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 ss.240.14a-11(c) or ss.240.14a-12
PENN ENGINEERING & MANUFACTURING CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
PENN ENGINEERING & MANUFACTURING CORP.
(Name of Person(s) Filing Proxy Statement)
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:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement no.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PENN ENGINEERING & MANUFACTURING CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 30, 1997
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 Wednesday, April 30,
1997 at 2:00 p.m., local time, at the offices of the Company, Building #3, Old
Easton Road, Danboro, Pennsylvania 18916, for the following purposes:
1. To elect three Class C Directors of the Company to hold office
until the Annual Meeting of Stockholders to be held in 2000 and until their
successors are duly elected;
2. To consider and vote upon a proposal to elect Deloitte & Touche LLP
as auditors for the Company for its 1997 fiscal year;
3. To transact such other business as may properly come before the
Annual Meeting and any adjournment, postponement or continuation thereof.
The Board of Directors has fixed the close of business on March 14, 1997 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 the year ended December 31, 1996
is being mailed to the stockholders together with this Notice.
If you do not expect to attend the Annual Meeting in person, please fill
in, sign, date, and return the enclosed form of proxy in the enclosed envelope
to Chase Mellon Shareholder Services, L.L.C.
By Order of the Board of Directors,
Kenneth A. Swanstrom
Chairman of the Board
Date: March 31, 1997
<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 March 31, 1997, 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 Wednesday, April 30, 1997
at 2:00 p.m., local time, and at any adjournment, postponement or continuation
thereof, at the offices of the Company, Building #3, Old Easton Road, Danboro,
Pennsylvania 18916. The Company's principal executive offices are located at
Building #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 nominees for Class C Director named below and in favor of
the election of Deloitte & Touche LLP as auditors of the Company for its 1997
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 of
revocation or a duly executed proxy bearing a later date 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, none of
whom will receive special compensation for such services. The Company, upon
request therefor, will reimburse brokers, nominees, fiduciaries and custodians
and 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.
The Company has two classes of common stock: Common Stock, par value $.01
per share ("Common Stock"), and Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"). Holders of record of both classes at the close of
business on March 14, 1997 will be entitled to notice of the Annual Meeting, but
only holders of Class A Common Stock of record at the close of business on March
14, 1997 will be entitled to vote at the Annual Meeting. As of March 14, 1997,
the Company had outstanding 1,707,082 shares of Class A Common Stock, each of
which is entitled to one vote. Cumulative voting rights do not exist with
respect to the election of directors. The holders of Common Stock will have no
voting rights at the Annual Meeting. For purposes of the Annual Meeting, a
quorum means a majority of the outstanding shares of Class A Common Stock
represented in person or by proxy at the Annual Meeting.
As of March 14, 1997, certain stockholders listed in the table herein under
"Beneficial Ownership of Common Stock and Class A Common Stock" beneficially
owned in the aggregate 894,890 shares, or approximately 52.4%, of the Company's
outstanding Class A Common Stock. Such stockholders have advised the Company
that they will vote their shares for the election of Willard S. Boothby, Jr.,
Thomas M. Hyndman, Jr., and Daryl L. Swanstrom as Class C Directors and for the
election of Deloitte & Touche LLP as the Company's auditors for 1997.
Accordingly, Messrs. Boothby and Hyndman and Mrs. Swanstrom will be elected as
Class C Directors, and Deloitte & Touche will be elected as auditors for the
Company for 1997 regardless of the votes of the Company's stockholders other
than those listed in such table.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK AND
CLASS A COMMON STOCK
The following table sets forth, as of February 28, 1997, the amount and
percentage of the Company's outstanding Common Stock and Class A Common Stock
beneficially owned by (i) each person who is known by the Company to own
beneficially more than 5% of its outstanding Common Stock or Class A Common
Stock, (ii) each director and nominee for director, (iii) each executive officer
named in the Summary Compensation Table, and (iv) all executive officers and
directors of the Company as a group.
<TABLE>
<CAPTION>
TITLE OF NUMBER OF
CLASS OF SHARES
CAPITAL BENEFICIALLY PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP STOCK OWNED(1) OF CLASS
- -------------------------------------------------------------------- ------------ ----------- -----------
<S> <C> <C> <C>
5% HOLDERS:
Kenneth A. Swanstrom
P.O. Box 1000
Danboro, PA 18916
Individually (2) Common 633,923 9.1%
Class A 244,641 14.3%
Trust under the Will of Gladys Swanstrom (3) Common 91,425 1.3%
Class A 62,975 3.7%
Trusts under the Will of Klas A. Swanstrom (3) Common 197,916 2.8%
Class A 98,472 5.8%
Daryl L. Swanstrom
P.O. Box 2309
Peachtree City, GA 30269
Individually (4) Common 297,077 4.3%
Class A 209,448 12.3%
Trust under Item Fourth of the Will of Common 62,720 *
Lawrence W. Swanstrom (5) Class A 54,240 3.2%
Trust under Item Fifth of the Will of Common 216,649 3.1%
Lawrence W. Swanstrom (5) Class A 111,794 6.5%
Thomas M. Hyndman, Jr. (6)
c/o Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103-7396
Individually Common 2,110 *
Class A 570 *
Trust under the Will of Gladys Swanstrom (3) Common 91,425 1.3%
Class A 62,975 3.7%
Trusts under the Will of Klas A. Swanstrom (3) Common 197,916 2.8%
Class A 98,472 5.8%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TITLE OF NUMBER OF
CLASS OF SHARES
CAPITAL BENEFICIALLY PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP STOCK OWNED(1) OF CLASS
- -------------------------------------------------------------------- ---------- --------- ---------
<S> <C> <C> <C>
Trust under Item Fourth of the Will of Common 62,720 *
Lawrence W. Swanstrom (5) Class A 54,240 3.2%
Trust under Item Fifth of the Will of Common 216,649 3.1%
Lawrence W. Swanstrom (5) Class A 111,794 6.5%
Trust under Deed of Klas A. Swanstrom dated 1/12/73 (7) Common 95,750 1.4%
Class A 57,750 3.4%
PNC Bank, National Association
398 North Main Street
Doylestown, PA 18901
Trust under the Will of Gladys Swanstrom (3) Common 91,425 1.3%
Class A 62,975 3.7%
Trusts under the Will of Klas A. Swanstrom (3) Common 197,916 2.8%
Class A 98,472 5.8%
Trust under Deed of Klas A. Swanstrom dated 1/12/73 (7) Common 95,750 1.4%
Class A 57,750 3.4%
Trust under Deed of Klas A. Swanstrom dated 9/26/66 (8) Common 61,250 *
Class A 38,500 2.3%
Trust under Deed of Gladys Swanstrom dated 9/26/66 (8) Common 26,250 *
Class A 16,500 *
Quest Advisory Corp. (9) Common 608,550 8.7%
Quest Management Company Class A 156,350 9.2%
1414 Avenue of the Americas
New York, NY 10019
Dimensional Fund Advisors Inc. (10) Common 258,900 3.7%
1299 Ocean Avenue Class A 84,400 5.0%
11th Floor
Santa Monica, CA 90401
Morgan Stanley Group Inc. (11) Common 459,800 6.6%
1585 Broadway
New York, NY 10036
DIRECTORS: (12)
Willard S. Boothby, Jr. Common 1,200 *
Class A 400 *
Frank S. Hermance Common 1,000 *
Class A -- *
Lewis W. Hull (13) Common 6,000 *
Class A 2,000 *
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TITLE OF NUMBER OF
CLASS OF SHARES
CAPITAL BENEFICIALLY PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP STOCK OWNED(1) OF CLASS
- -------------------------------------------------------------------- ---------- --------- ---------
<S> <C> <C> <C>
Maurice D. Oaks Common 500 *
Class A -- *
Mark W. Simon (14) Common 525 *
Class A 100 *
EXECUTIVE OFFICERS: (15)
Richard B. Ernest (16) Common 16,140 *
Class A 5,230 *
Martin Bidart (17) Common 400 *
Class A 100 *
Raymond L. Bievenour Common 550 *
Class A 100 *
All Executive Officers and Directors as a Group (15 persons) Common 1,711,935 24.6%
Class A 902,920 52.9%
</TABLE>
- ----------
* Less than 1%.
(1) Under the rules of the Commission, 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 and Class
A Common Stock of the Company over which the above-named persons
individually or together share voting power or investment power.
(2) Under the rules of the Commission, the maximum beneficial ownership of the
Company's outstanding Class A Common Stock which Kenneth A. Swanstrom could
be deemed to have is 23.8%. Mr. Swanstrom has sole voting and dispositive
power with respect to 633,923 shares of Common Stock and 244,641 shares of
Class A Common Stock, of which totals 11,301 shares of Common Stock and
3,767 shares of Class A Common Stock are owned by Mr. Swanstrom's wife and
2,100 shares of Common Stock and 700 shares of Class A Common Stock are
owned by their daughters. Mr. Swanstrom disclaims beneficial ownership of
the shares held by his wife and daughters. Mr. Swanstrom has shared voting
and dispositive power with respect to 91,425 shares of Common Stock and
62,975 shares of Class A Common Stock held by the Trust under the Will of
Gladys Swanstrom and 197,916 shares of Common Stock and 98,472 shares of
Class A Common Stock held by the Trusts under the Will of Klas A.
Swanstrom.
(3) The Trustees are Kenneth A. Swanstrom, Thomas M. Hyndman, Jr., and PNC
Bank, N.A. ("PNC").
(4) Under the rules of the Commission, the maximum beneficial ownership of the
Company's outstanding Class A Common Stock which Daryl L. Swanstrom could
be deemed to have is 22.0%. Mrs. Swanstrom has sole voting and dispositive
power with respect to 297,077 shares of Common Stock and 209,448 shares of
Class A Common Stock and shared voting and dispositive power with respect
to 62,720 shares of Common Stock and 54,240 shares of Class A Common Stock
held by the Trust under Item Fourth of the Will of Lawrence W. Swanstrom
and 216,649 shares of Common Stock and 111,794 shares of Class A Common
Stock held by the Trust under Item Fifth of the Will of Lawrence W.
Swanstrom. Pursuant to an agreement between Mrs. Swanstrom and the Company,
which expires December 31, 2006, Mrs. Swanstrom has agreed not to
4
<PAGE>
sell or otherwise transfer or dispose of any shares of the Company's Class
A Common Stock owned by her or that she may acquire without first offering
to sell such shares to the Company. The purchase price upon exercise of the
Company's option to purchase such shares is the higher of the market price
of such shares on the day prior to the day such shares are offered to the
Company or the price offered by a third party for such shares.
(5) The Trustees are Daryl L. Swanstrom, Thomas M. Hyndman, Jr., and
NationsBank of Georgia, N.A.
(6) Under the rules of the Commission, the maximum beneficial ownership of the
Company's outstanding Class A Common Stock which Thomas M. Hyndman, Jr.
could be deemed to have is 22.6%. Mr. Hyndman has sole voting and
dispositive power with respect to 2,110 shares of Common Stock and 570
shares of Class A Common Stock, of which totals 400 shares of Common Stock
are owned by Mr. Hyndman's wife. Mr. Hyndman disclaims beneficial ownership
of the shares held by his wife. Mr. Hyndman has shared voting and
dispositive power with respect to the 62,720 shares of Common Stock and
54,240 shares of Class A Common Stock held by the Trust under Item Fourth
of the Will of Lawrence W. Swanstrom, 216,649 shares of Common Stock and
111,794 shares of Class A Common Stock held by the Trust under Item Fifth
of the Will of Lawrence W. Swanstrom, 91,425 shares of Common Stock and
62,975 shares of Class A Common Stock held by the Trust under the Will of
Gladys Swanstrom, 77,500 shares of Common Stock and 57,750 shares of Class
A Common Stock held by the Trust under the Deed of Klas A. Swanstrom dated
1/12/73, and 197,916 shares of Common Stock and 98,472 shares of Class A
Common Stock held by the Trusts under the Will of Klas A. Swanstrom.
(7) The Trustees are Thomas M. Hyndman, Jr. and PNC.
(8) Under the rules of the Commission, the maximum beneficial ownership of the
Company's outstanding Class A Common Stock which PNC could be deemed to
have is 6.7%. Of these shares, (i) 91,425 shares of Common Stock and 62,975
shares of Class A Common Stock are held by the Trust under the Will of
Gladys Swanstrom and 197,916 shares of Common Stock and 98,472 shares of
Class A Common Stock are held by the Trusts under the Will of Klas A.
Swanstrom, with voting power shared with Kenneth A. Swanstrom and Thomas M.
Hyndman; (ii) 95,750 shares of Common Stock and 57,750 shares of Class A
Common Stock are held by the Trust under the Deed of Klas A. Swanstrom
dated 1/12/73 with voting power shared with Mr. Hyndman; and (iii) 61,250
shares of Common Stock and 38,500 shares of Class A Common Stock are held
by the Trust under Deed of Klas A. Swanstrom dated 9/26/66 and 26,250
shares of Common Stock and 16,500 shares of Class A Common Stock are held
by the Trust under Deed of Gladys Swanstrom dated 9/26/66, with voting
power shared with Stephen D. Teaford.
(9) According to Amendment No. 8 to a Schedule 13G dated February 4, 1997,
filed 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 Securities
Exchange Act of 1934 (the "Exchange Act") with respect to these shares.
According to such Amendment, Quest has sole voting and dispositive power
with respect to 590,950 shares of Common Stock and 147,150 shares of Class
A Common Stock, and QMC has sole voting and dispositive power with respect
to 17,600 shares of Common Stock and 9,200 shares of Class A Common Stock.
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 Capital 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.
(10) According to Amendment No. 3 to a Schedule 13G dated February 5, 1997,
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
adviser, is deemed to have beneficial ownership of 258,800 shares of Common
Stock and 84,400 shares of Class A Common Stock as of December 31, 1996,
all of
5
<PAGE>
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.
(11) According to a Schedule 13G dated February 14, 1996, filed by Morgan
Stanley Group Inc. and Miller Anderson & Sherrerd LLP, such persons may be
deemed the beneficial owners of an aggregate of 459,800 shares of Common
Stock held in accounts managed on a discretionary basis by wholly owned
subsidiaries of Morgan Stanley Group Inc., including Miller Anderson &
Sherrerd LLP.
(12) Excludes directors listed under "5% Holders."
(13) Of these shares, 3,000 shares of Common Stock and 1,000 shares of Class A
Common Stock are owned by Mr. Hull's wife. Mr. Hull disclaims beneficial
ownership of the shares held by his wife.
(14) Of these shares, 25 shares of Common Stock are owned by Mr. Simon's
daughter. Mr. Simon disclaims beneficial ownership of the shares held by
his daughter.
(15) Excludes executive officers listed under "5% Holders" and executive
officers listed under "Directors."
(16) Of these shares, 4,500 shares of Common Stock and 1,500 shares of Class A
Common Stock are held jointly with Mr. Ernest's sister.
(17) Of these shares, 100 shares of Common Stock are owned by Mr. Bidart's wife
and 100 shares of Class A Common Stock and 300 shares of Common Stock are
owned jointly with Mr. Bidart's wife. Mr. Bidart disclaims beneficial
ownership of the 100 shares of Common Stock owned by his wife.
6
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, three Class C Directors will be elected for a term
expiring at the 2000 Annual Meeting of Stockholders and when their successors
have been duly elected. The Class A Directors and the Class B 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 of Directors, 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 of Directors at eight.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the election of the nominees for Class C Directors listed
below, each of whom is currently a director of the Company. If any nominee
becomes 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 that the nominees named will be able to serve if elected. Any vacancy
on the Board of Directors for any reason may be filled by the affirmative vote
of 80% of the directors then in office. The three nominees for Class C Director
receiving the highest number of votes cast at the Annual Meeting will be
elected. Shares held by brokers or nominees 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 directors
will have no effect since they will not represent votes cast at the Annual
Meeting for the purpose of electing directors.
Certain information with respect to each nominee for Class C Director, and
each Class A Director and Class B Director continuing in office following the
Annual Meeting is as follows:
NOMINEES FOR CLASS C DIRECTORS
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR PAST FIVE YEARS SINCE CLASS
- ------------------------------------------- ----------- ---------------------------- ----------- ----------------------------
<S> <C> <C> <C> <C>
Willard S. Boothby, Jr. (1)(2)(4).......... 75 Former Managing Director, 1984 Class C; Term expires 2000*
PaineWebber Incorporated,
brokerage services
Thomas M. Hyndman, Jr. (1)(2)(5)........... 72 Of Counsel since 1993, 1974 Class C; Term expires 2000*
Partner, from 1957 to
1992, Duane, Morris &
Heckscher, Attorneys and
Counsel to the Company
Daryl L. Swanstrom (2)(6).................. 50 President, Spyraflo, Inc., 1987 Class C; Term expires 2000*
manufacturer of miniature
self-aligning sleeve
bearings and linear
slides; formerly President
of Engineered Components,
Inc., distributor of
electric components
</TABLE>
- ----------
* If elected at the Annual Meeting
7
<PAGE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE FOR PAST FIVE YEARS SINCE CLASS
- ------------------------------------------- ----------- ---------------------------- ----------- ----------------------------
<S> <C> <C> <C> <C>
CLASS A DIRECTORS
Maurice D. Oaks(1)......................... 63 Former Vice President of 1994 Class A; Term expires 1998
Worldwide Operations
Planning of Bristol-Myers
Squibb
Frank S. Hermance.......................... 48 President and Chief 1996 Class A; Term Expires 1998
Operating Officer of
Ametek, Inc. from November
1996 to present; formerly
held other executive
positions at Ametek, Inc.,
including, most recently,
Executive Vice President
and Chief Operating
Officer of Ametek, Inc.
and President of its
Precision Instrument Group
CLASS B DIRECTORS
Kenneth A. Swanstrom....................... 57 Chairman, President, and 1970 Class B; Term expires 1999
Chief Executive Officer of
the Company since August
1993; President and Chief
Operating Officer of the
Company from 1979 until
August 1993
Lewis W. Hull(1)(2)(3)..................... 80 Chairman, Hull Corporation, 1974 Class B; Term expires 1999
manufacturer of freeze-
dryer and injection
molding equipment
Mark W. Simon.............................. 58 Vice President-Finance, 1983 Class B; Term expires 1999
Chief Financial Officer and
Corporate Secretary of the
Company
</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
investigations. During 1996, 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. The
Compensation
8
<PAGE>
Committee also administers the Company's 1996 Equity Incentive Plan and the
Company's 1996 Employee Stock Purchase Plan. During 1996, the Compensation
Committee held two meetings.
(3) Mr. Hull is also a director of Willow Grove Bank.
(4) Mr. Boothby is also a director of The Glenmede Fund, Inc.
(5) Mr. Hyndman is also a director of Rochester & Pittsburgh Coal Company.
(6) Mrs. Swanstrom is the widow of Kenneth A. Swanstrom's brother, Lawrence W.
Swanstrom.
During 1996, the Company's Board of Directors held nine 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 such director served during 1996.
The Company's Board of Directors does not have a nominating committee.
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>
LONG-TERM
COMPENSATION
---------------
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
--------------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS(#) COMPENSATION (1)
- -------------------------------------------------- --------- ----------- --------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Kenneth A. Swanstrom, Chairman, President, and 1996 $ 280,000 $ 104,142 15,000 $ 18,300
Chief Executive Officer......................... 1995 270,000 129,416 -- 17,680
1994 250,000 122,662 -- 17,100
Mark W. Simon, Vice President -- Finance, Chief 1996 $ 164,320 $ 38,198 10,000 $ 18,300
Financial Officer and Corporate Secretary....... 1995 158,000 47,281 -- 16,672
1994 146,000 43,841 -- 15,764
Martin Bidart, Vice President -- Manufacturing.... 1996 $ 145,600 $ 33,846 10,000 $ 14,560
1995 140,000 41,825 -- 14,810
1994 130,000 37,794 -- 13,720
Raymond L. Bievenour, Vice President -- 1996 $ 145,600 $ 33,846 10,000 $ 14,560
Marketing/Sales................................. 1995 140,000 41,825 -- 14,518
1994 130,000 37,794 -- 13,461
Richard B. Ernest, Vice President -- Quality(2)... 1996 $ 135,200 $ 31,429 -- $ 13,520
1995 130,000 38,838 -- 14,123
1994 127,500 33,083 -- 13,838
</TABLE>
9
<PAGE>
- ----------
(1) Includes amounts of Company contributions for 1996 to the Company's
Profit-Sharing Plan, as follows: Kenneth A. Swanstrom, $15,000; Mark W.
Simon, $15,000; Martin Bidart, $14,560; Raymond L. Bievenour, $14,560; and
Richard B. Ernest, $13,520. The amounts set forth were expensed during the
Company's 1996 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 directors
fees of $3,300 paid to Mr. Swanstrom and Mr. Simon for meetings attended
during 1996.
(2) Mr. Ernest retired on December 31, 1996.
The following table sets forth information with respect to options granted
to the persons named in the Summary Compensation Table above during the fiscal
year ended December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE OR GRANT DATE
UNDERLYING OPTIONS GRANTED TO EMPLOYEES BASE PRICE EXPIRATION PRESENT
GRANTED(#)(1) IN FISCAL YEAR ($/SH) DATE VALUE($)(2)
--------------------- ----------------------- --------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Kenneth A. Swanstrom....... 15,000 11.25% $ 18.375 12/04/06 $ 88,200
Mark W. Simon.............. 10,000 7.5 18.375 12/04/06 58,800
Martin Bidart.............. 10,000 7.5 18.375 12/04/06 58,800
Raymond L. Bievenour....... 10,000 7.5 18.375 12/04/06 58,800
Richard B. Ernest.......... -- -- -- -- --
</TABLE>
- ----------
(1) All shares underlying options are shares of Common Stock. Each option
becomes exercisable in increments of 25% of the shares underlying such
options commencing on the first, second, third and fourth anniversaries of
the date of the option grant.
(2) The Black-Scholes model, a widely used and accepted formula for valuing
traded stock options, was used to determine the grant date present value of
the executive stock options. The Black-Scholes value used in this table is
the same value used to report the expense associated with stock options in
the Company's audited financial statements in accordance with FAS 123. The
following assumptions were used to calculate the Black-Scholes value: a
six-year option term, 30% stock price volatility, 5.93% risk-free rate of
return, annual dividend yield of 2.25% and an exercise price equal to stock
price on the date of grant. The Company has used the historical annual
dividend yield and stock price volatility rate as assumptions for the
Black-Scholes model. These are not projections, and therefore there is no
guarantee that these assumptions will be the actual annual dividend yield or
stock price volatility rate over the next six years. There is no gain to
executives, however, if the per share market price of the Company's Common
Stock does not increase or declines.
10
<PAGE>
The following table sets forth information with respect to options held at
December 31, 1996 by the persons named in the Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#) AT FY-END ($)(2)
-------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------- ----------------- ------------- ----------------- ------------
<S> <C> <C> <C> <C>
Kenneth A. Swanstrom....................................... 0 15,000 -- $ 38,875
Mark W. Simon.............................................. 0 10,000 -- 21,250
Martin Bidart.............................................. 0 10,000 -- 21,250
Raymond L. Bievenour....................................... 0 10,000 -- 21,250
Richard B. Ernest.......................................... -- -- -- --
</TABLE>
- ----------
(1) No options were exercised by the named executive officers during the year
ended December 31, 1996.
(2) Represents the difference between the aggregate exercise price and the
aggregate market value of the Company's Common Stock as of December 31,
1996.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Company's executive compensation policies are intended 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
compensation package that is competitive with the market for similar talent, and
create a feeling of shared destiny between the executives, all the other
employees and the Company's stockholders.
Prior to the Company's fiscal year ended December 31, 1996, the
Compensation paid 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 an annual bonus determined in
accordance with the provisions of a formal incentive plan (the "Executive Bonus
Plan") originally adopted for the year 1992 and amended thereafter from time to
time. The executive officers also are participants in the Company's profit
sharing plan, its pension plan, the 1996 Employee Stock Purchase Plan, the 1996
Equity Incentive Plan, and its various fringe benefit programs.
In 1996, the Board of Directors and Stockholders adopted the 1996 Equity
Incentive Plan. The 1996 Equity Incentive Plan was approved by the stockholders
of the Company at their annual meeting in May 1996. The 1996 Equity Incentive
Plan covers all employees and officers of the Company, including the Named
Executive Officers.
The 1996 Equity Incentive Plan provides for the grant of options to
purchase up to 500,000 shares of the Company's Common (Non-Voting) Stock at a
price not less than 100% of the fair market value of such stock on the date the
option is granted (except, in the case of an incentive stock option grant, if
the optionee owns more than 10% of the combined voting power of all classes of
stock of the Company, the option price must be at least 110% of the fair market
value of the stock on the date of grant). The 1996 Equity Incentive Plan is
administered by the Compensation Committee of the Board which has the authority
to determine the officers and employees to
11
<PAGE>
whom options shall be granted and the type, amount, size, and terms of each such
grant (subject always to all of the requirements of the 1996 Equity Incentive
Plan). The purposes of the 1996 Equity Incentive Plan are to provide longer term
incentives to the officers and employees of the Company by enabling them to
participate in the growth in value of the capital stock of the Company and to
better align their long-term interests with those of the Company's stockholders.
The annual salaries of the Named Executive Officers for fiscal year 1996
were determined in the month of December 1995. 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 with those paid by comparable organizations and that fairly
reward 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 is considered, and each position is
measured against the knowledge and problem-solving ability required to fulfill
the assigned duties and responsibilities of such position 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 1996, except that the Committee did not have the
recommendation of the Chief Executive Officer.
The salary increases of the Named Executive Officers, other than the Chief
Executive Officer, for 1996 approximated 4%. The Chief Executive Officer's
salary increase for 1996 was approximately 3.7%.
Payments to the Named Executive Officers under the Executive Bonus Plan are
determined by five factors, which combined are used to determine the amount of
the annual bonus. The first and second factors, each with a weighting factor of
25%, compared the Company's 1996 net income with 1995 net income and the 1996
Business Plan net income. The third and fourth factors, each with a weighting
factor of 10%, compared the Company's 1996 consolidated net sales with 1995
consolidated net sales and the 1996 Business Plan consolidated net sales. The
fifth factor, with a weighting factor of 30%, compared 1996 return on equity, as
defined in the 1996 Business Plan, with 1995 return on equity. The target bonus
for each officer, other than the Chief Executive Officer, the Treasurer, and the
Corporate Controller, is 25% of the individual's base salary. The target bonus
for the Chief Executive Officer is 40% of base salary, and for the Treasurer,
and Corporate Controller, is 20% of base salary. The relationship of the
Company's 1996 results for each factor to the prior year or the 1996 Business
Plan, as approved by the Board of Directors, can cause the annual bonus to range
from zero to 150% of the targeted amount. The consideration of earnings before
interest and taxes is the most significant factor in determining the annual
bonuses paid to all other salaried and hourly workers under the employee
incentive plan. Consolidated net income is the most significant factor in
determining the annual bonuses paid to the executive officers. These two
measures of earnings extend a common thread in the standard of measure for both
executive officers' and other employees' annual bonuses.
Both the fastener and motor operations failed to meet the overall targets
established by the Board of Directors for 1996, and, therefore, the bonuses
under the incentive plans were less than the targeted awards for all
participants.
The bonus paid to the Chief Executive Officer for the year 1996 was
determined in accordance with the current provisions of the Executive Bonus Plan
and reflects, in the opinion of the Committee, appropriate rewards for the
Company's current performance. The portion of the Chief Executive Officer's
bonus as compared to his 1996 target bonus for each factor was as follows: 1996
net income as compared to 1995 net income was 100.42% of target; 1996 net income
as compared to the 1996 Business Plan net income was 84.34% of target; 1996 net
sales as compared to 1995 net sales were 113.48% of target; 1996 net sales as
compared to the 1996 Business
12
<PAGE>
Plan net sales were 96.42% of target and 1996 return on equity as compared to
1995 return on equity was 86.09% of target. Therefore, the total bonus paid to
the Chief Executive Officer for 1996 was $104,142. This bonus was $7,858 or
7.02% less than the target amount.
In determining the grants of stock options under the 1996 Equity Incentive
Plan, the Compensation Committee took into account the various factors
(described above) considered in determining the annual salaries of the Named
Executive Officers, as well as the recommendations of the independent consultant
which assisted in the creation of the Plan. In 1996, the Chief Executive Officer
was granted non-qualified options to purchase up to 15,000 shares of the
Company's Non-Voting Common Stock and each of the other Named Executive Officers
was granted non-qualified options to purchase up to 10,000 shares of the
Company's Non-Voting Common Stock.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a public company for compensation over $1 million paid to each of
the company's chief executive officer and the 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 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
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
13
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return on the Company's Common Stock with the S&P 600(Registered) SmallCap
Index, 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;
and Communications Equipment Manufacturers. 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.
[GRAPHIC]
In the printed version of this document, a line graph appears which
depicts the following plot points:
<TABLE>
<CAPTION>
BASE INDEXED RETURNS
PERIOD YEARS ENDING
COMPANY NAME/INDEX DEC 91 DEC 92 DEC 93 DEC 94 DEC 95 DEC 96
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Penn Engineering & Manufacturing Corp.
- -PNNA/PNN........................................... 100 140.06 182.57 169.36 400.20 346.66
S&P 600(Registered) SmallCap Index.................. 100 121.04 143.78 136.92 177.94 215.88
American Stock Exchange Index....................... 100 101.06 120.78 109.78 138.77 147.65
S&P Indices......................................... 100 133.98 172.62 199.07 275.00 405.59
</TABLE>
- ----------
(1) The comparisons 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, 1991 in each of the Company's Common Stock, the
S&P 600(Registered) SmallCap Index, the AMEX Market Value Index, and the S&P
Indices with the investment weighted on the basis of market capitalization.
Inasmuch as the Company has listed its Common Stock and Class A Common Stock
on the New York Stock Exchange, the Company has added the S&P
600(Registered) SmallCap Index to this performance graph, and the Company
does not intend to include the AMEX Market Value Index in future years.
14
<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 the 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
500,000........................................... 18,420 36,840 55,260 73,680
</TABLE>
Credited full years of service for the five officers listed in the Summary
Compensation Table are as follows: Kenneth A. Swanstrom, 36 years; Mark W.
Simon, 20 years; Martin Bidart, 6 years; Raymond L. Bievenour,
6 years; and Richard B. Ernest, 35 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 of 1986, as
amended (the "Code"). Therefore, with regard to 1996, the maximum salary that
can be recognized under the plan is $150,000 and the maximum annual benefit at
age 65 is limited to $120,000. 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 annual benefit at age 65, after 44 years of service, is
$107,479.
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 for
travel expenses. Employees who are directors of the Company each received a fee
of $250 for each meeting attended in 1996. Members of the Audit Committee and
the Compensation Committee each receive a fee of $500 for each meeting attended
plus reimbursement for travel expenses.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, file reports of ownership and changes in ownership
with the Commission. Based solely on the Company's review of the copies of such
reports received by
15
<PAGE>
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, 1996 through December 31, 1996, all filing requirements applicable to
its officers and directors were complied with, except that Lewis Hull filed an
amended Form 5 late to report the transaction by his wife for the purchase of
1,000 shares of Class A Common Stock and Mark W. Simon reported late the
acquisition of 25 shares of Common Stock by his daughter on his Form 5 report.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Engineered Components/Spyraflo, Inc., which is engaged in the manufacturing
and distribution of various products, is 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 1996, net sales by the Company to
Engineered Components/Spyraflo, Inc. were approximately $651,000, and net
purchases by the Company from such company were $289,000. At December 31, 1996,
the Company had trade receivables balances due from this company of $443,000.
Daryl L. Swanstrom, a director of the Company and a member of the Compensation
Committee, is President and sole stockholder of Spyraflo, Inc. and was the
President of Engineered Components, Inc. until November 1996. The foregoing
amounts reflect transactions with Engineered Components, Inc. through November
1996.
Thomas M. Hyndman, Jr., a director of the Company and a member of the
Compensation Committee, is Of Counsel to Duane, Morris & Heckscher, a law firm
that performed legal services for the Company during 1996.
ELECTION OF AUDITORS
Deloitte & Touche LLP served as the Company's auditors for the Company's
1996 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 1997 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. 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 such
representative desires to do so, and will be available to respond to any
appropriate questions presented by the stockholders at the Annual Meeting.
ANNUAL REPORT
A copy of the Company's Annual Report for its fiscal year ended December
31, 1996 is being mailed to the Company's stockholders with this Proxy
Statement.
STOCKHOLDER PROPOSALS
Any stockholder who, in accordance with and subject to the provisions of
the proxy rules of the Commission, wishes to submit a proposal for inclusion in
the Company's proxy statement for the 1998 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 November 30,
1997.
16
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
consideration at the Annual Meeting 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
March 31, 1997
17
<PAGE>
PENN ENGINEERING & MANUFACTURING CORP.
Annual Meeting of Stockholders to be held April 30, 1997
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 the
Class A Common Stock 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 the Company,
Building #3, Old Easton Road, Danboro, Pennsylvania, on Wednesday, April 30,
1997, at 2:00 P.M., and at any adjournment, postponement, or continuation
thereof, as follows:
(Continued and to be signed on the reverse side)
+ FOLD AND DETACH HERE +
<PAGE>
Please mark
your votes as / X /
indicated in
this example
1. Election of Class C Directors
Nominees: Williard S. Boothby, Jr. FOR WITHHOLD
Thomas M. Hyndman, Jr. AUTHORITY
Daryl L. Swanstrom / / / /
Instructions: To withhold authority, write the name of the nominee(s) in
the space provided:
- ------------------------------------------------------------------------
2. Approval of Auditors FOR AGAINST ABSTAIN
Proposal to elect Deloitte & Touche LLP / / / / / /
as the Company's independent public
accountants for 1997
3. In their discretion the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment
thereof.
- ----------------------------------------------
Mark If You Plan to Attend Annual Meeting / /
- ----------------------------------------------
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 nominees for Class C Directors
set forth in proposal 1 and FOR proposal 2.
- -----------------------------------------------------
Signature of Stockholder
- -----------------------------------------------------
Signature(s)
Date: , 1997
-----------------------------------------
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.
+ FOLD AND DETACH HERE +
