<PAGE> 1
Morgan Products Ltd. Logo
469 MCLAWS CIRCLE
WILLIAMSBURG, VIRGINIA 23185
804/564-1700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Morgan
Products Ltd. (the "Company") will be held at 10:00 A.M. Eastern time at the
Marriott Hotel, 50 Kingsmill Road, Williamsburg, Virginia 23185 on Wednesday,
May 15, 1996, 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 ratify the selection of Price
Waterhouse LLP as independent accountants for the fiscal year ending
December 31, 1996.
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 20, 1996,
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 27, 1996 Douglas H. MacMillan
Williamsburg, Virginia Secretary
<PAGE> 2
MORGAN PRODUCTS LTD.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 1996
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 15, 1996, at 10:00 A.M. Eastern
time, or at any adjournment or postponement thereof. The Company's address is
469 McLaws Circle, Williamsburg, Virginia 23185, and its telephone number is
(804) 564-1700. This Proxy Statement and the enclosed proxy will first be mailed
to stockholders on or about March 27, 1996.
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, 1996 (the
"Record Date") will be entitled to notice of and to vote at the Meeting. As of
the Record Date, there were 8,648,136 shares of Common Stock issued and
outstanding, each of which is entitled to one vote. 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 LLP as the Company's independent accountants for
the fiscal year ending December 31, 1996.
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 LLP as the Company's independent accountants for
the fiscal year ending December 31, 1996. 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 are the equivalent of votes against such proposal and
broker non-votes have no effect. 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> 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 27, 1996, 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
The Parnassus Fund 940,000(3) 10.9
One Market
Stuart Tower, Suite 1600
San Francisco, CA 94105
Pioneering Management Corporation 835,600(4) 9.7
Sixty State Street
Boston, MA 02109-1820
Heartland Advisors, Inc. 466,100(5) 5.4
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors Inc. 439,800(6) 5.1
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
John S. Crowley 2,999(7) *
275 Guinea Road
Stamford, CT 06903
Howard G. Haas 6,899(8) *
Suite 1275
208 S. LaSalle Street
Chicago, IL 60604
William R. Holland 3,499(9) *
301 S. College Street
2300 One First Union Center
Charlotte, NC 28202
</TABLE>
2
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<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENTAGE OF
BENEFICIAL OWNER OF SHARES COMMON STOCK
- ----------------------------------------------------- --------- -------------
<S> <C> <C>
Patrick J. McDonough, Jr. 333(10) *
P.O. Box 508
153 Bowles Road
Agawam, MA 01001
Edward T. Tokar 2,333(11) *
P.O. Box 1219R
101 Columbia Road
Morristown, NJ 07962-1219
Byron H. Tony Stebbins 333(12) *
Newell Company
7630 S. County Line Road Ste. 7
Burr Ridge, IL 60521
Alton F. Doody, Jr. 3,433(13) *
3701 Canal Street
New Orleans, LA 70119
Larry R. Robinette 125,000(14) 1.4
469 McLaws Circle
Williamsburg, VA 23185
Douglas H. MacMillan 77,000(15) *
469 McLaws Circle
Williamsburg, Virginia 23185
Dennis C. Hood 64,633(16) *
469 McLaws Circle
Williamsburg, Virginia 23185
Peter Balint 16,717(17) *
Morgan Manufacturing
500 Park Plaza
Oshkosh, WI 54901
All Directors and Executive Officers as a group
(13 persons) 2,406,300(18) 26.9
</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
include 50,000 shares owned individually.
3
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(3) Based on information filed with the Securities and Exchange Commission, The
Parnassus Fund has sole voting power but no dispositive power with respect
to these shares.
(4) Based on information filed with the Securities and Exchange Commission,
Pioneering Management Corporation has sole voting power and shared
dispositive power with respect to these shares.
(5) Based on information filed with the Securities and Exchange Commission,
Heartland Advisors, Inc. has sole voting and dispositive power with respect
to these shares.
(6) Based on information filed with the Securities and Exchange Commission,
Dimensional Fund Advisors, Inc. has sole voting and dispositive power with
respect to 328,500 shares and shared voting and sole dispositive power over
an additional 111,300 shares owned by affiliates of Dimensional Fund
Advisors, Inc.
(7) This amount consists of 2,999 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 or exercisable within 60 days.
(8) This amount includes 2,999 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 or exercisable within 60 days, as well as
3,900 shares owned individually.
(9) This amount includes 2,999 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 or exercisable within 60 days, as well
as 500 shares owned individually.
(10) This amount represents 333 shares of Common Stock as to which Mr. McDonough
has options to purchase which were granted pursuant to the Director Plan
and which are currently exercisable or exercisable within 60 days.
(11) This amount includes 333 shares of Common Stock as to which Mr. Tokar has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days, as well as
2,000 shares owned individually.
(12) This amount represents 333 shares of Common Stock as to which Mr. Stebbins
has options to purchase which were granted pursuant to the Director Plan
and which are currently exercisable or exercisable within 60 days.
(13) This amount includes 333 shares of Common Stock as to which Mr. Doody has
options to purchase which were granted pursuant to the Director Plan and
which are currently exercisable or exercisable within 60 days, as well as
3,100 shares owned individually.
(14) This amount consists of 125,000 shares of Common Stock as to which Mr.
Robinette has options to purchase which were granted pursuant to the Morgan
Products Ltd. Incentive Stock Option Plan (the "Stock Option Plan") (as
defined herein) and which are currently exercisable or exercisable within
60 days.
(15) This amount includes 70,000 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 or
exercisable within 60 days, as well as 7,000 shares owned individually.
(16) This amount includes 61,333 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 or exercisable
within 60 days, as well as 3,300 shares owned individually.
(17) This amount includes 16,667 shares of Common Stock as to which Mr. Balint
has options to purchase which were granted pursuant to the Stock Option
Plan (as defined herein) and which are currently exercisable or exercisable
within 60 days. In addition, Mr. Balint has individual beneficial ownership
of 50 shares, which are in his wife's name. Mr. Balint disclaims beneficial
ownership of those shares.
4
<PAGE> 6
(18) This amount includes an aggregate of 2,047,551 shares beneficially owned by
Saugatuck and Laurel Partners. See footnotes (1) and (2) above. This amount
also includes the aggregate amount of 358,749 shares of Common Stock which
all executive officers and directors as a group have options to purchase
and which are currently exercisable or exercisable within 60 days, as well
as shares owned or beneficially owned individually.
5
<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. ...... 68 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 Limited Partnership");
Managing Partner of Greyrock Partners
Limited Partnership, 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............ 72 Director Private investor since 1994; Managing November 1986
Director of Saugatuck Associates from 1987
to 1993; 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............. 71 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......... 57 Director Chairman of the Board and Chief Executive July 1991
Officer of United Dominion Industries, a
diversified manufacturing company since
1987; prior to 1987 he served in various
senior executive positions with such
company.
Larry R. Robinette......... 52 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>
6
<PAGE> 8
<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL DIRECTOR
NAME AGE COMPANY OCCUPATION SINCE
- --------------------------- --- ---------------------- ------------------------------------------ ---------------
<S> <C> <C> <C> <C>
Alton F. Doody, Jr. ....... 61 Director Founder and Chairman of the Doody Group November 1994
(since November, 1990), a 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............ 48 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, an advisor to various investment
partnerships, and a trustee of the College
of William and Mary.
Byron H. Tony Stebbins..... 63 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, 64 Director From 1988 to present, Chairman and CEO of November 1994
Jr. ..................... 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 re-engineering.
</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 1995, Mr. Doody failed to file four such reports
regarding six transactions in the Common Stock on a timely basis.
During the year ended December 31, 1995, the Board of Directors held five
meetings (exclusive of consents executed in lieu of meetings). Mr. Tokar was
able to attend only two of the five meetings of the Board of Directors. All
other directors attended more than 75% of the 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 1995. 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.
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
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<PAGE> 9
(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 1995, seven Non-employee Directors (Messrs.
Crowley, Haas, Holland, Doody, Tokar, Stebbins, and McDonough) 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
(as defined in the Director Plan), 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, Tokar, 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, Holland, and
Stebbins. 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. Since
January 13, 1994, the term of such agreement has been automatically renewed for
additional one-year terms. 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 have also agreed 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.
8
<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 Exchange
Act (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 not increased in 1995. 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, and the base salaries
9
<PAGE> 11
of CEOs at the Comparator Companies. In 1995, Mr. Robinette's base salary was
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 earnings 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 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 goal is not met.
Since Company performance in 1995 was below the minimum threshold of 80% of
the targeted goal, no bonuses were paid to any executive officer under the
Executive Performance Incentive Plan. However, as noted below under the caption
"Employment Agreements", pursuant to the terms of Mr. Robinette's employment
agreement he was paid a bonus of $100,000 in 1995. In addition, Mr. Balint
received a bonus of $40,000 as part of his employment arrangement, and Mr. Hood
received a discretionary bonus of $19,500 due to the achievement of specific
objectives established for his functional area in 1995.
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. Since there is no defined
benefit retirement plan for officers, stock option grants and other long-term
incentives are also designed to serve as a vehicle for providing executives 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. In addition, the Committee considers the size of option
grants made in prior years. The Committee's objective is to deliver a
competitive award opportunity based on the estimated value of the award granted.
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 1995, 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 1996 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.
Mr. Frank J. Hawley, Jr., Chairman
Mr. William R. Holland
Mr. Byron H. Tony Stebbins
10
<PAGE> 12
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 1995, 1994, and 1993, of those
persons who were, at December 31, 1995 (i) the Chief Executive Officer and (ii)
the other three most highly compensated executive officers of the Company. No
other executive officer of the Company had a total salary plus bonus exceeding
$100,000 in 1995.
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 1995 $350,000 $ 0 $437,423(6) $ 0 20,000 $ 0 $ 11,593
President, Chief
Executive 1994 $113,077 $186,440 $ 1,792 $700,000(10) 250,000 $ 0 $ 3,393
Officer, and Director
Douglas H. MacMillan 1995 $197,522 $ 0 $199,567(7) $ 0 10,000 $ 0 $ 7,670
Vice President, Chief 1994 $189,042 $ 62,311(4) $ 6,008 $ 0 70,000(11) $ 0 $ 5,671
Financial Officer, 1993 $186,923 $ 0 $ 5,104 $ 0 0 $ 0 $ 5,815
and Secretary
Dennis C. Hood 1995 $150,020 $ 19,500(4) $107,075(8) $ 0 10,000 $ 0 $ 5,828
Senior Vice President
-- 1994 $124,632 $ 47,325(4) $ 6,093 $ 0 55,000(11) $ 0 $ 3,739
Human Resources and 1993 $118,256 $ 0 $ 5,321 $ 0 0 $ 0 $ 3,682
Administration
Peter Balint 1995 $126,935 $ 40,000(5) $ 82,947(9) $ 0 50,000 $ 0 $ 3,231
Vice President and
President --
Manufacturing
</TABLE>
- ---------------
(1) This includes amounts earned in the respective fiscal year, whether or not
deferred.
(2) This represents payments by the Company for moving expenses, excess life
insurance, leased automobiles, tax preparation fees, personal financial
planning fees, and tax gross-up on amounts included in taxable compensation
(other than salary and bonuses).
(3) This amount represents contributions 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) Pursuant to binding elections previously made, a portion of each named
executive officers' bonus has been deferred for the purchase of Convertible
Appreciation Rights (CARs), which can accrue value in connection with
improvements in stockholder value.
(5) This represents a bonus paid to Mr. Balint pursuant to his employment
agreement.
(6) Other Annual Compensation includes $338,719 of moving expenses paid on Mr.
Robinette's behalf and $74,746 of tax gross-up.
(7) Other Annual Compensation includes $139,807 of moving expenses paid on Mr.
MacMillan's behalf and $43,456 of tax gross-up.
(8) Other Annual Compensation includes $69,516 of moving expenses paid on Mr.
Hood's behalf and $26,730 of tax gross-up.
(9) Other Annual Compensation includes $50,178 of moving expenses paid on Mr.
Balint's behalf and $29,009 of tax gross-up.
(10) As an incentive to join the Company, Morgan Products Ltd. granted Mr.
Robinette 140,000 restricted shares of Common Stock with a then fair market
value of $5.00 per share. The value of these shares at December 31, 1995
was $822,500. The Company has never paid dividends on its Common Stock,
but, if paid, Mr. Robinette's shares would be entitled to receive such
dividends.
(11) This includes repriced options. 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.
11
<PAGE> 13
OPTION/SAR GRANTS IN 1995
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS/SARS ALTERNATIVE TO 5%
SHARES GRANTED TO AND 10%
UNDERLYING EMPLOYEES IN EXERCISE APPRECIATION:
OPTIONS/SARS FISCAL PRICE EXPIRATION GRANT DATE PRESENT
NAME GRANTED YEAR(1) $/SHARE(2) DATE VALUE $(3)
- --------------------------- ------------ ------------ ---------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Larry R. Robinette......... 20,000 7.5% $ 5.75 August 4, 2005 $ 78,000
Douglas H. MacMillan....... 10,000 3.7% 5.75 August 4, 2005 39,000
Dennis C. Hood............. 10,000 3.7% 5.75 August 4, 2005 39,000
Peter Balint............... 50,000 18.7% 5.75 August 4, 2005 195,000
</TABLE>
- ---------------
(1) Based on 267,500 total options granted to employees in 1995.
(2) All exercise prices are equal to fair market value on the date of grant.
(3) 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 are equal to the fair market value of the
underlying stock on the dates of the grant.
- The option term of ten years.
- 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 and 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. These
options vest over a three-year period, with 25% 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 cause (as defined therein), 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 will automatically
renew 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 base salary for a period of one year.
The Company has provided a Special Severance/Retention Plan for Messrs.
MacMillan and Hood, which was extended to Mr. Robinette effective September 13,
1995. This plan provides for severance benefits in the event a participant is
involuntarily terminated for any reason 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
12
<PAGE> 14
bonus award earned in the three fiscal years prior to the date of the
termination. Participants terminated are also eligible to continue the full
fringe benefit program for a twenty-four month period. If Mr. Robinette receives
benefits under this Plan, he will not be eligible for severance under his
employment agreement.
A special policy providing for severance payments in the event of an
acquisition was adopted by the board in 1992 and amended in 1995. This policy,
which is applicable to Messrs. Robinette, MacMillan, and Hood, defines an
acquisition 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 two and
one-half (2 1/2) multiplied by the sum of his annual base salary then in effect
and the average bonus earned over the three fiscal years prior to termination.
In addition, the terminated executive would receive a full year's bonus at the
targeted level, 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 order to avoid the imposition
of excise taxes, participants' benefits are capped at the "golden parachute"
excise tax limit set forth in Section 280G of the Internal Revenue Code (unless
removing the cap results in a greater after-tax benefit to the participant.)
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 of which the executive became aware
during his employment 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, retain or arrange to
participate in the employment of any person who is an employee or consultant of
the Company or its affiliates.
OPTION EXERCISES IN 1995 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, 1995.
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN THE MONEY OPTIONS
SHARES HELD AT FISCAL YEAR-END HELD AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry R. Robinette............ 0 $0 125,000 145,000 $ 109,375 $ 111,875
Douglas H. MacMillan.......... 0 $0 70,000 10,000 $ 27,499 $ 1,251
Dennis C. Hood................ 0 $0 61,333 16,667 $ 15,416 $ 2,084
Peter Balint.................. 0 $0 16,667 33,333 $ 2,083 $ 4,167
</TABLE>
- ---------------
(1) Total value of options based on the Common Stock's closing price on the New
York Stock Exchange of $5.875 as of December 29, 1995.
13
<PAGE> 15
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
[CR ART]
<TABLE>
<CAPTION>
12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Morgan
Products 100 109.62 111.54 136.54 86.54 90.38
S & P 100 130.34 140.25 154.32 156.42 214.99
Peer
Group 100 139.46 179.79 238.55 156.71 209.58
</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.
14
<PAGE> 16
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 LLP, independent
accountants, to examine the financial statements of the Company for the fiscal
year ending December 31, 1996. 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, 1996.
ANNUAL REPORT AND FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT AND FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED WITHOUT CHARGE (EXCEPT FOR EXHIBITS) BY FIRST CLASS MAIL WITHIN ONE
BUSINESS DAY OF RECEIPT OF THE REQUEST TO STOCKHOLDERS UPON WRITTEN REQUEST SENT
TO INVESTOR RELATIONS, MORGAN PRODUCTS LTD., 469 MCLAWS CIRCLE, WILLIAMSBURG,
VIRGINIA 23185, (804) 564-1700.
OTHER MATTERS
The Company will bear the cost of solicitation of proxies. 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 of Common Stock and will be reimbursed for their expenses by
the Company.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any stockholder who intends to present a proposal at the Company's 1997
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 28, 1996, and
the proposal must meet certain eligibility requirements of the Securities and
Exchange Commission.
By Order of the Board of Directors
Douglas H. MacMillan
Williamsburg, Virginia DOUGLAS H. MACMILLAN
March 27, 1996 Secretary
15
<PAGE> 17
<TABLE>
<S><C>
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 15, 1996
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, 1996, at the annual meeting of stockholders to be held on
May 15, 1996, 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)
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., L.R. Robinette, J.S. Crowley, For Withheld Except those whose name(s) appear below.
H.G. Haas, W.R. Holland, E.T. Tokar, B.H. Stebbins, / / / / / /
A.F. Doody, Jr. and P.J. McDonough, Jr.
For Against Abstain This Proxy when properly executed will be
2. Ratification of appointment of Price Waterhouse, LLP / / / / / / voted in the manner directed herein by
as Independent Public Accountants. the undersigned stockholder. If no
direction is made, the 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______________________, 1996
________________________________________
Signature(s)
________________________________________
</TABLE>
