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:
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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.
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2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SPECTRUM CONTROL, INC.
6000 West Ridge Road
Erie, Pennsylvania 16506
NOTICE OF ANNUAL SHAREHOLDER MEETING
April 5, 1999
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 5, 1999, at 9:00 a.m.,
prevailing time, for the following purposes:
1. To elect two Directors to hold office for a term of three 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 17,
1999 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 5, 1999
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 3,
1999, and is furnished in connection with the Directors' solicitation of proxies
for the Annual Meeting of Shareholders to be held on April 5, 1999 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 17, 1999, will be entitled to
vote. On that date there were 10,887,008 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, 1998,
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 1998.
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 three (3) times in 1998.
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 five (5) times in 1998.
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 1998.
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 1998.
<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,
both of whom are now members of the Board of Directors and whose present terms
expire at the time of this meeting.
First Term
Elected to
Name Age Director Term End
Edwin R. Bindseil 68 1991 3 yrs. 1999
John P. Freeman 44 1991 3 yrs. 1999
The terms of the following five (5) Directors extend beyond the time of
this meeting:
First Term
Elected to
Name Age Director Term End
Melvin Kutchin 73 1995 2 yrs. 2000
John M. Petersen 70 1970 3 yrs. 2001
Gerald A. Ryan 63 1968 3 yrs. 2000
Richard A. Southworth 56 1998 3 yrs. 2001
James F. Toohey 64 1968 3 yrs. 2001
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 the New York
Stock Exchange in the rental-purchase business.
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
1998, 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 17, 1999, 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) 1,286,600 - 1,286,600 11.71%
Wellington Management
Company LLP (3) 811,200 - 811,200 7.38%
Edwin R. Bindseil 97,600 7,500 105,100 0.96%
John P. Freeman(4) 38,977 22,500 61,477 0.56%
Joseph J. Gaynor(4) 12,523 15,000 27,523 0.25%
Melvin Kutchin(5) 15,000 7,500 22,500 0.20%
John M. Petersen(6) 341,935 7,500 349,435 3.18%
Gerald A. Ryan(7) 205,340 7,500 212,840 1.94%
Robert L. Smith(4) 10,548 3,667 14,215 0.13%
Richard A. Southworth(4) 36,762 13,333 50,095 0.46%
James F. Toohey(8) 340,394 7,500 347,894 3.17%
Brian F. Ward (4) 1,550 3,334 4,884 .04%
All Officers and
Directors as a Group 1,114,349 101,668 1,216,017 11.07%
(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 with the
Securities and Exchange Commission by David L. Babson and Company
Incorporated, One Memorial Drive, Cambridge, Massachusetts, 02142.
(3) Based upon information set forth in Schedule 13G as filed with the
Securities and Exchange Commission by Wellington Management Company,
LLP, 75 State Street, Boston, Massachusetts 02109.
(4) Includes the following shares held in the Company's 401(k) Profit
Sharing Plan for the benefit of the named individual: 6,050 shares
for Mr. Freeman, 3,633 shares for Mr. Gaynor, 7,048 shares for
Mr. Smith, 4,402 shares for Mr. Southworth, and 1,550 shares for
Mr. Ward.
(5) Includes 10,000 shares of Common Stock held by Mr. Kutchin's spouse.
(6) Includes 20,000 shares of Common Stock held by Mr. Petersen's spouse.
(7) 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.
(8) 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 1998 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 four most
highly compensated executive officers of the Company who served as executive
officers at the end of the 1998 fiscal year, for services rendered to the
Company and its subsidiaries during fiscal year 1998. The table also includes
amounts relating to the fiscal years 1997 and 1996. Inapplicable column
headings have been omitted.
SUMMARY COMPENSATION TABLE
<CAPTION> Long-Term
Compensation
Annual Compensation Awards
Other Securities All
Annual Underlying 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 1998 209,231 80,560 - 25,000 5,231
President, Chief Executive 1997 192,635 104,000 - 20,000 4,750
Officer 1996 141,154 42,630 - 20,000 4,699
Joseph J. Gaynor 1998 126,237 21,060 - - 3,166
Vice President, General 1997 122,887 27,300 - 15,000 2,433
Manager of Spectrum 1996 113,000 27,360 - 15,000 1,460
Control Technology, Inc.
John P. Freeman 1998 106,461 24,192 12,125 12,000 2,661
Vice President, 1997 98,808 32,411 12,914 17,500 2,470
Chief Financial Officer 1996 92,304 28,224 21,711 10,000 3,169
Brian F. Ward 1998 103,923 19,716 - 12,000 2,598
Vice President, (5) 1997 100,109 31,200 - - 22,896
Sales and Marketing (6) 1996 - - - - -
Robert L. Smith 1998 94,499 21,888 - 12,000 2,363
Vice President, Quality 1997 88,577 27,238 - 5,000 2,473
and Technology (6) 1996 - - - - -
<FN>
(1) Includes amounts deferred pursuant to Section 401(k) of the
Internal Revenue Code.
(2) Amounts earned under the Company's Management Incentive Plan.
(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) All other compensation in fiscal 1997 includes $20,000 in relocation
costs.
(6) Mr. Ward and Mr. Smith were named executive officers of the Company
in fiscal 1997. Accordingly, compensation amounts for fiscal year
1996 have been omitted.
</FN>
</TABLE>
<PAGE>
<TABLE>
1998 OPTION GRANTS
The following table shows information regarding grants of stock options in
fiscal year 1998 to the named executive officers.
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Number Appreciation
of % of Total For Option Term (4)
Securities Options
Under- Granted to Exercise
lying Employees Price
Options in 1998 per
Granted Fiscal Yr. Share Expiration
Name (#)(1) (2) ($) (3) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Richard A.
Southworth 25,000 25.00 5.88 04/06/03 40,579 89,669
Joseph J. Gaynor - - - - - -
John P. Freeman 12,000 12.00 5.88 04/06/03 19,478 43,041
Brian F. Ward 12,000 12.00 5.88 04/06/03 19,478 43,041
Robert L. Smith 12,000 12.00 5.88 04/06/03 19,478 43,041
<FN>
(1) All options were granted under the Company's Stock Option Plan of 1995.
Options are exercisable in three 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 100,000 shares to employees during
fiscal year 1998.
(3) The exercise price per share of each option is equal to the fair market
value of Common Stock on the date of grant.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%, as
prescribed by the Securities and Exchange Commission, compounded annually
from the date the respective options were granted to their expiration date.
The gains shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise of the
option or the sale of the underlying shares. The actual gains, if any, on
the stock option exercises will depend on the future performance of the
Common Stock, the optionholder's continued employment with the Company
through the option term, and the date on which the options are exercised
and the underlying shares are sold. 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 on future unknown
or volatile factors.
</FN>
</TABLE>
<PAGE>
<TABLE>
Option Exercises and 1998 Fiscal Year End Values Table. The following
table sets forth information with respect to the named executive officers
concerning the exercise of options during the fiscal year ended November 30,
1998 and unexercised options held as of November 30, 1998.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying 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 26,666 54,998 - 58,334 - 36,147
Joseph J. Gaynor 20,000 50,000 5,000 25,000 5,938 28,750
John P. Freeman - - 10,000 39,500 19,373 35,315
Brian F. Ward - - 1,666 15,334 1,978 3,959
Robert L. Smith - - 1,000 19,000 1,188 8,000
<FN>
(1) Market value of underlying securities on date of exercise, minus the
exercise price.
(2) Total value of options (market value of underlying securities minus
exercise price) based on a per share fair market value of Company
Common Stock of $4.1875 at November 30, 1998.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
As discussed above, the members of the Compensation Committee during
1998 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
which through 1998 were calculated under the Company's Management Incentive Plan
(the "MIP"), and commencing for 1999 under a plan known as the At-Risk
Compensation Plan, (the "ARC"). The purpose of these plans 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 provided for cash
awards commencing upon attainment of 90% of the annual operating plan. Based
upon these factors, aggregate awards of $278,431 were earned for the fiscal
year 1998 and, in accordance with the terms of the MIP, these amounts were
paid in 1999. The ARC utilizes Profit Before Taxes (the "PBT") as the basis
for payment. Each year, the Board of Directors will establish a minimum PBT
increase over the prior year that must be achieved before the program is
activated. For 1999, the activation threshold is a 7% increase. There is a
graduated scale of payments for management if the increase in PBT exceeds
the 7% activation threshold.
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 of annual stock options to the key executives of
Spectrum. Such options are priced at 100% of the Common Stock's 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.
1998 Chief Executive Officer Compensation
Mr. Southworth's current base salary of $212,000 was determined in
accordance with the criteria described in the "Base Salary" section of this
report. The Management Incentive Plan for 1998 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 $80,560
was earned for performance in fiscal year 1998. Under the terms of the MIP,
this award was paid in 1999.
EMPLOYEE 401(k) PROFIT SHARING PLAN
The Company maintains a Qualified Employee 401(k) Profit Sharing Plan.
Annual profit sharing contributions to the Plan, if any, are determined by the
Board of Directors. The assets of the Plan are held in trust and invested in
various mutual funds and collective trusts 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 $77,000 in 1998,
$73,000 in 1997 and $145,000 in 1996 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 stockholders.
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 1998, aggregate options to
purchase 37,500 shares of Common Stock were granted to non-employee
Directors, at an exercise price of $6.00 per share. In 1997 and 1996,
aggregate options to purchase 37,500 shares of Common Stock were granted 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 1994 though 1998. The graph assumes that $100
was invested on December 1, 1993, in the Company's Common Stock and in each of
the other indices.
1993 1994 1995 1996 1997 1998
Spectrum $ 100 $ 46 $ 75 $ 72 $ 123 $ 97
S&P 500 $ 100 $ 103 $ 139 $ 174 $ 219 $ 267
NASDAQ
Electronic
Components
Stock Index $ 100 $ 112 $ 207 $ 322 $ 379 $ 442
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 ending
November 30, 1998, all such filing requirements were met.
Appointment of the Company's Auditors for the Fiscal Year 1999
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 ending November 30, 1999, 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 10, 1999.
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 3, 1999
Document #26246
SPECTRUM CONTROL, INC-PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints, James F. Toohey as the Proxy of the
undersigned, with full power of substitution, to vote all of the undersigned's
shares of Common Stock in Spectrum Control, Inc., at the Annual Meeting of
Shareholders to be held on Monday, April 5, 1999, and at any adjournment
thereof, for the transaction of such business as may come before the meeting
and the following matters which are described in the Proxy Statement
accompanying the Notice of said meeting.
1. ELECTION OF DIRECTORS FOR the Nominees WITHHOLD AUTHORITY to
listed below vote for the Nominees
listed below
o o
Edwin R. Bindseil John P. Freeman
(To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list.)
2. Ratification of the appointment of Ernst & Young LLP as the Company's
auditors for the fiscal year 1999.
FOR o AGAINST o ABSTAIN o
3. In his discretion, the Proxy is authorized to vote upon such other business
as may properly come before the meeting.
(Continued on reverse side)
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDESIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND 2.
Please sign exactly as name appears below.
When shares are held by joint tenants, both
should sign. When signing as attorney, as
executor, administrator, trustee or
guardian, please give full title as such.
If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Signature
Signed if jointly held
Dated , 1999
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Document #26625
