<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
/ / 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 240.14a-11(c) or 240.14a-12
Central Sprinkler 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
[GRAPHIC OMITTED]
CENTRAL SPRINKLER CORPORATION
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 9, 1998
---------------------
TO OUR SHAREHOLDERS:
You are invited to be present either in person or by proxy at the Annual
Meeting of Shareholders of Central Sprinkler Corporation (the "Company") to be
held at the Company's executive offices, 451 North Cannon Avenue, Lansdale,
Pennsylvania on Monday, March 9, 1998 at 11:00 a.m. for the following purposes:
1. To elect nine directors to serve for one-year terms and until their
successors are elected and qualified;
2. To consider and act upon a proposal to ratify the selection by the
Board of Directors of Arthur Andersen LLP as independent public accountants
for the Company for fiscal year 1998; and
3. To transact such other business as may properly come before the
Meeting.
The Board of Directors has fixed the close of business on February 6, 1998
as the record date for determining the shareholders entitled to notice of, and
to vote at, the Annual Meeting or any adjournments thereof.
The Directors hope that you will find it convenient to attend the Meeting
in person, but whether or not you plan to attend, please sign, date and return
the enclosed proxy to assure that your shares are represented at the Meeting.
Returning your proxy does not deprive you of your right to attend the Meeting
and vote your shares in person.
/s/ George G. Meyer
----------------------------
George G. Meyer, Secretary
February 13, 1998
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Central Sprinkler
Corporation (the "Company") in connection with the solicitation by the Board of
Directors of proxies to be used at the Annual Meeting of Shareholders (the
"Meeting") to be held on Monday, March 9, 1998, at the time and place and for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
The approximate date upon which this Proxy Statement and the form of proxy
are to be mailed to shareholders is February 13, 1998.
If the enclosed proxy is executed and returned, it may nevertheless be
revoked at any time before it is exercised by giving written notice to the
Secretary of the Company, but mere attendance at the Meeting, without such
notice, will not revoke the proxy. Shares represented by a valid proxy that is
received pursuant to this solicitation and not revoked before it is exercised
will be voted as provided on the proxy at the Meeting or any adjournments
thereof.
The Company's executive offices are located at 451 North Cannon Avenue,
Lansdale, Pennsylvania 19446.
VOTING AT THE MEETING
Only holders of shares of Common Stock of the Company (the "Common Stock")
of record at the close of business on February 6, 1998 will be entitled to vote
at the Annual Meeting. On February 6, 1998, 3,845,637 shares of Common Stock,
the only outstanding voting securities of the Company, were issued and
outstanding. Each share of Common Stock is entitled to one vote on all matters.
The holders of a majority of the shares entitled to vote, present in
person or represented by proxy, constitute a quorum. Except for the election of
directors, for which a plurality is required, the affirmative vote of a
majority of the shares present in person or represented by proxy at the meeting
and entitled to vote is required for the adoption of the proposals to ratify
the selection of the independent accountants, or to take action with respect to
any other matter as may properly be brought before the Meeting. Shares cannot
be voted at the Meeting unless the holder of record is present in person or by
proxy. The enclosed proxy is a means by which a shareholder may authorize the
voting of his or her shares at the Meeting. The shares of Common Stock
represented by each properly executed proxy card will be voted at the Meeting
in accordance with each shareholder's directions. Shareholders are urged to
specify their choices by marking the appropriate boxes on the enclosed proxy;
if no choice has been specified, the shares will be voted as recommended by the
Board of Directors. If any other matters are properly presented to the Meeting
for action, the proxy holders will vote the proxies (which confer discretionary
authority to vote on such matters) in accordance with their judgment.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect, other than for purposes of determining the presence of a
quorum. Abstentions may be specified on the proposal to ratify the selection of
the independent accountants (but not for the election of directors).
Abstentions will be considered present and entitled to vote at the Meeting, but
will not be counted as votes cast in the affirmative. Abstentions on the
proposal to ratify the selection of the independent accountants will have the
effect of a negative vote because this proposal requires the affirmative vote
of a majority of the shares present at the Meeting in person or represented by
proxy at the Meeting and entitled to vote.
1
<PAGE>
Brokers that are member firms of the New York Stock Exchange ("NYSE") and
who hold shares in street name for customers have the authority under the rules
of the NYSE to vote those shares with respect to the election of directors and
the proposal to ratify the selection of the independent accountants if they
have not received instructions from a beneficial owner. A failure by brokers to
vote those shares will have no effect in the outcome of the election of
directors and the adoption of the proposal to ratify the selection of the
independent accountants because such shares will not be considered shares
present and entitled to vote with respect to such matters.
Your proxy vote is important. Accordingly, you are asked to complete, sign
and return the accompanying proxy whether or not you plan to attend the
meeting. If you plan to attend the Meeting to vote in person and your shares
are registered with the Company's transfer agent (StockTrans, Inc.) in the name
of a broker, bank or other custodian, nominee or fiduciary, you must secure a
proxy from such person assigning you the right to vote your shares.
SECURITY OWNERSHIP
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of January 1, 1998 by (1) each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (2) each director of the Company, (3) each executive officer
named in the summary compensation table included elsewhere herein and (4) all
executive officers and directors as a group. Percentages of less than one
percent have been omitted. Unless otherwise indicated, the shares listed in the
table are owned directly by the individual or entity, or by both the individual
and the individual's spouse, and the individual or entity has sole voting and
investment power as to shares shown or, in the case of the individual, such
power is shared with the individual's spouse.
2
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature Percent
of Beneficial of
Ownership Class
------------------- ---------
<S> <C> <C>
Over 5% Shareholders
Central Sprinkler Corporation Employee Stock .......................... 583,000 15.2%
Ownership Plan (the "Central ESOP")(1)
451 North Cannon Avenue, Lansdale, PA 19446
Heartland Advisors, Inc.(2) ........................................... 480,400 12.5%
790 N. Milwaukee Street, Milwaukee, WI 53202
Delaware Management Holdings, Inc. (2) ................................ 441,200 11.5%
2005 Market Street, Philadelphia, PA 19103
Wellington Management Company, LLP(2) ................................. 368,073 9.6%
75 State Street, Boston, MA 02109
Dimensional Fund Advisors, Inc.(2) .................................... 257,600 6.7%
1229 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
Investment Counselors of Maryland, Inc.(2) ............................ 195,000 5.1%
803 Cathedral Street, Baltimore, MD 21201
William J. Meyer(3) ................................................... 257,953 6.5%
George G. Meyer(4) .................................................... 431,111 10.4%
Stephen J. Meyer(5) ................................................... 361,778 8.9%
451 North Cannon Avenue, Lansdale, PA 19446
Directors
Winston J. Churchill(6) ............................................... 6,000 *
Barbara M. Henagan(6) ................................................. 6,508 *
Joseph L. Jackson(6) .................................................. 6,325 *
Richard P. O'Leary(7) ................................................. 13,925 *
Thomas J. Sharbaugh(8) ................................................ 6,498 *
Timothy J. Wagg(6) .................................................... 6,000 *
Executive Officers
James R. Buchanan(9) .................................................. 85,966 2.2%
Albert T. Sabol(10) ................................................... 37,467 *
All executive officers and directors as a group (21 persons)(11) ...... 1,381,309 26.4%
</TABLE>
- ------------
*Less than 1%
(1) The amount shown excludes 194,000 shares that have been allocated to
Central ESOP participants and will be voted by such participants pursuant
to the Central ESOP provisions. Shares that are not voted by such
participants, along with the remaining unallocated shares, will be voted
by the Central ESOP trustees pursuant to the provisions of the Central
ESOP, which provides that such shares shall be voted in accordance with
the directions received with respect to the plurality of the allocated
shares. Mr. George Meyer and Mr. Sabol are two of three trustees of the
Central ESOP and each of them disclaims beneficial ownership of the shares
owned of record by the Central ESOP.
3
<PAGE>
(2) As reported on Schedules 13G filed with the Securities and Exchange
Commission on: (i) January 12, 1998 in the case of Heartland Advisors,
Inc.; (ii) February 12, 1997 in the case of Delaware Management Holdings,
Inc.; and (iii) February 14, 1997 in the case of Investment Counselors of
Maryland, Inc. Heartland Advisors, Inc. reported sole dispositive power
with respect to 480,400 shares and sole voting power over 475,900 shares.
Delaware Management Holdings, Inc. reported sole dispositive power over
441,200 shares and sole voting power over 5,890 shares. Investment
Counselors of Maryland, Inc. reported sole dispositive power over 195,000
shares and sole voting power over 185,000 shares. Wellington Management
Company, LLP has informed the Company that as of September 30, 1997, it
had shared dispositive power over 368,073 shares and shared voting power
over 169,760 shares. Dimensional Fund Advisors, Inc. has informed the
Company that as of December 31, 1997, it had sole dispositive power over
257,600 shares and sole voting power over 76,200 shares.
(3) The amount shown includes (i) 116,875 shares that may be acquired under
currently exercisable options and (ii) 3,503 shares held for his account
in the Central ESOP.
(4) The amount shown includes (i) 303,875 shares that may be acquired under
currently exercisable options and (ii) 3,998 shares held for his account
in the Central ESOP.
(5) The amount shown includes (i) 231,875 shares that may be acquired under
currently exercisable options and (ii) 3,965 shares held for his account
in the Central ESOP.
(6) The amount shown includes 6,000 shares that may be acquired under
currently exercisable options.
(7) The amount shown includes 6,000 shares that may be acquired under
currently exercisable options. Does not include 42,000 shares that may be
acquired under options that are not exercisable within 60 days.
(8) The amount shown includes (i) 6,000 shares that may be acquired under
currently exercisable options and (ii) 125 shares that are owned by Mr.
Sharbaugh's minor daughter.
(9) The amount shown includes (i) 39,375 shares that may be acquired under
currently exercisable options and (ii) 3,405 shares held for his account
in the Central ESOP. Does not include 7,500 shares that be acquired under
options that are not exercisable within 60 days.
(10) The amount shown includes (i) 31,875 shares that may be acquired under
currently exercisable options and (ii) 2,767 shares held for his account
in the Central ESOP. Does not include 7,500 shares that may be acquired
under options that are not exercisable within 60 days.
(11) The amount shown includes (i) 847,750 shares that may be acquired under
currently exercisable options and (ii) 35,474 shares held for their
account in the Central ESOP. Does not include 87,000 shares that may be
acquired under options that are not exercisable within 60 days.
4
<PAGE>
NOMINATION AND ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors will consist
of three to eleven directors, as determined from time to time by resolution of
the Board. The Board has fixed the number of directors at nine, all of whom are
to be elected at the 1998 Annual Meeting. Each such director will serve until
the 1999 Annual Meeting and until a successor has been elected and qualified or
until the director's earlier resignation or removal. Each nominee has consented
to be named in this Proxy Statement and to serve if elected.
If any nominee becomes unavailable for any reason or if a vacancy occurs
for any other reason before the election (which events are not anticipated),
the shares represented by the enclosed proxy may be voted for such other person
as may be determined by the holders of such proxies.
The Board of Directors recommends a vote FOR each of the nominees for
director.
Nominees
The persons nominated to be directors of the Company are listed below. All
of the nominees listed below are currently directors of the Company.
<TABLE>
<CAPTION>
Position(s) with the Company and, where indicated, with
the Company's primary operating subsidiary,
Name Age Central Sprinkler Company ("Central Sprinkler")
- ---------------------- ----- ---------------------------------------------------------
<S> <C> <C>
Winston J. Churchill 57 Chairman of the Board and Director
George G. Meyer 48 President, Chief Executive Officer, Secretary, Treasurer
and Director; President and Chief Executive Officer of
Central Sprinkler
Stephen J. Meyer 46 Director; Senior Executive Vice President of Central
Sprinkler
Richard P. O'Leary 59 Director; Chief Operating Officer of Central Sprinkler
Barbara M. Henagan 38 Director
Joseph L. Jackson 70 Director
William J. Meyer 77 Director
Thomas J. Sharbaugh 45 Director
Timothy J. Wagg 63 Director
</TABLE>
WINSTON J. CHURCHILL -- Mr. Churchill has been Chairman of the Board and a
director of the Company and a director of Central Sprinkler since 1984. Mr.
Churchill has been the President of Churchill Investment Partners, Inc., a
private investment firm, since 1989. He was a partner of Bradford Associates, a
private investment firm, from 1984 to 1989. Mr. Churchill is also Chairman of
the Board of IBAH, Inc., Geotek Communications, Inc. and Tescorp, Inc.
GEORGE G. MEYER -- Mr. Meyer has been President since 1997 and Chief
Executive Officer since 1987 and Secretary and Treasurer of the Company since
1985, and a director of the Company and President and a director of Central
Sprinkler since 1984. He was Executive Vice President of the Company from 1985
to 1987.
STEPHEN J. MEYER -- Mr. Meyer has been a Senior Executive Vice President
since 1997 and a director of the Company since 1986. He was Executive Vice
President of Central Sprinkler from 1986 until 1997. He has been a director of
Central Sprinkler since 1983.
5
<PAGE>
RICHARD P. O'LEARY -- Mr. O'Leary has been a director of the Company since
1990 and has been the Chief Operating Officer of Central Sprinkler since
November 1997. He was a consultant, and he was former Vice President of Betz
Laboratories, Inc. from January 1990 until his retirement in March 1991. He was
President and Chief Operating Officer of Betz Equipment Systems, a division of
Betz Laboratories, Inc., from 1987 and Vice President & General Manager of Betz
Genesis Division of Betz Laboratories, Inc. prior to that time.
BARBARA M. HENAGAN -- Ms. Henagan has been a director of the Company since
1986. She has been a Senior Managing Director of Bradford Ventures Ltd., a
private investment firm, since 1992. Between 1990 and 1992, she was a Managing
Director of Bradford Ventures Ltd. Ms. Henagan has been a general partner of
Bradford Associates since 1986.
JOSEPH L. JACKSON -- Mr. Jackson has been a director of the Company since
1986. He has been the Executive Vice President of Churchill Investment
Partners, Inc., a private investment firm, since 1990. Mr. Jackson was also
Secretary and Treasurer (from 1990 to 1993) and Chief Financial Officer (from
1992 to 1993) of IBAH, Inc. He was Executive Director-Corporate Treasury of
Bell Atlantic Corporation from December 1987 until his retirement in December
1989.
WILLIAM J. MEYER -- Mr. Meyer has been a director of the Company since
1984 and a director of Central Sprinkler since 1975. From 1984 until 1997, Mr.
Meyer served as the President of the Company and the Chairman of the Board of
Central Sprinkler. He also served Central Sprinkler as Treasurer between 1975
and 1997 and as President from 1975 to 1984. In 1997, Mr. Meyer resigned as
President of the Company and as the Chairman and Treasurer of Central Sprinkler
and accepted a position as Senior Consultant of the Company and Central
Sprinkler.
THOMAS J. SHARBAUGH -- Mr. Sharbaugh has been a director of the Company
since 1986. He has been a partner in the law firm of Morgan, Lewis & Bockius
LLP since 1988.
TIMOTHY J. WAGG -- Mr. Wagg has been a director of the Company since 1984.
He is a Financial Consultant and he was Vice President, Administration of
Stone-Consolidated Inc. (forest products and packaging, formerly
Consolidated-Bathurst Inc.) from March 1989 until his retirement in July 1991.
He served as Vice President, Planning and Administration from November 1988 to
March 1989, and as Vice President, Finance prior to that time.
George G. Meyer and Stephen J. Meyer are siblings and they are the sons of
William J. Meyer.
General Information about Board of Directors
There were five regular meetings and one special meeting of the Board of
Directors in the 1997 fiscal year. During this period, each incumbent director
attended at least 75% of the aggregate of (1) the total number of meetings of
the Board held during the period for which such incumbent was a director, and
(2) the total number of meetings held by all committees of the Board on which
such incumbent served.
Director Compensation
Directors of the Company who are not full time employees of the Company or
its operating subsidiaries receive $2,000 for each meeting attended, as well as
an annual retainer of $8,000. In addition, upon the date that directors are
elected or reelected, each non-employee director shall receive options to
acquire 3,500 shares of
6
<PAGE>
Common Stock under the 1996 Equity Compensation Plan. The price per share shall
be equal to the fair market value of the Common Stock as determined in
accordance with the terms of the plan. The options are exercisable immediately
and for ten years from the date of grant.
Board Committees
The Board of Directors has a number of committees, including an Audit
Committee and a Compensation Committee, but it does not have a Nominating
Committee. Non-employee directors are paid $750 for each Audit Committee
meeting or other committee meeting that is held independently of a meeting of
the full Board, and $500 for each other committee meeting held in connection
with a meeting of the full Board.
The Audit Committee consists of two non-employee directors, Messrs. Wagg
and Jackson. The Audit Committee meets with the Company's independent auditors
and with the appropriate corporate officers for the purposes of reviewing
matters relating to the corporate financial reporting and accounting procedures
and policies of the Company and its subsidiaries and reporting thereon to the
Board of Directors. The Audit Committee also recommends to the Board the
appointment of the Company's independent auditors, subject to ratification by
the shareholders at the Annual Meeting. The Audit Committee held four meetings
during the 1997 fiscal year.
The Compensation Committee consists of three directors, Ms. Henagan and
Messrs. Churchill and Sharbaugh. The Compensation Committee reviews with the
principal executive officers of the Company the compensation of all officers of
the Company and its subsidiaries. It also negotiates the terms of employment of
the principal executive officers of the Company and its subsidiaries and
negotiates such employment contracts as may be necessary in connection
therewith. The Compensation Committee held four meetings during the 1997 fiscal
year.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the Company's President
and Chief Executive Officer and the four other most highly compensated
executive officers of the Company or its operating subsidiary, Central
Sprinkler, for the fiscal years ended October 31, 1997, 1996 and 1995. The
table includes William J. Meyer, who resigned from his offices on November 1,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------- -------------
Name and Principal Other
Position Year Salary Bonus Payout(1) Compensation(2)
- ---------------------------------------- ------ ----------- ----------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
George G. Meyer 1997 $350,000 $278,580 -- $10,710
President and Chief Executive Officer 1996 350,000 202,327 -- 10,479
1995 332,692 401,700 -- 10,587
William J. Meyer 1997 220,000 278,580 $120,000 47,334
Former President 1996 220,000 207,070 120,000 44,426
1995 220,000 418,180 120,000 24,104
Stephen J. Meyer 1997 250,000 208,935 -- 10,016
Senior Executive Vice President, 1996 250,000 155,302 -- 9,872
Central Sprinkler 1995 240,481 305,890 -- 9,964
James R. Buchanan 1997 175,000 69,645 -- 9,486
Executive Vice President, 1996 168,000 47,025 -- 9,247
Sales of Central Sprinkler 1995 165,923 88,065 -- 9,778
Albert T. Sabol 1997 175,000 69,645 -- 10,622
Executive Vice President, 1996 168,000 47,025 -- 10,051
Finance and Chief Financial 1995 162,807 88,065 -- 10,537
Officer of the Company and
Central Sprinkler
</TABLE>
- ------------
(1) Amount represents payments under a deferred compensation arrangement,
pursuant to such executive officer's then current employment agreement,
which pays the executive officer $10,000 per month from August 1993
through July 1998.
(2) (a) Includes the following amounts paid by the Company on behalf of the
executive officer for the year indicated to his respective account under
the Company's 401(k) Profit Sharing Plan: 1997, 1996 and 1995 -- George G.
Meyer, William J. Meyer, Stephen J. Meyer, James R. Buchanan and Albert T.
Sabol, $3,000.
(b) Includes the following amounts paid by the Company on behalf of the
executive officer for the year indicated to his respective account under the
Central ESOP: 1997 and 1996 -- George G. Meyer, William J. Meyer, Stephen J.
Meyer, James R. Buchanan and Albert T. Sabol, $4,645; and 1995 -- George G.
Meyer, William J. Meyer, Stephen J. Meyer, James R. Buchanan and Albert T.
Sabol, $4,962.
(c) Includes premiums for term life insurance paid by the Company on behalf
of the executive officer for the year indicated: 1997 -- George G. Meyer,
$3,065; William J. Meyer, $39,689; Stephen J. Meyer, $2,371;
8
<PAGE>
James R. Buchanan, $1,841; and Albert T. Sabol, $2,977; 1996 -- George G.
Meyer, $2,834; William J. Meyer, $36,781; Stephen J. Meyer, $2,227; James R.
Buchanan, $1,602; and Albert T. Sabol, $2,406 and 1995 -- George G. Meyer,
$2,625; William J. Meyer, $16,142; Stephen J. Meyer, $2,002; James R.
Buchanan, $1,816; and Albert T. Sabol, $2,575. The death benefit under such
life insurance is three times the executive officer's annual salary.
The following table sets forth certain information concerning grants of
stock options made during the year ended October 31, 1997 to the persons named
in the Summary Compensation Table.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realization Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term (10 years)(1)
Options Employees Price Expiration -----------------------------
Name Granted In Fiscal Year ($/share) Date 5% 10%
- --------------------------- ------------ ---------------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
George G. Meyer ........... 18,000 4.0% $ 30.00 12/15/06 $ 0 $288,720
42,000 9.4% 35.00 12/15/06 0 463,680
48,000 10.7% 40.00 12/15/06 0 289,920
54,000 12.1% 45.00 12/15/06 0 56,160
60,000 13.4% 50.00 12/15/06 0 0
William J. Meyer .......... 6,000 1.3% 30.00 12/15/06 0 96,240
12,000 2.7% 35.00 12/15/06 0 132,480
12,000 2.7% 40.00 12/15/06 0 72,480
Stephen J. Meyer .......... 12,000 2.7% 30.00 12/15/06 0 192,480
24,000 5.4% 35.00 12/15/06 0 264,960
30,000 6.7% 40.00 12/15/06 0 181,200
36,000 8.1% 45.00 12/15/06 0 37,440
48,000 10.7% 50.00 12/15/06 0 0
James R. Buchanan ......... 5,000 1.1% 24.05 12/15/06 24,300 109,950
Albert T. Sabol ........... 5,000 1.1% 24.05 12/15/06 24,300 109,950
</TABLE>
- ------------
(1) The dollar amounts under these columns are the result of calculations at
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation of
the price of the Common Stock. The Company did not use an alternative
formula for a grant date valuation. The Company is not aware of any
formula that will determine with reasonable accuracy a present value based
on future unknown or volatile factors.
9
<PAGE>
The following table summarizes certain information regarding the number
and value of stock options for the persons named in the Summary Compensation
Table at October 31, 1997. Year end values are based upon the closing price of
a share of the Company's Common Stock on October 31, 1997 of $18.625
AGGREGATED STOCK OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares Securities Value of
Acquired Underlying Unexercised
on Exercise Unexercised Options In-the-Money
(Number Value at October 31, 1997 Options at
Name of Shares) Realized (Number of Shares)(1) October 31, 1997
- --------------------------- ------------- ---------- ----------------------- -----------------
<S> <C> <C> <C> <C>
George G. Meyer ........... 31,250 $270,313 303,875 $526,247
William J. Meyer .......... 31,250 270,313 116,875 550,372
Stephen J. Meyer .......... 31,250 270,313 231,875 526,247
James R. Buchanan ......... -- -- 46,875 161,996
Albert T. Sabol ........... -- -- 39,375 117,610
</TABLE>
- ------------
(1) All options listed for George G. Meyer, William J. Meyer and Stephen J.
Meyer were exercisable at October 31, 1997. Of the options listed for
James R. Buchanan and Albert T. Sabol, 39,375 and 31,875 were exercisable
at October 31, 1997, respectively.
Incentive Compensation Plan
The Company has an Incentive Compensation Plan, administered by the
Compensation Committee of the Board of Directors, which provides awards to
designated officers and other employees. The plan provides for aggregate awards
in an amount equal to 8.0% of consolidated monthly operating income, as defined
in the plan, to be credited to the incentive compensation fund each year. In
fiscal 1997, this total was allocated to executive officers and key employees,
based on specified percentage participations in the Plan. The awards made to
the persons named in the Summary Compensation Table are included in the amounts
listed in the table.
401(k) Profit Sharing Plans
All non-union Central Sprinkler employees and certain subsidiary employees
who have attained age 21 and completed one year of service are eligible to
participate in Central Sprinkler's or a subsidiary's 401(k) Profit Sharing
Plan. Under the terms of the plans, the Company has agreed to match 100% of
each participant's basic contributions ("Basic Contributions"). The Basic
Contribution is limited to 2% of the participant's total compensation. A
participant may also make supplemental contributions of up to the maximum
permissible amount allowed by law ("Supplemental Contributions"). Basic and
Supplemental Contributions are made on a pre-tax basis. In addition, a
participant may contribute up to 10% of compensation as an after-tax
contribution ("Voluntary Contribution"). The Company may also, in its
discretion, make additional contributions to the plans out of its current or
accumulated net profits. Any additional Company contribution to a plan would be
allocated to the accounts of all participants in the proportion that each
participant's Basic Contributions for the year bear to the total Basic
Contributions of all participants for the year. All such contributions are
subject to applicable contribution and annual addition limitations imposed by
the Internal Revenue Code of 1986, as amended.
Company contributions vest at the rate of 25% after three years of service
and an additional 25% for each succeeding year of service. A participant is
fully vested in his Basic, Supplemental and Voluntary Contributions
10
<PAGE>
at all times and in his Company contributions upon the earliest of completion
of six years of service, attainment of age 55, death or disability. A
participant may withdraw his Voluntary Contributions once a year. Basic
Contributions and earnings on both Basic and Supplemental Contributions may be
withdrawn by participant upon attainment of age 59 1/2 or for financial
hardship. At termination of employment for any reason, a participant receives
his vested benefits in the form of a lump sum cash payment or annuity, or a
combination of both.
A participant may borrow up to the amount of the sum of his Basic,
Supplemental and Voluntary Contributions and the vested balance of his Company
contributions, except that if the loan amount exceeds $10,000, the limitation
is 50% of such sum, and in no event may the loan exceed $50,000. Loans must be
repaid within a period and at an interest rate determined by the plan
committee.
Since introduced, the Company has made no discretionary contributions to
the plans. The Company's matching contributions that were credited to the
accounts of the named persons listed in the Summary Compensation Table above
are included in such table.
Deferred Compensation Plan
In August 1978, Central Sprinkler established a Deferred Compensation Plan
for selected officers, at the level of Vice President and above of Central
Sprinkler, who have been employees for at least three years. There are no
active employees currently in the plan. The plan provides retirement benefits
based on individually established percentages of average annual pretax earnings
for the three years prior to leaving Central Sprinkler. Vesting is based on age
and the number of years of service with Central Sprinkler. Vested amounts are
payable to the participant or a surviving spouse over a ten-year period
commencing the later of the date the selected officer leaves Central Sprinkler
or age 60. The plan also provides for forfeiture of all rights to benefits
under certain circumstances.
Inasmuch as the payments to be made under the plan are tied to earnings,
Central Sprinkler has guaranteed minimum retirement payments to those officers
selected to participate in the plan. To be eligible for the minimum payments,
the participant must remain in the employ of Central Sprinkler until age 62
and, thereafter, not engage in any activities which compete with Central
Sprinkler. These minimum payments are to be reduced by amounts earned under the
formula described above. Currently, the minimum payments exceed the amount
provided under the average earnings formula.
Employment Contracts
In March 1990, George G. Meyer and Stephen J. Meyer entered into
employment agreements with Central Sprinkler, under which their employment
could not be terminated without five years' prior notice by either party.
George G. Meyer's employment agreement provides for a minimum annual salary of
not less than $350,000 and entitles him to an annual bonus for each fiscal
year, in an amount equal to a specified dollar payment for each $1,000 increase
over the Company's consolidated net profits for the 1985 fiscal year (the
"Income-Based Bonus"). On January 5, 1996, George G. Meyer's employment
agreement was amended to reduce his Income-Based Bonus payment, thereby
permitting Stephen J. Meyer to participate in the Income-Based Bonus plan
without increasing the aggregate bonus percentage paid by the Company.
Commencing with the 1995 fiscal year, George G. Meyer is entitled to an
Income-Based Bonus equal to $7.50 for each $1,000 increase over the Company's
consolidated net profits for the 1985 fiscal year. The Income-Based Bonus paid
to George G. Meyer for the 1996 and 1997 fiscal years was $14,227 and $0,
respectively. His agreement also guarantees a minimum participation interest in
the Company's Incentive Compensation Plan. Stephen J. Meyer's employment
agreement provides for a minimum annual salary of not less than $250,000 and
entitles him to a minimum participation
11
<PAGE>
interest in the Company's Incentive Compensation Plan. In connection with the
aforementioned amendment to George G. Meyer's employment agreement, Stephen J.
Meyer's employment agreement was amended on January 5, 1996 to provide him with
an Income-Based Bonus for each fiscal year, commencing with the 1995 fiscal
year, in an amount equal to $7.50 for each $1,000 increase over the Company's
consolidated net profits for the 1985 fiscal year. The Income-Based Bonus paid
to Stephen J. Meyer for the 1996 and 1997 fiscal years was $14,227 and $0,
respectively.
On November 1, 1997, William J. Meyer entered into a ten-year employment
agreement with the Company and Central Sprinkler. The agreement provides for an
annual salary of $360,000 and requires Mr. Meyer to serve as a senior
consultant to the Company and Central Sprinkler.
In September 1992, James R. Buchanan, William J. Pardue and Albert T.
Sabol each entered into an amended employment agreement with Central Sprinkler,
which provides for a minimum annual salary of $175,000, $145,000 and $175,000,
respectively, for an additional five-year term effective August 1993 through
August 1998, and successive one-year renewals, unless notice of termination is
given by either the employee or Central Sprinkler at least ninety days prior to
the end of the initial or a renewal term. The agreement also guarantees a
minimum participation interest in the Company's Incentive Compensation Plan.
George S. Polan entered into a five-year employment agreement with Central
Sprinkler in October 1992. The agreement provides for an annual salary of not
less than $95,000. The agreement automatically renews for additional one-year
terms unless either party terminates the agreement at the end of a term.
James E. Golinveaux entered into a three-year employment agreement with
Central Sprinkler on November 30, 1995. The agreement provides for an annual
salary of not less than $125,000. The agreement automatically renews for
additional one-year terms unless notice of termination is given by either the
employee or Central Sprinkler at least ninety days prior to the end of the
initial or a renewal term.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Barbara M. Henagan and Winston J. Churchill served on the Compensation
Committee during fiscal 1997. Ms. Henagan is a partner in Bradford Associates.
The Company has agreements with Bradford Ventures Ltd., an affiliate of
Bradford Associates, and Churchill Investment Partners, Inc., a company of
which Mr. Churchill is the President, under which each entity has agreed to
provide various financial consulting services to the Company for an annual fee
of $100,000, plus out-of-pocket expenses. The agreements automatically renew
for successive one-year terms unless notice of termination is given by either
party at least 90 days prior to the end of any term. The Company may terminate
the agreement with Bradford Ventures Ltd. by giving 30 days' advance notice.
During the 1997 fiscal year, the Company incurred costs for each entity of
$100,000 for services rendered and expenses incurred under such agreements.
Mr. Sharbaugh served on the Compensation Committee during fiscal 1997. He
is a partner in the law firm of Morgan, Lewis & Bockius LLP. The Company
retained this firm for various matters during the 1997 fiscal year and expects
to do so again during the 1998 fiscal year.
Notwithstanding anything to the contrary, the following report of the
Compensation Committee and the performance graph on page 16 shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
12
<PAGE>
COMPENSATION COMMITTEE REPORT
The Company's Compensation Committee consists of three directors: Winston
J. Churchill, Barbara M. Henagan and Thomas J. Sharbaugh.
The Company's compensation policies, plans and programs, as developed and
implemented by the Compensation Committee, seek to maintain the high level of
technical expertise necessary to ensure profitability, to attract and retain
professional management and to motivate the Company's executive officers to
perform to the full extent of their capabilities.
The Company has entered into employment agreements with George G. Meyer,
the Company's President and Chief Executive Officer, six other current
executive officers of the Company and William J. Meyer. The agreements set the
base salary of these officers. These agreements expire at various dates from
1998 through 2007, but have renewal terms.
Mr. George Meyer's salary was $350,000 in fiscal 1997 pursuant to the
terms of his employment agreement. In addition to his salary, Mr. Meyer
received a bonus of $278,580 in fiscal 1997 under the Incentive Compensation
Plan described above. The Committee approved an increase in the base salary for
Mr. George Meyer from $250,000 to $350,000 in fiscal 1995. The increase was the
result of the Committee's review of Mr. Meyer's performance relating to the
Company's improving market share in the sprinkler industry, the results of the
Company's investment in research and development, the performance of the
Company's stock on the NASDAQ/NMS stock market, the results of operations of
the Company and Mr. Meyer's achievement of the Committee's specific goal that
he guide the Company with a view toward its long-term competitive position.
In adjusting an executive officer's base salary and in determining the
salary of new executive officers, the Committee sets salaries to be competitive
with other comparable companies, taking into consideration the results of the
Company, if applicable, the position's complexity and responsibility and the
need for special expertise. The Committee makes bonus awards to the executive
officers pursuant to the Incentive Compensation Plan described above and under
the terms thereof. In addition, the Committee also uses the performance
criteria that were used in determining Mr. George Meyer's base salary discussed
above. The Company has enjoyed a long-standing relationship with its executive
officers, most of whom have worked for the Company for many years. The
Committee will continue to match the Company's goals of increased profitability
and shareholder return with executive performance.
The Stock Option Committee, as Plan Administrator of all of the Company's
Stock Option Plans, and the Compensation Committee, as Plan Administrator of
the Company's Employee Stock Ownership Plan, use stock options and grants of
stock as an additional incentive to employees. The objective of these plans is
to align employee interests, including senior management, with shareholder
long-term interests. Individual grants under the plans are based on individual
performance or, with respect to the Central ESOP, annual compensation.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits
the deduction that may be claimed by a "public company" for total compensation
in excess of $1 million paid to the chief executive officer or to any of the
other four most highly compensated officers except to the extent that any
compensation in excess of $1 million is paid pursuant to a performance-based
plan. This provision became effective November 1, 1994 with respect to the
Company. After considering the application of Section 162(m) to its
compensation policies, the Committee has determined that the provisions of that
Section would not affect the compensation of any of
13
<PAGE>
the executive officers of the Company. To the extent that this might not
continue to be the case, the Committee would consider any changes necessary to
conform to the provisions of Section 162(m).
Compensation Committee of the Board of Directors
Winston J. Churchill
Barbara M. Henagan
Thomas J. Sharbaugh
Certain Transactions
The Company leases an aircraft from a business in which Stephen J. Meyer,
a director and executive officer of the Company, is the sole proprietor. During
fiscal 1997, the Company paid such business $439,000 for the use of such
aircraft.
14
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Arthur Andersen LLP as
independent public accountants to audit the books, records and accounts of the
Company for fiscal year 1998. This firm audited the Company's books for fiscal
year 1997, has no ownership interest in the Company and is considered to be
well qualified.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting, will have an opportunity to make a statement if he desires to
do so and will be available to respond to appropriate questions at the meeting.
If the shareholders do not ratify the selection of this firm, the selection of
another firm of independent public accountants will be considered by the Board
of Directors.
The Board of Directors recommends a vote FOR the proposal to ratify the
selection of Arthur Andersen LLP as independent public accountants.
15
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock with the cumulative total shareholder return of (i) the Standard &
Poors Building Material Index (the "S&P Index") and (ii) the NASDAQ Stock
Market (U.S.) Index (the "NASDAQ Index"), assuming an investment of $100 on
October 31, 1992 in each of the Common Stock of the Company, the NASDAQ Index
stocks and the S&P Index stocks. The graph assumes dividend reinvestment.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CENTRAL SPRINKLER CORPORATION, THE NASDAQ STOCK MARKET-US INDEX
AND THE S & P BUILDING MATERIALS INDEX
500 |-------------------------------------------------------------------------|
| |
| |
| |
| |
| # |
400 |-------------------------------------------------------------------------|
| |
| |
| |
| |
| |
300 |-------------------------------------------------------------------------|
| |
| @ |
| |
| # |
| # |
200 |------------------------------------------------------@------------------|
| @ + |
| # |
| + |
| |
| @+ #@ + |
100 |#@+--------------------------+-------------------------------------------|
| |
| |
| |
| |
| |
0 |-------------------------------------------------------------------------|
10/92 10/93 10/94 10/95 10/96 10/97
<TABLE>
<CAPTION>
10/92 10/93 10/94 10/95 10/96 10/97
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
# Central Sprinkler 100 163 125 413 222 233
@ NASDAQ Stock Market U.S. 100 129 130 174 206 271
+ S&P Building Materials 100 133 106 130 152 183
</TABLE>
* $100 INVESTED ON 10/31/92 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
16
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matter which will be presented at
the Meeting for action by the shareholders. However, if other matters properly
come before the Meeting, or any adjournment thereof, it is intended that the
proxies will be voted according to the judgment of the person authorized to act
by the proxies. If the enclosed proxy is properly executed and returned prior
to voting at the Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. In the absence of such
instructions, the shares will be voted for the nominees of the Company in the
election of directors and for the other proposals specified in the Notice.
The expense of this solicitation will be paid by the Company. If
necessary, some of the officers of the Company and regular employees of Central
Sprinkler may solicit proxies personally or by telephone.
Further information regarding the Company is set forth in the Company's
Annual Report on Form 10-K for the fiscal year ended October 31, 1997 which has
been filed with the Securities and Exchange Commission. The Form 10-K
(including financial statements and schedules, but without exhibits) may be
obtained free of charge by writing to: Central Sprinkler Corporation, 451 North
Cannon Avenue, Lansdale, Pennsylvania 19446. Copies of exhibits to the Form
10-K will be furnished upon request and the payment of a reasonable fee.
A copy of the Company's 1997 Annual Report to Shareholders, which includes
financial statements, is being transmitted herewith, but does not form a part
of the proxy solicitation materials.
Shareholders are reminded that proposals of shareholders intended to be
presented at the Company's next Annual Meeting of Shareholders in 1999 must be
received by the Company for inclusion in its Proxy Statement and form of proxy
relating to that Meeting by October 8, 1998.
The Board of Directors will appreciate the prompt return of the enclosed
proxy, dated and signed. You may revoke your proxy before it is exercised by
giving written notice to the Secretary of the Company, and you may vote in
person if you attend the Meeting.
17
<PAGE>
PROXY PROXY CENTRAL SPRINKLER CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, MARCH 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints WILLIAM J. MEYER and GEORGE G. MEYER, and
each of them, jointly and severally, proxies, with full power of substitution,
to vote, as designated below and on the reverse side hereof, all shares of
Common Stock which the undersigned is entitled to vote on the election of
directors, the proposals on the reverse side hereof and on all other matters
which may come before the 1998 Annual Meeting of Shareholders of Central
Sprinkler Corporation or any adjournment thereof.
The shares represented by this Proxy, duly executed, will be voted. If
instructions are given in the spaces below and on the reverse side hereof, the
shares will be voted in accordance therewith; if instructions are not given,
the shares will be voted for the election of the directors named in Proposal 1
below and in favor of Proposal 2 set forth on the reverse side hereof.
1. ELECTION OF DIRECTORS.
FOR all nominees listed / / WITHHOLD AUTHORITY to vote for / /
(except as marked to all nominees listed below
the contrary)
(Winston J. Churchill, William J. Meyer, George G. Meyer, Stephen J. Meyer,
Barbara M. Henagan, Joseph L. Jackson, Richard P. O'Leary, Thomas J. Sharbaugh
and Timothy J. Wagg)
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
a line through that nominee's name in the list above.)
(Continued and to be signed on reverse side)
2. PROPOSAL TO RATIFY THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT
PUBLIC ACCOUNTANTS.
FOR / / AGAINST / / ABSTAIN / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated:-----------------------------, 1998
---------------------------------- [SEAL]
Signature
----------------------------------------
Signature if held jointly
