SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to ss. 240.14a-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/ No Fee Required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
<PAGE>
PENN ENGINEERING & MANUFACTURING CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 4, 2000
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, 2000,
at 2:00 p.m., local time, at the offices of the Company, Building 3, 5190 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 2003 and until their
successors are duly elected;
2. To consider and vote upon a proposal to elect Ernst & Young LLP as
auditors for the Company for its 2000 fiscal year; and
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 15, 2000 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, 1999
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 First Union National Bank.
By Order of the Board of Directors,
Kenneth A. Swanstrom
Chairman of the Board
Date: April 4, 2000
<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 4, 2000, 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, 2000, at
2:00 p.m., local time, and at any adjournment, postponement, or continuation
thereof, at the offices of the Company, Building 3, 5190 Old Easton Road,
Danboro, Pennsylvania 18916. The Company's principal executive offices are
located at 5190 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 the Class C Directors named below and in favor
of the election of Ernst & Young LLP as auditors of the Company for its 2000
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 of common stock
at the close of business on March 15, 2000 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 15, 2000 will be entitled to vote at the Annual Meeting. As
of March 15, 2000, the Company had outstanding 1,675,082 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 15, 2000, certain stockholders, listed in the table herein
under "Beneficial Ownership of Common Stock and Class A Common Stock,"
beneficially owned in the aggregate 897,990 shares, or approximately 53.6%, 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 Ernst & Young LLP as the Company's auditors
for its 2000 fiscal year. Accordingly, Mr. Boothby, Mr. Hyndman, and Mrs.
Swanstrom will be elected as Class C Directors, and Ernst & Young LLP will be
elected as auditors for the Company for its 2000 fiscal year 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 29, 2000, 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>
NUMBER OF
TITLE OF SHARES PERCENT
CLASS OF BENEFICIALLY OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP CAPITAL STOCK OWNED(1) CLASS
- --------------------------------------- ------------- ------------ -------
<S> <C> <C> <C>
5% HOLDERS:
Kenneth A. Swanstrom
P.O. Box 1000
Danboro, PA 18916
Individually (2) Common 605,373 8.7%
Class A 244,291 14.6%
Trust under the Will of Gladys Swanstrom (2) Common 91,425 1.3%
Class A 62,975 3.8%
Trusts under the Will of Klas A. Swanstrom (3) Common 197,916 2.9%
Class A 98,472 5.9%
Daryl L. Swanstrom
P.O. Box 2309
Peachtree City, GA 30269
Individually (4) Common 92,668 1.4%
Class A 280,506 16.8%
Trust under Item Fourth of the Will of Common 52,720 1.0%
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 40,736 2.4%
Thomas M. Hyndman, Jr. (6)
c/o Duane, Morris & Heckscher LLP
4200 One Liberty Place
Philadelphia, PA 19103-7396
Individually Common 2,735 *
Class A 570 *
Trust under the Will of Gladys Swanstrom (3) Common 91,425 1.3%
Class A 62,975 3.8%
Trusts under the Will of Klas A. Swanstrom (3) Common 197,916 2.9%
Class A 98,472 5.9%
Trust under Item Fourth of the Will of Common 52,720 1.0%
Lawrence W. Swanstrom (5) Class A 54,240 3.2%
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SHARES PERCENT
CLASS OF BENEFICIALLY OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP CAPITAL STOCK OWNED(1) CLASS
- --------------------------------------- ------------- ------------ -------
<S> <C> <C> <C>
Trust under Item Fifth of the Will of Common 216,649 3.1%
Lawrence W. Swanstrom (5) Class A 40,736 2.4%
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 (8)
398 North Main Street
Doylestown, PA 18901
Trust under the Will of Gladys Swanstrom (3) Common 91,425 1.3%
Class A 62,975 3.8%
Trusts under the Will of Klas A. Swanstrom (3) Common 197,916 2.9%
Class A 98,472 5.9%
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 1.0%
Bank of America Corporation (9)
110 North Tryon Street
Charlotte, NC 28255
Trust under Item Fourth of the Will of Common 52,720 *
Lawrence W. Swanstrom (5) Class A 54,240 3.24%
Trust under Item Fifth of the Will of Common 216,649 3.1%
Lawrence W. Swanstrom (5) Class A 40,736 2.4%
Royce & Associates, Inc. (10) Common 585,150 8.4%
1414 Avenue of the Americas Class A 192,750 11.5%
New York, NY 10019
Private Capital Management, Inc. (11) Common 1,292,281 18.8%
3003 Tamiami Trail North Class A -- *
3rd Floor
Naples, FL 34109
Sanford C. Bernstein & Co., Inc. (12) Common 649,485 9.4%
767 Fifth Avenue Class A -- --
New York, NY 10153-0185
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF SHARES PERCENT
CLASS OF BENEFICIALLY OF
NAME OF INDIVIDUAL OR IDENTITY OF GROUP CAPITAL STOCK OWNED(1) CLASS
- --------------------------------------- ------------- ------------ -------
<S> <C> <C> <C>
DIRECTORS: (13)
Willard S. Boothby, Jr. (14) Common 1,825 *
Class A 400 *
Lewis W. Hull (15) Common 6,625 *
Class A 2,000 *
Maurice D. Oaks (14) Common 1,125 *
Class A -- --
Martin Bidart (16) Common 16,160 *
Class A 100 *
Mark W. Simon (17) Common 17,160 *
Class A 100 *
Charles R. Smith (14) Common 625 *
Class A -- *
EXECUTIVE OFFICERS: (18)
Raymond L. Bievenour (19) Common 15,550 *
Class A 100 *
Francis P. Wilson (20) Common 8,177 *
Class A -- *
All Executive Officers and Directors as a Group Common 1,527,274 21.9%
(14 persons) (21) Class A 897,990 53.6%
</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 24.2%. Of these shares, Mr. Swanstrom has sole voting
and dispositive power with respect to 605,373 shares of Common Stock and
244,291 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, 51,050 shares of Common Stock and 350 shares of Class A
Common Stock are owned by one of their daughters. Mr. Swanstrom disclaims
beneficial ownership of the shares owned by his wife and daughter. 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. This total also includes currently
exercisable stock options to purchase 22,500 shares of Common Stock.
4
<PAGE>
(3) The Trustees are Kenneth A. Swanstrom, Thomas M. Hyndman, Jr., and PNC
Bank, National Association ("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 22.4%. Of this total, Mrs. Swanstrom has sole voting
and dispositive power with respect to 92,668 shares of Common Stock and
280,506 shares of Class A Common Stock and shared voting and dispositive
power with respect to 52,720 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 40,736 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 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. These shares include currently exercisable stock options to
purchase 625 shares of Common Stock.
(5) The Trustees are Daryl L. Swanstrom, Thomas M. Hyndman, Jr., and Bank of
America Corporation.
(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 18.8%. Of these shares, Mr. Hyndman has sole
voting and dispositive power with respect to 2,735 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 owned by his wife. Mr. Hyndman has
shared voting and dispositive power with respect to the 52,720 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 40,736 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, 95,750 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. These shares include currently exercisable stock options
to purchase 625 shares of Common Stock.
(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 16.4%. Of these shares, 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, 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, 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, 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, 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) Under the rules of the Commission, the maximum beneficial ownership of the
Company's outstanding Class A Common Stock which Bank of America
Corporation could be deemed to have is 5.7%. Of these shares, Bank of
America Corporation has shared voting and dispositive power with respect to
the
5
<PAGE>
52,720 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 40,736 shares of Class A Common
Stock held by the Trust under Item Fifth of the Will of Lawrence W.
Swanstrom.
(10) According to Amendment No. 3 to a Schedule 13G dated February 2, 2000 and
Amendment No. 12 to a Schedule 13G dated February 2, 2000, filed by Royce &
Associates, Inc., a New York corporation ("Royce"), and Charles M. Royce.
Royce 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. Mr. Royce may be deemed to be a controlling person of Royce
and as such may be deemed to beneficially own the shares of capital stock
beneficially owned by Royce. Mr. Royce does not own any shares outside of
Royce and disclaims beneficial ownership of the shares held by Royce.
(11) According to Amendment No. 2 to a Schedule 13G dated February 15, 2000,
filed by Private Capital Management, Inc., a Florida corporation ("Private
Capital"), SPS Partners, L.P. ("SPS") and Bruce S. Sherman. Mr. Sherman is
Chairman of Private Capital and exercises shared dispositive power with
respect to shares by Private Capital on behalf of its clients. Mr. Sherman
is also the Managing General Partner of SPS which acts as the investment
advisor to the Entrepreneurial Value Fund, L.P. and exercises shared
dispositive power with respect to those shares. Mr. Sherman disclaims the
existence of a "group."
(12) According to an Amendment to a Schedule 13G dated February 8, 2000, filed
by Sanford C. Bernstein & Co., Inc. ("Sanford"), Sanford may be deemed the
beneficial owner of an aggregate of 649,485 shares of Common Stock held in
accounts managed on a discretionary basis, of which Sanford has sole
dispositive power with respect to such shares.
(13) Excludes directors listed under "5% Holders."
(14) These shares include currently exercisable stock options to purchase 625
shares of Common Stock.
(15) 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 owned by his wife. These shares include currently
exercisable stock options to purchase 625 shares of Common Stock.
(16) Of these shares, 300 shares of Common Stock and 100 shares of Class A
Common Stock are owned by Mr. Bidart's wife. Mr. Bidart disclaims
beneficial ownership of the 100 shares of Common Stock owned by his wife.
These shares also include currently exercisable stock options to purchase
15,000 shares of Common Stock.
(17) Of these shares, 120 shares of Common Stock are owned by Mr. Simon's
daughter. Mr. Simon disclaims beneficial ownership of the shares owned by
his daughter. These shares also include currently exercisable stock options
to purchase 15,000 shares of Common Stock held by Mr. Simon.
(18) Excludes executive officers listed under "5% Holders" and executive
officers listed under "Directors."
(19) These shares include currently exercisable stock options to purchase 15,000
shares of Common Stock.
(20) These shares include currently exercisable stock options to purchase 7,500
shares of Common Stock.
(21) These shares include currently exercisable stock options to purchase an
aggregate of 93,750 shares of Common Stock.
6
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting, three Class C Directors will be elected for a term
expiring at the 2003 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 nine.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the election of the three 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.(2)(3)(5)...... 78 Former Managing Director, 1984 Class C; Term expires 2003*
PaineWebber Incorporated,
brokerage services
Thomas M. Hyndman, Jr.(1)............. 75 Of Counsel since 1993, 1974 Class C; Term expires 2003*
Partner, from 1957 to
1992, Duane, Morris &
Heckscher, LLP, Attorneys
and Counsel to the Company
Daryl L. Swanstrom(1)(6).............. 53 President, Spyraflo, Inc., 1987 Class C; Term expires 2003*
manufacturer of miniature
self-aligning sleeve
bearings and linear slides
</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
Martin Bidart......................... 63 President and Chief 1998 Class A; Term expires 2001
Operating Officer of the
Company since August 1998;
Vice President -
Manufacturing of the
Company from August 1990
to July 1998
Maurice D. Oaks(1)(2)................. 66 Former Vice President of 1994 Class A; Term expires 2001
Worldwide Operations
Planning of Bristol-Myers
Squibb
Charles R. Smith(2)(3)................ 55 Professor and Chairman of 1997 Class A; Term expires 2001
the Mechanical Engineering
Department of Lehigh
University
CLASS B DIRECTORS
Kenneth A. Swanstrom.................. 60 Chairman of the Board and 1970 Class B; Term expires 2002
Chief Executive Officer of
the Company since 1993;
President and Chief
Operating Officer of the
Company from 1979 until
1998
Lewis W. Hull(3)(4)................... 83 Chairman, Hull Corporation, 1974 Class B; Term expires 2002
manufacturer of injection
molding equipment
Mark W. Simon......................... 61 Vice President-Finance, 1983 Class B; Term expires 2002
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 1999, the Audit Committee held two 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 renumeration for senior management, adoption of compensation plans
in which officers are eligible to participate, and related matters. The
Compensation Committee also administers the Company's 1996 Equity Incentive
Plan, the Company's 1996 Employee Stock Purchase Plan, the Company's
8
<PAGE>
1998 Stock Option Plan for Non-Employee Directors, and the Company's 1999
Employee Stock Option Plan. During 1999, the Compensation Committee held two
meetings.
(3) Member of the Nominating Committee. The Nominating Committee is appointed
annually by the Board of Directors to recommend to the Board of Directors
nominees for election as directors of the Company. During 1999, the
Nominating Committee held one meeting.
(4) Mr. Hull is also a director of Willow Grove Bank.
(5) Mr. Boothby is also a director of The Glenmede Fund, Inc.
(6) Mrs. Swanstrom is the widow of Kenneth A. Swanstrom's brother, Lawrence W.
Swanstrom.
During 1999, the Company's Board of Directors held eight 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 1999.
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 and 1999 $395,000 $176,150 $15,000 $18,925
Chief Executive Officer.................. 1998 321,000 150,518 15,000 18,425
1997 310,000 123,917 15,000 18,550
Martin Bidart, President and 1999 260,000 90,181 10,000 18,225
Chief Operating Officer.................. 1998 175,792 64,112 10,000 16,500
1997 153,000 38,224 10,000 15,300
Mark W. Simon, Vice President -- Finance, 1999 210,000 72,839 10,000 18,925
Chief Financial Officer, and Corporate 1998 191,500 69,841 10,000 18,425
Secretary................................ 1997 185,000 46,219 10,000 18,350
Raymond L. Bievenour, Vice President -- 1999 182,000 54,109 10,000 16,000
Sales/Marketing.......................... 1998 161,375 50,446 10,000 16,000
1997 153,000 38,224 10,000 15,300
Francis P. Wilson, Vice President -- 1999 178,000 52,919 10,000 16,000
Operations............................... 1998 153,667 48,037 10,000 16,000
1997 70,096 17,512 10,000 --
</TABLE>
9
<PAGE>
- ------------------
(1) Includes amounts of Company contributions for 1999 to the Company's
Profit-Sharing Plan, as follows: Kenneth A. Swanstrom, $16,000; Martin
Bidart, $16,000; Mark W. Simon, $16,000; Raymond L. Bievenour, $16,000; and
Frank P. Wilson $16,000. The amounts set forth were expended during the
Company's 1999 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 $2,925 paid to Mr. Swanstrom, $2,225 paid to Mr. Bidart, and $2,925
paid to Mr. Simon for meetings attended during 1999.
The following table sets forth information with respect to options granted
to the persons named in the Summary Compensation Table above during the fiscal
year ended December 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE OR EXPIRATION GRANT DATE
NAME GRANTED(#)(1) IN FISCAL YEAR BASE PRICE ($/SH) DATE PRESENT VALUE($)(2)
- ---- -------------------- -------------------- ----------------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Kenneth A. Swanstrom.... 15,000 6.85% $25.375 12/08/09 $129,000
Martin Bidart........... 10,000 4.57 25.375 12/08/09 86,000
Mark W. Simon........... 10,000 4.57 25.375 12/08/09 86,000
Raymond L. Bievenour.... 10,000 4.57 25.375 12/08/09 86,000
Francis P. Wilson....... 10,000 4.57 25.375 12/08/09 86,000
</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: an
expected life of six years, 30% stock price volatility, 6.28% risk-free rate
of return, annual dividend yield of 2.00%, 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, 1999 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........................... 22,500 37,500 $57,656 $30,469
Martin Bidart.................................. 15,000 25,000 38,438 20,313
Mark W. Simon.................................. 15,000 25,000 38,438 20,313
Raymond L. Bievenour........................... 15,000 25,000 38,438 20,313
Francis P. Wilson.............................. 7,500 22,500 2,813 8,438
</TABLE>
- ------------------
(1) No options were exercised by the named executive officers during the year
ended December 31, 1999.
(2) Represents the difference between the aggregate exercise price and the
aggregate market value of the Company's Common Stock as of December 31,
1999.
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.
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, an annual bonus determined in
accordance with the provisions of a formal incentive plan (the "Management
Incentive Plan") originally adopted for the year 1992 and amended thereafter
from time to time, and non-qualified stock options as part of the 1996 Equity
Incentive Plan and the 1999 Employee Stock Option Plan. These plans cover all
employees and officers of the Company, including the Named Executive Officers.
The executive officers also 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 1999
were determined in the month of December 1998. 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 their
performance by the Chief Executive Officer 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.
11
<PAGE>
The same considerations were taken into account in fixing the Chief
Executive Officer's salary for 1999, except that the Committee did not have the
recommendation of the Chief Executive Officer.
The salary increases approved by the Board of Directors in December 1998
for the Named Executive Officers were as follows: Mr. Swanstrom, 23%; Mr.
Bidart, 30%; Mr. Simon, 9.7%; Mr. Bievenour, 7.1%; and Mr. Wilson, 4.7%.
Payments to the Named Executive Officers under the Management Incentive
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 1999 consolidated net income with 1998
consolidated net income and the 1999 Business Plan consolidated net income. The
third and fourth factors, each with a weighting factor of 10%, compared the
Company's 1999 consolidated net sales with 1998 consolidated net sales and the
1999 Business Plan consolidated net sales. The fifth factor, with a weighting
factor of 30%, compared 1999 return on equity with 1998 return on equity. The
target bonus for the Chief Executive Officer is 45% of base salary. The target
bonus for the Chief Operating Officer and the Chief Financial Officer is 35% of
their respective base salaries. The other executive officers have a target of
30% of their respective base salaries. The relationship of the Company's 1999
actual results to the prior year or the 1999 Business Plan targets 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.
The fastener operations and the motor operations achieved 108% and 112%,
respectively, of their overall targets established by the Board of Directors for
1999, and, therefore, the bonuses under the incentive plans were 108% and 112%,
respectively, of the targeted awards for all participants.
The bonus paid to the Chief Executive Officer for the year 1999 was
determined in accordance with the current provisions of the Management Incentive
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 1999 target bonus for each factor was as follows: 1999
consolidated net income as compared to 1998 consolidated net income was 103.1%
of target; 1999 consolidated net income as compared to the 1999 Business Plan
consolidated net income was 95.0% of target; 1999 consolidated net sales as
compared to 1998 consolidated net sales was 110.2% of target; 1999 consolidated
net sales as compared to 1999 Business Plan net sales was 101.0% of target, and
1999 return on equity as compared to 1998 return on equity was 94.7% of target.
Therefore, the bonus paid to the Chief Executive Officer for 1999 was $176,150.
This bonus was 99.1% of the target amount.
In determining the 1999 grants of stock options under the 1996 Equity
Incentive Plan and the 1999 Employee Stock Option 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 plans. In 1999, 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.
12
<PAGE>
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 necessary steps to conform the Company's
policies with respect to the 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
Maurice D. Oaks
Willard S. Boothby, Jr.
Charles R. Smith
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(R) SmallCap 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 the document, a line graph appears
which depicts the following plot points:
<TABLE>
<CAPTION>
BASE INDEXED RETURNS
PERIOD YEARS ENDING
COMPANY NAME/INDEX DEC 94 DEC 95 DEC 96 DEC 97 DEC 98 DEC 99
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Penn Engineering & Manufacturing Corp.-
PNN/PNNA..................................... 100 236.30 203.71 242.90 230.91 243.81
S&P 600(R) SmallCap Index.................... 100 129.96 157.67 198.01 195.42 219.66
S&P Indices.................................. 100 145.53 194.14 246.05 372.29 587.88
</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, 1994 in each of the Company's Common Stock, the
S&P 600(R) SmallCap Index, and the S&P Indices with the investment weighted
on the basis of market capitalization.
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
YEARS OF SERVICE
-------------------------------------
ANNUAL COMPENSATION 10 20 30 40
- ------------------- ------ ------ ------ ------
$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
160,000.............................. 19,670 39,340 59,010 78,680
175,000.............................. 19,670 39,340 59,010 78,680
200,000.............................. 19,670 39,340 59,010 78,680
300,000.............................. 19,670 39,340 59,010 78,680
400,000.............................. 19,670 39,340 59,010 78,680
500,000.............................. 19,670 39,340 59,010 78,680
Credited full years of service of the five officers listed in the Summary
Compensation Table are as follows: Kenneth A. Swanstrom, 39 years; Mark W.
Simon, 23 years; Martin Bidart, 9 years; Raymond L. Bievenour, 9 years; and
Francis P. Wilson, 3 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.
Therefore, with regard to 1999, the maximum salary that can be recognized under
the plan is $160,000 and the maximum annual benefit at age 65 is limited to
$130,000. 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 received 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 1999. Members of the Audit Committee and
the Compensation Committee each receive a fee of $500 for each meeting attended
plus reimbursement for travel expenses. For 2000, (i) the Company's non-employee
directors are each entitled to receive an annual retainer of $15,000 plus a fee
of $1,000 for each meeting attended and reimbursement for travel expenses; (ii)
employees who are directors of the Company are each entitled to receive a fee of
$250 for each meeting attended; and (iii) members of the Audit Committee and the
Compensation Committee are each entitled to receive a fee of $750 for each
meeting attended plus reimbursement for travel expenses.
15
<PAGE>
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 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, 1999 through December 31, 1999, all filing
requirements applicable to its officers and directors were complied with, except
that Victor E. Carlson filed a late report on Form 5.
CERTAIN TRANSACTIONS
Thomas M. Hyndman, Jr., a director of the Company and a nominee for Class C
Director, is Of Counsel to Duane, Morris & Heckscher LLP, a law firm that
performed legal services for the Company during 1999.
ELECTION OF AUDITORS
Ernst & Young LLP ("E&Y") served as the Company's auditors for the
Company's year ended December 31, 1999. Unless instructed to the contrary, it is
intended that votes will be cast pursuant to the proxies for the election of E&Y
as auditors for the Company for its 2000 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 E&Y 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 E&Y 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, 1999 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 2001 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 5,
2000.
Pursuant to Rule 14a-4(c) of the Exchange Act, if a stockholder who intends
to present a proposal at the 2001 Annual Meeting of Stockholders does not notify
the Company of such proposal on or before February 19, 2001, then management
proxies will be allowed to use their discretionary voting authority to vote on
the proposal when the proposal is raised at the Annual Meeting, even though
there is no discussion of the proposal in the 2001 proxy statement.
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
April 4, 2000
17
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(up arrow) FOLD AND DETACH HERE (up arrow)
PENN ENGINEERING & MANUFACTURING CORP.
Annual Meeting of Stockholders to be held May 4, 2000
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, Building 3, 5190 Old Easton Road, Danboro, Pennsylvania
18916, on Thursday, May 4, 2000, at 2:00 p.m., and at any adjournment,
postponement, or continuation thereof, as follows:
Please mark
your votes like /X/
this in blue or
black ink
(Continued and to be signed on reverse side)
1. Election of Class C Directors WITHHOLD
Nominees FOR AUTHORITY
Willard S. Boothby, Jr. /_/ /_/
Thomas M. Hyndman, Jr.
Daryl L. Swanstrom
Instruction: To withhold authority, write the name of the nominee(s)
in the space provided:
_______________________________________________________________________________
FOR AGAINST ABSTAIN
2. Approval of Auditors
Proposal to elect Ernst & Young /_/ /_/ /_/
LLP as the Company's auditors
for 2000
<PAGE>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(up arrow) FOLD AND DETACH HERE (up arrow)
____________________________
Class A Common Stock
MARK IF YOU PLAN TO ATTEND THE ANNUAL MEETING /_/
3. In their discretion the proxies are authorized to vote
upon such other matters as may properly come before the
meeting and any adjournment, postponement, or
continuation 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 nominees for Class C Directors set forth in
proposal 1 and FOR proposal 2.
______________________________________________________
Signature of Stockholder
_______________________________________________________
Signature of Stockholder
Date: _________________________________, 2000
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 in the enclosed postage paid envelope.
