SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
TB Wood's Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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1
<PAGE>
NOTICE OF ANNUAL MEETING OF THE
STOCKHOLDERS OF
TB WOOD'S CORPORATION
TO THE STOCKHOLDERS OF
TB WOOD'S CORPORATION:
The Annual Meeting of Stockholders of TB Wood's Corporation (the
"Company") will be held at the Four Seasons Hotel, 2800 Pennsylvania Avenue,
N.W., Washington, DC 20007 on April 28, 1998, commencing at 10:00 a.m., at which
meeting only holders of record of the Company's Common Stock at the close of
business on April 1, 1998, will be entitled to vote, for the following purposes:
1. To elect two directors of the third class;
2. To transact such other and further business, if any,
as may be lawfully brought before the meeting.
You are cordially invited to attend the meeting in person. Whether or
not you plan to attend the meeting, please execute the enclosed proxy and mail
it promptly. Should you attend the meeting, you may revoke your proxy and vote
in person. A return envelope which requires no postage if mailed in the United
States is enclosed for your convenience.
TB WOOD'S CORPORATION
By:
Emma K. Gross
Corporate Secretary
Chambersburg, Pennsylvania
April 2, 1998
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TB WOOD'S CORPORATION
440 North Fifth Avenue, Chambersburg, PA 17201
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 28, 1998
This proxy statement is furnished to the stockholders of TB Wood's
Corporation (the "Company"), in connection with the solicitation of proxies for
use at the Annual Meeting of Stockholders to be held on Tuesday, April 28, 1998
at 10:00 a.m. at the Four Seasons Hotel, 2800 Pennsylvania Avenue NW,
Washington, DC and at any adjournment thereof (the "Annual Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting. The Board of
Directors (the "Board") does not know of any business to be presented for
consideration at the Annual Meeting or any adjournment thereof other than as
stated in the Notice of Annual Meeting. This proxy statement and the enclosed
form of proxy are first being mailed to stockholders on or about April 2, 1998.
Whether or not you expect to be personally present at the Annual
Meeting, you are requested to fill in, sign, date and return the enclosed form
of proxy. Any person giving such proxy has the right to revoke it at any time
before it is voted by giving written notice to the Secretary of the Company. All
shares of TB Wood's Corporation common stock, par value $.01 per share (the
"Common Stock") represented by duly executed proxies in the accompanying form
will be voted as directed unless proxies are properly revoked prior to the
voting thereof. If the proxy is signed and returned without any direction given,
shares will be voted FOR the election of each of the nominees of the Board.
The close of business on April 1, 1998, has been fixed as the record
date for the determination of stockholders entitled to vote at the Annual
Meeting (the "Record Date"). As of the Record Date, there were outstanding and
entitled to be voted at the Annual Meeting 5,859,286 shares of Common Stock. The
holders of the Common Stock will be entitled to one vote for each share of
Common Stock held of record on the Record Date.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended January 2, 1998, accompanies this proxy statement.
The solicitation of this proxy is made by the Board. The solicitation
will be by mail and the expense thereof will be paid by the Company.
Solicitation of proxies may be made by telephone or telegram by directors,
officers or other employees of the Company.
ELECTION OF DIRECTORS
The Board is divided into three classes, with the terms of each class
ending in successive years. At the Annual Meeting, two directors of the Company
are to be elected for a term ending at the 2001 Annual
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Meeting of Stockholders, or until the successor of each such director has been
elected and has qualified. Certain information with respect to the nominees for
election as directors and the other directors whose terms of office as directors
will continue after the Annual Meeting is set forth below. Should either nominee
be unable or unwilling to serve (which is not expected), the proxies (except
proxies marked to the contrary) will be voted for such other person or persons
as the Board may recommend.
Information Regarding the Nominees for Director to be Elected in 1998
for a Term Ending in 2001.
Third Class
Jean-Pierre L. Conte - Director of the Company, Age 34, present term
expires 1998; Director of the Company since its formation in 1995. Mr. Conte is
currently a Managing Director of Genstar Capital Partners II. Prior to Genstar,
Mr. Conte was a principal of The NTC Group, Inc., a private investment firm. Mr.
Conte is also a Director of Andros Incorporated, NEN Life Science Products,
Inc., and Chairman of Panolam Industries. He holds a Bachelor of Arts degree
from Colgate University and an MBA from Harvard Business School.
Craig R. Stapleton - Director of the Company, Age 52, present term
expires 1998; Director of the Company since 1996. Mr. Stapleton is President of
Marsh & McLennan, Real Estate Advisors, Inc. Mr. Stapleton is also a Director of
Allegheny Properties, Inc., Cendant Corporation, Cornerstone Properties, Inc.,
and Vacu-Dry Company. He holds an AB from Harvard College and an MBA from
Harvard Business School.
Information Regarding the Directors Who Are Not Nominees for Election
and Whose Terms Continue Beyond 1998.
First Class
Thomas C. Foley - Chairman of the Board and Director of the Company,
Age 46, present term expires 1999; Director and Chairman of the Company since
its formation in 1995; served as Chairman of the Board of Directors of TB Wood's
Incorporated since December 1986. Mr. Foley is also a director of The NTC Group,
Inc. and Stevens Aviation, Inc. Mr. Foley holds an AB from Harvard College and
an MBA from Harvard Business School. Mr. Foley was previously a director,
officer, and principal shareholder of The Bibb Company which on July 3, 1996
filed a voluntary petition under Federal Bankruptcy laws as part of a
"prepackaged" restructuring. The Bibb Company's plan of reorganization was
confirmed and became effective during September of 1996.
Second Class
Michael L. Hurt - President and Director of the Company, Age 52,
present term expires 2000; Director and President of the Company since its
formation in 1995; President and a Director of TBW since January 1991. Before
joining the Company, Mr. Hurt spent 23 years at The Torrington Company, a
subsidiary of Ingersoll-Rand Corp. Mr. Hurt is a Registered Professional
Engineer and holds an MBA from Clemson-Furman University and a BSME from Clemson
University.
Robert J. Dole - Director of the Company, Age 74, present term expires
2000; Director since 1997. Mr. Dole is currently a partner of
Verner-Liipfert-Bernhard-McPherson & Hand. He was formerly Majority Leader of
the United States Senate. Mr. Dole is also a Director of
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<PAGE>
Community Health Systems, Tiger Management, and the Dole Foundation; and serves
on the Forstmann Little Advisory Board and the Ryan White Foundation Advisory
Board. Mr. Dole holds a BA and an LLB from Washburn University.
BOARD OF DIRECTORS AND COMMITTEES
The Board currently consists of five members and is classified into
three classes. One class of directors is elected each year, and the members of
such class hold office for a three-year term or until their successors are duly
elected and qualified. There were four meetings of the Board during 1997.
The Company had no standing nominating committee during 1997. The
Audit Committee reports to the Board and provides assistance to the Board in
discharging its responsibilities in connection with the financial accounting
practices of the Company and the internal controls related thereto and
represents the Board in connection with the services rendered by the Company's
independent accountants. Messrs. Conte and Stapleton serve on the Audit
Committee. The Compensation Committee reports to the Board and is responsible
for the review of executive compensation. Messrs. Conte and Stapleton serve on
the Compensation Committee. The Audit Committee held one meeting in 1997. The
Compensation Committee had two meetings in 1997. Each director of the Company
attended at least 75% of the aggregate meetings held by the Board and by the
Committees on which he served during the periods that he served.
Director Nomination Procedures
Nominations for election of directors of the Company may be made by
the Board or by any stockholder entitled to vote in the election of directors.
The Company's Bylaws require that stockholders intending to nominate candidates
for election as directors deliver written notice thereof to the Secretary of the
Company no later than 60 days in advance of the meeting of stockholders;
provided, however, that in the event that the date of the meeting is not
publicly announced by the Company by inclusion in a report filed with the
Securities and Exchange Commission or furnished to stockholders, or by mail,
press release or otherwise more than 75 days prior to the meeting, notice by the
stockholder to be timely must be delivered to the Secretary of the Company no
later than the close of business on the tenth day following the day on which
such announcement of the date of the meeting was so communicated. The Company's
Bylaws further require that the notice by the stockholder set forth certain
information concerning such stockholder and the stockholder's nominees,
including their names and addresses, a representation that the stockholder is
entitled to vote at such meeting and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the notice, the class
and number of shares of the Company's stock owned or beneficially owned by such
stockholder, a description of all arrangements or understandings between the
stockholder and each nominee, such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
nominees of such stockholder and the consent of each nominee to serve as a
director of the Company if so elected. The presiding officer of the Annual
Meeting may refuse to acknowledge the nomination of any person not made in
compliance with these requirements.
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Compensation of Directors
The Company paid an aggregate of $61,500 of directors' fees in fiscal
year 1997 for directors who were not employees or officers of the Company. Mr.
Foley is compensated by the Company for his services as Chairman in an amount
equal to $272,917 per annum plus a cash bonus and other incentive compensation
to be determined by the Company. Directors who are employees of the Company do
not receive additional compensation for serving on the Board or Committees. Each
outside Director receives an annual fee of $30,000, a meeting attendance fee of
$1,000 and reimbursement of applicable travel and other expenses.
MANAGEMENT
Executive officers are appointed by, and serve at, the discretion of
the Board. There are no family relationships among any of the directors or
executive officers of the Company. The current executive officers of the
Company, each of whom is elected for a term of one year or until his successor
is duly elected and qualified, are listed below.
Thomas C. Foley 46 Chairman and Director
Michael L. Hurt 52 President and Director
Carl R. Christenson 38 Vice President - Mechanical Division
Cedric A. Cleminson 62 President of Plant Engineering Consultants,
Inc. ("PEC")
Harold L. Coder, III 46 Vice President, Sales
Philip A. Garton 37 Vice President of Finance/Corporate Controller
David H. Halleen 58 Vice President and Treasurer
Michael H. Iversen 53 President of T. B. Wood's Canada, Ltd.
("TBWC")
William R. Juergens 48 Vice President of Quality/Human Resources
Willard C. Macfarland, Jr. 42 Vice President - International Operations
Stanley L. Mann 47 Vice President, Advanced Technology -
Electronics
Lee J. McCullough 53 Vice President - Electronics Division
Durand M. Miller 46 Vice President, Marketing - Electronic Products
James E. Williams 51 Vice President, Marketing - Mechanical Products
Mr. Christenson has been Vice President - Mechanical Division of TBW
since October 1994. Mr. Christenson joined TBW in June 1991 as Director of
Mechanical Engineering and soon thereafter assumed the additional responsibility
of Vice President of Engineering - Mechanical
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Products. Prior to that he was a Product Manager at The Torrington Company, from
1984 to 1991. Mr. Christenson holds an MBA from Rensselaer Polytechnic
Institute, and an MSME and BSME from The University of Massachusetts.
Mr. Cleminson has been President of PEC, a wholly-owned subsidiary of
TBW, since January 1995. Mr. Cleminson joined TBW as Vice President Marketing -
Electronics Products in May 1994. Previously he was Vice President of Marketing
and Strategic Planning of the Industrial Controls Division Emerson/Control
Techniques, Inc. from 1991 to May 1994. Mr. Cleminson holds an Advanced Business
Degree from Bowling Green University, and an EE from Faraday House Electrical
College of London, United Kingdom.
Mr. Coder has been Vice President, Sales of TBW since October 1991.
Mr. Coder joined TBW in June 1973, as a Field Sales Engineer Trainee, and
subsequently spent ten years in field sales. Since 1983, Mr. Coder has been in
sales management positions including Manager Distributor Sales and Manager Field
Sales. Mr. Coder holds a BS degree from Shippensburg University.
Mr. Garton has been Vice President of Finance and Corporate Controller
of TBW since July 1997. From 1991 to 1997 Mr. Garton held progressive financial
management positions with AlliedSignal Inc. Immediately prior to joining TBW, he
was the Business Controller for AlliedSignal Industrial Fibers, a $500 million
part of the Polymers Division. Mr. Garton is a licensed Certified Public
Accountant and holds the designation of Certified Cash Manager. Mr. Garton holds
MBA, BBA, and BA degrees, all from Southern Methodist University.
Mr. Halleen is currently Vice President and Treasurer of the Company.
His previous assignment was Vice President of Finance, Chief Financial Officer,
and Treasurer of TBW from June 1992 to July 1997. From 1980 to 1991 he was Vice
President of Finance and Chief Financial Officer of Cissell Manufacturing
Company. Mr. Halleen is a Certified Management Accountant and holds a BSBA from
Niagara University.
Mr. Iversen is currently serving as President of T. B. Wood's Canada,
Ltd., a subsidiary of the Company, ("TBWC"). His previous assignment was
Executive Vice President of TBW, from January 1992 to March 1998, and was
responsible for sales and marketing. Prior to joining the Company, Mr. Iversen
spent 25 years, serving most recently as Director of Sales to Original Equipment
Manufacturers, at The Torrington Company, a subsidiary of Ingersoll-Rand Corp.
Mr. Iversen holds a BIE from Georgia Institute of Technology.
Mr. Juergens has been Vice President of Quality/Human Resources of TBW
since September 1994. Mr. Juergens joined TBW in October 1985 as Director of
Quality Assurance and has assumed the additional responsibility of Vice
President of Human Resources. Mr. Juergens holds an MBA from Frostburg State
University, and MS and BSIE degrees from Western Michigan University.
Mr. Macfarland has been Vice President - International Operations
since May 1996. He is also President of Berges Holding Italiana S.R.L. His
previous assignment was President of TBWC from August 1994 to March 1998. From
1989 to August 1994, Mr. Macfarland was Director - Marketing and Sales of Roller
Bearing Company of America. Mr. Macfarland holds an MBA from Case Western
Reserve University and a BSME degree from Worcester Polytechnic Institute.
7
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Mr. Mann has been Vice President of Advanced Technology, Electronics
of TBW since April 1997. He joined TBW in May 1984 as Chief Electronics Engineer
and became Director of Advanced Technology, Electronics in July 1996. He began
his career at the Louis Allis Company, Drives and Systems Division, and prior to
coming to TBW he was Research & Development Group Leader at Fincor, Incom
International Inc. He holds a BSEE from the University of Illinois.
Mr. McCullough has been Vice President - Electronics Division of TBW
since February 1994. Mr. McCullough joined TBW in December 1991 as Marketing
Manager of Electronic Products and assumed the responsibility of Vice President
of the Electronics Division in February 1994. Prior to joining the Company, Mr.
McCullough was Vice President of Electronic Drives at Ranco Controls, Inc., from
1988 to December 1991. Mr. McCullough holds an MBA from the University of
Wisconsin - Milwaukee and a BSEE from the University of Illinois.
Mr. Miller has been Vice President, Marketing - Electronic Products of
TBW since April 1997. Mr. Miller joined TBW in January 1996 as Marketing Manager
- - Electronic Products. Prior to joining the Company, Mr. Miller spent 15 years
in various management positions, including Product Manager, Product Planning
Manager, and Program Manager for Group Schnieder/Square D and Reliance Electric.
Mr. Miller holds a BSEE from the University of Maryland.
Mr. Williams has been Vice President, Marketing - Mechanical Products
of TBW since December 1994. Mr. Williams joined TBW in September 1993 as Program
Manager and assumed responsibility for installation of the new Management
Information System. Prior to joining the Company, Mr. Williams spent 23 years in
various management positions, including Product Manager, Distribution Services
Manager, and Purchasing Manager at a division of Ingersoll-Rand Corp. Mr.
Williams holds a BS degree from Indiana University.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 16, 1998
regarding all persons known to the Company to be the beneficial owners of more
than five percent of the Company's Common Stock. The table also includes
security ownership for each director of the Company, the Company's President,
each of the Company's four other most highly compensated executive officers for
fiscal year 1997, and all executive officers and directors as a group. Except as
noted below, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them, except for shares deemed to be beneficially owned by them. Except as
otherwise listed below, the address of each person is c/o the Company, 440 North
Fifth Avenue, Chambersburg, Pennsylvania 17201.
8
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Security Ownership of Certain Beneficial Owners and Management
Number of Percent of
Name Shares (1) of Class (2)
- --------------------------------------------------------------------------------
Wellington Management Company, LLP 522,000(3) 8.9%
75 State Street
Boston, MA 02109
State of Wisconsin Investment Board 325,000(4) 5.5%
P. O. Box 7842
Madison, WI 53707
Wellington Trust Company, NA 340,000(5) 5.8%
75 State Street
Boston, MA 02109
FMR Corp., Edward C. Johnson III
and Abigail P. Johnson 585,400(6) 10.0%
c/o 82 Devonshire Street
Boston, MA 02109
Thomas C. Foley 2,758,758(7) 47.1%
Director and Chairman
Michael L. Hurt 125,485 2.1%
Director and President
Jean-Pierre L. Conte 75,922 1.3%
Director
Robert J. Dole 0 *
Director
Craig R. Stapleton 20,000 *
Director
Willard C. Macfarland, Jr. 1,344 *
Vice President - International Operations
Carl R. Christenson 8,942 *
Vice President - Mechanical Division
Michael H. Iversen 18,634 *
President T. B. Wood's Canada, Ltd.
Harold L. Coder, III 6,287 *
Vice President, Sales
All executive officers and directors as a group
(18 persons) 3,040,564 51.9%
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1 Includes options exercisable within sixty days of March 16, 1998 in the
following amounts:
Michael L. Hurt 57,236
Carl R. Christenson 3,797
Jean-Pierre L. Conte 72,922
Michael H. Iversen 5,625
Harold L. Coder, III 5,125
All executive officers and directors as a group 159,956
2 * Indicates less than one percent of class.
3 Information concerning the shares beneficially owned by Wellington Management
Company, LLP ("Wellington") was obtained from a Schedule 13G/A filed as of
February 10, 1998. The filing indicates that in its capacity as investment
adviser, Wellington may be deemed to beneficially own 522,000 shares of the
Company's Common Stock. Wellington reports that it has no sole voting power
with respect to any shares of the Company's Common Stock, shared voting power
with respect to 332,000 shares of the Company's Common Stock and shared
dispositive power with respect to 522,000 shares of the Company's Common
Stock.
4 Information concerning the shares beneficially owned by the State of Wisconsin
Investment Board was obtained from a Schedule 13G filed as of January 20,
1998.
5 Information concerning the shares beneficially owned by Wellington Trust
Company ("WTC") was obtained from a Schedule 13G/A filed as of February 11,
1998. The filing indicates that in its capacity as investment adviser, WTC may
be deemed to beneficially own 340,000 shares of the Company's Common Stock.
WTC reports that it has no sole voting power with respect to any shares of the
Company's Common Stock, shared voting power with respect to 180,000 shares of
the Company's Common Stock and shared dispositive power with respect to
340,000 shares of the Company's Common Stock.
6 Information concerning the shares beneficially owned by FMR Corp., Edward C.
Johnson III and Abigail P. Johnson was obtained from a Schedule 13G/A filed as
of February 28, 1998. The filing indicates that in its capacity as investment
adviser, Fidelity Management and Research Company ("Fidelity"), a wholly owned
subsidiary of FMR Corp., is the beneficial owner of 585,400 shares of the
Company's Common Stock as a result of acting as investment advisor to various
investment companies. Edward C. Johnson, III, FMR Corp., through its control
of Fidelity, and the funds each has sole power to dispose of the 585,400
shares of Common Stock owned by the funds. Neither Edward C. Johnson, III nor
FMR Corporation has the sole power to vote or direct the voting of the
Company's Common Stock owned directly by the funds. Edward C. Johnson III owns
approximately 12% and Abigail P. Johnson owns 24.5% of the aggregate
outstanding voting stock of FMR Corp. Mr. Johnson III is Chairman of FMR Corp.
and Abigail P. Johnson is a Director of FMR Corp. The Johnson family group and
all other Class B shareholders have entered into a shareholders' voting
agreement under which all Class B shares will be voted in accordance with the
majority vote of Class B shares. Accordingly, through their ownership of
voting common stock and the execution of the shareholders' voting agreement,
members of the Johnson family may be deemed, under the Investment Company Act
of 1940, to form a controlling group with respect to FMR Corp.
7 Includes 72,922 shares of Common Stock over which Mr. Foley has granted stock
options to Mr. Conte and 6,000 shares of Common Stock over which Mr. Foley has
granted stock options to a former employee of NTC. Also includes 90,000 shares
of Common Stock donated by Mr. Foley to the Foley Family Foundation, a
charitable trust he controls.
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EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
concerning the compensation paid or accrued by the Company for services rendered
during the fiscal year ended January 2, 1998 by the Company's Chairman,
President, and each of the Company's next four most highly paid executive
officers (the "Named Officers") whose salary and bonus exceeded $100,000 for
fiscal year 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
Long Term
Compensation
Awards
Fiscal Securities Under- All Other
Name and Principal Position Year Salary Bonus lying Options(1) Compensation
<S> <C> <C> <C> <C> <C>
Thomas C. Foley 1997 $272,917 $300,000 18,750 $1,218(2)
Chairman 1996 229,167 250,000 0 655(2)
1995 0 0 0 0
Michael L. Hurt 1997 248,333 300,000 37,500 29,212(3)
President 1996 228,750 305,000 0 28,736(3)
1995 213,749 371,000 0 28,810(3)
Willard C. Macfarland, Jr. 1997 104,708 50,000 6,000 60,659(4)(5)
Vice President 1996 102,198 50,000 0 29,570(4)(5)
International Operations 1995 98,333 40,000 0 29,115(4)
Carl R. Christenson 1997 108,000 80,000 7,500 12,420(6)
Vice President - Mechanical 1996 96,750 75,000 0 10,073(6)
Division 1995 88,333 65,000 0 9,665(6)
Michael H. Iversen 1997 126,000 55,000 7,500 13,360(7)
President T. B. Wood's 1996 120,000 40,000 0 12,814(7)
Canada, Ltd. 1995 120,000 55,000 0 12,730(7)
Harold L. Coder, III 1997 96,000 55,000 4,950 9,314(8)
Vice President, Sales 1996 92,883 40,000 0 9,305(8)
1995 87,900 50,000 0 8,954(8)
<FN>
1 No SAR's were granted.
2 Includes $655 in 1996 and $1,218 in 1997 in life insurance premium payments by
the Company.
3 Includes $2,174 in 1995, $2,016 in 1996, and $2,016 in 1997 in life insurance
premium payments by the Company; $4,500 in 1995 and 1996, and $4,800 in 1997,
in Company matching contributions to the Company's 401(k) plan; and $20,000
each year in split dollar life insurance premium payments by the Company.
11
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4 Includes $48 in 1995, $160 in 1996, and $335 in 1997 in life insurance premium
payments by the Company; $1,398 in 1995, $3,695 in 1996, and $4,800 in 1997 in
Company matching contributions to the Company's 401(k) plan; $6,500 in bonus,
$2,058 in auto allowance, $3,956 in apartment allowance, and $4,458 in
transportation allowance in 1995; $2,722 in housing allowance, $14,380 in
moving allowance, $4,113 in auto allowance and $4,500 for tax preparation in
1996; and $31,819 moving allowance, $1,955 in auto allowance and $500 for tax
preparation in 1997.
5 The Company has provided a $250,000 interest free secured loan to Mr.
Macfarland on May 31, 1996 to assist in his relocation to Chambersburg, PA.
Mr. Macfarland derived an estimated benefit in the amount of $10,208 in 1996,
based on a market interest of 7%; and $21,250 in 1997 based on a market
interest of 8-1/2%, as a result of such interest free loan.
6 Includes $165 in 1995, $203 in 1996, and $224 in 1997 in life insurance
premium payments by the Company; $4,500 in 1995 and 1996, and $4,800 in 1997
in Company matching contributions to the Company's 401(k) plan; and $5,000
each year in split dollar life insurance premium payments by the Company.
7 Includes $1,094 in 1995 and 1996, and $1,164 in 1997 in life insurance premium
payments by the Company; $4,500 in 1995 and 1996 and $4,800 in 1997 in Company
matching contributions to the Company's 401(k) plan; and $5,000 each year in
split dollar life insurance premium payments by the Company.
8 Includes $257 in 1995, $466 in 1996, and $494 in 1997 in life insurance
premium payments by the Company; $4,197 in 1995, $4,339 in 1996, and $4,320 in
Company matching contributions to the Company's 401(k) plan; $4,500 each year
in split dollar life insurance premium payments by the Company.
</FN>
</TABLE>
12
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Option Grants in Fiscal 1997
The following table sets forth information concerning grants of stock
options during 1997 to each of the named officer and the potential realizable
value of such options at assumed annual rates of stock price appreciation for
the option term.
<TABLE>
<CAPTION>
Stock Options
Option Grants in 1997(1)
Individual Grants
Number of Percent of Potential Realizable Value at
Securities Total Options Exercise Assumed Annual Rates of Stock
Underlying Granted to or Base Price Appreciation for Option
Options Employees in Price Expir. Term (2)
Granted (#) Fiscal Year ($/SH) Date 5%($) 10%($)
----------- ----------- ------ ---- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas C. Foley 6,250 4.50% $14.00 6/16/07 55,025 139,450
12,500 9.01% 23.00 6/16/02 0 166,400
Michael L. Hurt 12,500 9.01% 14.00 6/16/07 110,050 278,900
25,000 18.02% 23.00 6/16/02 0 332,800
Willard C. Macfarland, Jr. 2,000 1.44% 14.00 6/16/07 17,608 44,624
4,000 2.88% 23.00 6/16/02 53,248
Carl R. Christenson 2,500 1.80% 14.00 6/16/07 22,010 55,780
5,000 3.60% 23.00 6/16/02 0 66,560
Michael H. Iversen 2,500 1.80% 14.00 6/16/07 22,010 55,780
5,000 3.60% 23.00 6/16/02 0 66,560
Harold L. Coder, III 1,650 1.19% 14.00 6/16/07 14,527 36,815
3,300 2.38% 23.00 6/16/02 0 43,930
<FN>
1 The Company granted non-qualified options under the provisions of the 1996
Stock-based Incentive Compensation Plan. In June 1997, 46,250 options with an
option price of $14.00 per share and 92,500 options with an option price of
$23.00 per share were granted. The options vest evenly over a three year
period from the grant date. The options may be exercised as they vest.
2 The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission rules and are
not intended to forecast possible future appreciation, if any, in the
Company's stock price.
</FN>
</TABLE>
The table which follows sets forth information concerning exercises of
stock options during 1997 by each of the executive officers who is named in the
Summary Compensation Table and the value of each such officer's unexercised
options as of January 2, 1998 based on a closing stock price of $22.25 per share
of the Company's Common Stock on such date:
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values(1)
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised In-the-
on Value Options at FY-End (1/2/98) Money Options at FY-End (1/2/98)
Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)
Name (#) ($) (#) ($)
<S> <C> <C> <C> <C>
Thomas C. Foley 0 0 0/18,750 0/51,563
Michael L. Hurt 41,447 674,550 57,236/37,500 1,124,687/103,125
Willard C. Macfarland, Jr. 0 0 0/6,000 0/16,500
Carl R. Christenson 4,219 63,570 3,797/16,922 69,789/193,801
Michael H. Iversen 6,750 70,740 5,625/16,125 110,981/190,796
Harold L. Code 0 0 5,125/13,825 94,198/176,735
<FN>
1 The Company has not granted any Stock Appreciation Rights.
</FN>
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act") requires the Company's directors, officers and persons who own
more than 10% of a registered class of the Company's Common Stock to file
reports about their beneficial ownership of the Company's Common Stock. All the
directors and officers of the Company filed reports as required by Section 16(a)
of the Exchange Act with respect to the fiscal year 1997 on a timely basis
except for the following late reports: Messrs. Coder, Conte, Dole, Foley, Hurt,
Juergens, Macfarland, McCullough, and Miller, who did not timely file Form 4
with respect to two transactions in Common Stock (grants of options in June
1997); Messrs. Christenson, Stapleton, Halleen, and Iversen who did not timely
file Form 4 with respect to three transactions in Common Stock (including grants
of options in June 1997); and Mr. Cleminson who did not timely file Form 4 with
respect to five transactions in Common Stock (including grants of options in
June 1997) and Mr. Williams who did not timely file Form 4 with respect to six
transactions in Common Stock (including grants of options in June 1997).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Independent directors Messrs. Conte and Stapleton serve on the
Company's Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE REGARDING COMPENSATION
Executive Compensation Program. The Company's executive compensation
program is designed to attract and retain highly-qualified executives and to
motivate them to contribute to the Company's goals and objectives and its
overall financial success. The
13
<PAGE>
Company's Board of Directors believes that executives should have a greater
portion of their compensation at risk than other employees, and that
compensation should be tied directly to the performance of the business.
Compensation for the Company's executives consists of both cash and equity-based
compensation. In determining executive compensation, the Compensation Committee
reviews and evaluates information supplied by management and bases decisions on
management recommendations as well as on the Company's performance and on the
individual's contribution and performance.
Salary. The Compensation Committee reviews the salary of each
executive officer in relation to previous salaries and with regard to industry
compensation levels and general economic conditions. The salaries are set at
levels intended to reward achievement of individual and Company goals and to
motivate and retain highly qualified executives whom the Board of Directors
believes are important to the continued success of the Company. While the
Compensation Committee's decisions are in part subjective rather than solely
based on formulas, the Compensation Committee does consider various measures of
the financial performance of the Company in absolute terms and in relation to
internal performance goals.
Bonuses. The Company's annual incentive payments to executive officers
are intended to encourage and reward excellent individual performances by
managers who make significant contributions to the Company's financial success.
During 1997, annual incentive opportunities were based upon achievement of both
current financial performance objectives and individual operating objectives
related to longer-term performance. For 1997, the Company significantly exceeded
the minimum return on investment performance goals set by the Company in the
beginning of 1997, and the minimum individual operating objectives were met or
exceeded by each of the Named Officers identified in the Summary Compensation
Table. Accordingly, Messrs. Foley, Hurt, Iversen, Christenson, Coder and
Macfarland earned bonuses.
1997 Compensation of Chairman and President
Chairman
The Compensation Committee determined the 1997 compensation for Mr.
Foley in accordance with the guidelines described above. Mr. Foley's salary
increased in 1997 from $229,167 (prorated for the period beginning after the
Company's initial public offering) to $272,917, based upon an evaluation of his
performance and the Company's financial performance as well as a cost of living
increase. No specific weighting was assigned to these factors in determining the
base salary increase. Mr. Foley's bonus, increased from $250,000 to $300,000,
was based upon his strategic direction of the Company and his active
participation in the two acquisitions completed by the Company in 1997. Both of
these activities played a significant role in TB Wood's 1997 record performance.
President
The Compensation Committee determined the 1997 compensation for Mr.
Hurt in accordance with the guidelines described above. Mr. Hurt's salary
increased in 1997 from $228,750 to $248,333, based upon an evaluation of his
performance and the Company's financial performance as well as a cost of living
increase. No specific weighting was assigned to these factors in determining the
base salary increase. Mr. Hurt's bonus decreased in 1997 from $305,000 to
$300,000 based upon the increased use of options versus cash bonuses as a
14
<PAGE>
form of compensation and achievement of certain return on investment performance
objectives and individual operating objectives related to longer-term
performance. The initiatives and programs put in place by Mr. Hurt since he
joined the Company in 1991 have contributed significantly to the Company's
improved financial performance. In addition, Mr. Hurt's annual bonus for 1997
was based on his successful management of several recent acquisitions and in
recognition of the record performance of the Company. In 1997 revenues rose 21%
and EPS, before one-time charges, increased 31%.
Deductibility of Compensation. Section 162(m) of the Internal Revenue
Code of 1986, as amended, generally imposes a $1 million limit on the
deductibility of compensation paid to executive officers of public companies.
The Compensation Committee believes that all of the compensation awarded to the
Company's executive officers during 1997 is fully deductible in accordance with
this limit.
This report is respectfully submitted by the members of the
Compensation Committee of the Company.
COMPENSATION COMMITTEE
Craig R. Stapleton
Jean-Pierre L. Conte
PERFORMANCE GRAPH
<TABLE>
Comparison of
Cumulative Total Returns Among
TB Wood's, Russell 2000, and Peer Group
The stock price information shown in the table below is not necessarily
indicative of future price performance.
<CAPTION>
Measurement Period TBW Russell 2000 Peer Group
------------------ --- ------------ ----------
<S> <C> <C> <C>
2/8/96 100 100 100
1/3/97 100 113 116
1/2/98 194 136 162
</TABLE>
No published industry index accurately mirrors the Company's business.
Accordingly, the Company has created a special peer group index ("Peer Group")
of companies operating in the power transmission or mechanical manufacturing
industries. The Peer Group includes the following: Baldor Electric Company;
Bridgeport Machines, Inc.; Franklin Electric Co., Inc.; MagneTek, Inc.;
Kollmorgen Corp.; and Regal-Beloit Corporation.
INDEPENDENT AUDITORS
Arthur Andersen LLP was the auditor for the 1997 fiscal year and has
been selected as the Company's auditor for the 1998 fiscal year. Representatives
of Arthur Andersen LLP will be present at the Annual Meeting and will be
provided with an opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions.
VOTING
The holders of a majority of the outstanding shares of Common Stock
must be present in person or by proxy to constitute a quorum. When a quorum is
present at the Annual Meeting, the affirmative vote of the holders of a
plurality of the shares represented at the Annual Meeting or any adjournment
thereof which actually vote is required to elect directors and the affirmative
vote of the holders of a majority of the shares represented at the Annual
Meeting is required to act on any other matters properly brought before the
meeting. Shares represented by proxies which are marked "withhold authority"
with respect to the election of any one or more nominees for election as
directors, proxies which are marked to deny discretionary authority on other
matters and broker non-votes, will be counted for the purpose of determining the
number of shares represented at the meeting but will not be counted as voting.
STOCKHOLDER PROPOSALS
Any stockholder proposals submitted for inclusion in the Company's
Proxy Statement and proxy for the 1999 Annual Meeting of Stockholders must be
received by the Secretary of the Company at the address appearing on the front
page of this proxy statement no later than December 2, 1998, and must comply in
all other respects with applicable rules and regulations of the Securities and
Exchange Commission relating to such inclusion. In addition, any stockholder
intending to present a proposal for consideration at the 1999 Annual Meeting of
Stockholders must comply with certain provisions of the Company's Certificate of
Incorporation and Bylaws.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED BY THIS PROXY STATEMENT, ON THE WRITTEN REQUEST OF SUCH PERSON,
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL
STATEMENTS AND FINANCIAL STATEMENT SCHEDULES THERETO) AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN
REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF THE COMPANY, AT THE ADDRESS OF
THE COMPANY SET FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT.
16
<PAGE>
EXHIBIT B
[Front of Card]
TB Wood's Corporation
This proxy is solicited by the Board of Directors of TB Wood's Corporation for
the Annual Meeting of Stockholders on April 28, 1998.
The undersigned Stockholder of TB Wood's Corporation (the
"Corporation"), hereby revoking any contrary proxy previously given, hereby
appoints Thomas C. Foley, Michael L. Hurt, and Philip A. Garton or any one of
them (with full power to act alone and to designate substitutes and to make
revocations) attorneys and proxies of the undersigned, with authority to vote
and act with respect to all shares of common stock of the Corporation which the
undersigned would be entitled to vote, at the Annual Meeting of Stockholders to
be held on April 28, 1997 at 10:00 a.m. at the Four Seasons Hotel, 2800
Pennsylvania Avenue NW, Washington, DC 20007, and any adjournments thereof, with
all the powers the undersigned would possess if personally present, upon matters
noted on the reverse and upon such other matters as may properly come before the
meeting. The shares represented by this proxy shall be voted as follows:
(To be signed on the reverse side)
15
<PAGE>
TB WOOD'S CORPORATION
[Back of Card]
X Please mark your
votes as in this
example.
FOR the foregoing WITHHOLD AUTHORITY
nominee to vote for foregoing
nominee
1. To elect [ ] [ ]
Jean-Pierre L. Conte
as Director of the
Third Class
2. To elect [ ] [ ]
Craig R. Stapleton
as Director of the
Third Class
This proxy confers authority to vote "FOR" the proposals listed unless otherwise
indicated. If any other business is transacted at said meeting, this proxy shall
be voted in accordance with the judgment of the proxies. The Board of Directors
recommends a vote "FOR" the listed proposals.
This proxy is solicited on behalf of the Board of Directors of TB Wood's
Corporation and may be revoked prior to its exercise.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
__________________________________ Dated: ______________, 1998
SIGNATURE(S) OF STOCKHOLDER
_________________________________ Dated: ______________, 1998
SIGNATURE(S) OF STOCKHOLDER
NOTE: Signature(s) should follow exactly the name(s) on the stock
certificate. Executor, administrator, trustee or guardian should sign
as such. If more than one trustee, all should sign. ALL JOINT OWNERS
MUST SIGN.
17
<PAGE>
LETTER SUBMITTED ON COMPANY LETTER HEAD
TB Wood's Corporation
440 North Fifth Avenue
Chambersburg, Pennsylvania 17201-1778
717.267.2900, ext.4403 tel 717.264.2869 fax
April 1, 1998
Securities and Exchange Commission
450 Fifth Street
Washington, DC 20549
Re: TB Wood's Corporation Definitive Proxy Statement
Ladies and Gentlemen:
We transmit for filing the Company's proxy statement and proxy for the
1998 Annual Meeting of Stockholders (the "Meeting").
At the Meeting, the Company's stockholders will vote on a proposal to
elect two directors of the third class.
If the staff has any questions or requires any additional information,
please telephone the undersigned at (717) 264-7161, ext. 4403.
Sincerely,
Emma K. Gross
Corporate Secretary
