<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 sec.240.14a-11(c) or sec.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] No fee required.
[ ] 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
[NORTEK LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
The Annual Meeting of Stockholders of Nortek, Inc. (the "Company") will be
held at the Biltmore Hotel, 11 Dorrance Street, Providence, Rhode Island
02903-1734, on Thursday, May 20, 1999 at 11:00 a.m., local time, for the
following purposes:
1. To elect two directors to the Company's Board of Directors for terms
expiring at the 2002 Annual Meeting of Stockholders.
2. To approve the Company's 1999 Equity and Cash Incentive Plan.
3. To transact such other business or act upon such other matters as may
properly come before the meeting or any adjournment or postponement
thereof.
The Board of Directors has fixed the close of business on April 19, 1999 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
April 26, 1999
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. PLEASE REFERENCE THE ELECTRONIC VOTING PROCEDURES DESCRIBED
ON PAGE 2 FOR ALTERNATIVE VOTING METHODS.
<PAGE> 3
NORTEK, INC.
50 KENNEDY PLAZA
PROVIDENCE, RHODE ISLAND 02903-2360
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy materials have been furnished to stockholders 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 Thursday, May 20, 1999 at the Biltmore Hotel, 11 Dorrance Street, Providence,
Rhode Island 02903-1734, and at any adjournment or postponement thereof. These
proxy materials were first mailed to stockholders on or about April 26, 1999.
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Stockholders. Each proposal is described in more detail in this Proxy Statement.
A copy of the Company's 1998 Annual Report to Stockholders is being mailed
herewith to each stockholder entitled to vote at the meeting.
VOTING RIGHTS AND SOLICITATION
As of April 19, 1999 the Company had outstanding 11,294,144 shares of
Common Stock, $1.00 par value (the "Common Stock"), and 558,399 shares of
Special Common Stock, $1.00 par value (the "Special Common Stock"). Holders of
record at the close of business on April 19, 1999 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. 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. A plurality of votes properly cast by the appropriate
class of stockholders will elect directors. Approval of the 1999 Equity and Cash
Incentive Plan will require the affirmative vote of a majority of the total
votes of the outstanding shares of Common Stock and Special Common Stock, voting
as a single class, represented and entitled to vote at the meeting.
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
for the 1999 Equity and Cash Incentive Plan 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 proxies 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, EquiServe.
Abstentions from voting and broker nonvotes will have no effect on the outcome
of the election of directors. Abstentions from voting on
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<PAGE> 4
the 1999 Equity and Cash Incentive Plan are the equivalent of votes against the
item while broker nonvotes will have no effect on the outcome.
ELECTRONIC VOTING PROCEDURES
Stockholders whose shares are registered directly with EquiServe may vote
either via the Internet or by calling EquiServe. Specific instructions to be
followed by any registered stockholder interested in voting via the Internet or
telephone are set forth on the enclosed proxy card. The Internet and telephone
voting procedures are designed to authenticate the stockholder's identity and to
allow stockholders to vote their shares and confirm that their instructions have
been properly recorded.
If your shares are registered in the name of a bank or brokerage firm and
you have not elected to receive your Annual Report and Proxy Statement over the
Internet, you may be eligible to vote your shares electronically over the
Internet or by telephone. A large number of banks and brokerage firms are
participating in the ADP Investor Communication Services online program. This
program provides eligible stockholders who receive a paper copy of the annual
report and proxy statement the opportunity to vote via the Internet or by
telephone. If your bank or brokerage firm is participating in ADP's program,
your voting form will provide instructions. If your voting form does not
reference Internet or telephone information, please complete and return the
paper proxy card in the self-addressed postage paid envelope provided.
PROXIES
Whether or not you are able to attend the Annual Meeting, you are urged to
vote your proxy, which is solicited by the Company's Board of Directors and
which will be voted as you direct on your proxy when properly completed. You may
revoke or change your proxy at any time before the Annual Meeting. To do this,
send a written notice of revocation or another signed proxy with a later date to
the Secretary of the Company at the Company's principal executive offices before
the beginning of the Annual Meeting. You may also revoke your proxy by attending
the Annual Meeting and voting in person.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional solicitation material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company has retained D.F. King & Co., Inc., New York, New York
to act as a proxy solicitor in conjunction with the Annual Meeting and has
agreed to pay $8,000, plus reasonable out-of-pocket expenses, to D.F. King for
proxy solicitation services. The original solicitation of proxies by mail may be
supplemented by a solicitation by telephone or other means by directors,
officers or employees of the Company. No additional compensation will be paid to
these individuals for any such services. Except as described above, the Company
does not presently intend to solicit proxies other than by mail.
PROPOSAL NO. 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
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<PAGE> 5
term of three years. At the meeting, two directors are to be elected for a term
of three years expiring at the 2002 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% or the next highest whole number of
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 2002 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 2002 Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
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 another
person 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 by certain other
information.
Presented below is information regarding the nominees for director as well
as those directors continuing in office.
NOMINEES FOR THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NOMINEES FOR TERM EXPIRING DIRECTOR
AT THE 2002 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
-------------------------- -------------------- --- --------
<S> <C> <C> <C>
J. Peter Lyons....................... Chairman of The Lyons Companies (consulting service 64 1991
for employee insurance benefits)
William I. Kelly..................... Assistant Dean and Director of Northeastern 55 1996
University Graduate School of Professional
Accounting
</TABLE>
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
TERM EXPIRING AT THE
2000 ANNUAL MEETING
--------------------
<S> <C> <C> <C>
Richard J. Harris.................... Vice President and Treasurer of the Company 62 1984
</TABLE>
<TABLE>
<CAPTION>
TERM EXPIRING AT THE
2001 ANNUAL MEETING
--------------------
<S> <C> <C> <C>
Phillip L. Cohen..................... Financial Consultant; Certified Public Accountant 67 1996
Richard L. Bready.................... Chairman, President and Chief Executive Officer of 54 1976
the Company
</TABLE>
Mr. Lyons, for more than the past five years, has been Chairman of The
Lyons Companies which has designed benefit plans and provides insurance services
to the Company. Mr. Kelly has been Director of the Graduate School of
Professional Accounting of Northeastern University for more than the past five
years. He is a director of Scituate Federal Savings Bank in Scituate,
Massachusetts. Mr. Harris has been employed by the Company in his present
capacities for more than the past five years. Mr. Cohen was a partner with the
professional service firm Arthur Andersen LLP from 1965 until his retirement in
June 1994 and has been a financial consultant since that date. He is a director
and Treasurer of the Greater Boston Convention and
3
<PAGE> 6
Business Bureau. Mr. Bready has been Chairman and Chief Executive Officer of the
Company for more than the past five years.
BOARD OF DIRECTORS AND COMMITTEE ORGANIZATION
The Board of Directors held eight meetings during 1998. 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 a standing Audit
Committee, consisting of Messrs. Kelly (Chairman of the committee) and Cohen.
The duties of the Audit Committee consist of reviewing with the Company's
independent auditors and the Company's 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 1998
the Audit Committee held three meetings. The Stock Option Committee of the
Board, consisting of Messrs. Cohen (Chairman of the committee) and Kelly, which
is authorized to administer the Company's stock option plans, held four meetings
in 1998. The Compensation Committee, comprised of Messrs. Kelly (Chairman of the
committee) and Cohen, has authority to implement changes in the compensation
arrangements with the Chief Executive Officer and recommend changes in
compensation arrangements for certain other executive officers. It held three
meetings during 1998. The Board of Directors does not have a standing nominating
committee.
DIRECTOR COMPENSATION
For their services to the Company as directors, 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.
In addition, pursuant to the Company's 1997 Stock Option Plan for
Directors, each nonemployee director is automatically granted an option to
purchase 100 shares of Common Stock on the day after the date of each Annual
Meeting of Stockholders and such a grant will be made after this year's meeting.
Options under the Plan are granted at their fair market value on the date of
grant and vest in two equal installments on each of the first and second
anniversaries of the grant date.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of equity
securities of the Company by the Company's directors (including the 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 April 19, 1999, except for the number of shares held by Canyon
Capital Advisors, LLC, Gabelli Funds, Inc. and Neuberger Berman, LLC, as to
which the dates are March 4, 1999, April 20, 1999, and February 12, 1999,
respectively.
<TABLE>
<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)............................. 594,950 5.2 843,294 85.9
Phillip L. Cohen................................. 1,300 * -- --
Kevin W. Donnelly................................ 21,007 * 10 *
Almon C. Hall.................................... 31,983 * -- --
Richard J. Harris(3)............................. 271,533 2.4 46,263 8.3
William I. Kelly................................. 1,300 * -- --
J. Peter Lyons................................... 1,440 * -- --
Kenneth J. Ortman................................ 25,141 * -- --
All directors and executives
officers as a group(3)(4)...................... 711,854 6.2 843,304 85.7
Canyon Capital Advisors, LLC
9665 Wilshire Boulevard, Suite 200
Beverly Hills, CA 90212(5)..................... 557,500 5.0 -- --
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580(6)............................... 1,555,200(7) 13.8 18,665 3.3
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158(8).......................... 729,000(9) 6.5 -- --
</TABLE>
- ---------------
* 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 respect to all shares
shown as beneficially held by them, subject to community property laws where
applicable.
(2) Includes shares subject to exercisable options in the case of Messrs. Bready
(100,000 shares of Common Stock and 423,849 shares of Special Common Stock),
Cohen (1,300 shares of Common Stock), Donnelly (13,914 shares of Common
Stock), Hall (26,983 shares of Common Stock), Harris (17,083 shares of
Common Stock), Kelly (1,300 shares of Common Stock), Lyons (1,300 shares of
Common Stock) and Ortman (9,166 shares of Common Stock).
(3) Various defined benefit pension plans of the Company and certain of its
subsidiaries held approximately 2.1% of the outstanding Common Stock of the
Company and 8.26% of the outstanding Special Common
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<PAGE> 8
Stock at April 19, 1999. 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 171,046 shares of Common Stock and 423,849 shares of Special Common
Stock that directors and executive officers as a group have a right to
acquire upon the exercise of exercisable options.
(5) Based upon Schedule 13G filed with the Securities and Exchange Commission on
March 4, 1999 on behalf of Canyon Capital Advisors, LLC ("CCA"), Mitchell R.
Julis, Joshua S. Friedman and R. Christian B. Evensen. Messrs. Julis,
Friedman and Evensen are general partners of entities that own 100% of CCA.
(6) Based upon Schedule 13D/A filed with the Securities and Exchange Commission
on April 20, 1999 on behalf of Marc Gabelli, Mario Gabelli, Gabelli Funds,
Inc., GAMCO Investors, Inc. and Gabelli Performance Professional
Partnership.
(7) Includes 490,500 shares of Common Stock and 9,333 shares of Special Common
Stock over which Gabelli Funds, Inc. has sole voting and dispositive power;
includes 1,047,700 shares of Common Stock and 9,332 shares of Special Common
Stock over which GAMCO Investors, Inc. has sole voting and dispositive
power; and includes 17,000 shares of Common Stock over which Gabelli
Performance Professional Partnership L.P. has sole voting and dispositive
power.
(8) Based upon Schedule 13G/A filed with the Securities and Exchange Commission
on February 12, 1999.
(9) Includes 479,300 shares beneficially owned by Marvin Schwartz, a principal
of Neuberger Berman, LLC, for which Mr. Schwartz filed on Schedule 13D with
the Securities and Exchange Commission on March 31, 1997.
Except as set forth in the above table, the Company knows of no persons who
at April 19, 1999, beneficially owned more than 5% of the shares of Common Stock
or Special Common Stock of the Company outstanding on that date.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth, on an accrual basis, information concerning
the compensation for services to the Company and its subsidiaries for 1996, 1997
and 1998 of those persons who were, at December 31, 1998, the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<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 1998 $900,000 $2,338,000 225,000 $537,055
Chairman, President and 1997 817,080 327,250 250,000 43,380
Chief Executive Officer 1996 790,980 1,343,000 275,000 19,584
Almon C. Hall 1998 $287,500 $ 325,000 10,000 457
Vice President, Controller and 1997 254,264 300,000 10,000 404
Chief Accounting Officer 1996 248,062 225,000 -0- 404
Richard J. Harris 1998 $262,500 $ 200,000 17,500 300
Vice President and 1997 226,013 175,000 10,000 264
Treasurer 1996 220,500 175,000 -0- 264
Kenneth J. Ortman 1998 $210,000 125,000 5,000 -0-
Senior Vice President -- 1997 199,106 110,000 10,000 -0-
Group Operations 1996 194,250 85,000 -0- -0-
Kevin W. Donnelly 1998 $200,000 150,000 5,000 -0-
Vice President, General 1997 189,625 125,000 10,000 -0-
Counsel and Secretary 1996 185,000 85,000 -0- -0-
</TABLE>
- ---------------
(1) The aggregate amount of any compensation in the form of perquisites and
other personal benefits 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 1998 for Mr. Bready, represents the economic benefit to Mr. Bready of
the payment of premiums for split dollar life insurance by the Company
pursuant to agreements between Mr. Bready and the Company, of which $36,935
represents the term life portion of the premiums and $20,035 represents the
non-term portion. Pursuant to the split dollar life insurance agreements,
the Company will be reimbursed for premiums that it pays on the split dollar
life insurance policies upon the earlier of Mr. Bready's termination or
death. In addition, $1,290 of the amount for Mr. Bready and the total
amounts for the other executive officers are for premiums paid for
additional amounts of term life insurance over those provided to other
salaried employees. Also includes $478,795 of loan forgiveness pursuant to
Mr. Bready's employment agreement with the Company.
7
<PAGE> 10
STOCK OPTION TABLES
The following table provides information regarding stock options granted to
named executive officers in 1998.
<TABLE>
<CAPTION>
% OF TOTAL
NO. OF SHARES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME GRANTED 1998(%) PRICE DATE PRESENT VALUE(1)
---- ------------- ------------ -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Richard L. Bready............ 225,000(2) 58.9 $22.9375 09/01/08 $2,088,000
Almon C. Hall................ 10,000 2.6 22.9375 09/01/08 92,800
Richard J. Harris............ 10,000 2.6 30.7500 06/29/08 127,200
Richard J. Harris............ 7,500 2.0 22.9375 09/01/08 69,600
Kenneth J. Ortman............ 5,000 1.3 22.9375 09/01/08 46,400
Kevin W. Donnelly............ 5,000 1.3 22.9375 09/01/08 46,400
</TABLE>
- ---------------
(1) Pre-tax amounts based on Black-Scholes option pricing model with the
following assumptions: risk-free interest rate between 4.96% and 5.66%,
expected life of 5 years, expected volatility of 37% and dividend yield of
0%.
(2) Special Common Stock; all other information relates to Common Stock.
The following table contains information with respect to the value realized
(market value less exercise price) of options exercised in 1998 by those
executive officers listed in the Summary Compensation Table and the value of
their unexercised options at year-end.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
AGGREGATED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT YEAR-END AT YEAR-END(1)
ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Bready....... 251,151 $4,761,047 486,349(2) 162,500 $3,640,650(2) $558,594
Almon C. Hall........... 27,600 657,225 20,733 11,667 284,048 65,627
Richard J. Harris....... 34,600 821,375 18,833 16,667 186,678 36,978
Kenneth J. Ortman....... 15,000 337,500 6,666 8,334 42,184 50,003
Kevin W. Donnelly....... 8,000 140,500 12,747 9,000 166,412 53,125
</TABLE>
- ---------------
(1) Calculated by multiplying the relevant number of unexercised options by the
difference between the stock price for the Company's Common Stock on
December 31, 1998 of $27.625 and the exercise price of the options.
(2) 386,349 of these options with a value of $3,578,150 are for Special Common
Stock.
PENSION PLAN
As of December 31, 1995, the Company's qualified pension plan (the "Pension
Plan") was frozen and no further increases in benefits may occur as a result of
increases in service or compensation. The benefit payable to a participant at
normal retirement equals the accrued benefit as of December 31, 1995. 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 $130,000; Mr. Hall $60,304; Mr.
Harris $78,286, Mr. Ortman $19,966 and Mr. Donnelly $17,343.
8
<PAGE> 11
In part to compensate certain officers for the effect of the limitations
under the Code and the freezing of the Pension Plan, the Company adopted,
effective January 1, 1996 (for Mr. Bready effective January 1, 1997), the
Nortek, Inc. Supplemental Executive Retirement Plan, a nonqualified plan. Under
this plan, Messrs. Bready, Hall, Harris, Donnelly and Ortman will be entitled to
receive, at age 65, annual supplemental pension payments equal to fifty percent
(50%) (sixty percent (60%) for Mr. Bready and thirty percent (30%) for Messrs.
Donnelly and Ortman) 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. The Supplemental Executive Retirement
Plan provides for vesting upon 10 years of service. Messrs. Bready, Hall, Harris
and Donnelly have more than 10 years of service for purposes of the plan, and
Mr. Ortman currently has 9 years of service. With the consent of the Board of
Directors, reduced benefits may be received beginning at age 55.
The Company provides deferred compensation benefits for Messrs. Bready,
Hall and Harris of 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.
REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the Board
of Directors and its Compensation and Stock Option Committees. 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 terms 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 compensation of the Chief Executive Officer Richard
L. Bready is governed by the terms of his employment agreement with the Company,
which was approved by stockholders at the 1997 Annual Meeting of Stockholders.
The terms of the Mr. Bready's employment agreement in effect for 1998 are set
below under "Employment Agreements and Severance Arrangements."
The executive officers named in the Summary Compensation Table received
salary increases in 1998 based on competitive salary analyses and individual
performance of job goals and objectives. Bonuses awarded such executive officers
for the year reflected the achievement of individual goals, the operating
performance of the Company and certain units and other factors.
By the Board of Directors:
Richard L. Bready William I. Kelly
Phillip L. Cohen J. Peter Lyons
Richard J. Harris
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is authorized to approve changes in the
compensation arrangement with the Chief Executive Officer and recommend changes
with respect to certain other executive officers. In
9
<PAGE> 12
structuring compensation for the Chief Executive Officer, the Committee believes
it is important that Mr. Bready's compensation include incentives that may
qualify for deduction by the Company under Section 162(m) of the Internal
Revenue Code of 1986. The Committee may, however, grant compensation that would
not be deductible by the Company as a result of the application of Section
162(m). In June 1998, the Compensation Committee approved an amendment to Mr.
Bready's employment agreement which increased his base salary to $975,000 per
annum, effective July 1, 1998.
During 1998, Mr. Bready received a $500,000 performance award under the
Company's 1997 Equity and Cash Incentive Plan in connection with the sale of the
Company's Universal-Rundle Corporation ("U-R") subsidiary. Payment of the award
was approved by the Compensation Committee in 1997 and was based on the
Committee's belief that it was in the best interests of the Company that the
disposition of U-R be as financially successful as possible and that Mr.
Bready's active participation in the disposition process was key to that
success. In addition, during 1998, Mr. Bready received a $1,838,000 bonus
pursuant to his employment agreement with the Company.
By the Compensation Committee:
Phillip L. Cohen William I. Kelly
REPORT OF THE 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. In 1998, the Committee
awarded options to Mr. Bready for 225,000 shares of Special Common Stock. In
making the awards, the Committee considered his performance as the Company's
Chief Executive Officer, his compensation arrangements including his employment
agreement, the number and terms of outstanding options and information with
respect to options as a component of chief executive officer compensation which
align the goals of the stockholders with those of the executive. Stock options
were awarded to certain other executive officers based on their recent salary
history, prior option awards, job performance and overall success of the
Company.
By the Stock Option Committee:
Phillip L. Cohen William I. Kelly
EMPLOYMENT AGREEMENTS AND SEVERANCE ARRANGEMENTS
The Company does not regularly enter into employment agreements with its
executive officers, other than its Chief Executive Officer. Mr. Bready's
employment agreement with the Company (as amended, the "1998 Employment
Agreement") was approved by stockholders at the 1997 Annual Meeting and became
effective January 1, 1998. The 1998 Employment Agreement provides for the
employment of Mr. Bready as Chairman and Chief Executive Officer until January
1, 2003 and at the end of each year will be extended for an additional year. His
basic annual salary will be not less than $975,000 with adjustments based upon
increases in the cost of living. The 1998 Employment Agreement provides for
incentive compensation of 1% of the Company's earnings before taxes up to
$10,000,000, 2% of earnings from $10,000,000 to $15,000,000, 3% of earnings from
$15,000,000 to $20,000,000 and 4% of the excess over $20,000,000, subject to a
maximum of 2 1/2 times base salary.
10
<PAGE> 13
In addition, the Company made a loan in 1997 to Mr. Bready in the amount of
$3,000,000, repayable annually in installments of principal of $300,000 and
accrued interest. Interest accrues daily on the loan at the applicable federal
long-term rate (determined in accordance with Section 1274 of the Internal
Revenue Code of 1986) in effect on each day the loan is outstanding. In
accordance with the 1998 Employment Agreement, and as a result of the Company's
operating earnings in 1997 in excess of $35,000,000, the 1998 installment of
$478,795 of principal and interest was forgiven. Installments will also be
forgiven if Mr. Bready is terminated without cause, if he resigns for good
reason, or dies or is disabled during the term of the agreement. As of April 19,
1999, the outstanding principal balance of the loan was $2,400,000 and there was
accrued interest of $45,006.
Mr. Bready is eligible to participate in any deferred compensation,
supplemental executive retirement, pension or other benefit plan in which
executive personnel of the Company are eligible to participate and is eligible
for discretionary bonuses. In addition, Mr. Bready is entitled to receive all
other benefits or participate in any employee benefit plans generally available
to executive personnel of the Company.
The 1998 Employment Agreement may be voluntarily terminated at any time by
Mr. Bready. In the case of such a voluntary termination, Mr. Bready may not
compete with the Company for a period of five years from the date of such
termination (the "Noncompete Period"). Mr. Bready's agreement not to compete
with the Company during the Noncompete Period is limited to prohibiting Mr.
Bready from owning a greater than 5% equity interest in, serving as a director,
officer, employee or partner of, or being a consultant to or co-venturer with
any business enterprise or activity that competes in North America with any line
of business conducted by the Company or any of its subsidiaries at the
termination of the employment period and which accounts for more than 5% of the
Company's gross revenues. During the Noncompete Period, Mr. Bready will be
prohibited, among other things, from hiring or attempting to hire any person
employed by the Company or any of its subsidiaries during the 24 month period
prior to the termination of the employment period. In consideration of Mr.
Bready's agreement not to compete for such period, the Company will pay Mr.
Bready a fee at the annual rate of (i) 60% of his basic salary at the date of
such termination, plus (ii) 60% of the greater of (a) the average of his
incentive compensation earned for the preceding three calendar years or (b) the
incentive compensation that would have been payable to Mr. Bready for the year
in which the Noncompete Period begins if the employment period had not
terminated. In the event of a change of control during the period beginning 12
months prior to the commencement of the Noncompete Period or at any time during
the Noncompete Period, Mr. Bready may elect to be paid in cash an amount equal
to the balance of the fee payable if the Noncompete Period had continued for its
maximum five-year term, with incentive compensation for the purpose of such
payment to be calculated on the basis of the average of incentive compensation
earned for the preceding three calendar years.
The Company may terminate Mr. Bready at any time, but if termination is
other than for "cause" (as defined in the 1998 Employment Agreement), or if Mr.
Bready terminates the 1998 Employment Agreement for "good reason" (as defined in
the 1998 Employment Agreement), the Company will be obligated to pay Mr. Bready,
for a period of five years, an amount for each year equal to (i) 70% of his
basic salary as of the date of such termination, plus (ii) 70% of the greater of
(a) the average of his incentive compensation earned for the preceding three
calendar years or (b) incentive compensation that would have been payable to Mr.
Bready for the year in which termination occurs if the employment period had not
terminated. If a change of control occurs within the 24 months preceding such a
termination of the employment period or during the 12 months following such a
termination of the employment period, Mr. Bready may elect to be paid in cash an
amount equal to the balance of severance pay, with incentive compensation for
the purpose of such payment to be calculated on the basis of the average of the
incentive compensation for the preceding three calendar years. In June 1997, the
Compensation Committee approved an amendment to the 1998 Employment Agreement
which expanded the definition of a change of control to include events that
would be required to be reported on
11
<PAGE> 14
Form 8-K. In the event of such a termination of the employment period, Mr.
Bready will continue for a period of 60 months after termination of the
employment period to be covered at the expense of the Company by the same or
equivalent hospital, medical, accident, disability and life insurance coverages
as he was covered immediately prior to termination of the employment period.
If Mr. Bready becomes disabled or dies during the employment period or the
Noncompete Period, his estate or designated beneficiary will be entitled to
receive from the Company: (i) in the case of such a termination of the
employment period, for a period of five years, an amount equal to 60% of the
basic salary as of the date of his death, plus 60% of the greater of (a) the
average of the incentive compensation earned for the preceding three calendar
years or (b) the incentive compensation that would have been payable to Mr.
Bready if the employment period had not terminated, or (ii) in the case of such
a termination of the Noncompete Period, for the remainder of the Noncompete
Period, an amount equal to the annual fee payable to Mr. Bready at the date of
such termination.
If it is determined that any benefit provided by the Company to Mr. Bready
will be subject to the excise tax imposed by Section 4999 of the Code, the
Company will make an additional lump-sum payment to Mr. Bready sufficient, after
giving effect to all federal, state and other taxes and charges with respect to
such payment, to make Mr. Bready whole for all taxes imposed under or as a
result of Section 4999. The Company agrees to pay all costs and expenses
incurred by Mr. Bready in connection with the enforcement of the 1998 Employment
Agreement and will indemnify and hold him harmless from and against any damages,
liabilities and expenses (including without limitation fees and expenses of
counsel) incurred by Mr. Bready in connection with any litigation or threatened
litigation, including any regulatory proceedings, arising out of the making,
performance or enforcement of the 1998 Employment Agreement or termination of
the employment period.
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 employee is terminated
within the 24-month period following such 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 March 31,
1999, and the above-named executive officers were terminated as of such date,
they would have been entitled to receive, over the next succeeding 24-month
period, an aggregate of approximately $3,710,000. Mr. Ortman is entitled to a
minimum of 15 months severance pay if his employment is terminated without
cause.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Purchase of Shares by the Company. On February 18, 1998, the Company
purchased the following shares of Common Stock from executive officers at the
market price of $32.47 per share: 150,000 shares from Mr. Bready; 22,600 shares
from Mr. Harris; 16,527 shares from Mr. Hall; 9,000 shares from Mr. Donnelly;
and 6,000 shares from Mr. Ortman. On March 3, 1999, the Company purchased the
following shares of Common Stock from executive officers at the market price of
$26.75 per share: 23,000 shares from Mr. Harris; 11,900 shares from Mr. Ortman;
and 4,000 shares from Mr. Donnelly. On March 5, 1999, the Company purchased
50,000 shares from Mr. Bready at the market price of $26.656 per share.
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<PAGE> 15
Insurance Commissions Payable to Director. J. Peter Lyons, a director, is
an executive officer and 50% owner of L&M Insurance Agency, Inc. which received
a total of $62,471 from the Company in 1998, which includes commissions on
insurance premiums paid by the Company and fees for services rendered on
insurance-based compensation matters.
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of the Company's
outstanding Common Stock, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange. Officers, directors and greater than ten percent stockholders are
required by SEC regulations to furnish the Company with all copies of Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during the fiscal year
ended December 31, 1998, all filing requirements were timely satisfied.
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<PAGE> 16
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.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG NORTEK, INC., THE RUSSELL 2000 INDEX AND A PEER GROUP
[PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
NORTEK, INC. RUSSELL 2000 PEER GROUP
------------ ------------ ----------
<S> <C> <C> <C>
12/93 100.00 100.00 100.00
12/94 132.00 98.00 74.00
12/95 131.00 126.00 100.00
12/96 222.00 147.00 106.00
12/97 295.00 180.00 152.00
12/98 307.00 179.00 163.00
</TABLE>
* $100 INVESTED ON 12/31/93 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
The peer group companies are:
<TABLE>
<S> <C>
Armstrong World Industries, Inc. The Stanley Works
Masco Corporation Maytag Corporation
Morgan Products Ltd. Fedders Corporation
Whirlpool Corporation
</TABLE>
14
<PAGE> 17
Ply Gem Industries, Inc., formerly included in the peer group, was acquired
by the Company in 1997 and, since its shares are no longer publicly traded, has
been eliminated from the peer group companies.
Bird Corporation, formerly included in the peer group, was acquired by
CertainTeed Corporation in 1998 and, since its shares are no longer publicly
traded, has been eliminated from the peer group of companies.
PROPOSAL NO. 2
APPROVAL OF THE 1999 EQUITY AND CASH INCENTIVE PLAN
On March 22, 1999, the Company's Board of Directors approved, subject to
stockholder approval, the 1999 Equity and Cash Incentive Plan (the "1999
Incentive Plan"), and the issuance of 575,000 shares of the Company's Common
Stock or Special Common Stock pursuant to awards thereunder.
The purpose of the 1999 Incentive Plan is to advance the interests of the
Company and its subsidiaries by enhancing their ability to attract and retain
employees and other persons or entities who are in a position to make
significant contributions to the success of the Company and its subsidiaries,
and to reward participants for such contributions through ownership of shares of
the Company's Common Stock or Special Common Stock (together, the "Stock") and
cash incentives. The Plan is intended to accomplish these goals by enabling the
Company to grant awards in the form of options, stock appreciation rights,
restricted stock, unrestricted stock or deferred stock, or performance awards or
combinations thereof, all as more fully described below.
GENERAL
The 1999 Incentive Plan will be administered by a committee of the Board of
Directors designated for such purpose consisting of at least two directors (the
"Stock Option Committee"). During such times as the Company's Stock is
registered under the Securities Exchange Act of 1934 (the "1934 Act"), all
members of the Stock Option Committee will be "non-employee directors" within
the meaning of Rule 16b-3 promulgated under the 1934 Act and "outside directors"
within the meaning of Section 162 (m) (4) (C) (i) of the, Code. Under the 1999
Incentive Plan, the Stock Option Committee may grant stock options, stock
appreciation rights, restricted stock, unrestricted stock, deferred stock, and
performance awards (in cash or Stock), or combinations thereof, and may waive
the terms and conditions of any award. A total of 575,000 shares of Stock are
reserved for issuance under the 1999 Incentive Plan. Awards under the 1999
Incentive Plan may also include provision for the payment of dividend
equivalents with respect to shares subject to awards. Employees of the Company
and its subsidiaries and other persons or entities who are in a position to make
a significant contribution to the success of the Company are eligible to receive
awards under the 1999 Incentive Plan.
Section 162(m) of the Code places annual limitations on the deductibility
by public companies of compensation in excess of $1,000,000 paid to each of the
chief executive officer and the other four most highly compensated officers,
unless, among other things, the compensation is performance-based. For
compensation attributable to stock options and stock appreciation rights to
qualify as performance-based, the plan under which they are granted must state a
maximum number of shares with respect to which options and rights may be granted
to an individual during a specified period and must be approved by the company's
stockholders. To comply with these requirements, the 1999 Incentive Plan
provides that the maximum number of shares as to which awards may be granted to
any participant in any one calendar year is 300,000, and the 1999 Incentive Plan
is being submitted for stockholder approval.
Stock Options. The exercise price of an incentive stock option ("ISO")
granted under the 1999 Incentive Plan or an option intended to qualify as
performance-based compensation under Section 162(m) of the Code shall not be
less than 100% of the fair market value of the Stock at the time of grant. The
exercise
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<PAGE> 18
price of a non-ISO granted under the 1999 Incentive Plan is determined by the
Stock Option Committee. Options granted under the 1999 Incentive Plan will
expire and terminate 10 years from the date of grant. The exercise price may be
paid in cash or check acceptable to the Company. Subject to certain additional
limitations, the Stock Option Committee may also permit the exercise price to be
paid by tendering shares of Stock, by delivery to the Company an undertaking by
a broker to deliver promptly sufficient funds to pay the exercise price, or a
combination of the foregoing.
Stock Appreciation Rights (SARs). Stock appreciation rights may be granted
either alone or in tandem with stock option grants. Each SAR entitles the holder
on exercise to receive an amount in cash or Stock or a combination thereof (such
form to be determined by the Stock Option Committee) determined in whole or in
part by reference to appreciation in the fair market value of a share of Stock.
SARs may be based solely on appreciation in the fair market value of Stock or on
a comparison of such appreciation with some other measure of market growth. The
date as of which such appreciation or other measure is determined shall be the
exercise date unless another date is specified by the Stock Option Committee. If
an SAR is granted in tandem with an option, the SAR will be exercisable only to
the extent the option is exercisable. To the extent the option is exercised, the
accompanying SAR will cease to be exercisable, and vice versa.
Stock Awards; Deferred Stock. The 1999 Incentive Plan provides for awards
of nontransferable shares of restricted Stock subject to forfeiture ("Restricted
Stock"), as well as unrestricted shares of Stock. Shares of Restricted Stock may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable period and the satisfaction of any
other conditions or restrictions established by the Stock Option Committee.
Except as the Stock"Option Committee may otherwise determine, if a participant
dies or ceases to be an employee or ceases to continue the consulting or other
similar relationship engaged in by such participant with the Company for any
reason during the restricted period, the Company may purchase the shares of
Restricted Stock for the amount paid by the participant for the stock. Other
awards under the 1999 Incentive Plan may also be settled with Restricted Stock.
The 1999 Incentive Plan also provides for deferred grants entitling the
recipient to receive shares of Stock in the future at such times and on such
conditions as the Stock Option Committee may specify.
Performance Awards. The 1999 Incentive Plan provides for performance
awards entitling the recipient to receive cash or Stock following the attainment
of performance goals determined by the Stock Option Committee. Performance
conditions and provisions for deferred Stock may also be attached to other
awards under the 1999 Incentive Plan. In the case of any performance award
intended to qualify for the performance-based remuneration exception described
in Section 162(m) of the Code (an "Exempt Award"), the Committee will establish
in advance in writing specific performance goals that are based upon any one or
more operational, result or event-specific goals, which will be based upon the
following:
- sales; revenues; assets; expenses; earnings before or after deduction for
all or any portion of interest, taxes, depreciation or amortization,
whether or not on a continuing operations or an aggregate or per share
basis; return on equity, investment, capital or assets; inventory level
or turns; one or more operating ratios; borrowing levels, leverage ratios
or credit rating; market share; capital expenditures; cash flow; stock
price; stockholder return; or any combination of the foregoing; or
- acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations, restructurings, financings (issuance of debt or
equity) and refinancings; transactions that would constitute a Change of
Control; or any combination of the foregoing.
The maximum Exempt Award payable to an individual in respect of all
performance goals for any year cannot exceed $10,000,000. Payment of performance
awards based upon a performance goal for calendar years
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<PAGE> 19
2005 and thereafter is conditioned upon reapproval by the Company's stockholders
no later than the first meeting of stockholders in 2004.
Termination. Except as otherwise provided by the Stock Option Committee,
if a participant dies, options and SARs exercisable immediately prior to death
may be exercised by the participant's executor, administrator or transferee
during a period of one year following such death (or for the remainder of their
original term, if less). In the case of termination for reason other than death,
retirement or disability, options and SARs remain exercisable, to the extent
they were exercisable immediately prior to termination, for three months (or for
the remainder of their original term, if less). If termination is due to
retirement or total disability, options and SARs remain exercisable for their
original term. Options and SARs not exercisable upon termination of service will
terminate. Shares of Restricted Stock must be resold to the Company for the
amount paid for the stock, and other awards terminate, except as otherwise
provided.
Upon a Change of Control (as defined in the 1999 Incentive Plan), options
and SARs shall become fully exercisable, shares of Restricted Stock shall vest,
and holders of Performance Awards shall be entitled to receive a cash payment
equal to the full value of the cash component plus the fair market value of any
stock included in the award. If, as part of or in connection with the Change of
Control, there occurs a merger or consolidation in which the Company does not
survive or is wholly acquired or there is a liquidation or dissolution of the
Company, awards that are not disposed of in or prior to the transaction will
terminate.
Amendment. The Stock Option Committee may amend the 1999 Incentive Plan or
any outstanding award at any time, provided that no such amendment will, without
the approval of the stockholders of the Company, effectuate a change for which
stockholder approval is required in order for the 1999 Incentive Plan to
continue to qualify for the award of ISOs under section 422 of the Code or for
the award of performance-based compensation under Section 162(m) of the Code.
NEW PLAN BENEFIT
The future benefits or amounts that would be received under the 1999
Incentive Plan by the executive officers, the nonexecutive officer directors and
the nonexecutive officer employees are discretionary and are therefore not
determinable at this time.
FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the 1999 Incentive Plan. The
summary does not purport to cover federal employment tax or other federal tax
consequences that may be associated with the 1999 Incentive Plan, nor does it
cover state, local or non-U.S. taxes.
Incentive Stock Options. In general, an optionee realizes no taxable
income upon the grant or exercise of an ISO. However, the exercise of an ISO may
result in an alternative minimum tax liability to the optionee. With certain
exceptions, a disposition of shares purchased under an ISO within two years from
the date of grant or within one year after exercise produces ordinary income to
the optionee (and a deduction to the Company) equal to the value of the shares
at the time of exercise less the exercise price. Any additional gain recognized
in the disposition is treated as a capital gain for which the Company is not
entitled to a deduction. If the optionee does not dispose of the shares until
after the expiration of these one- and two-year holding periods, any gain or
loss recognized upon a subsequent sale is treated as a long-term capital gain or
loss for which the Company is not entitled to a deduction.
Nonstatutory (Non-ISO) Options. In general, in the case of a non-ISO, the
optionee has no taxable income at the time of grant but realizes income in
connection with exercise of the option in an amount equal to the excess (at the
time of exercise) of the fair market value of the shares acquired upon exercise
over the exercise price; a corresponding deduction is available to the Company;
and upon a subsequent sale or
17
<PAGE> 20
exchange of the shares, appreciation or depreciation after the date of exercise
is treated as capital gain or loss for which the Company is not entitled to a
deduction.
In general, an ISO that is exercised more than three months after
termination of employment (other than termination by reason of death) is treated
as a non-ISO. ISOs are also treated as non-ISOs to the extent they first become
exercisable by an individual in any calendar year for shares having a fair
market value (determined as of the date of grant) in excess of $100,000.
Under the so-called "golden parachute" provisions of the Code, the vesting
or accelerated exercisability of awards in connection with a change in control
of the Company may be required to be valued and taken into account in
determining whether participants have received compensatory payments, contingent
on the change in control, in excess of certain limits. If these limits are
exceeded, a substantial portion of amounts payable to the participant, including
income recognized by reason of the grant, vesting or exercise of awards under
the 1999 Incentive Plan, may be subject to an additional 20% federal tax (on the
payment) and may be nondeductible to the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1999
EQUITY AND CASH INCENTIVE PLAN.
Unless instructions are given to the contrary, it is the intention of the
persons named as proxies to vote the shares to which the proxy is related FOR
approval of the 1999 Incentive Plan, authorizing the adoption of the plan by the
Company, with 575,000 shares reserved for issuance under the terms of the plan.
AUDIT MATTERS
The Board of Directors has selected Arthur Andersen LLP, auditors of the
Company in 1998, to continue in that capacity for 1999. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting with the
opportunity to make a statement if they so desire and to be available to respond
to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1999 PROXY STATEMENT
In order for any proposal that a stockholder intends to present at the 2000
Annual Meeting of Stockholders of the Company 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 December 24, 1999.
FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
ITS ANNUAL REPORT ON FORM 10-K. REQUESTS SHOULD BE SENT TO NORTEK, INC., 50
KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360.
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.
April 26, 1999
18
<PAGE> 21
NORCM-PS-99
<PAGE> 22
APPENDIX A
NORTEK, INC.
1999 EQUITY AND CASH INCENTIVE PLAN
1. PURPOSE
The purpose of this Equity and Cash Incentive Plan (the "Plan") is to
advance the interests of Nortek, Inc. (the "Company") and its subsidiaries by
enhancing their ability to attract and retain employees and other persons or
entities who are in a position to make significant contributions to the success
of the Company and its subsidiaries through ownership of shares of the Company's
Common Stock and Special Common Stock and cash incentives.
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted Stock
or Unrestricted Stock Awards, Deferred Stock Awards or Performance Awards, or
combinations thereof, all as more fully described below.
2. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a Committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least two
directors. A majority of the members of the Committee shall constitute a quorum,
and all determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be made without
notice or meeting of the Committee by a writing signed by a majority of the
Committee members. During such times as the Company's Common Stock is registered
under the Securities Exchange Act of 1934 (the "1934 Act"), all members of the
Committee shall be "non-employee directors" within the meaning of Rule 16b-3
promulgated under the 1934 Act and "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as amended (the
"Code").
The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b) determine
whether the Award is with respect to the Company's Common Stock, $1.00 par
value, or its Special Common Stock, $1.00 par value (together, the "Stock"), or
a combination thereof and the size of each Award, including the number of shares
of Stock subject to the Award; (c) determine the type or types of each Award;
(d) determine the terms and conditions of each Award; (e) waive compliance by a
holder of an Award with any obligations to be performed by such holder under an
Award and waive any terms or conditions of an
<PAGE> 23
Award; (f) amend or cancel an existing Award in whole or in part (and if an
award is canceled, grant another Award in its place on such terms and conditions
as the Committee shall specify), except that the Committee may not, without the
consent of the holder of an Award, take any action under this clause with
respect to such Award if such action would adversely affect the rights of such
holder; (g) prescribe the form or forms of instruments that are required or
deemed appropriate under the Plan, including any written notices and elections
required of Participants (as defined below), and change such forms from time to
time; (h) adopt, amend and rescind rules and regulations for the administration
of the Plan; and (i) interpret the Plan and decide any questions and settle all
controversies and disputes that may arise in connection with the Plan. Such
determinations and actions of the Committee, and all other determinations and
actions of the Committee made or taken under authority granted by any provision
of the Plan, will be conclusive and will bind all parties. Nothing in this
paragraph shall be construed as limiting the power of the Committee to make
adjustments under Section or Section 8.6.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Awards may be made prior to such stockholder
approval if made subject thereto. No Award may be granted under the Plan after
May 20, 2009, but Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 8.6, the aggregate number of
shares of Stock that may be delivered under the Plan will be 575,000. If any
Award requiring exercise by the Participant for delivery of Stock terminates
without having been exercised in full, or if any Award payable in Stock or cash
is satisfied in cash rather than Stock, the number of shares of Stock as to
which such Award was not exercised or for which cash was substituted will be
available for future grants.
Subject to Section 8.6(a), the maximum number of shares of Stock as to
which Options or Stock Appreciation Rights may be granted to any Participant in
any one calendar year is 300,000, which limitation shall be construed and
applied consistently with the rules under Section 162(m) of the Code.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Each key employee of the Company or any of its subsidiaries (an "Employee")
and each other person or entity (including without limitation non-Employee
directors of
<PAGE> 24
the Company or a subsidiary of the Company) who, in the opinion of the
Committee, is in a position to make a significant contribution to the success of
the Company or its subsidiaries will be eligible to receive Awards under the
Plan (each such Employee, person or entity receiving an Award, "a Participant").
A "subsidiary" for purposes of the Plan will be a corporation in which the
Company owns, directly or indirectly, stock possessing 50% or more of the total
combined voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. OPTIONS
(a) NATURE OF OPTIONS. An Option is an Award giving the recipient the
right on exercise thereof to purchase Stock.
Both "incentive stock options," as defined in Section 422(b) of the
Code (any Option intended to qualify as an incentive stock option being
hereinafter referred to as an "ISO"), and Options that are not ISOs, may be
granted under the Plan. ISOs shall be awarded only to Employees. An Option
awarded under the Plan shall be a non-ISO unless it is expressly designated as
an ISO at time of grant.
(b) EXERCISE PRICE. The exercise price of an Option will be determined
by the Committee subject to the following:
(1) The exercise price of an ISO or an Option intended to
qualify as performance based compensation under Section 162(m) of the
Code shall not be less than 100% of the fair market value of the Stock
subject to the Option, determined as of the time the Option is
granted.
(2) In no case may the exercise price paid for Stock which
is part of an original issue of authorized Stock be less than the par
value per share of the Stock.
(c) DURATION OF OPTIONS. The latest date on which an Option may be
exercised will be the tenth anniversary of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified by
the Committee at the time the Option was granted.
(d) EXERCISE OF OPTIONS. An Option will become exercisable at such
time or times, and on such conditions, as the Committee may specify. The
Committee may at any time and from time to time accelerate the time at which all
or any part of the Option may be exercised. Any exercise of an Option must be in
writing, signed by the proper person and delivered or mailed to the Company,
accompanied by (1) any documents required by the Committee and (2) payment in
full in accordance with paragraph (e) below for the number of shares for which
the Option is exercised.
<PAGE> 25
(e) PAYMENT FOR STOCK. Stock purchased on exercise of an Option must
be paid for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
Committee at or after the grant of the Option or by the instrument evidencing
the Option, (i) through the delivery of shares of Stock which have been held for
at least six months (unless the Committee approves a shorter period) and which
have a fair market value equal to the exercise price, (ii) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to the
Company sufficient funds to pay the exercise price, or (iii) by any combination
of the foregoing permissible forms of payment.
(f) DISCRETIONARY PAYMENTS. If (i) the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2) exceeds the exercise price of
the Option at the time of its exercise, and (ii) the person exercising the
Option so requests the Committee in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Common Stock (at a price per share equal to the fair market value per share)
to the person exercising the Option an amount equal to the difference between
the fair market value of the Stock which would have been purchased pursuant to
the exercise (determined on the date the Option is canceled) and the aggregate
exercise price which would have been paid.
6.2. STOCK APPRECIATION RIGHTS.
(a) NATURE OF STOCK APPRECIATION RIGHTS. A Stock Appreciation Right
(or "SAR") is an Award entitling the holder on exercise to receive an amount in
cash or Stock or a combination thereof (such form to be determined by the
Committee) determined in whole or in part by reference to appreciation, from and
after the date of grant, in the fair market value of a share of Stock. SARs may
be based solely on appreciation in the fair market value of Stock or on a
comparison of such appreciation with some other measure of market growth such as
(but not limited) to appreciation in a recognized market index. The date as of
which such appreciation or other measure is determined shall be the exercise
date unless another date is specified by the Committee.
(b) GRANT OF STOCK APPRECIATION RIGHTS. SARs may be granted in tandem
with, or independently of, Options granted under the Plan.
(1) RULES APPLICABLE TO TANDEM AWARDS. When SARs are granted
in tandem with Options, (a) the SAR will be exercisable only at such
time or times, and to the extent, that the related Option is
exercisable and will be exercisable in accordance with the procedure
required for exercise of the related Option; (b) the SAR will
terminate and no longer be exercisable upon the termination or
exercise of the related Option, except that a SAR granted with respect
to less than the full number of shares covered by an Option will not
be reduced until the number of shares as to which the related Option
has been exercised or has
<PAGE> 26
terminated exceeds the number of shares not covered by the SAR; (c)
the Option will terminate and no longer be exercisable upon the
exercise of the related SAR; and (d) the SAR will be transferable only
with the related Option.
(2) EXERCISE OF INDEPENDENT SARS. A SAR not granted in
tandem with an Option will become exercisable at such time or times,
and on such conditions, as the Committee may specify. The Committee
may at any time accelerate the time at which all or any part of the
Right may be exercised.
Any exercise of an independent SAR must be in writing, signed by the proper
person and delivered or mailed to the Company, accompanied by any other
documents required by the Committee.
6.3. RESTRICTED AND UNRESTRICTED STOCK.
(a) GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of
the Plan, the Committee may grant shares of Stock in such amounts and upon such
terms and conditions as the Committee shall determine subject to the
restrictions described below ("Restricted Stock").
(b) RESTRICTED STOCK AGREEMENT. The Committee may require, as a
condition to an Award, that a recipient of a Restricted Stock Award enter into a
Restricted Stock Award Agreement, setting forth the terms and conditions of the
Award. In lieu of a Restricted Stock Award Agreement, the Committee may provide
the terms and conditions of an Award in a notice to the Participant of the
Award, on the Stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems appropriate.
(c) TRANSFERABILITY AND OTHER RESTRICTIONS. Except as otherwise
provided in this Section 6.3, the shares of Restricted Stock granted herein may
not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the end of the applicable period or periods established by
the Committee and the satisfaction of any other conditions or restrictions
established by the Committee (such period during which a share of Restricted
Stock is subject to such restrictions and conditions is referred to as the
"Restricted Period"). Except as the Committee may otherwise determine under
Section 7.1, if a Participant suffers a Termination of Service (as defined at
Section 7.1) for any reason during the Restricted Period, the Company may
purchase the shares of Restricted Stock subject to such restrictions and
conditions for the amount of cash paid by the Participant for such shares;
provided, that if no cash was paid by the Participant such shares of Restricted
Stock shall be automatically forfeited to the Company.
During the Restricted Period with respect to any shares of Restricted
Stock, the Company shall have the right to retain in the Company's possession
the certificate or certificates representing such shares.
<PAGE> 27
(d) REMOVAL OF RESTRICTIONS. Except as otherwise provided in this
Section 6.3, a share of Restricted Stock covered by a Restricted Stock grant
shall become freely transferable by the Participant upon completion of the
Restricted Period, including the passage of any applicable period of time and
satisfaction of any conditions to vesting. The Committee, in its sole
discretion, shall have the right at any time immediately to waive all or any
part of the restrictions and conditions with regard to all or any part of the
shares held by any Participant.
(e) VOTING RIGHTS, DIVIDENDS AND OTHER DISTRIBUTIONS. During the
Restricted Period, Participants holding shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such shares. Except as the Committee shall
otherwise determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock including any dividends
and distributions paid in shares shall be subject to the same restrictions and
conditions as the shares of Restricted Stock with respect to which they were
paid.
(f) OTHER AWARDS SETTLED WITH RESTRICTED STOCK. The Committee may, at
the time any Award described in this Section 6 is granted, provide that any or
all the Stock delivered pursuant to the Award will be Restricted Stock.
(g) UNRESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee may grant shares of Stock free of restrictions under the
Plan in such amounts and upon such terms and conditions as the Committee shall
determine.
(h) NOTICE OF SECTION 83(b) ELECTION. Any Participant making an
election under Section 83(b) of the Code with respect to Restricted Stock must
provide a copy thereof to the Company within 10 days of filing such election
with the Internal Revenue Service.
6.4. DEFERRED STOCK.
A Deferred Stock Award entitles the recipient to receive shares of
Stock to be delivered in the future. Delivery of the Stock will take place at
such time or times, and on such conditions, as the Committee may specify. The
Committee may at any time accelerate the time at which delivery of all or any
part of the Stock will take place. At the time any Award described in this
Section 6.4 is granted, the Committee may provide that, at the time Stock would
otherwise be delivered pursuant to the Award, the Participant will instead
receive an instrument evidencing the Participant's right to future delivery of
Deferred Stock.
6.5. PERFORMANCE AWARDS; PERFORMANCE GOALS.
(a) NATURE OF PERFORMANCE AWARDS. A Performance Award entitles the
recipient to receive, without payment, an amount in cash or Stock or a
combination thereof (such form to be determined by the Committee) following the
attainment of Performance Goals (as hereinafter defined). Performance Goals may
be related to personal performance,
<PAGE> 28
corporate performance, departmental performance or any other category of
performance established by the Committee. The Committee will determine the
Performance Goals, the period or periods during which performance is to be
measured and all other terms and conditions applicable to the Award.
(b) OTHER AWARDS SUBJECT TO PERFORMANCE CONDITION. The Committee may,
at the time any Award described in this Section 6.5 is granted, impose the
condition (in addition to any conditions specified or authorized in this Section
6 or any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award. Any such
Award made subject to the achievement of Performance Goals (other than an Option
or SAR) shall be treated as a Performance Award for purposes of Section 6.5(c)
below.
(c) LIMITATIONS AND SPECIAL RULES. In the case of any Performance
Award intended to qualify for the performance-based remuneration exception
described in Section 162(m)(4)(C) of the Code and the regulations thereunder (an
"Exempt Award"), the Committee shall in writing preestablish specific
Performance Goals. A Performance Goal must be established prior to passage of
25% of the period of time over which attainment of such goal is to be measured.
"Performance Goal" means criteria based upon any one or more of the following
(on a consolidated, divisional, subsidiary, line of business or geographical
basis or in combinations thereof): (i) sales; revenues; assets; expenses;
earnings before or after deduction for all or any portion of interest, taxes,
depreciation or amortization, whether or not on a continuing operations or an
aggregate or per share basis; return on equity, investment, capital or assets;
inventory level or turns; one or more operating ratios; borrowing levels,
leverage ratios or credit rating; market share; capital expenditures; cash flow;
stock price; stockholder return; or any combination of the foregoing; or (ii)
acquisitions and divestitures (in whole or in part); joint ventures and
strategic alliances; spin-offs, split-ups and the like; reorganizations;
recapitalizations, restructurings, financings (issuance of debt or equity) and
refinancings; transactions that would constitute a Change of Control; or any
combination of the foregoing. A Performance Goal and targets with respect
thereto determined by the Committee need not be based upon an increase, a
positive or improved result or avoidance of loss. The maximum Exempt Award
payable to any Participant in respect of all such Performance Goals for any year
shall not exceed $10,000,000. Payment of Exempt Awards based upon a Performance
Goal for calendar years 2004 and thereafter is conditioned upon reapproval by
Employer's shareholders no later than Employer's first meeting of shareholders
in 2003.
7. EVENTS AFFECTING OUTSTANDING AWARDS
7.1. TERMINATION OF SERVICE.
If a Participant who is an Employee ceases to be an Employee, or if there
is a termination of the consulting, service or similar relationship in respect
of which a non-Employee Participant was granted an Award hereunder (such
termination of the employment or other relationship to be referred to as a
"Termination of Service"), except
<PAGE> 29
as otherwise provided by the Committee with respect to an Award, the following
will apply:
(a) OPTIONS AND SARS.
(1) All Options and SARs held by the Participant immediately
prior to the Termination of Service, to the extent then exercisable,
may be exercised as follows:
(i) If the Termination of Service is on account of the
Participant's death, such Awards may be exercised by the Participant's
executor or administrator or the person or persons to whom the Option
or Right is transferred by will or the applicable laws of descent and
distribution, at any time within the one year period ending with the
first anniversary of the Participant's death, and shall thereupon
terminate.
(ii) If the Termination of Service is on account of the
Participant's retirement with consent of the Company after attainment
of age 65 or total and permanent disability (as determined by the
Committee), such Awards may be exercised by the Participant at any
time in accordance with the original terms of the Award.
(iii) If the Termination of Service is for any other reason, such
Awards may be exercised by the Participant at any time within the
three month period following the Termination, and shall thereupon
terminate, unless the Award provides by its terms for immediate
termination of the Award in the event of such a Termination of Service
or unless the Termination of Service results from a discharge for
cause that, in the opinion of the Committee, casts such discredit on
the Participant as to justify immediate termination of the Award.
(2) In no event, however, shall an Option or SAR remain
exercisable beyond the latest date on which it could have been
exercised without regard to this Section 7.
(3) Options and SARs held by a Participant immediately prior to
the Termination of Service that are not then exercisable shall
terminate upon the Termination of Service.
(b) RESTRICTED STOCK. Restricted Stock held by the Participant must be
transferred to the Company (and, in the event the certificates representing such
Restricted Stock are held by the Company, such Restricted Stock will be so
transferred without any further action by the Participant) in accordance with
Section 6.3(c).
(c) DEFERRED STOCK AND PERFORMANCE AWARDS. Any payment or benefit
under a Deferred Stock Award or Performance Award to which the Participant was
not
<PAGE> 30
irrevocably entitled prior to the Termination of Service will be forfeited and
the Award canceled upon the Termination of Service.
(d) SPECIAL CIRCUMSTANCES. In the case of a Participant who is an
Employee, a Termination of Service shall not be deemed to have resulted by
reason of (i) a sick leave or other bona fide leave of absence approved for
purposes of the Plan by the Committee, so long as the Employee's right to
reemployment is guaranteed either by statute or by contract, or (ii) a transfer
of employment between the Company and a subsidiary or between subsidiaries, or
to the employment of a corporation (or a parent or subsidiary corporation of
such corporation) issuing or assuming an option in a transaction to which
Section 424(a) of the Code applies.
7.2. CHANGE OF CONTROL PROVISIONS.
(a) EFFECT OF CHANGE OF CONTROL. Notwithstanding any other provision
of the Plan to the contrary, except as otherwise explicitly provided by the
Committee in writing with respect to a particular Award at the time the Award is
granted, in the event of a Change of Control:
(1) ACCELERATION OF AWARDS. As of the date on which such
Change of Control is determined to have occurred, (i) Options and SARs
that are outstanding and that are not then exercisable shall become
exercisable to the full extent of the original grants; (ii) shares of
Restricted Stock that are not otherwise vested shall vest (and any
Stock to be delivered under any other Award as Restricted Stock shall
upon delivery be unrestricted); and (iii) holders of Performance
Awards granted hereunder as to which the relevant performance period
has not ended shall be entitled at the time of the Change of Control
to receive a cash payment per Performance Award equal to the full
value of the cash component of such Award (if any) plus the fair
market value of any Stock included in such Award.
(2) TERMINATION OF AWARDS IN CERTAIN TRANSACTIONS. If, as
part of, or in connection with, the Change of Control, there occurs a
merger or consolidation in which the Company is not the surviving
corporation or which results in the acquisition of substantially all
the Company's outstanding stock by a person, entity or group of
persons and/or entities acting in concert or there is a dissolution or
liquidation of the Company, Awards payable in Stock that are not
cashed out or otherwise disposed of in or prior to the transaction
will terminate.
(3) RESTRICTION ON TERMINATION OF AWARDS DUE TO TERMINATION
OF EMPLOYMENT. Awards that remain outstanding after a Change of
Control shall not be terminated as a result of a Termination of
Service, other than by reason of death, for a period of at least seven
months following such Termination of Service.
(4) RESTRICTION ON AMENDMENT. In connection with or
following a Change of Control, neither the Committee nor the Board may
impose additional
<PAGE> 31
conditions upon exercise or otherwise amend or restrict an Award, or
amend the terms of the Plan in any manner adverse to the holder
thereof, without the written consent of such holder.
Notwithstanding the foregoing, if any right granted pursuant to this Section 7.2
would make a Change of Control transaction ineligible for pooling of interests
accounting under applicable accounting principles that but for this Section 7.2
would otherwise be eligible for such accounting treatment, the Committee shall
have the authority to substitute stock for the cash which would otherwise be
payable pursuant to this Section 7.2 having a fair market value equal to such
cash.
(b) DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall be
deemed to have occurred if and when:
(1) The Company ceases to be a publicly owned corporation
having at least 500 stockholders; or
(2) There occurs any event or series of events that would be
required to be reported as a change of control in response to Item
1(a) on a Form 8-K filed by the Company under the Exchange Act or in
any other filing by the Company with the Securities and Exchange
Commission unless the person ("Person"), as that term is defined or
used in Section 13(d) or 14(d)(2) of the 1934 Act, acquiring control
is an affiliate of the Company as of the date the Plan is approved by
stockholders of the Company; or
(3) The Company executes an agreement of acquisition,
merger, or consolidation which contemplates that after the effective
date provided for in the agreement all or substantially all of the
business and/or assets of the Company will be controlled by another
Person; provided, however, for purposes of this subparagraph (3) that
(i) if such an agreement requires as a condition precedent approval by
the Company's shareholders of the agreement or transaction, a Change
of Control shall not be deemed to have taken place unless and until
such approval is secured and, (ii) if the voting shareholders of such
other Person shall, immediately after such effective date, be
substantially the same as the voting shareholders of the Company
immediately prior to such effective date, the execution of such
agreement shall not, by itself, constitute a "Change of Control"; or
(4) Any Person (other than the Company, a majority-owned
subsidiary of the Company, an employee benefit plan maintained by the
Company or a majority-owned subsidiary of the Company or members of
the Board on the date the Plan is approved by stockholders of the
Company) becomes the beneficial owner, directly or indirectly (either
as a result of the acquisition of securities or as the result of an
arrangement or understanding, including the holding of proxies, with
or among security holders), of securities of the Company representing
25% or more of the votes that could then be cast in an election for
members of the
<PAGE> 32
Board unless within 15 days of being advised that such ownership level
has been reached, the Company's board of directors adopts a resolution
approving the acquisition of that level of securities ownership by
such Person; or
(5) During any period of 24 consecutive months, commencing
after the date this Plan is approved by stockholders of the Company,
individuals who at the beginning of such 24-month period were
directors of the Company shall cease to constitute at least a majority
of the Board, unless the election of each director who was not a
director at the beginning of such period has been approved in advance
by directors representing at least two thirds of (i) the directors
then in office who were directors at the beginning of the 24-month
period, or (ii) the directors specified in clause (i) plus directors
whose election has been so approved by directors specified in clause
(i).
8. GENERAL PROVISIONS
8.1. DOCUMENTATION OF AWARDS.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by the
Participant but acceptance of which will evidence agreement to the terms
thereof.
8.2. RIGHTS AS A STOCKHOLDER, DIVIDEND EQUIVALENTS.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain such
rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, only upon the issuance of Stock. However, the Committee
may, on such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on any
or all Stock subject to the Participant's Award had such Stock been outstanding.
Without limitation, the Committee may provide for payment to the Participant of
amounts representing such dividends, either currently or in the future, or for
the investment of such amounts on behalf of the Participant.
8.3. CONDITIONS ON DELIVERY OF STOCK.
The Company will not be obligated to deliver any shares of Stock pursuant
to the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulation have been complied with, (c) if the outstanding Stock is at
the time listed on any stock exchange or The Nasdaq National Market, until the
shares to be delivered have been listed or authorized to be listed on such
exchange or market upon official notice of notice of
<PAGE> 33
issuance, and (d) until all other legal matters in connection with the issuance
and delivery of such shares have been approved by the Company's counsel. If the
sale of Stock has not been registered under the Securities Act of 1933, as
amended, the Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the certificates
evidencing such Stock bear an appropriate legend restricting transfer.
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
8.4. TAX WITHHOLDING.
The Company will withhold from any cash payment made pursuant to an Award
an amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock
or removal of restrictions thereon. If and to the extent that such withholding
is required, the Committee may permit the Participant or such other person to
elect at such time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver to the Company,
Stock having a value calculated to satisfy the withholding requirement. The
Committee may make such share withholding mandatory with respect to any Award at
the time such Award is made to a Participant.
If at the time an ISO is exercised the Committee determines that the
Company could be liable for withholding requirements with respect to the
exercise or with respect to a disposition of the Stock received upon exercise,
the Committee may require as a condition of exercise that the person exercising
the ISO agree (a) to provide for withholding under the preceding paragraph of
this Section 8.4, if the Committee determines that a withholding responsibility
may arise in connection with tax exercise, (b) to inform the Company promptly of
any disposition (within the meaning of section 424(c) of the Code) of Stock
received upon exercise, and (c) to give such security as the Committee deems
adequate to meet the potential liability of the Company for the withholding
requirements and to augment such security from time to time in any amount
reasonably deemed necessary by the Committee to preserve the adequacy of such
security.
8.5. TRANSFERABILITY OF AWARDS.
<PAGE> 34
Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution.
8.6. ADJUSTMENTS IN THE EVENT OF CERTAIN TRANSACTIONS.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to holders of Stock other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate adjustments
to the maximum number of shares that may be delivered under the Plan under the
first paragraph of Section 4 above and to the limits described in the second
paragraph of Section 4 and in Section 6.5(c).
(b) In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of Stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected by
such change. The Committee may also make such adjustments to take into account
material changes in law or in accounting practices or principles, mergers,
consolidations, acquisitions, dispositions or similar corporate transactions, or
any other event, if it is determined by the Committee that adjustments are
appropriate to avoid distortion in the operation of the Plan; provided, that
adjustments pursuant to this sentence shall not be made to the extent it would
cause any Award intended to be exempt under Section 162(m)(4)(c) of the Code to
fail to be so exempt.
(c) In the case of ISOs, the adjustments described in (a) and (b) will be
made only to the extent consistent with continued qualification of the Option
under Section 422 of the Code (in the case of an ISO) or Section 162(m) of the
Code.
8.7. EMPLOYMENT RIGHTS, ETC.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary as
an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company to the Participant.
8.8. DEFERRAL OF PAYMENTS.
The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
8.9. PAST SERVICES AS CONSIDERATION.
<PAGE> 35
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
9. EFFECT, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or otherwise,
or to adopt other plans or arrangements under which Stock may be issued to
Employees.
The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for the
Plan to continue to qualify for the award of ISOs under Section 422 of the Code
or for the award of performance-based compensation under Section 162(m) of the
Code.
<PAGE> 36
COMMON STOCK NORTEK, INC. COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1999
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 May 20, 1999
at the Biltmore Hotel, 11 Dorrance Street, Providence, Rhode Island 02903-1734,
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 PROPOSAL 2 (APPROVAL OF 1999
EQUITY AND CASH INCENTIVE PLAN).
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: Please sign exactly as name(s) appear(s) hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DETACH CARD DETACH CARD
<PAGE> 37
<TABLE>
<S> <C>
[X] AS IN THIS EXAMPLE
- ---------------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS
NORTEK, INC. A VOTE FOR THE FOLLOWING PROPOSALS:
- ----------------------------------------------------------------
Common Stock 1. Election of Directors:
Election of one director by holders of
Common Stock, voting as a class:
If you are voting via the internet, the web site listed below is J. Peter Lyons For All With- For All
specific to the Common Stock. Nominees hold Except
Election of one director by holders of [ ] [ ] [ ]
Common Stock and Special Common Stock
voting together as a class: William I.
Kelly
CONTROL NUMBER:
RECORD DATE SHARES: NOTE: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and write that nominee's
name in the space provided below. Your shares will be voted for
the remaining nominee.
---------------------------------------------------------------
For Against Abstain
2. To approve the Company's 1999 Equity [ ] [ ] [ ]
and Cash Incentive Plan.
3. In their discretion, the proxies are authorized to vote upon
any other business that may properly come before the meeting.
----------------
Please be sure to sign and date this Proxy. Date Mark box at right if an address change has been noted on the
- ---------------------------------------------------------------- reverse side of this card. [ ]
- ----Stockholders sign here----------------Co-owner sign here----
- ----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ----------------- ----------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
- ---------------------------------------------------------------- ---------------------------------------------------------------
1. Read the accompanying Proxy Statement and Proxy Card. 1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Webside
1-877-PRX-VOTE (1-877-779-8683). For shareholders residing http://www.eproxyvote.com/ntk.
outside the United States call collect on a touch-tone phone
1-201-536-8073. 3. Enter your Control Number located on your Proxy Card.
There is NO CHARGE for this call.
4. Follow the instructions provided.
3. Enter your Control Number located on your Proxy Card.
4. Follow the recorded instructions.
- ---------------------------------------------------------------- ---------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/ntk anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
</TABLE>
<PAGE> 38
SPECIAL COMMON STOCK NORTEK, INC. SPECIAL COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1999
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 May 20, 1999
at the Biltmore Hotel, 11 Dorrance Street, Providence, Rhode Island 02903-1734,
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 DIRECTOR) AND PROPOSAL 2 (APPROVAL OF 1999
EQUITY AND CASH INCENTIVE PLAN).
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: Please sign exactly as name(s) appear(s) hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DETACH CARD DETACH CARD
<PAGE> 39
<TABLE>
<S> <C>
[X] AS IN THIS EXAMPLE
- ---------------------------------------------------------------- THE BOARD OF DIRECTORS RECOMMENDS
NORTEK, INC. A VOTE FOR THE FOLLOWING PROPOSALS:
- ----------------------------------------------------------------
Special Common Stock
For The With-
If you are voting via the internet, the web site listed below 1. Election of Directors: Nominee hold
is specific to the Common Stock.
Election of one director by holders of [ ] [ ]
Common Stock, voting as a class:
William I. Kelly
CONTROL NUMBER:
RECORD DATE SHARES:
For Against Abstain
2. To approve the Company's 1999 Equity [ ] [ ] [ ]
and Cash Incentive Plan.
3. In their discretion, the proxies are authorized to voted upon
any other business that may properly come before the meeting.
----------------
Please be sure to sign and date this Proxy. Date Mark box at right if an address change has been noted on the
- ---------------------------------------------------------------- reverse side of this card. [ ]
- ----Stockholders sign here----------------Co-owner sign here----
- ----------------- ----------------
VOTE BY TELEPHONE VOTE BY INTERNET
- ----------------- ----------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
- ---------------------------------------------------------------- ---------------------------------------------------------------
1. Read the accompanying Proxy Statement and Proxy Card. 1. Read the accompanying Proxy Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Webside
1-877-PRX-VOTE (1-877-779-8683). For shareholders residing http://www.eproxyvote.com/nrtk.
outside the United States call collect on a touch-tone phone
1-201-536-8073. 3. Enter your Control Number located on your Proxy Card.
There is NO CHARGE for this call.
4. Follow the instructions provided.
3. Enter your Control Number located on your Proxy Card.
4. Follow the recorded instructions.
- ---------------------------------------------------------------- ---------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/nrtk anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
</TABLE>
