<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
DIEBOLD, INCORPORATED
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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 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.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
DIEBOLD, INCORPORATED
5995 MAYFAIR ROAD
P.O. BOX 3077 - NORTH CANTON, OHIO 44720-8077
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 15, 1998
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of the Corporation will be held at the
Diebold Education Center at Stark State College of Technology, 5801 Dressler
Road, N.W., Canton, Ohio 44720, on April 15, 1998 at 10:00 a.m., Local Time, for
the following purposes:
1. To elect Directors;
2. To vote upon ratification of the appointment by the Board of Directors
of KPMG Peat Marwick LLP as independent auditors for the year 1998; and
3. To consider such other matters as may properly come before the meeting
or any adjournment thereof.
The enclosed proxy card is solicited, and the persons named therein have
been designated, by the Board of Directors of the Corporation.
Holders of record of the Common Shares at the close of business on February
27, 1998 will be entitled to vote at the meeting.
Your attention is directed to the attached proxy statement.
By Order of the Board of Directors
CHAREE FRANCIS-VOGELSANG
Vice President and Secretary
March 6, 1998
(approximate mailing date)
YOU ARE REQUESTED TO COOPERATE IN ASSURING A
QUORUM BY FILLING IN, SIGNING AND DATING THE ENCLOSED PROXY
AND PROMPTLY MAILING IT IN THE RETURN ENVELOPE.
<PAGE> 3
DIEBOLD, INCORPORATED
5995 MAYFAIR ROAD
P.O. BOX 3077 - NORTH CANTON, OHIO 44720-8077
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, APRIL 15, 1998
This proxy statement is furnished to shareholders of Diebold, Incorporated
(the "Corporation") in connection with the solicitation by the Board of
Directors of proxies which will be used at the 1998 annual meeting of
shareholders on April 15, 1998, at 10:00 a.m., local time, or any adjournments
thereof, for the purpose of considering and acting upon the matters referred to
in the preceding notice of annual meeting and more fully discussed below. This
proxy statement was first mailed to shareholders on or about March 6, 1998.
Shares represented by a properly executed proxy will be voted as indicated on
the proxy. Shareholders may revoke the authority granted by their proxies at any
time before the exercise of the powers conferred thereby by notice in writing
delivered to the Secretary of the Corporation; by submitting a subsequently
dated proxy; or by attending the meeting, withdrawing the proxy and voting in
person.
On February 27, 1998, the record date for the meeting, the outstanding
voting securities of the Corporation consisted of 69,067,165 Common Shares,
$1.25 par value per share, all of one class. Each shareholder of record as of
the close of business on February 27, 1998 will be entitled to one vote for each
Common Share held on that date.
If a shareholder gives written notice to the President, any Vice President
or Secretary at least forty-eight hours prior to the time fixed for holding the
meeting that the shareholder desires that the voting for the election of
directors shall be cumulative, and if an announcement of the giving of such
notice is made upon convening of the meeting by the Chairman or Secretary or by
or on behalf of the shareholder giving such notice, each shareholder will have
cumulative voting rights. In cumulative voting, each shareholder may cast a
number of votes equal to the number of shares owned multiplied by the number of
directors to be elected and the votes may be cast for one nominee only or
distributed among the nominees. In the event that voting at the annual meeting
is to be cumulative, unless contrary instructions are received on the enclosed
proxy, it is presently intended that all votes represented by properly executed
proxies will be divided evenly among the candidates nominated by the Board of
Directors. However, if voting in such manner would not be effective to elect all
such nominees, such votes will be cumulated at the discretion of the Board of
Directors so as to maximize the number of such nominees elected. The results of
shareholder voting at the annual meeting will be tabulated by the inspectors of
elections appointed for the annual meeting. The Corporation intends to treat
properly executed proxies that are marked "abstain" as present for purposes of
determining whether a quorum has been achieved at the annual meeting but will
not count any broker non-votes for such purpose. The director-nominees receiving
the greatest number of votes will be elected. Votes withheld with respect to the
election of directors will not be counted in determining the outcome of that
vote. Abstentions with respect to the proposal to ratify the appointment of the
independent auditors will have the same effect as votes against those proposals.
The Corporation does not anticipate receiving any broker non-votes at the annual
meeting in light of the nature of the matters to be acted upon at the annual
meeting; however, any broker non-votes received in respect of the appointment of
auditors will not affect the voting on such proposal.
2
<PAGE> 4
BENEFICIAL OWNERSHIP OF SHARES
To the knowledge of the Corporation, no person beneficially owned more than
5 percent of the outstanding Common Shares as of December 31, 1997, except for
the shareholders listed below. The information provided below is derived from
Schedules 13G filed with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
<S> <C> <C>
The Prudential Insurance Company of
America ("Prudential")
751 Broad Street
Newark, New Jersey 07102-3777............................... 6,264,788(a)(b) 9.08
Jennison Associates Capital Corp.
("Jennison")
466 Lexington Avenue
New York, New York 10017.................................... 6,216,011(b) 9.01
FMR Corp., Edward C. Johnson 3d
and Abigail P. Johnson ("FMR")
82 Devonshire Street
Boston, Massachusetts 02109-3614............................ 3,683,753(c) 5.34
</TABLE>
- ---------------
(a) Prudential has sole investment power and sole voting power as to 123,842
shares (0.18%), shared investment power as to 6,140,946 shares (8.85%) and
shared voting power as to 5,558,124 shares (8.01%)
(b) Jennison has sole voting power as to 669,080 shares (0.96%), shared voting
power as to 4,964,109 shares (7.15%) and shared investment power as to
6,216,011 shares (9.01%). Information taken from the Schedule 13G filed by
Jennison stated that Jennison is a wholly-owned subsidiary of Prudential. As
a result, Prudential may be deemed to have the power to exercise or to
direct the exercise of such voting and/or investment power that Jennison may
have with respect to the Corporation's shares held by the Managed Portfolio.
Jennison does not file jointly with Prudential. Therefore, the Corporation's
shares reported on Jennison's Schedule 13G may be included in the shares
reported by Prudential in its Schedule 13G.
(c) In its Schedule 13G FMR stated that Edward C. Johnson 3d, who is Chairman of
FMR, Abigail P. Johnson, who is a Director of FMR, and other family members
form a controlling group with respect to FMR. FMR beneficially owns
2,914,949 shares (3.91%) of the Corporation's shares through FMR's
wholly-owned subsidiary, Fidelity Management & Research Company ("Fidelity
Research"). Fidelity Research, as investment advisor to several investment
companies, claims sole investment power for 2,859,537 (4.12%) shares of the
Corporation's shares held by those investment companies, but states that the
sole voting power for those shares resides with the investment companies'
respective Boards of Trustees. Fidelity Research and FMR claim sole voting
and investment power for an additional 55,412 shares (0.08%) of the
Corporation's shares because Fidelity Research is a subadvisor to Fidelity
American Special Situations Trust ("FASST"), who also claims sole voting and
investment power for those 55,412 shares (0.08%). Fidelity International
Limited ("Fidelity International"), in its capacity as investment advisor to
various investment companies beneficially owns 86,512 shares (0.12%) of the
Corporation's shares, including the 55,412 shares (0.08%) beneficially owned
by FASST for which Fidelity International claims sole investment power, and
including 31,100 shares (0.04%) of the Corporation's shares for which
Fidelity International claims sole voting and investment power. FMR does not
aggregate shares owned by Fidelity International for purposes of Section
13(d) of the Securities Exchange Act of 1934, but nonetheless reports shares
owned by Fidelity International on a voluntary basis. FMR claims beneficial
ownership of another 737,704 shares (1.06%) of the Corporation's shares
because Fidelity Management Trust Company, a wholly-owned subsidiary of FMR
and a bank, serves as investment manager of the institutional accounts.
3
<PAGE> 5
ELECTION OF DIRECTORS
The Board of Directors recommends that eleven nominees for director be
elected at the annual meeting, each to hold office for a term of one year from
the date of the annual meeting, and until the election and qualification of a
successor. In the absence of contrary instruction, the Proxy Committee will vote
the proxies for the election of the eleven nominees, who are Louis V. Bockius
III, Daniel T. Carroll, Richard L. Crandall, Donald R. Gant, L. Lindsey
Halstead, Phillip B. Lassiter, John N. Lauer, Robert W. Mahoney, William F.
Massy, Gregg A. Searle and W. R. Timken, Jr. All nominees are presently members
of the Board of Directors.
If for any reason any nominees are not available for election when the
election occurs, the designated proxies, at their option, may vote for
substitute nominees recommended by the Board of Directors. Alternatively, the
Board of Directors may reduce the number of nominees. The Board of Directors has
no reason to believe that any nominee will be unavailable for election when the
election occurs.
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table shows the beneficial ownership of Common Shares of the
Corporation, including those shares which individuals have a right to acquire,
e.g., through exercise of stock options under the Amended and Extended 1972
Stock Option Plan (the "1972 Plan") and the 1991 Equity and Performance
Incentive Plan, as Amended and Restated (the "1991 Plan"), within the meaning of
Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, by each
director-nominee, including the chief executive officer and the other four most
highly compensated executive officers ("named executive officers") and for such
persons and the other executive officers as a group as of February 10, 1998.
Ownership is also reported as of December 31, 1997 for shares in the 401(k)
Savings Plan over which the individual has voting power, together with shares
held in the Dividend Reinvestment Plan.
<TABLE>
<CAPTION>
NAME, AGE,
PRINCIPAL OCCUPATION COMMON
OR EMPLOYMENT, SHARES PERCENT
PRESENT AND DURING DIRECTOR BENEFICIALLY DEFERRED OF OTHER
LAST FIVE YEARS SINCE OWNED(1) SHARES(1) CLASS(1) DIRECTORSHIPS
-------------------- -------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
DIRECTOR-NOMINEES:
Louis V. Bockius III -- 62 1978 236,396(2)(3) -- 0.34 UNB Corp., United National Bank
Chairman, Bocko & Trust Co.
Incorporated
North Canton, Ohio
(Plastic Injection Molding)
Daniel T. Carroll -- 71 1980 33,046(6) -- 0.05 A.M. Castle & Co., American
Chairman Woodmark Corporation, Aon
The Carroll Group Corporation, Comshare, Inc.,
Avon, Colorado Diversa Inc., Oshkosh Truck
(Management Consulting) Corporation, Wolverine World
Wide, Inc., Woodhead
Industries, Inc.
Richard L. Crandall -- 54 1996 7,265 -- 0.01 Comshare, Inc., Computer Task
Managing Director Group, Inc.
Arbor Partners, LLC
Ann Arbor, Michigan
(Venture Capital Assistance
Firm)
Prior -- Chairman of the
Board, President and Chief
Executive Officer
Comshare, Inc.
Ann Arbor, Michigan
(Software Producer)
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
NAME, AGE,
PRINCIPAL OCCUPATION COMMON
OR EMPLOYMENT, SHARES PERCENT
PRESENT AND DURING DIRECTOR BENEFICIALLY DEFERRED OF OTHER
LAST FIVE YEARS SINCE OWNED(1) SHARES(1) CLASS(1) DIRECTORSHIPS
-------------------- -------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Donald R. Gant -- 69 1977 47,128(2)(4) -- 0.07 ABC Rail Products Corporation,
Limited Partner Stride Rite Corp.
The Goldman Sachs Group L.P.,
New York, New York
(Investment Banker)
L. Lindsey Halstead -- 67 1993 19,674 -- 0.03 None
Retired Chairman of the
Board, Ford of Europe
(Automotive Industry)
Phillip B. Lassiter -- 54 1995 8,576 -- 0.01 AMBAC Inc., HCIA Inc.
Chairman of the Board,
President and Chief Executive
Officer
AMBAC Inc.
New York, New York
(Financial Guarantee
Insurance Holding Company)
John N. Lauer -- 59 1992 15,744 -- 0.02 BorsodChem, R.T., Menasha
President and Chief Executive Corporation, Oglebay Norton Co.
Officer
Oglebay Norton Co.
Cleveland, Ohio
(Industrial Minerals & Great
Lakes Shipping, Terminal
Management and Mining)
Prior -- Private Investor,
President and Chief Operating
Officer
The BFGoodrich Company
Akron, Ohio (Chemical and
Aerospace Company)
Robert W. Mahoney -- 61 1983 213,572(2)(6) 40,399 0.31 The Sherwin-Williams Company,
Chairman of the Board and The Timken Company
Chief Executive Officer
Diebold, Incorporated
Canton, Ohio
Prior -- Chairman of the
Board, President and Chief
Executive Officer
Diebold, Incorporated
Canton, Ohio
</TABLE>
5
<PAGE> 7
<TABLE>
<CAPTION>
NAME, AGE,
PRINCIPAL OCCUPATION COMMON
OR EMPLOYMENT, SHARES PERCENT
PRESENT AND DURING DIRECTOR BENEFICIALLY DEFERRED OF OTHER
LAST FIVE YEARS SINCE OWNED(1) SHARES(1) CLASS(1) DIRECTORSHIPS
-------------------- -------- ------------ --------- -------- -------------
<S> <C> <C> <C> <C> <C>
William F. Massy -- 63 1984 25,627 -- 0.04 None
President, The Jackson
Hole Higher Education
Group, Inc. and Professor
of Education and Business
Administration, Emeritus
Stanford University
Stanford, California
Prior -- Director, Stanford
Institute for Higher
Education Research and
Professor of Education and
Business Administration
Stanford University
Stanford, California
(Education)
Gregg A. Searle -- 49 1996 70,857(2)(6) 30,060 0.10 Fabri-Centers of America, Inc.
President and Chief
Operating Officer,
Diebold, Incorporated
Canton, Ohio
Prior -- Executive Vice
President
Diebold, Incorporated,
Canton, Ohio
W. R. Timken, Jr. -- 59 1986 138,056(2)(5) -- 0.20 Aeroquip-Vickers, Inc., The
Chairman, President and Timken Company
Chief Executive Officer
The Timken Company
Canton, Ohio
Prior -- Chairman of the
Board, The Timken Company
Canton, Ohio
(Manufacturer of Tapered
Roller Bearings and
Specialty Alloy Steel)
OTHER NAMED EXECUTIVE OFFICERS:
Gerald F. Morris -- 56,400(6) 12,893 0.08 --
Alben W. Warf -- 60,937(6) -- 0.09 --
David Bucci -- 24,498(6) -- 0.04 --
All Directors and Executive -- 1,219,398(2)(3) 83,352 1.77 --
Officers (26) as a Group (4)(5)
(6)
</TABLE>
- ---------------
(1) Messrs. Mahoney, Searle, Morris, Warf and Bucci have stock options issued
under the 1972 Plan and/or the 1991 Plan for 84,373, 35,625, 33,750, 20,250
and 19,067 shares respectively that are exercisable within 60 days following
February 10, 1998. For all directors and executive officers as a group, the
number of stock options issued under the 1972 Plan that are exercisable
within 60 days following February 10, 1998 is 10,635. Under the 1991 Plan,
Messrs. Bockius, Carroll, Crandall, Gant, Halstead, Lassiter, Lauer, Massy
and Timken each have stock options to acquire 18,981, 18,981, 1,265, 3,797,
5,696, 6,326, 3,797, 11,388 and 2,531
6
<PAGE> 8
shares, respectively, within 60 days following February 10, 1998. For all
directors and executive officers as a group, the number of shares that are
exercisable within 60 days following February 10, 1998 under the 1991 Plan
is 350,568. The shares subject to the stock options described in this
footnote are included in the table. The deferred shares for Messrs.
Mahoney, Searle and Morris are not included in the shares reported in the
beneficial ownership and percent columns in the above table.
(2) Includes shares registered as custodian or trustee for minors, shares held
in trust or shares otherwise beneficially owned.
(3) Includes 27,872 shares (0.04%) in which Mr. Bockius has sole voting power
and shared investment power. Mr. Bockius disclaims any beneficial ownership
of these shares.
(4) Includes 2,376 shares in which Mr. Gant disclaims any beneficial ownership.
(5) Includes 94,000 shares (0.14%) in which Mr. Timken has shared voting power
and shared investment power. Mr. Timken disclaims any beneficial ownership
of these shares.
(6) Includes shares held in his or her name under the 401(k) Savings Plan over
which he or she has voting power, and/or shares held in the Dividend
Reinvestment Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
One report covering one transaction for Larry D. Ingram, an executive
officer, was filed late for 1997.
DIRECTOR COMMITTEES AND COMPENSATION
The members of the Audit Committee are Louis V. Bockius III, Daniel T.
Carroll, Richard L. Crandall, L. Lindsey Halstead and W. R. Timken, Jr.,
Chairman. The committee met three times during 1997 in formal session and had
various informal communications between themselves and the independent auditors
at various times during the year. The functions performed by the committee
include recommending to the Board of Directors the independent auditors for the
upcoming year and meeting regularly and separately with both the independent
auditors and the Corporation's internal auditors to (a) discuss their respective
audit plans prior to the commencement of the audit, (b) discuss progress and
findings on an interim basis, (c) review audit findings of the independent
auditors after completion of examination and final discussions with internal
auditors on results of their reviews, and (d) inquire as to the legality and
propriety of the operations of the Corporation, including the steps taken to
comply with the Corporation's business conduct policies.
The members of the Board Membership Committee are Donald R. Gant, Chairman,
L. Lindsey Halstead, Robert W. Mahoney and W. R. Timken, Jr. The committee met
two times during 1997. The committee's functions include reviewing the
qualifications of potential director candidates and making recommendations to
the Board of Directors to fill vacancies or to expand the size of the Board,
when appropriate. The committee also makes recommendations as to the composition
of the various committees of the Board and as to the compensation paid to the
directors for their services on the Board and on the committees. The committee
will consider nominees recommended by shareholders upon written submission of
pertinent data to the attention of the Corporate Secretary. Such data should
include complete information as to the identity and qualifications of the
proposed nominee, including name, address, present and prior business and/or
professional affiliations, education and experience, particular field or fields
of expertise, an indication of the nominee's consent, and reasons why, in the
opinion of the recommending shareholder, the proposed nominee is qualified and
suited to be a director of the Corporation as well as what particular
contributions to the success of the Corporation such person could be expected to
make.
The members of the Compensation and Organization Committee are Donald R.
Gant, Phillip B. Lassiter, John N. Lauer and William F. Massy, Chairman. The
committee met five times during 1997. The committee's functions are described
below under "Compensation and Organization Committee Report on Executive
Compensation."
7
<PAGE> 9
The members of the Executive Committee are Louis V. Bockius III, John N.
Lauer, Chairman, Robert W. Mahoney and Gregg A. Searle. The committee did not
hold any formal meetings in 1997. The functions of the committee were carried
out by telephone or written correspondence. The committee's functions include
reviewing the management and operation of the business of the Corporation
between meetings of the Board of Directors.
The members of the Investment Committee are Daniel T. Carroll, Chairman,
Richard L. Crandall, Phillip B. Lassiter, William F. Massy and Gregg A. Searle.
The committee met one time in 1997. The committee's functions include
establishing the investment policy including asset allocation for the
Corporation's cash, short-term securities and retirement plan assets, overseeing
the management of those assets, ratifying fund managers recommended by
management and reviewing at least annually the investment performance of the
Corporation's retirement plans and 401(k) Savings Plans to assure adequate and
competitive returns.
In 1997 the Board of Directors held six meetings. All directors attended
more than 75% of the aggregate of all meetings of the Board and the Board
committees on which they served during the year.
Non-employee directors are compensated for their services as directors at
the rate of $20,000 per year. Non-employee directors who are members of the
Audit Committee, Board Membership Committee, Compensation and Organization
Committee, Executive Committee and Investment Committee are compensated for
their services at the rate of $3,000 per year per committee. In addition, each
chairman of a committee receives $1,000 per year, and each member of a committee
who attends a meeting of a committee receives a fee of $1,000. A director may
elect to defer receipt of all or a portion of his or her compensation pursuant
to the 1985 Deferred Compensation Plan for Directors. Each non-employee director
may also receive an award of option rights or restricted shares under the 1991
Plan. In 1997 each non-employee director was awarded a stock option to purchase
2,250 Common Shares at an exercise price representing 100% of the market price
of the Common Shares as of the day prior to the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Organization Committee are Donald R.
Gant, Phillip B. Lassiter, John N. Lauer and William F. Massy, Chairman. In 1997
Goldman, Sachs & Co. performed investment advisory services for the Corporation
or its subsidiaries. In the ordinary course of business, Goldman, Sachs & Co.
may be called upon in the future to provide similar or other services for the
Corporation. Donald R. Gant is a limited partner of The Goldman Sachs Group, L.
P. of which Goldman, Sachs & Co. is its primary affiliate. Mr. Gant formerly
served as a director and officer for two of the Corporation's subsidiaries, but
did not receive any additional compensation for serving in these capacities.
8
<PAGE> 10
EXECUTIVE COMPENSATION
The following table provides information relating to the annual and
long-term compensation for the years ended 1997, 1996, and 1995 for the named
executive officers of the Corporation. The amounts shown include compensation
for services in all capacities that were provided to the Corporation including
any amounts which may have been deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS(1)
------------------------------- ------ ----------
OTHER(2)
ANNUAL SECURITIES ALL OTHER(2)
NAME AND COMPEN- UNDERLYING LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION OPTIONS PAYOUTS SATION
------------------ ---- ------ ----- -------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Mahoney 1997 $525,000 $538,450 $21,166 56,250 $1,556,842 $23,930
Chairman of the Board 1996 469,583 498,750 21,261 168,750 1,214,649 12,191
and Chief Executive 1995 422,917 348,075 11,949 56,250 775,188 8,496
Officer
Gregg A. Searle 1997 335,000 371,981 17,137 30,000 1,075,009 8,318
President and Chief 1996 281,667 259,960 15,373 82,500 838,709 7,073
Operating Officer 1995 256,875 146,545 8,004 22,500 516,792 6,650
Gerald F. Morris 1997 287,500 220,660 16,613 22,500 1,075,009 25,224
Executive Vice 1996 272,500 205,800 16,201 22,500 838,709 18,141
President and Chief 1995 256,875 155,555 6,994 22,500 535,276 12,679
Financial Officer
Alben W. Warf 1997 246,000 194,510 14,316 13,500 698,172 8,963
Senior Vice President, 1996 230,000 175,398 12,966 13,500 544,744 7,691
Electronic Systems 1995 215,000 135,470 6,077 13,500 347,591 7,638
Development and Manufacturing
David Bucci 1997 178,125 95,408 6,452 2,250 -0- 6,214
Group Vice President 1996 118,299 40,412 4,957 2,250 -0- 5,720
North American Sales 1995 111,772 29,154 4,976 2,250 -0- 5,579
and Service
</TABLE>
- ---------------
(1) The payouts reported for 1997 were based upon a management objective of
cumulative earnings for the performance period of January 1, 1995 through
December 31, 1997. The performance objective was met at the maximum amount,
and the payout was in the form of cash.
(2) The amounts reported for 1997 for Other Annual Compensation consist of
amounts reimbursed to the named executive officers for tax liability on the
following items: use of a Corporation automobile or cash in lieu thereof;
supplemental executive life insurance; financial planning services or
relocation expenses. The Other Annual Compensation column also includes
preferential interest earned and paid to Messrs. Mahoney, Searle and Morris
on deferred compensation. The All Other Compensation column presents amounts
representing the dollar value of insurance premiums paid by the Corporation
for the benefit of the executive and amounts contributed for 1997 under the
Corporation's 401(k) Savings Plan respectively as follows: Mr. Mahoney
($3,644, $7,313); Mr. Searle ($884, $7,434); Mr. Morris ($1,235, $7,701);
Mr. Warf ($1,445, $7,518); Mr. Bucci ($-0-, $6,214). The All Other
Compensation column also includes an amount of $12,973 and $16,288 for
preferential interest earned but not paid in 1997 by Mr. Mahoney and Mr.
Morris respectively on deferred compensation.
9
<PAGE> 11
EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
The Corporation has entered into agreements with each of the named
executive officers, and certain other executives, providing that in the event of
any change in control of the Corporation through the acquisition of 20 percent
or more of the outstanding voting securities of the Corporation, certain changes
in the composition of the Corporation's Board of Directors, or by merger or
consolidation of the Corporation into, or sale of substantially all of its
assets to, another corporation, such persons would continue their employment
with the Corporation in their present positions for a term of three years
following such change in control. During such term of employment, each of the
named executive officers would be entitled to receive base compensation and to
continue to participate in incentive and employee benefit plans at levels no
less favorable to him or her than prior to commencement of the term. In the
event of the termination of such person's employment under certain circumstances
after a change in control of the Corporation, such person would be entitled to
receive a payment in the amount of approximately twice such person's prior base
salary and to continue to participate in certain employee benefit plans for up
to two years. None of the agreements will become operative until a change in
control of the Corporation has occurred, prior to which time the Corporation and
such persons each reserve the right at any time, with or without cause, to
terminate his or her employment relationship. The Corporation has established
trusts to secure, among other things, the payment of amounts that may become
payable pursuant to these agreements and to reimburse such persons for expenses
incurred in attempting to enforce the Corporation's obligations pursuant to
these agreements and certain other arrangements. These trusts will be funded
only in connection with or in anticipation of a change in control of the
Corporation.
10
<PAGE> 12
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock option grants
for the year 1997 for the named executive officers of the Corporation. No stock
appreciation rights were granted to the named executive officers or other
optionees during 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE(1)
----------------------------------------- -----------------------
NUMBER OF
SECURITIES % OF
UNDERLYING TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE GRANT DATE
GRANTED(2) EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#) FISCAL YEAR ($/SH)(3) DATE VALUE ($)
---- ---------- ------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert W. Mahoney..................... 56,250 6.8 38.08 1/29/07 424,125
Gregg A. Searle....................... 30,000 3.6 38.08 1/29/07 226,200
Gerald F. Morris...................... 22,500 2.7 38.08 1/29/07 169,650
Alben W. Warf......................... 13,500 1.6 38.08 1/29/07 101,790
David Bucci........................... 2,250 0.3 38.08 1/29/07 16,965
</TABLE>
- ---------------
(1) The Securities and Exchange Commission authorizes the use of variations of
the Black-Scholes option-pricing model for valuing executive stock options
in its rules on executive compensation disclosure. The Corporation utilizes
the Black-Scholes model to estimate the grant date present value of stock
option grants. The following assumptions were used in calculating the
Black-Scholes present value of the 1997 stock option grants: (a) an expected
option term of four years for options expiring on January 29, 2007 for the
options granted to Messrs. Mahoney, Searle, Morris and Warf and five years
for the option granted to Mr. Bucci, expiring on January 29, 2007; (b) an
interest rate of 5.5%, which is the interest rate for a zero-coupon U.S.
government issue; (c) volatility of 0.20 calculated using the quarter ending
stock price for the equivalent period to the expected option term prior to
grant date; and (d) dividend yield of 2.2%, the average dividends paid
annually. There is no assurance that the value actually realized by an
executive will be at or near the estimated Black-Scholes value. The actual
value, if any, an executive may realize will depend on the excess of the
stock price over the exercise price on the date the option is exercised. The
Corporation does not advocate or necessarily agree that the Black-Scholes
model can properly determine the value of an option.
(2) All option grants were new and not granted in connection with an option
repricing transaction. The term of the options is ten years, and vesting
occurs at the rate of 25% annually beginning one year from the date of grant
for Messrs. Mahoney, Morris, Searle and Warf and 20% annually beginning one
year from the date of grant for Mr. Bucci, or immediately in the event of a
change in control.
(3) The exercise or base price per share represents the fair market value of the
Corporation's Common Shares as of the day prior to the date of grant.
11
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table provides information relating to stock option exercises
for the year 1997 and exercisable and unexercisable stock options at December
31, 1997 for the named executive officers of the Corporation. No stock
appreciation rights were awarded to such individuals during the last fiscal
year, and no stock appreciation rights were exercised or remained unexercised
during the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END AT FY-END
(#) ($)
SHARES ---------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Robert W. Mahoney.................... 0 0 42,186* 1,351,724*
239,064** 4,225,689**
Gregg A. Searle...................... 0 0 16,875* 540,709*
118,125** 1,974,319**
Gerald F. Morris..................... 0 0 16,875* 540,709*
50,625** 1,120,331**
Alben W. Warf........................ 0 0 10,125* 324,425*
30,375** 672,199**
David Bucci.......................... 0 0 16,029* 631,642*
7,763** 207,101**
</TABLE>
- ---------------
*exercisable
**unexercisable
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
The following table provides information relating to the long-term
incentive awards that were made in the year 1997 under the 1991 Plan for the
named executive officers.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE NON-STOCK PRICE-BASED PLANS
NUMBER OF OR OTHER PERIOD NUMBER OF SHARES
SHARES, UNITS UNTIL MATURATION -------------------------------
NAME OR OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
---- --------------- ---------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Robert W. Mahoney.................... 15,000 1/1/97-12/31/99 4,000 15,000 22,000
Gregg A. Searle...................... 1,107 1/1/95-12/31/97 276 1,107 1,659
2,213 1/1/96-12/31/98 552 2,213 3,318
12,000 1/1/97-12/31/99 3,000 12,000 18,000
Gerald F. Morris..................... 9,788 1/1/97-12/31/99 2,448 9,788 14,682
Alben W. Warf........................ 6,357 1/1/97-12/31/99 1,592 6,357 9,536
David Bucci.......................... 4,950 1/1/97-12/31/99 1,238 4,950 7,425
</TABLE>
The table above presents information about performance shares awarded during the
year pursuant to the 1991 Plan. Each performance share that is earned out
entitles the holder to the then current value of one Common Share. Payouts of
awards are tied to achievement of management objectives based upon specified
cumulative levels of earnings for each performance period. The target amount
will be earned for a performance period if the Corporation achieves 100% of the
targeted earnings rate. No amount is payable unless the threshold amount, which
is fixed at 90% of targeted earnings, is exceeded. The maximum award amount will
be earned if the Corporation achieves 110% of the targeted earnings rate.
Payouts may be made in the form of Common Shares, cash or a combination of
Common Shares and cash as recommended by the Compensation and Organization
Committee and approved by the Board of Directors. The shares shown for Mr.
Searle for the performance periods
12
<PAGE> 14
of January 1, 1995 through December 31, 1997 and January 1, 1996 through
December 31, 1998 represent additional shares granted to him in 1997. The
additional shares were granted to him as a result of his promotion to President
and Chief Operating Officer late in 1996 and reflect his increased
responsibilities.
PENSION PLAN TABLE
The named executive officers and the other executive officers are eligible
to participate in a qualified non-contributory defined benefit retirement plan
("Retirement Plan"). In addition, the named executive officers, and the other
executive officers participate in an unfunded non-qualified supplemental
retirement plan ("Supplemental Plan").
The following table sets forth the estimated annual benefits for both the
Retirement Plan and the Supplemental Plan upon retirement at age 62 to the
executive officers who elect to retire and receive an annuity. The benefit
amounts shown in this table are in addition to any benefits to which the
participant might be entitled under the Social Security Act, and assume that the
Supplemental Plan and the Social Security Act continue unchanged and that
one-half of each participant's anticipated Social Security benefit is $6,702 per
year at age 62.
<TABLE>
<CAPTION>
ANNUAL BENEFIT PAYABLE AT AGE 62
--------------------------------------
AVERAGE 15 OR
COMPENSATION 5 YEARS 10 YEARS MORE YEARS
AT AGE 62 OF SERVICE OF SERVICE OF SERVICE
- ------------ ---------- ---------- ----------
<S> <C> <C> <C>
$ 300,000................................ $ 58,298 $123,298 $ 188,298
500,000................................ 101,631 209,965 318,298
700,000................................ 144,965 296,631 448,298
900,000................................ 188,298 383,298 578,298
1,100,000................................ 231,631 469,965 708,298
1,300,000................................ 274,965 556,631 838,298
1,500,000................................ 318,298 643,298 968,298
1,600,000................................ 339,965 686,631 1,033,298
1,700,000................................ 361,631 729,965 1,098,298
</TABLE>
Benefit levels under the Retirement Plan are based on years of service
(subject to a maximum of 30 years), final average compensation (which is a
5-year average of the Salary and Bonus as reflected in the Summary Compensation
Table but limited to $160,000 in 1997 and $150,000 in 1994 through 1996), and
the participant's individual Covered Compensation as defined under the Internal
Revenue Code. The Supplemental Plan provides a supplemental monthly retirement
benefit so that a participant's total retirement benefit from the Retirement
Plan and the Supplemental Plan, plus one-half of the participant's anticipated
Social Security benefit, equals 65% (prorated for less than 15 years of service)
of the participant's final average compensation received from the Corporation
during the highest five consecutive years of the last ten calendar years of
employment. Compensation is defined for this purpose as Salary plus Bonus
accrued for each such calendar year. The Supplemental Plan benefits are payable
at age 62 on a joint & survivor basis, if married, and a single life basis, if
single at retirement. In no case will less than 5 years of benefit be paid to
the participant, his or her spouse and/or beneficiary, as applicable. Benefits
are also available to participants electing early retirement at age 60 (on a
reduced basis), who die or become disabled while employed, or whose employment
is involuntarily terminated after completing 15 years of service. Reduced
benefits (computed at a 55% of final average compensation, rather than 65%) are
also available to a participant who voluntarily terminates employment after
completing 15 years service. Accrued benefits under the Supplemental Plan are
fully vested in the event of a change in control of the Corporation.
As of December 31, 1997, the number of years of service for the named
executive officers is as follows: Mr. Mahoney, 15.5 years; Mr. Searle, 7.4
years; Mr. Morris, 7.1 years; Mr. Warf, 16.3 years; and Mr. Bucci, 20.3 years.
13
<PAGE> 15
COMPENSATION AND ORGANIZATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation and Organization Committee (the "Committee") is composed
entirely of non-employee directors. The Committee's principal functions are to
establish base salary levels, to determine and measure achievement of corporate
and individual goals for the named executive officers and other executive
officers under the Annual Incentive Plan, select the participants, measure
achievement of objectives and determine awards under the 1991 Equity and
Performance Incentive Plan, as Amended and Restated (the "1991 Plan"). In
addition, the Committee reviews any proposed changes to any benefit plans of the
Corporation such as retirement plans, deferred compensation plans and 401(k)
Savings Plans. The Committee's recommendations are subject to the approval of
the Board of Directors.
The Committee believes that the compensation for the named executive
officers and the other executive officers should tie individual compensation to
the performance of the Corporation. From time to time, the Committee reviews
studies prepared by independent compensation consultants and meets with them to
review such studies when necessary. In 1996, the Committee reviewed and
evaluated the executive compensation program with an outside consultant.
Particular emphasis was placed on the long-term incentive elements of the
program. This evaluation included a review of compensation policies of companies
similar to the Corporation in size and industry and included those companies
with which the Corporation competes for talented executives. Due to the unique
character of the Corporation's business, the companies selected for this purpose
would not necessarily include any of those companies reflected in the
Corporation's performance graph. The survey data used for review of compensation
policies are based upon companies that are similar in size and lines of business
to the Corporation. The studies reviewed surveyed many companies but did not
identify any by name. Some or all of the companies in the peer group used in the
performance graph may have been included in the compensation studies used by the
Corporation, based on the reported lines of business and market capitalization
reflected in the surveys. The Committee used this information, as well as the
results from the evaluation of the executive compensation program, as a basis
for review and recommendation for compensation approved for the executive
officers in 1997. The Committee believes its present compensation programs are
competitive with those offered by companies similar to the Corporation. Also,
the Committee believes that the base salary should be set at or below median,
and that total compensation should be at or above the median when the
Corporation meets or exceeds its expectations and below when it does not.
Further, a significant proportion of total compensation should be variable and
dependent on the overall performance of the Corporation, and this objective can
be achieved through appropriate design of long-term incentive compensation.
The Corporation has three basic elements in the compensation for its
executive officers. These elements are (a) base salary compensation, (b) annual
incentive compensation and (c) long-term incentive compensation. These elements
of compensation recognize both individual and corporate performance. Annual
incentive compensation provides incentive compensation which optimizes rewards
for performance over a shorter period of performance, while long-term incentive
compensation optimizes rewards for performance over a longer term based upon
achievement of cumulative earnings, usually over a three-year period. In
addition, stock option grants result in a reward when the market value
appreciates in relation to the option price.
BASE SALARY COMPENSATION
The base salary for all executive officers is reviewed annually, and the
Committee's review process continues throughout the year. This review includes
an analysis of past and expected future performance of the executive officers,
as well as the responsibilities and qualifications of the executive officers
individually and the performance of the Corporation in comparison with companies
similar to the Corporation. The base salaries established for 1997 were
consistent with the Committee's compensation policy, noted above, of generally
setting base salary at or below median.
ANNUAL INCENTIVE COMPENSATION
The Annual Incentive Plan ("Incentive Plan") recognizes the performance of
the named executive officers, other executive officers and key managers who
contribute to the Corporation's success. These participants have
14
<PAGE> 16
the greatest impact on the profitability of the Corporation. In general, the
participants with the most significant responsibility have the greatest
proportion of their cash compensation tied to the Incentive Plan. The
performance criteria, which are described in more detail below, reflect a
combination of corporate operating profit, net of minority interest, and
specific individual goals and objectives.
At the beginning of each year, the Committee establishes annual performance
goals for the Corporation which are based on operating profit, net of minority
interest. The performance goals include threshold and maximum amounts for
achievement. The Committee established the threshold level for 1997 at a level
that required the Corporation to exceed by seven percent the operating profit
achieved in 1996 before any payout could occur and with the maximum amount at 22
percent over 1996. At the same time, the Committee reviewed, amended and
approved individual personal performance goals and objectives for the named
executive officers. The Incentive Plan is generally weighted 50% on the
Corporation achieving its operating profit goal, and 50% on the achievement of
the individual goals and objectives. No Incentive Plan compensation is paid if
the Corporation does not achieve at least the threshold amount of its operating
profit goal even though an individual may have achieved his or her personal
goals and objectives. At the end of each year, the Committee reviews the
performance of the Corporation and achievement of the personal goals and
objectives for the named executive officers and other executive officers. The
Committee then reviews its findings and recommendations with the Board of
Directors. In 1997, the Corporation exceeded the maximum amount of its
performance goals. In general, the individual goals of the executive officers
were met at slightly less than the maximum amount, and the executive officers
received Annual Incentive Compensation accordingly.
LONG-TERM INCENTIVE COMPENSATION
The 1991 Plan affords flexibility in the types of awards that can be made
for a long-term period. In particular, certain awards tie the individual's
performance to the performance of the Corporation.
In 1997 the Committee recommended performance share grants for the named
executive officers, and the other executive officers for the three-year
performance period of January 1, 1997 through December 31, 1999. Prior to
recommending the grants, the Committee reviewed the performance, together with
the responsibilities, of the executive officers. The performance share grants
were generally determined by the level of responsibilities and the performance
of the executive officers. These executive officers have the greatest impact on
the profitability of the Corporation. The management objective for this
performance period will be measured for the entire performance period on a
cumulative basis. There will be no earnout unless the earnings goal is achieved
for the three-year performance period. Payout of any awards will be based upon
achievement of a threshold amount of 90% of the management objective and the
maximum payout will be earned if 110% of the management objective is achieved.
The Committee believes these awards motivate individual performance and increase
shareholder value because achievement of corporate financial goals on a
cumulative basis over an extended period must be met before any earnout occurs.
The Committee believes that an example of this expected result is shown in the
most recent earnout for the three-year cumulative performance period of January
1, 1995 through December 31, 1997. The Committee recommended and the Board of
Directors approved a very challenging objective for this performance period.
Management performed well and, as a result, the earnout was at the maximum
amount. The payout was in the form of cash.
Performance share grants have generally been issued as the principal form
of equity incentive for the Corporation's executive officers during the last
seven years. No restricted share awards were made in 1997 to the named executive
officers. However, restricted share awards were made in 1997 to certain other
executive officers who were promoted to that level or who were not previously
awarded performance share grants, but were included in such grants when the
program was expanded. These awards in 1997 were made on the basis of their 1996
performance against their goals and objectives. The restricted share awards were
intended to provide an equivalent compensation program for these executive
officers until they achieved their earnout of performance shares under the
relevant performance period. All rights to the restricted share awards are
forfeited if the executive officer terminates employment voluntarily or in the
event of termination for cause before the end of a three-year period.
15
<PAGE> 17
In addition, during 1997 the Committee recommended, and the Board of
Directors approved, stock option grants to the named executive officers. Stock
options were also granted to certain other executive officers in 1997. The
option awards reflect conclusions presented in an earlier report by the outside
compensation consultant, which indicated that the combination of annual
incentive compensation and performance share awards were well below median at
the level of the top five executives. The report also concluded that reliance on
performance shares as the sole long-term incentive did not provide sufficient
upside leverage to recognize excellent performance. Further, the compensation
consultant informed the Committee that any increase in long-term incentive
compensation should be tied to the stock price. The number of shares granted to
the named executive officers was based upon the recommendations of the
compensation consultant. In making its recommendations, the consultant
considered target total compensation for the peer companies of the Corporation
as well as the value of option grants as determined by means of the
Black-Scholes option valuation method. The peer companies selected for this
purpose would not necessarily include any of those companies reflected in the
Corporation's performance graph. This is due to the unique character of the
Corporation's business. Some or all of the companies in the peer group used in
the performance graph may have been included in the compensation studies
provided by the consultant based on the reported lines of business and market
capitalization.
The Committee believes that stock options provide an essential competitive
component in the executive compensation program. Also, the Committee believes
that stock options align the interests of the named executive officers with
those of the Corporation's shareholders since no benefit inures to the named
executive officers unless stock price appreciation occurs over a period of
years. Information on the stock options granted to the named executive officers
is included in the table entitled Option Grants in Last Fiscal Year.
STOCK OWNERSHIP GUIDELINES
Based upon information provided by the executive compensation consultant,
stock ownership guidelines were established at the end of 1996 for the named
executive officers and other executive officers. The Committee and the Board of
Directors believe that it is important for each executive officer to have a
substantial investment in the Corporation as such investment links an executive
officer's interests with other shareholders. These guidelines set forth a
specific target level of ownership based upon base salary. The target levels are
4 times for group vice presidents and vice presidents, 6 times for executive
vice presidents and senior vice presidents, 8 times for the president and chief
operating officer and 10 times for the chairman of the board and chief executive
officer. The guidelines recommend that the executive officers reach their
respective level within three to five years. Periodic adjustments may be
considered, and discretion may be used in certain instances. It is expected that
the target levels will be achieved from stock that is obtained by the executive
officers through the various elements of the executive compensation program. The
Committee reviews progress toward the target levels of ownership on an annual
basis to determine whether all of the executive officers are at the requisite
level of making progress toward such target levels.
CHIEF EXECUTIVE OFFICER COMPENSATION
The chief executive officer, a named executive officer, participates in the
three elements of compensation previously discussed for the other executive
officers.
In setting the base salary compensation for the chief executive officer for
1997, the Committee considered a number of factors. These included an evaluation
of his experience and performance in relation to the performance of the
Corporation. As stated previously, the Committee believes that individual
compensation should be tied to the performance of the Corporation so that a
higher portion of total compensation is attributable to incentive compensation.
In addition to the Corporation's performance goal based on operating
profit, the chief executive officer's individual performance relating to annual
incentive compensation for 1997 was measured by achievement of specific personal
goals and objectives. In 1997 he earned annual incentive compensation slightly
less than the maximum amount. He received this amount because the Corporation's
financial results during the year exceeded the principal predetermined goals,
including earnings per share, operating profit, incoming order levels, and
because he met specified non-financial areas at slightly less than the maximum
amount.
16
<PAGE> 18
With respect to long-term incentive compensation, the chief executive
officer was granted a performance share grant in 1997 covering the performance
period of January 1, 1997 through December 31, 1999. As stated previously, any
earnout of shares will be based upon achievement of a threshold amount of 90% of
the management objective and the maximum payout will be earned if 110% of the
management objective is achieved. The estimated payout for the chief executive
officer is 4,000 shares at threshold, 15,000 shares at target and 22,000 shares
at maximum. For the performance period of January 1, 1995 through December 31,
1997, the chief executive officer earned 31,894 shares, which was the maximum
amount. The payout was in the form of cash. In addition, in 1997 the chief
executive officer was granted a stock option for 56,250 shares at $38.08 per
share, which represented the fair market value as of the day prior to the date
of grant.
Additional information on his stock option is included in the table
entitled Option Grants in Last Fiscal Year. The Committee believes the chief
executive officer's compensation is commensurate with his experience, his
performance and the performance of the Corporation. The Committee believes an
example of his performance is reflected in his leadership of the Corporation in
achieving record earnings, income, orders and revenue for 1997.
COMPLIANCE WITH FEDERAL TAX LEGISLATION
Federal tax legislation enacted in 1993 generally precludes the Corporation
and other public companies from taking a tax deduction for compensation in
excess of $1 million which is not performance-based and is paid, or otherwise
taxable, to the named executive officers. Certain awards were made prior to
February 18, 1993 and are not covered by the legislation. The compensation under
the Corporation's existing programs was affected by the limitation during 1997.
However, the Committee established a policy in 1995 that any amounts affected by
the limitation would be automatically deferred until the limitation no longer
applies. Therefore, such amounts for 1997 were automatically deferred. At the
annual meeting of shareholders in April 1997, an amendment and restatement of
the 1991 Plan was approved to ensure that certain awards qualify as
performance-based compensation that is exempt from the legislation.
The foregoing report on 1997 executive compensation was submitted by the
Compensation and Organization Committee of the Corporation's Board of Directors
and shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission (the "Commission") or subject to Regulation
14A promulgated by the Commission or Section 18 of the Securities Exchange Act
of 1934. The names of the directors who serve on the Compensation and
Organization Committee are set forth below:
William F.Massy, Chairman
Donald R. Gant
Phillip B. Lassiter
John N. Lauer
17
<PAGE> 19
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative shareholder return, which includes the reinvestment of cash
dividends, of the Corporation's Common Shares with the cumulative total return
of the S&P Composite-500 Stock Index and a self-constructed peer group. The peer
group consists of Hubbell Inc. and Thomas & Betts Corp. (electrical products
companies) and Harris Corp., SCI Systems Inc. and Varian Associates (diversified
electronic products companies). The peer group was selected based on similarity
to the Corporation's line of business and similar market capitalization. The
comparison covers the five-year period starting December 31, 1992 and ended
December 31, 1997. The comparisons in this graph are required by rules
promulgated by the Commission and are not intended to forecast future
performance of the Corporation's Common Shares.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1992
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Dec.-92 Dec.-93 Dec.-94 Dec.-95 Dec.-96 Dec.-97
Diebold $100 $153 $160 $220 $381 $465
S&P 500(R) $100 $110 $112 $153 $189 $252
Self-constructed
peer group $100 $113 $120 $159 $203 $258
</TABLE>
18
<PAGE> 20
RATIFICATION OF APPOINTMENT OF AUDITORS
BY THE BOARD OF DIRECTORS
KPMG Peat Marwick LLP acted as the Corporation's independent auditors
during the past fiscal year, and has so acted since 1965.
On the recommendation of the Audit Committee and the Board of Directors,
and subject to ratification by the shareholders, the Board of Directors
appointed KPMG Peat Marwick LLP to examine the accounts and other records of the
Corporation for the fiscal year ending December 31, 1998. The Board of Directors
will present to the annual meeting a proposal that such appointment be ratified.
Should the shareholders fail to ratify the appointment, the Board of Directors
will reconsider its selection.
KPMG Peat Marwick LLP has no financial interest, direct or indirect, in the
Corporation or any subsidiary.
A representative of KPMG Peat Marwick LLP is expected to be present at the
annual meeting to make a statement if he or she desires to do so and to respond
to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF AUDITORS.
EXPENSES OF SOLICITATION
The cost of soliciting the proxies will be paid by the Corporation. In
addition to solicitation by mail, some of the Corporation's directors, officers
and employee associates, without extra compensation may conduct additional
solicitations by telephone, facsimile and personal interviews. The Corporation
will also enlist, at its own cost, the assistance of banks, bankers and
brokerage houses in additional solicitations of proxies and proxy
authorizations, particularly from those of their clients or customers whose
shares are not registered in the clients' or customers' own names. Brokers,
bankers, etc., will be reimbursed for out-of-pocket and reasonable clerical
expenses incurred in obtaining instructions from beneficial owners of the Common
Shares. It is estimated that the expense of such special solicitation will be
nominal. In addition, Georgeson & Co., Inc., New York, New York, has been
retained to assist in the solicitation of proxies for an estimated fee of
$7,000.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1999 annual
meeting of shareholders must be received by the Secretary of the Corporation no
later than November 7, 1998 for consideration for inclusion in the proxy
statement and form of proxy for that meeting.
OTHER MATTERS
The Corporation is not aware of any matters to be presented at the annual
meeting other than the matters set forth herein. Should any other matters be
presented for a vote of the shareholders, the proxy in the enclosed form confers
discretionary voting authority upon the persons voting such proxy. In accordance
with the provisions of the General Corporation Law of the State of Ohio, the
Board of Directors has appointed inspectors of elections to act at the annual
meeting.
By Order of the Board of Directors
Charee Francis-Vogelsang
Vice President and Secretary
Canton, Ohio
March 6, 1998
THE ANNUAL REPORT OF DIEBOLD, INCORPORATED FOR THE
YEAR ENDED DECEMBER 31, 1997, WAS MAILED TO ALL
SHAREHOLDERS ON OR ABOUT MARCH 6, 1998.
19
<PAGE> 21
[Map] [Campus Map]
From Cleveland and Akron: Take I-77 South to Exit 111 (Portage Road). Turn right
on Portage to Frank Avenue. Turn left on Frank Avenue. Proceed to the light at
Frank Road and University Drive. Make a left turn and follow the signs to the
Diebold Education Center.
From Canton: Take I-77 North to Exit 111 (Portage Road). Turn left on Portage to
Frank Avenue. Turn left on Frank Avenue. Proceed to the light at Frank Road and
University Drive. Make a left turn and follow the signs to the Diebold Education
Center.
- --------------------------------------------------------------------------------
DIEBOLD, INCORPORATED
5995 Mayfair Road
P.O. Box 3077, North Canton, Ohio 44720-8077
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert W. Mahoney, Gregg A. Searle and
Gerald F. Morris, and each of them, as Proxies, with full power of substitution
to represent and to vote all the Common Shares of Diebold, Incorporated held of
record by the undersigned on February 27, 1998, at the annual meeting of
shareholders which will be held on April 15, 1998 or at any adjournment thereof,
as indicated on the reverse side.
You are encouraged to specify your choices by marking the appropriate
boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors recommendations. The Proxies cannot vote
your shares unless you sign and return this Card. In their discretion, the
Proxies are authorized to vote upon such other business as may properly come
before the meeting.
(Continued, and to be dated and signed on reverse side.)
DIEBOLD, INCORPORATED
P.O. BOX 11105
NEW YORK, N.Y. 10203-0105
<PAGE> 22
Detach Proxy Card Here
- --------------------------------------------------------------------------------
[ ]
<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below.
Nominees: L.V. Bockius III, D.T. Carroll, R.L. Crandall, D.R. Gant, L.L.
Halstead, P.B. Lassiter, J.N. Lauer, R.W. Mahoney, W.F. Massy, G.A. Searle
and W.R. Timken, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below).
*Exceptions ____________________________________________________________________
<CAPTION>
2. To Ratify the Appointment of KPMG
Peat Marwick LLP as Independent
Auditors for the year 1998. FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
Change of Address and
or Comments Mark Here [ ]
NOTE: Please sign exactly as
name appears hereon. Joint
owners should each sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such.
.
Dated:__________________, 1998
______________________________
Signature
______________________________
Signature
Votes MUST be indicated
(x) in Black or Blue ink.
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
<PAGE> 23
[Directional Map] [Campus Map]
From Cleveland and Akron: Take I-77 South to Exit 111 (Portage Road). Turn right
on Portage to Frank Avenue. Turn left on Frank Avenue. Proceed to the light at
Frank Road and University Drive. Make a left turn and follow the signs to the
Diebold Education Center.
From Canton: Take I-77 North to Exit 111 (Portage Road). Turn left on Portage to
Frank Avenue. Turn left on Frank Avenue. Proceed to the light at Frank Road and
University Drive. Make a left turn and follow the signs to the Diebold Education
Center.
- --------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS
To Key Trust Company of Ohio, NA, Trustee for the Diebold, Incorporated 401(k)
Savings Plan ("SP")
The undersigned, as a participant in the SP, hereby directs the Trustee to
vote in person or by proxy, with the powers the undersigned would possess if
personally present, to vote all Common Shares of the undersigned in Diebold,
Incorporated (and to exercise all other shareholder rights and powers) at the
annual meeting of its shareholders to be held on April 15, 1998 and at any
adjournments thereof, upon all matters that may properly come before the
meeting, including the matters identified on the reverse side of this consent
card and described in the proxy statement furnished herewith, subject to any
directions indicated on the reverse side of this consent card.
PLEASE MARK, SIGN AND DATE THE REVERSE SIDE AND RETURN THIS CONSENT CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.
DIEBOLD, INCORPORATED
P.O. BOX 11105
NEW YORK, N.Y. 10203-0105
<PAGE> 24
Detach Instruction Card Here
- --------------------------------------------------------------------------------
[ ]
<TABLE>
<S> <C> <C> <C>
1. Election of Directors FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ] *EXCEPTIONS [ ]
listed below for all nominees listed below.
Nominees: L.V. Bockius III, D.T. Carroll, R.L. Crandall, D.R. Gant, L.L.
Halstead, P.B. Lassiter, J.N. Lauer, R.W. Mahoney, W.F. Massy, G.A. Searle
and W.R. Timken, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below).
*Exceptions_____________________________________________________________________
<CAPTION>
2. To Ratify the Appointment of
KPMG Peat Marwick LLP as Independent
Auditors for the year 1998. FOR [ ] AGAINST [ ] ABSTAIN [ ]
</TABLE>
NOTE: Please sign exactly as
name appears hereon.
.
Dated:__________________, 1998
______________________________
Signature
______________________________
Signature
Votes MUST be indicated
(x) in Black or Blue ink.
Please Sign, Date and Return the Proxy Promptly Using the Enclosed Envelope.
