SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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-69e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11 or Rule 14a-12
TECHNITROL, 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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TECHNITROL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1997
The Annual Meeting of the Shareholders of Technitrol, Inc.
(hereinafter called the "Company"), will be held in the Meade Room, The
Union League of Philadelphia, 140 South Broad Street, Philadelphia,
Pennsylvania, on Wednesday, May 21, 1997, at 5:00 P.M., Eastern Daylight
Saving Time, for the following purposes:
(1) to nominate and elect two directors for a term of three years and
until their successors are elected and qualified;
(2) to increase the number of authorized shares of Technitrol Common
Stock from 30 million shares to 75 million shares;
(3) to consider and act upon the selection of KPMG Peat Marwick LLP as
the Company's independent public accountants for the year ending December
31, 1997; and
(4) to transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only shareholders of record at the close of business on March 7, 1997,
will be entitled to vote at the meeting.
By Order of the Board of Directors
Drew A. Moyer
Secretary
Trevose, Pennsylvania
March 28, 1997
SHAREHOLDERS ARE REQUESTED TO MARK, SIGN AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ENVELOPE PROVIDED
<PAGE>
TECHNITROL, INC.
1210 Northbrook Drive
Suite 385
Trevose, PA 19053
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, MAY 21, 1997
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Technitrol, Inc. (hereinafter
called the "Company" or "Technitrol") to be used in voting at the Annual
Meeting of the Shareholders of the Company to be held in the Meade Room,
The Union League of Philadelphia, 140 South Broad Street, Philadelphia,
Pennsylvania, on Wednesday, May 21, 1997, at 5:00 P.M., Eastern Daylight
Saving Time, or at any adjournment or adjournments thereof. This Proxy
Statement, the proxy and a copy of the Annual Report, including
Consolidated Balance Sheets for the years ended December 31, 1996 and 1995
and Consolidated Statements of Earnings for the Company for the years ended
December 31, 1996, 1995 and 1994, have been mailed to each shareholder of
record at the close of business on March 7, 1997, on or before March 31,
1997. The Company's telephone number is 215-355-2900.
You are requested to mark, sign and complete the accompanying proxy
and return it in the envelope provided.
Proxies in such form, if duly signed and received in time for the
voting, will be voted in accordance with the directions of the
shareholders. The persons designated as proxies shall have the
discretionary authority to vote cumulatively for the election of Directors
and distribute such votes among the nominees standing for election (except
as otherwise instructed by a shareholder in the accompanying proxy) to
assure the election of the nominees of the Board of Directors. The giving
of a proxy does not preclude the right to vote in person should the person
so desire and, as provided by the laws of Pennsylvania, one may revoke the
proxy by giving notice to the Secretary of the Company in writing or in
open meeting, but such revocation shall not affect any vote previously
taken.
The expense of soliciting proxies for the Annual Meeting, including
the cost of preparing, assembling and mailing the notice, proxy and Proxy
Statement, will be paid by the Company. The solicitation will be made by
the use of mails, through brokers and banking institutions, and by officers
and regular employees of the Company. Proxies may be solicited by personal
interview, mail, telephone or telegraph.
Each holder of Common Stock of record at the close of business on
March 7, 1997, is entitled to one vote per share so held on all matters
that come before the Annual Meeting except in the election for directors
which shall be by cumulative voting. In the election of directors, if a
shareholder entitled to vote wishes to exercise cumulative voting rights,
he shall so indicate his intention to the Chairman of the Annual Meeting
prior to voting, multiply the number of votes to which he may be entitled
by the total number of directors to be elected in the election and cast the
whole number of such votes among one or more candidates in such proportion
as he desires. The candidates receiving the highest number of votes, up to
the number of directors to be elected in the election, shall then be
elected.
At the close of business on March 7, 1997, there were outstanding and
entitled to vote at the Annual Meeting 16,013,870 shares of Common Stock,
the only class of stock outstanding and entitled to vote at the Annual
Meeting. In this Proxy Statement all references to share amounts
outstanding as of December 31, 1996 or any later date have been restated to
reflect the two for one stock split on February 28, 1997.
1
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Proposal No. 1--Election of Directors
The Board of Directors is divided into three classes. The Directors in
Class III, Messrs. Stanley E. Basara, Roy E. Hock and Edward M. Mazze are
presently serving terms expiring in 1998. The Directors in Class I, Messrs.
Thomas J. Flakoll, J. Barton Harrison and Graham Humes, are presently
serving terms expiring in 1999. Messrs. John E. Burrows and James M.
Papada, III, currently Class II Directors, are the Board of Directors'
nominees for election at this meeting and will, if elected, serve terms
expiring in 2000. These nominees were recommended to the Board of Directors
by the Nominating Committee on March 19, 1997.
Votes pursuant to the accompanying proxy will be cast equally, unless
otherwise indicated on the proxy, for the election of Messrs. Burrows and
Papada, provided that, as set forth above, the persons designated as
proxies shall have the discretionary authority to cumulate their votes.
However, each shareholder is allowed to vote his shares cumulatively in the
manner previously described and may indicate such intention on the enclosed
proxy. The two nominees are presently Directors of the Company. It is not
contemplated that either of Messrs. Burrows or Papada will be unable or
unwilling to serve as Director, but should that occur, the Board of
Directors reserves the right to nominate another person in place of either
one.
SECURITY OWNERSHIP OF CERTAIN PRINCIPAL OWNERS AND MANAGEMENT
Principal Owners
The following table sets forth as of December 31, 1996, the beneficial
ownership of those persons known by the Company to be the beneficial owners
of more than 5% of the Company's outstanding Common Stock, the only class
authorized (the shares shown below reflect the two for one stock split
effective February 28, 1997):
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
--------------------------------------------------------------
Gordon Palmer, Jr. 1,992,600(1) 12.47%
7147 Sabino Vista Circle Direct
Tucson, AZ 85750
- -----------
(1) Mr. Palmer is one of the founders of the Company. For many years he
was an officer of the Company and served as a Director from 1947 until
July 31, 1991. He has been retired since 1977.
2
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Management
The following table sets forth as of March 7, 1997, the beneficial
ownership of the Company's Common Stock by the five most highly compensated
officers, all Directors and nominees, and the Directors and officers of the
Company as a group:
Amount and Nature of Percent
Name Beneficial Ownership of Class
- ---------------------------------------------------------------------------
Stanley E. Basara ............ 3,900 Direct .02
John E. Burrows, Jr. ......... 2,340 Direct .01
Thomas J. Flakoll ............ 102,400 Direct .64
J. Barton Harrison ........... 121,780 Direct .76
Roy E. Hock .................. 537,262 Direct 3.35
Graham Humes ................. 57,000 Direct .36
Michael J. Kirchoff .......... 5,220 Direct .03
John L. Kowalski ............. 21,694 Direct .14
Edward M. Mazze .............. 3,900 Direct .02
James M. Papada, III ......... 10,000 Direct .06
James J. Rafferty, Jr. ....... 110,740 Direct .69
Albert Thorp, III ............ 7,236 Direct .05
Directors and officers
as a group (14 people) ...... 986,890 6.16
The Company has adopted a policy which requires all Directors to own
stock in the Company. See the section in this Proxy Statement entitled
Corporate Governance Matters.
DIRECTORS AND EXECUTIVE OFFICERS
Identification and Business Experience
The following table sets forth certain information with regard to each
person nominated for election or reelection to the Board (Messrs. Burrows
and Papada), each Director whose term will continue after the Annual
Meeting (Messrs. Basara, Flakoll, Harrison, Hock, Humes, and Mazze) and the
executive officers of the Company.
Name Age Position
- ---------------------------------------------------------------------------
Stanley E. Basara 63 Director
John E. Burrows, Jr. 49 Director
Thomas J. Flakoll 52 Director, Chief Executive Officer
and President
J. Barton Harrison 67 Director
Roy E. Hock 67 Director
Graham Humes 64 Director
Michael J. Kirchoff 52 Vice President
John L. Kowalski 53 Vice President
Dieter D. Littles 39 Treasurer
Edward M. Mazze 56 Director
Drew A. Moyer 32 Corporate Controller and Secretary
James M. Papada, III 48 Chairman of the Board
James J. Rafferty, Jr. 59 Vice President
Albert Thorp, III 42 Vice President and Chief Financial Officer
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There is no family relationship between any officer and/or Directors nor
are there any arrangements or understandings among any officers and/or
Directors and any other person(s) pursuant to which any such officer and/or
Director was or is to be selected as such.
Mr. Basara was elected as a Director of the Company in September 1993.
Mr. Basara was President and Chief Operating Officer of Panasonic
Broadcasting Systems Company from 1987 to 1995. From June 1982 through 1986
he was President of Thompson-CSF, Inc. From 1956 to 1981, he was employed
by RCA Corporation, his last position being Division Vice President and
General Manager of RCA's Broadcast Systems Division.
Mr. Burrows was elected a Director of the Company in May 1994.
Currently, he is President and Chief Executive Officer of SPI Polyols, a
global producer of specialty chemicals for the food, pharmaceutical and
personal care industries. Prior to joining SPI, he was Vice President-North
America of Quaker Chemical Corporation. From 1973 until his appointment at
Quaker Chemical Corporation in March 1990, he held various management
positions at FMC Corporation, the most recent being Division Manager,
Marine Colloids, a biotech and food specialty chemical operation with sales
in 75 countries and plants in Europe, the U.S. and the Philippines.
Mr. Flakoll has been a Director since 1984. He was elected President
in March 1994 and Chief Executive Officer in October 1995. He had
previously served as Vice President from March 1985 until March 1994. He
was General Manager of the Components Division from May 1980 until April
1990. Prior to joining the Company, Mr. Flakoll held positions with the
Fermont Division of Dynamics Corporation of America as Director of
Operations and as Director of Engineering and with Bowmar Instrument
Corporation as Director of Manufacturing and Director of Engineering.
Mr. Harrison has been a Director since 1966 and served as Secretary
from 1975 to 1977 and from February 1983 to May 1995. He was President of
Extracorporeal, Inc., a manufacturer of medical devices, from October 1977
until October 1982 and currently is a Director of Steel Plant Equipment
Corporation.
Mr. Hock has been a director since 1967 and was elected Chief
Executive Officer in 1976, a position which he held until September 30,
1995. He held the office of President from 1973 through November 1985 and
from July 1987 to March 1994. Mr. Hock was Chairman of the Board of
Directors from May 21, 1976 until December 31, 1995.
Mr. Humes was elected a Director of the Company in November 1986,
effective February 1987. He is currently a principal of Compass Capital
Advisors, Inc. He was General Director (CEO) of CARESBAC-St. Petersburg, in
St. Petersburg, Russian Federation, from June 1993 to May 1995. He was a
Senior Vice President and a Director of Legg Mason Wood Walker, Inc. from
March 1987 through June 1993. From 1974 through February 1987, he was a
Senior Vice President of Mellon Bank (East), N.A. and Manager of the
Corporate Finance Group. He is a Director of Brunschwig & Fils, Inc. and a
Director of Big Sky Foods, Inc., in St. Petersburg, Russia.
Mr. Kirchoff was elected Vice President in January of 1995. Previously
he was employed by Victoreen, Inc. from 1986 to 1993, serving as President
and Chief Executive Officer since 1988. Prior to that, he was employed in
various capacities by EG&G Ortec, Inc. from 1972 to 1986, including General
Manager, Materials Analysis Division from 1981 to 1985 and then Vice
President, Marketing and Sales, to 1986.
Mr. Kowalski was elected Vice President in September 1995. He is
President of the Electronic Components Segment and also holds the position
of President of Pulse Engineering, Inc. Mr. Kowalski held the position of
President of the Fil-Mag Group since January 1994 and General Manager of
the Components Division from April 1990 to October 1995. Prior to his
employment at Technitrol, he held various management positions at
Honeywell, General Electric and Varian.
4
<PAGE>
Mr. Littles joined Technitrol in January 1997 and, upon election,
became Treasurer in March 1997. Mr. Littles held positions previously as
Director of Cash Management and Treasury at the Franklin Mint, (1995) and
various positions involving risk management and international cash
management at Scott Paper, (1989 to 1994).
Dr. Mazze was elected a Director of the Company in November 1985. In
July 1993, Dr. Mazze was appointed Dean, The Belk College of Business
Administration, The University of North Carolina at Charlotte and Professor
of Marketing. Prior to that, he was Professor of Marketing and
International Business at Temple University and was formerly the Dean of
the School of Business and Management at Temple. From 1975 to 1979, he was
Dean of the W. Paul Stillman School of Business at Seton Hall University.
Dr. Mazze also serves as a management and marketing consultant. He is a
Trustee of Delaware Valley College of Science and Agriculture.
Mr. Moyer joined the Company in October 1989 and was elected Corporate
Controller in May 1995 and Secretary in November 1996. Prior to his
election as Corporate Controller, he served as the Company's Corporate
Accountant and Internal Auditor. Mr. Moyer was previously employed by Ernst
& Young LLP and is a Certified Public Accountant.
Mr. Papada was President and Chief Operating Officer of Hordis
Brothers, Inc., a privately-held glass fabricator from February 1983 until
December 1987. Commencing December 1987, Mr. Papada became a partner in the
law firm of Stradley, Ronon, Stevens & Young LLP, where he had been a
partner prior to his joining Hordis. Stradley, Ronon, Stevens & Young LLP
is counsel to the Company. Mr. Papada is also a Director of Para-Chem
Southern, Inc. and CTA Incorporated and has been a Director of the Company
since 1983. Mr. Papada was elected Chairman of the Board of the Company
effective January 1, 1996.
Mr. Rafferty has held the office of President of Advanced Metallurgy
from 1976 through 1985 and from July 1987 to the present time. He was
appointed Vice President of Technitrol in 1984, President in 1985, and Vice
President in 1987. Mr. Rafferty was a Director of the Company from 1984
until 1997 and is President of the Metallurgical Products Segment.
Previously, he held positions with Dietrich Industries, Blairsville
Division, as Division Manager, and with National Aluminum Products as Vice
President of Production.
Mr. Thorp was elected to the office of Vice President of Finance in
May 1995. Mr. Thorp joined the Company in August 1989 and was elected
Corporate Controller in September 1989. Mr. Thorp held the additional
position of Treasurer from May 1995 until March 1997. From February 1986
until August 1989, he was Controller of the Medical Packaging Division of
PM Company. Prior to that, he was Plant Controller for Centocor, Inc. from
November 1984 until February 1986. Mr. Thorp is a Certified Public
Accountant.
Committees
The Board of Directors of the Company has an Audit Committee, an
Executive Compensation Committee and a Nominating committee, the members of
which are non-employee Directors. The current members of such Committees
are: Audit - Messrs. Burrows, Humes, and Mazze; Executive Compensation -
Messrs. Basara, Harrison, and Mazze; Nominating Committee - Messrs. Basara,
Harrison, and Hock. During the year ended December 31, 1996, the Board held
six regular and three special meetings. The Audit, Executive Compensation
and Nominating Committees held three, four and three meetings,
respectively. No Director attended fewer than 75% of the aggregate of Board
meetings and Committee meetings of which such Director was a member.
The function of the Executive Compensation Committee is to review and
recommend to the Board the broad plan of key executive compensation, and
1
<PAGE>
implementation thereof, to review the performance and corporate objectives
of the Chief Executive Officer, to review the Company's pension plan and
investment performance thereof and to undertake special assignments as made
by the Board.
The main function of the Audit Committee is to assist the Board in
fulfilling its fiduciary responsibilities relating to corporate accounting
and reporting practices, including recommendation of the firm to be
employed as independent auditors; consultation with the independent auditor
regarding the plan, scope and cost of the audit and non-audit functions, if
any; consultation and review with the independent auditor of its report
(including accounting practices and principles, adjustments and required
disclosure) and management letter; periodic consultation (outside of
management's presence) with the independent auditor regarding the adequacy
of internal controls; review of internal audit reports and review of the
total insurance program for adequacy.
The functions of the Nominating committee include the review and
recommendation of individuals for election as Directors of the Company and
the review of criteria for selecting Directors and evaluating current
Directors. In carrying out its responsibilities for recommending candidates
to fill vacancies on the Board and in recommending a slate of Directors for
election by the shareholders at the Annual Meeting, the Committee will not
consider nominees recommended by security holders. Security holders may
nominate persons to serve as Directors at the Company's Annual Meeting.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
Executive Compensation
The following table sets forth information about the compensation of
the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company for services in all
capacities of the Company and its subsidiaries.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long-Term Compensation All Other
Compensation (1) Restricted Stock Plan Awards Compensation (3)
----------------------- ---------------------------- ----------------
Fiscal
Name and Principal Position Year Salary Bonus Shares (2) Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Flakoll, 1996(4) $243,100 $140,000 2,000 $44,250 $12,286
Chief Executive 1995 190,000 100,000 3,380 44,151 49,782
Officer and President 1994 161,800 87,000 3,360 24,990 37,574
John L. Kowalski, 1996(5) 196,900 111,000 1,660 36,728 37,403
Vice President 1995 155,000 90,000 2,760 36,053 2,970
1994 125,000 76,000 3,480 25,883 3,051
James J. Rafferty, Jr., 1996(6) 164,500 76,000 1,220 26,993 11,888
Vice President 1995 161,000 42,000 1,660 21,684 34,913
1994 150,000 70,000 2,880 21,420 9,772
Michael J. Kirchoff, 1996 153,000 41,000 730 16,151 2,970
Vice President (7) 1995 145,080 63,000 2,020 26,386 2,048
Albert Thorp, III, 1996 120,000 50,000 730 16,151 7,291
Vice President and Chief 1995 92,300 40,000 1,200 15,675 2,153
Financial Officer 1994 71,000 20,000 800 5,950 3,119
</TABLE>
6
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(1) None of the five officers received other annual compensation from the
Company exceeding the lesser of $50,000 or 10% of salary and bonus
during the years 1994, 1995 and 1996.
(2) At December 31, 1996, the aggregate shares held under the Restricted
Stock Plans and value thereof was as follows:
Shares Value
---------------------------------------------
Mr. Flakoll ........ 13,880 $266,323
Mr. Kowalski ....... 16,400 314,675
Mr. Rafferty ....... 16,540 317,361
Mr. Kirchoff ....... 2,020 38,759
Mr. Thorp .......... 5,300 101,694
Dividends are paid on shares held under the Restricted Stock Plans.
Share amounts are adjusted to reflect the two for one stock split
effective February 28, 1997.
(3) Includes cash received upon vesting of Restricted Stock Plan awards
previously granted, the Company's contribution under the 401(k)
Retirement Savings Plan, and term life insurance premiums paid. For the
year 1996, the aggregate sums reported above are specifically
identified as follows:
Cash under
Restricted Stock Plans 401(k) Plan Term Life Insurance
--------------------------------------------------------------------------
Mr. Flakoll ........ $9,158 $2,408 $720
Mr. Kowalski ....... 34,506 2,177 720
Mr. Rafferty ....... 9,158 2,250 480
Mr. Kirchoff ....... -- 2,250 720
Mr. Thorp .......... 4,579 1,752 960
(4) Increased to $250,000 on March 25, 1996.
(5) Increased to $205,000 on May 27, 1996.
(6) Increased to $168,000 on July 1, 1996.
(7) Mr. Kirchoff was hired on January 2, 1995.
Retirement Plan
The Company maintains a defined benefit pension plan which provides
retirement benefits to employees of the Company and its subsidiaries who
are not covered by a collectively bargained agreement providing retirement
benefits from other plans. Generally, the Company makes contributions
annually to the plan based upon the annual salary (excluding bonuses) of
each participant and certain actuarial calculations. The following table
sets forth as to the Company's defined benefit pension plan the annual
benefits payable upon retirement to persons with specified final average
salaries and years of credited service classification. The information
assumes that the person retires at age 65 or older and selects a single
life annuity payment:
Years of Credited Service
-----------------------------------------------
Final Average Salary 10 Years 20 Years 30 Years 40 Years
- ---------------------------------------------------------------------------
$ 50,000 ................. $ 6,000 $12,000 $18,000 $18,000
100,000 .................. 13,700 27,500 41,200 41,200
150,000 .................. 21,400 42,900 64,300 64,300
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The officers named above and their respective years of credited
service are as follows:
Officers Years of Credited Service
-----------------------------------------------
Mr. Flakoll ................. 16
Mr. Kowalski ................ 6
Mr. Rafferty ................ 21
Mr. Kirchoff ................ 2
Mr. Thorp ................... 7
Their annual salaries covered by the plan during the year ended
December 31, 1996, did not exceed $150,000 each, the maximum allowable
amount for qualified pension plans in 1996.
Under federal law, an employee's benefits under a qualified pension
plan, such as the Company's pension plan outlined above, are limited to
certain maximum amounts. Effective January 1, 1994, the Company adopted a
supplemental retirement plan which supplements, on an unfunded basis, the
benefits of any participant in the qualified pension plan in an amount by
which any participant's benefits are limited by law. The amount of the
annual salaries of Messrs. Flakoll, Kowalski, Rafferty, and Kirchoff
covered by this supplemental plan during the year ended December 31, 1996,
were $93,100, $46,900, $14,500, and $3,000, respectively.
Restricted Stock
In 1981, the Board of Directors and the Shareholders of the Company
approved the adoption of an Incentive Compensation Plan. The plan provides
that the Committee administering the plan (the "Committee") has the
authority and flexibility to develop and implement forms of incentive
compensation for executive employees and key employees of each of the
operating divisions and subsidiaries of the Company.
Pursuant to the authority granted it under the plan, the Committee
adopted a Restricted Stock Plan (the "Restricted Plan I"), pursuant to
which shares of restricted stock may be awarded to executive employees, at
no cost to such employee. The shares may not be sold, pledged, or otherwise
disposed of until the restriction period set forth in Restricted Plan I
(the "Restricted Period") has ended. During the Restricted Period, the
executive must remain in the employ of the Company, except normal
retirement, or early retirement with the Committee's permission. In the
event that the executive ceases to be an employee of the Company during the
Restricted Period, then ownership of the shares reverts to the Company.
At such times as the shares are issued to an executive pursuant to
Restricted Plan I, the Committee determines performance targets (the
"Performance Target"). The Performance Target must be achieved by the
executive, if at all (but subject to the provision set forth below), at any
time on or before the third anniversary of the date of the issuance of
shares under Restricted Plan I (the "Performance Date"). The Restricted
Period related to the shares issued each executive from time to time
expires upon the earlier of the seventh anniversary of the issuance of such
shares or the Performance Date. Restricted Plan I also provides that the
Committee can determine, at the Performance Date, that a Performance Target
has been partially achieved and may then modify the number of shares as to
which the Restricted Period has ended. If the executive dies or becomes
totally disabled after shares have been issued to him or her, Restricted
Plan I provides in some instances for early termination of the Restricted
Period, and allows, in other instances, for early termination of the
Restricted Period at the discretion of the Committee.
8
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In 1984, the Board of Directors adopted a second restricted stock plan
("Restricted Plan II") under the Incentive Compensation Plan. Restricted
Plan II is designed to enable the Company to obtain and retain the services
of qualified employees, and to reward and motivate them, by providing them
with the opportunity to acquire shares of the Company's Common Stock. Under
the Restricted Plan II, shares of restricted stock may be awarded not only
to executive employees, but also to employees of each of the operating
divisions and subsidiaries of the Company.
Under Restricted Plan II, shares of Common Stock may be awarded to
eligible employees, from time to time, at no cost to such employees. The
shares may not be sold, pledged or otherwise disposed of until the
restricted period set forth in Restricted Plan II has ended. During the
restricted period (five years), the shares remain physically in the
possession of the Company. If the employee resigns or has employment
terminated by the Company for cause prior to the end of the restricted
period, the shares are returned to the Company. Upon death, total
disability or retirement on the normal retirement date prior to the
expiration of the restricted period, the restrictions will be released. If
an employee elects early retirement or had employment terminated other than
for cause, the employee shall be entitled to pro rata vesting, and the
committee has the power to adjust the effective award.
Under both Restricted Plan I and Restricted Plan II (collectively, the
"Plans"), the executive at the Performance Date or the eligible employee
upon vesting of the shares awarded, receives as additional compensation, an
amount of cash equal to the lesser of (1) the amount (calculated at the
highest individual Federal income tax rate, including surcharge) necessary
to pay Federal income taxes on such shares and additional cash
compensation, and (2) 165% of the market value of the shares as of the date
of the initial award by the Committee, all calculated on the number of
shares for which the applicable restricted period has ended.
During 1996, the Committee issued an aggregate amount of 11,620 shares
of the Company's Common Stock to six officers of the Company under Plan II.
During the year ended December 31, 1996, the Company expensed $976,000 in
the aggregate for all participants under the Plan.
The shareholders of the Company have previously authorized 1,200,000
shares for use under the Incentive compensation Plan and the two Plans
described herein. As of December 31, 1996, 368,660 shares remain available
for future grant.
Compensation of Directors
Non-employee Directors are paid an annual retainer of $12,000 (except
for committee Chairmen who are paid $14,000) plus $1,000 for each Board
Meeting attended and $750 for each Committee meeting attended. Under a
Deferred Compensation Plan for non-employee Directors, all or part of the
annual fees may be deferred at the election of the Directors. The Chairman
of the Board is paid an additional annual retainer of $75,000.
CORPORATE GOVERNANCE MATTERS
During 1996, the Board of Directors of the Company adopted a number of
policies and procedures aimed at strengthening the independence of the
Board and improving its ability to maximize the Company's value to its
shareholders. The policies adopted by the Board, at the recommendation of
the Nominating Committee, include (1) the establishment of a Board
comprised exclusively of outside Directors, except for the Chief Executive
Officer of the Company and (2) the requirement that all Directors invest a
substantial portion of their Director fees in the Company's Common Stock
until the market value of the Director's personal investment has reached
$100,000, as such amount is determined to represent a sufficient interest
9
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in the Company. When a Director's personal investment has reached $100,000,
the policy does not require any further investment in the Company. However,
Directors are encouraged to acquire additional shares of the Company's
Common Stock from time to time as their personal financial position allows.
As a result of the Board's decision to have the Chief Executive
Officer as its only Director who is also an employee, James J. Rafferty,
Jr., an existing Director and Vice President of the Company, has not been
nominated for election to another term as Director of the Company. Mr.
Rafferty continues to serve as Vice President of the Company and President
of the Metallurgical Products Segment of the Company.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION POLICIES
The Company's executive compensation program is administered by the
Executive Compensation Committee of the Board of Directors (the
"Committee"). The Committee is composed of three outside directors. Upon
recommendation by the Committee, all issues pertaining to executive
compensation are submitted to the full Board of Directors for approval.
Compensation Philosophy: The purpose of the Company's executive
compensation program is to help the Company achieve its mission and goals
by attracting, motivating, and retaining key executives of high caliber and
good potential. Pay opportunities will be competitive for average
performance, and above average pay will be provided for superior
performance. Variable components of pay will be a significant element of
compensation and will be variable on the basis of performance. They are not
to be considered entitlements.
Components of Compensation: The executive compensation program
consists of base salary, discretionary cash bonuses and awards under the
Restricted Stock Plans. Base salary and potential bonus ranges are
established annually following comparison of the Company and each of its
operating units with surveys of other manufacturing companies of similar
size and complexity. Though utilizing several different surveys, the
Committee relies principally on The National Executive Compensation Survey
published annually by the Management Association of Illinois. In order to
achieve some balance between short term and long term business objectives
of the Company, the cash bonus is weighted two-thirds by performance
criteria relating to the current business year and one-third by criteria
relating to future business considerations. The weighting for stock awards
is reversed with the emphasis on longer term business development and
strategic plans.
Administration in 1996:
Salaries. In determining 1996 executive salaries, the Committee began
by considering the previously established salary ranges for each position
and each executive's relationship to the mid-point of his range in light of
his tenure with the Company and years in the current position. Next, it
noted the performance of each individual operating unit against its sales,
operating profit and return on employed capital projections and the
personal performance of each operating unit's senior executive relative to
stated goals and challenges which arose during the year. Finally, the
Committee noted the Company's strong operating performance in 1995 with net
earnings increasing 34.5%, net earnings per share increasing 24.3% and
return on shareholder's equity increasing to 20.4% in 1995 and the fact
that the Company completed the largest acquisition in its history (Pulse
Engineering, Inc.) in late 1995. The Committee also noted that the 1995
total return (with reinvestment of cash dividends) to its shareholders
amounted to 71.4%. 1996 executive salary increases averaged 14.2%.
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In considering the 1996 salary increase for Mr. Flakoll, the Chief
Executive Officer (CEO), the Committee considered the various factors set
forth above as well as the significantly improved profitability of the
Company, its enhanced prospects for future profitable growth and his
continued outstanding leadership.
Cash Bonuses. The current business criteria, mentioned above, include
sales, profits, profits as a percentage of sales, return on employed
capital, cost reduction, quality, customer services and individual
performance. The future business criteria include new product/program
development, new market development, management succession/development,
acquisitions and similar items. The values assigned to each may vary
depending upon the business plans and strategic objectives of each
operating unit and were negotiated at the beginning of 1996. Achievement of
most of the criteria is measured by objective historical information and
numerical data, while some involve subjective judgments. The Committee
retains the prerogative to modify on a uniform basis the results obtained
in light of the Company's overall results and business conditions existing
at the time of its decision. As calculated under the executive compensation
program, 1996 executive cash bonuses totaled $518,200, or 37.8% of 1996
aggregate executive salaries. The Committee noted the Company's outstanding
performance in 1996 with net earnings increasing 118.7%, net earnings per
share increasing 76.4% and return on shareholders equity which increased to
24.1% in 1996. The Committee also noted that 1996 total return (with
reinvestment of cash dividends) to its shareholders amounted to 71.9%. In
view of the foregoing factors, the Committee decided not to exercise its
prerogative to modify the cash bonuses as otherwise calculated.
Stock Awards: Through the Company's Restricted Stock Plans, the
Committee has endeavored to motivate management through stock ownership.
For example, most of the named executive officers are significant
shareholders in the Company and are thus presumably motivated to act on
behalf of all shareholders to optimize overall Company performance. As
previously mentioned, the weighting of the performance criteria for stock
awards is based mostly on long term business development and plans. This is
appropriate since awards under Restricted Plan I vest in seven years, but
may vest in the third year if preset performance goals are attained. Awards
under Restricted Stock Plan II vest in five years. For purposes of the
summary Compensation Table, awards are valued at the current market price
on the date of the grant.
For the year of 1996, the Committee based its awards on the levels of
performance attained and elected to not exercise its prerogative to modify
the number of shares awarded. The Committee believes it is in the best
interest of the Company's shareholders to encourage, promote and reward
sound long term business plans and strategies.
In evaluating Mr. Flakoll's bonus and stock award as CEO for 1996, the
Committee took into account: the Company's overall financial performance in
1996; the extent of the Company's progress in assimilating prior
acquisitions; the increasingly global nature of the Company's business and
the relative performance of each of the Company's business segments in a
year of operating in a very competitive global economy; the completion of
the acquisition of the Doduco operations in Germany and Spain; the progress
made by Mr. Flakoll in achieving the goals which he established with the
Committee in early 1996; and, the level of bonus and stock awards received
by the executive officers and key executives of the Company. The committee
believes that Mr. Flakoll's overall compensation is fair and reasonable.
No member of the committee is an employee of the Company or any of its
subsidiaries. Mr. Harrison was formerly the Secretary of the Company and
performs certain investor relations and communications functions on a
monthly retainer as an independent contractor.
Compensation Committee: J. Barton Harrison (Chairman), Stanley E.
Basara, and Edward M. Mazze.
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COMPARISON OF NINE-YEAR CUMULATIVE TOTAL RETURN
The following graph and table show a nine-year comparison of total
shareholder returns for the Company, the Russell 2000[R] Index and the Dow
Jones Electrical Components & Equipment Industry Group Index.
In June 1996, the Company's Common Stock was included in the Russell
2000[R] Index and in November 1996 the Company's Common Stock commenced
trading on the New York Stock Exchange. Accordingly, the AMEX Market Value
Index (used for comparison purposes in prior years) has been deleted from
the following comparison and the Russell 2000[R] Index has been added as a
comparable index for the Company.
12
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<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Technitrol, Inc. $100.00 $151.96 $211.96 $131.41 $158.67 $155.86 $189.12 $262.20 $449.43 $772.57
Russell 2000[R] Index $100.00 $124.89 $145.18 $116.86 $170.68 $202.10 $240.31 $235.93 $303.03 $353.01
Dow Jones Electrical
Components & Equipment
Industry Group Index $100.00 $98.73 $125.73 $115.11 $144.63 $144.88 $157.70 $164.20 $214.71 $261.48
</TABLE>
Assumes $100 invested on December 31, 1987, and reinvestment of dividends.
Proposal No. 2 - Amendment to Charter to Increase Authorized Common Stock
On January 22, 1997, the Board of Directors of Technitrol (the
"Technitrol Board") approved an amendment to Technitrol's Articles of
Incorporation (the "Charter"), subject to approval by Technitrol's
shareholders, that would increase the number of authorized shares of
Technitrol Common Stock from 30 million shares to 75 million shares. If
approved by Technitrol's shareholders, Article FIFTH of the Charter will be
amended and restated in its entirety to read as follows:
FIFTH: The aggregate number of shares which the corporation shall have
the authority to issue is 75 million shares of Common Stock; the par value
of said Common Stock shall be $.125 per share.
On January 22, 1997, the Company's Board of Directors approved a two
for one stock dividend (the "Stock Dividend") payable to shareholders of
record as of February 7, 1997. The stock dividend required the issuance of
a significant number of shares. The proposal to increase the number of
authorized shares from 30 million to 75 million is necessary in order that
there are (i) an adequate number of shares of Technitrol Common Stock
available for issuance upon exercise of the rights attached to shares of
Technitrol Common Stock (the "Rights") pursuant to the Rights Agreement
dated as of August 30, 1996 between Technitrol and Registrar and Transfer
Company, as Rights Agent (the "Rights Plan") and (ii) a sufficient number
of additional authorized shares of Technitrol Common Stock available for
future issuance. After the issuance of shares of Technitrol Common Stock
pursuant to the Stock Dividend, only approximately 7,600,000 shares of the
authorized shares of Technitrol Common Stock are available for issuance.
Therefore, the Technitrol Board believes that Technitrol does not presently
have a sufficient number of authorized but unissued and unreserved shares
of Technitrol Common Stock available for issuance upon exercise of the
Rights pursuant to the Rights Plan. In addition, the Technitrol Board
believes that the availability of the additional shares would provide
flexibility for Technitrol in meeting its possible needs by enabling the
Board to raise additional capital through the issuance of Technitrol Common
Stock or securities convertible into, or exercisable for Technitrol Common
Stock, to declare stock dividends payable in Technitrol Common Stock, to
grant additional share awards under Technitrol's Restricted Stock Plan, or
to employ Technitrol Common Stock as a form of consideration for
acquisitions. The Technitrol Board also believes that a sufficient number
of authorized but unissued and unreserved shares may not become available
in an appropriate time frame if and when needed to provide Technitrol the
flexibility to meets its possible needs through the issuance of Technitrol
Common Stock. Other than to issue shares of Technitrol Common Stock
pursuant to the Stock Dividend, Technitrol's Restricted Stock Plan, its
outstanding options and warrants and the Rights (if the conditions for
exercise are satisfied under the Rights Plan), Technitrol does not
presently intend to issue any additional shares for any specific purpose.
The amendment to the Charter is being recommended to Technitrol's
shareholders at this time, rather than when actually needed as a result of
the exercise of Rights under the Rights Plan or in connection with each
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specific issuance of shares that may be proposed in the future, in order to
avoid any unnecessary delay and expense in connection with such future
specific issuances of shares because of the need for shareholder approval
of additional authorized shares. Such a delay and attendant expense could
have consequences which may not be in the best interests of Technitrol and
its shareholders.
The Technitrol Common Stock is presently approved for trading on the
New York Stock Exchange ("NYSE"). Pursuant to the listing standards,
policies and requirements of the NYSE, Technitrol is required to obtain
shareholder approval prior to the issuance of Technitrol Common Stock when:
(a) a stock option or purchase plan is to be established or other
arrangements made pursuant to which stock may be acquired by officers or
directors, except for warrants or rights issued generally to
securityholders of Technitrol or broadly-based plans or arrangements
including other employees (e.g. ESOPS); provided, however, shareholder
approval may not be required where shares are issued to a person not
previously employed by Technitrol, as an inducement essential to his
entering into an employment contract with Technitrol;
(b) a business, a company, tangible or intangible assets or property
or securities representing any such interest are to be acquired, directly
or indirectly, from a director, officer or substantial securityholder of
Technitrol (including its subsidiaries, affiliates or other closely related
persons) or from any company or party in which one of such persons has a
substantial direct or indirect interest if the number of shares of Common
Stock to be issued or the number of shares of Common Stock into which the
securities may be convertible exceeds one percent of the number of shares
of Common Stock or one percent of the voting power outstanding before
issuance;
(c) Common Stock or securities convertible into or exercisable for
Common Stock are to be issued in any transaction or series of related
transactions, other than a public offering for cash, (i) if the Common
Stock has or will have upon issuance voting power equal to or in excess of
20% of the voting power outstanding before the issuance of such stock or
securities convertible into or exercisable for Common Stock, or (ii) the
number of shares of Common Stock to be issued is or will be equal to or in
excess of 20% of the number of shares of Common Stock outstanding before
the issuance of the stock; or
(d) the issuance will result in a change of control of Technitrol.
This proposal is not being recommended in response to any specific
effort of which Technitrol is aware to obtain control of Technitrol. Except
insofar as shares of Technitrol's Common Stock are issuable upon exercise
of rights under the Rights Plan, this proposal is not part of any plan by
Technitrol to adopt a proposal or a series of proposals relating to a
possible takeover of Technitrol. The Technitrol Board has no present
intention of soliciting a shareholder vote on any other such proposal. If
this proposal is approved, however, the additional authorized shares of
Technitrol Common Stock could be issued to dilute the stock ownership of
persons who in the future seek control of Technitrol. Except as noted
above, however, the Technitrol Board has no present plans to issue any of
the additional shares and would comply with the NYSE rules prior to any
such issuance.
In addition, the Charter and Technitrol's Bylaws contain provisions
that could have the effect of delaying, deterring or preventing changes of
control or management of Technitrol. More specifically, Technitrol's
Charter and Bylaws provide (i) for a Board of Directors only one-third of
which is elected each year, (ii) a limitation on the number of directors on
the Technitrol Board to nine (9), (iii) that twenty percent (20%) of the
shares entitled to vote are required to call a special meeting of the
shareholders, (iv) for approval of seventy-five percent (75%) of voting
shares to amend Bylaws concerning the number, terms and removal of the
14
<PAGE>
Technitrol Board, and (v) for approval of seventy-five percent (75%) of
voting shares to approve a merger, a sale of substantially all of the
corporation's assets, or an issuance or delivery of securities in exchange
for assets of another corporation.
Lastly, the Rights have certain anti-takeover effects. The Rights may
cause substantial dilution to a person or group that attempts to acquire
Technitrol without conditioning the offer on a substantial number of Rights
being acquired. Accordingly, the existence of the Rights may deter certain
acquirors from making takeover proposals or tender offers. However, the
Board of Technitrol believes that the Rights Plan helps ensure that
Technitrol's shareholders will receive fair and equal treatment in the
event of any proposed takeover of Technitrol. Thus, the Rights Plan is
intended to protect and potentially enhance shareholder value, as well as
assist the Technitrol Board in realizing Technitrol's strategic objectives.
The adoption of the Rights Plan was not in response to any known takeover
threat or proposal.
Although the Technitrol Board presently has no intention of doing so,
the availability of authorized but unissued shares could permit Technitrol
Common Stock (within the limits imposed by applicable law and the rules of
the NYSE and/or any other exchanges on which the Technitrol Common Stock is
listed) to be issued to a holder who might thereby obtain sufficient voting
power to ensure that any proposal to remove directors or to approve a
merger or other business combinations or to amend or repeal any of the
foregoing provisions would not receive the 75% shareholder vote required
therefor. Thus, the power of the Technitrol Board to issue stock could
enable the Technitrol Board to make it more difficult to replace incumbent
directors and to effect a change in control of Technitrol through a merger
or other business combination.
The affirmative vote of a majority of the votes cast by all
shareholders entitled to vote at the meeting is required for the approval
of the amendment to the charter.
Proposal No. 3 - Selection of Auditors
Shareholders will be asked to approve the selection of KPMG Peat
Marwick LLP as independent auditors for the Company and its subsidiaries
for the fiscal year ending December 31, 1997. KPMG Peat Marwick LLP has
advised that it does not have any direct financial interest or any material
indirect financial interest in the Company or its subsidiaries, and during
the past three years has not had any connection in the interest of the
Company or its subsidiaries in any capacity other than as auditors and
providing tax and consulting advice and preparation of tax returns for the
Company. A representative of the firm will be present at the meeting to
answer questions by shareholders concerning the accounts of the Company
and, if such representative so desires, he will have the opportunity to
make a statement.
The affirmative vote of a majority of the shares entitled to vote at
the meeting is required for approval of selection of auditors.
SHAREHOLDERS PROPOSALS
In order to be considered for inclusion in the proxy materials for the
1998 Annual Meeting, shareholders' proposals must be received by the
Company by December 19, 1997. Any change in this date will be communicated
to shareholders in a timely fashion.
15
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COMPLIANCE WITH SECTION 16 (a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent
of a registered class of the Company's equity securities ("ten-percent
holders") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors, and ten-percent
holders are required by regulation to furnish the Company with copies of
all Section 16 (a) forms that they file.
Based solely on review of the copies of such forms furnished to the
Company, or representation that no Forms 5 were required, the Company
believes that, during the fiscal year ended December 31, 1996, all Section
16 (a) filing requirements applicable to its officers, directors, and ten-
percent holders were satisfied.
OTHER MATTERS
The Board of Directors does not know of any other matters to come
before the meeting. However, if any additional matters are properly
presented to the meeting, it is the intention of the persons named in the
accompanying proxy to vote in accordance with their judgment on such
matters.
By order of the Board of Directors
Drew A. Moyer
Secretary
March 28, 1997
16
[ x ] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE TECHNITROL, INC.
1997 ANNUAL MEETING PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas J. Flakoll and Drew A. Moyer as
Proxies and attorneys-in-fact, each with the power of substitution, and
hereby authorizes them to represent and to vote, as designated below, all
the shares of Common Stock of the Company held of record by the undersigned
on March 7, 1997, at the Annual Meeting of Shareholders to be held on May
21, 1997 or any adjournment thereof.
Please be sure to sign and date this Proxy in the box below.
Date______________
- --------------------------------- ---------------------------------
Shareholder sign above Co-holder (if any) sign above
For With- For All
hold Except
1. Election of Directors [ ] [ ] [ ]
John E. Burrows
James M. Papada, III
INSTRUCTION: To withhold authority to vote for any individual nominee,
mark "For All Except" and write that nominee's name in the space provided
below.
_________________________________________________________________________
For Against Abstain
2. PROPOSAL TO AMEND CHARTER TO [ ] [ ] [ ]
INCREASE THE NUMBER OF AUTHORIZED
SHARES of Technitrol Common Stock
from 30 million shares to 75 million
shares.
For Against Abstain
3. PROPOSAL TO APPROVE THE [ ] [ ] [ ]
APPOINTMENT OF KPMG PEAT
MARWICK LLP as the Company's
independent auditors for the year
commencing January 1, 1997.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN AND IN ACCORDANCE WITH THE PROXY STATEMENT. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AND FOR
PROPOSAL 2 AND 3 AND IN ACCORDANCE WITH THE INSTRUCTIONS OF THE BOARD OF
DIRECTORS ON ALL OTHER MATTERS.
Please sign this Proxy exactly as name appears on this card. When
shares are held by joint tenants, both should sign. When signing as
attorney, trustee or guardian, or other fiduciary capacity please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership please sign in
Partnership name by authorized person.
<PAGE>
