SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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Filed
by the Registrant
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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MET-
PRO
CORPORATION
(Name
of registrant as specified in its charter)
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Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Amount
previously paid:
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Aggregate
number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed
maximum aggregate value of transaction:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
party:
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Date
filed:
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160
Cassell Road, Harleysville, Pennsylvania 19438
NOTICE
OF ANNUAL MEETING
OF
SHAREHOLDERS
To
Be Held On June 4, 2008
To the
Shareholders of MET-PRO CORPORATION:
Notice is
hereby given that the Annual Meeting of Shareholders of MET-PRO CORPORATION, a
Pennsylvania corporation (the “Company”), will be held at the
Best Western Inn at Towamencin,
Sumneytown Pike, Kulpsville, Pennsylvania,
on June 4, 2008, at the hour
of 9:30 a.m. for the following purposes:
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1.
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To
elect two Directors to serve until the 2011 Annual Meeting of
Shareholders.
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2.
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To
amend the Company's Articles of Incorporation to increase the number of
authorized Common Shares from 18,000,000 to
36,000,000.
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3.
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To
consider and act upon a proposal to adopt the 2008 Equity Incentive
Plan.
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4.
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To
ratify the selection of Margolis & Company P.C. as independent
registered public accountants for the Company’s fiscal year ending January
31, 2009.
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5.
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To
transact such other business as may properly come before the
meeting.
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Only
shareholders of record at the close of business on April 11, 2008, the record
date fixed by the Board of Directors, are entitled to notice of, and to vote at,
the meeting.
Harleysville,
Pennsylvania
April 18,
2008
Whether
or not you plan to attend the meeting, please sign and date the enclosed proxy,
which is solicited by the Board of Directors of the Company, and return it to
the Company. The proxy may be revoked at any time before it is voted, and
shareholders executing proxies may attend the meeting and vote there in person,
should they so desire, except that, if the shares are held in street name, you
may vote these shares in person at the meeting only if you obtain a signed proxy
from the record holder giving you the right to vote the shares.
MET-PRO
CORPORATION
160
Cassell Road, Harleysville, Pennsylvania 19438
PROXY
STATEMENT
The Board
of Directors of Met-Pro Corporation (the “Company” or “Met-Pro”) presents this
proxy statement to all shareholders and solicits their proxies for the Annual
Meeting of Shareholders to be held on June 4, 2008.
All
proxies duly executed and received will be voted on all matters presented at the
meeting in accordance with the specifications made in such proxies. In the
absence of your specific vote on your executed proxy card, if your Met-Pro
shares are registered directly in your name, your shares will be voted
consistent with the recommendations of the Board of Directors and in favor of
each of the four proposals identified for voting. In the absence of your
specific instructions on your executed proxy card, if the Met-Pro shares that
you own are registered in the name of your broker (“street name”), under
applicable New York Stock Exchange rules, your broker will vote your shares in
favor of the named nominees to the Company’s Board of Directors and the
ratification of the selection of Margolis & Company P.C. as independent
registered public accountants for the fiscal year 2009; however, in absence of
your specific instructions, your broker is not authorized to vote, and will not
vote, on the proposal to amend the Company's Articles of Incorporation to
increase the number of authorized Common Shares from 18,000,000 to 36,000,000 or
the proposal to adopt the 2008 Equity Incentive Plan.
Management
does not know of any other matters that may be brought before the meeting nor
does it foresee or have reason to believe that proxy holders will have to vote
for a substitute or alternate nominee. In the event that any other
matter should come before the meeting or any nominee is not available for
election, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies not marked to the contrary with respect to such
matters in accordance with their best judgment. The proxy may be
revoked at any time before being voted by written notice to such effect received
by the Company, 160 Cassell Road, P.O. Box 144, Harleysville, Pennsylvania
19438, attention: President, prior to exercise of the proxy, by delivery of a
later proxy or by a vote cast in person at the meeting; provided, however, if
the shares are held in street name, you may vote these shares in person at the
meeting only if you obtain a signed proxy from the record holder giving you the
right to vote the shares. The Company will pay the entire expense of
soliciting these proxies. Said solicitation will be primarily by
mail, although we may engage officers of the Company or outside parties to
solicit proxies personally or by telephone if we deem it
expedient. In accordance with New York Stock Exchange rules, we
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for their expenses incurred in sending proxy materials to beneficial owners of
Met-Pro shares.
The total
number of Common Shares of the Company outstanding as of April 11, 2008 was
15,038,900. The Common Shares are the only class of securities of the Company
entitled to vote, each share being entitled to one noncumulative vote. Only
shareholders of record as of the close of business on April 11, 2008 will be
entitled to vote. A majority of the Common Shares outstanding on the
April 11, 2008 record date must be present in person or by proxy at the Annual
Meeting in order to have a quorum for the transaction of business. Under
Pennsylvania law, abstentions (votes “withheld”) and broker non-votes will be
counted as present for purposes of determining the presence of a
quorum.
Directors
are elected by a plurality of the votes cast. Broker non-votes and shares that
are represented by proxies that are marked “withhold authority” with respect to
the election of one or more nominees as Directors are deemed under Pennsylvania
law not to have been cast, and will have no effect upon the vote as to the
election of Directors.
The
approvals of the proposals to amend the Company’s Articles of Incorporation to
increase the number of authorized Common Shares from 18,000,000 to 36,000,000
and the ratification of the selection of Margolis & Company P.C., require
the affirmative “FOR” vote of a majority of the shares which are present in
person or by proxy at the Annual Meeting and which are actually cast on each
specific proposal. Abstentions and broker non-votes will not be deemed as having
been “cast” and will have no effect upon the approval of either of these
proposals.
The
approval of the proposal to adopt the 2008 Equity Incentive Plan requires the
affirmative “FOR” vote of a majority of the shares which are present in person
or by proxy at the Annual Meeting and which are actually cast on such proposal,
and also, under New York Stock Exchange requirements, that the total votes cast
on such proposal constitutes at least a majority of the shares that are entitled
to be voted on this proposal. Broker non-votes are deemed not entitled to be
voted, and therefore have an impact upon the approval requirements for this
proposal.
A list of
shareholders entitled to vote at the meeting will be available at the Company’s
offices, 160 Cassell Road, Harleysville, Pennsylvania 19438, for a period of ten
(10) days prior to the meeting for examination by any shareholder.
These
proxy materials were first mailed to shareholders of the Company on or about
April 18, 2008.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The
Company’s Articles of Incorporation provide for a classified Board of Directors,
with the Board divided into three classes whose terms expire at different times.
Two Directors, Michael J. Morris and Constantine N. Papadakis, Ph.D., whose
terms of office expire with the June 4, 2008 meeting, have been recommended by
the Corporate Governance and Nominating Committee and nominated by the Board for
re-election to terms that expire at the 2011 Annual Meeting. Information
regarding the Board’s two nominees is set forth below. Information regarding the
Directors whose terms expire after the 2008 Annual Meeting is set forth on page
3.
Unless
otherwise indicated in valid proxies received pursuant to this solicitation,
such proxies will be voted for the election of the persons listed below as
nominees for the terms set forth below. Management has no reason to
believe that the nominees will not be available or will not serve if
elected. Proxies may not be voted for more than two
persons. If Mr. Morris or Dr. Papadakis should become unavailable to
serve as a Director, full discretion is reserved to the persons named as proxies
to vote for such other persons as may be nominated.
The
following sets forth certain information as to the nominees for election as
Directors and for each other person whose term of office as a Director will
continue after this Annual Meeting of Shareholders:
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FIRST
YEAR
OF
SERVICE
AS A
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NAME
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AGE
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PRINCIPAL
OCCUPATION
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DIRECTOR
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NOMINEES
FOR TERMS TO EXPIRE IN 2011
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Michael
J. Morris
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73
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Mr.
Morris is the retired Chief Executive Officer and President of both
Transport International Pool (TIP) and GE Modular
Buildings. Mr. Morris is a Director of Beneficial Mutual
Bancorp and a Trustee of Beneficial Mutual Savings Bank where he
serves as a member
of the Executive Committee, Senior Loan
Committee and Audit Committee. Mr. Morris is a Director of
Philadelphia Consolidated Holding Corporation and is Chairman of their
Governance and Nominating Committee and a member of the Audit
Committee. Currently, Mr. Morris is the Chairman of the
Company’s Audit Committee and also serves on the Corporate Governance and
Nominating Committee.
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1999
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Constantine
N.
Papadakis,
Ph.D.
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Dr.
Papadakis is the President of Drexel University, Philadelphia,
Pennsylvania, a position that he has held for twelve
years. Drexel University is one of the twenty largest private
universities in the nation and is renown for its cooperative education
program and its use of technology in the learning
process. See
www.Drexel.edu
. Before joining Drexel, Dr. Papadakis was
Dean of the College of Engineering at the University of
Cincinnati. Prior to returning to academia, Dr. Papadakis
served as Vice
President of
Tetra Tech Inc., a
Honeywell subsidiary; as Vice President of STS Consultants, LTD.; and at
several engineering positions with Bechtel Power
Corporation. Dr. Papadakis also serves on the Board of
Directors of Amkor Technologies, Inc., Aqua America, Inc., CDI
Corporation, MACE Security International, Inc., as well as the Board of
Governors of the Philadelphia Stock Exchange. Currently, Dr.
Papadakis is the Chairman of the Company’s Corporate Governance and
Nominating Committee and also serves on the Compensation and Management
Development Committee. Dr. Papadakis is also the Presiding
Independent Director of the Executive Sessions of the
Board.
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2004
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The
Board of Directors recommends a vote FOR the election of the above nominees as
Directors.
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FIRST
YEAR
OF
SER
VICE
AS A
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NAME
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A
GE
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PRINC
IPAL
OCCUPATION
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DIRECTOR
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DIRECTORS
WHOSE TERMS EXPIRE IN 2009
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George
H. Glatfelter II
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Mr.
Glatfelter II is Chairman of the Board and Chief Executive Officer of P.
H. Glatfelter Company, positions that he has held for more than five
years. P. H. Glatfelter Company, located in York, Pennsylvania,
a specialty paper manufacturer and a global manufacturer of specialty
papers and engineered products, is a public company whose shares are
listed on the New York Stock Exchange. See
www.Glatfelter.com
. Mr.
Glatfelter II is also a Director of the National Council for Air and
Stream Improvements, and the Alliance for the Chesapeake Bay. Currently,
Mr. Glatfelter II is the Chairman of the Company’s Compensation and
Management Development Committee and also serves on the Corporate
Governance and Nominating Committee.
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2004
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Alan
Lawley, Ph.D.
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Dr.
Lawley is Emeritus Professor of Metallurgy in the Department of Materials
Science and Engineering at Drexel University, Philadelphia, Pennsylvania.
He is a member of the National Academy of Engineering, a Fellow of ASM and
APMI International, a former President of the Metallurgical Society and of
AIME, and is Editor-in-Chief of the International Journal of Powder
Metallurgy. He is an expert in physical and mechanical
metallurgy, powder metallurgy, composite materials, and materials
engineering design. He has consulted, lectured and published in
these areas. Currently, Dr. Lawley serves on the Company’s
Audit Committee.
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1990
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Gary
J. Morgan
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Mr.
Morgan is Senior Vice President-Finance, Secretary, Treasurer, and Chief
Financial Officer of the Company. He was appointed Senior Vice
President-Finance in June 2006, prior to which, since October 1997, he was
Vice President-Finance, as well as Secretary, Treasurer and Chief
Financial Officer. He is a Certified Public
Accountant. Immediately prior to October 1997, Mr. Morgan was
the Corporate Controller of the Company. He has been employed
by the Company since 1980.
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1998
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DIRECTORS
WHOSE TERMS EXPIRE IN 2010
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Raymond
J. De Hont
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Mr.
De Hont was elected Chairman of the Board of Directors in September 2003
and appointed President and Chief Executive Officer effective March 1,
2003. In February 2003, the Board of Directors appointed Mr. De
Hont a Director of the Company. From June 2000 until March 2003, Mr. De
Hont was the Chief Operating Officer of the Company, and from June 1995
through December 2000, he was Vice President and General Manager of the
Company’s Fybroc Division. In addition, during the period
October 1999 to December 2000, Mr. De Hont also served as General Manager
of the Company’s Dean Pump business unit.
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2003
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Nicholas
DeBenedictis
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Mr.
DeBenedictis is Chairman of the Board, Chief Executive Officer and
President of Aqua America, Inc. (formerly Philadelphia Suburban
Corporation), positions that he has held for more than five
years. Aqua America is the nation’s largest U.S.-based
publicly-traded (New York Stock Exchange) water utility, serving
approximately 2.5 million customers. See
www.aquaamerica.com
. Mr.
DeBenedictis is also a Director of P.H. Glatfelter Company and Exelon
Corporation as well as a member of the Board of Trustees of Drexel
University. Currently, Mr. DeBenedictis serves on the Company’s
Compensation and Management Development Committee and the Audit
Committee.
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1997
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THE
BOARD OF DIRECTORS AND ITS COMMITTEES
The Board
of Directors presently consists of seven persons, with the Board having the
authority under the By-laws from time to time to set the number of Directors
constituting the whole of the Board. The Board is presently engaged in a search
for one additional Board member.
The Board
of Directors of the Company held seven (7) meetings during the fiscal year ended
January 31, 2008. The Board of Directors has three standing
committees: the Audit, Compensation and Management Development, and Corporate
Governance and Nominating Committees.
The
Board’s policy at present is that Committee appointments are for a two year term
or such earlier termination of the Director’s term of office as
such. All of the Directors attended at least 75% of the meetings of
the Board and Committees of which they were members.
Audit
Committee
The Audit
Committee of the Board of Directors is presently comprised of Mr. Morris,
Chairman, Mr. DeBenedictis and Dr. Lawley. The Board has determined that all of
the members of the Audit Committee are “independent” within the meaning of
Securities and Exchange Commission (“SEC”) regulations, the listing standards of
the New York Stock Exchange and the Company’s Corporate Governance Guidelines.
(See “Independence of Directors/Corporate Governance Guidelines” elsewhere in
this proxy statement). The Board has also determined that there is at
least one “audit committee financial expert” serving on the Audit Committee, as
that term is defined in Item 401(h) of Regulation S-K promulgated by the SEC,
namely Mr. Morris. The Audit Committee met four (4) times during the
fiscal year 2008 and took action by unanimous written consent on one
occasion.
The focus
of the Audit Committee is upon: (i) the adequacy of the Company’s internal
controls and financial reporting process and the reliability of the Company’s
financial statements; (ii) the independence and performance of the Company’s
independent auditor; and (iii) the Company’s compliance with designated legal
and regulatory requirements. Further information regarding the
functions of the Audit Committee are set forth in the “Report of the Audit
Committee” on page 26
and
the “Audit Committee Charter” which is available on our Company’s website at
www.met-pro.com
under the “Investor Relations – Corporate Governance”
captions. A copy of the entire charter may also be obtained upon
request from the Company’s Corporate Secretary. The Audit Committee
periodically reviews and modifies its charter.
Compensation
and Management Development Committee
The
Compensation and Management Development Committee of the Board is presently
comprised of Mr. Glatfelter II, Chairman, Mr. DeBenedictis and Dr. Papadakis.
The Board has determined that all the members of the Compensation and Management
Development Committee are “independent” within the meaning of the listing
standards of the New York Stock Exchange and the Company’s Corporate Governance
Guidelines. The Compensation and Management Development Committee met four (4)
times during fiscal year 2008 and took action by unanimous written consent on
one occasion.
Under the
provisions of the revised charter that this Committee adopted during the fiscal
year ended January 31, 2008, the purpose of this Committee is as
follows:
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To
discharge as to the Chief Executive Officer (“CEO”), and to assist the
Board in otherwise discharging, the Board’s responsibilities relating to
the compensation of the Company’s executives (consisting of the Company’s
elected officers and General Managers and such other key employees as
determined by the Committee with guidance from the CEO) and members of the
Board;
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To
review and discuss with the Company’s senior executives the Compensation
Discussion and Analysis included in the Company’s proxy statement and to
provide the Compensation and Management Development Committee Report for
inclusion in the Company’s proxy statement that complies with the rules
and regulations of the SEC; and
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To
assist the Board in ensuring that the Company has in place effective
policies and programs for senior executive succession and for the
development of its executives.
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The
charter of the Compensation and Management Development Committee is available on
our Company’s website at
www.met-pro.com
under the
“Investor Relations – Corporate Governance” captions. A copy of the
entire charter may also be obtained upon request from the Company’s Corporate
Secretary. The Compensation and Management Development Committee periodically
reviews and modifies its charter.
Corporate
Governance and Nominating Committee
The
Corporate Governance and Nominating Committee of the Board of Directors is
presently comprised of Dr. Papadakis, Chairman, Mr. Glatfelter II and Mr.
Morris. The Board has determined that all of the members of the
Committee are “independent” within the meaning of the listing standards of the
New York Stock Exchange and the Company’s Corporate Governance Guidelines. The
Corporate Governance and Nominating Committee met two (2) times during the
fiscal year 2008.
The
Corporate Governance and Nominating Committee is responsible for developing and
implementing policies and practices relating to corporate governance, including
reviewing and monitoring implementation of the Company’s Corporate Governance
Guidelines. In addition, the Committee is responsible for developing
and reviewing background information on candidates for the Board, and will make
recommendations to the Board regarding such candidates. The Committee
also is responsible for preparing and supervising the Board’s annual review of
Director independence and the Board’s performance
self-evaluation. The charter of the Corporate Governance and
Nominating Committee is available on our Company’s website at
www.met-pro.com
under the
“Investor Relations – Corporate Governance” captions. A copy of the
entire charter may also be obtained upon request from the Company’s Corporate
Secretary. The Corporate Governance and Nominating Committee
periodically reviews and modifies its charter.
The
Corporate Governance and Nominating Committee will consider candidates for Board
membership suggested by its members and other Board members, as well as
management and shareholders.
A shareholder who wishes
to recommend a prospective nominee for the Board should notify the Company’s
Corporate Secretary or any member of the Corporate Governance and Nominating
Committee in writing with whatever supporting material the shareholder considers
appropriate. The Corporate Governance and Nominating Committee will
also consider whether to nominate any person proposed by a shareholder pursuant
to the provisions of the Company’s bylaws relating to shareholder
nominations. See “Shareholder Proposals” elsewhere in this proxy
statement.
Once the
Corporate Governance and Nominating Committee has identified a new prospective
nominee, the Committee expects to make an initial determination as to whether to
conduct a full evaluation of the candidate. This initial determination will be
based on whatever information is provided to the Committee with the
recommendation of the prospective candidate, as well as the Committee’s own
knowledge of the prospective candidate, which may be supplemented by inquiries
to the person making the recommendation or others. The preliminary
determination is anticipated to be based primarily on the need for additional
Board members to fill vacancies or expand the size of the Board and the
likelihood that the prospective nominee can satisfy the evaluation factors
described below. If the Committee determines, in consultation with
the Chairman of the Board and other Board members as appropriate, that
additional consideration is warranted, with prior approval of the candidate, it
may request a third-party search firm to gather additional information about the
prospective nominee’s background and experience and to report its findings to
the Committee. The Committee then expects to evaluate the prospective
nominee against the standards and qualifications set out in the Company’s
Corporate Governance Guidelines, including:
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the
ability of the prospective nominee to represent the interests of the
shareholders of the Company;
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the
prospective nominee’s standards of integrity, commitment and independence
of thought and judgment;
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the
prospective nominee’s ability to dedicate sufficient time, energy and
attention to the diligent performance of his or her duties, including the
prospective nominee’s service on other public company boards, as
specifically set out in the Company’s Corporate Governance Guidelines;
and
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the
extent to which the prospective nominee contributes to the range of
talent, skill and expertise appropriate for the
Board.
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The
Committee also intends to consider such other relevant factors as it deems
appropriate, including the current composition of the Board, the balance of
management and independent Directors, the need for Audit Committee expertise
and, as part of the Company’s commitment to diversity, the candidate’s race and
gender. In connection with this evaluation, the Committee will
determine whether to interview the prospective nominee, and if warranted, one or
more members of the Committee, and others as appropriate, will interview
prospective nominees in person or by telephone. After completing
these evaluations and interviews, the Committee will make a recommendation to
the full Board as to the persons who should be nominated by the Board, and the
Board will determine the nominees after considering the recommendation and
report of the Committee.
Shareholder
and Other Interested Party Communications with Directors
Met-Pro
shareholders and other interested parties who wish to communicate directly with
the Board, a Board Committee, the Presiding Independent Director or any
individual Director (including non-management Directors) can write to: Met-Pro
Corporation, Board Administration, 160 Cassell Road, P.O. Box 144, Harleysville,
PA 19438. The Company will review all such correspondence and provide
any comments along with the full text of the communication to the Presiding
Independent Director or the non-management Directors as a group, as the case may
be.
In the
case of a shareholder, your letter should indicate that you are a Met-Pro
shareholder. Depending upon the subject matter, management will:
forward the communication to the Director or Directors to whom it is addressed;
attempt to handle the inquiry directly, if appropriate, such as a request for
information about the Company or a stock-related matter; or not forward the
communication, if it is primarily commercial in nature or if it relates to an
improper, irrelevant or inappropriate topic.
At each
Board meeting, a member of management will present a summary of all
communications received since the last meeting that were not forwarded, and will
make those communications available to Directors upon request.
The
Board’s policy is to encourage attendance by each Board member at the Annual
Meeting of Shareholders. All Directors were in attendance at the 2007
Annual Meeting of Shareholders.
How
to Request Copies of Certain Documents
The
Company will provide without charge, upon written request, a copy of the
Company’s Annual Report on Form 10-K, Corporate Governance Guidelines, charters
of the various Committees of the Board of Directors (Corporate Governance and
Nominating; Compensation and Management Development; and Audit) and Codes of
Conduct (Code of Business Conduct and Ethics (all employees and Directors) and
Code of Ethics (CEO and CFO only)). Please direct your requests to
Gary J. Morgan, Secretary, Met-Pro Corporation, 160 Cassell Road, P.O. Box 144,
Harleysville, Pennsylvania 19438.
INDEPENDENCE
OF DIRECTORS/CORPORATE GOVERNANCE GUIDELINES
The
Corporate Governance Guidelines adopted by the Board are intended to meet or
exceed the listing standards adopted by the New York Stock
Exchange. The Guidelines
describing the
composition of the Board addressing Director independence are available on our
Company’s website at
www.met-pro.com
under the
“Investor Relations – Corporate Governance” captions. A copy may also be
obtained upon request from the Company’s Corporate Secretary.
At its
April 2008 meeting, the Board reviewed Director independence, inquiring into
transactions and relationships between each Director or any member of his or her
immediate family and the Company and its subsidiaries and affiliates, the
disclosure of which would be required under Securities and Exchange Commission
(“SEC”) rules in this proxy statement under the section “Certain Business
Relationships,” as to which there are none. The Board also examined
transactions and relationships between Directors or their affiliates and members
of the Company’s senior management or their affiliates. As provided
in the Guidelines, the purpose of this review was to determine whether any such
relationships or transactions were consistent with a determination that the
Director is independent.
As a
result of this review, the Board determined Nicholas DeBenedictis, George H.
Glatfelter II, Alan Lawley, Michael J. Morris and Constantine N. Papadakis are
“independent” Directors for purposes of Section 303A of the Listed Company
Manual of the New York Stock Exchange, and that the members of the Audit
Committee are also “independent” for purposes of Section 10A(m)(3) of the
Securities Exchange Act of 1934 and Section 303.01 of the Listed Company Manual
of the New York Stock Exchange.
The
Company’s independent Directors meet periodically, without management being
present, generally in connection with a scheduled meeting of the Board of
Directors. These meetings are presided over by a Presiding
Independent Director. The policy of our Board of Directors is that
the Chair of the Corporate Governance and Nominating Committee is the Presiding
Independent Director. At its meeting in June 2007, the Company’s
non-management Directors elected Constantine N. Papadakis, Ph.D., as Chair of
the Corporate Governance and Nominating Committee, and as such, Dr. Papadakis
currently serves as the Company’s Presiding Independent Director, for a term
ending with the 2009 Annual Meeting of Shareholders or his earlier termination
of service as a Director.
The
duties of the Presiding Independent Director include: presiding at all meetings
of the Board of Directors at which the Chairman is not present, including
executive sessions of the non-management Directors; serving as liaison between
the Chairman and the independent Directors; reviewing information sent to the
Board; reviewing meeting agendas for the Board; reviewing meeting schedules to
assure that there is sufficient time for discussion of all agenda items; calling
meetings of the independent Directors, if appropriate; and, if requested by
major shareholders, ensuring that he is available for consultation and direct
communication with such shareholders.
CODES
OF ETHICS
The
Company has a Code of Business Conduct and Ethics, which is applicable to all
employees of the Company, including the Chief Executive Officer and Chief
Financial Officer. The Board has also approved a separate Code of
Ethics which is specifically applicable to the Chief Executive Officer and Chief
Financial Officer. Both the Code of Business Conduct and Ethics and
the Code of Ethics for the Chief Executive Officer and Chief Financial Officer
are available on our Company’s website at
www.met-pro.com
under the
“Investor Relations – Corporate Governance” captions. A copy of
either code may also be obtained upon request from the Company’s Corporate
Secretary.
SHARE
OWNERSHIP OF
EXECUTIVE
OFFICERS AND DIRECTORS
The
following table sets forth as of March 20, 2008 the number and percentage of
shares held by each Director and nominee for Director of the Company, each
executive officer of the Company named in the Summary Compensation Table and by
all Directors, nominees and executive officers as a group. Unless otherwise
stated, the beneficial owners exercise sole voting and/or investment power over
their shares.
|
Name of Executive
Officers
and
Directors
|
|
Number
of
Common
Shares Owned
|
|
|
|
Common Shares
Underlying Options Exercisable Within 60 Days
(1)
|
|
|
Percent of
Shares Beneficially
Owned
(2)
|
|
Raymond
J. De Hont
|
14,446
|
|
(3
|
)
|
230,851
|
|
|
|
1.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
DeBenedictis
|
17,777
|
|
|
|
54,524
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
H. Glatfelter II
|
4,444
|
|
|
|
30,224
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
Lawley, Ph.D.
|
63,359
|
|
|
|
8,890
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
J. Morgan
|
43,015
|
|
(4
|
)
|
122,643
|
|
|
|
1.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Morris
|
18,961
|
|
|
|
66,378
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constantine
N. Papadakis, Ph.D.
|
-
|
|
|
|
30,224
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
C. Kimmer
|
34,827
|
|
(5
|
)
|
52,802
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
P. Replogle
|
90,375
|
|
(6
|
)
|
68,980
|
|
|
|
1.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Tetley
|
5,491
|
|
(7
|
)
|
83,381
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Directors, nominees and executive officers as a group (12
persons)
|
294,822
|
|
(8
|
)
|
802,230
|
|
|
|
6.9%
|
|
|
*
|
Less than 1% of the
Company’s outstanding Common
Shares.
|
|
(1)
|
The
number of Common Shares beneficially owned by each person is determined
under rules promulgated by the Securities and Exchange Commission.
Under these rules, a person is deemed to have “beneficial ownership” of
any shares over which that person has or shares voting or investment
power, plus any shares that the person may acquire within 60 days, after
March 20, 2008, including through the exercise of stock options. This
number of shares beneficially owned therefore includes all shares that may
be acquired within 60 days pursuant to the exercise of stock
options.
|
|
(2)
|
The
percent ownership for each shareholder on March 20, 2008 is
calculated by dividing (1) the total number of shares beneficially
owned by the shareholder by (2) 15,038,900 shares plus any shares
acquirable (including stock options exercisable) by that person within 60
days after March 20, 2008.
|
|
(3)
|
The
number of shares held by Mr. De Hont includes 8,514 Common Shares
beneficially held through the Met-Pro Corporation Salaried Employee Stock
Ownership Trust and through the Company’s 401(k)
Plan.
|
|
(4)
|
The
number of shares held by Mr. Morgan includes 23,744 Common Shares
beneficially held through the Met-Pro Corporation Salaried Employee Stock
Ownership Trust and through the Company’s 401(k)
Plan.
|
|
(5)
|
The
number of shares held by Mr. Kimmer includes 14,290 Common Shares
beneficially held through the Met-Pro Corporation Salaried Employee Stock
Ownership Trust and through the Company’s 401(k)
Plan.
|
|
(6)
|
The
number of shares held by Mr. Replogle includes 4,231 Common Shares
beneficially held through the Met-Pro Corporation Salaried Employee Stock
Ownership Trust and through the Company’s 401(k)
Plan.
|
|
(7)
|
The
number of shares held by Mr. Tetley includes 5,491 Common Shares
beneficially held through the Met-Pro Corporation Salaried Employee Stock
Ownership Trust and through the Company’s 401(k)
Plan.
|
|
(8)
|
The
number of shares held by all thirteen executive officers and Directors as
a group include 57,989 Common Shares beneficially held through the Met-Pro
Corporation Salaried Employee Stock Ownership Trust and through the
Company’s 401(k) Plan.
|
BENEFICIAL
OWNERSHIP OF PRINCIPAL SHAREHOLDERS
As of
January 31, 2008, no entity known to us is the beneficial owner of more than
five percent of the Company’s outstanding Common Shares.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors
and executive officers, and persons who own more than ten percent of a
registered class of the Company’s equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Shares and other equity securities of the
Company. Officers, Directors and greater than ten percent
shareholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms that they
file.
Based
solely upon a review of the copies of the forms furnished to the Company, or
written representations from certain reporting persons that no Form 5 was
required, the Company believes that all filing requirements applicable to its
officers and Directors were complied with during the fiscal year ended January
31, 2008.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
of Compensation
The
Compensation and Management Development Committee of the Board of Directors (the
“Compensation Committee” or “Committee”) is comprised only of independent
non-employee members of the Board of Directors and has responsibility for among
other matters, establishing and implementing the Company’s executive
compensation philosophy. The Committee makes recommendations to the
Board of Directors (the “Board”) concerning compensation policies for the
Company’s executive officers, other senior managers and the Directors, except
that the Committee, with other independent Directors as determined by the Board,
has the sole authority to set compensation for the Chief Executive
Officer. Throughout this proxy statement, the individuals who served
as the Company’s Chief Executive Officer and Chief Financial Officer during the
fiscal year ended January 31, 2008, as well as the other individuals included in
the Summary Compensation Table on page 17, are referred to as the “named
executive officers.”
Compensation
Philosophy and Objectives
The
Committee makes every effort to ensure that the Company’s compensation program
is consistent with the values of Met-Pro Corporation and furthers its business
strategy. The Committee has established the following compensation objectives
for the Company’s named executive officers and other senior managers as
important elements of its overall compensation philosophy:
|
|
¨
|
Align the interests of
executives, including the Company’s named executive officers, with those
of the shareholders.
The Committee believes it is
appropriate to tie a portion of executive compensation to the value of the
Company’s stock in order to more closely align the interests of the named
executive officers and other senior managers with the interests of the
Company’s shareholders.
|
|
|
¨
|
Retain and develop competent
management.
The Company’s executive compensation program
components are designed to attract, retain, develop and motivate highly
qualified executives critical to achieving Met-Pro’s strategic objectives
and building shareholder value.
|
|
|
¨
|
Relate executive compensation
to the achievement of the Company’s goals and financial performance, both
short and long-term
. The Committee’s executive
compensation programs are designed to reward executives when performance
results for the Company and the executive are above stated objectives. The
Committee believes that compensation paid to executives should be closely
aligned with the performance of the Company on both a short-term and
long-term basis.
|
The
Committee reviews the Company’s compensation philosophy and objectives at least
twice each year, once in December near the end of the fiscal year and once again
in February at the start of the new fiscal year, to determine if revisions are
necessary in light of market conditions, the Company’s strategic goals, and/or
other relevant factors.
Role
of Company Management in Compensation Decisions
The
Committee makes decisions regarding the compensation of the Chief Executive
Officer. The Chief Executive Officer annually reviews compensation for the other
named executive officers and other senior managers and makes recommendations to
the Committee based on individual performance. He proposes base salary
adjustments and long-term incentive award grants for each of the other named
executive officers and other senior managers to the Committee for approval.
Together with the Chief Financial Officer, he also works with the participants
in the annual Management Incentive Plan (the “Plan”) to establish the thresholds
and goals under the Management Incentive Plan, presents these thresholds and
goals to the Committee as part of the Company’s annual budgeting process,
monitors and reports to the Board and the Committee on a periodic basis as to
performance relative to these thresholds and goals, and presents to the
Committee an assessment after the end of the fiscal year as to the extent to
which the thresholds and goals were met by each of the participants in the Plan.
The Chief Executive Officer also has discretionary authority to distribute a
certain pool of bonus money that may be available under the Management Incentive
Plan to participants in the Plan whose performance he believes merits
a bonus award notwithstanding that such participant did not otherwise qualify
for an award under the Plan. The Committee reviews and approves, and
retains discretion to modify, all recommendations made by the Chief Executive
Officer, and the Committee has modified recommendations made by the Chief
Executive Officer.
Establishing
Executive Compensation
The
primary objectives of Met-Pro Corporation’s executive compensation program is to
attract and retain highly qualified executive officers, to motivate them to
achieve measurable performance objectives at their management level and to align
their interests with those of Met-Pro Corporation’s shareholders. To
achieve these objectives, the Company follows the basic principles that annual
compensation should be competitive with other public manufacturing companies of
similar size and market base, and that long-term compensation should generally
be linked to Met-Pro Corporation’s total return to
shareholders.
During
fiscal year 2007, the Committee engaged Aon Consulting Inc., a national
consulting firm with expertise in executive compensation, to analyze of the
Company’s compensation program for the named executive officers and other senior
managers (as well as the Board of Directors). Aon Consulting
conducted a structured evaluation of the Company’s executive compensation levels
(in terms of both cash and equity) based on its understanding of the Company’s
business strategy and compensation philosophy. Aon Consulting
completed the following analyses to develop insights on market-wide compensation
practices:
|
|
¨
|
Matched
Met-Pro Corporation’s executive positions to published compensation survey
data for similar companies (in terms of revenue and industries
served).
|
|
|
¨
|
Adjusted
all historic survey data for comparative purposes to January 1, 2007
levels at a 3.5% annualized rate increase. The following
published survey sources were
used:
|
|
|
o
|
2006
Aon Consulting Executive Compensation
Report
|
|
|
o
|
2006
Confidential Executive Compensation Database –
Regression
|
|
|
o
|
2006
Confidential Executive Compensation
Survey
|
|
|
o
|
2005
William M. Mercer Benchmark Database – Executive
Regression
|
|
|
o
|
2006/2007
Watson Wyatt Industry Report on Top Management –
Regression
|
|
|
¨
|
Developed
going rates in the market on a job-by-job basis using published
compensation surveys and compared them against compensation data for the
named executive officers.
|
In fiscal
year 2008, the Committee engaged the Hay Group Inc. to provide an updated review
for a selected group of fifteen executives. The competitive
assessment performed by the Hay Group was limited to market data contained in
published surveys. In addition, the Hay Group provided the Committee
with an overview of the market trends and issues currently being addressed by
companies in response to regulatory changes and developing concepts of good
governance.
The
Committee based compensation decisions made in February 2008 in part upon the
Hay Group Inc. report.
In making
future compensation decisions, the Committee may also compare each component of
the Company’s total compensation program against the Company’s peer group of
similar publicly traded companies (collectively representing the Company’s
“Compensation Peer Group”). In order to develop a formal Compensation
Peer Group, during fiscal year 2007 Aon Consulting collected compensation level
data (base salary, total cash compensation and total direct compensation) from
filed proxies of select publicly traded companies with similar revenue levels
and industry focus to that of Met-Pro Corporation. The Compensation
Peer Group’s sales revenue range was $25.1 million to $731.7 million, with a
median of $122.9 million. The Compensation Peer Group is designed to
represent those companies of similar business and financial characteristics to
that of the Company and with which the Company competes for business
opportunities, managerial talent and shareholder investments. In addition, the
Committee will on occasion review data from other larger companies that belong
within relevant industry groups and serve comparable market
niches. The Compensation Peer Group developed by Aon Consulting
during its engagement consists of the following companies:
|
o
|
Calgon
Carbon Corporation
|
o
|
Gorman-Rupp
Corporation
|
o
|
Fuel
Tech Inc.
|
|
o
|
Ceco
Environmental Corporation
|
o
|
Graco
Inc.
|
o
|
Reunion
Industries
|
|
o
|
Environmental
Tectonics Corporation
|
o
|
K-Tron
International Inc.
|
o
|
SL
Industries Inc.
|
|
o
|
Flanders
Corporation
|
o
|
MFRI
Inc.
|
o
|
Strategic
Distribution Inc.
|
|
o
|
Peerless
Manufacturing Corporation
|
o
|
Misonix
Inc.
|
|
|
Compensation
Components
The
compensation components for the named executive officers consist of (i) base
salary, (ii) the Company’s Management Incentive Plan, (iii) a long-term
incentive (equity-based) program, and (iv) other executive
benefits. A discussion of these follows.
Base
Salary
The
Company provides the named executive officers with base salaries at dollar
levels intended to fairly compensate them for services rendered during the year,
and to help achieve the primary compensation objectives previously
stated. Base salary ranges for named executive officers are designed
to provide for different experience and performance levels within a specific
position.
Consistent
with the stated compensation objectives, the Committee has informally set base
salary ranges for each of the various officer positions that it expects to
periodically review and adjust. In establishing these base salary
ranges, the Committee has drawn upon historical salary levels, and more
recently, upon the data supplied to it by the Hay Group, which indicate that
Met-Pro’s base salaries, on average, are market competitive when compared with
the published survey data for organizations of similar size within comparable
industries. On an annual basis, the Committee requests the Chief Executive
Officer to make base salary recommendations for the officers of the Company
(other than himself) within these ranges.
Base
salaries for named executive officers are reviewed annually or upon changes in
responsibilities. The Committee considers the following factors (among others)
during its review:
|
|
¨
|
The
Compensation Peer Group data and other market data for comparable
positions;
|
|
|
¨
|
Individual
level of responsibility, performance and contributions to the Company;
and
|
|
|
¨
|
The
Chief Executive Officer’s recommendations for named executive officers
(other than himself).
|
In its
February 2008 meeting, the Committee considered these factors, as well as
others, and approved increases in the base salaries of the named executive
officers effective February 1, 2008 from those reported in column (c) of
the Summary Compensation Table on page 17, as follows: Raymond J. De Hont,
$341,000, from $310,0000; Gary J. Morgan, $220,000 from $210,000; Paul A.
Tetley, $187,400, from $182,000; Robert P. Replogle, $156,300, from $150,800;
and Gregory C. Kimmer, $154,000 from $148,000.
Management
Incentive Plan
A number
of years ago, the Compensation Committee established a compensation plan (the
“Management Incentive Plan” or the “Plan”) which is presently applicable to the
Chief Executive Officer, the Chief Financial Officer, the Company’s Executive
Vice President, the Assistant to the President and the various individuals who
function as General Managers of the Company’s business units (herein
collectively “business units”). In the fiscal year ended January 31,
2008, a total of twelve employees participated in the plan and a total of
$271,669 was awarded under the plan
to a total of nine
persons, which includes $32,000 awarded
to two General Managers
by the Chief Executive Officer from a pool as to which the Chief Executive
Officer has
discretionary
authority.
The
Management Incentive Plan provides participating individuals with the
opportunity to earn annual incentive awards (“awards”) based upon the
performance of the operating segment or business unit managed by the individual
Executive Vice President or General Manager, and for the achievement of measures
relating to the individual’s own performance. In the case of the Chief Executive
Officer (“CEO”), the Chief Financial Officer (“CFO”) and the Assistant to the
President, awards are based upon the performance of the overall Company, as well
as the achievement of measures relating to that individual’s own performance.
The types of measures and relative weight of those measures used in determining
annual incentive awards are tailored to the position and organizational
responsibility.
The
amount of the award is based on a percentage of annual base salary. This
percentage reflects the executive’s respective organizational level, position
and responsibility for achievement of the Company’s strategic goals. In the
fiscal year ended January 31, 2008, these percentages were as follows: for the
CEO, 50% of base salary; for the CFO, 40% of base salary; for the Executive Vice
President, 35% of base salary; for the Assistant to the President, 25% of base
salary; and for the General Managers, 25% of base salary. At its meeting in
February 2008, the Committee approved these same percentages for use in the FYE
2009 Management Incentive Plan.
Under the
terms of the Management Incentive Plan, in order to be eligible for an award,
certain objective threshold results must be met. The fiscal year 2008 Management
Incentive Plan requirements were as follows: for the CEO, the CFO and the
Assistant to the President, the achievement of a predetermined threshold
financial target in terms of the Company’s profit before tax (PBT); and for the
Executive Vice President and General Managers, the achievement of a
predetermined profit before tax (PBT) amount at their respective operating
segment or business unit. These threshold targets are equal to the
Company’s or the business unit’s profit before tax for the fiscal year in
question as determined in the course of creating the Company’s annual operating
plan. The operating plan is intended to be a realistic forecast of the fiscal
year and to this extent the threshold target for purposes of the Management
Incentive Plan is intended to be attainable. The Committee’s intention,
nonetheless, is that the threshold targets represent a “stretch”, and the
Committee’s experience is that, in any given fiscal year, a significant
percentage of Plan participants do not attain their respective threshold
targets. The Committee retains the discretion, for purposes of
determining a participant’s eligibility for a bonus under the Management
Incentive Plan, to make adjustments to take into account extraordinary or
unusual items outside of normal operations, such as capital asset sales or
unusual expenses. For the fiscal year 2008 Management Incentive Plan, the
Committee considered the sale of the Company’s property in Hauppauge, NY,
formerly occupied by its Sethco business unit to be an unusual item outside of
normal operations to be excluded from Management Incentive Plan
calculations.
As
discussed earlier in “Role of Company Management in Compensation Decisions”, the
CEO, together with the CFO, works with the participants in the Management
Incentive Plan to establish thresholds and goals under the Management Incentive
Plan, presents these thresholds and goals to the Committee (typically in
February of each year) as part of the Company’s annual budgeting process,
monitors and reports to the Board and the Committee on a periodic basis as to
performance relative to these thresholds and goals, and presents to the
Committee an assessment after the end of the fiscal year as to the extent to
which the thresholds and goals were met by each of the participants in the
Management Incentive Plan (other than himself).
A
“threshold financial multiplier” is used as a computational factor in
determining the actual award amount, the value of which varies depending on the
relative achievement of the threshold financial target (PBT) ranging from 80% to
125% for the CEO, CFO and Assistant to the President, 85% to 125% for the
Executive Vice President and 90% to 125% for the General
Managers. The specific threshold financial multiplier assigned
to the CEO, CFO and Assistant to the President, based upon the PBT achieved, is
shown in the table below. If the threshold financial target actually achieved at
year-end is less than 80% of the targeted goal for the CEO, CFO and Assistant to
the President (or 85% in the case of the Executive Vice President and 90% in the
case of the General Managers), no award will be paid, except to the extent of a
defined bonus pool under the Plan from which the Chief Executive Officer has
certain discretionary authority to grant awards.
|
Attainment
of Threshold Financial Target
|
|
Threshold
Financial Multiplier
|
|
less
than 80%
|
|
0.00%
|
|
80%
|
|
50.00%
|
|
85%
|
|
62.50%
|
|
90%
|
|
75.00%
|
|
95%
|
|
87.50%
|
|
100%
|
|
100.00%
|
|
105%
|
|
110.00%
|
|
110%
|
|
120.00%
|
|
115%
|
|
130.00%
|
|
120%
|
|
140.00%
|
|
125%
|
|
150.00%
|
|
greater
than 125%
|
|
150.00%
|
After
achieving 80%, or greater than 80%, of the threshold financial target (85% for
the Executive Vice President and 90% for the General Managers), the award
calculation also requires the participant to meet certain financial and
performance goals. For the CEO, the CFO and the Assistant to the
President, the financial and performance goals consist of profit before tax and
predetermined personal performance goals. The weight assigned to
profit before tax and personal performance goals were 65% and 35%, respectively.
The financial and performance goals for the Executive Vice President of the
Product Recovery/Pollution Control Technologies segment consisted of profit
before tax, net sales, accounts receivable days outstanding and predetermined
personal performance goals. The weight assigned to profit before tax,
net sales, accounts receivable days outstanding and personal performance goals
were 35%, 30%, 20% and 15%, respectively. For the General Managers,
the financial and performance goals consist of a number of possible performance
measurements such as, profit before tax, net sales, accounts receivable days
outstanding, inventory turns and predetermined personal performance
goals. The weight assigned to these goals range from 10% to 40% and
varies with the individual.
Based
upon relative performance, the weight of each financial and performance goals
would be multiplied by a corresponding percentage within the range of 0% to
125%. For the CEO, the CFO and the Assistant to the President, if
less than 80% of a particular goal is achieved the multiplier would be 0%,
between 80% and 100% the multiplier would be between 50% and 100%, between 100%
and 125% the multiplier would be between 100% and 125%, and greater than 125%
the multiplier would remain at 125%. For the Executive Vice
President, if less than 85% of a particular goal is achieved the multiplier
would be 0%, between 85% and 100% the multiplier would be between 50% and 100%,
between 100% and 125% the multiplier would be between 100% and 125%, and greater
than 125% the multiplier would remain at 125%. For the General
Managers, if less than 90% of a particular goal is achieved the multiplier would
be 0%, between 90% and 100% the multiplier would be between 50% and 100%,
between 100% and 125% the multiplier would be between 100% and 125%, and greater
than 125% the multiplier would remain at 125%.
Additionally,
for participants other than the CEO, the CFO and the Assistant to the President,
the Management Incentive Plan provides that the financial and personal
performance goals will be multiplied by a corporate goal percentage, which is
based on the profit before tax achieved by the Company during its fiscal year.
For the Executive Vice President, if the Company achieved less than 50% of its
profit before tax target, the corporate goal percentage would be 50%, while if
the Company achieved between 50% and 100% of its profit before tax target, the
corporate goal percentage would be between 50% and 100%. For the
General Managers, if the Company achieved less than 90% of its profit before tax
target, the corporate goal percentage would be 90%, while if the Company
achieved between 90% and 100% of its profit before tax target the corporate goal
percentage would be between 90% and 100%. If the Company achieves
equal to or greater than 100% of its profit before tax target, the corporate
goal percentage would remain at 100%.
A
participant’s total actual award amount cannot exceed 150% of his/her eligible
incentive level (that is, as previously discussed, for fiscal year 2008, 50% of
base salary for the CEO; 40% for the CFO; 35% for the Executive Vice President;
25% for the Assistant to the President; and 25% for the General Managers),
meaning that the participant’s award amount will not be greater than 1.5 times
their incentive level times their base salary.
The award
amounts in formulaic terms can be expressed as:
For
the CEO, the CFO and the Assistant to the President:
Award
amount = (Eligibility and Incentive Level) x (Base Salary) x (Threshold
Financial Multiplier) x
(Financial
and Performance Goals: PBT % + Personal Performance Goals %)
For
the Executive Vice President:
Award
amount = (Eligibility and Incentive Level) x (Base Salary) x (Threshold
Financial Multiplier) x
(Financial
and Performance Goals: PBT % + Net Sales % + Inventory Turnover % +
A/R Days
Outstanding % + Personal Performance Goals %) x
(Corporate
Goal %)
For
the General Managers:
Award
amount = (Eligibility and Incentive Level) x (Base Salary) x (Threshold
Financial Multiplier) x
(Financial
and Performance Goals: PBT % + Net Sales % +
A/R Days
Outstanding % + Inventory Turns %+ Personal Performance Goals %) x
(Corporate
Goal %)
The
Committee approved the fiscal year 2008 Management Incentive Plan at its
February 2007 meeting, reviewed expected payments under the Management Incentive
Plan at its December 2007 meeting, and considered data presented by the CEO and
CFO at its February 2008 meeting as to the attainment of thresholds and goals
under the Management Incentive Plan by each of the Management Incentive Plan
participants. At its February 2008 meeting, the Committee exercised
its discretion under the Plan to reduce the amount of profit before tax deemed
earned for purposes of the Plan by (i) the $3.5 million gain on the sale of the
Company’s property in Hauppauge, NY formerly occupied by its Sethco business
unit and also (ii) the approximately $400,0000 profit before tax
amount that the Company prematurely recognized during its fiscal year January
31, 2007, as part of the Company’s revenue recognition errors (as reported in
the Company’s SEC filings including its Annual Report on Form 10-K for the
fiscal year ended January 31, 2008). The Committee accepted the CEO’s assessment
of the attainment by the Executive Vice President, the General Managers and the
Assistant to the President of their respective “personal objectives” components
under the Plan. The Committee determined that as a result of the events leading
to the restatement during the fiscal year of prior period financial statements,
the CEO and CFO would be deemed not to have attained any of the “personal
objectives” components of the Management Incentive Plan. Subject to these
provisions, the Committee approved of the awards payable under the terms of the
Management Incentive Plan. The awards made to the named executive officers under
the 2008 Management Incentive Plan are included in the Non-Equity Incentive Plan
Compensation column (e) of the Summary Compensation Table on
page 17.
The
Committee expects periodically to make changes to the terms of the Management
Incentive Plan.
Long-Term
Equity Incentives
The
Company has historically provided long-term equity incentives, in the form of
stock option grants, to the same group of executives who are participants in the
Management Incentive Plan, as well as to certain other senior
managers. The Committee views stock options as a key incentive for
long-term organizational performance. The Committee believes that stock options
are to be awarded to encourage creation of increased value for the Company’s
shareholders, reward the achievement of superior operating results, facilitate
the retention of key management personnel, and align the interests of management
and shareholders through equity ownership. The Committee’s approach is to
consider a grant of stock options within the context of the demonstrated level
of performance and to induce future performance and retention.
The
Company has three stock option plans under which currently issued and
outstanding options have been granted: the 1997 Stock Option Plan (the “1997
Plan”), adopted by the Company’s Board of Directors on February 24, 1997 and
approved by the shareholders on June 4, 1997; the 2001 Stock Option Plan (the
“2001 Plan”), adopted by the Company’s Board of Directors on February 26, 2001
and approved by the shareholders on June 20, 2001; and the 2005 Equity Incentive
Plan (the “2005 Plan”), adopted by the Company’s Board of Directors on February
21, 2005 and approved by the shareholders on June 8, 2005. No shares
are available for future grants under the 1997 and 2001 Plans, and an aggregate
of 476,438 Common Shares are available as of January 31, 2008 for grant under
the 2005 Plan, plus an indeterminate number of additional shares resulting from
anti-dilution adjustments. These Plans provide for the granting of options which
are intended to satisfy the requirements of Section 422 of the Internal Revenue
Code of 1986 as well as options which are not intended to satisfy such
requirements, as well as other equity incentives.
The
Committee’s current practice is to consider at its December meeting
recommendations from the CEO as to stock option awards to the Company’s named
executive officers (other than himself), the General Managers, and such other
senior managers as the CEO believes appropriate, and to take action at such
meeting with respect to grants. The Company’s current practice is to provide for
vesting at a rate of one-third per year over the first three years of the
ten-year term of the stock option; provided, however, that in the event of a
“change of control”, as defined, any unvested portion of the option shall become
immediately exercisable
.
The Committee believes
the vesting schedule aids the Company in retaining executives and motivating
their long-term performance. Exercise rights cease ninety (90) days after
termination of employment except in cases of death, disability or
retirement.
The
Committee considers the Black-Scholes option pricing model in its valuation of
stock options which are granted.
At its
meeting in December 2007, the Committee received recommendations from the CEO as
to stock option awards for the Company’s General Managers and other senior level
executives (other than himself) and discussed with the CEO his general approach
to stock option awards, which the Committee agreed should take into account past
practices and awards as well as the impact of the stock options upon the number
of issued and outstanding shares. The CEO reviewed with the Committee his
rationale for each proposed individual grant. The Committee discussed with the
CEO the question as to what level of manager should stock options be granted.
The Committee took note of the stock split in November 2007 and considered the
impact of the split upon the number of stock options to be granted, and
considered the Black-Scholes value of the Company’s stock options. The Committee
concluded that the CEO’s recommendations were well supported. With respect to
the CEO, the Committee in executive session considered the CEO’s and the
Company’s performance for the fiscal year to date as well as the Board’s
interest in retaining the CEO, and approved an option award that was intended to
reflect these considerations. The Committee determined that on
a general basis it would seek approximate parity as to the aggregate value of
all of the stock option awards as compared with the prior year, based upon the
Black-Scholes value. The Committee approved stock option awards aggregating
215,800 shares inclusive of the awards to 14 executives and to the five
non-employee directors, or approximately 1.43% of the Company’s issued and
outstanding shares as of such date, as compared with prior year awards for an
aggregate of 238,667 shares (adjusted for stock split) or approximately 1.60% of
the Company’s issued and outstanding shares as of December 15,
2006.
Retirement
Benefits
Executive
officers are eligible to participate in a tax-qualified 401(k) defined
contribution plan. The current executive officers also participate in the
Salaried Pension Plan, which is a funded, tax-qualified non-contributory defined
benefit pension plan that was amended during the fiscal year ended January 31,
2007 to freeze the accrual of future benefits for all salaried and non-union
hourly employees, effective on December 31, 2006. The CEO and the CFO
participate in the Non-Qualified Pension Restoration Plan, which is an unfunded
non-qualified plan
,
as
to which the accrual of future benefits is expected to be frozen effective May
1, 2008, at which time a Non-Qualified Deferred Contribution Supplemental
Executive Retirement Plan will take effect and as to which the CEO, the CFO, and
a number of other senior managers of the Company, will participate. Gregory
C. Kimmer, Vice President-Duall Division, participates in the Deferred
Compensation Plan, a funded non-qualified plan. A description of these plans and
the benefits payable to each named executive officer upon retirement is set
forth in the “Pension Benefits” section on page 20.
Under the
Company’s 401(k) defined contribution plan, the Company will match, in the
form of Met-Pro Common Shares, up to 50% of the officer’s contribution up to 4%
of compensation. Effective January 1, 2007, in connection with the
freezing of the accrual of future benefits under the Company’s defined benefit
plans, the Company added a discretionary contribution to the Plan for
non-bargaining unit employees in the United States. The discretionary
contribution is (i) 2% for employees under 45 years old or with less than 5
years of service, (ii) 3% for employees 45 years or older and between five to
nine years of service, or (iii) 4% for employees 45 years or older and with ten
or more years of service. The levels of discretionary contribution
will not change with the employee’s age or years of service going forward and
all future eligible new hires after April 15, 2006 will receive a discretionary
contribution at the 2% level. The plan is open to all employees and officers and
participation is based upon the same terms and conditions.
During
fiscal year 2008, the Compensation and Management Development Committee engaged
Aon Consulting to undertake a review of the Company’s executive retirement
benefits. Based on this review, in December 2007, the Company’s Board
of Directors approved and adopted a Non-Qualified Defined Contribution
Supplemental Executive Retirement Plan (“SERP”), as noted earlier in this
report. The purpose of the SERP, which is expected to take effect on
May 1, 2008, is to provide supplemental retirement benefits to senior executives
of the Company and others, presently totaling eleven persons including the
Company’s Chief Executive and Chief Financial Officers, as determined by the
Company’s Board of Directors. The Company will make annual
contributions to the SERP in order to provide participants with up to 30% to 60%
of projected retirement age compensation (based upon base salary and bonus)
assuming thirty years of service to the Company, after taking into account all
Company-provided retirement income as well as the employee’s social security
benefit at a defined age. At the time that the SERP takes effect, the
Company will freeze the accrual of future benefits under the existing
Non-Qualified Pension Restoration Plan with respect to which the only employee
participants are the Chief Executive Officer and the Chief Financial
Officer.
Health
and Related Benefits
The
Company’s health and related plans include medical, life, disability, accidental
death and dismemberment and travel accident coverage. The Company’s health and
related benefit programs are designed to be competitive with other comparably
sized corporations. The health and related benefits provided to executive
officers are offered through broad-based plans applicable to all
employees.
During
fiscal year 2008, the Committee asked Aon Consulting to review the Company’s
short and long-term disability programs, and after considering the Aon
Consulting report, the Committee in November 2007
approved the adoption of
a new short-term disability policy as well as a new long-term disability policy
applicable to a group that presently consists of twelve senior executive
employees including without limitation the Chief Executive Officer, the Chief
Financial Officer, and other persons identified in the Company’s proxy materials
as “named executive officers.” To be eligible for these benefits, an
employee must have six months of continuous service with the Company. The
new policies took effect on January 1, 2008.
The
material provisions of the short-term disability policy are as follows: in the
event of a “disability” (as defined in the Company’s long-term disability
policy), the Company shall pay (i) in the case of the Company’s Chief Executive
Officer, Chief Financial Officer, and Executive Vice President, 100% of the
employee’s base salary for a period of up to six months, and (ii) in the case of
the other participating senior executive employees, 100% of base salary for a
period of up to three months and 66-2/3% for a period of up to three
months.
The
material provisions of the long-term disability policy are as follows: in the
event of a “disability” (as defined in the policy), the Company shall pay a
benefit amount that is based upon 60% of the sum of the employee’s base salary
and bonus, not to exceed $16,000 per month per employee. The base salary amount
is equal to the base salary being paid in the year in which the disability
occurs. The bonus amount is based upon the average of either the employee’s
prior two or three years’ bonuses earned under the Company’s management
incentive plan or any successor plan, which will be determined by the insurance
carrier selected to insure the plan.
Other
Benefits and Perquisites
All
employees, including executive officers, are eligible to receive standard
health, disability, life and travel insurance. In addition, the
Corporation provides vehicles to certain executives for use on Company
business. For the fiscal year ended January 31, 2008, the total
reimbursed expenses, excluding standard health and travel insurance, for all
named executive officers related to other benefits and perquisites are included
in column (g), “All Other Compensation” in the Summary Compensation Table on
page 17.
The
Company has no formal stock ownership requirement for its named executive
officers.
COMPENSATION AND
MANAGEMENT DEVELOPMENT COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION
Management
of the Company has prepared the Compensation Discussion and Analysis as required
by Item 402(b) of Regulation S-K, and the Committee has reviewed and
discussed it with Management. Based on this review and discussion, the Committee
recommended that the Compensation Discussion and Analysis be included in the
proxy statement for the Company’s 2008 Annual Meeting of
Shareholders.
Submitted
by the Compensation and Management Development Committee,
|
|
George
H. Glatfelter II (Chairman)
|
|
|
Nicholas
DeBenedictis
|
|
|
Constantine
N. Papadakis, Ph.D.
|
April 3,
2008
COMPENSATION
COMMITTEE
INTERLOCKS
AND INSIDER PARTICIPATION
No member
of the Company’s Compensation and Management Development Committee is currently,
or ever has been, an employee or officer of the Company or any of its
subsidiaries, nor has any member had any relationship with the Company, the
disclosure of which is required under Item 404 of Regulation S-K promulgated by
the SEC. None of the executive officers of the Company has served as
a Director or member of a Compensation Committee (or other committee serving an
equivalent function) of any other entity whose executive officers served as a
Director or member of the Compensation and Management Development Committee of
the Company.
SUMMARY COMPENSATION
TABLE
The table
below summarizes the total compensation earned by each of the named executive
officers during the fiscal years 2008 and 2007.
The named
executive officers did not receive any payments which would be characterized as
“Bonus” payments during the fiscal years 2008 and 2007 except to the extent of
the amounts listed under column (e), “Non-Equity Incentive Plan Compensation,”
which represent the annual incentive awards for fiscal years 2008 and 2007 under
the Company’s Management Incentive Plan. The fiscal year 2008 awards were
approved by the Compensation and Management Development Committee at its
February 25, 2008 meeting, and became payable on March 15,
2008.
|
(a)
|
|
(b)
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
Name and Principal
Position
|
|
Year
|
|
Salary
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
(3)
|
|
|
All Other
Compensation
($)
(4)
|
|
|
Total
($)
(5)
|
|
|
Raymond
J. De Hont
|
|
2008
|
|
|
$310,000
|
|
|
|
$108,708
|
|
|
|
$69,281
|
|
|
|
$25,897
|
|
|
|
$22,170
|
|
|
|
$536,056
|
|
|
Chairman,
Chief Executive Officer and President
|
|
2007
|
|
|
290,000
|
|
|
|
61,801
|
|
|
|
51,875
|
|
|
|
40,298
|
|
|
|
5,378
|
|
|
|
449,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
J. Morgan
|
|
2008
|
|
|
210,000
|
|
|
|
45,239
|
|
|
|
37,838
|
|
|
|
12,657
|
|
|
|
16,098
|
|
|
|
321,832
|
|
|
Senior
Vice President-Finance, Secretary, Treasurer and Chief Financial
Officer
|
|
2007
|
|
|
201,000
|
|
|
|
33,871
|
|
|
|
26,920
|
|
|
|
42,301
|
|
|
|
5,049
|
|
|
|
309,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Tetley
|
|
2008
|
|
|
182,000
|
|
|
|
28,072
|
|
|
|
28,163
|
|
|
|
1,628
|
|
|
|
12,560
|
|
|
|
252,423
|
|
|
Executive
Vice President-Product Recovery/Pollution Control Technologies and General
Manager, Strobic Air Corporation
|
|
2007
|
|
|
175,000
|
|
|
|
28,978
|
|
|
|
-
|
|
|
|
10,804
|
|
|
|
4,395
|
|
|
|
219,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
P. Replogle
|
|
2008
|
|
|
150,800
|
|
|
|
22,702
|
|
|
|
27,966
|
|
|
|
27,234
|
|
|
|
14,247
|
|
|
|
242,949
|
|
|
Vice
President and Assistant to President
|
|
2007
|
|
|
145,000
|
|
|
|
16,832
|
|
|
|
16,183
|
|
|
|
40,133
|
|
|
|
3,195
|
|
|
|
221,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
C. Kimmer
|
|
2008
|
|
|
148,000
|
|
|
|
19,039
|
|
|
|
50,033
|
|
|
|
3,080
|
|
|
|
14,147
|
|
|
|
234,299
|
|
|
Vice
President and General Manager, Duall Division
|
|
2007
|
|
|
141,000
|
|
|
|
12,333
|
|
|
|
52,875
|
|
|
|
19,726
|
|
|
|
3,467
|
|
|
|
229,401
|
|
|
(1)
|
The
amounts in column (c) include base
salary.
|
|
(2)
|
The
amounts in column (d) represent the dollar amount recognized for financial
statement reporting purposes for the fiscal years ended January 31,
2008 and 2007, in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 123(R) for stock options, which include amounts
from awards granted prior to the fiscal years 2008 and 2007 to the extent
such options became exercisable in fiscal years 2008 and 2007,
respectively, as well as options granted in such fiscal years to the
extent exercisable. The fair value of these awards is based on the
Black-Scholes option pricing model on the date of grant. Assumptions
used in the calculation of these amounts are included in the “Stock-Based
Compensation” footnote to the Company’s audited financial statements for
the fiscal year ended January 31, 2008 included in the Company’s Annual
Report on Form 10-K filed with the SEC on April 11,
2008.
|
|
(3)
|
The
amounts in column (f) represent the actuarial increase in the present
value of the named executive officers’ benefits under the Company’s
Salaried Pension Plan and, in addition, the Pension Restoration Plan for
Messrs. De Hont and Morgan, and the Deferred Compensation Plan for Mr.
Kimmer, further described in the “Pension Benefits” section on page
20. The increase was calculated using the interest rate, discount
rate and form of payment assumptions consistent with those used in the
Company’s financial statements. The calculation assumes benefit
commencement is at normal retirement age (age 65), and was calculated
without respect to pre-retirement death, termination or
disability.
|
|
(4)
|
The
amounts in column (g) “All Other Compensation” for fiscal year 2008,
consist of the following:
|
|
|
|
401(k)
|
|
|
401(k)
|
|
|
|
|
|
Life
|
|
|
|
|
|
|
|
|
|
|
Match
|
|
|
Discretionary
|
|
|
Car
|
|
|
Insurance
|
|
|
Disability
|
|
|
Total
|
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
Raymond
J. De Hont
|
|
|
$4,637
|
|
|
|
$14,442
|
|
|
|
$934
|
|
|
|
$1,314
|
|
|
|
$843
|
|
|
|
$22,170
|
|
|
Gary
J. Morgan
|
|
|
4,031
|
|
|
|
9,462
|
|
|
|
944
|
|
|
|
1,021
|
|
|
|
640
|
|
|
|
16,098
|
|
|
Paul
A. Tetley
|
|
|
3,634
|
|
|
|
5,451
|
|
|
|
2,027
|
|
|
|
885
|
|
|
|
563
|
|
|
|
12,560
|
|
|
Robert
P. Replogle
|
|
|
2,832
|
|
|
|
6,670
|
|
|
|
3,543
|
|
|
|
733
|
|
|
|
469
|
|
|
|
14,247
|
|
|
Gregory
C. Kimmer
|
|
|
3,333
|
|
|
|
8,023
|
|
|
|
1,609
|
|
|
|
719
|
|
|
|
463
|
|
|
|
14,147
|
|
|
(5)
|
The
amounts in column (h) represent the total of columns (c) through
(g).
|
GRANTS OF PLAN-BASED
AWARDS
The table below provides information
about equity and non-equity awards granted to the named executive officers
during the fiscal years 2008 and 2007.
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
(h)
|
|
|
(i)
|
|
|
|
|
Fiscal
Year Ended/
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
|
|
|
Exercise
or Base
Price of
Option
|
|
|
Grant
Date Fair
Value of
Stock and
Option
|
|
|
Grant
Date Price of
|
|
|
|
|
Grant
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
|
Options
|
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
(1)(2)
|
|
|
($/Sh)
(1)(3)
|
|
|
($)
(1)(4)
|
|
|
($/Sh)
(1)(2)
|
|
|
Raymond
J. De Hont
|
|
01/31/2008
|
(5
|
)
|
|
$0
|
|
|
|
$155,000
|
|
|
|
$232,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
01/31/2007
|
(5
|
)
|
|
0
|
|
|
|
116,000
|
|
|
|
174,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/
10/2007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
45,500
|
|
|
|
$11.75
|
|
|
|
$139,230
|
|
|
|
$11.96
|
|
|
|
|
12/15/2006
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,667
|
|
|
|
10.90
|
|
|
|
141,050
|
|
|
|
10.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
J. Morgan
|
|
01/31/2008
|
(5
|
)
|
|
0
|
|
|
|
84,000
|
|
|
|
126,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
01/31/2007
|
(5
|
)
|
|
0
|
|
|
|
60,300
|
|
|
|
90,450
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/10/2007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,500
|
|
|
|
11.75
|
|
|
|
59,670
|
|
|
|
11.96
|
|
|
|
|
12/15/2006
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
10.90
|
|
|
|
60,450
|
|
|
|
10.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Tetley
|
|
01/31/2008
|
(5
|
)
|
|
0
|
|
|
|
63,700
|
|
|
|
95,550
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
01/31/2007
|
(5
|
)
|
|
0
|
|
|
|
52,500
|
|
|
|
78,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/10/2007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.75
|
|
|
|
39,780
|
|
|
|
11.96
|
|
|
|
|
12/15/2006
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,334
|
|
|
|
10.90
|
|
|
|
40,300
|
|
|
|
10.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
P. Replogle
|
|
01/31/2008
|
(5
|
)
|
|
0
|
|
|
|
37,700
|
|
|
|
56,550
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
01/31/2007
|
(5
|
)
|
|
0
|
|
|
|
36,250
|
|
|
|
54,375
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/10/2007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/15/2006
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,000
|
|
|
|
10.90
|
|
|
|
24,180
|
|
|
|
10.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
C. Kimmer
|
|
01/31/2008
|
(5
|
)
|
|
0
|
|
|
|
37,000
|
|
|
|
55,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
01/31/2007
|
(5
|
)
|
|
0
|
|
|
|
35,250
|
|
|
|
52,875
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
12/10/2007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,800
|
|
|
|
11.75
|
|
|
|
23,868
|
|
|
|
11.96
|
|
|
|
|
12/15/2006
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,000
|
|
|
|
10.90
|
|
|
|
24,180
|
|
|
|
10.91
|
|
|
(1)
|
All
references to per option awards and price of options have been restated to
reflect the effect of the four-for-three stock split effective November
14, 2007.
|
|
(2)
|
The
amounts in column (f) represent the number of stock options granted
on December 10, 2007 and December 15, 2006, as part of the fiscal
years 2008 and 2007 long-term incentive
award.
|
|
(3)
|
The
amounts in column (g) represent the exercise price of the stock
options, which was the fair market value on the date of grant, calculated
by taking the average of the high and low trading values of the Company’s
common stock on the New York Stock Exchange on the date of grant. The
closing trade value on the Company’s Common Shares on the New York Stock
Exchange on the December 10, 2007 and December 15, 2006 was $11.96 and
$10.91, respectively, as presented in column
(i).
|
|
(4)
|
The
amounts in column (h) represents the fair value of the stock options
granted on December 10, 2007 and December 15, 2006 as part of the
fiscal years 2008 and 2007 long-term incentive award. The value is
computed in accordance with SFAS No. 123(R), using a Black-Scholes option
pricing model value of $3.06 and $3.02 per option,
respectively.
|
|
(5)
|
Columns (c),
(d) and (e) show for each named executive officer the potential
value of the payout of their fiscal years 2008 and 2007 annual incentive
award if the threshold, target and maximum performance goals are
satisfied. Annual incentive awards for fiscal years 2008 and 2007 were
paid as follows, respectively, and are reported in column (e) of the
Summary Compensation Table on page 17: Mr. De Hont, $69,281 and
$51,875; Mr. Morgan, $37,838 and $26,920; Mr. Tetley, $28,163 and $0; Mr.
Replogle, $27,966 and $16,183 and Mr. Kimmer, $50,033 and $52,875. The
Management Incentive Plan is described in the Compensation Discussion and
Analysis on pages 9-15.
|
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR END
The
following table provides information on the holdings of stock options by the
named executive officers at January 31, 2008.
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
|
Option Awards
(1)
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
(2)
|
|
Option
Expiration
Date
(
3)
|
|
Raymond
J. De Hont
|
|
|
9,956
|
|
|
|
-
|
|
|
|
$4.1659
|
|
|
|
12/16/2009
|
|
|
|
|
|
17,779
|
|
|
|
-
|
|
|
|
5.1047
|
|
|
|
2/26/2011
|
|
|
|
|
|
17,779
|
|
|
|
-
|
|
|
|
5.5476
|
|
|
|
2/25/2012
|
|
|
|
|
|
35,556
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
44,446
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
44,446
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
45,334
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
15,555
|
|
|
|
31,112
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
45,500
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
J. Morgan
|
|
|
13,156
|
|
|
|
-
|
|
|
|
4.1659
|
|
|
|
12/16/2009
|
|
|
|
|
|
15,408
|
|
|
|
-
|
|
|
|
5.1047
|
|
|
|
2/26/2011
|
|
|
|
|
|
15,408
|
|
|
|
-
|
|
|
|
5.5476
|
|
|
|
2/25/2012
|
|
|
|
|
|
17,779
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
17,779
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
17,779
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
18,667
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
6,667
|
|
|
|
13,333
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
19,500
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
A. Tetley
|
|
|
9,956
|
|
|
|
-
|
|
|
|
4.1659
|
|
|
|
12/16/2009
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.1047
|
|
|
|
2/26/2011
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.5476
|
|
|
|
2/25/2012
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
17,779
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
10,667
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
10,667
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
4,444
|
|
|
|
8,890
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
P. Replogle
|
|
|
9,956
|
|
|
|
-
|
|
|
|
4.1659
|
|
|
|
12/16/2009
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.1047
|
|
|
|
2/26/2011
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.5476
|
|
|
|
2/25/2012
|
|
|
|
|
|
7,112
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
10,667
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
10,667
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
2,666
|
|
|
|
5,334
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
C. Kimmer
|
|
|
7,112
|
|
|
|
-
|
|
|
|
5.1047
|
|
|
|
2/26/2011
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.5476
|
|
|
|
2/25/2012
|
|
|
|
|
|
9,956
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
7,112
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
8,000
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
2,666
|
|
|
|
5,334
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
7,800
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
(1)
|
All
references to per option awards and exercise price of options have been
restated to reflect the effect of the four-for-three stock split effective
November 14, 2007.
|
|
(2)
|
The
exercise price of the stock options is the fair market value of the
Company’s Common Shares on the date of grant, calculated by taking the
average of the high and low price of the Company’s Common Shares on the
New York Stock Exchange on the date of
grant.
|
|
(3)
|
Options
granted prior to fiscal year 2007 had a ten-year term and a vesting
schedule of one-third on the date of grant, one-third at the completion of
year one and one-third at the completion of year two. All
options granted during the fiscal years 2008 and 2007 have a ten-year term
and a vesting schedule of one-third per year over three years. The first
vesting date for all options granted during the fiscal years 2008 and 2007
is on the first anniversary date of the grant and is for one-third of the
options that were granted, and the options subsequently vest at a rate of
one-third of the grant per year on the following two anniversary dates,
subject to earlier termination as well as acceleration as elsewhere
described.
|
OPTION EXERCISE
S AND YEAR END
HOLDINGS
The
following table provides information with respect to options exercised during
the fiscal year ended January 31, 2008 by each of the named executive officers
and the status of their options at January 31, 2008. In accordance
with SEC rules, values are calculated by subtracting the exercise price from the
average of the high and low prices of the Company’s Common Shares as reported by
the New York Stock Exchange on the date of exercise, in the case of exercise, or
on January 31, 2008, in the case of fiscal year-end values.
|
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
|
(g)
|
|
|
|
|
|
|
|
|
|
Value
of Unexercised
|
|
|
|
Option Awards
(1)
|
|
|
Number
of Unexercised
|
|
|
In-The-Money
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
|
Options
at FY-End
(1)
|
|
|
Options
at FY-End
(1)(2)
|
|
|
|
Acquired on Exercise
|
|
|
on Exercise
|
|
|
(#
)
|
|
($)
|
|
|
Name
|
|
|
(#)
|
|
|
($)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
Raymond
J. De Hont
|
|
|
-
|
|
|
|
$0
|
|
|
|
230,851
|
|
|
|
76,612
|
|
|
|
$631,364
|
|
|
|
$0
|
|
|
Gary
J. Morgan
|
|
|
-
|
|
|
|
0
|
|
|
|
122,643
|
|
|
|
32,833
|
|
|
|
410,224
|
|
|
|
0
|
|
|
Paul
A. Tetley
|
|
|
-
|
|
|
|
0
|
|
|
|
83,381
|
|
|
|
21,890
|
|
|
|
266,824
|
|
|
|
0
|
|
|
Robert
P. Replogle
|
|
|
-
|
|
|
|
0
|
|
|
|
68,980
|
|
|
|
5,334
|
|
|
|
246,304
|
|
|
|
0
|
|
|
Gregory
C. Kimmer
|
|
|
-
|
|
|
|
0
|
|
|
|
52,802
|
|
|
|
13,134
|
|
|
|
171,755
|
|
|
|
0
|
|
|
(1)
|
All
references to per option awards and exercise price of options have been
restated to reflect the effect of the four-for-three stock split effective
November 14, 2007.
|
|
(2)
|
Market
value of shares covered by in-the-money options on January 31, 2008 less
option exercise price. Options are in-the- money if the market value of
the shares covered thereby is greater than the option exercise
price.
|
Defined
Contribution Plan
Effective
April 1, 1999, the Company implemented a Defined Contribution Plan (the “401(k)
Plan”). All employees of the Company in the United States are
eligible to participate in the 401(k) Plan following completion of one year of
service and attaining age 21. Pursuant to this plan, employees can
contribute up to 25% of their compensation to the Plan. The Company
will match, in the form of Met-Pro Common Shares, up to 50% of the employee’s
contribution up to 4% of compensation. Effective January 1, 2007, the
Company added a discretionary contribution to the Plan for non-bargaining unit
employees in the United States in lieu of the Defined Benefit Plan, which was
frozen on December 31, 2006, and accelerated the eligibility to
participate in the 401(k) Plan from the completion of one year of service to
six-months of service. The discretionary contribution is (i) 2% for
employees under 45 years old or with less than five years of service, (ii) 3%
for employees 45 years or older and between five to nine years of service, or
(iii) 4% for employees 45 years or older and with ten or more years of
service. The levels of discretionary contribution will not change
with the employee’s age or years of service going forward and all future
eligible new hires after April 15, 2006 will receive a discretionary
contribution at the 2% level. During the Company’s fiscal years ended
January 31, 2008 and 2007, the Company made contributions to the 401(k) Plan in
the amount of $19,079 and $5,378 for Raymond J. De Hont, $13,493 and $5,049 for
Gary J. Morgan, $9,085 and $4,395 for Paul A. Tetley, $9,502 and $3,195 for
Robert P. Replogle, $11,356 and $3,467 for Gregory C. Kimmer, and $73,795 and
$26,739 for all executive officers as a group (7 persons).
Salaried
Employee Stock Ownership Plan
Pursuant
to the Company’s Salaried Employee Stock Ownership Plan (the “Ownership Plan”),
the Company may make discretionary contributions to the Company’s Salaried
Employee Stock Ownership Trust (the “Trust”) either in cash or in Company Common
Shares. The Trust uses the cash contributions and dividends received
to purchase shares of the Company’s Common Shares. All full-time
salaried employees who are at least 21 years of age and who have been employed
by the Company on a full-time basis for at least one year are eligible to
participate in the Ownership Plan. All shares acquired by the Trust
are allocated to the accounts of eligible employees based on their respective
salaries. Employees nearing retirement have discretion to diversify a
portion of their investment. There were no contributions by the
Company to the Employee’s Stock Ownership Trust during the fiscal years ended in
2008, 2007 and 2006, and the Company does not presently expect to make any
future contributions to the Trust.
Pension
Plans
The
Salaried Pension Plan (the “Retirement Plan”) is a funded, tax-qualified
noncontributory defined benefit pension plan that covers certain employees,
including the named executive officers. Benefits under the Retirement
Plan are calculated as an annuity of one percent of the participant’s final
average earnings for the five highest consecutive years of the last ten years
multiplied by years of service. Earnings covered by the Retirement
Plan include annual salary and non-equity incentive paid pursuant to the
Company’s Management Incentive Plan. The amount of annual earnings
that may be considered in calculating benefits under the Retirement Plan is
limited by law. For the fiscal year ended 2008, the annual limitation
was $225,000.
Effective
February 1, 2000, the Board of Directors adopted a Non-Qualified Pension
Restoration Plan for Mr. Morgan. Mr. De Hont was added to the
Non-Qualified Pension Restoration Plan effective February 1,
2001. The Non-Qualified Pension Restoration Plan is an unfunded
supplemental plan that provides out of the Company’s general assets an amount
substantially equal to the difference between the amount that would have been
payable under the Retirement Plan, in the absence of legislation limiting
pension benefits and earnings that may be considered in calculating pension
benefits, and the amount actually payable under the Retirement
Plan. As noted elsewhere in this Report, the accrual of future
benefits under the Non-Qualified Pension Restoration Plan is expected to cease
as of May 1, 2008, when the SERP (as defined earlier in this Report) is expected
to take effect.
The
following table shows the estimated annual Retirement Plan and Pension
Restoration Plan benefits on a straight life (no death benefit) basis payable
for various earnings levels upon retirement at age 65, after 15, 20, 25, 30 and
35 years of credited service to the Company:
|
|
|
|
|
Years
of Service
|
|
|
Five
Year Average Earnings
|
|
|
|
|
15
|
|
|
|
20
|
|
|
|
25
|
|
|
|
30
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100,000
|
|
|
|
|
$15,000
|
|
|
|
$20,000
|
|
|
|
$25,000
|
|
|
|
$30,000
|
|
|
|
$35,000
|
|
|
|
125,000
|
|
|
|
|
18,750
|
|
|
|
25,000
|
|
|
|
31,250
|
|
|
|
37,500
|
|
|
|
43,750
|
|
|
|
150,000
|
|
|
|
|
22,500
|
|
|
|
30,000
|
|
|
|
37,500
|
|
|
|
45,000
|
|
|
|
52,500
|
|
|
|
170,000
|
|
|
|
|
25,500
|
|
|
|
34,000
|
|
|
|
42,500
|
|
|
|
51,000
|
|
|
|
59,500
|
|
|
|
175,000
|
|
|
|
|
26,250
|
|
|
|
35,000
|
|
|
|
43,750
|
|
|
|
52,500
|
|
|
|
61,250
|
|
|
|
200,000
|
|
|
|
|
30,000
|
|
|
|
40,000
|
|
|
|
50,000
|
|
|
|
60,000
|
|
|
|
70,000
|
|
|
|
225,000
(1)
|
|
|
|
|
33,750
|
|
|
|
45,000
|
|
|
|
56,250
|
|
|
|
67,500
|
|
|
|
78,750
|
|
|
|
250,000
|
|
|
|
|
37,500
|
|
|
|
50,000
|
|
|
|
62,500
|
|
|
|
75,000
|
|
|
|
87,500
|
|
|
|
300,000
|
|
|
|
|
45,000
|
|
|
|
60,000
|
|
|
|
75,000
|
|
|
|
90,000
|
|
|
|
105,000
|
|
|
|
350,000
|
|
|
|
|
52,500
|
|
|
|
70,000
|
|
|
|
87,500
|
|
|
|
105,000
|
|
|
|
122,500
|
|
|
|
400,000
|
|
|
|
|
60,000
|
|
|
|
80,000
|
|
|
|
100,000
|
|
|
|
120,000
|
|
|
|
140,000
|
|
|
|
450,000
|
|
|
|
|
67,500
|
|
|
|
90,000
|
|
|
|
112,500
|
|
|
|
135,000
|
|
|
|
157,500
|
|
|
|
500,000
|
|
|
|
|
75,000
|
|
|
|
100,000
|
|
|
|
125,000
|
|
|
|
150,000
|
|
|
|
175,000
|
|
|
(1)
|
Internal
Revenue Code Section 401(a)(17) limits earnings used to calculate
Retirement Plan benefits amounted to $225,000 and $220,000 for fiscal
years 2008 and 2007, respectively.
|
As of
January 31, 2008, Messrs. De Hont and Morgan had accrued 12 and 28 years of
service, respectively, under the Retirement Plan and the related Pension
Restoration Plan. Messrs. Tetley, Replogle and Kimmer each had
accrued 10, 33 and 19 years of service, respectively, under the Retirement Plan
for this same period.
Deferred
Compensation Plan
Prior to
the acquisition of the Duall Division in fiscal year 1989, Gregory C. Kimmer,
Vice President-Duall Division, was party to a Deferred Compensation Plan, which
was effective December 4, 1987. The Deferred Compensation Plan
provides Mr. Kimmer with a monthly retirement income equal to $2,093 for a
period of fifteen years beginning at the retirement age of sixty-five
years. In the event of Mr. Kimmer’s death after retirement, whether
prior to or after he has begun to receive the retirement benefits, his
designated beneficiary or beneficiaries shall be entitled to receive any
remaining balance of such payments.
Mr.
Kimmer shall receive a non-forfeitable right to the benefits above equivalent to
one (1) divided by the difference between the retirement age of sixty-five years
and Mr. Kimmer’s age as of the effective date of the Deferred Compensation Plan.
The percentage shall then be multiplied by the number of actual years of service
provided for Mr. Kimmer to give his vested portion of the benefits provided
hereunder. Mr. Kimmer was thirty-two years old on the effective date
of the Deferred Compensation Plan and has a total of thirty years of
service.
In the
event of a disability, Mr. Kimmer shall become one-hundred percent vested in his
right to receive a monthly disability payment. Mr. Kimmer shall
receive a monthly income equal to twenty-five percent of his former monthly base
salary as of April 1, 1986, which is defined as $650, increased annually by
three and one-half percent, compounded annually, up to and including the year he
becomes disabled. These monthly payments shall continue for a term of
fifteen years.
In the
event of Mr. Kimmer’s death while employed by the Company, he shall become
one-hundred percent vested in his right to receive a death
benefit. Mr. Kimmer’s designated beneficiary or beneficiaries shall
be entitled to receive a monthly death benefit equal to one-hundred percent of
his monthly base salary as of April 1, 1986, which is $2,600. These
monthly payments shall continue for a period of fifteen years.
On June
4, 1986, the prior owner of Duall Division, Duall Industries Inc., purchased a
whole life policy from Northwestern Mutual Life to cover the liabilities of the
Deferred Compensation Plan for Mr. Kimmer. This policy is owned by
the Company. The cash value of this policy as of January 31, 2008
amounted to $135,915.
The
following table shows, as to each of the named executive officers, (1) the
number of years of Credited Service as of October 31, 2007 (measurement date of
plans), (2) present value of the accumulated benefit and (3) the payments
during the last fiscal year.
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(#)
(1)
|
|
Present
Value of Accumulated Benefit
($)
(2)
|
|
Payments
During
Last
Fiscal Year
($)
|
|
Raymond
J. De Hont
|
|
Retirement
Plan
|
|
|
11.50
|
|
|
|
$104,484
|
|
|
|
$0
|
|
|
|
|
Pension
Restoration Plan
|
|
|
12.33
|
|
|
|
76,677
|
|
|
|
0
|
|
|
Gary
J. Morgan
|
|
Retirement
Plan
|
|
|
26.75
|
|
|
|
214,164
|
|
|
|
0
|
|
|
|
|
Pension
Restoration Plan
|
|
|
27.58
|
|
|
|
49,766
|
|
|
|
0
|
|
|
Paul
A. Tetley
|
|
Retirement
Plan
|
|
|
9.92
|
|
|
|
53,502
|
|
|
|
0
|
|
|
Robert
P. Replogle
|
|
Retirement
Plan
|
|
|
33.08
|
|
|
|
507,741
|
|
|
|
0
|
|
|
Gregory
C. Kimmer
|
|
Retirement
Plan
|
|
|
18.50
|
|
|
|
105,952
|
|
|
|
0
|
|
|
|
|
Deferred
Compensation Plan
|
|
|
20.83
|
|
|
|
65,838
|
|
|
|
0
|
|
|
(1)
|
Based upon the pension plans
measurement date of October 31,
2007.
|
|
(2)
|
The
amounts in column (d) represent the present value of accumulated
benefits for the period ended October 31, 2007. The actuarial values
were based on the mortality table and discount rate assumptions used in
the calculation in the “Employee Benefit Plans” footnote in the Company’s
audited financial statements for the fiscal year ended January 31, 2008
included in the Company’s Annual Report on Form 10-K filed with the SEC on
April 11, 2008.
|
POTENTIAL
PAYMENTS UPON TERMINATION
OR CHANGE OF CON
TROL
Mr. De
Hont is party to an Amended and Restated Key Employee Severance Agreement dated
April 4, 2001 with the Company which provides that in the event of a “change of
control” and the “involuntary termination of his employment” within eighteen
months thereafter, the Company shall pay him an amount that is equal to twenty
four months of his base salary in effect at the time that the change of control
occurs. Payment shall be made in a lump sum upon the involuntary
termination. Mr. De Hont’s current base annual salary, effective February 1,
2008, is $341,000.
A “change
in control” shall be deemed to have occurred as of the date on which any of the
following events shall occur: (i) any “person” or “group of persons acting in
concert”, who are not part of the present management, becomes the “beneficial
owner”, directly or indirectly, of securities of the Company representing thirty
percent (30%) or more of the combined voting power of the Company’s then
outstanding securities; or (ii) there shall be a change in the composition of
the Company’s Board of Directors so that a majority of the Directors in office
on the effective date of the Key Employee Severance Agreement no longer
constitute a majority of the Board of Directors; provided, however, that any
Director elected upon the recommendation of the then present majority shall be
considered to be a part of the present majority; or (iii) if the shareholders
approve of (a) a reorganization, merger, or consolidation, in each case with
respect to which persons who were shareholders of the Company immediately prior
to such transaction do not, immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or consolidated corporation’s
then outstanding securities entitled to vote generally in the election of
directors or (b) the liquidation or dissolution of the Company or (c)
the sale of all or substantially all of the Company’s assets; or (iv) there
shall be a change of control as defined by any other agreement or plan to which
the Company is a party.
“Involuntary
termination of employment” means termination without “cause” (as defined), or
termination of employment by Mr. De Hont as a result of a reduction in his
status, or duties, or responsibilities, or rate of compensation, or the
imposition of intolerable working conditions.
Mr. De
Hont has agreed that in consideration of the granting of the benefits under the
agreement, he will continue to use his best efforts to perform his duties as
assigned to him by the Company, and that in the event a change of control is
pending or threatened, he will not voluntarily terminate his employment prior to
the actual change of control but will continue to perform his duties in the same
manner and with the same effort as he had employed prior to the occurrence of
such events.
Mr.
Morgan is also party to an Amended and Restated Key Employee Severance Agreement
on terms that are identical to those to which Mr. De Hont is party, except that
the amount of compensation is equal to eighteen months of his base salary in
effect at the time of the change of control. Mr. Morgan’s current base annual
salary, effective February 1, 2008, is $220,000.
None of
the other named executive officers are party to a Key Employee Severance
Agreement or other similar agreement with respect to the termination of
employment following a change in control.
The
Company’s stock option agreements provide for the acceleration and immediate
vesting of all unvested stock options upon a “change of control”, which is
defined in the same way as such term is defined in the Key Employee Severance
Agreement. The following table summarizes the potential payments and intrinsic
value (the value based upon the fiscal year end closing price of $10.34 per
Common Share minus the stock option exercise price) derived from the accelerated
vesting of stock options upon a change of control termination if it
hypothetically were to have occurred on January 31, 2008, the last day of our
fiscal year:
|
|
|
Key
|
|
|
Accelerated
|
|
|
|
|
|
|
|
Employee
|
|
|
Vesting
of
|
|
|
Total
|
|
|
Name
|
|
Severance
|
|
|
Options
|
|
|
($)
|
|
|
Raymond
J. De Hont
|
|
|
$682,000
|
|
|
|
$0
|
|
|
|
$682,000
|
|
|
Gary
J. Morgan
|
|
|
330,000
|
|
|
|
-
|
|
|
|
330,000
|
|
|
Paul
A. Tetley
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Robert
P. Replogle
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Gregory
C. Kimmer
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
CERTAIN
BUSINESS RELATIONSHIPS
The
Company has no transactions or other payments to disclose under this heading
under applicable SEC rules for the fiscal year 2008.
The
Company’s compensation philosophy for non-employee Directors is consistent with
the philosophy established for the Company’s named executive officers. The
compensation program is designed to attract and retain Directors with the
necessary experience to represent the Company’s shareholders and to advise the
Company’s executive management. It is also important that the compensation
program aligns the Board of Directors with the interests of long-term
shareholders. The Company uses a combination of cash and stock options to
compensate Directors, and targets compensation survey data from the companies
included in the Compensation Peer Group discussed in the Compensation Discussion
and Analysis section of this proxy statement, as well as similar industry
segments and industry in general.
Cash
Compensation Paid to Board Members and for Committee Participation
For
fiscal year 2008, members of the Board who were not employees of the Company
received an annual cash retainer of $10,000, paid in quarterly
increments. In addition, the Chair of the Compensation and Management
Development Committee received an annual cash retainer in the amount of $3,500,
the Chair of the Audit Committee received an annual cash retainer in the amount
of $5,000 and the Chair of the Corporate Governance and Nominating Committee
received an annual retainer in the amount of $1,500. Directors also receive a
fee of $1,250 per day for each day during which one or more Board meetings are
attended (including telephonic meetings as to which the workload, in preparation
of the meeting or otherwise, justifies the payment, in the view of the
Chairman), and $800 per day for each day in which Committee meetings are
attended (including telephonic meetings as to which the workload, in preparation
of the meeting or otherwise, justifies the payment, in the view of the
Chairman). Effective February 1, 2007, members of the Board received
quarterly payments distributed in advance by the Company of amounts due for
Board and Committee membership and attendance. Directors who are
employees of the Company receive no compensation for their service as Directors.
In February 2008,
the Committee approved an increase in the retainer paid to the Chair of the
Audit Committee, to $7,500 per year, in recognition of the amount of work
associated with such position.
Option
Awards Paid to Board Membe
rs
The
non-employee Directors are paid an annual stock option grant on terms that are
intended to be substantially similar to the terms of the options granted to the
Company’s executive officers. The option terms, which the Board has
the authority to change from time to time, subject to the terms of the Company’s
stock option plans, in general, are as follows: an exercise price that is equal
to the average of the high and low price of the Company’s Common Shares on the
date of grant; a vesting period of three years; provided, however, that in the
event of a “change of control”, any unvested portion of the option shall become
immediately exercisable. The vesting period for stock option grants
prior to December 15, 2006 was two years, with one-third of the shares covered
by the option being immediately exercisable. The duration of the
option shall be for up to ten years, subject to earlier termination under
various conditions. The grant date is typically the same date as the
date that options are granted to the Company’s senior
employees. Consistent with this, in December 2007, the Committee
approved a stock option award of 13,000 shares to each non-employee Director,
which was intended to be substantially equivalent in value to the grant made in
December 2006, which was for 13,333 shares (adjusted for stock split) for each
non-employee Director, based upon the Black-Scholes values at the respective
times. The exercise price of the 2007 grant was $11.75 per share, which is the
average of the high and low of the Company’s Common Shares as quoted on the New
York Stock Exchange on the date of the grant.
Directors’
Retirement Plan
The
Board’s current policy as to an annual grant of options for non-employee
Directors was intended to replace participation by non-vested Directors in the
Directors’ Retirement Plan that the Board had established in 1994 (the
“Directors’ Plan”). Of the Company’s current Directors, only Dr. Lawley will
receive benefits in the future under the Directors’ Plan as a result of the fact
that each such person was vested as of December 16, 1999, the date of the
Board’s action on this plan. The accrual of benefits under the Directors’ Plan
for Dr. Lawley ceased as of December 16, 1999, in that Dr. Lawley elected to
receive options as aforementioned for continued service as Director in lieu of
participation under the Directors’ Plan. The Directors’ Plan, which
was established in 1994, provides that Directors who have completed six years of
service will be eligible to receive deferred compensation after they cease to
serve or reach age 70, whichever last occurs. Payment will be made in
annual installments based on $1,000 for each year of service as a Director, up
to a maximum of $10,000 and for a period equal to the length of service, up to a
maximum of 15 installments. Directors who have served as a Chief Executive
Officer for at least six years will be eligible to receive additional annual
deferred compensation at the rate of $1,000 for each year of service as an
officer and/or Director, up to a maximum of $20,000, for a period equal to the
length of such service, up to twenty years. In the event of death
before payments have been completed, the remaining annuity payments will be paid
to the Director’s surviving spouse. If there is no surviving spouse,
a lump sum payment will be paid to the Director’s estate equal to the sum of ten
annual retirement payments, less the total paid prior to death.
The
Directors’ Plan further provides that if a Director’s services are terminated
upon or after a “change in control” of the Company, the Director is entitled to
an immediate lump sum payment of the benefits then applicable to such Director,
and future payments due under the Plan to former Directors shall be accelerated
and shall be immediately due and payable. For purposes of the Plan, a
“change in control” shall be deemed to occur if any person or group of persons
as defined shall become the beneficial owner of 30% or more of the Company’s
voting securities, or there shall be a change in the majority composition of the
Company’s Board of Directors, or the shareholders of the Company shall approve a
merger or other similar reorganization in which the persons who were
shareholders of the Company prior to such merger do not immediately thereafter
own more than 50% of the voting securities of the
Company, or in the event of a
change of control as defined in
any other agreement or plan of the Company. There are
additional provisions to vest stock options upon death, disability, retirement
and cessation of the Director’s services.
DIRECTOR SUMMARY
COMPENSATION TABLE
The following table summarizes the
total compensation earned by each Director during the fiscal year
2008.
|
(a)
|
|
(b)
|
|
|
(c)
|
|
(d)
|
|
(e)
|
|
Name
|
|
Fees Earned or
Paid in Cash
($)
(1)
|
|
|
Option
Awards
($)
(2)
|
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
(3)
|
|
Total
($)
(4)
|
|
George
H. Glatfelter II
|
|
$26,250
|
|
|
$31,204
|
|
$0
|
|
|
$57,454
|
|
|
Alan
Lawley, Ph.D.
|
|
21,950
|
|
|
31,204
|
|
3,450
|
|
|
56,604
|
|
|
Nicholas
DeBenedictis
|
|
24,350
|
|
|
31,204
|
|
0
|
|
|
55,554
|
|
|
Michael
J. Morris
|
|
28,550
|
|
|
31,204
|
|
0
|
|
|
59,754
|
|
|
Constantine
N. Papadakis, Ph.D.
|
|
24,250
|
|
|
31,204
|
|
0
|
|
|
55,454
|
|
|
(1)
|
The
amounts in column (b) represent fees paid for board retainers,
committee retainers, board meetings and committee
meetings.
|
|
(2)
|
The
amounts in column (c) represent the dollar amount recognized for financial
statement reporting purposes for the fiscal year ended January 31,
2008, in accordance with SFAS No. 123(R) for stock options, regardless of
when the options were granted, and include amounts from awards granted
prior to the fiscal year 2008. The fair value of these awards is
based on the Black-Scholes option pricing model on the date of
grant. Assumptions used in the calculation of these amounts are
included in the “Stock-Based Compensation” footnote to the Company’s
audited financial statements for the fiscal year ended January 31, 2008
included in the Company’s Annual Report on Form 10-K filed with the SEC on
April 11, 2008.
|
|
(3)
|
The
amounts in column (d) represent the actuarial increase in the present
value of benefits under the Directors’ Retirement Plan for Dr. Lawley as
described in the Directors’ Retirement Plan section on page
24.
|
|
(4)
|
The
amounts in column (e) represent the total of columns (b), (c) and
(d).
|
|
(5)
|
The
following table provides information on the holdings of stock options by
each Director at January 31,
2008.
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
|
Option Awards
(6)
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
(7)
|
|
Option
Expiration
Date
(8)
|
|
George
H. Glatfelter II
|
|
|
12,446
|
|
|
|
-
|
|
|
|
$7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
13,334
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
4,444
|
|
|
|
8,890
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
Lawley, Ph.D.
|
|
|
4,446
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
4,444
|
|
|
|
8,890
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicholas
DeBenedictis
|
|
|
11,854
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
12,446
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
12,446
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
13,334
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
4,444
|
|
|
|
8,890
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Morris
|
|
|
11,854
|
|
|
|
-
|
|
|
|
$5.5476
|
|
|
|
2/25/2012
|
|
|
|
|
|
11,854
|
|
|
|
-
|
|
|
|
5.5181
|
|
|
|
2/24/2013
|
|
|
|
|
|
12,446
|
|
|
|
-
|
|
|
|
9.6440
|
|
|
|
2/23/2014
|
|
|
|
|
|
12,446
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
13,334
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
4,444
|
|
|
|
8,890
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constantine
N. Papadakis, Ph.D.
|
|
|
12,446
|
|
|
|
-
|
|
|
|
7.4110
|
|
|
|
2/22/2015
|
|
|
|
|
|
13,334
|
|
|
|
-
|
|
|
|
9.0375
|
|
|
|
12/15/2015
|
|
|
|
|
|
4,444
|
|
|
|
8,890
|
|
|
|
10.8975
|
|
|
|
12/15/2016
|
|
|
|
|
|
-
|
|
|
|
13,000
|
|
|
|
11.7500
|
|
|
|
12/10/2017
|
|
|
(6)
|
All
references to per option awards and exercise price of options have been
restated to reflect the effect of the four-for-three stock split effective
November 14, 2007.
|
|
(7)
|
The
exercise price of the stock options is the fair market value of the
Company’s Common Shares on the date of grant, calculated by taking the
average of the high and low price of the Company’s Common Shares on the
New York Stock Exchange on the date of
grant.
|
|
(8)
|
Options
granted prior to fiscal year 2007 had a ten-year term and a vesting
schedule of one-third on the date of grant, one-third at the completion of
year one and one-third at the completion of year two. All options granted
during the fiscal years 2008 and 2007 have a ten-year term and a vesting
schedule of one-third per year over three years. The first vesting date
for all options granted during the fiscal years 2008 and 2007 is on the
first anniversary date of the grant and is for one-third of the options
that were granted, and the options subsequently vest at a rate of
one-third of the grant per year on the following two anniversary dates,
subject to earlier termination as well as acceleration as elsewhere
described.
|
The
following table shows, as to each Director who is eligible for pension plan
benefits, (1) the number of years of Credited Service as of October 31,
2007 (measurement date of plans), (2) present value of the accumulated
benefit and (3) the payments during the last fiscal year.
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
Name
|
|
Plan Name
|
|
Number of Years
Credited Service
(#)
(1)
|
|
Present
Value of Accumulated Benefit
($)
(2)
|
|
Payments
During
Last
Fiscal Year
($)
|
|
Alan
Lawley, Ph.D.
|
|
Directors’
Retirement Plan
|
|
|
9.00
|
|
|
|
$53,110
|
|
|
|
$0
|
|
|
(1)
|
Based upon the pension plans
measurement date of October 31,
2007.
|
|
(2)
|
The
amounts in column (d) represent the present value of accumulated
benefits for the period ended October 31, 2007. The actuarial values
were based on the mortality table and discount rate assumptions used in
the calculation in the “Employee Benefit Plans” footnote in the Company’s
audited financial statements for the fiscal year ended January 31, 2008
included in the Company’s Annual Report on Form 10-K filed with the SEC on
April 11, 2008.
|
The Board
receives recommendations periodically from the Compensation and Management
Development Committee as to appropriate policies on Directors’ compensation, and
may make changes from time to time based upon such recommendations.
REPORT
OF THE AUDIT COMMITTEE
The Audit
Committee of the Board of Directors consists of three Directors, all of whom are
independent in accordance with New York Stock Exchange listing standards, the
rules of the SEC applicable to audit committee members and the Company’s
Corporate Governance Guidelines.
The
current charter of the Audit Committee of the Board specifies that the purpose
of the Audit Committee is to assist the Board in its oversight of:
|
|
¨
|
the
integrity of the Company’s financial statements and internal
controls;
|
|
|
¨
|
the
Company’s compliance with legal and regulatory
requirements;
|
|
|
¨
|
the
qualifications and independence of the Company’s independent registered
public accountants; and
|
|
|
¨
|
the
performance of the Company’s internal audit function and the
independent registered public
accountants.
|
The full
text of the Audit Committee’s charter is available on our Company’s website at
www.met-pro.com
under
the “Investor Relations – Corporate Governance” captions. A copy of
the entire charter may also be obtained upon request from the Company’s
Corporate Secretary.
The
Company’s management is responsible for preparing the Company’s financial
statements and systems of internal control and the independent registered
public accountants are responsible for auditing those financial statements and
expressing their opinion as to whether the financial statements present fairly,
in all material respects, the financial position, results of operations and cash
flows of the Company in conformity with generally accepted accounting
principles. The Audit Committee is responsible for overseeing the conduct of
these activities by the Company’s management and the independent registered
public accountants.
As a part
of its oversight of the Company’s financial statements, the Audit Committee met
four times during the fiscal year 2008 (and took action on one occasion by
unanimous written consent) to review and discuss, with both management and the
Company’s independent registered public accountants, all annual and
quarterly financial statements prior to their issuance. Management
represented to the Audit Committee that each set of the Company’s consolidated
financial statements reviewed were prepared in accordance with generally
accepted accounting principles, and reviewed significant accounting and
disclosure issues with the Committee. The Audit Committee held
discussions with the independent registered public accountants on matters
required to be discussed pursuant to Statement on Auditing Standards No. 61
(Communications with Audit Committees), including the quality of the Company’s
accounting principles, the reasonableness of significant judgments and the
clarity of disclosures in the Company’s financial statements. The
Committee also discussed with the Company’s independent registered public
accountants matters relating to their independence, including a review of audit
and non-audit engagement fees and the written disclosures from the Company’s
independent registered public accountants to the Committee pursuant to
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees).
The Audit
Committee, prior to the commencement of the audit, discussed with the Company’s
independent registered public accountants the overall scope and plans for its
audit. The Committee also met with the independent registered public
accountants to discuss the results of its examinations, the evaluations of the
Company’s internal controls and the overall quality of the Company’s financial
reporting.
In
reliance on the reviews and discussions with management and the independent
registered public accountants referred to above, the Audit Committee recommended
to the Board of Directors on April 3, 2008, and the Board has approved, the
inclusion of the audited financial statements in the Company’s Annual Report on
Form 10-K for the fiscal year ended January 31, 2008, for filing with
the SEC. The Audit Committee also recommended to the Board of Directors, and the
Board has approved, the selection of Margolis & Company P.C. as the
Company’s independent registered public accountants for the fiscal year ending
January 31, 2009.
Submitted
by the Audit Committee,
|
|
Michael
J. Morris (Chairman)
|
|
|
Nicholas
DeBenedictis
|
|
|
Alan
Lawley, Ph.D.
|
April 3,
2008
PROPOSAL
NO. 2
AMENDMENT
TO ARTICLES OF INCORPORATION
TO
INCREASE AUTHORIZED CAPITALIZATION
The Board
of Directors has recommended an amendment to the Company's Articles of
Incorporation to increase the number of Common Shares, par value $0.10 per
share, which the Company shall be authorized to issue from 18,000,000 to
36,000,000. The Board believes it is essential to increase the
authorized capital of the Company in order to have additional shares available
for stock splits, acquisitions, financings, present and future employee benefit
programs and other corporate purposes. The additional shares may be
issued from time to time as the Board of Directors may determine without further
action of the shareholders of the Company. The Board of Directors
considers it advisable to have the authorization to issue such additional shares
in order to enable the Company, as the need may arise, to move promptly to take
advantage of market conditions and the availability of other favorable
opportunities without the delay and expense involved in calling a shareholders'
meeting for such purpose.
Shareholders
of the Company do not currently possess, nor upon the adoption of the proposed
amendment will they acquire preemptive rights, which would entitle such persons,
as a matter of right, to subscribe for the purchase of any security of the
Company. Issuance of additional Common Shares could, under such
circumstances, dilute the voting rights, equity and earnings per share of
existing common shareholders. Nevertheless, the Company anticipates
that it would receive value for additional shares issued, minimizing or
eliminating the economic effect of any such dilution to
shareholders.
The
change effected by this amendment is to Article 4 of the Articles of
Incorporation, which as amended would read:
"ARTICLE
4: The total number of shares of stock which the Corporation shall have
authority to issue is Thirty-Six Million (36,000,000), each share to be
designated as a Common Share and to have a par value of Ten Cents
($0.10)."
The
approval of the proposal to amend the Articles of Incorporation requires the
affirmative “FOR” vote of a majority of the shares which are present in person
or by proxy at the Annual Meeting and which are actually cast on such
proposal.
The
Board of Directors recommends a vote FOR the adoption of the proposal to amend
the Company’s Articles of Incorporation.
PROPOSAL
NO. 3
APPROVAL
OF THE MET-PRO CORPORATION 2008 EQUITY INCENTIVE PLAN
We
believe that ownership of our stock by our senior managers and non-employee
Directors is an important element of our compensation package and that stock
awards help us attract and retain key personnel, encourage loyalty, provide
incentive for continuous improvement, and align interests directly with those of
the Company’s shareholders. Stock awards to executive officers and
non-employee Directors are a long-standing part of the Company’s
culture.
Our
shareholders approved stock option and equity compensation plans in 1992, 1997,
2001 and 2005. We adopted and sought shareholder approval of each of
these plans at the point in time when we had granted awards covering most of the
stock that was available under the latest existing plan. That is the
situation we have at this time. Taking into account stock splits and stock
dividends, the 1992 plan covered 533,333 shares, and the 1997 and 2001 plans
each covered 829,629 shares. As of January 31, 2008, there are no
shares available for new awards under the 1992, 1997 and 2001 plans, and only
476,438 shares are available for new awards under the 2005 Equity Incentive
Plan.
Our
practice over the last several fiscal years has been to issue stock options
covering an aggregate of approximately 200,000 to 240,000 Common Shares a year
to our executive officers, senior managers and non-employee Directors, typically
in December of each year. Of these shares, awards covering an
aggregate of approximately 150,000 to 160,000 shares a year are granted to our
senior managers, currently thirteen persons. In fiscal year 2008,
options covering an aggregate of 215,800 shares were awarded, 150,800 of which
were granted to fourteen senior managers of the Company and 65,000 of which were
awarded to our
five
non-employee Directors (13,000 shares each). At this present point in
time, we expect to continue these practices, with the understanding that our
Compensation and Management Development Committee is expected to review our
stock award practices and policies periodically, and may modify them as they
believe appropriate.
The Board
of Directors has recognized that the number of shares that are available for new
grants under the 2005 Equity Incentive Plan is insufficient to meet anticipated
grants in December 2009 and later, and that it is time to take steps to meet
this need. Accordingly, on February 25, 2008, the Board approved and
adopted the Met-Pro Corporation 2008 Equity Incentive Plan, which will become
effective upon shareholder approval.
The 2008
Equity Incentive Plan, under which 750,000 shares are reserved for issuance
(subject to adjustment for stock splits and stock dividends and as otherwise
provided in the plan), is very similar to the 2005 Equity Incentive Plan which
shareholders approved in June 2005 at that year’s Annual Meeting of
Shareholders.
As we did
with the 2005 Equity Incentive Plan, we intend to file a Registration Statement
on Form S-8 with the SEC covering the shares issuable under the 2008 Equity
Incentive Plan, provided shareholders approve the plan. This Registration
Statement will enable participants to freely sell the shares of Met-Pro stock
which they acquire upon exercise of an award.
The
complete 2008 Equity Incentive Plan is attached as Appendix A to this proxy
statement. A summary of the plan, which we qualify by reference to
the exact terms of the plan, follows.
Purpose
of the Plan
The
purpose of the Plan is to enhance the ability of the Company to attract and
retain employees and other persons who are in a position to make significant
contributions to the growth and success of the Company's business and to
encourage such employees and other persons to advance the long-term interests of
the Company through ownership of the Company's Common Shares.
Description
of the Plan
If
approved by the shareholders of the Company, the 2008 Equity Incentive Plan will
be effective on June 4, 2008 and terminate on June 3, 2018, unless earlier
terminated by the Board. Unless the Board determines otherwise, the
2008 Equity Incentive Plan will be administered by the Compensation and
Management Development Committee subject to the oversight of the
Board. The 2008 Equity Incentive Plan authorizes the Board to grant
(i) "incentive stock options" within the meaning of Section 422 of the Code,
(ii) nonqualified stock options, (iii) stock appreciation rights, (iv)
restricted stock grants, (v) deferred stock awards, and (vi) other stock based
awards (collectively, the "Awards") to employees and other persons
who, in the opinion of the Board, are in a position to make a significant
contribution to the success of the Company and its subsidiaries. The
Board will determine (i) the recipients of Awards under the Plan, (ii) the times
at which Awards will be made, (iii) the size and type of Awards, (iv) the form
of payment acceptable in respect to the exercise of an Award, and (v) the terms,
conditions, limitations and restrictions of Awards, including without limitation
the duration of the option, vesting terms, and, as to non-qualified stock
options, early termination provisions.
Eligibility
Those
eligible to receive Awards under the Plan will be persons in the employ of the
Company or any of its subsidiaries designated by the Board and other persons or
entities who, in the opinion of the Board, are in a position to make a
significant contribution to the success of the Company or its
subsidiaries, including without limitation, directors of the Company who are not
employees of the Company, consultants and agents of the Company or any
subsidiary.
Awards
Stock Options.
The Board can
grant either incentive stock options or nonqualified stock
options. Only employees of the Company and its subsidiaries may be
granted incentive stock options. The exercise price of an incentive
stock option shall not be less than the fair market value, or, in the case of a
10% or greater shareholder of the Company, 110% of the fair market value of the
Company's Common Shares on the date of grant. For purposes of the
Plan, fair market value is defined as the arithmetic mean of the highest and
lowest selling prices of the Common Shares as reported by the New York Stock
Exchange, or by such exchanges or markets as may heretofore be utilized by the
Company or as reported by a nationally recognized broker/dealer which makes a
market for the Common Shares, on such valuation date. The term of an
incentive stock option and the time or times at which such option is exercisable
shall be set by the Board in accordance with the Internal Revenue Service rules
or regulations when applicable. As to non-qualified stock options,
the Board has the authority to set the exercise price, which may be less than
the current market value, as well as all other terms thereof, except for the
duration of the option, which shall not exceed ten (10)
years. Payment of the exercise price of any option may be made in
cash, in Common Shares, or a combination of both at the discretion of the
Board.
Stock Appreciation
Rights
. The Board may grant stock appreciation rights ("SARs")
either alone or in combination with an underlying stock option. The
term of a SAR and the time or times at which a SAR shall be exercisable shall be
set by the Board; provided, that a SAR granted in tandem with an option will be
exercisable only at such times and to the extent that the
related option is exercisable. SARs entitle the
participants to receive an amount in cash or Common Shares with a value equal to
the excess of the fair market value of Common Shares on the date of exercise
over the fair market value of Common Shares on the date the SAR was granted,
which represents the same economic value that would have been derived from the
exercise of an option. Payment may be made in cash, in Common Shares
or a combination of both at the discretion of the Board. If a SAR
granted in combination with an underlying stock option is exercised, the right
under the underlying option to purchase Common Shares will
terminate.
Restricted Stock Grants.
The
Board may grant Common Shares under a restricted stock grant which shall set
forth the applicable restrictions, conditions and forfeiture provisions which
shall be determined by the Board and which may include restrictions on transfer,
continuous service with the Company or any of its subsidiaries, achievement of
business objectives, and individual, subsidiary and Company
performance. Common Shares may be granted pursuant to a restricted
stock grant for no consideration or for any consideration as determined by the
Board. A participant shall be entitled to vote the Common Shares and
receive any dividends thereon prior to the termination of any applicable
restrictions, conditions or forfeiture provisions.
Deferred Stock
Awards.
The Board may grant Common Shares under a deferred
stock award, with the delivery of such Common Shares to take place at such time
or times and under such conditions as the Board may specify. Common
Shares may be granted pursuant to deferred stock awards for no consideration or
for an amount of consideration as determined by the Board.
Other Stock Based
Awards.
The Board shall have the right to grant other stock
based awards under the 2008 Equity Incentive Plan to eligible
participants.
Federal
Income Tax Consequences
Stock Options.
The
grant of an incentive stock option or a nonqualified stock option does not
result in income for the participant or in a deduction for the
Company. The exercise of a nonqualified stock option results in
ordinary income for the participant and a business deduction for the Company
measured by the difference between the option's exercise price and the fair
market value of the Common Shares received at the time of
exercise. If the Company is required to withhold income taxes in
connection with the exercise of a nonqualified stock option, the Board may, in
its discretion, permit such withholding obligation to be satisfied by the
delivery of Common Shares held by the participant or to be delivered to the
participant upon exercise of the option.
The
exercise of an incentive stock option does not result in income for the
participant or in a business deduction for the Company, provided that the
employee does not dispose of the Common Shares acquired upon exercise within two
years after the date of grant of the option and one year after the transfer of
the Common Shares upon exercise, and provided further that the employee is
employed by the Company or a subsidiary of the Company from the date of grant
until three months before the date
of exercise. If these requirements are met, the employee's
basis in the Common Shares will be the exercise price. Any gain
related to the subsequent disposition of the Common Shares will be taxed to the
employee as a long-term capital gain and the Company will not be entitled to any
deduction. The excess of the fair market value of the Common Shares
on the date of exercise over the exercise price is an item of tax preference for
the employee, potentially subject to the alternative minimum tax.
If an
employee should dispose of the Common Shares acquired pursuant to the exercise
of an incentive stock option prior to the expiration of either of the designated
holding periods, the employee recognizes ordinary income and the Company is
entitled to a business deduction in an amount equal to the lesser of the fair
market value of the Common Shares on the date of exercise minus the option
exercise price or the amount realized on disposition of the Common Shares minus
the option exercise price. Any gain in excess of the ordinary income
recognized by the employee is taxable as long-term or short-term capital gain,
depending on the holding period. If an option, intended to be an
incentive stock option, does not satisfy all of the requirements of an incentive
stock option pursuant to Section 422 of the Code when granted, the employee
recognizes ordinary income upon exercise of the option and the Company is
entitled to a business deduction in an amount equal to the fair market value of
the Common Shares on the exercise date minus the option exercise
price. Income tax withholding is required, in such a
case.
SARs.
The grant of a SAR does
not result in income for the participant or in a business deduction for the
Company for federal income tax purposes. Upon the exercise of a SAR,
the participant recognizes ordinary income and the Company is entitled to a
business deduction measured by the fair market value of the Common Shares plus
any cash received. Income tax withholding is required for employees
of the Company and its subsidiaries.
Restricted Stock Grants and Deferred
Stock Awards.
If the Common Shares issued pursuant to a
restricted stock grant or deferred stock award are subject to restrictions
resulting in a "substantial risk of forfeiture" pursuant to the meaning of such
term under Section 83 of the Code, the restricted stock grant or deferred stock
award does not result in income for the participant or in a business deduction
for the Company for federal income tax purposes. If there are no such
restrictions, conditions, limitations or forfeiture provisions, the participant
recognizes ordinary income and the Company is entitled to a business
deduction upon receipt of Common
Shares. Dividends paid to the participant while the stock remained
subject to any restrictions shall be treated as compensation for federal income
tax purposes. At the time the restrictions lapse, the participant
receives ordinary income and the Company is entitled to a business deduction
measured by the fair market value of the Common Shares at the time of
lapse. Income tax withholding is required for employees of the
Company and its subsidiaries.
Other Stock Based Awards.
Any
employee of the Company or any of its subsidiaries who receives Common Shares as
bonus compensation or in lieu of the employee's cash compensation shall
recognize ordinary income, and the Company shall be entitled to a business
deduction measured by the fair market value of the Common Shares issued to the
employee.
Cancellation
and Rescission of Awards
The Plan
grants the Board of Directors or the Committee the authority to cancel, rescind
or limit any unexpired Award if a Participant engages in “Detrimental Activity”.
Additionally, the Board or the Committee may rescind the Award, and take other
related action, if the Participant engages in Detrimental Activity before or
within six months after the exercise of an Award, lapse or a restriction, or
delivery of Common Shares pursuant to an Award, for a period of time after such
Detrimental Activity or such exercise, lapse or delivery. “Detrimental Activity”
includes activity which results in the termination of employment for cause;
competing with the Company for a one year period following termination of
employment; disclosing or misusing the Company’s confidential information or
soliciting the Company’s employees, customers, or suppliers; and other
activities which are injurious or detrimental to the Company.
Vote
Required
The
approval of the proposal to adopt the 2008 Equity Incentive Plan requires the
affirmative “FOR” vote of a majority of the shares which are present in person
or by proxy at the Annual Meeting and
which are
actually cast on such proposal, and also, under New York Stock Exchange
requirements, that the total votes cast on such proposal constitutes at least a
majority of the shares that are entitled to be voted on this
proposal.
The
Board of Directors recommends a vote FOR the adoption of the Met-Pro Corporation
2008 Equity Incentive Plan.
PROPOSAL
NO. 4
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Unless
instructed to the contrary, the persons named in the enclosed proxy intend to
vote the same in favor of the ratification of the selection of Margolis &
Company P.C. as independent registered public accountants to the Company to
serve for the fiscal year ending January 31, 2009, unless such engagement shall
be earlier terminated. That firm, which has acted as independent
auditor of the Company since 1971, has reported to the Company that none of its
members have any direct financial interest or material indirect financial
interest in the Company.
A
representative of Margolis & Company P.C. is expected to attend the meeting
and have an opportunity to make a statement and/or respond to appropriate
questions from shareholders.
The
approval of the ratification of the selection of Margolis & Company P.C.
requires the affirmative “FOR” vote of a majority of the shares which are
present in person or by proxy at the Annual Meeting and which are actually cast
on such proposal.
The
Board of Directors recommends a vote FOR the ratification of the selection of
Margolis & Company P.C. as independent registered public accountants for the
fiscal year ending January 31, 2009.
OUR
RELATIONSHIP WITH OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
Under its
charter, the Audit Committee must pre-approve all engagements of our independent
registered public accountants unless an exception to such pre-approval exists
under the Securities Exchange Act of 1934 or the rules of the SEC. It
is the Committee’s practice each year to approve the independent registered
public accountants’ retention to audit our financial statements, including the
associated fee, before the filing of the preceding year’s Annual Report on Form
10-K. Early in the fiscal year, the Audit Committee intends to
evaluate other known potential engagements by the Company of the independent
registered public accountants, including the scope of the work proposed to be
performed and the proposed fees, and to approve or reject each service, taking
into account whether the services are permissible under applicable law and the
possible impact of each non-audit service on the independent registered public
accountants’ independence from management. At each subsequent Audit
Committee meeting, the Committee expects to receive updates on the services
actually provided by the independent registered public accountants, and
management may present additional services for approval. These might,
for example, be services for due diligence for an acquisition that would not
have been known earlier in the fiscal year. The Audit Committee has
the discretion to delegate to its Chairman the authority to evaluate and approve
engagements on behalf of the Committee in the event that a need arises for
pre-approval between Committee meetings. If the Chairman approves any
such engagements, he or she will report that approval to the Committee at the
next Committee meeting.
Since May
6, 2003, the effective date of the SEC rules stating that an auditor is not
independent of an audit client if services that it provides to the client are
not appropriately approved, there have been no new non-audit engagements of
Margolis & Company P.C.
Audit
and Other Fees
The
following table presents fees for professional audit services rendered by
Margolis & Company P.C. for the audit of the Company’s annual financial
statements for the fiscal years ended January 31, 2008 and 2007, and fees billed
for other services rendered by Margolis & Company P.C. during those
periods.
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|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Audit
fees
(1)
|
$213,750
|
|
|
$170,000
|
|
|
Audit
related fees
(2)
|
22,000
|
|
|
22,000
|
|
|
Tax
fees
(3)
|
65,000
|
|
|
45,000
|
|
|
All
other fees
(4)
|
-
|
|
|
20,000
|
|
|
Total
|
$300,750
|
|
|
$257,000
|
|
|
|
(1)
|
Audit
fees consisted of audit work performed on the Company’s annual
consolidated financial statements and the reviews of Quarterly Reports on
Form 10-Q, as well as work generally only the independent auditor can
reasonably be expected to provide, such as statutory audits. In the
fiscal year ended January 31, 2008, audit fees also include fees for the
audit of: (i) the effectiveness of internal control over financial
reporting and Form 10-K/A for the fiscal year ended January 31, 2007 and
reviews of Form 10-Q/A for the quarters ended October 31, July 31, April
30, 2007 and October 31, 2006. In the fiscal year ended January
31, 2007, audit fees also include fees for the audits of (i) the
effectiveness of internal control over financial reporting and (ii)
management’s assessment of the effectiveness of internal control over
financial reporting.
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|
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(2)
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Audit
related fees consisted of audit work performed on employee benefit
plans.
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|
|
(3)
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Tax
fees consisted principally for services related to the preparation of the
corporate income tax returns and assistance with Internal Revenue Service
examinations.
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(4)
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The
Company’s Audit Committee engaged Margolis & Company P.C. for other
services related to a SEC comment letter process during the fiscal year
ended January 31, 2007.
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All
services rendered by Margolis & Company P.C. in the fiscal year ended
January 31, 2008 were permissible under applicable laws and regulations, and
were pre-approved by the Audit Committee. The Audit Committee
pre-approval policy is set forth in the “Audit Committee Charter” which is
available on our Company website at
www.met-pro.com
under the
“Investor Relations – Corporate Governance” captions. A copy of the
entire charter may also be obtained upon request from the Company’s Corporate
Secretary.
OTHER
BUSINESS
The Board
of Directors is not aware of any other matters that will be presented for voting
by shareholders at the Annual Meeting. However, if any other matters
properly come before the meeting, it is the intention of the persons named in
the enclosed proxy to vote said proxy in accordance with their judgment in such
matters.
SHAREHOLDER
PROPOSALS
Any shareholder wishing to submit a
proposal for inclusion in the written proxy statement for the 2009 Annual
Meeting of Shareholders must submit the proposal to Secretary, Met-Pro
Corporation, 160 Cassell Road, P.O. Box 144, Harleysville, PA 19438 prior to
December 23, 2008 in order to be considered for inclusion in the written proxy
statement. The submission of such proposals by shareholders and the
consideration of such proposals by the Company for inclusion in next year’s
proxy statement and form of proxy are subject to applicable rules and
regulations of the SEC.
Shareholders who wish to present a
Director nomination or any other business at the 2009 Annual Meeting of
Shareholders, which the Company expects to hold on June 3, 2009, are required by
the Company’s Bylaws to notify the Secretary in writing between February 4, 2009
and March 6, 2009. The notice from the shareholder must provide
certain information that is described in Section 2.3 of the Company’s
Bylaws. A copy of these Bylaw requirements will be provided upon
written request to the Secretary at the address given in the preceding
paragraph, and the notice to the Secretary containing the required information
should be sent to this address as well. The Company is not required
to include in its written proxy statement nominations and proposals that are not
properly submitted as described in this paragraph.
The Company retains discretion to vote
proxies it receives with respect to proposals received after March 6,
2009. The Company retains discretion to vote proxies it receives with
respect to proposals received prior to March 6, 2009, provided (i) the Company
includes in its proxy statement advice on the nature of the proposal and how it
intends to exercise its voting discretion, and (ii) the proponent does not issue
his or her own proxy statement.
Harleysville,
Pennsylvania
April 18,
2008
THE
COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS BEING
SOLICITED, UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY’S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 31, 2008, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS
AND SCHEDULES THERETO. REQUESTS FOR COPIES OF SUCH REPORT SHOULD BE
DIRECTED TO GARY J. MORGAN, SECRETARY, MET-PRO CORPORATION, 160 CASSELL ROAD,
P.O. BOX 144, HARLEYSVILLE, PENNSYLVANIA 19438.
Appendix
A
Met-Pro
Corporation
2008
Equity Incentive Plan
The
purpose of this Met-Pro Corporation Year 2008 Equity Incentive Plan (the "Plan")
is to advance the interests of Met-Pro Corporation (the "Company") and its
subsidiaries by enhancing the ability of the Company to (i) attract and retain
employees and other persons or entities who are in a position to make
significant contributions to the success of the Company and its subsidiaries;
(ii) reward such persons for such contributions; and (iii) encourage such
persons or entities to take into account the long-term interest of
the Company through ownership of the Company's Common Shares (the "Common
Shares").
The Plan
is intended to accomplish these objectives by enabling the Company to grant
awards ("Awards") in the form of incentive stock options ("ISOs"), nonqualified
stock options ("Nonqualified Options") (ISOs and Nonqualified Options shall
be collectively referred to herein as "Options"), stock
appreciation rights ("SARs"), restricted stock ("Restricted Stock"),
deferred stock ("Deferred Stock"), or other stock based
awards ("Other Stock Based Awards"), all as more fully described
below.
The Plan
will be administered by the Compensation and Management Development Committee
(the "Committee") of the Board of Directors of the Company (the "Board"),
provided, however, that in the event that no such Committee is appointed by the
Board, the Board shall have all duties and powers reserved to the Committee, and
the term "Committee" as used herein shall refer to the Board. In any
event, the Committee is subject to the oversight of the Board. The
Committee may be constituted to permit the Plan to comply with the "Non-Employee
Director" requirement of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any successor rules,
and to comply with the "outside director" requirement of Section 162(m)(4)(C)(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder, or any successor rules. The Committee will
determine the recipients of Awards, the times at which Awards will be made, the
size and type or types of Awards to be made to each recipient, and will set
forth in each such Award the terms, conditions and limitations applicable to the
Award granted. The Board will determine whether, to what extent and
under what circumstances, consistent with the requirements of Section 409A of
the Internal Revenue Code of 1986 (the “Code”), Common Shares and other amounts
payable with respect to an Award under the Plan shall be deferred either
automatically or at the election of the Participant (as hereinafter
defined).
Awards
may be made singly, in combination or in tandem. Relative to
optionees, the Committee will have full and exclusive power to interpret the
Plan, to adopt rules, regulations and guidelines relating to the Plan, to grant
waivers of Plan restrictions and to make all of the determinations necessary for
its administration. Such determinations and actions of the Committee,
and all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and binding
on all parties.
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3.
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Effective
Date and Term of Plan.
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The Plan
will become effective on June 4, 2008, or such other date as it may be approved
by the Company’s shareholders. Awards under the Plan may be
made prior to that date, subject to shareholder approval of the
Plan.
The Plan
will terminate on June 3, 2018, subject to earlier termination of the Plan by
the Board pursuant to Section 19 herein. No Award may be granted
under the Plan after the termination date of the Plan, but Awards previously
granted may extend beyond that date pursuant to the terms of such
Awards.
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4.
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Shares
Subject to the Plan.
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Subject
to adjustment as provided in Section 16 herein, the aggregate number of Common
Shares reserved for issuance pursuant to Awards granted under the Plan shall be
Seven hundred and Fifty thousand (750,000). The Common Shares
delivered under the Plan may be either authorized but unissued Common Shares or
Common Shares held by the Company as treasury shares, including Common Shares
acquired by the Company in open market and private transactions. No
fractional Common Shares will be delivered pursuant to Awards granted under the
Plan and the Committee shall determine the manner in which fractional share
value will be treated.
If any
Award requiring exercise by a Participant for delivery of Common Shares is
cancelled or terminates without having been exercised in full, or if any Award
payable in Common Shares or cash is satisfied in cash rather than Common Shares,
the number of Common Shares as to which such Award was not exercised or for
which cash was substituted will be available for future Awards of Common
Shares; provided, however, that Common Shares subject to
an Option cancelled upon the exercise of an SAR shall not again be available for
Awards under the Plan unless, and to the extent that, the SAR is settled in
cash. Shares of Restricted Stock and Deferred Stock forfeited to the
Company in accordance with the Plan and the terms of the particular Award shall
be available again for Awards under the Plan unless the Committee determines
otherwise.
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5.
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Eligibility
and Participation.
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Those
eligible to receive Awards under the Plan (each, a "Participant") and
collectively, the ("Participants") will be persons in the employ of the Company
or any of its subsidiaries designated by the Committee ("Employees") and other
persons or entities who, in the opinion of the Committee, are in a position to
make a significant contribution to the success of the Company or its
subsidiaries, including without limitation, non-employee Directors of the
Company, consultants and agents of the Company or any subsidiary; provided, that
such consultants and agents have been actively engaged in the conduct of the
business of the Company or any subsidiary. A "subsidiary" for
purposes of the Plan will be a present or future corporation of which the
Company owns or controls, or will own or control, more than 50% of the total
combined voting power of all classes of stock or other equity
interests.
(a)
Nature of
Options.
An Option is an Award entitling the Participant to
purchase a specified number of Common Shares at a specified exercise
price. Both ISOs, as defined in Section 422 of the Code, and
Nonqualified Options may be granted under the Plan; provided however, that ISOs
may be awarded only to Employees.
(b) The
exercise price of each Option shall be equal to the "Fair Market Value" (as
defined below) of the Common Shares on the date the Award is granted to the
Participant; provided, however, that (i) with respect to a participant who owns
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, the exercise price of an ISO granted to such
Participant shall not be less than one hundred and ten percent (110%)
of the Fair Market Value of the Common Shares on the date the Award
is granted; and (ii) with respect to any Option re-priced by the Committee, the
exercise price shall be equal to the Fair Market Value of the Common Shares on
the date such Option is repriced unless otherwise determined by the
Committee. For purposes of this Plan, Fair Market Value is defined as
the arithmetic mean of the highest and lowest selling prices of the Common
Shares as reported by the New York Stock Exchange or exchanges or markets as may
heretofore be utilized by the Company or as reported by a nationally recognized
broker/dealer which makes a market in the Common Shares, on such valuation
date.
(c)
Duration of
Options.
The term of each Option granted to a Participant
pursuant to an Award shall be determined by the Committee; provided, however,
that in no case shall an Option be exercisable more than ten (10) years (five
(5) years in the case of an ISO granted to a ten-percent shareholder as defined
in (b) above) from the date of the Award.
(d)
Exercise of Options and
Conditions.
Except as otherwise provided in Sections 16,
17 and 18 herein, and except as otherwise provided below with respect
to ISOs, Options granted pursuant to an Award will become exercisable at such
time or times, and subject to such conditions, as the Committee may specify at
the time of the Award. The Options may be subject to such
restrictions, conditions and forfeiture provisions as the Committee may
determine, including, but not limited to, restrictions on transfer, continuous
service with the Company or any of its subsidiaries, achievement of business
objectives, and individual, division and Company performance. To the
extent exercisable, an Option may be exercised either in whole at any time or in
part from time to time. With respect to an ISO granted to a
Participant, the Fair Market Value of Common Shares on the date of grant which
are exercisable for the first time by a Participant during any calendar year
shall not exceed $100,000. To qualify for capital gains treatment,
the recipient of an ISO must hold the Common Shares purchased in exercise
thereof for a period of two years from the date of the grant of the ISO but not
less than one year after the Common Shares have been transferred to him and must
remain in the employ of the Company for the entire time from the date the ISO is
granted until three months before the date of the exercise thereof.
(e)
Payment for and Delivery of Stock.
Full payment for Common Shares purchased will be made at the time of the
exercise of the Option, in whole or in part. Payment of the purchase
price will be made in cash or in such other form as the Committee may, in its
sole discretion, permit, including, without limitation, delivery of Common
Shares, duly endorsed for transfer to the Company with a Fair Market Value on
the date of exercise of an Option or date of issuance of any other Award equal
to the aggregate exercise price of the Options or exercised portion thereof, or
the full consideration to be paid for any other Award. If payment for
the Common Shares is to be made in cash, then full payment will be made at the
time of the exercise of an Option and at the time of issuance of any other
Award. If the Committee permits payment for the Common Shares
acquired to be made in Common Shares owned by the Participant, then the Company
shall provide written notice to the Participant of the number
of Common Shares which must be delivered in full payment of the
Option exercise price or the consideration required to be paid for any other
Award, and the Participant shall deliver such number of Common Shares to the
Company within two (2) business days of the receipt of such
notice from the Company.
(f)
Disqualifying
Dispositions.
Each Participant awarded an ISO under the Plan
shall notify the Company in writing immediately after the date he or she makes a
disqualifying disposition of any Common Shares acquired pursuant to the exercise
of such ISO. A disqualifying disposition is any disposition
(including any sale) of such Common Shares before the later of (i) two years
after the time of grant of the ISO or (ii) one year after the date the
Participant acquired the Common Shares by exercising the ISO. The
Company may, if determined by the Committee and in accordance with procedures
established by it, retain possession of any Common Shares acquired pursuant to
the exercise of an ISO as agent for the applicable Participant until the end of
the period described in the preceding sentence, subject to complying with any
instructions from such Participant as to the sale of such
stock.
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7.
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Stock
Appreciation Rights.
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(a)
Nature of Stock Appreciation
Rights.
A SAR is an Award entitling the recipient to receive
payment, in cash and/or Common Shares, determined in whole or in part by
reference to appreciation in the value of Common Shares. A SAR
entitles the recipient to receive in cash and/or Common Shares, with respect to
each SAR exercised, the excess of the Fair Market Value of a Common Share on the
date of exercise over the Fair Market Value of a Common Share on the date the
SAR was granted.
(b)
Grant of
SARs.
SARs may be subject to Awards in tandem with, or
independently of, Options granted under the Plan. A SAR granted in
tandem with an Option which is not an ISO may be granted either at or after the
time the Option is granted. A SAR granted in tandem with an ISO may
be granted only at the time the ISO is granted and may expire no later than the
expiration of the underlying ISO.
(c)
Exercise of
SARs.
A SAR not granted in tandem with an Option will become
exercisable at such time or times, and on conditions, as the Committee may
specify. A SAR granted in tandem with an Option will be exercisable
only at such times, and to the extent, that the related Option is
exercisable. A SAR granted in tandem with an ISO may be exercised
only when the market price of the Common Shares subject to the ISO exceeds the
exercise price of the ISO, and the SAR may be for no more than one hundred
percent (100%) of the difference between the exercise price of the underlying
ISO and the Fair Market Value of the Common Shares subject to the underlying ISO
at the time the SAR is exercised. At the option of the Committee,
upon exercise, an SAR may be settled in cash, Common Shares or a combination of
both.
A
Restricted Stock Award entitles the recipient to acquire Common Shares, subject
to certain restrictions or conditions, for no cash consideration, if permitted
by applicable law, or for such other consideration as may be determined by the
Committee. The Award may be subject to such restrictions, conditions
and forfeiture provisions as the Committee may determine, including, but not
limited to, restrictions on transfer, continuous service with the Company or any
of its subsidiaries, achievement of business objectives, and individual,
division and Company performance. Subject to such restrictions,
conditions and forfeiture provisions as may be established by the Committee, any
Participant receiving an Award of Restricted Stock will have all the rights of a
shareholder of the Company with respect to the shares of Restricted Stock,
including the right to vote the shares and the right to receive any dividends
thereon.
A
Deferred Stock Award entitles the recipient to receive Common Shares to be
delivered in the future. Delivery of the Common Shares will take
place at such time or times, and on such conditions, as the Committee may
specify. At the time any Deferred Stock Award is granted, the
Committee may provide that the Participant will receive an instrument evidencing
the Participant's right to future delivery of Deferred Stock.
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10.
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Other
Stock Based Awards.
|
The
Committee shall have the right to grant Other Stock Based Awards under the Plan
to Employees which may include, without limitation, the grant of Common Shares
as bonus compensation and the issuance of Common Shares in lieu of an Employee's
cash compensation.
The grant
of any Award under the Plan may be evidenced by an agreement which shall
describe the specific Award granted and the terms and conditions of the
Award. Any Award shall be subject to the terms and conditions of any
such agreement required by the Committee.
No Award
(other than an outright Award in the form of Common Shares without any
restrictions) may be assigned, pledged or transferred other than by will or by
the laws of descent and distribution and, during a Participant's lifetime, will
be exercisable only by the Participant or, in the event of a Participant's
incapacity, by the Participant's guardian or legal
representative.
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13.
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Rights
of a Shareholder.
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Except as
specifically provided by the Plan, the receipt of an Award will not give a
Participant rights as a shareholder of the Company. The Participant
will obtain such rights, subject to any limitations imposed by the Plan, or the
instrument evidencing the Award, upon actual receipt of Common
Shares.
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14.
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Conditions
on Delivery of Stock.
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The
Company will not be obligated to deliver any Common Shares pursuant to the Plan
or to remove any restrictions or legends from Common Shares previously delivered
under the Plan until (a) in the opinion of the Company's counsel, all applicable
federal and state laws and regulations have been complied with and (b) all other
legal matters in connection with the issuance and delivery of such Common Shares
have been approved by the Company's counsel. If the sale of Common
Shares has not been registered under the Securities Act of 1933, as amended (the
"Act"), and qualified under the appropriate "blue sky" laws, the Company may
require, as a condition to exercise of the Award, such representations and
agreements as counsel for the Company may consider appropriate to avoid
violation of such Act and laws and may require that the certificates evidencing
such Common Shares bear an appropriate legend restricting transfer.
If an
Award is exercised by a Participant's legal representative, the Company will be
under no obligation to deliver Common Shares pursuant to such exercise until the
Company is satisfied as to the authority of such representative.
The
Company will have the right to deduct from any cash payment under the Plan taxes
that are required to be withheld and to condition the obligation to deliver or
vest Common Shares under this Plan upon the Participant's paying the Company
such amount as the Company may request to satisfy any liability for applicable
withholding taxes. The Committee may in its discretion permit
Participants to satisfy all or part of their withholding liability either by
delivery of Common Shares held by the Participant or by withholding Common
Shares to be delivered to a Participant upon the grant or exercise of an
Award.
(a) In
the event that a dividend shall be declared upon the Common Shares payable in
Common Shares, the number of Common Shares then subject to any Award and the
number of Common Shares which may be issued under the Plan but not yet covered
by an Award shall be adjusted by adding to each share the number of shares which
would be distributable thereon if such shares had been outstanding on the date
fixed for determining the shareholders entitled to receive such stock
dividend.
(b) In
the event that the outstanding Common Shares shall be changed into or exchanged
for a different number or kind of Common Shares or other securities of the
Company or of another corporation or for cash, whether through reorganization,
recapitalization, stock split, combination of shares, sale of assets, merger or
consolidation, then, there shall be substituted for each Common Share
then subject to any Award, the number and kind of shares of stock or other
securities or the amount of cash into which each outstanding Common Share shall
be so changed or for which each such share shall be exchanged.
(c) Any
adjustment in the numbers of Common Shares shall apply proportionately to only
the unexercised portion of an Option granted hereunder. If a fraction
of a Common Share would result from any such adjustment, the adjustment shall be
revised to the next lower whole number of shares.
(d) Any
adjustment in the number of Common Shares shall be made in a manner consistent
with the regulations under Section 409A of the Code so as not to cause the Plan
or any Award under the Plan to become subject to the application of Section 409A
of the Code.
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17.
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Cancellation
and Rescission of Awards for Detrimental
Activity.
|
(a) The
Committee or the Board of Directors may cancel, rescind, suspend or otherwise
limit or restrict any unexpired Award at any time if any Participant engages in
any “Detrimental Activity” (as defined below).
(b) In
addition to authority granted under Section 17(a) hereof, in the
event a Participant engages in Detrimental Activity at any time prior to or
during the six (6) months (one (1) year in the event of a Section 17(c)(v)
Detrimental Activity) after any exercise of an Award, lapse of a restriction
under an Award or delivery of Common Shares pursuant to an Award, such exercise,
lapse or delivery may be rescinded, in the Company’s sole discretion, until the
later of (i) two years after such exercise, lapse or delivery or (ii) two years
after such Detrimental Activity. Upon such rescission, the Company,
in its sole discretion, may require the Participant to (i) deliver and transfer
to the Company the Common Shares received by the Participant upon such exercise,
lapse or delivery, (ii) pay to the Company an amount equal to any gain (realized
or unrealized) received by the Participant upon such exercise, lapse, or
delivery minus the respective price paid upon exercise, lapse or delivery (if
any). Additionally, the Company shall be entitled to set-off any such amount
owed to the Company against any amount owed to the Participant by the
Company. Further, if the Company commences an action against the
Participant (by way of claim or counterclaim or declaratory claims) in which it
is preliminarily or finally determined that such Participant engaged in
Detrimental Activity or otherwise breached this Section 17(b) or the terms of
the Award, the Participant shall reimburse the Company for all costs and fees
incurred in such action, including without limitation the Company’s reasonable
attorneys’ fees and costs.
(c) As
used in this Section 17, “Detrimental Activity” shall include: (i) the failure
to comply with the terms of the Plan or certificate or agreement evidencing the
Award; (ii) the failure to comply with any term set forth in any Key Employee
Agreement; (iii) any activity which results in termination of employment or
services of the Participant for cause; (iv) a violation of any material rule,
policy, procedure or guideline of the Company; (v) at any time, within one (1)
year after his or her termination of employment, engaging, directly or
indirectly, either personally or as an employee, agent, partner, stockholder,
officer or director of, or consultant to, any entity or person engaged in any
business in which the Company or an affiliate is engaged, in conduct that
breaches any obligation or duty of such Participant to the Company or a
subsidiary or that is in material competition with the Company or a subsidiary
or that is materially injurious to the Company or a subsidiary, monetarily or
otherwise, which conduct shall include, but not be limited to, (a) disclosing or
misusing any confidential information pertaining to the Company or a subsidiary;
(b) any attempt, directly or indirectly, to induce any employee, or agent of the
Company or any subsidiary to be employed or perform services
elsewhere or (c) any attempt by a Participant, directly or indirectly, to
solicit the trade of any customer or supplier or prospective customer or
supplier of the Company or any subsidiary or (d) disparaging the Company, any
subsidiary or any of their respective officers or directors. The
Committee or the Board shall make the determination of whether any conduct
action or failure to act falls within the scope of activities contemplated by
this Section 17(c), in its sole discretion. For purposes of this
Section 17, a Participant shall not be deemed to be a stockholder of a competing
entity if the Participant’s record and beneficial ownership amount to not more
than one percent (1%) of the outstanding capital stock of any company subject to
the periodic and other reporting requirements of the 1934 Act or fifteen percent
(15%) of the capital stock of any other company.
(d)
Nothing in this Section 17 shall be deemed to limit the Committee’s authority
under Section 11 of the Plan to condition an Award upon such terms and
conditions as the Committee shall determine.
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18.
|
Termination
of Service.
|
Upon a
Participant's termination of service with the Company or a subsidiary (if an
employee only of a subsidiary), any outstanding Award shall be subject to the
terms and conditions set forth below, unless otherwise determined by the
Committee:
(a) In
the event a Participant leaves the employ or service of the Company or a
subsidiary, whether voluntarily or otherwise but other than by reason of the
Participant's death or "disability" (as such term is defined in Section 22(e)(3)
of the Code), each ISO granted to the Participant shall terminate
upon the earlier to occur of (i) the expiration of the period three (3) months
after the date of such termination or (ii) the date specified in the
ISO Award; provided, that, prior to the termination of such ISO, the Participant
shall be able to exercise any part of the ISO which is exercisable as of the
date of termination unless the Award shall otherwise so
provide. Further, each outstanding share of Restricted Stock
and each outstanding Deferred Stock Award which remains subject to any
restrictions or conditions of the Award shall be forfeited to the Company upon
such date of termination. For purposes of the Plan, the retirement of
a Participant either pursuant to a pension or retirement plan adopted by the
Company or at the normal retirement date prescribed from time to time by the
Company shall be deemed to be the termination of such Participant's
employment. For purposes of this subparagraph, an employee who leaves
the employ of the Company to become an employee of a subsidiary or the parent
corporation of the Company or a corporation which has assumed the Option of the
Company as a result of a corporate reorganization, etc. shall not be considered
to have terminated his employment.
(b)
Except as otherwise provided in this Section 18(b), in the event a Participant's
employment with or service to the Company or its subsidiaries terminates by
reason of the Participant's death or "disability" (as such term is defined in
Section 22(e)(3) of the Code), each ISO granted to the Participant shall become
immediately exercisable and shall terminate upon the earlier to occur of (i) the
expiration of the period one (1) year after the date of such termination or (ii)
the date specified in the ISO. An ISO may not be exercised and an Award may not
be deemed unrestricted pursuant to this subparagraph except to the extent that
the Participant was entitled to exercise the ISO or take the Award free of all
restrictions at the time of termination of employment by reason of death or
disability.
|
19.
|
Amendments
and Termination.
|
The
Committee will have the authority to make such amendments to any terms and
conditions applicable to outstanding Awards as are consistent with this Plan;
provided, that, (i) except for adjustments under Section 16 hereof, no such
action will modify such Award in a manner adverse to the Participant without the
Participant's consent except as such modification is provided for or
contemplated in the terms of the Award, and (ii) except for adjustments provided
for in Section 16 of this Plan, the exercise price of any
ISO, or the consideration due the Company with respect to any other Award, shall
not be repriced or otherwise amended without the approval
of the Company's shareholders.
The Board
may amend, suspend or terminate the Plan, except that no such action may be
taken, without shareholder approval, which would effectuate any change for which
shareholder approval is required pursuant to Section 16 of the Exchange Act or
Section 162(m) of the Code. In any event, no action may, without the consent of
a Participant, alter or impair any Award previously granted to the Participant
under the Plan.
|
20.
|
Successors
and Assigns.
|
The
provision of this Plan shall be binding upon all successors and assigns of any
such Participant including, without limitation, the estate of any such
Participant and the executors, administrators, or trustees of such estate, and
any receiver, trustee in bankruptcy or representative of the creditors of any
such Participant.
(a) This
Plan shall be governed by and construed in accordance with the laws of the State
of Pennsylvania. Further, the Plan and all Awards shall be construed
consistent with Section 409A of the Code and all applicable guidance thereunder
so as not to result in the inclusion in any Participant’s income of any benefit
under this Plan or under any Award by reason of the application of such
section
.
(b) Any
and all funds received by the Company under the Plan may be used for any
corporate purpose.
(c)
Nothing contained in the Plan or any Award granted under the Plan shall confer
upon a Participant any right to be continued in the employment of the Company or
any subsidiary, or interfere in any way with the right of the Company, or its
subsidiaries, to terminate the employment relationship at any time.
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