SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party of than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Mestek, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14(a)-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
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/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amounts Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 18, 1999
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 18, 1999 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 Grant
Thornton as independent accountants to audit the books of the
Company for the year ending December 31, 1999.
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 26, 1999 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, 1998 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 26, 1999
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MESTEK, INC.
GENERAL OFFICES
260 North Elm Street
Westfield, Massachusetts 01085
March 26, 1999
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
May 18, 1999
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 26, 1999, the record date. As of such
date, there were issued and outstanding 9,610,135 shares of Common Stock of the
Company, 8,873,105 of which are entitled to vote. The Company is not entitled to
vote the 737,030 shares of Common Stock held in the treasury, 500,000 of which
are reserved for the Mestek, Inc. 1996 Stock Option Plan.
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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 18, 1999.
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, 1998, are included in the Company's 1998 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 2000 must be received at the Company's General
Offices no later than December 31, 1999 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 53 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.
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R. Bruce Dewey Age 47 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 47 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 42 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, 1998, 1997 and 1996, of those persons who were at
December 31, 1998 (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, 1998, as determined by the Directors.
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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 LONG-TERM
PRINCIPAL POSITION COMPENSATION COMPENSATION
(3)
Securities
Underlying
Options (4)
(1) (2) Granted All Other
Fiscal Yr. Salary($) Bonus($) Other (Shares) Compensation($)
---------- --------- -------- ----- -------- --------------
John E. Reed 1998 262,000 668,000 - - 7,656
Chairman of the 1997 262,000 623,000 - - 7,740
Board, President 1996 262,000 540,000 - - 7,119
and Chief Executive
Officer (5)
William S. 1998 149,635 98,750 - - 28,013
Rafferty, Senior 1997 130,000 138,540 - - 23,863
Vice President- 1996 124,800 117,335 - 25,000 9,494
Marketing
R. Bruce Dewey 1998 149,635 100,200 - - 23,995
Senior Vice 1997 124,875 115,950 - - 22,939
President and 1996 118,375 69,000 - 25,000 8,915
General Counsel
James A. Burk 1998 105,800 115,650 - - 28,901
Vice President 1997 102,350 163,350 - - 28,478
1996 99,000 136,200 - - 8,394
Stephen M. Shea 1998 119,890 66,800 - - 17,525
Senior Vice 1997 108,000 77,300 - - 16,494
President-Finance 1996 104,000 69,000 - 25,000 8,546
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
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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 1998
and they are the only executive officers of Mestek eligible to participate under
such Policy for 1999. Mr. J.E. Reed is contractually entitled to participate in
the Executive Officer Bonus Policy. In 1998, 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 1998 and they are the only
executive officers anticipated to be awarded bonuses under such Policy for 1999.
(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 1996, 1997 and 1998, 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 in 1996 for the number of shares
indicated in the Summary Compensation Table. In January, 1999, the Board granted
stock options for 25,000 shares to each of Messrs. Rafferty and Dewey and for
15,000 shares to Mr. Shea. After the first year of the awards, 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. All stock options are exercisable at
the applicable option price which is equal to the price of the Common Stock as
of the grant date, which for the awards in 1996 is $13.75 per share and for the
awards in 1999 is $20.00 per share.
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(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 1996, 1997 and 1998 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
$68,400 and six percent (6%) of annual base salary for amounts of compensation
in excess of the OASDI maximum of $68,400 (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 1998 was $262,000, the same as 1997. 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 or former employees of the
Company were paid in 1998 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.
For 1999, the annual retainer will be increased to $6,000 (paid quarterly). Mr.
Burk and Mr. S.B. Reed, directors and former officers of the Company, received
$24,000 and $120,000 respectively for consulting services performed for the
Company in 1998. 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. 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
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 Committee is dedicated to the belief
that the compensation of the Company's senior executives must be directly and
objectively based on the Company's performance while under their stewardship.
Through the establishment and refinement of a pay-for-performance program for
executive compensation, utilizing a compensation package including base pay and
significant incentive pay programs, the Company has to a large extent
accomplished the goals of aligning the financial and long-term interests of the
Company's shareholders with the financial interest of its senior executives.
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 base salary of the Chief Executive Officer
and the Company's other senior executive officers are set include the prior
performance in meeting or exceeding pre-established business plan goals, the
level of responsibility within the Company, and the contributions of the Chief
Executive Officer and each of the Company's executive officers which will
enhance the long range prospects of the Company, but which may not be
immediately apparent. In particular, the major 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. In
1998 the annual base salary of the Chief Executive Officer remained unchanged
despite the strong 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 1998 on the basis of
higher performance-based cash bonuses due to the Company's financial
performance.
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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 rate of 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 performance and responsibility. The percentage of each
participating executive officer is applied to the amounts by which the Company's
operating profits exceed the specified targets of return on tangible net worth
plus borrowed capital as of January 1st of the fiscal year, after deduction for
all other bonuses and goodwill which are eliminated from net worth for this
purpose. The specified return target for the Executive Officer Bonus Policy for
1998 was a 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 1998, 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 1998 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 1999.
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 performance,
responsibility 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 1998
vary by business unit, but were generally a twenty percent (20%) return. In
1998, 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 1999.
As demonstrated in the Summary Compensation Table, the
performance-based cash bonuses paid to the Company's executive officers in 1998
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.
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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 1996 Stock Option Plan;
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 through a long-term disability benefit;
and by providing individual policies for long-term disability insurance under
which each of the executive officers may receive a benefit of $3,000 per month
until age 65 in the event of a disability, subject to certain conditions
including continued employment with the Company.
Stock Options granted under 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 and thereby closely aligning their
interests with the long-term interests of the shareholders, and also serves 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 1998.
Options to acquire 65,000 shares under the Plan were granted in 1999.
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 its December meeting each year. The recommendations
of the Compensation Committee for each of 1996, 1997 and 1998 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, 1998, 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 $68,400 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
$68,400 (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
against the cumulative total return of the S&P Composite 500 Stock Index and our
"Peer Group", the S&P Building Materials Index for the period of five (5) fiscal
years commencing December 31, 1993 and ended December 31, 1998. 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 Mestek Common Stock, S&P 500, and S&P
Building Materials. Cumulative total return assumes reinvestment of dividends.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
Mestek, Inc., S&P 500, S&P Building Materials (Performance
results through 12/31/98) [GRAPHIC OMITTED]
Company / Index Dec93 Dec94 Dec95 Dec96 Dec97 Dec98
- ---------------------------------------------------------------------------
MESTEK INC 100 104.00 125.33 176.00 200.00 213.33
- ---------------------------------------------------------------------------
S&P 500 INDEX 100 101.32 139.40 171.40 228.59 293.91
- ---------------------------------------------------------------------------
BUILDING MATERIALS-500 100 73.71 99.85 119.16 145.03 154.17
- ---------------------------------------------------------------------------
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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 expired on June
30, 1998, but was extended to December 31, 1999. 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 leased
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 was on a month to month basis through the end of 1998. Mestek
acquired the equipment as of January 1, 1999. Mestek also leased 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 which lease was on a month to month basis through the end of 1998. Mestek
acquired the equipment as of January 1, 1999. Mr. Reed is the trustee of the
Elizabeth C. Reed Trust and his daughter is sole beneficiary. Mestek also leases
certain equipment pursuant to a lease from Machinery Rental Company for an
annual rental of $24,888 that expires December 31, 1999. John E. Reed is the
sole proprietor of Machinery Rental Company.
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 leased 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, and pursuant to a lease
from the Elizabeth C. Reed Trust for an annual rental of $3,000 that expired
December 31, 1997, both of which leases were on a month to month basis through
the end of 1998. Mestek acquired the equipment from both Trusts as of January 1,
1999. Mestek also leases certain equipment pursuant to a lease from Machinery
Rental Company for an annual rental of $132,360 that expires December 31, 1999.
WRENS, GEORGIA. Mestek leased 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, and pursuant to a lease from
the Elizabeth C. Reed Trust for an annual rental of $11,940 that expired
December 31, 1997, both of which leases were on a month to month basis through
the end of 1998. Mestek acquired the equipment from both Trusts as of January 1,
1999. Mestek also leases certain equipment pursuant to a lease from Machinery
Rental Company for an annual rental of $16,032 that expires December 31, 1999.
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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 expires December 31, 1999.
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 $120,000 payable monthly. The
lease was renewed through December 31, 2000. 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 1998 and proposes to retain that firm during 1999.
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 26, 1999 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.
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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 26, 1999:
Amount and nature of Percent
Name and beneficial beneficial ownership of Class
- ------------------- -------------------- --------
Directors:
A. Warne Boyce 2,700 *
E. Herbert Burk 403,802 (1) 4.55%
William J. Coad 3,200 *
Winston R. Hindle, Jr. 9,000 *
David W. Hunter 13,330 (2) *
David M. Kelly 3,000 *
David R. Macdonald 8,000 *
John E. Reed 3,298,393 (3) 37.17%
Stewart B. Reed 2,207,087 (4) 24.87%
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) 5,986,413 67.47%
* 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.
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(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 15,000 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, 1998, all applicable Section 16(a) filing requirements were
satisfied except one late filing for each of Mr. Nelson, a Vice President, Mr.
S.B. Reed, a Director and Mr. Coad, a Director.
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 18, 1999. 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 69 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.
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E. Herbert Burk Age 80 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 67 Director of Mestek since 1986
Mr. Coad has been President and Chairman of the Board of The McClure
Corporation, St. Louis, Missouri, mechanical and electrical engineering
consultants, since 1984, and from 1968 until 1984 he served as its Vice
President and Director. He was an affiliate Professor of Mechanical Engineering
at Washington University in St. Louis, Missouri until his retirement from that
position in January 1989. 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 68 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 70 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.
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David M. Kelly Age 57 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 68 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 83 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, 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 51 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.
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BOARD MEETINGS AND COMMITTEES
During the calendar year of 1998 the Board of Directors held five (5)
meetings. All directors were present at the meetings.
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 1998. 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, 1998 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.
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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 Grant Thornton as independent public accountants to audit the
financial statements of the Company for the year ending December 31, 1999, 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
Grant Thornton. If such approval is not obtained, the Board of Directors of the
Company will reconsider its appointment of Grant Thornton. A representative of
Grant Thornton 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
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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 ByLaws.
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 26, 1999 MESTEK, INC.
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