<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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Com-
mission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KYSOR INDUSTRIAL CORPORATION
- -------------------------------------------------------------------------------
(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] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] 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:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
[KYSOR INDUSTRIAL CORPORATION LETTERHEAD]
TO THE SHAREHOLDERS OF
KYSOR INDUSTRIAL CORPORATION
You are cordially invited to attend the Annual Meeting of Shareholders of
Kysor Industrial Corporation. The meeting will be held at the corporate
headquarters, One Madison Avenue, Cadillac, Michigan, on Friday, April 26, 1996,
at 10 a.m., local time.
On the following pages you will find the Notice of Annual Meeting and the
Proxy Statement. The Proxy Statement and enclosed form of proxy are being
furnished to shareholders on and after March 22, 1996. At the Annual Meeting, in
addition to voting, you will hear our report on Company activities and the
outlook for 1996.
It is important that your shares be represented at the meeting, regardless
of the size of your holdings. We therefore urge you to SIGN, DATE AND RETURN AS
SOON AS POSSIBLE the enclosed proxy card in the postage-paid envelope furnished
for that purpose. Please do this whether or not you plan to attend the meeting.
Sending a proxy will not affect your right to vote in person in the event you
attend the meeting.
Respectfully,
GEORGE R. KEMPTON
George R. Kempton
Chairman of the Board and
Chief Executive Officer
-----------------------------------
YOUR VOTE IS IMPORTANT
Please Sign, Date and Return
Promptly the Enclosed Proxy
----------------------------------
<PAGE> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
APRIL 26, 1996
The 1996 Annual Meeting of Shareholders of Kysor Industrial Corporation
will be held at the corporate headquarters, One Madison Avenue, Cadillac,
Michigan, on Friday, April 26, 1996, at 10 a.m., local time, for the following
purposes:
1. Election of four directors.
2. Transaction of such other business as may properly come before the
meeting or any adjournment of the meeting.
The record date for the meeting has been fixed by the Board of Directors as
the close of business on March 1, 1996. All shareholders of record on that date
are entitled to vote at the meeting.
By Order of the Board of Directors.
David W. Crooks
Vice President-
General Counsel and Secretary
Cadillac, Michigan
March 22, 1996
<PAGE> 4
- --------------------------------------------------------------------------------
IMPORTANT
All shareholders are cordially invited to attend the meeting. Whether or
not you plan to attend in person, you are urged to date and sign the enclosed
proxy and return it promptly in the envelope provided. This will assure your
representation and a quorum for the transaction of business at the meeting. If
you do attend the meeting in person, the proxy will not be used if you so
request.
If your shares are registered in the name of a broker or bank, only your
broker or bank can submit a proxy card on your behalf. Please contact the person
responsible for your account and direct him or her to submit a proxy card on
your behalf. If you have any questions about the procedure to vote your shares,
please call our proxy solicitor:
D. F. King & Co.
77 Water Street
New York, New York 10005
Telephone No.: (212) 269-5550
(please call collect)
- --------------------------------------------------------------------------------
<PAGE> 5
KYSOR INDUSTRIAL CORPORATION
ONE MADISON AVENUE
CADILLAC, MICHIGAN 49601-9785
PROXY STATEMENT
This Proxy Statement is furnished as part of the solicitation of proxies by
the Board of Directors of Kysor Industrial Corporation ("Kysor" or the
"Company") to be voted at the Annual Meeting of Shareholders to be held on
Friday, April 26, 1996, at 10 a.m., local time, at the Company's headquarters,
One Madison Avenue, Cadillac, Michigan, and at any adjournment of that meeting,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Proxies in the accompanying form, if properly executed, duly
returned to the Company and not revoked, will be voted at the Annual Meeting. If
a shareholder specifies a choice, the shares represented by the proxy will be
voted as specified. If no choice is specified, the shares represented by the
proxy will be voted for the election of all nominees for director named in this
Proxy Statement and in accordance with the discretion of the persons named as
proxies on any other matters that may come before the meeting.
It is anticipated that this Proxy Statement and the enclosed proxy will be
first sent to shareholders on March 22, 1996. Any shareholder giving a proxy in
the enclosed form has the power to revoke it at any time before it is exercised.
A revocation must be made in writing and directed to the Secretary of the
Company at the address set forth above. A shareholder may also attend the Annual
Meeting and vote in person by ballot, in which event any prior proxy given by
the shareholder will be automatically revoked.
ELECTION OF DIRECTORS
The Board of Directors has nominated the following four persons for
election to the Board of Directors for terms expiring at the annual meeting to
be held in the years indicated below:
<TABLE>
<CAPTION>
NOMINEE TERM EXPIRING IN
---------------------------------------------------------
<S> <C>
Paul K Gaston 1999
Grant C. Gentry 1999
Peter W. Gravelle 1999
Robert W. Navarre 1997
</TABLE>
Mr. Navarre is nominated for a one-year term to move him into the class of
directors with terms expiring in 1997 in order to make the number of directors
in each class as nearly equal in number as possible.
This Proxy Statement contains more information about the director nominees
below.
The directors to be elected at the Annual Meeting of Shareholders are to
serve until the Annual Meeting of Shareholders to be held in the years indicated
above, or until their successors are elected and qualified. The nominees are
willing to be elected and to serve. If any nominee is unable
1
<PAGE> 6
to serve or is otherwise unavailable for election, which is not contemplated,
the incumbent Board of Directors may or may not select a substitute nominee. If
a substitute nominee is selected, all proxies will be voted for the person so
selected. If a substitute nominee is not selected, all proxies will be voted for
the election of the remaining nominees. Proxies will not be voted for a greater
number of persons than the number of nominees named.
A plurality of votes of the holders of shares of the Company's voting stock
(common and preferred) present in person or by proxy at the Annual Meeting and
voting on the election of directors is required to elect directors. For the
purpose of counting votes on the election of directors, abstentions, broker
non-votes and other shares not voted will not be counted as shares voted on the
election, and the number of votes of which a plurality is required will be
reduced by the number of shares not voted.
YOUR BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR ELECTION OF ALL NOMINEES AS DIRECTORS
VOTING SECURITIES
At the close of business on March 1, 1996, the record date for determining
the shareholders entitled to vote at the Annual Meeting, Kysor had issued and
outstanding 5,714,857 shares of its Common Stock, $1 par value ("Common Stock"),
and 797,517 shares of Series A Preferred Stock, $24.375 stated value per share
("Preferred Stock"). Each share of Common Stock and Preferred Stock issued and
outstanding on the record date entitles its holder to one vote on each matter to
be voted upon at the meeting.
2
<PAGE> 7
The following table shows the beneficial ownership of shares of the
Company's Common Stock and Preferred Stock by each shareholder known to be the
beneficial owner of more than 5% of the outstanding Common Stock or Preferred
Stock as of March 1, 1996:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
TITLE NAME AND ADDRESS OF BENEFICIAL OF
OF CLASS BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Neumeier Investment Counsel 439,525 7.7%
26435 Carmel Rancho Blvd.
Carmel, California 93923 (1)
Common Stock State of Wisconsin Investment Board 325,000 5.7%
P.O. Box 7842
Madison, Wisconsin 53707 (2)
Common Stock Kysor Industrial Corporation 318,580 5.6%
Employee Stock Ownership Plan ("ESOP")
Old Kent Bank, Trustee
One Vandenberg Center
Grand Rapids, Michigan 49503 (3)
Common Stock George R. Kempton 304,416 5.2%
Kysor Industrial Corporation
One Madison Avenue
Cadillac, Michigan 49601 (4)
Series A Preferred Stock Kysor Industrial Corporation 797,517 100%
Employee Stock Ownership Plan ("ESOP")
Old Kent Bank, Trustee
One Vandenberg Center
Grand Rapids, Michigan 49503 (3)
</TABLE>
(1) Based on Form 13F dated June, 1995.
(2) Based on Amendment No. 6 to Schedule 13G dated February, 1996.
(3) Peter W. Gravelle, Richard G. De Boer and Kent J. Rosenau, all officers or
employees of the Company, are members of the Administrative Committee of
the ESOP trust. The Administrative Committee does not have any investment
or voting power with respect to these shares. The shares of Preferred Stock
may be converted into shares of Common Stock on a one-for-one basis by the
Trustee. If a conversion were made, the ESOP would own 1,116,097 shares of
Common Stock, representing approximately 19.5% of the outstanding shares as
of March 1, 1996.
(4) Based on information provided by Mr. Kempton.
3
<PAGE> 8
The following table shows certain information concerning the beneficial
ownership of the Company's Common Stock as of March 1, 1996, by each director,
each nominee for director, each named executive officer and all directors and
executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND SHARES SUBJECT
NAME OF NATURE OF PERCENT TO OPTIONS
BENEFICIAL OWNER BENEFICIAL OF EXERCISABLE
OF COMMON STOCK OWNERSHIP (1) CLASS WITHIN 60 DAYS (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Timothy J. Campbell 80,829(3) 1.4% 65,050
Stephen I. D'Agostino 1,250 - 250
Thomas P. Forrestal, Jr. 32,002(3) .6 9,700
Paul K. Gaston 40,650 .7 21,150
Grant C. Gentry 33,150 .6 21,150
Peter W. Gravelle 65,123(3)(4) 1.1 18,990
George R. Kempton 304,416(3)(4) 5.2 113,600
Terry M. Murphy 19,289(3) .3 15,000
Robert W. Navarre 4,250 .1 3,250
Robert J. Ratliff 1,250 - 1,250
Frederick W. Schwier 42,250(4) .7 28,750
Raymond A. Weigel 51,750 .9 8,250
All directors and executive
officers as a group 882,778(3) 14.3 442,670
</TABLE>
(1) The number of shares stated in this column is based on information
furnished by the persons listed and includes shares personally owned of
record by each person and shares that, under applicable regulations, are
considered to be otherwise beneficially owned by each person. Under these
regulations, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power or investment power
with respect to the security. Voting power includes the power to vote or
direct the power to vote. Investment power includes the power to dispose or
direct the disposition of the security. A person is also considered the
beneficial owner of a security if the person has a right to acquire
beneficial ownership of the security within 60 days. The number of shares
stated includes shares which may be acquired through the exercise of stock
options within 60 days. Except as otherwise noted in the footnotes to the
table, single shareholders named have sole voting and investment power with
respect to all shares listed. Except as otherwise noted, joint
shareholders, as identified in the footnotes, share voting and investment
power with respect to all shares listed.
(2) The number of shares stated includes shares subject to options which may,
under certain circumstances, become immediately exercisable as of the date
of this Proxy Statement.
(3) The numbers shown for these individuals include an aggregate of 23,404
shares of Common Stock held by the ESOP and allocated to the accounts of
the named individuals. Allocated shares for which no vote direction is
given are voted in accordance with the vote direction actually made by ESOP
participants, on a per capita basis, with each voting participant being
4
<PAGE> 9
able to direct the vote of an equal number of unallocated shares and
allocated shares for which no vote direction is received.
In addition to the Common Stock allocated to their accounts in the ESOP,
each of the named individuals has shares of Preferred Stock held by the
ESOP allocated to his account. The named individuals, like all ESOP
participants, also direct the voting of unallocated Preferred Stock and
allocated Preferred Stock for which no vote direction is received in the
same manner as described above with respect to the Common Stock held by
the ESOP. The following table describes the beneficial ownership of shares
of Preferred Stock by the named individuals and all executive officers as
a group. Directors who are not also executive officers of the Company have
no interest in the ESOP. The table assumes that all ESOP participants
direct the vote of shares of Preferred Stock allocated to their respective
ESOP accounts:
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED PERCENT
PREFERRED PERCENT STOCK OVER OF CLASS
STOCK OF CLASS WHICH VOTING REPRESENTED
ALLOCATED TO REPRESENTED CONTROL MAY BY COLUMNS
ESOP ACCOUNT BY COLUMN 1 BE EXERCISED 1 AND 3
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Timothy J. Campbell 1,446 .2% 148 .2%
Thomas P. Forrestal, Jr. 1,659 .2 148 .2
Peter W. Gravelle 1,094 .1 148 .1
George R. Kempton 1,903 .2 148 .2
Terry M. Murphy 134 - 148 -
All executive officers as a
group 9,683 1.2 1,184 1.4
</TABLE>
Each share of Preferred Stock entitles its holder to one vote on matters
submitted for shareholder action at the Annual Meeting, as does each share
of Common Stock. The named individuals have sole voting power, but no
dispositive power (other than the power to direct the tender of their
allocated shares in the event of a tender offer), over the shares of
Common Stock and Preferred Stock held in the ESOP and allocated to their
respective ESOP accounts.
(4) The number of shares stated includes shares owned solely by the named
individual's spouse, but over which the named individual might share
voting and investment power by reason of the influence of their
relationship. Included is Priscilla Schwier (2,000 shares). All shares
reflected as beneficially owned by George R. Kempton are held jointly
with his wife, Joyce H. Kempton. Included among the shares reflected as
beneficially owned by Peter W. Gravelle are 300 shares held by Mr.
Gravelle as custodian for a minor child.
5
<PAGE> 10
DIRECTORS AND EXECUTIVE OFFICERS
The following tables show certain information with respect to each person
nominated for election as a director, each director whose term of office will
continue after the Annual Meeting of Shareholders, and each executive officer of
Kysor. Mr. Weigel will retire at the Annual Meeting of Shareholders.
<TABLE>
<CAPTION>
NOMINEES FOR PRINCIPAL
DIRECTOR OCCUPATION (1) DIRECTORSHIPS (2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
TERMS EXPIRING 1999
Paul K. Gaston Chairman of the Board of Director of Kysor since 1984;
Age 62 Guardsman Products, Inc. also a director of Guardsman
(diversified chemical Products, Inc.
manufacturer)(3)
Grant C. Gentry Retired. Former Chairman of Director of Kysor since 1986;
Age 71 the Board and Chief Executive also a director of Bromar,
Officer of Pantry Pride, Inc. Inc. and Van Camp Seafood
(diversified retailer) Corp.
Peter W. Gravelle President and Chief Operating Director of Kysor since 1991
Age 58 (4) Officer of Kysor (5)
TERM EXPIRING 1997
Robert W. Navarre Chairman of the Board of Director of Kysor since 1993;
Age 62 Simpson Industries, Inc. also a director of Simpson
(automotive supplier) Industries, Inc. and Webster
Industries, Inc.
<CAPTION>
DIRECTOR WITH
3-YEAR TERM PRINCIPAL
EXPIRING 1997 OCCUPATION (1) DIRECTORSHIPS (2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
George R. Kempton Chairman of the Board and Director of Kysor since 1978;
Age 62(4) Chief Executive Officer of also a director of Simpson
Kysor Industries, Inc., Guardsman
Products, Inc. and JLG
Industries, Inc.
</TABLE>
6
<PAGE> 11
<TABLE>
<CAPTION>
DIRECTORS WITH
3-YEAR TERMS PRINCIPAL
EXPIRING 1998 OCCUPATION (1) DIRECTORSHIPS (2)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Stephen I. D'Agostino President and Chief Executive Director of Kysor since 1995;
Age 62 Officer of D'Agostino also a director of SuperValu
Enterprises (personal Inc. and Catalina Marketing
investment company) (6)
Robert J. Ratliff Chairman of the Board and Director of Kysor since 1994;
Age 64 Chief Executive Officer of also a director of AGCO
AGCO Corporation (agriculture Corporation
equipment manufacturer) (7)
Frederick W. Schwier Chairman of the Board of Director of Kysor since 1985
Age 72 Great Lakes Communications,
Inc. (television
broadcasting)
<CAPTION>
EXECUTIVE OFFICERS
WHO ARE NOT PRINCIPAL SERVED IN SAME
DIRECTORS (4) OCCUPATION (1) OFFICE SINCE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Timothy J. Campbell Group Vice President- 1987
Age 53 Transportation Products
David W. Crooks Vice President-General 1991
Age 47 Counsel and Secretary (8)
David R. Downs Vice President- 1996
Age 58 Human Resources (9)
Thomas P. Forrestal, Jr. Group Vice President- 1983
Age 59 Commercial Products
Terry M. Murphy Vice President-Chief 1992
Age 47 Financial Officer (10)
Timothy D. Peterson Vice President-Marketing 1983
Age 58 and International
John B. Stevenson Vice President- 1996
Age 63 Global Manufacturing (11)
</TABLE>
(1) Except as noted, each person listed has been engaged in the same principal
occupation for over five years.
(2) Except as noted, no director is a director of any other company that has a
class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or is subject to Section 15(d) of that
act, or any company registered as an investment company under the
Investment Company Act of 1940.
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<PAGE> 12
(3) Since 1994; previously Partner of Warner Norcross & Judd LLP, Attorneys
(Partner 1965-1993; Managing Partner 1988-1992).
(4) Kysor's executive officers are appointed annually by, and serve at the
pleasure of, the Board of Directors.
(5) Since 1995; previously Executive Vice President-Chief Operating Officer
(1992-1995); Vice President, Treasurer and Chief Financial Officer
(1990-1992).
(6) Since 1994; previously Chairman of the Board and Chief Executive Officer
of Lord Capital Corporation (investment banking firm) (1989-1994).
(7) Since 1993; previously President and Chief Executive Officer of AGCO
Corporation since 1988.
(8) Since 1991; previously Vice President-General Counsel (1983-1991).
(9) Since January 1996; previously employed by Slayton, Inc. (executive search
firm) (1995-1996); self-employed retailer (auto repair and tires)
(1992-1994); Vice President-Human Resources for Interlake Corp.
(diversified manufacturer of metals, packaging and aerospace equipment)
(1984-1992).
(10) Since 1992; previously Vice President-Finance, Treasurer and Chief
Financial Officer of North-West Telecommunications, Inc.
(telecommunications service supplier) (1986-1992).
(11) Since January 1996; previously President/General Manager-Kysor/Cadillac
division (1987-1995).
MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
The Board of Directors, which is responsible for overall management of the
business and affairs of the Company, held four regular meetings and one special
meeting during 1995. All directors attended 100% of the total number of meetings
of the Board and the total number of meetings of committees of which they were
members except for Mr. LeBoutillier due to illness. The Board has four standing
committees: the Executive Committee, the Audit Committee, the Compensation and
Organization Committee, and the Nominating Committee. Mr. Kempton is an ex
officio voting member of each of these standing committees except the Audit
Committee and the Compensation and Organization Committee. The Board of
Directors also has an Acquisition, Divestiture and Merger Committee.
EXECUTIVE COMMITTEE: The responsibilities of the Executive Committee
include all of the responsibilities of the Board of Directors except those
responsibilities that cannot be delegated by law. The Executive Committee acts
upon matters requiring Board action during periods between Board meetings.
Messrs. Gaston (Chairman), Schwier and Weigel presently are members of the
Executive Committee. The Executive Committee met two times in 1995.
AUDIT COMMITTEE: The responsibilities of the Audit Committee are to (1)
recommend the firm to be employed by the Company as its independent auditors,
(2) review and approve the scope of the yearly audit plan and proposed budget
for audit fees, (3) review the results of the annual audit with the independent
auditors, (4) review the auditors' management letter with the independent
auditors
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<PAGE> 13
and engage in appropriate follow-up with corporate staff, (5) review with the
independent auditors the Company's internal controls, (6) review activities of
the internal auditors, and (7) report to the Board of Directors on activities
and findings of the committee and make recommendations to the Board of Directors
on such findings. Messrs. Ratliff (Chairman), D'Agostino, Gaston, Gentry,
Navarre and Schwier are members of the Audit Committee. The Audit Committee met
two times during 1995.
COMPENSATION AND ORGANIZATION COMMITTEE: The responsibilities of the
Compensation and Organization Committee include recommending to the Board of
Directors the salaries of each corporate officer and the retainer and attendance
fee for non-employee directors, making recommendations and determinations
concerning bonus compensation, administering stock option plans (including those
which permit the granting or award of other forms of equity-based compensation),
and reviewing compensation plans as they relate to key employees. The
Compensation and Organization Committee also reviews the administration and
results of operations of Kysor's pension plans, confers with and receives
reports from the actuaries and investment managers of the plans, makes
recommendations related to such plans, and reviews all material proposed plan
changes. Messrs. Schwier (Chairman), D'Agostino, Gentry, Ratliff and Weigel are
members of the Compensation and Organization Committee, and those individuals
comprised the committee at all times during 1995. The Compensation and
Organization Committee met two times during 1995.
NOMINATING COMMITTEE: The responsibilities of the Nominating Committee are
to (1) develop and recommend to the Board of Directors criteria for the
selection of candidates for director, (2) seek out and receive suggestions
concerning possible candidates, (3) review and evaluate the qualifications of
possible candidates, and (4) recommend to the Board candidates for vacancies
occurring from time to time and for the slate of directors to be proposed on
behalf of the Board of Directors at the Annual Meeting of Shareholders. The
present members of the Nominating Committee are Messrs. Navarre (Chairman),
D'Agostino, Gaston, Gravelle and Weigel. The Nominating Committee met two times
during 1995. The Nominating Committee will consider nominees recommended by
shareholders. Article IX of the Company's Restated Articles of Incorporation
requires that a shareholder desiring to nominate a director candidate submit to
the Company the nominee's name, age, business and residence address, principal
occupation, the number of shares of the Company's capital stock beneficially
owned by the nominee, and a statement that the nominee is willing to be
nominated. The information must be provided to the Company not less than 120
days prior to the date of the annual meeting of shareholders at which the
nominee will be considered, or if he or she is to be considered at a special
meeting of shareholders, not more than seven days following the notice of the
special meeting. The names of any such nominees and the other information
required by the Company's Restated Articles of Incorporation should be forwarded
to the Company's Secretary, Kysor Industrial Corporation, One Madison Avenue,
Post Office Box 1000, Cadillac, Michigan 49601-9785, who will submit the
information to the Nominating Committee for its consideration. Nominations made
other than in accordance with Article IX of the Company's Restated Articles of
Incorporation are void.
9
<PAGE> 14
ACQUISITION, DIVESTITURE AND MERGER COMMITTEE: The responsibilities of the
Acquisition, Divestiture and Merger Committee are to review and evaluate
proposals received from other companies or made by management relating to the
acquisition or divestiture by the Company of subsidiaries, divisions or other
substantial business operations, and to make recommendations to the Board of
Directors relating to such proposals. Messrs. Weigel (Chairman), Gentry,
Gravelle, Kempton, Navarre and Ratliff are members of the Acquisition,
Divestiture and Merger Committee. This committee met two times during 1995.
EXECUTIVE COMPENSATION
As described in further detail in the following report of the Company's
Compensation and Organization Committee, the Company's compensation for
executive officers consists of four components: a base salary, a profit-sharing
incentive bonus, an intermediate-term incentive, and a long-term incentive
historically provided through the Company's stock option plans. Information on
each of these compensation elements follows the Compensation and Organization
Committee's report.
COMPENSATION AND ORGANIZATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Organization Committee (the "Committee") administers
the executive compensation program formulated by the Company and provides
appropriate recommendations and reports to the full Board for approval. The
Committee consists of only non-employee directors, including Mr. Raymond A.
Weigel, who retired as chairman of Kysor in January 1987, and who also receives
contractual deferred compensation from the Company.
In 1991, the Company engaged The Wyatt Company, a nationally recognized
compensation consulting firm, to review its compensation policies and make
recommendations to the Committee concerning executive compensation policies and
competitive compensation levels. The recommendations of The Wyatt Company were
initially adopted in 1991 and are the foundation of the Company's current
executive compensation program. Competitive compensation level studies are
updated annually by The Wyatt Company and furnished to the Committee for its
consideration.
The Committee's compensation philosophy is to: (1) pay competitively for
similar positions in companies of comparable size in order to attract and retain
qualified executives, (2) align compensation with the achievement of specific
short-term and intermediate-term financial objectives rewarding above average
corporate performance while also recognizing individual initiative and
achievement, and (3) encourage long-term commitment to the Company through the
ownership and retention of Company stock. The implementation of this philosophy
is designed to enhance shareholder value by aligning the long-term financial
interests of executive officers with those of shareholders.
Compensation consists of both cash and equity, and includes: (1) a base
salary, (2) a profit-sharing incentive bonus, (3) an intermediate-term
incentive, and (4) a long-term incentive through participation in a stock option
plan. Executive officers are also eligible to participate in a
10
<PAGE> 15
supplemental executive retirement plan and a full range of other benefits
available to all other management employees of the Company.
In 1993, Congress amended the federal Internal Revenue Code to add Section
162(m). This section provides that publicly held corporations may not deduct
compensation paid to certain executive officers in excess of $1 million
annually, with certain exemptions. Kysor has examined its executive compensation
policies in light of Section 162(m) and the regulations that have been adopted
by the Internal Revenue Service to implement that section. It is not expected
that any portion of the Company's deduction for employee remuneration will be
disallowed in 1996 or in future years by reason of awards granted in 1996.
BASE SALARY
Base salaries are determined by the Committee through an independent
evaluation of the responsibilities of each executive position and a comparison
of those responsibilities with similar positions throughout the industry. Once a
salary range for a position has been established, the base pay of each executive
is determined individually within that range by considering the specific
experience and performance of the executive. The Company's current base salaries
are generally within the established market ranges. Annual adjustments are
considered and approved by the Committee when the competitive marketplace and
the Company's performance justifies those adjustments.
PROFIT-SHARING BONUS INCENTIVE PLAN
The Profit-Sharing Bonus Incentive Plan is a short-term compensation plan
designed to reward corporate officers and other key employees who are not
officers for achieving specific annual financial objectives. When these
objectives are met, executives will receive bonus compensation ranging from 20%
to 60% of their base salaries each year, depending upon their level of corporate
responsibility. The amount is determined by a formula that considers the amount
by which the Company's net income after tax ("NIAT"), as a percentage of sales,
exceeds a minimum percentage set by the Committee. NIAT excludes extraordinary,
unusual or infrequently occurring items as may be determined by the Committee.
Bonuses were paid for 1993, 1994 and 1995 consistent with the formula.
INTERMEDIATE-TERM INCENTIVE PLAN
The Intermediate-Term Incentive Plan is designed to reward officers and
other key employees who grow the business profitably and produce outstanding
financial performance over any two-year "rolling" period. Growth and
profitability are measured based upon primary earnings per share ("PEPS") and
return on investment ("ROI") as may be modified from time to time by the
Committee. The plan encourages executives to focus on sustaining performance at
or above minimum levels and improving profitability and shareholder value. When
these objectives are met, executives participating in the plan may receive
incentive awards ranging from 20% to 40% of their base salaries, depending upon
their level of corporate responsibility. The amount awarded is determined by a
formula that establishes performance levels that relate to an average of PEPS
and
11
<PAGE> 16
ROI over a two-year period, excluding extraordinary, unusual or infrequently
occurring items as may be determined by the Committee. Failure to meet
performance objectives during any two-year period will prevent payment with
respect to awards granted for that period under the plan. The 1992/93, 1993/94
and 1994/95 two-year averages exceeded the minimum levels and incentive bonuses
were paid to the Company's executives and some key employees under the plan. For
purposes of the Summary Compensation Table following this report and the
Long-Term Incentive Plan table on page 19 of this Proxy Statement, awards under
the Intermediate-Term Incentive Plan are considered "long-term" incentives
pursuant to regulations issued by the Securities and Exchange Commission.
LONG-TERM INCENTIVE PLAN
Stock options have been granted to executives and other key employees
pursuant to various plans since 1953. The purpose of these plans is to encourage
long-term investment in the Company and to provide incentives to executive
officers to operate the Company consistent with shareholder interests. The
Company's current stock option plans are administered by the Committee.
The Committee believes that, absent unusual circumstances, stock options
should be awarded to executives annually and on a generally consistent basis in
terms of the number of shares subject to options. For this purpose, the
Committee has established ranges of awards in terms of numbers of shares that
are based on and vary with levels of responsibility within the Company. The size
of awards generally increases as the level of corporate responsibility
increases. Other than for awards to the Chief Executive Officer, management
generally recommends to the Committee the individuals to whom options should be
awarded and the amount, timing and other terms of awards. The Committee reviews
the recommendations of management, modifies the recommended awards if the
Committee considers modifications appropriate, and grants awards to executives.
The Committee alone determines the amount and other terms of awards to the Chief
Executive Officer.
Stock option awards permit executives and other key employees to purchase
shares of Common Stock over a ten-year period at a price equal to the fair
market value of Common Stock at the date of the grant. All options granted since
1990 vest and become exercisable at the rate of 20% for each of the first four
years after the date of grant, and the remaining 20% only vests and becomes
exercisable if all vested options (i.e. the first 80%) are exercised in full and
all of the shares are held by the executive for a period of one year.
During January 1996, the Committee granted options to purchase an aggregate
of 205,250 shares of Common Stock to 117 employees under existing plans.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Chief Executive Officer's compensation is based upon the same
principles and philosophy outlined above for all executives as a group with one
exception. The Chief Executive Officer has a higher percentage of his total cash
compensation "at risk." Mr. Kempton's cash compensation includes his base salary
and participation in the Profit-Sharing Bonus Incentive Plan (0 - 60% of base
salary) and the Intermediate-Term Incentive Plan (0 - 40% of base salary). The
second and
12
<PAGE> 17
third elements of the cash compensation are "at risk" each year and could
constitute an amount up to 100% of base salary or an amount equal to 0 depending
upon the financial performance of the Company.
Mr. Kempton's base salary in 1995 was increased 4.3% above his 1994 salary.
The base salary paid to Mr. Kempton in 1995 was less than the estimated market
value paid by companies of comparable size as determined by the independent
outside consultant.
In January 1996, the Committee recommended, and the full Board ratified, a
profit-sharing incentive bonus of $199,261 (57.9% of 1995 base salary) and an
intermediate-term incentive bonus of $137,780 (40% of 1995 base salary) for Mr.
Kempton based upon the formulas outlined above.
Mr. Kempton received long-term incentive compensation during 1995 through
an award of stock options under the Company's 1993 Long-Term Incentive Plan.
Other corporate officers and key employees also received stock option awards
during 1995.
All recommendations of the Compensation and Organization Committee
concerning compensation attributable to 1995 were approved and adopted by the
Board of Directors without modification.
Respectfully submitted,
Frederick W. Schwier, Chairman
Stephen I. D'Agostino
Grant C. Gentry
Robert J. Ratliff
Raymond A. Weigel
13
<PAGE> 18
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid by Kysor to the
Chief Executive Officer and each of its four highest paid executive officers
other than the Chief Executive Officer during each year in the three-year period
ended December 31, 1995. The following table includes amounts that the named
individuals may have deferred pursuant to the Company's 401(k) Savings Plan. No
Company contributions are made to the Savings Plan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION --------- --------
---------------------------------- NUMBER OF
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS PAYOUTS COMPENSATION (1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
George R. Kempton 1995 $333,800 $199,261 $ 14,745(2) 10,000 $137,780 $ 24,360
Chairman of the Board, 1994 323,140 183,883 4,234 10,000 115,984 28,699
Chief Executive Officer & 1993 314,776 152,074 4,582 14,500 98,349 22,072
Director
Peter W. Gravelle 1995 $240,842 $133,843 $ 5,779 8,750 $ 88,340 $ 12,958
President, Chief Operating 1994 214,725 112,007 4,116 8,750 67,437 17,378
Officer & Director 1993 209,167 92,631 2,532 12,800 57,183 14,523
Thomas P. Forrestal, Jr. 1995 $204,920 $ 99,500 $ 5,191(2) 7,500 $ 61,920 $ 16,184
Group Vice President - 1994 197,520 91,649 16,780 7,500 52,027 19,908
Commercial Products 1993 190,463 79,206 1,020 11,000 46,101 14,563
Timothy J. Campbell 1995 $180,333 $ 87,738 $ 3,405 7,500 $ 54,600 $ 13,368
Group Vice President - 1994 168,295 79,808 252 7,500 45,305 16,115
Transportation Products 1993 163,937 66,001 345 11,000 38,415 11,752
Terry M. Murphy 1995 $153,333 $ 76,168 $ 4,838 7,500 $ 47,400 $ 8,541
Vice President - Chief 1994 148,750 69,600 4,670 7,500 39,510 1,278
Financial Officer 1993 135,000 54,135 4,728 15,000 - 9,188
</TABLE>
(1) "All Other Compensation" includes imputed income from premiums paid for
group life insurance above $50,000 ($10,309 for Mr. Kempton, $3,572 for Mr.
Gravelle, $3,518 for Mr. Forrestal, $2,062 for Mr. Campbell and $1,322 for
Mr. Murphy), and amounts allocated to each named officer under the ESOP
based on shares allocated in 1995 for 1994 service ($14,051 for Mr.
Kempton, $9,386 for Mr. Gravelle, $12,666 for Mr. Forrestal, $11,306 for
Mr. Campbell and $7,219 for Mr. Murphy).
(2) Includes $11,889 for Mr. Kempton and $4,701 for Mr. Forrestal which the
Company paid on their behalf for the employee portion of Medicare tax due
on the present value of the vested benefits related to Messrs. Kempton's
and Forrestal's vesting under the Supplemental Executive Retirement Plan
and an amount to cover income taxes due on the income imputed to them as a
result of this payment.
14
<PAGE> 19
RETIREMENT PLANS
The following table shows the estimated annual benefits payable upon
retirement under Kysor's Administrative Pension Plan for various compensation
and years of service classifications, assuming retirement at age 65 in 1995:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE -----------------------------------------------------------
REMUNERATION 15 20 25 30 35
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$150,000 $36,278 $48,371 $60,464 $72,557 $76,307
</TABLE>
The executive officers referred to above are participants in Kysor's
Administrative Pension Plan. The Administrative Pension Plan is a qualified
defined benefit retirement plan. All salaried employees are eligible to
participate after they meet vesting requirements. Amounts expensed for
retirement plan benefits cannot be readily determined for specific individuals
since payments to the plan are computed on an actuarial basis. Payments under
the plan are based on the levels of compensation, not to exceed $150,000, and
years of service of an individual at retirement. Compensation covered by the
plan for this purpose is determined in the same fashion as for determination of
social security taxes. Except for the $150,000 cap, this compensation for 1995
does not vary by more than 10% from the amounts shown under the heading "Annual
Compensation" in the Summary Compensation Table above.
The executive officers referred to above have the following years of
accredited service for qualification under Kysor's Administrative Pension Plan:
George R. Kempton 17
Thomas P. Forrestal, Jr. 15
Peter W. Gravelle 5
Timothy J. Campbell 11
Terry M. Murphy 3
In addition to the above, the Company has an unfunded Supplemental
Executive Retirement Plan (the "Supplemental Plan") which covers all of the
executive officers named in the Summary Compensation Table shown above except
Mr. Murphy. To achieve minimum qualification in the Supplemental Plan, a
participant must have attained the age of 57 and completed at least 10 years of
credited service, and the sum of the participant's age plus years of credited
service must equal at least 72. A person is fully qualified under the
Supplemental Plan following 15 years of credited service and having attained the
age of 62. Once a person achieves full qualification, the Supplemental Plan
provides an additional annual benefit which, together with benefits payable
under the Administrative Pension Plan, benefits payable by each and every former
employer, and 50% of benefits under Social Security, will equal 65% of the
participant's average annual cash compensation for the three years in which his
or her cash compensation was highest during the final five complete years of the
person's employment at the time of retirement or termination of employment.
15
<PAGE> 20
For this purpose, compensation does not vary by more than 10% from the amounts
shown under the heading "Annual Compensation" in the Summary Compensation Table
above. The 65% is reduced proportionately for each month the participant's
termination date precedes his or her 62nd birthday and for each month less than
15 years of credited service. Benefits are payable commencing on the
participant's 57th birthday or the date of his or her termination of employment,
whichever occurs later. Participants may apply to receive an actuarially reduced
lump-sum payment of benefits payable under the Supplemental Plan at the time
such benefits would otherwise first become payable under the plan, subject to
approval by the committee that administers the Supplemental Plan. The
Supplemental Plan also provides participants with health care coverage at least
equal to that provided under the basic plan.
If the participant has attained the minimum eligibility requirements, but
dies either before or after his or her actual retirement date, the Company will
pay benefits under the Supplemental Plan to the person's spouse for the
remainder of the spouse's life, but the benefits are reduced by one-third. In
addition, minimum age requirements are waived for qualification purposes if the
participant becomes totally disabled while in the Company's employ, but benefits
payable will be reduced accordingly. If the participant has not attained age 57
at the time of disability, then disability benefits terminate upon the
participant's death.
Minimum eligibility requirements are inapplicable in the case of
involuntary termination (actual or constructive) without cause occurring within
five years after a change in control of the Company (as that term is defined in
the section entitled "Management Transactions; Termination of Employment and
Change in Control Arrangements"). In that event, benefits payable are calculated
using compensation for the highest consecutive 12 calendar months out of the
last complete 60 calendar months of employment, and by using the age the
participant would have attained and the complete calendar months of credited
service he or she would have attained as of the date which is five years after a
change in control.
The Company has also approved irrevocable trusts for each participant to
hold any Company contributions required by the Supplemental Plan. The Company
has no obligation to make contributions to such trusts unless there is a change
in control of the Company. If a change in control occurs, the Company is then
required to make contributions sufficient to meet all future obligations to each
participant under the Supplemental Plan as determined from time to time by an
actuary enrolled with the Internal Revenue Service in accordance with standards
provided in the Supplemental Plan. The Company may, at its option, satisfy any
funding obligations by contributing a life insurance policy on the life of each
participant having a cash surrender value equal to any required contribution
amount.
16
<PAGE> 21
STOCK OPTION PLANS
The following table summarizes options granted under the Company's 1993
Long-Term Incentive Plan during the last fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
- ---------------------------------------------------------------------------------- RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR (PER SHARE) DATE 5% 10%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George R. Kempton 10,000 5.0% $ 22.5625 1/27/05 $367,519 $585,213
Peter W. Gravelle 8,750 4.3 22.5625 1/27/05 321,579 512,061
Thomas P. Forrestal, Jr. 7,500 3.7 22.5625 1/27/05 275,640 438,910
Timothy J. Campbell 7,500 3.7 22.5625 1/27/05 275,640 438,910
Terry M. Murphy 7,500 3.7 22.5625 1/27/05 275,640 438,910
</TABLE>
Pursuant to its 1993 Long-Term Incentive Plan, its 1987 Stock Option and
Restricted Stock Plan, its 1984 Stock Option Plan, its 1983 Incentive Stock
Option Plan and its 1980 Stock Option and Stock Appreciation Rights Plan
(collectively, the "Plans"), the Company has granted certain of its executive
officers, directors and key employees options to purchase shares of the
Company's Common Stock over a ten-year period at prices equal to the fair market
value of the shares on the dates the options were granted. All options granted
since 1990 vest and become exercisable at the rate of 20% for each of the first
four years after the date of grant, and the remaining 20% only vests and becomes
exercisable if all vested options (i.e. the first 80%) are exercised in full and
all of the shares are held by the optionee for a period of one year. Options
terminate, subject to certain limited exercise provisions, in the event of
death, retirement or other termination of employment. The Plans are administered
by the Compensation and Organization Committee consisting of five disinterested
directors. Although authorized, no stock appreciation rights or restricted stock
have been granted under the Plans. The 1980 Stock Option and Stock Appreciation
Rights Plan terminated on April 25, 1990, the 1983 Incentive Stock Option Plan
terminated on April 22, 1993, and the 1984 Stock Option Plan terminated on July
27, 1994, although certain options granted under those plans remain outstanding.
17
<PAGE> 22
The Plans permit option exercise loans or installment purchase agreements
to encourage the exercise of options and thereby advance the purposes of the
Plans. In 1989, the Committee implemented a program to provide for installment
payments upon the exercise of stock options. The installment purchase program
was available for a period of six months (ended October 30, 1989) for the
exercise of non-qualified stock options. Non-qualified options for 157,128
shares were exercised under the installment purchase program. The purchase
obligations relating to those options are secured by the stock acquired upon
exercise of each option and related dividends, but are otherwise non-recourse
obligations. Interest is charged at a rate of 4.5% per annum, and will be offset
in whole or in part by dividends paid on the Common Stock purchased pursuant to
the program. In October 1995, the Compensation and Organization Committee
authorized that the terms of the outstanding loans be extended an additional
four years to December 31, 1999.
The Company will receive a tax deduction in connection with the exercise of
the options equal to the difference between the option price and the mean market
price on the date of exercise. The optionee would recognize income in a
corresponding amount.
The following table summarizes stock options exercised by the listed
individuals during the last fiscal year and the total number of options held by
each listed individual as of December 31, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George R. Kempton - $ - 106,700 27,800 $ 1,126,092 $ 214,063
Peter W. Gravelle - - 48,930 26,370 648,941 225,856
Thomas P. Forrestal, Jr. 42,600 399,375 1,500 17,900 2,531 121,063
Timothy J. Campbell - - 59,850 23,900 570,563 211,813
Terry M. Murphy 1,500 11,063 9,000 16,500 46,594 78,563
</TABLE>
18
<PAGE> 23
LONG-TERM INCENTIVE COMPENSATION
The following table summarizes all awards of incentive compensation under
Kysor's Intermediate-Term Incentive Plan to the listed individuals during the
last fiscal year:
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER PERFORMANCE
OF SHARES, OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
UNITS OR PERIOD UNTIL NON-STOCK-PRICE-BASED PLANS (1)
OTHER MATURATION ---------------------------------
NAME RIGHTS (1) OR PAYOUT (2) THRESHOLD TARGET MAXIMUM
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George R. Kempton 40 Two Years $68,890 $103,335 $137,780
Peter W. Gravelle 35 Two Years 44,170 66,255 88,340
Thomas P. Forrestal, Jr. 30 Two Years 30,960 46,440 61,920
Timothy J. Campbell 30 Two Years 27,300 40,950 54,600
Terry M. Murphy 30 Two Years 23,700 35,550 47,400
</TABLE>
(1) Under the Intermediate-Term Incentive Plan, the Company's executive
officers may earn incentive compensation based upon two performance
objectives: primary earnings per share ("PEPS") and return on investment
("ROI"). The executive officers may be granted "performance units" intended
to equal 1% of the applicable officer's salary if maximum performance
objectives are satisfied. The maximum number of units that may be granted
to each of the named executives are as follows: Mr. Kempton -- 40% of base
salary; Mr. Gravelle -- 35% of base salary; and Messrs. Forrestal, Campbell
and Murphy -- 30% of base salary. The actual value of such performance
units will be based on actual two-year PEPS and ROI averages, subject to
the satisfaction of minimum plan thresholds. Performance units are to be
paid two years after they are granted.
(2) The award is calculated for fiscal years 1995 and 1996. The two-year
average PEPS and ROI results will determine the actual value of the
performance units to be paid.
19
<PAGE> 24
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage in the Company's
cumulative shareholder return on the Company's Common Stock with various equity
indices over a five-year period ended December 31, 1995, using 1990 as a "base
period." The S & P 500 Index is a broad-based equity market index published by
Standard & Poor's, while the Russell 2000 is comprised of companies with a
market capitalization similar to that of Kysor. Over the five-year period ended
December 31, 1995, a $100 investment in Kysor Common Stock in 1990 would be
worth $402 compared to $215 for the S & P 500 stocks and $259 for the Russell
2000 stocks.
FIVE-YEAR INVESTMENT IN KYSOR INDUSTRIAL
CORPORATION VERSUS S & P 500 AND RUSSELL 2000
INVESTMENT VALUE
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) KYSOR S & P 500 RUSSELL 2000
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 103.40 130.47 146.05
1992 279.87 140.41 172.94
1993 273.10 154.57 205.63
1994 357.73 156.61 201.88
1995 402.42 215.46 259.30
</TABLE>
YEAR ENDED 12/31
Assumes $100 Investment at December 31, 1990
The dollar values for total shareholder return plotted in the graph above
are shown below:
<TABLE>
<CAPTION>
Year Ended December 31, 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Kysor $100.00 $103.40 $279.87 $273.10 $357.73 $402.42
S & P 500 100.00 130.47 140.41 154.57 156.61 215.46
Russell 2000 100.00 146.05 172.94 205.63 201.88 259.30
</TABLE>
20
<PAGE> 25
MANAGEMENT TRANSACTIONS; TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into an Employment Agreement with George R.
Kempton, the Chairman of the Board and Chief Executive Officer of the Company.
Under the Employment Agreement, Mr. Kempton will receive a salary as may be
determined from time to time by the Company's Board of Directors, provided that
in no event shall Mr. Kempton's salary for any given calendar year be less than
the salary received by Mr. Kempton during the prior calendar year.
Notwithstanding this provision, Mr. Kempton has elected in the past to receive a
salary less than the salary received by him in the prior calendar year when he
and other corporate executive officers recommended to the Board of Directors and
accepted a salary cut in response to then-current business conditions. In
addition, Mr. Kempton is entitled to bonuses under the Company's present bonus
plans (subject to the terms of such plans), or any subsequent plans, and other
fringe benefits in an amount not less favorable than those presently enjoyed by
Mr. Kempton. If Mr. Kempton's employment is terminated involuntarily by the
Company without cause (termination for cause requiring a two-thirds vote of the
Board of Directors) or by Mr. Kempton for good reason, Mr. Kempton is entitled
to receive severance pay for the remainder of the term of the Employment
Agreement. Severance pay includes payments under the Supplemental Executive
Retirement Plan described above, and those items (other than item (5)) listed
below in the description of certain other corporate officer Termination
Agreements. Mr. Kempton's Employment Agreement has a term of five years and is
automatically renewed for one additional year each January 1 unless either the
Company or Mr. Kempton notifies the other in writing that it or he does not
choose to extend the period of employment. No such notification has been
provided. The Employment Agreement was unanimously approved by the Board of
Directors.
The Company has also entered into Termination Agreements ("Agreements")
with Peter W. Gravelle, President and Chief Operating Officer; Thomas P.
Forrestal, Jr., Group Vice President-Commercial Products; Timothy J. Campbell,
Group Vice President-Transportation Products; Terry M. Murphy, Vice
President-Chief Financial Officer; and other corporate officers. The Agreements
provide for separation pay and benefits if a change in control of the Company
occurs. The Agreements were unanimously approved by the Board of Directors.
Under the Agreements, the executive's employment must be terminated
involuntarily, without cause, whether by actual or "constructive" demotion,
relocation, loss of benefits, or other changes short of actual termination of
employment, and within five years after a change in control of the Company for
an executive to be entitled to compensation. If an executive's employment is
terminated involuntarily by the Company without cause or by an executive for
good reason within five years after a change in control of Kysor has occurred,
the executive will be entitled to receive severance pay for the period remaining
between the date of the termination and 60 months after the change in control of
Kysor. A change in control means a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A issued under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), provided that, without limitation, a change in control will be considered
to have occurred if (1) any "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of Kysor representing 25% or more of the combined
voting power of Kysor's then outstanding securities, or
21
<PAGE> 26
(2) during any period of two consecutive years, individuals who at the beginning
of the period constitute the Board of Directors cease for any reason to
constitute at least a majority thereof (unless the election or nomination for
election by Kysor's shareholders of each new director was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of the period).
Severance pay includes the following: (1) monthly payments equal to the
executive's monthly salary for the last full month immediately preceding the
executive's termination plus one-twelfth of either 55% to 70% (for certain
corporate officers other than those named in the paragraph above), 80% (for
Thomas P. Forrestal, Jr., Timothy J. Campbell and Terry M. Murphy), 90% (for
Peter W. Gravelle) and 100% (for George R. Kempton (see above)) of the total
salary paid to the executive during the one-year period immediately preceding
his or her termination; (2) continued treatment of the executive as an
"employee" under any stock option, employee benefit or other long-term
compensation arrangement for the term of the compensation period; (3) reasonable
outplacement services selected by the executive; (4) continued treatment of the
executive as an employee under each employee welfare benefit plan in which the
executive was entitled to participate immediately prior to the date of his or
her termination; (5) payment of a supplemental retirement benefit offset by any
amount payable under the Administrative Pension Plan; (6) payment by the Company
of all reasonable legal fees and expenses incurred by the executive as a result
of his or her termination of employment by Kysor; (7) the right to immediately
exercise, in full, all stock options held by the executive; (8) an option to
sell his or her principal residence to Kysor at the greater of its then fair
market value or the executive's aggregate capital investment in the residence;
and (9) an option to purchase his or her automobile from Kysor at its then
wholesale value. The Agreements also provide that Kysor will reimburse, on a
non-deductible basis, each executive for the 20% excise tax payable pursuant to
Section 280G of the Internal Revenue Code of 1986, as amended, including
additional tax due with respect to the reimbursement, in connection with
compensation payable associated with a change in control of Kysor.
The Board of Directors believes that the agreements described above assure
fair treatment of the covered executives and, by assuring the executives of some
financial security, protect the shareholders by tending to neutralize any bias
of these executives in considering proposals to acquire the Company.
The stock option agreements entered into between the Company and its
directors and officers, as well as other employees, with respect to outstanding
stock options provide for accelerated vesting of all outstanding but unexercised
stock options upon the occurrence of, among other things, a change in control of
Kysor. For purposes of these agreements, "change in control" is defined as (1)
the failure of the individuals who were directors at the time the applicable
option plan was adopted and those whose election or nomination to the Board of
Directors was approved by a two-thirds vote of the directors then still in
office who were directors at the time the applicable option plan was adopted to
constitute a majority of the Board of Directors; (2) the acquisition by certain
persons or groups of 20% or more of the Company's Common Stock or the combined
voting power of the Company's outstanding voting securities; (3) the approval by
the shareholders of a reorganization, merger or consolidation (except with
certain permitted entities); or (4) the approval
22
<PAGE> 27
by the shareholders of a complete liquidation or dissolution of the Company or
the sale or disposition of all or substantially all of the assets of the Company
(other than to certain permitted entities).
In 1987, the Company entered into an Indemnity Agreement with each of the
Company's directors and executive officers, and the Company has entered into a
similar agreement with each individual who has become a director or executive
officer of the Company since that time. The Indemnity Agreements, which were
ratified by the Company's shareholders at the 1987 Annual Meeting of
Shareholders, are designed to provide the maximum indemnification protection
allowed under the Michigan Business Corporation Act. An indemnitee's rights
under an Indemnity Agreement are not exclusive of any other rights that he or
she may have under the Michigan Business Corporation Act, the Company's Restated
Articles of Incorporation or Bylaws, any liability insurance presently
maintained or purchased in the future, or otherwise. A copy of the form of the
Indemnity Agreement was included as an exhibit to the Company's 1987 Proxy
Statement.
DIRECTOR COMPENSATION
Director fees are paid to those directors who are not employees of Kysor.
During 1995, each director was paid $4,000 per quarter plus an additional $1,000
for attendance at each regular or special meeting of the Board of Directors. In
addition, Board committee chairmen were paid $1,000 for each committee meeting
attended and Board committee members were paid $800 for each committee meeting
attended. Kysor provides each non-employee director a death benefit in the
amount of $25,000, which is paid to his or her designated beneficiary if the
director dies while a director. Upon his death in December 1995, the Company
paid to Mr. LeBoutillier's beneficiary the sum of $25,000. Directors of the
Company may also elect to participate in the Company's health care benefit plan.
The Company has a deferred compensation plan for non-employee directors.
Each member of the Board of Directors who is not an employee of the Company is
eligible to participate in the plan by directing that all or any part of the
compensation that would be payable for services as a director be credited to a
deferred compensation account. When a participating director ceases to be a
director of the Company, he or she will be paid an amount in cash equal to the
amount of compensation deferred, plus an additional amount of compensation
equivalent to interest computed on the director's deferred compensation balance
at an annual percentage rate to be determined by the Compensation and
Organization Committee at the time of any election.
Under the Company's retirement plan for directors, annual retirement
benefits are payable to retired directors who have five or more years of service
as a director under specified circumstances equal to one-fifteenth of the annual
retainer at the time of retirement or the year before a change in control of the
Company, times years of service on the Board of Directors (not to exceed 15
years). One-fourth of the annual benefit is payable each calendar quarter.
Payments cease upon the death of a director or 15 years following retirement,
whichever occurs first. To qualify for these benefits, a retired director must
agree to be available to provide consultation and advice to the Company
following his or her retirement.
23
<PAGE> 28
Directors who are not employees of Kysor or any of its subsidiaries have
been granted options to purchase shares of Common Stock semiannually pursuant to
a formula specified in the 1993 Long-Term Incentive Plan. Pursuant to this
formula, each non-employee director was awarded options to purchase an aggregate
of 2,500 shares of Common Stock during 1995. Options are awarded pursuant to the
formula on the first Thursday following 10 days after the release by the Company
of earnings information in the months of April and October each year. The per
share exercise price of options granted to non-employee directors under the 1993
Long-Term Incentive Plan is 100% of the market value of Common Stock on the date
each option is granted. The term of each option is 10 years from the date of
grant. All options granted under the plan are subject to delayed vesting and
become exercisable at the rate of 20% for each of the first 4 years after the
date of grant, and the remaining 20% only vests and becomes exercisable if all
vested options (i.e. the first 80%) are exercised in full and all of the shares
are held by the director for a period of one year.
INDEBTEDNESS OF MANAGEMENT
The following directors and executive officers were indebted to the Company
in 1995 in amounts exceeding $60,000 for credit extended to them to exercise
stock options pursuant to the Company's various stock option plans, as described
elsewhere in this Proxy Statement (see section entitled "Stock Option Plans").
The shares acquired pursuant to the exercise of these options are pledged to the
Company to secure payment of the indebtedness, which is without recourse except
to the pledged shares. Interest is charged on the indebtedness at a rate of 4.5%
per annum:
<TABLE>
<CAPTION>
LARGEST AMOUNT
AMOUNT OWED OWED AT
NAME RELATIONSHIP IN 1995 12/31/95
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
George R. Kempton Chairman of the Board, Chief $1,002,179 $958,649
Executive Officer and Director
Paul K. Gaston Director 97,806 97,610
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served as members of the Compensation and
Organization Committee during the last fiscal year: Messrs. Schwier (Chairman),
D'Agostino, Gentry, Ratliff and Weigel.
The Company has a continuing deferred compensation agreement with Mr.
Weigel, former Chairman of the Company, which provides for annual payments of
$350,000 through the year 2005 or for the remainder of Mr. Weigel's life,
whichever is longer.
The Company is a limited partner in a partnership formed to construct a $58
million cogeneration facility in Cadillac, Michigan. The Company has
approximately an 8% equity interest in the project. Other equity participants in
the cogeneration project include a corporation controlled by Mr. Weigel and his
son (approximately 18% interest).
24
<PAGE> 29
INDEPENDENT AUDITORS
Coopers & Lybrand LLP served as independent auditors of the Company for the
year ended December 31, 1995, and it is anticipated that Coopers & Lybrand LLP
will be selected by the Board of Directors as independent auditors of the
Company for the year ending December 31, 1996. The Board of Directors will
select the independent auditors of the Company for the current year at its
regular meeting scheduled to be held in October 1996. Coopers & Lybrand LLP has
advised Kysor that it has no direct financial interest nor any material indirect
financial interest in Kysor or its subsidiaries, or any connection during the
past three years with Kysor or its subsidiaries in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
Representatives of Coopers & Lybrand LLP are expected to be present at the
Annual Meeting of Shareholders and will have an opportunity to make a statement
if they desire to do so. These representatives are likewise expected to be
available to respond to any appropriate questions.
OTHER BUSINESS
At the date of this Proxy Statement, management of the Company has no
knowledge of any business, other than that described above, which will be
presented at the meeting. If any other business should come before the meeting,
the proxies named in the enclosed proxy will have discretionary authority to
vote on those matters.
SECTION 16(A) REPORTING DELINQUENCIES
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who beneficially own more than 10% of the Company's Common
Stock, to file reports of ownership and changes in ownership of the Company's
Common Stock with the Securities and Exchange Commission and the New York Stock
Exchange. Directors, officers and greater than 10% beneficial owners are
required to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the copies of such reports received by it, or
written representations from certain reporting persons that no other filings
were required for those persons, the Company believes that all filing
requirements applicable to its directors, officers and greater than 10%
beneficial owners were satisfied in 1995.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting scheduled to be held on April 25, 1997, must be received by the Company
for consideration for inclusion in its proxy statement and form of proxy
relating to that meeting by November 22, 1996. Proposals of shareholders should
be made in accordance with Rule 14a-8 issued under the Exchange Act and should
be addressed to Mr. George R. Kempton, Chairman of the Board and Chief Executive
Officer, Kysor Industrial Corporation, One Madison Avenue, Post Office Box 1000,
Cadillac, Michigan 49601-9785.
25
<PAGE> 30
SOLICITATION OF PROXIES
The expenses involved in the preparation and solicitation of proxies for
the Annual Meeting of Shareholders will be borne by the Company. Brokerage
houses, custodians, nominees and fiduciaries will be reimbursed by the Company
for their reasonable expenses incurred in forwarding the soliciting material to
the beneficial owners of stock held by such persons or firms. In addition to the
solicitation of proxies by use of the mails, solicitation may be made by certain
directors, officers, employees and shareholders of the Company, who will receive
no compensation therefor, by personal interview, telephone or facsimile. The
Company has retained D. F. King & Co., 77 Water Street, New York, New York
10005, to aid in the solicitation of proxies. It is anticipated that the fee to
be paid to D. F. King & Co. will not exceed $8,000 plus expenses.
By Order of the Board of Directors.
David W. Crooks
Vice President-
General Counsel and Secretary
Cadillac, Michigan
March 22, 1996
26
<PAGE> 31
NOTICE OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
[KYSOR LOGO]
<PAGE> 32
<TABLE>
<S><C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
With- For All
For hold Except For Against Abstain
1.) Election of Directors. / / / / / / 2.) In their discretion, the Proxies / / / / / /
are authorized to vote upon all other
PAUL K. GASTON, GRANT C. GENTRY, matters that may be presented at
PETER W. GRAVELLE AND ROBERT W. NAVARRE the meeting or any adjournment
thereof.
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE "FOR" A
PARTICULAR NOMINEE MARK THE "FOR ALL EXCEPT" BOX THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF
AND STRIKE A LINE THROUGH THE NOMINEE(S) NAME. NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR ELECTION OF
YOUR SHARES WILL BE VOTED FOR THE REMAINING ALL OF THE BOARD NOMINEES AS DIRECTORS AND IN ACCORDANCE WITH THE
NOMINEE(S). JUDGMENT OF THE PROXIES WITH RESPECT TO ANY OTHER MATTER WHICH MAY
COME BEFORE THE MEETING.
[SPACE FOR
SHAREHOLDER INFORMATION]
Mark box at right if comments or address change have / /
Please be sure to sign and date this Proxy. Date ______ been noted on the reverse side.
______________________________ _______________________
Shareholder sign here Co-owner sign here
</TABLE>
- --------------------------------------------------------------------------------
DETACH CARD
<PAGE> 33
KYSOR INDUSTRIAL CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The shareholder(s) listed on the reverse side of this Proxy acknowledges
receipt of a Notice of Annual Meeting and a Proxy Statement dated March 22,
1996 and appoints GEORGE R. KEMPTON, PAUL K. GASTON and DAVID W. CROOKS, and
each of them, Proxy of the shareholder, each with full power of substitution,
to vote all stock which the shareholder is entitled to vote at the ANNUAL
MEETING OF SHAREHOLDERS of KYSOR INDUSTRIAL CORPORATION at the corporate
headquarters, One Madison Avenue, Cadillac, Michigan, on April 26, 1996, or at
any adjournment of that meeting as specified on the reverse side.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. JOINT
OWNERS SHOULD EACH SIGN PERSONALLY. TRUSTEES AND OTHER FIDUCIARIES SHOULD
INDICATE THE CAPACITY IN WHICH THEY SIGN, AND WHERE MORE THAN ONE NAME APPEARS,
A MAJORITY MUST SIGN. IF A CORPORATION, THIS SIGNATURE SHOULD BE THAT OF AN
AUTHORIZED OFFICER WHO SHOULD STATE HIS OR HER TITLE.
HAS YOUR ADDRESS CHANGED?
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE> 34
KYSOR INDUSTRIAL CORPORATION EMPLOYEE STOCK
OWNERSHIP PLAN
THIS VOTE DIRECTION FORM IS BEING FURNISHED TO THE
PARTICIPANT LISTED ON THE REVERSE SIDE PURSUANT TO THE
KYSOR INDUSTRIAL CORPORATION EMPLOYEE STOCK OWNERSHIP
PLAN (THE "PLAN").
The Participant acknowledges receipt of a Notice of Annual Meeting and a Proxy
Statement dated March 22, 1996, for Kysor Industrial Corporation and submits
this Vote Direction Form to THE WYATT COMPANY as a special agent to the Trustee
of the Plan to direct the voting by the Trustee of the shares of Kysor
Industrial Corporation voting stock allocated to an account of the participant
pursuant to the Plan at the ANNUAL MEETING OF SHAREHOLDERS OF KYSOR INDUSTRIAL
CORPORATION at the corporate headquarters, One Madison Avenue, Cadillac,
Michigan, on April 26, 1996, or at any adjournment of that meeting as specified
on the reverse side.
DO NOT RETURN THIS CARD TO THE COMPANY. IT MUST BE RETURNED NO LATER THAN
APRIL 19, 1996, TO THE WYATT COMPANY, ONE NORTHWESTERN PLAZA, SUITE 500, 28411
NORTHWESTERN HIGHWAY, SOUTHFIELD, MICHIGAN 48034.
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
PLEASE SIGN THIS VOTE DIRECTION FORM EXACTLY
AS YOUR NAME APPEARS ON THE MAILING LABEL.
HAS YOUR ADDRESS CHANGED?
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE> 35
<TABLE>
<S><C>
With- For All
For hold Except For Against Abstain
1.) Election of Directors. / / / / / / 2.) In the Trustee's discretion upon / / / / / /
all other matters that may be
PAUL K. GASTON, GRANT C. GENTRY, presented at thee meeting or any
PETER W. GRAVELLE AND ROBERT W. NAVARRE adjournment thereof.
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE "FOR" A THE SHARES OF VOTING STOCK OF KYSOR INDUSTRIAL CORPORATION ALLOCATED TO
PARTICULAR NOMINEE MARK THE "FOR ALL EXCEPT" BOX AN ACCOUNT OF THE UNDERSIGNED PURSUANT TO THE PLAN (EITHER A TRASOP
AND STRIKE A LINE THROUGH THE NOMINEE(S) NAME. ACCOUNT OR AN ESOP ACCOUNT) WILL BE VOTED BY THE TRUSTEE AS DIRECTED.
YOUR SHARES WILL BE VOTED FOR THE REMAINING SHARES ALLOCATED TO A TRASOP ACCOUNT WILL NOT BE VOTED UNLESS A PROPERLY
NOMINEE(S). EXECUTED VOTE DIRECTION FORM IS RECEIVED. SHARES HELD IN AN ESOP
ACCOUNT WITH RESPECT TO WHICH NO VOTE DIRECTION FORM IS RECEIVED AND
UNALLOCATED ESOP SHARES WILL BE VOTED BY THE TRUSTEE IN ACCORDANCE WITH
VOTE DIRECTIONS RECEIVED WITH RESPECT TO ALLOCATED ESOP SHARES, ON A
[SPACE FOR PER CAPITA BASIS.
SHAREHOLDER INFORMATION]
Mark box at right if an address change has been / /
Please be sure to sign and date this Vote Direction noted on the reverse side.
Form. Date___________________
- ---------------------------------------------------
Participant sign here
</TABLE>
