MESTEK, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 1998
To The Shareholders of Mestek, Inc:
Please take notice that the Annual Meeting of the Shareholders of
Mestek, Inc. (the "Company") will be held at the Reed Institute, 152 Notre Dame
Street, Westfield, Massachusetts adjacent to the Company's headquarters, on
Tuesday, May 12, 1998 at 11:00 a.m. local time, for the following purposes:
1. To elect a Board of nine (9) Directors for one-year terms,
each to hold office until his or her successor is elected and
qualified or he or she shall resign or be removed.
2. To approve the appointment by the Board of Directors of
GrantThornton as independent accountants to audit the books of
the Company for the year ending December 31, 1998.
3. To transact such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
Pursuant to the By-Laws of the Company, the Board of Directors has, by
resolution, fixed the close of business on March 20, 1998 as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any postponement or adjournment thereof. Enclosed is your
copy of the Proxy Statement and the Annual Report of the Company, including the
financial statements for the year ended December 31, 1997 which has been mailed
to all shareholders. Please refer to it for information concerning the affairs
of the Company. The Annual Report does not constitute proxy soliciting material.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE SIGN THE
ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. THIS WILL NOT LIMIT YOUR RIGHT TO VOTE
IN PERSON AT THE ANNUAL MEETING.
By Order of the Board of Directors
Mestek, Inc.
R. BRUCE DEWEY, Secretary
260 North Elm Street
Westfield, Massachusetts
March 23, 1998
<PAGE>
MESTEK, INC.
GENERAL OFFICES
260 North Elm Street
Westfield, Massachusetts 01085
March 23, 1998
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
May 12, 1998
Tuesday
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 March 20, 1998, the record date. As of such date, there
were issued and outstanding 9,610,135 shares of Common Stock of the Company,
8,926,305 of which are entitled to vote. The Company is not entitled to vote the
683,830 shares of Common Stock held in the treasury, 500,000 of which are
reserved for the Mestek, Inc. 1996 Stock Option Plan.
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 nine (9)
directors to be elected at the Annual Meeting to be held May 12, 1998.
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,
1997, are included in the Company's 1997 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 1999 must be received at the Company's General
Offices no later than December 31, 1998 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 52 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 46 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 46 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 41 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, 1997, 1996 and 1995, of those persons who were at December 31, 1997
(a) the Chief Executive Officer of the Company and (b) the other four most
highly compensated executive officers of the Company who were serving in such
capacity at December 31, 1997, as determined by the Directors.
<PAGE>
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 LONG-TERM
PRINCIPAL POSITION COMPENSATION COMPENSATION
Securities Underlying
Options Granted All Other
Fiscal Salary Bonus Other (Shares) Compensation
Year ($) ($)(1) (2) (3) ($)(4)
John E. Reed 1997 262,000 623,000 - - 7,740
Chairman of the 1996 262,000 540,000 - - 7,119
Board, President 1995 262,000 462,300 - - 7,164
and Chief Executive
Officer (5)
William S. 1997 130,000 138,540 - - 23,863
Rafferty, Senior 1996 124,800 117,335 - 25,000 9,494
Vice President- 1995 120,120 75,690 - - 9,474
Marketing
James A. Burk 1997 102,350 163,350 - - 28,478
Vice President 1996 99,000 136,200 - - 8,394
1995 95,850 82,740 - - 9,474
R. Bruce Dewey 1997 124,875 115,950 - - 22,939
Senior Vice 1996 118,375 69,000 - 25,000 8,915
President and 1995 111,875 61,230 - - 8,653
General Counsel
Stephen M. Shea 1997 108,000 77,300 - - 16,494
Senior Vice 1996 104,000 69,000 - 25,000 8,546
President-Finance 1995 100,100 61,230 - - 7,917
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"). Under the Executive Officer Bonus Policy the bonus for an eligible
executive officer 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 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. Messrs. J.E. Reed, S.M. Shea and R.B. Dewey were the only
participants in the Executive Officer Bonus Policy for 1997 and they are the
only executive officers of Mestek eligible to participate under such Policy for
1998. Mr. J.E. Reed is contractually entitled to participate in the Executive
Officer Bonus Policy. In 1997, 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"). Under the Key
Employee Bonus Policy, the bonus for an eligible executive officer is 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. Messrs. Rafferty and J.A. Burk were awarded bonuses under the
Key Employee Bonus Policy for 1997 and they are the only executive officers
anticipated to be awarded bonuses under such Policy for 1998.
(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 1995, 1996 and 1997, 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 each of such individuals in the
Summary Compensation Table. Such perquisites may include, among others, the
compensation attributable to the personal use of a Company automobile and
compensation attributable to personal use of club memberships.
(3) In 1996, the Board of Directors recommended, and the shareholders approved,
the Mestek, Inc. 1996 Stock Option Plan which provides for the award of up to
500,000 shares of the Company's Common Stock to eligible individuals at the
discretion of the Board of Directors. Pursuant to the Plan, several key
employees of the Company were awarded stock options under the Plan. Among the
executive officers of the Company, Messrs. S.M. Shea, W.S. Rafferty and R.B.
Dewey received awards of stock options for the number of shares indicated in the
Summary Compensation Table. After the first year of the award, the stock options
vest over a five year period in equal increments of 20% of the total stock
option amount, and expire after ten years. The stock options are exercisable at
the option price which is equal to the price of the Common Stock as of the grant
date. For each of the executive officers who received such awards in 1996 the
exercise price of the option is $13.75 per share.
(4) In accordance with the revised proxy rules on executive officer compensation
adopted by the Securities and Exchange Commission, amounts of All Other
Compensation for 1995, 1996 and 1997 include 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 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, the Company's contributions on behalf of each
executive officer to the Mestek, Inc. Profit Sharing Plan, whereby the Company
contributes three percent (3%) of annual base salary up to the OASDI maximum of
$65,400 and six percent (6%) of annual base salary for amounts of compensation
in excess of the OASDI maximum of $65,400 (as limited in accordance with the
Employee Retirement Income Security Act), and premiums paid by the Company to
fund a Supplemental Executive Retirement Plan whereby eligible participants, if
they have not forfeited their rights by failing to continue employment with the
Company until attaining age 65 (subject to certain change of control
provisions), receive (i) a retirement benefit equal to $3,000 or $2,500
(depending upon eligibility) per month for life after retirement from the
Company, (ii) a "monthly survivor annuity" benefit upon death equal to half the
amount payable under the retirement benefit or (iii) a disability benefit equal
to the retirement benefit.
(5) 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 1997 was $262,000, the same as 1996. 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.
DIRECTORS COMPENSATION
Directors of Mestek who are not employees were paid in 1997 an annual
retainer of $4,000 (paid quarterly), a fee of $1,500 for each Board Meeting
attended (including subsidiary Boards) 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.
<PAGE>
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
It is the philosophy of the Company to establish and maintain compensation
programs that closely align the compensation of the Company's executive officers
with the financial and long-term interests of the Company's shareholders while
at the same time reflect the Company's core values and reward individuals for
outstanding contributions to the Company's profitability. Therefore to a large
extent, the Company relies on performance-based cash bonuses to compensate its
executive officers for their performance and contribution to the Company's
profitability, as well as the selective use of long-term incentives to even more
closely align the financial interests of the Company's senior executives with
those of the shareholders. The Compensation Committee of the Board of Directors
(the "Committee"), which consists entirely of non-employee Directors, annually
reviews the Company's executive officer compensation program, as well as the
levels of compensation to be paid to the Chief Executive Officer and other
executive officers, and makes recommendations to the entire Board of Directors
regarding compensation to be paid or awarded.
The Company's compensation program for executive officers consists of the
following elements: payments of annual salary, payment of annual
performance-based cash bonus based on the financial results of the Company as
measured against its pre-established business plans, long-term incentives and
certain other benefits, including a supplemental retirement program.
Base salary. The Compensation Committee annually reviews the annual base
salary of the Chief Executive Officer and the recommendations of the Chief
Executive Officer of the annual base salary of the Company's other executive
officers. The factors upon which the Compensation Committee bases its annual
salary recommendations to the entire Board of Directors include the individual
work performance of each of the respective officers in meeting or exceeding the
pre-established business plan goals. In particular, the majority factor in
assessing the annual base salary of the Chief Executive Officer is the
accomplishment of the sales, profitability and other goals set forth in the
business plan of the Company. The Compensation Committee also takes into account
the accomplishments of the Chief Executive Officer that may not have immediately
contributed to the profitability of the Company in the current year, but which
may contribute to the Company's long-term strategic goals. In 1997 the annual
base salary of the Chief Executive Officer remained unchanged despite the strong
performance and financial results of the Company in the previous years. However,
in keeping with the Company's philosophy of relying on performance-based cash
bonuses to motivate its senior executives, the Chief Executive Officer total
annual compensation increased in 1997 on the basis of higher performance-based
cash bonuses due to the Company's financial performance as discussed more fully
below.
Annual Bonus Plan. The bonus policies under which the Compensation Committee
makes its recommendations to the full Board of Directors regarding
performance-based cash bonuses are the Executive Officer Bonus Policy and the
Key Employee Bonus Policy.
The Compensation Committee annually determines the eligible executive
officers of the Company for participation in the Executive Officer Bonus Policy.
The Compensation Committee also establishes the targets by which the Company's
financial performance will be measured for purposes of the Executive Officer
Bonus Policy, utilizing a specified return on the Company's net investment in
its businesses. There are two separate tiers in the Executive Officer Bonus
Policy for each executive officer participating therein, based on the operating
profits of the Company. The first $5,000,000 of operating profits constitute the
first tier, and amounts in excess of $5,000,000 of operating profits constitute
the second tier. Each executive officer is assigned a percentage by the
Committee in both the first and second tier based on their respective levels of
responsibility, experience, and performance. The percentage of each
participating executive officer is applied to the amounts by which the Company's
operating profits, after deduction for all other bonuses, exceed the specified
targets of return on tangible net worth plus borrowed capital as of January 1st
of the fiscal year. The specified return target for the Executive Officer Bonus
Policy for 1997 was fifteen percent (15%) return. The percentages assigned to
the Chief Executive Officer are determined by an employment contract that is
reviewed annually by the Committee for renewal. In 1997, the Chief Executive
Officer was entitled to receive ten percent (10%) under the first tier bonus,
and five percent (5%) under the second tier bonus. The other executive officers
who participated in the Executive Officer Bonus Policy in 1997 were R. Bruce
Dewey and Stephen M. Shea. Messrs. Reed, Dewey and Shea are the only executive
officers entitled to participate in the Executive Officer Bonus Policy in 1998.
The Compensation Committee, based on the recommendations of the Chief
Executive Officer, also selects executive officers eligible to participate in
the Key Employee Bonus Policy, and establishes their respective participation
percentage, as well as the targets for the specified return on tangible net
assets employed. Each of the executive officers' respective participation
percentage is established by reference to his or her level of responsibility,
performance, and contribution to the profitability of the various business units
in which the executive officer is involved. The participation by executive
officers in the Key Employee Bonus Policy is based on their participation
percentage in the operating profits of the Company's individual business units
in excess of a specified return on tangible net assets employed in such business
unit. The specified return targets for the Key Employee Bonus Policy for 1997
vary by business unit, but were generally a twenty percent (20%) return. In
1997, William S. Rafferty and James A. Burk were the executive officers
participating in the Key Employee Bonus Policy and they are the only executive
officers eligible to participate in 1998.
As demonstrated in the Summary Compensation Table, the performance-based
cash bonuses paid to the Company's executive officers in 1997 are a major
portion of their respective total compensation and thus the Compensation
Committee's objective, of directly and objectively binding the compensation of
the executive officers to the Company's financial performance, has been
achieved.
Other Compensation. The Compensation Committee also relies on several other
compensation methods to retain executive talent critical to the Company's
operations by granting the opportunity to acquire a proprietary interest in the
Company to selected senior executives under the Mestek, Inc. 1996 Stock Option
Plan and by providing a supplemental retirement plan which provides a fixed
retirement benefit payable for the life of the participant after he or she
reaches age 65, with payments to any surviving spouse or dependent at 50% of the
amounts payable during the life of the participant and a long-term disability
benefit.
Stock Options granted under the Company's stock incentive plan, the Mestek,
Inc. 1996 Stock Option Plan, (which has previously been approved by the
shareholders) provide incentives to the senior executives receiving such options
in maximizing stock price appreciation of the Company's common stock thereby
closely aligning their interests with the long-term interests of the
shareholders. Such Options also serve to retain senior executives by vesting in
them a proprietary interest in the Company. Option exercise prices are set at
100% of the fair market value on the date of the grant. The options vest in 20%
increments annually after one year from the date of the grant, and thereafter
expire in ten years. The number of shares in each particular stock option is at
the discretion of the Compensation Committee and upon the recommendation of the
Chief Executive Officer. However, the total aggregate amount of stock options
granted under the Mestek, Inc. 1996 Stock Option Plan is limited to 500,000
shares. Options to acquire 90,000 shares under the Plan were granted in 1996. No
stock options were granted in 1997.
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 this 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 1995, 1996
and 1997 were presented, discussed and voted upon, and approved in an Executive
Session of the Board of Directors of the Company, Mr. J.E. Reed abstaining.
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 Profit Sharing Plan.
For the fiscal year ended December 31, 1997, 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 $65,400 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
$65,400 (as limited in accordance with the Employee Retirement Income Security
Act).
DAVID W. HUNTER, Chairman, A. WARNE BOYCE, WILLIAM J. COAD, Members
<PAGE>
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, 1992 and ended December 31, 1997. 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 12/31/97)
1992 1993 1994 1995 1996 1997
Mestek, Inc. 100.00 105.63 109.86 132.39 185.92 211.27
Peer Group 100.00 123.91 91.34 123.72 147.66 179.71
S&P 500 100.00 110.08 111.53 153.45 188.68 251.63
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 for an annual rental
of $24,360 that expired December 31, 1997, which lease is now on a month to
month basis pending negotiation. Mestek also leases certain equipment used in
the Westfield facilities pursuant to a lease from the Elizabeth C. Reed Trust
for an annual rental of $3,600 that expired December 31, 1997, and pursuant to a
lease from Machinery Rental Company for an annual rental of $24,888 that expired
December 31, 1997, both of which leases are now on a month to month basis
pending negotiation. 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") pursuant to an amended
lease for an annual minimum net base rental of $408,000, payable monthly.
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 from Sterling Realty Trust for an
annual rental of $5,700 that expired December 31, 1997, pursuant to a lease from
the Elizabeth C. Reed Trust for an annual rental of $3,000 that expired December
31, 1997 and pursuant to a lease from Machinery Rental Company for an annual
rental of $132,360 that expired December 31, 1997, all of which leases are now
on a month to month basis pending negotiation.
WRENS, GEORGIA. Mestek leases certain equipment used in its Wrens, Georgia
facility pursuant to a lease from Sterling Realty Trust for an annual rental of
$10,440 that expired December 31, 1997, pursuant to a lease from the Elizabeth
C. Reed Trust for an annual rental of $11,940 that expired December 31, 1997,
and pursuant to a lease from Machinery Rental Company for an annual rental of
$16,032 that expired December 31, 1997, all of which leases are now on a month
to month basis pending negotiation.
SOUTH WINDSOR, CONNECTICUT. Mestek leases its South Windsor, Connecticut
facility from MacKeeber Associates Limited Partnership ("MacKeeber"), a
Connecticut limited partnership, pursuant to an 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 for an
annual rental of $24,000 that expired December 31, 1997, which lease is now on a
month to month basis pending negotiation.
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., pursuant to a written lease
for an amount equivalent to an annual rental of $114,000, payable monthly. The
lease expires on December 31, 1999 with an option to renew for an additional two
years at an annual rental of $120,000, 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 1997 and proposes to retain that firm during 1998.
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%) of the common stock of the Company as of
March 20, 1998 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 March 20, 1998:
Amount and nature of Percent
Name and beneficial beneficial ownership of Class
Directors:
A. Warne Boyce 2,700 *
E. Herbert Burk 419,802 (1) 4.70%
William J. Coad 2,200 *
Winston R. Hindle, Jr. 8,000 *
David W. Hunter 13,330 (2) *
David M. Kelly 3,000 *
David R. Macdonald 8,000 *
John E. Reed 3,298,393 (3) 36.95%
Stewart B. Reed 2,192,287 (4) 24.56%
Executive Officers:
James A. Burk 33,594 *
R. Bruce Dewey 307 (5) *
William S. Rafferty 1,000 (5) *
Stephen M. Shea 3,000 (5) *
All executive officers and
directors as a group
(13 persons) 5,985,613 67.06%
* 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 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.
(5) Excludes 10,000 shares of common stock which have vested under the Mestek,
Inc. 1996 Stock Option Plan, but which have not been exercised.
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, 1997, all applicable Section 16(a) filing requirements were
satisfied, except one report of each of Mr. Hindle and Mr. S. B. Reed on Form 4
were filed untimely and one report of each of Messrs. Shea, Rafferty, Kaddaras
and Dewey on Form 5 regarding the grant of stock options were filed untimely.
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 12, 1998. 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 68 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 79 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 66 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 67 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 serves as a director of National Northeast
Corporation and MCS, Inc., subsidiaries of the Company. Mr. Hindle is also a
director of Keane, Inc., of Boston, Massachusetts and CP Clare Corporation of
Beverly, Massachusetts.
David W. Hunter Age 69 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 56 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 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, Elliott Corporation
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 82 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
and serves on the Boards of the Company's subsidiaries. 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 50 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 and serves as a director of National Northeast
Corporation and MCS, Inc., subsidiaries of the Company. 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. Hunter was excused from
the December meeting due to illness.
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 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),
Kelly 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, 1997 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), Hunter and
Macdonald. 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 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, 1998, 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 Articles 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.
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.
March 23, 1998 MESTEK, INC.
