<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
TB WOOD'S CORPORATION
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ 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:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(A)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[TB WOOD'S LOGO]
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 Sheraton Rittenhouse Square Hotel, 18th at Locust
Street, Philadelphia, Pennsylvania, April 25, 2000, commencing at 2:00 p.m., at
which meeting only holders of the Company's Common Stock of record at the close
of business on March 24, 2000 will be entitled to vote, for the following
purpose:
1. To elect two directors of the second class.
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: /s/ Emma K. Gross
---------------------
Emma K. Gross
Corporate Secretary
Chambersburg, Pennsylvania
March 30, 2000
<PAGE>
TB WOOD'S CORPORATION
440 North Fifth Avenue, Chambersburg, PA 17201
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 25, 2000
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 25, 2000,
at 2:00 p.m. at Sheraton Rittenhouse Square Hotel, 18th at Locust Street,
Philadelphia, Pennsylvania and any adjournment thereof (the "Annual Meeting"),
for the purpose 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 March 30, 2000.
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 the nominees of the Board.
The close of business on March 24, 2000, 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 5,471,252 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 December 31, 1999, 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 telefax by directors,
officers or other employees or agents of the Company.
ELECTION OF DIRECTORS
At the Annual Meeting, two directors of the Company are to be elected
for a term ending at the 2003 Annual Meeting of Stockholders, or until their
respective successors have been elected and have been 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
<PAGE>
Annual Meeting, is set forth below. Should either of the nominees 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 Directors to be Elected in 2000
for a Term Ending in 2003
Second Class
Michael L. Hurt - President and Director of the Company, Age 54,
present term expires 2000; Director and President of the Company since its
formation in 1995; President and a Director of TB Wood's Incorporated ("TBWI")
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 76, present term expires
2000, Director since 1997. Mr. Dole is currently special counsel at Verner,
Liipfert, Bernard, McPherson and Hand. He was formerly Majority Leader of the
United States Senate. Mr. Dole is also a director of each of Community Health
Systems and Tiger Management. Mr. Dole serves on the Forstmann Little Advisory
Board and on the Ryan White Foundation Advisory Board. Mr. Dole holds a BA and
an LLB from Washburn University.
Information Regarding the Directors Who Are Not Nominees for Election
and Whose Terms Continue Beyond 2000.
First Class
Thomas C. Foley - Chairman of the Board and Director of the Company,
Age 48, present term expires 2002, Director and Chairman of the Company since
its formation in 1995; served as Chairman of the Board of Directors of TBWI
since December 1986. Mr. Foley is also a director of The NTC Group, Inc., a
private investment firm, and of Stevens Aviation, Inc. Mr. Foley holds an AB
from Harvard College and an MBA from Harvard Business School.
Third Class
Jean-Pierre L. Conte - Director of the Company, Age 36, present term
expires 2001, Director of the Company since its formation in 1995. Mr. Conte is
currently a Managing Director of Genstar Capital LLC. Prior to his role at
Genstar, Mr. Conte was a principal of The NTC Group, Inc. Mr. Conte is also a
Director of each of NEN Life Science Products, Inc., BioSource International,
Inc. (NASDAQ: BIOI), Andros Incorporated, and Skyway Freight Systems, Inc. Mr.
Conte holds a BA degree from Colgate University and an MBA from Harvard Business
School.
Craig R. Stapleton - Director of the Company, Age 54, present term
2
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expires 2001, Director of the Company since 1996. Mr. Stapleton is President of
Marsh & McLennan, Real Estate Advisors, Inc. Mr. Stapleton is also a director of
each of Allegheny Properties, Inc., Cornerstone Properties, Inc., and Vacu-Dry
Company. Mr. Stapleton holds an AB from Harvard College and an MBA from Harvard
Business School.
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 1999.
The Company had no standing nominating committee during 1999. 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 two meetings in 1999. The
Compensation Committee held two meetings in 1999. Each director of the Board of
the Company attended at least 75% of the aggregate meetings held by the Board
and by the committees of the Board on which he served during the periods that he
served, except Robert J. Dole who attended 50% of the aggregate meetings held by
the Board and by the committees of the Board on which he served during the
period 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 such 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
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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.
Compensation of Directors
The Company paid an aggregate of $100,000 of directors' fees in fiscal
year 1999 for directors who were not employees or officers of the Company.
Directors who are employees of the Company do not receive additional
compensation for serving on the Board or committees of the Board. 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:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Thomas C. Foley 48 Chairman of the Board
Michael L. Hurt 54 President and Director
Carl R. Christenson 40 Vice President/General Manager - Mechanical Business
Thomas F. Tatarczuch 54 Vice President-Finance
Cedric A. Cleminson 64 President of Plant Engineering Consultants, Inc.
Harold L. Coder, III 48 Vice President, Sales
David H. Halleen 60 Vice President, Treasury Management & Investor Relations
Michael H. Iversen 56 President of T. B. Wood's Canada Ltd.
William R. Juergens 50 Vice President of Quality/General Manager, Foundry Operations
Willard C. Macfarland, Jr. 44 Vice President, International
Stanley L. Mann 49 Vice President, Advanced Technology - Electronics
Durand M. Miller 48 Vice President, Engineering - Electronics
James E. Williams 53 Vice President, Electronics Operations and Logistics
</TABLE>
4
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Mr. Christenson has been Vice President/General Manager - Mechanical
Business of the Company since its formation, and of TBWI since October 1994. Mr.
Christenson joined TBWI in June 1991 as Director of Mechanical Engineering and
in 1992 assumed the additional responsibility of Vice President of Engineering -
Mechanical Products of TBWI. Mr. Christenson holds an MBA from Rensselaer
Polytechnic Institute, and an MSME and BSME from The University of
Massachusetts.
Mr. Tatarczuch has been Vice President-Finance of the Company and TBWI
since September 1999. From 1991 to 1999 he was Division Controller at a major
autonomous subsidiary of Ingersoll Rand Company. Mr. Tatarczuch holds a BS
degree from Southern Illinois University.
Mr. Cleminson has been President of Plant Engineering Consultants, Inc.
("PEC"), a wholly-owned subsidiary of the Company, since January 1995. Mr.
Cleminson joined TBWI as Vice President Marketing - Electronics Products in May
1994. Previously, he was Vice President of Marketing and Strategic Planning of
the Industrial Electronic Controls Division Emerson/Control Techniques, Inc.
from 1991 to 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 the Company since its
formation, and of TBWI since October 1991. Mr. Coder holds a BS degree from
Shippensburg University.
Mr. Halleen has been Vice President, Treasury Management & Investor
Relations, of the Company from September 1999 to present. He also served as Vice
President, Finance of the Company from its formation until July 1997 and from
October 1998 to September 1999. He served as Vice President, Finance of TBWI
from June 1992 to July 1997 and from October 1998 to September 1999. Mr. Halleen
served as Treasurer of the Company from its formation until January 1999, and of
TBWI from June 1992 to January 1999. Mr. Halleen is a Certified Management
Accountant and holds a BSBA from Niagara University.
Mr. Iversen has been President of T. B. Wood's Canada Ltd., a
subsidiary of the Company, ("TBWC") since April 1998. Mr. Iversen served as
Executive Vice President, Marketing of the Company from its formulation until
March 1998, and of TBWI from January 1992 to March 1998, and was responsible for
sales and marketing. Mr. Iversen holds a BIE from Georgia Institute of
Technology.
Mr. Juergens has served as Vice President of Quality/General Manager -
Foundry Operations of the Company and of TBWI since September 1998. His previous
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assignment was Vice President of Quality/Human Resources of the Company from its
formation until 1998 and Vice President of Quality/Human Resources of TBWI from
1994 to 1998. 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 of the Company
since its formation and of TBWI since August 1994. He has also served as
Managing Director of TB Wood's (Deutschland) GmbH since June 1998, Managing
Director of Berges electronic GmbH since August 1998, President of the Board of
Directors of Berges electronic s.r.l., Naturno, Italy (formerly Berges Holding
Italiana S.R.L.) since December 1997, and a member of the Board of Directors, TB
Wood's (India) Private Limited since January, 1997. Mr. Macfarland's 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.
Mr. Mann has been Vice President, Advanced Technology - Electronics of
the Company and of TBWI since April 1997. He joined TBWI in May 1984 as Chief
Electronics Engineer and became Director of Advanced Technology, Electronics in
July 1996. He holds a BSEE from the University of Illinois.
Mr. Miller has been Vice President, Engineering - Electronics of the
Company and of TBWI since April 1998. Previously he was Vice President Marketing
- - Electronic Products of the Company and of TBWI from 1997 to 1998. Mr. Miller
joined TBWI in January 1996 as Marketing Manager - Electronic Products. From
1991 to 1996 Mr. Miller held 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, Electronic Operations and
Logistics of the Company and of TBWI since April 1998. Mr. Williams served as
Vice President, Marketing - Mechanical Products of the Company from its
formation, and TBWI from 1994 to 1998. Mr. Williams joined TBWI in September
1993 as Program Manager and assumed responsibility for installation of the new
Management Information System. Mr. Williams holds a BS degree from Indiana
University.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 12, 1999, the Company commenced a "Dutch Auction"
self-tender offer for up to 400,000 shares of its Common Stock, or approximately
6.8% of its then-outstanding shares, at a purchase price not greater than $12.50
nor less than $9.00 per share. On December 17, 1999, the Company completed the
self-tender offer. A total of 424,398 shares were tendered at $9.00 per share.
Due to the over-subscription, shares tendered were pro-rated. The Company
purchased 400,000 shares at $9.00 per share, resulting in a final pro-ration
factor of 94%. The following directors and executive officers participated in
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the self-tender and sold Common Stock to the Company in the following amounts:
Mr. Hurt, $250,020; Mr. Iversen, $31,806; Mr. Conte, $254,475; and Mr. Halleen,
$16,965. Mr. Foley did not tender any shares of Common Stock into the
self-tender. On November 9, 1999 he entered into an option agreement (the
"Option Agreement") with a third party (the "Option Holder"). Pursuant to the
Option Agreement, the Option Holder had the option (the "Option") to purchase up
to 275,000 shares from Mr. Foley at a purchase price of $.05 per share less than
the final per share purchase price to be paid by the Company for shares tendered
into and accepted for payment pursuant to the self-tender (but in no event less
than $8.95 per share). The Option Holder tendered 275,000 Shares into the Offer
at a price of $9.00 per share. Subsequently, the Option Holder exercised the
Option and acquired directly from Mr. Foley 259,190 shares of Common Stock, the
number of shares accepted in the self-tender.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to beneficial
ownership of the Common Stock as of February 15, 2000 by (i) each of the
Company's directors and certain of its executive officers, (ii) each person who
is known by the Company to own beneficially more than 5% of the Common Stock and
(iii) all of the Company's directors and executive officers 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 as otherwise listed below, the address of each person is c/o the
Company, 440 North Fifth Avenue, Chambersburg, Pennsylvania 17201.
Security Ownership of Certain Beneficial Owners and Management
<TABLE>
<CAPTION>
Number of
Common Stock Percent
Name and Address Shares (1) of Class (2)
---------------- ---------- ------------
<S> <C> <C>
Wellington Management Company, LLP 524,500(3) 9.6%
75 State Street
Boston, MA 02109
State of Wisconsin Investment Board 406,800(4) 7.4%
P. O. Box 7842
Madison, WI 53707
FMR Corp., Edward C. Johnson III
and Abigail P. Johnson 587,800(5) 10.7%
82 Devonshire Street
Boston, MA 02109
Fleet Boston Corp. 305,000(6) 5.6%
One Federal Street
Boston, MA 02110
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Thomas C. Foley 2,451,969(7) 44.8%
Chairman of the Board and Director
Michael L. Hurt 124,444 2.3%
President and Director
Jean-Pierre L. Conte 57,647 1.1%
Director
Robert J. Dole 10,000 *
Director
Craig R. Stapleton 79,500 1.5%
Director
Jeffrey A. Petry 27,641 *
Vice President/Gen. Mgr. - Electronics Business
Carl R. Christenson 27,236 *
Vice President/General Manager - Mechanical Business
Michael H. Iversen 36,259 *
President T. B. Wood's Canada Ltd.
Willard C. Macfarland, Jr. 11,389 *
Vice President, International
All executive officers and directors as a group (17 persons) 2,921,671 53.4%
</TABLE>
- --------------------
(1) Includes options exercisable within sixty days of February 15, 2000 for
the following number of shares:
Thomas C. Foley 31,250
Michael L. Hurt 62,500
Carl R. Christenson 18,336
Jeffrey A. Petry 27,500
Michael H. Iversen 11,000
Jean-Pierre L. Conte 10,000
Craig R. Stapleton 10,000
Robert J. Dole 10,000
Willard C. Macfarland, Jr. 9,500
All executive officers and directors as a group 266,845
(2) * Indicates less than one percent of class.
(3) Information concerning the shares beneficially owned by Wellington
Management
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Company, LLP ("Wellington") was obtained from a Schedule 13G/A filed as of
February 11, 2000. The filing indicates that in its capacity as investment
adviser, Wellington may be deemed to beneficially own 524,500 shares of the
Common Stock. Wellington reports that it has no sole voting power with
respect to any shares of the Common Stock, shared voting power with respect
to 474,500 shares of the Common Stock and shared dispositive power with
respect to 524,500 shares of the Common Stock.
(4) Information concerning the shares beneficially owned by State of
Wisconsin Investment Board was obtained from a Schedule 13G filed as of
February 2, 2000. The filing indicates that it is a government agency
which manages public pension funds subject to provisions comparable to
ERISA. State of Wisconsin Investment Board beneficially owns 406,800
shares of the Company's Common Stock as a result of acting as a
government agency which manages public pension funds subject to
provisions comparable to ERISA. The State of Wisconsin Investment Board
has sole power to dispose of the 406,800 shares of Common Stock owned
by the funds. The State of Wisconsin Investment Board has the sole
power to vote or direct the voting of the 406,800 shares of the
Company's Common Stock owned by the funds.
(5) 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 14, 2000. 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 587,800 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 587,800 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 12.0% 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.
(6) Information concerning the shares beneficially owned by Fleet Boston
Corp. ("Fleet") was obtained from a Schedule 13G filed as of February
14, 2000. The filing indicates that in its capacity as a parent holding
company, Fleet may be deemed to have sole power to vote or to direct
the vote of 208,400 shares and sole power to dispose or to direct the
disposition of 305,000 shares of common stock. Fleet reports that it
has no shared power to vote or direct the vote nor shared power to
dispose or to direct the disposition of the Common Stock.
(7) Includes 87,300 shares of Common Stock donated by Mr. Foley to the
Foley Family Foundation, a charitable trust he controls.
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 last three completed fiscal years by the Company's Chairman,
President and each of the Company's next four most highly paid executive
officers (the "Named Officers").
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Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Awards
Compensation No. of Securities
Fiscal --------------------- Underlying All Other
Name and Principal Position Year Salary Bonus Options (1) Compensation
- --------------------------- ---- ------ ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Thomas C. Foley 1999 $303,750 $75,000 18,750 $42,140(2)
Chairman 1998 288,750 165,000 18,750 37,109(2)
1997 272,917 300,000 18,750 29,304(2)
Michael L. Hurt 1999 278,750 75,000 37,500 82,129(3)
President 1998 263,750 165,000 37,500 73,801(3)
1997 248,333 300,000 37,500 68,215(3)
Jeffrey A. Petry 1999 187,083 15,000 7,500 48,741(4)
Vice President/General Mgr. 1998 77,083 40,000 75,000 72,097(4)
- - Electronics Business.
Carl R. Christenson 1999 131,666 32,000 7,500 24,832(5)
Vice President/General Mgr. 1998 115,833 40,000 7,500 21,432(5)
- Mechanical Business 1997 108,000 80,000 7,500 20,215(5)
Michael H. Iversen 1999 131,371 10,000 6,000 54,360(6)
President, T. B. Wood's 1998 123,951 20,000 6,000 46,892(6)
Canada Ltd. 1997 126,000 55,000 7,500 34,119(6)
Willard C. Macfarland, Jr. 1999 111,815 9,000 4,500 7,158(7)(8)
Vice President, International 1998 107,000 25,000 6,000 45,733(7)(8)
1997 104,708 50,000 6,000 60,659(7)(8)
</TABLE>
(1) No stock appreciation rights or restricted stock awards were granted.
(2) Includes $1,218 in each of 1997, 1998, and 1999 in life insurance
premium payments by the Company; and $28,086 in 1997, $35,891 in 1998,
and $40,762 in 1999 pursuant to the TB Wood's Corporation Supplemental
Executive Retirement Plan ("SERP").
(3) Includes $2,016 in each of 1997, 1998, and 1999 in life insurance
premium payments by the Company; $4,800 in each of 1997, 1998, and 1999
in Company matching contributions to the Company's 401(k) plan; $2,002
in 1999 in vehicle allowance; $20,000 in each of 1997, 1998 and 1999 in
split dollar life insurance
10
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premium payments by the Company; $39,003 in 1997, $44,463 in 1998, and
$50,497 in 1999 pursuant to the SERP; and $2,396 in 1997, $2,522 in
1998, and $2,653 in 1999 in Country Club dues allowance.
(4) Includes $1,148 in 1999 in life insurance premium payments by the
Company; $2,177 in 1999 in Company matching contributions to the
Company's 401(k) plan; $803 in 1998 and $2,048 in 1999 in vehicle
allowance; $70,239 in 1998 and $19,567 in 1999 in moving allowance; and
$20,000 in 1999 in a sign-on bonus; $1,055 in 1998 and $2,653 in 1999
in Country Club dues allowance. Due to a re-organization as of February
23, 2000, Mr. Petry no longer serves as Vice President/General Manager
- Electronics Business nor as an employee of the Company.
(5) Includes $224 in each of 1997 and 1998, and $469 in 1999 in life
insurance premium payments by the Company; $4,800 in each of 1997, 1998
and 1999 in Company matching contributions to the Company's 401(k)
plan; $5,000 each year in split dollar life insurance premium payments
by the Company; and $7,795 in 1997, $8,886 in 1998, and $10,092 in 1999
pursuant to the SERP; $2,396 in 1997, $2,522 in 1998, and $2,653 in
1999 in Country Club dues allowance; and $1,662 in 1999 in vehicle
allowance.
(6) Includes $1,164 in each of 1997 and 1998, and $918 in 1999 in life
insurance premium payments by the Company; $4,800 in 1997, $3,980 in
1998, and $2,913 in 1999 in Company matching contributions to the
Company's 401(k) plan; $5,000 in each of 1997, 1998 and 1999 in split
dollar life insurance premium payments by the Company; $3,980 in 1998
and $6,167 in 1999 in auto allowance; $6,567 in 1998 and $10,995 in
1999 in housing allowance; and $20,759 in 1997, $23,666 in 1998, and
$26,877 in 1999 pursuant to the SERP; $2,396 in 1997, $2,522 in 1998,
and $1,406 in 1999 in Country Club dues allowance.
(7) Includes $335 in 1997 and 1998, and $355 in 1999 in life insurance
premium payments by the Company; $4,800 in each of 1997 and 1998, and
$3,959 in 1999 in Company matching contributions to the Company's
401(k) plan; $31,819 moving allowance, $1,955 in auto allowance and
$500 for tax preparation in 1997; and $20,431 moving allowance, and
$1,955 in auto allowance in 1998; and $2,700 in auto allowance in 1999.
(8) The Company 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
$21,250 in 1997 based on a market interest of 8-1/2%; and $18,212 in
1998 based on a market interest of 7.75% as a result of such
interest-free loan. The balance on this loan was paid in January 1999.
11
<PAGE>
Option Grants in 1999
The following table sets forth information concerning grants of stock
options during fiscal year 1999 to each of the Named Officers and the potential
realizable value of such options at assumed annual rates of stock price
appreciation for the option terms.
<TABLE>
<CAPTION>
Option Grants in 1999(1)
Individual Grants
Number of Percent of Potential Realizable Value at
Securities Total Options Exercise Assumed Annual Rates of Stock
Underlying Granted to or Base Price Appreciation for Option
Options Employees in Price Expir. Term (2)
Name Granted (#) Fiscal Year ($/SH) Date 5% ($) 10% ($)
- ---- ----------- ----------- ------ ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Foley 6,250 3.91% 12.00 1/25/09 47,175 119,538
12,500 7.82% 18.00 1/25/04 62,163 137,363
Michael L. Hurt 12,500 7.82% 12.00 1/25/09 94,350 239,075
25,000 15.65% 18.00 1/25/04 124,325 274,725
Jeffrey A. Petry 2,500 1.56% 12.00 1/25/09 18,870 47,815
5,000 3.13% 18.00 1/25/04 24,865 54,945
Carl R. Christenson 2,500 1.56% 12.00 1/25/09 18,870 47,815
5,000 3.13% 18.00 1/25/04 24,865 54,945
Michael H. Iversen 2,000 1.25% 12.00 1/25/09 15,096 38,252
4,000 2.50% 18.00 1/25/04 19,892 43,956
Willard C. Macfarland, Jr. 1,500 0.94% 12.00 1/25/09 11,322 28,689
3,000 1.88% 18.00 1/25/04 14,919 32,967
</TABLE>
(1) The Company granted non-qualified options under the provisions of the
1996 Stock-based Incentive Compensation Plan. On January 26, 1999,
53,250 options with an option price of $12.00 per share and 106,500
options with an option price of $18.00 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.
<PAGE>
Option Exercises in 1999
The table which follows sets forth information concerning exercises of
stock options during fiscal year 1999 by each of the Named Officers and the
value of each such officer's unexercised options as of December 31, 1999 based
on a closing stock price of $8.50 per share of the Company's Common Stock on
such date:
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values(1)
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Options at Fiscal Year End at Fiscal Year End
On Value (12/31/99) (Exercisable/ (12/31/99) (Exercisable/
Exercise Realized Unexercisable) Unexercisable)
Name (#) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thomas C. Foley 0 0 18,750/37,500 0/0
Michael L. Hurt 0 0 37,500/75,000 0/0
Jeffrey A. Petry 0 0 25,000/57,500 0/0
Carl R. Christenson 3,586 18,284 13,336/15,000 27,021/0
Michael H. Iversen 8,625 81,495 7,000/12,500 0/0
Willard C. Macfarland, Jr. 0 0 6,000/10,500 0/0
</TABLE>
- -------------------
(1) The Company has not granted any stock appreciation rights.
Supplemental Executive Retirement Plan
Effective January 1, 1998, the Company adopted the Supplemental
Executive Retirement Plan (the "Plan"), which is designed to offer additional
retirement benefits to a select group of executive employees. Coverage under the
Plan is limited to executives who have completed five years of service with the
Company and whose benefits under the Retirement Savings and Investment Plan are
limited because of restrictions imposed by the Internal Revenue Code on the
amount of benefits that may be contributed on behalf of executive employees
under that type of a tax-qualified plan.
Each year on December 31, the Company credits a participant's account
with an additional retirement contribution plus any earnings on contributions
for prior years. The contributions are made using a "target benefit formula"
13
<PAGE>
which is intended to insure (but does not guarantee) that the value of a
participant's account, at age 65, will equal the value of a single life annuity
for 50% of the participant's final average earnings with the Company less the
following amounts: (1) benefits under our tax-qualified retirement plan, (2) the
participant's social security benefits and (3) a portion of any amount received
by a participant from certain split-dollar life insurance policies that have
been purchased for such participants.
A participant is 25% vested in his or her account in the first year of
participation in the Plan and vests ratably over a subsequent ten-year period
based on continued employment with the Company. A participant is entitled to a
distribution of the vested portion of his or her account after the earliest to
occur of the following: (1) the participant's termination of employment (other
than for Cause, as defined in the Plan), (2) the participant's death, (3) the
participant's disability, (4) a Change of Control (as defined in the Plan) or
(5) termination of the Plan.
Executive Employment Contract
The following sets forth a description of the executive employment
contract for Mr. Hurt.
Mr. Hurt's employment contract was effective on April 14, 1998 and
provides that he will continue to serve as our President or other senior
executive officer until December 31, 2002. The contract sets Mr. Hurt's annual
salary at $265,000, which may be adjusted if the Company and Mr. Hurt agree to
any such adjustment. Mr. Hurt's employment contract further provides that he
will be entitled to participate in all employee benefit plans or programs that
are made available to our other executive employees.
If Mr. Hurt voluntarily terminates his employment with the Company
without good reason or the Company terminates his employment for cause as
defined in his agreement or because his performance does not satisfy the terms
of his contract, Mr. Hurt will not be entitled to any payments or benefits
beyond his last day of employment. If Mr. Hurt terminates his employment with
the Company for good reason or he is terminated following a change of control,
the Company will pay him $350,000 per year for the two-year period following his
termination. Finally, if the Company terminates Mr. Hurt's employment because
the Company no longer needs his services, the Company has agreed to continue his
then-current compensation for a period of twenty-four months, provided that Mr.
Hurt refrains from competing with the Company during that period. Mr. Hurt's
contract also provides that Mr. Hurt is subject to noncompetition,
nonsolicitation and confidentiality restrictions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act") requires that the Company's directors and officers, and persons
who own more than 10% of a registered class of the Company's Common Stock 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)
14
<PAGE>
of the Exchange Act with respect to the fiscal year 1999 on a timely basis
except for Mr. Williams who did not file timely reports as required in relation
to dividend reinvestment transactions in April, July, and October 1999 which
resulted in the acquisition of 22 shares. While Mr. Hurt timely filed all his
reports on Form 4, one transaction was inadvertently reported incorrectly and
the report of that transaction was subsequently corrected by Mr. Hurt by his
filing an amended Form 4.
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 Board 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, personal performance,
salaries of executive officers in the industry and general economic conditions.
The salaries are set at levels intended to motivate and retain highly qualified
executives whom the Board believes are important to the continued success of the
Company.
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 1999 an executive officer could earn bonus compensation based in
part upon achievement by the Company of certain financial performance objectives
and in part by achievement of individual operating objectives designed to
enhance future performance by the Company. For 1999, the Company did not meet
its performance objectives and as a result no bonus compensation was paid to
executives on that basis. However, individual operating objectives were met by
each of Messrs. Iversen, Christenson, and Macfarland and as a result each such
executive was paid bonus compensation.
Incentive Stock Options. The Company grants stock options to
provide long-term incentives for the executive officers. The option grants under
the 1996 Stock Based Incentive Compensation Plan are designed to better align
the interests of the executive officers with those of the stockholders and to
provide each individual with a significant incentive to manage the Company from
the perspective of an owner and to remain employed by the Company. The number of
shares subject to each option grant is based on the officer's level of
responsibility and relative position within the Company.
15
<PAGE>
1999 Compensation of Chairman and President
Chairman
The Compensation Committee determined the 2000 compensation
for Mr. Foley in accordance with the guidelines described above. Mr. Foley's
salary increased in 2000 from $303,750 to $320,000 based upon an evaluation of
his personal 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 earned a bonus of $75,000 based
on his achievement of certain personal operating objectives designed to enhance
future long-term performance of the Company including his strategic direction of
the Company.
President
The Compensation Committee determined the 1999 compensation
for Mr. Hurt in accordance with the guidelines described above. Mr. Hurt's
salary increased in 2000 from $278,750 to $295,000, based upon an evaluation of
his personal 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.
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 1999 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
16
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
the Company's Common Stock over the past four years with the cumulative total
return on shares of companies comprising the Russell 2000 index and a special
Peer Group index.
Comparison of
Cumulative Total Returns Among
TB Wood's, Russell 2000, and Peer Group
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
2/8/96 1/3/97 1/2/98 1/1/99 1/1/00
<S> <C> <C> <C> <C> <C>
TB Wood's 100 98 190 108 82
Russell 2000 100 113 136 132 155
Peer Group 100 141 216 183 162
---------------------------------------------------------------------------------------------------
</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;
Franklin Electric Co., Inc.; MagneTek, Inc.; Kollmorgen Corp.; and Regal-Beloit
Corporation.
17
<PAGE>
INDEPENDENT AUDITORS
Arthur Andersen LLP was the auditor for the 1999 fiscal year and has
been selected as the Company's auditor for the 2000 fiscal year. Representatives
of Arthur Andersen LLP will be present at the Annual Meeting 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 (i) proxies which are marked "withhold authority"
with respect to the election of any one or more nominees for election as
directors, (ii) proxies which are marked to deny discretionary authority on
other matters, and (iii) 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 2001 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 1, 2000, and must comply in
all other respects with applicable rules and regulations of the Securities and
Exchange Commission relating to such inclusion. Any stockholder proposal
submitted to the Company for inclusion in the Company's Proxy Statement for the
2001 Annual Meeting of Stockholders after February 13, 2001 is considered
untimely. In addition, any stockholder intending to present a proposal for
consideration at the 2001 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 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.
18
