<PAGE> 1
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MERITOR AUTOMOTIVE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[ ] Check box if any of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[MERITOR LOGO]
LETTER TO
SHAREOWNERS
NOTICE OF 2000
ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE> 3
[Meritor Logo]
December 27, 1999
Dear Shareowner:
You are cordially invited to attend the 2000 annual meeting of shareowners of
Meritor Automotive, Inc.
The Company will hold the meeting at its World Headquarters, 2135 West Maple
Road, Troy, Michigan, on Wednesday, February 9, 2000, at 9 a.m., Eastern
Standard Time. At the meeting, I will report on the current activities of the
Company, and we will discuss and take action on the matters described in the
Proxy Statement. Shareowners will also have an opportunity to comment on or
inquire about the affairs of the Company.
If you plan to attend the meeting, please check the box provided on your proxy
or direction card, or indicate your intention to attend when voting by telephone
or Internet.
I sincerely hope that you can attend the meeting.
Sincerely yours,
/s/ Larry D. Yost
Larry D. Yost
Chairman of the Board
and Chief Executive Officer
<PAGE> 4
MERITOR AUTOMOTIVE, INC.
2135 WEST MAPLE ROAD
TROY, MICHIGAN 48084-7186
NOTICE OF 2000 ANNUAL MEETING OF SHAREOWNERS
TO THE SHAREOWNERS OF
MERITOR AUTOMOTIVE, INC.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareowners of Meritor
Automotive, Inc. (the "Company") will be held at the Company's World
Headquarters, 2135 West Maple Road, Troy, Michigan, on Wednesday, February 9,
2000, at 9 a.m. (Eastern Standard Time) for the following purposes:
(a) (i) to elect three members of the Board of Directors of the Company
with terms expiring at the Annual Meeting in 2003;
(ii) to elect one member of the Board of Directors of the Company with a
term expiring at the Annual Meeting in 2001;
(b) to consider and vote upon a proposal to approve the selection by the
Board of Directors of the firm of Deloitte & Touche LLP as auditors of
the Company; and
(c) to transact such other business as may properly come before the
meeting.
Only shareowners of record at the close of business on December 13, 1999, will
be entitled to receive notice of, and to vote at, the meeting.
By order of the Board of Directors.
/s/ Vernon G. Baker, II
Vernon G. Baker, II
Secretary
December 27, 1999
NOTE: THE BOARD OF DIRECTORS SOLICITS THE EXECUTION AND PROMPT RETURN OF THE
ACCOMPANYING PROXY. A RETURN ENVELOPE IS ENCLOSED.
<PAGE> 5
PROXY STATEMENT
The 2000 Annual Meeting of Shareowners of Meritor Automotive, Inc. (the
"Company") will be held on February 9, 2000, for the purposes set forth in the
accompanying Notice of 2000 Annual Meeting of Shareowners. The Board of
Directors is soliciting proxies to be used at the Annual Meeting and any
adjournment, and is furnishing this statement and the accompanying proxy in
connection with its solicitation. This statement and the proxy are first being
sent to shareowners on or about December 27, 1999.
Shareowners of record may vote by (a) executing and returning a proxy in
the accompanying form; (b) calling a toll-free telephone number; or (c) voting
via the Internet. Specific instructions for telephone and Internet voting are
included on the enclosed proxy card. If a shareowner votes by telephone or
Internet, it is not necessary to return a proxy card. If you properly give a
proxy (including a written proxy or a proxy via telephone or Internet), your
shares will be voted as you specify in the proxy. If no specification is made,
the shares will be voted in accordance with the recommendations of the Board of
Directors. You may revoke your proxy prior to its exercise by delivering written
notice of revocation to the Secretary of the Company, by giving a valid, later
dated proxy or by attending the meeting and voting in person.
The Company was incorporated in 1997 and began operations as an
independent, publicly-held company after the distribution by Rockwell
International Corporation ("Rockwell"), on September 30, 1997, of all the
outstanding shares of Common Stock, par value $1 per share, of the Company
("Common Stock"), to Rockwell's shareowners (the "Distribution"). Prior to the
Distribution, Rockwell transferred substantially all of the operations, assets
and liabilities related to its automotive businesses to the Company or its
subsidiaries.
The Company's policy is to keep confidential proxy cards, ballots and
voting tabulations that identify individual shareowners. However, exceptions to
this policy may be necessary in some instances to comply with legal requirements
and, in the case of any contested proxy solicitation, to verify the validity of
proxies presented by any person and the results of the voting. The judges of
election and any employees associated with processing proxy cards or ballots and
tabulating the vote must acknowledge their responsibility to comply with this
policy of confidentiality.
VOTING SECURITIES
Only shareowners of record at the close of business on December 13, 1999,
are entitled to receive notice of, and to vote at, the meeting. On December 13,
1999, the Company had outstanding 64,871,037 shares of Common Stock. Each holder
of Common Stock is entitled to one vote for each share held.
On December 13, 1999, T. Rowe Price Trust Company ("T. Rowe Price"), Owings
Mills, Maryland, as trustee under the Company's Savings Plan for its
participating employees, held 934,618 shares of Common Stock, representing
approximately 1.44% of the total outstanding shares of Common Stock. In
addition, on that date, Wells Fargo Bank, N.A., Los Angeles, California, as
trustee under Rockwell's Savings Plan for its participating employees, held
8,067,401 shares of Common Stock, representing approximately 12.44% of the total
outstanding shares of Common Stock. Shares held by the trustees of the Savings
Plans of the Company and Rockwell on account of the participants in such plans
will be voted by the respective trustees in accordance with instructions from
the participants (either in writing or by means of the Company's telephone or
Internet voting procedures). Where no instructions are received, shares held in
the Rockwell plan will be voted as the trustee deems proper, and shares held in
the Company plan will not be voted.
On February 12, 1999, Scudder Kemper Investments, Inc., 345 Park Avenue,
New York, New York 10154, filed a Schedule 13G/A with the Securities and
Exchange Commission ("SEC") reporting that it owned beneficially 6,041,842
shares of Common Stock, which represented approximately 9.3% of the total
outstanding shares of Common Stock as of December 13, 1999. Scudder Kemper
Investments reported that it had sole voting power with respect to 1,295,560
shares, shared voting power with respect to 4,412,799 shares, sole dispositive
power with respect to 6,041,841 shares and shared dispositive power with respect
to one share.
1
<PAGE> 6
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the Board
of Directors consists of three classes of directors with overlapping three-year
terms, and that the three classes should be as nearly equal in number as
possible. The Company's Board of Directors currently consists of nine members.
One class of directors is elected each year with terms extending to the
Annual Meeting held three years later. Three of the four directors in Class III
are standing for re-election at the 2000 Annual Meeting, for a term expiring at
the Company's Annual Meeting in 2003. In addition, to make the three classes of
directors equal in number, one current Class III director is standing for
re-election at the 2000 Annual Meeting as a Class I director with a term
expiring at the Company's Annual Meeting in 2001. The two remaining directors in
Class I and the three directors in Class II are serving terms expiring at the
Company's Annual Meeting of Shareowners in 2001 and 2002, respectively.
Proxies will be voted at the meeting (unless authority to do so is
withheld) for the election as directors of the three nominees specified in Class
III -- Nominees for Directors with Terms Expiring in 2003 and the nominee
specified in Class I -- Nominee for Director with a Term Expiring in 2001 below.
If for any reason any of the nominees is not a candidate (which is not expected)
when the election occurs, it is likely that either (a) proxies would be voted
for the election of the other nominees and of a substitute nominee, or (b) the
Board of Directors would reduce the number of directors.
INFORMATION AS TO NOMINEES FOR
DIRECTORS AND CONTINUING DIRECTORS
The following information, as reported to the Company, is shown below for
each nominee for director and each continuing director: name, age and principal
occupation; period during which he or she has served as a director; position, if
any, with the Company; business experience; other directorships held; and the
committees of the Board of Directors on which the nominee or continuing director
serves.
CLASS III -- NOMINEES FOR DIRECTORS WITH TERMS EXPIRING IN 2003
JOSEPH B. ANDERSON, JR.
Chairman of the Board and Chief Executive Officer, Chivas Industries LLC
(Automotive Component Supplier)
Age 56
[PHOTO]
Mr. Anderson, a director since September 1997, is Chairman of
the Board Composition Committee and a member of the
Environmental and Social Responsibility Committee. He is
Chairman of the Board and Chief Executive Officer of Chivas
Industries LLC, having held that position (including with its
predecessor, Chivas Products, Ltd.) since October 1994. From
December 1992 to July 1993, Mr. Anderson was President and Chief
Executive Officer of Composite Energy Management Systems,
Incorporated (automotive component supplier). Mr. Anderson
served in a variety of positions, primarily in manufacturing,
with General Motors Corporation (automotive manufacturer) from
1979 until December 1992. He also served as an assistant to the
U.S. Secretary of Commerce from 1977 to 1979. Mr. Anderson is a
director of Quaker Chemical Corporation and R. R. Donnelley &
Sons Co. and is a trustee of Kettering University. He is also a
director, trustee or member of a number of business, educational
and civic organizations.
2
<PAGE> 7
DONALD R. BEALL
Retired Chairman of the Board and Chief Executive Officer, Rockwell
International Corporation (Electronic Controls and Communications)
Age 61
[PHOTO]
Mr. Beall, a director since May 1997, is a member of the Board
Composition Committee and the Compensation and Management
Development Committee. He was Chairman of the Board of Rockwell
from February 1988 through February 1998, and Chief Executive
Officer of Rockwell from February 1988 through September 1997.
He served nine years as President and Chief Operating Officer of
Rockwell and in a number of other increasingly responsible
senior management positions after joining Rockwell in 1968. He
is a director of Rockwell and chairman of the board's executive
committee. He is also a director of The Procter & Gamble
Company, Conexant Systems, Inc. and The Times Mirror Company. He
is a trustee of the California Institute of Technology and a
member of the University of California-Irvine Foundation Board
and numerous UCI support organizations, as well as The Business
Council, Hoover Institution and several Young Presidents
Organization alumni organizations. He is also a director,
trustee or member of a number of other professional, civic and
entrepreneurial organizations.
RHONDA L. BROOKS
President, Roofing Systems Business, Owens Corning, Inc. (Building Materials and
Fiberglass Composites)
Age 47
[PHOTO]
Ms. Brooks, a director since July 1999, is a member of the
Environmental and Social Responsibility Committee. She has
served as the President of the Roofing Systems Business of Owens
Corning, Inc. since December 1997. She served Owens Corning as
Vice President, Investor Relations from January to December 1997
and as Vice President-Marketing of the Composites Division from
1995 to 1996. Prior to that time, she served as Senior Vice
President and General Manager of PlyGem Industries, Inc. from
1994 to 1995, and as Vice President -- Oral Care and New Product
Strategies, and Vice President -- Marketing of Warner Lambert
Company from 1990 to 1994. She is a director of Central Vermont
Public Service Corporation.
CLASS I -- NOMINEE FOR DIRECTOR WITH A TERM EXPIRING IN 2001
JOHN J. CREEDON
Retired President and Chief Executive Officer, Metropolitan Life Insurance
Company (Insurance)
Age 75
[PHOTO]
Mr. Creedon, a director since September 1997, is a member of the
Audit Committee and Chairman of the Environmental and Social
Responsibility Committee. He is the retired President and Chief
Executive Officer of Metropolitan Life Insurance Company. He
joined Metropolitan Life in 1942 and was appointed Senior Vice
President and General Counsel in 1973. He became an Executive
Vice President in 1976, President and a director in 1980, and
served as Chief Executive Officer from 1983 through August 1989.
He is also a director of Corporate Partners and serves as a
consultant to Rockwell pursuant to a Rockwell retirement policy
in effect prior to December 1995 for former directors. He is
also a director, trustee or member of a number of business,
educational and civic organizations.
3
<PAGE> 8
CLASS I -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2001
CHARLES H. HARFF
Retired Senior Vice President, General Counsel and Secretary, Rockwell
International Corporation (Electronic Controls and Communications)
Age 70
[PHOTO]
Mr. Harff, a director since May 1997, is Chairman of the Audit
Committee and a member of the Compensation and Management
Development Committee. He is a consultant to Rockwell. From June
1984, when he joined Rockwell, until November 1994, Mr. Harff
served as Senior Vice President, General Counsel and Secretary
of Rockwell. From November 1994 to February 1996, Mr. Harff
served as Senior Vice President and Special Counsel of Rockwell.
He is a director of the Fulbright Association, the Christian A.
Johnson Endeavor Foundation and several civic organizations.
LARRY D. YOST
Chairman of the Board and Chief Executive Officer
Age 61
[PHOTO]
Mr. Yost has been a director since May 1997, when he was elected
to his present position. Mr. Yost joined Allen-Bradley Company,
LLC (automation), a subsidiary of Rockwell, as a manager in 1971
and, after serving in a number of increasingly responsible
management positions, served as Senior Vice President,
Operations, of Allen-Bradley from July 1992 until November 1994.
He served as President, Heavy Vehicle Systems of Rockwell from
November 1994 until March 1997 and was Senior Vice President and
President, Automotive and Acting President, Heavy Vehicle
Systems of Rockwell from March 1997 to September 1997. Mr. Yost
is a director of Kennametal Inc. and a trustee of Kettering
University.
CLASS II -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2002
VICTORIA B. JACKSON
Former President and Chief Executive Officer, DSS/Prodiesel, Inc. (Manufacturer
and Remanufacturer of Transportation Components)
Age 44
[PHOTO]
Ms. Jackson, a director since July 1999, is a member of the
Audit Committee. She was President and Chief Executive Officer
of DSS/Prodiesel, Inc. from 1982 until 1998, when the company
was sold to TransCom USA. She has served as a consultant to
TransCom USA since 1998. Ms. Jackson is a director of AmSouth
Bancorporation, Hussmann International and Whitman Corporation,
and is a member of various business, educational and civic
organizations.
4
<PAGE> 9
JAMES E. MARLEY
Retired Chairman of the Board, AMP Inc. (Communications Components and Cabling
Products)
Age 64
[PHOTO]
Mr. Marley, a director since April 1999, is a member of the
Audit and the Environmental and Social Responsibility
Committees. He is the retired Chairman of the Board of AMP Inc.,
serving in that position from 1993 to 1998. He joined AMP in
1963 and served in a variety of engineering and executive
positions until his retirement in 1998. He is also a director of
Armstrong World Industries Inc. and ybn.com and a number of
business, educational and civic organizations, and is a member
of a number of engineering and management professional
associations.
HAROLD A. POLING
Retired Chairman of the Board and Chief Executive Officer, Ford Motor Company
(Automotive)
Age 74
[PHOTO]
Mr. Poling, a director since September 1997, is a member of the
Board Composition Committee and Chairman of the Compensation and
Management Development Committee. He is an investor in Metapoint
Partners, an investment partnership. He retired as Chairman of
the Board and Chief Executive Officer of Ford Motor Company in
January 1994, having joined Ford in 1951 and served in a number
of senior management positions prior to becoming President (in
1975) and Chairman (in 1977) of Ford in Europe. Mr. Poling
became President and Chief Operating Officer of Ford in February
1985 and served as Chairman of the Board and Chief Executive
Officer from March 1990 to January 1994. He is a director of
Kellogg Company, LTV Corporation, Shell Oil Company and
Thermadyne Holdings Corporation, and an advisory director of
Donaldson, Lufkin and Jenrette, Inc. He is also a director,
trustee or member of a number of business, educational and civic
organizations.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors manages or directs the management of the business of
the Company. The Board has established four standing committees whose principal
functions are briefly described below. In the 1999 fiscal year, the Board held a
total of ten regularly scheduled and special meetings. Each director attended at
least 84% of the aggregate number of fiscal year 1999 meetings of the Board and
of the committees on which he or she served, except Rhonda L. Brooks, who
attended one of the two meetings held between the date of her election and the
end of the fiscal year.
The Audit Committee is currently composed of four non-employee directors,
Charles H. Harff (chairman), John J. Creedon, Victoria B. Jackson and James E.
Marley. Among its functions, it reviews the scope and effectiveness of audits of
the Company by the independent public accountants and by the Company's internal
auditors; selects and recommends to the Board of Directors the employment of
independent public accountants for the Company, subject to approval of the
shareowners; reviews the audit plans of the independent public accountants and
the Company's internal auditors; reviews and approves the fees charged by the
independent public accountants; reviews the Company's annual financial
statements before their release and discusses with management and the
independent public accountants the Company's quarterly financial statements
(before their release if there are pertinent substantive issues not previously
discussed or reviewed with the Audit Committee); reviews the adequacy of the
Company's systems of internal controls and recommendations of the independent
public accountants with respect to internal controls; reviews and acts on
comments and suggestions by the independent public accountants and by the
Company's internal auditors with respect to their audit activities; monitors the
Company's Year 2000 and Enterprise Resource
5
<PAGE> 10
Planning initiatives and related compliance and fail-safe programs; and monitors
compliance by the employees of the Company with the Company's standards of
business conduct policies. The Audit Committee held four meetings in fiscal
1999.
The Board Composition Committee is currently composed of three non-employee
directors, Joseph B. Anderson, Jr. (chairman), Donald R. Beall and Harold A.
Poling. The principal functions of the Board Composition Committee are to
consider and recommend to the Board qualified candidates for election as
directors of the Company and periodically to prepare and submit to the Board for
adoption the Committee's selection criteria for director nominees. The Committee
also periodically assesses and reports to the Board on the performance of the
Board of Directors. The Board Composition Committee held one meeting in fiscal
1999, as well as several informal telephone discussions regarding prospective
candidates. Shareowners may recommend candidates for consideration by the
Committee by writing to the Secretary of the Company at its World Headquarters
in Troy, Michigan, giving the candidate's name, biographical data and
qualifications. A written statement from the candidate, consenting to be named
as a candidate and, if nominated and elected, to serve as a director, should
accompany any such recommendation.
The three members of the Compensation and Management Development Committee
(the "Compensation Committee"), Harold A. Poling (chairman), Donald R. Beall and
Charles H. Harff, are non-employee directors and are not eligible to participate
in any of the plans or programs that are administered by the Committee (except
the Directors Stock Plan). The principal functions of the Compensation Committee
are to evaluate the performance of the Company's senior executives and plans for
management succession and development, to consider the design and
competitiveness of the Company's compensation plans, to review and approve
senior executive compensation and to administer the Company's incentive,
deferred compensation, stock option and long-term incentives plans. The
Compensation Committee held five meetings and acted by unanimous written consent
on two occasions in fiscal 1999.
The Environmental and Social Responsibility Committee, which is composed of
four non-employee directors, John J. Creedon (chairman), Joseph B. Anderson,
Jr., Rhonda L. Brooks and James E. Marley, reviews and assesses the Company's
policies and practices in the following areas: employee relations, with emphasis
on equal employment opportunity and advancement; the protection and enhancement
of the environment and energy resources; product integrity and safety; employee
health and safety; and community and civic relations, including programs for and
contributions to health, educational, cultural and other social institutions.
This committee held two meetings in fiscal 1999.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive a retainer at the rate of
$35,000 per year for Board service. No additional retainer is paid for service
on committees.
Pursuant to the Directors Stock Plan, each non-employee director receives a
grant of 1,000 shares of Common Stock immediately following each Annual Meeting
of Shareowners. In addition, pursuant to the Directors Stock Plan, each
non-employee director is granted options to purchase, at the closing price of
the Common Stock on the New York Stock Exchange -- Composite Transactions
reporting system on the date of the grant, 3,000 shares of Common Stock
immediately after each Annual Meeting of Shareowners of the Company. A
non-employee director who is elected to the Board during the fiscal year
receives a pro rata portion of these grants.
A director may elect to defer payment of all or part of the cash retainer
fees to a later date, with interest on deferred amounts accruing quarterly at a
rate equal to 120% of the Federal long-term rate set each month by the Secretary
of the Treasury. Each director also has the option each year to defer all of the
annual grant of shares and all or any portion of the cash retainer by electing
to receive restricted shares that could be forfeited if certain conditions are
not satisfied. These restricted shares are valued at the closing price of the
Common Stock on the New York Stock Exchange -- Composite Transactions reporting
system on the date of the annual grant and the date each retainer payment would
otherwise be made in cash.
Directors who are also employees of the Company or a subsidiary of the
Company do not receive compensation for serving as directors.
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<PAGE> 11
CERTAIN TRANSACTIONS AND OTHER RELATIONSHIPS
In connection with the Distribution, Rockwell and the Company entered into
several agreements, including agreements relating to services to be provided by
Rockwell to the Company following the Distribution. In fiscal 1999, Rockwell
performed services and the Company made payments in excess of $60,000 under
these agreements. These agreements were negotiated and executed at a time when
certain of the Company's directors and executive officers also served as a
director and executive officers of Rockwell. The Company believes the terms of
these agreements to be fair.
In October 1997, Chivas Products, Ltd., of which Joseph B. Anderson, Jr., a
director of the Company, was Chairman of the Board and Chief Executive Officer,
filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in the
Eastern District of Michigan. On March 4, 1998, the court approved a
restructuring plan, pursuant to which the assets of Chivas Products, Ltd. were
sold on March 17, 1998 to Chivas Industries LLC, a joint venture between Mr.
Anderson and Continental Plastics Co. Mr. Anderson is Chairman of the Board and
Chief Executive Officer of the joint venture.
OWNERSHIP BY MANAGEMENT OF EQUITY SECURITIES
The following table shows the beneficial ownership, reported to the Company
as of November 30, 1999, of the Company's Common Stock of (a) each director, (b)
each executive officer listed in the Summary Compensation Table under the
heading Executive Compensation below and (c) such persons and other executive
officers as a group. See Voting Securities above for information on beneficial
holders of more than 5% of the Company's Common Stock.
BENEFICIAL OWNERSHIP AS OF NOVEMBER 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------
NAME SHARES(1)(2) PERCENT OF CLASS(3)
- ---- ------------ -------------------
<S> <C> <C>
Joseph B. Anderson, Jr. ................................... 4,500 *
Donald R. Beall............................................ 153,741(4)(5)(6) .23
Rhonda L. Brooks........................................... 750(7) *
John J. Creedon............................................ 7,589(8) *
Charles H. Harff........................................... 23,230(9) *
Victoria B. Jackson........................................ 750 *
James E. Marley............................................ 4,276(6) *
Harold A. Poling........................................... 24,500 *
Larry D. Yost.............................................. 403,561(4)(6)(10) .61
Prakash R. Mulchandani..................................... 187,987(4)(6) .29
Thomas A. Madden........................................... 172,256(4)(6)(10) .26
Glenn J. Eggert............................................ 97,739(4) .15
S. Carl Soderstrom......................................... 54,543(4) *
All of the above and other executive officers as a group
(21 persons)............................................. 1,423,688(4)(6) 2.14
</TABLE>
- ---------------
* Less than 0.1%
(1) Each person has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
(2) Includes the following numbers of shares of Common Stock which may be
acquired upon exercise of options that were exercisable or would become
exercisable within 60 days: 2,000 shares for each of Messrs. Anderson,
Beall, Creedon, Harff and Poling; 310,998, 131,999, 130,998, 83,033 and
43,432 shares for Messrs. Yost, Mulchandani, Madden, Eggert and Soderstrom,
respectively; and 912,619 shares for all directors and executive officers
as a group.
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<PAGE> 12
(3) For purposes of computing the percentage of outstanding shares beneficially
owned by each person, the number of shares owned by that person and the
number of shares outstanding includes shares as to which such person has a
right to acquire beneficial ownership within 60 days (for example, through
the exercise of stock options, conversions of securities or through various
trust arrangements), in accordance with Rule 13d-3(d)(1) under the
Securities Exchange Act of 1934, as amended.
(4) Includes shares beneficially owned under the Company's and Rockwell's
Savings Plans. Does not include the following share equivalents held under
supplemental savings plans of Rockwell and the Company on November 30,
1999: 3,592, 4,171, 2,082, 1,357, 546 and 390 shares for Messrs. Beall,
Yost, Mulchandani, Madden, Eggert and Soderstrom, respectively, and 12,953
shares for all directors and executive officers as a group.
(5) Includes shares as to which beneficial ownership is disclaimed, as follows:
6,717 shares held for the benefit of family members and 3,333 shares owned
by the Beall Family Foundation, of which Mr. Beall is President and a
director.
(6) Includes restricted shares of Common Stock awarded under the Directors
Stock Plan or the 1997 Long-Term Incentives Plan, as applicable. The
Company holds restricted shares until certain conditions are satisfied.
(7) Held by a trust of which Ms. Brooks is trustee.
(8) Includes 2,000 shares held by a revocable trust of which Mr. Creedon is
trustee and beneficiary.
(9) Includes 3,110 shares held by the Charles H. and Marion M. Harff Charitable
Remainder Trust and 6,500 shares held by the Charles H. Harff Revocable
Living Trust. Mr. Harff is co-trustee of each such trust.
(10) Includes shares held by spouse.
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<PAGE> 13
EXECUTIVE COMPENSATION
The Company began operation independent of Rockwell on October 1, 1997. The
information shown below reflects the annual and long-term compensation, from all
sources, of the Chief Executive Officer of the Company and the other four most
highly compensated executive officers of the Company at September 30, 1999 (the
"Named Executive Officers"), for services rendered in all capacities to the
Company and its subsidiaries for the fiscal years ended September 30, 1999 and
September 30, 1998, and to Rockwell and its subsidiaries for the fiscal year
ended September 30, 1997. In many cases, the individuals listed below served
Rockwell and its subsidiaries in different capacities than those in which they
serve the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- ------------------------------
OTHER STOCK
ANNUAL UNDERLYING LONG-TERM
NAME AND PRINCIPAL POSITION COMPEN- OPTIONS INCENTIVE ALL OTHER
WITH THE COMPANY(1) YEAR SALARY BONUS(2) SATION (# OF SHARES)(3) PAYMENTS(4) COMPENSATION(5)
- --------------------------- ---- -------- -------- ------- ---------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Larry D. Yost............. 1999 $575,000 $600,000 $25,066 107,000 $ 0 $32,813
Chairman of the Board 1998 475,000 400,000 10,339 335,000 566,400 28,528
& Chief Executive Officer 1997 290,000 425,000 10,364 39,000 786,100 16,099
Prakash R. Mulchandani.... 1999 325,000 256,000 14,909 58,000 0 18,867
Senior Vice President 1998 264,000 168,300 5,667 147,000 705,165 15,840
and President, Heavy 1997 210,000 172,500 6,322 0 957,200 16,021
Vehicle Systems
Thomas A. Madden.......... 1999 275,000 200,000 29,303 41,000 0 15,775
Senior Vice President 1998 260,000 153,500 18,946 103,000 92,920 15,600
& Chief Financial Officer 1997 207,500 171,600 16,483 58,500 154,700 13,277
Glenn J. Eggert........... 1999 225,000 120,000 27,959 22,000 0 13,158
Senior Vice President, 1998 210,000 108,900 24,471 91,900 395,064 12,600
Operations 1997 184,165 134,000 12,112 0 481,800 11,050
S. Carl Soderstrom........ 1999 220,000 115,000 23,266 22,000 0 12,738
Senior Vice President, 1998 186,417 79,200 8,677 52,600 215,232 11,185
Engineering, Quality 1997 148,000 87,200 13,121 0 87,500 8,880
and Procurement
</TABLE>
- ---------------
(1) The table reflects the positions held with the Company at September 30,
1999. The Named Executive Officers served the Company in the following
additional capacities during fiscal years 1998 and 1999: Mr. Yost -- Acting
President, Light Vehicle Systems (January 1998-March 1999); Mr.
Mulchandani -- Senior Vice President and President, Worldwide Truck and
Trailer Systems (September 1997-December 1997); Mr. Eggert -- Senior Vice
President - Operations, Heavy Vehicle Systems (September 1997-September
1998); and Mr. Soderstrom -- Vice President - Engineering & Quality, Heavy
Vehicle Systems (September 1997-February 1998). The Named Executive Officers
served Rockwell and its subsidiaries in the following capacities during
fiscal year 1997: Mr. Yost -- Senior Vice President and President,
Automotive and Acting President, Heavy Vehicle Systems (March 1997-September
1997), and President, Heavy Vehicle Systems (October 1996-March 1997); Mr.
Mulchandani -- President - Worldwide Truck and Trailer Systems, Heavy
Vehicle Systems (October 1996-September 1997); Mr. Madden -- Vice President
and Senior Vice President - Finance, Automotive (March 1997-September 1997),
and Vice President, Corporate Development (October 1996-March 1997); Mr.
Eggert -- Vice President - Operations, Heavy Vehicle Systems (October
1996-September 1997); and Mr. Soderstrom -- Vice President, Engineering &
Quality, Heavy Vehicle Systems (October 1996-September 1997).
(2) Reflects amount awarded, even if deferred for future payment.
(3) Stock options for fiscal year 1998 include one-time incentive grants
incident to the Company's becoming a publicly-held company and additional
grants made in connection with the early termination of a performance period
under the 1997 Long-Term Incentives Plan. See Long-Term Incentive Plan
Awards below. Stock options for fiscal year 1997 were originally granted as
options to purchase Rockwell common stock under Rockwell's 1995 Long-Term
Incentives Plan. The Company assumed these options at the
9
<PAGE> 14
time of the Distribution and, as adjusted, they now relate to the purchase
of the Company's Common Stock.
(4) Long-term incentive payments for fiscal years 1998 and 1997 consist of cash
and the market value of Common Stock paid by the Company to the Named
Executive Officers with respect to performance plans established under
Rockwell's long-term incentives plans. The three-year performance cycle for
the period October 1, 1996 -- September 30, 1999 was terminated after the
first year and payments with respect to that cycle were made at the time of
termination. As a result, cash payments with respect to the first year of
that performance cycle are included in the 1997 amount and no long-term
incentive payments were made in fiscal year 1999. See Long-Term Incentive
Plan Awards below.
(5) This column reflects amounts contributed or accrued for fiscal years 1999,
1998 and 1997 for the Named Executive Officers under employee savings plans
and related supplemental savings plans of the Company (for fiscal years 1999
and 1998) and of Rockwell and certain subsidiaries (for fiscal year 1997).
OPTION GRANTS
The following table shows grants to the Named Executive Officers of options
to purchase Common Stock pursuant to the Company's 1997 Long-Term Incentives
Plan that were made during the fiscal year ended September 30, 1999. These
options are reflected in the Summary Compensation Table above.
<TABLE>
<CAPTION>
GRANT DATE
OPTION GRANTS VALUE
----------------------------------------------------------------- ----------
NUMBER OF PERCENTAGE OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING COMPANY EMPLOYEES EXERCISE OR GRANT DATE
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME (# OF SHARES)(1) 1999 (PER SHARE) DATE VALUE(2)
---- ---------------- ------------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Larry D. Yost................... 107,000 13.10% $20.75 11/13/08 $768,260
Prakash R. Mulchandani.......... 58,000 7.10 20.75 11/13/08 416,440
Thomas A. Madden................ 41,000 5.02 20.75 11/13/08 294,380
Glenn J. Eggert................. 22,000 2.69 20.75 11/13/08 157,960
S. Carl Soderstrom.............. 22,000 2.69 20.75 11/13/08 157,960
</TABLE>
- ---------------
(1) These long-term incentive grants were made on November 13, 1998. The first
of three approximately equal installments of these options became
exercisable November 13, 1999, and the second and third installments will
become exercisable on November 13, 2000, and November 13, 2001.
(2) These values are based on the Black-Scholes option pricing model which
produces a per option share value of $7.18, using the following assumptions
and inputs: options exercised after 7 1/2 years; weighted one-year stock
price volatility and dividend yield of 31% and 2%, respectively; and an
interest rate of 4.93%, which was the zero coupon 7 1/2-year Treasury bond
rate at the date of grant. The Black-Scholes option pricing methodology
attempts to portray the value of an option at the date of grant. The actual
value, if any, that may be realized from these options by the officer will
depend solely on the gain in stock price over the exercise price when the
options are exercised.
10
<PAGE> 15
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table shows (1) options to purchase the Company's Common
Stock that were exercised by the Named Executive Officers in fiscal year 1999
and (2) the value as of September 30, 1999 of unexercised in-the-money options
to purchase the Company's Common Stock. This table does not include options to
purchase Rockwell common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1999 SEPTEMBER 30, 1999(1)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Larry D. Yost.................. 0 $0 116,332 364,668 $0 $13,375
Prakash R. Mulchandani......... 0 0 27,666 177,334 0 7,250
Thomas A. Madden............... 0 0 73,332 129,168 0 5,125
Glenn J. Eggert................ 0 0 16,200 97,700 0 2,750
S. Carl Soderstrom............. 0 0 10,999 63,601 0 2,750
</TABLE>
- ---------------
(1) Based on the closing price of the Company's Common Stock ($20.875) on the
New York Stock Exchange -- Composite Transactions reporting system on
September 30, 1999, the last trading day in that month.
LONG-TERM INCENTIVE PLAN AWARDS
The following table shows for each Named Executive Officer information with
respect to awards during fiscal 1999 under the Company's 1997 Long-Term
Incentives Plan.
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYMENT UNDER
SHARES, OTHER PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER MATURATION OR ----------------------------------
NAME RIGHTS(1)(2) PAYMENT THRESHOLD TARGET(2) MAXIMUM(2)
- ---- -------------- ------------------ --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Larry D. Yost................ $446,333 10/1/98-9/30/01 $0 $446,333 $1,339,000
Prakash R. Mulchandani....... 243,000 10/1/98-9/30/01 0 243,000 729,000
Thomas A. Madden............. 171,167 10/1/98-9/30/01 0 171,167 513,500
Glenn J. Eggert.............. 90,167 10/1/98-9/30/01 0 90,167 270,500
S. Carl Soderstrom........... 90,167 10/1/98-9/30/01 0 90,167 270,500
</TABLE>
- ---------------
(1) Potential awards for target performance are expressed as cash amounts.
(2) Before application of stock price change modifier.
Under performance plans established pursuant to the 1997 Long-Term
Incentives Plan, the Compensation Committee of the Board of Directors
establishes performance periods of at least three fiscal years and performance
objectives for those periods, and grants potential awards expressed as cash
payments to key employees of the Company and its subsidiaries. Participants earn
awards upon conclusion of the applicable performance period (which may vary from
0% to 300% of the target award) based on actual performance, as measured by
sales growth, cash flow/return on investment and return on sales, against target
levels established by the Compensation Committee. However, awards are subject to
achieving at least minimum threshold levels established by the Compensation
Committee. The award payments are further modified by the percentage change in
the Company's Common Stock price over the three-year period of the performance
plans, which may increase or decrease the payment finally awarded. At the
discretion of the Compensation Committee, payments may be made wholly or partly
by delivering shares of the Company's Common Stock valued at the fair market
value on the payment date.
All liabilities in respect of Rockwell long-term incentives plan awards
that were granted to individuals who became employees of the Company and that
were outstanding at the time of the Distribution were assumed by the Company.
The Summary Compensation Table includes payments made by the Company to
11
<PAGE> 16
the Named Executive Officers in fiscal years 1998 and 1997 in respect of grants
previously made under Rockwell's long-term incentives plan. For fiscal year
1998, these payments related to the three-year performance period ended
September 30, 1998. For fiscal year 1997, these payments related to (a) the
three-year performance period ended September 30, 1997, and (b) early
termination of the three-year performance period ended September 30, 1999.
Payments in 1998 and 1997 were made in cash or in restricted shares of
Common Stock, based on the closing price of the Common Stock on the New York
Stock Exchange -- Composite Transactions reporting system on the payment date.
In addition, in connection with the early termination of the performance cycle
ended on September 30, 1999, certain Named Executive Officers were granted
options to purchase Common Stock in fiscal year 1998. These options are included
in the table under the heading Summary Compensation Table above.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board of
Directors, which consists entirely of non-employee directors (see Board of
Directors and Committees above), has responsibility for reviewing all aspects of
the Company's executive compensation and has furnished the following report:
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Compensation Committee has adopted compensation policies for the
Company intended to "pay for performance" through meeting three fundamental
objectives:
- foster the creation of shareowner value through close alignment of the
financial interests of executives with those of the Company's shareowners
- recognize individual and team performance through evaluation of each
executive's effectiveness in meeting strategic and operating plan goals
- create compensation systems to attract, retain and motivate the high
caliber of executives necessary for the Company's leadership and growth
EMPLOYEE STOCK OWNERSHIP
The Compensation Committee believes the focus on "pay for performance" can
best be achieved by aligning the financial interests of the Company's key
executives with those of the shareowners. Accordingly, it has set the following
minimum Ownership Guidelines (multiple of base salary) to be achieved and
maintained:
<TABLE>
<CAPTION>
COMMON STOCK
MARKET VALUE
------------
<S> <C>
- - Chief Executive Officer................................... 5
- - Senior Vice Presidents.................................... 3
- - Other Executive Officers.................................. 2
- - Other Vice Presidents..................................... 1.5
- - Other Executives subject to the guidelines................ 1
</TABLE>
Non-U.S. based executives in each category listed above are subject to the
same Ownership Guidelines except in the case of "Other Vice Presidents," who are
subject to a multiple of 1, and "Other Executives subject to the guidelines,"
who are subject to a multiple of 0.5.
Only shares owned directly (including restricted shares of Common Stock) or
through savings plans of the Company or Rockwell, but not shares subject to
unexercised stock options, are considered for determining whether an executive
meets the Ownership Guidelines. The Ownership Guidelines provide a transition
period during which executives may achieve compliance. In general, this period
ends five years after the date the Ownership Guidelines become applicable to
them. All executives of the Company are within the five-year
12
<PAGE> 17
transition period for satisfying the Guidelines. As of November 30, 1999, the
chief executive officer, senior vice presidents and other executive officers
owned an aggregate of 330,461 shares of the Company's Common Stock under the
Guidelines.
COMPENSATION STRATEGY
The Compensation Committee carries out its "pay for performance" philosophy
by tying each executive's total compensation to the performance of both the
Company and the individual. Beginning with fiscal year 2000, base salaries will
be set at a level that is competitive with other major automotive suppliers,
commensurate with responsibilities and experience. However, executives have an
opportunity to earn above-median compensation through the Company's annual and
long-term incentive plans, which provide rewards for superior performance by the
individual and the Company. The Compensation Committee considers the total
compensation potentially available to each executive in establishing each
element of compensation.
This represents a modification of the policy in effect in fiscal year 1999
and stated in the Compensation Committee's report in the proxy statement for the
Company's 1999 annual meeting of shareowners, which provided for base salaries
to be set at a level somewhat below the median of other automotive suppliers.
The Compensation Committee believes this modification, effective in fiscal year
2000, is more aligned with the Company's compensation philosophy and objectives
to "create compensation systems to attract, retain and motivate the high caliber
of executives necessary for the Company's leadership and growth."
In its deliberations, the Compensation Committee reviews data from
industry, peer group and national surveys of other major industrial companies
and considers the size and performance of those companies whose data is included
in such surveys. The Compensation Committee is advised periodically by
independent compensation consultants concerning the Company's compensation
programs in comparison to those of other companies that the Compensation
Committee believes compete with the Company for executive talent. For fiscal
year 1999, the Compensation Committee reviewed data from competing companies
compiled by Hewitt Associates LLP in consultation with the senior human
resources executives of the Company, including nine of the 12 companies included
in the peer group index used in the shareowner return performance graph. In
addition, reference data for a broader group of comparable industrial companies
was reviewed.
The Compensation Committee also considers the tax deductibility of
executive compensation in determining the amount and form of awards. Section
162(m) of the Internal Revenue Code provides that the Company may not deduct
compensation in excess of one million dollars paid to a Named Executive Officer
in any taxable year, unless the compensation is "performance based." Awards
under the 1997 Long-Term Incentives Plan are "performance based" for purposes of
Section 162(m) and are not subject to the limit on deductibility. However, base
salaries and awards under the Incentive Compensation Plan do not qualify as
"performance based" compensation for this purpose because the Compensation
Committee retains discretion with respect to these payments. Accordingly, to
avoid loss of the tax deduction, the Compensation Committee has adopted a formal
policy whereby any portion of the base, non-performance based incentive or other
compensation of any person whose compensation is subject to the limitation on
deductibility under Section 162(m) that exceeds one million dollars will be
deferred until the executive's retirement or other termination of employment. In
accordance with that policy, for the excess over one million dollars of fiscal
1999 base salary and non-performance based incentive awards, Mr. Yost received a
deferred award of Common Stock that will be issued on January 1 of the year
following his retirement or other termination of employment.
COMPONENTS OF THE COMPANY'S COMPENSATION PLANS
The primary components of the Company's executive compensation are base
salary, annual incentives and long-term incentives. Each of these components is
discussed below.
- Base Salary -- In the early part of fiscal year 1999, the Compensation
Committee established the base salaries of the senior executives of the Company,
including the Named Executive Officers. The Compensation Committee separately
determined the salary for the Chief Executive Officer (as discussed below), and
established the base salaries of other senior executives upon recommendations of
the Chief Executive Officer and the Company's senior human resources executive.
The recommended base salaries were developed based
13
<PAGE> 18
on the survey data and consultants' reports described above, on individual
performance and on judgments as to the expected future contributions of the
individual senior executives. Base salaries were also adjusted to reflect the
number of years of experience that each executive had in his or her current
position. If an executive's position and level of responsibility changed during
the fiscal year, his or her base salary was adjusted accordingly, using the same
procedures.
- Annual Incentives -- Near the beginning of fiscal year 1999, the
Compensation Committee and the Board of Directors reviewed with the Chief
Executive Officer the corporate goals and objectives for that year. These goals
and objectives were focused on shareowner value creation objectives, which
included measurable financial goals for the fiscal year as well as strategic
goals that require more subjective assessments. The financial objectives for
fiscal year 1999 included sales penetration growth, increased return on sales
and improvement in the ratio of non-cash working capital to sales. The Company's
strategic objectives related to building customer relationships; enhancing
organizational excellence; developing long-term leadership; improving
competitive position; and exercising social responsibility. In addition,
separate goals and objectives were developed for each of the Company's business
units, tailored to its particular operations.
In determining the incentive compensation for fiscal year 1999 for the
Named Executive Officers (see the column headed "Bonus" in the table under
Executive Compensation -- Summary Compensation Table above) and other key
employees of the Company, the Compensation Committee focused on the significant
positive accomplishments of the Company over the past year. Not only did the
Company meet or exceed most of its financial performance objectives, but the
effective leadership of the management team successfully integrated three
substantial acquisitions, established an important joint venture and saw to it
that substantial progress was made toward achieving the strategic long-term
goals established for the Company. The Compensation Committee concluded that
these accomplishments merited increased incentive compensation in that intrinsic
shareowner value was created even though the price of the Company's Common Stock
did not reflect these accomplishments.
More particularly, the Compensation Committee considered the effect of
acquisitions and dispositions in fiscal year 1999. It determined that for each
business acquired or disposed of during the fiscal year, (a) its actual sales
and profit after tax, for the portion of the year during which it was part of
the Company, were included for purposes of the annual incentive calculation; and
(b) performance for prior periods, against which the current period is compared,
was not adjusted to reflect the pro forma effects of the transaction.
In addition, the Compensation Committee based individual awards on its
assessment of the Chief Executive Officer's individual performance (as discussed
below) and on the Chief Executive Officer's assessment of individual performance
of other executives. Levels of responsibility were also considered in
determining individual awards.
When corporate, business unit and individual goals and objectives are
achieved, incentive compensation is intended to be awarded at or above 100% of
stated target levels. These target levels were established based on broad
industry surveys, with significant upward and downward leverage dependent on
performance. For the 1999 fiscal year, annual incentive compensation for the
Company's executives averaged above target levels.
- Long-Term Incentives -- The Company's 1997 Long-Term Incentives Plan
provides the flexibility to grant long-term incentives in a variety of forms,
including performance units, stock options, stock appreciation rights and
restricted shares of Common Stock. Annually, the Compensation Committee
evaluates the type of long-term incentives it believes are most likely to
achieve the Company's total compensation objectives. The Compensation Committee
currently provides long-term incentives to executive officers two-thirds through
stock option grants and one-third through awards under long-term performance
plans. The Compensation Committee believes this allocation furthers an alignment
of the executive officers' interests with the interests of the Company's
shareowners and provides executive officers with a means of increasing Company
stock ownership and achieving the ownership guidelines stated above.
Other executives' long-term incentives are provided one-half each through
stock options and awards under long-term performance plans. Other key employees'
long-term incentives are provided solely through stock option grants.
14
<PAGE> 19
In accordance with its current practice, the Compensation Committee granted
stock options to executive officers, including the Named Executive Officers (see
the table under Executive Compensation -- Option Grants above), in fiscal year
1999. The Compensation Committee determined the individual award of stock
options to the Chief Executive Officer (as discussed below), and reviewed the
Chief Executive Officer's recommendations for individual awards of stock options
to other key executives. The Compensation Committee also considered the relevant
survey data and consultants' reports described above, and the anticipated future
contributions of the individual executive officers.
In fiscal year 1999, the Compensation Committee also established a
performance plan with a three-year performance period ending September 30, 2001,
and awarded performance units to executives, including the Named Executive
Officers (see Executive Compensation -- Long-Term Incentive Plan Awards above).
Under the performance plan, potential compensation depends on achieving levels
of sales growth, cash flow/ return on investment and return on sales, as
modified by the change in the Common Stock price during the term of the
performance period.
In fiscal year 1997, the Compensation and Management Development Committee
of Rockwell's Board of Directors granted key executives long-term incentives
under Rockwell's long-term incentives plan. These incentives were granted, in
part, in the form of units under a performance plan that provided a long-term
compensation opportunity dependent on achieving certain goals over a period of
three fiscal years ending September 30, 1999. The Company assumed all
liabilities in respect of Rockwell long-term incentives plan awards that were
granted to individuals who became employees of the Company and that were
outstanding at the time of the Distribution, including the performance plan
units that were granted by the Rockwell Committee in 1997.
The performance plan for the three-year period ended September 30, 1999 was
terminated in November 1997, at which time payments were made with respect to
this performance cycle in the form of cash and options to purchase Common Stock.
These cash amounts have been reported as paid in fiscal year 1997, and these
options have been reported as awarded in fiscal year 1998. (See the columns
headed "Stock Underlying Options" and "Long-Term Incentive Payments" in the
table under Executive Compensation -- Summary Compensation Table above.) As a
result, no long-term incentive payments were reported for fiscal year 1999.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Yost's base salary for fiscal year 1999 was $575,000, which the
Compensation Committee believes was in line with the Company's compensation
philosophy in that year and appropriately reflected his responsibilities as
Chief Executive Officer of a significant publicly owned company.
In determining Mr. Yost's annual incentive compensation for fiscal year
1999, the Compensation Committee concluded that the Company had performed well
under his leadership, substantially exceeding most of its financial goals and
either meeting or making significant progress with respect to its other goals
and objectives. In recognition of strong individual and Company performance in
fiscal 1999 and Mr. Yost's continued leadership in pursuing the Company's
envisioned future, and consistent with its "pay for performance" philosophy, the
Compensation Committee awarded Mr. Yost an annual incentive award of $600,000.
The Compensation Committee granted stock options to Mr. Yost in fiscal year
1999 as long-term incentives. In determining the number of options granted, the
Compensation Committee considered advice of independent compensation consultants
and the value of long-term incentives provided by other comparable companies, as
reported in surveys. The Compensation Committee also considered Mr. Yost's total
compensation, as well as his past and expected future contributions to the
Company's achievement of its long-term performance goals.
Mr. Yost was also granted performance units under the performance plan
established by the Compensation Committee in fiscal 1999 for the three-year
performance period ending September 30, 2001. See Executive
Compensation -- Long-Term Incentive Plan Awards above.
15
<PAGE> 20
The Board in executive session (when Mr. Yost was not present), as provided
in the Company's Corporate Governance Guidelines, received and discussed the
Compensation Committee's evaluation of the Company's and Mr. Yost's performance
in the 1999 fiscal year and its proposed 1999 incentive compensation for Mr.
Yost and long-term incentives granted to him in the form of stock options and
performance units.
SUMMARY
The Committee believes that the Company's compensation plans are integrated
and consistent with the Company's strategic objectives and are properly aligned
with shareowners' best interests. The programs enable the Company to attract,
retain and motivate highly qualified individuals and provide appropriate
incentives to reward them for achieving and surpassing corporate and personal
goals. The Compensation Committee periodically re-assesses these programs to
assure that they emphasize performance and reward the enhancement of shareowner
value, and modifies the programs as necessary and appropriate to achieve their
stated objectives.
Compensation and Management
Development Committee
Harold A. Poling, Chairman
Donald R. Beall
Charles H. Harff
16
<PAGE> 21
SHAREOWNER RETURN PERFORMANCE PRESENTATION
The Company has operated as an independent company only since the
Distribution on September 30, 1997. The line graph below compares the cumulative
total shareowner return on the Company's Common Stock with the cumulative total
returns of the S&P 500 and a peer group of companies for the two fiscal years
that commenced October 1, 1997, assuming a fixed initial investment of $100
valued at the respective closing prices on the last day of each quarter and
assuming reinvestment of all cash dividends.
COMPARISON OF TWO-YEAR TOTAL RETURN
MERITOR COMMON STOCK, S&P 500 INDEX(1) AND PEER GROUP INDEX(2)
[LINE GRAPH]
<TABLE>
<CAPTION>
MERITOR
AUTOMOTIVE, INC. PEER GROUP INDEX S&P 500 INDEX
---------------- ---------------- -------------
<S> <C> <C> <C>
10/01/97 100.00 100.00 100.00
12/31/97 88.61 92.92 102.87
3/31/98 112.23 107.98 117.22
6/30/98 101.81 99.47 121.09
9/30/98 64.20 77.16 109.05
12/31/98 90.26 88.89 132.27
3/31/99 66.86 85.35 138.86
6/30/99 110.44 104.43 148.65
9/30/99 90.84 88.95 139.37
</TABLE>
- ---------------
(1) Standard & Poor's 500 Market Index.
(2) The Company believes that a peer group of representative independent
automotive suppliers of comparable size and products is appropriate for
comparing shareowner return. The peer group consists of Arvin Industries,
Inc., Borg-Warner Automotive, Inc., Cummins Engine, Inc., Dana Corporation,
Detroit Diesel Corporation, Eaton Corporation, Federal Mogul Corporation,
Johnson Controls, Inc., Lear Corporation, MascoTech, Inc., Superior
Industries International and Tower Automotive, Inc. This group differs from
the peer group included in the shareowner return performance graph in the
1999 proxy statement in the following respects: (a) two companies (Excel
Industries, Inc. and Standard Products Co.) were dropped from the peer group
because they have been acquired by other companies; and (b) one company
(Donnelly Corp.) was dropped because the Company deemed it not to be
comparable in terms of size and products. Peer group performance including
the latter company would not be materially different from that reported
above.
<TABLE>
<S> <C>
Closing market price of Common Stock at 9/30/99............. $ 20.875
Total dividends per share of Common Stock during two fiscal
years ended 9/30/99......................................... $ 0.84
</TABLE>
RETIREMENT BENEFITS
Prior to the Distribution, the Named Executive Officers participated in a
Rockwell defined benefit pension plan, and Rockwell has retained the obligations
for vested benefits earned by the Named Executive
17
<PAGE> 22
Officers prior to the Distribution. At the time of the Distribution, the Company
established a defined benefit pension plan that is intended to qualify under
Section 401(a) of the Internal Revenue Code and that is substantially similar in
all material respects to Rockwell's plan. The Company's plan credits
participants for service earned with Rockwell, and the benefits payable under
the Company's plan will be equal to the difference between the total benefit
earned with both companies and the vested benefit obligations retained by
Rockwell.
The following table shows the estimated aggregate annual retirement
benefits payable on a straight life annuity basis to participating employees in
the earnings and years of service classifications indicated under the Company's
and Rockwell's retirement plans, which cover most officers and other salaried
employees of the Company on a noncontributory basis. These benefits reflect a
reduction to recognize in part the cost of Social Security benefits related to
service with the Company and Rockwell. The plans also provide for the payment of
benefits to an employee's surviving spouse or other beneficiary.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS FOR YEARS OF SERVICE INDICATED
---------------------------------------------------------------------
AVERAGE ANNUAL EARNINGS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------------- --------- --------- --------- --------- --------- ---------
<C> <S> <C> <C> <C> <C> <C> <C>
$ 300,000 ..................... $ 78,506 $117,742 $124,829 $131,916 $139,002 $146,089
400,000 ..................... 105,176 157,742 167,329 176,916 186,502 196,089
500,000 ..................... 131,846 197,742 209,829 221,916 234,002 246,089
600,000 ..................... 158,516 237,742 252,329 266,916 281,502 296,089
700,000 ..................... 185,186 277,742 294,829 311,916 329,002 346,089
800,000 ..................... 211,856 317,742 337,329 356,916 376,502 396,089
900,000 ..................... 238,526 357,742 379,829 401,916 424,002 446,089
1,000,000 ..................... 265,196 397,742 422,329 446,916 471,502 496,089
1,100,000 ..................... 291,866 437,742 464,829 491,916 519,002 546,089
1,200,000 ..................... 318,536 477,742 507,329 536,916 566,502 596,089
1,300,000 ..................... 345,206 517,742 549,829 581,916 614,002 646,089
1,400,000 ..................... 371,876 557,742 592,329 626,916 661,502 696,089
1,500,000 ..................... 398,546 597,742 634,829 671,916 709,002 746,089
</TABLE>
Covered compensation includes salary and annual bonus. The calculation of
retirement benefits under the plan generally is based upon average earnings for
the highest five consecutive years of the ten years preceding retirement. The
credited years of service of Messrs. Yost, Mulchandani, Madden, Eggert and
Soderstrom are 28, 25, 18, 21 and 13, respectively.
Sections 401(a)(17) and 415 of the Internal Revenue Code limit the annual
benefits that may be paid from a tax-qualified retirement plan. As permitted by
the Employee Retirement Income Security Act of 1974, the Company and Rockwell
have established supplemental plans that authorize the payment out of their
respective general funds of any benefits calculated under provisions of the
applicable retirement plan which may be above the limits under these sections.
Pursuant to an agreement between the Company and Rockwell in connection with the
Distribution, the Company has assumed all liabilities under Rockwell's
supplemental plans with respect to participants under Rockwell's supplemental
plans who became employees of the Company as of the time of the Distribution.
PROPOSAL TO APPROVE THE SELECTION OF AUDITORS
The Board of Directors of the Company has selected the firm of Deloitte &
Touche LLP as the auditors of the Company for fiscal year 2000, subject to the
approval of the shareowners. Deloitte & Touche LLP have acted as auditors for
the Company since its inception.
Before the Audit Committee recommended to the full Board the appointment of
Deloitte & Touche LLP, it carefully considered the qualifications of that firm,
including its performance for the Company and for Rockwell in prior years and
its reputation for integrity and for competence in the fields of accounting and
18
<PAGE> 23
auditing. The Company expects representatives of Deloitte & Touche LLP to be
present at the 2000 Annual Meeting to respond to appropriate questions and to
make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL, WHICH
IS PRESENTED AS ITEM (B).
VOTE REQUIRED
At the 2000 Annual Meeting, the three nominees who receive the greatest
number of votes for the election of Class III directors, and the nominee who
receives the greatest number of votes for the election of a Class I director,
cast by the holders of the Company's Common Stock entitled to vote at the
meeting, a quorum being present, will become directors at the conclusion of the
tabulation of votes. An affirmative vote of the holders of a majority of the
voting power of the Company's Common Stock present in person or represented by
proxy and entitled to vote at the meeting, a quorum being present, is necessary
to approve the selection of auditors. The presence, in person or by proxy, of
the holders of at least a majority of the shares of the Company's Common Stock
issued and outstanding on the record date set for the meeting is necessary to
have a quorum for the Annual Meeting.
Under Delaware law and the Company's Restated Certificate of Incorporation
and By-Laws, the aggregate number of votes entitled to be cast by all
shareowners present in person or represented by proxy at the meeting, whether
those shareowners vote "for" or "against" or abstain from voting (including
broker non-votes), will be counted for purposes of determining the minimum
number of affirmative votes required for approval of the selection of auditors,
and the total number of votes cast "for" such matter will be counted for
purposes of determining whether sufficient affirmative votes have been cast. The
shares of a shareowner who abstains from voting on a matter or whose shares are
not voted by reason of a broker non-vote on a particular matter will be counted
for purposes of determining whether a quorum is present at the meeting so long
as the shareowner is present in person or represented by proxy. An abstention
from voting or a broker non-vote on a matter by a shareowner present in person
or represented by proxy at the meeting has no effect in the election of a
director (assuming a quorum is present) and has the same legal effect as a vote
"against" approval of the selection of auditors even though the shareowner or
interested parties analyzing the results of the voting may interpret such a vote
differently.
OTHER MATTERS
The Board of Directors does not know of any other matters which may be
presented at the meeting. In the event of a vote on any matters other than those
referred to in items (a) and (b) of the accompanying Notice of 2000 Annual
Meeting of Shareowners, it is intended that properly given proxies will be voted
on the additional matters in accordance with the judgment of the person or
persons voting those proxies.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the New
York Stock Exchange. Officers, directors and greater than ten percent
shareowners are required by SEC regulation to furnish the Company with copies of
all Forms 3, 4 and 5 they file.
Based solely on its review of the copies of such forms it has received, the
Company believes that all its officers, directors and greater than ten percent
beneficial owners have filed with the SEC on a timely basis all required forms
with respect to transactions during fiscal year 1999.
ANNUAL REPORT AND FORM 10-K
The Company's Annual Report to Shareowners, including financial statements,
for the fiscal year ended September 30, 1999, was previously mailed to
shareowners. If you have multiple accounts and received multiple copies of the
Company's Annual Report to Shareowners, and you want to receive just one copy
next
19
<PAGE> 24
year, mark the box provided on the proxy cards for all but one of your accounts,
or so state when you grant your proxy via telephone or Internet.
THE COMPANY WILL PROVIDE TO SHAREOWNERS WITHOUT CHARGE, UPON WRITTEN
REQUEST, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1999, AS FILED WITH THE SEC (WITHOUT EXHIBITS). THE COMPANY WILL
FURNISH EXHIBITS TO THE FORM 10-K UPON WRITTEN REQUEST AND PAYMENT OF A FEE OF
TEN CENTS PER PAGE COVERING THE COMPANY'S COSTS. WRITTEN REQUESTS SHOULD BE
DIRECTED TO THE COMPANY AT 2135 WEST MAPLE ROAD, TROY, MICHIGAN 48084-7186,
ATTENTION: INVESTOR RELATIONS.
SHAREOWNER PROPOSALS FOR 2001 ANNUAL MEETING
Under the rules and regulations of the SEC, shareowner proposals for the
2001 Annual Meeting of Shareowners must be received on or before August 29,
2000, at the Office of the Secretary at the Company's World Headquarters located
at 2135 West Maple Road, Troy, Michigan 48084-7186, in order to be eligible for
inclusion in the Company's proxy materials. In addition, the Company's By-Laws
require a shareowner desiring to propose any matter for consideration at the
2001 Annual Meeting of Shareowners to notify the Company's Secretary in writing
at the above address on or after November 11, 2000 and on or before December 11,
2000.
EXPENSES OF SOLICITATION
The cost of the solicitation of proxies will be borne by the Company. In
addition to using the mails, proxies may be solicited personally, or by
telephone, telegraph, telecopy, Internet or other means of communication by
directors, officers and employees of the Company without additional
compensation. The Company does not expect to pay any compensation for the
solicitation of proxies but will reimburse brokers and other persons holding
stock in their names, or in the names of nominees, for their expenses of
resending proxy materials to principals and obtaining their proxies.
December 27, 1999
If you plan to attend the Annual Meeting of Shareowners to be held in Troy,
Michigan on February 9, 2000, please be sure to:
- mark the appropriate box on the proxy card and mail the card using the
enclosed envelope; OR
- indicate your desire to attend the meeting when you grant your proxy via
the Company's telephone or Internet voting procedures; OR
- write to the Company at the following address:
Meritor Automotive, Inc.
2135 West Maple Road
Troy, Michigan 48084-7186
Attention: Secretary
20
<PAGE> 25
MERITOR AUTOMOTIVE, INC.
PROXY CARD SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
DIRECTION CARD TO T. ROWE PRICE TRUST COMPANY, TRUSTEE
and/or WELLS FARGO BANK, N.A., TRUSTEE
P The undersigned hereby appoints Larry D. Yost, John J. Creedon and
Charles H. Harff, jointly and severally, proxies, with full power of
substitution, to vote shares of capital stock of the Company owned of
R record by the undersigned and which the undersigned is entitled to vote,
at the Annual Meeting of Shareowners to be held at the Company's World
Headquarters, 2135 West Maple Road, Troy, Michigan, on February 9, 2000,
O or any adjournment thereof, as specified on the reverse side of this card,
and to vote in accordance with their discretion on such other matters as
may properly come before the meeting.
X
The undersigned also provides directions to T. Rowe Price Trust
Company, Trustee, and to Wells Fargo Bank, N.A., Trustee, to vote shares of
Y capital stock of the Company allocated, respectively, to accounts of the
undersigned under the Meritor Automotive, Inc. Savings Plan and the
various Rockwell International Corporation Savings Plans (Rockwell Salaried
Retirement Savings Plan, Rockwell Non-Represented Hourly Retirement Savings
Plan, Rockwell Employee Savings and Investment Plan for Represented Hourly
Employees, Rockwell Retirement Savings Plan for Represented Hourly
Employees and Rockwell Retirement Savings Plan for Certain Employees), and
which are entitled to be voted, at the aforesaid Annual Meeting or any
adjournment thereof, as specified on the reverse side of this card.
The undersigned also provides directions to Wells Fargo Bank, N.A.,
as Trustee, to vote all such shares allocated to Rockwell Plan accounts
of the undersigned in accordance with its discretion on such other matters
as may properly come before the meeting.
IF NO SPECIFICATION IS MADE ON THE REVERSE SIDE OF THIS CARD:
. all such shares allocated to Meritor Savings Plan accounts of the
undersigned WILL NOT BE VOTED.
. all such shares owned of record by or allocated to the Rockwell
Plan accounts of the undersigned will be voted FOR the election
of the nominees proposed for election as directors and
FOR proposal (b).
-----------
SEE REVERSE
SIDE
-----------
(continued, and to be signed and dated, on the other side)
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
TO PARTICIPANTS IN THE ROCKWELL INTERNATIONAL CORPORATION SAVINGS PLANS:
Please vote in accordance with the instructions on the reverse side of this
card by February 7, 2000. If you do not properly vote by that date, Wells Fargo
Bank, N.A., as Trustee for the Rockwell Plans, will vote the shares allocated
to your Rockwell Plan accounts FOR the election of nominees proposed for
election as directors and FOR proposal (b).
<PAGE> 26
PLEASE MARK YOUR
X VOTES AS INDICATED
IN THIS EXAMPLE.
WHERE A VOTE IS NOT SPECIFIED, THE PROXIES OR WELLS FARGO AS TRUSTEE WILL VOTE
THE SHARES FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL (b) AND WILL VOTE IN
ACCORDANCE WITH THEIR DISCRETION ON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING; AND T. ROWE PRICE AS TRUSTEE WILL NOT VOTE THE SHARES.
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS VOTES FOR (a) AND (b).
- -------------------------------------------------------------------------------
(a) The election of directors. FOR WITHHOLD AUTHORITY
--- ---
Nominees for a term expiring in 2003: 01. Joseph B. Anderson, Jr.,
02. Donald R. Beall and
03. Rhonda L. Brooks
Nominee for a term expiring in 2001: 04. John J. Creeden
For, except vote withheld from the following nominee(s):
- -----------------------------------------
(b) The selection of auditors FOR AGAINST ABSTAIN
--- --- ---
I will attend the annual meeting.
---
ANNUAL REPORT -- MARK HERE TO
DISCONTINUE MAILING OF ANNUAL
REPORT TO SHAREOWNERS FOR THIS
ACCOUNT (FOR MULTIPLE
ACCOUNT HOLDERS ONLY).
---
SIGNATURE(S) DATE
------------------------------------- -----------------------
NOTE: Please sign, date, and return the proxy card promptly using the enclosed
envelope. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such, and if signing for a
corporation, please give your title. When shares are in the name of more
than one person, each should sign the proxy/direction card.
- -------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
[LOGO Meritor]
AFTER YOU READ THE PROXY/DIRECTION CARD AND THE ACCOMPANYING PROXY STATEMENT,
YOU CAN VOTE IN ONE OF THREE WAYS:
TELEPHONE VOTING:
1. Call 1-877-PRX-VOTE (1-877-779-8683), toll-free, from a touchtone
telephone (outside the US and Canada, call 201-536-8073).
2. Enter your control number, located in the box above,
just below the perforation.
3. Follow the recorded instructions.
INTERNET VOTING:
1. Log onto internet and type: http://www.exproxyvote.com/mra.
2. Enter your control number, located in the box above,
just below the perforation.
3. Follow the on-line instructions.
PROXY/DIRECTION CARD:
1. Mark, sign and date your proxy/
direction card, and return it promptly
in the enclosed return envelope.
