subsidiary), or make other arrangements for the collection of, all amounts
deemed necessary to satisfy any and all federal, state and local
withholding and employment-related tax requirements attributable to an
Incentive Award, including, without limitation, the grant, exercise or
vesting of, or payment of dividends with respect to, an Incentive Award or
a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the
amount of such withholding to the Company before taking any action with
respect to an Incentive Award. Unless the Committee determines otherwise,
withholding may be satisfied by withholding Common Stock to be received
upon exercise or by delivery to the Company of previously owned Common
Stock.
9.3 COMPLIANCE WITH LAWS; LISTING AND REGISTRATION OF SHARES. All
Incentive Awards granted under the Plan (and all issuances of Common Stock
or other securities under the Plan) shall be subject to applicable laws,
rules and regulations, and to the requirement that if at any time the
Committee determines, in its sole discretion, that the listing,
registration or qualification of the shares covered thereby upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of such Incentive Award
or the issue or purchase of shares thereunder, such Incentive Award may not
be exercised in whole or in part, or the restrictions on such Incentive
Award shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
9.4 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements,
including the grant of options and other stock-based awards, and such
arrangements may be either generally applicable or applicable only in
specific cases.
9.5 NO RIGHT TO EMPLOYMENT. The grant of an Incentive Award shall
not be construed as giving a Participant the right to be retained in the
employ or directorship of the Company or any Subsidiary. The Company or
any Subsidiary may at any time dismiss a Participant from employment, free
from any liability or any claim under the Plan, unless otherwise expressly
provided in the Plan or in any written agreement with a Participant.
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<PAGE>
9.6 GOVERNING LAW. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable federal
law.
9.7 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
SECTION 10
EFFECTIVE DATE AND DURATION OF THE PLAN
This Plan shall take effect December 9, 1997 and shall be submitted to
the Company's shareholders for approval. Unless earlier terminated by the
Board of Directors, no Incentive Award shall be granted under this Plan
after December 8, 2007.
SECTION 11
TERMINATION AND AMENDMENT
The Board may terminate the Plan at any time, or may from time to time
amend the Plan, provided that no such amendment may impair any outstanding
Incentive Award without the consent of the Participant, except according to
the terms of the Incentive Award. No termination, amendment or
modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written
consent of the Participant holding such Incentive Award unless such
amendment or modification operates solely to the benefit of the
Participant.
A-15
<PAGE>
PROXY PROXY
HASTINGS MANUFACTURING COMPANY
325 NORTH HANOVER
HASTINGS, MICHIGAN 49058
TELEPHONE NO. (616) 945-2491
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints Monty C. Bennett and
Andrew F. Johnson, and each of them, each with full power of substitution,
proxies to represent the shareholder listed on the reverse side of this
Proxy and to vote all shares of Common Stock of Hastings Manufacturing
Company that the shareholder would be entitled to vote on all matters which
come before the Annual Meeting of Shareholders to be held at the principal
office of Hastings Manufacturing Company in the City of Hastings, Michigan,
on Tuesday, May 5, 1998, at 9 a.m. local time, and any adjournment of that
meeting.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
NAMED ON THIS PROXY AS DIRECTORS. THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS THAT
MAY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
<PAGE>
HASTINGS MANUFACTURING COMPANY
1. ELECTION OF DIRECTOR Nominee: FOR WITHHELD FOR ALL
Neil A. Gardner EXCEPT THOSE
(INSTRUCTION: TO WITHHOLD AUTHORITY INDICATED
TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE THROUGH THAT NOMINEE'S NAME
ABOVE) [ ] [ ] [ ]
Your Board of Directors Recommends that You Vote "FOR" All Nominees
2. APPROVAL OF THE STOCK OPTION AND FOR AGAINST ABSTAIN
RESTRICTED STOCK PLAN OF 1997
[ ] [ ] [ ]
IF ANY NOMINEE IS UNABLE OR UNWILLING TO SERVE AS A DIRECTOR AT
THE TIME OF THE ANNUAL MEETING OF SHAREHOLDERS, EACH PROXY MAY BE VOTED FOR
ANY SUBSTITUTE NOMINEE DESIGNATED BY THE PRESENT BOARD OF DIRECTORS.
FURTHER, THE PROXIES NAMED HEREIN SHALL HAVE DISCRETIONARY AUTHORITY TO
VOTE ON OTHER MATTERS, NOT PRESENTLY KNOWN, THAT MAY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS THEREOF. RECEIPT OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT DATED APRIL 10, 1998, IS ACKNOWLEDGED.
Dated: _________________, 1998 X_______________________________________
X_______________________________________
Signature of Shareholder(s)
IMPORTANT -- Please sign exactly as
your name(s) appears on this Proxy.
When signing on behalf of a
corporation, partnership, estate or
trust, indicate title or capacity
of person signing. IF SHARES ARE
HELD JOINTLY, EACH HOLDER SHOULD
SIGN.
