SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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Spectrum Control, Inc.
(Name of Registrant as Specified In Its Charter)
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<PAGE>
SPECTRUM CONTROL, INC.
8031 Avonia Road
Fairview, Pennsylvania 16415
NOTICE OF ANNUAL SHAREHOLDER MEETING
April 3, 2000
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 3, 2000, 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.
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 15,
2000 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 3, 2000
Solicitation of Proxy
This Proxy Statement and the accompanying form of proxy will be mailed
to all Shareholders of Spectrum Control, Inc., 8031 Avonia Road, Fairview,
Pennsylvania 16415 ("Spectrum", "the Corporation" or "the Company") by March
1, 2000, and is furnished in connection with the Directors' solicitation of
proxies for the Annual Meeting of Shareholders to be held on April 3, 2000 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 15, 2000, will be
entitled to vote. On that date there were 11,001,370 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, 1999,
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 eight (8)
Directors.
During the past fiscal year, the Board of Directors met eight (8) times.
All Directors attended more than 80% 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 1999.
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 1999.
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;
J. Thomas Gruenwald; John M. Petersen; and Gerald A. Ryan. It met five
(5) times in 1999.
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; Gerald A. Ryan; and Richard A. Southworth.
It met eleven (11) times in 1999.
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 two (2) times in
1999.
<PAGE>
Election of Directors
The Company presently has eight (8) 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.
First Term
Elected to
Name Age Director Term End
J. Thomas Gruenwald 52 ---- 3 yrs. 2003
Melvin Kutchin 74 1995 3 yrs. 2003
Gerald A. Ryan 64 1968 3 yrs. 2003
The terms of the following five (5) Directors extend beyond the time of this
meeting:
First Term
Elected to
Name Age Director Term End
Edwin R. Bindseil 69 1991 3 yrs. 2002
John P. Freeman 45 1991 3 yrs. 2002
John M. Petersen 71 1970 3 yrs. 2001
Richard A. Southworth 57 1998 3 yrs. 2001
James F. Toohey 65 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.
J. Thomas Gruenwald obtained his undergraduate degree in Physics from
the University of Cincinnati, and his Masters degree and Ph.D. in Theoretical
Physics from Purdue University. He has been employed by Tellabs, Inc. since
1991, serving in various executive positions including Vice President of
Strategic Resources and Director of Engineering - Network Access Division.
Currently, Mr. Gruenwald serves as Vice President and General Manager of the
Broadband Media Group and Network Solutions Group. Prior to joining Tellabs,
Mr. Gruenwald served as President of UNI Quality, Inc., a professional
services firm, and held several executive and technical positions with AT&T.
He was appointed a Director of the Company in June of 1999.
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 Director/Chairman Emeritus of 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
1999, 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 15, 2000, 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 Inc.(2) 1,154,050 - 1,154,050 10.39%
Wellington Management
Company LLP(3) 776,900 - 776,900 6.99%
Kern Capital
Management, LLC(4) 724,800 - 724,800 6.52%
Dimensional Fund
Advisors, Inc.(5) 648,300 - 648,300 5.83%
Edwin R. Bindseil 97,600 15,000 112,600 1.01%
John P. Freeman(6) 39,956 13,167 53,123 0.48%
J. Thomas Gruenwald - - - -
Lawrence G. Howanitz(6)(7) 2,256 4,000 6,256 0.06%
Melvin Kutchin(8) 15,000 15,000 30,000 0.27%
John M. Petersen(9) 341,935 15,000 356,935 3.21%
Gerald A. Ryan(10) 117,679 15,000 132,679 1.19%
Robert L. Smith(6) 10,932 6,667 17,599 0.16%
Richard A. Southworth(6) 37,636 10,000 47,636 0.43%
James F. Toohey(11) 300,394 15,000 315,394 2.84%
Brian F. Ward(6) 1,996 4,000 5,996 0.05%
All Officers and
Directors as a Group 972,551 114,167 1,086,718 9.78%
(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, Inc.,
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) Based upon information set forth in Schedule 13G as filed with the
Securities and Exchange Commission by Kern Capital Management, LLC, 114
West 47th Street, Suite 1926, New York, New York 10036.
(5) Based upon information set forth in Schedule 13G as filed with the
Securities and Exchange Commission by Dimensional Fund Advisors, Inc.,
1299 Ocean Avenue, 11th Floor, Santa Monica, California, 90401.
(6) Includes the following shares held in the Company's 401(k) Profit
Sharing Plan for the benefit of the named individual: 6,498 shares for
Mr. Freeman, 1,856 shares for Mr. Howanitz, 7,432 shares for Mr. Smith,
5,276 shares for Mr. Southworth, and 1,996 shares for Mr. Ward.
(7) Includes 400 shares of Common Stock held by Mr. Howanitz's spouse and
child.
(8) Includes 10,000 shares of Common Stock held by Mr. Kutchin's spouse.
(9) Includes 20,000 shares of Common Stock held by Mr. Petersen's spouse.
(10) Includes 69,130 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.
(11) 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Quinn, Buseck, Leemhuis, Toohey & Kroto, Inc. performed legal services
for the Company during the 1999 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 1999 fiscal year, for services rendered
to the Company and its subsidiaries during fiscal year 1999. The table also
includes amounts relating to the fiscal years 1998 and 1997. Inapplicable
column headings have been omitted.
<PAGE>
<TABLE>
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 1999 229,308 228,850 - 30,000 5,733
President, Chief Executive 1998 209,231 80,560 - 25,000 5,231
Officer 1997 192,635 104,000 - 20,000 4,750
John P. Freeman 1999 124,269 66,864 20,859 21,000 2,982
Vice President, 1998 106,461 24,192 12,125 12,000 2,661
Chief Financial Officer 1997 98,808 32,411 12,914 17,500 2,470
Brian F. Ward 1999 123,923 66,864 - 15,000 2,973
Vice President, 1998 103,923 19,716 - 12,000 2,598
Sales and Marketing (5) 1997 100,109 31,200 - - 22,896
Lawrence G. Howanitz 1999 117,558 62,370 - 21,000 2,351
Vice President, (6) 1998 - - - - -
Signal Products Group (6) 1997 - - - - -
Robert L. Smith 1999 105,712 60,297 - 12,000 2,518
Vice President, Quality 1998 94,499 21,888 - 12,000 2,363
and Technology 1997 88,577 27,238 - 5,000 2,473
<FN>
(1) Includes amounts deferred pursuant to Section 401(k) of
the Internal Revenue Code.
(2) Amounts earned under the Company's At-Risk Compensation
Plan and former 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 $20,000 in
relocation costs.
(6) Mr. Howanitz was named an executive officer of the
Company in fiscal 1999. Accordingly, compensation
amounts for fiscal years 1998 and 1997 have been omitted.
</FN>
</TABLE>
<PAGE>
<TABLE>
1999 OPTION GRANTS
The following table shows information regarding grants of stock options in
fiscal year 1999 to the named executive officers.
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Number Appreciation
of % of Total For Option Term (4)
Securities Options
Under- Granted to Exercise
lying Employees Price
Options in 1999 per
Granted Fiscal Yr. Share Expiration
Name (#)(1) (2) ($) (3) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Richard A.
Southworth 30,000 19.11 4.13 01/25/04 34,200 75,540
John P. Freeman 21,000 13.38 4.25 01/06/04 24,570 54,390
Brian F. Ward 15,000 9.55 4.25 01/06/04 17,550 38,850
Lawrence G.
Howanitz 21,000 13.38 4.25 01/06/04 24,570 54,390
Robert L. Smith 12,000 7.64 4.25 01/06/04 14,040 31,080
<FN>
(1) All options were 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 157,000 shares to employees
during fiscal year 1999.
(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 based on future unknown or volatile
factors.
</FN>
</TABLE>
<PAGE>
<TABLE>
Option Exercises and 1999 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,
1999 and unexercised options held as of November 30, 1999.
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 - - 13,333 75,001 103,851 482,716
John P. Freeman 15,531 87,113 - 48,001 - 316,528
Brian F. Ward 3,333 9,999 - 28,667 - 172,503
Lawrence G.
Howanitz 2,333 10,083 - 35,667 - 219,961
Robert L. Smith 3,666 13,645 - 28,334 - 173,422
<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 of option) based on a per share fair market value of
Company Common Stock of $10.875 at November 30, 1999.
</FN>
</TABLE>
Compensation Committee Interlocks and Insider Participation
As discussed above, the members of the Compensation Committee during
1999 were Messrs. Bindseil, Gruenwald, Petersen, Ryan and Toohey. All five
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, performance-based cash awards and long-term incentive 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.
Performance-Based 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 since 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. The ARC utilizes Profit Before Taxes (the "PBT") as a basis
for payment. Each year, the Board of Directors establishes a minimum PBT
increase over the prior year that must be achieved before the program is
activated. For 1999, the activation threshold was a 7% increase. There is a
graduated scale of payments for management if the increase in PBT exceeds the
activation threshold. Based upon these factors, aggregate awards of $632,605
were earned for the fiscal year 1999. In accordance with the terms of the
ARC, these performance-based cash awards were paid in fiscal year 2000.
Long-Term Incentive Stock Options
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.
1999 Chief Executive Officer Compensation
Mr. Southworth's base salary in 1999 of $230,000 was determined in
accordance with the criteria described in the "Base Salary" section of this
report. The At-Risk Compensation Plan for 1999 provided for a possible award
to Mr. Southworth not to exceed 100% of his annualized salary. The actual
award is calculated and paid upon completion of the year end audit and is
arithmetically determined based upon the increase in PBT over the prior year
and the minimum activation threshold established by the Board of Directors.
Based upon these factors, an award of $228,850 was earned for performance in
fiscal year 1999. Under the terms of the ARC, this award was paid in 2000.
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. Substantially all employees are 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 $126,000 in 1999,
$77,000 in 1998, and $73,000 in 1997 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
1999, aggregate options to purchase 37,500 shares of Common Stock were granted
to non-employee Directors, at an exercise price of $4.38 per share. In 1998,
aggregate options to purchase 37,500 shares of Common Stock were granted at an
exercise price of $6.00 per share. In 1997, 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 1995 though 1999. The graph assumes that $100
was invested on December 1, 1994, in the Company's Common Stock and in each of
the other indices.
1994 1995 1996 1997 1998 1999
Spectrum $ 100 $ 163 $ 156 $ 266 $ 209 $ 544
S&P 500 $ 100 $ 137 $ 176 $ 226 $ 280 $ 339
NASDAQ
Electronic
Components
Stock Index $ 100 $ 185 $ 287 $ 337 $ 418 $ 799
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, 1999, all such filing requirements were met except that a Form 4
was inadvertently filed late for Gerald A. Ryan on one occasion.
Appointment of the Company's Auditors for the Fiscal Year 2000
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, 2000, 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 exits 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 8, 2000.
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 1, 2000
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 3, 2000, 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 o
J. Thomas Gruenwald Melvin Kutchin Gerald A. Ryan
(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 2000.
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 , 2000
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
