<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
SPS Technologies, Inc.
- - -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
<PAGE>
SPS
Technologies (LOGO)
- - -------------------------------------------------------------------------------
SPS TECHNOLOGIES, INC.
101 GREENWOOD AVENUE, SUITE 470
JENKINTOWN, PENNSYLVANIA 19046
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
- - -------------------------------------------------------------------------------
The Annual Meeting of Shareholders of SPS Technologies, Inc. will be held on
Tuesday, April 29, 1997, at ten o'clock a.m., local time, at 17 Mellon Bank
Center, 1735 Market Street, Philadelphia, Pennsylvania 19101, in the Forum
Room (eighth floor), for the following purposes:
1. To elect two Class II directors for a term of three years;
2. To transact such other business as may properly come before the meeting or
any adjournments or postponements thereof.
All shareholders are cordially invited to attend the meeting. Shareholders of
record at the close of business on March 11, 1997 will be entitled to vote at
the meeting.
Aaron Nerenberg
Secretary
March 31, 1997
- - -------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
You are urged to mark, sign, date and promptly return your proxy in the
enclosed envelope.
- - -------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
===============================================================================
GENERAL
- - -------------------------------------------------------------------------------
This proxy statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders of SPS Technologies,
Inc. ("Company"), to be held on Tuesday, April 29, 1997, and at any
adjournments or postponements thereof. This proxy statement and the enclosed
form of proxy are first being mailed to shareholders on or about March 31,
1997.
Shareholders are requested to mark, sign, date and return in the envelope
provided, the enclosed proxy which is being solicited by the Board of
Directors of the Company. No postage is required if the proxy is returned in
the enclosed envelope and mailed in the United States.
Execution of the enclosed proxy will not affect a shareholder's right to
attend the meeting and vote in person. The proxy is revocable by delivering
written notice of revocation to the Secretary of the Company at any time
before the proxy is voted, by a properly executed, later-dated proxy, or by
attending the meeting and voting in person.
The cost of soliciting proxies will be paid by the Company. The Company
will reimburse brokers, custodians, nominees and fiduciaries for the cost of
forwarding materials to beneficial owners. Proxies may be solicited by
directors, officers and employees, but such persons will not be specially
compensated for such services.
- - -----------------------------------------------------------------------------
Voting Information
- - -----------------------------------------------------------------------------
Only record holders of Common Stock of the Company at the close of
business on March 11, 1997, are entitled to vote. On that date there were
issued and outstanding 6,022,771 shares of Common Stock, par value $1.00 per
share, each of which is entitled to one vote and which, in the election of
directors, has cumulative voting rights. This means that shareholders have
the right to multiply the number of votes to which they may be entitled by
the total number of directors to be elected in the same election and may cast
the whole number of such votes for one nominee or may distribute them among
any two or more nominees. Proxy holders may vote cumulatively for any or all
of the nominees, and it is the Company's intention to have the proxy holders
exercise such cumulative voting rights to elect the maximum number of
nominees proposed by the Board of Directors.
Shares represented by proxies in the accompanying form, unless otherwise
directed, will be voted at the Annual Meeting or any adjournments or
postponements thereof FOR the election of directors as stated under the
heading "Election of Directors." Management does not intend to bring any
other matters before the meeting, and it does not know of any additional
proposals to be presented by others. However, if any other matters properly
come before the meeting, the persons named in the accompanying proxy will
vote thereon in accordance with their best judgment. Under the Company's
By-laws, proposals of shareholders to be presented at the meeting must be
submitted in accordance with the procedures summarized below under the
heading "Proposals of Shareholders."
<PAGE>
- - -----------------------------------------------------------------------------
Ownership of Voting Securities
- - -----------------------------------------------------------------------------
As of February 28, 1997, the following persons were known by the Company
to be the principal beneficial owners of the voting securities of the
Company:
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Beneficial
of Beneficial Owner Ownership of Shares of Common Stock Percent of Class
- - -------------------------------------------------------------------------------------------
<S> <C> <C>
Gabelli Funds, Inc., 1,408,250(a) 23.4%
GAMCO Investors, Inc.,
Gabelli International
Limited,
Gabelli Asset Management
Company International
Advisory Services Ltd., and
Mario J. Gabelli
One Corporate Center
Rye, NY 10580-1434
Tinicum Investors, 989,333(b) 16.4%
RIT Capital Partners plc,
Putnam L. Crafts, Jr., and
Eric M. Ruttenberg,
990 Stewart Avenue
Garden City, NY 11530
Fidelity Management and Research 599,600(c) 9.9%
Company,
Fidelity Management Trust Company
82 Devonshire Street
Boston, MA 02109
Anne Hallowell Miller 279,496(d) 4.6%
c/o Stacey W. McConnell
MacElree, Harvey, Gallagher
& Featherman, Ltd.
P.O. Box 660
West Chester, PA 19381-0660
Howard T. Hallowell III 271,486(e) 4.5%
c/o Stacey W. McConnell
MacElree, Harvey, Gallagher
& Featherman, Ltd.
P.O. Box 660
West Chester, PA 19381-0660
</TABLE>
- - -----------------------------------------------------------------------------
(a) Based on information supplied by the named entities in a joint filing on
Schedule 13D made on December 27, 1996, with the Securities and Exchange
Commission. According to such filing, the named entities held sole,
shared or no voting and dispositive power over the shares as follows:
Gabelli Funds, Inc. -- 193,100 shares (sole voting and dispositive
power); GAMCO Investors, Inc. -- 1,181,390 shares (sole voting and
dispositive power) and 25,500 shares (no voting and sole dispositive
power); Gabelli International Limited (no voting or dispositive power);
and Gabelli Asset Management Company International Advisory Services Ltd.
-- 1,000 shares (sole voting and dispositive power). Mr. Mario J. Gabelli
is the majority stockholder of Gabelli Funds, Inc. and individually owns
7,260 shares (sole voting and dispositive power) of the Company's Common
Stock.
(b) Based on information supplied by the named entities in a joint filing on
Schedule 13D made on January 27, 1997, with the Securities and Exchange
Commission. According to such filing, the named entities held sole,
shared or no
2
<PAGE>
voting and dispositive power over the shares as follows: Tinicum
Investors -- 756,569 shares (sole voting and dispositive power); RIT
Capital Partners plc -- 132,311 shares (sole voting and dispositive
power); Putnam L. Crafts, Jr. -- 100,000 shares (sole voting and
dispositive power); and Eric M. Ruttenberg -- 1,065 shares (sole voting
and dispositive power). Eric M. Ruttenberg, a director of the Company, is
a general partner of Tinicum Investors.
(c) Based on information supplied by the named entities in a joint filing on
Schedule 13G made on February 14, 1997 with the Securities and Exchange
Commission. According to such filing, the named entities, both
wholly-owned subsidiaries of FMR Corp., held sole, shared or no voting
and dispositive power over the shares as follows: Fidelity Management &
Research Company -- 282,300 shares (no voting or dispositive power);
Fidelity Management Trust Company -- 317,300 shares (no voting or
dispositive power). FMR Corp. has sole voting power over 334,300 shares,
and sole dispositive power over 599,600 shares. Neither FMR Corp. nor
Edward C. Johnson, 3rd, Chairman of FMR Corp., has the sole power to vote
or direct the voting of the shares owned directly by the Fidelity Funds,
which power resides with the Funds' Boards of Trustees. Fidelity carries
out the voting of the shares under written guidelines established by the
Funds' Boards of Trustees.
(d) Based on information supplied by Mrs. Miller to the Company. According to
such information, the shareholdings indicated by Mrs. Miller include
279,496 shares held by Mrs. Miller as to which she has sole voting and
dispositive power. The amount of shares held and percent of ownership
shown does not include 30,000 shares held by the Hallowell Foundation,
established in 1956 by H. Thomas Hallowell, Jr., of which the Company is
informed Mrs. Miller is a trustee. Mrs. Miller has disclaimed beneficial
ownership of such shares.
(e) Based on information supplied by Mr. Hallowell to the Company. According
to such information, the shareholdings indicated by Mr. Hallowell include
369 shares held in a fiduciary capacity in which he has a beneficial
interest and shared voting and dispositive power, and 271,117 shares held
by Mr. Hallowell as to which he has sole voting and dispositive power.
The amount of shares held and percent of ownership shown does not include
30,000 shares held by the Hallowell Foundation, of which the Company is
informed Mr. Hallowell is a trustee. Mr. Hallowell has disclaimed
beneficial ownership of such shares.
3
<PAGE>
Information pertaining to the voting securities of the Company
beneficially owned, as of February 28, 1997, by each director, by the Chief
Executive Officer and the four other most highly compensated executive
officers, and by the group consisting of such persons and the Company's other
executive officers (the "Group") is set forth below. This information has
been supplied in each instance by the individuals involved.
- - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares
Name of Individual or Amount and Nature of Acquirable
Number of Beneficial Ownership of Shares Within Percent of Class
Persons in Group of Common Stock(a) 60 Days(b) If 1% or More
<S> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------
Charles W. Grigg 13,435 162,000 2.8%
Howard T. Hallowell III 271,486 0 4.5%
Richard W. Kelso 940 0 --
Dr. John F. Lubin 1,256 1,877 --
Eric M. Ruttenberg 1,435(c) 2,926 --
Raymond P. Sharpe 2,435 1,047 --
Harry J. Wilkinson 12,522 64,883 1.3%
John P. McGrath 4,744 24,914 --
William M. Shockley 2,447 13,500 --
Aaron Nerenberg 1,016 21,202 --
All Directors and Executive Officers as
a Group (12 persons) 312,884 309,549 9.8%
</TABLE>
- - -----------------------------------------------------------------------------
(a) The individuals named in the table or included in the Group each exercise
sole voting and dispositive power over the shares beneficially owned by
them except for 5,092 shares held by certain members of the Group, over
which such members have shared voting and dispositive power. The total
includes 210 shares held by an executive officer not named in the table,
as to which he disclaims beneficial ownership and has no voting or
dispositive power.
(b) Represents shares which may be acquired within 60 days of February 28,
1997, through the exercise of stock options under the SPS 1988 Long Term
Incentive Stock Plan.
(c) The indicated shares of Common Stock are beneficially owned directly by
Mr. Ruttenberg. Mr. Ruttenberg is a general partner of Tinicum Investors,
a Delaware partnership ("Investors"), that had direct beneficial
ownership of 759,069 shares of Common Stock as of February 28, 1997.
Based on understandings with certain other beneficial owners of Common
Stock described in a Statement on Schedule 13D filed on January 27, 1997,
Mr. Ruttenberg and Investors may be deemed to have indirect beneficial
ownership of an additional 232,311 shares of Common Stock beneficially
owned directly by such other beneficial owners as of February 28, 1997.
Mr. Ruttenberg disclaims beneficial ownership of any shares of Common
Stock beneficially owned directly by Investors or such other beneficial
owners.
- - -----------------------------------------------------------------------------
Election of Directors
- - -----------------------------------------------------------------------------
The Company currently has seven directors serving in three classes,
consisting of one class of three members and two classes of two members each.
The term of office of one class will expire each year. Members of each class
are elected for terms of three years, except in the case of a vacancy in any
class, in which case the vacancy may be filled by the Board of Directors for
the balance of the term of the class in which the vacancy exists.
The terms of office of the two Class II directors expire this year.
Accordingly, shareholders are being asked to elect two Class II directors who
will hold office until the 2000 Annual Meeting of Shareholders and until
their successors are duly elected and qualified. Unless you indicate
otherwise, your proxy will be voted in favor of the election of each of the
nominees named below for a three-year term. Should any nominee become
unavailable for election for any unforeseen reason, the Board of Directors or
the Executive Committee of the Board of Directors will determine how the
proxies will be voted. The two nominees receiving the highest number of votes
cast at the meeting will be elected as Class II directors.
4
<PAGE>
Listed below are the names of, and certain other information respecting
the two nominees for election as Class II directors, and the other five
directors who will be continuing in office following the meeting.
- - -----------------------------------------------------------------------------
CLASS II - NOMINEES FOR A THREE-YEAR TERM
- - -----------------------------------------------------------------------------
Raymond P. Sharpe
Age: 48 Director since 1994
Executive Vice President of Cookson America, Inc., a manufacturer of
industrial materials, and Chief Operating Officer of the Electronic Materials
Division, a supplier of special chemicals, metals, printed circuit board
laminates and equipment to the printed circuit board fabrication and
electronic assembly market, since 1994. President of the Electronic Materials
Division since prior to 1992. A director of Cookson Group plc and HIS Company
Inc.; Trustee, St. Andrews School.
- - -----------------------------------------------------------------------------
James F. O'Connor
Age: 56 Nominee for Director
Executive Director of Corporate Development since 1995, for the BBA Group
plc, serving the transportation and industrial markets worldwide. Previously,
since prior to 1992, Managing Director and Principal of Ingoldsby, O'Connor &
Company, providing strategic investment banking services to middle market
companies.
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
CLASS I - DIRECTORS WITH TERMS EXPIRING IN 1998
- - -----------------------------------------------------------------------------
Howard T. Hallowell III
Age: 62 Director since 1992
Economist, since prior to 1992 until his retirement in July, 1994, at Eastman
Kodak Company, a leading manufacturer of photographic equipment and supplies.
A director of PMHP Inc.; Trustee of the Hallowell Foundation.
- - -----------------------------------------------------------------------------
Charles W. Grigg
Age: 57 Director since 1993
Chairman of the Board and Chief Executive Officer of the Company since
December 1, 1993. Previously, since prior to 1992, President and Chief
Operating Officer of Watts Industries, Inc., a manufacturer of valve
products. A director of Wyman-Gordon Corporation.
- - -----------------------------------------------------------------------------
Richard W. Kelso
Age: 59 Director since 1995
President and Chief Executive Officer of PQ Corporation, a global
manufacturer of inorganic chemicals, high performance catalysts and
functional glass products, since prior to 1992. A director of PQ Corporation,
P.H. Glatfelter Company and the World Affairs Council of Philadelphia.
- - -----------------------------------------------------------------------------
5
<PAGE>
- - -----------------------------------------------------------------------------
CLASS III - DIRECTORS WITH TERMS EXPIRING IN 1999
- - -----------------------------------------------------------------------------
Harry J. Wilkinson
Age: 59 Director since 1986
President and Chief Operating Officer of the Company since prior to 1992
until his resignation as of March, 1997. A director of Drexelbrook
Engineering Co. and Flexible Circuits, Inc.
- - -----------------------------------------------------------------------------
Eric M. Ruttenberg
Age: 41 Director since 1991
General Partner of Tinicum Investors, an investment management company, since
prior to 1992. A director of Environmental Strategies Corporation; Trustee,
Mount Sinai Medical Center.
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
Board Meetings, Committees and Compensation of Directors
- - -----------------------------------------------------------------------------
During 1996, there were four meetings of the Board of Directors of the
Company. Throughout 1996 there was an Executive Compensation and Stock Option
Committee, a Directors Committee and an Audit Committee.
The Executive Compensation and Stock Option Committee, composed of Messrs.
Sharpe (Chairman), Hallowell, Lubin and Ruttenberg, held one meeting in 1996.
The Committee's function is to fix the salaries and other compensation of all
officers and key executives of the Company other than the Chief Executive
Officer and the President of the Company (whose compensation is fixed by the
Board of Directors), to evaluate the Company's executive compensation
programs to insure that they remain effective in retaining and attracting
managerial talent, and to administer certain of the Company's executive
incentive compensation and stock option plans, including the granting of
awards as provided in those plans.
The Directors Committee of the Board of Directors, composed of Messrs.
Lubin (Chairman), Grigg, Ruttenberg and Sharpe, held one meeting in 1996. Its
functions are to nominate candidates for election to the Board of Directors,
recommend nominees for service on its standing committees, review programs
for senior management succession, make recommendations to the Board on
matters of directors' compensation, benefits, retirement and tenure policy,
and consider nominees for director recommended by shareholders.
The Directors Committee will consider shareholder nominations in
accordance with the Company's By-laws, as approved by shareholders. To be
considered, notice of a nomination must be received not less than 60 days
before the date of the relevant Annual Shareholder Meeting. Such notice must
include (i) the name and address of the nominating shareholder, (ii) a
representation that the shareholder is entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting, (iii) the name, age,
business and residence addresses and principal occupation of such proposed
nominee, (iv) a description of any and all arrangements or understandings
between the shareholder and each proposed nominee, (v) such other information
as would be required by the Securities and Exchange Commission to be included
in a proxy statement soliciting proxies for the election of the proposed
nominee, and (vi) the signed consent of each such individual to serve as
director if elected. The Board may require any proposed nominee to furnish
other information reasonably required to determine the proposed nominee's
eligibility and qualifications to serve as a director. Under Pennsylvania
law, to be eligible, a nominee must be an individual 18 years of age or
older. Factors relevant to a nominee's qualifications would include his or
her experience or lack thereof in managing business enterprises, service on
other boards of directors, potential or actual conflicts of interest,
expertise in a field related to the Company's business, criminal record and
other similar information. If the Board (after affording the shareholder a
reasonable opportunity to cure any deficiency in the original notice)
determines
6
<PAGE>
that an individual was not proposed in accordance with the By-laws, then such
individual would not be eligible for nomination and election as a director.
If a nominee is determined to have been properly proposed by a shareholder,
and the Directors Committee determines not to nominate the person, the
shareholder proposing such person may nominate the candidate at the meeting.
A copy of the Company's By-laws specifying the requirements for nominations
for director will be furnished to any shareholder without charge upon written
request to the Secretary of the Company.
The Audit Committee of the Board of Directors, composed of Messrs.
Ruttenberg (Chairman), Hallowell, Kelso, Lubin, and Sharpe, held three
meetings in 1996. The Committee's functions include meeting periodically with
the Company's management, internal auditors and independent certified public
accountants to review with each whether they are properly discharging their
respective responsibilities. In addition, this committee is responsible for
recommendations to the Board of Directors in the selection and retention of
the Company's independent certified public accountants, for establishing the
scope of their accounting services and for approval of related fees.
In 1996, all of the directors attended more than 75% of the aggregate of
the meetings of the Board and the committees of the Board on which they
served.
7
<PAGE>
- - -------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- - -------------------------------------------------------------------------------
The following table sets forth, for the Company's fiscal years ended
December 31, 1994 through 1996, the total annual and long-term compensation
of the Chairman and Chief Executive Officer and the four other most highly
compensated executive officers other than the Chairman and Chief Executive
Officer (the "Named Officers").
- - -------------------------------------------------------------------------------
Summary Compensation Table
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
- - -----------------------------------------------------------------------------------------------------------------------------
Awards Payouts
---------------------------------------
Securities
Underlying Long-Range All Other
Other Annual Restricted Options Incentive Compen-
Name and Salary Bonus Compensation Stock Granted Bonus sation
Principal Position Year ($)(1) ($)(2) ($)(3) ($)(4) (#) ($)(5) ($)(6)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles W. Grigg 1996 487,667 217,147 16,962 96,800 20,000 96,800 10,193
Chairman and 1995 443,333 210,895 13,171 54,417 20,000 54,417 9,225
Chief Executive Officer 1994 400,000 150,000 8,318 0 0 0 51,474
- - -----------------------------------------------------------------------------------------------------------------------------
Harry J. Wilkinson(7) 1996 322,000 95,597 43,434 30,959 3,000 30,959 11,530
President and 1995 310,000 108,717 49,882 25,113 5,000 25,113 11,032
Chief Operating Officer 1994 300,000 56,220 28,792 0 5,000 0 7,182
- - -----------------------------------------------------------------------------------------------------------------------------
John P. McGrath(7) 1996 164,000 49,200 8,856 11,480 0 21,320 137,793
Vice President, 1995 159,000 31,800 6,720 5,506 2,000 10,225 3,099
Corporate Services 1994 154,000 34,804 1,247 0 2,000 0 2,925
- - -----------------------------------------------------------------------------------------------------------------------------
William M. Shockley 1996 150,000 47,879 0 15,000 3,000 22,500 415
Vice President, Chief 1995 125,800 37,490 0 6,827 15,000 10,240 272
Financial Officer and
Controller 1994 105,000 25,830 0 0 7,500 0 229
- - -----------------------------------------------------------------------------------------------------------------------------
Aaron Nerenberg(7) 1996 146,000 43,800 9,655 10,220 1,000 18,980 2,807
Vice President, General 1995 141,000 42,300 7,321 4,883 2,000 9,068 2,616
Counsel and Secretary 1994 136,000 33,456 2,036 0 2,000 0 1,670
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Amounts shown include amounts (where applicable) deferred by the Named
Officers under the Company's Executive Deferred Compensation Plan.
2. Amounts shown reflect cash payments to the Named Officers under the
Company's Management Incentive Plan.
3. Amounts shown include directors' fees for 1996 through 1994, respectively
as follows for Mr. Grigg -- $4,000, $5,000 and $7,000; and for Mr.
Wilkinson -- $4,000, $5,000, and $7,000. Amounts shown also reflect, for
each of the Named Officers, except Mr. Shockley, interest accrued in
excess of 120% of the applicable federal long-term rate with respect to
the Company's Executive Deferred Compensation Plan.
4. Restricted stock awards were made for the dollar values shown pursuant to
the Company's Long Range Incentive Plan on February 10, 1997 at the fair
market value of the Company's common stock of $67.8125 per share on that
date under the SPS 1988 Long Term Incentive Stock Plan to the Named
Officers in the following amounts -- Mr. Grigg (1,427 shares); Mr.
Wilkinson (457 shares); Mr. McGrath (169 shares); Mr. Shockley (221
shares); and Mr. Nerenberg (151 shares). The restrictions lapse on 20% of
the shares each year on the anniversary date of the award for the next
five years, after which all restrictions will have lapsed.
5. Amounts shown reflect cash payments to the Named Officers under the
Company's Long Range Incentive Plan.
6. Amounts shown include payments by the Company on behalf of the Named
Officers for term life insurance and, in the case of Mr. Wilkinson, deemed
compensation under a Split Dollar Life Insurance Plan, for the years 1996
through 1994, respectively, as follows: $617, $538 and $882. In the case
of Mr. McGrath, the amount shown for 1996 includes $134,581 representing
compensation from the exercise of 3,530 options on October 29, 1996, under
the SPS 1988 Long Term Incentive Stock Plan. In the case of Mr. Grigg, the
amount shown for 1994 includes $43,636 representing payment for purchase
of an automobile from his previous employer including all federal and
state income taxes resulting from such payment, as specified in his
Employment Agreement.
8
<PAGE>
7. Messrs. Wilkinson and McGrath ceased to be executive officers of the
Company on March 1, 1997, and Mr. Nerenberg will cease to be an executive
officer of the Company effective May 1, 1997. Each will receive benefits
to which he is entitled under the Senior Executive Severance Plan and
other compensation and benefit plans in which he is a participant. In
addition, under agreements entered into with the Company, Mr. McGrath and
Mr. Nerenberg will serve as paid consultants to the Company until February
28, 1998 and April 30, 1999, respectively. Mr. Nerenberg will receive
additional payments aggregating $170,861 in installments due at various
times from October 2002 through July 2005. Each of Messrs. McGrath and
Nerenberg has agreed not to compete with the Company during the term of
his consultancy.
The following tables provide information concerning the number and value
of option grants during the last year and the number and value of options to
purchase the Company's Common Stock held by each of the Named Officers as of
December 31, 1996. All options outstanding were granted under the SPS 1988
Long Term Incentive Stock Plan at 100% of the fair market value of the
Company's Common Stock on the date of grant. The vesting provisions of the
options are determined by the Executive Compensation and Stock Option
Committee.
- - -------------------------------------------------------------------------------
Option Grants in Last Year
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
Potential Realizable
Value at
Assumed Annual Rates of
Stock
Price Appreciation for
Individual Grants Option Term
- - -----------------------------------------------------------------------------------------------------------
% of Total
Options
Number of Granted to
Securities All
Underlying Employees Exercise
Options in Last Price Expiration
Name Granted Year ($/Sh) Date 5% ($) 10% ($)
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Charles W. Grigg 20,000 22% 54.00 Jan. 31, 2006 679,206 1,721,242
- - -----------------------------------------------------------------------------------------------------------
Harry J. Wilkinson 3,000 3% 54.00 Jan. 31, 2006 101,881 258,186
- - -----------------------------------------------------------------------------------------------------------
William M. Shockley 3,000 3% 54.00 Jan. 31, 2006 101,881 258,186
- - -----------------------------------------------------------------------------------------------------------
Aaron Nerenberg 1,000 1% 54.00 Jan. 31, 2006 33,960 86,062
- - -----------------------------------------------------------------------------------------------------------
John P. McGrath 0 0% NA NA NA NA
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
- - -------------------------------------------------------------------------------
<PAGE>
Aggregated Option Exercises and Year-End Option Value Table
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------
Number of Value of Unexercised
Unexercised "In-the-Money"
Options at Options at Year-End
Year-End ($)(1)
Number of
Shares Dollar
Acquired on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
==========================================================================================
<S> <C> <C> <C> <C>
Charles W. Grigg(2) 0 0 154,000/36,000 6,537,000/778,000
- - ------------------------------------------------------------------------------------------
Harry J. Wilkinson 0 0 62,283/10,000 2,272,978/296,625
- - ------------------------------------------------------------------------------------------
William M. Shockley 0 0 10,400/19,500 400,438/555,938
- - ------------------------------------------------------------------------------------------
Aaron Nerenberg 0 0 20,202/3,800 694,529/116,600
- - ------------------------------------------------------------------------------------------
John P. McGrath 3,530 134,581 24,114/2,800 841,181/106,350
- - ------------------------------------------------------------------------------------------
</TABLE>
(1) Value of unexercised options based on the year end, December 31, 1996, stock
price of $64.25 per share.
(2) Mr. Grigg received an option grant of 150,000 shares under the SPS 1988
Long Term Incentive Stock Plan ("Plan") on December 1, 1993, upon being
elected Chairman and Chief Executive Officer of the Company. In the event
the closing sale price of the Company's Common Stock, as reported on the
New York Stock Exchange Composite Tape, equals or exceeds the target
price set forth below for at least forty-five trading days in any period
of sixty consecutive trading days, then the number of options set forth
below opposite such target price shall thereupon become vested and
exercisable. As of January 23, 1996, all 150,000 options became fully
vested and exercisable.
9
<PAGE>
Target Price Number of Options Vested and Exercisable
-------------- ----------------------------------------
$28.125 45,000
$34.60 45,000
$43.25 60,000
The Stock Option Agreement contains certain resale restrictions. The total
number of Common Stock issued pursuant to the option grant (150,000) shall
not be sold more quickly than as follows:
Time Period Cumulative Percent Which May Be Sold
-------------------------- ----------------------------------------
12/1/94 to 11/30/95 20%
12/1/95 to 11/30/96 40%
12/1/96 to 11/30/97 60%
12/1/97 to 11/30/98 80%
12/1/98 and thereafter 100%
Mr. Grigg was granted 20,000 options on February 1, 1996 at a exercise
price of $54.00 per share which vest 20% per year on the anniversary date of
the grant for the next five years.
- - -------------------------------------------------------------------------------
Pension Benefits
- - -------------------------------------------------------------------------------
The following table shows the amount of the total annual pension which a
Named Officer (with the exception of Messrs. McGrath, Nerenberg and Shockley)
would receive at age 65 for the years-of-service indicated under (i) the
Company's Retirement Income Plan (RIP), a qualified cash balance plan in
which the benefit is determined by Company contribution credits based on age
and service, and interest credits based on one-year Treasury rates; (ii) the
Benefit Equalization Plan (BEP), a non-qualified unfunded plan which makes up
retirement benefit reductions under RIP due to ceilings established by the
Internal Revenue Code and/or reductions due to participation in the Executive
Deferred Compensation Plan; and (iii) the Supplemental Executive Retirement
Plan (SERP), a non-qualified unfunded plan in which an enhanced retirement
benefit is accrued based upon highest average pensionable earnings and
years-of-service.
- - -------------------------------------------------------------------------------
Pension Plan Table
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------
Years of Service
- - --------------------------------------------------------------------------------------
Average Pensionable
Earnings for Highest
Five-Year Period 5 Years 10 Years 20 Years 30 Years 40 Years
Preceding Retirement Service Service Service Service Service
======================================================================================
<S> <C> <C> <C> <C> <C>
$150,000 $29,412 $ 51,912 $ 90,912 $105,912 $105,912
- - --------------------------------------------------------------------------------------
200,000 33,912 63,912 115,912 135,912 135,912
- - --------------------------------------------------------------------------------------
250,000 38,412 75,912 140,912 165,912 165,912
- - --------------------------------------------------------------------------------------
300,000 42,912 87,912 165,912 195,912 195,912
- - --------------------------------------------------------------------------------------
350,000 47,412 99,912 190,912 225,912 225,912
- - --------------------------------------------------------------------------------------
400,000 51,912 111,912 215,912 255,912 255,912
- - --------------------------------------------------------------------------------------
450,000 56,412 123,912 240,912 285,912 285,912
- - --------------------------------------------------------------------------------------
500,000 60,912 135,912 265,912 315,912 315,912
- - --------------------------------------------------------------------------------------
</TABLE>
Pensionable earnings with respect to the Named Officers are based solely
on the amounts shown in the salary column of the Summary Compensation Table.
10
<PAGE>
As of December 31, 1996, the years of credited service for the Named
Officers were as follows: C. W. Grigg -- 3; H. J. Wilkinson -- 31; J. P.
McGrath -- 38; W. M. Shockley -- 5; A. Nerenberg -- 22.
The total annual payments represent the straight life annuity amounts
payable at age 65 including primary social security benefits and benefits
provided under RIP, BEP and SERP, for the years of service indicated in the
Pension Table.
Participants under the RIP and BEP receive quarterly statements evidencing
an accrued benefit in the form of a present value lump sum which grows
through Company contribution credits and interest credits based on one-year
Treasury rates. The Company contribution credits are determined on the basis
of age and service points, as follows:
- - ------------------------------------------------------------------------------
Company
Contribution as % of Earnings:
- - ------------------------------------------------------------------------------
Age and Service Under SS Over SS
Points *Wage base *Wage base **Supplemental
==============================================================================
0-27 1.250% 2.500% 0.000%
- - ------------------------------------------------------------------------------
28-35 1.625% 3.250% 0.000%
- - ------------------------------------------------------------------------------
36-43 2.000% 4.000% 0.000%
- - ------------------------------------------------------------------------------
44-51 2.500% 5.000% 0.000%
- - ------------------------------------------------------------------------------
52-59 3.125% 6.125% 0.000%
- - ------------------------------------------------------------------------------
60-67 3.750% 6.750% 1.500%
- - ------------------------------------------------------------------------------
68-75 4.625% 7.625% 1.850%
- - ------------------------------------------------------------------------------
76-83 5.625% 8.625% 2.250%
- - ------------------------------------------------------------------------------
84-91 6.750% 9.750% 2.700%
- - ------------------------------------------------------------------------------
92 and over 8.125% 11.125% 3.250%
- - ------------------------------------------------------------------------------
* For 1997, the Social Security (SS) wage base is $65,400.
** Supplemental credits are available only to those active participants who
had 60 or more total age and service points as of December 31, 1994, the
date of the cash balance plan inception.
The estimated total annual life annuity benefits payable upon retirement
at the normal retirement age of 65 from the RIP and BEP only, for each of the
Named Officers, are as follows:
- - ------------------------------------------------------------------------------
Date Years of Service
Named Officer at Age 65 at Age 65 Annual Benefit
==============================================================================
Charles W. Grigg June, 2004 10 $ 71,500
- - ------------------------------------------------------------------------------
Harry J. Wilkinson November, 2002 37 184,400
- - ------------------------------------------------------------------------------
John P. McGrath August, 2004 45 99,800
- - ------------------------------------------------------------------------------
William M. Shockley August, 2026 34 195,700
- - ------------------------------------------------------------------------------
Aaron Nerenberg September, 2005 31 58,400
- - ------------------------------------------------------------------------------
11
<PAGE>
- - ------------------------------------------------------------------------------
Compensation of Directors
- - ------------------------------------------------------------------------------
Each director who is not an employee of the Company receives an annual
retainer of $17,000 plus a fee of $1,000 for each meeting of the Board of
Directors or one of its committees attended by him. Each director who is an
employee of the Company receives a fee of $1,000 for each meeting of the
Board of Directors attended by him. Each non-employee director on May 2, 1995
received a restricted stock award in the amount of $25,000, or 765 shares,
based upon the fair market value of the Company's common stock on that date
of $32.6875 per share. Mr. Kelso, who was appointed as a director on October
24, 1995, received a pro rata restricted stock award in the amount of
$22,500, based upon the number of months remaining until May 2, 2000, in
accordance with the SPS 1988 Long-Term Incentive Stock Plan, or 570 shares
based upon the fair market value of the Company's common stock on October 24,
1995 of $39.4375 per share. Each non-employee director on February 10, 1997
received a restricted stock award in the amount of $25,000, or 370 shares,
based upon the fair market value of the Company's common stock on that date
of $67.8125 per share. The restrictions on each award lapse on 20% of the
shares each year on the anniversary date of the award for the succeeding five
years, after which all restrictions will have lapsed. A director who is not a
participant in any of the Company's qualified retirement plans and who
retires at or after age 70 with 5 or more years of service, or at or after
age 65 with 10 or more years of service, will receive annually during his
lifetime an amount equal to the annual retainer in effect as of the date of
his retirement. A director who retires at or after age 65 but before age 70
with less than 10 years of service will receive annually a pro rata amount. A
non-employee director may elect to receive discounted options in lieu of all
or a portion of his annual retainer under the SPS 1988 Long Term Incentive
Stock Plan. If elected for any year, these discounted options are available
for all or any portion of the non-employee director's annual retainer. The
number of options granted is determined by the amount of retainer so applied
divided by the difference between the fair market value of the Company's
common stock at the time of grant less, for each option, the par value per
share of one dollar, which is payable by the director at the time of
exercise.
- - ------------------------------------------------------------------------------
Employment Contracts and Termination of Employment and Change of Control
Arrangements
- - ------------------------------------------------------------------------------
The Company entered into an Employment Agreement with Mr. Grigg on
December 1, 1993, which continues until termination of his employment with
the Company or his retirement at age 65. The Agreement provides for an annual
base salary in the first year of $400,000, with an increase on each
subsequent December 1 of an amount equal to at least the percentage increase
in the Consumer Price Index for the Philadelphia Region. The Employment
Agreement also provides for an incentive bonus payment of $150,000 for the
first year, and eligibility to participate in the Company's Management
Incentive Plan thereafter. The Agreement further provides for a payment of up
to $25,000 plus any federal and state income tax liability resulting from
such payment for the purchase of an automobile from his previous employer. He
is eligible to participate in all executive benefit plans, stock option
programs and employee fringe benefits during his employment with the Company.
The Employment Agreement contains severance provisions whereby, upon a
"change of control" (as defined in the Executive Severance Agreement
described below), the provisions under such Severance Agreement govern; upon
termination of employment by Mr. Grigg, or by the Company for "cause" (as
defined in the Employment Agreement) or upon death, disability or retirement,
he is entitled only to the benefits accrued under the specific benefit plans
in which he participates; and upon termination of employment by the Company
without "cause," if within the first three years of employment, he is
entitled to 200% of his base salary then in effect plus such benefits to
which he would have been entitled under the Company's Senior Executive
Severance Plan (described below) as if he were a participant, and if after
three years of employment, the benefits provided in the Senior Executive
Severance Plan (described below). Mr. Grigg is subject to a non-competition
provision during the term of his employment with the Company and for a period
of two years thereafter.
The Company has entered into an Executive Severance Agreement
("Agreement") with each of the Named Officers. The Agreement provides that if
a "triggering termination" of employment (as defined in the
12
<PAGE>
Agreement) occurs within three years after a "change of control" of the
Company (as defined in the Agreement), then the employee is entitled to
receive within 15 days after the employee's termination date, among other
benefits, cash in an amount equal to two times the sum of the employee's
annual base salary plus the incentive bonus awards earned by or allocated to
the employee in the previous fiscal year under the Company's Management
Incentive Plan (MIP) and Long Range Incentive Plan (LRIP). A "triggering
termination" generally includes a termination of employment initiated by the
Company for any reason other than a disability qualifying the employee for
benefits under the Company's Long Term Disability Plan, or for "cause" (as
defined in the Agreement), or by the employee for certain reasons set forth
in the Agreement.
Upon a "triggering termination," the employee will also be entitled to
receive the appreciated value of all the employee's stock options outstanding
and unexercised as of the termination date (whether or not vested), any
unpaid salary, all incentive bonus awards payable to, earned by or allocated
to the employee under the MIP and LRIP, and all amounts deferred by the
employee under any incentive plan and under the Company's Executive Deferred
Compensation Plan. The employee will also receive two additional years of
credited service under each of the Company's RIP, BEP and SERP (if a
participant), and will, for two years, continue to receive certain insurance
benefits on a cost-sharing basis. The employee's benefits from BEP and SERP
(if a participant) are payable in a lump sum within 15 days after the
termination date. Any restrictions remaining on restricted shares that may
have been awarded to the employee lapse, and the employee will own such
shares free and clear of any Company-imposed restriction. Any non-competition
agreements (including non-compete provisions of the MIP) terminate; however,
the employee will continue to be bound by the confidentiality provisions of
the Agreement. Each Agreement provides for compensation to the employee for
any adverse effect of payments under the Agreement determined to be "excess
parachute payments," as defined in the Internal Revenue Code.
Pursuant to the Company's Senior Executive Severance Plan (SESP), each of
the Named Officers would receive certain compensation and benefits in the
event of termination of employment with the Company, without a change of
control, for any reason other than for "cause" (as defined in the SESP) or a
disability which qualifies the participant for benefits under the Company's
Long-Term Disability Plan, or if initiated by the participant, upon the
occurrence of certain events described in the SESP. Upon such termination,
the participant is entitled to receive (among other benefits) the base salary
in effect prior to the termination date for a period of up to 12 months, all
bonuses earned under the MIP and LRIP for completed and uncompleted (pro
rata) periods, and all amounts deferred under the Company's Executive
Deferred Compensation Plan. The participant will remain on the Company's
payroll for up to 12 months, during which all employee benefits to which the
participant was entitled prior to the termination will continue, and the
participant will be entitled to Company-paid professional outplacement
services. At the end of the 12-month period, the participant will be vested
in the Company's BEP and SERP (if a participant) and will be entitled to
receive a lump sum payment of these retirement benefits. Restrictions on
restricted shares, if any, issued to the participant lapse. The participant
is prohibited from competing with the Company during the 12-month period
following termination of employment. If the participant is employed by a
competitor of the Company without the Company's consent, the ongoing benefits
described above cease as of the date of such employment. If the participant
is employed on a full-time basis by other than a competitor, the ongoing
benefits cease either as of the date of such employment or six months,
whichever is later. In the event an employee receives a payment under the
Agreement, he is not eligible to receive any payment under the SESP. The
Company has agreed that the SESP will not be terminated or amended to reduce
or eliminate the benefits granted to certain employees, including the Named
Officers. The SESP provides for additional compensation to the participant if
any plan payment is subject to an excise or similar tax under the Internal
Revenue Code.
In addition, the Company offers retiring executives (including the Named
Officers) an agreement pursuant to which, under certain circumstances, the
Company would be required to pay in a lump sum all amounts otherwise payable
periodically to them under any plan of, or agreement with, the Company. Such
lump sum payment would be made only if, within three years after a "change of
control" (as defined in such agreement), there is a change in two of the top
three executive officers of the Company designated in such agreement. To
date, no such agreements are in effect.
13
<PAGE>
- - ------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- - ------------------------------------------------------------------------------
In connection with the Company's Rights Offering of the Company's Common
Stock which concluded in December, 1994 (the "Rights Offering"), the Company
entered into a Standby Purchase Agreement, dated as of November 16, 1994, with
certain Purchasers and Investors.(1) The Purchasers agreed to acquire from the
Company, at the subscription price provided in the Rights Offering, all
remaining shares of Common Stock not subscribed for by the Company's
shareholders. Eric M. Ruttenberg, a director of the Company, is an "Affiliate"
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended) of certain of the Purchasers.
Pursuant to the Standby Purchase Agreement, the Purchasers acquired 268,380
shares of Common Stock for $6,575,310 and received from the Company $63,088 as
reimbursement for certain expenses incurred by the Purchasers in connection with
the Rights Offering. The Purchasers, Investors and their Affiliates
(collectively the "Affiliated Group") owned an aggregate of 785,280 shares of
Common Stock, or approximately 13.93% of the 5,636,359 shares of the Company's
Common Stock outstanding, at the conclusion of the Rights Offering and the
Purchase of unsubscribed shares in accordance with the Standby Purchase
Agreement.
The Standby Purchase Agreement will terminate upon the earliest to occur
of:
(a) six years from the date of the Standby Purchase Agreement (the "Term"),
or
(b) the date upon which the Affiliated Group no longer beneficially owned
Common Stock representing in excess of 10% of the Total Voting Power
(as defined below), or
(c) removal of or failure to re-elect the designee(s) of the Purchasers and
Investors to the Board of Directors in certain circumstances
contemplated by the Standby Purchase Agreement.
Pursuant to the Standby Purchase Agreement, the Company on November 16,
1994, amended its Rights Agreement dated as of November 11, 1988, as amended,
between the Company and Mellon Bank (East), N.A., as Rights Agent (the "Rights
Agreement"), to permit the Affiliated Group to acquire or beneficially own
Common Stock representing up to 20% (the "Percentage Limitation") of the total
voting power in the general election of directors of the Company ("Total Voting
Power"). The Company further agreed, during the Term, to amend the Rights
Agreement as necessary to permit an increase of the Percentage Limitation in
certain circumstances, including the Company's permitting any other person,
generally, to acquire or beneficially own Common Stock representing in excess of
18% of the Total Voting Power, in which case the Percentage Limitation will
generally automatically increase to 110% of the percentage of Total Voting Power
that such other person is permitted to acquire or beneficially own.
The Affiliated Group has agreed for approximately six years, to a broad
range of restrictions prohibiting such activities as: soliciting proxies;
generally making shareholder proposals; engaging in efforts to acquire stock in,
or assets of, the Company (by purchase, merger, or otherwise); or seeking
changes in the composition of the Board of Directors. Such restrictions will be
automatically waived (A) if any person publicly makes a bona fide offer to
acquire a majority of the outstanding Common Stock and the Company's Board of
Directors does not oppose such offer, or (B) if any person makes a bona fide
offer to acquire a majority of the outstanding Common Stock and either (i) the
Company's Board of Directors determines to accept such offer, or (ii) the
Company's Board of Directors determines, for example, to seek competing offers
or proposes to effect or negotiate with any person any form of business
combination or similar transaction with the Company, or proposes in response to
such bona fide offer, a recapitalization, share repurchase,
- - -----------
(1) Tinicum Enterprises, Inc., Tinicum Investors, RUTCO Incorporated, Tinicum
Foreign Investments Corporation, Tinicum Associates, G.P., Putnam L. Crafts,
Jr. and James H. Kasschau (collectively, the "Purchasers"), and RIT Capital
Partners plc, J. Rothchild Capital Management Limited and St. James's Place
Capital plc (collectively, the "Investors"). See "Ownership of Voting
Securities" for more recent information on the Affiliated Group as herein
defined. In the Rights Offering, all remaining shares of Common Stock not
subscribed for by the Company's shareholders. Eric M. Ruttenberg, a director
of the Company, is an "Affiliate" (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended) of certain of the
Purchasers.
14
<PAGE>
extraordinary dividend or other similar extraordinary transaction involving
the Company, its securities or assets, to the extent necessary to allow the
Affiliated Group to make a competing offer to the Company's Board of
Directors to acquire the Company or its securities or its assets.
The Purchasers and Investors have also agreed that, for approximately six
years, all shares of Common Stock which are directly or indirectly
beneficially owned by the Affiliated Group, other than those shares of Common
Stock which represent voting power of up to 10% of the Total Voting Power,
will be voted in accordance with the recommendation of the majority of the
Company's Board of Directors on all matters submitted to the shareholders for
a vote, including the election of directors of the Company, except with
respect to any matter which, pursuant to the Company's Bylaws, requires the
approval of an 80% super majority of the Company's shareholders, will be
voted pro rata in accordance with the vote of the Company's other
shareholders.
The Purchasers and Investors have further agreed during the Term, with
certain specific exceptions, not to sell or transfer shares of Common stock
representing in excess of 10% of Total Voting Power to any one person in any
transaction or series of transactions, unless such person agrees to be bound
by the terms of the Standby Purchase Agreement.
During the Term, the Company has agreed, generally, to exercise all
authority under applicable law, to cause Eric M. Ruttenberg (or another
designee of the Purchasers and Investors) to be elected to the Company's
Board of Directors and in addition, to the Audit, Executive, Directors and
Executive Compensation and Stock Option Committees of the Board. In the event
the Board of Directors is expanded beyond eight members, the Purchasers and
Investors are entitled to nominate an individual to fill the first out of
each three Board member positions in excess of eight Board member positions
(i.e. the ninth, twelfth, etc.).
The Company also entered into a certain Registration Rights Agreement with
the Purchasers and Investors, dated as of November 16, 1994, pursuant to
which the Company, subject to certain terms and conditions, has granted two
demand registration rights and unlimited piggyback registration rights to the
Purchasers and Investors whereby the Purchasers and Investors may require the
Company to cause shares of Common Stock beneficially owned by them to be
registered for public sale under the Securities Act. The demand registration
rights will not be exercisable for a period of three years from November 16,
1994, but the piggyback registration rights will be currently exercisable.
All such registration rights will terminate on November 16, 2002.
- - -------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION OVERVIEW AND
PHILOSOPHY
- - -------------------------------------------------------------------------------
The Executive Compensation and Stock Option Committee of the Board of
Directors ("Compensation Committee") is composed entirely of outside
directors and is responsible for developing and making recommendations to the
Board with respect to the Company's executive compensation policies. In
addition, the Compensation Committee annually recommends to the full Board
the compensation to be paid to the Chief Executive Officer and President, and
determines the compensation of each of the other executive officers of the
Company. The Compensation Committee is free to engage and consult with
outside compensation consultants as it sees fit and generally has access to
independent compensation data.
The objectives of the Company's executive compensation program are to:
o Emphasize long-term performance and increases in shareholder value.
o Provide base compensation and benefit levels that are competitive with
those in the markets in which the Company competes for executive
personnel.
o Reward executives for the achievement of short-term and long-term
financial goals and the enhancement of shareholder value.
o Support a performance-oriented environment by providing incentive
compensation that changes in a consistent and predictable way with both
the financial performance of the Company and management performance in
support of strategic objectives.
15
<PAGE>
o Provide a long-term and career-oriented compensation environment.
o Offer meaningful and competitive retirement and supplemental benefits
that are consistent with the Company's objective of retaining key
employees.
The executive compensation program provides a compensation package that is
competitive with those offered by similar companies. The Company periodically
reviews the competitive practices of companies in the fabricated metals,
durable manufacturing and other industries, as well as with a broader group
of companies of comparable size and complexity. Actual compensation levels
may be greater or less than average competitive levels in surveyed companies
based upon annual and long-term Company performance as well as individual
performance. The Compensation Committee uses its discretion to set executive
compensation at levels warranted in its judgment by external, internal and
individual circumstances.
- - -------------------------------------------------------------------------------
EXECUTIVE OFFICER COMPENSATION
- - -------------------------------------------------------------------------------
Executive officer compensation is comprised of base salary, annual cash
incentive compensation, long-term incentive compensation in the form of stock
options, long range cash and restricted stock incentive compensation,
specific benefits designed to provide remuneration for career service, and
various benefits, including medical, life insurance and savings plans
generally available to employees of the Company.
- - -------------------------------------------------------------------------------
BASE SALARY
- - -------------------------------------------------------------------------------
Base salary levels for the Company's executive officers are competitively
set relative to certain companies in the fabricated metals, durable
manufacturing and other industries as well as other comparable companies. In
determining salaries, the Compensation Committee also takes into account
individual experience and performance and specific expertise beneficial to
the Company.
- - -------------------------------------------------------------------------------
INCENTIVE COMPENSATION
- - -------------------------------------------------------------------------------
The Company's incentive programs are intended to provide incentives to
achieve financial and individual objectives, and to reward exceptional
performance. The Management Incentive Plan is the Company's annual incentive
program for executive officers and key managers. The purpose of the plan is
to provide a direct financial incentive in the form of an annual cash bonus
to executives for the attainment of annual financial and individual goals.
Threshold, target and maximum goals for total Company and individual business
unit performance are set by the Compensation Committee at the beginning of
each fiscal year. The Long Range Incentive Plan is the Company's three-year
incentive program for executive officers and key managers. The purpose of the
Plan is to provide a direct financial incentive in the form of an annual cash
bonus and a restricted share award under the SPS 1988 Long Term Incentive
Stock Plan to executives for the attainment of long-range financial goals of
the Company.
- - -------------------------------------------------------------------------------
EQUITY-BASED COMPENSATION
- - -------------------------------------------------------------------------------
The equity-based compensation component of the Company's executive
compensation program is oriented toward the achievement of increasing
shareholder value over the long term. This component of the program -- the
SPS 1988 Long Term Incentive Stock Plan -- provides for grants of stock
options which align the executives' awards with future shareholder gains.
These grants enable executives to develop and maintain a significant,
long-term ownership position in the Company's Common Stock.
16
<PAGE>
- - -------------------------------------------------------------------------------
EXECUTIVE BENEFITS
- - -------------------------------------------------------------------------------
The benefit component of executive compensation is designed to provide
executives with adequate and meaningful retirement benefits which are
reflective of the benefits offered in comparable companies, and which
encourage career-service orientation of the Company's executives. In
addition, other benefits such as perquisites are rigidly controlled and
minimized. The amount of such perquisites, as determined in accordance with
rules of the Securities and Exchange Commission relating to executive
compensation, did not exceed 10% of salary for fiscal 1996.
- - -------------------------------------------------------------------------------
CHIEF EXECUTIVE OFFICER COMPENSATION
- - -------------------------------------------------------------------------------
The compensation of the Chief Executive Officer (CEO) is fixed by the full
Board of Directors (other than the CEO) consistent with the practices
described above. Factors considered by the Board of Directors in deciding the
compensation of the CEO are generally subjective. Effective December 1, 1996,
Mr. Grigg's annual base salary was increased by the Board of Directors from
$484,000 to $518,000. The Board believes this increase is commensurate with
the Company's improved financial performance during 1996. This amount is also
believed to be competitive with companies of similar size and complexity. Mr.
Grigg, has a 50% incentive opportunity under the Company's Management
Incentive Plan and a 50% incentive opportunity under the Company's Long Range
Incentive Plan.
Members of the Executive Compensation and Stock Option Committee --
Raymond P. Sharpe, Chairman; Howard T. Hallowell, III; Dr. John F. Lubin; and
Eric M. Ruttenberg.
17
<PAGE>
- - -------------------------------------------------------------------------------
Common Stock Performance Graph
- - -------------------------------------------------------------------------------
The graph set forth below shows the cumulative shareholder return (i.e.,
price change plus reinvestment of dividends) of the Company's Common Stock
during the five-year period ended December 31, 1996, as compared to the
Standard & Poor's 500 Index and the Standard & Poor's Diversified
Manufacturing Index.
Comparison of Five-Year Cumulative Total Return for
SPS, the S&P Index and the S&P Diversified
Industrial Manufacturing Index
(See Notes 1 and 2 Below)
300-|-------------------------------------------------------------------------|
| |
| %#|
| |
250-|-------------------------------------------------------------------------|
| |
| |
| % |
200-|----------------------------------------------------------------------+--|
| # |
| + |
| |
150-|-------------------------------------------------------------------------|
| # |
| # + |
| + # + |
100-|+%#-----------------------------------------%----------------------------|
| % |
| % |
| |
50-|--------------|--------------|--------------|--------------|-------------|
| | | | | |
1991 1992 1993 1994 1995 1996
+=S&P 500 %=SPS Technologies #=S&P Manufacturing Index
S&P 500
YEAR
ENDING ANNUAL CUM VALUE OF
12/31 RETURN RETURN $100 INVEST
1991 $100.00
1992 7.6% 7.6% $107.60
1993 10.1% 18.5% $118.47
1994 1.3% 20.0% $120.01
1995 37.58% 65.1% $165.11
1996 22.96% 103.0% $203.02
SPS TECHNOLOGIES
YEAR
ENDING ANNUAL CUM VALUE OF
12/31 RETURN RETURN $100 INVEST
1991 $100.00
1992 -17.60% -17.6% $ 82.40
1993 -9.57% -25.5% $ 74.51
1994 39.04% 3.6% $103.60
1995 110.34% 117.9% $217.92
1996 20.37% 162.3% $262.31
S&P MANUFACTURING INDEX
YEAR
ENDING ANNUAL CUM VALUE OF
12/31 RETURN RETURN $100 INVEST
1991 $100.00
1992 8.4% 8.4% $108.40
1993 21.2% 31.4% $131.38
1994 3.5% 36.0% $135.98
1995 40.6% 91.2% $191.19
1996 37.6% 163.1% $263.07
- - ------
NOTES:
(1) Total Return assumes reinvestment of Dividends.
(2) The above graph assumes $100 was invested on December 31, 1991 in SPS
Technologies Common Stock, the S&P 500 Index and S&P Diversified
Industrial Manufacturing Index. The values shown in the graph above
are as of the end of each period indicated. Raw data for the S&P 500
Index and S&P Diversified Manufacturing Index are supplied by S&P.
<PAGE>
- - -------------------------------------------------------------------------------
Independent Certified Public Accountants
- - -------------------------------------------------------------------------------
Coopers & Lybrand L.L.P., the Company's independent certified public
accountants for the year 1996, has been selected to continue for the year
1997. Representatives of Coopers & Lybrand are expected to be present at the
Annual Meeting with the opportunity to make a statement if they desire to do
so and to respond to appropriate questions.
18
<PAGE>
- - -------------------------------------------------------------------------------
Section 16 Reports
- - -------------------------------------------------------------------------------
Based solely on a review of the reports on Forms 3, 4 and 5 filed with the
Company by its directors, executive officers and known 5% beneficial owners,
and in certain cases upon certificates received from such persons that such
filings are not required, no such person failed to file any report required
to be filed during, or with respect to, the fiscal year of the Company ended
December 31, 1996.
- - -------------------------------------------------------------------------------
Proposals of Shareholders
- - -------------------------------------------------------------------------------
Under the Company's By-laws, notice of any proposal to be presented by any
shareholder at a meeting must be received by the Secretary of the Company not
less than 60 days in advance of the meeting. The notice must include the text
of the proposal to be presented, a brief written statement of the reasons why
such shareholder favors the proposal, the name and address of record of the
proposing shareholder, a representation that the shareholder is entitled to
vote at the meeting and intends to appear at the meeting, in person or by
proxy, the number of shares of stock beneficially owned by such shareholder
and any material interest of such shareholder in the proposal (other than as
a shareholder). A copy of the Company's By-laws specifying these requirements
will be furnished to any shareholder without charge upon written request to
the Secretary.
Under the rules of the Securities and Exchange Commission, shareholders
wishing to submit proposals for inclusion in the Proxy Statement of the Board
of Directors for the Annual Meeting of Shareholders to be held in 1998 must
submit such proposals so as to be received at the office of the Secretary,
SPS Technologies, Inc., 101 Greenwood Avenue, Suite 470, Jenkintown, PA
19046, no later than November 27, 1997.
Aaron Nerenberg
Secretary
March 31, 1997
- - -------------------------------------------------------------------------------
Upon written request to the office of the Secretary, SPS Technologies, Inc.,
101 Greenwood Avenue, Suite 470, Jenkintown, PA 19046, the Company will
provide, without charge, to any shareholder solicited hereby, a copy of its
Annual Report on Form 10-K, including the financial statements and the
schedules thereto.
- - -------------------------------------------------------------------------------
19
