<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Echlin Inc.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Echlin Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11.
(4) Proposed maximum aggregate value of transaction:
- --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] 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:
- --------------------------------------------------------------------------------
Notes:
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<PAGE>
[LOGO OF ECHLIN INC. APPEARS HERE]
November 17, 1995
Dear Fellow Shareowner:
You are cordially invited to attend the Annual Meeting of Shareowners of
Echlin Inc. to be held at the Company's offices at 100 Double Beach Road,
Branford, Connecticut on December 20, 1995 at 2:00 p.m. We look forward to
greeting personally those shareowners who are able to attend.
The accompanying formal Notice of Annual Meeting and Proxy Statement describe
the matters on which action will be taken at the meeting.
I hope that you will be able to attend this meeting. However, if you are not
planning to be present, please sign, date and promptly mail the enclosed proxy
in the envelope provided to ensure that your vote will be received and counted.
Thank you for your continued interest in Echlin.
Very truly yours,
/s/ Frederick J. Mancheski
Frederick J. Mancheski
Chairman of the Board
and Chief Executive Officer
<PAGE>
[LOGO OF ECHLIN INC. APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TO BE HELD DECEMBER 20, 1995
- --------------------------------------------------------------------------------
To the Shareowners of
Echlin Inc.
Notice is Hereby Given that the Annual Meeting of Shareowners of Echlin Inc.
(hereinafter referred to as "the Company"), a Connecticut corporation, has been
called and will be held at the Company's offices at 100 Double Beach Road,
Branford, Connecticut 06405, on Wednesday, December 20, 1995, at 2:00 P.M.,
E.S.T., for the purpose of considering and acting upon the following matters:
1. To elect eleven directors of the Company;
2. To approve the First Amendment to the Echlin Inc. Performance Unit
Plan;
3. To approve the designation by the Company's Board of Directors of
Price Waterhouse LLP as independent accountants for the fiscal year ending
August 31, 1996;
4. To transact any and all business which may lawfully come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 3, 1995,
as the record date for determining the shareowners of the Company entitled to
notice of and to vote at such meeting and any adjournment thereof.
You are requested to fill in, sign, date and promptly return the enclosed
proxy, whether or not you expect to attend the meeting. A self-addressed,
stamped envelope is enclosed for your convenience.
By Order of the Board of Directors
Jon P. Leckerling
Vice President and Corporate Secretary
November 17, 1995
- --------------------------------------------------------------------------------
PLEASE VOTE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. YOUR PROMPT RESPONSE WILL ENSURE A QUORUM AT THE ANNUAL MEETING AND
SAVE YOUR COMPANY THE EXPENSE OF FURTHER SOLICITATION OF PROXIES.
<PAGE>
ECHLIN INC.
100 DOUBLE BEACH ROAD
BRANFORD, CONNECTICUT 06405
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREOWNERS
DECEMBER 20, 1995
APPROXIMATE DATE OF MAILING: NOVEMBER 17, 1995
This Proxy Statement accompanies the Notice of Annual Meeting of Shareowners
of Echlin Inc. (herein referred to as "the Company"), a Connecticut
corporation, to be held at the Company's offices at 100 Double Beach Road,
Branford, Connecticut on Wednesday, December 20, 1995, at 2:00 P.M., E.S.T.
GENERAL
The accompanying proxy is solicited by and on behalf of the Board of
Directors of the Company. The solicitation will be made by mail and the cost
will be borne by the Company. Forms of proxies and proxy material may also be
distributed through brokers, custodians and other like parties to the
beneficial owners of shares. The Company will reimburse such parties for their
reasonable expenses incurred in so distributing the Company's proxy materials.
Without additional compensation, officers and regular employees of the Company
may solicit proxies personally or by mail, telephone or telegraph if proxies
are not promptly received. Morrow & Co., Inc. has been retained by the Company
to assist in the solicitation of proxies. In this connection, Morrow & Co.,
Inc. is expecting to receive a fee of approximately $6,000 plus reimbursement
of expenses.
Proxies in the accompanying form received by the Board of Directors will be
voted in accordance with the terms and specifications made thereon at the
meeting or any adjournment thereof; any such proxy may, however, be revoked at
any time before it is voted by notice in writing to the Secretary of the
Company, by duly executing a proxy bearing a later date, or by appearing at the
meeting and voting in person.
As of November 3, 1995, the Company had outstanding 59,657,560 shares of
Common Stock ($1.00 par value), exclusive of shares held in the Treasury, and
only holders of Common Stock of record at the close of business on that date
will be entitled to vote at the meeting or any adjournment thereof. Each share
is entitled to one vote. A majority of the votes present in person or by proxy
is required for approval of all matters to be considered at the meeting. In
certain circumstances, a shareowner will be considered to be present at the
Annual Meeting for quorum purposes, but will not be deemed to have voted in the
election of directors or in connection with other matters presented for
approval at the Annual Meeting. Such circumstances will exist where a
shareowner is present but specifically abstains from voting, or where shares
are represented at the meeting by a proxy conferring authority to vote on
certain matters but not on election of directors or other matters presented for
shareowner approval. Under Connecticut law, such abstentions and non-votes have
the effect of a vote against the election of management's nominees and against
approval of other proposed shareowner action.
The Board of Directors knows of no business other than that listed in the
Notice of Annual Meeting which may be presented at the meeting.
1
<PAGE>
1. ELECTION OF DIRECTORS
The By-Laws provide for not less than three nor more than twelve directors to
be elected at the Annual Meeting of Shareowners, each to serve for the ensuing
year and until his or her successor is elected and has qualified. The Board of
Directors has directed by resolution that the number of directors to be elected
at the meeting be fixed at eleven. For each of the eleven persons nominated for
election as a director, the following chart gives his age, the year he first
became a director and his business activities during the last five years. All
of the nominees are presently members of the Board.
<TABLE>
<CAPTION>
DIRECTOR BUSINESS ACTIVITIES SINCE
NAME AGE SINCE SEPTEMBER 1, 1990
---- --- -------- -------------------------
<S> <C> <C> <C>
D. Allan Bromley........ 69 1993 Sterling Professor of the Sciences and Dean of Engi-
neering, Yale University 1993-present; The Assis-
tant to the President of the United States for Sci-
ence and Technology and Director, Office of Science
and Technology Policy in the Executive Office of
the President 1989-1993; Henry Ford II Professor of
Physics, Yale University 1972-1993; Professor of
Physics and Director, A.W. Wright Nuclear Structure
Laboratory, Yale University 1960-1993 (on leave of
absence 1989-1993); member of the Scientific Advi-
sory and Compensation and Management Development
Committees of the Board.
John F. Creamer, Jr..... 65 1986 President and sole shareholder of Distribution Mar-
keting Services, Inc., Stamford, Connecticut (mar-
keting consultants to the automotive aftermarket);
President, Automotive Warehouse Distributors Asso-
ciation--AWDA (automotive aftermarket parts trade
association) (1994 to present); Director, R&B Inc.
(automotive fasteners supplier); member of the Ex-
ecutive Committee of the Board.
Milton P. DeVane........ 66 1965 Partner, Tyler Cooper & Alcorn, New Haven, Connecti-
cut (law firm); member of the Audit and Executive
Committees of the Board.
John E. Echlin, Jr...... 60 1964 Retired; former Account Executive, PaineWebber,
Guilford, Connecticut, 1983-1989; member of the Au-
dit and Executive Committees of the Board.
C. Scott Greer.......... 45 1990 President and Chief Operating Officer of the Compa-
ny; various managerial positions within Echlin's
International Group from 1980-1990.
John F. Gustafson....... 73 1973 President, John F. Gustafson & Company, Myrtle
Beach, South Carolina (management consultants);
member of the Audit Committee of the Board.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR BUSINESS ACTIVITIES SINCE
NAME AGE SINCE SEPTEMBER 1, 1990
---- --- -------- -------------------------
<S> <C> <C> <C>
Donald C. Jensen........ 60 1991 Retired; former Vice Chairman of Ernst & Young (in-
ternational accounting and management consulting
firm) 1981-1990; Chairman of the Audit Committee
and member of the Compensation and Management De-
velopment and Executive Committees of the Board.
Trevor O. Jones......... 65 1991 Chairman and Chief Executive Officer, International
Development Corporation (management consulting
firm); retired Chairman of the Board, Libbey-Owens-
Ford Co. (1987 to 1994); Director, Libbey-Owens-
Ford Co. (manufacturer of automotive and industrial
glass products); Vice Chairman of the Board; Chair-
man of the European Advisory Council to the Board;
Chairman of the Compensation and Management Devel-
opment Committee and member of the Executive Com-
mittee of the Board.
Frederick J. Mancheski.. 69 1963 Chairman of the Board and Chief Executive Officer of
the Company and Chairman of the Executive Committee
of the Board; Director, Portec, Inc. (manufacturer
of construction, material handling and railway
maintenance products).
Phillip S. Myers........ 79 1975 Professor Emeritus and former Department Chairman,
Department of Mechanical Engineering, University of
Wisconsin; Chairman of the Scientific Advisory Com-
mittee of the Board.
Jerome G. Rivard........ 62 1991 President, Global Technology and Business Develop-
ment, Inc. (technology and manufacturing consul-
tants) 1988-present; former Vice President and
Group Executive, Bendix Electronics division of Al-
lied Signal, Inc., 1986-1988; member of the Scien-
tific Advisory Committee of the Board.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended August 31, 1995, there were six meetings of the
Board of Directors (two of which were telephone meetings). Each director
attended at least 75 percent of the aggregate of (i) the total number of
meetings of the Board and (ii) the total number of meetings held by all
Committees of the Board on which the director served.
The Board of Directors has the following committees:
The Executive Committee may exercise all powers which the Board of Directors
possesses except (a) the power to change the By-Laws and (b) the power to
declare any dividend or other distribution with respect to the stock of the
Company. During the fiscal year, three meetings of the Executive Committee were
held. Messrs. Mancheski (Chairman), Creamer, DeVane, Echlin, Jensen and Jones
are members of this Committee.
3
<PAGE>
The Compensation and Management Development Committee of the Board
periodically reviews the compensation of officers and key employees and makes
recommendations to the full Board on such matters, reviews and makes awards
under performance based compensation programs such as the Echlin Inc.
Performance Unit Plan (see page 18) and makes recommendations with respect to
executive remuneration plans and the granting of stock options. This Committee
also reviews and reports to the Board on the status of the Company's and its
subsidiaries' organization and succession plans for all key executive positions
and the continuity for such positions. During the fiscal year, five meetings of
the Compensation and Management Development Committee were held. Messrs. Jones
(Chairman) and Jensen and Dr. Bromley are members of this Committee.
The Audit Committee reviews the accounting policies and procedures of the
Company and the performance of the internal audit staff, monitors compliance
with such policies and procedures and makes recommendations thereon to the full
Board. The Audit Committee meets with the Company's independent accountants and
reviews and approves in advance the scope of the annual audit and other audits
and the type and scope of each non-audit professional service rendered by the
Company's independent accountants. The Committee also considers the possible
effect which rendering such services might have on the independence of such
accountants. During the fiscal year, three meetings of the Audit Committee were
held. Messrs. Jensen (Chairman), DeVane, Echlin and Gustafson are members of
this Committee.
The Scientific Advisory Committee reviews production and research activities
of the various units of the Company and reports on scientific and technological
developments with potential impact on the Company's operations. During the
fiscal year, three meetings of the Scientific Advisory Committee were held. In
addition, because of the specialized nature of various technologies
investigated by the Committee, there were three meetings of various subsections
of the Scientific Advisory Committee. Drs. Myers (Chairman) and Bromley and Mr.
Rivard are members of this Committee.
The European Advisory Council, a Committee of the Board with membership
comprised of experienced, automotive industry executives from various countries
within the region, assists and advises corporate and European-based management
and the Board on developments and strategic opportunities in Europe. During the
fiscal year, the Council had three meetings. Mr. Jones serves as the Chairman
of this Council.
COMPENSATION OF DIRECTORS
The annual retainer presently paid to outside directors is $25,000. The fee
for attendance at each meeting of the Board is $1,200 and $800 is payable for
participation in telephone meetings. The standard fee for attendance at each
committee meeting, other than the European Advisory Council, is $1,000.
Chairmen of each Committee, other than the European Advisory Council, are paid
an annual retainer of $6,000 and a per meeting fee of $2,000. Scientific
Advisory Committee members receive a $2,200 annual retainer. European Advisory
Council members receive an annual retainer of $24,000 and the Council's
Chairman receives a $36,000 annual retainer.
Mr. Creamer is President of Distribution Marketing Services, Inc.
Distribution Marketing Services, Inc. provides advice regarding distribution
and marketing strategies to various subsidiaries
4
<PAGE>
of the Company at a cost in Fiscal Year 1995 of $90,000. The payments to
Distribution Marketing Services, Inc. exceeded five percent of the gross
revenues of that company.
Dr. Myers provides consulting services to the Company in regard to existing
and new technologies within the automotive industry. He was compensated for
these services at a rate equivalent to the meeting fee for the Scientific
Advisory Committee. Dr. Myers was paid a total of $6,200 for these services.
Mr. Rivard is President of Global Technology and Business Development. Global
Technology and Business Development provides consulting services to the Company
in regard to patented technologies and was paid a total of $28,887 for these
services. The payments to Global Technology and Business Development exceeded
five percent of the gross revenues of that company.
Mr. DeVane is a partner in the law firm of Tyler Cooper & Alcorn. Tyler
Cooper & Alcorn has been retained by the Company on various legal matters and
it is expected that this relationship will continue. Legal fees paid under this
arrangement did not exceed five percent of the gross revenues of Tyler Cooper &
Alcorn.
For additional information regarding Mr. Jones, see page 12.
BENEFICIAL OWNERSHIP
The following table sets forth information as to the only persons known to
the Company to be the beneficial owners of more than five percent of the
Company's Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENTAGE
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- ----------
<S> <C> <C>
FMR Corp. ................................... 7,060,881(1) 11.84%
82 Devonshire Street
Boston, Massachusetts 02109
Gabelli Funds, Inc........................... 3,693,133(2) 6.19%
One Corporate Center
Rye, New York 10580
</TABLE>
- --------
(1) FMR Corp., through its wholly-owned subsidiaries, Fidelity Management &
Research Company and Fidelity Management Trust Company (acting as an investment
advisor to several investment companies, including Fidelity Magellan Fund), has
sole voting power with respect to 276,296 shares and sole dispositive power
with respect to 7,060,881 shares as reported on Schedule 13G filed with the
Securities and Exchange Commission on February 14, 1995.
(2) Gabelli Funds, Inc. ("GFI") has sole voting and dispositive power with
respect to 412,500 shares; GAMCO Investors, Inc., a wholly-owned subsidiary of
GFI, has sole voting power with respect to 2,868,433 shares and sole
dispositive power over 3,096,133 shares; and Gabelli & Company, Inc., an
indirectly owned subsidiary of GFI, has shared voting and dispositive power
with respect to 184,500 shares as reported by the owner as of October 13, 1994.
The following table sets forth as to each nominee for director and for each
Named Executive Officer (see page 12) information pertaining to his beneficial
ownership of Common Stock of the
5
<PAGE>
Company as of November 3, 1995. Beneficial ownership in the table is comprised
of either sole voting and investment power, or voting and investment power
that is shared with the spouse of the director or officer:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------- ----------
<S> <C> <C>
D. Allan Bromley............................ 700 shares *
John F. Creamer, Jr......................... 15,000 shares *
Milton P. DeVane............................ 1,000 shares *
John E. Echlin, Jr.(1)...................... 664,692 shares 1.11%
C. Scott Greer(2)........................... 101,080 shares *
John F. Gustafson........................... 6,500 shares *
Donald C. Jensen(3)......................... 3,000 shares *
Trevor O. Jones............................. 12,500 shares *
Jon P. Leckerling(4)........................ 30,132 shares *
Milton J. Makoski(5)........................ 36,560 shares *
Frederick J. Mancheski(6)................... 1,162,252 shares 1.95%
Phillip S. Myers(7)......................... 9,400 shares *
Jerome G. Rivard............................ 3,000 shares *
Richard A. Wisot(8)......................... 48,965 shares *
</TABLE>
- --------
*Less than 1 percent of class.
(1) Includes 125,200 shares held in an irrevocable charitable foundation of
which Mr. Echlin is a trustee with shared voting rights over such shares,
61,907 shares owned by Mrs. John E. Echlin, Jr. and 43,200 shares held in
trust accounts for his daughter as to which Mr. Echlin has voting rights.
(2) Includes 88,355 shares either exercisable currently or within 60 days of
November 3, 1995 under the Echlin Inc. 1992 Stock Option Plan or credited to
Mr. Greer's account in the Echlin Incentive and Savings Investment Plan as of
August 31, 1995.
(3) Shares held indirectly by the Donald C. Jensen Revocable Living Trust
dated September 6, 1990.
(4) Includes 26,532 shares either exercisable currently or within 60 days of
November 3, 1995 under the Echlin Inc. 1992 Stock Option Plan or credited to
Mr. Leckerling's account in the Echlin Incentive and Savings Investment Plan
as of August 31, 1995.
(5) Includes 34,560 shares either exercisable currently or within 60 days of
November 3, 1995 under the Echlin Inc. 1992 Stock Option Plan or credited to
Mr. Makoski's account in the Echlin Incentive and Savings Investment Plan as
of August 31, 1995.
(6) Includes 499,188 shares either exercisable currently or within 60 days
of November 3, 1995 under the Echlin Inc. 1992 Stock Option Plan or credited
to Mr. Mancheski's account in the Echlin Incentive and Savings Investment Plan
as of August 31, 1995. Also includes 9,400 shares owned by Mr. Mancheski as
custodian for his daughter, 8,600 shares owned by Mrs. Frederick J. Mancheski
and 500 shares owned by Mrs. Mancheski as custodian for her daughter.
(7) Includes 2,200 shares owned by Mrs. Phillip S. Myers. Dr. Myers
disclaims beneficial ownership of these shares.
6
<PAGE>
(8) Includes 36,965 shares either exercisable currently or within 60 days of
November 3, 1995 under the Echlin Inc. 1992 Stock Option Plan or credited to
Mr. Wisot's account in the Echlin Incentive and Savings Investment Plan as of
August 31, 1995.
As of November 3, 1995, the directors and twelve executive officers of the
Company (including the Named Executive Officers) as a group owned beneficially
2,232,697 shares of Common Stock or 3.74 percent thereof. Such shares include
the shares reflected above as to which Dr. Myers disclaims beneficial
ownership; 809,491 shares either exercisable currently or within 60 days of
November 3, 1995 under the Echlin Inc. 1992 Stock Option Plan or, with respect
to officers of the Company, held in their respective accounts in the Echlin
Incentive and Savings Investment Plan as of August 31, 1995.
GENERAL
Shares of Common Stock of the Company covered by proxies in the accompanying
form of proxy will be voted for the election as directors of each of the eleven
proposed nominees named above, unless the shareowner votes otherwise. The Board
of Directors is unaware of any reasons why any of the nominees would be unable
or unwilling to serve, if elected. In the event that, for any reason, one or
more of such nominees is unable or unwilling to serve, the persons named in the
proxies or their substitutes shall have authority to vote or refrain from
voting in their discretion for other individuals as directors in lieu of such
nominees.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than
ten percent of Echlin's common stock to file initial stock ownership reports
and reports of changes in ownership with the Securities and Exchange Commission
and the New York Stock Exchange. SEC regulations require that the Company be
furnished with a copy of these reports. Based on its review of these reports
and on written representations from the reporting persons that no other reports
were required, the Company believes that, with the following exception,
applicable Section 16(a) reporting requirements have been met: Phillip S. Myers
filed a Form 5 for Fiscal Year 1994 reporting the gift of 500 shares of Common
Stock when that gift had previously been reported on a Form 4 filed in January,
1994. Dr. Myers filed a corrected Form 5 for Fiscal Year 1994 which negated the
redundant filing.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE OF THE BOARD OF
DIRECTORS
The Compensation and Management Development Committee is composed entirely of
independent, non-employee directors of the Company. Among other duties, the
Committee is responsible for reviewing the design and administration of the
Company's annual and long-term compensation plans and reviewing and making
recommendations to the Board with respect to all compensation which is paid to
the Company's executive officers.
7
<PAGE>
The Company's executive compensation program is designed to attract and
retain the management talent required to excel in a demanding, competitive
environment, to enhance shareowner value and to reward the attainment of
corporate and business unit objectives. For 1995, these objectives were
achieved through a program that provided a mix of annual cash compensation--
base salary and annual incentive bonus; and long-term incentives that are
directly tied to increases in shareowner value--stock options and performance
unit plan payments based on earnings per share (EPS) growth of the Company.
This year the Company also established Executive Stock Ownership Guidelines
(the "Guidelines") covering approximately fifteen key executives. This share
ownership program is designed to assure a direct relationship between senior
management and shareowner interests. Under the Guidelines after a graduated
phase-in period, these key executives will be asked to own between one to six
times their salary grade midpoint in Common Stock. The Guidelines for the
Chief Executive Officer, President and the three other Named Executive
Officers (see page 12) are six, four and one times salary grade midpoints
respectively. The Company also provides a competitive package of employee
benefits.
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to add Section 162(m). Section 162(m) places a limit of $1,000,000 on
the amount of compensation that may be deducted by the Company in any year
with respect to certain of the Company's highest paid executives. Certain
performance-based compensation that has been approved by shareowners and meets
other requirements of the Code is not subject to the deduction limit. The
Echlin Inc. Performance Unit Plan which was approved by the shareowners in
1994 and the Echlin Inc. 1992 Stock Option Plan which was approved by the
shareowners in 1992 are contemplated to be exempt from the deduction limit. In
addition to the exemption provided these long-term Compensation Plans, the
Company may require its highest paid executives to defer compensation over the
limit of $1,000,000 under the Company's 1976 Deferred Compensation Plan.
However, the Board of Directors may from time to time pay compensation to its
executive officers that may not be deductible when that is deemed in the best
interest of shareowners.
Annual Cash Compensation
The annual cash compensation of key executives consists of a base salary and
the opportunity for a cash bonus. For each executive, a potential cash
compensation level is established and periodically adjusted, at the market
median total annual cash compensation of similar job positions and
responsibilities reported in a survey of 339 manufacturing companies (the
"Market Median"). Total cash compensation for a position is divided between
base salary and annual cash bonus based on competitive practices. Consistent
with practices within the Market Median group, target annual cash bonuses, as
percentage of total cash compensation, are set at a range from 33 percent for
the Company's chief executive officer to 5 percent for the least senior
executive eligible for a cash bonus. The actual base salary and annual cash
bonus of an executive depends upon individual factors described below:
Salaries: Salaries in aggregate are targeted at the Market Median. Each
executive's annual salary relates to this Market Median based on the
executive's individual performance and contributions to business success,
relevant experience and demonstrated capabilities in fulfilling the
requirements of the position.
Annual Incentives: Executives may earn a percentage of their targeted
annual bonus based on their individual performance and the performance of
the Company or their business unit. For all participants including the
Named Executive Officers (see page 12), the
8
<PAGE>
performance factors are Company or operating business unit net income, cash
flow and the percentage of customer orders filled on a timely basis against
objectives set at the beginning of each year. Subject to adjustment by the
Committee, actual awards may range from zero to 144 percent of the target
award based on individual performance and the degree to which performance
factors were over- or under-achieved.
Long-Term Incentives: The long-term incentive program is designed to link
the common interests of the executive officers and the Company's
shareowners in maximizing long-term shareowner value. The program consists
of stock options and performance units that are based on EPS growth over a
three-year cycle. The combined value of stock options and performance units
granted to each executive is based on the Market Median of long-term
incentives. Executives may receive from 0 to 152 percent of the competitive
grant appropriate to their position, based on the prior year performance of
the individual and of the Company or business unit as described above. Two-
thirds of the value of an executive's long-term award is anticipated to be
paid in performance units with the remainder in stock options. Performance
units are valued based upon the targeted accumulated EPS over the three-
year performance period utilizing a target compound rate of EPS growth over
that period which is set at the start of each three-year period by the
Committee. Upon approval of Shareowners of the First Amendment to the
Performance Unit Plan (see page 18), performance unit awards awarded for
Fiscal Year 1996 will be paid 60 percent in cash and 40 percent in Common
Stock. Payouts for performance units awarded in Fiscal Year 1995 will be
paid 70 percent in cash and 30 percent in Common Stock and awards prior to
Fiscal Year 1995 will be paid 100 percent in cash. Stock options are
granted at 100 percent of the fair market value of the underlying stock on
the date of grant and may not be exercised until one year later. The number
of stock options granted is determined based upon the anticipated increase
in share value resulting from achievement of target EPS growth times the
Company's historical earnings per share multiple.
Compensation of the Chief Executive Officer: The measurements governing
the compensation paid to Frederick J. Mancheski, Chairman and Chief
Executive Officer of the Company, are the same as those covering other
executive officers and for Fiscal Year 1995 were recommended by the
Committee and approved by the Board (other than Messrs. Mancheski and
Greer). In addition, the Committee, with the assistance of outside
compensation consultants retained by the Company, during the year compared
total compensation of the CEO with the compensation levels at the peer
group companies described on page 11 to assure that the salary level
targets derived from the Market Median group are consistent with those in
the peer group. The peer group alone is not used to establish compensation
levels because of the statistical limitations of a sample containing only
five companies. The Committee's actions are explained below as they relate
to each component of Mr. Mancheski's 1995 compensation as reported in the
charts and tables included in this proxy statement.
Salary: Mr. Mancheski's base salary was increased at the beginning of
Fiscal Year 1995 (September 1, 1994) by 5 percent to $625,000 in
recognition of his contribution to the Company's performance in Fiscal Year
1994 and in order to properly align his salary at the median of chief
executive officer salary levels within the group of 339 companies.
Annual Incentive Payment: The Committee recommended and the Board
authorized a payment to Mr. Mancheski of $600,000 under the Company's
annual bonus program. Mr. Mancheski's 1995 bonus was made in recognition of
the Company's 26 percent increase in net income in 1995, the third
consecutive year where Echlin's total return in value to shareowners
9
<PAGE>
exceeded the performance of both the peer group and the Standard & Poor's
500 index, and a fifth consecutive year with strong cash flow from
operations. The Committee also set Mr. Mancheski's bonus level in
consideration of his successful development and implementation of the
Company's long-term strategies which have resulted in its long-term
profitability. The Committee believes that the overall level of payment is
consistent with the continued outstanding leadership Mr. Mancheski
demonstrated in positioning the Company for continued growth and
profitability and the resultant increase in shareowner value.
Long-Term Incentive Award: Mr. Mancheski was granted an award comprised
of Incentive and Non-Qualified Stock Options and Performance Units as shown
in the accompanying tables. These amounts were set at 145 percent of
targeted amounts based on the Company's excellent 1994 performance which
established the base for the 1995-1998 cycle of long-term compensation.
That performance was highlighted with a 29 percent growth in net income and
a strong improvement in gross margins as total sales rose almost 15
percent. Mr. Mancheski received a payout for performance units under the
1992-1995 long-term compensation cycle of $1,702,575 representing a maximum
200 percent payout which was earned based on the Company's 31 percent
three-year, compounded earnings per share growth during the cycle.
Trevor O. Jones, Chairman
D. Allan Bromley
Donald C. Jensen
November 17, 1995
10
<PAGE>
FIVE-YEAR PERFORMANCE COMPARISON
The graph below provides a comparison of Echlin cumulative total shareowner
return with the Standard & Poor's 500 Composite Stock Index and a Peer Group
Composite Index for the five-year period commencing August 31, 1990 and ending
August 31, 1995:
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Industry S&P 500
Echlin Peer Group Index
------ ---------- -------
<S> <C> <C> <C>
Aug 1990 $100 $100 $100
Aug 1991 $123 $105 $127
Aug 1992 $182 $128 $137
Aug 1993 $288 $187 $158
Aug 1994 $325 $189 $166
Aug 1995 $372 $191 $202
</TABLE>
Assumes $100 invested on September 1, 1990 in Echlin Inc., Standard & Poor's
500 Stock Index (the Company is a member of the Standard & Poor's 500 and its
individual shareholder return went into calculating the Standard & Poor's 500
results set forth in this performance graph) and a Peer Group Composite Index
comprised of Arvin Industries, Dana Corporation, Federal-Mogul Corp., Standard
Motor Products Inc. and SPX Corp.
Total return assumes reinvestment of dividends.
11
<PAGE>
In constructing the Peer Group Composite Index (Peer Index) for use in the
performance graph above, the Committee's criteria for selection were publicly
held companies (weighted in accordance with each such company's stock market
capitalization as measured at the beginning of each fiscal year period and
including reinvestment of dividends) that were both manufacturing companies and
that compete with the Company in the automotive parts industry.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation and Management Development Committee during
Fiscal Year 1995 were Trevor O. Jones (Chairman), D. Allan Bromley and Donald
C. Jensen. All Committee members are outside directors and no Committee member
is or has ever been an officer or employee of the Company or any of its
subsidiaries. Mr. Jones is Chairman and Chief Executive Officer of
International Development Corporation. International Development Corporation
provides management analysis in regard to acquisition strategies and
opportunities. In Fiscal Year 1995, the Company paid International Development
Corporation or Mr. Jones directly a total of $11,800 for such services
rendered. These payments did not exceed five percent of the gross revenues of
International Development Corporation.
SUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation for
services to the Company for Fiscal Years 1995, 1994 and 1993 paid to the chief
executive officer and to each of the four other most highly compensated
officers of the Company at August 31, 1995 (such five officers being referred
to as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ -----------------------------
AWARDS PAYOUTS
-------------- --------------
OTHER SECURITIES LONG-TERM
NAME AND ANNUAL UNDERLYING INCENTIVE PLAN ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(A) COMPENSATION OPTIONS (#)(C) PAYOUTS ($)(D) COMPENSATION ($)(E)
------------------ ---- ---------- ------------ ------------ -------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Frederick J. Mancheski.. 1995 625,000 600,000 57,000 1,702,575 2,610
Chairman of the Board 1994 595,000 495,000 (b) 54,000 587,578 2,402
and Chief Executive Of-
ficer 1993 550,000 435,000 48,100 545,650 1,169
C. Scott Greer.......... 1995 275,000 220,000 23,000 631,575 2,610
President 1994 253,500 210,000 (b) 18,400 201,518 2,402
1993 240,000 165,000 17,850 283,675 1,215
Richard A. Wisot........ 1995 167,000 70,000 6,700 192,465 2,624
Vice President and 1994 159,000 70,000 (b) 6,050 72,993 2,043
Controller 1993 150,000 57,000 5,425 77,700 1,051
Jon P. Leckerling....... 1995 164,000 65,000 6,300 192,465 2,620
Vice President, 1994 156,000 65,000 (b) 5,775 72,993 2,043
General Counsel and 1993 147,500 55,000 5,425 67,725 1,082
Corporate Secretary
Milton J. Makoski....... 1995 157,000 65,000 6,300 211,995 2,612
Vice President 1994 149,000 65,000 (b) 6,350 80,510 1,991
Human Resources 1993 140,000 62,000 5,975 77,700 972
</TABLE>
12
<PAGE>
- --------
(a) Annual bonuses received under the Company's Executive Bonus Plan are
reported in the year earned, although paid in the subsequent year.
(b) No amounts of "Other Annual Compensation" were paid to each Named
Executive Officer, except for perquisites and other personal benefits,
securities or properties which for each executive officer did not exceed the
lesser of $50,000 or 10% of such individual's salary plus bonus.
(c) Options may have stock appreciation rights attached in accordance with
the provisions of the Change in Control Severance Policy described below.
(d) Long-term incentive payouts received for 3-year performance periods under
the Company's Performance Unit Plan are reported in the last year of the
performance period during which they were earned, although paid in the
subsequent year. Performance unit payouts may be accelerated in accordance with
the provisions of the Change in Control Severance Policy described below.
(e) The Company contribution under the Echlin Inc. Incentive and Savings
Investment Plan (a qualified salary deferral plan under Section 401(k) of the
Internal Revenue Code).
OPTION GRANTS IN FISCAL YEAR 1995
Shown below is further information on grants of stock options pursuant to the
Company's 1992 Stock Option Plan during the fiscal year ended August 31, 1995
to the Named Executive Officers. Such grants are reflected in the Summary
Compensation Table on page 12:
OPTION/SAR GRANTS IN FY 1995
AND FY 1995 GRANT DATE VALUE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------
% OF GRANT DATE
NUMBER OF TOTAL VALUE
SECURITIES OPTIONS ------------------
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES EXERCISE (NOVEMBER 1, 1994)
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) (A) YEAR ($/SH)(B) DATE (C) VALUE $ (D)
---- ---------- ---------- --------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Frederick J. Mancheski.. 57,000 19.50 $30.75 10/31/04 $697,680
C. Scott Greer.......... 23,000 7.87 30.75 10/31/04 281,520
Richard A. Wisot........ 6,700 2.29 30.75 10/31/04 82,008
Jon P. Leckerling....... 6,300 2.15 30.75 10/31/04 77,112
Milton J. Makoski....... 6,300 2.15 30.75 10/31/04 77,112
</TABLE>
- --------
(a) No stock appreciation rights ("SAR") were granted in Fiscal Year 1995.
(b) The exercise price is the fair market value of the Company's Common Stock
on the date of the grant of the option.
(c) Options may be exercised during a period that begins one year after the
date of grant and ends ten years after the date of the grant of the option.
(d) Valuation based on Black-Scholes option pricing model. The Company does
not advocate or necessarily agree that the Black-Scholes model can properly
determine the value of an option.
13
<PAGE>
The actual value, if any, a Named Executive Officer may realize will depend on
the excess of the stock price over the exercise price on the date the option is
exercised so that there is no assurance the value realized by a Named Executive
Officer will be at or near the value estimated by the Black-Scholes model. The
value calculations for the options listed above are based on the following
assumptions: interest rate of 7.91%; annual dividend yield of 2.53%; and
volatility as measured by the standard deviation of .266.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1995 AND FISCAL YEAR-END OPTION
VALUES
Shown below is information with respect to options exercised by the Named
Executive Officers during Fiscal Year 1995 and the unexercised options to
purchase the Company's Common Stock granted in Fiscal Year 1995 and prior years
under the Echlin Inc. 1992 Stock Option Plan to the Named Executive Officers
and held by them as of August 31, 1995:
AGGREGATED OPTION/SAR EXERCISES IN FY 1995
AND FY 1995 YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END (#) FY-END ($) (B)
SHARES ACQUIRED EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($)(A) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------------- ------------------------- -------------------
<S> <C> <C> <C> <C>
Frederick J. Mancheski.. 125,000 $1,848,425 453,640/57,000 $8,254,625/$213,750
C. Scott Greer.......... 0 0 70,020/23,000 1,069,113/ 86,250
Richard A. Wisot........ 4,000 81,899 29,330/ 6,700 468,375/ 25,125
Jon P. Leckerling....... 2,500 46,875 20,025/ 6,300 289,734/ 23,625
Milton J. Makoski....... 2,000 51,125 27,795/ 6,300 422,581/ 23,625
</TABLE>
- --------
(a) The Value Realized is ordinary income, before taxes, and represents the
amount equal to the excess of the fair market value of the shares at the time
of exercise over the exercise price.
(b) Represents the fair market value as of August 31, 1995 ($34.50 per share
closing stock price) of the option shares less the exercise price of the
options.
PERFORMANCE UNIT PLAN
The Company sponsors a long-term incentive plan known as the Performance Unit
Plan for certain key employees of the Company, including the Named Executive
Officers, whose responsibilities and job performance can have an impact upon
the growth and performance of the Company. At the beginning of each fiscal
year, the Compensation and Management Development Committee of the Board, no
member of which is a participant under the plan, may award performance units
for a forward three-year cycle period to eligible employees.
The target value for each participant is based on a percentage of benchmark
total compensation of executives with similar positions and responsibilities at
the 339 manufacturing companies which include approximately sixty percent of
all Fortune 500 companies. The targeted percentage of total
14
<PAGE>
compensation attributable to performance units for the Named Executive Officers
varied for Fiscal Year 1995 from 56 percent for Mr. Mancheski to 32 percent for
Messrs. Wisot, Makoski and Leckerling. The actual number of performance units
awarded depends on the then current performance rating for the individual and
his or her business unit and a target compounded, annual growth rate in
earnings per share over the three-year cycle as established by the Compensation
and Management Development Committee of the Board of Directors. The value of
each unit will equal the actual earnings per share of the Company's Common
Stock over the three year performance period multiplied by a factor based upon
the compounded annual growth rate in earnings per share over such three year
period. The value of each unit is zero if the actual compounded earnings per
share growth rate over the three-year period is less than one-half the targeted
growth rate and is increased by a factor of two if the targeted growth rate is
exceeded by 50 percent. The value of a performance unit cannot be determined
and does not vest in the participant until the end of the three-year period
following the fiscal year in which the performance unit was granted when the
actual earnings per share and compound growth rate can be computed.
The Company has submitted the First Amendment to the Echlin Inc. Performance
Unit Plan for approval of shareowners at this year's Annual Meeting (see page
18).
The following table shows estimated future threshold, target and maximum
payouts for performance unit awards made during Fiscal Year 1995.
LONG-TERM INCENTIVE PLANS--FISCAL 1995 AWARDS
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-
BASED PLANS
-------------------------------
PERFORMANCE
PERIOD UNTIL
NUMBER OF MATURATION OR THRESHOLD TARGET MAXIMUM
NAME UNITS (#) PAYOUT (A) ($) (B) ($) (C) ($) (D)
---- --------- ------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Frederick J. Mancheski.. 150,000 8/31/97 $294,000 $1,303,500 $2,907,000
C. Scott Greer.......... 50,000 8/31/97 98,000 434,500 969,000
Richard A. Wisot........ 15,000 8/31/97 29,400 130,350 290,700
Jon P. Leckerling....... 14,500 8/31/97 28,420 126,005 281,010
Milton J. Makoski....... 14,500 8/31/97 28,420 126,005 281,010
All Executive Officers
as a group(12)
including those above.. 289,500 8/31/97 567,420 2,515,755 5,610,510
All employees who are
not Executive Officers,
as a group............. 665,125 8/31/97 1,303,645 5,779,936 12,890,123
</TABLE>
- --------
(a) Performance Unit payouts may be accelerated as a result of a change in
control and the value of such units would then be determined in accordance with
the provisions of the Performance Unit Plan and the Change In Control Severance
Policy described below.
(b) The threshold amount will be earned if 50 percent of the target
compounded growth rate of earnings per share over the three-year cycle is
achieved.
(c) The target amount will be earned if 100 percent of the target compounded
growth rate of earnings per share over the three-year cycle is achieved.
15
<PAGE>
(d) The maximum award will be earned if 150 percent or more of the target
compounded growth rate of earnings per share over the three-year cycle is
achieved.
PENSION PLANS
The Company maintains a noncontributory Pension Plan for Echlin Inc.
Employees which includes, among the participants, the Named Executive Officers
of the Company. A director who is not also an employee is ineligible to
participate. The Plan provides that a participant who retires with 30 years of
service will receive a pension of 26 percent of final average earnings up to
the Average Social Security Covered Compensation plus 44 percent of final
average earnings in excess of such Average Social Security Compensation. Final
average earnings is based upon cash compensation (comprised of base salary and
annual bonus) computed as of the highest five consecutive calendar years of the
participant's final ten calendar years of service preceding his or her
termination date. Normal retirement occurs at the later of age 65 or completion
of five years of service. Participants vest in pension benefits after five
years of service or, if the Board of Directors declares a qualifying change in
control event (as defined below under the Change In Control Severance Policy),
on the date of a change in control of Echlin Inc. In addition, employees
receiving lump sum payments under the Change In Control Severance Policy
receive credit for years of service equivalent to the period of time associated
with their lump sum payment. The Company has also put into effect a
Supplemental Executive Retirement Plan (SERP). The Code limits both the annual
pension which may be paid by an employer from plans which are qualified under
the Code for federal income tax purposes and the maximum amount of earnings
utilized to compute benefits under such plans. The SERP was established by the
Board of Directors to provide officers who also serve as directors and other
designated employees with the benefits they would have received under the
Pension Plan for Echlin Inc. Employees but for the limitations imposed by the
Code. All Named Executive Officers participate under the SERP.
The following illustrative table provides the total annual pension benefits
under various years of credited service assuming retirement in 1995 at age 65.
Illustrative total annual benefits from both the Echlin Inc. Pension Plan and
the SERP:
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
FINAL AVERAGE -------------------------------
EARNINGS 15 20 25 30
- ------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 100,000..................................... 19,667 26,223 32,779 39,334
200,000..................................... 41,667 55,556 69,445 83,334
400,000..................................... 85,667 114,223 142,779 171,334
600,000..................................... 129,667 172,890 216,112 259,334
800,000 .................................... 173,667 231,556 289,445 347,334
1,000,000..................................... 217,667 290,223 362,779 435,334
1,200,000..................................... 261,667 348,890 436,112 523,334
</TABLE>
The current covered five-year compensation average and the current years of
credited service for the Named Executive Officers are as follows: Frederick J.
Mancheski, $846,540 and 32 years; C. Scott Greer, $336,340 and 15 years;
Richard A. Wisot, $186,987 and 20 years; Jon P. Leckerling, $184,948 and 5
years; Milton J. Makoski, $176,760 and 9 years.
16
<PAGE>
CERTAIN TRANSACTIONS
Change in Control Severance Policy
The Company has established a Change In Control Severance Policy covering
some 350 designated employees of Echlin Inc. and its domestic U.S.
subsidiaries, including the Named Executive Officers. A "change in control"
event of Echlin Inc. is defined as: (i) more than 30 percent of Echlin's
outstanding Common Stock being beneficially held or acquired by any person or
entity; (ii) more than 20 percent of Echlin's outstanding Common Stock being
purchased pursuant to a tender or exchange offer; (iii) Echlin Inc. merging or
consolidating with or selling substantially all of its assets to another entity
and Echlin Inc. not being the surviving corporation; or (iv) during any two
year period, a majority of individuals who are Directors of Echlin Inc. at the
beginning of the period ceasing to be Directors by the end of the period,
unless the nomination of each new Director is approved by a two-thirds majority
of those who are Directors at the beginning of the period. The Board of
Directors must declare whether such an event qualifies as a change in control
event under the Echlin Inc. Change In Control Severance Policy.
Employees covered by the policy receive special severance benefits if, within
two years after a qualified change in control, the employee terminates for
"good reason" because (i) there has been an adverse change in the employee's
duties, responsibilities, title, position, compensation, benefits or general
status; (ii) the employee is required to relocate to a place of business more
than 50 miles from the location where the employee works at the time of the
change in control; (iii) the employee is terminated for reasons other than for
cause; or (iv) for Echlin Inc. corporate officers, including the Named
Executive Officers, the employee elects to terminate his or her employment
during the 30-day period commencing one year after the change in control.
Severance benefits are payable within 30 days of termination and consist of a
lump sum payment equivalent to the sum of the higher of the employee's annual
base salary and most recent executive bonus, if applicable, either as of the
date of the change in control or the date of the termination for a period
varying from 7.5 months to 36 months depending upon the employee's employment
level. The Named Executive Officers all qualify for the payment equivalent to
36 months. Employees covered by the policy continue to receive other benefits
such as medical insurance for a period equivalent to the period associated with
their severance payment. The Policy also provides that all outstanding
performance units under the Company's long-term incentive plan immediately vest
on the date of the change in control. Performance units are valued at 100
percent of their original targeted value multiplied by a fraction representing
the number of months lapsed in the three-year vesting cycle. Further, if the
Board of Directors declares a qualifying change in control event, all options
granted after December 19, 1985 will be deemed to have stock appreciation
rights attached. In some cases, such severance payments are increased to
compensate for any excise taxes resulting from the payment and any other
benefits extended based upon the change in control.
If a covered employee's employment ends after a change in control because of
death, disability or for cause, or if the employee voluntarily terminates
employment, other than as provided in the severance policy, the employee will
get no special severance benefits.
17
<PAGE>
2. PROPOSAL TO APPROVE THE FIRST AMENDMENT TO THE ECHLIN INC. PERFORMANCE UNIT
PLAN
In 1994, shareowners approved the Echlin Inc. Performance Unit Plan (the
"PUPlan"). As explained in last year's proxy, all compensation paid under the
plan is derived from the objective measurement of growth in the Company's
earnings per share thereby making it highly variable with the earnings of the
Company. Benefits and amounts to be received under the PUPlan are not
determinable until the end of each three year cycle of the plan. For awards
made for fiscal year 1995, see the table on page 15 for benefits and amounts
estimated and allocated for the Named Executive Officers, all current executive
officers and all employees, who are not executive officers, as a group. The
First Amendment to the PUPlan changes Section 8 of the plan to give the
Compensation and Management Development Committee of the Board of Directors
(the "Committee") the flexibility to alter the percentage of vested awards
payable in Common Stock of the Company rather than having a percentage fixed in
the PUPlan. In order to encourage executives and other participants under the
PUPlan to increase further their ownership of Common Stock, the Committee has
determined that the appropriate percentage of payment in Common Stock for the
three-year performance cycle commencing in Fiscal 1996 should be forty percent
(40%), an increase from the fixed thirty percent (30%) set forth in the PUPlan
prior to the First Amendment. The Board believes that increasing management's
equity ownership in the Company serves to align management more closely with
the interests of shareowners. The amendment also provided that the shares
deliverable in payment of vested units may be either from authorized but
previously unissued shares or from treasury or other shares reacquired by the
Company, including shares purchased in the open market.
The following constitutes a brief description of the material features of the
PUPlan as proposed to be amended and is qualified in its entirety by reference
to the copy of the amended PUPlan which is attached to this Proxy Statement as
Appendix A.
Purpose. The PUPlan is part of the long-term compensation program for key
employees to provide incentive to improve the earnings and performance of
the Company. Compensation from the PUPlan varies directly with the three-
year compounded growth in earnings per share. Maturing performance units
are also intended to provide a source of funds with which to exercise stock
options granted under the long-term incentive compensation program.
Overall, long-term incentive compensation is designed to provide a
percentage of salary equal to such compensation paid to individuals holding
similar job positions and responsibilities at the 339 manufacturing
companies participating in the compensation survey utilized by the Company
to set long-term compensation allocated by value one-third to stock options
and two-thirds to performance units payable in cash and Common Stock.
Participants. Individuals eligible for participation in the PUPlan are
key employees of the Company and its subsidiaries who have an effect upon
the growth and performance of the Company. Participation in the plan is by
selection by the Committee. Currently, some 350 key employees, including
all the Named Executive Officers, participate under the PUPlan.
Maximum Payout Criteria. The First Amendment to the PUPlan provides that
vested Performance Units are paid in a combination of cash and Common Stock
based upon percentages set by the Committee on a performance cycle to
performance cycle basis. The Common Stock delivered will be either from
authorized but previously unissued shares or from treasury or other shares
reacquired by the Company, including shares purchased in the open market.
Payouts for Performance Units awarded in fiscal year 1995 are paid out 70
percent in cash and 30 percent in Common Stock. Payouts for performance
units awarded prior to Fiscal
18
<PAGE>
Year 1995 are paid out 100 percent in cash. The payment to each participant
is directly related to the cumulative earnings per share for the three-year
period multiplied by up to 2 if compounded earnings per share growth rate
was 50 percent higher than the pre-selected targeted rate or reduced to
zero if such growth rate was less than 50 percent of such target. Thus, the
actual value of performance units since 1991 have varied from zero to
$12.60 (two times the $6.30 cumulative earnings per share in the cycle
covering fiscal years 1993, 1994 and 1995.) For the two most recent years,
the earnings per share growth rate target set by the Committee has been 15
percent. Assuming that the growth rate target is met and if earnings per
share increase over the three-year cycle, the value of each performance
unit will increase; provided, however, that no single year performance unit
award to any one executive may be paid in excess of $5,000,000. The PUPlan
also limits the aggregate number of shares of Common Stock which may be
paid to participants under the PUPlan at 1,000,000 shares and provides that
no individual participant may receive more than 50,000 shares in any
calendar year. Except in accordance with rules established by the Committee
for retirees and participants who either die or become disabled,
performance unit payment generally requires the participant to be employed
by the Company throughout the entire three-year performance cycle;
provided, however, if the Board of Directors declares a qualifying change
in control event (as defined above in the Change In Control Severance
Policy), all outstanding performance units would immediately vest on the
date of the change in control. Performance units would then be valued as if
the Company had achieved 100 percent of the targeted earnings per share
growth through the full three-year cycle multiplied by a fraction
representing the number of months lapsed in the cycle divided by 36 months.
Tax Consequences. The award of Performance Units will create no income
tax consequences for the participant or the Company. Upon receipt of cash
or shares of Common Stock at the end of the applicable three-year
performance cycle, the participant will generally recognize ordinary income
equal to the amount of any cash and the fair market value of any shares
received. The Company will be entitled to a deduction in the same amount
and at the same time as income is recognized by the participant.
Required Vote. The affirmative vote of the holders of a majority of the
shares of Common Stock represented and voting at the Annual Meeting is
required to approve the First Amendment to the Echlin Inc. Performance Unit
Plan. Unless marked to the contrary, proxies received will be voted FOR
approval of the First Amendment to the Echlin Inc. Performance Unit Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREOWNERS VOTE FOR THE APPROVAL
OF THE FIRST AMENDMENT TO THE ECHLIN INC. PERFORMANCE UNIT PLAN.
3. SELECTION OF INDEPENDENT ACCOUNTANTS OF THE COMPANY
The Board of Directors of the Company has designated Price Waterhouse LLP, as
independent accountants of the Company for the fiscal year ending August 31,
1996, subject to shareowner approval. Representatives of Price Waterhouse LLP
are expected to be present at the Annual Meeting with the opportunity to make a
statement if they desire to do so and to respond to appropriate questions.
For the fiscal year ended August 31, 1995, Price Waterhouse LLP examined the
Company's annual consolidated statements, reviewed quarterly reports and
filings with the SEC and rendered various other services in connection with the
audit.
19
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREOWNERS VOTE FOR THE APPROVAL
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS.
4. OTHER MATTERS
The Board of Directors knows of no other business which may come before the
meeting or any adjournment thereof. However, if any other matters properly come
before the meeting, or any adjournment thereof, it is intended that the person
or persons voting the proxies will vote them in accordance with their best
judgment.
DEADLINE FOR SUBMISSION OF SHAREOWNER PROPOSALS
Proposals of shareowners intended to be presented at the next Annual Meeting
must be received by the Secretary, Echlin Inc., 100 Double Beach Road,
Branford, Connecticut 06405 no later than July 22, 1996.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended August 31, 1995 is
mailed to shareowners of record herewith. The Annual Report is not part of this
Proxy Statement.
UPON WRITTEN REQUEST OF ANY PERSON SOLICITED HEREUNDER, THE COMPANY
UNDERTAKES TO PROVIDE TO SUCH PERSON, WITHOUT CHARGE, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED AUGUST 31, 1995. THE FORM
10-K MAY BE OBTAINED BY WRITING TO THE SECRETARY, ECHLIN INC., 100 DOUBLE BEACH
ROAD, BRANFORD, CONNECTICUT 06405.
The Board of Directors
By: Jon P. Leckerling
Vice President and Corporate
Secretary
Date: November 17, 1995
20
<PAGE>
APPENDIX A
THE ECHLIN INC.
PERFORMANCE UNIT PLAN
AS AMENDED BY THE FIRST AMENDMENT DATED OCTOBER 18, 1995
The following is the Performance Unit Plan of Echlin Inc. ("the Company"), as
originally adopted by the Board of Directors of the Company at a regular
meeting of the Board of Directors held on October 20, 1976 and as subsequently
amended through October 18, 1995:
1. Name. The name of the Plan is The Echlin Inc. Performance Unit Plan
(hereinafter called the "Plan").
2. Purpose. The purpose of the Plan is to provide incentive to certain
key employees of the Company and of its subsidiary corporations to improve
the earnings and performance of the Company. In addition, if earning
targets are met, it is also intended to provide a source of funds for
participants to use to exercise stock options granted under the Company's
Stock Option Plan.
3. Eligibility. Employees eligible to participate in the Plan shall be
those key employees of the Company or any subsidiary corporation whose
efforts may have an effect upon the growth and performance of the Company
and who shall be selected to participate in the Plan by the Compensation
and Management Development Committee or any successor thereto (hereinafter
called the "Committee") of the Board of Directors of the Company.
4. Administration. The Plan shall be administered by the Committee. No
member of the Committee shall be eligible to participate in the Plan. The
Committee shall consist of two or more directors of the Board of Directors.
It is intended that the directors designated to serve on the Committee
shall be "disinterested persons" (within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the "1934 Act")) and
"outside directors" (within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code")); however, the mere fact that
a Committee member shall fail to qualify under either of these requirements
shall not invalidate any award made by the Committee which award is
otherwise validly made under the Plan. The Committee shall have power to
construe and interpret the Plan and to establish and amend rules,
regulations and forms for its administration and to certify all payments
made under the Plan. The determination of the Committee on all matters
relating to the Plan shall be conclusive. No member of the Committee shall
be liable for any action or determination made in good faith with respect
to the Plan or any award thereunder. Notwithstanding anything to the
contrary herein, the Board of Directors, other than Directors who are
participants under the Plan or who are otherwise not "disinterested
persons" or "outside directors", may, in its sole discretion, at any time
from time to time, administer the Plan, in which case, the term Committee
as used herein shall be deemed to mean the Board of Directors.
5. Award of Performance Units. Annually, within 90 days after the close
of the Company's fiscal year, the Committee may award to eligible employees
Performance Units in such amounts so as to have a target value at the
conclusion of a three-year cycle equal to a pre-determined percentage of
salary grade midpoint compensation. Such percentage is adjusted to reflect
individual and business unit performance ratings for the just completed
fiscal year.
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<PAGE>
6. Value of Performance Units. In connection with each award, the
Committee shall establish a targeted three year compound growth rate in
earnings per share for such three year cycle of the Plan. The value of a
Performance Unit shall be equal to (i) the actual earnings per share of the
Common Stock of the Company for the three full fiscal years beginning with
the fiscal year in which an award of a Performance Unit is made to an
employee, multiplied by (ii) a performance factor based on the annual
growth rate in earnings per share by comparing, upon a compounded basis,
the earnings per share for the final year of the period with the earnings
per share of the Company during the fiscal year immediately preceding the
award of a Performance Unit, interpolated with reference to the following
table:
<TABLE>
<CAPTION>
THREE-YEAR COMPOUND PERFORMANCE
GROWTH RATE ACHIEVED FACTOR
-------------------- -----------
<S> <C>
Equal to or greater than 150% of the Targeted Growth Rate...... 200%
Equal to the Targeted Growth Rate.............................. 100%
Equal to 50% of the Targeted Growth Rate....................... 25%
Less than 50% of the Targeted Growth Rate...................... 0%
</TABLE>
Earnings per share for any fiscal year will be determined by reference to
the published financial reports of the Company by dividing reported
consolidated net income for the year by the reported average number of
common shares outstanding, during such year.
7. Vesting of Performance Units.
(a) General. The value of Performance Units will vest fully in the
employee to whom awarded at the close of business on the last day of
the fiscal year with reference to which the value of a Performance Unit
is finally determined.
(b) Vesting Upon Change in Control. If there is an event constituting
a Change In Control (as hereinafter defined) of the Company and the
Board of Directors declares, in its sole discretion, that such event
qualifies or will qualify as a Change in Control under this Plan, the
value of all outstanding Performance Units shall immediately vest in
the employee to whom awarded as of the date on which such change in
control occurs. The value shall be equal to (a) one hundred percent
(100%) of the targeted value of each unit at the time of issuance as
recorded in the office of the Vice President--Human Resources
multiplied by (b) a fraction, the numerator of which is the number of
full and partial months since the beginning of the fiscal year in which
the Performance Unit was awarded until the later of the date on which
the change in control occurs or the date on which the Board of
Directors decides that the change in control provisions of this Plan
shall apply, and the denominator of which is thirty-six (36).
(c) Definition of Change in Control. An event constituting a "Change
In Control" shall occur when (and only when) the Company obtains actual
knowledge that: (a) any person within the meaning of Sections 13(d) and
14(d) of the 1934 Act, other than the Company or any of its
subsidiaries, has become the beneficial owner, within the meaning of
Rule 13d-3 under the 1934 Act, of thirty percent (30%) or more of the
combined voting power of the Company's then outstanding voting
securities; or (b) the expiration of a tender offer or exchange offer,
other than an offer by the Company, to which twenty percent (20%) or
more of the combined voting power of the Company's then outstanding
shares of common stock have been purchased; or (c) the stockholders of
the Company have approved an agreement to merge or consolidate with or
into another corporation and the Company is not the surviving
corporation or an agreement to sell or otherwise dispose of
A-2
<PAGE>
all or substantially all of the Company's assets (including a plan of
liquidation); or (d) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company would cease for any reason to constitute at
least a majority thereof, unless the election or nomination for the
election by the Company's stockholders of each new director was
approved by a vote of at least two-thirds ( 2/3) of the directors then
still in office who were directors at the beginning of the period. A
change in control shall also occur with respect to a participant under
the Plan who is an employee of an employer that is a wholly owned
subsidiary of the Company, but only if one of the events described in
(a), (b) or (c) of the preceding sentence occurs with respect to that
employer.
8. Payments on Account of Performance Units and Maximum
Payments. Payments in respect of Performance Units which have fully vested
shall be made to the employees in whom such Units have vested in cash
within 90 days of the date upon which such units become vested; provided,
however, that in the sole discretion of the Committee, such discretion
being exercised at the time of the award of the Performance Unit, payment
may be made wholly or partly in shares of Common Stock of the Company of
equal value (determined on the basis of the closing sales price of Common
Stock as quoted on the New York Stock Exchange Composition Tape on the last
day of each three-year performance cycle and computed to the nearest full
share) in conformity with applicable federal and state securities laws and
allocated to participants in accordance with the rules and regulations
established by the Committee. Payments on account of Performance Units
awarded in Fiscal Year 1995 shall be made seventy percent (70%) in cash and
thirty percent (30%) in Common Stock. Payments on account of Performance
Units awarded prior to Fiscal Year 1995 and on account of Performance Units
vesting upon a Change In Control shall be one hundred percent (100%) in
cash. Shares deliverable in payment of such vested Performance Units may be
either authorized but previously unissued shares of Common Stock or
treasury or other shares reacquired by the Company, including shares
purchased in the open market at the discretion of the Board of Directors or
the Committee. Subject to adjustments made consistent with paragraph 9(i)
hereof, (i) the aggregate number of shares of Common Stock to be purchased
and delivered under the Plan shall not exceed 1,000,000 shares; (ii) no
participant may receive more than 50,000 shares in payment on account of
Performance Units which have become fully vested in any calendar year; and
(iii) the maximum payment on account of Performance Units for each three-
year cycle to any one participant shall be $5,000,000 including the value
of shares received. Performance Units payable in shares but in excess of
the limitation provided in subparagraph (ii) above, shall be payable in
cash.
9. Adjustments. The Committee may make adjustments from time to time in
the number of Performance Units credited to any employee's account or in
the earnings per share, in such reasonable manner as the Committee may
determine to reflect (i) any increase or decrease in the number of issued
shares of common stock of the Company resulting from a subdivision or
consolidation of shares or any other capital adjustment, the payment of
stock dividends or other increases or decreases in such shares effected
without receipt of consideration by the Company; or (ii) material changes
in the Company's accounting practices or principles; or (iii) material
acquisitions or dispositions, the effect of which would be to distort
earnings per share of the Performance Factor described above; provided,
however, that no such adjustment shall be made to the extent that the
Committee determines that adjustment would cause payment under the award to
fail to be fully deductible by the Company under Section 162(m) of the
Code.
A-3
<PAGE>
10. Disability, Death, Retirement or Termination. If, before the vesting
of Performance Units, an employee holding such Units ceases to be employed
by the Company or any of its subsidiaries for any reason other than death,
disability or retirement, unvested Performance Units will be forfeited.
In the event of an employee's death, disability or retirement before the
vesting of any Performance Units which he or she may hold, the Committee
may provide in its sole discretion for the vesting and payment of any such
unvested Performance Units upon an equitable basis reflecting the
performance of the Company during the period beginning on the date when
such employee was awarded Performance Units and ending upon the date of
disability, death or retirement.
No Performance Unit shall be regarded as in any way vested unless the
employee is in the employ of the Company or any of its subsidiaries at the
conclusion of the period in which the value of any Performance Unit is
finally determined, and the decision of the Committee with respect to any
such determination shall be final.
11. Amendment or Termination of Plan. The Board of Directors, other than
Directors who are participants under the Plan or who are otherwise not
"disinterested persons" or "outside directors", may amend, suspend or
terminate this Plan at any time or from time to time, provided, however,
that no amendment, suspension or termination may affect the terms of any
then outstanding Performance Units except with the written consent of the
holder thereof and that no amendment may be made which shall (i) increase
the aggregate number of shares delivered under the Plan (except for
adjustments pursuant to paragraph 9(i) above), (ii) materially modify the
requirements for eligibility to participate in the Plan, or (iii)
materially increase the benefits accruing to participants under the Plan,
without the approval of the Company's shareholders.
12. Continuance of Employment. The Plan shall not impose any obligation
on the Company or its subsidiary corporations to continue the employment of
any person.
A-4
<PAGE>
ECHLIN INC.
PROXY - ANNUAL MEETING OF SHAREOWNERS - DECEMBER 20, 1995
P
R This Proxy is Solicited on Behalf of the Board of Directors
O
X The undersigned hereby appoints Frederick J. Mancheski, Milton P.
Y DeVane and Jon P. Leckerling, and any one of them, as Proxies, each with
the power to appoint his or her substitute, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all the shares of
common stock of ECHLIN INC. held of record by the undersigned on November
3, 1995 at the annual meeting of share-owners to be held at the office of
the Company at 100 Double Beach Road, Branford, CT 06405 on Wednesday,
December 20, 1995 at 2:00 P.M., E.S.T. and at any and all adjournments
thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareowners and the Proxy Statement, each dated November 15,
1995.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareowner. If no direction is made, this proxy
will be voted for Proposals 1, 2 and 3.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE>
[X] Please mark votes as in this example.
1. ELECTION OF DIRECTORS
Nominees: D.A. Bromley, J.F. Creamer, Jr., M.P. DeVane, J.E. Echlin, Jr., C.S.
Greer, J.F. Gustafson, D.C. Jensen, T.O. Jones, F.J. Mancheski, P.S. Myers, J.G.
Rivard
[_] FOR all nominees [_] WHITHHOLD AUTHORITY
listed above to vote as to all
nominees listed above
[_]_____________________________________
For all nominees except as noted above
2. APPROVE the First Amendment to the Echlin Inc. Performance Unit Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. APPROVE the appointment of independent accountants for the Company.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [_]
Please date and sign exactly as name appears on this Proxy. Joint owners should
both sign. Executors, administrators, trustees, etc, should so indicate when
signing. Corporations should show full corporate name and title of signing
officer.
Signature: Date
--------------------------------------- -------------------------
Signature: Date
--------------------------------------- -------------------------
