formproxystatement.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
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the Registrant (x)
Filed by
a Party other than the Registrant ( )
Check the
appropriate box:
(
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Preliminary
Proxy Statement
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(
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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(x)
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Definitive
Proxy Statement
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(
)
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Definitive
Additional Materials
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(
)
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Soliciting
Material Pursuant to §240.14a-12
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OMEGA FLEX, INC.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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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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of each class of securities to which transaction applies:
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(set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed
maximum aggregate value of transaction:
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fee paid:
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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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Amount
Previously Paid:
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Form,
Schedule or Registration Statement
No.:
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Dear
Shareholders:
It is my
pleasure to invite you to the 2010 annual meeting of the Omega Flex
shareholders. We will hold the meeting on Tuesday, June 8, 2010, at 1:00 p.m.,
in the Reed Institute, 152 Notre Dame Street, Westfield,
Massachusetts. At the annual meeting, we will discuss each item of
business described in the notice of annual meeting and in the proxy statement
and give a report on our business operations. There will also be time for your
questions.
You will
have received a notice of internet availability, which directs you to our
website – www.envisionreports.com/OFLX– to access the proxy statement and annual
report. You can also request a paper copy of these documents by
following the instructions in that notice. This booklet contains the
proxy statement and a notice of annual meeting. The proxy statement
provides information about the business we will conduct at the annual meeting,
in addition to describing our directors and management. Also
available on our website is a copy of our Annual Report on Form 10-K that we
filed with the Securities and Exchange Commission, which includes information
about our business and our 2009 financial results. We have dispensed
with a glossy annual report this year to control our costs in a very challenging
environment.
We hope
you will be able to attend the annual meeting. If you need special
assistance at the meeting, please contact the Company secretary at the address
shown on the next page. Whether or not you expect to attend, please vote your
shares using any of the following methods:
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vote
by telephone or the Internet, as described in the instructions on the
notice of internet availability;
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§
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request
a proxy card or voting instruction card; sign, date and return it in the
prepaid envelope; or
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§
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vote
in person at the meeting.
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We look
forward to seeing you at the annual meeting, and thank you for investing in
Omega Flex, Inc.
Sincerely,
Kevin R.
Hoben,
President
and Chief Executive Officer
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To Be
Held June 8, 2010
To The
Shareholders of Omega Flex, Inc.:
Please take notice that the annual
meeting of the shareholders of Omega Flex, Inc. (the “Company”) will be held at
the Reed Institute, 152 Notre Dame Street, Westfield, Massachusetts, on Tuesday,
June 8, 2010 at 1:00 p.m. local time, for the following purposes:
1.
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to
elect three Class 2 directors for a three year term expiring at the 2013
annual meeting of shareholders.
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2.
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to
ratify the appointment by the audit committee of the board of directors of
Caturano & Company, as independent auditors for the Company for the
fiscal year ending December 31, 2010.
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3.
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to
transact such other business as may properly come before the annual
meeting or any postponement or adjournment
thereof.
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Pursuant
to the by-laws of the Company, the board of directors has by resolution
fixed the close of business on April 14, 2010 as the record date for the
determination of shareholders entitled to notice of and to vote at the
annual meeting and any postponement or adjournment thereof. In
accordance with recent rules instituted by the Securities and Exchange
Commission, the notice of internet availability has been mailed to all
shareholders. The notice contains instructions on accessing the
proxy statement and the annual report of the Company on our website –
www.envisionreports.com/OFLX. If you wish to obtain a paper
copy of the proxy statement and annual report, please follow the
instructions on the notice of internet availability. Please
refer to the proxy statement and annual report for information concerning
the affairs of the Company. The annual report does not
constitute proxy soliciting
material.
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It
is important that your shares be represented at the annual
meeting.
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All
shareholders are cordially invited to attend the annual meeting in
person. Whether or not you plan to attend the annual meeting in
person, please vote your shares in accordance with the instructions on the
notice of internet availability. If you voted by internet or by
telephone, that vote will not limit your right to vote in person at the
annual meeting.
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By
Order of the Board of Directors
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Omega
Flex, Inc.
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Timothy
P. Scanlan,
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Secretary
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Principal
Executive Office:
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213
Court Street
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Suite
701
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Middletown,
CT 06457
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April
27, 2010
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OMEGA
FLEX, INC.
Corporate
Offices
213 Court
Street, S. 701
Middletown,
CT 06457
PROXY
STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
Tuesday,
June 8, 2010
SOLICITATION
AND REVOCATION OF PROXIES
The accompanying proxy is solicited
by and on behalf of the board of directors of Omega Flex, Inc., hereinafter
referred to as "Omega Flex" or the "Company". The cost of the
solicitation of proxies will be borne entirely by the
Company. Regular employees of the Company may solicit proxies by
personal interview, mail or telephone and may request brokerage houses and other
custodians, nominees and fiduciaries to forward soliciting material to the
beneficial owners of the stock held of record by such
persons. Broadridge Investor Communication Solutions has been
retained by the Company to assist in the distribution of proxy materials and the
solicitation of proxies by mail, for a estimated fee of $2,900, plus expenses to
be paid by the Company. This proxy statement and the enclosed form of
proxy are first being mailed to shareholders on or about April 27,
2010.
If a proxy is voted pursuant to the
instructions in the notice of internet availability, the shares represented will
be voted at the annual meeting and where a choice is specified, will be voted in
accordance with the specification made. Proxies may be revoked at any
time prior to voting by (1) executing and delivering a new proxy to the
secretary of the Company at or before the annual meeting, (2) voting in person
at the annual meeting or (3) giving written notice of revocation to the
secretary of the Company at or before the annual meeting.
This proxy statement is being provided
to shareholders of record of the Company as of April 14, 2010 in connection with
the solicitation of proxies by the board of directors for use at the annual
meeting of the shareholders to be held on Tuesday, June 8, 2010.
__________________________
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of
this proposed transaction, passed upon the merits or fairness of this
transaction, or determined that the proxy statement is truthful or complete.
It is illegal for any person to tell you otherwise.
PROPOSALS
FOR SHAREHOLDERS’ VOTE
The following proposals are being
submitted to the shareholders for a vote to approve or disapprove these
measures. Please read each of the proposals carefully before
voting your shares.
Proposal
1 - Election of Directors
Our board of directors is currently
divided into three classes, with members of each class holding office for
staggered three-year terms (in all cases, subject to the election and
qualification of their successor, or in the event of their death, resignation or
removal). Unless authority to vote for the election of any or all of
the nominees is withheld by marking the proxy to that effect, the persons named
in the proxy will vote to elect J. Nicholas Filler, Bruce C. Klink, and Edward
J. Trainor as
Class 2 directors for a term expiring at the 2013 annual meeting of
shareholders. Proxies cannot be voted for a greater number of persons
than the number of nominees named. Each of the nominees is currently
a Class 2 director whose term expires at the 2010 annual meeting of
shareholders. All of the nominees have indicated their willingness to serve if
elected, but if any should be unable or unwilling to stand for election, proxies
may be voted for a substitute nominee designated by our board of
directors.
The nominees for directors for a
three-year term expiring at the 2013 annual meeting of shareholders (Class 2
Directors) are:
J.
Nicholas Filler
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Age
58
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Director
of Omega Flex since 2009
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Bruce
C. Klink
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Age
59
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Director
of Omega Flex since 1997
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Edward
J. Trainor
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Age
70
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Director
of Omega Flex since 2005
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For complete biographical information
concerning each of the three Class 2 directors, please refer to the information
under the caption "Directors Background Information"
THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF THE THREE NOMINEES
LISTED ABOVE AS DIRECTORS.
Proposal 2 - Ratification of Audit
Committee’s Appointment of Auditors.
To ratify the appointment by the audit
committee of the board of directors of Caturano & Company, as independent
auditors for the Company for the fiscal year ending December 31,
2010. Although action by the shareholders in this matter is not
required, the board believes that it is appropriate to seek shareholder
ratification of this appointment in light of the critical role played by
independent auditors in maintaining the integrity of our financial controls and
reporting. If a majority of the shares present and entitled to vote
on the proposal do not ratify the appointment of Caturano & Company, the
audit committee will consider the vote and the reasons therefor in future
decisions on the selection of independent auditors.
THE BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE AUDIT
COMMITTEE’S APPOINTMENT OF AUDITORS.
No business other than that set forth
in the attached notice of annual meeting is expected to be acted upon, but
should any other matters requiring a vote of shareholders be properly brought
before the annual meeting or any postponement or adjournment thereof, the
persons named in the accompanying proxy card will vote thereon according to
their best judgment in the interest of the Company.
Vote
Required
The Company's by-laws provide that the
presence of the holders of a majority of the issued and outstanding stock of the
Company entitled to vote at the annual meeting, in person or represented by a
proxy, constitutes a quorum for the annual meeting; and that the vote of the
shareholders who hold a majority of the voting power present in person or
represented by proxy at the annual meeting and entitled to vote will decide any
question brought before the annual meeting, unless otherwise provided by statute
or the Company's restated articles of incorporation or by-laws.
The nominees for election as directors
of the Company at the annual meeting who receive the greatest number of votes
cast will be elected as directors for the three (3) positions on the board of
directors of the Company to be filled.
The affirmative vote of a majority of
the shares of common stock entitled to vote is required to ratify the
appointment of the indpendent accountants. Abstentions will have no
effect on the outcome of the election of directors, but will have the same
effect as a negative vote with respect to the ratification of the appointment of
the independent accountants. If you do not provide your broker or
other nominee with instructions on how to vote your shares held in “street
name,” your broker or nominee will not be permitted to vote your shares on
non-routine matters (a broker non-vote), and your shares will not affect the
outcome of proposals concerning non-routine matters. Please note that
the rules regarding how brokers may vote your shares have changed, such that,
starting this year, the election of directors is a “non-discretionary”
item. This means that your broker may no longer vote your shares in
connection with the election of directors in the absence of your specific
instructions as to how to vote. If you hold your shares beneficially
through a broker or nominee, we strongly encourage you to provide instructions
regarding the voting of your shares as your broker cannot vote your shares with
respect to this proposal without instructions from you.
Voting
Rights
The shareholders entitled to vote at
the annual meeting will be those whose names appeared on the records of the
Company as holders of its common stock at the close of business on April 14,
2010, the record date. As of April 14, 2010, there were issued and
outstanding 10,091,822 shares of common stock of the Company, all of which are
entitled to vote. The Company is not entitled to vote the shares of
common stock held in the treasury nor are such shares considered “issued and
outstanding.” As of April 14, 2010 there were 61,811 shares of common
stock held in the treasury.
Shareholders are entitled to one vote
for each share held on all matters to be considered and acted upon at the annual
meeting. Cumulative voting is not permitted. There are
three (3) directors to be elected at the annual meeting to be held on June 8,
2010. Unless otherwise indicated on the proxy cards, the votes
represented by such proxies will be voted in favor of the nominees listed
thereon and in favor of the Proposals set forth above under the caption
“Proposals for Shareholders’ Vote.”
Shareholder
Proposals
Proposals that shareholders wish to
present for consideration at the annual meeting to be held in 2011, pursuant to
SEC Rule 14a-8, must be received at the Company's corporate offices no later
than December 30, 2010 in order to be included in the Company's proxy statement
and proxy relating to such meeting. Upon receipt of any proposal, the
Company will determine whether or not to include such proposal in next year’s
proxy statement and proxy in accordance with regulations governing the
solicitation of proxies.
In order for a shareholder to bring
other business before a shareholders’ meeting, timely notice must be received by
the Company within the time limits described above. Such notice must
include a description of the proposed business, the reasons therefor and other
specified matters. These requirements are separate from the
requirements a shareholder must meet to have a proposal included in the
Company’s proxy statement and proxy.
BOARD
OF DIRECTORS AND EXECUTIVE OFFICERS
General
Information
The Omega Flex board of directors
consists of nine directors. The nominating/governance committee
reviewed the disclosures submitted by the nine board members and determined that
directors David K. Evans, J. Nicholas Filler, David W. Hunter, Bruce C. Klink,
John E. Reed, Stewart B. Reed and Edward J. Trainor were “independent” directors
under the requirements set forth in the corporate governance guidelines of the
board, applicable Securities and Exchange Commission (SEC) rules and the NASDAQ
listing standards. The Company’s corporate governance guidelines can
be found at the Company’s website at www.omegaflex.com. The
Company will provide any person, without charge, upon filing a written request
to the secretary of the Company at its general offices, with a copy of the
Company’s corporate governance guidelines. The process by which
directors are considered for nomination is more fully described in the report of
the nominating/governance committee below.
During the calendar year of 2009 the
board of directors held five meetings. All directors were present at
all of the meetings. At each meeting non-management, independent
directors had the opportunity to meet in executive session. The
Company’s corporate governance guidelines sets forth the policy that all
directors are encouraged, but not required to attend the annual meeting of
shareholders, and all of the directors attended the annual meeting of
shareholders in June 2009.
The board of directors has adopted a
code of business ethics, applicable to all employees of the Company, including
its principal executive officer, its principal financial officer, its principal
accounting officer or controller and persons performing similar functions. This
code of business ethics can be found at the Company’s website at www.omegaflex.com. The
Company will provide any person, without charge, upon filing a written request
to the Secretary of the Company at its general offices, with a copy of the
Company’s code of business ethics. Amendments to and waivers from the
code of business ethics will be disclosed on the Company’s website within four
business days following the date of amendment or waiver.
The Company is not aware of any
material proceeding in which any director or executive officer, or any associate
of any director or executive officer, is a party adverse to the Company or has
any material interest adverse to the Company. The Company is not
aware of having made any charitable contribution to an entity of which any
Director is a director, trustee or executive, in excess of the reporting
thresholds of $1,000,000 or 2% of such entity’s gross revenues.
Board
Leadership Structure and Role in Risk Oversight
The board of directors exercises
oversight of the Company and its business through the Company’s executive
management. Under the Company’s bylaws, the board annually elects a
chairman of the board, who may or may not be an officer of the Company, and who
presides at all meetings of the shareholders and the directors, and a chief
executive officer, who has the general and active management of the business of
the Company. Since 2005, when Omega Flex, Inc. became a
publicly-traded corporation and continuing to the present time, John E. Reed has
been the chairman of the board, and the
position
of the Company’s chief executive officer has been held by Kevin R.
Hoben. The board of directors has determined that this leadership
structure is appropriate in that the separation of the offices of chairman of
the board and chief executive officer enhances board independence and
oversight. Moreover, the separation of the chairman of the board and
chief executive officer allows the chief executive officer to focus on his
responsibilities of the day-to-day running the Company and expanding and
strengthening the Company, and allows the chairman of the board to lead the
board in its fundamental role of providing advice to and independent oversight
of management.
Risk is inherent in every business and
the Company is subject to many risks which have been described in our periodic
filings. Management is responsible for the day-to-day management of
the risks that the Company faces and the board of directors is responsible for
the oversight of risk management. While the board is ultimately
responsible for risk oversight at the Company, our board committees assist the
board in these oversight responsibilities in certain areas of
risk. Most notably, the audit committee has general oversight with
respect to risk management in the areas of financial reporting, internal
controls and compliance with legal and regulatory requirements and reports to
the board on these matters regularly.
Communication
with the Board
Shareholders who wish to communicate
with the Company’s board of directors may do so in writing, addressed to the
chairman of the board of directors, or to any individual director, at the
Company’s corporate headquarters at Omega Flex, Inc., 213 Court St., Suite 701,
Middletown, CT, 06457. Shareholders wishing to communicate with the
director presiding over the executive session of the Company’s non-management
directors may direct such communications to the chairman of the board, at the
address set forth above. All such correspondence will be forwarded to
the Company’s investor relations department, which will review the
correspondence. The board has delegated to the investor relations
personnel discretion to review such correspondence, and forward any matters
dealing with current, specific business or customer matters to the appropriate
senior management in the Company. All other correspondence will be
forwarded to the appropriate director designated by the
shareholders.
Director
Background Information
The following persons constitute the
Company’s board of directors. Only the Class 2 directors are standing
for election for a three-year term and until their respective successor have
been elected and qualified. The specific experience, qualifications,
attributes or skills that have led the board to conclude that each of the
directors should serve in that role in light of the Company’s business and
structure are included in each of their respective biographies. No
other candidates for election to the board of directors have been proposed or
nominated.
Director
Biographies
Mark F. Albino, Age
57
Mr.
Albino is currently Executive Vice President and Chief Operating
Officer. Since 1996, Mr. Albino served as Senior Vice President –
Manufacturing and Engineering until he assumed his current position in
2005. Mr. Albino has served as our director since 1996, and has also
served as director of Omega Flex Limited since 2001. Prior to his
joining us, Mr. Albino held a variety of positions in manufacturing and
engineering with Titeflex Corporation and Western Consolidated
Technologies. Mr. Albino has over 30 years of experience and
extensive knowledge of manufacturing operations in our industry, product design,
and the technical requirements for bringing new products to market, and is the
inventor of several patents covering important components of our
products. Mr. Albino is a Class 3 director with a term expiring at
the annual meeting of shareholders in 2011.
David K. Evans, Age
55
Mr. Evans
has served as a director of the Company since 1996. He is currently
the President and CEO of Partners Mechanical, Inc., a mechanical contractor in
Raleigh, North Carolina. Mr. Evans was previously the Construction
Manager of American Residential Services, LLC (“ARS”), a large construction
company headquartered in Raleigh, North Carolina. Previously, he was
the General Manager of Metro Heating and Air Conditioning, Inc. of Raleigh,
North Carolina prior to its acquisition by ARS. Mr. Evans previously
held a number of senior executive positions at TD Industries, Inc. of Dallas,
Texas. Mr. Evans has extensive experience in construction and
installation of mechanical systems in construction, including products
manufactured by the Company. Mr. Evans is a Class 1 director with a
term expiring at the annual meeting of shareholders in 2012.
J. Nicholas Filler,
Age 58
Mr.
Filler has served as a director since 2009. Since 2007, Mr. Filler
has been the Chief Operating Officer of Argotec, Inc., a manufacturing firm in
Greenfield, Massachusetts. Previously, Mr. Filler was the Senior Vice
President – Corporate and Legal of Mestek, Inc., the Company’s former parent
corporation, from 2001 to 2007, and is currently the corporate secretary of
Mestek. Mr. Filler was also employed as in-house counsel to several
small manufacturing and transportation firms in Western Massachusetts, and was
an attorney and partner at Bulkley Richardson and Gelinas in Springfield,
Massachusetts. Mr. Filler also served as corporate secretary of the
Company from 2005 to 2007, and asssitant secretary from 2007 to 2009, until his
resignation upon his appointment to the board. Mr. Filler is also a
director at Channing Bete Co., Pinsley Railroad Co., Bete Fog Nozzle Co., and
Argotec, Inc. Mr. Filler received a JD degree from Boston University
Law School, and has extensive experience in directing and leading manufacturing
firms, and also has extensive experience in accounting, finance, and financial
reporting, as well as being an attorney with a practice in corporate law and
corporate financing. Mr. Filler was elected by the board to fill the
vacancy as a Class 2 Director with a term expiring at the annual meeting of
shareholders in 2010, and is a candidate for election.
Kevin R. Hoben, Age
63
Mr. Hoben
is currently President and Chief Executive Officer of Omega Flex, and has served
in that position since 2005, and prior to that he served as President since
1996. Mr. Hoben also has served as our director since 1996 and as a
director and chairman of our United Kingdom subsidiary, Omega Flex Limited,
since 2001. Prior to joining Omega Flex, Mr. Hoben served in a number
of senior executive positions with Titeflex Corporation, a manufacturer of
flexible metal hose located in Springfield, Massachusetts, and is also a trustee
of Williston-Northampton School, a private secondary school in Easthampton,
Massachusetts. Mr. Hoben has over 30 years of experience in the sale
and distribution of flexible metal hose products in positions of increasing
scope and responsibility, has served as the Company’s president since 1996 and
CEO since 2005, and is a significant shareholder. Mr. Hoben is a
Class 3 Director with a term expiring at the annual meeting of shareholders in
2011.
David
W. Hunter, Age 81
Mr.
Hunter has served as a director of the Company since 2005. He has
been Chairman of Hunter Associates, Inc., an investment-banking firm in
Pittsburgh, Pennsylvania since 1992. From 1990 to 1992 Mr. Hunter was
Chairman Emeritus of Parker/Hunter, Inc., an investment-banking firm in
Pittsburgh, Pennsylvania, where he was Chairman from 1978 until
1990. Mr. Hunter is also a director of Lockhart Companies, Kiene
Diesel Accessories, Inc., and Justifacts, Inc. He served as Chairman of the
Board of Governors of the National Association of Securities Dealers, Inc. from
1986 to 1987. Mr. Hunter is also a director of Mestek, Inc., the
Company’s former parent corporation. Mr. Hunter has extensive
experience in capital markets, corporate finance, management, compliance and
governance, as well as directing companies in a number of different
industries. Mr. Hunter is a Class 1 Director with a term expiring at
the annual meeting of shareholders in 2012.
Bruce C. Klink, Age
59
Mr. Klink
has served as a director since 1996. Until his retirement in 2009,
Mr. Klink served as President of Dominion East Ohio, Inc., a subsidiary of
Dominion, Inc., a diversified energy producer headquartered in Richmond,
Virginia from 2008 and was previously Vice President – Gas Regulations and Vice
President –Pricing and Business Development from 2000 to 2008. Mr.
Klink previously held a number of executive positions primarily in senior
positions for pricing and regulatory affairs with Consolidated Natural Gas from
1983 to 1999 prior to its acquisition by Dominion Resources, and prior to that,
held a variety of positions in accounting, auditing, and regulatory
affairs. Mr. Klink has extensive experience and knowledge (a) of the
natural gas utility market, which is an important factor in our TracPipeÒ
FGP business, (b) managing and leading large and sophisticated companies in
regulated markets, (c) experience and knowledge of regulatory and compliance
issues, and (d) finance, financial accounting and auditing. Mr. Klink
is a Class 2 Director with a term expiring at the annual meeting of shareholders
in 2010, and is a candidate for election.
John E. Reed, Age
94
Mr. J.E.
Reed is our current Chairman of the board of directors and had been Chairman and
CEO, since 1997 to 2005. He is currently Chairman and Chief Executive
Officer of Mestek, Inc., the Company’s former parent corporation, and has served
as a Mestek director since 1986. From 1986 until 1989 he was
President and Chief Executive Officer of Mestek, and prior to the 1986 merger of
Mestek and Reed National Corp., had been President and Chief Executive Officer
of Reed since he founded it in 1946. Mr. JE Reed is also a director
of Wainwright Bank & Trust Co., Boston, Massachusetts. Mr. Reed
has an LLB in Law from Northeastern University, and has extensive knowledge and
experience in (a) managing and leading large manufacturing enterprises supplying
the HVAC industry in which most of our products are distributed, (b) experience
as the CEO of a publicly-traded corporation, with experience and knowledge of
regulatory and compliance issues, (c) corporate finance and accounting, (d) as
an attorney (non-practicing), a number of legal areas; and he is also a
significant shareholder. Mr. Reed is a Class 3 Director with a term
expiring at the annual meeting of shareholders in 2011.
Stewart B. Reed, Age
62
Mr. S.B.
Reed has served as a director of the Company since 2005. Since 2009,
Mr. S.B. Reed has served as the Vice Chairman and Chief Operating Officer of
Mestek, Inc., the Company’s former parent corporation. Previously, he
has filled a number of offices and roles at Mestek, most recently as a
consultant on acquisitions, labor and employment matters. Mr. Reed is
a director of Mestek, Inc. Mr. Reed is the son of John E. Reed, our
Chairman of the board. Mr. Reed has extensive knowledge and
experience in managing and leading large manufacturing enterprises supplying the
HVAC industry in which most of our products are distributed, and in corporate
finance and accounting, and he is also a significant shareholder. Mr.
S.B. Reed is a Class 1 director with a term expiring at the annual meeting of
shareholders in 2012.
Edward J. Trainor,
Age 70
Mr.
Trainor has served as a director of the Company since 2005. Mr.
Trainor is currently Chairman of the board of Standex International Corporation
(NYSE: SXI) and was formerly Chairman and Chief Executive Officer of Standex
from 2001 to 2002, was President and Chief Executive Officer of Standex from
1995 to 2001, and was President of Standex from 1994 to 1995. Prior
to joining Standex, Mr. Trainor held a variety of executive positions with Kodak
Corporation in engineering and manufacturing. Mr. Trainor is also a
director of Mestek, Inc., the Company’s former parent corporation. He
has an advanced degree from Harvard Business School; extensive experience and
knowledge of manufacturing operations in a variety of industries; significant
management experience as a CEO of a publicly-traded company; and knowledge and
experience in corporate finance and accounting. Mr. Trainor is
currently Vice Chairman of the Company, and is a Class 2 Director with a term
expiring at the annual meeting of shareholders in 2010, and is a candidate for
election.
Executive Officers
The executive officers of the Company
in addition to Mr. Hoben and Mr. Albino, whose biographies appear in the section
entitled "Director Background Information" above, are the
following:
Paul J. Kane, Age
42
Mr. Kane
is currently Vice President – Finance and Chief Financial Officer, which he has
held since 2008. Mr. Kane joined Omega Flex in September
2005, serving as Controller until 2007, and was named Principal Accounting
Officer in 2007. Prior to joining the Company, he was the Assistant
Controller at US Vision, Inc., a retail company, from 2002 to 2005; Senior
Financial Analyst at Foamex International, a manufacturing and distribution
company, from 1999 to 2002; and a Senior Accounting Consultant with Ernst &
Young LLP from 1996 to 1999. He has been a certified public accountant since
1996.
Steven A. Treichel,
Age 59
Mr.
Treichel is currently the Senior Vice President-Corporate Development and
Facilities Management, which he assumed in early 2006. Previously he
served as Vice President – TracPipe® Operations from 1996 to 2002, where he is
responsible for engineering for the TracPipe® product line and research and
development. Previously he served as Vice President of the Company in
manufacturing and in engineering from 1990 to 2002, and prior to that, he was
Plant Manager and Process Engineer from 1984 to 1990. Prior to joining Omega
Flex, Mr. Treichel held a number of managerial positions at American Flexible
Hose Company from 1978 to 1984, in manufacturing of metal hose fabrication,
welding and assembly.
Timothy P. Scanlan,
Age 54
Mr.
Scanlan is currently General Counsel, a position he has held since he joined the
Company in 2006, and is also the Company’s corporate
Secretary. Previously, Mr. Scanlan was Associate General Counsel with
Mestek, Inc., the Company’s former parent corporation, from 1993 to
2006. Prior to 1993, Mr. Scanlan was previously employed by
General Electric Company in a variety of positions in legal, manufacturing and
finance. Mr. Scanlan is an attorney admitted to practice law in
Massachusetts and Pennsylvania.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain
information on the beneficial ownership of shares of the Company's common stock
by each current director and nominee for director of the Company, each of the
Company’s executive officers and the current directors and executive officers of
the Company as a group. As of April 14, 2010, there were 10,091,822 shares of
common stock outstanding. There were no persons known to the Company
to own beneficially more than 5% of the outstanding shares of common stock,
except as noted below.
|
Shares
of
|
|
|
common
Stock
|
Percent
of
|
Beneficial
Owner
|
Owned
|
Class
|
Directors
John
E. Reed (1)
|
|
|
3,297,893 |
|
|
|
32.68 |
% |
|
|
|
|
|
|
|
|
|
Stewart
B. Reed (2)
|
|
|
2,195,387 |
|
|
|
21.75 |
% |
|
|
|
|
|
|
|
|
|
Kevin
R. Hoben
|
|
|
1,018,340 |
|
|
|
10.09 |
% |
|
|
|
|
|
|
|
|
|
Mark
F. Albino
|
|
|
406,145 |
|
|
|
4.02 |
% |
|
|
|
|
|
|
|
|
|
David
K. Evans (3)
|
|
|
790 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
J.
Nicholas Filler
|
|
|
1,200 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Bruce
C. Klink
|
|
|
1,650 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
David
W. Hunter (4)
|
|
|
22,830 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Edward
J. Trainor
|
|
|
3,500 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
J. Kane
|
|
|
50 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Timothy
P. Scanlan
|
|
|
250 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
Steven
A. Treichel
|
|
|
1,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
All
executive officers and directors
|
|
|
|
|
|
|
|
|
As
a group (12 persons)
|
|
|
6,949,035 |
|
|
|
68.86 |
% |
*
indicates less than 1% ownership of the issued and outstanding common
stock.
Except as otherwise noted in the
footnotes below, the entity, individual director or executive officer or their
family members or principal shareholder has sole voting and investment power
with respect to such securities.
(1)
|
Excludes
1,712,691 shares of common stock held by John E. Reed as trustee for
various family trusts, but for which he disclaims beneficial
ownership. However, 1,325,833 of such shares are included in
the shares listed as beneficially owned by Stewart B. Reed per note (2)
below. Includes 524,994 shares of common stock owned by
Sterling Realty Trust, a Massachusetts trust of which John E. Reed is the
trustee and of which he and a family trust are the
beneficiaries. Mr. Reed has pledged 634,500 shares as
collateral to Sovereign Bank, and 524,994 shares as collateral to Bank of
America.
|
(2)
|
Includes
1,325,833 shares of common stock owned by the Stewart B. Reed Trust, of
which Stewart B. Reed is the beneficiary and John E. Reed is the
trustee.
|
(3)
|
Shares
are held by a corporation of which Mr. Evans is an officer and
shareholder, and beneficial ownership is disclaimed except to the extent
of Mr. Evans’ pecuniary interest in that
corporation.
|
(4)
|
Includes
9,500 shares of common stock held by his spouse to which he disclaims
beneficial ownership.
|
There has
been no change of control of the Company since the beginning of the last fiscal
year.
BOARD
COMMITTEES
The board of directors has four (4)
standing committees: nominating/governance, audit, executive and
compensation.
Nominating/Governance
Committee
The board of directors has established
the nominating/governance committee pursuant to the Company’s by-laws and the
NASDAQ listing standards. The nominating/governance committee's
responsibilities are as set forth in its charter, which can be found at the
Company’s website at
www.omegaflex.com. The committee
responsibilities include (a) evaluating and recommending nominees for election
as directors to the board of directors, (b) recommending to the board of
directors criteria for membership on the board, (c) proposing nominees to fill
vacancies on the board of directors as they occur, and (d) recommending
principles of corporate governance pursuant to which the board and its
committees perform their respective duties. The Company does not have
a formal policy with regard to
the
consideration of diversity in identifying candidates for director but the
nominating committee strives to nominate directors with a variety of skills and
qualifications such that the board, as a whole, will possess the appropriate
expertise to oversee the Company’s business. The committee held 3
meetings in 2009. The current members of the committee are Messrs.
Evans (Chairman), Hunter and S.B. Reed. The board of directors
determined that the committee members are independent directors in accordance
with the Company’s corporate governance guidelines, applicable SEC rules and the
requirements of the NASDAQ listing standards. In selecting candidates
for election to the board of directors at future annual meetings of
shareholders, the Committee will consider prospective candidates whose names
have been submitted by shareholders in accordance with the procedures described
in the committee’s report, below. Such submissions should be in
writing and directed to the secretary of the Company at 213 Court Street, Suite
701, Middletown, Connecticut, 06457.
Audit
Committee
The board of directors has established
and maintains an audit committee comprised of three of the Company’s independent
directors. No member of the audit committee serves on the audit
committee of more than three public companies.
The audit committee’s responsibilities
are as set forth in its charter, which can be found at the Company’s website at
www.omegaflex.com. These
responsibilities include assisting the board of directors in its oversight of
the accounting and financial controls of the Company, reviewing the process and
procedures underlying management’s assessment of the effectiveness of the
Company’s systems and financial controls, and the Company’s compliance with
legal and regulatory requirements. The audit committee selects the
independent auditors, reviews the scope of the audit and the results of the
audit, approves permitted non-audit services (such as tax services), and reviews
the financial and disclosure controls procedures. The audit committee
also oversees management’s efforts to establish and maintain a process for
handling complaints or concerns relating to accounting or financial matters, as
well as compliance issues generally.
As part of its oversight role relating
to the Company’s systems, controls and procedures, the audit committee also
oversees management’s response to relevant risk factors that potentially face
the Company. On an annual basis, the committee reviews those risks to
the Company and its businesses that have been identified by management, and
reviews the analysis and plans prepared by management to eliminate, mitigate or
address those potential risks.
The audit committee acts pursuant to
the Company’s by-laws and the audit committee charter. The
audit committee charter is reviewed annually by the audit committee to determine
the charter’s adequacy to respond to the issues raised in the course of the
audit committee’s activities. The audit committee has acted under its
charter. The committee held 10 meetings in 2009, at which all members attended
in person or by telephone, and consulted with each other and management as
necessary to discharge its duties. Please see the report of the audit
committee set forth in this proxy statement. The current members of
the audit committee are Messrs. Trainor (Chairman), Klink and
Filler. The board of directors has determined that (a) all of the
members of the committee are each an “audit committee financial expert” under
SEC rules, and (b) all of the audit committee members are “financially
sophisticated” as required by the NASDAQ Listing Standards.
Executive
Committee
To the extent permitted by the laws of
the Commonwealth of Pennsylvania, the executive committee has and may exercise
all the powers and authorities of the board of directors as follows: (a) to take
action on behalf of the board of directors during intervals between regularly
scheduled meetings of
the board
of directors if it is impracticable to delay action on a matter until the next
regularly scheduled meeting of the board of directors, and (b) to take action on
all matters of the Company that have been delegated for action by the board of
directors. The executive committee meets from time to time,
irregularly, and consults with each other and management as necessary to
discharge its duties. The current members of the committee are
Messrs. J.E. Reed (chairman), Hoben and Albino.
Compensation
Committee
The compensation committee’s
responsibilities are as set forth in its charter, which can be found at the
Company’s website at www.omegaflex.com. The committee’s
duties include establishing a compensation philosophy to guide the committee in
executive compensation decisions, establishing and approving executive
compensation plans, reviewing the compensation of the chief executive officer
and the executive officers of the Company, and recommending to the board of
directors the amount of compensation to be paid to the chief executive officer
and the executive officers of the Company. Please see the report of
the compensation committee set forth in this proxy statement. The
committee met 3 times in 2009, with all members in attendance, to consider and
recommend compensation matters to the board of directors. The
current members of the committee are Messrs. Hunter (chairman), Evans and
Trainor, each of whom have been determined to be independent directors in
accordance with the Company’s corporate governance guidelines, applicable SEC
rules and the requirements of NASDAQ listing standards.
BOARD
REPORTS
Nominating/Governance
Committee Report
And
Director Nomination Process
This report of the
nominating/governance committee shall not be deemed to be “soliciting material”
or subject to Regulations 14A or 14C of the Securities and Exchange Commission,
or to the liabilities of Section 18 of the Securities and Exchange Act of 1934
(the “Exchange Act”) and shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 ("Securities Act") or under the Exchange
Act, notwithstanding any general incorporation by reference of this proxy
statement into any other document, and shall not otherwise be deemed filed under
such Acts. The Company will provide any person, without charge, upon
filing a written request to the secretary of the Company at its general offices,
with a copy of the Company’s nominating/governance committee
charter.
REPORT
The nominating/governance committee
met in 2009 to review director qualifications, nominate directors for election
at the annual meeting of shareholders, to review the corporate governance issues
for the board, and discuss the adoption of certain policies by the
Company.
The Company has a policy, as set
forth in its by-laws, of considering candidates for election to the board of
directors who may be nominated by the shareholders. The board of
directors recognizes and fully appreciates its position of stewardship of the
Company for the benefit of the shareholders, and the board firmly subscribes to
the proposition that the shareholders should be free to exercise their franchise
to select and elect the persons who direct the Company in which the shareholders
have invested. To that end, the by-laws of the Company provide for a
process by which shareholders may nominate individuals for election
to
the board
of directors. This process requires that such shareholder nomination
be made in writing by a shareholder holding, or by a group of shareholders who
in the aggregate hold, five percent (5%) or more of the Company’s common stock
continuously for at least one year prior to the date of the submission of such
candidate, and
delivered to the chairman of the board of directors not later than 120 days
prior to the anniversary date of the immediately preceding annual
meeting. Such nomination must also include (a) the name and residence
of each proposed nominee and of the nominating shareholder, (b) the principal
occupation of each proposed nominee, (c) the written consent of each nominee to
serve as a director of the Company, if elected, and (d) any information
regarding each nominee proposed by a shareholder that would be required to be
included in a proxy statement filed with the Securities and Exchange Commission
pursuant to the Securities Act, the Exchange Act, and the rules and regulations
promulgated thereunder and applicable NASDAQ listing standards.
Any candidate for election to the board
of directors nominated by a shareholder shall possess the minimum
qualifications, as required by the by-laws and by the corporate governance
guidelines, to wit: (a) be a natural person, (b) be not less than 21
years of age, and (c) not be a director, officer or employee of a competitor of
the Company. The specific skills or expertise of a shareholder
nominee should complement the needs of the board at the time of the
election. These needs will vary from time to time based on the
composition of the board. In reviewing and identifying candidates for
the board of directors, the nominating/governance committee is charged with a
mandate under the Company’s corporate governance guidelines to identify and
consider candidates having significant skills or experience in any one or more
of the following areas: understanding of the application and use of
some or all of the Company’s products, understanding of various manufacturing
technologies, an understanding of general accounting principles as applied in
the preparation and reporting of financial statements of a public company, and
expertise and knowledge of management of a large multi-facility organization,
international experience, and other pertinent characteristics – all in the
context of an assessment of the then current perceived needs of the
Company. To that extent, the committee will seek to identify and
consider candidates who may have a diverse background and not limited strictly
to the markets in which the Company competes or to manufacturing industries
generally.
Identification of persons to become
nominees for the board of directors are obtained through a variety of sources,
including the directors, the executive officers of the Company, and trade or
industry groups in which the Company participates. Once a candidate has been
identified, the nominating/governance committee evaluates such candidate based
upon his or her length and breadth of business experience, specific skills or
knowledge, values, and other qualities which the Company may deem
pertinent. The committee’s review may include personal interviews
and/or reference checks. This process is applied regardless of
whether the potential nominee has been identified and proposed by a shareholder
or by any other person.
As of the date of this proxy statement
neither the chairman of the board nor the nominating/governance committee had
received from shareholders owning more than 5% of the Company’s common stock a
nomination of any individual to the board of directors. There are no
nominees included on the Company’s proxy card who are not standing for
re-election.
David K.
Evans, Chairman, David
W. Hunter, Stewart B. Reed, Members
Audit
Committee Report
This report of the audit committee
shall not be deemed to be “soliciting material” or subject to Regulations 14A or
14C of the Securities and Exchange Commission or to the liabilities of Section
18 of the Exchange Act and shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act or under the Exchange Act, notwithstanding any
general incorporation by reference of this proxy statement into any other
document, and shall not otherwise be deemed filed under such
Acts. The audit committee furnished the following report
as
required
under the revised proxy rules adopted by the Securities and Exchange
Commission. The Company will provide any person, without charge, upon
filing a written request to the secretary of the Company at its general offices,
with a copy of the Company’s audit committee charter.
REPORT
The audit committee met ten times
during the 2009 fiscal year and discussed with the Company’s management the
interim financial statements of the Company for each applicable reporting period
prior to the filing or distribution of such financial statements. The
audit committee met in March 2010 to review and discuss with the Company’s
management and the independent auditors, together and separately, the audited
financial statements of the Company for the fiscal year ended December 31,
2009. Management has the responsibility for preparation of the
Company’s financial statements, and the independent auditors have the
responsibility for examining those statements and expressing an opinion
thereon. The audit committee’s primary responsibility with respect to
the Company’s financial statements is one of review and oversight.
The committee has acted, pursuant to
its charter, and has during the year, (a) reviewed with the independent auditors
their internal quality control procedures and independence from management, (b)
reviewed with management and the independent auditors recent accounting
pronouncements and their effect on the financial statements of the Company, (c)
reviewed the Company’s financial and disclosure control procedures instituted by
management, and (d) reviewed with the vice president-finance and chief financial
officer the Company’s internal system of financial and accounting
controls.
The audit committee also discussed with
the independent auditors matters required to be discussed by Statement and
Auditing Standards No. 61, titled “Communication with Audit Committees,” and
received from the independent auditors written disclosures regarding the
independence of the independent auditors from the Company as required by
Independence Standards Board Standard No. 1, titled “Independence Discussions
with Audit Committees.” The audit committee considered the
compatibility of the non-audit services the Company received from its
independent auditor and the effect of such engagements on the independence of
the independent auditors.
Based on all of the above, the audit
committee recommended that the board of directors include the audited
consolidated financial statements in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2009, filed with the Securities and
Exchange Commission.
Edward J.
Trainor, Chairman, J.
Nicholas Filler, Bruce C. Klink, Members.
NOTE: If any person wishes to
communicate with the Company’s audit committee regarding any question or concern
arising out of the Company’s accounting, internal financial controls, or
auditing matters, such questions or concerns should be forwarded to the Company
under its compliance reporting policy, a copy of which is available for viewing
at www.omegaflex.com/compliance.asp.
Compensation
Committee Report
This report of the compensation
committee shall not be deemed to be “soliciting material” or subject to
Regulations 14A or 14C of the Securities and Exchange Commission, or to the
liabilities of Section 18 of the Exchange Act and shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or under the
Exchange Act, notwithstanding any general incorporation by reference of this
proxy statement into any other document, and shall not otherwise be deemed filed
under such Acts. The compensation committee furnishes the report on
executive compensation as required under the proxy rules on executive
compensation adopted by the Securities and Exchange Commission. The
compensation committee charter is available on the Company’s
website
at www.omegaflex.com. The Company will provide any person, without
charge, upon filing a written request to the secretary of the Company at its
general offices, with a copy of the Company’s compensation committee
charter.
REPORT
The compensation committee of the board
of directors consists entirely of independent, non-employee
directors. The committee has the responsibility for: (a) fixing the
elements of a comprehensive compensation program for the chief executive officer
and the executive officers of the Company that provide rewards and create
incentives for their performance in maintaining and improving the profitability
of the Company and enhancing long-term shareholder value; (b) reviewing the
levels of compensation to be paid or granted to the chief executive officer and
the executive officers of the Company; and (c) recommending to the entire board
of directors the levels of such compensation to be paid or awarded.
The compensation committee is fully
committed to the proposition that compensation paid to the chief executive
officer and the executive officers of the Company should be fashioned in a
manner so as to encourage initiatives by those officers that will promote the
long-term growth and enhancement of the intrinsic value of the
Company. The committee believes that growth of the Company’s
intrinsic value will ultimately translate into the growth and enhancement of the
interests of the shareholders in the Company. This compensation
program is further intended to provide incentives to the executive officers that
are linked to the financial results of the Company. The committee is
also mindful of the need to attract and retain individuals possessing the vision
and leadership skills necessary to continue the Company’s growth into the
future. With these propositions in mind, the compensation committee
has based the compensation of the Company’s executive officers upon three
pillars: base salary, performance-related bonuses based on the actual financial
results of the Company measured against its pre-established business plans, and
long-term incentives, such as phantom stock units.
Base salary. The
committee annually reviews the annual base salary of the chief executive
officer, the chief operating officer and the chief financial officer, and
considers the recommendations of the chief executive officer regarding the
annual base salaries of the Company’s other executive officers. The
compensation committee considered the recommendations of its compensation
consultant to establish the initial base salary of the chief executive officer
and the chief operating officer. The base salary of the Company’s
chief executive officer is subject to increase but not decrease on an annual
basis as the board of directors may determine. The compensation
committee considers factors such as performance in the preceding year in meeting
pre-established business plan goals for sales and net income, the level of
responsibility within the Company and the contributions of each of the chief
executive officer and other executive officers in connection with determining
whether increases in salary are advisable in order to
enhance
the long-range prospects of the Company but the effects of which may not be
immediately apparent. Effective January 1, 2010, the annual base
salary of the chief executive officer was increased by 4% from $325,260 in 2009
to $338,500 in 2010.
Incentive Bonus
Plan. Effective January 2009, the committee adopted a
performance measurement for the plan based on net income of the Company for the
fiscal year, and established the bonus pool at 30% of net income. The
plan was implemented with the intention of aligning management’s focus on the
bottom line with the interests of shareholders in attaining solid financial
results that were readily discernible to the shareholders. The net
income performance measurement was also made in recognition of the adverse
economic conditions in the United States at the beginning of
2009. The committee has previously used performance measurements for
growth of EBIT and net sales for the Company, but it was apparent to the
committee and to management that, given those extremely adverse general economic
conditions, it would be difficult if not impossible to generate growth in those
measurements. The bonus plan results for fiscal year 2009 generated a
pool of approximately $1.3 million, a reduction of 40% from the amount of the
bonus pool from the prior year and in line with the reduction in the Company’s
financial performance for the year.
We believe that executives, like
others, should be paid for performance. Although management performed
very well in 2009 by reducing costs and maintaining profitability in the most
challenging period of the Company, and delivering a record dividend to the
shareholders, in the end the general economic conditions seriously affected the
top line sales, and as a result dampened the Company’s financial
performance. In the end, all stakeholders in the Company –
shareholders, management, employees, customers and vendors – must bear a part of
the burden in the lean times if they are to share in the rewards of the good
times; and by all accounts, 2009 was a very lean time.
Long-term
Compensation. The Omega Flex, Inc. 2006 Phantom Stock Plan is
designed to function as the long-term component of our compensation
program. Under the phantom stock plan, select members of the
management team may receive units of phantom stock. The value of the
phantom stock is tied to the value of our common stock. The phantom
stock units have a vesting schedule, typically three years. After the
phantom stock units have vested, the executive would receive the value of the
phantom stock, which would be equal to the then current value of the Company’s
common stock on the maturity date of the phantom stock units. This
amount could either be full value (the phantom stock unit is equal to the common
stock) or it could be appreciation only (the phantom stock unit is equal to any
increase in the value if the common stock). The outstanding phantom
stock units also accrue amounts equal to any cash or stock dividends declared on
the Company’s common stock. If the executive voluntarily leaves the
Company or is terminated, then any unvested awards of phantom stock units are
forfeited. Awards to employees are at the discretion of the committee
and upon recommendation by the chief executive officer. We do not
have a formal program on the timing of the phantom stock awards, but we do
review decisions on whether to grant phantom stock units on an annual basis in
the first quarter, and then during the year depending on
circumstances. Generally, the awards will be made either outside any
black-out period applicable to insider trading of our common stock, or in
conjunction with the calculation and payment of our annual bonus program, which
occurs in the first quarter of each year.
After considering all of the factors
and making recommendations upon the annual base compensation and bonus formulae
and percentage participations for the chief executive officer and each of the
other executive officers of the Company, the committee presents this report to
the full membership of the board of directors at its December meeting each
year. The recommendations of the compensation committee for 2009 were
presented, discussed and voted upon, and approved in an executive session of the
board of directors of the Company, Messrs. Hoben and Albino
abstaining.
Other
Compensation. In addition, each year the entire board of
directors, based upon the recommendation of the compensation committee,
considers the percentage participation of all employees (including the chief
executive officer and the other executive officers of the Company) in the
Company’s
profit
sharing plan. For the fiscal year ended December 31, 2009, the
committee recommended and the board of directors voted in favor of a Company
contribution of 3% of annual base salary for all eligible employees up to the
maximum of $106,800 and a Company contribution of six percent 6% of annual base
salary for all eligible employees for amounts in excess of the maximum of
$106,800 (as limited in accordance with the Employee Retirement Income Security
Act).
David W.
Hunter, Chairman, David
K. Evans, Edward J. Trainor,
Members.
Executive
Compensation
The following table sets forth all of
the compensation awarded to, earned by or paid to the Company’s executive
officers for the years ended December 31, 2009 and December 31,
2008.
Summary
Compensation Table
|
Year
|
Salary ($)
|
Bonus
($)
|
Stock
Awards ($)
|
Non-equity
Incentive Plan Compensation ($)
|
All
Other Comp ($)(1)
|
Total
($)
|
|
|
Kevin
R. Hoben,
President
& CEO
|
2009
|
331,739
|
325,708
|
0
|
514,067
|
37,917
|
1,209,431
|
|
2008
|
325,261
|
0
|
0
|
930,077
|
37,840
|
1,293,178
|
|
|
|
|
|
|
|
|
|
|
Mark
F. Albino,
Exec.
Vice President & COO
|
2009
|
265,601
|
258,183
|
0
|
407,492
|
35,340
|
966,616
|
|
2008
|
260,415
|
0
|
0
|
716,617
|
23,704
|
1,000,736
|
|
|
|
|
|
|
|
|
|
|
Steven
A. Treichel,
Sr.
Vice President
|
2009
|
136,035
|
79,440
|
32,582
|
125,382
|
29,552
|
402,991
|
|
2008
|
132,407
|
0
|
0
|
238,872
|
28,357
|
399,636
|
Footnotes:
(1) Amounts
reflected in this column include:
Company contributions to the
profit sharing plan. The matching contributions paid in 2009 for each
executive officer were: Mr. Hoben – $10,740; Mr. Albino – $10,740; and Mr.
Treichel –$10,740; and the matching contributions paid in 2008 for each
executive officer were: Mr. Hoben – $10,575; Mr. Albino – $10,575; and
Mr.Treichel –$10,575.
Company car - For Mr. Hoben
and Mr. Albino, this amount also includes the use of a company car, valued on an
annual basis at $18,305 and $11,933 respectively.
Dividends – For executives
with outstanding phantom stock units, those units accrue amounts equal to
dividends paid on the Company’s common stock. The dividend equivalent
amounts are subsequently paid at the same time with the payout of the underlying
vested units. In 2009, Mr. Treichel received an accrual of $4,482
relating to his outstanding phantom stock units, which are scheduled for payment
in 2013.
Benefits – All Other
Compensation includes amounts relating to employee benefit programs, including
life and disability insurance, and medical and dental benefits, that are offered
to all employees on equivalent terms.
We have
omitted from this table two columns relating to (a) option awards, and (b)
non-qualified deferred compensation earnings. Under regulations
issued by the Securities and Exchange Commission, registrants are required to
report any compensation that may fall within any of these
categories. However, we do not have any reportable amounts for any of
our executive officers under any of these categories of
compensation.
Outstanding
Equity Awards at Fiscal Year End(1)
Name
|
Number
of share or units of stock that have not vested (#)(2)
|
Market
value of shares of units of stock that have not vested ($)(3)
|
Equity
incentive plan awards; number of unearned shares, units or other rights
that have not vested (#)
|
Equity
incentive plan awards; market or payout value of of unearned shares, units
or other rights that have not vested ($)
|
Kevin
R. Hoben, President and CEO
|
0
|
0
|
0
|
0
|
Mark
F. Albino, Exec. Vice President and COO
|
0
|
0
|
0
|
0
|
Steven
A. Treichel, Sr. Vice President
|
2,241
|
31,374
|
0
|
0
|
Footnotes:
(1)
|
All
equity awards are in the form of phantom stock units issued pursuant to
the Omega Flex, Inc. 2006 Phantom Stock Plan, as described in the
compensation committee report on page
15.
|
(2)
|
The
vesting of the phantom stock awards occur in three approximately equal
installments beginning one year after the grant
date.
|
(3)
|
The
market value is computed by multiplying the closing market price of the
Company’s stock at December 31 of each year by the number of phantom stock
units.
|
Employment
Agreements
On
December 15, 2008, Omega Flex, Inc. entered into an employment agreement with
each of Kevin R. Hoben, President and CEO of the Company, and Mark F. Albino,
Executive Vice President and Chief Operating Officer of the Company. The
agreements supersede the prior employment agreements between the Company and
each of those officers that were in effect since 1996.
The
agreements with Mr. Hoben and Mr. Albino contain the following
terms:
Duties and Term. Mr.
Hoben will be employed by the Company as President and CEO, and Mr. Albino will
be employed as Executive Vice President and Chief Operating Officer of the
Company. Each of the executives will be employed for a period of two years, and
that term will be automatically extended for consecutive one-year periods unless
the Company provides six-months advance notice of termination. In each case, the
agreements are also subject to earlier termination by the Company or by the
executive.
Compensation. The
agreements provide for compensation in the form of: (1) annual base salary
(currently for Mr. Hoben – $338,500; for Mr. Albino - $271,010) subject to
annual review and adjustment by the compensation committee of the board of
directors; (2) annual incentive bonus awards in accordance with the bonus
programs established by the board; (3) twenty days of paid vacation; (4) a car
allowance; and (5) other employment benefits provided by the Company to all of
its employees, such as retirement plans, medical and life insurance programs,
and short- and long-term disability plans, in accordance with the terms of those
employee benefit plans. The executive will be reimbursed for all reasonable and
necessary expenses incurred in performing his duties.
Termination. Each of the agreements may
be terminated in any of the following circumstances: (1) death, (2) permanent
disability, (3) for “cause” (as defined below) at the option of the Company, (4)
without “cause” at the option of the Company, (5) for “good reason” (as defined
below) at the option of the executive, (6) by resignation or retirement at the
option of the executive, or (7) by the Company’s decision not to renew the
agreement.
Payments on
Termination. The executive will receive payments under his agreement as a
result of the termination of the agreement, as follows:
§
|
Death or disability –
accrued and unpaid base salary and vacation, and severance in an amount
equal to the average incentive bonuses paid to the executive in the three
previous fiscal years;
|
§
|
For cause, retirement or
resignation - accrued and unpaid base salary and vacation as of the
date of termination, retirement, or
resignation;
|
§
|
Without cause or for good
reason - accrued and unpaid base salary and vacation, severance (as
described above), one year’s base salary, and continuation of health
benefits and car allowance for one year;
or
|
§
|
Non-renewal – accrued and
unpaid base salary and vacation, severance (as described above), one
year’s base salary, and continuation of health benefits and car allowance
for one year.
|
For purposes of the agreements, “cause” is defined under the
agreements as (a) the willful failure to perform the executive duties under the
agreement; (b) willful or gross misconduct; (c) conviction of, or plea of guilty
or nolo contendere to,
a felony; or (d) a material breach of the executive’s obligations under the
agreement, including confidentiality and non-competition.
In addition, “good reason” is defined under
the agreements to mean (a) a reduction in annual base salary; (b) a material
reduction in bonus compensation related to factors other than (i) business or
economic conditions, (ii) poor performance, (iii) limits on executive
compensation imposed by law or regulation, or (iv) new requirements in the
Internal Revenue Code or Employee Retirement Income Security Act; (c) a
relocation of the place of employment greater than twenty five (25) miles from
the current place of employment, or (d) a material reduction in principal duties
and responsibilities.
Change in Control.
Each of the agreements provides that if the agreement is terminated without
cause or for good reason, or is not renewed by the Company, anytime in an 18
month period following a change in control, the executive will receive an amount
equal to two years’ base salary and two times the average incentive bonus
amounts paid or earned in the prior three years. These amounts are in addition
to any payments that may be received in respect of the termination of the
agreement. A “change in control” may occur through (1) a merger or consolidation
of the Company with another entity, where the Company’s shareholders prior to
the transaction will not hold a majority of the voting power of the equity
interests of the successor entity; (2) a sale or transfer of all or
substantially all of the Company’s assets; (3) acquisition by a person or group
of persons acting together in a transaction or series of transaction resulting
in that person or persons’ owning 50% or more of the voting power of the voting
securities of the Company; (4) a change in the composition of the board of
directors in a two year period where a majority of the board members as of the
date of determination have changed from the beginning date; and (5) the
liquidation or dissolution of the Company (excluding however, any bankruptcy of
the Company).
Restrictive
Covenants. During the term of each agreement and for one year after
termination of each agreement, the executive may not solicit or induce any
employee to leave the employment of the Company, or to solicit or induce any
customer or supplier of the Company to terminate or modify their business
relationship with the Company. Further, during the term of the agreement and for
one year after termination of the agreement, the executive may not engage,
either individually or as an employee, director, owner or consultant of any
entity, in any business that is engaged in the manufacture and sale of flexible
metal hose and braid products, or other line of business in which the Company is
engaged at the time of termination.
Miscellaneous. The
agreement will be interpreted in accordance with Section 409A of the Internal
Revenue Code, including deferral of any payments to the executive if he is
deemed to be a “specified employee” under §409A. Any payments under the
agreements that may be subject to an excise tax imposed under Section 4999 of
the IRC will be reduced to a level so that the payment will not be subject to
that excise tax. The agreements supersede and replace the prior executive
employment agreements.
Retirement
Plans
All of
the executive officers of the Company are participants in the Omega Flex, Inc.
401(k) Profit Sharing Plan.
Director
Compensation
Directors who are also employees of the
Company receive no separate compensation for serving as directors or as members
of any committees of the board. Each non-employee director receives
the following compensation:
Annual
Retainer
|
$15,000
|
|
|
Retainer
– Chairman of the board
|
$5,000
|
Retainer
– Chairman of board committee
|
$3,000
|
Retainer
– Audit committee member
|
$3,000
|
|
|
Attendance
–Board meeting
|
$3,000
|
Attendance
– Committee meeting
|
$3,000
|
Attendance
– Telephonic meeting
|
$1,000
|
Directors
are also reimbursed for their reasonable expenses in attending or participating
in a board or committee meeting. The compensation of each director
for the fiscal year ended December 31, 2009 are set forth in the table
below:
|
|
Fees
earned or
|
|
|
Name
|
|
paid in cash ($)
|
|
Total
($)
|
David
K Evans
|
47,000
|
|
47,000
|
J
Nicholas Filler
|
40,000
|
|
40,000
|
Bruce
C Klink
|
42,000
|
|
42,000
|
David
W Hunter
|
41,000
|
|
41,000
|
John
E Reed
|
41,000
|
|
41,000
|
Stewart
B Reed
|
34,000
|
|
34,000
|
Edward
J Trainor
|
52,000
|
|
52,000
|
The
non-management directors do not receive any equity compensation, incentive plan
compensation, nor non-qualified deferred compensation.
TRANSACTIONS
WITH RELATED PERSONS
The Company is the holder of a
promissory note payable by Mestek, Inc., its former parent corporation in the
principal amount of $3,249,615. The promissory note (a) bears
interest at the rate of 6% per annum, (b) has a maturity date of October 10,
2010, (c) is secured by a guarantee by an affiliate
of
Mestek, and (d) is subordinated to the loan by Bank of America to
Mestek. Two of our directors, Mr. J.E. Reed and Mr. S.B. Reed are
executive officers of Mestek, and Messers. J.E. Reed and S.B. Reed each
beneficially own more than 10% of Mestek.
COMPLIANCE
WITH SECTION 16(a)
OF
THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities
Exchange Act of 1934 requires directors and certain officers of the Company, as
well as persons who own more than ten percent (10%) of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the Securities and Exchange
Commission. To the Company's knowledge, based solely on its review of
the copies of such reports furnished to the Company and written representations
that no other reports were required, during the fiscal year ended December 31,
2009, all applicable Section 16(a) filing requirements were
satisfied.
COMPENSATION
COMMITTEE INTERLOCKS
Since May of 2005 when it was
constituted, the members of the compensation committee have been Messrs. Hunter
(chairman), Evans and Trainor. None of the members of the
compensation committee was or has been an officer or employee of the
Company. No member of the compensation committee is an executive
officer of a company in which one of our executive officers sits as a director
or serves on the compensation committee of that company.
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
The audit committee approved the
retention of Caturano & Company to audit the Company’s consolidated
financial statements for the fiscal year ended December 31, 2009. The
audit committee has restricted the non-audit services that Caturano &
Company may provide primarily to special projects relating to prospective tax
issues. The audit committee has appointed Caturano & Company to
audit the Company’s consolidated financial statements in 2010. The
following table sets forth the aggregate amounts invoiced to the Company for the
audit period for the fiscal years ended December 31, 2009 and December 31, 2008
by Caturano & Company:
Audit
Fees:
|
|
$ 97,500
|
|
$ 85,000
|
Audit-Related
Fees:
|
|
|
|
|
Quarterly
Reviews
|
|
$ 31,500
|
|
$ 33,500
|
SOX
Controls Test
|
|
$ 40,000
|
|
$ 0
|
401(k)
Review
|
|
$ 20,000
|
|
$ 0
|
Other:
|
|
$ 25,000
|
|
$ 43,100
|
Total
|
|
$214,000
|
|
$161,600
|
This amount does not reflect fees
incurred in January and February 2010 and relating to the audit of the Company’s
2009 financial statements. “Audit Fees” are fees the Company paid
Caturano & Company for professional services for the audit of the Company’s
financial statements included in the Company’s Annual Report on Form 10-K and
review of financial statements included in Quarterly Reports on Forms 10-Q, or
for services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements. “Audit-Related Fees”
are fees billed by Caturano & Company for assurance and related services,
reasonably related to the performance of the audit or review of the financial
statements. “Other” fees are fees billed by Caturano & Company
for providing advice and guidance on current and prospective tax issues, and
advice on transfer pricing.
FINANCIAL
STATEMENTS
The Company's audited consolidated
financial statements and notes thereto, including selected financial data and
management's discussion and analysis of financial condition and results of
operations for the fiscal year ended December 31, 2009, are included in the
Company's annual report to shareholders which is available on the internet at
www.envisionreports.com/OFLX. The annual report does not constitute proxy
soliciting material.