<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240-14a.11(c) or Section
240.a14-12
MORGAN PRODUCTS LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
MR. DOUGLAS H. MACMILLAN
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transactions applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1*
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4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state
how it was determined.
/ / 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:
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2) Form, Schedule or Registration Statement no.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
(ART)
75 TRI-STATE INTERNATIONAL, SUITE 222
LINCOLNSHIRE, ILLINOIS 60069
708/317-2400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 1994
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Morgan
Products Ltd. (the "Company") will be held at 9:00 A.M. local time at the
Northbrook Hilton Allgauers, 2855 North Milwaukee, Northbrook, Illinois 60062 on
Wednesday, May 18, 1994, for the following purposes:
1. To elect six (6) directors to serve until the next Annual Meeting
of Stockholders and until their successors are elected and
qualified.
2. To consider and act upon a proposal to ratify the selection of
Price Waterhouse as independent accountants for the fiscal year
ending December 31, 1994.
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 21, 1994,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting or any adjournment or postponement thereof. A
list of those stockholders will be available for inspection at the Annual
Meeting upon request of any stockholder.
You are cordially invited to attend the Annual Meeting. Your vote is
important. If you do not expect to attend the Annual Meeting, or if you do plan
to attend but wish to vote by proxy, please date, sign and mail promptly the
enclosed proxy, for which a return envelope is provided. If you do attend, you
may revoke your proxy and vote your shares in person if you wish to do so.
By Order of the Board of Directors,
/s/ DOUGLAS H. MACMILLAN
Dated: March 25, 1994 DOUGLAS H. MACMILLAN
Lincolnshire, Illinois Secretary
<PAGE> 3
MORGAN PRODUCTS LTD.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1994
The enclosed proxy is solicited by and on behalf of the Board of Directors
of Morgan Products Ltd. (the "Company") to be voted at the Annual Meeting of
Stockholders (the "Meeting") to be held at the Northbrook Hilton Allgauers, 2855
North Milwaukee, Northbrook, Illinois 60062, on Wednesday, May 18, 1994, at 9:00
A.M. local time, or at any adjournment or postponement thereof. The Company's
address is 75 Tri-State International, Suite 222, Lincolnshire, Illinois 60069,
and its telephone number is (708) 317-2400. This Proxy Statement and the
enclosed proxy will first be mailed to stockholders on or about March 29, 1994.
Only holders of record of the Company's common stock, par value $.10 per
share (the "Common Stock"), as of the close of business on March 21, 1994 (the
"Record Date") will be entitled to notice of and to vote at the Meeting. As of
the Record Date, there were 8,497,280 shares of Common Stock issued and
outstanding, each of which is entitled to one vote. In addition, as of the
Record Date, 2,386 shares of Common Stock were outstanding and held by the
Company as treasury shares. There is no other class of voting securities issued
and outstanding. The presence in person or by proxy of holders of a majority of
the outstanding Common Stock will be necessary to constitute a quorum for the
transaction of business at the Meeting.
Assuming a quorum is present, a plurality of the votes of the shares of
Common Stock present or represented by proxy at the Meeting is required for the
election of any nominee or other person as a director and the affirmative vote
of a majority of the shares of Common Stock present or represented by proxy at
the Meeting and entitled to vote is required for the ratification of the
selection of Price Waterhouse as the Company's independent accountants for the
fiscal year ending December 31, 1994.
All shares represented by properly executed proxies will be voted in
accordance with the instructions indicated thereon unless such proxies
previously have been revoked. If any such proxies do not contain voting
instructions, the shares represented by such proxies will be voted (1) FOR the
election of the nominees listed thereon, and (2) FOR the ratification of the
selection of Price Waterhouse as the Company's independent accountants for the
fiscal year ending December 31, 1994. An automated system administered by the
Company's transfer agent tabulates the votes. Abstentions and broker non-votes
are each included in the determination of the number of shares present. Each is
tabulated separately. Abstentions are counted in tabulations of the votes cast
on proposals presented to shareholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved. The Board of
Directors does not know of any business to be brought before the Meeting other
than as indicated in the Notice of Annual Meeting. If any other matters properly
come before the Meeting, shares represented by all properly executed proxies
will be voted in accordance with the judgment of the persons acting thereunder.
Any stockholder who executes and delivers a proxy may revoke it at any time
prior to its exercise upon the: (a) receipt by the Secretary of the Company of
written notice of such revocation; (b) receipt by the Secretary of the Company
of a duly executed proxy bearing a later date; or (c) appearance of the
Stockholder at the Meeting and a request for the return of the proxy.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 1, 1994, the number of
shares of Common Stock owned beneficially, to the knowledge of the Company, by
each beneficial owner of more than 5% of the Common Stock, by each director, by
each named executive officer, and by all executive officers and directors of the
Company as a group. Unless otherwise indicated in a footnote, each person listed
in the table possesses sole voting and investment power with respect to the
shares indicated.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF COMMON
BENEFICIAL OWNER OF SHARES STOCK
- --------------------------------------------------------- --------- ---------
<S> <C> <C>
Saugatuck Capital Company 2,511,817(1)(2) 28.8
Limited Partnership
One Canterbury Green
Stamford, CT 06901
Laurel Partners 2,511,817(1)(2) 28.8
One Canterbury Green
Stamford, CT 06901
Frank J. Hawley, Jr. 2,511,817(1)(2) 28.8
One Canterbury Green
Stamford, CT 06901
Alexander H. Dunbar 2,513,817(1)(2)(3) 28.8
One Canterbury Green
Stamford, CT 06901
Norman W. Johnson 2,511,817(1)(2) 28.8
One Canterbury Green
Stamford, CT 06901
Owen S. Crihfield 2,511,817(1)(2) 28.8
One Canterbury Green
Stamford, CT 06901
Associated Banc-Corp 689,144(4)(5) 8.1
112 North Adams Street
P.O. Box 13307
Green Bay, WI 54307
Allied-Signal Inc. 600,000(4) 7.1
101 Columbia Road
P.O. Box 400
Morristown, NJ 07962
State of Wisconsin 500,000(4) 5.9
Investment Board
P.O. Box 7842
Madison, WI 53707
Dimensional Fund Advisors Inc. 490,900(4)(6) 5.8
1299 Ocean Avenue
Santa Monica, CA 90401
Arthur L. Knight, Jr. 221,666(7)(8) 2.5
75 Tri-State International
Suite 222
Lincolnshire, IL 60069
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PERCENTAGE
OF
NAME AND ADDRESS OF NUMBER COMMON
BENEFICIAL OWNER OF SHARES STOCK
- --------------------------------------------------------- --------- ----
<S> <C> <C>
John S. Crowley 333(9) *
627 Round Hill Road
Greenwich, CT 06831
Howard G. Haas 3,233(10) *
Suite 1275
208 S. LaSalle Street
Chicago, IL 60604
Donald N. Boyce 2,333(11) *
630 Dundee Road
Suite 400
Northbrook, IL 60062
William R. Holland 833(12) *
301 S. College Street
2300 One First Union Center
Charlotte, NC 28202
Joseph G. LaCroix 50,000(13) *
303 Mulberry Drive
Mechanicsburg, PA 17055
Donald E. Schlegel 46,666(13) *
601 Oshkosh Street
Oshkosh, WI 54902
Douglas H. MacMillan 43,333(14) *
75 Tri-State International
Suite 222
Lincolnshire, IL 60069
Dennis C. Hood 33,300(15) *
75 Tri-State International
Suite 222
Lincolnshire, IL 60069
All Directors and Executive Officers as a group (12
persons) 2,710,281(16) 30.5
</TABLE>
- ---------------
* Number equals less than one percent (1%) of outstanding shares of Common
Stock.
(1) This number includes an aggregate of 295,151 shares beneficially owned (as
such term is defined under Rule 13d-3 under the Securities Exchange Act of
1934, as amended) by George T. Brophy, J. Phillipe Latreille, Robert L.
Slagle, Dan S. Schriber, Donald C. Houghton and George E. Mangarelli, each
a former employee of the Company, as to which Saugatuck Capital Company
Limited Partnership ("Saugatuck") may be deemed to have shared power to
vote or direct the voting of and shared power to dispose or direct the
disposition of pursuant to the terms of a Stockholders Agreement (Restated)
dated as of January 13, 1984, as amended (the "Stockholders Agreement").
This number also includes 216,666 shares beneficially owned by Arthur L.
Knight, Jr. as to which Saugatuck may be deemed to have shared power to
vote or direct the voting of and shared power to dispose or direct the
disposition of pursuant to the terms of a Stockholders Agreement (Alternate
Version) dated as of February 14, 1990. (See "Compensation Committee
Interlocks and Insider Participation" Section for discussion of
Stockholders Agreement - Change in Control).
(2) Frank J. Hawley, Jr., Alexander H. Dunbar, Norman W. Johnson and Owen S.
Crihfield are deemed to be the beneficial owners of these shares by virtue
of their being general partners of Laurel Partners, the general partner of
Saugatuck. In addition, Messrs. Hawley and Dunbar are officers and
directors of the
3
<PAGE> 6
Company. Laurel Partners is deemed to be the beneficial owner of these
shares by virtue of its being the general partner of Saugatuck.
(3) This amount includes 2,000 shares of Common Stock as to which Mr. Dunbar
has sole voting and investment power.
(4) Based on information filed with the Securities and Exchange Commission.
(5) Associated Banc-Corp and its wholly-owned subsidiary companies, Associated
Bank, N.A. and Associated Trust Company, Inc. (collectively, "Associated
Banc-Corp."), have sole voting power with respect to 664,344 of these
shares, shared voting power with respect to 22,500 of these shares, sole
dispositive power with respect to 641,144 of these shares and shared
dispositive power with respect to 22,500 of these shares. 244,600 of these
shares are beneficially owned by George T. Brophy, and Associated Banc-Corp
has sole dispositive power over such shares pursuant to a revocable trust
agreement.
(6) Dimensional Fund Advisors Inc., and certain officers of certain related
companies (DFA Investment Dimensions Group, Inc. and The Investment Trust
Company) collectively have sole voting power and dispositive power of such
shares.
(7) This amount includes 216,666 shares of Common Stock as to which Mr. Knight
has options to purchase which were granted pursuant to the Stock Option
Plan (as defined herein) and which are currently exercisable. Also included
are 5,000 shares of Common Stock as to which Mr. Knight has sole voting and
investment power.
(8) Saugatuck may be deemed to share voting and dispositive power with respect
to certain of these shares as described in footnote (1) above.
(9) This amount represents shares of Common Stock as to which Mr. Crowley has
options to purchase which were granted pursuant to the Morgan Products Ltd.
1992 Non-employee Director Stock Option Plan (the "Director Plan") and
which are currently exercisable.
(10) This amount includes 333 shares of Common Stock as to which Mr. Haas has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable. Also included are 2,900 shares of Common
Stock as to which Mr. Haas has sole voting and investment power.
(11) This amount includes 333 shares of Common Stock as to which Mr. Boyce has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable. Also included are 2,000 shares of Common
Stock as to which Mr. Boyce has sole voting and investment power.
(12) This amount includes 333 shares of Common Stock as to which Mr. Holland has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable. Also included are 500 shares of Common
Stock as to which Mr. Holland has sole voting and investment power.
(13) This amount represents shares of Common Stock as to which the individual
has options to purchase which were granted pursuant to the Stock Option
Plan (as defined herein) and which are currently exercisable.
(14) This amount includes 38,333 shares of Common Stock as to which Mr.
MacMillan has options to purchase which were granted pursuant to the Stock
Option Plan (as defined herein) and which are currently exercisable. Also
included are 5,000 shares of Common Stock as to which Mr. MacMillan has
sole voting and investment power.
(15) This amount includes 30,500 shares of Common Stock as to which Mr. Hood has
options to purchase which were granted pursuant to the Stock Option Plan
(as defined herein) and which are currently exercisable. Also included are
2,800 shares of Common Stock as to which Mr. Hood has sole voting and
investment power.
(16) This amount includes an aggregate of 2,511,817 shares beneficially owned by
Saugatuck and Laurel Partners of which Messrs. Hawley and Dunbar are both
beneficial owners. See footnotes (1) and (2) above. This amount also
includes the aggregate amount of 394,830 shares of Common Stock as to which
all executive officers and directors as a group have options to purchase
which were granted to them pursuant to the Stock Option Plan and which are
currently exercisable.
4
<PAGE> 7
1. ELECTION OF DIRECTORS
The Board of Directors has nominated six (6) persons for election as
directors of the Company to serve until the next Annual Meeting of Stockholders
and until their successors are elected and qualified. It is intended that the
accompanying form of proxy will be voted for the following persons, all of whom
are presently directors of the Company and have agreed to serve if elected. If,
prior to the Meeting, any nominee becomes unable to serve, the shares
represented by all properly executed proxies will be voted for such additional
person as may be recommended by the Board of Directors.
The following table sets forth information about the nominees for election.
<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL DIRECTOR
NAME AGE COMPANY OCCUPATION SINCE
- ---------------------------- --- ---------------------- ------------------------------------ ---------------
<S> <C> <C> <C> <C>
Frank J. Hawley, Jr. ....... 66 Chairman of the Board; Managing Partner of Laurel Partners, December, 1983
Director which is the general partner of
Saugatuck; Managing Partner of
Bedford Partners, which is the
general partner of Saugatuck Capital
Company Limited Partnership II
("Saugatuck II"); Managing Director
and principal stockholder of
Saugatuck Associates, Inc.
("Saugatuck Associates"), a risk
capital management firm which
provides investment advice and
assistance to Saugatuck and
Saugatuck II.
Arthur L. Knight, Jr. ...... 56 President and Chief President and Chief Executive December, 1988
Executive Officer; Officer of the Company since 1988;
Director from 1982 to 1986 he was president
and a director of John Crane
Houdaille, Inc., a manufacturer of
engineered sealing devices, and from
1986 to November, 1988 he was
president, chief executive officer
and a director of such company.
John S. Crowley............. 70 Director Managing Director of Saugatuck November, 1986
Associates; from 1983 to 1987 he was
the organizer and general partner of
Round Hill Associates, a private
investment fund engaged in
management buyouts, and president of
Round Hill Associates Management
Company; Mr. Crowley is a director
of General Housewares Corporation.
Alexander H. Dunbar......... 70 Assistant Secretary; Partner of Laurel Partners and December, 1983
Director partner of Bedford Partners;
Managing Director of Saugatuck
Associates.
Howard G. Haas.............. 69 Director Chairman of Howard G. Haas September, 1987
Associates, a consulting firm; from
1967 to 1986 Mr. Haas was the
president and chief executive
officer of Sealy Incorporated; Mr.
Haas is also a member of the faculty
of the Graduate School of Business
at the University of Chicago.
William R. Holland.......... 55 Director Chairman of the Board and Chief July, 1991
Executive Officer of United Dominion
Industries, a manufacturing,
construction and engineering company
since 1987; prior to 1987 he served
in various senior executive
positions with such company.
</TABLE>
Mr. Donald N. Boyce has informed the Board that he does not wish to be
considered for nomination as a director in 1994. Mr. Boyce had served as a
Director since May, 1989.
5
<PAGE> 8
There are no family relationships between any of the above directors or
between any director and executive officer of the Company.
During the year ended December 31, 1993, the Board of Directors held five
meetings (exclusive of consents executed in lieu of meetings). The standing
committees of the Board of Directors are the Audit Committee and the
Compensation Committee. All directors receive reimbursement for all expenses
incurred in connection with attendance at Board meetings and all directors,
other than Messrs. Hawley, Knight and Dunbar, receive a fee of $1,500 per
meeting of the Board, $1,500 per Committee meeting and a retainer of $3,000 per
quarter.
In addition, each individual serving on the Board of Directors who is not
an employee of the Company or a beneficial owner (within the meaning of Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of more than 20% of the issued and outstanding Common Stock (a
"Non-employee Director") is automatically granted an option to purchase 1,000
shares of Common Stock upon such person's election and each re-election to the
Board of Directors. During 1993 four Non-employee Directors (Messrs. Crowley,
Haas, Boyce and Holland) each received a grant of options for the purchase of
1,000 shares of Common Stock pursuant to the Morgan Products Ltd. 1992
Non-employee Director Stock Option Plan (the "Director Plan").
Each grant under the Director Plan permits the holder to purchase from the
Company 1,000 shares of Common Stock at the fair market value of such shares on
the date the option was granted. Such options vest beginning one year from the
date of grant in equal amounts over the next three years. In the event that a
person granted options under the Director Plan ceases to be a director for any
reason other than death or disability or in connection with a Change of Control,
each option not vested as of the effective date of termination as a director
shall, to the extent not so vested, be forfeited and revert back to the Company.
The Audit Committee consists of Messrs. Crowley, Haas, Boyce and Holland.
The Audit Committee held two meetings during 1993. The Audit Committee's
functions include the recommendation of a firm to be employed by the Company as
its independent auditors, consultation with the auditors with respect to the
plan of audit, review with such auditors of their report of audit, consultation
with such auditors regarding the adequacy of internal controls, the direct
monitoring of the Company's accounting practices and system of internal
controls, and other related functions.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF ALL NOMINEES FOR DIRECTOR.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Hawley, Dunbar and Boyce.
Messrs. Hawley and Dunbar are officers of the Company and may be considered
employees of the Company. However, neither individual receives compensation for
their services as a director, officer or employee. Mr. Boyce is not a former or
current officer or employee of the Company or any of its subsidiaries.
The Company pays Saugatuck Associates, an affiliate of Saugatuck, of which
Messrs. Hawley and Dunbar are the sole stockholders and, together with Mr.
Crowley, are executive officers, an annual fee of $125,000 under a consulting
and management assistance agreement dated as of January 13, 1984 pursuant to
which Saugatuck Associates provides strategic planning, management and financial
services to the Company. The initial term of such agreement was for a period of
five years ending January 13, 1989. On January 13, 1994, the term of such
agreement automatically renewed for an additional one-year term. The agreement
will continue to be automatically renewed for an unlimited number of successive
one-year terms unless either party notifies the other in writing of its desire
not to renew the agreement at least sixty days prior to the expiration of the
initial term or of any renewal term. No such notification has been given by
either party.
The Company is party to a Stockholders Agreement (Restated) dated as of
January 13, 1984, as amended (the "Stockholders Agreement"), among the Company,
Saugatuck and certain former management and employee stockholders. The
Stockholders Agreement provides that in the event that Saugatuck proposes
6
<PAGE> 9
to sell all of the shares of any class of stock of the Company owned by
Saugatuck to an unaffiliated entity or to an affiliate (as defined therein) in a
bona fide arm's length transaction, Saugatuck may obligate the stockholders who
are parties to the Stockholders Agreement to sell all, or a stated percentage of
all, shares of such class of stock owned by such stockholders on the same terms
as Saugatuck. Such stockholders also agree to vote their shares of Common Stock
with Saugatuck in the event of a proposed consolidation or merger of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company to another person or entity, where such transaction is to
or with an unaffiliated entity or an affiliate in a bona fide arm's length
transaction.
Pursuant to the terms of a Stockholders Agreement (Alternate Version) dated
as of February 14, 1990 by and among the Company, Saugatuck and Arthur L.
Knight, Jr., Mr. Knight has agreed to the same restrictions as are set forth in
the Stockholders Agreement on all shares of Common Stock to be issued to him
upon the exercise of his outstanding options pursuant to the Stock Option Plan.
COMPENSATION COMMITTEE REPORT
Function and Overall Policy
The Compensation Committee of the Board of Directors ("the Committee")
oversees the general compensation policies of the Company, establishes
compensation plans and specific compensation levels for executive officers and
administers the Executive Performance Incentive Plan. The Committee is also
responsible for administering the Morgan Products Ltd. Incentive Stock Option
Plan (1985) (the "Stock Option Plan"), the Morgan Products Ltd. Convertible
Appreciation Rights Plan (the "CAR Plan"), and other compensation programs of
the Company.
The Committee is comprised entirely of Board members. No member of the
Committee is eligible to receive awards under any plan administered by the
Committee. All members of the Compensation Committee are individuals who are
"disinterested administrators" as defined in Rule 16b-3(c) under the Securities
Act of 1934 (but see "Compensation Committee Interlocks and Insider
Participation").
The Committee's primary objective in establishing compensation
opportunities for the Company's key executive officers is to support the
Company's goal of maximizing the value of shareholder interests in the Company.
To achieve this objective, the Committee believes it is critical to:
Hire, develop, reward and retain the most competent executives possible,
and to provide compensation opportunities for executives which are
competitive in the marketplace.
Encourage decision-making that enhances shareholder value by providing
short-term and long-term incentives that are tied directly to the
Company's stock price.
Pay executives based on competitive levels of incentive compensation, but
only after shareholders have been rewarded.
Promote a close identity of interest between management and shareholders
by tying executive pay to increases in shareholder value.
The Committee targets total pay opportunities at median pay levels of a
group of comparable companies. These companies (the "Comparator Companies") are
selected based upon their size, industry, and their inclusion in publicly
available survey sources. This group is comprised of different companies than
those comprising the peer group in the Performance Graph. The Committee does not
believe that the companies which are used for purposes of evaluating financial
performance are necessarily the same companies against which the Company
competes for executive talent.
The Committee makes all decisions pertaining to the Company's executive
compensation programs which promote the objectives detailed above. The Committee
believes that the Company's current compensation programs support the Company's
business mission, and that such programs are closely linked to the enhancement
of shareholder value.
7
<PAGE> 10
Components of Compensation
Base Salary
The Committee annually reviews each executive officer's base salary. Base
salaries are determined according to the following factors: requirements under
existing employment contracts, comparable levels of pay among executives in
similar positions at the Comparator Companies, level of responsibilities, prior
experience and breadth of knowledge, and internal pay equity. The Committee does
not ascribe any specific weightings to any of the factors described above.
However, in all cases, any increases in salary levels are driven by individual
job performance.
Base salaries are targeted at the median levels for the Comparator
Companies. Overall, executive salaries were increased at rates less than the
increases provided at the Comparator Companies.
As reflected in the Summary Compensation Table, Mr. Knight's base salary
was not increased in 1993. The Committee believes that the Chief Executive
Officer's compensation should be heavily influenced by the Company's
performance. In determining Mr. Knight's base salary, the Committee considers
Mr. Knight's individual performance, his long-term contributions to the success
of the Company, and the base salaries of CEOs at the Comparator Companies. In
1993, Mr. Knight's base salary was approximately equal to market levels.
Annual Incentives
The Committee believes that the annual incentives of executive officers
should be directly tied to improving shareholder value. Consistent with this
philosophy, the Executive Performance Incentive Plan (the "Bonus Plan") focuses
on increasing shareholder value by establishing targets that are tied directly
to the Company's or business unit's attainment of a prespecified cash flow on
investment ("CFOI") goal.
Under this Plan, the executive officers can earn a bonus equal to 40% of
their base salary upon attainment of the targeted CFOI goal. The maximum
incentive to any executive under the Bonus Plan is equal to 50% of base salary
in any one calendar year, and no payment is made if an achievement level of 80%
of the targeted CFOI goals is not met.
No bonuses have been paid to Mr. Knight since he joined the Company in
December of 1988. No bonuses were awarded for Company performance under the
Executive Performance Incentive Plan for the three fiscal years ended December
31, 1993; however, Joseph G. LaCroix, President of Morgan Distribution, was paid
a bonus of 10% of his base compensation in 1991, and a bonus of 8% of his base
compensation in 1992 due to specific objectives achieved at the business unit
level. Mr. LaCroix received no bonus in 1993.
Long-Term Incentives
The Committee believes that long-term incentive awards should be payable
only after financial rewards have been delivered to shareholders. Long-term
incentives are awarded under the Stock Option Plan and the CAR Plan, discussed
below.
Under the Stock Option Plan, options may be granted at an option price of
not less than 85% of the fair market value of the Common Stock on the date of
grant. However, with the exception of one grant in a prior year, all options
granted to executive officers have been at option prices equal to the fair
market value of the Common Stock on the date of the grant. Thus, the options
have value only if the stock price appreciates from the date the options are
granted. The design focuses executives on the creation of shareholder value over
the long term and encourages equity ownership in the Company. Stock options are
used as the primary long-term incentive vehicle.
The size of stock option grants is based primarily on competitive practice
and is generally targeted to be at the median of option values granted by the
Comparator Companies. The size of the award can be adjusted
8
<PAGE> 11
based on individual factors and historical award data. The Committee's objective
is to deliver a competitive award opportunity based on the estimated value of
the award granted.
In 1993, as detailed in the Summary Compensation Table, Mr. Knight received
no options. The Committee has determined that Mr. Knight's compensation
opportunities should remain constant as long as total compensation fairly
reflects overall corporate and individual achievement. Mr. Knight now owns 5,000
shares of the Company's Common Stock, and holds options to purchase an
additional 250,000 shares, 216,666 of which are currently exercisable. The
Committee believes this equity interest provides an appropriate link to the
interests of shareholders.
In 1992, the Committee approved the introduction of the CAR Plan. It
applies to key employees including executive officers and Mr. Knight. This
long-term incentive program will pay cash awards based on the appreciation in
value of the Company's business units provided overall shareholder value, as
reflected by the Company stock price, also increases. Participants in this
program, including executive officers and Mr. Knight, are required to commit a
portion of their annual bonuses under the Executive Performance Incentive Plan
over a five-year period to the purchase of additional appreciation rights. Thus,
like share-holders, they are making at-risk investments whose return is tied to
shareholder value enhancement. In accordance with the terms of the CAR Plan, no
cash awards were paid in 1993.
Policy With Respect to $1 Million Deduction Limit
Recently enacted Section 162(m) of the Internal Revenue Code generally
limits the Corporate deduction for compensation paid to executive officers named
in the proxy to $1 million, unless certain requirements are met. The Committee
has carefully considered the impact of this new tax code provision. At this
time, the Committee has determined that the Company is not affected by Section
162(m) because compensation to a single individual does not exceed $1 million.
Accordingly, plan design changes are not currently planned in response to this
provision.
Summary
The Committee believes that the compensation policies summarized above
provide increased motivation for executives to enhance the value of the Company
for the shareholders' benefit. Significantly, the Committee has assured that
shareholders are rewarded for positive performance before executives receive
long-term incentive awards. We will continue to monitor the effectiveness of the
Company's compensation programs to meet the Company's needs.
Mr. Frank J. Hawley, Jr., Chairman
Mr. Alexander H. Dunbar
Mr. Donald N. Boyce
EXECUTIVE COMPENSATION
The following table (Summary Compensation Table) sets forth information
with respect to all cash and non-cash compensation for services rendered to the
Company in all capacities for fiscal years 1993, 1992 and 1991, of those persons
who were, at December 31, 1993 (i) the Chief Executive Officer and (ii) the
other four most highly compensated executive officers of the Company.
9
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION (1) COMPENSATION
-------------------------------------- ------------------------
OTHER AWARDS OF
NAME & PRINCIPAL ANNUAL STOCK LONG-TERM ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION (5)
- ---------------------------- ---- -------- -------- ------------ --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur L. Knight, Jr. 1993 $350,000 $ 0 $ 7,795(4) 0 $ 0 $7,075
President, Chief Executive 1992 $350,000 $ 0 $ 5,791(4) 50,000 $ 0 $6,713
Officer & Director 1991 $315,169(2) $ 0 0 $ 0 $6,366
Joseph G. LaCroix 1993 $192,556 $ 0 $ 7,450(4) 0 $ 0 $6,390
Executive Vice President & 1992 $190,122 $14,372 (3) $ 6,183(4) 37,500 $ 0 $6,423
President-Distribution 1991 $166,876(2) $18,002 30,000 $ 0 $5,006
Donald E. Schlegel 1993 $189,519 $ 0 $ 5,521(4) 0 $ 0 $5,898
Vice President & 1992 $183,750 $ 0 $ 4,919(4) 20,000 $ 0 $5,513
President-Manufacturing 1991 $170,335(2) $ 0 10,000 $ 0 $5,110
Douglas H. MacMillan 1993 $186,923 $ 0 $ 5,104(4) 0 $ 0 $5,815
Vice President & Chief 1992 $179,998 $ 0 $ 5,094(4) 25,000 $ 0 $5,400
Financial Officer 1991 $ 91,461 $ 0 30,000 $ 0 $1,994
Dennis C. Hood 1993 $118,256 $ 0 $ 5,321(4) 0 $ 0 $3,682
Vice President- 1992 $116,496 $ 0 $ 4,311(4) 30,000 $ 0 $3,495
Human Resources 1991 $101,969(2) $ 0 13,000 $ 0 $3,059
</TABLE>
(1) Includes amounts earned in the respective fiscal year, whether or not
deferred.
(2) Amount reflects a 10% base salary reduction voluntarily taken by the
executive officers as of April 1, 1991. This reduction was rescinded by the
Board of Directors on January 1, 1992.
(3) This amount includes $1,256 required to be used to purchase convertible
appreciation rights (see "Description of CAR Plan").
(4) This amount represents amounts paid by the Company for the tax gross-up on
amounts included in taxable compensation (other than salary or bonuses).
(5) This amount represents amounts contributed by the Company under Section
401(k) of the Code pursuant to the Profit Sharing Plan.
EMPLOYMENT AGREEMENTS
On February 19, 1992, the Company and Mr. Knight executed an extension of
Mr. Knight's prior employment agreement. Pursuant to the new agreement, Mr.
Knight will continue to be employed as President and Chief Executive Officer of
the Company through December 1, 1994 and will receive an annual base salary of
$350,000 which will be continued for fiscal year 1994. Mr. Knight's base salary
for 1991 was set at $340,000. However, effective April 1, 1991, Mr. Knight and
the other executive officers voluntarily agreed to a 10% reduction in base
salary. As a result of the reduction, Mr. Knight's base salary for 1991 was
$315,169. Effective January 1, 1992 the Board of Directors rescinded the 10%
reduction in base salary for the fiscal 1992 year. Pursuant to the new
agreement, Mr. Knight is furnished with the use of a Company automobile,
participation in group health, term life insurance and other employee benefit
plans available to other executive personnel. He is eligible for four weeks paid
vacation in each calendar year. He is also eligible to participate in the
Company's Executive Performance Incentive Plan (the "Bonus Plan").
The Company has entered into agreements with Messrs. LaCroix, Schlegel,
MacMillan and Hood, whereby the Company may terminate any of such person's
employment at any time provided that the Company pays such person's severance
pay. These agreements provide for severance pay equal to one year's base annual
salary then in effect, payable monthly over the twelve-month period following
the effective date of termination.
On December 22, 1992, the Board of Directors adopted a special policy
providing for severance payments to Messrs. Knight, LaCroix, Schlegel, MacMillan
and Hood, in the event of an Acquisition, defined as a change of management or
control where (a) at least 35% of the Common Stock is redeemed by the Company,
purchased by any person or exchanged for shares in any other corporation, or (b)
at least 51% of the Company's assets are acquired by any person, or (c) during
any period of two (2) consecutive years,
10
<PAGE> 13
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute a majority thereof, or (d) the Company is merged or
consolidated with or into another corporation. Should the employment of any of
these executives be terminated within thirty (30) months following an
Acquisition, the executive will be paid a severance benefit equal to his monthly
base salary then in effect multiplied by thirty (30). Such payment shall be made
to the covered executive in cash, in one lump sum within sixty (60) days
following termination. Termination shall include any of the following: (i) any
reduction in the Covered Executive's annual rate of salary below the amount in
effect immediately prior to the Acquisition or any significant reduction in
benefits, or (ii) any assignment of new duties that requires the covered
executive to relocate his domicile; or (iii) any significant reduction or
diminution in the duties, responsibility or position in effect immediately prior
to the Acquisition. In addition, the terminated executive would receive a full
year's bonus at the targeted level for the year in which the Acquisition
occurred, as determined under the Bonus Plan, regardless of whether targeted
objectives are ultimately achieved. Further, such terminated executive would
receive any unused or accrued vacation pay, and would be eligible to receive
those fringe benefits he had been receiving prior to his termination for a
period of thirty (30) months.
In exchange for this severance benefit the covered executive, for a period
of twenty-four (24) calendar months after termination shall not, directly or
indirectly: (i) use, attempt to use, disclose or otherwise make known to any
person or entity knowledge or information including lists of customers or
suppliers, trade secrets or similar information and information of a
confidential nature including, without limitation, information relating to the
business, properties, accounting or similar functions of the Company, (ii)
engage or become interested in any business conducted by the Company, and (iii)
employ, return or arrange to participate in the employment of any person who is
an employee or consultant of the Company or its affiliates.
Mr. Dale H. Von Behren, Controller and Treasurer, is party to a similar
change of control severance agreement to that outlined above, except that the
severance benefit shall be for a period of fifteen (15) months and does not
include any restrictions after termination.
OPTION GRANTS IN LAST FISCAL YEAR
During the fiscal year ended December 31, 1993, no options were granted to
the individuals listed in the Summary Compensation Table.
OPTION EXERCISES IN 1993 AND YEAR END OPTION VALUE
The following table sets forth certain information as to the individuals
listed in the Summary Compensation Table with regard to stock options exercised
during the fiscal year and year end option value as of December 31, 1993.
<TABLE>
<CAPTION>
TOTAL NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN THE MONEY OPTIONS
SHARES HELD AT FISCAL YEAR END HELD AT FISCAL YEAR END
ACQUIRED ON VALUE -------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE (1) UNEXERCISABLE
- ---------------------------------------- ----------- -------- ----------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Arthur L. Knight, Jr. .................. 0 $0 216,666 33,334 $ 0 $0
Joseph G. LaCroix....................... 0 $0 50,000 25,000 $67,500 $0
Donald E. Schlegel...................... 0 $0 46,666 13,334 $22,500 $0
Douglas H. MacMillan.................... 0 $0 38,333 16,667 $ 0 $0
Dennis C. Hood.......................... 0 $0 30,500 20,000 $29,250 $0
</TABLE>
(1) Total value of vested options based on the closing price on the New York
Stock Exchange of $8.875 as of December 31, 1993.
11
<PAGE> 14
LONG-TERM INCENTIVE PLAN AWARDS IN 1993
As discussed in the Compensation Committee Report, in 1992 the Compensation
Committee and the Board of Directors approved a new long-term incentive plan,
the Morgan Products Ltd. 1992 Convertible Appreciation Rights Plan (the "CAR
Plan"). Individuals eligible to participate are considered key employees of the
Company and include the individuals listed in the Summary Compensation Table. No
awards were made to the individuals listed in the Summary Compensation Table
during the fiscal year ended December 31, 1993.
DESCRIPTION OF CAR PLAN
The following description of the CAR Plan is qualified in its entirety by
reference to the full text of the CAR Plan, a copy of which is on file with the
Securities and Exchange Commission.
Selection to participate is subject to the approval of the Compensation
Committee. If a key employee elects to participate and such participant is not
an executive officer of the Company, the participant shall receive an initial
grant of convertible appreciation rights ("CARs") having an aggregate beginning
value ranging from fifty percent (50%) to seventy-five percent (75%) of the sum
of such participant's base pay and target annual cash bonus. In the case of
executive officers of the Company (including the named individuals above) the
aggregate beginning value of the initial grant of CARs shall equal fifty percent
(50%) of the sum of such executive officer's base pay plus target annual cash
bonus. The initial Business Unit value is established by the Compensation
Committee in accordance with CAR Plan guidelines. The initial grant of CARs
requires no payment on the part of the participant. The CARs granted and
Business Unit values are designated based on the business unit employing the
participant.
In addition, each participant must commit to receive an additional number
of CARs in lieu of a portion of such participant's annual cash bonus earned over
the five (5) year period following the initial CAR grant. The aggregate amount
of such additional CARs will be an amount equal to such participant's initial
CAR grant and will have the same initial Business Unit value as the CARs granted
pursuant to the initial CAR grant.
Beginning with the fiscal year ended December 31, 1992, an annual Business
Unit and Company valuation will be conducted according to guidelines established
by the CAR Plan. This valuation shall determine the value of all outstanding
CARs. The difference between the annual valuation and the initial Business Unit
value shall determine the value of each CAR. The Compensation Committee may, at
its sole discretion, adjust such valuation at the beginning of and/or for any
Plan year.
From the date of grant, subject to certain exceptions, the CARs shall
become vested after 3 years at 50%, after 4 years at 75% and 5 years at 100%.
The value of all vested CARs shall be paid to participants in cash or its
equivalent, within ninety (90) days following the last day of a Plan year in
which the CARs vest. However, no participant shall receive a payout unless the
value of the Company as a whole has increased from the initial value in the year
in which the individual became eligible to participate. As of December 31, 1993,
a total of 28 individuals, including the named individuals, are participants in
the CAR Plan.
12
<PAGE> 15
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares the cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the S & P Composite - 500 Stock Index and a Peer Group Index. The Peer
Group consists of Masco Corporation, Ply-Gem Industries, Inc., T.J.
International, Inc., and Nortek, Inc. Management believes that the Peer Group
sells to similar customers and that their financial performance is similarly
influenced by the residential construction and repair and remodeling markets.
<TABLE>
<CAPTION>
Measurement Period Morgan
(Fiscal Year Covered) Products LTD Peer Group S&P 500
- ----------------------- --------------- ------------- ----------
<S> <C> <C> <C>
1988 100 100 100
1989 69.49 97.92 131.59
1990 44.07 70.05 127.49
1991 48.31 97.70 166.17
1992 49.15 125.95 178.81
1993 60.17 167.12 196.75
</TABLE>
Assumed $100.00 invested on December 31, 1988. Total return assumes
reinvestment of dividends.
CERTAIN TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation" for a
discussion of Certain Transactions.
2. INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse, independent
accountants, to examine the financial statements of the Company for the fiscal
year ending December 31, 1994. In accordance with a resolution of the Board of
Directors, this selection is being presented to the stockholders for
ratification at the Meeting.
A representative of Price Waterhouse will attend the Meeting and will be
available to respond to appropriate questions; however, no statement shall be
made by such representative on behalf of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR"
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE AS THE INDEPENDENT ACCOUNTANTS
OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1994.
13
<PAGE> 16
ANNUAL REPORT AND FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1993 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS BEING
FURNISHED TO STOCKHOLDERS WITH THIS PROXY STATEMENT (EXCEPT FOR EXHIBITS).
ADDITIONAL COPIES MAY BE OBTAINED BY STOCKHOLDERS UPON WRITTEN REQUEST SENT TO
INVESTOR RELATIONS, MORGAN PRODUCTS LTD., 75 TRI-STATE INTERNATIONAL, SUITE 222,
LINCOLNSHIRE, ILLINOIS 60069.
OTHER MATTERS
The Company will bear the cost of solicitation of proxies. In addition,
officers, directors, and other employees of the Company may, without additional
remuneration, solicit proxies from stockholders in person and by mail, telegram,
telephone, telophase, or teletype. Brokerage houses, nominees, fiduciaries and
other custodians will be requested to forward soliciting material to the
beneficial owners of shares and will be reimbursed for their expenses by the
Company.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Any stockholder who intends to present a proposal at the Company's 1995
Annual Meeting of Stockholders is advised that in order for such proposal to be
included in the Board of Directors' proxy material for such meeting, the
proposal must be directed to the Secretary of the Company at its principal
executive offices such that it is received not later than November 30, 1994, and
the proposal must meet certain eligibility requirements of the Securities and
Exchange Commission.
By Order of the Board of Directors
/s/ DOUGLAS H. MACMILLAN
Dated: March 25, 1994 DOUGLAS H. MACMILLAN
Lincolnshire, Illinois Secretary
14
<PAGE> 17
COMMON STOCK MORGAN PRODUCTS LTD. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING TO BE HELD MAY 18, 1994
The undersigned hereby appoints Arthur L. Knight, Jr., Douglas H. MacMillan and
Dale H. Von Behren, individually, as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of common stock of Morgan Products Ltd. held
of record by the undersigned on March 21, 1994 at the annual meeting of
stockholders to be held on May 18, 1994 or any adjournment or postponement
thereof. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
<TABLE>
<S> <C> <C> <C> <C>
FOR ALL
(Except
Nominee(s) 2. Ratification of appointment of For Against Abstain
Election of Directors- For Withhold written below) Price Waterhouse as independent / / / / / /
Nominees: F.J. Hawley, Jr., / / / / / / Public Accountants.
A.L. Knight, Jr., J.S. Crowley,
A.M. Dunbar, H.G. Haas, W.R.
Holland This Proxy when properly executed will be
voted in the manner directed herein by the
undersigned stockholder. If no direction is
made, this proxy will be voted "FOR all
nominees" in Proposal 1, and "FOR" Proposal 2.
The Board of Directors recommends a vote "FOR
all nominees" in Proposal 1, and "FOR"
Proposal 2.
Please sign exactly as name appears hereon.
Joint owners should each sign. Where
applicable, indicate official position or
representative capacity.
Dated: _____________________________, 1994
Signature(s): ____________________________
__________________________________________
</TABLE>
