<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MORGAN PRODUCTS LTD.
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(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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.
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
MORGAN PRODUCTS LTD.
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(4) Date filed:
MARCH 30, 1995
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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 17, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Morgan
Products Ltd. (the "Company") will be held at 9:30 A.M. eastern time at the
Marriott Hotel, 50 Kingsmill Road, Williamsburg, Virginia 23185 on Wednesday,
May 17, 1995, for the following purposes:
1. To elect nine (9) 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 amend and restate the 1990
Incentive Stock Option Plan.
3. To consider and act upon a proposal to ratify the selection of Price
Waterhouse LLP as independent accountants for the fiscal year ending
December 31, 1995.
4. 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 20, 1995,
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,
Dated: March 30, 1995 DOUGLAS H. MACMILLAN
Lincolnshire, Illinois Secretary
<PAGE> 3
MORGAN PRODUCTS LTD.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 1995
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 Marriott Hotel, 50 Kingsmill
Road, Williamsburg, Virginia, on Wednesday, May 17, 1995, at 9:30 A.M. eastern
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 30, 1995.
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 20, 1995 (the
"Record Date") will be entitled to notice of and to vote at the Meeting. As of
the Record Date, there were 8,641,528 shares of Common Stock issued and
outstanding, each of which is entitled to one vote. As of the Record Date, 2,940
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 (i) the amendment and
restatement of the 1990 Incentive Stock Option Plan and (ii) the ratification of
the selection of Price Waterhouse LLP as the Company's independent accountants
for the fiscal year ending December 31, 1995.
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, (2) FOR the amendment and restatement
of the 1990 Incentive Stock Option Plan and (3) FOR the ratification of the
selection of Price Waterhouse LLP as the Company's independent accountants for
the fiscal year ending December 31, 1995. An automated system administered by
the Company's transfer agent tabulates the votes. Where the approval of a
majority of the shares represented at the meeting is required for the approval
of a proposal, abstentions and broker non-votes are the equivalent of votes
against such proposal. 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, 1995, 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>
NAME AND ADDRESS OF NUMBER PERCENTAGE OF
BENEFICIAL OWNER OF SHARES COMMON STOCK
----------------------------------------------------- --------- -------------
<S> <C> <C>
Saugatuck Capital Company 2,047,551(1)(2) 23.7%
Limited Partnership
One Canterbury Green
Stamford, CT 06901
Laurel Partners 2,047,551(1)(2) 23.7
One Canterbury Green
Stamford, CT 06901
Frank J. Hawley, Jr. 2,097,551(1)(2) 24.3
One Canterbury Green
Stamford, CT 06901
Owen S. Crihfield 2,047,551(1)(2) 23.7
One Canterbury Green
Stamford, CT 06901
Pioneering Management Corporation 727,100(3) 8.4
Sixty State Street
Boston, MA 02109-1820
John S. Crowley 999(4) *
627 Round Hill Road
Greenwich, CT 06831
Howard G. Haas 4,899(5) *
Suite 1275
208 S. LaSalle Street
Chicago, IL 60604
William R. Holland 1,499(6) *
301 S. College Street
2300 One First Union Center
Charlotte, NC 28202
Patrick J. McDonough, Jr. 0(7) *
P.O. Box 508
153 Bowles Road
Agawam, MA 01001
Edward T. Tokar 2,000(7) *
P.O. Box 1219R
101 Columbia Road
Morristown, NJ 07962-1219
Byron H. Tony Stebbins 0(7) *
Newell Company
7630 S. County Line Road
Ste. 7
Burr Ridge, IL 60521
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENTAGE OF
BENEFICIAL OWNER OF SHARES COMMON STOCK
----------------------------------------------------- --------- -------------
<S> <C> <C>
Alton F. Doody, Jr. 0(7) *
3701 Canal Street
New Orleans, LA 70119
Larry R. Robinette 62,500(7)(8) *
75 Tri-State International
Ste. 222
Lincolnshire, IL 60069
Joseph G. LaCroix 73,499(9) *
303 Mulberry Drive
Mechanicsburg, PA 17055
Douglas H. MacMillan 68,665(10) *
75 Tri-State International
Suite 222
Lincolnshire, IL 60069
Donald E. Schlegel 54,332(11) *
601 Oshkosh Street
Oshkosh, WI 54902
Dennis C. Hood 48,499(12) *
75 Tri-State International
Suite 222
Lincolnshire, IL 60069
All Directors and Executive Officers as a group 2,414,443(13) 27.0
(13 persons)
</TABLE>
---------------
* Number equals less than one percent (1%) of outstanding shares of Common
Stock.
(1) This number includes an aggregate of 47,551 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").
(See "Compensation Committee Interlocks and Insider Participation" Section
for discussion of Stockholders Agreement - Change in Control).
(2) Frank J. Hawley, Jr. 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, Mr. Hawley is an
officer and director of the Company. Laurel Partners is deemed to be the
beneficial owner of these shares by virtue of its being the general partner
of Saugatuck. In addition, the shares beneficially owned by Mr. Hawley
includes 50,000 shares owned individually.
(3) Based on information filed with the Securities and Exchange Commission.
Pioneering Management Corporation has sole voting power and shared
investment power with respect to these securities.
(4) This amount consists of 999 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.
(5) This amount includes 999 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.
3
<PAGE> 6
(6) This amount includes 999 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.
(7) These directors were appointed in November 1994.
(8) This amount consists of 62,500 shares of Common Stock as to which Mr.
Robinette has options to purchase which were granted pursuant to the Stock
Option Plan (as defined herein) and which are currently exercisable.
(9) This amount includes 72,499 shares of Common Stock as to which Mr. LaCroix
has options to purchase which were granted pursuant to the Stock Option
Plan (as defined herein) and which are currently exercisable.
(10) This amount includes 61,665 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.
(11) This amount represents 53,332 shares of Common Stock as to which Mr.
Schlegel has options to purchase which were granted pursuant to the Stock
Option Plan (as defined herein) and which are currently exercisable.
(12) This amount includes 47,999 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.
(13) This amount includes an aggregate of 2,047,551 shares beneficially owned by
Saugatuck and Laurel Partners of which Mr. Hawley is a beneficial owner.
See footnotes (1) and (2) above. This amount also includes the aggregate
amount of 300,992 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 nine (9) 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,
unless contrary instructions are received, 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. ...... 67 Chairman of the Board; Managing Partner of Laurel Partners, which December, 1983
Director 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 Partner of
Greyrock Partners, which is the general
partner of Saugatuck Capital Company
Limited Partnership III ("Saugatuck III"),
President and principal stockholder of
Saugatuck Associates, Inc. ("Saugatuck
Associates") and Saugatuck Associates II,
Inc., each a risk capital management firm
which provides investment advice and
assistance to Saugatuck, Saugatuck II and
Saugatuck III.
John S. Crowley............ 71 Director Managing Director of Saugatuck Associates November, 1986
from 1987 to 1994; 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.
Howard G. Haas............. 70 Director Chairman of Howard G. Haas Associates, a September, 1987
consulting firm since 1986; 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......... 56 Director Chairman of the Board and Chief Executive July, 1991
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.
Larry R. Robinette......... 51 President & Chief President and Chief Executive Officer of November, 1994
Executive Officer; the Company since September, 1994. From
Director 1993 to 1994, he was the President and CEO
of Anchor Hocking Packaging of Cincinnati,
Ohio, a subsidiary of CarnaudMetalbox.
From 1980 to 1993, he held a series of
executive assignments at Newell Company,
including operations vice presidencies in
the EZ Painter Division, Newell Window
Furnishings and the Mirro Foley Division
and the presidency of Anchor Industrial
Glass. He was President of Anchor Hocking
Packaging when it was acquired in 1993 by
CarnaudMetalbox.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL DIRECTOR
NAME AGE COMPANY OCCUPATION SINCE
--------------------------- --- ---------------------- ------------------------------------------ ---------------
<S> <C> <C> <C> <C>
Alton F. Doody, Jr. ....... 60 Director Founder and Chairman of The Doody Group, a November, 1994
New Orleans, Louisiana, consulting firm
serving consumer goods manufacturers and
retailers throughout the world. Dr. Doody
was co-founder of Management Horizons,
Inc. a marketing consulting firm, now a
division of Price Waterhouse. He also
founded Applied Retail Systems. He serves
as a director on several boards, including
Newell Company; Grant Investments, Inc.;
and Hyde Park Restaurants, Inc. He is a
Senior Fellow at the A.B. Freeman School
of Business, Tulane University, and a
member of the Dean's advisory Council.
Edward T. Tokar............ 47 Director From 1985 to present, Vice President- November, 1994
Investments, AlliedSignal Inc.,
responsible for the overall investment
management of employee benefit asset funds
worldwide. Employed at AlliedSignal since
1977 in various management positions. He
is a director of Noel Group, Inc., a
trustee of the Morgan Grenfell Investment
Funds and an advisor to various investment
partnerships.
Byron H. Tony Stebbins..... 62 Director From 1986 to present, Senior Vice November, 1994
President, Market Development, at Newell
Company. Employed at Newell since 1973 in
various executive positions. He has served
on numerous professional and corporate
boards including the Hardware, Home
Improvement Council-City of Hope; American
Hardware Manufacturers Association; the
President's Council of the Home Center
Industry; and the Hardware Marketing
Council.
Patrick J. McDonough, Jr... 63 Director From 1988 to present, Chairman and CEO of November, 1994
Olympic Manufacturing Group, Inc., a
private company located in Massachusetts.
He spent 22 years with the Black & Decker
Manufacturing Company; his last two
assignments were as President of the U.S.
company and Chief Administrative Officer
in the Office of the CEO. After leaving
Black & Decker, he formed McDonough &
Associates, a management consulting firm
that specialized in corporate strategic
planning and reengineering.
</TABLE>
Each Executive Officer and Director of the Company is required to report to
the Securities and Exchange Commission, by specified dates, his transactions in
the Common Stock. During 1994, Mr. Haas failed to file one such report regarding
one transaction in the Common Stock on a timely basis.
Mr. Alexander H. Dunbar, a director since 1983, resigned in 1994 for health
reasons. Mr. Arthur L. Knight, Jr., a director since 1989 and former President
and Chief Executive Officer has chosen not to stand for re-election.
During the year ended December 31, 1994, 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. The Audit Committee and the Compensation Committee held
two meetings and one meeting, respectively, during 1994. All directors receive
reimbursement for all expenses incurred in connection with attendance at Board
meetings and all directors, other than Messrs. Hawley and Robinette receive a
fee of $1,500 per meeting of the Board, $1,500 per Committee meeting and a
retainer of $3,000 per quarter.
6
<PAGE> 9
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 1994 three Non-employee Directors (Messrs. Crowley,
Haas, 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, and Holland. 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 and Holland. Mr.
Hawley is an officer of the Company and may be considered an employee of the
Company. However, Mr. Hawley does not receive compensation for his service as a
director, officer or employee.
The Company pays Saugatuck Associates, an affiliate of Saugatuck, of which
Mr. Hawley is the sole stockholder and, an executive officer, 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, 1995, 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 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.
7
<PAGE> 10
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 (the "Stock Option 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 stockholder 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 stockholder 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 stockholders have been rewarded.
- Promote a close identity of interest between management and stockholders
by tying executive pay to increases in stockholder 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 linked to the enhancement of
stockholder value.
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, base salaries are targeted at the median levels for the Comparator
Companies taking into consideration individual job performance.
As reflected in the Summary Compensation Table, Mr. Robinette's base salary
was the same as Mr. Knight's salary in 1994. The Committee believes that the
Chief Executive Officer's compensation should be heavily influenced by the
Company's performance. In determining Mr. Robinette's base salary, the Committee
considered Mr. Robinette's previous experience, his long-term role in the
success of the Company,
8
<PAGE> 11
and the base salaries of CEOs at the Comparator Companies. In 1994, Mr.
Robinette's base salary was approximately equal to median market levels. Mr.
Knight's base salary was also approximately equal to median market levels.
Annual Incentives
The Committee believes that the annual incentives of executive officers
should be directly tied to improving stockholder value. Consistent with this
philosophy, the Executive Performance Incentive Plan (the "Bonus Plan"), which
was revised in 1994, focuses on increasing stockholder 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.
The bonus is targeted to median market levels. Under the Bonus Plan, the
executive officers can earn a bonus equal to 50% of their base salary upon
attainment of the targeted CFOI goal. The maximum incentive to any executive
under the Bonus Plan is equal to 70% 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.
The Committee also established bonus opportunities related to the
performance of the Company's continuing operations adjusting for a special one
time restructuring charge of $11.3 million. (See Note 2 of Notes to Consolidated
Financial Statements of the 1994 Annual Report.) Since the year ended with
achievement for continuing operations that was above the minimum threshold
level, officers were awarded bonuses which were paid in March 1995. The
Compensation Committee believes this adjustment was necessary in order to
maintain the incentive opportunities which were intended when the goals were
established at the start of the year. Mr. Knight did not receive a bonus for
1994.
Long-Term Incentives
The Committee believes that long-term incentive awards should be payable
only after financial rewards have been delivered to stockholders. Long-term
incentives are awarded under the Stock Option Plan, discussed below. Since there
is no qualified retirement plan for officers, stock option grants and other long
term incentives are also designed to serve as a vehicle for providing them with
post retirement income. Stock Options focus executives on the creation of
stockholder value over the long term and encourage equity ownership in the
Company. Stock options are used as the primary long-term incentive vehicle.
The size of stock option grants is based on competitive practice and is
targeted to be at the median of option values granted by the Comparator
Companies. The size of the award can be adjusted 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 1994, Mr. Robinette, as part of his employment agreement, was awarded
options to purchase 250,000 shares, 62,500 of which are currently exercisable.
The Committee believes that the 250,000 option grant was necessary to attract
Mr. Robinette as Chief Executive Officer and that this equity interest provides
an appropriate link to the interest of stockholders. The award is the same as
the number of options forfeited by the previous Chief Executive Officer. In
addition, Mr. Robinette was awarded 140,000 shares of stock, which are held in
trust and vest ratably to Mr. Robinette over a three (3) year period beginning
in 1995. This award was designed to replace a nonqualified retirement plan of
similar value that Mr. Robinette held at his previous employer. Mr. Knight did
not receive any stock options in 1994.
On August 31, 1994, the Board of Directors approved the repricing to fair
market value of officer options with grant dates of August 9, 1991 and May 20,
1992. This repricing was done in conjunction with the issuance of Mr.
Robinette's options and was designed to establish a comparable basis for
appreciation. The Committee believes that the repriced options will provide the
executive team with additional incentives to effect the many difficult actions
necessary to improve the Company's performance.
9
<PAGE> 12
In December of 1994, the Compensation Committee approved the extension of
the terms of all stock options scheduled to expire in 1996 and beyond from five
or six years to ten years from their date of issue in keeping with normal
industry and business practice.
Since there is no defined benefit or supplemental retirement plan for
executives, the Committee believes these actions were necessary to bring
executive compensation opportunities closer to competitive norms and to further
focus executives on stockholder interests.
Policy With Respect to $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code generally limits the annual
corporate deduction for compensation paid to named executive officers to $1
million, unless certain requirements are met. The Committee has carefully
considered the impact of this new tax code provision. For 1994 the Committee has
determined that the Company is not affected by Section 162(m) because
compensation to a single individual does not exceed $1 million. The Committee is
currently reviewing Company compensation policies with respect to 1995 and
subsequent years to determine whether it is appropriate to conform some or all
components of executive pay to requirements of Section 162(m) in order to ensure
full tax deductibility.
Summary
The Committee believes that the compensation policies summarized above
provide motivation for executives to enhance the value of the Company for the
stockholders' benefit. We will continue to monitor the effectiveness of the
Company's compensation programs to meet the Company's needs.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE EXERCISE LENGTH OF
UNDERLYING OF STOCK AT PRICE AT NEW ORIGINAL OPTION
OPTIONS TIME OF TIME OF EXERCISE TERM REMAINING AT
REPRICING REPRICED REPRICING REPRICING PRICE DATE OF REPRICING
NAME DATE OR AMENDED OR AMENDMENT($) OR AMENDMENT($) ($) OR AMENDMENT(1)
------------------------------- --------- ---------- --------------- --------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT EXECUTIVE OFFICERS
Joseph G. LaCroix.............. 8/31/94 37,500 $5.38 $ 9.13 $ 5.38 3 years, 9 months
Executive Vice President and 2/14/90 7,500 9.63 11.16 9.63 4 years, 10 months
President-Distribution 2/14/90 5,633 9.63 17.75 9.63 1 year, 9 months
2/14/90 19,367 9.63 15.09 9.63 1 year, 9 months
Donald E. Schlegel............. 8/31/94 20,000 5.38 9.13 5.38 3 years, 9 months
Vice President and 2/14/90 30,000 9.63 15.09 9.63 4 years, 6 months
President-Manufacturing
Douglas H. MacMillan........... 8/31/94 30,000 5.38 12.50 5.38 2 years, 11 months
Vice President, Chief 8/31/94 25,000 5.38 9.13 5.38 3 years, 9 months
Financial Officer, Secretary
Dennis C. Hood................. 8/31/94 30,000 5.38 9.13 5.38 3 years, 9 months
Senior Vice President- 2/14/90 7,500 9.63 11.16 9.63 4 years, 10 months
Human Resources 2/14/90 4,367 9.63 15.09 9.63 1 year, 9 months
and Administration 2/14/90 5,633 9.63 17.75 9.63 1 year, 9 months
FORMER EXECUTIVE OFFICERS
Michael A. Lupo................ 2/14/90 9,000 9.63 11.16 9.63 4 years, 10 months
Executive Vice President,
Chief Financial Officer and
Secretary
Phillipe J. Latreille.......... 2/14/90 3,000 9.63 11.16 9.63 4 years, 10 months
Vice President-Business
Development
Arthur L. Knight, Jr........... 2/14/90 200,000 9.63 12.11 9.63 3 years, 9 months
President and
Chief Executive Officer
</TABLE>
---------------
(1) Options repriced on August 31, 1994, all of which had original terms of five
or six years, were modified to provide for ten year terms from the repricing
date.
Mr. Frank J. Hawley, Jr., Chairman
Mr. William R. Holland
10
<PAGE> 13
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 1994, 1993 and 1992, of those persons
who were, at December 31, 1994 (i) the Chief Executive Officer and (ii) the
other four most highly compensated executive officers of the Company. Since
Arthur L. Knight was the Chief Executive Officer through September, 1994, he is
included as well.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1) LONG-TERM COMPENSATION
-------------------------------------- ------------------------------------
OTHER AWARDS
ANNUAL RESTRICTED OF ALL OTHER
COMPENSATION STOCK STOCK LONG-TERM COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY BONUS (2) AWARDS OPTIONS PAYOUTS (3)
----------------------------- ---- -------- -------- ------------ ---------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry R. Robinette 1994 $113,077 $186,440(5) $1,792 $700,000(7) 250,000(4) $ 0 $ 3,393
President and Chief
Executive
Officer beginning 9/94
and Director
Arthur L. Knight, Jr. 1994 $273,808(6) $ 0 $8,003 0 0 $ 0 $648,655(8)
President, Chief Executive 1993 $350,000 $ 0 $7,795 0 0 $ 0 $ 7,075
Officer until 9/94 1992 $350,000 $ 0 $5,791 0 50,000 $ 0 $ 6,713
Joseph G. LaCroix 1994 $195,000 $ 52,630(9) $7,246 0 55,000(4) $ 0 $ 5,850
Executive Vice President
and 1993 $192,556 $ 0 $7,450 0 0 $ 0 $ 6,390
President-Distribution 1992 $190,112 $ 14,372 $6,183 0 37,500 $ 0 $ 6,423
Donald E. Schlegel 1994 $190,000 $ 73,055(9) $6,495 0 37,500(4) $ 0 $ 5,700
Vice President and 1993 $189,519 $ 0 $5,521 0 0 $ 0 $ 5,898
President-Manufacturing 1992 $183,750 $ 0 $4,919 0 20,000 $ 0 $ 5,513
Douglas H. MacMillan 1994 $189,042 $ 62,311(9) $6,008 0 70,000(4) $ 0 $ 5,671
Vice President, Chief 1993 $186,923 $ 0 $5,104 0 0 $ 0 $ 5,815
Financial Officer,
Secretary 1992 $179,998 $ 0 $5,094 0 25,000 $ 0 $ 5,400
Dennis C. Hood 1994 $124,632 $ 47,325(9) $6,093 0 55,000(4) $ 0 $ 3,739
Senior Vice President-Human 1993 $118,256 $ 0 $5,321 0 0 $ 0 $ 3,682
Resources and
Administration 1992 $116,496 $ 0 $4,311 0 30,000 $ 0 $ 3,495
</TABLE>
---------------
(1) Includes amounts earned in the respective fiscal year, whether or not
deferred.
(2) Represents payments by the Company for the tax gross-up on amounts included
in taxable compensation (other than salary or bonuses).
(3) This amount represents amounts contributed by the Company under Section
401(K) of the Code pursuant to the Profit Sharing Savings and Retirement
Plan as well as excess 401(K) amounts the Company contributed to the
Deferred Compensation Plan.
(4) Includes repriced options. See "Option/SAR Grants in Last Fiscal Year" and
"Ten-Year Option Repricings" tables.
(5) $150,000 of such amount was paid to Larry Robinette in 1994 and January 1995
as a hiring bonus.
(6) Represents approximately eight months salary as President and Chief
Executive Officer.
(7) As an incentive to joining the Company, the Company granted Mr. Robinette
140,000 restricted shares of Common Stock at $5.00 per share. The value of
these shares at December 31, 1994 is $787,500. The Company has never paid
dividends on its common stock but, if paid, Mr. Robinette's shares would be
entitled to receive such dividends.
(8) Includes amounts received as part of severance agreement including salary
payments through May 1996.
(9) Pursuant to binding elections previously made, a portion of each named
executive officers' bonus has been deferred for purchase of Convertible
Appreciation Rights (CARs) which can accrue value in connection with
improvements in stockholder value.
11
<PAGE> 14
MORGAN PRODUCTS LTD
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ALTERNATIVE TO
5%
NUMBER OF % OF TOTAL AND 10%
SECURITIES OPTIONS/SARS APPRECIATION:
UNDERLYING GRANTED TO EXERCISE GRANT DATE VALUE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED FISCAL YEAR(2) $/SHARE(3) DATE VALUE $(6)
-------------------------- ------------ -------------- ---------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Larry R. Robinette........ 250,000 50.8% $ 5.00 August 19, 2004 $870,000
Joseph G. LaCroix......... 17,500(4) 5.88 March 30, 2004 70,875
37,500(1) 5.38 May 20, 2002 125,625
------- --------
55,000 11.2% 196,500
------- --------
Donald E. Schlegel........ 20,000(1) 5.38 May 20, 2002 67,000
17,500(4) 5.75 November 3, 2004 69,475
------- --------
37,500 7.6% 136,475
------- --------
Douglas H. MacMillan...... 30,000(1) 5.38 August 9, 2001 95,400
25,000(1) 5.38 May 20, 2002 83,750
15,000 5.88 March 30, 2004 60,750
------- --------
70,000 14.2% 239,900
------- --------
Dennis C. Hood............ 15,000(4) 5.88 March 30, 2004 60,750
30,000(1) 5.38 May 20, 2002 100,000
10,000(5) 5.75 November 3, 2004 39,700
------- --------
55,000 11.2% 200,950
------- --------
</TABLE>
---------------
(1) Represents repriced options. See "Ten-Year Option Repricings Table."
(2) Based on 492,500 total options granted to employees in 1994.
(3) All exercise prices are equal to fair market value on the date of grant or
repricing.
(4) New grant in 1995.
(5) Replaces options that were to expire in December 1994.
(6) The estimated grant date present values reflected in the above table are
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the values
of the options reflected in the above table include:
- Exercise prices on the options equal to the fair market value of the
underlying stock on the dates of grant.
- The option terms.
- Interest rates that represent the interest rate on a U.S. Treasury
security on the dates of grant with maturity dates corresponding to those
of the option terms.
- Volatilities calculated using daily stock prices for the one-year period
prior to the grant dates.
- Dividends at the rate of $0.00 per share representing the annualized
dividends paid with respect to a share of common stock at the dates of
grant. The Company does not pay a dividend with respect to common stock.
EMPLOYMENT AGREEMENTS
On September 6, 1994, the Company and Mr. Robinette executed an employment
agreement. Pursuant to the agreement, Mr. Robinette will be employed as
President and Chief Executive Officer of the Company through December 31, 1997
and will receive an annual base salary of $350,000. Mr. Robinette 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 Bonus Plan. In addition, Mr. Robinette
received a signing bonus of $150,000, of which $50,000 was paid in 1994 and
$100,000 was paid on January 13, 1995. As part of this agreement, Mr. Robinette
was awarded 250,000 stock options at an exercise price of $5 per share.
12
<PAGE> 15
These options vest over a three year period with 1/4 vesting immediately upon
employment. In addition, Mr. Robinette was granted 140,000 restricted shares of
stock at $5 per share. These shares vest ratably over the next three years.
Under this agreement, the restricted shares will vest automatically upon
termination as a result of death or disability, termination as a result of any
reason other than fraud or dishonesty, or termination as a result of the
acquisition by a third party of all of the assets or outstanding voting stock of
the Company. After the expiration of the initial term of Mr. Robinette's
employment on December 31, 1997, the term of his employment shall be
automatically renewed for successive one year terms, unless either party
delivers written notice of its desire not to renew 180 days prior to the end of
such term. The agreement provides that if the Company elects not to renew the
term of Mr. Robinette's agreement at the end of the initial term or any renewal
term, Mr. Robinette will continue to receive salary for a period of one year.
The Company has provided a Special Severance/Retention Plan for Messrs.
LaCroix, Schlegel, MacMillan and Hood. This plan provides for severance benefits
in the event a participant is involuntarily terminated for other than cause, or
where a participant voluntarily terminates for certain prescribed reasons
outlined in the plan. If terminated, the participant will receive severance pay
equal to two (2) multiplied by the sum of the participant's base salary and the
average bonus award earned in the three fiscal years prior to the date of the
termination, except for Mr. Schlegel who will receive 1.5 multiplied by the sum
of his base salary and average three year bonus. Participants terminated are
also eligible to continue the full fringe benefit program for a twenty four
month period (eighteen months for Mr. Schlegel).
On December 22, 1992, the Board of Directors adopted a special policy
providing for severance payments to Messrs. 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, 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). 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. 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.
On August 19, 1994, Mr. Arthur L. Knight Jr. resigned as Chief Executive
Officer and President. On May 31, 1994, Mr. Knight signed a severance agreement
which made his resignation effective upon appointment of a successor, and which
provides for severance payments in the amount of his base salary of $350,000 per
year through May 31, 1996. This amount will be reduced by earnings from personal
services for others (whether as an employee, consultant, director or otherwise)
in excess of $35,000 per year. In addition, all unexercised options were
cancelled on the date of his resignation.
13
<PAGE> 16
OPTION EXERCISES IN 1994 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, 1994.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SECURITIES UNDERLYING 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>
Larry R. Robinette......... 0 $0 62,500 187,500 $ 39,063 $ 117,187
Joseph G. LaCroix.......... 0 $0 72,499 12,501 $ 6,250 $ 3,125
Donald E. Schlegel......... 0 $0 53,332 24,168 $ 3,333 $ 1,667
Douglas H. MacMillan....... 0 $0 61,665 8,335 $ 11,666 $ 2,084
Dennis C. Hood............. 0 $0 47,999 20,001 $ 5,000 $ 2,500
</TABLE>
---------------
(1) Total value of vested options based on the closing price on the New York
Stock Exchange of $5.63 as of December 31, 1994.
14
<PAGE> 17
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below compares the cumulative total
stockholder 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.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
MORGAN PRODUCTS LTD., S&P 500; AND PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MORGAN
(FISCAL YEAR COVERED) PRODUCTS PEER GROUP S&P 500
<S> <C> <C> <C>
1989 100 100 100
1990 63.41 71.54 96.89
1991 69.51 99.77 126.28
1992 70.73 128.62 135.88
1993 86.59 170.66 149.52
1994 54.88 112.11 151.55
</TABLE>
PEER GROUP COMPANIES
Masco Corporation
Nortek, Inc.
Ply-Gem Industries, Inc.
T.J. International, Inc.
*Total return assumes reinvestment of dividends on a quarterly basis.
15
<PAGE> 18
CERTAIN TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation" for a
discussion of Certain Transactions.
2. PROPOSAL TO AMEND AND RESTATE THE MORGAN PRODUCTS LTD.
1990 INCENTIVE STOCK OPTION PLAN
In June 1985, the Company's Board of Directors and stockholders approved
the Incentive Stock Option Plan (referred to in this section of the proxy as the
"Plan") which was amended in 1990. Pursuant to the Plan, incentive stock options
which meet the requirements of Section 422 of the Code and nonqualified stock
options may be granted. The total number of shares of Common Stock which were
originally authorized for grant under options under the Plan was 750,000
(103,200 of which have been exercised since 1985). The 1985 Stock Option Plan
will expire in June, 1995 and will be replaced with a new Stock Option Plan
("the Stock Option Plan"). This amendment to the Plan seeks shareholder approval
of an additional authorization to grant one hundred fifty thousand (150,000)
shares of Common Stock under options. Any unused shares under the original
authorization of seven hundred fifty thousand (750,000) shares shall also remain
available for grant under the Plan. In addition, any shares under options which
expire, terminate, lapse, or are forfeited (whether pursuant to options granted
under the original share authorization or this 1995 additional share
authorization) shall once again be available for grant under the Plan.
All salaried employees of the Company (currently approximately 500
individuals) are eligible to receive grants of options under the Plan, including
all named executive officers appearing within this proxy statement. Members of
the Board of Directors who are not employees are not eligible to participate in
the Plan. As of the date of this proxy statement, neither the individuals who
are to receive options, nor the number of shares under option that will be
granted to any individual or group of individuals have been determined.
Full payment for shares purchased upon exercise of an option, along with
payment of any required tax withholding, must be made at the time of exercise.
This amendment to the Plan allows the Compensation Committee to authorize the
surrender of previously held shares and the use of a broker-assisted, "cashless"
exercises, to satisfy the exercise price.
This amendment to the Plan clarifies that the Plan will be administered by
a committee of members of the Board of Directors, all of whom are "disinterested
administrators" as defined under Rule 16b of the Securities Exchange Act of
1934. The Plan shall be administered by the Compensation Committee (the
"Committee"). The Committee has sole discretion to determine, subject to the
express provisions of the Plan, the employees to whom options are granted, the
terms and conditions of such options, whether the options will be incentive
stock options or nonqualified stock options, the time or times at which options
are granted, the option price of the options (which, pursuant to this amendment,
must at least equal the fair market value of Company stock on the date the
option is granted), when such options are exercisable (provided that the maximum
life of an option is ten years and one day), and the number of shares covered by
such options.
No option may be granted to an employee if the sum of the number of shares
of Common Stock subject to the option, plus the number of shares owned directly
or indirectly by the employee as of the date the option is granted exceeds 3% of
the issued and outstanding Common Stock as of such date.
The Plan provides that each option granted on or after February 14, 1990
and outstanding as of the time of a Change of Control shall, effective as of the
effective date of such Change of Control, become exercisable in full for the
remainder of its term; provided, however, in the event the optionee's employment
with the Company (or any successor company) is terminated after a Change of
Control, such option granted on or after February 14, 1990 shall remain
exercisable for a period equal to the lesser of (i) seven (7) calendar months
after such termination of employment or (ii) the remainder of its term. Upon
exercise of any option subsequent to a Change of Control, the optionee shall be
entitled to receive the securities or other consideration he would have been
entitled to receive had he been entitled to exercise, and had he exercised, such
option immediately prior to such Change of Control.
16
<PAGE> 19
This amendment revises the definition of events which will be deemed to
constitute a Change in Control. Under the amended definition, a Change in
Control will be deemed to exist if: (i) at least 35% of the shares of Common
Stock are acquired by one individual or entity, or are redeemed by the Company;
(ii) at least 51% of the Company's assets are purchased by one individual or
entity; (iii) a majority of the members of the Board of Directors are replaced;
(iv) the Company is merged or consolidated with another company; or (v) any
substantially equivalent event which is deemed by the Board of Directors to
constitute a change in management or control occurs.
The Plan provides that each option granted on or after February 14, 1990
and outstanding for at least 180 days during any fiscal year of the Company
shall also become exercisable in full by the holder thereof upon a determination
that the Company has met 100% of budgeted Income Before Income Taxes for such
fiscal year. Such budgeted Income Before Income Taxes shall be as set annually
by the Board of Directors in connection with the adoption of the Company's
annual budget.
This amendment to the Plan provides that the per share purchase price of
the Common Stock under each stock option must be at least equal to the fair
market value of Company stock on the date of grant. With respect to incentive
stock options, the aggregate fair market value (determined as of the date the
option is granted) of the Common Stock with respect to which such options are
exercisable for the first time by any one employee in any one calendar year may
not exceed $100,000. This amendment to the Plan preserves the ability to qualify
for full tax deductibility in connection with option exercises (under Internal
Revenue Code Section 162(m)) by adding the restriction that the total number of
shares which may be granted to any one optionee in any calendar year is
seventy-five thousand.
This amendment provides that the Committee shall determine, with respect to
each grant of options, how the options may be exercised following employment
termination. This amendment also extends the term of the Plan until May 16,
2005, clarifies that successors to the business of the Company shall remain
subject to liabilities under the Plan, and makes several other minor revisions
necessary to satisfy various technical requirements.
The shares of Common stock available for purchase under the Plan are the
Company's Common Stock, par value $0.10, and on March 1, 1995, the closing price
of Common Stock was $6.13.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general description of Federal income tax consequences
to participants and the Company relating to nonqualified and incentive stock
options that may be granted under the Plan. This discussion does not purport to
cover all tax consequences relating to stock options.
An optionee will not recognize income upon the grant of a nonqualified
stock option to purchase shares of Common Stock. Upon exercise of the option,
the optionee will recognize ordinary compensation income equal to the excess of
the fair market value of the Company's Common Stock on the date the option is
exercised over the option price for such stock. The tax basis of the option
stock in the hand of the optionee will equal the option price for the stock plus
the amount of ordinary compensation income the optionee recognizes upon exercise
of the option, and the holding period for the stock will commence on the day the
option is exercised. An optionee who sells option stock will recognize capital
gain or loss measured by the difference between the tax basis of the stock and
the amount realized on the sale. Such gain or loss will be long term if the
stock is held for more than one year after exercise. The Company will be
entitled to a deduction equal to the amount of ordinary compensation income
recognized by the optionee. The deduction will be allowed at the same time the
optionee recognizes the income.
An optionee will not recognize income upon the grant of an incentive stock
option to purchase shares of the Company Common Stock, and will not recognize
income upon exercise of the option, provided such optionee was an employee of
the Company or a subsidiary at all times from the date of grant until three
months prior to exercise (or one year prior to exercise in the event of death or
disability). Generally, the amount by which the fair market value of the
Company's Common Stock on the date of exercise exceeds the option price will be
includable in alternative minimum taxable income for purposes of determining
alternative
17
<PAGE> 20
minimum tax and such amount will be added to the tax basis of such stock for
purposes of determining alternative minimum taxable income in the year the stock
is sold. Where an optionee who has exercised an incentive stock option sells the
shares acquired upon exercise more than two years after the grant date and more
than one year after exercise, long-term capital gain or loss will be recognized
equal to the difference between the sales price and the option price. An
optionee who sells such shares within two years after the grant date or within
one year after exercise will recognize ordinary compensation income in an amount
equal to the lesser of the difference between (a) the option price and the fair
market value of such shares on the date of exercise or (b) the option price and
the sales proceeds. Any remaining gain or loss will be treated as a capital gain
or loss. The Company or a subsidiary will be entitled to a deduction equal to
the amount of ordinary compensation income recognized by the optionee in this
case. The deduction will be allowable at the same time the optionee recognizes
the income.
If, as a result of a Change in Control event, a participant's options
become immediately exercisable, the additional economic value, if any,
attributable to the acceleration or issuance may be deemed a "parachute payment"
under Section 280G of the Code. In such case, the participant may be subject to
a 20% nondeductible excise tax as to all or a portion of such economic value, in
addition to any income tax payable. The Company will not be entitled to a
deduction for that portion of any parachute payment that is subject to the
excise tax.
Notwithstanding any of the foregoing discussion with respect to the
deductibility of compensation under the Plan, Section 162(m) would render
nondeductible to the Company certain compensation in excess of $1,000,000 in any
year to certain executive officers of the Company, unless such excess
compensation is "performance based" (as defined) or is otherwise exempt from
Section 162(m). The applicable conditions of an exemption for a
performance-based compensation plan include, among others, a requirement that
the stockholders approve the material terms of the plan, and a requirement that
shareholders approve a maximum number of shares which may be granted to any one
optionee within a given period of time (this requirement is satisfied pursuant
to one of the amendments to the Plan, described above). Stock options that may
be granted under the Plan are intended to qualify for the exception for
performance-based compensation under Section 162(m).
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENT AND RESTATEMENT OF THE MORGAN PRODUCTS LTD. 199O INCENTIVE STOCK
OPTION PLAN AS DESCRIBED IN THIS PROXY STATEMENT.
3. INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to examine the financial statements of the Company for the fiscal
year ending December 31, 1995. 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 LLP 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 LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1995.
ANNUAL REPORT AND FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1994 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
FURNISHED WITHOUT CHARGE (EXCEPT FOR EXHIBITS) TO STOCKHOLDERS UPON WRITTEN
REQUEST SENT TO INVESTOR RELATIONS, MORGAN PRODUCTS LTD., 75 TRI-STATE
INTERNATIONAL, SUITE 222, LINCOLNSHIRE, ILLINOIS 60069.
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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 or facsimile. 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 1996
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 24, 1995, and
the proposal must meet certain eligibility requirements of the Securities and
Exchange Commission.
By Order of the Board of Directors
Lincolnshire, Illinois DOUGLAS H. MACMILLAN
March 30, 1995 Secretary
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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 17, 1995
The undersigned hereby appoints Larry R. Robinette and Douglas H. MacMillan,
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 20, 1995, at the annual meeting of stockholders to be held
on May 17, 1995, 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)
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<S> <C>
MORGAN PRODUCTS, LTD.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /x/
1. Election of Directors For All
Nominees: F.J. Hawley, Jr., For Withheld Except those whose names appear below.
L.R. Robinette, J.S. Crowley, / / / / / /
H.G. Haas, W.R. Holland, E.T. For Against Abstain
Tokar, B.H. Stebbins, A.F. / / / / / / ________________________________
Doody, Jr., and P.J. McDonough, 2. Ratification of appointment of Price Waterhouse as
Jr. Independent Public Accountants.
For Against Abstain
3. To amend and restate the 1990 / / / / / /
Incentive Stock Option Plan.
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 and 3. The Board of Directors
recommends a vote "FOR all nominees" in Proposal 1,
and "FOR" Proposal 2 and 3.
Please sign exactly as name appears hereon. Joint
owners should each sign. Where applicable, indicate
official position or representative capacity.
Dated: ________________________________________, 1995
Signature(s) _______________________________________
____________________________________________________
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