<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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
EATON CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: ............
(2) Aggregate number of securities to which transaction applies: ...............
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): ...............................
(4) Proposed maximum aggregate value of transaction: ...........................
(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
[LOGO]
PROXY
STATEMENT
&
NOTICE of MEETING
2000 ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------------------------------
<PAGE> 3
NOTICE OF MEETING
The 2000 annual meeting of Eaton Corporation shareholders will be held
Wednesday, April 26, at 10:30 a.m. local time at the Company's Cutler-Hammer
Headquarters, 1000 Cherrington Parkway, Moon Township, PA, for the purpose of:
1. Electing directors;
2. Adopting Amended Regulations;
3. Ratifying the appointment of independent auditors; and
4. Considering reports and such other business as may properly come before the
meeting.
These matters are more fully described in the following pages.
The record date for the meeting has been fixed by the Board of Directors as the
close of business on February 28, 2000. Shareholders of record at that time are
entitled to vote at the meeting.
By order of the Board of Directors
/s/ Earl R. Franklin
Earl R. Franklin
Secretary
March 17, 2000
Your Vote Is Important
- --------------------------------------------------------------------------------
To vote your shares, please indicate your choices, sign and date the enclosed
proxy card and return it in the accompanying postage-paid envelope. You will
save your Company the expense of a second mailing by returning your proxy card
promptly.
- --------------------------------------------------------------------------------
<PAGE> 4
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT ................................ 3
Proxy Solicitation ............................. 3
Voting at the Meeting .......................... 3
Election of Directors .......................... 4
Board Committees ............................... 8
Compensation of Directors ...................... 9
Executive Compensation ......................... 10
Adoption of Amended Regulations ................ 19
Ratification of the Appointment of
Independent Auditors ......................... 20
Other Business ................................. 20
Ownership of Outstanding Voting Shares.......... 20
Future Shareholder Proposals ................... 22
</TABLE>
<PAGE> 5
PROXY STATEMENT
EATON CORPORATION
Eaton Center
Cleveland, Ohio 44114-2584
216-523-5000
- ----------------------------------------------
This proxy statement, the accompanying proxy form and Eaton's annual report for
the year ended December 31, 1999 are scheduled to be sent to shareholders on or
about March 17, 2000.
PROXY SOLICITATION
Eaton's Board of Directors solicits your proxy, in the form enclosed, for use at
the 2000 annual meeting of shareholders and any adjournments thereof. The
individuals named in the enclosed form of proxy have advised the Board of their
intention to vote at the meeting in compliance with instructions on all forms of
proxy tendered by shareholders and, where no contrary instruction is indicated
on the proxy form, for the election of the individuals nominated to serve as
directors, for adoption of the Amended Regulations, and for ratification of the
appointment of Ernst & Young LLP as independent auditors. These matters are
described in the following sections of this proxy statement.
Any shareholder giving a proxy may revoke it by giving Eaton written notice
before the meeting or by revoking it at the meeting. All properly executed
proxies not revoked will be voted at the meeting.
In addition to soliciting proxies through the mail, certain employees may
solicit proxies in person or by telephone or facsimile. Eaton has retained
Morrow & Co., Inc., 445 Park Avenue, New York, New York 10022, to assist in the
solicitation of proxies, primarily from brokers, banks and other nominees, for a
fee estimated at $7,000. Brokerage firms, nominees, custodians and fiduciaries
may be asked to forward proxy soliciting material to the beneficial
shareholders. All reasonable soliciting costs will be borne by Eaton.
VOTING AT THE MEETING
Each Eaton shareholder of record at the close of business on February 28, 2000
is entitled to one vote for each share then held. On February 28, 72,731,811
Eaton common shares (par value, 50c each) were outstanding and entitled to vote.
At the 2000 annual meeting, the inspectors of election appointed by the Board of
Directors for the meeting will determine the presence of a quorum and tabulate
the results of shareholder voting. As provided by Ohio law and Eaton's Amended
Regulations, Eaton shareholders present in person or by proxy at the meeting
will constitute a quorum. The inspectors of election intend to treat properly
executed proxies marked "abstain" as "present" for these purposes. The
inspectors will also treat as "present" shares held in "street name" by brokers
that are voted on at least one proposal to come before the meeting.
Director nominees receiving the greatest number of votes will be elected
directors. Votes withheld in respect of the election of directors will not be
counted in determining the outcome of the election. Adoption of all other
proposals to come before the meeting will require the affirmative vote of the
holders of a majority of the outstanding Eaton common shares, which requirement
is consistent with the general vote requirement in Eaton's Amended Articles of
Incorporation. The practical effect of this vote requirement will be that
abstentions and shares held in "street name" by brokers that are not
3
<PAGE> 6
voted in respect of those proposals will be treated the same as votes cast
against those proposals.
As provided by Ohio law, each shareholder is entitled to cumulative voting
rights in the election of directors if any shareholder gives written notice to
the President or a Vice President or the Secretary of Eaton at least 48 hours
before the time fixed for the meeting, requesting cumulative voting, and if an
announcement of that notice is made at the beginning of the meeting by the
Chairman or Secretary, or by or on behalf of the shareholder who gave the
notice. If cumulative voting is in effect with respect to an election of
directors, each shareholder has the right to cumulate his or her voting power by
giving one nominee that number of votes which equals the number of directors to
be elected multiplied by the number of the shareholder's shares, or by
distributing his or her votes on the same principle among two or more nominees,
as the shareholder sees fit. If cumulative voting is in effect with respect to
an election of directors, the individuals named in the proxy will vote the
shares represented by the proxy cumulatively for those nominees that they may
determine in their discretion, except that no votes will be cast for any nominee
as to whom the shareholder giving the proxy has directed that his or her vote be
withheld.
1. ELECTION OF DIRECTORS
The Board of Directors is presently composed of eleven members. The terms of
four directors will expire in April, 2000. One of these directors is Phyllis B.
Davis. Mrs. Davis, a director since 1991, having attained the normal retirement
age, will resign as director at the conclusion of the annual meeting of
shareholders on April 26. Deborah L. McCoy has been nominated to fill the
vacancy thus created. (See page 5.)
The remaining three directors whose terms are expiring have been nominated for
re-election. Each of these directors was elected at the 1997 annual meeting.
(See page 5.)
If any of the nominees become unable or decline to serve, the individuals named
in the enclosed proxy will have the authority to vote for substitutes. But
Eaton's management has no reason to believe that this will occur.
Following is biographical information about each nominee and each director.
4
<PAGE> 7
NOMINEES FOR ELECTION TO TERMS ENDING IN 2003 OR WHEN THEIR SUCCESSORS ARE
ELECTED AND HAVE QUALIFIED:
<TABLE>
<S> <C> <C> <C>
A. M. CUTLER PHOTO S. R. HARDIS PHOTO G. L. TOOKER PHOTO D. L. McCOY PHOTO
ALEXANDER M. CUTLER, 48, is STEPHEN R. HARDIS, 64, is GARY L. TOOKER, 60, is DEBORAH L. MCCOY, 45, is
President and Chief Chairman and Chief Executive former Chairman and Chief Senior Vice President,
Operating Officer of Eaton Officer of Eaton Executive Officer and is Flight Operations of
Corporation. Mr. Cutler Corporation. Mr. Hardis presently a director of Continental Airlines, Inc.
joined Cutler-Hammer, Inc. joined Eaton in 1979 as Motorola, Inc., a She joined Continental as a
in 1975, which was Executive Vice manufacturer of electronics pilot in 1979, advanced
subsequently acquired by President - Finance and equipment. Mr. Tooker joined through several senior pilot
Eaton, and became President Administration. He was Motorola in 1962 and positions to become Senior
of Eaton's Industrial Group elected Vice Chairman in advanced to the position of Director, Operations
in 1986 and President of the 1986 and designated Chief Senior Executive Vice Performance in 1994, Vice
Controls Group in 1989. He Financial and Administrative President and Chief President, Inflight and
advanced to Executive Vice Officer. He became Chief Corporate Staff Officer in Standards Training and
President - Operations in Executive Officer in 1995 1986. He became Chief Performance in 1996, and
1991, was elected Executive and Chairman in 1996. Mr. Operating Officer in 1988, Vice President, Flight
Vice President and Chief Hardis is a director of President in 1990, Vice Training and Inflight in
Operating Officer - Controls American Greetings, KeyCorp, Chairman and Chief Executive 1997. Ms. McCoy assumed her
in 1993 and assumed his Lexmark International Group, Officer in 1993, Chairman in present position in 1999.
present position in 1995. Inc., Marsh & McLennan 1997, and Vice Chairman in
DIRECTOR SINCE 1993 Companies, Nordson 1999. Mr. Tooker is a
Corporation and Progressive director of the Atlantic
Corporation. Richfield Company.
DIRECTOR SINCE 1983 DIRECTOR SINCE 1992
</TABLE>
5
<PAGE> 8
DIRECTORS WHOSE PRESENT TERMS CONTINUE UNTIL APRIL 2001:
<TABLE>
<S> <C> <C>
M. J. CRITELLI PHOTO E. GREEN PHOTO A. WILLIAM REYNOLDS PHOTO
MICHAEL J. CRITELLI, 51, is ERNIE GREEN, 61, is founder, A. WILLIAM REYNOLDS, 66, is
Chairman and Chief Executive President and Chief Chief Executive of the Old
Officer of Pitney Bowes Executive Officer of EGI, Mill Group, a private
Inc., a provider of Inc., a manufacturer of investment firm. Mr.
messaging and advanced automotive components. He is Reynolds is former Chairman
business communications also President of Florida of GenCorp Inc. He was
solutions. He was elected Production Engineering, Chairman of GenCorp from
Vice Chairman of Pitney Inc., subsidiary of EGI. He 1987 to 1995 and Chief
Bowes in 1994. He was is a director of DP&L Inc., Executive Officer from 1985
promoted to Vice Chairman and Pitney Bowes Inc. to 1994. Mr. Reynolds is a
and Chief Executive Officer DIRECTOR SINCE 1995 director of Boise Cascade
of the corporation in 1996, Corporation and Boise
and Chairman and Chief Cascade Office Products
Executive Officer in 1997. Corp.
Mr. Critelli is a trustee of DIRECTOR SINCE 1987
the National Urban League.
DIRECTOR SINCE 1998
</TABLE>
6
<PAGE> 9
DIRECTORS WHOSE PRESENT TERMS CONTINUE UNTIL APRIL 2002:
<TABLE>
<S> <C> <C> <C>
N. C. LAUTENBACH PHOTO J. R. MILLER PHOTO F. C. MOSELEY PHOTO V. A. PELSON PHOTO
NED C. LAUTENBACH, 56, is a JOHN R. MILLER, 62, is FURMAN C. MOSELEY, 65, is VICTOR A. PELSON, 62, is a
partner of Clayton, Dubilier Chairman and Chief Executive Chairman of Sasquatch Senior Advisor to Warburg
& Rice, Inc., an investment Officer of TBN Holdings Publishing Company. He is Dillon Read LLC, investment
firm specializing in Inc., a buyout firm, and is former President of Simpson bankers. Before joining
structuring leveraged a director of Cambrex Investment Company, holding Warburg Dillon Read in 1996,
buyouts. Before joining Corporation and Waterlink, company for Simpson Paper Mr. Pelson was associated
Clayton, Dubilier, Mr. Inc. He was President, Chief Company and Simpson Timber with AT&T from 1959 to 1996,
Lautenbach was associated Operating Officer and a Company. He was Chairman of where he held a number of
with IBM from 1968 until his director of The Standard Oil Simpson Paper from 1969 to executive positions,
retirement in 1998. At IBM, Company from 1980 to 1986. 1995 and retired as including Group Executive
he held several executive Mr. Miller formerly served President of Simpson and President responsible
positions, including Vice as Chairman of the Federal Investment in 1995. Mr. for the Communications
President, President of IBM Reserve Bank of Cleveland. Moseley is a director of Services Group, Executive
Asia Pacific, Senior Vice DIRECTOR SINCE 1985 Owens Corning. Vice President and member of
President, Chairman of IBM DIRECTOR SINCE 1975 the Management Executive
World Trade Corporation, Committee. At the time of
Senior Vice President and his retirement from AT&T,
Group Executive, Sales and Mr. Pelson was Chairman of
Distribution, and was a Global Operations and a
member of IBM's Corporate member of the Board of
Executive Committee. He is a Directors. Mr. Pelson is a
director of ChoicePoint, director of Dun &
Inc., Dynatech Corp., Bradstreet, Dynatech Corp.,
Fidelity Mutual Funds, and United Parcel Service and
Fairfield University. Carrier 1 International,
DIRECTOR SINCE 1997 S.A.
DIRECTOR SINCE 1994
</TABLE>
7
<PAGE> 10
BOARD COMMITTEES -- The Board of Directors has the following standing
committees: Audit, Compensation and Organization, Corporate Responsibility and
Public Policy, Executive and Finance.
Audit Committee. The functions of the Audit Committee include aiding directors
in fulfilling the Board's responsibility for the quality of financial reporting,
meeting with the Company's director of internal audits to review the annual
internal audit plan and, subsequently, the results of the audit, receiving and
considering management recommendations regarding the appointment of independent
auditors and recommending to the Board a firm to serve as independent auditors,
meeting with the independent auditors and management to review the scope of and
the plan for the annual audit and, subsequently, to review the results of the
audit, reviewing any significant changes in accounting policies, reviewing the
annual financial statements, reviewing significant non-audit professional
services provided by the independent auditors and fees for those services and
serving as the auditors' access to the Board (for both internal and independent
auditors). The Audit Committee held three meetings in 1999. Present members are
Messrs. Critelli, Green, Moseley and Reynolds.
Compensation and Organization Committee. The functions of the Compensation and
Organization Committee include recommending and attracting qualified candidates
as director nominees, recommending the number of directors to serve for each
ensuing year, reviewing and recommending changes in the functions and
responsibilities of each of the Board's committees, reviewing proposed
organization or responsibility changes at the officer level, evaluating the
performance of the Chief Executive Officer and reviewing the performance
evaluations of the other elected officers, reviewing succession planning for key
officer positions and recommending the individual to assume the position of
Chief Executive Officer if that position becomes vacant due to unforeseen
circumstances. The committee is also responsible for recommending to the Board
of Directors the salary of each elected officer and the retainer and attendance
fees and other compensation to non-employee directors, reviewing awards to
elected officers under the Executive Incentive Compensation Plan and the
aggregate amount of awards under the Plan, adjusting that amount as appropriate
within the terms of the Plan, establishing and subsequently determining the
attainment of performance objectives under the Company's long-term incentive
compensation plans, administering stock option plans and reviewing compensation
and benefit plans as they relate to key employees to confirm that those plans
remain equitable and competitive, as well as maintaining a program to analyze
and recommend such plans for the long range, and preparing an annual report for
the Company's proxy statement regarding executive compensation. The Compensation
and Organization Committee held seven meetings in 1999. Present members are Mrs.
Davis and Messrs. Lautenbach, Miller, Pelson and Tooker.
The Compensation and Organization Committee will consider individuals for
nomination to stand for election as directors who are recommended to it in
writing by any Eaton shareholder. Any shareholder wishing to recommend an
individual as a nominee for election at the annual meeting of shareholders to be
held in 2001 should send a signed letter of recommendation, to be received
before November 3, 2000, to the following address: Eaton Corporation, Eaton
Center, Cleveland, Ohio 44114-2584, attention Corporate Secretary.
Recommendation letters must state the reasons for the recommendation and contain
the full name and address of each proposed nominee as well as a brief
biographical history setting forth past and present directorships, employments,
occupations and civic activities. Any such recommendation should be accompanied
by a
8
<PAGE> 11
written statement from the proposed nominee consenting to be named as a
candidate and, if nominated and elected, consenting to serve as a director.
Corporate Responsibility and Public Policy Committee. The function of the
Corporate Responsibility and Public Policy Committee is to provide oversight
regarding significant public issues of concern with respect to the Company's
relationships with shareholders, employees, customers, competitors, suppliers
and the communities in which the Company operates, including such areas as
ethics, environmental, health and safety issues, diversity and equal employment
opportunity, community relations, government relations, charitable
contributions, shareholder and investor relations and the Eaton Philosophy --
Excellence through People. The Corporate Responsibility and Public Policy
Committee held two meetings in 1999. Present members are Mrs. Davis and Messrs.
Critelli, Green, Miller and Tooker.
Executive Committee. The functions of the Executive Committee include all of the
functions of the Board of Directors other than the filling of vacancies in the
Board of Directors or in any of its committees. The Executive Committee acts
upon matters requiring Board action during the intervals between Board meetings.
It met once in 1999. Mr. Hardis is a member for the full twelve-month term; each
of the non-employee directors serves a four-month term.
Finance Committee. The functions of the Finance Committee include the periodic
review of the Company's financial condition and the recommendation of financial
policies, analyzing Company policy regarding its debt-equity relationship,
reviewing and making recommendations regarding the Company's dividend policy,
reviewing the Company's cash flow, proposals for long- and short-term debt
financing and the risk management program, meeting with and reviewing the
performance of management pension committees and any other fiduciaries appointed
by the Board for pension and profit-sharing retirement plans and reviewing those
plans and recommending modifications to them. The Finance Committee held two
meetings in 1999. Present members are Messrs. Critelli, Green, Lautenbach,
Moseley, Pelson and Reynolds.
The Board of Directors held eight meetings in 1999. Two directors, Phyllis B.
Davis and Furman C. Moseley, attended fewer than 75% of the meetings of the
Board and its committees. The average rate of attendance for all directors was
93%.
COMPENSATION OF DIRECTORS -- Employee directors are not compensated for their
services as directors. Non-employee directors receive an annual retainer of
$40,000, an annual retainer of $5,000 for each non-employee director who serves
as chairman of any standing committee of the Board, a fee of $1,500 for each
Board meeting attended and for attendance at any special presentation on
non-Board meeting days, and a fee of $1,000 for each Board committee and
shareholder meeting attended.
Non-employee directors first elected before 1996 may defer payment of their
annual fees not to exceed $30,000 at a rate of interest specified in their
deferred compensation agreements. The rate of interest is based upon the number
of years until a director's normal retirement date and, in general, is higher
than prevailing market rates. All non-employee directors may defer payment of
their fees at a rate of return which varies, depending on whether the director
defers the fees as retirement compensation or as short-term compensation. At
least 50% of retirement compensation, or any greater portion which the director
elects, is converted to share units and earns share price appreciation and
dividend equivalents. The balance of retirement compensation earns 10-year
Treasury note returns plus 300 basis points. Short-term
9
<PAGE> 12
compensation earns 13-week Treasury bill returns. These arrangements provide for
accelerated lump sum or installment payments upon a failure by the Company to
pay or termination of service in the context of a change in control of the
Company.
Under the Company's 1998 Stock Plan, as approved by the shareholders, each
person who on April 22, 1998 or thereafter becomes a non-employee director
automatically is granted an option for 5,000 shares upon the date of his or her
election. So long as each non-employee director continues to serve in that
capacity, beginning in the year after the director receives his or her initial
grant, he or she is automatically granted an option for a number of shares equal
to the quotient resulting from dividing (i) four times the annual retainer for
each non-employee director in effect on the granting date, by (ii) the closing
price of an Eaton common share on the New York Stock Exchange Composite
Transactions on the last business day immediately preceding the granting date.
The granting date is the Tuesday immediately before the fourth Wednesday of each
January.
Upon leaving the Board, non-employee directors who were first elected prior to
1996 are eligible to receive an annual benefit, as described below. For Board
service of at least five years, eligible directors receive an annual benefit
equal to the annual retainer in effect at the time the directors leave the
Board. Eligible directors having fewer than five years but more than one year of
Board service at the time of their Board retirement receive a proportionately
reduced annual benefit. The annual benefit is paid for the lesser of ten years
or life. The present value of payments under this plan will be paid in a lump
sum upon a "proposed change in control" of the Company, unless otherwise
determined by a committee of the Board. Directors who are first elected in 1996
or later are not eligible to receive the annual benefit.
EXECUTIVE COMPENSATION -- The following table summarizes the total compensation
of the Chief Executive Officer of Eaton and the four other most highly
compensated executive officers for fiscal year 1999. The table also summarizes
compensation of the named executive officers for fiscal years 1998 and 1997.
10
<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS PAYOUTS
-------- ----------
LONG-
ANNUAL COMPENSATION OTHER STOCK TERM ALL OTHER
---------------------------- ANNUAL OPTIONS INCENTIVE COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (SHARES) PAYOUTS (1)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
S. R. Hardis 1999 $946,700 $1,345,611 $ 0 125,000 $1,139,253 $777,437
Chairman and Chief 1998 866,680 1,053,531 0 60,000 1,130,481 449,931
Executive Officer 1997 790,000 1,534,680 0 250,000 973,409 748,410
A. M. Cutler 1999 $695,040 $ 914,250 $ 0 75,000 $ 792,576 $ 26,944
President and Chief Operating 1998 640,040 715,479 0 36,000 793,221 26,034
Officer 1997 586,680 990,031 0 175,000 709,458 22,733
B. R. Bachman 1999 $380,040 $ 364,656 $ 0 35,000 $ 414,037 $ 14,560
Senior Vice President 1998 355,020 299,495 0 17,000 0 24,788
and Group Executive -- 1997 332,040 418,044 0 90,000 225,000 18,844
Hydraulics, Semiconductor
Equipment and Specialty
Controls
R. J. McCloskey 1999 $377,360 $ 422,233 $ 0 30,000 $ 414,037 $ 16,985
Senior Vice President 1998 354,020 346,783 0 15,000 348,331 49,962
1997 330,700 437,046 0 90,000 310,938 21,887
T.W. O'Boyle 1999 $400,340 $ 441,425 $ 0 30,000 $ 414,037 $ 21,489
Senior Vice President and 1998 366,000 394,072 0 15,000 348,331 25,443
Group Executive -- 1997 338,680 494,052 0 90,000 310,938 29,604
Truck Components
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All Other Compensation contains several components. The Eaton Corporation
Share Purchase and Investment Plan permits an employee to contribute from 1%
to 6% of his or her salary to the matching portion of the plan. Eaton makes
a matching contribution which, except in special circumstances, ranges
between $.25 and $1.00 for each dollar contributed by the participating
employee, as determined under a formula designed to reflect Eaton's
quarterly earnings per share. The amount the Company contributed during 1999
for each of the named executive officers was as follows: S. R. Hardis,
$8,804; A. M. Cutler, $8,060; B. R. Bachman, $4,392; R. J. McCloskey, $2,822
and T. W. O'Boyle, $5,579. The Company maintains plans pursuant to which
incentive compensation may be deferred. Earning on such deferrals which are
above rates established by the Internal Revenue Service are disclosed in
this table. Those earnings during 1999 for each of the named executive
officers were as follows: S. R. Hardis, $735,725; A. M. Cutler, $3,405; B.
R. Bachman, $0; R. J. McCloskey, $4,795; and T. W. O'Boyle, $1,733. Under a
Company program, each executive officer may acquire an automobile. Under
this program for 1999, the approximate cost to the Company for each of the
named executive officers was as follows: S. R. Hardis, $13,020; A. M.
Cutler, $10,522; B. R. Bachman, $9,486; R. J. McCloskey, $5,613; T. W.
O'Boyle, $12,366. The Company provides certain executives, including the
named executive officers, with the opportunity to acquire individual
whole-life insurance. The annual premiums paid by the Company during 1999
for each of the named executive officers were as follows: S. R. Hardis,
$19,888; A. M. Cutler, $4,957; B. R. Bachman, $682; R. J. McCloskey, $3,755;
and T. W. O'Boyle, $1,811. Each executive officer is responsible for paying
individual income taxes due with respect to the Company's automobile and
insurance programs.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES -- The following table
contains information concerning the exercise of stock options during fiscal year
1999 and the value of unexercised stock options at the end of fiscal year 1999
with respect to the named executive officers.
<TABLE>
<CAPTION>
TOTAL VALUE OF
TOTAL NUMBER OF UNEXERCISED,
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES HELD AT HELD AT
ACQUIRED ON FISCAL YEAR END FISCAL YEAR END
EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
S. R. Hardis 11,478 $681,033 287,136 310,000 $4,689,414 $300,625
A. M. Cutler 4,140 247,057 239,926 198,500 4,462,134 192,906
B. R. Bachman 0 0 64,400 97,000 429,475 94,200
R. J. McCloskey 2,540 147,409 82,460 90,000 845,397 87,188
T. W. O'Boyle 11,104 601,974 85,416 90,000 953,505 87,188
- -------------------------------------------------------------------------------------------------------
</TABLE>
OPTION GRANTS -- The following table gives information concerning grants of
stock options made during fiscal year 1999 to each of the named executive
officers. No stock appreciation rights were granted during fiscal year 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS POTENTIAL REALIZABLE VALUE AT ASSUMED
SECURITIES GRANTED TO ANNUAL RATES OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL OR BASE EXPIRATION -----------------------------------------
NAME GRANTED (#) YEAR(1) PRICE DATE 0% 5% 10%
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
S. R. Hardis 125,000 5.77 $71.41 1/26/09 $0 $ 5,623,538 $ 14,192,738
A. M. Cutler 75,000 3.46 71.41 1/26/09 0 3,374,123 8,515,643
B. R. Bachman 35,000 1.62 71.41 1/26/09 0 1,574,591 3,973,967
R. J. McCloskey 30,000 1.38 71.41 1/26/09 0 1,349,649 3,406,257
T. W. O'Boyle 30,000 1.38 71.41 1/26/09 0 1,349,649 3,406,257
- -------------------
All Shareholders(2) N/A N/A N/A N/A 0 3,277,944,127 8,272,906,608
</TABLE>
(1) Based on a total of 2,166,280 options granted to all employees. All options
granted to the named executive officers were granted on January 26, 1999. As
granted, one-third of the options become exercisable upon each of the first,
second and third anniversary of the date of grant.
(2) At the assumed annual rates of stock price appreciation of 0%, 5% and 10%,
the value of all 72,862,147 shares outstanding on January 31, 2000 would
increase by the amounts shown. There can be no assurance that the market
price of Eaton shares will increase in the future.
- --------------------------------------------------------------------------------
12
<PAGE> 15
LONG-TERM INCENTIVE PLAN AWARDS -- The following table gives information
regarding Long-Term Incentive Plan awards made during fiscal year 1999 to each
of the named executive officers.
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
NUMBER OF PERIOD ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES, UNTIL PRICE BASED PLANS
UNITS OR MATURATION ----------------------------------------
NAME OTHER RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
S. R. Hardis 10,200 4 years 5,100 10,200 20,400
A. M. Cutler 7,100 4 years 3,550 7,100 14,200
B. R. Bachman 3,700 4 years 1,850 3,700 7,400
R. J. McCloskey 3,700 4 years 1,850 3,700 7,400
T. W. O'Boyle 3,700 4 years 1,850 3,700 7,400
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) These units were awarded during 1999 under the Company's long-term incentive
plan at a target price per unit of $70.93. The actual, final value of the
units will be determined after the completion of the four-year award period
based upon the achievement of corporate and individual performance goals.
The corporate goals relate to cash flow return on gross capital and growth
in earnings per Company common share. Any future payouts will be made in
Company common shares, unless the executive has elected to defer receipt of
the payment under the Company's long-term deferral plan or to the extent
necessary to satisfy tax withholding requirements.
COMPENSATION AND ORGANIZATION COMMITTEE REPORT -- The Committee, consisting of
five non-employee directors, met seven times in 1999. The Committee has adopted
several fundamental compensation policies which have been endorsed by the Board
of Directors. It is Committee policy that executive compensation must to a large
extent be at risk, in the sense of being dependent on achieving rigorous
Company, business unit and individual performance objectives that are designed
to enhance shareholder value. It is also Committee policy that executive
compensation must be competitive in the employment marketplace in order to allow
the Company to attract, motivate and retain highly qualified executives, and
that it must fairly reflect, in the judgment of the Committee, accomplishments
and responsibilities within the Company.
The administration of the Company's executive compensation is consistent with
these policies. This is confirmed by studies of Company and industry practices
conducted for the Committee at least every two years with the assistance of a
nationally recognized consulting firm, the results of which are summarized for
the Board of Directors. Based on the study conducted during 1999 and the
consulting firm's recommendations, the Committee has established annual
guidelines designed to limit the dilutive effect of the Company's stock option
grants. Further, the Committee will review the Company's short-term incentive
plan to confirm that its performance metrics are aligned with the Company's
earnings growth objectives. Sixty-six percent of the 1999 aggregate cash
compensation of the executive officers named in the compensation table was based
directly on specific financial performance objectives. For 1999, the Committee
established base salary at approximately the median range of compensation paid
by similar companies included in the survey data bases of several nationally
recognized compensation consulting firms. The Committee also established
short-term and long-term incentive opportunities and stock option grants at
approximately the median 13
<PAGE> 16
range, with opportunities for larger payments if the Company achieves superior
performance.
Salary -- In setting executive salaries, the Committee uses input from outside
sources as noted above and management recommendations for individual
adjustments. In judging performance, the Committee considers performance against
annual plans, accomplishment of other objectives and the financial results of
similar companies. The Company also normally considers factors such as
initiative and leadership, as well as time in position, experience, knowledge
and level of competitive compensation in the marketplace. Consistently effective
individual performance is a threshold requirement for any salary increase. The
Committee considers these same factors when preparing its recommendations for
base salary adjustments for the Company's Chairman and Chief Executive Officer.
The Committee's recommendations for 1999 salary adjustments were based upon
these considerations and accepted by the Board of Directors.
Short-Term Incentives -- Annual performance awards, including those paid in
1999, are based on percentages of salary range midpoints and depend on whether
the Company has achieved predetermined levels of cash flow return on gross
capital employed in the business ("CFR"), individual performance ratings,
business unit performance (for operating managers) and Committee discretion. CFR
correlates well with corporate performance and is a measure easily understood by
incentive compensation plan participants. The Committee also believes that, over
time, consistently high CFR provides a good statistical correlation with
sustained high stock market valuation. No payments are made unless the Company
achieves the predetermined CFR levels, as it did in 1999. Individual performance
ratings take into account factors such as unanticipated challenges and
opportunities, actual performance against profit plan, personal objectives,
general economic conditions and the performance of other large industrial
corporations. Individual ratings emphasize pay for performance, and may result
in payments ranging from zero to 150% of the amount otherwise payable. The
Committee may adjust the total amount available for payment under the plan up or
down by 20%. Payments to executive officers for 1999 were made at levels
generated by the plan metrics and were not affected by the exercise of this
discretion. Executives may defer payment of their bonuses. Amounts deferred
until retirement earn the greater of share price appreciation and dividend
equivalents or 13-week Treasury bill returns. Amounts deferred for shorter
periods earn Treasury bill returns.
Long-Term Incentives -- Long-term incentives are granted annually. Their value
depends on whether the Company achieves aggressive performance objectives during
the four years following a grant. For award periods beginning before 1998, these
objectives were expressed in terms of CFR. For award periods beginning in 1998,
the Committee significantly raised the performance hurdle, which is now
expressed as a combination of CFR, growth in earnings per share and a
discretionary assessment of individual performance. The performance objectives
are established by the Committee based upon a review with management of the
Company's past performance in comparison to that of its peer group companies and
the Company's strategic objectives and annual business plans. For the 1996-1999
award period, the Company substantially exceeded the target objectives
established for that period. Payments are made in cash for award periods
beginning before 1998. For later award periods, payments will be made in Eaton
shares except to the extent necessary to satisfy tax-withholding obligations.
Executive officers may defer payment of their awards. At least 50% of any
deferrals that will be paid after retirement are converted to share units and
earn share price appreciation and dividend equivalents. The
14
<PAGE> 17
balance earns 10-year Treasury note returns plus 300 basis points. Short-term
deferrals earn 13-week Treasury bill returns.
Tax Deduction -- Any non-deferred annual compensation of more than $1 million
for the Company's Chief Executive Officer and each of its four other most
highly-compensated officers is not tax deductible unless paid pursuant to
formula-driven, performance-based arrangements that preclude Committee
discretion to adjust compensation after the beginning of the period in which the
compensation is earned. The Committee preserves deductibility by requiring
deferrals of otherwise non-deductible payments.
Stock Options -- Stock options align the interests of the Company's officers and
other executives with those of its shareholders by having a significant
component of their compensation tied directly to increases in shareholder value.
All officers of the Company are expected to hold a multiple of from two to five
times their base salary in Company shares depending on their level in the
organization. Options typically have been granted annually, have an exercise
price equal to the fair market value of the shares on the date of the grant and,
to encourage a long-term perspective, have an exercise period of ten years. The
Company does not "reprice" stock options after they have been granted and does
not grant stock appreciation rights. Based upon its 1999 review of compensation
practices, the Committee has adopted guidelines that limit the Company's regular
total stock option grants, during any five-year period, to a maximum of 10% of
the Company's outstanding shares.
Chief Executive Officer Compensation -- The 1999 compensation of S.R. Hardis,
the Company's Chief Executive Officer, was earned pursuant to the arrangements
described above. The Committee recommended, and the Board of Directors approved,
a 1999 adjustment to Mr. Hardis' base salary to reflect his overall performance
in this key strategic leadership role, to position his salary competitively in
the marketplace, and to reflect his time in this position. Mr. Hardis' 1999
short-term incentive payout reflected the award formula of the Company's
incentive compensation plan, which was based primarily on the Company's
financial performance, as measured by CFR compared to targets set by the
Committee for 1999. Consistent with the plan's design, this formula-driven
payout was further adjusted to reflect the Committee's evaluation of Mr. Hardis'
performance. In addition to the Company's financial performance that achieved
the Board approved 1999 Profit Plan, this evaluation took into account the
Company's $2.1 billion acquisition of Aeroquip-Vickers, Inc., the largest
acquisition in the Company's history. This complementary acquisition
fundamentally repositions the Company's hydraulics businesses among the world
leaders. Under Mr. Hardis' leadership, the Company has made significant progress
in integrating the Aeroquip-Vickers' operations during 1999, while successfully
divesting several business units on terms that created value for shareholders
and restored strength to the balance sheet. This evaluation also took into
account Mr. Hardis' continued focus on the Company's strategic direction, his
management of succession issues and his effectiveness as the Company's principal
spokesman. Mr. Hardis also earned a 1996-1999 payout from the Executive
Strategic Incentive Plan, which was based on the Company's four-year CFR
performance against stretch objectives established by the Committee for this
period. The grants of stock options and long-term incentives were based on the
factors described in earlier sections of this report.
Respectfully submitted to the Company's shareholders by the Compensation and
Organization Committee of the Board of Directors.
John R. Miller, Chairman
Phyllis B. Davis
Ned C. Lautenbach
Victor A. Pelson
Gary L. Tooker
15
<PAGE> 18
COMPANY STOCK PERFORMANCE -- The following graph compares the cumulative total
return for Eaton common shares with the S&P 500 Index and with a group of 20
peer companies: Aeroquip-Vickers, Inc., Applied Materials, Inc., Borg-Warner
Automotive, Inc., Cooper Industries, Inc., Cummins Engine Company, Inc., Dana
Corporation, Detroit Diesel Corporation, Emerson Electric Co., Honeywell Inc.,
Hubbell Incorporated, Johnson Controls, Inc., Meritor Automotive, Inc., Navistar
International Corporation, PACCAR Inc., Parker-Hannifin Corporation, Rockwell
International Corporation, SPX Corporation, TRW Inc., Thomas & Betts Corporation
and Varian Associates, Inc.
The company expressed disappointment with its relative stock performance,
especially over the past two years as the stock market has narrowed its focus
almost exclusively to the "high tech" sector. It noted that, among its peers,
only Applied Materials ("high tech" semiconductor equipment) and Honeywell
(acquired by Allied-Signal near year-end 1999) had outperformed the S&P 500
index over the past half decade. Excluding those two firms from the index, the
cumulative total return of the revised peer group dropped from $269 to $191.
<TABLE>
<CAPTION>
EATON PEERS S&P 500
----- ----- -------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 111.00 132.00 138.00
1996 147.00 158.00 169.00
1997 191.00 190.00 226.00
1998 154.00 194.00 290.00
1999 160.00 253.00 351.00
</TABLE>
Assumes $100 invested on December 31, 1994 in Eaton common shares, the S&P 500
index and stock of the peer companies. Total return assumes that all dividends
are reinvested when received. The returns of each company in the group of peer
companies are weighted based on the relative stock market capitalization of
those companies.
16
<PAGE> 19
RETIREMENT PLANS -- The following table shows the annual normal retirement
benefits payable to officers and other employees of the Company under the
Company's retirement plans upon retirement at age 65 at the compensation levels
and years of service specified. The table assumes retirement under the standard
post-retirement single life annuity option. Under the standard post-retirement
surviving spouse option, the participant receives a reduced pension, and a
pension equal to 50% of the reduced pension is payable to his or her surviving
spouse. The benefit for an employee electing that option whose spouse is three
years younger would be approximately 11% less than the amounts shown in the
table.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL NORMAL RETIREMENT BENEFITS PURSUANT TO STANDARD
AVERAGE FINAL SINGLE LIFE ANNUITY OPTION FOR YEARS OF CREDITED SERVICE INDICATED
ANNUAL -----------------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
<S> <C> <C> <C> <C> <C> <C>
=============================================================================================
$ 300,000 $ 65,165 $ 86,887 $108,609 $130,331 $152,053 $ 173,774
400,000 87,665 116,887 146,109 175,331 204,553 233,774
500,000 110,165 146,887 183,609 220,331 257,053 293,774
600,000 132,665 176,887 221,109 265,331 309,553 353,774
700,000 155,165 206,887 258,609 310,331 362,053 413,774
800,000 177,665 236,887 296,109 355,331 414,553 473,774
900,000 200,165 266,887 333,609 400,331 467,053 533,774
1,000,000 222,665 296,887 371,109 445,331 519,553 593,774
1,100,000 245,165 326,887 408,609 490,331 572,053 653,774
1,200,000 267,665 356,887 446,109 535,331 624,553 713,774
1,300,000 290,165 386,887 483,609 580,331 677,053 773,774
1,400,000 312,665 416,887 521,109 625,331 729,553 833,774
1,500,000 335,165 446,887 558,609 670,331 782,053 893,774
1,600,000 357,665 476,887 596,109 715,331 834,553 953,774
1,700,000 380,165 506,887 633,609 760,331 887,053 1,013,774
1,800,000 402,665 536,887 671,109 805,331 939,553 1,073,774
1,900,000 425,165 566,887 708,609 850,331 992,053 1,133,774
</TABLE>
The information contained in the preceding table is based on the assumption that
the retirement plans will be continued in their present form.
Annual normal retirement benefits are computed at the rate of 1% of average
final annual compensation up to the applicable Social Security integration level
($31,128 for 1999 retirements) plus 1 1/2% of average final annual compensation
in excess of the Social Security integration level, multiplied by the employee's
years of credited service.
An employee's average final annual compensation is the average annual amount of
his or her total compensation (which includes salary and bonus as so identified
in the Summary Compensation Table on page 11) for service during the five
consecutive years within the last ten years of employment for which the
employee's total compensation was greatest. Years of credited service means the
number of years of employment between age 21 and retirement, with a maximum of
44 years. As of January 31, 2000, the number of years of credited service for
each of the individuals named in the Summary Compensation Table on page 11 was
as follows: S. R. Hardis, 20.4; A. M. Cutler, 24.4; B. R. Bachman, 4.1; R. J.
McCloskey, 30.8; and T. W. O'Boyle, 33.3.
---------------
Certain provisions of the Internal Revenue Code, as amended, limit the annual
benefits that may be paid from a tax-qualified retirement plan. As permitted
under the Code, the Board of
17
<PAGE> 20
Directors has authorized the payment from Eaton's general funds of any benefits
calculated under the provisions of the applicable retirement plan which may
exceed those limits. The present value of these benefits will be paid in a
single installment upon a proposed change in control of the Company unless
otherwise determined by the Board of Directors.
---------------
The Board of Directors has adopted a plan which provides supplemental annual
retirement income to certain executives who do not have the opportunity to
accumulate significant credited service with Eaton, provided that they retire at
age 55 or older and have at least five years of service with Eaton. The amount
of the annual supplement is generally equal to the amount by which a percentage
(described below) of the executive's average final annual compensation exceeds
his or her earned retirement income (which includes amounts receivable pursuant
to the retirement plans described above as well as retirement plans maintained
by the executive's previous employers). The percentage of average final annual
compensation used for this purpose depends upon an executive's age and years of
service at retirement. The percentage ranges from 20% (for retirements at age 55
with less than 15 years of service) to 45% (for retirements at age 65 with 15
years or more of service). Under the plan, the present value of payments will be
paid in a single installment upon a proposed change in control of the Company
unless otherwise determined by the Board of Directors. Six executive officers
currently are participating in the plan, including S. R. Hardis and B. R.
Bachman, who are named in the Summary Compensation Table on page 11. The
estimated annual benefits payable under this plan are $261,202 to Mr. Hardis,
and $161,481 to Mr. Bachman, based on the assumptions that both retire at age 65
and that their base salary and target incentive compensation increase at 4% per
annum.
---------------
The Company has entered into agreements with its executive officers, including
those named in the Summary Compensation Table on page 11, which provide for
payments and benefits in the event of a termination of employment in the context
of a change of control of the Company. The purpose of these agreements is to
assure continued dedication, and to diminish the inevitable distraction caused
by personal uncertainties and risks, in the event of a corporate change of
control.
The agreements provide that each officer, for three years following a change of
control, will have duties, salary, bonus, fringe benefits and opportunities for
savings, incentive earnings and retirement compensation no less favorable than
was previously the case. If the Company were to terminate an officer's
employment during this three-year period for reasons other than cause or
disability, or if the officer were to terminate employment because of changed
circumstances, then the officer would be entitled to receive certain amounts and
benefits under these agreements. These amounts and benefits would include (i)
long-term incentive compensation reflective of the portion of the award periods
completed prior to termination, (ii) salary and bonus multiplied by three (or
any lesser number of years and portions thereof until age 65), and (iii)
continuation of medical, life insurance and other welfare benefits for two years
(or any lesser number of years and portions thereof until age 65), subject to
reduction for comparable benefits received in any subsequent employment. The
officer would be entitled to receive an additional payment, net of taxes, to
compensate for the excise tax imposed on these and other payments if they are
determined to be "excess parachute payments" under the Internal Revenue Code.
The agreements provide that, upon the occurrence of a proposed change of
control, the Company would deposit in trust a cash amount sufficient to provide
the benefits and payments to which the officers would be entitled under the
18
<PAGE> 21
agreements upon a change of control and termination of employment. The
agreements also provide that the Company would reimburse the officers for any
costs incurred to enforce the agreements.
---------------
Certain grantor trusts established by the Company hold approximately $36 million
of marketable securities and 493,000 Company shares in order to provide for a
portion of the Company's deferred compensation obligations. The trust assets,
which are subject to the claims of the Company's creditors, will be used to pay
those obligations in proportion to trust funding. The trusts provide for full
funding upon a change in control of the Company and for accelerated lump sum or
installment payments upon a failure by the Company to pay amounts due under the
plans or upon a termination of employment in the context of a change in control.
2. ADOPTION OF AMENDED REGULATIONS
THIS DESCRIPTION OF PROPOSED AMENDMENTS TO ARTICLE I, SECTION 8 OF THE COMPANY'S
AMENDED REGULATIONS IS A SUMMARY ONLY AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE COPY OF PROPOSED NEW ARTICLE I, SECTION 8 INCLUDED AS EXHIBIT A
TO THIS PROXY STATEMENT. SHAREHOLDERS ARE URGED TO READ EXHIBIT A IN ITS
ENTIRETY.
The ability of the Company's shareholders to exercise their rights as
shareholders through the use of proxies is governed by Section 1701.48 of the
Ohio Revised Code (the "Ohio Law") and Section 8 of Article I ("Section 8") of
the Company's Amended Regulations (the "Amended Regulations"). Historically, the
Ohio Law and Section 8 have required that a proxy be in the form of a writing
signed by the shareholder, a photographic, photostatic or equivalent
reproduction of such a writing, or a telegram or cablegram appearing to have
been transmitted by the shareholder. Neither the Ohio Law nor Section 8 have
contemplated or permitted other means of appointing a proxy that modern
technology have made possible in recent years.
In 1999, the Ohio legislature adopted amendments to Section 1701.48 of the Ohio
Law that expand the permitted means of appointing a proxy to take advantage of
these modern technologies. In particular, the Ohio Law was amended to provide
that, in addition to other permitted means of appointing a proxy, a shareholder
may also appoint a proxy through specified types of "verifiable communication"
authorized by the shareholder. The Ohio Law defines verifiable communication as
"any transmission that creates a record capable of authentication, including,
but not limited to, a telegram, a cablegram, electronic mail, or an electronic,
telephonic, or other transmission, that appears to have been transmitted" by a
shareholder and that appoints a proxy. The amendments to Section 1701.48 also
provide that, in addition to other types of copies of signed proxies previously
permitted by the Ohio Law, facsimile transmission of a signed writing that
appoints a proxy is sufficient to appoint a proxy.
The current version of Section 8 in general follows the language of Section
1701.48 of the Ohio Law as it existed prior to the adoption of the amendments
summarized above. Accordingly, in its present form, Section 8 does not permit
shareholders to appoint proxies in the additional ways now permitted by the Ohio
Law. The proposed amendments to Section 8 would, if adopted, permit the
Company's shareholders to take advantage of the expanded means of appointing
proxies now permitted by the Ohio Law.
It is also proposed that the current Amended Regulations be changed to
substitute gender-neutral language for masculine pronouns wherever appearing
throughout the document. Except for the changes described above, the proposed
Amended Regulations would in all
19
<PAGE> 22
respects be identical to the existing Amended Regulations.
Adoption of Amended Regulations requires the affirmative vote of the
shareholders of record entitled to exercise a majority of the voting power on
such proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE AMENDED
REGULATIONS.
3. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of its Audit Committee, the Board of Directors has
appointed the accounting firm of Ernst & Young LLP as independent auditors to
conduct the annual audit of Eaton's books and records for 2000. The submittal of
this matter to the shareholders at the annual meeting is not required by law or
by Eaton's Amended Regulations. The Board of Directors is nevertheless
submitting it to the shareholders to ascertain their views. If this proposal is
not approved at the annual meeting by the affirmative vote of holders of a
majority of the outstanding shares, the Board intends to reconsider its
appointment of Ernst & Young LLP as independent auditors.
A representative of Ernst & Young LLP will be present at the annual meeting to
answer any questions concerning the independent auditors' areas of
responsibility.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP.
4. OTHER BUSINESS
Management does not know of any other matters requiring shareholder action that
may come before the meeting; but, if any are properly presented, the individuals
named in the enclosed form of proxy will vote on those matters according to
their best judgment.
OWNERSHIP OF OUTSTANDING VOTING SHARES -- Set forth below is certain information
concerning persons who are known by Eaton to have reported owning beneficially
more than 5% of the Company's common shares as of the most recent practicable
date.
TITLE OF CLASS: COMMON SHARES
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF CLASS
- ---------------------------------------------------
<S> <C> <C>
Capital Research and 3,978,900(1) 5.4%
Management Company
333 South Hope Street
Los Angeles, CA 90071
FMR Corp. 6,182,305(2) 8.399%
82 Devonshire Street
Boston, Massachusetts 02109
- ---------------------------------------------------
</TABLE>
(1) Capital Research and Management Company has filed with the Securities and
Exchange Commission a Schedule 13G dated February 10, 2000, which reports
the beneficial ownership of 3,978,900 common shares by it and certain
affiliated entities and individuals. As reported in the Schedule 13G,
Capital Research and Management Company and such affiliated entities and
individuals have no voting power with respect to these shares and sole power
to dispose or to direct the disposition of 3,978,900 common shares.
(2) FMR Corp. has filed with the Securities and Exchange Commission a Schedule
13G dated February 14, 2000, which reports the beneficial ownership of
6,182,305 common shares by it and certain affiliated entities and
individuals. As reported in the Schedule 13G, FMR Corp. and such affiliated
entities and individuals have sole voting power with respect to 304,655
common shares and sole power to dispose or to direct the disposition of
6,182,305 common shares.
20
<PAGE> 23
The following table shows the beneficial ownership, reported to the Company as
of January 31, 2000, of Company common shares by each director and nominee, each
executive officer named in the Summary Compensation Table on page 11 and all of
those individuals and all other executive officers as a group and also sets
forth the number of share units held under various deferred compensation plans.
Ms. McCoy, nominated by the Board on February 23, owns 200 shares.
TITLE OF CLASS: COMMON SHARES
<TABLE>
<CAPTION>
NAME OF NUMBER PERCENT TOTAL NUMBER OF
BENEFICIAL OF SHARES OF DEFERRED SHARES AND
OWNER OWNED(1,2) CLASS(3) SHARE UNITS(4) DEFERRED SHARE UNITS
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
B. R. Bachman 77,993(5) -- 6,354 84,347
M. J. Critelli 7,062 -- 0 7,062
A. M. Cutler 289,899(5,6) -- 46,907 336,806
P. B. Davis 10,983 -- 479 11,462
E. Green 10,162 -- 722 10,884
S. R. Hardis 386,543(5) -- 182,877 569,420
N. C. Lautenbach 9,662 -- 1,794 11,456
R. J. McCloskey 102,407(5) -- 7,472 109,879
J. R. Miller 14,162 -- 0 14,162
F. C. Moseley 23,662(6) -- 807 24,469
T. W. O'Boyle 111,036(5) -- 6,053 117,089
V. A. Pelson 11,662(6) -- 1,928 13,590
A. W. Reynolds 15,662 -- 925 16,587
G. L. Tooker 12,662(6) -- 1,063 13,725
Directors, Nominees and
Executive Officers as a group
of 31 2,102,559 345,315 2,447,874
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Each person has sole voting and investment power with respect to the shares
listed, unless otherwise indicated.
(2) Includes shares which the person has the right to acquire within 60 days
after January 31, 2000 upon the exercise of outstanding stock options as
follows: S. R. Hardis, 328,386; A. M. Cutler, 264,676; B. R. Bachman,
75,950; R. J. McCloskey, 92,360; T. W. O'Boyle, 95,316; and all directors,
nominees and executive officers as a group, 1,713,960 shares.
(3) Each of the individuals listed holds less than 1% of outstanding common
shares.
(4) For descriptions of these units, see pages 9-10 and 14-15.
(5) Includes shares held under the Eaton Corporation Share Purchase and
Investment Plan as of January 31, 2000.
(6) Includes shares held jointly or in other capacities, such as by trust.
21
<PAGE> 24
Employee benefit plans of the Company and its subsidiaries on January 31, 2000
held 7,990,476 common shares for the benefit of participating employees, or 11%
of common shares outstanding.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE -- Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's directors and officers to
file reports of holdings and transactions in the Company's equity securities
with the Securities and Exchange Commission and the New York Stock Exchange. The
Company believes that there was compliance with all such filing requirements
with respect to 1999, except that J. J. Mikelonis, a former officer of the
Company, had one late report, and B. K. Rawot, Vice President and Controller,
had one late report.
FUTURE SHAREHOLDER PROPOSALS -- Shareholders who wish to submit proposals for
inclusion in the proxy statement and for consideration at the annual meeting
must do so on a timely basis. In order to be included in the proxy statement for
the 2000 annual meeting, proposals must relate to proper subjects and must be
received by the Corporate Secretary, Eaton Corporation, Eaton Center, Cleveland,
Ohio 44114-2584, before November 16, 2000.
By order of the Board of Directors
/s/ E. R. FRANKLIN
Earl R. Franklin
Secretary
March 17, 2000
EXHIBIT A
PROPOSED AMENDED REGULATIONS
ARTICLE I, SECTION 8 -- PROXIES
A. A person who is entitled to attend a shareholders' meeting, to vote at a
shareholders' meeting, or to execute consents, waivers, or releases, may be
represented at the meeting or vote at the meeting, may execute consents,
waivers, and releases, and may exercise any of the person's other rights, by
proxy or proxies appointed by a writing signed by the person, appointed by a
verifiable communication authorized by the person, or appointed by any other
means or in any other form now or hereafter permitted by Ohio Revised Code
Chapter 1701 or any successor statute.
B. Any transmission that creates a record capable of authentication, including,
but not limited to, a telegram, a cablegram, electronic mail, or an electronic,
telephonic, or other transmission, that appears to have been transmitted by a
person described in subsection A of this Section 8, and that appoints a proxy is
a sufficient verifiable communication to appoint a proxy. A photographic,
photostatic, facsimile transmission, or equivalent reproduction of a writing
that is signed by a person described in subsection A of this Section 8 and that
appoints a proxy is a sufficient writing to appoint a proxy.
C. No appointment of a proxy is valid after the expiration of eleven months
after it is made unless the writing or other form of proxy appointment specifies
the date on which it is to expire or the length of time it is to continue in
force.
D. Unless the writing or other form of proxy appointment otherwise provides:
(1) Each proxy has the power of substitution, and, if three or more
proxies are appointed, a majority of them or of their substitutes may
appoint one or more substitutes to act for all;
22
<PAGE> 25
(2) If more than one proxy is appointed, then (a) with respect to
voting or executing consents, waivers, or releases, or objections to
consents at a shareholders' meeting, a majority of the proxies that attend
the meeting, or if only one attends then that one, may exercise all the
voting and consenting authority at the meeting; and if one or more attend
and a majority do not agree on any particular issue, each proxy so
attending shall be entitled to exercise that authority with respect to an
equal number of shares; (b) with respect to exercising any other authority,
a majority may act for all;
(3) A revocable appointment of a proxy is not revoked by the death or
incompetency of the maker unless, before the vote is taken or the authority
granted is otherwise exercised, written notice of the death or incompetency
of the maker is received by the Corporation from the executor or
administrator of the estate of the maker or from the fiduciary having
control of the shares in respect of which the proxy was appointed;
(4) The presence at a meeting of the person appointing a proxy shall
not revoke the appointment. Without affecting any vote previously taken,
the person appointing a proxy may revoke a revocable appointment by a later
appointment received by the Corporation or by giving notice of revocation
to the Corporation in writing, by a verifiable communication, by other
statutorily permissible means, or in open meeting.
Any signature on any instrument, or any reproduction of a signature on any
photographic, photostatic, facsimile transmission or equivalent reproduction of
any instrument, approved by the inspectors hereinafter provided for as genuine,
or as a reproduction of a genuine signature, shall be deemed to be the signature
of the shareholder whose name is signed thereon, or a reproduction of the
genuine signature of such shareholder, as the case may be, and the falsity of
such signature or of such reproduction shall in no manner impair the validity of
such instrument or such reproduction of such instrument, or of any vote or
action taken at such meeting, provided that such shareholder shall not have
previously filed with the Corporation his or her authorized signature guaranteed
by a reputable bank or trust company. Any record of a verifiable communication,
or other statutorily permissible means of proxy appointment, approved by such
inspectors as authentic shall be deemed to be authentic, and the falsity of such
record shall in no manner impair the validity of such verifiable communication,
or other statutorily permissible means of proxy appointment, or of any vote or
action taken at such meeting.
23
<PAGE> 26
Admission to the Annual Meeting
Shareholders who plan to attend the 2000 annual meeting of
shareholders may apply for admission tickets at the
Registration Desk immediately prior to the meeting.
Shareholders whose shares are registered in the name of
a broker or bank should obtain certification of
ownership to bring to the meeting.
Eaton Corporation
Eaton Center
Cleveland, Ohio 44114-2584
-------------------------------------------------------------
[LOGO]
<PAGE> 27
EATON CORPORATION
EATON CENTER
CLEVELAND, OHIO 44114-2584
-------------------------------------------------------------------
[Eaton Logo]
The undersigned hereby appoints S. R. Hardis, J. R. Horst and E. R.
Franklin as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated
on the reverse side of this card, all of the Eaton common shares,
including reinvestment shares, if any, held by the undersigned on
February 28, 2000, at the annual meeting of shareholders to be held
at the Company's Cutler-Hammer Headquarters, 1000 Cherrington
Parkway, Moon Township, PA, on April 26, 2000, at 10:30 a.m. local
time and at any adjournments thereof.
Election of Directors: A. M. Cutler, S. R. Hardis, G. L.
Tooker, D. L. McCoy
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
WHEN PROPERLY EXECUTED, IT WILL BE VOTED FOR ITEMS #1, #2 AND
#3 UNLESS CONTRARY INSTRUCTIONS ARE INDICATED ON THE REVERSE
SIDE.
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
P
R
O
X
Y
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 28
X PLEASE MARK YOUR 954
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE BOARD OF DIRECTORS' NOMINEES AND "FOR"
ITEMS #2 AND #3.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS #1, #2 AND #3.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Adoption of [ ] [ ] [ ] 3. Ratification of [ ] [ ] [ ]
Directors Amended appointment
(see reverse) Regulations of Independent
Auditors
For, except vote withheld from the
following nominee(s):
______________________________
</TABLE>
4. In their discretion, the proxies are authorized to vote
upon such other business as may properly come
before the meeting.
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.
--------------------------------
--------------------------------
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
EATON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 26, 2000, 10:30 A.M.
CUTLER-HAMMER HEADQUARTERS
1000 CHERRINGTON PARKWAY
MOON TOWNSHIP, PA
<PAGE> 29
CONFIDENTIAL VOTING INSTRUCTIONS
To Key Trust Company of Ohio, N.A., Trustee for the Eaton
Corporation Share Purchase and Investment Plan ("Plan"):
The undersigned, as a participant in the above Plan, hereby directs
the Trustee to vote in person or by proxy all common shares of
Eaton Corporation credited to the undersigned's account under the
Plan on the record date, at the annual meeting of shareholders of
Eaton Corporation to be held at the Company's Cutler-Hammer
Headquarters, 1000 Cherrington Parkway, Moon Township, PA, on April
26, 2000, at 10:30 a.m. local time and at any adjournments thereof.
The Trustee is hereby instructed to vote FOR Items #1, #2 and #3
unless contrary voting instructions are indicated on the reverse
side of this card. Under the Plan, shares for which the Trustee
does not receive directions in the form of a signed voting
instruction card are voted by the Trustee in accordance with and in
the same proportion as the shares for which it receives voting
instructions.
Election of Directors: A. M. Cutler, S. R. Hardis, G. L.
Tooker, D. L. McCoy
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 30
X PLEASE MARK YOUR 2826
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE BOARD OF DIRECTORS' NOMINEES AND "FOR"
ITEMS #2 AND #3.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS #1, #2 AND #3.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Adoption of [ ] [ ] [ ] 3. Ratification of [ ] [ ] [ ]
Directors Amended appointment
(see reverse) Regulations of Independent
Auditors
For, except vote withheld from the
following nominee(s):
______________________________
</TABLE>
4. In their discretion, the proxies are authorized to vote
upon such other business as may properly come
before the meeting.
Please sign, date and return promptly in the exclosed
envelope to protect confidentiality.
--------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
EATON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 26, 2000, 10:30 A.M.
CUTLER-HAMMER HEADQUARTERS
1000 CHERRINGTON PARKWAY
MOON TOWNSHIP, PA
<PAGE> 31
CONFIDENTIAL VOTING INSTRUCTIONS
To Key Trust Company of Ohio, N.A., Trustee for the Plans listed
below ("Plans"):
The undersigned, as a participant in the (a) Eaton Corporation
401(k) Savings Plan for Hourly Employees of the Airflex Division,
(b) Eaton Corporation Investment Plan for Hourly Employees of the
Hydraulics Division Hutchinson Plant, (c) Eaton Corporation
Wauwatosa Union Plan and Trust, and/or (d) Eaton Corporation 401(k)
Savings Plan and Trust ((a) through (d) being the "Group A
Participants"), and/or (e) Cutler-Hammer de Puerto Rico, Inc.
Retirement Savings Plan (the "Cutler-Hammer Group Participants")
hereby directs the Trustee to vote in person or by proxy all common
shares of Eaton Corporation credited to the undersigned's account
under the Plans on the record date (the "Credited Eaton Shares") at
the annual meeting of shareholders of Eaton Corporation to be held
at the Company's Cutler-Hammer Headquarters, 1000 Cherrington
Parkway, Moon Township, PA, on April 26, 2000, at 10:30 a.m. local
time and at any adjournments thereof. The Group A Participants and
the Cutler-Hammer Group Participants, by issuing their instructions
on this card, confirm that they have received a copy of the
Supplemental Voting Directions Statement which accompanies this
card, that they are acting as a Named Fiduciary and that their vote
is amended to incorporate the additional shares described on the
Supplemental Voting Directions Statement. The Trustee is hereby
instructed to vote FOR items #1, #2 and #3 unless contrary voting
instructions are indicated on the reverse side of this card.
Election of Directors: A. M. Cutler, S. R. Hardis, G. L.
Tooker, D. L. McCoy
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 32
X PLEASE MARK YOUR 2821
VOTES AS IN THIS
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" ALL OF THE BOARD OF DIRECTORS' NOMINEES AND "FOR"
ITEMS #2 AND #3.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS #1, #2 AND #3.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Adoption of [ ] [ ] [ ] 3. Ratification of [ ] [ ] [ ]
Directors Amended appointment
(see reverse) Regulations of Independent
Auditors
For, except vote withheld from the
following nominee(s):
______________________________
</TABLE>
4. In their discretion, the proxies are authorized to vote
upon such other business as may properly come
before the meeting.
Please sign, date and return promptly in the exclosed
envelope to protect confidentiality.
--------------------------------
SIGNATURE DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
EATON CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, APRIL 26, 2000, 10:30 A.M.
CUTLER-HAMMER HEADQUARTERS
1000 CHERRINGTON PARKWAY
MOON TOWNSHIP, PA
<PAGE> 33
CUTLER-HAMMER
SUPPLEMENTAL VOTING DIRECTIONS STATEMENT
FOR CUTLER-HAMMER DE PUERTO RICO, INC.
RETIREMENT SAVINGS PLAN (THE "PLAN")
This Supplemental Voting Directions Statement is being sent to participants and
former participants in the above-described Plan who hold shares of Eaton
Corporation in their Plan accounts.
Under the Plan, if the Trustee does not receive a signed voting instruction card
telling the Trustee how to vote the Eaton shares in your account, the Trustee
will vote those shares in the same proportion, on each issue, as it votes other
Eaton shares according to instructions from the other Plan participants.
<PAGE> 34
PRISM
SUPPLEMENTAL VOTING DIRECTIONS STATEMENT
FOR
EATON CORPORATION 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES OF THE AIRFLEX
DIVISION
EATON CORPORATION INVESTMENT PLAN FOR HOURLY EMPLOYEES OF THE
HYDRAULICS DIVISION HUTCHINSON PLANT
EATON CORPORATION WAUWATOSA UNION PLAN AND TRUST
EATON CORPORATION 401(k) SAVINGS PLAN AND TRUST
(THE "PLANS")
This Supplemental Voting Directions Statement is being sent to participants and
former participants in the above-described Plans who hold shares of Eaton
Corporation in their Plan accounts and who sign and return the Confidential
Voting Instructions Card in connection with the annual meeting of shareholders
of Eaton Corporation to be held on April 26, 2000.
Under the Plans, in addition to voting the Credited Eaton Shares (as defined on
the Confidential Voting Instructions Card), each participant has the right to
instruct the Trustee how to vote a proportionate share of the common shares not
allocated to any account and shares for which the Trustee does not receive
timely directions from the other participants in the Plans (the "Unvoted
Shares"). Unless a participant instructs the Trustee otherwise, the Trustee will
follow the instructions given by participants who submit a signed Confidential
Voting Instructions Card. As a result, by executing and returning a Confidential
Voting Instructions Card, you will also be issuing an instruction to vote the
proportionate shares of the Unvoted Shares. (Any participant wishing to vote the
Unvoted Shares differently from the voted shares may do so by requesting a
separate voting instructions card from Key Trust Company of Ohio, N.A., at 127
Public Square, Mail Code: OH-01-27-1402, Cleveland, Ohio 44114-1306, telephone
216-689-3728.)
<PAGE> 35
CONSOLIDATED CONTROLS
EATON CORPORATION CONSOLIDATED CONTROLS
PROFIT SHARING PLAN TRUST
Dear Participant:
As a participant in the Eaton Corporation Consolidated Controls Profit Sharing
Plan, you have the right to direct Fidelity Management Trust Company as trustee
of the Plan on how to vote the Eaton Corporation common shares credited to your
account under the Plan.
The enclosed proxy card will also serve as a trustee instruction card that you
may use to give voting instructions to Fidelity. Your directions to Fidelity
will be kept confidential.
If First Chicago Trust Company of New York, which is acting as the tabulating
agent, receives your proxy card by April 20, 2000, Fidelity will vote the shares
in your account as instructed.
If First Chicago does not receive your proxy card by that date, Fidelity will
vote the shares in your account in the same proportion on each issue as it votes
those shares for which it has received voting directions from the other
participants.
<PAGE> 36
AEROQUIP-VICKERS
AEROQUIP-VICKERS RETIREMENT SAVINGS
AND PROFIT SHARING PLAN
Dear Participant:
As a participant in the Aeroquip-Vickers Retirement Savings and Profit Sharing
Plan, you have the right to direct Vanguard Fiduciary Trust Company
("Vanguard"), as trustee of the Plan, on how to vote the Eaton Corporation
common shares credited to your account under the Plan.
The enclosed proxy card will also serve as a trustee instruction card that you
may use to give voting instructions to Vanguard. Your directions to Vanguard
will be kept confidential.
If First Chicago Trust Company of New York, which is acting as the tabulating
agent, receives your proxy card by April 20, 2000, Vanguard will vote the shares
in your account as instructed.
If First Chicago does not receive your proxy card by that date, Vanguard will
vote the shares in your account in the same proportion on each issue as it votes
those shares for which it has received voting directions from the other
participants.
