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>
[LOGO] NORTEK
NORTEK, INC., 50 KENNEDY PLAZA, PROVIDENCE, RHODE ISLAND 02903-2360
401-751-1600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 2000
The Annual Meeting of Stockholders of Nortek, Inc. (the "Company") will be
held at the Inter-Continental Hotel, 360 St. Antoine West, Montreal, Quebec,
Canada H2Y 3X4 on Thursday, May 4, 2000 at 11:00 a.m., local time, for the
following purposes:
1. To elect one director to the Company's Board of Directors for a term
expiring at the 2003 Annual Meeting of Stockholders.
2. To approve the Company's 2000 Equity and Cash Incentive Plan.
3. To approve the Company's 2000 Stock Option Plan for Directors.
4. 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 March 21, 2000 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
March 28, 2000
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>
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 4, 2000 at the Inter-Continental Hotel, 360 St. Antoine West,
Montreal, Quebec, Canada H2Y 3X4, and at any adjournment or postponement
thereof. These proxy materials were first mailed to stockholders on or about
March 28, 2000.
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 1999 Financial Report to Stockholders is being
mailed herewith to each stockholder entitled to vote at the meeting.
VOTING RIGHTS AND SOLICITATION
As of March 21, 2000 the Company had outstanding 10,947,300 shares of
Common Stock, $1.00 par value (the "Common Stock"), and 549,644 shares of
Special Common Stock, $1.00 par value (the "Special Common Stock"). Holders of
record at the close of business on March 21, 2000 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 the
director, holders of Common Stock shall be entitled to elect the director, and
the holders of Special Common Stock shall have no voting rights with respect to
the election of such director. A plurality of votes properly cast by the holders
of Common Stock will elect the director. Approval of the 2000 Equity and Cash
Incentive Plan and the 2000 Stock Option Plan for Directors 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. Abstentions from voting and broker nonvotes
will have no effect on the outcome of the election of the director. Abstentions
from voting on the 2000 Equity and Cash Incentive Plan and the 2000 Stock Option
Plan for Directors are the equivalent of votes against the item while broker
nonvotes will have no effect on the outcome.
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. It is
the intention of the persons named as proxies to vote shares of Common Stock
represented by duly executed proxies for the election of the nominee for
director selected by the Board of Directors and to vote shares of Common Stock
and Special Common Stock represented by duly executed proxies for the 2000
Equity and Cash Incentive Plan and the 2000 Stock Option Plan for Directors
unless authority to do so has been withheld or a contrary specification has been
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
1
<PAGE>
proxies. 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 so it is received before the beginning of the Annual Meeting.
You may also revoke your proxy by attending the Annual Meeting, requesting
return of the proxy and voting in person. Proxies will be tabulated by the
Company's transfer agent, EquiServe.
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(s). 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, 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 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 proxy card in the
self-addressed postage paid envelope provided.
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
cards 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 $8,500, 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 DIRECTOR
The By-laws of the Company provide that the Board of Directors shall
consist of not less than three directors and that the number of directors at any
time shall be the number of directors fixed by resolution of the Board of
Directors. The Board of Directors has fixed the number of directors at five
which is the current number of directors. The Board of Directors is divided into
three classes, with each class to hold office for a term of three years. At the
meeting, one director is to be elected for a term of three years expiring at the
2003 Annual Meeting and until his respective successor is 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. Richard J. Harris 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 2003 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE.
2
<PAGE>
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
the election of the nominee for director.
The nominee has agreed to serve as a director, if elected. If, at the time
of the Annual Meeting, the 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 nominee for director as well
as those directors continuing in office.
NOMINEE FOR THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NOMINEE FOR TERM EXPIRING DIRECTOR
AT THE 2003 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
- -------------------------- -------------------- --- -------
<S> <C> <C> <C>
Richard J. Harris................ Vice President and Treasurer of the Company 63 1984
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING AT THE DIRECTOR
2001 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
- ------------------- -------------------- --- -------
Phillip L. Cohen................. Financial Consultant; Certified 68 1996
Public Accountant
Richard L. Bready................ Chairman, President and Chief 55 1976
Executive Officer of the Company
TERM EXPIRING AT THE DIRECTOR
2002 ANNUAL MEETING PRINCIPAL OCCUPATION AGE SINCE
- ------------------- -------------------- --- -------
J. Peter Lyons................... Chairman of The Lyons Companies (consulting 65 1991
service for employee insurance benefits)
William I. Kelly................. Director of Human Resources, American 56 1996
Express Tax and Business Services, Boston
Region (taxand consulting services)
</TABLE>
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 an international
public accounting firm 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 Visitors Bureau and a director of Bike Athletic
Co. Mr. Bready has been Chairman, President and Chief Executive Officer of the
Company for more than the past five years. 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 Human Resources for the Boston Region of American Express Tax and
Business Services, a provider of tax and consulting services affiliated with
American Express Company, since January 2000 and was previously Director of the
Graduate School of Professional Accounting of Northeastern University for more
than five years until August 1999. He is a director of Scituate Federal Savings
Bank in Scituate, Massachusetts.
3
<PAGE>
BOARD OF DIRECTORS AND COMMITTEE ORGANIZATION
The Board of Directors held five meetings during 1999. 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 1999
the Audit Committee held two 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 five meetings in
1999. 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 five
meetings during 1999. 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 $2,000 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 $1,000 per
committee meeting ($500 if held in conjunction with a Board meeting or if a
member participates by telephone). Committee chairmen receive an additional
$2,000 per year.
In addition, pursuant to the Company's 1997 Stock Option Plan for
Directors, each nonemployee director is automatically granted so-called
"formula" options to purchase 200 shares of Common Stock on the day of the
adjournment of each Annual Meeting of Stockholders. Such a formula option grant
was made after the 1999 Annual Meeting of Stockholders and another such grant
will be made after this year's meeting. These formula options 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. In 1999,
pursuant to the discretionary option grant provisions of the 1997 Stock Option
Plan for Directors, each nonemployee director also received options to purchase
5,000 shares of Common Stock at a price equal to the fair market value on the
date of grant. Of these options, 2,500 were granted on February 17, 1999 and
2,500 were granted on May 20, 1999. The February 17 options were 20% vested
immediately, with 20% vesting on each of the first four anniversaries of the
grant date and the May 20 options were 50% vested immediately, with 50% vesting
on May 20, 2000.
4
<PAGE>
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 nominee 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 March 21, 2000, except for the number of shares held by Gabelli
Funds, Inc. and Neuberger Berman, LLC, as to which the dates are April 16, 1999
and December 31, 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)................... 644,950 5.8 1,318,294 91.0
Phillip L. Cohen........................ 5,850 * -- --
Kevin W. Donnelly....................... 37,840 * 10 *
Almon C. Hall........................... 59,899 * -- --
Richard J. Harris (3)................... 308,241 2.8 46,263 8.4
William I. Kelly........................ 5,850 * -- --
J. Peter Lyons.......................... 6,870 * -- --
Kenneth J. Ortman....................... 19,307 * -- --
All directors and executives
officers as a group (3)(4)............ 852,007 7.6 1,318,294 91.0
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580 (5).................... 1,555,200 (6) 14.2 18,665 (6) 3.4
Neuberger Berman, LLC
605 Third Avenue
New York, NY 10158 (7)............... 767,050 (8) 7.0 -- --
</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 (150,000 shares of Common Stock and 898,849 shares of Special Common
Stock), Cohen (5,850 shares of Common Stock), Donnelly (29,247 shares of
Common Stock), Hall (42,899 shares of Common Stock), Harris (54,166 shares
of Common Stock), Kelly (5,850 shares of Common Stock), Lyons (5,850 shares
of Common Stock) and Ortman (5,832 shares of Common Stock).
5
<PAGE>
(3) Various defined benefit pension plans of the Company and certain of its
subsidiaries held approximately 2.2% of the outstanding Common Stock of the
Company and 8.4% of the outstanding Special Common Stock at March 21, 2000.
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 299,694 shares of Common Stock and 898,849 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 13D/A filed with the Securities and Exchange Commission
on April 20, 1999 on behalf of Gabelli Funds, LLC, GAMCO Investors, Inc.,
Gabelli Performance Partnership L.P., Gabelli Funds, Inc., Gabelli Asset
Management, Inc., Marc J. Gabelli and Mario J. Gabelli.
(6) Includes 490,500 shares of Common Stock and 9,333 shares of Special Common
Stock over which Gabelli Funds, LLC. 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 Partnership L.P. has sole voting and dispositive power.
(7) Based upon Schedule 13G/A filed with the Securities and Exchange Commission
on February 3, 2000.
(8) 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 March 21, 2000, beneficially owned more than 5% of the shares of Common Stock
or Special Common Stock of the Company outstanding on that date.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, on an accrual basis, information concerning
the compensation for services to the Company and its subsidiaries for 1997, 1998
and 1999 of those persons who were, at December 31, 1999, the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
ANNUAL COMPENSATION (1) OPTIONS COMPENSATION(2)
----------------------- ------------ ---------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- --------------------------- ---- ------ -----
<S> <C> <C> <C> <C> <C>
Richard L. Bready 1999 $990,600 $4,976,500 350,000 $524,583
Chairman, President and 1998 900,000 2,338,000 225,000 571,153
Chief Executive Officer 1997 817,080 327,250 250,000 537,178
Almon C. Hall 1999 $325,000 $ 400,000 37,500 $ 16,078
Vice President, Controller and 1998 287,500 325,000 10,000 5,257
Chief Accounting Officer 1997 254,264 300,000 10,000 5,204
Richard J. Harris 1999 $300,000 $ 250,000 42,500 $ 22,250
Vice President 1998 262,500 200,000 17,500 5,100
and Treasurer 1997 226,013 175,000 10,000 5,064
Kenneth J. Ortman 1999 $220,000 $ 150,000 --- $ 12,800
Senior Vice President - 1998 210,000 125,000 5,000 4,800
Group Operations 1997 199,106 110,000 10,000 4,800
Kevin W. Donnelly 1999 $210,000 $ 175,000 20,000 $ 12,800
Vice President, General 1998 200,000 150,000 5,000 4,800
Counsel and Secretary 1997 189,625 125,000 10,000 4,800
</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 any executive
officer's annual salary and bonus or $50,000.
(2) In 1999 for each of Messrs. Bready, Hall and Harris, includes premiums paid
by the Company for split dollar life insurance pursuant to agreements
between each of them and the Company, of which $30,159, $441 and $1,270
represents the term life portion of the premiums and $18,001, $2,837 and
$8,105 represents the non-term portion, in each case for Messrs. Bready,
Hall and Harris, respectively. Pursuant to each split dollar life insurance
agreement, the Company will be reimbursed for premiums that it pays on the
split dollar life insurance policies upon the death of the second to die of
the executive and his spouse (except that the Company pays premiums on
other life insurance policies on Mr. Bready that are subject to split
dollar agreements providing that the Company will be reimbursed for
premiums upon the earlier of Mr. Bready's termination or death). In prior
proxy statements, the Company calculated the benefit of the non-term
portion of split dollar life insurance policies using an interest rate
equal to 120% of the federal mid-term rate. The numbers in the table above
for Messrs. Bready, Hall and Harris have been calculated using 100% of such
rate, and the 1998 and 1997 numbers for Mr. Bready reflect the same rate.
In addition, in 1999 $903 of the amount for Mr. Bready, $114 of the amount
for Mr. Hall and $75 of the amount for Mr. Harris are for premiums paid for
additional amounts of term life insurance over the level provided to other
salaried employees.
7
<PAGE>
Also includes loan forgiveness pursuant to Mr. Bready's employment
agreement with the Company of $462,720 in 1999.
Includes $4,800 in matching contributions and $8,000 in profit sharing
contributions by the Company in 1999 for each of Messrs. Bready, Hall,
Harris, Ortman and Donnelly under the Company's 401(k) Savings Plan, which
is a defined contribution retirement plan.
STOCK OPTION TABLES
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
named executive officers in 1999.
<TABLE>
<CAPTION>
% OF TOTAL
NO. OF SHARES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME GRANTED 1999(%) PRICE DATE PRESENT VALUE(1)
---- --------------- ---------------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard L. Bready............... 75,000(2) 13.5 $24.8750 2/16/09 $ 744,000
Richard L. Bready............... 275,000(2) 49.7 29.5625 5/19/09 3,333,000
Almon C. Hall................... 7,500 1.4 24.8750 2/16/09 74,400
Almon C. Hall................... 20,000 3.6 29.5625 5/19/09 242,400
Almon C. Hall................... 10,000 1.8 24.7500 12/15/09 104,500
Richard J. Harris............... 7,500 1.4 24.8750 2/16/09 74,400
Richard J. Harris............... 20,000 2.9 29.5625 5/19/09 242,400
Richard J. Harris............... 15,000 2.7 24.7500 12/15/09 156,750
Kevin W. Donnelly............... 5,000 0.9 24.8750 2/16/09 49,600
Kevin W. Donnelly............... 10,000 1.8 29.5625 5/19/09 121,200
Kevin W. Donnelly............... 5,000 0.9 24.7500 12/15/09 52,250
</TABLE>
- -----------
(1) Pre-tax amounts based on Black-Scholes option pricing model with the
following assumptions: risk-free interest rate between 4.91% and 6.31%,
expected life of 5 years, expected volatility of 36% and dividend yield of
0%.
(2) Special Common Stock; all other information relates to Common Stock.
8
<PAGE>
The following table contains information with respect to the value realized
(market value less exercise price) of options exercised in 1999 by those
executive officers listed in the Summary Compensation Table and the value of
their unexercised options at year-end.
AGGREGATED OPTION EXERCISES IN 1999 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..... --- --- 823,849 (2) 175,000 (3) $4,559,749 (2) $177,188 (3)
Almon C. Hall......... 17,000 $487,738 26,649 26,251 77,323 68,390
Richard J. Harris..... 8,000 142,500 37,916 32,084 107,656 75,000
Kenneth J. Ortman..... 7,500 129,375 3,332 4,168 16,868 26,569
Kevin W. Donnelly..... 3,000 47,438 21,580 17,167 147,254 54,564
</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, 1999 of $28.00 and the exercise price of the options.
(2) 673,849 of these options with a value of $4,409,749 are for Special Common
Stock.
(3) Options for Special Common Stock.
LONG-TERM INCENTIVE PLANS
On July 1, 1999, the Compensation Committee of the Company's Board of
Directors approved the 1999 Equity Performance Plan (the "Performance Plan"),
which was adopted pursuant to the 1999 Equity and Cash Incentive Plan. The
Performance Plan provides for cash performance awards to Messrs. Bready, Hall,
Harris and Donnelly in the event that the market price of the Company's Common
Stock closes at or above certain targets for any 20 trading days within any
consecutive 60-day trading period. Upon attainment of any stock price target, an
aggregate award will be distributed among recipients of awards in an amount
based on appreciation in the Company's stock price relative to certain
benchmarks. Each recipient of a performance award pursuant to the Performance
Plan will receive an amount equal to the aggregate award multiplied by the
applicable percentage of participation set forth in the table below. Failure to
attain any stock price target will result in the failure to earn any performance
award related to that target, except that in the event of a "change of control"
(as defined in the 1999 Equity and Cash Incentive Plan), performance awards will
be paid based on all stock price targets exceeded as a result of such change of
control and the proximity of the Company's stock price to the next target as a
result of such change of control.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
NUMBER OF PERFORMANCE OR
SHARES, UNITS OR OTHER PERIOD UNTIL
NAME OTHER RIGHTS MATURATION OR PAYOUT *
- ---- ------------- ----------------------
Richard L. Bready 50% 3 years
Almon C. Hall 15% 3 years
Richard J. Harris 15% 3 years
Kevin W. Donnelly 5% 3 years
- ------------
* The Performance Plan will terminate on July 1, 2002.
9
<PAGE>
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 and will be
payable as a joint and 50% survivor annuity in the case of a married employee
and as a single-line annuity in the case of an unmarried employee. In part to
compensate certain officers for the effect of the limitations under the Internal
Revenue Code of 1986, as amended (the "Code") and the freezing of the Pension
Plan, the Company adopted, effective January 1, 1996, the Nortek, Inc.
Supplemental Executive Retirement Plan, a nonqualified plan. Under this plan,
each of the executive officers listed in the Summary Compensation Table will be
entitled to receive, at age 65, annual supplemental pension payments equal to a
specified percentage of their highest consecutive three-year average W-2
compensation, less the amounts to which they are entitled under the Pension
Plan. The specified percentage is sixty percent (60%) for Mr. Bready, fifty
percent (50%) for Messrs. Hall and Harris and thirty percent (30%) for Messrs.
Ortman and Donnelly. The Supplemental Executive Retirement Plan provides for
vesting upon 10 years of service. All of the executive officers have more than
10 years of service for purposes of the plan. With the consent of the Board of
Directors, reduced benefits may be received beginning at age 55. The estimated
combined annual pension benefits entitled to be paid to the executive officers
beginning at age 65 under the Pension Plan and the Supplemental Executive
Retirement Plan are as follows: Mr. Bready $3,518,290, Mr. Hall $383,210, Mr.
Harris $330,026, Mr. Ortman $100,995 and Mr. Donnelly $105,782.
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 Mr. Bready's employment agreement in effect for 1999 are set forth
below under "Employment Agreements and Severance Arrangements."
The executive officers named in the Summary Compensation Table received
salary increases in 1999 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.
10
<PAGE>
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 to recommend
changes with respect to certain other executive officers. In 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 Code. 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 1999, Mr. Bready received a performance award under the Company's
1998 Equity and Cash Incentive Plan in connection with the integration of the
Company's Broan and NuTone subsidiaries. The performance award provided that if
the cost savings achieved by such integration were $12.5 million or more, Mr.
Bready would receive $2.5 million. The award was approved by the Compensation
Committee in March 1999 and was based on the Committee's belief that it was in
the best interests of the Company that such subsidiaries be effectively and
seamlessly integrated, and that Mr. Bready's active participation in the
integration process would be key to that success. The Compensation Committee
approved a payment of $2.5 million under the award in 1999 based on the cost
savings achieved. In addition, during 1999, Mr. Bready received a $2,476,500
bonus pursuant to his employment agreement with the Company.
On July 1, 1999, the Compensation Committee of the Company's Board of
Directors approved the Performance Plan, which was adopted pursuant to the 1999
Equity and Cash Incentive Plan. The Performance Plan is described above under
"Long-Term Incentive Plans." The Committee believes it is in the best interests
of the Company that the participants in the Performance Plan be rewarded for
their contributions to the success of the Company and its subsidiaries as
reflected in the value of the Company's Common Stock.
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 1999, the Committee
awarded options to Mr. Bready for 350,000 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
11
<PAGE>
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 provides that the term of his employment will be extended for an
additional year at the end of each year during the term of his employment. His
basic annual salary will be not less than $975,000 with adjustments based upon
increases in the cost of living. Mr. Bready's 1999 salary was $990,600. 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.
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 Code) in
effect on each day the loan is outstanding. In accordance with the 1998
Employment Agreement, as a result of the Company's operating earnings in 1999 in
excess of $35,000,000, on January 10, 2000 the Company forgave $462,720,
consisting of the principal installment due on such date and accrued interest.
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 March 21, 2000, the outstanding principal balance of the loan
was $2,100,000 and there was accrued interest of $28,141.
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,
12
<PAGE>
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 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 1,
2000, and the above-named executive officers were terminated as of such date,
they would have been entitled to receive, over the next succeeding
13
<PAGE>
24-month period, an aggregate of approximately $4,210,000. Mr. Ortman is
entitled to a minimum of 15 months severance pay if his employment is terminated
without cause.
The Nortek, Inc. Supplemental Executive Retirement Plan provides that, upon
a Change in Control (as defined in the plan), each of the participants in the
plan will be entitled to receive a lump sum payment equal to the actuarially
determined present value of the benefits payable under the plan calculated at
the time of such Change in Control as though retirement had commenced on such
date without reduction for early retirement. If such lump sum payments are
subject to the excise tax imposed by Section 4999 of the Code, the Company will
make a "gross-up" payment sufficient to ensure that the net after-tax amount
retained by the executive is the same as if such excise tax had not applied.
In the event of a Change of Control (as defined in the 1999 Equity and Cash
Incentive Plan), certain executive officers may be entitled to payments under
the Performance Plan, as described above under "Long-Term Incentive Plans."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Purchase of Shares by the Company. 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: 19,157 shares from Mr. Harris; 11,900 shares from Mr.
Ortman; and 4,000 shares from Mr. Donnelly. On March 3, 1999, the Company
purchased 3,843 shares of Special Common Stock from Mr. Harris at the market
price of the Company's Common Stock of $26.75 per share. On March 5, 1999, the
Company purchased 50,000 shares of Common Stock from Mr. Bready at the market
price of $26.656 per share. On August 5, 1999, the Company purchased 10,000
shares of Common Stock from Mr. Ortman at the market price of $38.21875 per
share.
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 $313,969 from the Company in 1999, 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, 1999, all filing requirements were timely satisfied.
14
<PAGE>
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 GRAPHIC OMITTED]
<TABLE>
<CAPTION>
NORTEK, INC. PEER GROUP RUSSELL 2000
------------ ---------- ------------
<S> <C> <C> <C>
12/94 100.00 100.00 100.00
12/95 98.95 133.52 127.49
12/96 168.42 144.36 154.73
12/97 223.68 194.21 203.91
12/98 232.63 207.30 190.75
12/99 235.79 186.55 187.92
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
The peer group companies are:
Armstrong World Industries, Inc. The Stanley Works
Masco Corporation Maytag Corporation
York International Corp. Fedders Corporation
Whirlpool Corporation
Morgan Products Ltd., formerly included in the peer group, was acquired by
Anderson Corporation in 1999 and, since its share are no longer publicly traded,
has been eliminated from the peer group of companies.
15
<PAGE>
PROPOSAL NO. 2
APPROVAL OF THE 2000 EQUITY AND CASH INCENTIVE PLAN
On February 3, 2000, the Company's Board of Directors approved, subject to
stockholder approval, the 2000 Equity and Cash Incentive Plan (the "2000
Incentive Plan"), and the issuance of 530,000 shares of the Company's Common
Stock or Special Common Stock pursuant to awards thereunder.
The purpose of the 2000 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 2000 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 2000
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 530,000 shares of Stock are
reserved for issuance under the 2000 Incentive Plan. Awards under the 2000
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 2000 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 2000 Incentive Plan is
being submitted for stockholder approval and provides that the maximum number of
shares as to which awards may be granted to any participant in any one calendar
year under the plan is 300,000.
Stock Options. The exercise price of an incentive stock option ("ISO")
granted under the 2000 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 price of a non-ISO granted under the 2000 Incentive Plan is determined
by the Stock Option Committee. Options granted under the 2000 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.
16
<PAGE>
Stock Appreciation Rights (SARs). Stock appreciation rights may be granted
either alone or in tandem with stock option grants. Each SAR entitles the holder
upon 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 2000 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 2000 Incentive Plan may also be settled with Restricted Stock.
The 2000 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 2000 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 2000 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:
o 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
o 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 (as defined in the 2000 Incentive Plan);
or any combination of the foregoing.
The maximum Exempt Award payable to an individual in respect of all
performance goals for any year under the 2000 Incentive Plan cannot exceed
$10,000,000. Payment of performance awards based upon a performance goal for
calendar years 2006 and thereafter is conditioned upon reapproval by the
Company's stockholders no later than the first meeting of stockholders in 2005.
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
17
<PAGE>
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 2000 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 2000 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 2000 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 BENEFITS
To the extent that they are determinable, the future benefits or amounts
that will be received under the 2000 Incentive Plan if the plan is approved by
the Company's stockholders are set forth in the following table:
SHARES SUBJECT
NAME AND POSITION TO OPTIONS (1)
----------------- ---------------
Richard L. Bready (Chairman, President and Chief
Executive Officer)....................................... 250,000
All Other Executive Officers as a Group.................... 0
-------
Total Executive Group............................. 250,000
Non-Executive Director Group............................... 0
Non-Executive Employee Group............................... 94,000
- -----------------
(1) On February 3, 2000, Mr. Bready and certain other employees of the Company
and its subsidiaries were granted options under the 2000 Incentive Plan to
purchase shares of the Company's stock at $21.625 per share, the fair market
value on the date of grant. Mr. Bready's options are to purchase the
Company's Special Common Stock and vest 50% immediately and 50% on August 3,
2000. The options granted to other employees are to purchase the Company's
Common Stock and vest 25% immediately and 25% on each of the first three
anniversaries of the grant date. All such options expire on February 2, 2010
and are subject to stockholder approval of the 2000 Incentive Plan. The
closing market price of the Company's Common Stock on March 21, 2000 was
$21.0625.
18
<PAGE>
FEDERAL TAX EFFECTS
The following discussion summarizes certain federal income tax consequences
of the issuance and receipt of options under the 2000 Incentive Plan. The
summary does not purport to cover federal employment tax or other federal tax
consequences that may be associated with the 2000 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 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
of 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 2000 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 2000
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 2000 Incentive Plan, authorizing the adoption of the plan by the
Company, with 530,000 shares of Common Stock and Special Common Stock reserved
for issuance under the terms of the plan.
PROPOSAL NO. 3
APPROVAL OF THE 2000 STOCK OPTION PLAN FOR DIRECTORS
On February 3, 2000 the Company's Board of Directors approved, subject to
stockholder approval, the 2000 Stock Option Plan for Directors (the "2000
Directors Plan"), and the issuance of 40,000 shares of the Company's Common
Stock pursuant to awards thereunder. The purpose of the 2000 Directors Plan is
to advance the interests of the Company by enhancing the ability of the Company
to attract and retain directors who are in a position to make
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significant contributions to the success of the Company, and to reward directors
for such contributions through ownership of shares of the Company's Common
Stock, all as more fully described below.
GENERAL
Under the 2000 Directors Plan, the Stock Option Committee of the Board of
Directors may grant non-ISO stock options to those directors who are not
employees of the Company or its subsidiaries ("Eligible Directors"). A total of
40,000 shares of Common Stock are reserved for issuance under the 2000 Directors
Plan, which will be administered by the Stock Option Committee. Options granted
under the 2000 Directors Plan will expire and terminate 10 years from the date
of grant.
Formula and Discretionary Options. As of the close of business on the day
of the final adjournment of each annual meeting of stockholders of the Company
commencing with the 2001 annual meeting, each Eligible Director (other than an
Eligible Director first elected as a director at such meeting) will be awarded
an option covering 200 shares of Common Stock. Following stockholder approval of
the 2000 Directors Plan, each newly elected Eligible Director will be awarded
options to purchase 200 shares of Common Stock on the date of his or her first
election. The Stock Option Committee may also award options to purchase shares
of Common Stock to Eligible Directors on such terms as it may determine and as
are not inconsistent with the 2000 Directors Plan. Unless otherwise determined
by the Stock Option Committee, options are transferable at any time by a
director.
Exercise of Options. The exercise price of each formula option may not be
less than the fair market value per share of the Company's Common Stock at the
time of the grant. The exercise price of each discretionary option shall be as
determined by the Stock Option Committee. Each formula option will become
exercisable in increments of one half of the shares covered thereby on each of
the first and second anniversaries of the grant. Each discretionary option will
become exercisable at such time or times as the Stock Option Committee
determines. Common Stock purchased under the 2000 Directors Plan may be paid for
in cash or by check, through the delivery of shares of Common Stock having a
fair market value on the last business day preceding the date of exercise equal
to the purchase price, or by a combination of cash and Common Stock.
Termination. If an Eligible Director dies, options exercisable immediately
prior to death may be exercised by the Director's executor, administrator or
transferee during a period of three years following such death (or for the
remainder of their original term, if less). Unless the Stock Option Committee or
the Board of Directors specifies otherwise, in the case of termination by
reasons other than death, all options that are not then exercisable terminate
and options that are exercisable on the date of termination shall continue to be
exercisable for six months (or for the remainder of their original term, if
less).
Upon a Change of Control (as defined in the 2000 Directors Plan), options
shall become fully exercisable. 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 2000 Directors Plan at
any time, provided that no such amendment shall, without the approval of the
stockholders of the Company, (a) increase the maximum number of shares available
under the 2000 Directors Plan; (b) increase the number of options to be granted
to Eligible Directors; (c) amend the definition of Eligible Directors; or (d)
reduce the price at which options may be granted other than as permitted in the
2000 Directors Plan.
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FEDERAL TAX EFFECTS
For federal income tax purposes, options under the 2000 Directors Plan are
treated as non-ISO options. For a discussion of the federal income tax
consequences of the issuance and exercise of such options, see "Federal Tax
Effects" in the description of Proposal No. 2 above.
NEW PLAN BENEFITS
To the extent that they are determinable, the future benefits or amounts
that will be received under the 2000 Directors Plan if the plan is approved by
the Company's stockholders are set forth in the following table. In addition, if
the 2000 Directors Plan is approved by the stockholders, each non-employee
director will be awarded options to purchase 200 shares of Common Stock as of
the close of business on the day of the final adjournment of each annual meeting
of stockholders of the Company commencing with the 2001 annual meeting.
SHARES SUBJECT
NAME AND POSITION TO OPTIONS (1)
----------------- --------------
Phillip L. Cohen, Director............................. 2,500
William I. Kelly, Director............................. 2,500
J. Peter Lyons, Director............................... 2,500
------
Total Non-Executive Director Group................. 7,500
Executive Group........................................ 0
Non-Executive Employee Group........................... 0
- ----------------
(1) On February 3, 2000, Messrs. Cohen, Kelly and Lyons were granted options
under the 2000 Directors Plan to purchase shares of the Company's Common
Stock at $21.625 per share, the fair market value on the date of grant. Such
options vest 50% immediately and 50% on February 3, 2001. All such options
expire on February 3, 2010 and are subject to stockholder approval of the
2000 Directors Plan. The closing market price of the Company's Common Stock
on March 21, 2000 was $21.0625.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2000 STOCK OPTION PLAN
FOR DIRECTORS.
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 2000 Directors Plan, authorizing the adoption of the plan by the
Company, with 40,000 shares of Common Stock 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 1999, to continue in that capacity for 2000. 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.
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STOCKHOLDER PROPOSALS
In order for any proposal that a stockholder intends to present at the 2001
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 November 28, 2000.
In general, stockholder proposals intended to be presented at an annual
meeting must be received by the Secretary of the Company at the Company's
offices in Providence, Rhode Island not later than forty-five days before the
date on which the Company first mailed its notice for the prior year's annual
meeting, or by February 11, 2001 for consideration at the 2001 Annual Meeting of
Stockholders of the Company. The requirements for submitting such proposals are
set forth in the Company's By-laws.
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.
March 28, 2000
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APPENDIX A
NORTEK, INC.
2000 EQUITY AND CASH INCENTIVE PLAN
1. PURPOSE
The purpose of this 2000 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 Award; (f) amend or cancel an
existing Award in whole or in part (and if an award is
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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 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 4, 2010, 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 530,000. 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 under the Plan 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 the Company or a subsidiary of the Company) who, in
the opinion of the Committee, is
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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.
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(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
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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.
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(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,
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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 under the Plan shall not
exceed $10,000,000. Payment of Exempt Awards based upon a Performance Goal for
calendar years 2006 and thereafter is conditioned upon reapproval by Employer's
shareholders no later than Employer's first meeting of shareholders in 2005.
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
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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
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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
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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
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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
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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.
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8.5. TRANSFERABILITY OF AWARDS.
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.
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8.9. PAST SERVICES AS CONSIDERATION.
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.
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APPENDIX B
NORTEK, INC.
2000 STOCK OPTION PLAN FOR DIRECTORS
1. PURPOSE
The purpose of this 2000 Stock Option Plan for Directors (the "Plan")
is to advance the interests of Nortek, Inc. (the "Company") by enhancing the
ability of the Company to attract and retain directors who are in a position to
make significant contributions to the success of the Company and to reward
directors for such contributions through ownership of shares of the Company's
Common Stock, $1.00 par value ("Stock").
2. ADMINISTRATION
The Plan shall be administered by the Stock Option Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall have authority, not inconsistent with the express provisions of
the Plan, (a) to grant options in accordance with the Plan to such directors as
are eligible to receive options; (b) to prescribe the form or forms of
instruments evidencing options and any other instruments required under the Plan
and to change such forms from time to time; (c) to adopt, amend and rescind
rules and regulations for the administration of the Plan; and (d) to interpret
the Plan and decide any questions and settle all controversies and disputes that
may arise in connection with the Plan. Such determinations of the Committee
shall be conclusive and shall bind all parties. Subject to Section 7, the
Committee shall also have the authority, both generally and in particular
instances, to waive compliance by a director with any obligation to be performed
by him or her under an option and to waive any condition or provision of an
option.
3. EFFECTIVE DATE AND TERM OF PLAN
The Plan shall become effective on the date on which the Plan is
approved by the stockholders of the Company. Awards may be made prior to such
stockholder approval if made subject thereto. No option shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but options granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
(a) Number of Shares. Subject to adjustment as provided in Section
4(c), the aggregate number of shares of Stock that may be delivered upon the
exercise of options granted under the Plan shall be 40,000. If any option
granted under the Plan terminates without having been exercised in full, the
number of shares of Stock as to which such option was not exercised shall be
available for future grants within the limits set forth in this Section 4(a).
<PAGE>
(b) Shares to Be Delivered. Shares delivered under the Plan shall
be authorized but unissued Stock or, if the Board so determines, previously
issued Stock acquired by the Company and held in treasury. No fractional shares
of Stock shall be delivered under the Plan.
(c) Changes in Stock. In the event of a stock dividend, stock
split or other change in corporate structure or capitalization affecting the
Stock, the number and kind of shares of stock or securities of the Company to be
subject to options then outstanding or to be granted under the Plan, and the
option price, and other relevant provisions shall be appropriately adjusted by
the Committee, whose determination shall be binding on all persons.
5. ELIGIBILITY FOR OPTIONS
Directors eligible to receive options under the Plan ("Eligible
Directors") shall be those directors who are not employees of the Company or its
subsidiaries.
6. TERMS AND CONDITIONS OF OPTIONS
(a) Formula Options. Following stockholder approval of the Plan,
each newly elected Eligible Director shall be awarded options to purchase up to
200 shares of Stock on the date of his or her first election (unless such
Director receives formula options under the Company's 1997 Stock Option Plan for
Directors on such date). In addition, as of the close of business on the day of
the final adjournment of each annual meeting of stockholders commencing with the
2001 annual meeting, each Eligible Director (other than an Eligible Director
first elected as a director at such meeting) shall be awarded an option covering
200 shares of Stock.
(b) Discretionary Options. The Committee may also award options to
purchase shares of Stock to Eligible Directors on such terms as it may determine
not inconsistent with this Plan.
(c) Exercise Price. The exercise price of each formula option
shall be not less than the fair market value per share of the Stock at the time
of the grant. For this purpose "fair market value" shall mean the last sale
price of the shares of the Company's Common Stock as reported on the New York
Stock Exchange on the date of the grant (based on The Wall Street Journal report
of composite transactions), or if such stock is no longer listed on such
Exchange, it shall have the same meaning as it does in the provisions of the
Internal Revenue Code of 1986 (the "Code") and the regulations thereunder
applicable to incentive options. The exercise price of each discretionary option
shall be as determined by the Committee.
(d) Duration of options. The latest date on which an option may be
exercised (the "Final Exercise Date") shall be the date which is ten years from
the date the option was granted.
(e) Exercise of Options.
(1) Each formula option shall become exercisable in increments
of one half of the shares covered thereby on each of the first and
second anniversaries of the grant. Each
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discretionary option shall become exercisable at such time or times as
the Committee shall determine.
(2) Any exercise of an option shall be in writing, signed by
the proper person and delivered or mailed to the Company, accompanied
by (i) an option exercise notice and any other documents required by
the Committee; and (ii) payment in full in accordance with paragraph
(f) below for the number of shares for which the option is exercised.
(3) If any option is exercised by the executor or
administrator of a deceased director, or by the person or persons to
whom the option has been transferred by the director's will or the
applicable laws of descent and distribution, the Company shall be under
no obligation to deliver Stock pursuant to such exercise until the
Company is satisfied as to the authority of the person or persons
exercising the option.
(4) The Company shall have the right to settle any option, and
to terminate the rights of the holder thereof, by paying to the option
holder the excess (if any) of the fair market value of the Stock at the
time of settlement over the purchase price.
(f) Payment for and Delivery of Stock. Stock purchased under the
Plan shall be paid for as follows: (i) in cash (which payment may be made by
personal check payable to the order of the Company); (ii) through the delivery
of shares of Stock having a fair market value on the last business day preceding
the date of exercise equal to the purchase price; or (ii) by a combination of
cash and Stock as provided in clauses (i) an (ii) above.
An option holder shall not have the rights of a stockholder with regard
to awards under the Plan except as to Stock actually received by him or her
under the Plan.
The Company shall not be obligated to deliver any shares of Stock (i)
until, in the opinion of the Company's counsel, all applicable federal and state
laws and regulations have been complied with; (ii) if the outstanding Stock is
at the time listed on any stock exchange, until the shares to be delivered have
been listed or authorized to be listed on such exchange upon official notice of
issuance; and (iii) 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
option, 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.
(g) Transferability of Options. Unless otherwise determined by
the Committee, options are transferable at any time by a director.
(h) Death. If a director dies at a time he or she is entitled to
exercise an option, then the portion formerly exercisable by the director may be
exercised by the director's executor or administrator, or by the person to whom
the option is transferred under the applicable laws of
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<PAGE>
descent and distribution, within three years of the death of the director,
subject to earlier termination upon the Final Exercise Date.
(i) Other Termination of Status of Director. All options that are
not then exercisable terminate and are forfeited automatically upon the
termination of the director's service with the Company, unless the Committee or
the Board of Directors specifies otherwise. Options that are exercisable on the
date of termination shall continue to be exercisable until the earlier of (i)
the 180th day following the date of termination (or such later date as is
determined by the Committee or the Board) or (ii) the Final Exercise Date.
(j) 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 option at the time the
option is granted, in the event of a Change of Control (as defined below):
(1) Acceleration of Options. As of the date on which such
Change of Control is determined to have occurred, options that are
outstanding and that are not then exercisable shall become exercisable
to the full extent of the original grants.
(2) Termination of Options 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, options that are not cashed out or
otherwise disposed of in or prior to the transaction will terminate.
(3) Restriction on Termination of Options Due to Termination
of Employment. Options that remain outstanding after a Change of
Control shall not be terminated as a result of the termination of a
director's service with the Company, 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 conditions upon exercise or otherwise amend or restrict an
option, or amend the terms of the Plan in any manner adverse to the
holder thereof, without the written consent of such holder.
(5) Impact on Pooling-of-Interests Accounting. Notwithstanding
the foregoing, if any right granted pursuant to this Section 6(j) would
make a Change of Control transaction ineligible for pooling of
interests accounting under applicable accounting principles that but
for this Section 6(j) 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
6(j) having a fair market value equal to such cash.
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<PAGE>
(6) Definition of Change of Control. A "Change of Control"
shall be deemed to have occurred if and when:
(A) The Company ceases to be a publicly owned
corporation having at least 500 stockholders; or
(B) 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 Securities Exchange Act of 1934, as amended, 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
(C) 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 (C) 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
(D) 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 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
(E) 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
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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).
7. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of options to a director
shall affect the Company's right to grant to such director or any director
options that are not subject to the Plan, to issue to such directors Stock as a
bonus or otherwise, or to adopt other plans or arrangements under which Stock
may be issued, or payments made, to directors.
The Committee may at any time discontinue granting options under the
Plan. The Committee may at any time, or times, amend the Plan for the purpose of
satisfying any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law, or may at any time terminate
the Plan as to any further grants of options, provided that (except to the
extent expressly required or permitted herein above) no such amendment shall,
without the approval of the stockholders of the Company, (a) increase the
maximum number of shares available under the Plan; (b) increase the number of
options to be granted to Eligible Directors; (c) amend the definition of
Eligible Directors so as to enlarge the group of director eligible to receive
options under the Plan; (d) reduce the price at which options may be granted
other than as permitted in the Plan; or (e) amend the provisions of this Section
7.
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<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 Director.
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 (01) Richard J. Harris For The With-
specific to the Common Stock. Nominee hold
[ ] [ ]
CONTROL NUMBER: For Against Abstain
RECORD DATE SHARES: 2. To approve the Company's 2000 Equity [ ] [ ] [ ]
and Cash Incentive Plan.
For Against Abstain
3. To approve the Company's 2000 Stock [ ] [ ] [ ]
Option Plan for Directors.
4. In their discretion, the proxies are authorized to vote upon
any other business that may properly come before the meeting.
---------------- Mark box at right if an address change has been noted on the
Please be sure to sign and date this Proxy. Date reverse side of this card. [ ]
- ----------------------------------------------------------------
- ----Stockholder sign here----------------Co-owner sign here----
DETACH CARD DETACH CARD
- ----------------- ----------------
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). http://www.eproxyvote.com/ntk.
There is NO CHARGE for this call.
3. Enter your Control Number located on your Proxy Card. 3. Enter your Control Number located on your Proxy Card.
4. Follow the recorded instructions. 4. Follow the instructions provided.
- ---------------------------------------------------------------- ---------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE Go to http://www.eproxyvote.com/ntk
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
</TABLE>
<PAGE>
COMMON STOCK NORTEK, INC. COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 2000
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 4, 2000
at the Inter-Continental Hotel, 360 St. Antoine West, Montreal, Quebec, Canada
H2Y 3X4, 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), PROPOSAL 2 (APPROVAL OF 2000
EQUITY AND CASH INCENTIVE PLAN) AND PROPOSAL 3 (APPROVAL OF 2000 STOCK OPTION
PLAN FOR DIRECTORS).
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
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- --------------------------------------------------------------------------------
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.
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HAS YOUR ADDRESS CHANGED?
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<PAGE>
<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 Against Abstain
If you are voting via the Internet, the web site listed below 1. To approve the Company's 2000 Equity [ ] [ ] [ ]
is specific to the Special Common Stock. and Cash Incentive Plan (Proposal 2).
CONTROL NUMBER: For Against Abstain
2. To approve the Company's 2000 Stock [ ] [ ] [ ]
RECORD DATE SHARES: Option Plan for Directors (Proposal 3).
3. In their discretion, the proxies are authorized to vote upon
any other business that may properly come before the meeting.
---------------- Mark box at right if an address change has been noted on the
reverse side of this card. [ ]
Please be sure to sign and date this Proxy. Date
- ----------------------------------------------------------------
- ----Stockholder sign here----------------Co-owner sign here----
DETACH CARD DETACH CARD
- ----------------- ----------------
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 Website
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/nrtk.
There is NO CHARGE for this call.
3. Enter your Control Number located on your Proxy Card. 3. Enter your Control Number located on your Proxy Card.
4. Follow the recorded instructions. 4. Follow the instructions provided.
- ---------------------------------------------------------------- ---------------------------------------------------------------
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE Go to http://www.eproxyvote.com/nrtk
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
</TABLE>
<PAGE>
SPECIAL COMMON STOCK NORTEK, INC. SPECIAL COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 2000
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 4, 2000
at the Inter-Continental Hotel, 360 St. Antoine West, Montreal, Quebec, Canada
H2Y 3X4, at 11:00 a.m., local time, or at any adjournment or postponement
thereof, all of the shares of Special Common Stock, par value $1 per share, of
Nortek, Inc. that the undersigned would be entitled to vote if personally
present. The undersigned instructs such proxies or their substitutes to act on
the following matters as specified by the undersigned, and to vote in such
manner as they may determine on any other matters that may properly come before
the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO CONTRARY DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 2 (APPROVAL OF 2000 EQUITY AND CASH INCENTIVE PLAN) AND
PROPOSAL 3 (APPROVAL OF 2000 STOCK OPTION PLAN FOR DIRECTORS).
- --------------------------------------------------------------------------------
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?
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
