<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to [Section]240.14a-11(c) or
[Section]240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NORTEK, INC.
(Name of Registrant as Specified In Its Charter)
NORTEK, INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
September 30, 1996
Dear Fellow Stockholder:
As indicated in the accompanying Proxy Statement, our Annual Meeting this
year will be held in Fabriano, Italy, the headquarters of Best S.p.A., one of
three 1995 additions to our Residential Building Products Group and our first
major advance into European markets.
You know that 1995 was a very good year for Nortek, and 1996 has shown
operational improvement as we continue to build our solid business base for the
future. For the first six months of 1996, sales are up 27 percent, net earnings
are up 44 percent, and earnings per share are up 62 percent over 1995. These
results include the three acquisitions completed in the fourth quarter of 1995.
Increased earnings per share also reflects the success of our stock buyback
program, under which we repurchased approximately 2.3 million shares since last
November. Had the shares been purchased as of January 1, 1995, earnings per
share for 1995 would have been $.17 higher than reported.
Nortek's operations remain strong, and barring unforeseen economic
developments such as an upward spike in interest rates, we expect good earnings
for the year. We anticipate Best could contribute up to approximately 10 percent
of Nortek's consolidated net sales in 1996 and will continue to grow in
importance to Nortek's worldwide operations.
Holding the Annual Meeting in Fabriano allows us to extend to you the
opportunity to visit Best's fine facilities, demonstrates to Best's management
our confidence in them and allows Nortek's management to use our visit for
meetings with potential European customers and investors.
Richard L. Bready
Chairman and Chief Executive Officer
<PAGE> 3
[LOGO]
NORTEK, INC. 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360 401-751-1600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 25, 1996
The Annual Meeting of Stockholders of Nortek, Inc. (the "Company") will be
held at the Janus Hotel, Fabriano, Italy, on October 25, 1996 at 11 o'clock
a.m., local time, for the following purposes:
1. To elect two directors for a term expiring at the 1999 Annual Meeting
of Stockholders.
2. To consider and act upon (if properly presented) the shareholder
proposal set forth in the accompanying Proxy Statement, which is
OPPOSED by the Board of Directors.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on September 30,
1996 as the record date of the Annual Meeting to determine the stockholders
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof. The Company's stock transfer books will not be closed
prior to the Annual Meeting.
By Order of the Board of Directors,
KEVIN W. DONNELLY
Secretary
Providence, Rhode Island
September 30, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE DATE, SIGN
AND PROMPTLY RETURN THE ENCLOSED FORM(S) OF PROXY IN THE ENCLOSED STAMPED AND
ADDRESSED ENVELOPE.
<PAGE> 4
NORTEK, INC.
50 KENNEDY PLAZA
PROVIDENCE, RHODE ISLAND 02903-2360
PROXY STATEMENT
The enclosed form(s) of proxy and this Proxy Statement have been mailed to
stockholders on or about September 30, 1996 in connection with the solicitation
by the Board of Directors of Nortek, Inc. (the "Company") of proxies for use at
its Annual Meeting of Stockholders to be held on October 25, 1996 or at any
adjournment or postponement thereof.
A copy of the Company's 1995 Annual Report to Stockholders, which includes
the Annual Report on Form 10-K, has been previously mailed to each stockholder
entitled to vote at the meeting.
As of September 24, 1996 the Company had outstanding 9,497,020 shares of
Common Stock, $1.00 par value (the "Common Stock"), and 476,812 shares of
Special Common Stock, $1.00 par value (the "Special Common Stock"). Holders of
record at the close of business on September 30, 1996 are entitled to vote at
the meeting or any adjournment thereof. Holders of shares of Common Stock are
entitled to one vote for each share, and holders of shares of Special Common
Stock are entitled to ten votes per share on each matter to be voted on at the
meeting. With respect to the election of directors, holders of Common Stock
shall be entitled to elect one director and the holders of Special Common Stock
shall have no voting rights with respect to the election of such director. The
holders of Common Stock and Special Common Stock, voting as a single class,
shall be entitled to elect the remaining director to be elected. Approval of the
shareholder proposal set forth as item 2 will require the affirmative vote of
not less than two thirds of the total votes of the outstanding shares of Common
Stock and Special Common Stock voting as a single class.
It is the intention of the persons named as proxies to vote shares of
Common Stock and Special Common Stock represented by duly executed proxies for
the election of the nominees for director selected by the Board of Directors and
against the shareholder proposal set forth as item 2 (if it is properly
presented at the Annual Meeting) unless authority to do so has been withheld or
a contrary specification made. If any other business is properly brought before
the Annual Meeting and on all matters incidental to the conduct of the meeting,
the proxy will be voted in accordance with the discretion of the persons named
as proxies. Any such proxy may be revoked by the stockholder at any time prior
to the voting of the proxy by a written revocation received by the Secretary of
the Company, by properly executing and delivering a later-dated proxy, or by
attending the meeting, requesting return of the proxy and voting in person.
Proxies will be tabulated by the Company's transfer agent, State Street Bank and
Trust Company. A plurality of votes properly cast by the appropriate class of
stockholders will elect directors. Abstentions from voting will have no effect
on the outcome of the election of directors, even though a person analyzing the
results of the voting may interpret such a vote differently. Abstentions and
broker nonvotes on the shareholder proposal are the equivalent of votes against
the proposal.
1. ELECTION OF DIRECTORS
The By-laws of the Company provide that the Board of Directors shall
consist of not less than three directors and that the number of directors at any
time shall be the number of directors fixed by resolution of the Board of
Directors. The Board of Directors has fixed the number of directors at five
which is the current number of directors. The Board of Directors is divided into
three classes, with each class to hold office for a term of three years. At the
meeting, two directors are to be elected for a term of three years expiring at
the
1
<PAGE> 5
1999 Annual Meeting and until their respective successors are elected and
qualified. Holders of Common Stock, voting separately as a class, are entitled
to elect 25% of the directors to be elected at the Annual Meeting, which in this
case constitutes one director. J. Peter Lyons has been nominated to be elected
by the holders of Common Stock, voting separately as a class, for a term of
three years expiring at the 1999 Annual Meeting. William I. Kelly has been
nominated to be elected by the holders of Common Stock and Special Common Stock,
voting as a single class, for a term of three years expiring at the 1999 Annual
Meeting.
Each of the nominees has agreed to serve as a director, if elected. If, at
the time of the Annual Meeting, a nominee is unwilling or unable to serve (which
is not currently anticipated), the Board may fix the number of directors at less
than five, or the persons named as proxies may nominate and may vote for other
persons in their discretion. The By-laws require nominations of directors, other
than by the Board of Directors, to be submitted to the Company's Chief Executive
Officer or Secretary at least 30 days before the meeting and be accompanied by a
petition signed by at least 100 stockholders of record, holding in the aggregate
at least 1% of the capital stock entitled to vote, and certain other
information.
Presented below is information regarding the nominees for director as well
as those directors continuing in office.
<TABLE>
NOMINEES FOR THE BOARD OF DIRECTORS
<CAPTION>
NOMINEES FOR TERM EXPIRING DIRECTOR
AT THE 1999 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
-------------------------- -------------------- --- --------
<S> <C> <C> <C>
J. Peter Lyons................... President of The J. Peter Lyons Companies 62 1991
(consulting services for employee insurance
benefits)
William I. Kelly................. Director of Northeastern University 53 1996
Graduate School of Professional Accounting
<CAPTION>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE
1997 ANNUAL MEETING
--------------------
<S> <C> <C> <C>
Richard J. Harris................ Vice President and Treasurer of the Company 60 1984
<CAPTION>
TERM EXPIRING AT THE
1998 ANNUAL MEETING
--------------------
<S> <C> <C> <C>
Richard L. Bready................ Chairman, President and Chief Executive 52 1976
Officer of the Company
Philip B. Brooks................. Retired, Certified Public Accountant 82 1981
</TABLE>
Mr. Lyons, for more than the past five years, has been President of The J.
Peter Lyons Companies which has designed benefit plans and provided insurance
services to the Company in the past. Mr. Kelly has been Director of the Graduate
School of Professional Accounting of Northeastern University for more than the
past five years. Mr. Harris has been employed by the Company in his present
capacities for more than the past five years. Mr. Bready has been Chairman and
Chief Executive Officer of the Company for more than the past five years. He is
also a director of Lehigh Group, Inc. and Initial Acquisition Corp. Mr. Brooks
is a certified public accountant who retired from active practice in 1967.
The Board of Directors held four meetings during 1995. Each director
attended more than 75% of the meetings and of the meetings of the committees of
the Board on which he served. The Board of Directors has
2
<PAGE> 6
a standing Audit Committee, consisting of Messrs. Brooks (Chairman of the
committee), Kelly and Lyons. The duties of the Audit Committee consist of
reviewing with the Company's independent auditors and its management the scope
and results of the annual audit, the scope of other services provided by the
Company's auditors, proposed changes in the Company's financial and accounting
standards and principles, the Company's policies and procedures with respect to
its internal accounting, auditing and financial controls, and making
recommendations to the Board of Directors on the engagement of the independent
auditors. During 1995 the Audit Committee held one meeting. The Stock Option
Committee of the Board, consisting of Messrs. Brooks, Lyons (Chairman of the
committee) and Kelly, which is authorized to administer the Company's stock
option plans, did not meet in 1995. The Compensation Committee, comprised of
Messrs. Brooks and Lyons (Chairman of the committee) has authority to implement
changes in the compensation arrangements with the Chief Executive Officer and
certain other executive officers. The Board of Directors does not have a
standing nominating committee. Directors who are not officers or employees of
the Company or its subsidiaries receive directors' fees from the Company. The
fees currently paid to such directors are $1,250 per month and $1,000 per
meeting ($500 if a director participates by telephone). In addition, members of
committees of the Board of Directors receive $750 per committee meeting ($250 if
held in conjunction with a Board meeting or if a member participates by
telephone). Committee chairmen receive an additional $1,500 per year. During
1995 Messrs. Brooks and Lyons as members of a special committee of the Board
each received a retainer of $7,500.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth the beneficial ownership of equity
securities of the Company by the Company's directors, by nominees for director,
by its executive officers named in the Summary Compensation Table, by its
directors and executive officers as a group, and by those known by the Company
to own beneficially more than 5% of its Common Stock or Special Common Stock,
all as of September 24, 1996 except for the number of shares held by Gabelli
Funds, Inc. as to which the date is September 20, 1996.
<CAPTION>
COMMON STOCK SPECIAL COMMON STOCK
----------------------- ------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
BENEFICIAL PERCENT BENEFICIAL PERCENT
NAME(1) OWNERSHIP(2) OF CLASS OWNERSHIP(2) OF CLASS
- ------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Richard L. Bready(3)...................... 746,081 7.7 318,294 61.9
Philip B. Brooks.......................... 38,600 * 6,699 1.4
Kevin W. Donnelly......................... 23,684 * 10 *
Almon C. Hall............................. 46,956 * 2,078 *
Richard J. Harris(3)...................... 304,976 3.2 50,106 10.5
William I. Kelly.......................... -- --
J. Peter Lyons............................ -- --
Kenneth J. Ortman......................... 40,489 * --
All directors and executive officers as a
group(3)(4)............................. 993,986 10.1 330,924 63.6
Gabelli Funds, Inc.,
One Corporate Center
Rye, NY 10580........................... 1,919,300 20.2 20,965 4.4
<FN>
- ---------------
* Less than 1%
(1) The address of all such persons unless otherwise stated is c/o Nortek, Inc.,
50 Kennedy Plaza, Providence, Rhode Island 02903-2360. Certain of the shares
shown in the table are shares as to which the persons named in the table
have the right to acquire beneficial ownership, as specified in Rule 13d-
3(d)(1) promulgated under the Securities Exchange Act of 1934 as amended.
Unless otherwise indicated, the persons or entities identified in this table
have sole voting and investment power with
</TABLE>
3
<PAGE> 7
respect to all shares shown as beneficially held by them, subject to
community property laws where applicable.
(2) Includes shares subject to currently exercisable options in the case of
Messrs. Bready (150,000 shares of Common Stock and 37,500 shares of Special
Common Stock), Brooks (36,000 shares of Common Stock and 6,000 shares of
Special Common Stock), Hall (30,000 shares of Common Stock), Harris (40,100
shares of Common Stock), Ortman (29,150 shares of Common Stock) and Donnelly
(20,250 shares of Common Stock). Does not include future rights to acquire
shares upon the exercise of options in the case of Messrs. Bready (275,000
shares of Special Common Stock), Hall (10,000 shares of Common Stock),
Harris (10,000 shares of Common Stock), Ortman (3,750 shares of Common
Stock) and Donnelly (6,250 shares of Common Stock).
(3) Various defined benefit pension plans of the Company and certain of its
subsidiaries held approximately 2.5% of the outstanding Common Stock of the
Company and 9.7% of the outstanding Special Common Stock at September 24,
1996. Under the provisions of the trust agreement governing the plans, the
Company may instruct the trustee regarding the acquisition and disposition
of plan assets and the voting of securities held by the trust. Accordingly,
although the directors and officers disclaim beneficial ownership of such
shares, the shares are included in the table as being beneficially owned by
Messrs. Bready and Harris and are also included under shares held by
directors and executive officers as a group.
(4) Includes 305,500 shares of Common Stock and 43,500 shares of Special Common
Stock that directors and executive officers as a group have a right to
acquire upon the exercise of currently exercisable options. Does not include
future rights of executive officers to acquire shares upon exercise of
options totalling 30,000 shares of Common Stock and 275,000 shares of
Special Common Stock. Except as set forth in the above table, the Company
knows of no persons who at September 24, 1996, beneficially owned more than
5% of the shares of Common Stock or Special Common Stock of the Company
outstanding on that date.
4
<PAGE> 8
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The following graph compares the yearly percentage change for the last five
years in the cumulative total shareholder return of the Company's Common Stock
against the cumulative total return of the Russell 2000 Index and a group of
peer companies which are listed below.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COMPANY, A PEER GROUP AND THE RUSSELL 2000 INDEX
Research Data Group Total Return - Data Summary
<CAPTION>
NTK
Cumulative Total Return
---------------------------------------------
12/90 12/91 12/92 12/93 12/94 12/95
<S> <C> <C> <C> <C> <C> <C> <C>
Nortek Inc NTK 100 65 183 313 413 409
PEER GROUP PPEER1 100 147 170 229 171 227
RUSSELL 2000 IR20 100 146 173 206 202 260
<FN>
* $100 INVESTED ON 12/31/90 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
</TABLE>
<TABLE>
The peer group companies are:
<S> <C>
Armstrong World Industries, Inc. The Stanley Works
Bird Corporation Maytag Corporation
Masco Corporation Fedders Corporation
Morgan Products Ltd. Whirlpool Corporation
Ply-Gem Industries, Inc.
</TABLE>
5
<PAGE> 9
REPORTS ON EXECUTIVE COMPENSATION
BOARD OF DIRECTORS
The compensation of the Chief Executive Officer, Mr. Bready, is governed by
the terms of his employment agreement with the Company which was last amended in
November 1990. The terms of the agreement are set forth in a footnote to the
Summary Compensation Table. The Company's policy with respect to the
compensation of executive officers, other than the Chief Executive Officer, is
primarily based on the performance of the individual officer along with such
other factors as compensation paid by competitors of the Company, local
geographical factors, the term of employment, salary surveys and the use of
consultants when considered necessary. Bonuses for executive officers are
awarded on a discretionary basis by the Chief Executive Officer based on
individual goals derived from the responsibilities of the individual and which
are determined, in part, on Company performance and to a greater extent on
individual performance.
The executive officers named in the Summary Compensation Table other than
the Chief Executive Officer received salary increases in 1995 based on
competitive salary analyses prepared by an outside consultant and individual
performance of job goals and objectives. Bonuses awarded such executive officers
for the year reflected the achievement of certain cash flow objectives, the
operating performance of certain units which was slightly lower than the
previous year, and other factors.
The Board of Directors considers performance in 1995 to be excellent in
terms of achieving Company objectives and the resulting ongoing positive impact
on the balance sheet and operating results considering the impact of rising
interest rates during late 1994 and the substantial increase in the cost of raw
materials.
<TABLE>
By the Board of Directors:
<S> <C>
Richard L. Bready William I. Kelly
Philip B. Brooks J. Peter Lyons
Richard J. Harris
</TABLE>
COMPENSATION COMMITTEE
The Compensation Committee is authorized to approve changes in the
compensation arrangements with the Chief Executive Officer and certain other
executive officers. Based on Mr. Bready's performance as Chief Executive Officer
during 1995 the Committee authorized payment of a cash bonus to him of
$1,000,000.
<TABLE>
By the Compensation Committee:
<S> <C>
Philip B. Brooks J. Peter Lyons
</TABLE>
STOCK OPTION COMMITTEE
With respect to long-term incentive compensation, the Company believes that
stock options are an additional incentive for executive officers and other
selected key employees of the Company and its subsidiaries and upon whose
efforts the Company is largely dependent for the successful conduct of its
business. The award of stock options will encourage such persons to improve
operations and increase profits and to accept employment with or remain in the
employ of the Company or its subsidiaries. The Company's stock option plans are
administered by the Stock Option Committee of the Board whose members are
Messrs. Brooks, Kelly and Lyons. No stock options were awarded in 1995.
<TABLE>
By the Stock Option Committee:
<S> <C>
Philip B. Brooks J. Peter Lyons
William I. Kelly
</TABLE>
6
<PAGE> 10
INTERLOCKS AND INSIDER PARTICIPATION
Mr. Bready, President and Chief Executive Officer of the Company, is
Chairman of the Board of Directors. Mr. Harris, Vice President and Treasurer of
the Company, is also a director. As directors they participate in Board
deliberations regarding executive compensation.
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth, on an accrual basis, information concerning
the compensation for services to the Company and its subsidiaries for 1993, 1994
and 1995 of those persons who were, at December 31, 1995, the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(1) SECURITIES
------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(2)
- --------------------------- ---- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Richard L. Bready 1995 $771,696 $1,220,150 0 $4,623
Chairman, President, and 1994 751,404 259,525 0 3,300
Chief Executive Officer(3) 1993 731,649 2,450,000* 150,000 3,420
Almon C. Hall 1995 236,250 140,000 0 1,338
Vice President, Controller and 1994 225,000 157,500 0 1,168
Chief Accounting Officer 1993 210,000 100,000 40,000 9,288
Richard J. Harris 1995 210,000 125,000 0 877
Vice President and 1994 200,000 140,000 0 766
Treasurer 1993 175,000 100,000 40,000 793
Kenneth J. Ortman 1995 185,000 60,000 0 0
Senior Vice President -- 1994 175,000 70,000 0 0
Group Operations 1993 150,000 75,000 15,000 0
Kevin W. Donnelly 1995 165,000 65,000 0 0
Vice President, General 1994 150,000 60,000 0 0
Counsel and Secretary 1993 140,000 50,000 25,000 0
<FN>
- ---------------
* A cumulative bonus for 1991, 1992 and 1993
(1) The aggregate amount of any compensation in the form of perquisites and
other personal benefits (club dues, personal use of Company property, etc.)
paid in each of the years based on the Company's incremental cost, did not
exceed the lesser of 10% of the executive officer's annual salary and bonus
or $50,000.
(2) For certain executive officers, the Company provides additional amounts of
life insurance over those provided to other salaried employees. The amounts
shown for 1995 are the premiums paid for such coverage.
(3) Mr. Bready's employment agreement with the Company provides for his
employment as President and Chief Executive Officer through December 31,
1998. As of November 1, 1990, his annual base salary was $650,000 with
adjustments based upon increases in the cost of living. The agreement also
provides for incentive compensation based upon the Company's annual
consolidated pre-tax earnings as follows: 0.7% of the amount of such
earnings up to $10,000,000, plus 1.05% of the amount of such earnings in
excess of $10,000,000 and provides that discretionary bonuses may be
awarded. For 1995, $220,150 of Mr. Bready's
</TABLE>
7
<PAGE> 11
bonus was incentive compensation based on this formula. The employment
agreement may be terminated at the election of Mr. Bready and in such event
he is to be retained by the Company for five years as a consultant at an
annual rate of 60% of his then current annual salary, plus incentive
compensation. The Company may terminate the agreement at any time but in
such event Mr. Bready would receive severance pay in an amount equal to 60%
of his then current annual salary, plus incentive compensation, payable for
five years following termination. If there has been a Change in Control of
the Company (as defined in the agreement) within two years before or one
year after his termination, then Mr. Bready may elect to accelerate the
receipt of his severance pay. If he becomes disabled or dies while employed,
the Company will pay to Mr. Bready or his estate an amount equal to 60% of
his then current annual salary, plus incentive compensation for five years,
or, if he was performing consulting services at the time, an amount equal to
60% of the consulting fee plus incentive compensation for the remainder of
the consulting period. Mr. Bready is entitled to receive bonuses and to
participate in any of the Company's corporate incentive and other benefit
plans except for the Company's 401(k) plan in which no executive officers
are eligible to participate.
The Company has established a severance plan for certain of its executive
officers, including Messrs. Donnelly, Hall, Harris and Ortman. The plan provides
that in consideration of each such employee's agreement not to voluntarily
terminate his employment if there is an attempted Change in Control (as that
term is defined in the plan) of the Company, if such an employee is terminated
within the 24-month period following a Change in Control (including termination
by reason of a material adverse change in the terms of employment as provided in
the plan), such employee will be entitled to severance pay for a period of 24
months following such termination at a rate equal to his base salary plus bonus
or incentive compensation (at the highest rate in the previous three years) and
to continued medical, life insurance and other benefits for such 24-month period
(or payment of an amount equal to the cost of providing such benefits). If a
Change in Control were to have occurred as of September 1, 1996, and the named
executive officers were terminated as of such date, the officers covered under
this plan would have been entitled to receive, over the next succeeding 24-month
period, an aggregate of approximately $2,631,000. Mr. Ortman is entitled to a
minimum of 15 months severance pay if his employment is terminated without
cause.
STOCK OPTIONS
<TABLE>
The following table contains information with respect to the value realized
(market value less exercise price) of options exercised in 1995 by those
executive officers listed in the Summary Compensation Table and the value of
their unexercised options at year-end. No options were granted to any executive
officer in 1995.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR-END OPTION VALUES
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END
ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Bready....... -- -- 187,500(1) -- $615,625 --
Almon C. Hall........... -- -- 38,000 10,000 161,000 $30,000
Richard J. Harris....... 4,900 $45,938 40,100 10,000 179,638 30,000
Kenneth J. Ortman....... 2,000 16,000 29,150 3,750 192,613 11,250
Kevin W. Donnelly....... 1,500 12,375 20,250 6,250 69,563 18,750
<FN>
- ---------------
(1) 37,500 shares are Special Common Stock; all other option information
relates to Common Stock.
</TABLE>
8
<PAGE> 12
PENSION PLAN
As of December 31, 1995 the Company's qualified pension plan for its
headquarters employees (the "Pension Plan") was frozen and no increases in
benefits will occur as a result of increases in service or compensation. The
vested annual retirement benefits payable under the Pension Plan at age 65 as a
straight-life annuity to the executive officers listed in the Summary
Compensation Table are as follows: Mr. Bready $111,996; Mr. Hall $60,304; Mr.
Harris $78,286, Mr. Ortman $19,966 and Mr. Donnelly $17,343.
In part to compensate certain officers for the effect of the limitations
under the Internal Revenue Code and the freezing of the Pension Plan, the
Company adopted, effective January 1, 1996, the Nortek, Inc. Supplemental
Executive Retirement Plan, a non-qualified plan. Under this plan, Messrs. Hall
and Harris will be entitled to receive, at age 65, annual supplemental pension
payments equal to fifty percent (50%) of their highest consecutive five-year
average compensation (all compensation reported on the employee's Form W-2) less
the amounts to which they are entitled under the Pension Plan. Messrs. Ortman
and Donnelly will be entitled to receive, at age 65 subject to the completion of
10 years of service, annual supplemental pension payments equal to thirty
percent (30%) of their highest consecutive five-year average compensation, less
the amounts to which they are entitled under the Pension Plan. Messrs. Ortman
and Donnelly currently have 7 and 9 years of service respectively for purposes
of the Supplemental Executive Retirement Plan. Mr. Bready is not a participant
in the plan.
The Company provides deferred compensation benefits for Messrs. Bready,
Hall and Harris. The agreements provide for 180 monthly payments beginning at
age 65, although in the Company's discretion, the employee may receive reduced
benefits upon retirement as early as age 60. Benefits are subject to forfeiture
(except in the case of Mr. Bready) in the event employment terminates for any
reason prior to age 60. Benefits are also subject to forfeiture in the event
that the employee engages in competitive activity. Monthly payments to Messrs.
Bready, Hall and Harris respectively, will, assuming retirement at age 65, be
$5,050, $1,833 and $1,833.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Investment in Ecological Engineering Associates Limited Partnership.
Ecological Engineering Associates Limited Partnership (EEA) is engaged in the
design and operation of wastewater-treatment systems. Dennis J. McGillicuddy,
D. Stevens McVoy and Barry Silverstein, former directors of the Company, are
directors and sole stockholders of Environmental Engineering Inc. (EEI) which
is the general partner of EEA. The Company has made an investment in EEA of
$1,480,000 through September 1996 in the form of a note with interest accruing
at 2% over prime and compounded annually and is currently investing at the rate
of $17,500 per month contingent on EEI matching such investment and subject to
termination at the discretion of management. The note, secured by a first lien
on the partnership assets, matures on January 8, 1998. The Company also
receives, in connection with its investment, warrants to acquire limited
partnership units proportionate to all debt and equity investments made by
other investors in EEA.
Purchase of Shares by the Company. In November 1995 the Company announced
the commencement of a stock repurchase program. Since then approximately
2,300,000 shares of Common Stock were acquired by the Company, including the
purchase of 1,189,809 shares on April 26, 1996 at a price of $17 per share from
Messrs. McGillicuddy, McVoy and Silverstein who then resigned as directors. The
repurchase was approved by the Board of Directors and by a committee of
independent directors after receiving investment advice from independent
financial advisors as to the fairness of the repurchase. The purchase of such
shares was accretive as to earnings. If all of the shares had been purchased as
of January 1, 1995, earnings per share for 1995 would have been $.17 higher than
reported. With respect to the shares purchased from the former directors the
advice of the independent financial advisor was that the price paid was less
than the Company would pay in acquiring that number of shares from
non-affiliates of the Company.
9
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2. SHAREHOLDER PROPOSAL
Loretta L. Lipman, whose address can be obtained from the Secretary of the
Company, has notified the Company that she intends to propose a resolution at
the Annual Meeting and has submitted the following statement in support of her
proposal:
"In April 1996, our Company paid over $20.2 million to three directors in
exchange for Nortek shares they owned. Each of the three individuals was also at
the time a partner with a fourth director -- Nortek's Chairman, Richard Bready
- -- in a partnership called Bready Associates.
To use $20.2 million in cash to repurchase stock -- from directors -- is an
unusual use of funds. The price of $17 per share paid to the three directors
represented a 10% premium over the then market price. All told, Nortek paid the
three directors a premium that amounted to more than $1.78 million above market.
No other stockholders were offered the opportunity to sell their shares to the
Company for a premium.
The Stock Purchase Agreement between Nortek, the three directors, Bready
and their affiliates contained interesting provisions: the three individual
directors were to hold on to their offices as directors until their resignation
immediately following the stock purchase; Nortek was required to provide a
general release to each of the three individual directors, which included a
release in connection with the performance of their duties as directors; Nortek
was required to pay the legal expenses of the three directors in connection with
the premium buy-out of their stock; Nortek was required to make a detailed
representation as to status of discussions with potential acquirers; and perhaps
most disturbingly, Nortek agreed to indemnify the three individuals, in their
capacities as directors and otherwise, for any losses they might incur in
connection with the purchase transactions. Thus, if one contemplated whether the
three individuals violated their fiduciary duties to the Company, in any event,
the three would have a contractual claim to be indemnified for the very acts in
question.
This stock buy-back was the most recent unusual transaction between Nortek
and this group, but Nortek has made a series of investments in an entity
controlled by the same three individual directors. Also, in 1991, the Board
amended Nortek's "poison pill" rights plan to exempt Richard Bready and Bready
Associates from the trigger threshold, enabling them, and no other shareholder
of Nortek, to increase their percentage ownership of Nortek without triggering
the poison pill.
These matters demonstrate the need for a strong and independent Board of
Directors. Yet the By-laws, as amended, contain a very cumbersome mechanism for
shareholder nominations of directors -- one that appears designed to vest
nominating power solely in the self-perpetuating Board itself. To nominate a
candidate other than a Board-endorsed nominee, currently 100 individual
shareholders are required to act together -- a virtual impossibility with a
public company. If the By-law amendment proposal is approved, it will be
possible for shareholders to nominate and elect candidates on the floor of the
Annual Meeting. I urge you to send Nortek management a message -- vote for the
following:
RESOLVED: The By-laws of Nortek are amended by striking Section 3.4."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THE
SHAREHOLDER PROPOSAL.
Section 3.4 of the Company's By-laws, adopted in 1982, provides:
"3.4 Nominations. Nominations of persons to be elected directors of
the corporation, other than nominations submitted on behalf of the
incumbent board of directors, must
(a) be submitted in writing to the secretary or chief executive
officer of the corporation not less than 30 days before the meeting of
the stockholders at which such election is to be held;
10
<PAGE> 14
(b) be accompanied by a written statement, as to each such nominee,
of his residence and business (if any) address, occupation (if any),
date of birth, and record and beneficial holdings of the shares of the
corporation; and
(c) accompanied by a petition in support of such nomination signed
by at least 100 record holders of shares of capital stock of the
corporation entitled to vote in elections of directors, holding in the
aggregate not less than 1% of the shares of capital stock of the
corporation entitled to vote in elections of directors outstanding as of
the date such petition is submitted."
The proposal has been submitted by the ex-wife of the Company's chief
executive officer who has been engaged for the past six years in divorce
litigation in Rhode Island over division of marital property. She owns 125
shares of the Company's Common Stock which she purchased during the divorce
trial and used to attempt to gain access to Company records for use in her
marital property claims.
The By-law is a corporate governance procedural provision that is not
unique to the Company. Contrary to the proponent's claim, it does not prohibit
shareholders from nominating board candidates. It does require that those
submitting nominations give advance notice of their intention, provide certain
minimal information concerning the candidates and have at least a 1% stake in
the Company. The provision seeks to avoid the disruption that could occur if
disgruntled shareholders such as the proponent could submit nominations to
satisfy their personal agendas.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL
(ITEM 2 ON THE PROXY CARD).
AUDIT MATTERS
The Board of Directors has selected Arthur Andersen & Co., auditors of the
Company in 1995 to continue in that capacity for 1996. Representatives of Arthur
Andersen & Co., are not expected to be present at the Annual Meeting.
STOCKHOLDER PROPOSALS
The Board of Directors has set March 27, 1997 as the date for the 1997
Annual Meeting of Stockholders of the Company. Accordingly, in order for any
proposal that a stockholder intends to present at the 1997 Annual Meeting to be
eligible for inclusion in the Company's proxy material for that meeting, it must
be received by the Secretary of the Company at the Company's offices in
Providence, Rhode Island, no later than October 30, 1996.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company knows of
no business to be presented for consideration at the Annual Meeting of
Stockholders other than as stated in the Notice of the Annual Meeting of
Stockholders.
In addition to the solicitation of proxies by mail, management and
employees of the Company may solicit proxies in person or by telephone, for
which they will receive no additional compensation. The Company also retained
D.F. King & Co., Inc., New York, New York, to assist in the solicitation of
proxies and will pay such firm a fee, estimated not to exceed $8,000 plus
reimbursement of reasonable out-of-pocket expenses. Persons holding stock as
nominees will, upon request, be reimbursed for their reasonable out-of-pocket
expenses in sending soliciting materials to their principals. The cost of
solicitation will be borne by the Company.
September 30, 1996
11
<PAGE> 15
PROXY FOR COMMON STOCK NORTEK, INC. PROXY FOR COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 25, 1996
The undersigned hereby appoints Richard L. Bready, Richard J. Harris and Kevin
W. Donnelly, or any of them, proxies with power of substitution to each, to vote
at the Annual Meeting of Stockholders of Nortek, Inc. to be held on October 25,
1996 at the Janus Hotel, Fabriano, Italy, at 11:00 a.m., local time, or at any
adjournment or postponement thereof, all of the shares of Common Stock, par
value $1 per share, of Nortek, Inc. that the undersigned would be entitled to
vote if personally present. The undersigned instructs such proxies or their
substitutes to act on the following matters as specified by the undersigned, and
to vote in such manner as they may determine on any other matters that may
properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder(s). IF NO CONTRARY DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1 (ELECTION OF DIRECTORS) AND AGAINST PROPOSAL 2 (SHAREHOLDER
PROPOSAL).
ADDRESS CHANGE:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(OVER)
<TABLE>
<S> <C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NORTEK, INC. COMMON STOCK FOLLOWING PROPOSAL:
For With- For All
NOTE: Please sign exactly as name appears hereon, joint owners hold Except
should each sign. When signing as attorney, executor, administrator, 1.) Election of Directors / / / / / /
trustee of guardian, please give full title as such.
Election of one director by holders of Common Stock,
Mark box at right if address change has been noted on / / voting as a class.
the reverse side of this card. J. PETER LYONS
Election of one director by holders of Common Stock,
RECORD DATE SHARES: and Special Common Stock, voting together as a class.
WILLIAM I. KELLY
INSTRUCTION:
To withhold authority to vote for any individual
nominee, write that nominee's name in the space
provided below.
-------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
THE FOLLOWING PROPOSAL:
For Against Abstain
2.) Amendment to strike / / / / / /
Section 3.4 of the Company's
By-laws.
----------------------
Please be sure to sign and date this Proxy. Date 3.) In their discretion, the proxies are authorized to
- --------------------------------------------------------------------- vote upon such other business as may properly come
before the meeting.
- ------ Shareholder sign here ------------- Co-owner sign here--------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 16
PROXY FOR SPECIAL COMMON STOCK NORTEK, INC. PROXY FOR SPECIAL COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 25, 1996
The undersigned hereby appoints Richard L. Bready, Richard J. Harris and Kevin
W. Donnelly, or any of them, proxies with power of substitution to each, to vote
at the Annual Meeting of Stockholders of Nortek, Inc. to be held on October 25,
1996 at the Janus Hotel, Fabriano, Italy, at 11:00 a.m., local time, or at any
adjournment or postponement thereof, all of the shares of Special Common Stock,
par value $1 per share, of Nortek, Inc. that the undersigned would be entitled
to vote if personally present. The undersigned instructs such proxies or their
substitutes to act on the following matters as specified by the undersigned, and
to vote in such manner as they may determine on any other matters that may
properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder(s). If no contrary direction is made, this proxy will be
voted for Proposal 1 (election of director) and against Proposal 2 (shareholder
proposal).
ADDRESS CHANGE:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(OVER)
<TABLE>
<S> <C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NORTEK, INC. SPECIAL COMMON STOCK FOLLOWING PROPOSAL:
For With-
NOTE: Please sign exactly as name appears hereon, Joint owners Hold
should each sign. When signing as attorney, executor, administrator, 1.) Election of Director / / / /
trustee or guardian, please give full title as such.
Mark box at right if address change has been noted on / / Election of one diretor by holders of Common Stock, and
the reverse side of this card. Special Common Stock, voting together as a class.
WILLIAM I. KELLY
RECORD DATE SHARES:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST
THE FOLLOWING PROPOSAL:
For Against Abstain
2.) Amendment to strike Section / / / / / /
3.4 of the Company's By-laws.
3.) In their discretion, the proxies are authorized to
vote upon such other business as may properly come
before the meeting.
--------------------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------------------
- ------ Shareholder sign here ------------- Co-owner sign here-------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
