<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PENN ENGINEERING & MANUFACTURING CORP.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-5(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth amount on which 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 collecting 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:
- - --------------------------------------------------------------------------------
__________________
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
PENN ENGINEERING & MANUFACTURING CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 4, 1995
TO THE STOCKHOLDERS OF PENN ENGINEERING & MANUFACTURING CORP.:
The Annual Meeting of Stockholders of Penn Engineering & Manufacturing
Corp. (hereinafter called the 'Company') will be held on Thursday, May 4, 1995
at 2:00 p.m., E.D.T., at the offices of the Company, Plant #2, Old Easton Road,
Danboro, Pennsylvania 18916, for the following purposes:
1. To elect one Class A director of the Company to hold office until
the Annual Meeting of Stockholders to be held in 1998 and until his
successor is duly elected;
2. To consider and vote upon a proposal to elect Deloitte & Touche LLP
as auditors for the Company for its 1995 fiscal year; and
3. To transact such other business as may properly come before the
Annual Meeting and any adjournment thereof.
The Board of Directors has fixed the close of business on March 15, 1995 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting.
A copy of the Company's Annual Report for 1994 is being mailed with this
Notice.
If you do not expect to attend the Annual Meeting in person, please fill
in, sign, and return the enclosed form of proxy in the enclosed envelope to
Chemical Bank, New York, New York.
By Order of the Board of Directors,
Kenneth A. Swanstrom
Chairman of the Board
Date: April 6, 1995
<PAGE>
PENN ENGINEERING & MANUFACTURING CORP.
---------------------------
PROXY STATEMENT
---------------------------
This Proxy Statement and the form of proxy enclosed herewith, which are
first being mailed to stockholders on or about April 6, 1995, are furnished in
connection with the solicitation by the Board of Directors of Penn Engineering &
Manufacturing Corp. (the 'Company') of proxies to be voted at the Annual Meeting
of Stockholders (the 'Annual Meeting') to be held on Thursday, May 4, 1995 at
2:00 p.m., E.D.T. and at any adjournment thereof, at Plant #2, Old Easton Road,
Danboro, Pennsylvania 18916. The Company's principal executive offices are
located at Plant #1, Old Easton Road, Danboro, Pennsylvania 18916.
Shares represented by proxies in the accompanying form, if properly signed
and returned, will be voted in accordance with the specifications made thereon
by the stockholders. Any proxy not specifying to the contrary will be voted for
the election of the nominee for Class A director named below and in favor of the
election of Deloitte & Touche LLP as auditors of the Company for its 1995 fiscal
year. A stockholder who signs and returns a proxy in the accompanying form may
revoke it at any time before it is voted by giving written notice thereof to the
Secretary of the Company or by attending the Annual Meeting and voting in
person.
The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing this
Proxy Statement. Such solicitation will be made by mail and may also be made on
behalf of the Company by the Company's regular officers and employees personally
or by telephone or telegram. The Company, upon request therefor, will reimburse
brokers or persons holding shares in their names or in the names of nominees for
their reasonable expenses in sending proxies and proxy material to beneficial
owners.
Only holders of Common Stock of record at the close of business on March
15, 1995 will be entitled to notice of and to vote at the Annual Meeting. As of
March 15, 1995, the Company had outstanding 1,707,082 shares of Common Stock,
each of which is entitled to one vote. Cumulative voting rights do not exist
with respect to the election of directors. The one nominee for Class A Director
receiving the highest number of votes cast at the Annual Meeting will be
elected. Shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or persons entitled to vote and as to
which the broker or nominee does not have discretionary voting power, i.e.,
broker non-votes, will be treated as not present and not entitled to vote with
respect to the election of directors. Abstentions and broker non-votes on the
election of the Class A Director will have no effect since they will not
represent votes cast at the Annual Meeting for the purpose of electing the Class
A Director.
As of March 15, 1995, certain stockholders listed in the table herein under
'Beneficial Ownership of Common Stock -- Principal Beneficial Owners of Common
Stock' beneficially owned in the aggregate 894,890 shares, or approximately
52.42%, of the Company's outstanding Common Stock. Such stockholders have
advised the Company that they will vote their shares in favor of the election of
Deloitte & Touche LLP as the Company's auditors for 1995 and for the election of
Maurice D. Oaks as Class A Director. Accordingly, Deloitte & Touche LLP will be
elected as auditors and Maurice D. Oaks will be so elected regardless of the
votes of the Company's stockholders other than those listed in such table.
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth, as of March 7, 1995, the name and address
of each person who is known by the Board of Directors to be the beneficial owner
of more than 5% of the Company's outstanding Common Stock, the number of shares
beneficially owned by each such person, and the percentage of the Company's
outstanding Common Stock so owned.
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED COMMON STOCK
- - ---------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Kenneth A. Swanstrom (2)
P.O. Box 1000
Danboro, PA 18916
and
Daryl L. Swanstrom (3)
P.O. Box 2249
Peachtree City, GA 30269
and
Trust under the Will of Gladys Swanstrom,
Deceased (4)
c/o Duane Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
and
Estate of K. A. Swanstrom (5)
c/o Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
and
Trust under Item Fourth of the Will of Lawrence 894,890(1) 52.42%
W. Swanstrom, Deceased (6)
c/o NationsBank of Georgia, N.A.
P.O. Box 12448
Atlanta, GA 30355
and
Trust under Item Fifth of the Will of Lawrence W.
Swanstrom, Deceased (7)
c/o NationsBank of Georgia, N.A.
P.O. Box 12448
Atlanta, GA 30355
and
Thomas M. Hyndman, Jr. (8)
c/o Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
and
First Fidelity Bank, National Association (9)
2673 Main Street
P.O. Box 6980
Lawrenceville, NJ 08648
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OWNED COMMON STOCK
- - ---------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Quest Advisory Corp. (10) 206,550 12.10%
Quest Management Company
1414 Avenue of the Americas
New York, NY 10019
Lazard Freres & Co. (11) 127,900 7.49%
One Rockefeller Plaza
New York, NY 10020
Dimensional Fund Advisors Inc. (12) 86,300 5.06%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
</TABLE>
- - ------------------
(1) Under the rules of the Securities and Exchange Commission (the 'SEC'), a
person is deemed to be the beneficial owner of securities if such person
has, or shares, 'voting power' (which includes the power to vote, or to
direct the voting of, such securities) or 'investment power' (which
includes the power to dispose, or to direct the disposition, of such
securities). Under these rules, more than one person may be deemed the
beneficial owner of the same securities. The information set forth in the
above table includes all shares of Common Stock of the Company over which
the above named persons individually or together share voting power or
investment power adjusted, however, to eliminate the reporting of shares
more than once in order not to overstate the aggregate beneficial ownership
of such persons.
(2) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which Kenneth A. Swanstrom could be deemed to have
is 406,088 shares, or 23.79%, of the Company's outstanding Common Stock. Of
these shares, Mr. Swanstrom has sole voting and dispositive power with
respect to 240,174 shares and shared voting and dispositive power with
respect to 62,975 shares held in the Trust referenced in footnote (4)
below, 86,453 shares held in the estate referenced in footnote (5) below,
and 12,019 shares held in the Trust under the Will of Klas A. Swanstrom.
3,767 of these shares are owned by Kenneth A. Swanstrom's wife and 700 of
these shares are owned by his daughters. Kenneth A. Swanstrom disclaims
beneficial ownership of the shares held by his wife and daughters.
(3) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which Daryl L. Swanstrom could be deemed to have is
375,482 shares, or 22.00%, of the Company's outstanding Common Stock. Of
this total, Mrs. Swanstrom has sole voting and dispositive power with
respect to 155,166 shares and shared voting and dispositive power with
respect to 72,393 shares held in the trust referenced in footnote (6) below
and 147,923 shares held in the trust referenced in footnote (7) below.
(4) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which the Trust Under the Will of Gladys Swanstrom,
Deceased, could be deemed to have is 62,975 shares, or 3.69%, of the
Company's outstanding Common Stock.
(5) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock under the Estate of K. A. Swanstrom could be deemed
to have is 86,453 shares, or 5.06%, of the Company's outstanding Common
Stock. Also included are 12,019 shares that have been transferred from this
estate to the Trust under the Will of Klas A. Swanstrom.
3
<PAGE>
(6) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which the Trust under Item Fourth of the Will of
Lawrence W. Swanstrom, Deceased, could be deemed to have is 72,393 shares,
or 4.24%, of the Company's outstanding Common Stock.
(7) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which the Trust under Item Fifth of the Will of
Lawrence W. Swanstrom, Deceased, could be deemed to have is 147,923 shares,
or 8.67%, of the Company's outstanding Common Stock.
(8) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which Thomas M. Hyndman, Jr. could be deemed to have
is 440,083 shares, or 25.78%, of the Company's outstanding Common Stock. Of
these shares, Mr. Hyndman has sole voting and dispositive power with
respect to 570 shares and shared voting and dispositive power with respect
to the 72,393 shares held in the trust referenced in footnote (6) above,
147,923 shares held in the Trust referenced in footnote (7) above, 62,975
shares held in the Trust referenced in footnote (4) above, 57,750 shares
held under the Trust under Deed of Klas A. Swanstrom dated June 12, 1973,
86,453 shares held in the estate referenced in footnote (5) above, and
12,019 shares held in the Trust under Will of Klas A. Swanstrom.
(9) Under the rules of the SEC, the maximum beneficial ownership of the
Company's Common Stock which First Fidelity Bank, National Association and
its parent holding companies, First Fidelity Bancorporation and First
Fidelity Incorporated, could be deemed to have is 114,455 shares, or 6.70%,
of the Company's outstanding Common Stock.
(10) According to Amendment No. 6 to the Schedule 13G dated February 10, 1995
filed with the SEC under the Securities Exchange Act of 1934, as amended
(the 'Exchange Act'), by Quest Advisory Corp., a New York corporation
('Quest'), Quest Management Company ('QMC') and Charles M. Royce, Quest,
QMC and Mr. Royce reported as a 'group' pursuant to Rule 13d-1(b)(ii)(H) of
the Exchange Act with respect to these shares. According to such Amendment,
Quest has sole voting and dispositive power with respect to 197,350 of
these shares, and QMC has sole voting and dispositive power with respect to
8,200 of these shares. Mr. Royce may be deemed to be a controlling person
of Quest and QMC and as such may be deemed to beneficially own the shares
of Common Stock beneficially owned by Quest and QMC. Mr. Royce does not own
any shares outside of Quest and QMC and disclaims beneficial ownership of
the shares held by Quest and QMC.
(11) According to the Schedule 13G dated February 14, 1995 filed with the SEC
under the Exchange Act, Lazard Freres & Co., a registered investment
advisor, is deemed to have beneficial ownership of 127,900 shares of the
Company's Common Stock as of December 31, 1994.
(12) According to Amendment No. 2 to the Schedule 13G dated January 31, 1995
filed with the SEC under the Exchange Act, Dimensional Fund Advisors Inc.
('Dimensional'), a registered investment advisor, is deemed to have
beneficial ownership of 86,300 shares of the Company's Common Stock as of
December 31, 1994, all of which shares are held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and DFA Participation Group Trust, investment vehicles
for qualified employee benefit plans, for all of which Dimensional serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
4
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK BY EXECUTIVE OFFICERS, DIRECTORS AND
NOMINEES
The following table sets forth, as of March 7, 1995, the amount and
percentage of the Company's outstanding Common Stock actually beneficially owned
by each executive officer named in the Summary Compensation Table, each director
and nominee for director and by all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
SHARES ACTUALLY PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OF INDIVIDUAL OR IDENTITY OF GROUP OWNED COMMON STOCK
- - --------------------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Kenneth A. Swanstrom (1)................................................... 240,174 14.07%
Daryl L. Swanstrom (2)..................................................... 155,166 9.09%
Willard S. Boothby, Jr..................................................... 400 (4)
Thomas M. Hyndman, Jr. (3)................................................. 570 (4)
Lewis W. Hull.............................................................. 1,000 (4)
Maurice D. Oaks............................................................ 0 --
Mark W. Simon.............................................................. 100 (4)
Richard B. Ernest.......................................................... 5,230(5) (4)
Martin Bidart.............................................................. 100(6) (4)
Raymond L. Bievenour....................................................... 100 (4)
All Executive Officers and Directors as a Group (12 persons)............... 402,840 23.60%
</TABLE>
- - ------------------
(1) Reference is made to footnote (2) above.
(2) Reference is made to footnote (3) above.
(3) Reference is made to footnote (8) above.
(4) Less than 1%.
(5) Of these shares, 3,130 are owned jointly with Mr. Ernest's wife, and 1,500
are held jointly with his sister.
(6) These shares are owned jointly with Mr. Bidart's wife.
5
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, one Class A Director will be elected for a term
expiring at the 1998 Annual Meeting of Stockholders and when his successor has
been duly elected. The Class B and Class C Directors will continue in office for
the remainder of their respective terms shown below. Under the Company's
By-Laws, the number of directors constituting the entire Board of Directors is
determined by the Board, but such number may not be less than three nor more
than twelve. The Board of Directors has currently fixed the number of members of
the Board at seven. Mr. Oaks was appointed to the Board of Directors in June
1994 to fill a vacancy.
Unless otherwise instructed, the proxyholders will vote the proxies
received by them for the election of the nominee listed below, currently a Class
A Director of the Company. The nominee for Class A Director receiving the
highest number of the votes cast at the Annual Meeting will be elected. If the
nominee should become unavailable for any reason, it is intended that votes will
be cast for a substitute nominee designated by the Board of Directors. The Board
of Directors believes the nominee named will be able to serve if elected.
Certain data with respect to the Class A nominee and each continuing Class
B Director and Class C Director follows:
NOMINEE FOR CLASS A DIRECTOR
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR PAST FIVE YEARS SINCE CLASS
- - ------------------------------- ----------- ------------------------------ ----------- --------------------------------
<S> <C> <C> <C> <C>
Maurice D. Oaks................ 61 Former Vice President of 1994 Class A; Term expires 1998*
Worldwide Operations
Planning, Bristol-Myers
Squibb from October 1990 to
October 1992; from July 1989
to September 1990, Executive
Vice President of Squibb
Pharmaceutical Group, U.S.;
manufacturer of
pharmaceuticals
</TABLE>
- - ------------------
* If elected at the Annual Meeting.
6
<PAGE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR PAST FIVE YEARS SINCE CLASS
- - ------------------------------- ----------- ------------------------------ ----------- --------------------------------
<S> <C> <C> <C> <C>
CLASS B DIRECTORS
Kenneth A. Swanstrom........... 55 Chairman, President and Chief 1970 Class B; Term expires 1996
Executive Officer of the
Company; formerly Chief
Operating Officer until
August 1993
Lewis W. Hull(1)(2)(3)......... 78 Chairman, Hull Corporation; 1974 Class B; Term expires 1996
manufacturer of freeze-dryer
and injection-molding
equipment
Mark W. Simon.................. 56 Vice President-Finance and 1983 Class B; Term expires 1996
Chief Financial Officer of
the Company
CLASS C DIRECTORS
Willard S. Boothby, Jr. 73 Former Managing Director, 1984 Class C; Term expires 1997
(1)(2)(4).................... PaineWebber, Incorporated;
brokerage services
Thomas Hyndman, Jr. (1)(2)(5).. 70 Of Counsel since 1993, Partner 1974 Class C; Term expires 1997
(1957-1992), Duane, Morris &
Heckscher; Attorneys and
Counsel to the Company
Daryl L. Swanstrom(2).......... 48 President, Engineered 1987 Class C; Term expires 1997
Components/Spyraflo, Inc.;
distributor of electronic
components
</TABLE>
- - ------------------
(1) Member of the Audit Committee. The Audit Committee is appointed annually by
the Board of Directors to recommend the selection of independent auditors,
review the scope and results of the audit, review the adequacy of the
Company's accounting, financial and operating controls and supervise special
investigations. During 1994, the Audit Committee held three meetings.
(2) Member of the Compensation Committee. The Compensation Committee is
appointed annually by the Board of Directors to recommend to the Board of
Directors remuneration for senior management, adoption of compensation plans
in which officers are eligible to participate and related matters. During
1994, the Compensation Committee held one meeting.
(3) Mr. Hull is also a director of Willow Grove Federal Savings Bank.
(4) Mr. Boothby is also a director of Georgia-Pacific Corporation and The
Glenmede Fund, Inc.
(5) Mr. Hyndman is also a director of Rochester & Pittsburgh Coal Company.
During 1994, the Company's Board of Directors held five meetings. None of
the directors attended fewer than 75% of the aggregate of the total number of
meetings of the Board of Directors plus the total number of meetings of all
committees of the Board of Directors on which he served that were held during
1994. The Company's Board of Directors does not have a nomination committee.
7
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company in each of the last three years to
the Company's Chief Executive Officer and the four other most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION (1)
- - --------------------------------------------------------------- --------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Kenneth A. Swanstrom, Chairman, President and 1994 $ 250,000 $ 122,662 $ 17,100
Chief Executive Officer...................................... 1993 220,000 74,502 22,979
1992 198,750 82,605 20,734
Mark W. Simon, Vice President -- 1994 $ 146,000 $ 43,841 $ 15,764
Finance and Corporate Secretary.............................. 1993 140,000 34,028 14,518
1992 130,000 37,375 13,811
Martin Bidart, Vice President -- Manufacturing................. 1994 $ 130,000 $ 37,794 $ 13,720
1993 125,000 30,601 13,175
1992 117,500 34,883 12,362
Raymond L. Bievenour, Vice President -- 1994 $ 130,000 $ 37,794 $ 13,461
Marketing/Sales.............................................. 1993 125,000 30,601 12,932
1992 117,500 34,883 11,987
Richard B. Ernest, Vice President -- Quality................... 1994 $ 127,500 $ 33,083 $ 13,838
1993 123,250 26,424 12,957
1992 120,750 32,075 12,711
</TABLE>
- - ------------------
(1) Includes amounts of Company contributions for 1994 to the Company's
Profit-Sharing Plan, as follows: Kenneth A. Swanstrom, $15,000; Mark W.
Simon, $14,600; Martin Bidart, $13,000; Raymond L. Bievenour, $13,000; and
Richard B. Ernest, $12,750. The amounts set forth were expensed during the
Company's 1994 fiscal year for financial reporting purposes under the
Company's Profit-Sharing Plan, which covers all of its United States
eligible employees, including officers, whose length of employment qualified
them to participate. The Company's contribution to the Profit-Sharing Plan
for each year is allocated among the participants in proportion to their
compensation for that year. Also included in these amounts are insurance
premiums paid by the Company in 1994 for the benefit of such persons, as
follows: Kenneth A. Swanstrom, $1,800; Mark W. Simon, $864; Martin Bidart,
$720; Raymond L. Bievenour, $461: and Richard B. Ernest, $1,088.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee's executive compensation policies are designed
to focus the executive's attention and efforts on the attainment of Company
goals, reward the executive for the successful attainment of those goals,
provide a total cash compensation package that is competitive with the market
for similar talent and create a feeling of shared destiny between the executives
and all of the other employees.
The Company has a long history of paying its executive officers annual cash
bonuses for successful Company and individual performance. The Company has not
provided equity based benefits to its executive officers.
The compensation paid for the year 1994 to the Company's executive
officers, including its Chief Executive Officer and the four other highest paid
officers (the 'Named Executive Officers'), consisted of a base salary and a
bonus. In addition, the executive officers are participants in the Company's
profit sharing plan, its pension plan and its various fringe benefit programs.
The annual salaries of the Named Executive Officers for fiscal year 1994
were determined in the month of December 1993. In determining the annual salary
for each of the executive officers of the Company, including the Named Executive
Officers, the Compensation Committee sought to establish salaries that were fair
and competitive to those paid by comparable organizations and that fairly
rewarded the executive officers for their performance and the Company's
performance. In determining the annual salary of each of the Named Executive
Officers, other than the Chief Executive Officer, the evaluation of the Chief
Executive Officer of their performance, independent surveys of salaries for, and
the salary increases then being granted with respect to, comparable positions in
other businesses are considered, and each position is measured against the
knowledge and problem solving ability required to fulfill the assigned duties
and responsibilities of such positions and the officer's impact upon the
operations and profitability of the Company.
The same considerations were taken into account in fixing the Chief
Executive Officer's salary for 1994, except that the Committee did not have the
recommendation of the Chief Executive Officer.
The salary increases given to the Named Executive Officers, other than the
Chief Executive Officer, approximated 4%. The Chief Executive Officer's salary
increase for 1994 was approximately 13.6%. This reflects the Committee's
satisfaction with his performance as the Company's new Chief Executive Officer
as well as a recognition of his increased responsibilities.
Beginning with the year 1992, the Committee, with the assistance of
independent consultants and the approval of the Board of Directors, established
two formal incentive plans, one for all hourly and salaried employees of the
Company and the other for the executive officers, including the Named Executive
Officers. The bonus paid to each of the Named Executive Officers is determined
in accordance with the Plan for the Company's executive officers, which was
slightly modified for 1994.
Under the incentive plan for the executive officers of the Company, three
factors are taken into consideration in determining the amount of the annual
bonus. The first and most significant is the Company's earnings before interest
and taxes as defined in the Plan, 'EBIT'; the second is the performance of the
individual against functional objectives established for the position; and the
third is a subjective evaluation of the individual's performance. The target
bonus for each officer, other than the Chief Executive Officer, is 25% of the
individual's base salary. In the case of the Chief Executive Officer, the target
is 40% of base salary (an increase of 5% over the previous year's target).
Depending upon the relationship of the Company's actual EBIT for the year to the
amount of EBIT fixed by the Board of Directors at the start of the year as the
target for the year, the bonus can range from zero to 150% of the targeted
amount. The consideration of EBIT is also the most
9
<PAGE>
significant factor in determining the annual bonuses paid to all other salaried
and hourly workers under the employee incentive plan so that all executive
officers and employees have a common standard of measure.
Both the Pittman Division and the fastener operations of the Company
exceeded the EBIT targets set forth in their respective business plans for the
year 1994, and as a result their bonuses under the incentive plans exceeded
target awards for all participants.
With respect to the Chief Executive Officer, 50% of the 1994 bonus is based
upon EBIT of the Company; 25% is based upon the Company's return on equity; and
25% is based upon the Committee's subjective analysis of his performance.
The bonus paid to the Chief Executive Officer for the year 1994 was
determined in accordance with the provisions of the incentive plan and reflect,
in the opinion of the Compensation Committee, appropriate rewards for the
outstanding successes achieved during the year. As a result of this success,
that portion of the Chief Executive Officer's bonus dependent upon EBIT and the
achievement of his functional objectives was 130.22% of the Target Amount for
that portion of his bonus, and that portion of the bonus which is based upon the
Committee's subjective analysis of his performance (which, under the Plan cannot
exceed 25% of the Target Amount) was fixed at the full 25%. Accordingly, the
total bonus paid to the Chief Executive Officer for the year 1994 was $122,662.
This is $22,662 or 22.662% above the total Target Amount. In determining the
amount of the discretionary portion of the bonus payable to the Chief Executive
Officer, the Committee took into account, among other things, his performance in
his first full year as Chief Executive Officer, the outstanding success of the
Company for the year (sales grew by 20.7% over 1993, and earnings per share
increased from $4.31 for 1993 to $6.12 for 1994, a 42% increase) and the strong
executive team which he has been most instrumental in assembling for the
Company.
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the corporation's chief executive officer and four other most highly
compensated executive officers. Qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. The
Compensation Committee did not consider the deductibility for federal tax
purposes of the compensation paid to the Chief Executive Officer and the Named
Executive Officers under the provisions of Section 162(m) given their current
compensation levels. The Compensation Committee intends to take the necessary
steps to conform the Company's policies with respect to executive compensation
in order to comply with the provisions of Section 162(m) if and at such time as
the deductibility thereof becomes affected by such provisions.
Respectfully submitted by
the Compensation Committee
of the Board of Directors
Willard S. Boothby, Jr.
Lewis W. Hull
Thomas M. Hyndman, Jr.
Daryl L. Swanstrom
10
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Company's Common Stock with the AMEX Market Value Index and the
following combined Standard & Poor's line-of-business indices (the 'S&P
Indices'): Electronics-Semiconductor Companies; Electronics-Instrumentation
Companies; Office Equipment Companies; Communications Equipment Manufacturers.
[ PERFORMANCE GRAPH ]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
PENN ENGINEERING & MFG CORP 100 77.55 110.83 155.22 202.32 187.69
AMERICAN STOCK EXCHANGE INDEX 100 81.51 104.51 105.62 126.23 114.73
PEER GROUP 100 88.28 130.06 174.26 224.51 258.91
</TABLE>
- - ------------------
(1) The comparison of total return on investment (change in year end stock price
plus reinvested dividends) for each of the periods assumes that $100 was
invested on December 31, 1989 in each of the Company's Common Stock, the
AMEX Market Value Index and the S&P Indices with investment weighted on the
basis of market capitalization. The S&P Indices consist of companies that
are representative of the lines of business that generate the major portion
of the Company's revenues.
11
<PAGE>
PENSION PLAN
The following table is representative of the annual benefits payable under
the Company's qualified retirement plans to an employee currently age 65 whose
annual compensation remained unchanged during the last five years of employment
and whose benefits will be paid for the remainder of employee's life.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------
ANNUAL COMPENSATION 10 20 30 40
- - ---------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$75,000................................. $ 9,045 $ 18,090 $ 27,135 $ 36,180
100,000................................. 12,170 24,340 36,510 48,680
125,000................................. 15,295 30,590 45,885 61,180
150,000................................. 18,420 36,840 55,260 73,680
175,000................................. 18,420 36,840 55,260 73,680
200,000................................. 18,420 36,840 55,260 73,680
300,000................................. 18,420 36,840 55,260 73,680
400,000................................. 18,420 36,840 55,260 73,680
</TABLE>
Credited full years of service for the five officers listed above are as
follows: Kenneth A. Swanstrom, 34 years; Mark W. Simon, 18 years; Martin Bidart,
4 years; Raymond L. Bievenour, 4 years; and Richard B. Ernest, 33 years. The
covered compensation under the Pension Plan Table is that amount shown in the
salary and bonus columns of the Summary Compensation Table. The amounts shown in
the Pension Plan Table do not reflect any deduction for social security or other
offset amounts. Benefits are subject to maximum limitations under the Internal
Revenue Code. Therefore, with regard to 1994, the maximum salary that can be
recognized under the plan is $150,000 and the maximum benefit at age 65 is
limited to $118,800. The foregoing Pension Plan Table may be used for all five
officers, except for Kenneth A. Swanstrom, who is entitled to a higher benefit
due to plan provisions protecting prior accrued benefits. Mr. Swanstrom's
projected benefit at age 65, after 44 years of service is $103,629.
DIRECTOR COMPENSATION
The Company's non-employee directors each receive an annual retainer of
$10,000 plus a fee of $750 for each meeting attended and reimbursement of travel
expenses. Employees who are directors of the Company each receive a fee of $50
for each meeting attended. Members of the Audit Committee and the Compensation
Committee each receive a fee of $500 for each meeting attended plus
reimbursement of travel expenses.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons that no Forms 5 were required for those persons,
the Company believes that, during the period January 1, 1994 through December
31, 1994, all filing requirements applicable to its officers and directors were
complied with, except that the initial report of ownership of Maurice D. Oaks, a
director of the Company, was filed late.
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Engineered Components/Spyraflo, Inc., which is engaged in manufacturing and
distribution of various products, is also an authorized distributor for the
Company's products in Florida, Alabama, Georgia and South Carolina. As such,
Engineered Components/Spyraflo, Inc. maintains an inventory of the Company's
products which Engineered Components/Spyraflo, Inc. purchases from the Company
at the Company's standard distributor prices for resale to Engineered
Components/Spyraflo, Inc.'s customers. In 1994, net sales by the Company to
Engineered Components/Spyraflo, Inc. were approximately $7,061,000. Daryl L.
Swanstrom, a director of the Company and a member of the Compensation Committee,
is President and sole stockholder of Engineered Components/Spyraflo, Inc.
The Company was billed $60,418 for legal services rendered during 1994 by
the law firm of Duane, Morris & Heckscher. Thomas M. Hyndman, Jr., a director of
the Company and a member of the Compensation Committee, is Of Counsel to such
firm.
ELECTION OF AUDITORS
Deloitte & Touche LLP served as the Company's independent public
accountants for the Company's 1993 fiscal year. Unless instructed to the
contrary, it is intended that votes will be cast pursuant to the proxies for the
election of Deloitte & Touche LLP as auditors for the Company for its 1995
fiscal year. The Company has been advised by such firm that none of its members
or any of its associates has any direct financial interest or material indirect
financial interest in the Company or its subsidiaries, except in its capacity as
auditors. Election of Deloitte & Touche LLP will require the affirmative vote of
the holders of a majority of the shares represented in person or by proxy at the
Annual Meeting.
A representative of Deloitte & Touche LLP will attend the Annual Meeting.
This representative will have the opportunity to make a statement, if he desires
to do so, and will be available to respond to any appropriate questions
presented by the stockholders at the Annual Meeting.
STOCKHOLDER PROPOSALS
Any stockholder who, in accordance with and subject to the provisions of
the proxy rules of the Securities and Exchange Commission, wishes to submit a
proposal for inclusion in the Company's proxy statement for the 1996 Annual
Meeting of Stockholders must deliver such proposal in writing to the Secretary
of the Company at the Company's mailing address in Danboro, Pennsylvania, not
later than December 8, 1995.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the Notice of Annual Meeting,
but if other matters are properly presented, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with their
judgment.
By Order of the Board of Directors,
Kenneth A. Swanstrom
Chairman of the Board
April 6, 1995
13
<PAGE>
PENN ENGINEERING & MANUFACTURING CORP.
Annual Meeting of Stockholders to be held May 4, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned hereby constitutes and appoints Kenneth A. Swanstrom and
Thomas M. Hyndman, Jr., and each or either of them, proxies of the undersigned,
with full power of substitution, to vote all of the shares of Penn Engineering &
Manufacturing Corp. (the "Company") which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of the Company to be held at the
offices of the Company, Plant #2, Old Easton Road, Danboro, Pennsylvania, on
Thursday, May 4, 1995, at 2:00 P.M., and at any adjournments thereof, as
follows:
(Continued and to be signed on reverse side)
<PAGE>
<TABLE>
<S> <C>
[X] Please mark your
votes like this in
blue or black ink
----------
COMMON
WITHHOLD
FOR AUTHORITY FOR AGAINST ABSTAIN
1. Election of Class A Director [ ] [ ] 2. Approval of Auditors [ ] [ ] [ ]
Nominee Maurice D. Oaks Proposal to elect Deloitte & Touche LLP
as the Company's independent public
accountants for 1995
3. In their discretion the proxies are authorized to vote upon such other matters
as may properly come before the meeting and any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR the nominee for Class A Director set forth in proposal 1 and FOR proposal 2.
__________________________________________________________________________________
Signature of Stockholder
__________________________________________________________________________________
Signature(s)
Date: ______________________________________________________________________, 1995
Note: Please sign your name exactly as it appears hereon. If stock is registered
in more than one name, each joint owner must sign. When signing as attorney,
executor, administrator, guardian or corporate officer, please give your full
title as such
Please sign, date and return this proxy promptly in the enclosed postage paid envelope.
</TABLE>
<PAGE>
