<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 19, 1999
---------------------
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 Philadelphia Marriott Hotel, 1201 Market Street, Philadelphia,
Pennsylvania on Friday, March 19, 1999 at 10:00 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 1999; 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 5, 1999
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 19, 1999
<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 Friday, March 19, 1999, 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 19, 1999.
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 5, 1999 will be entitled to vote
at the Annual Meeting. On February 5, 1999, 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, 1999 by (1) each
person known by the Company to own beneficially more than 5% of the outstanding
Common Stock, (2) each director and other director nominee 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 ............................ 543,000 14.1%
Ownership Plan (the "Central ESOP")(1)
451 North Cannon Avenue, Lansdale, PA 19446
Heartland Advisors, Inc.(2) ............................................. 766,800 19.9%
790 N. Milwaukee Street, Milwaukee, WI 53202
Frontier Capital Management Company, Inc.(2) ............................ 293,970 7.6%
99 Summer Street, 19th Floor, Boston, MA 02110
Dimensional Fund Advisors, Inc.(2) ...................................... 276,000 7.2%
1229 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401
William J. Meyer(3) ................................................... 211,146 5.4%
George G. Meyer(4) .................................................... 389,663 9.5%
Stephen J. Meyer(5) ................................................... 332,330 8.2%
451 North Cannon Avenue, Lansdale, PA 19446
Directors and Other Director Nominees
E. Talbot Briddell(6) ................................................... 150,000 3.8%
Winston J. Churchill(7) ................................................. 12,700 *
Harold B. Hairston (8) .................................................. -- *
Barbara M. Henagan(7) ................................................... 10,008 *
Corbin A. McNeill, Jr.(8) ............................................... -- *
Thomas J. Sharbaugh(9) .................................................. 9,998 *
Timothy J. Wagg(7) ...................................................... 10,500 *
Executive Officers
James R. Buchanan(10) ................................................... 64,519 1.7%
Albert T. Sabol(11) ..................................................... 25,019 *
All executive officers and directors as a group (18 persons)(12) ........ 1,394,590 29.6%
</TABLE>
- ------------
*Less than 1%
(1) The amount shown excludes 226,000 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 13, 1999 in the case of Heartland Advisors,
Inc.; (ii) February 12, 1999 in the case of Frontier Capital Management
Company, Inc.; and (iii) February 11, 1999 in the case of Dimensional Fund
Advisors, Inc. Heartland Advisors, Inc. reported sole dispositive and
voting power with respect to 766,800 shares and sole voting power over
715,500 shares. Frontier Capital Management Company, Inc. reported sole
dispositive and voting power over 293,970 shares. Dimensional Fund
Advisors, Inc. has informed the Company that as of December 31, 1998, it
had sole voting and dispositive power over 276,000 shares.
(3) The amount shown includes (i) 70,000 shares that may be acquired under
currently exercisable options and (ii) 3,571 shares held for his account
in the Central ESOP.
(4) The amount shown includes (i) 262,000 shares that may be acquired under
currently exercisable options and (ii) 4,425 shares held for his account
in the Central ESOP.
(5) The amount shown includes (i) 190,000 shares that may be acquired under
currently exercisable options and (ii) 4,392 shares held for his account
in the Central ESOP.
(6) The amount shown includes 150,000 shares that may be acquired under
currently exercisable options.
(7) The amount shown includes 9,500 shares that may be acquired under
currently exercisable options.
(8) The person listed is a nominee, but is not currently a director.
(9) The amount shown includes (i) 9,500 shares that may be acquired under
currently exercisable options and (ii) 125 shares that are owned by Mr.
Sharbaugh's minor daughter.
(10) The amount shown includes (i) 13,750 shares that may be acquired under
currently exercisable options and (ii) 3,833 shares held for his account
in the Central ESOP.
(11) The amount shown includes (i) 11,250 shares that may be acquired under
currently exercisable options and (ii) 3,194 shares held for his account
in the Central ESOP.
(12) The amount shown includes (i) 859,000 shares that may be acquired under
currently exercisable options and (ii) 33,011 shares held for their
account in the Central ESOP.
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 effective as of
the 1999 Annual Meeting. The shareholders will elect all nine directors at the
1999 Annual Meeting. Each such director will serve until the 2000 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 except for
Messrs. Hairston and McNeill. The term "Central Sprinkler" refers to the
Company's primary operating subsidiary, Central Sprinkler Company.
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
- ------------------------ ----- ---------------------------------------------------------------
<S> <C> <C>
E. Talbot Briddell 56 Chairman of the Board and Chief Executive Officer
George G. Meyer 49 President, Secretary, Treasurer and Director
Stephen J. Meyer 47 Director, Senior Executive Vice President of Central Sprinkler
Winston J. Churchill 58 Director
Harold B. Hairston 59 No current position
Barbara M. Henagan 39 Director
Corbin A. McNeill, Jr. 59 No current position
Thomas J. Sharbaugh 46 Director
Timothy J. Wagg 64 Director
</TABLE>
E. TALBOT BRIDDELL -- Mr. Briddell has been Chief Executive Officer and a
director since July 1998 and Chairman of the Board since January 1999. Mr.
Briddell has been President of Phoenix Management Services, Inc., ("Phoenix"),
a private consulting firm since 1985, when he founded that corporation. Phoenix
specializes in turnaround management for under-performing and transitional
companies.
GEORGE G. MEYER -- Mr. Meyer has been President since 1997, Chief
Executive Officer from 1987 to 1998, and Secretary and Treasurer since 1985 of
the Company, and a director of the Company and President 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
of Central Sprinkler since 1997 and a director since 1986 of the Company. He
was Executive Vice President of Central Sprinkler from 1986 until 1997.
WINSTON J. CHURCHILL -- Mr. Churchill has been a director of the Company
since 1984, and Chairman of the Board of the Company from 1984 to January 1999.
Mr. Churchill has been the President of Churchill
5
<PAGE>
Investment Partners, Inc., a private investment firm, since 1989. Mr. Churchill
has also been a Managing Partner of SCP Private Equity Partners, a private
investment firm, since 1986. He was a partner of Bradford Associates, a private
investment firm, from 1984 to 1989. Mr. Churchill is also a director of AMKOR
Technologies, Inc., Griffin Land & Nurseries, Inc. and Cinemastar, Inc.
HAROLD B. HAIRSTON -- Mr. Hairston has been the Fire Commissioner of the
City of Philadelphia since 1992. He has worked for the Philadelphia Fire
Department in various positions for over 32 years.
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.
CORBIN A. McNEILL, JR. -- Mr. McNeill has been the Chairman, President and
Chief Executive Officer of PECO Energy Company since 1997. He was President,
Chief Operating Officer and a Director of PECO Energy Company since 1990.
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 four regular meetings and seven special meetings of the Board
of Directors in the 1998 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 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 Standing
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.
6
<PAGE>
The Audit Committee for the 1998 fiscal year consisted of two non-employee
directors, Messrs. Wagg and Jackson. Mr. Jackson retired in January 1999. A new
appointment to the Audit Committee is expected at the March 19, 1999 meeting.
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 three meetings during the 1998
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 one meeting during the 1998 fiscal
year.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the Company's Chairman
and Chief Executive Officer, President and the three other most highly
compensated executive officers of the Company or its operating subsidiary,
Central Sprinkler, for the fiscal years ended October 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------- -------------
Name and Principal Other
Position Year Salary Bonus Payout(3) Compensation(2)
- ----------------------------------- ------ ----------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
E. Talbot Briddell
Chief Executive Officer 1998 $ 233,750(1) $ -- $ -- $ --
George G. Meyer 1998 350,000 73,800 -- 10,679
President (and Chief Executive 1997 350,000 278,580 -- 10,710
Officer through June 1998) 1996 350,000 202,327 -- 10,479
Stephen J. Meyer 1998 250,000 55,425 -- 10,947
Senior Executive Vice President, 1997 250,000 208,935 -- 10,016
Central Sprinkler 1996 250,000 155,302 -- 9,872
James R. Buchanan 1998 175,000 18,675 -- 9,381
Executive Vice President, 1997 175,000 69,645 -- 9,486
Sales of Central Sprinkler 1996 168,000 47,025 -- 9,247
Albert T. Sabol 1998 175,000 18,675 -- 10,532
Executive Vice President, 1997 175,000 69,645 -- 10,622
Finance and Chief Financial 1996 168,000 47,025 -- 10,051
Officer of the Company and
Central Sprinkler
</TABLE>
- ------------
(1) Amount shown represents the amount paid by the Company during the 1998
fiscal year to Phoenix Management Services, Inc. ("Phoenix"), Mr.
Briddell's employer, for Mr. Briddell's services from July 1998 through
October 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: 1998 -- George G. Meyer, Stephen
J. Meyer, James R. Buchanan and Albert T. Sabol, $3,200; 1997 and 1996 --
George G. 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: 1998 -- George G. Meyer, Stephen J. Meyer, James R. Buchanan
and Albert T. Sabol, $4,142; 1997 and 1996 -- George G. Meyer, Stephen J.
Meyer, James R. Buchanan and Albert T. Sabol, $4,645.
(c) Includes premiums for term life insurance paid by the Company on behalf
of the executive officer for the year indicated: 1998 -- George G. Meyer,
$3,337; Stephen J. Meyer, $3,605; James R. Buchanan, $2,039;
8
<PAGE>
and Albert T. Sabol, $3,190; 1997 -- George G. Meyer, $3,065; Stephen J.
Meyer, $2,371; James R. Buchanan, $1,841; and Albert T. Sabol, $2,977; 1996
-- George G. Meyer, $2,834; Stephen J. Meyer, $2,227; James R. Buchanan,
$1,602; and Albert T. Sabol, $2,406. The death benefit under such life
insurance is three times the executive officer's annual salary.
(3) The former President of the Company, William J. Meyer, resigned his office
November 1, 1997 and in fiscal year 1998 received $250,000, primarily
under the terms of an employment/consulting contract that provides of up
to $30,000 monthly for a period of up to ten years from November 1, 1997.
The following table sets forth certain information concerning grants of
stock options made during the year ended October 31, 1998 to the persons named
in the Summary Compensation Table.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realization Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term (5 years) (1)
Options Employees In Price Expiration -----------------------------
Name Granted Fiscal Year ($/share) Date 5% 10%
- ---------------------------- ------------ -------------- ----------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
E. Talbot Briddell ......... 75,000 39.1% $ 7.81 7/8/03(2) $297,750 $513,750
75,000 39.1% $ 10.00 7/8/03(2) $133,500 $349,500
</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.
(2) If not exercised at an earlier date, these options would expire on the
second anniversary after the date on which Mr. Briddell ceases being the
Chief Executive Officer of the Company.
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, 1998. Year end values are based upon the closing price of
a share of the Company's Common Stock on October 31, 1998 of $9.375.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL
1998 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, 1998 Options at
Name of Shares) Realized (Number of Shares)(1) October 31, 1998
- ---------------------------- ------------- ---------- ----------------------- -----------------
<S> <C> <C> <C> <C>
E. Talbot Briddell ......... -- -- 150,000 $117,375
George G. Meyer ............ -- -- 262,000 --
Stephen J. Meyer ........... -- -- 190,000 --
James R. Buchanan .......... -- -- 17,500 --
Albert T. Sabol ............ -- -- 15,000 --
</TABLE>
- ------------
(1) All options listed for George G. Meyer and Stephen J. Meyer were
exercisable as of October 31, 1998. Of the options held by E. Talbot
Briddell, James R. Buchanan and Albert T. Sabol, none, 13,750 and 11,750
were exercisable as of October 31, 1998, respectively.
Incentive Compensation Plan
The Company adopted the 1999 Management Incentive Compensation Plan
effective for the fiscal year that began November 1, 1998 (the "1999 Plan").
The 1999 Plan is administered by the Compensation Committee and provides
incentive payments to management and other key employees based upon, among
other things, the Company achieving targeted levels of earnings before interest
and income taxes that are established by the Board of Directors each year.
The 1999 Plan replaced a previous incentive plan which was suspended by
the Board of Directors in April 1998. The earlier plan provided 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 the 1998 fiscal year, this total was allocated to executive officers
and key employees, based on specified percentage participations in the plan.
The awards paid 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
10
<PAGE>
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 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 50% of the amount of the sum of his Basic,
Supplemental and Voluntary Contributions and the vested balance of his Company
contributions, but, 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.
Employment Contracts
Mr. Briddell is employed pursuant to an agreement between Phoenix and the
Company. The agreement provides that the Company will compensate Phoenix at the
rate of $13,750 per week for Mr. Briddell's services and that Mr. Briddell will
serve as Chief Executive Officer and as a director of the Company. The
agreement also provided for the Company to grant to Mr. Briddell personally
options to purchase 75,000 shares of common stock at a price of $7.81 per share
and options to purchase 75,000 shares of common stock at a price of $10.00 per
share. The Company may cancel this agreement at any time by giving Phoenix six
weeks' notice of cancellation.
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. 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 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
11
<PAGE>
year. The Company gave notice of termination under both of these employment
agreements so that they will terminate in April 2003. The Company is currently
negotiating new employment arrangements with both of these officers, but a
final agreement has not been reached with either officer as of this date and
the existing agreements would continue unless the parties agree to other terms.
On November 1, 1997, William J. Meyer entered into a ten-year
employment/consulting agreement with the Company and Central Sprinkler. The
agreement provides for annual payments not in excess of $360,000 and requires
Mr. Meyer to serve as a senior consultant to the Company and Central Sprinkler.
Mr. Meyer waived $110,000 in payments under this agreement in the fiscal year
ended October 31, 1999.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Barbara M. Henagan and Winston J. Churchill served on the Compensation
Committee during fiscal 1998. Ms. Henagan is a partner in Bradford Associates.
The Company had 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 had agreed to
provide various financial consulting services to the Company for an annual fee
of $100,000, plus out-of-pocket expenses. The Company's agreements with
Bradford Ventures Ltd. and Churchill Investment Partners, Inc. were terminated
in April 1998. During the 1998 fiscal year, the Company paid Churchill
Investment Partners, Inc. $75,000 and Bradford Ventures Ltd. $75,000 for
services rendered and expenses incurred under such agreements.
Mr. Sharbaugh served on the Compensation Committee during fiscal 1998. He
is a partner in the law firm of Morgan, Lewis & Bockius LLP. The Company
retained this firm for various matters during the 1998 fiscal year and has
continued to do so during the 1999 fiscal year.
Notwithstanding anything to the contrary, the following report of the
Compensation Committee and the performance graph on page 15 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.
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 an employment agreement with Phoenix, the
employer of E. Talbot Briddell, the Company's Chief Executive Officer. The
Company also has employment agreements with two other officers, as described
above.
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.
12
<PAGE>
The Committee makes bonus awards to the executive officers pursuant to the
Incentive Compensation Plan described above and under the terms thereof. 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 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 and Phoenix have entered into a financial consulting agreement
whereby E. Talbot Briddell, the President of Phoenix, became a director,
chairman, and Chief Executive Officer of the Company. During the 1998 fiscal
year, in addition to those payments to Phoenix for Mr. Briddell's services set
forth in the Summary Compensation Table, the Company paid $186,250 to Phoenix
for other services rendered.
The Company expensed $463,000 in fiscal 1998 for legal fees to a law firm
in which Thomas J. Sharbaugh, a director, is a partner. In addition, the
Company charged $1,917,000 against the Omega(TM) liability for legal fees
incurred by this firm relating to Omega(TM) actions during fiscal 1998.
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 1998, the Company paid such business $343,000 for the use of such
aircraft. The lease was cancelled January 31, 1999, pursuant to its notice
requirements.
13
<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 1999. This firm audited the Company's books for the
1998 fiscal year, 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.
14
<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, 1993 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
300 |-------------------------------------------------------------------|
| |
| |
| |
250 |---------------------------&---------------------------------------|
| # |
D | |
| # |
O 200 |-------------------------------------------------------------------|
| |
L | |
| # @ |
L 150 |-------------------------------------------------------------------|
| # & @& |
A | |
| @ |
R 100 |---&#@----------#----------@---------------------------------------|
| @ |
S | & & |
| |
50 |-------------------------------------------------------------------|
| |
| |
| |
0 |-------------------------------------------------------------------|
10/93 10/94 10/95 10/96 10/97 10/98
* = CENTRAL SPRINKLER CORPORATION # = NASDAQ STOCK MARKET (U.S.)
@ = S&P BUILDING MATERIALS
* $100 INVESTED ON 10/31/93 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
15
<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, 1998 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 1998 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 2000 must be
received by the Company for inclusion in its Proxy Statement and form of proxy
relating to that Meeting by October 7, 1999.
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.
16
<PAGE>
PROXY CENTRAL SPRINKLER CORPORATION PROXY
ANNUAL MEETING OF SHAREHOLDERS, MARCH 19, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. Talbot Briddell, proxy, 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 1999 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.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS. FOR all nominees listed / / WITHHOLD AUTHORITY to vote for / /
(except as marked to all nominees listed below
the contrary)
</TABLE>
(E. Talbot Briddell, Winston J. Churchill, Harold B. Hairston, Barbara M.
Henagan, Corbin A. McNeill, Jr., George G. Meyer, Stephen J. Meyer, 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: , 1999
-----------------------------
[SEAL]
-----------------------------
Signature
-----------------------------
Signature if held jointly
