<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 [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF ECHLIN INC. APPEARS HERE]
November 14, 1997
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 17, 1997 at 10:00 a.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.
We 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/ Trevor O. Jones /s/ Larry W. McCurdy
Trevor O. Jones Larry W. McCurdy
Chairman of the Board President and Chief Executive
Officer
<PAGE>
[LOGO OF ECHLIN INC. APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
TO BE HELD DECEMBER 17, 1997
- -------------------------------------------------------------------------------
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 17, 1997, at 10:00
A.M., E.S.T., for the purpose of considering and acting upon the following
matters:
1. To elect nine directors of the Company;
2. 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, 1998;
3. To transact any and all other business which may lawfully come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 5, 1997,
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
Executive Vice President--
Administration and Corporate
Secretary
November 14, 1997
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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 17, 1997
APPROXIMATE DATE OF MAILING: NOVEMBER 14, 1997
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 17, 1997, at 10:00 A.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 $7,000 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 5, 1997, the Company had 63,149,304 outstanding 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 nine. For each of the nine 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, 1992
---- --- -------- -------------------------
<S> <C> <C> <C>
John F. Creamer, Jr..... 67 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); Vice Chairman of
the Board (through December 31, 1997); member of
the Executive and Corporate Governance Committees
of the Board.
Richard E. Dauch........ 55 1997 Chairman, President and Chief Executive Officer,
American Axle & Manufacturing, Inc., Detroit, Mich-
igan (manufacturer of automotive driveline systems,
chassis components and forged products) (1994 to
present); Private Investor (1992-1993); member of
the Audit Committee of the Board.
Milton P. DeVane........ 68 1965 Retired; former partner, Tyler Cooper & Alcorn, New
Haven, Connecticut (law firm); Chairman of the Cor-
porate Governance Committee and member of the Au-
dit, Compensation and Management Development and
Executive Committees of the Board.
John E. Echlin, Jr...... 62 1964 Retired; former Account Executive, PaineWebber,
Guilford, Connecticut (1983-1989); Chairman of the
Finance Committee and member of the Audit, Corpo-
rate Governance and Executive Committees of the
Board.
Donald C. Jensen........ 62 1991 Retired; former Vice Chairman of Ernst & Young (in-
ternational accounting and management consulting
firm) (1981-1990); Chairman of the Audit and the
Compensation and Management Development Committees
and member of the Corporate Governance and Execu-
tive Committees of the Board.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR BUSINESS ACTIVITIES SINCE
NAME AGE SINCE SEPTEMBER 1, 1992
---- --- -------- -------------------------
<S> <C> <C> <C>
Trevor O. Jones......... 67 1991 Chairman and Chief Executive Officer, International
Development Corporation (management consulting
firm); retired Chairman of the Board, President and
Chief Executive Officer, Libbey-Owens Ford Co.
(1987-1994); Non-Executive Chairman of the Board;
Vice Chairman of the Board ( until February 20,
1997); Chairman of the Board and Interim Chief Ex-
ecutive Officer (until March 7, 1997); Chairman of
the Executive Committee, Chairman of the Compensa-
tion and Management Development Committee (until
February 20, 1997) and Chairman of the European Ad-
visory Council of the Board.
Larry W. McCurdy........ 62 1997 President and Chief Executive Officer (since March
7, 1997); former Executive Vice President-Opera-
tions, Cooper Industries, Inc. (automotive products
manufacturer) (1994-1997); former President and
Chief Executive Officer, Moog Automotive, Inc. (au-
tomotive products manufacturer) (1985-1994); Direc-
tor, Breed Technologies, Inc. (automotive safety
systems manufacturer), Lear Corporation (automotive
interiors manufacturer), Mohawk Industries Inc.
(broadloom carpet manufacturer).
William P. Nusbaum...... 52 1996 Principal, Tricap Investors, Inc. (an investment
partnership); former President, Long Manufacturing
Ltd., a subsidiary of the Company; former President
and Chief Executive Officer of Long Manufacturing
Ltd. (1983-1996) (manufacturer of automotive fluid
coolers); member of the Finance Committee of the
Board.
Jerome G. Rivard........ 64 1991 President, Global Technology and Business Develop-
ment, Inc. (technology and manufacturing consul-
tants) (1988 to present); former Vice President and
Group Executive, Bendix Electronics division of Al-
lied-Signal, Inc., (1986-1988); member of the Sci-
entific Advisory Committee of the Board.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended August 31, 1997, there were ten meetings of the
Board of Directors (four 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 established the following committees with
responsibilities as described:
The Executive Committee may exercise all powers which the Board of
Directors possesses except those powers delineated in the By-Laws including
the power to change the Certificate of Incorporation or By-Laws and the
power to declare any dividend or other distribution with respect to the
stock of the Company. During the fiscal year, seven meetings of the
Executive Committee were held. Messrs. Jones (Chairman), Creamer, DeVane,
Echlin, Jensen and McCurdy are members of this Committee.
3
<PAGE>
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. The Committee
recommends to the Board the appointment of independent accountants for
ratification by the shareowners at the Annual Meeting. During the fiscal
year, five meetings of the Audit Committee were held. Messrs. Jensen
(Chairman), Dauch, DeVane, Echlin and Gustafson are members of this
Committee.
The Compensation and Management Development Committee reviews and
approves the Company's basic compensation philosophy covering executive
officers and senior management employees as well as the competitiveness of
the Company's total compensation practices. The Committee reviews and
recommends to the Board the compensation package and employee benefits of
the President and Chief Executive Officer and any other officers who are
also directors. It also reviews and approves base salaries and short-term
incentive awards of officers and key management executives, sets
performance measures for the Echlin Inc. Performance Unit Plan (see page
16) and makes recommendations to the Board with respect to the granting of
options under the Echlin Inc. 1992 Executive Stock Option Plan. This
Committee also reviews and reports to the Board on the status of the
Company's organization and succession plans for all key executive positions
and the continuity for such positions. During the fiscal year, seven
meetings of the Compensation and Management Development Committee were
held. Messrs. Jensen (Chairman) and DeVane are members of this Committee.
The Corporate Governance Committee advises and makes recommendations to
the Board on all matters concerning directorships and corporate governance
practices, including the structure and membership of all committees of the
Board, compensation of directors and the review and recommendation of
candidates for election as directors. The Committee will consider
shareowner nominations for director sent in accordance with the procedures
set forth in the By-Laws to the Corporate Governance Committee, c/o Jon P.
Leckerling, Secretary, Echlin Inc., 100 Double Beach Road, Branford,
Connecticut 06405. The Committee also reviews and makes recommendations to
the Board concerning succession planning for the positions of Chairman of
the Board and President and Chief Executive Officer. During the fiscal
year, four meetings of the Corporate Governance Committee were held.
Messrs. DeVane (Chairman), Creamer, Echlin and Jensen are members of this
Committee.
The Finance Committee reviews periodically the capital structure,
financing, dividend and risk management strategies of the Company. The
Committee also monitors the performance of management's Investment Advisory
Committee and Benefits Committee as to the management and administration of
the Company's various defined benefit and defined contribution retirement
plans. During the fiscal year, two meetings of the Finance Committee were
held. Messrs. Echlin (Chairman) and Nusbaum are members of this Committee.
The Board established three advisory committees which are being
discontinued as Board committees as of December 31, 1997. The Scientific
Advisory Committee reviews production and
4
<PAGE>
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, four meetings of the
Scientific Advisory Committee were held. Phillip S. Myers (Chairman), who
is retiring as a director as of the Annual Meeting of Shareowners, and Mr.
Rivard are members of this Committee. The Asian Development Advisory
Council is a Committee of the Board with membership comprised of
experienced business executives who have conducted business over a period
of years within various countries in the Asian region, and which assists
and advises corporate and Asian-based management and the Board on the
conduct and expansion of the Company's business in Asia. During the fiscal
year, the Council had one meeting. Dr. Myers serves as Chairman of this
Council. The European Advisory Council is comprised of experienced
automotive industry executives from various countries within the region and
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 two meetings. Mr. Jones serves as Chairman of this
Council.
COMPENSATION OF DIRECTORS
The annual retainer paid to outside directors is $25,000. Mr. Jones, as Non-
Executive Chairman of the Board, received a monthly retainer of $30,000, which
is reduced to $25,000 per month for Fiscal Year 1998, in lieu of all other
Board and Committee fees and retainers. Mr. Creamer, who will serve as Vice
Chairman of the Board until December 31, 1997, received a special retainer of
$57,777 for Board service from February 20, 1997 through June 30, 1997 and
thereafter received Board fees and retainers at twice the normal rate for
service as Vice Chairman ending December 31, 1997. 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 and the Asian Development Advisory
Council, is $1,000. Chairmen of each Committee, other than the European
Advisory Council and the Asian Development Advisory Council are paid an annual
retainer of $6,000 and a per meeting fee of $2,000. Scientific Advisory
Committee members receive a $3,000 annual retainer. European Advisory Council
and Asian Development Advisory Council members receive an annual retainer of
$24,000 and each Council's Chairman receives a $36,000 annual retainer.
Under the 1996 Non-Executive Director Stock Option Plan, directors who are
not employees of the Company, annually receive 2,000 options for Board
service, 500 options for service as a Board committee chairman, 1,000 options
for service on the Executive Committee, 4,000 options for service as Vice
Chairman of the Board and 8,000 options for service as Chairman of the Board.
The Board also established Non-Executive Director Stock Ownership Guidelines
on June 18, 1997 which require outside directors to own Common Stock equal in
value to four times the annual retainer. These guidelines are phased in over
three years for then current directors and five years for new directors.
Options held under the 1996 Non-Executive Director Stock Option Plan do not
count as shares held under the guidelines.
Mr. Creamer is President of Distribution Marketing Services, Inc.
Distribution Marketing Services, Inc. provides advice regarding distribution
and marketing strategies to various subsidiaries of the Company at a cost in
Fiscal Year 1997 of $108,200.
Dr. Myers provides consulting services to the Company in regard to existing
and new technologies within the automotive industry. He was paid a total of
$4,289 in Fiscal Year 1997 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 business opportunities and was
paid a total of $51,581 in Fiscal Year 1997 for these services.
5
<PAGE>
Mr. DeVane is a former 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.
RELATED TRANSACTIONS
In September, 1996, the Company purchased Long Manufacturing Ltd. ("Long")
for approximately $173,000,000 from Long's shareholders. Mr. Nusbaum was the
principal shareholder of Long, controlling some 40 percent of the shares
acquired by the Company. The Company has made a claim for adjustment of the
purchase price by approximately $2,000,000 against an escrow provided by the
selling shareholders for such contingencies. Mr. Nusbaum is currently a
director and nominee for election as a director.
BENEFICIAL OWNERSHIP
The following table sets forth information as to the only persons known by
the Company to be the beneficial owner 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>
The Capital Group Companies, Inc............. 6,510,500(1) 10.27%
333 South Hope Street
Los Angeles, California 90071
FMR Corp..................................... 5,175,704(2) 8.35%
82 Devonshire Street
Boston, Massachusetts 02109-3614
Putnam Investments........................... 4,293,482(3) 7.00%
One Post Office Square
Boston, Massachusetts 02109
MacKay-Shields Financial Corporation......... 4,002,530(4) 6.32%
Investment Advisors
9 West 57th Street
New York, New York 10019
</TABLE>
- --------
(1) The Capital Group Companies, Inc., through its wholly-owned
subsidiaries, including Capital Research and Management Company (acting as an
investment advisor), has sole voting power with respect to 1,377,200 shares as
reported on Schedule 13G filed with the Securities and Exchange Commission on
April 10, 1997.
(2) 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 754,993 shares and sole
dispositive power with respect to 5,175,704 shares as reported on Schedule 13G
filed with the Securities and Exchange Commission on February 14, 1997.
6
<PAGE>
(3) Putnam Investments, Inc., through its wholly-owned subsidiaries, Putnam
Investment Management, Inc. and The Putnam Advisory Company, Inc. (acting as
investment advisors), has shared voting power with respect to 126,300 shares
and shared dispositive power with respect to 4,293,482 shares as reported on
Schedule 13G filed with the Securities and Exchange Commission on January 27,
1997.
(4) MacKay-Shields Financial Corporation, Investment Advisors, has shared
investment power and shared dispositive power with respect to 4,002,530 shares
as reported by the owner on September 15, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK PERCENTAGE
NAME BENEFICIALLY OWNED OF CLASS
---- ------------------- ----------
<S> <C> <C>
John F. Creamer, Jr.(1).......................... 21,750 shares *
Richard E. Dauch................................. 1,142 shares *
Milton P. DeVane(2).............................. 13,600 shares *
John E. Echlin, Jr.(3)........................... 634,392 shares 1.00%
Donald C. Jensen(4).............................. 9,050 shares *
Trevor O. Jones(5)............................... 23,350 shares *
Jon P. Leckerling(6)............................. 34,729 shares *
Milton J. Makoski(7)............................. 41,395 shares *
Larry W. McCurdy................................. 3,000 shares *
William P Nusbaum................................ 3,000 shares *
Joseph A. Onorato(8)............................. 40,880 shares *
Jerome G. Rivard(9).............................. 6,800 shares *
Edward D. Toole(10).............................. 27,264 shares *
</TABLE>
- --------
*Less than 1 percent of class
(1) Includes 6,750 shares exercisable within 60 days of November 5, 1997
under the Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(2) Includes 12,600 shares exercisable within 60 days of November 5, 1997
under the Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(3) 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 12,900 shares exercisable
within 60 days of November 5, 1997 under the Echlin Inc. 1996 Non-Executive
Director Stock Option Plan.
(4) Shares held indirectly by the Donald C. Jensen Revocable Living Trust
dated September 6, 1990. Includes 6,050 shares exercisable within 60 days of
November 5, 1997 under the Echlin Inc. 1996 Non-Executive Director Stock
Option Plan.
(5) Includes 10,850 shares exercisable within 60 days of November 5, 1997
under the Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(6) Includes 29,729 shares either exercisable currently or within 60 days of
November 5, 1997 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Leckerling's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
7
<PAGE>
(7) Includes 35,045 shares either exercisable currently or within 60 days of
November 5, 1997 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Makoski's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
(8) Includes 32,780 shares either exercisable currently or within 60 days of
November 5, 1997 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Onorato's account in the Echlin Incentive Savings and
Investment Plan as of August 31, 1997.
(9) Includes 3,800 shares exercisable within 60 days of November 5, 1997
under the Echlin Inc. 1996 Non-Executive Director Stock Option Plan.
(10) Includes 22,914 shares either exercisable currently or within 60 days
of November 5, 1997 under the Echlin Inc. 1992 Executive Stock Option Plan or
credited to Mr. Toole's account in the Echlin Incentive Savings and Investment
Plan as of August 31, 1997.
As of November 5, 1997, the directors and twelve executive officers of the
Company (including the Named Executive Officers other than Mr. Mancheski who
is neither a director nor executive officer of the Company) as a group owned
beneficially 999,929 shares of Common Stock or 1.58 percent thereof. Such
shares include 278,770 shares either exercisable currently or within 60 days
of November 5, 1997 under the Echlin Inc. 1992 Executive Stock Option Plan and
the Echlin Inc. 1996 Non-Executive Director Stock Option Plan or, with respect
to officers of the Company, held in their respective accounts in the Echlin
Incentive Savings and Investment Plan as of August 31, 1997.
GENERAL
Shares of Common Stock of the Company covered by proxies in the accompanying
form of proxy will be voted for the election of directors of each of the nine
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 all applicable
Section 16(a) reporting requirements have been met.
8
<PAGE>
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 reviews and approves the Company's basic compensation philosophy and
is responsible for reviewing the design and administration of the Company's
annual and long-term compensation plans. The Committee also reviews and
recommends to the Board the compensation package and employee benefits for the
President and Chief Executive Officer and reviews and approves all
compensation which is paid to the Company's executive officers and key
management executives.
The Company's executive compensation philosophy is to maintain a
compensation program which attracts and retains the management talent required
to excel in a demanding competitive environment and which rewards the
enhancement of shareholder value. In Fiscal Year 1997, the Company retained
independent compensation consultants to evaluate the competitiveness of the
Company's total compensation program against various peer groupings. Among the
program features considered were individual compensation for key management
positions, the relationship of salary to annual and long-term incentive
programs and the historical effectiveness of the Company's incentive plan. The
competitive assessment covered the companies included in the peer group (see
page 12) as well as other companies in the automotive and other industries
with which the Company competes for executive talent. The result of this
evaluation has been a realignment for Fiscal Year 1998 of the elements of the
total compensation program--base salary, short-term incentive, and long-term
incentive (performance unit awards and stock options)--to link more firmly
business unit results and performance to rewards and each individual manager's
compensation to shareholder value. Specifically, the Committee approved
changes in selected base salaries to be phased in over a two to three-year
period to bring certain employees to competitive pay levels, modification of
the short-term incentive plan performance measures and modification of the
long-term incentive plan to de-emphasize performance unit awards and to
increase stock option awards. For both the short-term and long-term incentive
plans, the percentage of target performance level that must be achieved to
qualify for any payment was increased while the maximum payouts were also
raised for exemplary performance against those targets. The Committee believes
these changes will provide a more effective compensation program designed to
motivate and reward contribution to the Company's business mission and to
enhance shareowner value. These compensation program changes for Fiscal Year
1998 are, however, thought to be transitional in nature because the Company,
with periodic review by the Committee, has undertaken a process for the
implementation in Fiscal Year 1999 of a new incentive approach based on
economic value added concepts.
BASE SALARY AND SHORT-TERM (ANNUAL) COMPENSATION: The short-term 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 various
surveys and peer groupings used by the Committee to assess competitiveness
(the "Market Median"). Total cash compensation for a position is divided
between base salary and annual cash bonus based on competitive practices and,
for Fiscal Year 1998, will be weighted more heavily toward the cash bonus
segment. Consistent with market practices, target annual cash bonuses for
Fiscal Year 1997, as percentage of total
9
<PAGE>
cash compensation, were set at a range from 50 percent for the Company's Chief
Executive Officer to 15 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 for Fiscal Year 1997 in aggregate were targeted at the
Market Median while salaries for Fiscal Year 1998 will be targeted at
slightly below the Market Median. Each executive's annual salary further
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 other than Mr. Jones, the performance factors for
Fiscal Year 1997 were 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 the year. For Fiscal Year 1998, the
performance factors were altered to be net cash flow against plan, year-
over-year increase in net income and, to a lesser extent, net income
against plan. 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 INCENTIVE COMPENSATION: 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 earnings per
share ("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. For Fiscal Year 1997, 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. For Fiscal Year 1998, two-thirds of
the projected value will be in stock options with the remainder in performance
units. Performance units are valued for purposes of the grant upon the basis
of the targeted EPS over the three-year performance period using a target
compound rate of EPS growth over that period which is set at the start of each
three-year period by the Committee. Performance unit awards awarded for Fiscal
Year 1997 will be paid in cash. Payouts for Fiscal Years 1995 and 1996 will be
paid 60 percent in cash and 40 percent in Common Stock. Stock options are
granted at 100 percent of the fair market value of the underlying stock on the
date of grant, may not be exercised until one year later and must be exercised
within ten years of the date of grant. The number of stock options granted is
based upon the anticipated increase in share value which could result from
achievement of target EPS growth times the Company's historical EPS multiple.
STOCK OWNERSHIP GUIDELINES: The Company has 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 President and Chief Executive Officer and the
four other Named Executive Officers (see page 13) are six and one times the
salary grade midpoints respectively. Mr. Jones, as Non-Executive Chairman, is
not covered by the Guidelines. The Company also provides a competitive package
of employee benefits.
IRC SECTION 162(M) POLICY: Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") places a limit of $1,000,000 on the amount of
compensation that may be deducted by the
10
<PAGE>
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 Executive 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.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER: Fiscal Year 1997 was a year of
transition in the position of Chief Executive Officer for the Company. After
thirty-four years of service, Frederick J. Mancheski elected to retire on
February 20, 1997 and leave the Board June 18, 1997. Mr. Mancheski's
compensation consisted entirely of base salary set against the Market Median
at the beginning of the fiscal year and his supplemental retirement benefits
paid in accordance with the Supplemental Executive Retirement Plan and the
Supplemental Senior Executive Retirement Plan (see page 18).
The Board turned to Mr. Jones, who had had an expanded Board role serving as
Vice Chairman, to serve as Chairman and Interim Chief Executive Officer for an
undetermined length of time as the Board continued its Chief Executive Officer
succession search. Recognizing the uncertain length of time Mr. Jones would be
required to serve, the Committee decided that Mr. Jones would not participate
under the annual incentive plan, performance unit plan, retirement plan or
other executive benefit programs but instead recommended a monthly cash
compensation of $150,000 set at the approximate rate of Mr. Mancheski's total
compensation for Fiscal Year 1996. It also recommended and the Board
authorized the grant of 100,000 stock options under the Echlin Inc. 1992
Executive Stock Option Plan established as a one-time grant of sufficient size
to provide an incentive to Mr. Jones linked directly to future shareowner
value. The Committee set Mr. Jones' compensation in lieu of all normal Board
fees and retainers and established that this compensation would continue for a
three-month transition period after a new Chief Executive Officer was hired.
In early March, 1997, the Company was fortunate to have Mr. McCurdy, a
highly respected and experienced industry executive who had served as
President and Chief Operating Officer of the Company in the 1980s, join the
Company as President and Chief Executive Officer. During negotiations with Mr.
McCurdy regarding his joining the Company and utilizing as a baseline the
Market Median, the Committee set Mr. McCurdy's salary at $600,000 with a
minimum cash bonus of $300,000 for the six-month period of Fiscal Year 1997
that he would be employed by the Company. The Committee also evaluated Mr.
McCurdy's unvested long-term compensation awards which he forfeited on leaving
his prior employment to join the Company at $3,000,000 and agreed to allow Mr.
McCurdy to defer that payment under the Company's 1976 Deferred Compensation
Plan. In lieu of any participation in the Performance Unit Plan for Fiscal
Year 1997, the Committee authorized the payment to Mr. McCurdy of $200,000. It
also recommended to the Board the grant of 100,000 stock options under the
Echlin Inc. 1992 Executive Stock Option Plan. The size of this award was set
in relation to competitive practices within the Median Market Group to provide
incentive linked to improvement in future shareowner value.
Donald C. Jensen, Chairman
Milton P. DeVane
November 14, 1997
11
<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 September 1, 1992 and
ending August 31, 1997.
[LINE GRAPH APPEARS HERE]
Comparison of Five Year Cumulative Total Return
Echlin Inc., Industry Peer Group and the S&P 500
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Index Data Sep92 Aug93 Aug94 Aug95 Aug96 Aug97
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Echlin Inc $100.00 $158 $178 $204 $185 $231
- --------------------------------------------------------------------------------
S&P 500 $100.00 $115 $122 $148 $175 $246
- --------------------------------------------------------------------------------
Industry Peer Index $100.00 $146 $148 $149 $153 $256
- --------------------------------------------------------------------------------
</TABLE>
(a) Assumes $100 invested on September 1, 1992 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 was included in 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.
12
<PAGE>
In constructing the Peer Group Composite Index (Peer Index) for use in the
performance 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 1997 were Donald C. Jensen (Chairman), Milton P. DeVane and Trevor
O. Jones until his election as Chairman and Interim Chief Executive Officer in
February, 1997. All Committee members are outside directors and no Committee
member has ever been an officer or employee of the Company or any of its
subsidiaries.
SUMMARY COMPENSATION TABLE
The following table summarizes the annual and long-term compensation for
services to the Company for Fiscal Years 1997, 1996 and 1995 paid to the
executives serving as Chief Executive Officer during Fiscal Year 1997 and to
each of the four other most highly compensated officers of the Company at
August 31, 1997 (such officers being referred to as the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- ----------------------------
AWARDS PAYOUTS
------------- --------------
OTHER
ANNUAL
COMPENSA- SECURITIES LONG-TERM ALL OTHER
NAME AND SALARY BONUS(A) TION(B) UNDERLYING INCENTIVE PLAN COMPENSATION(E)
PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#)(C) PAYOUTS($)(D) ($)
------------------ ---- ------- -------- --------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
L.W. McCurdy (*)......... 1997 283,330 300,000 3,200,000(1) 100,000 0 0
President and Chief
Executive Officer
T.O. Jones (**) ......... 1997 869,900(2) 0 -- 110,850(3) 0 0
Chairman and Interim
Chief Executive Officer
F.J. Mancheski (***)..... 1997 360,577 0 -- 12,975 0 248,600(4)
Chairman and Chief 1996 700,000 264,000 1,446(5) 500,000 788,163 900
Executive Officer 1995 625,000 600,000 -- 57,000 1,702,575 2,610
(retired)
J.P. Leckerling.......... 1997 202,500 58,300 -- 1,700 100,775 1,146
Executive Vice President 1996 172,500 34,700 131(5) 3,000 72,443 1,445
--Administration, Gen- 1995 164,000 65,000 -- 6,300 192,465 2,612
eral
Counsel and Corporate
Secretary
J.A. Onorato............. 1997 184,000 53,700 -- 1,775 100,775 1,148
Vice President and 1996 152,500 37,200 -- 3,000 72,443 1,538
Chief Financial Officer. 1995 145,000 65,000 -- 6,300 192,465 2,610
M.J. Makoski............. 1997 178,000 38,200 -- 1,700 100,775 1,046
Vice President--Human 1996 164,100 34,700 -- 3,000 79,770 1,445
Resources 1995 157,000 65,000 -- 6,300 211,995 2,612
E.D. Toole............... 1997 158,200 32,300 -- 1,250 52,473 938
Vice President, Associ-
ate 1996 150,700 32,700 -- 1,400 47,282 1,608
General Counsel and 1995 143,500 39,200 -- 2,050 131,040 2,624
Assistant Secretary
</TABLE>
13
<PAGE>
- --------
* Mr. McCurdy was elected President and Chief Executive Officer on March 7,
1997.
** Mr. Jones was elected Chairman and Interim Chief Executive Officer on
February 20, 1997. He became Non-Executive Chairman upon the election of
Mr. McCurdy as President and Chief Executive Officer.
*** Mr. Mancheski retired as Chairman and Chief Executive Officer on February
20, 1997.
FOOTNOTES
(a) Annual bonuses received under the Company's Executive Bonus Plan are
reported in the year earned, although paid in the subsequent year.
(b) Except as noted, 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 (see
page 19).
(d) Long-term incentive payouts received for three-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 with the Change in Control Severance Policy described
below (see page 19).
(e) Except as noted, 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).
(1) Includes amount awarded to Mr. McCurdy to replace unvested long-term
compensation benefits forfeited with his prior employer when he joined the
Company as President and Chief Executive Officer in March, 1997 which was
deferred by Mr. McCurdy under the Company's 1976 Deferred Compensation Plan
until the year 2001 and thereafter and $200,000 paid in lieu of Mr. McCurdy's
participation in the Performance Unit Plan during Fiscal Year 1997.
(2) Includes $179,900 in Board fees earned by Mr. Jones from September 1,
1996 through February 20, 1997; $630,000 in Chairman and Interim Chief
Executive Officer's fees paid February 20, 1997 through June 30, 1997; and
$60,000 Non-Executive Chairman's fees paid July 1, 1997 through August 31,
1997.
(3) Includes 100,000 options granted in March, 1997 under the Echlin Inc.
1992 Executive Stock Option Plan when Mr. Jones became Chairman of the Board
and Interim Chief Executive Officer and 10,850 options granted in December,
1996 under the 1996 Non-Executive Director Stock Option Plan.
( 4) Includes $247,000 paid to Mr. Mancheski under the Supplemental
Executive Retirement Plan and the Supplemental Senior Executive Retirement
Plan.
(5) Under the Company's 1976 Deferred Compensation Plan, as amended,
directors can defer up to 100 percent of their directors' fees and designated
officers and key executives can defer up to 25 percent of their salary and
bonus and up to 100 percent of their performance unit plan award payment each
year. Interest is accrued on deferred accounts at the greater of the average
rate of interest paid by the Company on its commercial paper borrowings or the
Company's return on assets. The amount shown is the interest accrued on
deferred compensation accounts equal to the Company's return on assets but in
excess of 120 percent of the Federal long-term interest rate on December 31,
1995 (5.982 percent).
14
<PAGE>
OPTION SAR GRANTS IN FISCAL YEAR 1997
Shown below is further information on grants of stock options pursuant to
the Company's 1992 Executive Stock Option Plan, and in the case of Mr. Jones,
options granted under the Echlin Inc. 1996 Non-Executive Director Stock Option
Plan during the fiscal year ended August 31, 1997 to the Named Executive
Officers. Such grants are reflected in the Summary Compensation Table on page
13:
OPTION/SAR GRANTS IN FY 1997
AND FY 1997 GRANT DATE VALUE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------- -------------------
% OF TOTAL GRANT DATE
OPTIONS (DECEMBER 18, 1996,
OPTIONS GRANTED TO EXERCISE MARCH 7, 1997 AND
GRANTED EMPLOYEES PRICE EXPIRATION DECEMBER 20, 1996)
NAME (#)(A) IN FISCAL YEAR ($/SH)(B) DATE (C) PRESENT VALUE $(D)
- ---- ------- -------------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Larry W. McCurdy........ 100,000 29.2453 34.8750 3/07/07 1,100,000
Trevor O. Jones......... 10,850* 3.1731 31.1250 12/20/06 108,066
100,000 29.2453 34.8750 3/07/07 1,100,000
Frederick J. Mancheski.. 12,975 3.7945 30.7500 12/18/06 127,674
Jon P. Leckerling....... 1,700 .4971 30.7500 12/18/06 16,728
Milton J. Makoski....... 1,700 .4971 30.7500 12/18/06 16,728
Joseph A. Onorato....... 1,775 .5191 30.7500 12/18/06 17,466
Edward D. Toole......... 1,250 .3655 30.7500 12/18/06 12,300
</TABLE>
- --------
* 1996 Non-Executive Director Stock Option Plan.
(a) No stock appreciation rights ("SAR") were granted in Fiscal Year 1997.
(b) The exercise price is based on 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. 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 for the December 18, 1996 and December 20, 1996 stock option
grants: interest rate of 6.3%; annual dividend yield of 2.6%; and
volatility as measured by the standard deviation of .212. For the March 7,
1997 stock option grant, the assumptions were: interest rate of 6.42%;
annual dividend yield of 2.6% and volatility as measured by the standard
deviation of .207.
15
<PAGE>
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1997 AND FISCAL YEAR-END OPTION
VALUE
Shown below is information with respect to options exercised by the Named
Executive Officers during Fiscal Year 1997 and unexercised options to purchase
the Company's Common Stock granted in Fiscal Year 1997 and prior years under
the Echlin Inc. 1992 Executive Stock Option Plan to the Named Executive
Officers and held by them as of August 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN FY 1997
AND FY 1997 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 VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(A) UNEXERCISABLE UNEXERCISABLE
---- --------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
Larry W. McCurdy........ 0 0 0/100,000 0/218,750
Trevor O. Jones......... 0 0 0/110,850 0/283,171
Frederick J. Mancheski.. 23,175 312,862 523,465/ 12,975 9,009,710/ 81,904
Jon P. Leckerling....... 1,425 29,450 27,700/ 1,700 338,612/ 10,731
Milton J. Makoski....... 1,375 18,562 34,720/ 1,700 491,270/ 10,731
Joseph A. Onorato....... 1,625 21,734 31,140/ 1,775 426,027/ 11,204
Edward D. Toole......... 4,350 66,815 21,045/ 1,250 345,321/ 7,890
</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 29, 1997 ($37.0625 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 other than Mr. Jones, 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 Market Median Group. The targeted percentage of total compensation
attributable to performance units for the Named Executive Officers varied for
Fiscal Year 1997 from 56 percent for Mr. Mancheski, who was serving as Chief
Executive Officer at the time of the grant, to 30 percent for Mr. Toole. 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. 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 will be zero if the actual
compounded earnings per share growth rate over
16
<PAGE>
the three-year period is less than one-half the targeted growth rate and will
be 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 following table shows estimated future threshold, target and maximum
payouts for performance unit awards made during Fiscal Year 1997.
LONG-TERM INCENTIVE PLANS--FISCAL 1997 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>
Larry W. McCurdy........ 0
Trevor O. Jones......... 0
Frederick J. Mancheski.. 44,750 8/31/99 13,276* 60,189* 136,786*
Jon P. Leckerling....... 5,825 8/31/99 10,369 47,008 106,831
Milton J. Makoski....... 5,825 8/31/99 10,369 47,008 106,831
Joseph A. Onorato....... 6,100 8/31/99 10,858 49,227 111,874
Edward D. Toole......... 4,300 8/31/99 7,654 34,701 78,862
All Executive Officers
as a group (12) includ-
ing those above........ 86,325 8/31/99 87,279 395,697 899,271
All employees who are
not Executive Officers,
as a group............. 526,100 8/31/99 870,078 3,944,682 8,964,744
</TABLE>
- --------
* Mr. Mancheski, having retired after only six months of the thirty-six
month long-term incentive cycle, is only eligible for one-sixth of the future
payout. The reduced estimated future payout is, therefore, shown.
(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 Change in Control Severance Policy described below
(see page 19).
(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.
(d) The maximum amount will be earned if 150 percent 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 (the "Plan") which includes, among the participants, the Named
Executive Officers of the Company other than Mr. Jones. A director who is not
also an employee is ineligible to participate. The Plan provides that a
17
<PAGE>
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 two supplemental executive
retirement plans. 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 Supplemental Executive Retirement Plan ("SERP") was
established by the Board of Directors to provide designated executive
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 other than Mr. Jones participate under the SERP. The
second plan, the Supplemental Senior Executive Retirement Plan ("SSERP"), was
established by the Board of Directors to provide designated senior executive
employees with a benefit increasing the Plan benefit from 44 percent of final
average earnings in excess of the Average Social Security Covered
Compensation to 60 percent of such final average earnings. Mr. Mancheski is
currently the only participant under the SSERP.
The following illustrative table provides the total annual pension benefits
under various years of credited service assuming retirement in 1997 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..................................... 19,363 25,817 32,271 38,725
200,000..................................... 41,363 55,150 68,938 82,725
400,000..................................... 85,363 113,817 142,271 170,725
600,000..................................... 129,363 172,484 215,604 258,725
800,000..................................... 173,363 231,150 288,938 346,725
1,000,000..................................... 217,363 289,817 362,271 434,725
1,200,000..................................... 261,363 348,484 435,604 522,725
</TABLE>
The current covered five-year compensation average and the current years of
credited service for the Named Executive Officers are as follows: Larry W.
McCurdy,(not yet eligible) $0.00 and 1 year; Jon P. Leckerling, $212,580 and 7
years; Milton J. Makoski, $206,907 and 11 years; Joseph A. Onorato, $193,660
and 16 years; Edward D. Toole, $180,577 and 11 years and Frederick J.
Mancheski, $1,041,633 and 34 years. Mr. Jones is not a participant under any
of the Company's pension or retirement plans. In addition to the benefit shown
in the table above, Mr. Mancheski's annual benefit from the SSERP is $164,080.
18
<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 other than Mr. Jones and Mr. Mancheski who is
presently retired, 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 other than Mr. Jones and Mr.
Mancheski who is presently retired, 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
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.
The Company has also authorized the establishment of a grantor trust with a
trust company for the purpose of paying amounts due under the 1976 Deferred
Compensation Plan and the SERP and SSERP described above (see page 18).
19
<PAGE>
2. 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, 1998, 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, 1997, 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREOWNERS VOTE FOR THE APPROVAL
OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS.
3. 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 17, 1998.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended August 31, 1997 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, 1997. 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
Executive Vice President--
Administration and Corporate
Secretary
Date: November 14, 1997
20
<PAGE>
1250 - PS - 97
<PAGE>
DETACH HERE ECH F
ECHLIN INC.
PROXY-ANNUAL MEETING OF SHAREOWNERS-DECEMBER 17, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Larry W. McCurdy, Milton P. 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 5, 1997, at the annual meeting of
shareowners to be held at the office of the Company at 100 Double Beach Road,
Branford, CT 06405 on Wednesday, December 17, 1997 at 10:00 A.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 14, 1997.
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 AND 2.
-------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-------------
PROXY
<PAGE>
[X] Please mark
votes as in
this example
1. ELECTION OF DIRECTORS
Nominees: J. F. Creamer, Jr., R. E. Dauch, M. P. DeVane,
J. E. Echlin, Jr., D. C. Jensen, T. O. Jones,
L. W. McCurdy, W. P. Nusbaum, J. G. Rivard
[_] FOR all [_] WITHHOLD AUTHORITY
nominees to vote as to all
listed nominees listed
above above
[_]
---------------------------------------
For all nominees except as noted above
2. APPROVE the appointment of FOR AGAINST ABSTAIN
independent accountants for [_] [_] [_]
the Company.
3. 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:
-------------------------------- ------------------------
