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 Commission only
(as permitted by Rule 14a-6(e) (2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Spectrum Control, Inc.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth 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:
[ ] 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.
[ ] Fee paid previously with preliminary materials.
1) Amount Previously Paid:
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3) Filing Party:
4) Date Filed:
<PAGE>
SPECTRUM CONTROL, INC.
6000 West Ridge Road
Erie, Pennsylvania 16506
NOTICE OF ANNUAL SHAREHOLDER MEETING
APRIL 6, 1998
SPECTRUM CONTROL, INC.
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of Spectrum Control, Inc. will be held at the Bel-Aire Hotel, 2800 West
Eighth Street, Erie, Pennsylvania 16505, on Monday, April 6, 1998, at
9:00 a.m., prevailing time, for the following purposes:
1. To elect three Directors to hold office for a term of three years
and to elect one Director to hold office for a term of two years.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors of the Company.
3. To transact such other business as may come before the meeting
or any adjournment thereof.
Accompanying this Notice is a Form of Proxy and Proxy Statement.
Shareholders of the Company of record at the close of business on
February 18, 1998, are entitled to notice and the right to vote at the
Annual Meeting. Each holder of shares of Common Stock is entitled to
one (1) vote per share.
ALL SHAREHOLDERS ARE URGED TO ATTEND THE MEETING OR TO VOTE BY PROXY.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
JAMES F. TOOHEY, Secretary
You are urged, whether you own one or many shares, to mark, date, sign and
promptly mail the enclosed Proxy in the enclosed envelope in order that your
Company receives enough proxy vote returns to conduct its annual meeting.
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 6, 1998
Solicitation of Proxy
This Proxy Statement and the accompanying form of proxy will be
mailed to all Shareholders of Spectrum Control, Inc., 6000 West Ridge Road,
Erie, Pennsylvania 16506 ("Spectrum", "the Corporation" or "the Company")
by March 4, 1998, and is furnished in connection with the Directors'
solicitation of proxies for the Annual Meeting of Shareholders to be held
on April 6, 1998 at the time and place and for the purposes set forth in
the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Only holders of Common Stock of record at the close of business
on February 18, 1998, will be entitled to vote. On that date there were
10,870,343 shares of Common Stock outstanding, the holders of which will
vote together as a class.
Each share of Common Stock entitles the holder thereof to one (1)
vote. With respect to the election of Directors, Shareholders have the
right to vote cumulatively. This means that each Shareholder may multiply
the number of shares he or she owns by the number of Directors to be elected
and distribute this number among any number or all of the candidates in any
manner he or she desires. Cumulative voting enables Shareholders to
concentrate the voting of their shares in favor of the election of a lesser
number of nominees than the total number of Directors being voted upon;
persons holding less than a majority of shares voting may thereby be able
to elect one or more Directors.
Revocation of Proxy
The giving of a proxy does not preclude the right to vote in person
should the person giving the proxy desire, and the person giving the proxy
has the power to revoke the proxy at any time before it has been exercised.
This right of revocation is not limited nor is it subject to any formal
procedure.
Proxy Solicitation Cost
The cost of soliciting proxies in the accompanying form will be
borne by the Company. The officers, directors and employees of the Company,
without additional compensation, may solicit proxies by mail, facsimile,
telephone or personal contact. The Company does not expect to pay any
compensation for the solicitation of proxies, but will reimburse brokerage
firms and other custodians, nominees and fiduciaries for their expenses in
forwarding proxies and proxy material to the beneficial owners of its Common
Stock.
Annual Report
The Annual Report of the Company for the year ended November 30, 1997,
is being mailed to Shareholders concurrently with this Proxy Statement.
The Annual Report is not to be considered a part of the proxy soliciting
materials.
Corporate Governance
The By-Laws of the Corporation provide that the business shall be
managed by a Board of Directors, up to eleven (11) in number, who need not
be residents of Pennsylvania or Shareholders of the Corporation, and who
normally serve for terms of three (3) years each. The Company presently
has seven (7) Directors.
During the past fiscal year, the Board of Directors met eight (8)
times. All Directors attended more than 90% of the Board of Directors and
Committee Meetings they were scheduled to attend.
Because of the multitude of matters requiring Board consideration,
the Board of Directors has established a number of committees to devote
attention to specific subjects, as further described below.
Committees of the Board
Acquisition, Divestiture, and Major New Business Development
Committee: This committee reviews and recommends to the Board matters
involving acquisition of companies and product lines, and divestiture
of plant and/or product lines. The current members of this committee
are Gerald A. Ryan, Chairman; Edwin R. Bindseil; John P. Freeman;
Melvin Kutchin; and Richard A. Southworth. It met three (3) times in
1997.
Audit Committee: The Audit Committee recommends to the Board
the engagement of independent public accountants to audit the financial
statements of the Company. It also negotiates and recommends the fee
to be paid by the Company to the Auditors for audit and non-audit
services. Its responsibility further includes reviewing the proposed
scope and results of the audit, as well as the scope, adequacy and
results of the Company's internal audit and control procedures.
The current members of the Audit Committee are: John M. Petersen,
Chairman; and Gerald A. Ryan. It met four (4) times in 1997.
Compensation Committee: The Compensation Committee reviews and
makes recommendations to the Board on salary, incentive compensation
practices and benefit programs for the compensation of the President
and other key employees; recommends to the Board the amount and method
of compensation of Board members; and reviews annually the operation
and performance of incentive compensation plans that apply to the
President and other key employees of the Company. The current members
of this committee are James F. Toohey, Chairman; Edwin R. Bindseil;
John M. Petersen; and Gerald A. Ryan. It met four (4) times in 1997.
Finance Committee: The Finance Committee of the Board of
Directors has the responsibility of analysis of the financial condition
and trends of the Company. The Committee reports the information to the
full Board for possible resolution or action. Included as specific
responsibilities of this Committee are: ratifying and approving all
financial projections, forecasts and expectations that are intended for
submission to banks, financial institutions or the public. The current
members of this Committee are John P. Freeman, Chairman; Edwin R.
Bindseil; John M. Petersen; and Gerald A. Ryan. It met eleven (11)
times in 1997.
Nominating Committee: This Committee has the responsibility for
recommending to the Board of Directors nominees to fill Board vacancies.
The Nominating Committee also has the responsibility for providing the
evaluation of director performance, bringing to the Board recommendations
for the membership of the Committees of the Board, and recommending to
the Board a successor to the Chief Executive Officer when a vacancy
occurs through retirement or otherwise. The Committee will consider
Board nominees recommended by management or shareholders, and such
recommendations, together with appropriate biographical information,
may be delivered in writing to the attention of the Nominating Committee
Chairman at the Company's principal executive offices. The current
members of this Committee are James F. Toohey, Chairman; Melvin Kutchin;
and Gerald A. Ryan. It met three (3) times in 1997.
<PAGE>
Election of Directors
The Company presently has seven (7) Directors. It is intended that
the proxies given to Directors will be used to elect the nominees named
below, all of whom are now members of the Board of Directors and whose
present terms expire at the time of this meeting. Richard A. Southworth
was appointed a Director of the Company in March of 1997.
First Term
Elected to
Name Age Director Term End
Melvin Kutchin 72 1994 2 yrs. 2000
John M. Petersen 69 1970 3 yrs. 2001
Richard A. Southworth 55 ---- 3 yrs. 2001
James F. Toohey 63 1968 3 yrs. 2001
The terms of the following three (3) Directors extend beyond the time of
this meeting:
First Term
Elected to
Name Age Director Term End
Edwin R. Bindseil 67 1991 3 yrs. 1999
John P. Freeman 43 1991 3 yrs. 1999
Gerald A. Ryan 62 1968 3 yrs. 2000
Directors of the Company
Edwin R. Bindseil obtained his undergraduate degree in Chemical
Engineering from the University of Detroit and an MBA from Harvard University.
In 1989, Mr. Bindseil retired from AMSCO after 31 years of service, 22 years
of which he served in senior executive management positions, including
general management, marketing, operations, research and development,
acquisitions and corporate strategic planning. Since 1990, Mr. Bindseil
has been an independent businessman, consultant and entrepreneur. He also
serves as a Director of a number of privately held companies.
John P. Freeman is a graduate of Gannon University in Accounting and
is a Certified Public Accountant and Certified Management Accountant. He
joined the Company in 1988 as Controller. Prior to that time, he was a
principal in a public accounting firm. In January of 1990, he was named
Vice President and Chief Financial Officer.
Melvin Kutchin is a graduate of the University of Pennsylvania and
was appointed a Director of the Company in October of 1994. He served as
President of Kitchen and Kutchin, Inc., manufacturer's representative of
electronic components, from 1961 through January 1994 when he became Chairman
of the Board. From 1980 through 1990, he was President of JBM Electronics,
manufacturer of delay lines and other magnetic devices.
John M. Petersen is a graduate of the University of Pittsburgh. He
is the retired President and Chief Executive Officer of Erie Family Life
Insurance Company, Erie Indemnity Company, Erie Insurance Company and
Flagship City Insurance Company, comprising the Erie Insurance Group, and
serves as a Director of each of these Companies. Since 1995, he has been
an investment consultant. Mr. Petersen is a founder and has served as a
Director of Spectrum since 1970.
Gerald A. Ryan is a graduate of the Massachusetts Institute of
Technology and has been a Director of the Company since its inception and
Chairman since 1991. Mr. Ryan is a principal with Erie Business Management
Corporation, Erie, Pennsylvania, which invests in and manages various
businesses. Mr. Ryan serves as Chairman of the Board of Automated Industrial
Systems, Inc. and Rent-Way, Inc. a company listed on NASDAQ in the
rental-purchase business and is Chairman and Chief Executive Officer of
Skinner Engine Company which manufactures and rebuilds mixers for use in
the rubber industry.
Richard A. Southworth is a graduate of Gannon University in Mechanical
Engineering and Mathematics. He joined the Company in 1991 as Vice Present
and General Manager. Prior to joining the Company, Mr. Southworth held
executive positions with National Water Specialties, Philips Components,
Murata Electronics North America, and Erie Technological Products. In 1997,
Mr. Southworth was named President and Chief Executive Officer.
James F. Toohey is a graduate of Gannon University and Dickinson School
of Law and is a practicing member of the Erie County Bar Association. He is
a member of the law firm of Quinn, Buseck, Leemhuis, Toohey & Kroto, Inc.,
general counsel to the Company, and has been a Director and Secretary of
the Company since its organization.
Compensation of Directors
Directors who are not full-time employees are compensated for services
as Directors as authorized and approved by the full Board of Directors. In
1997, the Directors received annual compensation, paid monthly, as follows:
Board of Directors Annual Retainer. . . . . . . . . . $8,000
Attendance at each Board Meeting. . . . . . . . . . . 500
Attendance at each Committee Meeting. . . . . . . . . 250
Chairman at each Committee Meeting. . . . . . . . . . 50
Secretary . . . . . . . . . . . . . . . . . . . . . . 2,100
<PAGE>
Securities Ownership
The following table sets forth, as of February 18, 1998, the
securities beneficially owned by: (i) all persons known to the Company to be
the beneficial owners of more than 5% of the Company's Common Stock, (ii)
each Director of the Company, (iii) each of the executive officers named in
the Summary Compensation Table, and (iv) all Officers and Directors of the
Company as a group. Except as otherwise indicated, all Shareholders listed
below have record and beneficial ownership of, and sole voting and
dispositive power over, the securities listed.
Total
Shares of Common Beneficial Approximate
Common Stock Ownership of Percentage of
Stock Options Common Stock Common Stock
Beneficial Owner Owned Owned (1) Outstanding (1) Outstanding (1)
David L. Babson and
Company Incorporated(2) 792,600 - 792,600 7.23%
Edwin R. Bindseil 97,600 2,500 100,100 0.91%
John P. Freeman(3) 38,651 10,000 48,651 0.44%
Joseph J. Gaynor(3) 7,194 25,000 32,194 0.29%
Melvin Kutchin(4) 15,000 2,500 17,500 0.16%
John M. Petersen(5) 341,935 2,500 344,435 3.14%
Gerald A. Ryan(6) 165,340 2,500 167,840 1.53%
Robert L. Smith(3) 7,210 4,000 11,210 0.10%
Richard A. Southworth(3) 22,870 26,666 49,536 0.45%
James F. Toohey(7) 340,394 2,500 342,894 3.13%
All Officers and
Directors as a Group 1,050,531 90,831 1,141,362 10.41%
(12 persons)
(1) Includes only Common Stock Options exercisable within sixty days of the
date of this Proxy Statement, which securities are deemed for purposes
of the Securities Act of 1933 to be owned beneficially (but not of
record) by their respective holders. The shares underlying these
securities are deemed to be outstanding for purposes of determining the
percent of class with respect to each Holder and all Directors and
Officers as a group.
(2) Based upon information set forth in Schedule 13G as filed on January 20,
1998, with the Securities and Exchange Commission by David L. Babson
and Company Incorporated, One Memorial Drive, Cambridge, Massachusetts,
02142.
(3) Includes the following shares held in the Company's 401(k) Profit
Sharing Plan for the benefit of the named individual: 5,724 shares
for Mr. Freeman, 3,194 shares for Mr. Gaynor, 6,710 shares for Mr. Smith,
and 4,176 shares for Mr. Southworth.
(4) Includes 10,000 shares of Common Stock held by Mr. Kutchin's spouse.
(5) Includes 20,000 shares of Common Stock held by Mr. Petersen's spouse.
(6) Includes 115,391 shares of Common Stock held in a Keogh Plan for the
benefit of Mr. Ryan and 1,740 shares of Common Stock held in Individual
Retirement Accounts for the benefit of Mr. Ryan and his spouse.
(7) Mr. Toohey is a member of the law firm of Quinn, Buseck, Leemhuis,
Toohey and Kroto, Inc. which holds 339,310 shares of Common Stock in
its Profit Sharing Plan. Of this amount, 197,385 shares are included
in the table above for Mr. Toohey. Mr. Toohey disclaims beneficial
ownership as to all other shares held by such firm and does not have
voting or dispositive power with respect thereto.
<PAGE>
<TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Quinn, Buseck, Leemhuis, Toohey & Kroto, Inc. performed legal services
for the Company during the 1997 fiscal year. This law firm is expected to
continue to perform such services during the current fiscal year. James F.
Toohey, a Director of the Company, is a partner in this law firm.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows the compensation
paid to the President and Chief Executive Officer and each of the next three
most highly compensated executive officers of the Company who served as
executive officers at the end of the 1997 fiscal year, for services rendered
to the Company and its subsidiaries during fiscal year 1997. Except for the
individuals listed below, no executive officer of the Company earned salary
and bonus in excess of $100,000 during the 1997 fiscal year. The table also
includes amounts relating to the fiscal years 1996 and 1995. Inapplicable
column headings have been omitted.
SUMMARY COMPENSATION TABLE
<CAPTION> Long-Term
Compensation
Annual Compensation Awards
Other All
Annual Other
Name and Salary Bonus Comp. Options Comp.
Principal Position Year ($)(1) ($)(2) ($)(3) (#) ($)(4)
<S> <C> <C> <C> <C> <C> <C>
Richard A. Southworth 1997 192,635 42,630 - 20,000 4,750
President, Chief Executive 1996 141,154 46,800 - 20,000 4,699
Officer 1995 123,500 - - - 3,088
Joseph J. Gaynor 1997 122,887 27,360 - 15,000 2,433
Vice President, General 1996 113,000 33,000 - 15,000 1,460
Manager of Spectrum 1995 108,673 - - - 1,274
Control Technology, Inc.
John P. Freeman 1997 98,808 28,224 12,914 17,500 2,470
Vice President, 1996 92,304 34,445 21,711 10,000 3,169
Chief Financial Officer 1995 88,769 - 11,101 10,000 2,219
Robert L. Smith 1997 88,577 21,888 - 5,000 4,429
Vice President, Quality 1996 - - - - -
and Technology 1995 - - - - -
<FN>
(1) Includes amounts deferred pursuant to Section 401(k) of the Internal
Revenue Code.
(2) Management Incentive Plan awards paid in 1997 and 1996 attributable to
1996 and 1995, respectively, including amounts deferred pursuant to
Section 401(k) of the Internal Revenue Code.
(3) Amounts earned under the Company's Directors' Performance Incentive Plan.
(4) Matching contributions made by the Company to the Spectrum Control, Inc.
401(k) Profit Sharing Plan on behalf of the named executive officers.
(5) Mr. Smith was named an executive officer of the Company in fiscal 1997.
Accordingly, compensation amounts for fiscal years 1996 and 1995 have
been omitted.
</FN>
</TABLE>
<PAGE>
<TABLE>
1997 OPTION GRANTS
The following table shows information regarding grants of stock options
in fiscal year 1997 to the named executive officers.
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Individual Grants Appreciation
% of Total For Option Term (3)
Options
Granted to
Employees
Options in 1997 Exercise
Granted Fiscal Yr. Price Expiration
Name (#)(1) (2) ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Richard A.
Southworth 15,000 12.77 3.06 12/04/01 12,692 28,045
5,000 4.26 3.50 03/06/02 4,835 10,684
Joseph J. Gaynor 15,000 12.77 3.06 12/04/01 12,692 28,045
John P. Freeman 17,500 14.89 3.06 12/04/01 14,807 32,720
Robert L. Smith 5,000 4.26 3.06 12/04/01 4,231 9,348
<FN>
(1) Such options were all granted under the Company's Stock Option Plan of
1995. Options are exercisable in three equal annual installments
commencing two years from the date of grant. All unexercised options
expire five years from the date of grant.
(2) The Company granted options representing 117,500 shares to employees
during fiscal year 1997.
(3) The dollar amounts under these columns are the result of calculations
at 5% and 10% annual rates of appreciation as prescribed by the
Securities and Exchange Commission. The dollar amounts are not
intended to forecast possible future appreciation, if any, of the
stock price. The Company did not use an alternative formula for
a grant date valuation, as it is not aware of any formula which will
determine with reasonable accuracy a present value based on future
unknown or volatile factors.
</FN>
</TABLE>
<PAGE>
<TABLE>
Option Exercises and 1997 Fiscal Year End Values Table. The following
sets forth information with respect to the named executive officers concerning
the exercise of options during the fiscal year ended November 30, 1997 and
unexercised options held as of November 30, 1997.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-Money Options
Options at Fiscal at Fiscal Year End
Shares Year End (#) ($)(2)
Acquired
on Value
Exercise Realized Unexer- Unexer-
Name (#) ($)(1) Exercisable cisable Exercisable cisable
<S> <C> <C> <C> <C> <C> <C>
Richard A.
Southworth - - 13,333 46,667 14,166 96,147
Joseph J. Gaynor - - 13,333 36,667 14,166 75,522
John P. Freeman 25,000 20,313 3,333 34,167 11,457 85,418
Robert L. Smith - - 2,000 9,000 2,125 19,251
<FN>
(1) Market value of underlying securities on date of exercise, minus the
exercise price.
(2) Total value of options (market value minus exercise price) based on a
per share fair market value of Company Common Stock of $5.3125 at
November 30, 1997.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
As discussed above, the members of the Compensation Committee during
1997 were Messrs. Bindseil, Petersen, Ryan and Toohey. All four members are
non-management or outside directors. None of the executive officers of the
Company has served on the Board of Directors or Compensation Committee of
any other entity of which any member of the Spectrum Board is in any way
affiliated.
Compensation Committee Report
The Company's Compensation Committee is charged with the responsibility
of recommending an executive compensation program, plans and policies to the
Board of Directors.
The Compensation Committee is committed to compensating the key
executives in such a manner as to encourage them to develop business
strategies to capitalize on Spectrum's position in the electronic control
products and systems business and to grow in new technology markets. The
Committee is dedicated to attracting and retaining the best executive talent
available to achieve its aggressive strategy.
Accordingly, the Committee periodically retains the services of
compensation consultants to prepare and update executive compensation studies.
As a result, the Committee has adopted a compensation package comprised of
base salary, cash awards and performance-based stock options.
Base Salary
The Committee's goal is to establish base salaries which are fair,
reasonable and competitive with similar industrial companies. With this in
mind, the Committee periodically reviews and analyzes compensation consultant
data and establishes base salaries within plus or minus 20% of the estimated
average base compensation levels of similar companies as indicated in the
consultant's report.
Annual Cash Awards
The Company's executive officers are eligible for annual cash awards
under the Company's Management Incentive Plan (the "MIP"). The purpose of
the Plan is to provide strong incentive for key employees to properly
motivate individuals under their direction, thereby obtaining for the
shareholders the best financial results possible under the prevailing
circumstances. The MIP generally provides for cash awards commencing upon
attainment of 90% of the Annual Operating Plan. Based upon these factors,
aggregate awards of $301,020 were earned for the fiscal year 1997. In
accordance with the terms of the MIP, these amounts were paid in 1998.
Long-Term Performance Based Incentive
In recognition that an overall compensation package should include
rewards for efforts which impact on the value of the company stock, the
Committee has recommended and the Board has adopted a policy to award
competitive amounts, not to exceed 1% of the total outstanding shares, of
annual stock options to the key executives of Spectrum priced at 100% of
fair market value as of the date of grant. The grant of these options shall
be consistent with the adoption of the Annual Operating Plan.
The Company currently utilizes the Stock Option Plan of 1995 to
provide the annual grant of stock options.
1997 Chief Executive Officer Compensation
Mr. Southworth's current base salary of $200,000 was determined in
accordance with the criteria described in the "Base Salary" section of this
report. The Management Incentive Plan for 1997 provided for an award to
Mr. Southworth not to exceed 65% of his annualized salary. This award is
calculated and paid upon completion of the year end audit and is
arithmetically determined based upon performance, achievement to budget,
and attainment of specifically provided objectives. Based upon these
factors, an award of $104,000 was earned for performance in fiscal year 1997.
Under the terms of the MIP, this award was paid in 1998.
EMPLOYEE 401(k) PROFIT SHARING PLAN
The Company maintains a Qualified Employee 401(k) Profit Sharing Plan.
The Company makes annual profit sharing contributions to the Plan in an
amount determined by the Board of Directors. The assets of the Plan are
held in trust and invested in various mutual funds under the direction of
the Plan participants. All employees with at least one year of service are
automatically eligible for participation in the Plan. The annual allocation
to each Employee's Profit Sharing Account is based upon the actual
compensation paid to the Participant.
A participant becomes fully vested in his Profit Sharing Account
balance on the earliest of the following dates: (i) upon the completion of
seven years of service; (ii) upon attaining normal retirement age of 65;
(iii) upon incurring total disability; or (iv) on the date of the
Participant's death. A Participant may not receive a distribution from
the Employee Profit Sharing Account prior to the earliest of the following
dates: (i) termination of employment with the Company; (ii) retirement or
(iii) death. The Plan provides that distribution of the Participant's
entire interest in the Plan must begin no later than the taxable year in
which the Participant attains age seventy and one-half (70-1/2) or, if later,
the year the Participant retires and terminates employment with the Employer.
The Plan includes a tax deferred employee savings plan pursuant to
Section 401(k) of the Internal Revenue Code. The Company matches an
employee's contribution to the savings plan at a rate determined by the
Board of Directors. The Company's matching contribution to the 401(k)
plan is not subject to any vesting requirements.
Directors' Long-Term Incentive Plan
The Board of Directors has adopted a Directors' Performance Incentive
Plan (the "DPIP") which provides for an annual cash payment to each Director
of an amount equal to the price appreciation of 5,224 common shares. Price
appreciation is measured over a five-year period, ending on June 30 of the
current year, and is subject in all cases of adjustments for stock splits,
combinations and similar transactions. Aggregate amounts of $73,000 in 1997,
$145,000 in 1996 and $89,000 in 1995 were paid under the DPIP. In connection
with the adoption of the 1996 Non-Employee Directors Stock Option Plan,
the Board of Directors amended the DPIP to terminate effective July 1, 2000.
The 1996 Non-Employee Directors Stock Option Plan (the "Plan") was
approved by the Corporation's stockholders on April 1, 1996. The Plan is
designed to promote the long-term success of the Corporation by creating a
mutuality of interests between the non-employee directors and the stock-
holders. Under the terms of the Plan, stock options to purchase 7,500
shares of Common Stock are granted annually to all qualified non-employee
Directors. The option exercise price is equal to the market price of the
Company's Common Stock on the date of the option grant. The options become
exercisable at varying dates and expire five years from the date of grant.
In 1997 and 1996, aggregate options to purchase 37,500 shares of Common
Stock were granted to non-employee Directors, at an exercise price of $3.50
per share.
Stock Price Performance Graph
The following graph shows the Company's total return to shareholders
compared to the S&P 500 Index and the NASDAQ Electronic Components Stock
Index over the five year period from 1993 though 1997. The graph assumes
that $100 was invested on December 1, 1992, in the Company's Common Stock
and in each of the other indices.
1992 1993 1994 1995 1996 1997
Spectrum $ 100 $ 173 $ 80 $ 130 $ 125 $ 213
S&P 500 $ 100 $ 114 $ 117 $ 158 $ 198 $ 249
NASDAQ
Electronic
Components
Stock Index $ 100 $ 153 $ 172 $ 318 $ 494 $ 588
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and owners of more than 10% of
the Common Stock to file reports of ownership of equity securities of the
Company and to furnish copies of such reports to the Company. Based on
a review of such reports, the Company believes that during the fiscal year
ended November 30, 1997, all such filing requirements were met except that
Form 4s were inadvertently filed late for each of the Directors on one
occasion, and for Melvin Kutchin, on two occasions.
Appointment of the Company's Auditors for the Fiscal Year 1998
Upon recommendation of the Audit Committee, the Board of Directors
has resolved to appoint Ernst & Young LLP as the Company's auditors for
the fiscal year ended November 30, 1998, subject only to ratification by
the Shareholders.
Representatives of Ernst & Young LLP will be present at the meeting
with the opportunity to make a statement, if they desire to do so, and such
representatives will be available to respond to appropriate questions. All
services of the auditors were reviewed by the Audit Committee and approved
by the Board of Directors prior to commencement. No relationship exists
other than the usual relationship between independent public accountant and
client.
General Matters
The Directors know of no matter, other than those referred to in this
Proxy Statement, which will be presented at the meeting. However, if other
matters properly come before the meeting or any of its adjournments, the
person or persons voting the proxies will vote them in accordance with their
judgment in such matters. Should any Nominee for the office of Director
become unable to accept nomination or election, the persons named in the
proxy will vote it for the election of such other person, if any, as the
Board of Directors may recommend. The Board of Directors is not aware that
any Nominee named herein will be unable or unwilling to accept nomination
or election.
You are advised that the deadline for submitting Shareholder proposals
for consideration at the next annual meeting is December 11, 1998.
The cost of soliciting proxies will be borne by the Company. Regular
employees of the Company may solicit proxies personally or by telephone.
In addition to solicitation by mail and regular employees as aforesaid,
arrangements may be made with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy soliciting material to
their principals, and the Company may reimburse them for their expense in
so doing.
You are urged to sign and return your proxy promptly to make certain
your shares will be voted at the meeting. You may revoke the proxy at any
time before it is voted, and if you attend the meeting, as we hope you will,
you may vote your shares in person. For your convenience, a return envelope
is enclosed, requiring no additional postage if mailed in the United States.
JAMES F. TOOHEY, Secretary
Dated: March 4, 1998
