<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / 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
</TABLE>
PATTEN CORPORATION
- --------------------------------------------------------------------------------
(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 Rules 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PATTEN
CORPORATION
5295 TOWN CENTER ROAD, SUITE 400
BOCA RATON, FLORIDA 33486
TEL: (407) 361-2700 FAX: (407) 361-2800
June 19, 1995
To our Shareholders:
You are cordially invited to attend the Special Meeting in Lieu of the
Annual Meeting of Shareholders of Patten Corporation (the "Company") which will
be held at the Sheraton New York Hotel at Seventh Avenue and 52nd Street, New
York, New York on Thursday, July 20, 1995 at 10:00 a.m., local time.
The accompanying Notice of the Special Meeting in Lieu of the Annual
Meeting and Proxy Statement describe the formal business to be transacted at
the meeting and contain certain information about the Company and its officers
and Directors. During the meeting we will also report on the operations of the
Company. Directors and executive officers of the Company will be present to
respond to any questions that shareholders may have.
Please sign, date and return the enclosed proxy card promptly. If you
attend the meeting, which we sincerely hope you will do, you may vote in person
even if you have previously mailed a proxy card.
Thank you for your attention and continued interest in our Company.
We look forward to seeing you at the meeting.
Very truly yours,
/s/ GEORGE F. DONOVAN
- ----------------------------
George F. Donovan
President and Chief Executive Officer
<PAGE> 3
PATTEN CORPORATION
5295 TOWN CENTER ROAD, SUITE 400
BOCA RATON, FLORIDA 33486
NOTICE OF SPECIAL MEETING IN LIEU OF THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 20, 1995
A Special Meeting in Lieu of the Annual Meeting of the Shareholders of
Patten Corporation will be held at the Sheraton New York Hotel at Seventh
Avenue and 52nd Street, New York, New York, at 10:00 a.m., local time, on
Thursday, July 20, 1995, to consider and act on the following matters:
(1) To fix the number of Directors for the ensuing year at six;
(2) To elect six Directors;
(3) To approve an amendment to the Company's 1988 Outside
Directors Stock Option Plan;
(4) To approve the Company's 1995 Stock Incentive Plan; and
(5) To transact such other business as may properly come before
the meeting or any adjournments thereof.
The close of business on June 1, 1995 has been fixed as the record
date for determining the shareholders entitled to notice of, and to vote at,
the Special Meeting in Lieu of the Annual Meeting.
THE PRESENCE OF A QUORUM IS IMPORTANT. THEREFORE, YOU ARE URGED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY BY MAIL WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING. THIS WILL NOT PREVENT YOU FROM VOTING IN
PERSON, BUT WILL ENSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND
THE MEETING.
By order of the Board of Directors,
/s/ PATRICK E. RONDEAU
- ---------------------------
Patrick E. Rondeau
Clerk
June 19, 1995
<PAGE> 4
PATTEN CORPORATION
5295 TOWN CENTER ROAD, SUITE 400
BOCA RATON, FLORIDA 33486
(407) 361-2700
-------------------
SPECIAL MEETING IN LIEU OF THE
ANNUAL MEETING OF SHAREHOLDERS
JULY 20, 1995
-------------------
PROXY STATEMENT
-------------------
INFORMATION CONCERNING SOLICITATION
This Proxy Statement is furnished to the holders of common stock of
Patten Corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Special Meeting
in Lieu of the Annual Meeting of Shareholders (the "Special Meeting") to be
held at the Sheraton New York Hotel at Seventh Avenue and 52nd Street, New
York, New York 10019, on Thursday, July 20, 1995, at 10:00 a.m., local time,
and at any adjournment thereof. If the enclosed proxy is signed and returned
and is not revoked, it will be voted at the Special Meeting in accordance with
the instructions of the shareholder(s) who execute it. If no instructions are
given, the proxy will be voted FOR the election of the nominees for Director
and FOR the proposals described herein. The proxy of any shareholder may be
revoked by such shareholder in writing addressed to Patrick E. Rondeau, the
Clerk of the Company, at the above address or in person at any time before it
is voted. Submission of a later dated proxy will revoke an earlier dated
proxy.
All costs of solicitation will be borne by the Company. The
solicitation is to be principally conducted by the Company's transfer agent and
its affiliates (Chemical Mellon Shareholder Services). This may be
supplemented by telephone and personal contacts by Directors, executive
officers and regular employees of the Company, without additional remuneration.
Arrangements will be made with brokerage houses, banks and custodians, nominees
and other fiduciaries to forward solicitation materials to the beneficial
owners of shares held of record. The Company will reimburse such persons for
their reasonable out-of-pocket expenses incurred in connection with the
distribution of proxy materials.
It is anticipated that this Proxy Statement and the enclosed proxy,
together with the Company's annual report to shareholders, will first be mailed
to shareholders on or about June 20, 1995.
OUTSTANDING VOTING SECURITIES
The Board of Directors has fixed the close of business on June 1, 1995
as the record date for determining the shareholders entitled to receive notice
of, and to vote at, the Special Meeting. The number of shares of common stock
of the Company ("Common Stock") outstanding and entitled to vote on that date
was 19,513,797 with each share being entitled to one vote. A majority of the
issued and outstanding shares as of the record date will constitute a quorum
for the transaction of business at the Special Meeting.
<PAGE> 5
The affirmative vote of the holders of a plurality of the votes cast
at the Special Meeting is required for the election of Directors. All other
matters that are before the meeting will require the affirmative vote of
holders of a majority of the Common Stock present or represented at the Special
Meeting.
Shares voted to abstain or to withhold as to a particular matter and
shares as to which a nominee (such as a broker holding shares in street name
for a beneficial owner) has no voting authority in respect of such matter, will
be deemed represented for both quorum and voting purposes. Such shares will be
the equivalent of negative votes. Votes will be tabulated by the Company's
transfer agent subject to the supervision of persons designated by the Board of
Directors as inspectors.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of shareholders of the Company intended to be presented at
the 1996 Annual Meeting of Shareholders must be received by the Company not
later than March 22, 1996 to be included in the Company's Proxy Statement and
form of proxy relating to the 1996 Annual Meeting. Other requirements for
inclusion are set forth in Rule 14a-8 under the Securities Exchange Act of
1934, as amended (The "Exchange Act").
PROPOSALS 1 AND 2 - FIXING OF NUMBER OF DIRECTORS AT SIX AND ELECTION OF NAMED
DIRECTORS
The By-Laws of the Company provide that there shall be a Board of not
less than three Directors, the exact number to be fixed at annual meetings by
the shareholders or any special meeting in lieu thereof, subject to change from
time to time by the Directors. It is recommended that the shareholders vote to
fix the number of Directors for the coming year at six.
Unless contrary instructions are received, the enclosed proxy will be
voted for fixing the number of Directors at six and for the election of the six
nominees listed herein. Each of the nominees is currently serving as a
Director of the Company and was elected by the shareholders at the 1994 Special
Meeting in Lieu of the Annual Meeting. Although the Board of Directors does
not contemplate that any nominee will be unavailable for election, in the event
that vacancies occur unexpectedly, the enclosed proxy will be voted for such
substituted nominees, if any, as may be designated by the Board. The enclosed
proxy will not be voted for more than six Directors even if the number of
Directors is determined to be more than six. If elected, the nominees listed
below will serve until the next annual meeting (or special meeting in lieu
thereof) and until their successors are duly elected and qualified.
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of May 1, 1995 by (a)
each Director, (b) each of the executive officers listed in the Summary
Compensation Table below, (c) all current Directors and executive officers as a
group and (d) all persons known to be the beneficial owners of more than five
percent of the Company's outstanding Common Stock. A nominal amount of Common
Stock held by certain executive officers under the Company's 401(k) profit
sharing plan has been excluded from the table. Unless otherwise noted, each
stockholder has sole voting and investment power with respect to the shares of
Common Stock listed.
2
<PAGE> 6
<TABLE>
<CAPTION>
Shares of
Common Stock
Issuable
Upon Percent of
Director Common Stock Exercisable Conversion of Total Shares
Name Age Since Benefically Owned Options Debentures (1) Shares Outstanding (2)
---- --- -------- ----------------- ----------- -------------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph C. Abeles (3) 80 1987 324,483 50,886 224,162 599,531 3.04%
George F. Donovan 56 1991 87,797 55,037 --- 142,834 *
Ralph A. Foote 72 1987 7,495 50,886 --- 58,381 *
Daniel C. Koscher 37 --- 1,160 39,181 --- 40,341 *
Alan L. Murray 48 --- 41,249 39,298 231 80,778 *
Frederick M. Myers (4) 72 1990 136,500 39,530 --- 176,030 *
Patrick E. Rondeau 48 --- 10,799 22,801 --- 33,600 *
Stuart A. Shikiar (5) 49 1994 354,961 --- 33,526 388,487 1.99%
Bradford T. Whitmore (6) 38 1990 2,061,710 33,852 482,659 2,578,221 12.89%
All Directors and executive 3,046,104 347,275 740,578 4,133,957 20.41%
officers as a group (12 persons)
- ----------------------------------
Templeton, Galbraith & --- --- 2,519,164 --- 159,191 2,678,355 13.61%
Hansberger, Ltd.
P.O. Box N-7776
Nassau, Bahamas
Franklin Resources, Inc --- --- 1,136,140 --- 158,382 1,294,522 6.29%
777 Mariners Island Blvd.
San Mateo, California 94404 (7)
</TABLE>
* Less than 1%.
(1) The price of $8.65 per share (the current conversion price) is used to
determine the shares of Common Stock into which the Company's 8.25%
convertible subordinated debentures due 2012 (the "Debentures") are
convertible.
(2) The denominator used to calculate the percent of shares outstanding
includes shares issuable upon conversion of any Debentures held by the
applicable stockholder or group, plus 19,513,797 shares currently
outstanding.
(3) Includes 11,024 shares and 47,398 shares issuable upon the conversion
of $410,000 aggregate principal amount of Debentures held by Mr.
Abeles' wife for which he disclaims beneficial ownership.
(4) Includes 136,500 shares of Common Stock held by Mr. Myers' wife and
children for which he disclaims beneficial ownership.
(5) Includes 2,890 shares of Common Stock issuable upon the conversion of
$25,000 aggregate principal amount of Debentures held indirectly by
Mr. Shikiar for which he disclaims beneficial ownership. Also
includes 177,364 shares of Common Stock and 20,231 shares issuable
upon the conversion of $175,000 aggregate principal amount of
Debentures over which Mr. Shikiar exercises voting and investment
power.
(6) Includes 1,312,380 shares of Common Stock and 482,659 shares issuable
upon the conversion of $4,175,000 aggregate principal amount of
Debentures held by Grace Brothers, Ltd. Mr. Whitmore is a general
partner of Grace Brothers, Ltd. Mr. Whitmore exercises shared voting
and investment power with respect to such shares and disclaims
beneficial ownership of such shares except to the extent of his
proportionate interest therein. Grace Brothers, Ltd. is located at
100 W. Diversey Parkway, Suite 233, Chicago, Illinois 60614.
(7) Represents holdings as of December 31, 1994 as reported on the most
recent Form 13G filed with the Securities and Exchange Commission
retroactively adjusted to reflect a 5% Common Stock dividend paid by
the Company on March 30, 1995.
3
<PAGE> 7
The principal occupations and business experience of the nominees for
Director for the preceding five years along with any directorships of other
publicly-owned or registered investment companies are as follows:
JOSEPH C. ABELES, a private investor, has been a Director of the
Company since 1987. Mr. Abeles has been a Director of Intermagnetics General
Corporation since 1986. He has also served as a Director of Igene
Biotechnology, Inc. and Ultralife Batteries, Inc. since 1991.
GEORGE F. DONOVAN joined the Company as a Director in 1991 and was
appointed President and Chief Operating Officer in October, 1993. He became
Chief Executive Officer in December, 1993. Mr. Donovan has served as an
officer of a number of other recreational real estate corporations, including
Leisure Management International, of which he was President from 1991 to 1993.
From 1989 to 1991, Mr. Donovan served as President and Chief Executive Officer
of Thousand Trails and from 1988 to 1989, he formed and operated the Donovan
Companies.
RALPH A. FOOTE has been a Director of the Company since 1987. Since
1955 he has been a senior partner of Conley & Foote, a Middlebury, Vermont law
firm which serves as legal counsel to the Company with respect to various
matters.
FREDERICK M. MYERS has been a Director of the Company since 1990.
Since 1964 he has been a senior partner of Cain, Hibbard, Myers & Cook, a
Pittsfield, Massachusetts law firm which serves as legal counsel to the Company
with respect to various matters. He has also served as a Director of Systemed,
Inc. since 1989.
STUART A. SHIKIAR was elected to the Board of Directors in April,
1994. Mr. Shikiar is an investment advisor and has served as President of
Shikiar Asset Management, Inc. since November, 1994. From 1993 to November,
1994, Mr. Shikiar was a general partner of Omega Advisors, a private
investment partnership. From 1985 to 1993, Mr. Shikiar served as a Managing
Director for Prudential Securities Investment Management, Inc. He has also
served as a Director of Ultralife Batteries, Inc. since 1991.
BRADFORD T. WHITMORE has been a Director of the Company since 1990.
Mr. Whitmore has been a general partner of Grace Brothers, Ltd., an investment
partnership and securities broker-dealer, since 1986. He has been a trustee of
Aerospace Creditors Liquidating Trust since 1993 and a Director of
Biotechnology General Corporation since 1994.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held seven meetings during the
fiscal year ended April 2, 1995. Each Director attended all of the meetings of
the Board of Directors and of all committees of the Board of Directors on which
he served during fiscal 1995.
4
<PAGE> 8
Directors of the Company WHO ARE EMPLOYEES of the Company DO NOT
RECEIVE fees or retainers for serving as Directors. For fiscal 1995, EACH
NON-MANAGEMENT DIRECTOR received an annual retainer of $17,500 and an $800 fee
for each Board meeting attended. In addition, the Company's non-management
Directors are entitled to receive stock options under the Company's Outside
Directors Stock Option Plan which was approved by shareholders at the 1988
Special Meeting in Lieu of the Annual Meeting, amended in 1991 and is proposed
to be further amended. See "Proposal 3 - Approval of Amendment to the
Company's 1988 Outside Directors Stock Option Plan".
AUDIT COMMITTEE
The Audit Committee, which met twice during fiscal 1995, consists of
Messrs. Foote, Myers, and Whitmore. The Committee's responsibilities include:
(a) recommending to the full board the selection of the Company's independent
auditors, (b) discussing the arrangements for the proposed scope and the
results of the annual audit with management and the independent auditors, (c)
reviewing the scope of non-audit professional services provided by the
independent auditors, (d) obtaining from both management and the independent
auditors their observations on the Company's system of internal accounting
controls and (e) reviewing the overall activities and recommendations of the
Company's internal auditors.
NOMINATING COMMITTEE
The Nominating Committee, which met twice during fiscal 1995, consists
of Messrs. Abeles, Donovan and Shikiar. The Committee is responsible for the
selection of potential candidates for membership on the Board of Directors and
the periodic review of compensation of Directors. The committee will consider
nominees recommended by shareholders. Recommendations should be submitted in
writing to: Nominating Committee, Patten Corporation, 5295 Town Center Road,
Suite 400, Boca Raton, Florida 33486.
COMPENSATION COMMITTEE
The Compensation Committee met two times during fiscal 1995. The
committee: (a) monitors compensation arrangements for management employees for
consistency with corporate objectives and shareholders' interests, (b) approves
incentive distributions and grants of stock options to employees and
independent contractors of the Company and its subsidiaries and (c) advises
management on matters pertaining to management development and corporate
organizational planning.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1995, Joseph C. Abeles, Ralph A. Foote, Stuart A.
Shikiar and Bradford T. Whitmore served as members of the Compensation
Committee of the Board of Directors.
- -- Mr. Foote is a partner of the Middlebury, Vermont law firm of Conley &
Foote, which rendered services to the Company during fiscal 1995. The
total amount paid to Conley & Foote for services rendered during
fiscal 1995 was approximately $12,000. It is anticipated that Conley &
Foote will continue to perform certain legal services for the Company
during fiscal 1996.
5
<PAGE> 9
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee of the Board of Directors hereby presents
its report on executive compensation for fiscal 1995. The Committee is
composed of four outside (non-management) Directors of the Company and is
responsible for reviewing and making recommendations to the Board generally
with respect to the compensation of the Company's executive officers. The
Board of Directors reviews these recommendations and approves all executive
compensation action.
COMPENSATION PRINCIPALS
The Company's executive compensation program is designed to align
compensation with business strategy, Company values and management initiatives.
The program:
- -- Integrates compensation programs with the Company's annual and
long-term strategic planning and measurement processes.
- -- Reinforces strategic performance objectives through the use of
incentive compensation programs.
- -- Rewards executives for long-term strategic management and the
enhancement of shareholder value by delivering appropriate
ownership interest in the Company.
- -- Seeks to attract and retain quality talent which is critical to both
the short-term and long-term success of the Company.
Base Compensation
The Committee has evaluated and determined appropriate ranges of pay
for all categories of management to facilitate a Company-wide systematic salary
structure with appropriate internal alignment. In determining appropriate pay
ranges, the Committee annually examines market compensation levels for
executives who are currently employed in similar positions in public companies
with comparable revenues, net income and market capitalization. This market
information is used as a frame of reference for annual salary adjustments and
starting salaries. However, base salaries have become a relatively smaller
element in the total compensation of executive officers as the Company
introduced a pay-for-performance program over the last four years.
The aggregate base salaries for the named executive officers in the
"Summary Compensation Table" herein decreased by 7% from fiscal 1994 to 1995.
Excluding Harry S. Patten (whose employment was terminated in November, 1994),
the aggregate base salaries for the other four named executive officers
increased by 11%.
6
<PAGE> 10
Annual Bonus Plan
The objectives of the annual bonus plan are to motivate and reward the
accomplishment of corporate annual objectives, reinforce strong performance
with differentiation in individual awards based on contributions to business
results and provide a fully competitive compensation package which will
attract, reward and retain individuals of the highest quality. As a
pay-for-performance plan, year-end cash bonus awards are paid only upon the
achievement of performance objectives established for the fiscal year and no
bonuses are paid if a minimum threshold is not met. Participants may be
measured on two performance components: (1) corporate financial performance
(specific measurements are defined each year and threshold, target and maximum
performance levels are established to reflect the Company's objectives) and (2)
key individual performance which contributes to critical end results for the
management position. A weighting is established for each component based on
the relative importance of each to the individual.
Appropriate performance objectives are established for each fiscal year in
support of the Company's annual strategic plan. For fiscal 1995, the corporate
performance objective consisted of a target for pretax earnings. The aggregate
pay-for-perfomance bonuses for the named executive officers in the "Summary
Compensation Table" herein decreased by 35% from fiscal 1994 to 1995 while
PRETAX EARNINGS INCREASED by 31% for the same period. Excluding Harry S.
Patten, the aggregate pay-for-performance bonuses for the other four named
executive officers increased by 26%.
Incentive Stock Options
Stock options align the interests of employees and shareholders by providing
value to the employee when the stock price increases. All options are granted
at 100% of the fair market value of the Common Stock on the date of grant
except incentive options issued to employees who own more than 10% of the
Company's Common Stock, in which case the option price may not be less than
110% of the market value of the Common Stock on the date of grant. Incentive
stock options were granted to four executive officers during fiscal 1995. See
"Stock Option Grants During Last Fiscal Year". The Company's current employee
stock option plan expires by its term during fiscal 1996 and a new plan,
adopted by the Board of Directors, is being presented to the shareholders for
their approval. See "Proposal 4 - 1995 Stock Incentive Plan".
TOTAL COMPENSATION for the five highest paid executive officers named in
the "Summary Compensation Table" decreased by 3% for fiscal 1995 compared with
fiscal 1994. Excluding Harry S. Patten (and annualizing George F. Donovan's
base salary for 1994), total compensation for the other four named executive
officers increased by 14%. NET INCOME increased by 25% for the comparable
period. Section 162(m) of the Interval Revenue Code of 1986, as amended (the
"Code"), limits an employer's income tax deduction for compensation paid to
certain key executives of a public company to $1,000,000 per executive per
year. The Company has no executives whose salaries currently approach this
level and, accordingly, has not addressed what approach it will take with
respect to section 162(m), except to the extent the 1995 Stock Incentive Plan
contains standard limits and provisions on awards which are extended to enable
such awards to be exempt from the section 162(m) deduction limits.
7
<PAGE> 11
EMPLOYEE AGREEMENTS
The Company has an employment agreement with Mr. Donovan. Under the terms
of Mr. Donovan's agreement, he shall receive a minimum salary of $250,000 per
annum, subject to increases from time to time in the sole judgment and
discretion of the Board of Directors and committees thereof. In addition, Mr.
Donovan shall be eligible to receive annual performance awards as determined by
the Compensation Committee and subject to approval by the Board of Directors.
The term of Mr. Donovan's employment agreement is December 20, 1993 through the
date of the first meeting of the Board of Directors following the fiscal 1996
Annual Meeting of Shareholders. According to the Company's Amended and
Restated By-Laws, the 1996 Annual Meeting of Shareholders will be held within
six months of the end of the fiscal year. As indicated below, the Company's
employment agreement with Harry S. Patten was terminated during fiscal 1995 in
connection with his resignation from the Company.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
As indicated above, the Company's executive compensation program is based
upon business performance and any increases in an executive's yearly
compensation are substantially dependent upon the Company's performance in that
year.
George F. Donovan was elected President and Chief Operating Officer in
October, 1993 and assumed the position of Chief Executive Officer in December,
1993. Mr Donovan's base salary together with annual bonus increased by 15%
over fiscal 1994. The increase reflects an adjustment for (a) assuming
increased responsibilities as a result of the resignation by Harry S. Patten
and (b) leading the Company to improved financial performance for the most
recent fiscal year.
Mr. Donovan was also awarded options to purchase 60,000 shares of the
Company's Common Stock during fiscal 1995 compared to the award of options to
purchase 200,000 shares in fiscal 1994. (These awards have been adjusted in
the "Summary Compensation Table" to reflect the change in capitalization as a
result of Common Stock dividends paid in each year.)
In determining Mr. Donovan's compensation, the Committee concluded that his
experience in, and knowledge of, the recreational land, residential real estate
and timesharing industries support his compensation arrangement. The
Committee's knowledge of Mr. Donovan's successful background, including his
service as the chief executive officer of another public real estate company,
together with its observations of Mr. Donovan's performance during his tenure
with the Company, served equally to assure the Committee of his ability to lead
the Company as its chief executive. The Committee and the Board believe that
realization of success in attaining the five-year plan objectives of the
Company are best assured by retaining Mr. Donovan.
Compensation Committee
Joseph C. Abeles
Ralph A. Foote
Stuart A. Shikiar
Bradford T. Whitmore
8
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services rendered in all capacities to the Company
and its subsidiaries by the Company's Chief Executive Officer and the other
four most highly compensated executive officers (the "Named Executive
Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensati Awards
Name and Securities All Other
Principal Fiscal Underlying Compensation
Position Year Salary Bonus ($) (1) Options (#) (2) ($) (3)
--------- ------ ------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
George F. Donovan, 1995 275,000 100,000 63,000 501
President, Chief Executive 1994 116,346 75,000 218,400 ---
Director 1993 --- --- --- ---
Harry S. Patten, 1995 200,000 --- --- 1,213
Chairman of the Board of Directors(4) 1994 325,000 150,000 216,320 3,116
1993 286,923 125,000 --- 2,208
Alan L. Murray, 1995 160,000 35,000 31,500 2,204
Treasurer and Chief Financial Officer 1994 150,000 32,500 28,392/13,069 2,432
1993 150,000 22,000 28,392 1,419
Patrick E. Rondeau, 1995 145,000 33,000 31,500 ---
Director of Corporate Legal 1994 134,615 27,500 22,714 ---
Vice President and Secretary/Clerk 1993 130,000 25,000 28,392 ---
Daniel C. Koscher, 1995 125,000 33,000 31,500 1,430
Chief Accounting Officer, Vice 1994 100,000 25,000 22,714 1,492
President and Assistant Secretary 1993 100,000 13,000 --- 1,016
</TABLE>
- ------------------------------------------
(1) Bonus amounts earned for each fiscal year are paid during the subsequent
fiscal year.
(2) Represents incentive stock options granted under the Company's Second
Amended and Restated 1985 Stock Option Plan to purchase the stated number
of shares of Common Stock at the exercise prices shown in the following
table. Incentive stock options have been adjusted to reflect Common Stock
dividends.
(3) Represents the employer matching contributions to the Company's Section
401(k) Retirement Savings Plan.
(4) Harry S. Patten terminated his employment with the Company in all
capacities in November, 1994. All incentive stock options previously
granted were forfeited in connection with his termination. See "Certain
Transactions and Other Information".
9
<PAGE> 13
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the Named Executive Officers during fiscal 1995, adjusted to reflect
the 5% Common Stock dividend paid on March 30, 1995.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants (1) for Option Term (2)
--------------------- ---------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted (#) in Fiscal Year ($ Per Share) Date 5% ($) 10% ($)
---- ----------- -------------- ------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
George F. Donovan 63,000 24% 3.21 7/27/04 127,181 322,303
Alan L. Murray 31,500 12% 3.21 7/27/04 63,591 161,151
Patrick E. Rondeau 31,500 12% 3.21 7/27/04 63,591 161,151
Daniel C. Koscher 31,500 12% 3.21 7/27/04 63,591 161,151
Harry S. Patten --- --- --- --- --- ---
</TABLE>
- -------------------------
(1) As required by the rules promulgated by the Securities and Exchange
Commission, potential realizable values are based on the prescribed
assumption that the Company's Common Stock will appreciate in value from
the date of grant to the end of the option term at rates (compounded
annually) of 5% and 10%, respectively, and therefore are not intended to
forecast possible future appreciation, if any, in the price of the
Company's Common Stock.
(2) These options become exercisable in five equal annual installments
commencing on July 27, 1995.
FISCAL YEAR END OPTION VALUES
During fiscal 1995, none of the Named Executive Officers exercised stock
options issued by the Company. The following table sets forth information
regarding the number and unrealizable value of unexercised options held by the
Named Executive Officers at April 2, 1995.
10
<PAGE> 14
<TABLE>
<CAPTION>
Shares Underlying
Number of Unexercised Value of Unexercised
Options at Fiscal Year In-the-Money Options
(#) and Exercisable (E) vs at Fiscal Year End ($) and
Name Unexercisable (U) Exercisable (E) vs Unexercisable (U)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George F. Donovan 43,680 E --- E
237,720 U 10,395 U
Alan L. Murray 39,298 E 69,927 E
62,055 U 54,582 U
Patrick E. Rondeau 22,801 E 44,086 E
54,345 U 50,374 U
Daniel C. Koscher 39,181 E 61,130 E
51,943 U 45,413 U
</TABLE>
COMPENSATION OF DIVISION PRESIDENTS AND REGIONAL MANAGERS
Compensation for the Company's five Division Presidents typically includes
a base salary of approximately $100,000 accompanied by performance bonuses.
Compensation for the Company's ten Regional Managers typically includes a base
salary of approximately $50,000 accompanied by several performance bonuses.
Bonuses are established to reward exceptional performance by a subsidiary and
the payment of a bonus is subject to exceeding predetermined, acceptable
performance objectives. Management defined these objectives to address
operating benchmarks deemed critical to the success of the subsidiary. They
include, but are not limited to, the attainment of projected retail sales,
containment of overhead costs, achievement of maximum operating profits,
optimizing transactional cash flow and, on a project by project basis,
surpassing gross margin projections.
PERFORMANCE GRAPH
The following graph assumes an investment of $100 on April 1, 1990 and
thereafter compares the yearly percentage change in cumulative total return to
shareholders of the Company with an industry index (the Dow Jones Real Estate
Investment Index) and a broad market index (the Dow Jones Equity Market Index).
The graph shows performance on a total return (dividend reinvestment) basis.
11
<PAGE> 15
[GRAPH]
THE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION AND THE
PERFORMANCE GRAPH ABOVE SHALL NOT BE DEEMED "SOLICITING MATERIAL" OR
INCORPORATED BY REFERENCE INTO ANY OF THE COMPANY'S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION BY IMPLICATION OR BY ANY REFERENCE IN ANY SUCH FILING
TO THIS PROXY STATEMENT.
CERTAIN TRANSACTIONS AND OTHER INFORMATION
On November 22, 1994, the Company and Harry S. Patten, then a Director and
Chairman of the Board of Directors, entered in a Separation Agreement (the
"Separation Agreement"). The Separation Agreement provided for, among other
things, (a) Mr. Patten's voluntary resignation in all capacities from the
Company, (b) the termination of Mr. Patten's employment agreement with the
Company dated December 20, 1993, (c) the cancellation of all outstanding stock
options held by Mr. Patten, (d) Mr. Patten's agreement to cooperate with the
Company with respect to the defense of any pending or threatened litigation and
the Company's agreement to pay Mr. Patten a per diem fee in an amount not to
exceed $1,000 and reimburse Mr. Patten for his reasonable out of pocket
expenses incurred in connection therewith and (d) certain releases and
indemnifications by the Company and by Mr. Patten. Simultaneously with the
execution of the Separation Agreement, Mr. Patten entered into a Stock Purchase
Agreement with a limited number of purchasers pursuant to which Mr. Patten
sold an aggregate of 1,481,366 shares of Common Stock owned by him to the
Purchasers at a price per share of $2.875. The purchasers consisted of members
of the Company's management or Board of Directors or their affiliates (who
purchased an aggregate of 1,081,366 shares) and three private investors (who
purchased an aggregate of 400,000 shares).
12
<PAGE> 16
Patten Corporation
Data Points for Performance Graph
<TABLE>
<CAPTION>
Dow Jones Dow Jones
Real Estate Equity
Patten Investment Market
Corporation Index Index
<S> <C> <C> <C>
4/2/90 100 100 100
5/1/90 85.714286 98.163025 98.236572
6/1/90 92.857143 98.588726 107.69364
7/2/90 85.714288 94.595087 106.78442
8/1/90 53.6 90.111146 105.49877
9/4/90 57.142867 76.877971 96.261763
10/1/90 53.6 69.29486 93.867091
11/1/90 35.714286 64.906992 91.512958
12/3/90 39.314286 67.944874 97.530042
1/2/91 25.028571 68.610757 98.497177
2/1/91 28.571429 76.919382 104.14941
3/1/91 42.857143 81.747859 113.03605
4/1/91 46.457143 85.413526 113.825
5/1/91 50 85.618923 116.78587
6/3/91 71.428571 87.134551 119.64094
7/1/91 64.285714 81.817429 116.58607
8/1/91 114.28571 82.03939 119.76835
9/3/91 92.857143 81.424856 122.12828
10/1/91 92.857143 77.205943 121.6478
11/1/91 85.714286 75.049279 122.7074
12/2/91 64.285714 70.566994 120.19111
1/2/92 64.285714 76.553312 131.82279
2/3/92 92.857143 79.51003 130.1636
3/2/92 85.714286 80.505541 131.72723
4/1/92 92.867143 77.297047 129.12697
5/1/92 100 76.11436 131.65195
6/1/92 92.857143 72.524888 133.74837
7/1/92 85.714286 70.797237 132.49168
8/3/92 107.14286 64.090375 136.73375
9/1/92 107.14286 61.489788 134.31012
10/1/92 142.85714 64.068841 134.9819
11/2/92 171.42857 66.003545 137.63428
12/1/92 164.28571 63.873383 141.11771
1/4/93 178.57143 69.369399 142.99117
2/1/93 228.57143 73.112918 145.64065
3/1/93 171.42857 75.587617 145.98523
4/1/93 214.28571 76.843186 149.12408
5/3/93 200 72.948932 146.57883
6/1/93 192.85714 72.162131 150.84697
7/1/93 200 70.656441 149.79875
8/2/93 215.2 73.477332 150.34023
9/1/93 192.85714 74.391678 155.14695
10/1/93 245.54286 78.948502 155.15564
11/1/93 267.88571 78.868993 157.21152
12/1/93 230.34286 79.844627 155.33806
1/3/94 192.85714 81.345348 156.88722
2/1/94 192.85714 86.135727 161.9169
3/1/94 223.2 86.303026 157.41711
4/4/94 208.05714 80.679465 149.16751
5/2/94 224.11429 81.110136 154.17982
6/1/94 200.91429 83.349622 156.1054
7/1/94 185.71429 83.5633 152.39612
8/1/94 232.17143 84.762552 157.57927
9/1/94 224.11429 83.960842 162.18619
10/3/94 200.91429 80.629773 158.59273
11/1/94 192.85714 78.66194 160.93818
12/1/94 216.05714 75.860927 154.81685
1/3/95 200.91429 79.085985 158.50297
2/1/95 208.91429 78.859055 162.75373
3/1/95 208.91429 83.404284 168.85479
3/31/95 218.74286 84.000596 173.98871
</TABLE>
<PAGE> 17
Ralph A. Foote, a Director of the Company, is a senior partner of the
Middlebury, Vermont law firm of Conley & Foote which rendered services to the
Company during fiscal 1995. The total amount paid to Conley & Foote by the
Company for services rendered during fiscal 1995 was approximately $12,000. It
is anticipated that Conley & Foote will continue to perform certain legal
services for the Company during fiscal 1996. See "Compensation Committee
Interlocks and Insider Participation".
Frederick M. Myers, a Director of the Company, is a senior partner of the
Pittsfield, Massachusetts law firm of Cain, Hibbard, Myers & Cook, which
rendered services to the Company during fiscal 1995. The total amount paid to
Cain, Hibbard, Myers & Cook by the Company for services rendered during fiscal
1995 was approximately $51,000. It is anticipated that Cain, Hibbard, Myers &
Cook will continue to perform certain legal services for the Company during
fiscal 1996.
In connection with Mr. George F. Donovan's appointment as the Company's
chief executive, the Board of Director's authorized payment for certain
relocation expenses whereby Mr. Donovan was advanced an aggregate of $298,000
of which $191,209 was outstanding as of May 1, 1995. The $191,209 covers: (1)
a $130,000 loan accruing interest at the prime lending rate as published in The
Wall Street Journal, (2) a $33,209 equity advance against his home in
Atlanta, Georgia and (3) $28,000 paid to his current residential community for
an equity membership purchase. The equity membership is fully refundable by the
residential community in the event Mr. Donovan's home is sold.
In May 1988, the Company's Board of Directors approved a policy regarding
the purchase of property from the Company by employees or executive officers,
which policy was amended in March, 1993. Under this policy, one parcel per
year may be purchased from the Company for 15% below the retail price of such
parcel. An employee taking advantage of a discount may not receive a
commission on the sale and the sale does not qualify for a bonus. In addition,
employees or executive officers may receive financing on one lot at a time for
up to 90% of the purchase price at the prevailing rate provided that the
employee qualifies for such financing under the Company's credit policy with no
exceptions. Under the policy, borrowings by any employee will be limited to
$100,000. Any purchaser under the policy must agree to hold the parcel for at
least two years before selling, provided that a sale may be made at any time
after termination of employment. Notwithstanding the foregoing, all purchases
by executive officers under the policy are required to be approved by the Board
of Directors. No purchases under the policy were made by any executive officer
during fiscal 1995.
Any existing loans to the Company's officers and employees other than in
the ordinary course of business have been approved, and any such future loans
will be approved, by a majority of disinterested, non-management Directors. It
is also the Company's policy that any transaction with an employee, officer,
Director or principal shareholder, or affiliate of any of them, involving in
excess of $1,000 (other than in the ordinary course of the Company's business)
shall be approved by a majority vote of disinterested Directors, and any such
transaction will be on terms no less favorable to the Company than those which
could reasonably be obtained from an independent third party.
13
<PAGE> 18
PROPOSAL 3 - APPROVAL OF AMENDMENT TO THE COMPANY'S 1988 OUTSIDE DIRECTORS
STOCK OPTION PLAN
On March 1, 1995, the Board of Directors unanimously voted to amend the
Outside Directors Stock Option Plan (the "Directors Plan") to increase the
total number of shares issuable under the Plan from 340,704 to 540,704 (subject
to further adjustment for stock dividends, stock spits and other changes in
capitalization). The Directors Plan, which was originally adopted by the
Company's shareholders at the 1988 Annual Meeting, provides for the grant of
nonqualified stock options to purchase shares of Common Stock to non-employee
Directors (each an "Outside Director"). For information with respect to the
number of options granted to incumbent Directors, see the table under "Proposal
1 - Fixing the Number of Directors at Six and Election of Named Directors".
The Company's Board of Directors recommends that shareholders vote FOR the
proposal to adopt and approve the amendment to the Directors Plan. As of the
date of this Proxy Statement, there were options to purchase 337,335 shares of
Common Stock outstanding under the Directors Plan (at a weighted average
exercise price of $2.75 per share). The purpose of the Directors Plan is to
make service on the Board of Directors more attractive to present and future
Outside Directors, since the Company believes that the service of qualified
Outside Directors is essential to the continued growth and progress of the
Company. In view of the qualifications and contributions to the Company from
the Outside Directors, the Board believes that the increase in the number of
available shares is appropriate and desirable.
At the 1991 Special Meeting in Lieu of the Annual Meeting, the shareholders
adopted an amendment to the Directors Plan to increase the total number of
shares of Common Stock offered under the Director's Plan from 150,000 shares to
300,000 shares, to increase the number of shares granted under each option from
5,000 to 15,000 and to provide that such options will vest (become exercisable)
in three annual installments of 5,000 shares each.
Under the Directors Plan, each year each Outside Director will
automatically be granted a stock option covering 15,000 shares of the Common
Stock on the first business day after the first trading day after the annual
meeting of the Company's shareholders or any special meeting held in lieu
thereof. In the event that the total number of shares available for grant
under the Directors Plan shall not be sufficient to grant each Outside Director
15,000 shares of Common Stock on a particular grant date, the shares available
for grant shall be allocated proportionately among the Outside Directors then
in office.
The option price per share of each option granted under the Directors Plan
is equal to the closing sale price of the Common Stock as reported on the
principal stock exchange on which the shares are traded on the last trading day
preceding the date on which the stock option is granted.
The Directors Plan provides that it is to be administered by the Board of
Directors (of which a majority of the Directors acting will be Outside
Directors), provided that the Board may, at its discretion, delegate any and
all of its powers under the Directors Plan. The Board has delegated the
administration of the Directors Plan to the Board's Compensation Committee,
which consists of four Outside Directors.
14
<PAGE> 19
The maximum number of shares available under the Directors Plan and the
number of shares subject to the outstanding options are subject to adjustment
upon changes in capitalization or other changes in the corporate structure of
the Company. Accordingly, the number of shares covered under the Directors
Plan has increased to 340,704 as a result of the Common Stock dividends paid in
1993, 1994 and 1995. In the event that any unexercised option granted under
the Directors Plan expires or terminates for any reason, the shares covered
thereby will again be available for the granting of options.
Options granted under the Directors Plan presently vest (become
exercisable) in three equal annual installments. However, if there is a change
in the control of the Company prior to the vesting date, all options will be
immediately exercisable. A "change of control" is deemed to take place if (i)
any person or group becomes the beneficial owner of 25% or more of the total
votes that may be cast in any election of Directors, (ii) there is a change in
Board composition such that at any time a majority of the Board have been
members for less than 24 months, (iii) the Company merges or consolidates
without the transaction having been approved by three-fourths of the Board or
in circumstances where at least two-thirds of the board of the surviving entity
were not Directors of the Company or (iv) the Company sells a majority of its
assets. If an option holder ceases to serve as a Director of the Company prior
to the vesting date for any reason other than death, disability or a change of
control of the Company, all of the option holder's rights in the option will
terminate. Unless earlier terminated, options granted under the Directors Plan
will terminate five years after the option holder ceases to be a Director of
the Company or, if earlier, ten years after the date of grant.
During the optionee's lifetime an option will be exercisable only by the
optionee and will not be transferable except by will or by the laws of descent
and distribution. After the option holder's death, his or her executor,
administrator, heirs or legatees may exercise the option.
The Directors Plan authorizes the Board of Directors to discontinue,
suspend or amend the Directors Plan, except that no action of the Board may,
without the shareholders' approval, increase the maximum number of shares to be
offered for sale under options, reduce the purchase price at which shares may
be offered pursuant to options (except in connection with corporate
recapitalizations), modify the eligibility requirements of the Directors Plan
or extend the expiration date of the Directors Plan; nor may any action of the
Board of Directors or the shareholders alter or impair an optionee's rights
under an option previously granted, without the optionee's consent. The
Directors Plan provides that the provisions thereof with respect to the nature,
amount, terms and timing of awards may not be amended more than once every six
months, other than to comply with changes in the Code, ERISA, or the rules
thereunder. The Directors Plan will terminate on April 22, 1998.
In considering this proposal, shareholders should recognize the fact that,
if the amendment to the Directors Plan is approved, the Outside Directors will
be entitled to additional benefits (in the form of additional shares of stock
available under the Directors Plan) not currently available to them.
Consequently, the interest of the Board in recommending the amendment to the
Directors Plan may diverge from the interests of the shareholders. The federal
income tax consequences to the Company and participants in the Plan are the
same as the consequences of the grant of nonqualified stock options under the
1995 Incentive Plan discussed below.
15
<PAGE> 20
PROPOSAL 4 - APPROVAL OF 1995 STOCK INCENTIVE PLAN
The Company's 1995 Stock Incentive Plan (the "1995 Incentive Plan") was
adopted by the Board of Directors on May 31, 1995. The 1995 Incentive Plan
provides for the grant of stock options (both nonqualified and incentive),
restricted stock, unrestricted stock, performance shares, loans and cash and
other awards to employees (including executive officers) and other individuals
(including consultants and independent contractors) performing services for the
Company and its subsidiaries and other entities in which the Company or any of
its subsidiaries has a substantial equity interest (as of April 2, 1995 less
than 10 persons). Any award many be granted alone or in conjunction with other
awards under the Plan.
The Company's Second Amended and Restated 1985 Stock Option Plan covering,
among other eligible participants, the Company's executive officers and
employees, will expire by its terms on September 30, 1995 and no further option
grants may be made under such plan after that date. The Board of Directors
believes that approval of the 1995 Incentive Plan is in the best interest of
the Company because it will provide the Company with sufficient equity and
equity-based incentives to compensate adequately the executive officers,
employees and independent contractors of the Company and its subsidiaries and
thereby aid the Company in attracting, retaining and motivating qualified
personnel and the Board recommends a vote FOR the proposal to approve the 1995
Incentive Plan.
Administration. The Board has delegated the administration of the 1995
Incentive Plan to the Compensation Committee of the Board of Directors (the
"Committee"), which has complete discretion to select, from among eligible
participants, the individuals to receive grants under the 1995 Incentive Plan
and to establish the terms of the grants. The Committee is comprised solely of
Directors qualified to administer the 1995 Incentive Plan pursuant to Rule
16b-3(c)(2) of the Exchange Act.
Shares Subject to the 1995 Incentive Plan. The aggregate number of shares
of the Company's Common Stock ("Shares") reserved for issuance under the 1995
Incentive Plan is 1,000,000. If any corporate transaction occurs that causes a
change in the capitalization of the Company, the Committee is authorized to
make such adjustments to the number and class of Shares delivered and the
number and class and/or price of Shares subject to outstanding awards granted
under the 1995 Incentive Plan, as it deems appropriate and equitable to prevent
dilution or enlargement of participant's rights. If any option or award
terminates or expires for any reason or the Company reacquires any shares
issued under the 1995 Incentive Plan, the applicable shares will again be
available for issuance.
Amendment and Termination. In no event may any option or other award under
the 1995 Incentive Plan be granted on or after May 31, 2005. The Board may
amend, modify or terminate the 1995 Incentive Plan at any time, provided that
no amendment shall be effective unless and until it is approved by the
stockholders of the Company where failure to obtain such approval would
adversely affect the compliance of the plan with Rule 16b-3 under the Exchange
Act or the amendment would increase the total number of shares reserved for
issuance under the plan, decrease the options price of any nonqualified stock
option to less than 50% of fair market value on the date of grant of the
option, change the class of persons who may be eligible to participate in the
plan, or extend the termination date of the plan beyond ten years, and no
amendment, termination or modification shall adversely affect in a material
manner any right of a participant with respect to any outstanding award without
the consent of the participant.
16
<PAGE> 21
Stock Options. The Committee may grant incentive stock options intended to
meet the requirements of Section 422 of the Code ("ISOs"), nonqualified stock
options or a combination thereof under the 1995 Incentive Plan. ISOs may only
be granted to employees of the Company or its subsidiaries. The exercise price
for nonqualified stock options issued under the 1995 Incentive Plan must be at
least 50% of the fair market value of the underlying stock at the time of grant
and the exercise price for ISOs under the 1995 Incentive Plan cannot be less
than 100% of the fair market value of the underlying stock at the time of
grant, provided that the exercise price of any option granted to any employee
who owns 10% or more of the capital stock of the Company or any subsidiary
cannot be less than 110% of such fair market value. On June 1, 1995, the
closing sale price of the Common Stock on the New York Stock Exchange was $3.38
per share. Options granted under the 1995 Incentive Plan will expire ten years
after the grant date. The Committee will establish other terms for options
including the schedule for vesting or exercisability of options, terms for
payment of the option price and periods for exercise following the
optionholder's termination of employment. Each option granted shall be
evidenced by an instrument in such form as the Committee shall approve. No
incentive stock option may be granted under the 1995 Incentive Plan that is
first exercisable in any year if and to the extent that the aggregate fair
market value, at the time of grant, of all incentive stock options granted to
the employees which are first exercisable in such year exceeds 100,000.
Options are not transferable by the participant, except by will or by the laws
of descent and distribution. During a participant's lifetime, options are
exercisable only by the participant.
Restricted and Unrestricted Stock. Grants of restricted stock involve the
issuance of Shares to the recipient subject to transfer restrictions and the
Company's right to repurchase the Shares at a price determined by the Committee
if certain conditions (such as continuation of employment) are not satisfied by
the recipient. As the conditions are satisfied, the repurchase restrictions
"lapse" and the recipient is then free to hold or sell the Shares free of the
restrictions. Grants of unrestricted stock involve the issuance of Shares,
free of any transfer or repurchase restrictions. The Committee shall have
discretion to determine the number of shares to be granted, whether or not they
will be restricted (and, if so, the terms of the restrictions) and the amount
and form of the consideration to be paid for the shares granted, provided that
the purchase price shall in no event be less than the par value of the Common
Stock.
Performance Shares. Grants of performance shares involve setting
performance goals and the Company's agreement to pay a specified amount
determined by the Committee (which may be paid in the form of cash, shares,
other securities of the Company or other forms of payment, or a combination
thereof, all as determined by the Committee) to the recipient if the
performance goals are fully satisfied. The performance goals may be
individual, group, divisional or Company-wide goals. Each performance share
grant shall be subject to such terms and conditions, including but not limited
to the award period, the performance objectives to be obtained and any
restriction upon the payment issued in respect of the grant, as the Committee
shall determine. The award may be converted into a specified number of Shares
at the time the goals are established, with the payoff, after satisfaction of
the goals, being made in the number of Shares or their current value at that
time. The Committee shall have the power to determine the maximum value of
each performance share (and the amount to be paid if performance objectives are
met in part or if the participant's employment is terminated prior to the end
of the award period). The Committee shall also have authority to adjust
performance measures and the value of performance shares if it subsequently
determines they are not appropriate in the circumstances. All rights with
respect to performance shares shall be available only during a participant's
(and his or her beneficiary's) rights in the event of retirement, death or
other termination of employment.
17
<PAGE> 22
Other Awards. The 1995 Incentive Plan authorizes the making of loans in
connection with the purchase of shares under an award or the payment of any
applicable tax in respect of income recognized as a result of the award. The
Committee shall have full authority to decide the terms of any such loan,
provided that no loan may have a term more than ten years. In addition, the
1995 Incentive Plan authorizes the grant of other types of awards that are
consistent with the terms of the 1995 Incentive Plan.
The Indenture pursuant to which the Company's Debentures were issued
provides for an adjustment to the price at which the Debentures may be
converted into Common Stock in certain circumstances. In particular, the
Indenture provides (subject to certain exceptions) for certain anti-dilution
adjustments to the conversion price if, among other things, (a) the Company
issues shares for less than the current market price on the date the Company
fixes the offering price of such shares or (b) the Company issues any
securities exercisable for or convertible into shares for an exercise or
conversion price less than the current market price per share of Common Stock.
Consequently, the issuance of stock or grant of options under the 1995
Incentive Plan could, depending the terms of the applicable award, result in an
adjustment to the conversion price of the Debentures.
Awards to Employees Covered by Section 162(m) of the Code. Section 162(m)
of the Code generally limits the income tax deduction for compensation paid by
an employer which is a publicly held corporation to certain key executives to
$1,000,000 per executive per year. The deduction limitation of Section 162(m)
does not apply, however, to certain performance-based compensation
arrangements, including plans providing for stock options having an exercise
price of not less than 100% of fair market value, which establish specific
performance goals and/or limits on the amount of awards, which are administered
by a committee composed exclusively of "outside" directors, and which are
disclosed to and approved by the stockholders of the public company. The 1995
Incentive Plan includes provisions and limits on awards which are intended to
enable such awards to be exempt from the deduction limitation of Section 162(m)
of the Code.
Grant Information. To date, no stock options, restricted or unrestricted
stock, performance shares or other awards have been granted under the 1995
Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES UNDER THE 1995 INCENTIVE PLAN
The following is a brief description of the federal income tax consequences
related to options awarded under the 1995 Incentive Plan.
Consequences to the Optionholder. There are no federal income tax
consequences to the optionholder solely by reason of the grant of ISOs or
nonqualified options under the 1995 Incentive Plan. The exercise of an ISO is
not a taxable event for regular federal income tax purposes if certain
requirements are satisfied, including the restriction providing that the
optionholder generally must exercise the option no later than three months
following termination of his employment. However, the exercise of an ISO may
give rise to an alternative minimum tax liability (see discussion below).
18
<PAGE> 23
Upon the exercise of a nonqualified option, the optionholder will generally
recognize ordinary income in an amount equal to the excess of fair market value
of the Shares at the time of exercise over the amount paid as the exercise
price. The ordinary income recognized in connection with the exercise by an
optionholder of a nonqualified option will be subject to both income and
employment tax withholding. The optionholder's tax basis in the Shares
acquired pursuant to the exercise of an option will be the amount paid upon
exercise plus, in the case of a nonqualified option, the amount of ordinary
income recognized by the optionholder upon exercise.
If any optionholder disposes of Shares acquired upon the exercise of an ISO
in a taxable transaction, and such disposition occurs more than two years from
the date on which the option is granted and more than one year after the date
on which the Shares are transferred to the optionholder pursuant to the
exercise of the ISO (a "qualifying disposition"), the optionholder will
recognize long-term capital gain or loss equal to the difference between the
amount realized upon such disposition and the optionholder's adjusted basis in
such Shares (generally the exercise price). In the case of Shares acquired
under the 1995 Incentive Plan for less than 100% of the fair market value at
the time the option was granted, any disposition of such Shares in a qualifying
disposition will result in the optionholder being required to include as
ordinary income (and not as gain) in his or her gross income the excess of fair
market value of such Shares at the time of disposition.
If the optionholder disposes of Shares acquired upon the exercise of an ISO
(other than in certain tax-free transactions) within two years from the date on
which the ISO is granted or within one year after the transfer of the Shares to
the optionholder pursuant to the exercise of the ISO (a "disqualifying
disposition"), then at the time of disposition the optionholder will generally
recognize ordinary income equal to the lesser of (i) the excess of such Shares'
fair market value on the date of exercise over the exercise price paid by the
optionholder or (ii) the optionholder's actual gain (i.e. the excess, if any,
of the amount realized on the disposition over the exercise price paid by the
optionholder). If the total amount realized on a taxable disposition
(including return of capital and capital gain) exceeds the fair market value on
the date of exercise, then the optionholder will recognize a capital gain in
the amount of such excess. If the optionholder incurs a loss on the
disposition (i.e., if the total amount realized is less than the exercise price
paid the optionholder), then the loss will be a capital loss.
If any optionholder disposes of Shares acquired upon exercise of a
nonqualified option in a taxable transaction, the optionholder will recognize
capital gain or loss in an amount equal to the difference between his/her basis
(as discussed above) in the Shares sold and the total amount realized upon
disposition. Any such capital gain or loss (and any capital gain or loss
recognized on a disqualifying disposition of Shares acquired upon exercise of
ISOs as discussed above) will be long-term depending on whether the Shares were
held for more than one year from the date such Shares were transferred to the
optionholder.
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Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the optionholder's regular tax for the taxable year.
Generally, AMT is computed at the rate of 26% on the excess of a taxpayer's
alternative minimum taxable income ("AMTI") over the exception amount, but only
if such excess amount does not exceed $175,000 ($87,500 in the case of married
individuals filing separate returns). The AMT tax rate is 28% of such excess
amount over the $175,000 ($87,500 ) amount. For these purposes, the exemption
amount is $45,000 for joint returns or returns of surviving spouses ($33,750
for single taxpayers and $22,500 for married individuals filing separate
returns), reduced by 25% of the excess of AMTI over $150,000 for joint returns
or returns of surviving spouses ($112,500 for single taxpayers and $75,000 for
married individuals filing separate returns). A taxpayer's AMTI is essentially
the taxpayer's taxable income adjusted pursuant to the AMT provisions and
increased by items of tax preference.
The exercise of ISOs (but not nonqualified options) will generally result
in an upward adjustment to the optionholder's AMTI in the year of exercise by
an amount equal to the excess, if any, of the fair market value of the stock on
the date of exercise over the exercise price. The basis of the stock acquired
for AMT purposes, will equal the exercise price increased by the prior upward
adjustment of the taxpayer's AMTI due to the exercise of the option. This will
result in a corresponding downward adjustment to the optionholder's AMTI in the
year the stock is disposed. The AMT paid with respect to the exercise of an
ISO is allowed as a credit against the regular tax liability of the
optionholder in a subsequent year when he disposes of the stock; therefore,
imposition of the AMT at the time of exercise of an ISO may not increase the
aggregate amount of income tax paid by the optionholder, but instead may only
affect the timing of such payments.
Consequences to the Company. There are no federal income tax consequences
to the Company by reason of the grant of ISOs or nonqualified options or the
exercise of ISOs (other than disqualifying dispositions). At the time the
optionholder recognizes ordinary income from the exercise of a nonqualified
option, the Company will be entitled to a federal income tax deduction in the
amount of the ordinary income so recognized (as described above), provided that
the Company satisfies its tax reporting obligations described below. To the
extent the optionholder recognized ordinary income by reason of a disqualifying
disposition of the stock acquired upon exercise of ISOs, the Company will be
entitled to a corresponding deduction in the year in which the disposition
occurs, provided that the Company satisfies a tax reporting obligation
described below. The Company will be required to report to the Internal
Revenue Service any ordinary income recognized by any optionholder by reason of
the exercise of a nonqualified option or the disqualifying disposition of stock
acquired upon exercise of ISOs. The Company will be required to withhold
income and employment taxes (and pay the employer's share of employment taxes)
with respect to ordinary income recognized by the optionholder upon the
exercise of nonqualified options.
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Tax Treatment of Restricted Stock. An employee who receives a restricted
stock award under the 1995 Incentive Plan generally will not recognize taxable
income at the time the award is received, but will recognize ordinary
compensation income when the transfer and forfeiture restrictions lapse in an
amount equal to the excess of the aggregate fair market value, as of the date
the restrictions lapse, over the amount, if any, paid by the employee for the
restricted stock. Alternatively, an employee receiving stock may elect, in
accordance with Section 83(b) of the Code, to be taxed on the excess of the
fair market value of the shares of restricted stock at the time of grant over
the amount if any, paid by the employee, notwithstanding the transfer and
forfeiture restrictions on the stock. All such taxable amounts are deductible
by the Company at the time and in the amount of the ordinary compensation
income recognized by the employee. The full amount of dividends or other
distributions of property made with respect to restricted stock prior to the
lapse of the transfer and forfeiture restrictions will constitute ordinary
compensation income to the employee and the Company will be entitled to a
deduction at the same time and in the same amount.
Tax Treatment of Unrestricted Stock. Upon receiving an award of
unrestricted stock under the 1995 Incentive Plan, the employee will realize
ordinary compensation income to the extent of the fair market value (determined
at the time of transfer to the employee) of such Shares, over the amount, if
any paid by the employee for the Shares. Such taxable amounts are deductible
as compensation by the Company.
Limitation on Deduction Under Section 162(m) of the Code. Section 162(m)
of the Code generally limits an employer's income tax deduction for
compensation paid to certain key executives of a public company to $1,000,000
per executive per year. The deduction limitation of Section 162(m) does not
apply, however, to certain performance-based compensation arrangements,
including plans providing for stock options having an exercise price of not
less than 100% of fair market value, which establish specific performance goals
and/or limits on awards, which are administered by a committee composed
exclusively of "outside" directors, and are disclosed to and approved by the
shareholders of the public company.
Other Tax Consequences. The foregoing discussion is not a complete
description of the federal income tax aspects of ISOs and nonqualified options
under the 1995 Incentive Plan. In addition, administrative and judicial
interpretations of the application of the federal income tax laws are subject
to change. Furthermore, the foregoing discussion does not address state or
local tax consequences.
INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP ("E&Y")
as auditors for fiscal 1996, subject to final approval by the Audit Committee
of the scope of, and E&Y's fees for, performing the audit for such fiscal year.
E&Y and its predecessor, Arthur Young & Co., have served as the Company's
auditors since 1984. The Company has been informed that E&Y has no direct or
indirect financial interest in the Company and has no other connection with the
Company other than as independent auditors. Representatives of E&Y are
expected to be present at the Special Meeting and will have the opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
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AMENDMENTS TO BY-LAWS
On May 31, 1995, the Board of Directors voted to amend the Company's
By-Laws to provide that the annual meeting of the shareholders shall be held
within six months after the end of the Company's fiscal year, at such time,
date and place as the Board of Directors determines each year, but if the
annual meeting is not held within such six month period, a special meeting in
lieu thereof will be held at a later time. Such amendment will be effective as
of the day immediately following the Special Meeting. The Company's By-Laws
currently provide that the annual meeting will be held not later than the last
Tuesday in June each year, but that if for any reason a meeting is not held on
that date, a special meeting in lieu thereof will be held at a later time.
Under Massachusetts law, when a By-Law change is approved by the Board,
notice of the By-Law change must be given no later than the time that notice of
the next stockholder meeting is given, and therefore is included here. Under
Massachusetts law, any change to the By-Laws adopted by the Directors may be
amended or repealed by the shareholders.
SECTION 16 COMPLIANCE
Rule 16(a)-3 of the Exchange Act requires that a statement of changes in
beneficial ownership of securities of an issuer held by a Director or officer
be reported on Form 4 within ten (10) days after the end of the month in which
the change occurs.
On August 8, 1994, Joseph C. Abeles, a Director of the Company, was granted
options to purchase 15,000 shares of Common Stock under the Directors Plan.
The transaction was reported to the Securities and Exchange Commission on Form
4 on December 8, 1994.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
business to come before the meeting except as set forth above. If any other
matters should properly come before the meeting, it is expected that the
enclosed proxy will be voted on such matters in accordance with the best
judgment of the proxies. Discretionary authority with respect to any such
matters is conferred by the proxy.
By the order of the Board of Directors,
/s/ PATRICK E. RONDEAU
- ----------------------------
Patrick E. Rondeau, Clerk
June 19, 1995
A COPY OF THE COMPANY'S ANNUAL REPORT AND/OR FORM 10-K FOR THE YEAR ENDED
APRIL 2, 1995, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO,
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE PROVIDED WITHOUT
CHARGE UPON WRITTEN REQUEST TO INVESTOR RELATIONS, PATTEN CORPORATION, 5295
TOWN CENTER ROAD, SUITE 400, BOCA RATON, FLORIDA 33486.
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<S> <C> <C>
APPENDIX A
PATTEN CORPORATION
5295 TOWN CENTER ROAD, SUITE 400
BOCA RATON, FLORIDA 33486
The undersigned stockholder of PATTEN CORPORATION, a Massachusetts corporation, hereby acknowledges receipt of the Notice of Special
Meeting in Lieu of Annual Meeting of Stockholders and Proxy Statement, each dated June 19, 1995, and hereby appoints Patrick E.
Rondeau proxy and attorney-in-fact with full power of substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the 1995 Special Meeting in Lieu of Annual Meeting of Stockholders of PATTEN CORPORATION to be held on Thursday, July
20, 1995 at 10:00 a.m. local time at the Sheraton New York Hotel at Seventh Avenue and 52nd Street, New York, New York, and at any
adjournment(s) thereof and to vote all shares of Common Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below. Either of such attorneys or substitutes shall have and may exercise all of the
powers of said attorneys-in-fact thereunder.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER, OR IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4 AND AS SAID PROXY DEEMS ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE SPECIAL MEETING.
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1. FIX THE NUMBER OF 2. ELECT DIRECTORS
DIRECTORS AT SIX
FOR all nominees WITHHOLD (INSTRUCTION: To withhold authority to vote for any
listed (except as AUTHORITY individual nominee strike a line through the nominee's
marked to the to vote for all name in the list below)
FOR AGAINST ABSTAIN contrary) nominees listed
Joseph C. Abeles, George F. Donovan, Ralph A. Foote,
[ ] [ ] [ ] [ ] [ ] Frederick M. Myers, Stuart A. Shikiar, Bradford T. Whitmore
3. APPROVE AN AMENDMENT TO 4. APPROVE THE 1995 STOCK 5. In their discretion, the Proxies are authorized to
THE 1988 OUTSIDE DIRECTORS INCENTIVE PLAN vote upon such other business as may properly come
STOCK OPTION PLAN before this meeting.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
Please sign exactly as your name appears on this proxy.
[ ] [ ] [ ] [ ] [ ] [ ] When shares are held by joint tenants or as community
property, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign
the full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
DATED: , 1995
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Signature
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Signature
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PLEASE VOTE, SIGN, DATE AND RETURN USING
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES" THE ENCLOSED ENVELOPE
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