MESTEK, INC.
GENERAL OFFICES
260 North Elm Street
Westfield, Massachusetts 01085
April 4, 1997
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
May 22, 1997
Thursday
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 2, 1997, 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
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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 nine (9) directors to be elected at the Annual Meeting to
be held May 22, 1997. 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.
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, 1996, are included in the Company's 1996 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 1998 must be received at the Company's General
Offices no later than December 31, 1997 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 51 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 45 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,
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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 45 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 40 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 to 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, 1996, 1995 and 1994, of those persons who were at
December 31, 1996 (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, 1996. Mr. S. B. Reed, formerly
Executive Vice President of the Company left the employ of the Company in April,
1996, and continues to serve the Company as a Director and pursuant to a
continuing consulting arrangement.
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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 Annual All other
Fiscal Yr Salary($) Bonus($)(1) Compensation(2)Compensation(3)
John E. Reed 1996 262,000 540,000 - 7,119
Chairman of the 1995 262,000 462,300 - 7,164
Board, President 1994 262,250 350,000 - 7,182
and Chief Executive
Officer (4)
William S. 1996 124,800 117,335 - 9,494
Rafferty, Senior 1995 120,120 75,690 - 9,474
Vice President- 1994 110,500 107,775 - 9,491
Marketing
James A. Burk 1996 99,000 136,200 - 8,394
Vice President 1995 95,850 82,740 - 9,474
1994 92,130 121,680 - 9,197
R. Bruce Dewey 1996 118,375 69,000 - 8,915
Senior Vice 1995 111,875 61,230 - 8,653
President and 1994 106,400 37,825 - 7,214
General Counsel
Stephen M. Shea 1996 104,000 69,000 - 8,546
Senior Vice 1995 100,100 61,230 - 7,917
President-Finance 1994 95,050 50,325 - 6,547
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
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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 1996 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.M. Shea and R.B. Dewey were the only participants in the
Executive Officer Bonus Policy for 1996 and Messrs. J.E. Reed, S.M. Shea and
R.B. Dewey are the only executive officers of Mestek eligible to participate for
1997. Mr. J.E. Reed is contractually entitled to participate in the Executive
Officer Bonus Policy. In 1996, Mr. J.E. Reed was entitled to receive ten percent
(10%) under the first tier bonus and five percent (5%) 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 1996 and they are
the only executive officers anticipated to be awarded bonuses under the Key
Employee Bonus Policy for 1997. 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 1994, 1995 and 1996, which would include the incremental costs
to the Company of perquisites and personal
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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 may
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 1994, 1995 and 1996 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, 1996, 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 $62,700 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 $62,700 (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 1996 was $262,000, the same as 1995. The
contract provides for continuation of salary for six (6) months in the case of
death and for twelve (12) months, with the contractual bonus, described above,
in the case of incapacitation. The contract provides for Mr. J.E. Reed to be
furnished with the use of a Company automobile and to be reimbursed for
legitimate business expenses.
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OPTION GRANTS IN 1996
Number of Percentage of
Securities Total Options Exercise Grant Date
Underlying Granted to Price Expiration Present
Name Options Granted(1) Employees in 1996 ($/Share) Date Value (2)
- ---- ------------------ ----------------- --------- ---- ---------
John E. Reed - - - - -
William S. Rafferty 25,000 27.7778 $13.75 3/19/06 $181,775
James A. Burk - - - - -
R. Bruce Dewey 25,000 27.7778 $13.75 3/19/06 $181,775
Stephen M. Shea 25,000 27.7778 $13.75 3/19/06 $181,775
(1) The options listed were granted at an exercise price equal to the fair
market value of the Company's Common Stock on March 20, 1996, the date of grant,
pursuant to the Mestek, Inc. 1996 Stock Option Plan. Each of the grants vest in
five equal annual amounts of 5,000 shares beginning March 20, 1997. As of
December 31, 1996 none of the grants had vested.
(2) Options are valued using a Black-Scholes option pricing model which assumes
a historic three-year average volatility of 22.5%, the average dividend yield
for the three years ended December 31, 1996 of 0%, a 6.56% risk-free rate of
return (based on the ten-year U.S. Treasury note yield for the month of grant),
and an expected option life of 10 years. No adjustments are made for risk of
forfeiture or non-transferability. Options will have no actual value unless, and
then only to the extent that, the Common Stock price appreciates from the grant
date to the exercise date. If the grant date present values are realized, total
shareowner value will have appreciated by approximately $64.93 million, and the
value of the granted options reflected in the table will be approximately 0.8%
of the total shareowner appreciation.
DIRECTORS COMPENSATION
Directors of Mestek who are not employees were paid in 1996 an annual
retainer of $4,000 (paid quarterly), 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 a fee of $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.
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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. 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
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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 compensation of the Chief
Executive Officer in 1996 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 1996 did not increase over 1995. Base salaries for executive officers for
1996 rose from 1995 levels an average of 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 1996 was a fifteen percent (15%) return.
The specified return targets for the Key Employee Bonus Policy for 1996 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 1996, 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.
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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
1994, 1995 and 1996 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 recommended to the Board of Directors
early in 1996 the adoption of a stock option plan, the purpose of which is 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. That plan was
approved by the shareholders of the Company in May, 1996 and implemented.
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, 1996, 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 $62,700 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 $62,700 (as limited in accordance with the Employee Retirement Income
Security Act).
DAVID W. HUNTER, Chairman, A. WARNE BOYCE, WILLIAM J. COAD, Members
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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, 1991 and ended December 31, 1996. 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 12/31/96)
[GRAPHIC OMITTED]
1991 1992 1993 1994 1995 1996
MCC $100.00 89.87 94.94 98.73 118.99 167.09
S&P 500 $100.00 107.62 118.46 120.03 165.13 203.05
PEER GROUP $100.00 127.92 158.50 116.84 158.26 188.88
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 Company and Rudbeek intend to
amend the lease effective July 1, 1997 because of additions to the property to
be completed at that time. The amended lease increases the annual minimum net
base rent to $408,000, payable monthly, and will expire on June 30, 2010.
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. A subsidiary of 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
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$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, pursuant to a recently amended
lease for a net annual base rental of $324,600, payable monthly. Such lease
expires on December 31, 2004. 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 is negotiating a
longer term lease of the facility. 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. The Company
is negotiating a purchase of such equipment. 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 1996 and proposes to retain that firm during 1997.
David R. Macdonald, a director of the Company, retired as a partner in the
Washington, D.C. office of Baker & McKenzie in June, 1996.
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%)
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of the common stock of the Company as of April 2, 1997 are John E. Reed and
Stewart B. Reed, both 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. 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 Common Stock
as follows on April 2, 1997:
Amount and nature of Percent
Name and beneficial beneficial ownership of Class
Directors:
A. Warne Boyce 2,100 *
E. Herbert Burk 419,802 (1) 4.70%
William J. Coad 2,200 *
Winston R. Hindle, Jr. 5,500 *
David W. Hunter 13,330 (2) *
David M. Kelly 1,000 *
David R. Macdonald 3,000 *
John E. Reed 3,298,393 (3) 36.94%
Stewart B. Reed 2,181,937 (4) 24.43%
Executive Officers:
James A. Burk 33,594 *
R. Bruce Dewey 307 *
William S. Rafferty 1,000 *
Stephen M. Shea 3,000 *
All executive officers and
directors as a group
(13 persons) 5,965,163 66.80%
* less than 1%
(1) Excludes 137,500 shares of common stock held by a spousal trust, 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 and 13,307
shares of common stock held by a family trust for which he is not
trustee, to which he disclaims ownership. Excludes 1,712,691 shares
of common stock held by John E. Reed as 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
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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 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 trustee.
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, 1996, all applicable Section 16(a) filing requirements were
satisfied.
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
forth 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 nine (9). Nine
(9) of the current directors will stand for election at the Annual Meeting on
May 22, 1997. The Board of Directors recommends the election of the nine (9)
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 nine (9) 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 67 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
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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 78 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 65 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
recently became its Chairman. 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 66 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 a member of Mestek's
Executive Committee. Mr. Hindle is also a director of Keane, Inc., Boston,
Massachusetts and CP Clare Corporation of Beverly, Massachusetts.
David W. Hunter Age 68 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 M. Kelly Age 55 Director of Mestek since 1996
Mr. Kelly is currently the Chairman of the Board and Chief Executive
Officer of Matthews International Corporation, located in Pittsburgh,
Pennsylvania, and also served as President and
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Chief Operating Officer of Matthews International since 1995. Prior to his
employment with Matthews International, Mr. Kelly was employed by Carrier
Corporation for 22 years where he held a variety of executive positions, in the
United States and in Asia, in Marketing, Manufacturing and Operations. Mr. Kelly
received a Bachelor of Science in Physics from Boston College in 1964, a Master
of Science degree in Molecular Biophysics from Yale University in 1966, and a
Master of Business Administration from Harvard Business School in 1968. Mr.
Kelly also serves as a Director of various subsidiaries of Matthews
International, and the United Way of Allegheny County.
David R. Macdonald Age 67 Director of Mestek since 1986
Mr. Macdonald is Chairman and Chief Executive Officer of the David R.
Macdonald Foundation. In June, 1996, he retired as a partner in the Washington,
D.C. office of the law firm of Baker & McKenzie. 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.
John E. Reed Age 81 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 49 Director of Mestek since 1986
Through April 1996, Mr. S.B. Reed was employed as the Executive Vice
President of the Company and now serves as a consultant to 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 Mr. Boyce was
excused from one meeting due to illness.
The Board of Directors has four (4) standing committees: Audit,
Compensation, Executive and Nominating.
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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 two (2) meetings and consulted with each other and
management as necessary to discharge its duties throughout 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 met in December, 1996 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, and consults with each other and management as necessary to
discharge its duties. The current members of the Executive Committee are Messrs.
J.E. Reed (Chairman), S.B. Reed and Hindle.
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 consulted with each other and management as
necessary to discharge its duties during the last twelve months. The current
members of the Nominating Committee are Messrs. Boyce (Chairman), Coad and
Macdonald. In selecting candidates for election to the Board of Directors at
future annual meetings of shareholders,
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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 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, 1997, 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.
3. 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 nine (9) positions on the Board of Directors of the Company to
be filled. The appointment of the independent accountants 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.
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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
ratification of the appointment of the independent accountants.
April 4, 1997 MESTEK, INC.
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