MESTEK, INC.
GENERAL OFFICES
260 North Elm Street
Westfield, Massachusetts 01085
April 5, 1996
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
May 22, 1996
Wednesday
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Mestek, Inc., hereinafter referred to as "Mestek" or the "Company".
The cost of the solicitation of proxies will be borne entirely by the Company.
Regular employees of the Company may solicit proxies by personal interview, mail
or telephone and may request brokerage houses and other custodians, nominees and
fiduciaries to forward soliciting material to the beneficial owners of the stock
held of record by such persons.
If a proxy in the accompanying form is duly executed and returned, the
shares represented will be voted at the Annual Meeting and where a choice is
specified, will be voted in accordance with the specification made. Proxies may
be revoked at any time prior to voting by (1) executing and delivering a new
proxy to the Secretary of the Company at or before the Annual Meeting, (2)
voting in person at the Annual Meeting or (3) giving written notice of
revocation to the Secretary of the Company at or before the Annual Meeting.
VOTING RIGHTS
The shareholders entitled to vote at the Annual Meeting will be those
whose names appeared on the records of the Company as holders of its common
stock at the close of business on April 4, 1996, the record date. As of such
date, there were issued and outstanding 9,610,135 shares of Common Stock of the
Company, 8,929,771 of which are entitled to vote. The Company is not entitled to
vote the 680,364 shares of Common Stock held in the treasury.
Shareholders are entitled to one vote for each share held on all
matters to be considered and acted upon at the Annual Meeting, except that, with
respect to the election of directors, cumulative voting is permitted. Cumulative
voting means that each shareholder is entitled to as many votes as are equal to
the number of shares which the shareholder owns multiplied by the number of
directors to be elected in the same election and that the shareholder may cast
all of such votes for a single nominee for director or may distribute them among
two or more nominees, as the shareholder may see fit. There are eight (8)
directors to be elected at the Annual Meeting to be held May 22, 1996.
Discretionary authority to cumulate votes is solicited by the Board of Directors
with respect to the election of directors in those cases in which no direction
is made on the proxy card. Therefore, in such elections, unless otherwise
indicated on the proxy cards, the votes represented by such proxies will be
voted in favor of the nominees listed thereon (unless otherwise indicated) and
in favor of Proposal 2 and Proposal 3.
FINANCIAL STATEMENTS
The Company's audited consolidated financial statements and notes
thereto, including selected financial data and management's discussion and
analysis of financial condition and results of operations for the year ended
December 31, 1995, are included in the Company's 1995 Annual Report to
Shareholders, which was mailed concurrently with this proxy statement to all
shareholders of record. The Annual Report does not constitute proxy soliciting
material.
SHAREHOLDER PROPOSALS
Proposals which shareholders wish to present for consideration at the
Annual Meeting to be held in 1997 must be received at the Company's General
Offices no later than December 31, 1996 in order to be included in the Company's
proxy statement relating to such meeting.
EXECUTIVE OFFICERS
The executive officers of the Company in addition to Mr. J.E. Reed,
whose biography appears in the
section entitled "ELECTION OF DIRECTORS" below, are the following:
James A. Burk Age 50 Vice President since 1986
Prior to the merger of Mestek, Inc. and Reed National Corp., Mr. Burk
had been a Vice President of Reed since 1975. Mr. Burk had been employed in a
number of manufacturing management positions by Reed since 1965.
Mr. Burk is the son of E. Herbert Burk, Director of the Company.
R. Bruce Dewey Age 44 Senior Vice President and
General Counsel since 1994 and Secretary since 1992.
Mr. Dewey was Vice President-Administration prior to 1994. Prior to
joining Mestek in 1990, Mr. Dewey was an attorney in private practice in
Seattle, Washington most recently with Cairncross, Ragen & Hempelmann from 1987
to 1990. Prior to the merger of Mestek, Inc. and Reed National Corp., Mr. Dewey
had been Assistant to the President of Reed from 1979 to 1983 and had been
affiliated with the Cooper-Weymouth, Peterson division of Reed from 1975 to
1979.
William S. Rafferty Age 44 Senior Vice President of Sales
and Marketing since 1991.
Mr. Rafferty was Vice President of Marketing prior to 1991. Prior to
joining Mestek in 1990, Mr. Rafferty was Senior Vice President of Sales and
Marketing of Taco, Inc., from 1984 to 1990, and held a number of sales and
marketing management positions with The Trane Company from 1974 to 1984.
Stephen M. Shea Age 39 Senior Vice President-Finance
since 1994 and Chief Financial Officer since 1990.
Mr. Shea was Vice President-Finance prior to 1994. Mr. Shea was
Controller of the Company from 1987 until 1990 and was Manager of Corporate
Planning from 1986 to 1987, holding the same position at Reed National
Corp. from 1985 to 1986. Prior to joining Reed in 1985, Mr. Shea was a
Certified Public Accountant with the Hartford, Connecticut accounting firm
of Spitz, Sullivan, Wachtel & Falcetta from 1979 to 1985.
EXECUTIVE COMPENSATION
Consistent with the revised proxy rules on executive compensation
adopted by the Securities and Exchange Commission, there is shown below,
information concerning the annual compensation (salary, bonus and other) for
services in all capacities to the Company and its subsidiaries for the fiscal
years ended December 31, 1995, 1994 and 1993, of those persons who were at
December 31, 1995 (a) the Chief Executive Officer of the Company and (b) the
other four most highly compensated executive officers of the Company who were
serving as executive officers at December 31, 1995. No executive officers left
the employ of the Company during 1995.
SUMMARY COMPENSATION TABLE
Under the revised proxy rules on executive compensation adopted by the
Securities and Exchange Commission, all suggested columns and headings relating
to forms of compensation not offered by the Company have been omitted for
presentation in the Summary Compensation Table below.
NAME AND ANNUAL
PRINCIPAL POSITION COMPENSATION
Other All
Annual Other
Fiscal Yr. Salary($) Bonus($)(1) Compensation(2) Compensation(3)
John E. Reed 1995 262,000 462,300 - 7,164
Chairman of the 1994 262,250 350,000 - 7,182
Board, President 1993 250,388 215,500 - 12,422
and Chief Executive
Officer (4)
Stewart B. Reed 1995 192,400 183,690 - 9,474
Executive Vice 1994 184,990 150,000 - 9,491
President (5) 1993 176,930 64,650 - 11,032
William S. 1995 120,120 75,690 - 9,474
Rafferty, Senior 1994 110,500 107,775 - 9,491
Vice President- 1993 103,400 77,055 - 10,392
Marketing
James A. Burk 1995 95,850 82,740 - 9,474
Vice President 1994 92,130 121,680 - 9,197
1993 86,705 88,485 - 9,234
R. Bruce Dewey 1995 111,875 61,230 - 8,653
Senior Vice 1994 106,400 37,825 - 7,214
President and 1993 101,302 22,775 - 6,345
General Counsel
NOTES TO SUMMARY COMPENSATION TABLE
(1) Certain executive officers whose corporate responsibilities are applicable
to all segments of the Company's business historically have been paid, and in
some cases are contractually entitled to be paid, bonuses based on the
company-wide profits during each fiscal year (the "Executive Officer Bonus
Policy"). Except for certain officers whose bonuses are specified by contract,
the eligible executive officers and the exact formula for determining the bonus
of each such executive officer is specified by the Board of Directors of the
Company based upon the recommendations of its Compensation Committee each
December for the following fiscal year. In general, the bonus for an eligible
executive officer for the calendar year 1995 is equal to the sum of percentages
(which may be different for each participant) of the Company's operating profits
in excess of a specified return on tangible net worth plus borrowed capital as
of January 1 of the fiscal year, after deduction for all other bonuses and with
goodwill eliminated from net worth for this purpose, on the first $5,000,000 of
operating profits for the first tier and in excess of $5,000,000 of operating
profits for the second tier. Except for certain officers whose participation is
contractually specified, the Board of Directors of the Company historically has
determined the officers eligible to participate under the Executive Officer
Bonus Policy, the target for the specified return on tangible net worth and the
percentages applicable to each participant each year which percentages are based
on the level of responsibility, seniority and performance of the officers.
Messrs. J.E. Reed, S.B. Reed, S.M. Shea and R.B. Dewey were the only
participants in the Executive Officer Bonus Policy for 1995 and Messrs. J.E.
Reed, S.M. Shea and R.B. Dewey are the only executive officers of Mestek
eligible to participate for 1996. Messr. J.E. Reed is contractually entitled to
participate in the Executive Officer Bonus Policy. In 1995, Messrs. J.E. Reed
and S.B. Reed were entitled to receive, respectively, ten percent (10%) and
three percent (3%) under the first tier bonus and five percent (5%) and two
percent (2%) under the second tier bonus. All officers of Mestek, other than
those participating under the Executive Officer Bonus Policy in a given year,
and certain other key employees involved in the Company's operations,
historically have been paid annual bonuses based on the profitability of the
individual business units (termed "profit centers" by the Company) to which such
persons are assigned and for which they have specific responsibility (the "Key
Employee Bonus Policy"). Except for certain officers whose bonuses are specified
by contract or determined by the Compensation Committee of the Board of
Directors, such bonuses have generally been determined by the Chief Executive
Officer before the beginning of each fiscal year, in an amount equal to a
percentage (which may be different for each participant) of the amount by which
the operating profits of such employee's profit centers for such fiscal year
exceed a specified return on the average tangible net assets employed by such
profit centers. The level of responsibility and seniority of participants are
taken into account in determining the persons eligible to participate and the
applicable percentages of each participant each year. Of the executive officers
of Mestek, only Messrs. Rafferty and J.A. Burk were awarded bonuses under the
Key Employee Bonus Policy for 1995 and they are the only executive officers
anticipated to be awarded bonuses under the Key Employee Bonus Policy for 1996.
Except to the extent embodied in employment contracts with certain officers and
employees, the Executive Officer Bonus Policy and the Key Employee Bonus Policy
represent only historical practices and are not embodied in any written plan.
Except to the extent required by particular employment contracts, the Company
may cease paying bonuses under either policy, or alter the amounts payable, at
any time, based upon the recommendation of the Compensation Committee and
actions of the Board of Directors.
(2) In accordance with the revised proxy rules on executive officer compensation
adopted by the Securities and Exchange Commission, amounts of Other Annual
Compensation for 1993, 1994 and 1995, which would include the incremental costs
to the Company of perquisites and personal benefits paid to any executive
officer, are excluded because they are less than $50,000 or less than 10% of the
total annual salary and bonus compensation for all such individuals in the
Summary Compensation Table. Such perquisites would include, among others, the
cost of premiums for life insurance having a benefit in excess of $50,000 to
which individuals other than the Company are beneficiaries, the compensation
attributable to the personal use of a Company automobile, and compensation
attributable to personal use of club memberships.
(3) In accordance with the revised proxy rules on executive officer compensation
adopted by the Securities and Exchange Commission, amounts of All Other
Compensation for 1993, 1994 and 1995 include the costs to the Company of the
contributions by the Company to each executive officer under the Company's
401(k) Plan whereby the Company matches each $1.00 of employee contribution with
$0.25 up to the first 6% of salary and bonus, and the Company's contributions on
behalf of each executive officer to its Deferred Profit Sharing Plan whereby for
the year ended December 31, 1995, the Board of Directors voted a Company
contribution of three percent (3%) of annual base salary for all eligible
employees up to the OASDI maximum of $61,200 and a Company contribution of six
percent (6%) of annual base salary for all eligible employees for amounts of
compensation in excess of the OASDI maximum of $61,200 (as limited in accordance
with the Employee Retirement Income Security Act).
(4) Mr. J.E. Reed is employed under an agreement with the Company which is
automatically extended for one-year periods unless either party gives the other
sixty (60) days' notice of termination. The contract specifies a certain base
salary to be reviewed annually by the Board of Directors of the Company. The
base salary under this contract for 1995 was $262,000, the same as 1994. The
contract provides for continuation of salary for six (6) months in the case of
death and for twelve (12) months, with the contractual bonus, described above,
in the case of incapacitation. The contract provides for Mr. J.E. Reed to be
furnished with the use of a Company automobile and to be reimbursed for
legitimate business expenses.
(5) In 1995, Mr. S.B. Reed was employed under an agreement with the Company. The
contract specified a certain base salary to be reviewed annually by the Board of
Directors of the Company. The base salary under this contract for 1995 was
$192,400, an increase of 4.0% over 1994. The contract provided for continuation
of salary for six (6) months in the case of death and for twelve (12) months,
with the contractual bonus, described above, in the case of incapacitation. The
contract provided for Mr. S.B. Reed to be furnished with the use of a Company
automobile and to be reimbursed for legitimate business expenses.
DIRECTORS COMPENSATION
Except for David R. Macdonald, who is discussed below, directors of
Mestek who are not employees were paid in 1995 an annual retainer of $2,000, a
fee of $1,500 for each Board Meeting attended, and a fee of $500 for each
meeting of each Committee of the Board of Directors and each Special Assignment
attended, or $1,500 if such Committee meeting or Special Assignment attended is
not held in conjunction with a Board Meeting. In 1996, directors of Mestek who
are not employees will be paid an annual retainer of $4,000, a fee of $1,500 for
each Board Meeting attended and a fee of $500 for each meeting of each Committee
of the Board of Directors and each Special Assignment attended, or $1,500 if
such Committee meeting or Special Assignment attended is not held in conjunction
with a Board Meeting. Certain members of Mestek's Board of Directors are also
members of one or more of the subsidiary Boards. Mr. Macdonald, a director of
Mestek and a partner in the law firm of Baker & McKenzie, bills to Mestek at his
usual and customary rates a portion of the time he spends at meetings of the
Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report of the Compensation Committee of the Board of Directors of the
Company shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, and shall
not otherwise be deemed filed under such Acts. No members of the Compensation
Committee are officers or employees of the Company or any of its subsidiaries
nor are any of the members of the Committee former officers of the Company or
any of its subsidiaries. The Compensation Committee furnished the following
report on Executive Compensation as required under the revised proxy rules on
executive compensation adopted by the Securities and Exchange Commission.
REPORT
Under the supervision of the Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee"), the Company has developed and
implemented compensation policies, plans and programs which seek to enhance the
profitability of the Company and thus shareholder value, by closely aligning the
financial interest of the Company's Chief Executive Officer and senior executive
management with the profitability of the Company. In furtherance of this goal,
annual base salaries are generally set somewhat below competitive levels so that
the Company relies to a large degree on annual bonuses to attract and retain
corporate officers and other key employees of outstanding abilities and to
motivate them to perform to the full extent of their abilities. Bonuses are
variable and closely tied to the overall corporate or individual business unit
performance in a manner that encourages a sharp and continuing focus on building
profitability and return on tangible net assets employed.
In general, the Compensation Committee believes that the various
compensation programs of the Company should (a) support the long and short-term
strategic goals and objectives of the Company, (b) reflect the Company's values,
and (c) reward individuals for outstanding contributions to the Company's
profitability. The Compensation Committee further believes that compensation
programs, especially performance-based bonuses, play a critical role in
attracting and retaining well-qualified executives. While compensation
opportunities should be based on individual contributions, the actual amounts
earned by executives in variable compensation programs will be dictated by how
the Company or individual business units perform.
BASE COMPENSATION. As noted above, the Compensation Committee's approach to base
compensation is to offer executive salaries somewhat below the competitive
levels represented by the salaries of those executives currently employed in
similar positions in public companies with sales and market capitalization
similar to the Company. The Compensation Committee annually considers and
determines the annual base salary of the Chief Executive Officer and, based upon
the recommendation of the Chief Executive Officer, the annual base salary of
each of the executive officers of the Company. The base salaries of executive
officers are set pursuant to a written annual review conducted by the Chief
Executive Officer of the work performance, accomplishments, experience and
decision-making responsibilities of each executive officer and the individual's
contributions to the achievement of the sales, profitability and other goals of
the Company or its individual business units set forth in the business plan.
Individual work performance in achieving business plan goals is the majority
factor in considering increases in compensation. Responsibility and experience
are the majority factors in setting an initial salary for an individual in a
particular executive position. The salary of the Chief Executive Officer in 1995
was set by reference to the profitability of the Company as measured by
unaudited results of operations, the degree of accomplishment of the business
plan of the Company, and other individual contributions. The majority factor is
the degree of accomplishment of the sales, profitability and other goals set
forth in the business plan of the Company. In addition, the Compensation
Committee also takes into account the accomplishments of the Chief Executive
Officer that may not have contributed to the profitability of the Company in the
current year, but may contribute to the Company's long-term strategic goals. The
salary of the Chief Executive Officer for 1995 did not increase over 1994. Base
salaries for executive officers for 1995 rose from 1994 levels approximately
four percent (4%).
ANNUAL BONUS PLAN. The Compensation Committee determines the executive officers
eligible to participate under the Executive Officer Bonus Policy and, based upon
the recommendation of the Chief Executive Officer, the Key Employee Bonus
Policy, the specified return on tangible net worth targets under the Executive
Officer Bonus Policy and, based upon the recommendation of the Chief Executive
Officer, the targets for the specified return on tangible net assets employed
under the Key Employee Bonus Policy and the percentages applicable to the
participation of the Chief Executive Officer and each of the eligible executive
officers of the Company under the applicable bonus policy based on their level
of responsibility, experience and performance. The specified return target for
the Executive Officer Bonus Policy for 1995 was a fifteen percent (15%) return.
The specified return targets for the Key Employee Bonus Policy for 1995 vary by
business unit, but were generally a twenty percent (20%) return. The
participation in the Executive Bonus Policy is equal to the sum of percentages
(which may be different for each participant) of the Company's operating profits
in excess of a specified return on tangible net worth plus borrowed capital as
of January 1 of the fiscal year, after deduction for all other bonuses and with
goodwill eliminated from net worth for this purpose, on the first $5,000,000 of
operating profits for the first tier and in excess of $5,000,000 of operating
profits for the second tier. The percentages applicable to Mr. J.E. Reed are
determined by an employment contract that is reviewed annually for renewal. The
Chief Executive Officer was entitled to receive, for 1995, ten percent (10%)
under the first tier bonus and five percent (5%) under the second tier bonus.
The participation in the Key Employee Bonus Policy is equal to the sum
of percentages (which may be different for each participant) of the operating
profits of individual business units of the Company in excess of a specified
return on tangible net assets employed in the individual business units. Certain
executive officers participate in the Executive Officer Bonus Policy and certain
executive officers participate in the Key Employee Bonus Policy. Based upon the
above considerations, the annual bonus compensation of the Chief Executive
Officer and the eligible executive officers of the Company is directly and
objectively tied to the Company's performance and profitability.
After considering all of the factors and making recommendations upon
the annual base compensation and bonus formulae and percentage participations
for the Chief Executive Officer and each of the other executive officers of the
Company, the Compensation Committee presents its written report to the full
membership of the Board of Directors at the December Board Meeting of the
Company each year. The recommendations of the Compensation Committee for each of
1993, 1994 and 1995 were presented, discussed and voted upon, and approved in an
Executive Session of the Board of Directors of the Company, Messrs. J.E. Reed
and S.B. Reed abstaining.
The Compensation Committee also has fully debated and considered and
recommended to the entire Board of Directors early in 1996 the adoption of a
stock option plan, the purpose of which would be to attract and retain the
services of and motivate valued key employees and directors of the Company, to
encourage such individuals to acquire a greater proprietary interest in the
Company thereby strengthening such persons' incentive to achieve the objectives
of the shareholders of the Company, and to serve as an aid and inducement in the
hiring of new key employees.
In addition, each year the entire Board of Directors, based upon the
recommendation of the Compensation Committee considers the percentage
participation of all employees (including the Chief Executive Officer and the
other executive officers of the Company) in the Company's Deferred Profit
Sharing Plan. For the fiscal year ended December 31, 1995, the Compensation
Committee recommended and the Board of Directors voted a Company contribution of
three percent (3%) of annual base salary for all eligible employees up to the
OASDI maximum of $61,200 and a Company contribution of six percent (6%) of
annual base salary for all eligible employees for amounts in excess of the OASDI
maximum of $61,200 (as limited in accordance with the Employee Retirement Income
Security Act).
DAVID W. HUNTER, Chairman
A. WARNE BOYCE, WILLIAM J. COAD, Members
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
This Shareholder Return Performance Presentation shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, and shall not otherwise be deemed filed
under such Acts. Set forth below is a line graph comparing the yearly percentage
change in the cumulative total shareholder return on the common stock of Mestek
(referred to by its New York Stock Exchange symbol "MCC" in the line graph and
notes thereto) against the cumulative total return of the S&P Composite 500
Stock Index and the S&P Building Materials Index (referred to as the "Peer
Group" in the line graph and notes thereto) for the period of five (5) fiscal
years commencing December 31, 1990 and ended December 31, 1995. It assumes $100
invested at the close of trading on the last trading day preceding the first day
of the fifth preceding fiscal year in MCC Common Stock, S&P 500, and Peer Group.
Cumulative total return assumes reinvestment of dividends.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
Mestek, Inc., S&P 500, Peer Group (Performance results
through 12/31/95)
1990 1991 1992 1993 1994 1995
MCC $100.00 $127.42 $114.52 $120.97 $125.81 $151.61
- --------- -------------- --------- --------------------- -----------------------
S&P 500 $100.00 $130.47 $140.41 $154.56 $156.60 $215.45
- --------- -------------- --------- --------------------- -----------------------
PEER GROUP $100.00 $143.14 $183.10 $226.88 $167.24 $226.53
- --------- -------------- --------- --------------------- -----------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
WESTFIELD, MASSACHUSETTS. Mestek leases its Westfield, Massachusetts
commercial products manufacturing facilities from Sterling Realty Trust under
two leases corresponding to the two major buildings on the north side of Notre
Dame Street, one at a net annual rental of $192,000, which expires on December
31, 1999, and the other at a net annual rental of $42,000, which expires on June
30, 1998. Both leases are payable monthly. Mestek leases its South Complex,
including its advertising facility, the Reed Institute training facility and the
baseboard manufacturing facility pursuant to a lease which expires December 31,
2008 from Sterling Realty Trust at a net annual rental of $256,800, payable
monthly. Sterling Realty Trust is a Massachusetts business trust of which John
E. Reed is the sole trustee and of which Mr. Reed and a Reed family trust are
the sole beneficiaries. Mestek leases certain equipment used in the Westfield
facilities pursuant to a lease from Sterling Realty Trust that expires December
31, 1997, for an annual rental of $24,360. Mestek also leases certain equipment
used in the Westfield facilities pursuant to a lease from the Elizabeth C. Reed
Trust that expires December 31, 1997, for an annual rental of $3,600 and
pursuant to a lease from Machinery Rental Company that expires December 31, 1997
for an annual rental of $24,888. John E. Reed is the sole proprietor of
Machinery Rental Company. Mr. Reed is the trustee of the Elizabeth C. Reed Trust
and his daughter is sole beneficiary.
FARMVILLE, NORTH CAROLINA. Mestek leases its Farmville, North Carolina
production facility from Rudbeek Realty Corp. ("Rudbeek") for an annual minimum
net base rental of $324,000, payable monthly. The lease expires on December 31,
1998. Rudbeek is wholly owned by family trusts for which John E. Reed and E.
Herbert Burk, directors of the Company, respectively, serve as trustees and of
which Stewart B. Reed (Mr. Reed's son and a director of the Company), James A.
Burk (Mr. Burk's son and Vice President of the Company) and certain other
members of the Burk family are beneficiaries. Mestek leases certain equipment
for use at the Farmville facility pursuant to a lease which expires December 31,
1997, from Sterling Realty Trust for an annual rental of $5,700. Mestek also
leases certain equipment used at the Farmville facility pursuant to a lease from
the Elizabeth C. Reed Trust that expires December 31, 1997, for an annual rental
of $3,000 and pursuant to a lease from Machinery Rental Company that expires
December 31, 1997, for an annual rental of $132,360.
CLINTON, MAINE. Mestek leases certain equipment used in its Clinton,
Maine facility pursuant to a lease from Machinery Rental Company that expires
December 31, 1997, for an annual rental of $24,000.
WRENS, GEORGIA. Mestek leases certain equipment used in its Wrens,
Georgia facility pursuant to a lease which expires December 31, 1997, from
Sterling Realty Trust, for an annual rental of $12,600. Mestek also leases
certain equipment used in the Wrens facility pursuant to a lease from the
Elizabeth C. Reed Trust that expires December 31, 1997, for an annual rental of
$7,500 and pursuant to a lease from Machinery Rental Company that expires
December 31, 1997, for an annual rental of $18,732.
SOUTH WINDSOR, CONNECTICUT. Mestek leases its South Windsor,
Connecticut facility from MacKeeber Associates Limited Partnership
("MacKeeber"), a Connecticut limited partnership, for a net annual base rental
of $616,041, payable monthly. Such lease expires on December 31, 2004, and the
annual base rental increases over time to $677,652, payable monthly, by the year
of expiration. The annual rental will increase to $677,652 in the year 2000.
MacKeeber is owned by John E. Reed, Stewart B. Reed, E. Herbert Burk and David
R. Macdonald, all directors of the Company, as limited partners and John E. Reed
as the sole general partner. In 1984, the Connecticut Development Authority
issued an Industrial Development Bond in the principal amount of $3,500,000,
bearing interest at 72% of the prime rate, with final maturity in 2004. Of the
proceeds of issuance of such Bond, $2,650,000 were lent by the Authority to
MacKeeber (the proceeds of which loan were used to acquire the South Windsor
facility) and $850,000 were lent by the Authority to a former subsidiary of the
Company (the proceeds of which loan were used to acquire certain machinery and
equipment for use at the South Windsor facility). The Company and MacKeeber have
agreed to an unconditional guaranty of the payment of each other's note under
the loan agreement. The obligations of the Company under its note have been paid
in full. Mestek leases certain equipment for use at the South Windsor facility
pursuant to a lease from Machinery Rental Company that expires December 31,
1997, for an annual rental of $24,000.
LOS ANGELES, CALIFORNIA. Pacific/Air Balance, Inc., a wholly-owned
subsidiary of the Company, rents a facility at 13516 Desmond Street, Los
Angeles, California, from Production Realty, Inc., for an amount equivalent to
an annual rental of $26,400, payable monthly. The Company occupies the facility
as a tenant-at-will. Pacific/Air Balance, Inc. also rents on a month-to-month
basis certain equipment used at this facility from Production Realty, Inc. for
an amount equivalent to an annual rental of $41,400, payable monthly. Stewart B.
Reed, a director of the Company, is the sole shareholder of Production Realty,
Inc.
OTHER CONSIDERATIONS AND RELATIONSHIPS. Mestek retained the law firm
of Baker & McKenzie during 1995 and proposes to retain that firm during 1996.
David R. Macdonald, a director of the Company, is a partner in the
Washington, D.C. office of Baker & McKenzie.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Under the proxy rules of the Securities and Exchange Commission, a
person who directly or indirectly has or shares voting power and/or investment
power with respect to a security is considered a beneficial owner of the
security. Shares as to which voting power and/or investment power may be
acquired within 60 days are also considered as beneficially owned under these
proxy rules. The information set forth in this proxy statement concerning
beneficial ownership of shares of the common stock of the Company has been
received from or on behalf of the persons named. The only persons known by the
Company to be the beneficial owners of more than five percent (5%) of the common
stock of the Company as of April 4, 1996 are John E. Reed, Stewart B. Reed and
E. Herbert Burk, all of whom are directors of the Company. The address of each
of Messrs. J.E. Reed and S.B. Reed is 260 North Elm Street, Westfield,
Massachusetts 01085, and the address of Mr. Burk is 14 Westwood Drive,
Westfield, Massachusetts 01085. The amount and nature of their beneficial
ownership is included in the table below.
The directors of the Company and the executive officers and directors
as a group beneficially owned shares of the Company's outstanding stock as
follows on April 4, 1996:
Amount and nature of Percent
Name and beneficial beneficial ownership of Class
Directors:
A. Warne Boyce 1,500 (less than 1%)
E. Herbert Burk 447,102 (1) 5.01%
William J. Coad 2,200 (less than 1%)
Peter Glynn-Jones 675 (less than 1%)
Winston R. Hindle, Jr. 2,000 (less than 1%)
David W. Hunter 13,330 (2) (less than 1%)
David R. Macdonald 3,000 (less than 1%)
John E. Reed 3,298,393 (3) 36.94%
Stewart B. Reed 2,181,937 (4) 24.43%
Executive Officers:
James A. Burk 32,294 (5) (less than 1%)
R. Bruce Dewey 307 (less than 1%)
William S. Rafferty 1,000 (less than 1%)
Stephen M. Shea 3,000 (less than 1%)
All executive officers and
directors as a group
(13 persons) 5,986,738 67.04%
(1) Excludes 137,500 shares of common stock held by a spousal trust, to
which he disclaims ownership. Also excludes 4,128 shares of common
stock held by his wife, to which he disclaims ownership.
(2) Excludes 9,500 shares of common stock held by his spouse to which he
disclaims ownership.
(3) Excludes 13,307 shares of common stock held by his wife, to which he
disclaims ownership. Excludes 1,712,691 shares of common stock held by
John E. Reed as sole trustee for various family trusts, but for which
he disclaims beneficial ownership. 1,325,833 of such common shares are,
however, included in the shares listed as beneficially owned by Stewart
B. Reed per note (4) below. Includes 524,994 shares of common stock
owned by Sterling Realty Trust, a Massachusetts business trust of which
John E. Reed is the sole trustee and of which he and a family trust are
the beneficiaries.
(4) Includes 1,325,833 shares of common stock owned by the Stewart B.
Reed Trust, of which Stewart B. Reed is
the beneficiary and John E. Reed is the sole trustee.
(5) Excludes 100 shares held by his daughter.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
certain officers of the Company, as well as persons who own more than ten
percent (10%) of a registered class of the company's equity securities, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission. To the Company's knowledge, based solely on
its review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1995, all applicable Section 16(a) filing requirements were
satisfied, except that two reports of Mr. Glynn-Jones and one report of Mr.
Hindle on Form 4 were filed late.
MATTERS TO BE ACTED UPON
1. Election of Directors
In accordance with the By-Laws of the Company, the Board of Directors
consists of not less than seven (7) nor more than fourteen (14) members, as set
from time to time by the Board of Directors, elected by the shareholders
annually. The Board of Directors has set the number of members at eight (8).
Eight (8) of the current directors elected at the last Annual Meeting will stand
for election at the Annual Meeting on May 22, 1996. Mr. Glynn-Jones will not
stand for election. The Board of Directors recommends the election of the eight
(8) nominees identified below. The proxies named in the accompanying proxy card
intend, subject to the discretionary authority to cumulate votes described
above, to vote for the eight (8) persons named below, unless otherwise directed
by the shareholder on the proxy card. The Board of Directors knows of no reason
why any nominee will be unavailable or unable to serve. If any nominee is unable
to serve or for good cause will not serve, the persons named as proxies will
vote for such other persons as they shall deem to be in the best interest of the
Company.
Nominees to be Elected
A. Warne Boyce Age 66 Director of Mestek from
1983 to 1986 and since 1990
Mr. Boyce has been Chairman and Chief Executive Officer of Microbac
Laboratories, Inc., Pittsburgh, Pennsylvania, since 1989 and President since
1969. He holds the same positions with three affiliated companies: BTC Analysts,
Inc., also of Pittsburgh, Orbeco Analytical Systems, Inc., Long Island, New York
and CPA Microbac, Ltd., U.K. Mr. Boyce was a Director of Chester Environmental,
Inc., a former subsidiary of the Company, from 1985 until 1990.
E. Herbert Burk Age 77 Director of Mestek since 1986
Mr. Burk retired on July 31, 1987 as Senior Vice President of the Company,
an office he had held since 1986. Prior to the merger of Mestek, Inc. and Reed
National Corp. on July 31, 1986, Mr. Burk had been a Director and Vice President
of Reed since 1969 and a Senior Vice President of Reed since 1975. He had been
employed by Reed since 1948. Mr. Burk is the father of James A. Burk, who is a
Vice President of the Company.
William J. Coad Age 64 Director of Mestek since 1986
Mr. Coad has been President and Director of The McClure Corporation, St.
Louis, Missouri, mechanical and electrical engineering consultants, since 1984,
and from 1968 until 1984 he served as its Vice President and Director. He was
Professor of Mechanical Engineering at Washington University in St. Louis,
Missouri until his retirement from that position in January 1987 and is now an
Affiliate Professor at that institution. Mr. Coad is also a Director of
Mechanical Engineering Data Service, Inc., St. Louis, Missouri, and Exergen
Corporation, Natick, Massachusetts. Prior to the 1986 merger of Mestek, Inc. and
Reed National Corp., Mr. Coad had been a Director of Reed since 1985.
Winston R. Hindle, Jr. Age 65 Director of Mestek since 1994
Mr. Hindle was Senior Vice President of Digital Equipment Corporation,
Maynard, Massachusetts, prior to his retirement in July, 1994. In his 32 years
with Digital, he managed both corporate functions and business units and was a
member of the Company's Executive Committee. Mr. Hindle is also a director of
Keane, Inc., Boston, Massachusetts and CP Clare of Lexington, Massachusetts.
David W. Hunter Age 67 Director of Mestek since 1985
Mr. Hunter has been Chairman of Hunter Associates, Inc., an investment
banking firm in Pittsburgh, Pennsylvania since 1992. From 1990 to 1992 he was
Chairman Emeritus of Parker/Hunter, Inc., an investment banking firm in
Pittsburgh, Pennsylvania, where he was Chairman from 1978 until 1990. Mr. Hunter
is also a Director of Lockhart Companies, Kiene Diesel Accessories, Inc.,
Justifacts, Quanterra, Inc. and U.S. Tool & Die Corporation. He served as
Chairman of the Board of Governors of the National Association of Securities
Dealers, Inc. from 1986 to 1987.
David R. Macdonald Age 66 Director of Mestek since 1986
Mr. Macdonald is a partner in the Washington, D.C. office of the law firm
of Baker & McKenzie. Mr. Macdonald is a member of Mestek's Executive Committee.
Between 1981 and 1983, Mr. Macdonald served as Deputy United States Trade
Representative, with the rank of Ambassador. Between 1977 and 1981, Mr.
Macdonald was engaged in private law practice with the firm of Baker & McKenzie
in Chicago, Illinois. Before 1977, Mr. Macdonald served as Under Secretary of
the Navy and as Assistant Secretary of the Treasury for Enforcement, Operations
and Tariff Affairs. Prior to the merger of Mestek, Inc. and Reed National Corp.,
Mr. Macdonald had been a Director of Reed since 1983. Mr. Macdonald is also a
director of Chicago City Bank and Trust Company and Chicago City Bancorporation,
Inc.
John E. Reed Age 80 Director of Mestek since 1986
Mr. J.E. Reed has been Chairman of the Board, President and Chief Executive
Officer of the Company since 1989, and is a member of the Executive Committee.
From 1986 until 1989 he was President and Chief Executive Officer and prior to
the 1986 merger of Mestek, Inc. and Reed National Corp., had been President and
Chief Executive Officer of Reed since he founded it in 1946. Mr. Reed is also a
Director of Wainwright Bank & Trust Co., Boston, Massachusetts. Mr. Reed is the
father of Stewart B. Reed, a director of the Company.
Stewart B. Reed Age 48 Director of Mestek since 1986
Through the end of 1995, Mr. S.B. Reed was employed as the Executive Vice
President of the Company. He is a member of the Executive Committee. Prior to
the 1986 merger of Mestek, Inc. and Reed National Corp., Mr. Reed had been
Executive Vice President of Reed in charge of corporate development. Mr. Reed
had been employed by Reed since 1970. Mr. Reed is the son of John E. Reed,
Chairman of the Board, President and Chief Executive Officer of the Company.
BOARD MEETINGS AND COMMITTEES
During the past twelve months the Board of Directors held four
meetings. All directors were present at the meetings except Messrs. Glynn-Jones
and S.B. Reed were excused from attendance at one meeting each due to prior
commitments.
The Board of Directors has four (4) standing committees: Audit,
Compensation, Executive and Nominating.
Audit Committee
The Audit Committee's responsibilities include (a) reviewing and
evaluating the work and performance of the Company's independent accountants and
making recommendations to the Board of Directors regarding the selection of such
independent accountants, (b) conferring with the Company's independent
accountants and its financial officers to evaluate the Company's internal
accounting methods and procedures and to recommend changes in such methods and
procedures, (c) reviewing and making recommendations on all related party
transactions and the Company's conflict of interest policy, (d) directing the
tasks of the internal auditor of the Company, and (e) reviewing and overseeing
the organization and operation of the financial operations of the Company. The
Audit Committee held three (3) meetings during the past twelve months. The
current members of the Audit Committee are Messrs. Burk (Chairman), Hunter and
Hindle.
Compensation Committee
The Compensation Committee is responsible for reviewing the salary of
the Chief Executive Officer and the executive officers of the Company and
recommending to the Board of Directors the amount of salary to be paid, the
bonus formulae and other compensation for the Chief Executive Officer and the
executive officers of the Company. Please see the report of the Compensation
Committee above. The Compensation Committee held three (3) meetings in the last
twelve months and generally meets annually in December to consider and recommend
compensation matters to the Board of Directors. The current members of the
Compensation Committee are Messrs. Hunter (Chairman), Coad and Boyce.
Executive Committee
To the extent permitted by the laws of the Commonwealth of
Pennsylvania, the Executive Committee has and may exercise all the powers and
authorities of the Board of Directors as follows: (a) to take action on behalf
of the Board of Directors during intervals between regularly scheduled meetings
of the Board of Directors if it is impracticable to delay action on a matter
until the next regularly scheduled meeting of the Board of Directors, and (b) to
take action on all matters of the Company that have been delegated for action by
the Board of Directors. The Executive Committee meets from time to time,
irregularly, as necessary to discharge its duties. The current members of the
Executive Committee are Messrs. J.E. Reed (Chairman), S.B. Reed and Macdonald.
Nominating Committee
The Nominating Committee's responsibilities include (a) evaluating and
recommending nominees for election as directors to the Board of Directors, (b)
recommending to the Board of Directors criteria for membership on the Board, and
(c) proposing nominees to fill vacancies on the Board of Directors as they
occur. The Nominating Committee held two (2) meetings during the last twelve
months. The current members of the Nominating Committee are Messrs. Boyce
(Chairman), Coad and Glynn-Jones.
In selecting candidates for election to the Board of Directors at future
annual meetings of shareholders, the Nominating Committee will consider
prospective candidates whose names have been submitted by shareholders. Such
submissions should be in writing and directed to the Secretary of the Company at
260 North Elm Street, Westfield, Massachusetts 01085.
2. Approval of the Mestek, Inc. 1996 Stock Option Plan
The Compensation Committee of the Mestek Board of Directors has
recommended adoption of a stock option plan, the Mestek, Inc. 1996 Stock Option
Plan (the "Plan"), a copy of which is attached as Exhibit A to this Proxy
Statement. The Board of Directors approved and adopted the Plan at its meeting
held March 20, 1996, effective immediately, and approved its submission to the
shareholders for approval by the affirmative vote of the shareholders within the
requisite period. The Plan will terminate ten years after the Board's initial
approval. The Plan is submitted to the shareholders for approval, as more fully
described below. The purpose of the Plan is to enable the Company and the
Related Corporations (as defined in the Plan) to attract, retain and motivate
officers and employees and to provide the Company with the ability to provide
incentives directly linked to the performance of the Company's businesses and
increases in economic value and shareholder value. Grants made under the Plan
prior to the Annual Meeting are subject to the approval of the Plan by the
Shareholders.
In an effort to ensure that any stock awards under the Plan will
qualify as performance-based compensation, which is generally deductible, the
Plan is being submitted to shareholders for approval at the Annual Meeting.
While the Company believes compensation payable pursuant to the Plan will be
deductible for federal income tax purposes under most circumstances, there can
be no assurance in this regard. Moreover, under certain circumstances such as
death, disability and change in control (all as defined in the Plan),
compensation not qualified under Section 162(m) of the Code, may be payable. The
affirmative vote of a majority of the votes entitled to be cast by the holders
of the shares of the Company's Common Stock represented at the Annual Meeting
and entitled to vote thereon is required to approve the Plan. Such vote will
also satisfy the shareholder approval requirements of Section 422 of the Code
with respect to the grant of Incentive Stock Options ("ISO's"), Section 162(m)
of the Code and Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") ("Rule 16b-3").
Set forth below is a summary of certain important features of the Plan,
which summary is qualified in its entirety by reference to the full text of the
Plan attached as Exhibit A to this Proxy Statement.
Administration of the Plan. The Plan may be administered by the Board
or such committee as the Board may from time to time designate (the "Plan
Administrator"). The Board has designated the Compensation Committee as the Plan
Administrator. Such committee will be composed of not less than two
"disinterested persons" for purposes of Rule 16b-3 who also qualify as "outside
directors" for purposes of Section 162(m) of the Code. Among other things, the
Plan Administrator will have the authority, subject to the terms of the Plan, to
select officers and employees to whom awards may be granted, to determine the
type of award as well as the number of shares of Common Stock to be covered by
each award, and to determine the terms and conditions of any such awards. It
also will have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it shall deem advisable,
to interpret the terms and provisions of the Plan and any awards issued
thereunder and to otherwise supervise the administration of the Plan. All
decisions made by the Plan Administrator pursuant to the Plan will be final and
binding.
Eligibility. Officers and salaried employees of the Company and the
Related Corporations designated by the Plan Administrator who are responsible
for or contribute to the management, growth and profitability of the Company are
eligible to be granted awards under the Plan. Grants may be made under the Plan
to directors and such other persons who are not officers or employees of the
Company as the Plan Administrator shall select. Determination of persons
eligible to participate in the Plan will be made by the Plan Administrator. It
is not possible to estimate at this time the number of persons who will be
eligible to participate in the Plan.
Certain Features of the Plan. The Plan authorizes the issuance of up to
500,000 shares of Common Stock pursuant to the grant and exercise of stock
options, including ISO's and nonqualified stock options. The shares available
under the Plan can be divided among the eligible participants as the Plan
Administrator deems appropriate. The shares subject to grant under the Plan are
to be made available from authorized but unissued shares or from treasury shares
as determined from time to time by the Plan Administrator. Awards may be granted
for such terms as the Plan Administrator may determine, except that the term of
an ISO may not exceed ten years from its date of grant. No awards outstanding on
the termination date of the Plan shall be affected or impaired by such
termination. Awards will not be transferable except by will and the laws of
descent and distribution. The Plan Administrator will have broad authority to
fix the terms and conditions of individual agreements with participants. The
Plan authorizes the Plan Administrator to grant options to purchase Common Stock
at an exercise price which, in the case of ISO's, cannot be less than 100% of
the fair market value of such stock on the date of grant. The Plan permits
optionees, with the approval of the Plan Administrator, to pay the exercise
price of options in cash, stock (valued at its fair market value on the date of
exercise) or a combination thereof. As noted above, options may be granted
either as ISO's or nonqualified stock options. The principal difference between
ISO's and nonqualified stock options is their tax treatment. See "Federal Income
Tax Consequences of the Plan" below.
Amendment and Discontinuance of the Plan. The Plan may be amended,
altered or discontinued by the Plan Administrator, but no amendment, alteration
or discontinuance may be made which would (i) impair the rights of an optionee
under an option previously granted without the optionee's or recipient's
consent, except such an amendment made to qualify the Plan for the exemption
provided by Rule 16b-3 or (ii) disqualify the Plan from the exemption provided
by Rule 16b-3. Any amendment that will permit the granting of options to a class
of persons other than those currently eligible to receive options under this
Plan or that would cause this Plan to no longer comply with Rule 16b-3, requires
the approval of a majority of the shareholders of the Company.
Changes in Capitalization; Change in Control. The Plan provides that,
in the event of any change in corporate capitalization, such as stock split, or
a corporate transaction, such as any merger, consolidation, share exchange,
separation, spin-off or other distribution of stock or property of the Company,
or any reorganization or partial or complete liquidation of the Company, the
Plan Administrator shall proportionally adjust the option rights and may make
such substitutions or adjustments in the aggregate number and kind of shares
reserved for issuance under the Plan and in the number, kind and option price of
shares subject to outstanding stock options, as may be determined to be
appropriate by the Plan Administrator. The Plan also provides that in the event
of a change in control (as defined in the Plan) of the Company, any stock
options outstanding as of the date of the change of control which are not then
exercisable and vested will become fully exercisable and vested.
Federal Income Tax Consequences of the Plan. The following discussion
is intended only as a brief summary of the federal income tax rules relevant to
stock options and participation in the Plan. This discussion is general in
nature and does not address issues related to the tax circumstances of any
particular employee. The discussion is based on federal income tax laws in
effect on the date hereof and is, therefore, subject to possible future changes
in law. This discussion does not address state, local or foreign consequences.
ISO's. An optionee will not recognize any income upon either
grant or exercise of an ISO, although the exercise may subject the optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time of exercise over the purchase
price of the shares is included in income for purposes of the alternative
minimum tax. The treatment of any gain realized upon sale or other disposition
of the Common Stock received upon exercise of an ISO will depend on the holding
period. If the optionee does not dispose of the stock received within either one
year after exercise of the ISO or two years after grant, any gain realized upon
disposition will be characterized as long-term capital gain. If the optionee
disposes of his or her shares within either one year after exercise of the ISO
or two years after grant, such disposition will be a disqualifying disposition.
In the case of a disqualifying disposition, the portion of the gain realized on
disposition equal to the excess of the fair market value of the shares at the
time the ISO was exercised over the option price will be ordinary income taxable
as compensation in the year of disposition. The balance, if any, of the gain
will be capital gain. If the optionee sells the shares in a disqualifying
disposition at a price that is below the fair market value of the shares at the
time the ISO was exercised, the optionee's ordinary income will be limited to
the excess of the amount realized upon the disposition over the adjusted basis
in the shares. In the event of a disqualifying disposition in which ordinary
income is realized by the optionee, the Company will only withhold income taxes
from the optionee's compensation with respect to that ordinary income element if
the optionee elects to have withholding imposed. The Company is entitled to a
deduction with respect to an ISO only in the taxable year of the Company in
which a disqualifying disposition occurs. In that event, the deduction would be
equal to the ordinary income, if any, recognized by the optionee upon
disposition of the shares, provided that the deduction is not otherwise
disallowed under the Code.
Nonqualified Stock Options. An optionee will not recognize any
income upon either grant or vesting of a Nonqualified Stock Option. Upon
exercise of any part of a Nonqualified Stock Option, the optionee will recognize
ordinary income in an amount equal to the difference between the option exercise
price and the then fair market value of the shares acquired. The Company must
withhold taxes from the optionee's compensation with respect to the ordinary
income recognized by the optionee upon exercise. In general, upon a subsequent
disposition of the shares, the optionee's basis for determining taxable gain or
loss would be the amount paid for such shares plus the amount that was
includable in the optionee's income at the time of exercise. Any gain recognized
on such disposition would generally be taxed as long-term or short-term capital
gain depending on the length of time the optionee is deemed to have held these
shares and the holding period in effect at the time. In determining the amount
of consideration paid to the optionee, the fair market value of the stock on the
date of exercise is used, except that in the case of an optionee subject to the
six month short-swing profit recovery provisions of Section 16(b) of the
Exchange Act (generally officers and directors of the Company), the fair market
value will be determined six months after the date on which the option was
granted (if such date is later than the exercise date) unless such optionee
elects to be taxed based on the fair market value at the date of exercise. Any
such election under Section 83(b) of the Code must be made and filed with the
Internal Revenue Service within 30 days after exercise in accordance with the
regulations under Section 83(b) of the Code. The Company will be entitled to a
deduction for federal income tax purposes upon exercise of a Nonqualified Stock
Option in an amount equal to the ordinary income recognized by the optionee,
provided that the deduction is not otherwise disallowed under the Code.
New Plan Benefits. The Board of Directors, upon the recommendation of
the Compensation Committee, on March 20, 1996, after adoption of the Plan,
granted the following options to certain officers of the Company:
Officer Number of Shares
R. Bruce Dewey 25,000 Shares
Senior Vice President &
General Counsel
John W. Kaddaras 15,000 Shares
Executive Vice President
William S. Rafferty 25,000 Shares
Senior Vice President-
Marketing
Stephen M. Shea 25,000 Shares
Senior Vice President-
Finance
It cannot be determined at this time what benefits or amounts, if any, will be
received by or allocated to any other persons or group of persons under the Plan
or what benefits or amounts would have been received by or allocated to any
other persons or group of persons for the last fiscal year if the Plan had been
in effect. These determinations will be made by the Plan Administrator. On April
4, 1996, the closing price of the Company's Common Stock on the New York Stock
Exchange was 13 1/2.
The Plan is attached hereto as Exhibit A and should be read in its
entirety by shareholders.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.
3. Approval of Appointment of Independent Public Accountants
The Board of Directors of the Company has voted to appoint the
accounting firm of GrantThornton as independent public accountants to audit the
financial statements of the Company for the year ending December 31, 1996, and
recommends that the shareholders of the Company approve such appointment at the
Annual Meeting of the Company. Although approval by the shareholders of the
appointment of independent public accountants is not required, the Company has
followed the practice of submitting such appointment for approval by the
shareholders. The persons named in the accompanying proxy intend, subject to the
discretionary authority above, to vote FOR the Approval of the Appointment of
GrantThornton. If such approval is not obtained, the Board of Directors of the
Company will reconsider its appointment of GrantThornton. A representative of
GrantThornton has been invited and is expected to be present at the Annual
Meeting where he or she will have an opportunity to make a statement if he or
she desires, and he or she will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.
4. Other Matters
No business other than that set forth in the attached Notice of Annual
Meeting is expected to be acted upon, but should any other matters requiring a
vote of shareholders be properly brought before the Annual Meeting or any
postponement or adjournment thereof, the persons named in the accompanying proxy
will vote thereon according to their best judgment in the interest of the
Company.
VOTE REQUIRED
The Company's By-Laws provide that the presence of the holders of a
majority of the issued and outstanding stock of the Company entitled to vote at
the Annual Meeting, present in person or represented by a proxy, shall
constitute a quorum for the Annual Meeting and that the vote of the shareholders
who hold a majority of the voting power present in person or represented by
proxy at the Annual Meeting and entitled to vote will decide any question
brought before the Annual Meeting, unless otherwise provided by statute or the
Company's Restated Certificate of Incorporation or By-Laws.
The nominees for election as directors of the Company at the Annual
Meeting who receive the greatest number of votes cast will be elected as
directors for the eight (8) positions on the Board of Directors of the Company
to be filled. The approval of the stock option plan and the appointment of the
independent accountants each will be approved by the affirmative vote of a
majority of the shares present in person or represented by proxy at the Annual
Meeting and entitled to vote thereon.
Where the quorum requirement set forth above is met, broker non-votes
will have no effect on the outcome of the election of directors or the
ratification of the appointment of the independent accountants because the
matters to be acted upon are routine matters for which brokers have the
discretion to vote on behalf of beneficial owners in the absence of instructions
from beneficial owners. Abstentions will have no effect on the outcome of such
election, but will have the same effect as a negative vote with respect to the
approval of the stock option plan and the ratification of the appointment of the
independent accountants.
April 5, 1996 MESTEK, INC.
EXHIBIT A: PROPOSED MESTEK, INC. 1996 STOCK OPTION PLAN
This 1996 Stock Option Plan (the "Plan") provides for the grant of
options to acquire shares of Common Stock, without par value (the "Common
Stock"), of Mestek, Inc., a Pennsylvania corporation (the "Company"). Stock
options granted under this Plan that qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), are referred to in this Plan as
"Incentive Stock Options." Incentive Stock Options and stock options that do not
qualify under Section 422 of the Code ("Non-Qualified Stock Options") granted
under this Plan are referred to as "Options").
1. Purposes. The purposes of this Plan are to retain the services of
valued key employees and consultants of the Company, and such other persons as
the Plan Administrator shall select in accordance with Section 3 below, to
encourage such persons to acquire a greater proprietary interest in the Company,
thereby strengthening their incentive to achieve the objectives of the
shareholders of the Company, and to serve as an aid and inducement in the hiring
of new employees, consultants and other persons selected by the Plan
Administrator.
2. Administration. This Plan shall be administered by the Board of
Directors of the Company (the "Board"), except that the Board may, in its
discretion, establish a committee composed of not less than two "disinterested
persons" who are members of the Board or other persons to administer this Plan,
which committee (the "Committee") may be an executive, compensation or other
committee, including a separate committee especially created for this purpose.
The Committee shall have such of the powers and authority vested in the Board
hereunder as the Board may delegate to it (including the power and authority to
interpret any provision of this Plan or of any Option). The members of any such
Committee shall serve at the discretion of the Board. The Board, or the
Committee if one has been established by the Board, are referred to in this Plan
as the "Plan Administrator." No person shall serve as a member of the Plan
Administrator if his or her service would disqualify this Plan from eligibility
under Securities and Exchange Commission Rule 16b-3, as amended from time to
time, or any successor rule or regulatory requirements or under Section 162(m)
of the Code; provided, that the Plan Administrator shall consist of at least the
minimum number of persons required by Securities and Exchange Commission Rule
16b-3, as amended, or any successor rule or regulatory requirements.
Subject to the provisions of this Plan, and with a view to effecting
its purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to: (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) determine the individuals to whom Options shall
be granted under this Plan and whether the Option is an Incentive Stock Option
or a Non-Qualified Stock Option; (f) determine the time or times at which
Options shall be granted under this Plan; (g) determine the number of shares of
Common Stock subject to each Option, the exercise price of each Option, the
duration of each Option and the times at which each Option shall become
exercisable; (h) determine all other terms and conditions of Options; and (i)
make all other determinations necessary or advisable for the administration of
this Plan. All decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants in this Plan
and on their legal representatives, heirs and beneficiaries.
3. Eligibility. Incentive Stock Options may be granted to any
individual who, at the time the Option is granted, is an employee of the Company
or any Related Corporation (as defined below), including employees who are
directors of the Company ("Employees"). Non-Qualified Stock Options may be
granted to Employees and to such other persons, including directors of the
Company, who are not Employees, as the Plan Administrator shall select. Options
may be granted in substitution for outstanding Options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization between such other corporation and the Company or any
subsidiary of the Company. Options also may be granted in exchange for
outstanding Options. Any person to whom an Option is granted under this Plan is
referred to as an "Optionee."
As used in this Plan, the term "Related Corporation," when
referring to a subsidiary corporation, shall mean any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company if,
at the time of the granting of the Option, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing eighty percent
(80%) or more of the total combined voting power of all classes of stock of one
of the other corporations in such chain.
4. Stock. Subject to approval of the Plan by shareholders of the
Company, options to purchase a maximum of 500,000 shares of the Company's
authorized but unissued, or re-acquired, Common Stock may be issued pursuant to
the Plan, subject to adjustment as provided in Section 5.13(a) below; provided,
that any shares of Common Stock received or withheld by the Company as payment
for shares of Common Stock purchased upon exercise of Options pursuant to
Section 5.9 below shall be added to the number of such shares as to which
Options may be granted. The number of shares with respect to which Options may
be granted hereunder is subject to adjustment as set forth in Section 5.13
below. In the event that any outstanding Option expires or is terminated for any
reason, the shares of Common Stock allocable to the unexercised portion of such
Option may again be subject to an Option to the same Optionee or to a different
person eligible under Section 3 above.
5. Terms and Conditions of Options. Each Option granted under this Plan
shall be evidenced by a written agreement approved by the Plan Administrator
(the "Agreement"). Agreements may contain such additional provisions, not
inconsistent with this Plan, as the Plan Administrator in its discretion may
deem advisable. All Options also shall comply with the following requirements.
5.1 Number of Shares and Type of Option. Each Agreement shall
state the number of shares of Common Stock to which it pertains and whether the
Option is intended to be an Incentive Stock Option or a Non-Qualified Stock
Option. In the absence of action to the contrary by the Plan Administrator in
connection with the grant of an Option, all Options shall be Non-Qualified Stock
Options. The aggregate fair market value (determined at the Date of Grant, as
defined below) of the stock with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year shall
not exceed such limit as may be prescribed by the Code as it may be amended from
time to time. Any Option which exceeds the annual limit shall not be void but
rather shall be a Non-Qualified Stock Option.
5.2 Date of Grant. Each Agreement shall state the date the
Plan Administrator has deemed to be the effective date of the Option for
purposes of this Plan (the "Date of Grant").
5.3 Option Price. Each Agreement shall state the price per
share of Common Stock at which it is exercisable. The exercise price shall be
fixed by the Plan Administrator at whatever price the Plan Administrator may
determine in the exercise of its sole discretion; provided, that the per share
exercise price for an Incentive Stock Option shall not be less than the fair
market value per share of the Common Stock at the Date of Grant as determined by
the Plan Administrator in good faith; provided further, that with respect to
Incentive Stock Options granted to greater-than-ten percent (>10%) shareholders
of the Company (as determined with reference to Section 424(d) of the Code), the
exercise price per share shall not be less than one hundred ten percent (110%)
of the fair market value per share of the Common Stock at the Date of Grant;
and, provided further, that Incentive Stock Options granted in substitution for
outstanding options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization
involving such other corporation and the Company or any subsidiary of the
Company may be granted with an exercise price equal to the exercise price for
the substituted option of the other corporation, subject to any adjustment
consistent with the terms of the transaction pursuant to which the substitution
is to occur.
5.4 Duration of Options. At the time of the grant of the
Option, the Plan Administrator shall designate, subject to Section 5.7 below,
the expiration date of the Option, which date shall not be later than ten (10)
years from the Date of Grant in the case of Incentive Stock Options; provided,
that the expiration date of any Incentive Stock Option granted to a
greater-than-ten percent (>10%) shareholder of the Company (as determined with
reference to Section 424(d) of the Code) shall not be later than five (5) years
from the Date of Grant. In the absence of action to the contrary by the Plan
Administrator in connection with the grant of a particular Option, and except in
the case of Incentive Stock Options as described above, all Options granted
under this Plan shall expire ten (10) years from the Date of Grant.
5.5 Vesting Schedule. Except as set forth in Section 5.6
below, no Option shall be exercisable until it has vested. The vesting schedule
for each Option shall be specified by the Plan Administrator at the time of
grant of the Option and, in the case of employee optionees, provide for
continuous employment of the Optionee during the vesting period, except as set
forth in Section 5.6 below; provided, that if no vesting schedule is specified
at the time of grant, the Option shall vest according to the following schedule:
Percentage of
Number of Years Total Option to
Following Date of Grant be Exercisable
1 20%
2 40%
3 60%
4 80%
5 100%
5.6 Acceleration of Vesting. The vesting of one or more
outstanding Options may be accelerated by the Plan Administrator at such times
and in such amounts as it shall determine in its sole discretion. If an Employee
Optionee's employment terminates by reason of death or Disability (as defined in
Section 5.7 below), any Option held by such Employee Optionee who has been
Continuously Employed by the Company or Related Corporation for a minimum of two
(2) years shall become fully vested and exercisable and may thereafter be
exercised during the term of the Option set forth in Section 5.7 below.
"Continuously Employed" shall mean the absence of any interruption or
termination of service. Continuous Employment with the Company or Related
Corporation shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Company or Related
Corporation or in the case of transfers between locations of the Company or
between the Company, Related Corporations or their successors, provided that the
Optionee continues to be an employee of the Company or any Related Corporation.
The vesting of Options also shall be accelerated under the circumstances
described in Section 5.13 and 5.14 below.
5.7 Term of Option. Vested Options shall terminate, to the
extent not previously exercised, upon the occurrence of the first of the
following events: (i) the expiration of the Option, as designated by the Plan
Administrator in accordance with Section 5.4 above; (ii) the expiration of
ninety (90) days from the date of an Optionee's termination of employment or
contractual relationship with the Company or any Related Corporation for any
reason whatsoever other than death or Disability (as defined below) unless, in
the case of a Non-Qualified Stock Option, the exercise period is extended by the
Plan Administrator until a date not later than the expiration date of the
Option; or (iii) the expiration of one (1) year from (A) the date of death of
the Optionee or (B) cessation of an Optionee's employment or contractual
relationship by reason of Disability (as defined below) unless, in the case of a
Non-Qualified Stock Option, the exercise period is extended by the Plan
Administrator until a date not later than the expiration date of the Option. If
an Optionee's employment or contractual relationship is terminated by death, any
Option held by the Optionee shall be exercisable only by the person or persons
to whom such Optionee's rights under such Option shall pass by the Optionee's
will or by the laws of descent and distribution of the state or county of the
Optionee's domicile at the time of death. "Disability" shall mean that a person
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than twelve (12) months. The Plan Administrator shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination of
Disability, the Board shall, for purposes of the Plan, determine the date of an
Optionee's termination of employment or contractual relationship. Unless
accelerated in accordance with Section 5.6 above, unvested Options shall
terminate immediately upon termination of employment of the Optionee by the
Company for any reason whatsoever, including death or Disability.
If, in the case of an Incentive Stock Option, an Optionee's relationship
with the Company
changes (e.g., from an Employee to a non-employee, such as a consultant), such
change shall not constitute a termination of an Optionee's employment with the
Company, but rather of the Optionee's Incentive Stock Option which shall then be
deemed a Non-Qualified Stock Option. For purposes of this Section 5.7, transfer
of employment between or among the Company and/or any Related Corporation shall
not be deemed to constitute a termination of employment with the Company or any
Related Corporation. For purposes of this Section 5.7, employment shall be
deemed to continue while the Optionee is on military leave, sick leave or other
bona fide leave of absence (as determined by the Plan Administrator). The
foregoing notwithstanding, with respect to Incentive Stock Options, employment
shall not be deemed to continue beyond the first ninety (90) days of such leave,
unless the Optionee's re-employment rights are guaranteed by statute or by
contract.
5.8 Exercise of Options. Options shall be exercisable, either
all or in part, at any time after vesting until termination; provided, that
Optionee must comply with the six (6) month holding period requirements of
Section 16(b) of the Exchange Act and Rule 16b-3 thereunder. If less than all of
the shares included in the vested portion of any Option are purchased, the
remainder may be purchased at any subsequent time prior to the expiration of the
Option term. No portion of any Option for less than one hundred (100) shares (as
adjusted pursuant to Section 5.13 below) may be exercised; provided, that if the
vested portion of any Option is less than one hundred (100) shares, it may be
exercised with respect to all shares for which it is vested. Only whole shares
may be issued pursuant to an Option, and to the extent that an Option covers
less than one (1) share, it is unexercisable. Options or portions thereof may be
exercised by giving to the Company an executed notice of election to exercise,
which notice shall specify the number of shares to be purchased, and be
accompanied by payment in the amount of the aggregate exercise price for the
Common Stock so purchased, which payment shall be in the form specified in
Section 5.9 below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to any Optionee, or to his personal
representative, until the aggregate exercise price has been paid for all shares
for which the Option shall have been exercised and adequate provision has been
made by the Optionee for satisfaction of any tax withholding obligations
associated with such exercise. During the lifetime of an Optionee, Options are
exercisable only by the Optionee.
5.9 Payment upon Exercise of Option. Upon the exercise of any
Option, the aggregate exercise price shall be paid to the Company in cash or by
certified or cashier's check. In addition, upon approval of the Plan
Administrator, an Optionee may pay for all or any portion of the aggregate
exercise price by (i) delivering to the Company shares of Common Stock
previously held by such Optionee, (ii) having shares withheld from the amount of
shares of Common Stock to be received by the Optionee, (iii) delivering an
irrevocable subscription agreement obligating the Optionee to take and pay for
the shares of Common Stock to be purchased within one (1) year of the date of
such exercise or (iv) complying with any other payment mechanisms as the Plan
Administrator may approve from time to time. The shares of Common Stock received
or withheld by the Company as payment for shares of Common Stock purchased upon
the exercise of Options shall have a fair market value at the date of exercise
(as determined by the Plan Administrator) equal to the aggregate exercise price
(or portion thereof) to be paid by the Optionee upon such exercise.
5.10 Rights as a Shareholder. An Optionee shall have no rights
as a shareholder with respect to any shares covered by an Option until such
Optionee becomes a record holder of such shares, irrespective of whether such
Optionee has given notice of exercise. Subject to the provisions of Section 5.13
and 5.14 below, no rights shall accrue to an Optionee and no adjustments shall
be made on account of dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights declared on, or
created in, the Common Stock for which the record date is prior to the date the
Optionee becomes a record holder of the shares of Common Stock covered by the
Option, irrespective of whether such Optionee has given notice of exercise.
5.11 Transfer of Option. Options granted under this Plan and
the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by applicable laws of descent and distribution,
as defined by the Code, or the Employee Retirement Income Security Act, or the
rules and regulations thereunder, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any Option or of any right or privilege
conferred by this Plan contrary to the provisions hereof, or upon the sale, levy
or any attachment or similar process upon the rights and privileges conferred by
this plan, such Option shall thereupon terminate and become null and void.
5.12 Securities Regulation and Tax Withholding
5.12.1 Shares shall not be issued with respect to
an Option unless the exercise of such
Option and the issuance and delivery of such shares shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, as
amended, the rules and regulations thereunder and the requirements of any stock
exchange upon which such shares may then be listed, and such issuance shall be
further subject to the approval of counsel for the Company with respect to such
compliance, including the availability of an exemption from registration for the
issuance and sale of such shares. The inability of the Company to obtain from
any regulatory body the authority deemed by the Company to be necessary for the
lawful issuance and sale of any shares under this Plan, or the unavailability of
an exemption from registration for the issuance and sale of any shares under
this Plan, shall relieve the Company of any liability with respect to the
non-issuance or sale of such shares.
As a condition to the exercise of an Option,
the Plan Administrator may require
the Optionee to represent and warrant in writing at the time of such exercise
that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with federal and state securities laws. THE COMPANY HAS
NO OBLIGATION TO UNDERTAKE REGISTRATION OF THE OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.
5.12.2 As a condition to the exercise of any Option
granted under this Plan, the Optionee
shall make such arrangements as the Plan Administrator may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise.
5.12.3 The issuance, transfer or delivery of
certificates of Common Stock pursuant to the
exercise of Options may be delayed, at the discretion of the Plan Administrator,
until the Plan Administrator is satisfied that the applicable requirements of
the federal and state securities laws and the withholding provisions of the Code
have been met.
5.13. Stock Dividend, Reorganization or Liquidation
5.13.1 If (i) the Company shall at any time be
involved in a transaction described in
Section 4.24(a) of the Code (or any successor provision) or any "corporate
transaction" described in the regulations thereunder, (ii) the Company shall
declare a dividend payable in, or shall subdivide or combine, its Common Stock
or (iii) any other event with substantially the same effect shall occur, then
the Plan Administrator shall proportionately adjust the number of shares of
Common Stock authorized for issuance under this Plan pursuant to section 4
above, and shall further proportionately adjust the number of shares of Common
Stock and/or the exercise price per share with respect to each Option then
outstanding so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, all without
further action on the part of the Plan Administrator, the Company or its
shareholders.
5.13.2 If the Company is liquidated or dissolved,
the Plan Administrator shall allow the
holders of any outstanding Options to exercise all or any part of the unvested
portion of the Options held by them; provided, that such Options must be
exercised prior to the effective date of such liquidation or dissolution. If the
Option holders do not exercise their Options prior to such effective date, each
outstanding Option shall terminate as of the effective date of the liquidation
or dissolution.
5.13.3 The foregoing adjustments in the shares
subject to Options shall be made by the
Plan Administrator, or by any successor administrator of this Plan, or by the
applicable terms of any assumption or substitution document.
5.13.4 The grant of an Option shall not affect
in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or any part of its business or assets.
5.14 Change in Control; Extraordinary Dividend
5.14.1 Change in Control. If at any time there is a
Change in Control (as defined below)
of the Company, all Options shall accelerate and become fully vested and
immediately exercisable for the duration of the Option term. For purposes of
this Subsection 5.14.1, "Change in Control" shall mean either one of the
following: (i) When any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than a shareholder of the Company on the date
of this Plan, the Company, a Subsidiary or an employee benefit plan of the
Company, including any trustee of such plan acting as trustee) becomes, after
the date of this Plan, the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined voting power of the
Company's then outstanding securities; or (ii) the occurrence of a transaction
requiring shareholder approval, and involving the sale of all or substantially
all of the assets of the Company or the merger of the Company with or into
another corporation.
5.14.2 Declaration of Extraordinary Dividend.
If at any time the Company declares an Extraordinary Dividend (as defined
below), all Options shall accelerate and thereupon become fully vested and
immediately exercisable for the duration of the Option term. For purposes of
this Subsection 5.14.2, "Extraordinary Dividend" shall mean a cash dividend
payable to holders of record of the Common Stock in an amount in excess of ten
percent (10%) of the then fair market value of the Company's Common Stock. The
fair market value of the Company's Common Stock shall be determined in good
faith by the Board.
6. Effective Date; Term. This Plan is effective March 20, 1996, the
date of approval by Board of Directors of the Company, so long as it is
subsequently approved by the affirmative vote of the shareholders of the Company
within one year thereof. Incentive Stock Options may be granted by the Plan
Administrator from time to time from the effective date until ten (10) years
thereafter. Non-Qualified Stock Options may be granted until this Plan is
terminated by the Board in its sole discretion. Termination of this Plan shall
not terminate any Option granted prior to such termination.
7. No Obligations to Exercise Option. The grant of an Option
shall impose no obligation upon the Optionee to exercise such Option.
8. No Right to Options or to Employment. The grant of any Options under
this Plan shall be exclusively within the discretion of the Plan Administrator,
and nothing contained in this Plan shall be construed as giving any person any
right to participate under this Plan. The Plan shall not confer on any Optionee
any right with respect to continuation of any employment or contractual
relationship with the Company or any Related Corporation, nor shall it interfere
in any way with the Company's or, where applicable, a Related Corporation's
right to terminate any Optionee's employment or contractual relationship at any
time, which right is hereby reserved.
9. Application of Funds. The proceeds received by the Company
from the sale of Common Stock issued upon the exercise of Options shall be used
for general corporate purposes, unless otherwise directed by the Board.
10. Indemnification of Plan Administrator. In addition to all other
rights of indemnification they may have as members of the Board, members of the
Plan Administrator shall be indemnified by the Company for all reasonable
expenses and liabilities of any type or nature, including reasonable attorneys'
fees, incurred in connection with any action, suit or proceeding to which they
or any of them are a party by reason of, or in connection with, this Plan or any
Option granted under this Plan, and against all amounts paid by them in
settlement thereof (provided that such settlement is approved by independent
legal counsel selected by the Company), except to the extent that such expenses
relate to matters for which it is adjudged that such Plan Administrator member
is liable for willful misconduct; provided, that within fifteen (15) days after
the institution of any such action, suit or proceeding, the Plan Administrator
member involved therein shall, in writing, notify the Company of such action,
suit or proceeding, so that the Company may have the opportunity to make
appropriate arrangements to prosecute or defend the same.
11. Amendment of Plan. The Plan Administrator may, at any time, modify,
alter, amend, discontinue or terminate this Plan and options granted under this
Plan, including, without limitation, such modifications or amendments as are
necessary to maintain compliance with applicable statutes, rules or regulations;
provided, that no amendment with respect to an outstanding Option shall be made
over the objection of the Optionee thereof; and provided further, that, the
approval of the holders of a majority of the Company's outstanding shares of
voting capital stock represented at a meeting at which a quorum is present is
required within twelve (12) months before or after the adoption by the Plan
Administrator of any amendment that will permit the granting of Options to a
class of persons other than those currently eligible to receive Options under
this Plan or that would cause this Plan to no longer comply with Securities and
Exchange Commission Rule 16b-3, as amended, or any successor rule or other
regulatory requirements. Without limiting the generality of the foregoing, the
Plan Administrator may modify grants to persons who are eligible to receive
Options under this Plan who are foreign nationals or employed outside the United
States to recognize differences in local law, tax policy or custom.
