UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14a
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 [ ]
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
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SL INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[X] No fee required.
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filing fee is calculated and state how it was determined):
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SL INDUSTRIES, INC.
520 FELLOWSHIP ROAD
SUITE A-114
MT. LAUREL, NEW JERSEY 08054
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2006
----------
To The Holders of Our Common Stock:
We invite you to attend our annual shareholders' meeting on May 17,
2006 at the Warwick Hotel, 65 West 54th Street, New York, New York at 10:00
A.M., Eastern Time. At the meeting, you will hear an update on our operations,
have a chance to meet some of our directors and executives, and vote on the
following matters:
1. To elect seven (7) directors until the next annual meeting in 2007 or
until their successors have been elected and qualified;
2. To ratify the appointment of Grant Thornton LLP as our independent
accountants for fiscal 2006; and
3. Any other matters that properly come before the meeting.
This booklet includes a formal notice of the meeting and the proxy
statement. The proxy statement tells you more about the agenda and procedures
for the meeting. It also describes how our Board of Directors operates and gives
personal information about our director nominees.
Only record holders of SL Industries, Inc. common stock at the close
of business on April 3, 2006 will be entitled to vote on the foregoing matters
at the annual meeting. Even if you only own a few shares of common stock, we
want your shares to be represented at the annual meeting. I urge you to
complete, sign, date and return your proxy card promptly in the enclosed
envelope.
We have also provided you with the exact place and time of the meeting
if you wish to attend in person.
Sincerely yours,
----------------------------------------
DAVID R. NUZZO
Secretary
Dated: Mt. Laurel, New Jersey
April 17, 2006
SL INDUSTRIES, INC.
520 FELLOWSHIP ROAD
SUITE A-114
MT. LAUREL, NEW JERSEY 08054
(856) 727-1500
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of SL Industries, Inc., a New Jersey
corporation (the "Company") of proxies in the accompanying form to be used at
the Annual Meeting of Shareholders of the Company to be held on May 17, 2006,
and any adjournment or postponement thereof (the "Meeting"). This Proxy
Statement, the accompanying form of proxy and the Company's Annual Report for
the fiscal year ended December 31, 2005 (the "2005 Annual Report") are being
mailed to shareholders on or about April 17, 2006. The shares represented by the
proxies received pursuant to the solicitation made hereby and not revoked will
be voted at the Meeting.
MEETING OF SHAREHOLDERS
The Meeting will be held at the Warwick Hotel, 65 West 54th Street, New York,
New York, on May 17, 2006, at 10:00 A.M., Eastern Time.
RECORD DATE AND VOTING
The Board of Directors fixed the close of business on April 3, 2006, as the
record date (the "Record Date") for the determination of holders of outstanding
shares of the Company entitled to notice of and to vote on all matters presented
at the Meeting. Such shareholders will be entitled to one vote for each share
held on each matter submitted to a vote at the Meeting. On the Record Date,
there were 5,614,696 shares of the Company's common stock, $.20 par value per
share (the "Common Stock"), issued and outstanding, each of which is entitled to
one vote on each matter to be voted upon.
PURPOSES OF THE MEETING
The purposes of the Meeting are to vote upon (i) the election of seven (7)
directors until the next annual meeting in 2007, or until their successors have
been elected and qualified; (ii) the ratification of Grant Thornton LLP as the
Company's independent auditors for the fiscal year ending December 31, 2006; and
(iii) such other business as may properly come before the Meeting.
QUORUM AND REQUIRED VOTE
Under the By-Laws of the Company, the presence of a quorum is required for each
matter to be acted upon at the Meeting. The presence, either in person or by
properly executed proxy, of the holders of a majority of the outstanding shares
of Common Stock is necessary to constitute a quorum for the purpose of acting on
the matters referred to in the Notice of Annual Meeting of
Shareholders accompanying this Proxy Statement and any other proposals that may
properly come before the Meeting. Broker non-votes and abstentions will be
counted only for the purpose of determining whether a quorum is present at the
Meeting. Broker non-votes occur when a broker returns a proxy but does not have
the authority to vote on a particular proposal.
The director nominees receiving a plurality of the votes cast during the Meeting
will be elected to fill the seats of the Board. For the other proposal to be
approved, the favorable vote of a majority of shares present and entitled to
vote thereon is required. Abstentions count for quorum purposes and will have
the same effect as a vote against the other proposal.
PROXIES
The Board requests your proxy. Giving the Board your proxy means you authorize
it to vote your shares at the Meeting in the manner you direct. You may vote for
all, some or none of the director nominees. You may also vote for or against the
other proposal or abstain from voting.
On the matters coming before the Meeting as to which a choice has been specified
by a shareholder by means of the ballot on the proxy, the shares will be voted
accordingly. If no choice is so specified, the shares will be voted (i) FOR the
election of the nominees for director listed in this Proxy Statement, and (ii)
FOR the ratification of Grant Thornton LLP as the Company's independent
auditors, all as referred to in Items 1 and 2, respectively, in the Notice of
Annual Meeting of Shareholders and as described in this Proxy Statement.
The form of proxy accompanying this Proxy Statement confers discretionary
authority upon the named proxy holders with respect to amendments or variations
to the matters identified in the accompanying Notice of Annual Meeting of
Shareholders and with respect to any other matters which may properly come
before the Meeting. As of the date of this Proxy Statement, management of the
Company knows of no such amendment or variation or of any matters expected to
come before the Meeting which are not referred to in the accompanying Notice of
Annual Meeting of Shareholders.
A shareholder who has given a proxy may revoke it by voting in person at the
Meeting, by giving written notice of revocation to the Secretary of the Company
or by giving a later dated proxy at any time before voting.
Only holders of Common Stock, their proxy holders, and the Company's invited
guests may attend the Meeting. If you wish to attend the Meeting in person but
you hold your shares through someone else, such as a stockbroker, you must bring
proof of your ownership and identification with a photo at the Meeting. For
example, you could bring an account statement showing that you beneficially
owned shares of the Common Stock as of April 3, 2006 as acceptable proof of
ownership.
COSTS OF SOLICITATION
The Company will bear the cost of printing and mailing proxy materials,
including the reasonable expenses of brokerage firms and others for forwarding
the proxy materials to beneficial owners of Common Stock. In addition to
solicitation by mail, solicitation may be made by certain directors, officers
and employees of the Company, or firms specializing in
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solicitation; and may be made in person or by telephone or telegraph. No
additional compensation will be paid to any director, officer or employee of the
Company for such solicitation. The Company has retained Innisfree M&A, Inc. to
assist the Company in the solicitation of proxies for a fee of $6,500, plus
expenses.
ITEM 1: ELECTION OF DIRECTORS
The Company has one class of directors, each serving a one-year term. Directors
elected at the Meeting will serve until the 2007 Annual Meeting of Shareholders
and until their respective successors are duly elected and qualified.
INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS
Set forth below are the names and ages of the nominees for directors and their
principal occupations at present and for the past five years. There are, to the
knowledge of the Company, no agreements or understandings by which these
individuals were so selected. No family relationships exist between any
directors or executive officers, as such term is defined in Item 402 of
Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The Board has adopted independence standards for directors
that conform to the standards required by the American Stock Exchange ("AMEX")
for listed companies. Based on the Company's director independence standards,
the Board has affirmatively determined that each of the nominees, other than
Messrs. Lichtenstein, Kassan and Henderson, is independent, including each of
the non-management directors, consisting of Messrs. Baumgardner, Schwarz, Gray
and Risher.
Director
Name Age All Offices with the Company Since
---- --- ---------------------------- --------
Warren G. Lichtenstein(1) 40 Chairman of the Board 2002
Glen M. Kassan(1) 62 Vice Chairman 2002
J. Dwane Baumgardner(2)(4) 65 Director 1990
James R. Henderson 48 Director 2002
Mark E. Schwarz(1)(3)(4) 45 Director 2002
Avrum Gray(2)(3)(4) 70 Director 2002
James A. Risher(2)(3) 63 Director 2003
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
(4) Member of Nominating and Corporate Governance Committee.
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BUSINESS BACKGROUND
The following is a summary of the business background and experience of each of
the persons named above:
WARREN G. LICHTENSTEIN was elected Chairman of the Board on January 24, 2002.
From February 4, 2002 until August 10, 2005, Mr. Lichtenstein served as Chief
Executive Officer of the Company. Mr. Lichtenstein had previously served as a
director of the Company from 1993 to 1997. Mr. Lichtenstein has been the
Chairman of the Board, Secretary and the Managing Member of Steel Partners,
L.L.C., the general partner of Steel Partners II, L.P. ("Steel"), a private
investment partnership, since January 1, 1996 and the President, Chief Executive
Officer and a director of Steel Partners, Ltd. ("SPL"), a management and
advisory company that provides management services to Steel and its affiliates,
since June 1999. Mr. Lichtenstein has been a director (currently Chairman of the
Board) of United Industrial Corporation ("UIC"), a company principally focused
on the design, production and support of defense systems and a manufacturer of
combustion equipment for biomass and refuse fuels, since May 2001. Mr.
Lichtenstein has been a director of Layne Christensen Company, a provider of
products and services for the water, mineral, construction and energy markets,
since January 2004. He has been a director of BKF Capital Group, Inc., the
parent company of John A. Levin & Co., an investment management firm, since
2005. He has served as Chairman of the Board of WHX Corporation ("WHX"), a
holding company, since July 2005. Mr. Lichtenstein served as a director of
WebFinancial Corporation ("WebFinancial"), a consumer and commercial lender,
from 1996 to June 2005, as Chairman and Chief Executive Officer from December
1997 to June 2005 and as President from December 1997 through December 2003. Mr.
Lichtenstein has been a director of KT&G Corporation, South Korea's largest
tobacco company, since March 17, 2006.
GLEN M. KASSAN was elected as a director on January 24, 2002 and as Vice
Chairman of the Board on August 10, 2005. From February 4, 2002 until August 10,
2005, Mr. Kassan served as President of the Company. He has served as Executive
Vice President of SPL and its predecessor since June 2001 and as Vice President
of its predecessor from October 1999 through May 2001. Mr. Kassan has served as
Vice President, Chief Financial Officer and Secretary of WebFinancial since June
2000. Mr. Kassan has served as a director of WHX since July 2005 and as its Vice
Chairman of the Board, Chief Executive Officer and Secretary since October 2005.
Mr. Kassan is also currently a director of UIC.
J. DWANE BAUMGARDNER has been a director since 1990. From January 2003 to May
2004, Mr. Baumgardner served as Vice Chairman and President of Magna Donnelly
Corporation, an automotive supplier of exterior and interior mirror, lighting
and engineered glass systems. Prior to January 2003, he had been the Chief
Executive Officer and President of Magna Donnelly Corporation since October
2002. Magna Donnelly Corporation is a wholly owned subsidiary of Magna
International Inc. that was established in October 2002 by the merger of
Donnelly Corporation and Magna Mirror Systems. Prior to October 2002, Mr.
Baumgardner had been the Chairman and Chief Executive Officer of Donnelly
Corporation, an automotive supplier, since 1986. Mr. Baumgardner is currently a
director of Wescast Industries, Inc., a global automotive supplier, and of
Landscape Forms, Inc., a designer and manufacturer of outdoor commercial
furnishings. He is also a member of the Board of Advisors for the Strive Group,
an integrated
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merchandising supply chain company to large consumer product companies. He also
serves as the President of the Scanlon Foundation.
JAMES R. HENDERSON was elected as a director on January 24, 2002. Mr. Henderson
has served as a Vice President of SPL since March 2002 and as a Vice President
of its predecessor from August 1999 through March 2002. He has also served as
President of Gateway Industries, Inc., a provider of database development and
Web site design and development services, since December 2001. Mr. Henderson
served as a director of ECC International Corp., a manufacturer and marketer of
computer controlled simulators for training personnel to perform maintenance and
operator procedures on military weapons, from December 1999 to September 2003
and as acting Chief Executive Officer from July 2002 to March 2003. He has
served as a director of BNS Co., a real estate management company, since June
2004. Mr. Henderson has served as a director and Chief Executive Officer of
WebFinancial since June 2005, as President and Chief Operating Officer since
November 2003, and was the Vice President of Operations of WebFinancial from
September 2000 through December 2003. He has served as a director of WebBank,
the operating subsidiary of WebFinancial, since March 2002 and as acting Chief
Executive Officer of WebBank from November 2004 to May 2005. He has also served
as a director of Del Global Technologies Corp., a designer and manufacturer of
medical imaging and diagnostic systems, since November 2003. From January 2001
to August 2001, Mr. Henderson served as President of MDM Technologies, Inc., a
direct mail and marketing company that was principally controlled by the
Company's Chief Executive Officer and Chairman. From 1996 to July 1999, Mr.
Henderson was employed in various positions with Aydin Corporation ("Aydin"), a
defense electronics manufacturer, which included a tenure as President and Chief
Operating Officer from October 1998 to June 1999. Prior to his employment with
Aydin, Mr. Henderson was employed as an executive with UNISYS Corporation, an
e-business solutions provider.
MARK E. SCHWARZ was elected as a director on January 24, 2002. He is the
Chairman, Chief Executive Officer and Portfolio Manager of Newcastle Capital
Management, L.P., a private investment management firm he founded in 1993 that
is the general partner of Newcastle Partners, L.P., a private investment firm.
Mr. Schwarz has served as Chairman of the Board of Hallmark Financial Services,
Inc., a property and casualty insurance company, since October 2001 and as its
Chief Executive Officer since January 2003. He currently serves as Chairman of
the Board of Bell Industries, Inc., a computer systems integrator, Pizza Inn,
Inc., a franchisor and food and supply distributor, and New Century Equity
Holdings Corp., an asset management company. Mr. Schwarz is a director of Nashua
Corporation, a specialty paper, label and printing supplies manufacturer, Vesta
Insurance Group, Inc., a holding company for a group of insurance companies, and
WebFinancial. From October 1998 through April 1999, Mr. Schwarz served as a
director of Aydin.
AVRUM GRAY was elected as a director on May 23, 2002. Mr. Gray is the Chairman
of G-Bar Limited Partnership, one of the nation's largest independent options
trading firms and a leading specialist in computer-based arbitrage activities in
the derivative markets, and has held this position since 1981. Mr. Gray is the
former Chairman of the Board of Lynch Systems, Inc., a glass press supplier to
the television and computer industry, and a former Chief Executive Officer of a
privately held manufacturer of components and devices for the automotive
aftermarket. Mr. Gray is also a director of Nashua Corporation, a specialty
paper, label and printing supplies manufacturer; Lynch Corporation, a holding
company with subsidiaries
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engaged in manufacturing and distributing frequency control devices and glass
forming and other equipment; and Material Sciences Corporation, a materials
solution provider. Additionally, Mr. Gray has been Chairman of the Board of
Spertus College, as well as a board member of the Illinois Institute of
Technology, the Stuart School, and a number of philanthropic organizations,
including the Jewish Federation of Chicago.
JAMES A. RISHER was elected as a director on May 29, 2003. Mr. Risher has been
the Managing Partner of Lumina Group, LLC, a private company engaged in the
business of consulting and investing in small and mid-size companies, since
1998. From February 2001 to May 2002, Mr. Risher served as Chairman and Chief
Executive Officer of BlueStar Battery Systems International, Inc. ("BlueStar"),
a Canadian public company that is an e-commerce distributor of electrical and
electronic products to selected automotive aftermarket segments and targeted
industrial markets. BlueStar filed CCAA (a petition for reorganization under
Canadian bankruptcy laws) in August 2001, and a plan of reorganization was
approved in November 2001. From 1986 to 1998, Mr. Risher served as a director,
Chief Executive Officer and President of Exide Electronics Group, Inc.
("Exide"), a global leader in the uninterruptible power supply industry. He also
served as Chairman of Exide from December 1997 to July 1998.
DIRECTOR COMPENSATION
Directors other than the Chairman and Vice Chairman receive the following fees:
- $5,000 quarterly retainer fee for each director;
- $1,250 quarterly retainer fee for the chairman of each committee;
- $1,000 for each Board meeting attended; and
- $750 for each committee meeting attended.
BOARD COMMITTEES AND MEETINGS
The Board met on six occasions during the year ended December 31, 2005 and acted
by written consent on four occasions. Each of the directors attended at least
75% of the aggregate of (i) the total number of meetings of the Board; and (ii)
the total number of meetings held by all committees of the Board on which he
served. There are four committees of the Board: the Executive Committee, the
Audit Committee, the Compensation Committee and the Nominating and Corporate
Governance Committee.
Each director is expected to make reasonable efforts to attend Board meetings,
meetings of committees of which such director is a member and the Annual Meeting
of Shareholders. Four directors attended the 2005 Annual Meeting of
Shareholders.
EXECUTIVE COMMITTEE
The Executive Committee has and may exercise all the authority of the Board,
except that the Executive Committee cannot make, alter or repeal any By-Law of
the Company, elect or appoint any director or remove any officer or director,
submit to shareholders any action that requires shareholder approval, or amend
or repeal any resolution previously adopted by the Board, which by its terms is
amendable or repealable only by the Board. The members of the Executive
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Committee are Warren G. Lichtenstein, Glen M. Kassan and Mark E. Schwarz. The
Executive Committee did not meet during the fiscal year ended December 31, 2005.
AUDIT COMMITTEE
The Company has a separately-designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee has
adopted a written charter, which is available on the Company's website at
www.slindustries.com. The adequacy of the charter has been reviewed and assessed
by the Audit Committee on an annual basis. The members of the Audit Committee
are Avrum Gray, James A. Risher and J. Dwane Baumgardner. The Company certifies
that it has and will continue to have an Audit Committee of at least three
members, each of whom meets the criteria for being "independent" set forth under
Section 121(A) of the listing standards of the AMEX. In addition, the Board has
determined that Avrum Gray, the Chairman of the Audit Committee and a
non-management director, is an audit committee financial expert serving on the
Audit Committee. The primary purpose of the Audit Committee is to assist the
Board in fulfilling its responsibility to oversee the Company's financial
reporting activities. The Audit Committee annually selects independent public
accountants to serve as auditors of the Company's books, records and accounts,
reviews the scope of the audits performed by such auditors and the audit reports
prepared by them and reviews and monitors the Company's internal accounting
procedures. A report from the Audit Committee is also included in this Proxy
Statement. See Audit Committee Report. The Audit Committee met on five occasions
during the fiscal year ended December 31, 2005 and acted by written consent
once.
COMPENSATION COMMITTEE
The Compensation Committee reviews compensation arrangements and personnel
matters. The Compensation Committee has adopted a written charter. The members
of the Compensation Committee are James A. Risher, Mark E. Schwarz and Avrum
Gray. Each member of the Compensation Committee meets the criteria for being
"independent" set forth under Section 121(A) of the listing standards of the
AMEX. The Compensation Committee met on four occasions during the fiscal year
ended December 31, 2005 and acted by written consent once.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee recommends criteria for
service as a director, reviews candidates and recommends appropriate governance
practices and compensation for directors. The Nominating and Corporate
Governance Committee has adopted a written charter, which is available on the
Company's website at www.slindustries.com. The members of the Nominating and
Corporate Governance Committee are Mark E. Schwarz, Avrum Gray and J. Dwane
Baumgardner. Each member of the Nominating and Corporate Governance Committee
meets the criteria for being "independent" set forth under Section 121(A) of the
listing standards of the AMEX. The Nominating and Corporate Governance Committee
met on one occasion during the fiscal year ended December 31, 2005 and acted by
written consent once.
The Nominating and Corporate Governance Committee considers and makes
recommendations to the Board with respect to the size and composition of the
Board and identifies potential
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candidates to serve as directors, to the extent there are vacancies on the
Board. The Nominating and Corporate Governance Committee considers
recommendations for director nominees from a wide variety of sources, including
members of the Board, business contacts, community leaders, third-party advisory
services and members of management. The Nominating and Corporate Governance
Committee also considers shareholder recommendations for director nominees that
are properly received in accordance with the Company's By-laws, and applicable
rules and regulations of the Securities and Exchange Commission (the "SEC"). The
Nominating and Corporate Governance Committee does not evaluate director
candidates recommended by shareholders differently than director candidates
recommended by other sources.
In considering Board candidates, members of the Nominating and Corporate
Governance Committee take into consideration all factors that it deems
appropriate, including, but not limited to, the individual's character,
education, experience, knowledge and skills. The Nominating and Corporate
Governance Committee will also consider the extent of the individual's
experience in business, education or public service, his or her ability to bring
a desired range of skills, diverse perspectives and experience to the Board and
whether the individual possesses high ethical standards, a strong sense of
professionalism and is capable of serving the interests of shareholders. In
addition to reviewing a candidate's background and accomplishments, candidates
for director nominees are reviewed in the context of the current composition of
the Board and the evolving needs of the Company's businesses. It is the policy
of the Board that at all times at least a majority of its members meet the
standards of independence promulgated by the AMEX and the SEC. Additionally, the
Nominating and Corporate Governance Committee will consider the number of boards
on which the candidate already serves when assessing whether the candidate has
the appropriate time to devote to service on the Board.
Shareholders wishing to bring a nomination for a director candidate prior to a
shareholders meeting must give written notice to David R. Nuzzo, Secretary, SL
Industries, Inc., 520 Fellowship Road, Suite A-114, Mt. Laurel, New Jersey
08054, either by personal delivery or by United States mail, postage prepaid.
The shareholder's notice must be received by the Secretary not later than the
close of business on the 120th calendar day prior to the anniversary date on
which notice of the prior year's annual meeting was first mailed to
shareholders. The shareholder's written notice to the Secretary shall set forth
(i) as to each person whom the shareholder proposes to nominate for election or
reelection as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act, including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; and (ii)
as to the shareholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination is made, the name and address of such shareholder,
as they appear on the Company's books; and of such beneficial owner, (a) the
class and number of shares of the Common Stock that are owned beneficially and
of record by such shareholder and such beneficial owner; and (b) a
representation that the shareholder is a holder of record of shares of the
Common Stock and intends to appear in person or by proxy at the meeting to
propose such business.
The Nominating and Corporate Governance Committee initially evaluates a
prospective nominee on the basis of his or her resume and other background
information that has been made available to the Committee. A member of the
Nominating and Corporate Governance Committee will
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contact for further review those candidates who the Committee believes are
qualified, who may fulfill a specific Board need, and who would otherwise best
make a contribution to the Board. If, after further discussions with the
candidate, and other further review and consideration as necessary, the
Nominating and Corporate Governance Committee believes that it has identified a
qualified candidate, it will make a recommendation to the Board.
Except as set forth above, the Nominating and Corporate Governance Committee
does not have a formal policy regarding the handling or consideration of
director candidate recommendations received from a shareholder, or a formal
process for identifying and evaluating nominees for directors (including
nominees recommended by shareholders).
CODE OF CONDUCT AND ETHICS
The Company has adopted a code of conduct and ethics (the "Code") that applies
to all of its directors, officers and employees. The Code is reasonably designed
to deter wrongdoing and to promote (i) honest and ethical conduct, including the
ethical handling of actual or apparent conflicts of interest between personal
and professional relationships, (ii) full, fair, accurate, timely and
understandable disclosure in reports and documents filed with, or submitted to,
the SEC and in other public communications made by the Company, (iii) compliance
with applicable governmental laws, rules and regulations, (iv) the prompt
internal reporting of violations of the Code to appropriate persons identified
in the Code, and (v) accountability for adherence to the Code. The Code has been
filed as an exhibit to the Company's annual report on Form 10-K for the fiscal
year ended December 31, 2003 and is available on the Company's website at
www.slindustries.com. The Code may also be requested in print, without charge,
by writing to: David R. Nuzzo, Secretary, SL Industries, Inc., 520 Fellowship
Road, Suite A-114, Mt. Laurel, New Jersey 08054. Amendments to the Code and any
grant of a waiver from a provision of the Code requiring disclosure under
applicable SEC rules will be disclosed on the Company's website at
www.slindustries.com.
PROCEDURES FOR CONTACTING DIRECTORS
The Company has adopted a procedure by which shareholders may send
communications, as defined within Item 7(h) of Schedule 14A under the Exchange
Act, to one or more directors by writing to such director(s) or to the whole
Board, care of the Corporate Secretary, SL Industries, Inc., 520 Fellowship
Road, Suite A-114, Mt. Laurel, New Jersey 08054. Any such communications will be
promptly distributed by the Secretary to such individual director(s) or to all
directors if addressed to the whole Board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and officers,
and persons who own more than 10% of a registered class of its equity
securities, to file reports of ownership and changes in ownership (typically,
Forms 3, 4 and/or 5) of such equity securities with the SEC and the AMEX. Such
entities are also required by SEC regulations to furnish the Company with copies
of all such Section 16(a) reports.
Based solely on a review of Forms 3 and 4 and amendments thereto furnished to
the Company and written representations that no Form 5 or amendments thereto
were required, the Company
9
believes that during the fiscal year ended December 31, 2005, its directors and
officers, and greater than 10% beneficial owners, have complied with all Section
16(a) filing requirements except for the following transactions that were
inadvertently reported late:
Number of Type of
Name Transactions Form Number of Forms Filed Late
---- ------------ ------- --------------------------
J. Dwane Baumgardner 5 4 3
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
DAVID R. NUZZO has served as Vice President and Chief Financial Officer and
Secretary since December 1997. Mr. Nuzzo has served as Treasurer since January
2001.
JAMES C. TAYLOR has served as Chief Executive Officer and President of the
Company since August 10, 2005. Mr. Taylor has previously served as Executive
Vice President and Chief Operating Officer of the Company since January 2004, as
President of the Company's Power Electronics Group since August 2002, and as
President of the Company's subsidiary, Teal Electronics Corp., since January
2000. From September 1997 to December 1999, Mr. Taylor was President of
Transicoil, a division of Horizon Aerospace, LLC, a privately held company
specializing in military, aerospace, and medical motors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of the
Common Stock, as of April 3, 2006 (except as otherwise noted), by: (i) each
person or entity (including such person's or entity's address) who is known by
the Company to own beneficially more than five percent of the Common Stock; (ii)
each of the Company's directors and nominees for director who beneficially owns
shares of Common Stock; (iii) each Named Executive Officer (as defined under the
Executive Compensation section of this Proxy Statement) who beneficially owns
shares of Common Stock; and (iv) all executive officers and directors as a
group. The information presented in the table is based upon the most recent
filings with the SEC by such persons or upon information otherwise provided by
such persons to the Company. Unless otherwise indicated, the address for all of
the executive officers, directors and shareholders named below is c/o SL
Industries, Inc., 520 Fellowship Road, Suite A-114, Mt. Laurel, New Jersey
08054.
10
Number of Shares
Name of Beneficial Owner Beneficially Owned(1) Percentage Owned(2)
------------------------ --------------------- -------------------
The Gabelli Funds 1,405,833(3) 25.0%
One Corporate Center
Rye, NY 10580-1435
Steel Partners II, L.P. 1,449,650(4) 25.8%
590 Madison Avenue
32nd Floor
New York, NY 10022
Warren G. Lichtenstein 1,459,950(4)(5) 26.0%
Glen M. Kassan 0(4) *
Mark E. Schwarz 243,473(6) 4.3%
J. Dwane Baumgardner 95,995(7) 1.7%
David R. Nuzzo 72,088.8(8) 1.3%
James C. Taylor 58,524.7(9) 1.0%
Avrum Gray 39,578(10) *
James R. Henderson 20,824(4) *
James A. Risher 0 *
All Directors and Executive
Officers as a Group 1,990,433.5(11) 35.5%
* Less than one percent(1%)
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
Under such rules, shares are deemed to be beneficially owned by a person or
entity if such person or entity has or shares the power to vote or dispose
of the shares, whether or not such person or entity has any economic
interest in such shares. Except as otherwise indicated, and subject to
community property laws where applicable, the persons and entities named in
the table above have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them. Shares of
Common Stock subject to options or warrants currently exercisable or
exercisable within 60 days are deemed outstanding for purposes of computing
the percentage ownership of the person or entity holding such option or
warrant, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person or entity.
(2) Based upon 5,614,696 shares outstanding as of April 3, 2006.
11
(3) Based upon a Schedule 13D/A Amendment No. 27 filed on July 8, 2005 with the
SEC by GGCP, Inc., formerly known as Gabelli Group Capital Partners, Inc.
("GGCP"), Gabelli Asset Management Inc. ("GBL"), Gabelli Funds, LLC
("Gabelli Funds"), GAMCO Investors, Inc. ("GAMCO"), Gabelli Advisers, Inc.
("Gabelli Advisers"), Gabelli Securities, Inc. ("GSI"), Gabelli & Company,
Inc. ("Gabelli & Company"), Gabelli & Company, Inc. Profit Sharing Plan
(the "Plan"), MJG Associates, Inc. ("MJG Associates"), Gabelli Foundation,
Inc. ("Foundation"), Mario J. Gabelli, Lynch Corporation ("Lynch") and
Lynch Interactive Corporation ("Interactive") (collectively, the "Reporting
Persons"), in addition to other information. GGCP makes investments for its
own account and is the parent company of GBL. GBL, a public company listed
on the New York Stock Exchange, is the parent company for a variety of
companies engaged in the securities business, including (i) GAMCO, a
wholly-owned subsidiary of GBL, an investment adviser registered under the
Investment Advisers Act of 1940, as amended, which provides discretionary
managed account services for employee benefit plans, private investors,
endowments, foundations and others; (ii) GSI, a majority-owned subsidiary
of GBL, which acts as a general partner or investment manager to limited
partnerships and offshore investment companies and as a part of its
business may purchase or sell securities for its own account; (iii) Gabelli
Funds, a wholly-owned subsidiary of GBL, which is an investment adviser
registered under the Investment Advisers Act of 1940, as amended, which
presently provides discretionary managed account services for various
registered investment companies; and (iv) Gabelli Advisors, a subsidiary of
GBL, which is an investment advisor providing discretionary advisory
services to The Gabelli Westwood Mighty Mites Fund.
Gabelli & Company, a wholly-owned subsidiary of GSI, is a broker-dealer
registered under the Exchange Act, which as a part of its business
regularly purchases and sells securities for its own account. The Plan, a
qualified employee profit sharing plan, covers substantially all employees
of GBL and its affiliates. MJG Associates provides advisory services to
private investment partnerships and offshore funds, and Mario J. Gabelli is
its sole stockholder, director and employee. The Foundation is a private
foundation in which Mario J. Gabelli is President, a Trustee and the
Investment Manager of the Foundation. Lynch is a public company traded on
the AMEX engaged in manufacturing. Interactive is a publicly held holding
company with operating subsidiaries engaged primarily in the rural
telephone industry. Lynch and Interactive actively pursue new business
ventures and acquisitions. Lynch and Interactive make investments in
marketable securities to preserve capital and maintain liquidity for
financing their business activities and acquisitions and are not engaged in
the business of investing, reinvesting, or trading in securities. Mario J.
Gabelli is a director, officer and a substantial shareholder of Lynch and
Interactive. Mario J. Gabelli is also the majority stockholder and Chairman
of the Board of Directors and Chief Executive Officer of Gabelli Partners
and GBL, and the Chief Investment Officer for each of the Reporting
Persons. Gabelli Partners is the majority shareholder of GBL. GBL, in turn,
is the sole stockholder of GAMCO. GBL is also the majority stockholder of
GSI and the largest shareholder of Gabelli Advisers. Gabelli & Company is a
wholly-owned subsidiary of GSI.
Includes the following shares deemed to be owned beneficially by the
following affiliates: 1,174,933 shares held by GAMCO; 123,000 shares held
by MJG Associates; 92,000 shares held by Gabelli Funds; 13,900 shares held
by Gabelli Advisors; and 2,000 shares held by Foundation. The foregoing
persons do not admit to constituting a group within the meaning of Section
13(d) of the Exchange Act. Mario J. Gabelli is deemed to have beneficial
ownership of the securities owned beneficially by each of the foregoing
persons. GSI is deemed to have beneficial ownership of the securities owned
beneficially by Gabelli & Company. GBL and GGCP are deemed to have
beneficial ownership of the securities owned beneficially by each of the
foregoing persons other than the Foundation.
12
GGCP, GBL, GAMCO, and Gabelli & Company are New York corporations and GSI
and Gabelli Advisers are Delaware corporations, each having its principal
business office at One Corporate Center, Rye, New York 10580. Gabelli Funds
is a New York limited liability company having its principal business
office at One Corporate Center, Rye, New York 10580. MJG Associates is a
Connecticut corporation having its principal business office at 140
Greenwich Avenue, Greenwich, CT 06830. The Foundation is a Nevada
corporation having its principal offices at 165 West Liberty Street, Reno,
Nevada 89501. Lynch is an Indiana corporation having its principal business
office at 50 Kennedy Plaza, Suite 1250, Providence, Rhode Island 02903.
Interactive is a Delaware corporation having its principal place of
business at One Corporate Center, Rye, New York 10580.
(4) Based upon a Schedule 13D/A Amendment No. 14 filed jointly on January 17,
2006 with the SEC by Steel, Mr. Lichtenstein, Mr. Kassan and Mr. Henderson,
in addition to other information. In such filing Mr. Kassan reports that he
beneficially owns no shares of Common Stock and Mr. Henderson reports that
he beneficially owns the right to acquire 20,824 shares at any time upon
exercise of stock options.
(5) Includes the 1,449,650 shares, which by virtue of his position as Chairman
of the Board, Chief Executive Officer and Secretary of Steel, Mr.
Lichtenstein has the power to vote and dispose.
(6) Includes 217,350 shares that Mr. Schwarz has the power to vote and dispose,
by virtue of his position as Managing Member of Newcastle Capital Group,
L.L.C., which is the general partner of Newcastle Capital Management, L.P.,
which is the general partner of Newcastle Partners, L.P. Also includes
26,123 shares that Mr. Schwarz has the right to acquire at any time upon
exercise of stock options.
(7) Includes 24,831 shares owned by Mr. Baumgardner and 71,164 shares that Mr.
Baumgardner has the right to acquire at any time upon exercise of stock
options.
(8) Includes 4,500 shares owned by Mr. Nuzzo, 5,588.8 shares beneficially owned
by Mr. Nuzzo as a participant in the Company's Savings and Pension Plan,
and 62,000 shares that Mr. Nuzzo has the right to acquire at any time upon
exercise of stock options.
(9) Includes 10,000 shares owned directly by Mr. Taylor, 100 shares owned
indirectly by Mr. Taylor through a family member, 1,424.7 shares
beneficially owned by Mr. Taylor as a participant in the Company's Savings
and Pension Plan, and 47,000 shares that Mr. Taylor has the right to
acquire at any time upon exercise of stock options.
(10) Includes 3,500 shares held by Mr. Gray's Individual Retirement Account,
13,400 shares held by 1993 GF Limited Partnership, in which the general
partner is a corporation owned solely by Mr. Gray, and 6,800 shares held by
AVG Limited Partnership, in which Mr. Gray is a general partner. Also
includes 2,500 shares held by JYG Limited Partnership, in which Mr. Gray's
spouse is a general partner, and 13,378 shares that Mr. Gray has the right
to acquire at any time upon exercise of stock options. Except for the
shares held in his Individual Retirement Account and by JYG Limited
Partnership, Mr. Gray disclaims beneficial ownership of these shares.
(11) Includes 240,489 shares that directors and executive officers have the
right to acquire, at any time, upon the exercise of nonqualified and
incentive stock options granted by the Company.
13
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
awarded to, earned by or paid to (i) all persons who served as Chief Executive
Officer of the Company during the 2005 fiscal year, (ii) the Company's other
executive officers, whose total annual salary and bonus exceeded $100,000 during
the 2005 fiscal year (the "Named Executive Officers") and who were serving as
executive officers at the end of the year and (iii) one additional individual
who was an executive officer during the 2005 fiscal year, but was not an
executive officer at year end, for services in all capacities during the years
ended December 31, 2005, 2004 and 2003.
14
SUMMARY COMPENSATION TABLE
Annual Compensation All Other
Name and ----------------------------- Compensation
Principal Position Year Salary ($) Bonus ($) ($)
------------------ ---- ---------- --------- ------------
James C. Taylor(1) 2005 267,308 120,712 10,800(3)
Chief Executive Officer and 2004 250,000 196,375(2) 10,190(3)
President 2003 225,000 263,595 5,000(3)
David R. Nuzzo 2005 200,000 50,147 10,291(3)
Vice President and Chief Financial Officer, 2004 185,000 67,222(4) 10,995(3)
Treasurer and Secretary 2003 171,000 25,500 4,000(3)
Warren G. Lichtenstein(5) 2005 0 0 475,000(5)
Chairman of the Board, Chief Executive Officer 2004 0 0 725,000(5)
through August 10, 2005 2003 0 0 475,000(5)
Glen M. Kassan(5) 2005 0 0 475,000(5)
Vice Chairman of the Board, President through 2004 0 0 725,000(5)
August 10, 2005 2003 0 0 475,000(5)
(1) Mr. Taylor was elected Chief Executive Officer and President on August 10,
2005. Prior to this date Mr. Taylor served as Executive Vice-President and
Chief Operating Officer of the Company.
(2) Includes total of 2004 bonus, however, $49,094 of the total bonus will be
deferred from bonus and will be paid to Mr. Taylor in equal increments of
$24,547 payable in 2006 and 2007.
(3) Includes the Company's matching contributions and profit sharing
contributions made to the SL Industries, Inc. Savings and Pension Plan for
Messrs. Taylor and Nuzzo in the amount of $10,500 and 9,841 for 2005,
respectively; $10,190 and $10,995 for 2004, respectively; and $5,000 and
$4,000 in 2003, respectively. The Company's contribution to the plan is
based on a percentage of the participants elective contributions up to the
maximum defined under the plan and a fixed percentage, determined annually
by the Board of Directors, of the participant's total annual earnings.
Under the plan, benefits are payable at retirement as a lump sum or as an
annuity. Also includes premiums paid for group term life insurance for
Messrs. Nuzzo and Taylor.
(4) Includes total of 2004 bonus, however, $16,806 of the total bonus will be
deferred from bonus and will be paid to Mr. Nuzzo in equal increments of
$8,403 payable in 2006 and 2007.
(5) Mr. Lichtenstein was elected Chairman of the Board on January 24, 2002 and
named Chief Executive Officer on February 4, 2002. Mr. Kassan was named
President on February 4, 2002. On August 10, 2005, Mr. Lichtenstein stepped
down as Chief Executive Officer and Mr. Kassan stepped down as President of
the Company. Neither Mr. Lichtenstein nor Mr. Kassan receive direct
compensation from the Company. Mr. Lichtenstein's services as Chairman of
the Board and Chief Executive Officer and Mr. Kassan's services as
President were provided to the Company in accordance with the provisions of
a management agreement with SPL. The fee paid to SPL by the Company was
$475,000 in 2005, $725,000 in 2004 and $475,000 in 2003. See
15
"Compensation Committee Report on Executive Compensation" and "Certain
Relationships and Related Transactions" presented below.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant options to the Named Executive Officers during the
fiscal year ended December 31, 2005.
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END STOCK
OPTION VALUES
The following table sets forth the number of shares received upon exercise of
stock options by each of the Named Executive Officers during the last completed
fiscal year and the aggregate options to purchase shares of the Common Stock
held by the Named Executive Officers at December 31, 2005.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
-------------------- ----------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- -------------------- ----------------------
James C. Taylor 47,000/0 273,500/0
David R. Nuzzo 62,000/0 273,625/0
Warren G. Lichtenstein 0/0 0/0
Glen M. Kassan 0/0 0/0
(1) Computed by multiplying the number of options by the difference between (i)
the per share closing price of $16.05 at fiscal year-end and (ii) the
exercise price per share.
16
EQUITY COMPENSATION PLAN SUMMARY
The following table sets forth information as of December 31, 2005 regarding the
number of shares of Common Stock issued and available for issuance under the
Company's existing equity compensation plans:
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE
ISSUED UPON EXERCISE OF EXERCISE PRICE OF
OUTSTANDING OPTIONS, WARRANTS OUTSTANDING OPTIONS,
PLAN CATEGORY AND RIGHTS WARRANTS AND RIGHTS
------------- ----------------------------- --------------------
(a) (b)
Equity compensation plans approved by
security holders 579,988 $10.33
Equity compensation plans not approved
by security holders 53,513 $11.24
Total 632,501 $10.41
There are no securities available for future issuance under any equity
compensation plan, other than securities reflected in column (a) above.
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
The Company did not grant awards to any of its executive officers under any
long-term incentive plans during the fiscal year ended December 31, 2005.
In May 2005, the Compensation Committee of the Board of Directors of the Company
adopted the 2005 Bonus Plan (the "Bonus Plan") to provide incentives to officers
and members of management of the Company and its subsidiaries, including certain
of the Company's executive officers, in the form of cash bonus payments for
achieving certain performance goals established for them. Participants in the
Bonus Plan who are executive officers of the Company include James C. Taylor,
President and Chief Executive Officer of the Company and David R. Nuzzo, Vice
President and Chief Financial Officer of the Company.
The Bonus Plan includes two components. The first component is a Short Term
Incentive Plan ("STIP"), and the second component is a Long Term Incentive Plan
("LTIP"). The structure of the Bonus Plan is designed to provide incentives to
participants for achieving annual targets, while also motivating and rewarding
eligible participants for achieving longer term growth goals.
Short Term Incentive Plan. The Compensation Committee has established two
components for the STIP, a quantitative component based on a return on invested
capital ("ROIC") and a qualitative component based on the achievement of
pre-determined individual objectives. Based on the determination of the
objectives under the two components, the annual STIP bonus earned by a
participant ranges from 20% to 45% of his or her base salary, but may exceed
such range in
17
the event that ROIC exceeds the Company's plan. STIP bonuses earned are paid
annually. No STIP bonus will be paid if either component is below a
predetermined threshold.
Long Term Incentive Plan. The LTIP component of the Bonus Plan is based on a
combination of the achievement of certain sales targets and ROIC targets over
the three fiscal years beginning in 2005. Based on the determination of these
objectives, the annual LTIP bonus that may be earned by a participant ranges
from 10% to 55% of his or her base salary, but may exceed such range in the
event that ROIC exceeds the Company's plan. LTIP bonuses earned will be paid
following the conclusion of the 2007 fiscal year. A bonus payout under the LTIP
will not occur if either the ROIC or sales component is below 80% of the
respective target.
Under the Bonus Plan, the total bonus that may be earned by the President and
Chief Executive Officer of the Company is 100% of his base salary and the total
bonus that may be earned by the Vice President and Chief Financial Officer of
the Company is 50% of his base salary, however, each bonus may exceed the
applicable percentage in the event that ROIC exceeds the Company's plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Risher, Schwarz and Gray served on the Compensation Committee during the
fiscal year ended December 31, 2005. None of the committee members have ever
been officers or employees of the Company, or ever had any relationship
requiring disclosure below under the caption "Certain Relationships and Related
Transactions."
EMPLOYMENT CONTRACTS, TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS
James C. Taylor, the Company's Chief Executive Officer and President, is party
to a change in control agreement dated as of May 1, 2001 (the "Change in Control
Agreement") by and between him and the Company. Pursuant to the Change in
Control Agreement, Mr. Taylor shall receive a payment equal to two times his
annual salary in the event he is terminated as Chief Executive Officer and
President without cause or he terminates such employment for good reason within
one year of a change in control of the Company or the execution of a definitive
agreement contemplating a change in control of the Company.
Pursuant to an agreement dated as of August 5, 2002 (the "Agreement"), Mr.
Taylor shall be paid a bonus (the "First Bonus") upon (i) the occurrence of a
change in control; or (ii) the delivery of a notice by Mr. Taylor requesting the
payment of the First Bonus, which may be in one or two parts. The First Bonus
shall be an amount equal to the product of (i) 100,000 and (ii) the amount by
which the Common Stock price exceeds $5.45. Upon his termination of employment
with the Company for any reason, Mr. Taylor shall have no further right to
receive the First Bonus.
In addition, pursuant to a Long Term Bonus Agreement dated September 1, 2005
(the "Long Term Bonus Agreement"), Mr. Taylor shall be paid a bonus (the "Second
Bonus") upon (i) the occurrence of a change in control; or (ii) the delivery of
a notice by Mr. Taylor requesting the payment of the Second Bonus. The Second
Bonus shall be an amount equal to the product of (i) 50,000 and (ii) the amount
by which the Common Stock price exceeds $15.02. The Second Bonus shall vest as
follows: 20% on each of September 1, 2005, 2006, 2007, 2008 and 2009.
18
Upon his termination of employment with the Company for any reason, Mr. Taylor
shall be entitled to receive the Second Bonus upon delivery of a notice for a
period of thirty (30) days following the date of termination, after which time
he shall have no further right to receive the Second Bonus.
PERFORMANCE GRAPH
The following Performance Graph summarizes the cumulative total shareholder
return on an investment of $100 on December 31, 2000 in the Common Stock for the
period from that date to December 31, 2005, as compared to the cumulative total
return on a similar investment of $100 on that date in stocks comprising the S&P
Electrical Components & Equipment Group and the Russell 2000 Stock Index. The
graph assumes the reinvestment of all dividends. The Performance Graph is not
necessarily indicative of future performance.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG SL INDUSTRIES, INC.,
RUSSELL 2000 INDEX AND S&P GROUP INDEX
(PERFORMANCE GRAPH)
ASSUMES $100 INVESTED ON DEC. 31, 2000
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2005
12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
-------- -------- -------- -------- -------- --------
SL Industries, Inc. $100.00 $ 51.15 $46.34 $ 70.12 $123.71 $140.32
S&P Group Index $100.00 $ 77.68 $73.99 $106.36 $121.65 $134.63
Russell 2000 Index $100.00 $101.02 $79.22 $115.16 $135.31 $139.81
19
BOARD COMPENSATION
COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for the establishment of
the level and manner of compensation of the Company's executive officers
(including its Named Executive Officers). In addition, the Compensation
Committee seeks to ensure that sound compensation policies and practices exist
and are being followed. At the end of fiscal year 2005, the members of the
Compensation Committee were James A. Risher (Chairman), Mark E. Schwarz and
Avrum Gray, each of whom are non-employee directors of the Company.
The following describes the Compensation Committee's compensation policies
applicable to its executive officers (including its Named Executive Officers),
including the relationship of corporate performance to executive compensation,
with respect to compensation reported for the last fiscal year.
The Compensation Committee believes that executive compensation should be linked
to value delivered to shareholders. The Company's compensation programs have
been designed to provide a correlation between the financial success of the
executive and the shareholders. Both long and short-term incentives are intended
to align the interests of executives and shareholders and to reward the
executive for building value within the Company.
The functions of the Compensation Committee are to oversee general compensation
policies for the Company's employees, to review and approve compensation
packages annually for the Company's executive officers and subsidiary
presidents, and to approve cash incentive programs for all subsidiaries. The
Company seeks to provide executive compensation that will support the
achievement of the Company's financial goals, while attracting and retaining
talented executives and rewarding superior performance. In performing this
function, the Compensation Committee reviews executive compensation surveys, the
compensation levels of executive officers of companies in competing businesses
and in the Company's geographic markets, and recommendations by Mr. Taylor, the
Company's Chief Executive Officer and President. The Compensation Committee may
also from time to time consult with independent compensation consultants and
others.
The Committee's current philosophy is to balance short-term performance of
executives with achievement of long-range strategic goals resulting in
continuously improving shareholder value, and to engender and preserve a sense
of fairness and equity among employees, shareholders, and customers. In keeping
with that philosophy, it has set the following objectives: (i) to link a
significant portion of annual compensation directly to operating performance;
(ii) to promote achievement of the Company's long-term strategic goals and
objectives; (iii) to align the interest of Company executives with long-term
shareholder interest; (iv) to align the interest of Company employees with
long-term shareholder interest; and (v) to attract, retain, and motivate
executives critical to the Company's long-term success.
20
The Company's executive compensation program consists of base salary and a cash
bonus incentive, which is provided through a short-term incentive plan, or STIP,
and a long-term incentive plan, or LTIP. The structure of the bonus plan is
designed to provide incentives to participants for achieving annual targets,
while also motivating and rewarding eligible participants for achieving longer
term growth goals. The Compensation Committee has established two components for
the STIP, a quantitative component based on return on invested capital ("ROIC")
and a qualitative component based on the achievement of pre-determined
individual objectives. Based on the determination of the objectives under the
two components, the bonus that may be earned by the participants ranges from 20%
to 45% of base salary, but may exceed such range in the event that ROIC exceeds
the Company's plan. STIP bonuses earned are paid annually. No STIP bonus will be
paid if either component is below a predetermined threshold. The LTIP component
of the Bonus Plan is based on a combination of the achievement of certain sales
targets and ROIC targets over the three fiscal years beginning in 2005. Based on
the determination of these objectives, the bonus that may be earned by the
participants ranges from 10% to 55% of base salary, but may exceed such range in
the event that ROIC exceeds the Company's plan. LTIP bonuses earned will be paid
following the conclusion of the 2007 fiscal year. A bonus payout under the LTIP
will not occur if either the ROIC or sales component is below 80% of the
respective target.
Under the bonus plan, the total bonus that may be earned by the President and
Chief Executive Officer of the Company is 100% of his base salary and the total
bonus that may be earned by the Vice President and Chief Financial Officer of
the Company is 50% of his base salary, although the bonus of each such person
may exceed such range under certain circumstances. At the present time, the
Company does not have any option plans in effect. Along with all other
employees, executives also participate in one of the Company's defined
contribution pension plans. Salary levels of executive officers are reviewed
annually by the Compensation Committee. In order to align the interests of
executive officers with long-term shareholder interest, bonus payments are
awarded only if Company performance targets are met, or if the Compensation
Committee believes there are special circumstances. If the Company performance
targets are met, bonus payments are based on the achievement of such targets and
the achievement of individual performance goals, including certain non-financial
performance measurements such as improvements in productivity, improvement of
product quality, development and introduction of new products, and relationships
with customers.
In 2005, James C. Taylor, the Company's President and Chief Executive Officer,
earned a bonus payment of $120,712, and David R. Nuzzo, the Company's Vice
President, Chief Financial Officer, Treasurer and Secretary earned a bonus
payment of $50,147.
No specific weight or relative importance was assigned to the various
qualitative factors and compensation information considered by the Compensation
Committee. Accordingly, the Company's compensation policies and practices may be
deemed subjective, within an overall published framework based on both the
financial and non-financial factors.
21
In the past, the Compensation Committee has provided long term incentive
compensation in the form of stock options, where appropriate, as compensation
for its executive officers. In determining whether individual stock option
grants were made, the Compensation Committee evaluated each participant's job
responsibilities and performance during the last completed year, as well as the
perceived potential that the individual has in contributing to the success of
the Company.
COMPENSATION COMMITTEE
James A. Risher
Mark E. Schwarz
Avrum Gray
22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of certain services being provided to the Company by SPL, a company
controlled by the Chairman of the Board of the Company, Warren G. Lichtenstein,
the Compensation Committee engaged an independent firm to provide a report and
advice regarding the amount of management fees that should be payable to SPL.
These fees are the only consideration for the services of the Chairman of the
Board, Warren G. Lichtenstein, the Company's Vice Chairman, Glen M. Kassan, and
other assistance from SPL. The services provided include management and advisory
services with respect to operations, strategic planning, finance and accounting,
merger, sale and acquisition activities and other aspects of the businesses of
the Company. In consideration for such services, the fee paid to SPL by the
Company was $475,000 in 2005, $725,000 in 2004 and $475,00 in 2003.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
23
REPORT OF THE AUDIT COMMITTEE
The Audit Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. Each member of the
Audit Committee meets the criteria for being "independent" set forth under AMEX
Rule PARAGRAPH 10,021, Sec. 121. During the fiscal year ended December 31, 2005,
the Committee met five times and acted by written consent on one other occasion.
In discharging its responsibility for oversight of the audit process, the Audit
Committee obtained from the independent auditors, Grant Thornton LLP, a formal
written statement describing any relationships between the auditors and the
Company that might bear on the auditors' independence consistent with the
Independent Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," and discussed with the auditors any relationships that might impact
the auditors' objectivity and independence and satisfied itself as to the
auditors' independence.
The Committee discussed and reviewed with the independent auditors the
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and discussed and reviewed the results of
the independent auditors' examination of the financial statements for the fiscal
year ended December 31, 2005.
The Committee reviewed the audited financial statements of the Company as of and
for the fiscal year ended December 31, 2005, with management and the independent
auditors. Management has the responsibility for preparation of the Company's
financial statements and the independent auditors have the responsibility for
examination of those statements.
Based upon the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the Company's
audited financial statements be included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2005, for filing with the SEC.
AUDIT COMMITTEE
Avrum Gray
J. Dwane Baumgardner
James Risher
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ITEM 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Grant Thornton LLP to serve as the Company's independent
auditors. Grant Thornton LLP has served as the Company's independent auditors
since July 2002. While it is not required to do so, the Board is submitting to
shareholders for ratification the selection of Grant Thornton LLP as the
Company's independent auditors for the year ending December 31, 2006. Such
ratification of the selection of Grant Thornton LLP will require the affirmative
vote of the holders of a majority of the shares of Common Stock entitled to vote
thereon and represented at the Meeting. The Board will reconsider its selection
should the shareholder votes evidence disapproval.
Audit Fees
The aggregate fees billed by Grant Thornton LLP for professional fees rendered
in connection with the audit of the Company's annual financial statements and
the reviews of the Company's financial statements included in the Company's
quarterly reports on Form 10-Q, including services related thereto, were
$371,815 for the year ended December 31, 2005 and $294,187 for the year ended
December 31, 2004.
Audit-Related Fees
The aggregate fees billed by Grant Thornton LLP for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's financial statements and are not reported as "Audit Fees,"
including planning efforts related to the review of the Company's internal
controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley
Act of 2002 and consultations concerning financial accounting and reporting
matters not classified as audit, were $16,980 for the year ended December 31,
2005, and $20,152 for the year ended December 31, 2004.
Tax Fees
The aggregate fees billed by Grant Thornton LLP for professional services
rendered for tax compliance, tax advice and tax planning were $25,364 for the
year ended December 31, 2005, and $100,028 for the year ended December 31, 2004.
The services comprising the fees reported as "Tax Fees" included tax return
preparation in various foreign jurisdictions, consultation regarding various tax
issues, and support provided to management in connection with income and other
tax audits.
All Other Fees
There were no other fees billed by Grant Thornton LLP for products and services,
other than those described for the years ended December 31, 2005 and December
31, 2004.
Pre-approval Policies and Procedures
All audit and non-audit services to be performed by the Company's independent
accountant must be approved in advance by the Audit Committee. Consistent with
applicable law, limited amounts of services, other than audit, review or attest
services, may be approved by the
25
Chairman of the Audit Committee pursuant to authority delegated by the Audit
Committee, provided each such approved service is reported to the full Audit
Committee at its next meeting.
All of the engagements and fees for the year ended December 31, 2005 were
approved by the Audit Committee. Of the total number of hours expended on Grant
Thornton LLP's engagement to audit the Company's financial statements for the
year ended December 31, 2005, none of the hours were attributed to work
performed by persons other than Grant Thornton LLP's full-time, permanent
employees.
The Audit Committee considered whether the provision of non-audit services by
Grant Thornton LLP was compatible with its ability to maintain independence from
an audit standpoint and concluded that Grant Thornton LLP's independence was not
compromised.
Representatives of Grant Thornton LLP are expected to be present at the Meeting
and available to respond to appropriate questions. Such representatives will
have the opportunity to make a statement if they desire to do so.
26
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF GRANT THORNTON LLP.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the proxy materials to be distributed
in connection with the next annual meeting of shareholders of the Company,
shareholder proposals for such meeting must be submitted to the Company no later
than December 18, 2006. Shareholders wishing to nominate directors or bring a
proposal before the 2007 annual meeting of shareholders (but not include it in
the Company's proxy material) must provide written notice of such nomination or
proposal to the attention of the corporate secretary, no later than the close of
business on the 60th calendar day prior to the date of the 2007 annual meeting.
OTHER MATTERS
So far as now known, there is no business other than that described above to be
presented for action by the shareholders at the Meeting, but it is intended that
the proxies will be voted upon any other matters and proposals that may legally
come before the Meeting or any adjournment thereof, in accordance with the
discretion of the persons named therein.
ANNUAL REPORT
The Company is concurrently sending all of its shareholders of record as of
April 3, 2006 a copy of its Annual Report for the year ended December 31, 2005.
Such report contains the Company's certified consolidated financial statements
for the year ended December 31, 2005, including that of the Company's
subsidiaries.
Whether or not you intend to be present at this Meeting you are urged to sign
and return your proxy promptly.
By order of the Board of Directors,
Warren G. Lichtenstein
Chairman
Mt. Laurel, New Jersey
April 17, 2006
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND ANY AMENDMENTS THERETO
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS PROVIDED WITH CERTAIN OTHER
SHAREHOLDER INFORMATION IN THE MATERIALS ACCOMPANYING THIS PROXY STATEMENT. TO
OBTAIN ADDITIONAL COPIES WITHOUT CHARGE, PLEASE WRITE TO: DAVID R. NUZZO,
SECRETARY, SL INDUSTRIES, INC., 520 FELLOWSHIP ROAD, SUITE A-114, MT. LAUREL,
NEW JERSEY 08054.
27
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SL INDUSTRIES, INC.
PROXY -- ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 2006
The undersigned, a shareholder of SL Industries, Inc., a New Jersey
corporation (the "Company"), does hereby appoint Warren G. Lichtenstein and Glen
M. Kassan, and each of them (with full power to act alone), the true and lawful
attorneys and proxies with full power of substitution, for and in the name,
place and stead of the undersigned, to vote all of the shares of Common Stock of
the Company that the undersigned would be entitled to vote if personally present
at the 2006 Annual Meeting of Shareholders of the Company to be held at the
Warwick Hotel, 65 West 54th Street, New York, New York May 17, 2006, at 10:00
A.M., Eastern Time, or at any adjournment or postponements thereof.
The undersigned hereby revokes any proxy or proxies heretofore given and
acknowledges receipt of a copy of the Notice of Annual Meeting and Proxy
Statement, both dated April 17, 2006, and a copy of the Company's Annual Report
for the year ended December 31, 2005.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREIN GIVEN. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE DIRECTORS, AND TO
RATIFY THE APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANTS.
CONTINUED TO BE COMPLETED, SIGNED
AND DATED ON THE REVERSE SIDE
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THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR PROPOSALS 1 AND 2
1. ELECTION OF DIRECTOR NOMINEES
WARREN G. LICHTENSTEIN
GLEN M. KASSAN
J. DWANE BAUMGARDNER
JAMES R. HENDERSON
MARK E. SCHWARZ
AVRUM GRAY
JAMES A. RISHER
[ ] For the election as directors for the ensuing year of all nominees
listed above (except as stricken above) (TO WITHHOLD AUTHORITY TO VOTE
FOR ANY SPECIFIC NOMINEES, CHECK THE FORGOING BOX AND CLEARLY STRIKE
OUT OR LINE THROUGH WITH DARK INK SUCH NOMINEE'S NAME IN THE LIST
ABOVE.)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE.
2. RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31,
2006.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect
to all other matters that may come before the Meeting and any adjournment
of postponement thereof.
NOTE: Your signature should appear the same as your name appears hereon. In
signing as attorney, executor, administrator, trustee or guardian, please
indicate the capacity in which signing. When signing as joint tenants, all
parties in the joint tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer and the corporate seal affixed. No
postage is required if mailed in the United States.
Signature: Date
-------------------------- ----------------------
Signature : Date
-------------------------- ----------------------
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW: ____________
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