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 [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
STANDARD MOTOR PRODUCTS
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(Name of Registrant as Specified In Its Charter)
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(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:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
STANDARD MOTOR PRODUCTS
________________________________________________________________________________
4) Date Filed:
4/20/2004
________________________________________________________________________________
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
May 20, 2004
April 20, 2004
To the Shareholders of
STANDARD MOTOR PRODUCTS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of STANDARD
MOTOR PRODUCTS, INC. (the "Company") will be held in the offices of JP Morgan
Chase, One Chase Manhattan Plaza, New York, NY 10081, on Thursday, the 20th day
of May, 2004 at 2:00 o'clock in the afternoon (New York Time). The meeting will
be held for the following purposes:
1. To elect nine directors of the Company, all of whom shall hold
office until the next annual meeting of shareholders and until their
successors are elected and qualified.
2. To consider and vote upon a proposal to adopt the Company's 2004
Omnibus Stock Option Plan under which 500,000 shares of the
Company's Common Stock will be available for issuance thereunder.
3. To consider and vote upon a proposal to adopt the Company's 2004
Independent Outside Director's Stock Option Plan under which 50,000
shares of the Company's Common Stock will be available for issuance
thereunder.
4. To consider and vote upon a shareholder proposal concerning
preferred purchase rights; and
5. To transact such other business as may come before the meeting.
Whether or not you plan to attend the Annual Meeting, please vote, date
and sign the enclosed Proxy, which is solicited by the Board of Directors of the
Company, and return it in the preaddressed envelope, to which no postage need be
affixed, if mailed in the United States.
By Order of the Board of Directors
SANFORD KAY
Secretary
ONLY SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS
ON APRIL 9, 2004 WILL BE ENTITLED TO NOTICE OF OR TO VOTE AT
THE MEETING, OR ANY ADJOURNMENT THEREOF
STANDARD MOTOR PRODUCTS, INC.
37-18 NORTHERN BOULEVARD o LONG ISLAND CITY, N.Y. 11101
MANAGEMENT PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, May 20, 2004
This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Standard Motor Products, Inc. (the "Company") for
use at the Annual Meeting of Shareholders of the Company to be held on May 20,
2004, or at any adjournment thereof. Proxy material is being mailed on or about
April 20, 2004, to the Company's approximately 477 shareholders of record. The
total number of shares outstanding and entitled to vote on April 9, 2004, was:
Common Stock .......................19,754,606
The purposes of the Annual Meeting are: (1) to elect nine directors (2) to
consider and vote upon management's proposal to adopt the Company's 2004 Omnibus
Stock Option Plan under which 500,000 shares of the Company's Common Stock will
be available for issuance (3) to consider and vote upon a proposal to adopt the
Company's 2004 Independent Outside Director's Stock Option Plan (4) to consider
and vote upon a shareholder proposal concerning preferred share purchase rights,
and (5) to transact such other business as may properly come before the meeting.
Proposal 1. Election of Directors
At the Annual Meeting, nine directors are to be elected to hold office
until the next annual meeting of shareholders and until their successors are
elected and qualified. Unless individual shareholders specify otherwise, each
executed proxy will be voted for the election to the Board of Directors of the
nine nominees named below, all of whom are currently directors of the Company.
Each director has consented to be named as a nominee and agreed to serve if
elected. If any of those named are not available for election at the time of the
Annual Meeting, discretionary authority will be exercised to vote for
substitutes unless the Board chooses to reduce the number of directors.
Management is not aware of any circumstances that would render any nominee
herein unavailable.
The nominees are: Marilyn F. Cragin, Arthur D. Davis, Robert M. Gerrity,
John L. Kelsey, Kenneth A. Lehman, Arthur S. Sills, Lawrence I. Sills, Frederick
D. Sturdivant and William H. Turner.
Emeritus Directors of the Board of Directors
The Board of Directors has elected the following former Standard Motor
Products directors, Susan F. Davis and Peter J. Sills, to serve as emeritus
members of the Board of Directors. Emeritus directors are invited to attend
Board of Director meetings but such emeritus directors do not have any voting
rights. Emeritus board members are entitled to a fee of $1,000 per meeting
attended, reimbursement for meeting travel expenses and they are also covered
under Standard's medical plan.
Proposal 2: Adoption of the Company's 2004 Omnibus Stock Option Plan.
The Board of Directors and its Compensation Committee believe that the
Company's long-term success is dependent upon its ability to attract and retain
outstanding individuals and to motivate them to exert their best efforts on
behalf of the Company's shareholders. The Board and the Committee believe that a
stock option plan is instrumental in fulfilling these goals since the 1994
Omnibus Stock Option Plan terminates on May 25, 2004. There are 131,499 shares
still available to be granted under the 1994 Omnibus Stock Option Plan and all
of these options will be forfeited on May 25, 2004 when the Plan terminates.
Accordingly, the Board and its Compensation Committee have approved and propose
to the Company's shareholders the 2004 Omnibus Stock Option Plan (The "Plan").
Summary of Material Provisions of the Plan.
The Plan will authorize 500,000 shares of the Company's Common Stock be
made available for the grant of either incentive stock options or non-qualified
stock options. Unless sooner terminated by the Board of Directors, the Plan will
terminate on May 20, 2014.
1
No individual grant can exceed 50,000 shares. The Plan is administered by
the Compensation Committee, none of the members of which is eligible to
participate in the Plan. The Committee has the power and complete discretion to
determine when to grant option awards, which eligible employees will receive
option awards, and the number of shares to be allocated to each option award.
The Committee may impose conditions on the exercise of options and may impose
such other restrictions and requirements as it may deem appropriate. Officers
and other key management employees of the Company and its subsidiaries will be
eligible to receive grants under the Plan.
If a grant is canceled, terminates or lapses unexercised, any such shares
allocable to that grant may be subjected again to a new grant. Adjustments will
be made in the number of shares which may be issued under the Plan in the event
of a future stock dividend, stock split or similar pro rata change in the number
of outstanding shares of Common Stock or the future creation or issuance to
stockholders generally of rights, options or warrants for the purchase of Common
Stock or Preferred Stock.
Stock option grants under the Plan may be either incentive stock options
or non-qualified stock options. No more than one grant may be to an individual
in any calendar year. Incentive stock options qualify for favorable income tax
treatment under the Internal Revenue Code while nonstatutory stock options do
not. The option price of Common Stock covered by a stock option may not be less
that 100% of the fair market value of the Common Stock on the date of the
options grant. The value of incentive stock options, based on the exercise
price, that can be exercisable for the first time in any calendar year under the
Plan is limited by the Internal Revenue Code to $100,000.
Options may only be exercised at such time as may be specified by the
Compensation Committee. The minimum period of time from the date of grant that
an option vests (exercisable) is twelve months and all options are exercisable
for a period of ten years from the date such options were granted. Option grants
may be fully exercisable (vest) at one point in time or may have graded
exerciseability (vesting) in which case exerciseability will occur over a period
of years. The Compensation Committee may require that, for stock option grants
in excess of a specified number of shares, an optionee must directly own shares
of the Company's Common Stock whose fair market value bears a predetermined
relationship to the optionee's base salary, up to a maximum of 50% of the
optionee's base salary. Exerciseability may be accelerated by the Compensation
Committee at any time after grant, and is accelerated automatically upon the
death or disability of an optionee. Upon termination of employment other than
for cause, an optionee will have ninety days to exercise any option grant that
is vested. Any option grant not exercised within that time period will be
forfeited. Forfeiture will automatically occur if the optionee's employment with
the Company is terminated for cause.
Upon exercise, optionees may acquire their shares by paying an exercise
price to the Company in cash; by delivering or causing to be withheld from the
option shares, shares of the Company's Common Stock the value of which is equal
to the exercise price or by delivering an exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds from the option shares to pay the exercise
price.
The Plan provides that options would become immediately and fully
exercisable upon a Change in Control. For purposes of the Plan, a "Change in
Control" occurs principally (i) when a person (or group of persons acting in
concert) acquires 25% or more of the Company's Common Stock (other than those
presently holding such amount), (ii) when there is a change in the composition
of a majority of the Board of Directors when compared with those who are
currently serving or (iii) when the stockholders of the Company approve a
reorganization, merger, consolidation or other transaction as a result of which
the Company or a Subsidiary is not the surviving entity.
No option may be sold, transferred, pledged, or otherwise disposed of,
other than by will or by laws of descent and distribution. All rights granted to
a participant under the Plan shall be exercisable during his lifetime only by
such participant, or his guardians or legal representatives.
2
The Compensation Committee may amend the Plan in such respects as it deems
advisable except that it may not (1) grant an option price that is less than
100% of the fair market value of the Company's Common Stock on the date of the
options grant, (2) grant an individual option in excess of 50,000 shares of the
Company's Common Stock and (3) change the vesting requirement to be less than
twelve months from date of grant. The shareholders of the Company must approve
any amendment that would (i) materially increase the number of shares of Common
Stock that may be issued under the Plan, or (ii) materially modify the
requirements of eligibility for participation in the Plan. Stock option grants
under the Plan may be amended with the consent of the recipient so long as the
amended award is consistent with the terms of the Plan.
Federal Income Tax Consequences
An optionee will not incur Federal income tax liabilities when he or she
is granted an incentive stock option or a non-qualified stock option.
Upon exercise of an incentive stock option, an optionee generally will not
recognize income, unless he or she is subject to the alternative minimum tax.
Upon exercise of a non-qualified stock option, an optionee generally will
recognize compensation income, which is subject to income tax withholding by the
Company, equal to the difference between the fair market value of the Common
Stock on the date of the exercise and the option price.
The Company usually will be entitled to a tax deduction at the time and in
the amount that the optionee recognizes ordinary compensation income in
connection therewith. As stated above, this usually occurs upon exercise of
non-qualified options. No deduction is allowed in connection with an incentive
stock option, unless the employee disposes of Common Stock received upon
exercise in violation of the holding period requirement.
This summary of Federal income tax consequences of non-qualified stock
options and incentive stock options does not purport to be complete, and is
based upon interpretations of the existing laws, regulations and rules which
could be materially altered with enactment of new tax legislation. There may
also be state and local income taxes applicable to those transactions.
The Board of Directors believes that approval of the 2004 Omnibus Stock
Option Plan is in the best interests of all shareholders and recommends a vote
"For" this Proposal.
The favorable vote of the holders of a majority of the shares of Common
Stock represented at the meeting is needed to approve this Proposal No. 2.
Proposal 3: Management's Proposal to Adopt the Company's 2004 Independent
Outside Director's Stock Option Plan.
The 2004 Independent Outside Director's Stock Option Plan (the "Plan") is
intended to enable the Company to provide an incentive to attract and retain
qualified directors to serve on the Company's Board of Directors and to further
the identity of interests of the directors and shareholders of the Company. The
Plan provides for the grant of non-qualified stock options to independent
outside directors. Options to purchase a maximum of 50,000 shares of the
Company's Common Stock may be granted under the Plan. A Committee selected by
the Board of Directors will administer the Plan.
The Plan will provide for an annual option grant to each qualified
director as of the date of the Company's Annual Meeting of Shareholders. The
exercise price per share will be the average of the high and low sales price of
the Company's Common Stock on the New York Stock Exchange on the day prior to
the date of the grant.
Options granted under the Plan are exercisable upon the first anniversary
of the date the option was granted. Options must be exercised before the earlier
(i) ten years from the date such options were granted, (ii) 90 days after the
termination of the optionee's service as a director or other than by reason of
death or (iii) 120 days after an optionee's death.
3
The Board of Directors believes that approval of the 2004 Independent
Directors' Stock Option Plan is in the best interests of all shareholders and
recommends a vote "For" this Proposal.
The favorable vote of the holders of a majority of the shares of Common
Stock represented at the meeting is needed to approve this Proposal No. 3.
Proposal 4. Shareholder Proposal Concerning Preferred Share Purchase Rights
GAMCO Investors, Inc.,One Corporate Center, Rye, New York 10580-1434,
which claims beneficial ownership of 2,597,350 shares of the Company's common
stock (as shown in an amendment filed with the Securities and Exchange
Commission on December 23, 2003 with respect to its earlier Schedule 13D), has
submitted the following proposal:
"RESOLVED: that the shareholders of Standard Motor Products, Inc. (the
"Company") request the Board of Directors redeem the Preferred Share Purchase
Rights issued pursuant to the Rights Agreement, dated as of February 15, 1996,
unless the holders of a majority of the outstanding shares approve the issuance
at a meeting of the shareholders held as soon as practical.
The shareholder's statement in support of the proposal is as follows:
On February 15, 1996, the Board of Directors adopted a Rights Agreement.
The Rights represent a corporate anti-takeover device, commonly known as a
"poison pill." Absent Board intervention, the Rights are exercisable when a
person or group acquires a beneficial interest in 20% or more of the Company's
common shares then outstanding. Once exercisable, the Rights entitle holders to
purchase shares of the Company's Series A Participating Preferred stock or the
right to receive shares of the acquiring entity.
We oppose the use of Rights to prevent a potential bidder from effecting
any merger or tender offer that is not approved by the Board of Directors. A
poison pill stops a potential bidder from taking their offer directly to the
shareholders even if an overwhelming majority would have accepted the offer. The
potential bidder must instead negotiate with management, and a Board or
management may sometimes have interests that conflict with the interest of the
shareholders. In effect, the pill allows a Board to arrogate to itself the sole
right to determine what price a potential buyer must pay to acquire an entire
company. The power of shareholders to accept an offer by a potential bidder
provides an important check and balance on management and the Board in their
stewardship of the shareholders' interests. We believe the shareholders should
retain the right to decide for themselves what represents a fair price for their
holdings.
We Urge Shareholders To Vote In Favor Of This Proposal.
Your Board of Directors Recommends a Vote Against the Above Proposal.
On February 15, 1996, the Board of Directors adopted the Company's
Preferred Share Purchase Rights Agreement to enhance the ability of the Board to
preserve and protect shareholder value in the event of certain unsolicited
takeover attempts. Similar rights plans have been adopted by a majority of the
corporations included in the Standard & Poor's 500.
The Board believes the Rights Agreement allows the Company to more
effectively address situations involving a potential change in control or sale
of our Company. A potential acquiror who obtained beneficial ownership of more
than 20% of the Company's voting stock, without approval of the Board, would
risk substantial dilution of its holdings through operation of the Rights
Agreement. As a result, the Board believes that the Rights Agreement encourages
a potential acquiror to negotiate directly and in good faith with the Board. By
encouraging negotiation, the Rights Agreement puts the Board in a better
position to defend against unfair offers, such as coercive, partial or
two-tiered bids and stock accumulation programs in which all shareholders may
not share in the premium associated with a change in control. The Rights
Agreement also gives the Board, as elected representatives of the shareholders,
flexibility and a greater period of time within which it can properly evaluate
and determine if an offer reflects the full value of the company and is fair to
all shareholders, and if not, to reject the offer or to seek an alternative that
meets these criteria.
4
The Rights Agreement is not intended to and will not prevent a takeover on
terms determined by the Board to be fair and equitable to all shareholders. If
the Board determines that an offer adequately reflects the value of the Company
and is in the best interests of all stockholders, the Board may redeem the
Rights.
A study released by Georgeson & Co. in November 1997 found that takeover
bids were actually more likely to be completed when the target had a rights
plan. Georgeson also concluded that, from 1992 to 1996, companies with rights
plans received an added $13 billion in additional takeover premiums than did
companies without rights plans.
The Board's fiduciary duty to the shareholders dictates that it evaluate
the merits of each and every acquisition proposal presented to it and seek to
insure that any proposed business combination or acquisition delivers full value
to the shareholders. The Board believes that the adoption of a Rights Agreement
is appropriately within the scope of responsibilities of the Board of Directors,
acting on behalf of the shareholders. Redeeming the Rights would remove an
important tool that the Board believes it should have for the protection of
shareholders. The Board therefore believes that any decision to redeem the
Rights should be made in the context of a specific acquisition proposal.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
Information With Respect to Nominees and Major Shareholders
Information with respect to each nominee is set forth in Chart "A" on page
6. Additional information with respect to major shareholders of the Company,
including their percentage ownership in the Company's voting stock is set forth
in Chart "B" on page 8.
Beneficial shares of Common Stock owned directly or held as trustee by
Fife family members aggregate 2,387,926 shares (12.1 %). Shares of Common Stock
owned directly or held as trustee by Sills family members aggregate 2,808,615
shares (14.2%). The 247,125 shares of Common Stock owned by charitable
foundations of which various members of the Fife and Sills families are trustees
represent 1.3% of the total outstanding voting securities of the Company.
Information With Respect to Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's Common Stock, to file with the
Securities and Exchange Commission and the New York Stock Exchange initial
reports of ownership and reports of changes in ownership of the Common Stock of
the Company. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely upon a review of
the copies of such reports furnished to the Company and representations that no
other reports were required, during the fiscal year ended December 31, 2003,
except that a From 4 was late being filed for Mr. Lawrence I. Sills. The Form 4
was filed late as a result of the broker handling the purchase of shares for Mr.
Sills not informing the Company on a timely basis of the purchase. All other
Section 16(a) filing requirements applicable to its officers and directors were
in compliance.
5
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CHART A--INFORMATION ABOUT NOMINEES
Has Shares of Common Stock
Office with Company and Served Beneficially Owned Directly
Principal Occupation as Director or Indirectly as of
Name Age During the Past Five Years Since March 15, 2004*
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Marilyn F. Cragin (1).................. 52 Director of the Company 1995 1,588,048 (10)
Arthur D. Davis (2).................... 56 Vice Chairman of the Board and
Director of the Company 1986 1,466,910 (11)
Robert M. Gerrity (3).................. 66 Director of the Company 1996 15,568 (12)
John L. Kelsey (4) 78 Director of the Company 1964 18,010 (13)
Kenneth A. Lehman (5).................. 60 Director of the Company 1999 11,966 (14)
Arthur S. Sills (6).................... 60 Director of the Company 1995 1,117,529 (15)
Lawrence I. Sills (7).................. 64 Chief Executive Officer, Chairman
and Director of the Company 1986 1,617,451 (16)
Frederick D. Sturdivant (8)............ 66 Director of the Company 2001 12,880 (17)
William H. Turner (9).................. 63 Director of the Company 1990 16,982 (18)
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(1) Marilyn F. Cragin has served as a director since October 1995. Mrs. Cragin
has been an independent consultant to Wellesley College since July 2001
and the Planned Parenthood of Greater Massachusetts since January 2002.
From November 1988 to August 2000 she served as Program Director for an
Arts in Progress Program. From 1995 to 1998 Mrs. Cragin was the co-owner
of an art gallery and prior to that she was a practicing psychotherapist
for more than twenty years.
(2) Arthur D. Davis has served as our Vice-Chairman of the Board since
December 2000 and as a director since May 1986. Mr. Davis served as our
Vice president of Materials Management from May 1986 to January 1989. Mr.
Davis is the husband of Susan F. Davis who is an Emeritus director.
(3) Robert M. Gerrity has served as a director since July 1996. Mr. Gerrity
served as Chairman and Chief Executive Officer of the Antrim Group, Inc.
from 1996 to 2000. Prior to 1996, Mr. Gerrity served as Vice Chairman of
New Holland, n.v., an agricultural and construction equipment company. Mr.
Gerrity is also a director of the Rimrock Corporation, Federal Signal
Corporation and Polyair Corporation PPK.
(4) John L. Kelsey has served as a director since 1964. Mr. Kelsey is
currently retired. From 1989 to 1994, Mr. Kelsey served as Advisory
Director of PaineWebber Inc. ( and its predecessor firms) for more than 30
years.
(5) Kenneth A. Lehman has served has a director since April 1999. Mr. Lehman
has been Managing Director of the KKP Group LLC since April 1999. From
1990 to December 1998, he was Co-Chairman and Chief Executive Officer of
Fel-Pro Incorporated. He is also a director of Gold Eagle Co.
(6) Arthur S. Sills has served as a director since October 1995. Mr. Sills was
an educator and administrator in Massachusetts school districts for thirty
years prior to his retirement in 2000. Mr. Sills is the brother of
Lawrence I. Sills, who is a director, and Peter J. Sills who is an
Emeritus director.
(7) Lawrence I. Sills has been our Chief Executive Officer and Chairman of the
Board since December 2000 and has been a director since 1986. From 1986 to
December 2000, Mr. Sills served as President and Chief Operating Officer.
From 1983 to 1986, Mr. Sills served as Vice president of Operations. Mr.
Sills is the brother of Arthur S. Sills, who is a director, and Peter J.
Sills, who is an Emeritus director.
(8) Frederick D. Sturdivant has served as a director since December 2001. Mr.
Sturdivant has been Chairman of the Tylor Group Inc. since April 2002. Mr.
Sturdivant was Chairman of Reinventures LLC from October 2000 to March
2002. From June 1998 to September 2000, he was Executive Managing Director
of Strategic Decisions Group/Navigant. From January 1996 to June 1998, he
was President of Index Research and Advisory Services, a subsidiary of
Computer Sciences Corporation.
(9) William H. Turner has served as a director since May 1990. Since January
2004, Mr. Turner has been the Acting Dean of the College of Business at
Stony Brook University. From Augusst 1997 until September 2002 Mr. Turner
served in various capacities at PNC Bank NJ including President, Chief
Executive Officer and Chairman Northeast Region. He was President & Co-CEO
of Franklin Electronic Publishers, Inc. from October 1, 1996 to July 31,
1997. He was the Vice-Chairman, Chase Manhattan Bank, and its predecessor
Chemical Banking Corporation before his employment with Franklin
Electronics Publishers, Inc. He is also a director of Franklin Electronic
Publishers, Inc., Volt Information Sciences, Inc. and New Jersey Resources
Corporation.
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6
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CHART A - footnotes continued.
(10) Includes 884,289 shares of common stock, of which: (a) 447,187 shares are
held as co-trustee with, among other, Arthur D. Davis and Susan F. Davis,
Director Emeritus, for which Mrs. Cragin has shared voting and investment
power; (b) 104,063 shares held by the Fife Family Foundation, Inc. of
which Mrs. Cragin is a director and officer and shares voting and
investment power with, among others, Susan F. Davis, (c) 137,270 shares
are held by Mrs. Cragin as custodian for minor children for which she has
sole voting and investment power; (d) 52,400 shares are held as co-trustee
with Arthur D. Davis for which Mrs. Cragin has shared voting and
investment power; (e) 53,527 shares are deemed beneficially owned by Mrs.
Cragin in connection with her purchase of our convertible debentures; (f)
18,560 shares are held as co-trustee for which she has shared voting and
investment power; (g) 9,307 shares are owned by Mrs. Cragin's husband; and
(h) 61,975 shares are held by Mrs. Cragin's husband as trustee for their
children. In her capacity as a trustee, director of the foundation and for
shares held as custodian for minor children and owned by her spouse, Mrs.
Cragin disclaims beneficial ownership of such shares so deemed
"beneficially owned" by her within the meaning of Rule 13d-3 of the
Exchange Act.
(11) Includes 1,374,241 shares of common stock, of which: (a) 420,982 shares
are held by Arthur D. Davis as trustee for which he has sole voting and
investment power; (b) 52,400 shares are held as co-trustee with Marilyn F.
Cragin for which Mr. Davis has shared voting and shared investment power;
(c) 129,835 shares are held as co-trustee with Susan F. Davis, Director
Emeritus, for which Mr. Davis has shared voting and investment power; (d)
447,187 shares are held as co-trustee with, among others, Marilyn F.
Cragin and Susan F. Davis for which Mr. Davis has shared voting and
investment power; (e) approximately 1,287 shares are deemed beneficially
owned by Arthur D. Davis and Susan F. Davis in connection with their
purchase of our convertible debentures; (f) approximately 53,527 shares
deemed beneficially owned by Arthur D. Davis and Susan F. Davis in
connection with their purchase of our convertible debentures; (g) 87
shares are allocated to Mr. Davis under the Standard Motor Products
Employee Stock Ownership Plan (the "Standard Motor Products ESOP"); (h)
238,936 shares are owned by Susan F. Davis; and (i) 30,000 shares are held
by Mr. Davis that were subject to options exercisable within 60 days of
March 15, 2004. In his capacity as a trustee and with regard to the 53,527
shares deemed beneficially owned by Mr. Davis in connection with the
conversion of our convertible debentures and the 238,936 shares owned by
Susan F. Davis, Mr. Davis disclaims beneficial ownership of the shares so
deemed "beneficially owned" by him within the meaning of Rule 13d-3 of the
Exchange Act.
(12) Includes 11,000 shares of common stock held by Robert M. Gerrity that were
subject to options exercisable within 60 days of March 15, 2004.
(13) Includes 11,000 shares of common stock held by John L. Kelsey that were
subject to options exercisable within 60 days of March 15, 2004.
(14) Includes 6,000 shares of common stock held by Kenneth A. Lehman that were
subject to options exercisable within 60 days of March 15, 2004
(15) Includes 573,374 shares of commons stock, of which: (a) 430,312 are held
as co-trustee with Lawrence I. Sills and Peter S. Sills, Director
Emeritus, for which Arthur S. Sills has shared voting and shared
investment power and (b) 143,062 shares are held by the Sills Family
Foundation, Inc. of which Arthur S. Sills is a director and officer and
shares voting and investment power with, among others, Peter J. Sills. In
his capacity as a trustee and director of the foundation, Arthur Sills
disclaims beneficial ownership of the shares so deemed "beneficially
owned" by him within the meaning of Rule 13d-3 of the Exchange Act.
(16) Includes 971,856 shares of common stock, of which: (a) 430,312 are held as
co-trustee with Arthur S. Sills for which Lawrence I. Sills has shared
voting and shared investment power; (b) 435,770 shares held by the Estate
of Nathaniel I. Sills for which Lawrence I. Sills is executor and has sole
voting and investment power; (c) 5,295 shares of common stock allocated to
Lawrence I. Sills under the Standard Motor Products, ESOP; (d) 2,812
shares owned by Mr. Sills' wife; and (e) 97,667 shares of common held by
Lawrence I. Sills which were subject to options exercisable within 60 days
of March 15, 2004. In his capacity as a trustee and executor and for
shares of stock held by his wife, Lawrence Sills disclaims beneficial
ownership of the shares so deemed "beneficially owned" by him within the
meaning of Rule 13d-3 of the Exchange Act,
(17) Includes 2,000 shares of common stock held by Frederick D. Sturdivant that
were subject to options exercisable within 60 days of March 15, 2004.
(18) Includes 11,000 shares of common stock held by William H. Turner that were
subject to options exercisable within 60 days of March 15, 2004.
--------------------------------------------------------------------------------
7
--------------------------------------------------------------------------------
CHART B--HOLDINGS OF MANAGEMENT AND HOLDERS OF 5% OR MORE OF ANY
CLASS OF THE COMPANY'S VOTING SECURITIES
Amount and
Nature of
Beneficial
Title of Address of Ownership Percent of
Class Beneficial Owner as of March 15, 2004* Class
----------------------------------------------------------------------------------------------------------------------------
Marilyn F. Cragin (10) ............. Common 37-18 Northern Boulevard 1,588,048 (1) 8.02
Long Island City, NY
Arthur D. Davis (11) ............... Common 37-18 Northern Boulevard 1,466,910 (1) 7.32
Long Island City, NY
Robert M. Gerrity .................. Common 114 Division Street 15,568 (1) 0.08
Bellaire, MI
John L. Kelsey ..................... Common P.O. Box 8264 18,010 (1) 0.09
Vero Beach, FL
Kenneth A. Lehman .................. Common One Peninsula Dr. 11,966 (1) 0.06
Stratham, NH
Arthur S. Sills (12) ............... Common 37-18 Northern Boulevard 1,117,529 (1) 5.66
Long Island City, NY
Lawrence I. Sills (13) ............. Common 37-18 Northern Boulevard 1,617,451 (1) 8.15
Long Island City, NY
Frederick D. Sturdivant ............ Common 6010 Squirrel Wood Drive 12,880 (1) 0.07
Cincinnati, OH
William H. Turner .................. Common 384 Upper Mountain Ave. 16,982 (1) 0.09
Upper Montclair, NJ
John P. Gethin ..................... Common 37-18 Northern Boulevard 86,192 (2) 0.44
Long Island City, NY
Joseph G. Forlenza ................. Common 37-18 Northern Boulevard 76,654 (3) 0.39
Long Island City, NY
James J. Burke ..................... Common 37-18 Northern Boulevard 68,764 (4) 0.35
Long Island City, NY
Donald E. Herring .................. Common 37-18 Northern Boulevard 62,878 (5) 0.32
Long Island City, NY
Directors and Officers as a
Group (nineteen persons) ........... 5,988,635 (6) 29.40
Gabelli Funds, Inc, ................ Common One Corporate Center 2,597,350 (7) 12.73
Rye, New York
Wellington Management .............. Common 9 State Street 2,199,100 (8) 11.14
Boston, MA
Dana Corporation...................... Common PO Box 1000 1,378,760 (9) 6.99
Toledo, Ohio
--------------------------------------------------------------------------------
(1) The nature of the beneficial ownership of these shares are listed in the
footnotes of Chart A.
(2) Includes (a) 1,422 shares of common stock allocated to the account of John
P. Gethin under the Standard Motor Products ESOP and (b) 71,250 shares of
common stock held by Mr. Gethin which were subject to options exercisable
within 60 days of March 15, 2004.
(3) Includes (a) 4,104 shares of common stock allocated to the account of
Joseph G. Forlenza under the Standard Motor Products ESOP and (b) 58,050
shares of common stock held by Mr. Forlenza which were subject to options
exercisable within 60 days of March 15, 2004 and (c) 2,500 shares of
common stock owned by Mr. Forlenza's wife, of which Mr. Forlenza disclaims
"bneficial ownership" of such shares within in the meaning of Rule 13d-3
of the Exchange Act.
(4) Includes (a) 3,514 shares of common stock allocated to the account of
James J. Burke under the Standard Motor Products ESOP and (b) 55,250
shares of common stock held by Mr. Burke which were subject to options
exercisable within 60 days of March 15, 2004.
(5) Includes (a) 3,227 shares of common stock allocated to the account of
Donald E. Herring under the Standard Motor Products ESOP and (b) 54,250
shares of common stock held by Mr. Herring which were subject to options
exercisable within 60 days of March 15, 2004.
--------------------------------------------------------------------------------
8
--------------------------------------------------------------------------------
CHART B - footnotes continued.
(6) Includes 30,000, 11,000, 11,000, 6,000, 97,667, 2,000 and 11,000 shares,
respectively, for Mr. Davis, Mr. Gerrity, Mr. Kelsey, Mr. Lehman, Mr.
Sills, Mr. Sturdivant and Mr. Turner in the case of all listed Directors
and Officers named above, which were subject to options exercisable within
60 days of March 15, 2004. All of our officers and directors as a group
have 535,567 shares, which were subject to options exercisable within 60
days of March 15, 2004, 26, 284 shares allocated to all officers and
directors under the Standard Motor Products ESOP and approximately 108,341
shares of common stock in connection with the purchase of our convertible
debentures.
(7) The information for Gabelli Asset Management Inc. and certain of its
affiliates ("Gabelli") is based solely on an amendment to its Section 13D,
filed with the SEC on December 23, 2003, wherein Gabelli stated that it
beneficially owned an aggregate of 2,597,350 shares of our common stock.
Gabelli states that it has sole voting power for 2,564,350 shares and has
sole dispositive power for 2,564,350.
(8) Wellington Corporation is a Mutual Fund that as of December 31, 2003 had
2,199,100 beneficially owned shares of Standard Motor Products, Inc.
(9) Dana Corporation accepted 1,378,760 shares as part of the purchase price
paid for Dana's Engine Management Division on June 30, 2003.
(10) Marilyn F. Cragin is the sister-in-law of Arthur Davis.
(11) Arthur D. Davis is the brother-in-law of Marilyn F. Cragin
(12) Arthur S. Sills is the brother of Lawrence I. Sills.
(13) Lawrence I. Sills is the brother of Arthur S. Sills.
* Mrs. Marilyn F. Cragin, Mr. Arthur D. Davis, Mr. Arthur S. Sills and Mr.
Lawrence I. Sills disclaim beneficial ownership of securities with respect
to which their ownership is specified to be indirect.
--------------------------------------------------------------------------------
Meetings of the Board of Directors and Its Committees
In the last full fiscal year the total number of meetings of the Board of
Directors, including regularly scheduled and special meetings was seven. The
Company has a Compensation Committee and an Audit Committee of the Board of
Directors, each consisting of all five independent outside directors. The
members of both committees are Robert M. Gerrity, John L. Kelsey, Kenneth A.
Lehman, Frederick D. Sturdivant and William H. Turner. The Compensation
Committee's function is to approve the compensation packages (salary and bonus)
of the Company's officers, to administer the Company's Stock Option Plan and to
review the Company's overall compensation policies. The Compensation Committee
was established in late 1992 and held two meetings in 2003. The Audit Committee
recommends to the Board of Directors the engagement of the independent auditors
of the Company and reviews with the independent auditors the scope and results
of the Company's audits, the professional services furnished by them to the
Company and their Management Letter with comments on the Company's internal
accounting controls. The Audit Committee met five times in 2003.
The Nominating and Corporate Governance Committee
In 2003 the Company formed the Nominating and Corporate Governance
Committee to assist the Board in discharging and performing the duties and
responsibilities of the Board with respect to corporate governance including:
o The identification and recommendation to the Board of indivduals
qualified to become or continue as directors.
o The continuous improvement in corporate governance policies and
practices.
o The annual self-assessment of the performance of the Board.
o The recommendation of members for each committee of the Board.
The Committee is comprised of the independent directors of the Board and
the Charter is available on the Company's Website www.smpcorp.com.
Shareholders may propose director candidates for consideration by the
Committee. In order for shareholder candidates to be considered, written notice
of such shareholder recommendation (i) must be
9
provided to the Secretary of the Company not less than 45 days nor more than 75
days prior to the first anniversary of the record date for the preceding year's
annual meeting, and (ii) must contain the name of any recommended candidate for
director, together with a brief biographical sketch, a document indicating the
candidate's willingness to serve, if elected, and evidence of the nominating
person's ownership of Company stock. Both shareholder proposed candidates and
other candidates identified and evaluated by the Committee must comply with the
procedures, and meet the qualification of directors, as outlined in the Charter
of the Committee.
Shareholders may communicate with the Board of Directors or individual
directors pursuant to the procedures established by the Committee from time to
time. The Committee shall review such shareholder correspondence that first is
delivered to the attention of the Secretary of the Company at 37-18 Northern
Boulevard, Long Island City, NY 11101, which correspondence the Secretary will
forward to the Committee. The Committee shall have the discretion to distribute
only such correspondence to the Board or individual members of the Board that
the Committee determines in good faith has a valid business purpose or is
otherwise appropriate for the Board or individual member thereof to receive.
Company's Code of Ethics
The Board of Directors of the Company has adopted a Code of Conduct and
Business to (1) promote honest and ethical conduct, including fair dealing and
the ethical handling of actual or apparent conflicts of interest, (2) promote
full, fair, accurate, timely and understandable disclosure, (3) promote
compliance with applicable laws and governmental rules and regulations, (4)
ensure the protection of the Company's legitimate business interests, including
business opportunities, assets and confidential information and (5) deter
wrongdoing. The Code of Ethics is available on the Company's Website,
www.smpcorp.com.
Directors Compensation
Directors who are not officers or related to officers (the "Independent
Directors") were paid a retainer of $30,000 of which at least $10,000 must be in
shares of the Company's common stock valued as of the date of the Annual Meeting
of Shareholders. The Chairman of the Audit Committee receives an additional
retainer of $3,500. In addition, pursuant to the Company's Independent Outside
Directors' Stock Option Plan, the Outside Directors each received a stock option
grant of up to 2,000 shares of the Company's common stock with an exercise price
per share equal to the price of the stock on the New York Stock Exchange as of
the date of the Annual Meeting of Shareholders. Independent Directors also
received $1,000 for each Board and Committee meeting they attended and are
reimbursed for meeting expenses. Marilyn F. Cragin, Arthur D. Davis, Susan F.
Davis, Arthur S. Sills and Peter J. Sills received $1,000 for each Board meeting
they attended, reimbursement for meeting expenses and are covered under
Standard's medical plan. All other directors, being officers of the Company,
received no payment for the fulfillment of their directorial responsibilities.
Certain Transactions
During 2003 two executive officers, Lawrence I. Sills, Chairman of the
Board and Chief Executive Officer and John P. Gethin, President and Chief
Operating Officer were indebted to the Company as a result of loans made to them
by the Company.
Mr. Gethin had an outstanding loan relating to his 1999 relocation to
Texas to fulfill his responsibilities as General Manager of the Company's
Temperature Control Division. This loan carries an interest rate equal to the
Company's short-term interest rate. At March 31, 2004, the amount of this
indebtedness was zero. The greatest amount of Mr. Gethin's indebtedness with
respect to this loan in 2003 was $90,414.
In August 2000, Mr. Sills borrowed $75,500 to purchase company stock under
a plan that was put in place on November 11, 1999 allowing Officers of the
Company to borrow up to 25% of their gross annual salary to purchase shares of
the Company's common stock. The loan must be paid back in four years at an
interest rate equal to the Company's short-term interest rate. The greatest
amount of Mr. Sills indebtedness with respect to all loans in 2003 was $54,521.
At March 31, 2004, the indebtedness was $42,252.
Under the rules of the Sarbanes-Oxley Act of 2002 loans to Officers are no
longer allowed. The loans mentioned above was granted prior to the passage of
this act. The Company will no longer grant loans to Officers except for
permitted loans in case of relocation.
10
Change in Control Arrangements
The Company has long-term retention agreements with John Gethin and James
Burke. If a change in control of the Corporation occurs, and within twelve
months thereafter the executive's employment is terminated by the Company
without cause, or by the executive for certain specific reasons, the executive
will receive severance payments and certain other benefits. The specific reasons
which allow the executive to resign and receive the benefits are: (1) a
reduction in status or position with the Company, (2) a reduction by the Company
in the executive's annual rate of base salary, and (3) relocation.
If the executive resigns for one of the specific reasons, or is terminated
without cause, the executive will be entitled to receive: (1) a severance
payment equal to three times his base salary plus standard bonus, payable over a
two year period, (2) continued participation for a period of thirty six months
in group medical, dental and/or life insurance plans and (3) enhanced benefits
under the Company's Supplemental Compensation Plan.
A change in control of the Company for these purposes means the occurrence
of any of these events: (1) a sale of all or substantially all of the assets of
the Company to any person or group other than certain designated individuals:
(2) any person or group, other than certain designated individuals, become the
beneficial owner or owners of more than 50 percent of the total voting stock of
the Company, including by way of merger, consolidation or otherwise: (3)
Lawrence Sills ceases to be the Chairman of the Board of Directors of the
Company or the Chief Executive Officer of the Company.
Supplemental Retirement Program
Effective October 1, 2001, the Company adopted an unfunded supplemental
retirement program for eligible employees. Participation is limited to those
employees who as of the effective date have been designated by the Compensation
Committee. The benefits under this supplemental retirement program (the
"Supplemental Program") are computed under a formula which takes into account a
percentage of the participant's average annual base salary plus bonus and other
incentive compensation earned in three (3) of the last five (5) years of service
prior to age 60 ("Final Average Earnings") and years of participating service.
The maximum benefit payable to a participant under the Supplemental Program is
an amount equal to 50% of the participant's Final Average Earnings. If a
participant terminates his employment voluntarily prior to age 60 or is
terminated for cause (as defined under the Supplemental Program) he will forfeit
his benefits under the Supplemental Program. The benefits under the Supplemental
Program are in addition to benefits payable to participants under the Company's
401(k) Plan and SERP. Benefits under the Supplemental Program will be paid from
general corporate funds in the form of a single life annuity and are not subject
to any deduction for Social Security or other offset amounts.
It is not possible to calculate exactly each participant's benefits under
the Supplemental Program prior to retirement. However, the tables on the
following page indicate the aggregate amount of annual benefits payable under
the Supplemental Program using the formula described above for the specified
final average earnings and years of participating service for Category A and
Category B participants, respectively, and are based upon retirement at age 60
and payment in the form of a life annuity. A participant must have completed the
number of years of participating service specified in order to receive the
benefit listed. Benefits do not increase pro rata between the years of
participating service categories specified.
11
Category A
----------
Annual Benefit Years of Participating Service
---------------------------------------------
Final Average Earnings 2 5 6 7 or more
---------------------- - - - ---------
$570,000 ................... $ 71,250 $142,500 $213,750 $285,000
$610,000 ................... 76,250 152,500 228,750 305,000
$650,000 ................... 81,250 162,500 243,750 325,000
$690,000 ................... 86,250 172,500 258,750 345,000
$730,000 ................... 91,250 182,500 273,750 365,000
$770,000 ................... 96,250 192,500 288,750 385,000
$810,000 ................... 101,250 202,500 303,750 405,000
Category B
----------
Annual Benefit Years of Participating Service
---------------------------------------------
Final Average Earnings 4 10 12 14 or more
---------------------- - -- -- ----------
$370,000 ................... $ 46,250 $ 92,500 $138,750 $185,000
$410,000 ................... 51,250 102,500 153,750 205,000
$450,000 ................... 56,250 112,500 168,750 225,000
$490,000 ................... 61,250 122,500 183,750 245,000
$530,000 ................... 66,250 132,500 198,750 265,000
$570,000 ................... 71,250 142,500 213,750 285,000
$610,000 ................... 76,250 152,500 228,750 305,000
The only participants in the Supplemental Program at the current time are Mr.
Gethin in Category A and Mr. Burke in Category B. The approximate number of
years of participating service at December 31, 2003 for each of Messrs. Gethin
and Burke was two.
12
Executive Compensation
The following table sets forth the annual compensation paid or incurred by
the Company during fiscal 2003, 2002 and 2001 to the Chief Executive Officer and
the four other most highly compensated executive officers of the Company in 2003
(the "Named Officers").
SUMMARY COMPENSATION TABLE
Long-Term
Compensation All Other
Annual Compensation Awards Compensation
--------------------------------------------------------------------------------
Name and
Principal Other Stock Options
Position Year Salary Bonus Compensation (1) Granted (2)
--------------------------------------------------------------------------------------------------------------------------
Lawrence I. Sills (3) .............. 2003 $403,000 $255,200 20,000 $ 32,688
Chief Executive Officer, Chairman 2002 353,000 364,850 -- 18,887
and Director 2001 305,000 82,000 -- 13,730
John P. Gethin (4) ................. 2003 453,000 208,800 18,000 31,718
President - Chief Operating Officer 2002 403,000 291,880 -- 22,958
2001 353,000 128,000 -- 15,776
Joseph G. Forlenza (5) ............. 2003 338,000 51,688 12,000 24,863
Vice President and 2002 322,000 244,449 -- 18,506
General Manager Standard Division 2001 305,000 104,000 -- 19,956
James J. Burke (6) ................. 2003 303,000 170,000 12,000 21,339
Vice President - Finance 2002 278,000 145,940 -- 14,944
Chief Financial Officer 2001 223,000 64,000 -- 10,795
Donald Herring (7) ................. 2003 230,000 60,516 12,000 14,932
Vice President - Aftermarket Sales 2002 221,000 117,110 -- 11,905
2001 211,000 49,319 -- 10,691
--------------------------------------------------------------------------------------------------------------------------
(1) Does not include compensation associated with perquisites because such
amounts do not exceed the lesser of either $50,000 or 10% of total salary
and bonus disclosed.
(2) Represents Company contributions to the Profit Sharing, 401K, ESOP and
SERP programs on behalf of the named individual.
(3) Lawrence I. Sills has been our Chief Executive Officer and Chairman of the
Board since December 2000 and has served as a director since 1966. From
1986 to December 2000, Mr. Sills served as our President and Chief
Operating Officer. From 1983 to 1986, Mr. Sills served as our Vice
President of Operations.
(4) John P. Gethin has served as our President and Chief Operating Officer
since December 2000. From December 1997 to November 2000, Mr. Gethin
served as our Senior Vice President of Operations. From 1998 to June 2003,
he has served as General Manager of our Temperature Control Division. From
October 1995 to December 1997, Mr. Gethin was Vice President and General
Manager of EIS Brake Parts Division (a former business unit of ours).
(5) Joseph G. Forlenza has served as Vice President and General Manager of our
Engine Management Division since July 1993. From May 1988 to June 1993,
Mr. Forlenza served as Vice President and General manager of our Champ
Service Line division (a former business unit of ours).
(6) James J. Burke has served as our Vice President Finance, Chief Financial
Officer since October 1999. From January 1998 to September 1999, Mr. Burke
served as our Director of Finance, Chief Accounting Officer. From March
1993 to December 1997, Mr. Burke served as our Corporate Controller.
(7) Donald E. Herring has served as our Vice President of Aftermarket Sales
since January 1993. From January 1990 to December 1992, Mr. Herring served
as our National Sales Manager.
13
OPTION GRANTS IN THE LAST FISCAL YEAR
Potential Realized
Value at Assumed
Annual Rates of
Stock Appreciation
Individual Grants for Option Term (3)
------------------------------------------------------------------------------------------------------------------------------
Number of Percentage of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration(1)
Name Granted Fiscal Year ($/Sh) (1) Dates (2) 5% 10%
------------------------------------------------------------------------------------------------------------------------------
Lawrence I. Sills................... 20,000 5.7% $13.74 - $15.74 2/14/09 - 2/14/11 $ 81,394 $179,945
John P. Gethin...................... 18,000 5.1% $13.74 - $15.74 2/14/09 - 2/14/11 $ 73,255 $161,951
James J. Burke...................... 12,000 3.4% $13.74 - $15.74 2/14/09 - 2/14/11 $ 48,837 $107,968
Joseph G. Forlenza.................. 12,000 3.4% $13.74 - $15.74 2/14/09 - 2/14/11 $ 48,837 $107,968
Donald Herring...................... 12,000 3.4% $13.74 - $15.74 2/14/09 - 2/14/11 $ 48,837 $107,968
------------------------------------------------------------------------------------------------------------------------------
(1) Stock options granted in 2003 vest equally over a three year period
beginning at the anniversary of the grant. The exercise price in the first
year is $13.74 and increases by $1.00 each subsequent year.
(2) Stock option grants expire at the rate of one-third of the total grant on
February 14th of each year beginning February 14, 2009.
(3) No gain to the optionees is possible without an increase in the stock
price, which would benefit all shareholders commensurately. The dollar
amounts under the columns are the result of calculations at five percent
and ten percent rates set by the Securities and Exchange Commission and
therefore are not intended to forcast possible future appreciation, if
any, of the Company's stock price.
Option Exercises and holdings
The following table provides information with respect to option exercises
in 2003 by the Named Officers and the value of such Named Officers' unexercised
options at December 31, 2003.
AGGREGATED OPTION EXERCISES IN 2003
AND DECEMBER 31, 2003 OPTION VALUES
Number of Shares Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money Options at
Acquired on Value Fiscal Year-End Fiscal Year-End (1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------
Lawrence I. Sills................... -- -- 97,667 13,333 $46,501 $ --
John P. Gethin...................... -- -- 75,250 12,000 20,400 --
James J. Burke...................... -- -- 57,250 8,000 27,900 --
Joseph G. Forlenza.................. -- -- 58,050 8,000 24,468 --
Donald Herring...................... -- -- 54,250 8,000 13,600 --
(1) Market value of unexercised options is based on the closing price of the
Company's common stock on the New York Stock Exchange of $12.15 per share
on December 31, 2003 (the last trading day of 2003) minus the exercise
price
EQUITY COMPENSATION PLAN INFORMATION
The following table presents a summary of outstanding stock options
available for future grant under our stockholder approved equity compensation
plan as December 31, 2003.
Number of Securites Number of Securites
to be Issued upon Weighted Average Remaining Available
Exercise of Exercise Price of for Future Issuance
Outstanding Outstanding Under Equity
Plan Category Stock Options Stock Options Compensation Plan
----------------------------------------------------------------------------------------------------------------------------
Equity Compenstion plans approved by security holders (1) 1,163,447 $ 16.33 99,327
Equity Compenstion plans not approved by security holders -- -- --
----------------------------------------------------------------
All Plans 1,163,447 $ 16.33 99,327
(1) Represents shares of the Company's Common Stock issuable upon exercise of
options outstanding under the following equity compensation plan: 1994
Omnibus Stock Option Plan.
14
REPORT OF THE COMPENSATION COMMITTEE
The Company's Compensation Committee of the Board of Directors was
established in 1992. The Committee is responsible for approving the compensation
packages (base salary and bonus) of the Company's officers, for administering
the Company's Stock Option Plans, and for reviewing the Company's overall
compensation policies including the structure of its bonus program.
Effective January 1, 1998 the Company modified its MBO Bonus Program into
an Economic Value Added (EVA) based program. Simply stated, EVA is equal to net
operating profit after tax, less a charge for the cost of capital. Bonuses tied
to EVA are such that increasing EVA year over year will be favorable for the
Company's shareholders as well as those whose compensation is based on EVA. In
the event of decreasing EVA, bonuses will be affected negatively to the point of
erasing the portion based upon EVA. EVA bonuses earned in any one year may not
necessarily be paid out in full. In order to promote longer-term shareholder
improvement and to provide for years which may produce "negative EVA" results,
the entire bonus structure is monitored through a "banking" feature. The "bank"
allows only a portion of the year's earnings to be paid out in any given year,
saving the remainder for lean year's growth or negative growth. Due to this
feature, it is possible to receive a nominal bonus in a poor year only because
the individual has a bank upon which to draw. It is also possible to completely
exhaust the bank or create a negative bank. In the case of a negative bank,
bonuses tied to EVA would not be paid until the bank is once again positive.
However, the Board may in its discretion reset negative bank balances to zero in
order to preserve an incentive for continuous effort in future years. In January
2001, 2002 and 2003 negative bank balances were reset to zero.
The change to EVA was made to more closely align executive compensation to
continuous improvements in corporate performance and increases in shareholder
value. In this regard, the Compensation Committee endorses the following
guidelines for compensation decisions:
o Provide a competitive total compensation package that enables the
Company to attract and retain key executive talent.
o Align all pay programs with the Company's annual and long-term
strategies and objectives.
o Provide variable compensation incentives directly linked to the
performance of the Company and improvement in shareholder return.
Under the EVA bonus program, the bonuses of the officers are based on a
minimum 50% on year-over-year improvement in Company EVA and remaining 50% or
less on MBO goals approved by the Compensation Committee. Earned MBO bonuses are
paid out in full each year.
As part of the Company's compensation program, the Compensation Committee,
from time to time, grants stock options to the Company's executive officers and
other key employees. This feature further strengthens the link between
continuous Company improvement and long-term compensation. These grants
generally include proportional vesting over multi-year periods at increasing
exercise prices. The grants also require a holding period before they may be
exercised. The Charter of the Compensation Committee is available on the
Company's Website, www.smpcorp.com.
Chief Executive Compensation.
The executive compensation policy described above is applied in setting
the compensation of our Chief Executive Officer, Lawrence I. Sills. Mr. Sills
generally participates in the same executive compensation plans and arrangements
available to the other senior executives. Accordingly, his compensation also
consists of an annual base salary, a potential annual cash bonus and,
potentially, long-term equity-linked compensation in the form of stock options.
The Compensation Committee's general approach in establishing Mr. Sills'
compensation is to be competitive with peer companies, but to have a large
percentage of his target compensation based upon certain performance criteria
and targets established in the Company's strategic plan.
Mr. Sill's compensation for the fiscal year ended December 31, 2003,
included $403,000 in base salary, and bonus compensation of $255,200. Mr. Sills'
compensation for 2003 was based on, among other factors, the Company's
performance and the 2002 compensation of chief executives of comparable
companies, although his compensation was not linked to any particular group of
these companies. In 2003, Mr. Sills did receive a grant of 20,000 stock options
to purchase shares of common stock. The Company may make other grants of stock
options to Mr. Sills in the future.
Submitted by:
Robert M. Gerrity
John L. Kelsey
Kenneth A. Lehman
Frederick D. Sturdivant
William H. Turner
15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All members of the Board's Compensation Committee during 2003 were
independent directors, and none of them were employees or former employees of
the Company. During 2003, no executive officer of the Company served on the
compensation committee (or equivalent), or the board of directors, of another
entity whose executive officer(s) served on the Company's Compensation Committee
or Board of Directors.
Five Year Performance Graph
Comparison of Five Year Cumulative Total Return*
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL.]
SMP S&P PEER
500 GROUP (1)
1998 100 100 100
1999 68 121 68
2000 33 110 32
2001 62 97 60
2002 60 75 69
2003 57 97 103
Standard Motor Products, Inc., S&P 500 Index and a Peer Group (1)
Assumes $100 invested on December 31, 1998 in Standard Motor Products, Inc.
common stock, S&P 500 Index and a Peer Group (1).
* Total Return assumes reinvestment of dividends.
(1) The Peer Group companies consist of Dana Corp., Arvin Industries, Inc. and
R&B, Inc.
16
Information as to Voting Securities
The close of business on April 9, 2004 has been fixed by the Board of
Directors as the record date for the determination of shareholders entitled to
notice of, and vote at, the Annual Meeting of Shareholders of the Company to be
held on May 20, 2004.
Holders of shares of common stock have the right to one vote for each
share registered in their names on the books of the Company as of the close of
business on the record date. On that date 19,754,606 shares of common stock were
outstanding and entitled to vote.
Voting and Revocation of Proxies
The persons named in the accompanying form of proxy will vote the shares
represented thereby, as directed in the proxy, if the proxy appears to be valid
on its face and is received on time. In the absence of specific instructions,
proxies so received will be voted for the election of the named nominees to the
Company's Board of Directors. Proxies are revocable at any time before they are
exercised by sending in a subsequent proxy (with the same or other
instructions), by appearing at the Annual Meeting and voting in person or by
notifying the Company that it is revoked.
Votes Required
Nominees receiving a plurality of the votes cast will be elected as
directors. Only those votes cast for or against a proposal are used in
determining the results of a vote. Abstentions are counted for quorum purposes
only. Broker non-votes have the same effect as abstentions.
Method and Expense of Proxy Solicitation
The solicitation of proxies will be made primarily by mail. Proxies may
also be solicited personally and by telephone by regular employees of the
Company at nominal cost.
The Company does not expect to pay compensation for any solicitation of
proxies but may pay brokers and other persons holding shares in their names, or
in the name of nominees, their expenses for sending proxy material to beneficial
owners for the purpose of obtaining their proxies. The Company will bear all
expenses in connection with the solicitation of proxies.
Independent Auditors
The Board of Directors of the Company will appoint KPMG LLP to audit the
accounts of the Company for the fiscal year ending December 31, 2004. Management
does not believe it is necessary for shareholders to ratify this appointment due
to the satisfactory services of KPMG LLP, in the prior year. There is no
requirement under Federal or New York law that the appointment of independent
auditors be approved by shareholders. It is expected that representatives of
KPMG LLP will be present at the Annual Meeting of Shareholders with an
opportunity to make a statement if they so desire and to respond to questions.
Shareholder Proposals for the 2005 Annual Meeting
To be considered for inclusion in next year's proxy Statement pursuant to
the provisions of Rule 14a-8 of the Securities and Exchange Commission,
promulgated under the Securities Exchange Act of 1934, as amended, shareholder
proposals must be received at the Company's offices no later than the close of
business on December 20, 2004. Proposals should be addressed to Sanford Kay,
Secretary, Standard Motor Products, Inc., 37-18 Northern Boulevard, Long Island
City, New York 11101.
For any shareholder proposal that is not submitted for inclusion in the
next year's Proxy Statement, but is instead sought to be presented directly at
the 2005 Annual Meeting, SEC rules permit management to vote proxies in its
discretion if the Company: (1) receives notice of the proposal before close of
business on March 5, 2005, and advises shareholders in the 2005 Proxy Statement
about the nature of the matter and how management intends to vote on such
matter, or (2) does not receive notice of the proposal prior to the close of
business on March 5, 2005. Notice of intention to present proposals at the 2005
Annual Meeting should be addressed to Sanford Kay, Secretary, Standard Motor
Products, Inc., 37-18 Northern Boulevard, Long Island City, New York 11101.
The Company's 2003 Annual Report has been mailed to shareholders. A copy of the
Company's Annual Report on Form 10-K will be furnished to any shareholder who
requests the same free of charge (except for Exhibits thereto for which a
nominal fee covering reproduction and mailing expenses will be charged.)
Other Matters
On the date this Proxy Statement went to press, management knew of no
other business that will be presented for action at the Annual Meeting. In the
event that any other business should come before the Annual Meeting, it is the
intention of the proxyholders named in the proxy card to take such action as
shall be in accordance with their best judgment.
By Order of the Board of Directors
Sanford Kay
Secretary
Dated: April 20, 2004
17
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Committee which is composed of five
Directors who are "independent" which as defined under the listing standards of
the New York Stock Exchange, met five times in 2003, and operates under a
written charter (Appendix A) adopted by the Board of Directors. Management has
the primary responsibility for the financial statements and the reporting
process, including the Company's systems of internal controls. In fulfilling its
oversight responsibilities, the Committee reviewed the audited financial
statements in the Annual Report on Form 10-K with management, including a
discussion of the quality and the acceptability of the Company's financial
reporting and controls.
The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgements as to
the quality and the acceptability of the Company's financial reporting and such
other matters as are required to be discussed with the Committee under generally
accepted auditing standards. In addition, the Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the auditors' written disclosures required by the
Independence Standard's Board.
The Committee also discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets periodically with the internal and the independent auditors, with and
without management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2003 for filing with the Securities and Exchange Commission.
Audit Committee:
William H. Turner, Chairman
Robert M. Gerrity
John L. Kelsey
Kenneth A. Lehman
Frederick D. Sturdivant
AUDIT AND NON-AUDIT FEES
The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of the Company's annual financial statements for 2003
and 2002, and fees billed for other services rendered by KPMG LLP.
--------------------------------------------------------------------------------
2003 2002
----------------------------------------
$ % $ %
----------------------------------------
Audit fees, including fees paid in
2004 for services performed in 2003
and excluding audit related fees 1,004,000 831,000
(1) Audit Related Fees 76,000 0% 372,000 0%
(2) Tax fees 117,000 0% 194,000 0%
(3) All other fees 2,000 0% -- 0%
----------- ----------
Total 1,199,000 1,397,000
--------------------------------------------------------------------------------
(1) Audit related fees consisted principally of audits of financial statements
of certain employee benefit plans and due diligence related to the Dana
acquisition (2002 only).
(2) Tax fees consist primarily of U.S. and international tax compliance and
planning
* Percentage of the services (if any) for which pre-approval was waived by
the Audit Committee with respect to (1), (2) and (3) only.
18
APPENDIX A
STANDARD MOTOR PRODUCTS, INC.
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. AUDIT COMMITTEE
There shall be an Audit Committee of the Board of Directors, composed of at
least three Directors, appointed annually by the Board of Directors, each of
whom shall have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company and shall
otherwise satisfy the applicable membership requirements under the rules of the
New York Stock Exchange, Inc., as such requirements are interpreted by the Board
of Directors in its business judgment. All members of the Committee shall have a
basic understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial management expertise.
II. AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the Board
of Directors in fulfilling its oversight responsibilities. In fulfilling their
responsibilities hereunder, it is recognized that members of the Audit Committee
are not full-time employees of the Company. Each member is independent according
to the specified criteria of the Securities and Exchange Commision's standards
relating to listed company audit committees. All members shall have sufficient
financial experience and ability to enable them to discharge their
responsibilities and at least one member shall be a financial expert subject to
the SEC's definition of a "financial expert." The Audit Committee's primary
duties are to:
1. Review the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting and legal
compliance.
2. Review the independence and performance of the Company's independent
auditors and internal auditing department.
3. Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.
4. Prepare the report of the Audit Committee that the SEC Rules require to be
included in the Company's Annual Proxy statement.
A-1
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities and it has direct access to the independent
auditors as well as anyone in the organization. The Audit Committee has the
ability to retain, at the Company's expense, special legal, accounting, or other
consultants or experts it deems necessary in the performance of its duties.
III. AUDIT COMMITTEE RESPONSIBILITIES
The Audit Committee's primary duties and responsibilities are to:
1. Review the annual audited financial statements prior to filing or
distribution. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the independent
auditors in accordance with Statement of Auditing Standards (SAS) No. 61.
2 Review the financial information contained in the Quarterly Reports on
Form 10-Q prior to its filing or prior to the release of earnings.
3. Retain and, where appropriate, terminate the independent auditors. On an
annual basis, approve the compensation of the independent auditors, and
evaluate the performance of the independent auditors. The independent
auditors are ultimately accountable to the Board of Directors and the
Audit Committee, as represntatives of the Company's shareholders.
4. Review the independent auditors audit plan and approve the fees and other
significant compensation to be paid to the independent auditors.
5. Review the resources, the internal audit charter, risk assessment and the
scope of work of the internal audit department.
6. Review the quarterly summary reports to Management prepared by the
internal audit department.
7. The Committee shall maintain procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters and the confidential and
anonymous submission by Company employees of concerns regarding accounting
or auditing matters.
8. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 (added by the Private Securities
Litigation Reform Act of 1995) has not been implicated.
9. Obtain reports from Management, the Company's senior internal audit
executive and the independent auditor that the Company's subsidiary/
foreign affiliated entities are in conformity with applicable legal
requirements and the Company's Code of Conduct.
A-2
10. Review and update the Audit Committee Charter periodically, at least
annually, as conditions dictate. The Charter shall be submitted to the
Board of Directors for approval and published at least every three years
in accordance with SEC regulations.
11. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement.
IV. MEETINGS
The Audit Committee shall meet as and when deemed appropriate by the Chair of
the Committee, however, not less than four times annually. Three members of the
Committee shall constitute a quorum for the transaction of business.
V. REPORTING OF COMMITTEE ACTIVITIES AND RECOMMENDATIONS
The Audit Committee will maintain minutes and other relevant records of its
meetings that will document its activities and recommendations. The General
Auditor who shall act as Secretary to the Committee will compile said
documentation.
A-3
|X| PLEASE MARK VOTES STANDARD MOTOR PRODUCTS, INC.
AS IN THIS EXAMPLE REVOCABLE PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. For Withhold
Election Vote
of All For All For All
Nominees Nominees Except
ANNUAL MEETING OF SHAREHOLDERS 1. Election of Directors |_| |_| |_|
MAY 20, 2004
Marilyn F. Cragin, Arthur D. Davis, Robert M. Gerrity,
The undersigned shareholder of STANDARD John L. Kelsey, Kenneth A. Lehman, Arthur S. Sills,
MOTOR PRODUCTS, INC. (the "Company") hereby Lawrence I. Sills, Frederick D. Sturdivant and
appoints LAWRENCE I. SILLS and JOHN P. GETHIN, as William H. Turner
Proxies, each with the power to appoint his
substitute, and hereby authorizes them to INSTRUCTION: To withhold authority to vote for any
represent and vote as designated on this Proxy, individual nominee(s), mark "For All Except" and
all of the shares of the Company's Common Stock write the name of such nominee(s) in the space
held of record by the undersigned on April 9, 2004 provided below.
at the annual meeting of the shareholders of the
Company to be held on May 20, 2004, or at any ---------------------------------------------------------------------
adjournment thereof.
ESOP DIRECTORS
RECOMMENDATION
For Against Abstain
FOR 2. To consider and vote upon a proposal to adopt |_| |_| |_|
the Company's 2004 Omnibus Stock Option Plan
under which 500,000 shares of the Company's
Common Stock will be available for issuance
thereunder.
FOR 3. To consider and vote upon a proposal to adopt
the Company's 2004 Independent Outside
Directors Stock Option Plan which 50,000 shares
of the Company's Common Stock will be available
for issuance thereunder.
For Against Abstain
AGAINST 4. Shareholder proposal concerning preferred share |_| |_| |_|
purchase rights.
---------------------- 5. In their discretion, the Proxies are authorized
Please be sure to sign and date Date to vote upon such other business as may
this Proxy in the box below. properly come before the meeting.
----------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE NOMINEES NAMED ABOVE, FOR
--Shareholder sign above -- Co-holder (if any) sign above-- PROPOSAL 2, FOR PROPOSAL 3 AND AGAINST PROPOSAL
4. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT
THE ANNUAL MEETING.
--------------------------------------------------------------------------------
^ Detach above card, sign, date and mail in postage paid envelope provided. ^
STANDARD MOTOR PRODUCTS, INC.
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Please sign exactly as your name appears on this card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
--------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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