<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 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 28, 1998, 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 three Class I 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 10, 1998 will be entitled to vote at the meeting.
James D. Dee
Secretary
March 27, 1998
- - --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
You are urged to mark, sign, date and promptly return your proxy in the
enclosed envelope.
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<PAGE>
Proxy Statement
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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 28, 1998, 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 27, 1998.
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.
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Voting Information
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Only record holders of Common Stock of the Company at the close of
business on March 10, 1998, are entitled to vote. On that date there were
issued and outstanding 12,371,357 shares of Common Stock, par value $.50 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>
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Ownership of Voting Securities
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As of February 28, 1998, the following persons were known by the Company
to be the principal beneficial owners of the voting securities of the Company:
<TABLE>
<CAPTION>
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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., 2,732,260(a) 22.1%
GAMCO Investors, Inc.,
Gabelli International Limited,
Gemini Capital Management
Ltd., and
Mario J. Gabelli
One Corporate Center
Rye, NY 10580-1434
Tinicum Investors, 1,992,048(b) 16.1%
RIT Capital Partners plc,
Putnam L. Crafts, Jr., and
Eric M. Ruttenberg
990 Stewart Avenue
Garden City, NY 11530
FMR Corp. 1,089,600(c) 8.8%
82 Devonshire Street
Boston, Massachusetts 02109
Anne Hallowell Miller 541,456(d) 4.4%
c/o Stacey W. McConnell
McConnell & Associates, P.C.
1235 Westlakes Drive
Suite 230
Berwyn, PA 19312
Howard T. Hallowell III 543,434(e) 4.4%
c/o Stacey W. McConnell
McConnell & Associates, P.C.
1235 Westlakes Drive
Suite 230
Berwyn, PA 19312
- - ---------------------------------------------------------------------------------------------
</TABLE>
(a) Based on information supplied by the named entities in a joint filing on
Schedule 13D dated January 27, 1998, 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. -- 418,200 shares (sole voting and dispositive power); GAMCO
Investors, Inc. -- 2,274,540 (sole voting and dispositive power) and
20,000 shares (no voting and sole dispositive power); Gabelli
International Limited (no voting or dispositive power); and Gemini Capital
Management Limited -- 5,000 shares (sole voting and dispositive power).
Mr. Mario J. Gabelli is the majority stockholder of Gabelli Funds, Inc.
and individually owns 14,520 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 dated on January 24, 1997, with the Securities and Exchange
Commission, as updated by the named entities through February 28, 1998.
According to such information, the named entities held sole, shared or no
voting and dispositive power over the shares as follows: Tinicum Investors
-- 1,518,138 shares (sole voting and dispositive power); RIT Capital
Partners plc -- 264,622 shares (sole voting and dispositive power); Putnam
L. Crafts, Jr. -- 200,000 shares (sole voting and dispositive power); and
Eric M. Ruttenberg -- 9,288 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 entity in a filing on Schedule
13G dated February 14, 1998, with the Securities and Exchange Commission.
According to such filing, FMR Corp. has sole voting power over 739,700
shares
2
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and sole dispositive power over 1,089,600 shares. Also according to such
filing, certain related entities held sole, shared or no voting and
dispositive power over the shares as follows: Fidelity Management &
Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., is
the beneficial owner of 388,800 shares; Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity, and the funds each has sole power to
dispose of the 349,900 shares owned by the Funds; Fidelity International
Limited ("FIL"), FMR Corp., through its control of Fidelity, and Fidelity
American Special Situations Trust ("FASST") each has sole power to vote
and to dispose of the 38,900 shares held by FASST; Fidelity Management
Trust Company, a wholly-owned subsidiary of FMR Corp., is the beneficial
owner of 678,800 shares; Edward C. Johnson 3d and FMR Corp., through its
control of Fidelity Management Trust Company, each has sole voting and
dispositive power over 678,800 shares; and FIL is the beneficial owner of
60,900 shares, which includes the 38,900 shares owned by FASST. Neither
FMR Corp. nor Edward C. Johnson 3d, 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
541,456 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 40,000 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
1,082 shares held in a fiduciary capacity in which he has a beneficial
interest and shared voting and dispositive power, and 542,352 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
40,000 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, 1998, by each director, by the Chairman,
Chief Executive Officer and President and the three other executive officers is
set forth below. This information has been supplied in each instance by the
individuals involved.
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------
Name of Individual Number of Shares Number of Shares Total Shares Percent of Class
or Number of with Direct Acquirable within Beneficially If 1% or
Persons in Group Beneficial Ownership 60 Days Owned(a) More(b)
<S> <C> <C> <C> <C>
- - -----------------------------------------------------------------------------------------------------------
Charles W. Grigg 43,374 307,999 351,373 2.8%
Howard T. Hallowell III 542,868 566 543,434 4.4%
Richard W. Kelso 1,880 566 2,446 --
James F. O'Connor 1,170 0 1,170 --
Eric M. Ruttenberg 2,870 6,418 9,288(c) --
Raymond P. Sharpe 4,870 2,660 7,530 --
Harry J. Wilkinson 47,947 92,000 139,947 1.1%
James D. Dee 1,040 5,200 6,240 --
John M. Morrash 3,056 28,200 31,256 --
William M. Shockley 5,446 29,400 34,846 --
All Directors and
Executive Officers as a
Group (10 persons) 654,521 473,009 1,127,530 8.8%
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</TABLE>
(a) Beneficial ownership for purposes of this Proxy Statement is defined in
accordance with the requirements of Rule 13d-3 under the Securities
Exchange Act of 1934, which provides that the beneficial owner of a
security includes any person who, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise, has or
shares voting power or investment power with respect to such security, or
has the right to acquire such voting power or investment power through the
exercise of an option, warrant or right within 60 days. The individuals
named in the table each exercise sole voting and dispositive power over
the shares beneficially owned by them except for 1,082 shares held by Mr.
Hallowell, over which he has shared voting and dispositive power. The
total includes 420 shares held by an executive officer's spouse.
(b) For purposes of calculating the percentage of the outstanding shares of
Common Stock at February 28, 1998 for each listed person or entity, the
number of shares of Common Stock includes shares that may be acquired by
such person or entity within 60 days of February 28, 1998 through the
exercise of vested stock options under the SPS 1988 Long Term Incentive
Stock Plan but does not include the number of shares underlying such
options held by any other person.
(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 1,518,138 shares of Common Stock as of February 28, 1998. Based on
understandings with certain other beneficial owners of Common Stock
described in a Statement on Schedule 13D dated January 24, 1997 as updated
by the named entities through February 28, 1998, Mr. Ruttenberg and
Investors may be deemed to have indirect beneficial ownership of an
additional 464,622 shares of Common Stock beneficially owned directly by
such other beneficial owners as of February 28, 1998. Mr. Ruttenberg
disclaims beneficial ownership of any shares of Common Stock beneficially
owned directly by Investors or such other beneficial owners.
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Election of Directors
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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 three Class I directors expire this year.
Accordingly, shareholders are being asked to elect three Class I directors who
will hold office until the 2001 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
4
<PAGE>
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 three nominees receiving the highest number
of votes cast at the meeting will be elected as Class I directors.
Listed below are the names of, and certain other information respecting
the three nominees for election as Class I directors, and the other four
directors who will be continuing in office following the meeting.
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CLASS I - NOMINEES FOR A THREE-YEAR TERM
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Howard T. Hallowell III
Age: 63 Director since 1992
Economist, since prior to 1993 until his retirement in 1994, from Eastman Kodak
Company, a leading manufacturer of photographic equipment and supplies. A
director of PMHP Inc., and Trustee of the Hallowell Foundation.
- - --------------------------------------------------------------------------------
Charles W. Grigg
Age: 58 Director since 1993
Chairman of the Board and Chief Executive Officer of the Company since 1993,
and President of the Company since 1997. Previously, since prior to 1993,
President and Chief Operating Officer of Watts Industries, Inc., a manufacturer
of valve products. A director of Wyman-Gordon Corporation.
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Richard W. Kelso
Age: 60 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 1993. A director of PQ Corporation and
P.H. Glatfelter Company.
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CLASS III - DIRECTORS WITH TERMS EXPIRING IN 1999
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Harry J. Wilkinson
Age: 60 Director since 1986
President and Chief Operating Officer of the Company since prior to 1993 until
his resignation in 1997. A director of Drexelbrook Engineering Co. and Flexible
Circuits, Inc.
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Eric M. Ruttenberg
Age: 42 Director since 1991
General Partner of Tinicum Investors, an investment management company, since
prior to 1993. A director of Environmental Strategies Corporation; Trustee,
Mount Sinai Medical Center.
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CLASS II - DIRECTORS WITH TERMS EXPIRING IN 2000
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Raymond P. Sharpe
Age: 49 Director since 1994
Chief Executive Officer of the Cookson Electronics Division of Cookson Group
plc, a supplier of special chemicals, metals, printed circuit board laminates
and equipment to the printed circuit board fabrication and electronic assembly
market. Previously, Executive Vice President of Cookson America, Inc., and
Chief Operating Officer of the Electronic Materials Division since 1994.
President of the Electronic Materials Division since prior to 1993. A director
of Cookson Group plc.
5
<PAGE>
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James F. O'Connor
Age: 57 Director since 1997
Managing Director of The Chartwell Company, a private merchant and investment
bank. Previously, since prior to 1998, Executive Director of Corporate
Development for the BBA Group plc, serving the transportation and industrial
markets worldwide. A director of PC Cox Holdings, Ltd.; Trustee, Pope John
XXIII Seminary.
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Board Meetings, Committees and Compensation of Directors
- - --------------------------------------------------------------------------------
During 1997, there were five meetings of the Board of Directors of the
Company. Throughout 1997 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, O'Connor, Ruttenberg and Wilkinson, held three
meetings in 1997. The Committee's functions are to fix the salaries and other
compensation of all officers and key executives of the Company other than the
Chief Executive Officer and 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.
Kelso (Chairman), Grigg, O'Connor, Ruttenberg and Sharpe, held two meetings in
1997. 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 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, O'Connor, and Sharpe, held two
meetings in 1997. The Committee's functions include meeting periodically with
the Company's management, internal auditors and independent certified public
accountants to
6
<PAGE>
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 1997, 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>
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Executive Compensation
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The following table sets forth, for the Company's fiscal years ended
December 31, 1995 through 1997, the total annual and long-term compensation of
the Chairman, Chief Executive Officer and President and the three other
executive officers of the Company (the "Named Officers").
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Summary Compensation Table
<TABLE>
<CAPTION>
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Annual Compensation
- - ------------------------------------------------------------------------------
Other
Annual
Compen-
Name and Salary Bonus sation
Principal Position Year ($)(1) ($)(2) ($)(3)
==============================================================================
<S> <C> <C> <C> <C>
Charles W. Grigg 1997 520,833 259,000 23,313
Chairman, Chief Executive 1996 487,667 217,147 16,962
Officer and President 1995 443,333 210,895 13,171
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William M. Shockley 1997 170,000 68,000 0
Vice President, Chief Financial 1996 150,000 47,879 0
Officer and Controller 1995 125,800 37,490 0
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John M. Morrash 1997 145,000 50,750 1,616
Vice President, Treasurer 1996 133,000 36,485 1,260
and Assistant Secretary 1995 125,000 31,875 1,491
- - ------------------------------------------------------------------------------
James D. Dee 1997 130,000 39,000 0
Vice President, General 1996 98,367 31,200 0
Counsel and Secretary 1995 89,700 21,750 0
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</TABLE>
<PAGE>
[RESTUBBED FROM TABLE ABOVE]
<TABLE>
<CAPTION>
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Long-Term Compensation
----------------------------------------
Awards Payouts
-------------------------- ------------
Securities
Underlying Long-Range All Other
Restricted Options Incentive Compen-
Name and Stock Granted Bonus sation
Principal Position ($)(4) (#) ($)(5) ($)(6)
=======================================================================================
<S> <C> <C> <C> <C>
Charles W. Grigg 123,462 40,000 123,462 1,313,598
Chairman, Chief Executive 96,800 40,000 96,800 10,193
Officer and President 54,417 40,000 54,417 9,225
- - ---------------------------------------------------------------------------------------
William M. Shockley 22,690 4,000 34,036 321,631
Vice President, Chief Financial 15,000 6,000 22,500 415
Officer and Controller 6,827 30,000 10,240 272
- - ---------------------------------------------------------------------------------------
John M. Morrash 12,096 4,000 22,464 281,638
Vice President, Treasurer 9,310 6,000 17,290 566
and Assistant Secretary 4,329 8,000 8,039 529
- - ---------------------------------------------------------------------------------------
James D. Dee 10,845 6,000 20,140 515
Vice President, General 7,280 10,000 13,520 243
Counsel and Secretary 3,014 0 5,598 214
- - ---------------------------------------------------------------------------------------
</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 1997 through 1995, respectively
as follows for Mr. Grigg -- $5,000, $4,000 and $5,000. Amounts shown also
reflect, for each of the Named Officers, except Mr. Shockley and Mr. Dee,
interest accrued in excess of 120% of the applicable federal long-term
rate with respect to the Company's Executive Deferred Compensation Plan.
(4) As of December 31, 1997 the value of restricted shares held by the Named
Officers was as follows: Mr. Grigg $327,338 (7,466 shares); Mr. Shockley
$52,349 (1,194 shares); Mr. Morrash $30,515 (696 shares) and Mr. Dee
$24,816 (566 shares). The value of the restricted shares is based on the
year end average stock price of $43.8438 per share. Restricted stock
awards earned in 1997 were made on February 2, 1998, for the dollar values
shown as determined in accordance with the Company's Long Range Incentive
Plan. These awards were granted at the fair market value of the Company's
common stock of $41.0938 per share on that date under the SPS 1988 Long
Term Incentive Stock Plan to the Named Officers in the following amounts
-- Mr. Grigg (3,004 shares); Mr. Shockley (552 shares); Mr. Morrash (294
shares); and Mr. Dee (264 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. Additionally, in the case of Messrs.
Grigg, Shockley and Morrash, the amount shown for 1997 includes
$1,302,584, $321,153 and $281,016, respectively, representing compensation
from the exercise of 40,000, 8,600, and 9,800 stock options, respectively,
under the SPS 1988 Long Term Incentive Stock Plan.
The following tables provide information concerning the number and value
of option grants during the last year and the number and value of options to
purchase the Company's common stock held by each of the Named Officers as of
December 31, 1997. All options outstanding were granted under the SPS 1988 Long
8
<PAGE>
Term Incentive Stock Plan at 100% of the fair market value of the Company's
common stock on the date of grant. The vesting provisions of the options are
determined by the Executive Compensation and Stock Option Committee.
- - --------------------------------------------------------------------------------
Option Grants in Last Year
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
- - ------------------------------------------------------------------------------------------------------------
% of Total
Options
Number of Granted to
Securities All
Underlying Employees Exercise
Options in Last Price Expiration
Name Granted Year ($/Sh) Date 5% ($) 10% ($)
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Charles W. Grigg 40,000 20.62% 33.9063 Feb. 9, 2007 852,938 2,161,513
- - ------------------------------------------------------------------------------------------------------------
William M. Shockley 4,000 2.06% 33.9063 Feb 9, 2007 85,294 216,151
- - ------------------------------------------------------------------------------------------------------------
John M. Morrash 4,000 2.06% 33.9063 Feb. 9, 2007 85,294 216,151
- - ------------------------------------------------------------------------------------------------------------
James D. Dee 6,000 3.09% 33.9063 Feb. 9, 2007 127,941 324,227
- - ------------------------------------------------------------------------------------------------------------
</TABLE>
- - --------------------------------------------------------------------------------
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) 40,000 1,302,584 283,999/96,001 9,196,858/1,647,517
- - ------------------------------------------------------------------------------------------------------
William M. Shockley 8,600 321,153 22,400/32,800 627,587/780,412
- - ------------------------------------------------------------------------------------------------------
John M. Morrash 9,800 281,016 22,600/17,600 701,944/391,425
- - ------------------------------------------------------------------------------------------------------
James D. Dee 0 0 2,000/14,000 33,687/194,375
- - ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value of unexercised options based on the year end, December 31, 1997,
average stock price of $43.8438 per share.
(2) Mr. Grigg received an option grant of 300,000 shares under the SPS 1988
Long Term Incentive Stock Plan on December 1, 1993, upon being elected
Chairman and Chief Executive Officer of the Company. As of January 23,
1996, all 300,000 options became fully vested and exercisable as a result
of the achievement of target prices for the Company's common stock as set
forth below:
Target Price Number of Options Vested and Exercisable
-------------- -----------------------------------------
$ 14.0625 90,000
$ 17.30 90,000
$ 21.625 120,000
9
<PAGE>
The Stock Option Agreement with Mr. Grigg contains certain resale
restrictions. The total number of shares of Common Stock issued pursuant to the
option grant (300,000) 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%
- - --------------------------------------------------------------------------------
Pension Benefits
- - --------------------------------------------------------------------------------
The following table shows the amount of the total annual pension which a
Named Officer 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 the participant's final five year average
pensionable earnings and years-of-service.
- - --------------------------------------------------------------------------------
Pension Plan Table
Years of Service
- - --------------------------------------------------------------------------------
Average Pensionable 15 or More
Earnings for Five-Year 5 Years 10 Years Years
Period Preceding Retirement Service Service Service
==============================================================================
$ 150,000 30,000 60,000 90,000
200,000 40,000 80,000 120,000
250,000 50,000 100,000 150,000
300,000 60,000 120,000 180,000
350,000 70,000 140,000 210,000
400,000 80,000 160,000 240,000
450,000 90,000 180,000 270,000
500,000 100,000 200,000 300,000
550,000 110,000 220,000 330,000
600,000 120,000 240,000 360,000
Pensionable earnings with respect to the Named Officers are based solely
on the amounts shown in the salary column of the Summary Compensation Table.
As of December 31, 1997, the years of credited service for the Named
Officers were as follows: C. W. Grigg -- 14; W. M. Shockley -- 6; J. M. Morrash
- - -- 16; J. D. Dee -- 9.
For Mr. Grigg, years-of-service includes service with Watts Industries,
Inc. The straight life annuity amount payable to Mr. Grigg at age 65 will be
reduced by benefits payable under the Watts Industries, Inc. Supplemental
Employees Retirement Plan.
10
<PAGE>
The RIP and BEP are cash balance plans wherein participants 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
==============================================================================
28 1.250% 2.500%
- - ------------------------------------------------------------------------------
36 1.625% 3.250%
- - ------------------------------------------------------------------------------
44 2.000% 4.000%
- - ------------------------------------------------------------------------------
52 2.500% 5.000%
- - ------------------------------------------------------------------------------
60 3.125% 6.125%
- - ------------------------------------------------------------------------------
68 3.750% 6.750%
- - ------------------------------------------------------------------------------
76 4.625% 7.625%
- - ------------------------------------------------------------------------------
84 5.625% 8.625%
- - ------------------------------------------------------------------------------
92 6.750% 9.750%
- - ------------------------------------------------------------------------------
92 and over 8.125% 11.125%
- - ------------------------------------------------------------------------------
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 (these amounts are not incremental to those
shown in the Pension Plan Table above):
- - ------------------------------------------------------------------------------
Date Years of Service
Named Officer at Age 65 at Age 65 Annual Benefit
==============================================================================
Charles W. Grigg June, 2004 10 $ 47,400
- - ------------------------------------------------------------------------------
William M. Shockley August, 2026 34 163,000
- - ------------------------------------------------------------------------------
John M. Morrash October, 2019 38 90,900
- - ------------------------------------------------------------------------------
James D. Dee July, 2022 34 92,700
- - ------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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 1,530 shares,
based upon the fair market value of the Company's common stock on that date of
$16.3438 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 1,140 shares based upon the
fair market value of the Company's common stock on October 24, 1995 of $19.7188
per share. Each non-employee director on February 10, 1997 received a
restricted stock award in the amount of $25,000, or 740 shares, based upon the
fair market value of the Company's common stock on that date of $33.9063 per
share. Mr. Wilkinson, who became an outside director on March 1, 1997, received
a pro rata restricted stock award in the amount of $40,416, based upon the
number of months remaining until May 2, 2000 and February 10, 2002, in
accordance with the SPS 1988 Long Term Incentive Stock Plan, or 1,270 shares
based
11
<PAGE>
upon the fair market value of the Company's common stock on March 3, 1997 of
$31.8236 per share. Mr. O'Connor, who was elected as a director on April 29,
1997, received a pro rata restricted stock award in the amount of $38,750,
based upon the number of months remaining until May 2, 2000 and February 10,
2002, in accordance with the SPS 1988 Long Term Incentive Stock Plan, or 1,170
shares based upon the fair market value of the Company's common stock on April
29, 1997 of $33.1197 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.
12
<PAGE>
- - --------------------------------------------------------------------------------
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 provided 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
provided for an incentive bonus payment of $150,000 for the first year, and
eligibility to participate in the Company's Management Incentive Plan
thereafter. Under the Agreement, he is eligible to participate in all executive
benefit plans, stock option programs and employee fringe benefits during his
employment with the Company. 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 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.
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 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 for completed and uncompleted (pro rata) periods, under the LRIP for
completed 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
13
<PAGE>
entitled to receive a lump sum payment of these retirement benefits.
Restrictions on restricted shares, if any, issued to the participant lapse. 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. On February 28, 1997, Harry J. Wilkinson and
another individual not named in the Summary Compensation Table, and on April
30, 1997, an additional individual not named in the tables received Notice of
Termination under the SESP. These three individuals received $214,667, $123,000
and $85,167, respectively in salary continuation through December 31, 1997.
Their remaining benefits under the SESP will be paid in full in 1998.
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.
- - --------------------------------------------------------------------------------
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
536,760 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
1,570,560 shares of Common Stock, or approximately 13.93% of the 11,272,718
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.
- - ------------
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>
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, 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, in which case such matter 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 were not 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.
15
<PAGE>
- - --------------------------------------------------------------------------------
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.
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.
16
<PAGE>
- - --------------------------------------------------------------------------------
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.
- - --------------------------------------------------------------------------------
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 1997.
- - --------------------------------------------------------------------------------
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 January 1, 1998,
Mr. Grigg's annual base salary was increased by the Board of Directors from
$517,800 to $536,000. The Board believes this increase is commensurate with the
Company's improved financial performance during 1997. This amount is also
believed to be competitive with companies of similar size and complexity. Mr.
Grigg, has a 60% incentive opportunity under the Company's Management Incentive
Plan and a 60% 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; James F. O'Connor; Eric
M. Ruttenberg; and Harry J. Wilkinson.
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, 1997, as compared to the
Standard and Poor's 500 Index and the Standard and 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)
[INSERT PERFORMANCE GRAPH]
- - ------------
Notes:
(1) Total return assumes reinvestment of dividends.
(2) The above graph assumes $100 was invested on December 31, 1992 in SPS
Technologies Common Stock, the S&P 500 Index ad 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.
- - --------------------------------------------------------------------------------
Independent Certified Public Accountants
- - --------------------------------------------------------------------------------
Coopers & Lybrand L.L.P., the Company's independent certified public
accountants for the year 1997, has been selected to continue for the year 1998.
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, 1997.
- - --------------------------------------------------------------------------------
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 1999 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, 1998.
James D. Dee
Secretary
March 27, 1998
- - --------------------------------------------------------------------------------
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
