SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Echlin Inc.
--------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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PRELIMINARY REVOCATION SOLICITATION MATERIALS
DATED FEBRUARY 24, 1998
SUBJECT TO COMPLETION
REVOCATION SOLICITATION STATEMENT BY ECHLIN INC. IN OPPOSITION TO THE
SOLICITATION OF DEMANDS BY SPX CORPORATION TO HOLD A SPECIAL MEETING OF
SHAREHOLDERS OF ECHLIN INC.
This Revocation Solicitation Statement is being furnished to
shareholders of Echlin Inc., a Connecticut corporation ("Echlin," or the
"Company"), by the Board of Directors of the Company (the "Board"). The Board
is seeking revocations ("Revocations") of demands ("Demands") from the
Company's shareholders previously given to SPX Corporation, a Delaware
corporation ("SPX") in connection with SPX's purported solicitation of Demands
(the "SPX Solicitation") to call a special meeting of the Company's
shareholders (the "Special Meeting") to vote on the following proposals ("SPX
Proposals"):
(i) to repeal any By-laws adopted by the Company subsequent to April 3,
1997;
(ii) to remove from office all members of the Board;
(iii) to amend the By-laws of the Company to fix the number of members of the
Board at five; and
(iv) to fill the newly created vacancies on the Board by electing to the
Board five persons whom SPX has purported to nominate as its designees
(the "SPX Designees").
Section 33-696 of the Connecticut Business Corporation Act
states that a corporation which has a class of voting stock registered
pursuant to Section 12 of the Securities Exchange Act of 1934 shall hold a
special meeting of shareholders if the holders of at least thirty-five percent
of all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date and deliver to the corporation's
secretary one or more written demands for the meeting describing the purpose
or purposes for which it is to be held. The Company's By-laws contain a
substantially similar provision. The Company's By-laws further provide that
each holder of shares of common stock, par value $1.00 per share, of the
Company (the "Common Stock") is entitled to one vote per share of Common Stock
held. The record date for determining shareholders entitled to demand the
Special Meeting and submit Demands in connection therewith is ___________,
1998. As of ___________, 1998, there were _____ shares of the Company's
Common Stock outstanding. Accordingly, SPX would need to deliver to the
Company unrevoked Demands from holders of ______ shares of Common Stock to
satisfy the thirty-five percent requirement under Section 33-696.
SPX has announced an intention to make an unsolicited exchange
offer (the "Proposed Offer") for shares of Common Stock, and the associated
preferred stock purchase rights (the "Rights"), in which shareholders of the
Company would receive $12 in cash and 0.4796 shares of SPX common stock, par
value $10.00 per share, for each share of Common Stock exchanged. SPX has
stated that the Proposed Offer is intended to be the first step of a
transaction in which a subsidiary of SPX would be merged into the Company (the
"Proposed Combination"). However, at this time SPX has not made the Proposed
Offer to the Company's shareholders or taken steps to obtain the approval of
its own shareholders that would be required to consummate the Proposed
Combination, and SPX is not legally bound to do so. Your Board, with the
assistance of its advisors, is carefully and deliberately considering the
Proposed Offer and the Proposed Combination in accordance with its fiduciary
duties under Connecticut law. Your Board believes SPX's purpose in compelling
the Company to call the Special Meeting is to have the SPX Designees dismantle
the shareholder protections contained in the Connecticut Business Corporation
Act and the Company's Rights Plan so that SPX can acquire the Company at the
lowest possible cost to SPX and at the lowest possible price to the Company's
shareholders. SPX is asking you to help it accomplish this objective before
the Board can properly consider the Proposed Offer and the Proposed
Combination -- indeed before SPX has even considered any formal offer at all
to the Company's shareholders.
The Board unanimously opposes the SPX Solicitation, unanimously
recommends that you DO NOT deliver any Demands (including any Gold demand
card) to SPX pursuant to the SPX Solicitation, and is soliciting from you a
Revocation of any Demand previously delivered by you to SPX. There will be no
meeting at which to revoke any Demand you may have previously delivered to
SPX, and accordingly you must act quickly.
If you have previously signed and returned any Demand
(including any Gold demand card), you have every right to change your mind and
revoke your Demand by signing, dating and returning the enclosed GREEN
revocation card. A shareholder's Revocation of a previously executed Gold
demand card will have the effect of opposing SPX's attempt to compel the
Company to call the Special Meeting. Whether or not you have previously
executed a Demand, the Company urges you to complete, sign, date and deliver
the enclosed GREEN revocation card as promptly as possible by mail (using the
postage-paid envelope provided) to Morrow & Co. The Company is not currently
seeking your demand or proxy with respect to any merger or other business
combination, the election or removal of any person to or from the Board or any
other matter.
The first date this Revocation Solicitation Statement and GREEN
revocation card with respect thereto are being sent or given to shareholders
is on or about February ___, 1998.
If your shares are held of record by your bank or brokerage
firm, only that firm can execute your GREEN revocation card. Call your bank or
broker with your instructions to execute your GREEN revocation card.
If you have any questions or need any assistance in revoking
any Demand (including any Gold demand card) you may have given to SPX, please
contact our proxy solicitor, Morrow & Co., Inc. at (800) 566-9061 toll free.
Why You Should Deliver a Green Revocation Card to the Company and Not Deliver
a Gold Demand Card to SPX
Shareholders Should Maintain a Board That Is Independent from SPX
The Board believes that the interests of the Company and all of
its shareholders will be best served by retaining the Company's current
directors (the "Directors"), who will act on behalf of the Company and all of
its shareholders, independently of the interests of SPX. Eight of the nine
Directors on your current Board are independent directors -- three of the five
SPX Designees are SPX employees. If the Directors are removed and replaced
with the SPX Designees, the Board believes the SPX Designees will act in a
manner which will serve the interests of SPX and not the Company's
shareholders. It is in SPX's interest to acquire the Company at the lowest
possible cost to SPX and at the lowest possible price to the Company's
shareholders. The interests of an SPX controlled Board will by definition be
directly contrary to your interests as shareholders of the Company.
SPX claims the SPX Designees will promote SPX's interests
"subject to their fiduciary duties as directors of the Company". Your Board,
however, does not believe it is realistic to expect the SPX Designees to
consider carefully and objectively the attractiveness of the Proposed Offer
compared to other alternatives, to pursue actively alternatives that would
frustrate an SPX business strategy personally crafted by a majority of the SPX
Designees, to negotiate forcefully for better terms with SPX, or to pursue
remedies if SPX were to breach any agreement that might exist with the
Company. Indeed, SPX is doing its best to insulate the SPX Designees from
their duties to the Company's shareholders by indemnifying each of them for
potential wrong-doing related to his possible future service as a Company
director. SPX is asking you to put the SPX Designees in a position where they
will determine, together with SPX, whether and on what terms your Company will
be sold to SPX.
SPX is Attempting to Use the Special Meeting Process in an Improper and
Coercive Manner
At this time, SPX has not made the Proposed Offer to the
Company's shareholders or taken steps to obtain the approval of its own
shareholders that would be required to consummate the Proposed Combination,
and SPX is not legally bound to do so. All SPX has done is to float a
proposal which lacks financing commitments and any apparent strategic
rationale, and which contains numerous conditions within SPX's sole
discretion. SPX has also reserved the right to amend the terms of the
Proposed Offer (including amending the number of shares to be purchased and
the nature or amount of the consideration to be paid) at any time before or
after the Proposed Offer is made.
In seeking to compel the Company to hold the Special Meeting to
consider the SPX Proposals in these circumstances, SPX is hoping to exploit
what Mr. Blystone has described as a "major weakness in its [the Company's]
takeover defenses" to dismantle the protections which you as Echlin
shareholders enjoy under the Connecticut Business Corporation Act and the
Company's Rights Plan. This is an opportunistic and coercive tactic to
enhance the chances of SPX obtaining control of Echlin quickly, cheaply, and
on terms that SPX dictates. Moreover, SPX has not even guaranteed that the
Proposed Offer, or any offer at all to the Company's shareholders, will be
made. Your Board believes this is a highly improper use of the special
meeting process, and urges you to protect the Company and your interests by
refusing to deliver a Demand to SPX, or, if you have already delivered a
Demand, by revoking it as soon as possible.
Your Board, with the assistance of its advisors, is carefully
and deliberately considering the Proposed Offer and the Proposed Combination
in accordance with its fiduciary duties under Connecticut law. SPX wants you
to think that quick action on its Proposed Offer is in your best interest.
But your Board believes SPX knows that undue haste only helps SPX. The Board
believes that the history of other unsolicited bids shows that when a Board
has time to react thoughtfully, the bid often turns out to be much less
attractive to target shareholders than the bidder claimed. SPX's attempt to
compel the Company to hold the Special Meeting to consider the SPX Proposals
at this time cannot be separated from SPX's wider goals: to acquire the
Company at the lowest possible cost to SPX and at the lowest possible price to
the Company's shareholders.
The Company's Board is Committed to Delivering Value to the Company's
Shareholders
Your Board is fully committed to delivering value to its
shareholders. In furtherance of its commitment to shareholder value, Echlin
has instituted a strategic repositioning plan that includes divestiture of
underperforming or non-strategic businesses, factory rationalizations,
aggressive cost cutting aimed at profit improvements, heightened asset
management and cash flows gains, and a steadfast commitment to incorporating
the EVA framework. Since the initiation of this plan in fiscal 1997, seven
non-core or under performing businesses have been identified and either sold,
or placed under contract to be sold, resulting in proceeds to the Company of
$281 million. Fourteen facilities have been identified for closure and/or
rationalization as part of the Company's repositioning plan. Of the fourteen,
four have been completed, eight are currently being processed in accordance
with the action plans which have been established and the remaining two
facilities are in the final stages of completing their action plans for
approval and implementation.
The Board believes that the prospects for the Company are
extremely bright, and that the Company's repositioning strategy is the right
strategy for the future. Indeed, in a recent conference call with industry
analysts, Mr. Blystone agreed that "the road map that they've [the Company
has] tried to lay out including the sale of one of their businesses they
announced this morning is fundamentally the right track." This Board has
never precluded any alternative that it believes would further the interests
of the Company and its shareholders.
SPX Has Not Explained How the SPX Designees Can Deliver Greater Value to the
Company's Shareholders than the Current Board.
In light of the Board's proven commitment to delivering value
to the Company's shareholders and Constituencies, SPX must explain how the SPX
Designees and SPX's combination plan will provide any greater value before you
permit SPX to take the first steps to control the Company.
Your Board believes that SPX has not yet given any objective
support for its assertion that the combination of SPX and Echlin "represents a
tremendous opportunity to the shareholders, customers, suppliers, communities
and employees of both companies." The Board has noted skepticism among
independent analysts about whether there is any strategic rationale or
potential to realize synergies underlying SPX's plan to combine Echlin's broad
range of aftermarket and OE components with SPX's businesses. According to
one research report: "Echlin and SPX operate in very different markets. The
importance of long-term customer relationships and brand strength in the parts
side of the business would probably be the most significant challenge for an
SPX takeover." Another analyst has noted: "There appear to be little
operational synergies that would aid in achieving these cost savings. SPX is
a manufacturer of shop tools and diagnostic equipment, while ECH [Echlin] is a
manufacturer of aftermarket brake systems, ignition parts and OEM fluid
delivery tubing."
SPX claims it will achieve annual cost savings of $125 million
in the first year after the closing of a combination with Echlin and appears
to view those savings as central to the financial rationale for the
combination. However, the Board notes that to date very little detail about
the basis for achieving these claimed savings, or the increased associated
costs that will necessarily be incurred, has been provided. The Board also
notes that SPX has not made any attempt to explain how the SPX Designees would
go about performing the wide-ranging duties of directors to manage the
Company's ongoing businesses, nor has SPX given the Company's shareholders any
meaningful information on the experience or qualifications of the SPX
Designees to manage the operations of the Company. The Board believes that if
the SPX Designees were to obtain control of the Company, the Company's
suppliers, employees and customers would be faced with a significant degree of
uncertainty, which could create great risks for the Company and its
shareholders in the future.
You should not permit SPX to take the first steps to control of
Echlin without these questions and concerns being answered.
Accordingly, the Board unanimously opposes the SPX
Solicitation, unanimously recommends that you DO NOT deliver any Demands
(including any Gold demand card) to SPX pursuant to the SPX Solicitation, and
is soliciting from you a Revocation of any Demand previously delivered by you
to SPX. Whether or not you have previously executed any Demand, the Board
urges you to sign, date and deliver the enclosed GREEN revocation card as
promptly as possible by mail (using the postage-paid envelope provided) to
Morrow & Co. There will be no meeting at which to revoke any Demand you may
have previously delivered to SPX, and accordingly you must act quickly.
Background
In February 1997, Trevor O. Jones, then Chairman and interim
Chief Executive Officer of the Company, met informally with John B. Blystone,
Chairman and Chief Executive Officer of SPX to discuss a number of general
topics concerning the vehicle industry. No specific proposal regarding a
business combination between the two companies was made at the meeting.
In November 1997, Larry W. McCurdy, who had succeeded Mr. Jones
as President and Chief Executive Officer of the Company, met with Mr. Blystone
to discuss business in general. A possible business combination between the
two companies was discussed at the meeting. General discussion regarding a
business combination also took place on November 24, 1997, between Robert F.
Tobey, the Company's Vice President - Corporate Development and Patrick J.
O'Leary, SPX's Vice President - Finance and Chief Financial Officer. However,
SPX did not come forward in either meeting with any specific proposal
regarding any business combination or with specific evidence of synergies that
would result from a business combination. During the course of his meeting
with Mr. O'Leary, Mr. Tobey stated that in order to understand SPX's views
regarding potential synergies, the parties should exchange confidential
information, subject to appropriate protections. Mr. O'Leary
categorically rejected the suggestion. Accordingly, Mr. Tobey advised
that in these circumstances further discussions would not be fruitful.
On December 12, 1997, following a conversation between Mr.
McCurdy and Mr. Blystone, Mr. McCurdy received a letter from Mr. Blystone
setting out Mr. Blystone's thoughts on a business combination of the two
companies. The letter stated that SPX was thinking about a price "in the
$40's range", and contained a suggestion that the letter itself be shared with
the Board.
On December 17, 1997, the Board had a full discussion of the
merits of Mr. Blystone's views and determined that it had no interest in
pursuing further discussions with SPX regarding a business combination. That
same day, Mr. McCurdy wrote a letter to Mr. Blystone stating that Mr. McCurdy
had shared Mr. Blystone's views with the Board, and that the Company's
position remained that the Company had no interest in further discussions with
SPX regarding a business combination.
On December 18, 1997, each member of the Board received a
letter from Mr. Blystone enclosing a copy of his December 12 letter and
reiterating his views on the merits of a business combination.
On December 23, 1997, Mr. McCurdy sent a letter to Mr. Blystone
advising him that Mr. Blystone's letters of December 12 and December 18 had
been shared with the Board, and that the Board was of the unanimous view that
the Company did not have an interest in pursuing discussions with SPX.
On January 6, 1998, the Company was notified by SPX that it was
filing a Premerger Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 ("HSR") seeking to acquire up to 100% of
the voting securities of the Company.
On January 8, 1998, Mr. McCurdy wrote to Mr. Blystone
acknowledging receipt of notice of SPX's HSR filing and advising SPX that the
Company and its advisors stood ready to aggressively defend Echlin's
shareholders' interests.
On February 17, 1998, the Board of Directors of the Company
received a letter from SPX indicating that it was prepared to make an
unsolicited offer to acquire all of the outstanding shares of Echlin and
stating that SPX desired to enter into negotiations with the Company regarding
a business combination, as well as offer materials in connection with the
Proposed Offer, preliminary solicitation materials to solicit demands that a
special meeting be called and held, and certain other materials which were
filed by SPX with the Securities and Exchange Commission that day. On the
same day SPX publicly announced details of its Proposed Offer and the Company
issued the following press release:
"ECHLIN INC. COMMENTS ON HOSTILE TAKEOVER PROPOSAL
BY SPX CORPORATION
-- Auto Parts Company Says It Will Continue To Implement Its Own
Strategic Plan To Build Economic Value --
BRANFORD, Conn., February 17, 1998--Echlin Inc. (NYSE: ECH) confirmed
today, in response to SPX Corporation's unsolicited takeover proposal
and consistent with its fiduciary responsibilities, that its board of
directors will review the SPX proposal in due course. To that end,
Echlin has retained Salomon Smith Barney and Davis Polk & Wardwell to
assist it in its review of the proposal.
Echlin stated that stockholders need not take any action at this time
with respect to the proposal, and requested they await the
recommendation of Echlin's board.
Echlin Chairman, President and CEO Larry McCurdy said, "Echlin's
management and board of directors had previously been contacted by SPX,
and after careful evaluation of a proposed combination, unanimously
rejected the idea based upon two major concerns: the lack of market
synergies between the two companies, and, our significantly different
views on the future of the automotive parts business and how it may best
be served. At that time, Echlin's board communicated to SPX that such a
combination did not make good business sense, and that it was clearly
not in the best interests of Echlin's stockholders, customers or
employees. Echlin informed SPX that it had no interest in pursuing the
matter."
"The board and management of Echlin reiterated their conviction that
prospects for the company are extremely bright. Echlin is making
significant progress in implementing its previously announced, strategic
repositioning plan," Mr. McCurdy continued. "Key elements of the plan
include divestiture of underperforming or non-strategic businesses;
factory rationalizations; aggressive cost cutting aimed at profit
improvements; heightened asset management and cash flows gains; and, a
steadfast commitment to incorporating the EVA framework to enhance
value."
Mr. McCurdy concluded, "Echlin will continue to implement its
well-conceived strategic plan to build economic value."
Echlin, with annual sales of $3.6 billion, manufactures a wide scope of
safety- and efficiency-related products for the world's 650 million
motor vehicles. It employs 30,000 associates in over 150 operations
spread across six continents.
Certain statements included above are forward-looking, and involve risks
and uncertainties which could cause actual results to differ materially
from those implied. Information about potential factors identified by
the company, which could affect its actual financial results, is
included in the company's Form 10-K filed in November 1997 with the SEC."
Certain Litigation Against the Company
On or about February 18, 1998, Geoffrey and Jordana Miller
filed a complaint (the "Miller Complaint") in the Superior Court of
Connecticut, Judicial District of New Haven, against Echlin and certain
directors of Echlin. The Miller Complaint is brought on behalf of a purported
class of all shareholders of Echlin and alleges that Echlin and the director
defendants have breached their fiduciary duties to Echlin shareholders by
failing to negotiate with SPX concerning its acquisition overtures and failing
to take steps to maximize shareholder value and Echlin's attractiveness as a
potential acquisition candidate. The Complaint seeks to enjoin defendants
from taking any action that does not maximize the shareholder value of Echlin
and unspecified monetary damages.
On or about February 19, 1998, Park East, Inc. filed a
complaint (the "Park East Complaint") in the United States District Court for
the District of Connecticut against Echlin and certain directors of Echlin.
The Park East Complaint is brought on behalf of a purported class of all
shareholders of Echlin and alleges the same fiduciary duty claims as are
alleged in the Miller Complaint, as well as claims that the Connecticut
Anti-Takeover Statutes are unconstitutional. The Park East Complaint seeks to
order the defendants to cooperate fully with any entity proposing a
transaction, as well as unspecified monetary damages and a declaration that
the Connecticut Anti-Takeover Statutes are unconstitutional.
The Company and the Board believe that the allegations in both
the Miller Complaint and the Park East Complaint are without merit.
Effect of Execution and Delivery of Gold Demand Cards and Green Revocation
Cards; Revocations
Section 33-696 of the Connecticut Business Corporation Act
states that a corporation which has a class of voting stock registered
pursuant to Section 12 of the Securities Exchange Act of 1934 shall hold a
special meeting of shareholders if the holders of at least thirty-five percent
of all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date and deliver to the corporation's
secretary one or more written demands for the meeting describing the purpose
or purposes for which it is to be held. Section 33-696 of the Connecticut
Business Corporation Act provides that, if not otherwise fixed by a company's
By-laws or its board of directors, the record date for determining
shareholders entitled to demand a special meeting is the date the first
shareholder signs the demand. The record date ("Record Date") with respect to
the Special Meeting is __________, 1998. As of ___________, 1998, there were
_____ shares of the Company's Common Stock outstanding. Accordingly, SPX
would need to deliver to the Company unrevoked Demands from holders of ______
shares of Common Stock to satisfy the thirty-five percent requirement under
Section 33-696.
The By-laws of the Company state that, upon written request of
the requisite holders, the President of the Company shall call a special
meeting. SPX has indicated that following receipt of the requisite Demands,
it will deliver the Demands to the Secretary of the Company and request the
Secretary to cause notice of the Special Meeting to be given to the Company's
shareholders.
Section 33-697 of the Connecticut Business Corporation Act
states that the Connecticut Superior Court may summarily order a special
meeting of a corporation to be held if notice of the special meeting is not
given within thirty days after the date the demand is delivered to the
corporation's secretary or if the special meeting is not held in accordance
with the notice. Section 33-699 of the Connecticut Business Corporation Act
states that corporation shall notify shareholders of the date, time and place
of a special meeting no fewer than ten nor more than sixty days before the
meeting date. (The Company's By-laws contain a substantially similar
provision.)
A Demand (including a Gold demand card) may be revoked by
filing with the Secretary of the Company a signed and dated GREEN revocation
card or any other form of written notice of revocation which is signed and
dated and clearly expresses your intention to revoke your previously executed
Demand. A shareholder's revocation of a previously executed Demand will have
the effect of opposing SPX's request for the Special Meeting. Whether or not
you have previously executed a Demand, the Company urges you to complete,
sign, date and deliver the enclosed GREEN revocation card, or any other form
of written notice revoking a Demand, as promptly as possible by mail (using
the postage-paid envelope provided) to Morrow & Co.
You may also revoke a Revocation (including a GREEN revocation
card) by filing with the Secretary of the Company a form of written notice of
revocation which is signed and dated and clearly expresses your intention to
revoke your previously executed Revocation. Your latest dated submission will
supersede any earlier-dated Demand, Revocation or other written notice of
revocation. THERE WILL BE NO MEETING AT WHICH TO REVOKE ANY DEMAND OR
REVOCATION, AND ACCORDINGLY YOU MUST ACT QUICKLY.
Participants in The Revocation Solicitation
Revocations are being solicited by and on behalf of the
Company. All expenses of this solicitation, including the cost of preparing
and mailing this Revocation Solicitation Statement, will be borne by the
Company. In addition to solicitation by use of the mails, Revocations may be
solicited by directors, certain officers, and employees of the Company in
person or by telephone, telegram, telex, telecopier, facsimile, advertisement,
courier service, or other means of communication. Such directors, officers and
employees will not be additionally compensated, but may be reimbursed for
out-of-pocket expenses in connection with such solicitation. In addition, the
Company has retained Morrow & Co., Inc. ("Morrow") to assist in the
solicitation of Revocations. The Company has agreed that Morrow will be paid a
solicitation fee not to exceed $150,000, plus reimbursement for their
reasonable out-of-pocket expenses. The Company has also agreed to indemnify
Morrow against certain liabilities and expenses, including certain liabilities
and expenses under the federal securities laws. It is anticipated that Morrow
will employ approximately 60 persons to solicit shareholders.
The Company has engaged Salomon Brothers Inc and Smith Barney
Inc. (collectively doing business as Salomon Smith Barney) ("Salomon") to act
as its financial advisor in connection with the Proposed Offer and related
matters, including this solicitation. Salomon may assist in the solicitation
of Revocations. Pursuant to the terms of an engagement letter dated February
26, 1997, the Company has agreed to pay Salomon for its financial advisory
services (i) an initial retainer fee of $50,000, (ii) additional quarterly
fees of $50,000 during the term of Salomon's engagement, (iii) additional
customary fees as the Company and Salomon may agree on from time to time, and
(iv) reasonable expenses arising from the engagement. The Company will also
indemnify Salomon against certain liabilities, including liabilities under the
Federal Securities laws. Salomon will not receive any fee for, or in
connection with, any solicitation activities apart from the fees it is
otherwise entitled to receive under its engagement. Salomon does not admit or
deny that any of its directors, officers or employees is a "participant" as
defined in Schedule 14A promulgated by the Commission under the Securities
Exchange Act of 1934, as amended, or that such Schedule 14A requires the
disclosure of certain information concerning such persons. In the normal
course of its business, Salomon regularly buys and sells the Common Stock and
other securities for its own account and for the accounts of its customers,
which transactions may result from time to time in Salomon and its associates
having a net "long" or net "short" position in the Common Stock or other
securities or option contracts or derivatives in or relating to the Company's
securities. As of February 20, 1998 Salomon beneficially held a "net long"
position of 241,678.36 shares of Common Stock. If Salomon assists the
Company in connection with the solicitation of Revocations, such activity will
be carried out by a team of individuals consisting of officers and employees
of Salomon.
The Company estimates that its total expenditures relating to
the solicitation (excluding costs representing salaries and wages of regular
employees and officers of the Company) will be approximately $200,000. The
Company to date has incurred estimated total expenses of approximately
$15,000. In addition to the members of the Board (which consists of Messrs.
Creamer, Dauch, DeVane, Echlin, Jensen, Jones, McCurdy, Nusbaum and Rivard),
its executive officers and certain officers of its subsidiaries may solicit
Revocations. The business address for each of the members of the Board and the
officers named above is, and the Company's executive offices are located at:
100 Double Beach Road, Branford, Connecticut 06405. For further information
with respect to participants in the solicitation, including the names of its
executive officers and certain officers of its subsidiaries who may solicit
Revocations, and certain transactions by those participants in the Company's
shares of Common Stock, see Schedules A and B.
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.
If the Special Meeting is held, removal of the Board of Directors from office
would constitute a "change of control" event. 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 has 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 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.
Security Ownership of Certain Beneficial Owners and Management
The following shareholders are beneficial owners of more than
five percent (5%) of the shares of Common Stock as of _________ ___, 1998.
The Company has no other class of equity security outstanding:
The following table sets forth information as to the only
persons known to the Company to be the beneficial owner of more than five
percent of the Company's Common Stock:
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percentage of Class
- --------------------------------------------- ---------------------- -------------------
<S> <C> <C>
Scudder Kemper Investments, Inc.
Two International Place
Boston, MA 02110-4103 4,579,317 (1) _____%
McKay-Shields Financial Corporation
Investment Advisors
9 West 57th Street
New York, New York 10019 4,349,380 (2) _____%
The Capital Group Companies, Inc
333 South Hope Street
Los Angeles, California 90071 3,582,400 (3) _____%
- ------------
(1) Scudder Kemper Investments, Inc., has sole voting power with respect to
969,650 shares, shares voting power with respect to 3,358,544, sole
dispositive power with respect to 4,549,973 and shares dispositive power
with respect to 29,344 shares as reported on Schedule 13G filed with the
Securities and Exchange Commission on February 12, 1998.
(2) McKay-Shields Financial Corporation, Investment Advisors, has shared
voting and shared dispositive power with respect to 4,349,380 shares as
reported on Schedule 13F filed with the Securities and Exchange Commission
on February 13, 1998.
(3) The Capital Group Companies, Inc., through its wholly-owned subsidiaries,
including Capital Research and Management Company (acting as investment
advisor), has sole voting power with respect to 491,400 shares and sole
dispositive power with respect to 3,582,400 as reported on Schedule 13G
filed with the Securities and Exchange Commission on February 10, 1998.
</TABLE>
The following table sets forth information with respect to
beneficial ownership as of __________ ___, 1998 by the Company's current
directors, the Company's "named executive officers" for 1997 fiscal year,
the Company's chief executive officer, the Company's "named executive
officers" for the 1998 fiscal year and by all directors and current
executive officers as a group, together with the percentage of the
outstanding shares of Common Stock which such ownership represents. Unless
otherwise indicated, the beneficial ownership consists of sole voting and
investment power with respect to the shares indicated, except to the extent
that authority is shared by spouses under applicable law.
Number of Shares of
Common Stock Percentage of
Name Beneficially Owned Class
- ---------------------------- ------------------- -------------
John F. Creamer, Jr......... 21,750 shares
Richard E. Dauch............ 1,142 shares *
Milton P. DeVane............ 13,600 shares *
John E. Echlin, Jr.(1)...... 634,392 shares 1.00%
Donald C. Jensen(2)......... 9,050 shares *
Trevor O. Jones(3).......... 118,350 shares *
Jon P. Leckerling(4)........ 34,589 shares *
Milton J. Makoski(5)........ 41,395 shares *
Larry W. McCurdy(6)......... 108,000 shares *
William P. Nusbaum.......... 3,000 shares *
Joseph A. Onorato(7)........ 40,880 shares *
Jerome G. Rivard............ 6,800 shares *
Edward D. Toole(8).......... 27,264 shares *
- ------------
* 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
and 61,907 shares owned by Mrs. John E. Echlin, Jr.
(2) Shares held indirectly by the Donald C. Jensen Revocable Living Trust
dated September 6, 1990.
(3) Includes 100,000 shares exercisable within 60 days of ________, 1998 under
the Echlin Inc. 1992 Executive Stock Option Plan.
(4) Includes 29,029 shares either exercisable currently or within 60 days of
_______, 1998 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.
(5) Includes 35,045 shares either exercisable currently or within 60 days of
________, 1998 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.
(6) Includes 100,000 shares either exercisable currently or within 60 days of
_______, 1998 under the Echlin Inc., 1992 Executive Stock Option Plan.
(7) Includes 32,780 shares either exercisable currently or within 60 days of
_______, 1998 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.
(8) Includes 22,914 shares either exercisable currently or within 60 days of
_______, 1998 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.
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 that 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.
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 that 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 shareholders 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 shareholder 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 were
discontinued as Board committees as of December 31, 1997. The Scientific
Advisory Committee reviewed production and research activities of the various
units of the Company and reported 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 has retired as a director as of the Annual Meeting of
Stockholders, and Mr. Rivard were members of this Committee. The Asian
Development Advisory Council was a Committee of the Board with membership
comprised of experienced business executives who had conducted business over a
period of years within various countries in the Asian region, and which
assisted and advised 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 served as Chairman of this
Council. The European Advisory Council was comprised of experienced automotive
industry executives from various countries within the region and assisted and
advised 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 served 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 and for service as Non-Executive Vice-Chairman of the Board receives a
retainer of $25,000 per month for Fiscal Year 1998, in lieu of all other Board
and Committee fees and retainers. Mr. Creamer served as Non-Executive 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 which ended 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 received a $3,000 annual retainer. European
Advisory Council and Asian Development Advisory Council members received an
annual retainer of $24,000 and each Council's Chairman received 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.
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.
Certain 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 in connection with certain contingencies.
Mr. Nusbaum is currently a director of the Company.
As of ________, 1998, 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 1,161,089 shares of Common Stock or ______
percent thereof. Such shares include 441,075 shares either exercisable
currently or within 60 days of _______________, 1998 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 _________________, 1998.
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.
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>
Long-Term Compensation
--------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------- -------------- -----------
Long-Term
Incentive
Other Annual Securities Plan All Other
Bonus Compensation Underlying Payouts Compensation
Name and Principal Position Year Salary ($) (A)($) (B)($) Options(#)(C) (S)(D) (E)($)
- -----------------------------------------------------------------------------------------------------------------------------------
<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) 50,000 788,163 900
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 0 1,146
Executive Vice President 1996 172,500 34,700 131 (5) 3,000 72,443 1,445
Administration, 1995 164,000 65,000 6,300 192,465 2,612
General Counsel and
Corporate Secretary
J.A. Onorato............... 1997 184,000 53,700 1,775 0 1,148
Vice President and 1996 152,500 37,200 3,000 72,443 1,538
Chief Financial 1995 145,000 65,000 6,300 192,465 2,610
Officer
M.J. Makoski............... 1997 178,000 38,200 1,700 0 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 0 938
Vice President, 1996 150,700 32,700 1,400 47,282 1,608
Associate General 1995 143,500 39,200 2,050 131,040 2,624
Counsel and Assistant
Secretary
- -------------------
* 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.
(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 $247,000 paid to Mr. Mancheski under the Supplemental Executive
Retirement Plan and the Supplemental Senior Executive Retirement Plan.
(5) Under the Company's 1976 Deferred Compensation Plan, as amended, directors
can defer up to 100 percent of their directors' fees and designated
officers and key executives can defer up to 25 percent of their salary and
bonus and up to 100 percent of their performance unit plan award payment
each year. Interest is accrued on deferred accounts at the greater of the
average rate of interest paid by the Company on its commercial paper
borrowings or the Company's return on assets. The amount shown is the
interest accrued on deferred compensation accounts equal to the Company's
return on assets but in excess of 120 percent of the Federal long-term
interest rate on December 31, 1995 (5.982 percent).
</TABLE>
Option/SAR Grants in Fiscal Year 1997
Shown below is further information on grants of stock options pursuant
to the Company's 1992 Executive Stock Option Plan, and in the case of Mr.
Jones, options granted under the Echlin Inc. 1996 Non-Executive Director
Stock Option Plan during the fiscal year ended August 31, 1997 to the Named
Executive Officers. Such grants are reflected in the Summary Compensation
Table.
Option/SAR Grants in FY 1997 and FY 1997 Grant Date Value
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
-------------------------------------------------------- -----------------------------------
Grant Date
(December 18
1996, March 7,
1997 and
% of Total December 20,
Options Granted 1996)
Options-Granted to Employees in Exercise Price Expiration Date Present Value
Name (#)(A) Fiscal Year ($/SH)(B) (C) ($)(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 3.7645 30.7500 12/18/06 127,674
Jon P. Leckerling................ 1,700 0.4971 30.7500 12/18/06 16,728
Milton J. Makoski................ 1,700 0.4971 30.7500 12/18/06 16,728
Joseph A. Onorato................ 1,775 0.5191 30.7500 12/18/06 17,466
Edward D. Toole.................. 1,250 0.3655 30.7500 12/18/06 12,300
- -------------------
* 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.
</TABLE>
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 Unexercised
Value of Unexercised in-the-money Options at
Options at FY End (#) FY End ($) (B)
Shares Acquired on Value Exercisable/ Exercisable/
Name 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
- -------------------
(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.
</TABLE>
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 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>
Performance
Period Until
Number Maturation or
Name of Units (#) Payout (A) Threshold($)(B) Target($)(C) Maximum($)(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) including 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
- ----------
* 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.
(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.
</TABLE>
Pension Plans
The Company maintains a noncontributory Pension Plan for
Echlin 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 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.
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.
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 30 40
- ---------------------------------------------------------- -------- -------- -------- --------
<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............................................. 173,363 231,150 298,938 346,725
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.
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.
Deadline for Submission of Shareholder Proposals
Proposals of shareholders 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.
The Board of Directors
By: /s/ Jon P. Leckerling
---------------------------
Name: Jon P. Leckerling
Title: Senior Vice President
and Corporate Secretary
Date: February 24, 1998
PRELIMINARY COPY -- NOT FOR USE
NO GREEN REVOCATION CARD WILL ACCOMPANY THESE
MATERIALS UNTIL DEFINITIVE SOLICITATION MATERIALS
ARE DISTRIBUTED TO SHAREHOLDERS OF THE COMPANY.
ECHLIN INC
REVOCATION CARD SOLICITED ON BEHALF OF
BOARD OF DIRECTORS OF ECHLIN INC.
IN OPPOSITION TO THE SPX SOLICITATION OF DEMANDS
TO HOLD A SPECIAL MEETING
The undersigned shareholder, acting with regard to all shares of common
stock, par value $1.00 per share, of Echlin Inc entitled to vote and held by the
undersigned, hereby REVOKES any previously executed demand requesting the demand
for a special meeting of shareholders (the "Special Meeting") described in the
Demand Solicitation of SPX Corporation and hereby confirms that the undersigned
has the power to deliver a revocation of demand for the number of shares
represented hereby.
The Board of Directors of Echlin Inc. unanimously recommends that you sign,
date and deliver this GREEN revocation card as promptly as possible by mail
(using the postage-paid envelope provided), whether or not you have previously
executed any Demand (including any Gold demand card). There will be no meeting
at which to revoke any Demand, and accordingly you must act quickly.
Please sign this revocation card exactly as your name appears hereon.
If signing as Attorney, Administrator, Executor, Guardian, or Trustee,
please give title as such. If a Corporation, this signature should be that
of an Authorized Officer who should state his or her title. If a
Partnership, sign in Partnership name by authorized person. If your shares
are held jointly, this revocation card should be signed by one or both of
the joint owners. Signed but unmarked revocations will be deemed to revoke
all previously given demands for the number of shares represented hereby by
the Undersigned.
SIGNATURE ______________________
Title(s) (if applicable) ______________________
SIGNATURE (IF HELD JOINTLY) ______________________
Dated: ____________, 1998
SCHEDULE A
INFORMATION REGARDING PARTICIPANTS
IN THE REVOCATION SOLICITATION
Set forth in the tables below are the present principal occupation or
employment, and the name, principal business and address of any corporation or
organization in which such employment is carried on, for (1) each of the
directors and executive officers of Echlin Inc. and (2) certain employees and
other representatives of Echlin Inc. who may also solicit Revocations from the
shareholders of the Company. The principal business address of Echlin Inc. is
100 Double Beach Road, Branford Connecticut 06405. Unless otherwise indicated,
the principal business address for each individual listed below is the address
of Echlin Inc. Except as otherwise provided in this Revocation Solicitation
Statement (including the Schedules hereto), none of the participants in this
Solicitation, (i) directly or indirectly owns any Shares or any other securities
of the Company, (ii) was in the past ten years convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), (iii) is, or
was within the past year a party to any contracts, arrangements or
understandings with any person with respect to any securities of the Company,
including but not limited to joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profits, or the giving or withholding or proxies.
Directors of Echlin Inc.
<TABLE>
<CAPTION>
Name Director Business Activities Since September 1, 1992
---- -------- -------------------------------------------
<S> <C> <C>
John F. Creamer, Jr (Age 67)............. 1986 President and sole shareholder of Distribution
Marketing Services, Inc., Stamford, Connecticut
(marketing consultants to the
automotive aftermarket);
President, Automotive Warehouse
Distributors Association-- AWDA
(automotive aftermarket parts
trade association) (1994 to present);
Director, R&B Inc. (automotive fasteners
supplier); Bonded Motors, Inc.
(automotive engine rebuilders), HiLite
Industries Inc. (automotive electro
magnetic clutches and stampings); Vice
Chairman of the Board (through December 31,
1997); member of the Executive and
Corporate Governance Committees of the
Board.
Richard E. Dauch (Age 55)................ 1997 Chairman, President and Chief Executive Officer,
American Axle & Manufacturing, Inc., Detroit,
Michigan (manufacturer of automotive driveline
systems, chassis components and forged products) (1994
to present); Private Investor (1992-1993); member of the
Executive and Corporate Governance Committees of the
Board.
Milton P. DeVane (Age 68)................ 1965 Retired; former partner, Tyler Cooper & Alcorn, LLP,
New Haven, Connecticut (law firm); Chairman of the
Corporate Governance Committee and member of the
Audit, Compensation and Management Development
and Executive Committees of the Board.
John E. Echlin, Jr. (Age 62)............. 1964 Retired; former Account Executive, PaineWebber,
Guilford, Connecticut (1983-1989); Chairman of the
Finance Committee and member of the Audit, Corporate
Governance and Executive Committees of the Board.
Donald C. Jensen (Age 62)................ 1991 Retired; former Vice Chairman of Ernst & Young
(international 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 Executive Committees
of the Board.
Trevor O. Jones (Age 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 Executive
Officer (until March 7, 1997); Chairman of the
Executive Committee, Chairman of the Compensation
and Management Development Committee (until
February 20, 1997) and Chairman of the European
Advisory Council of the Board.
Larry W. McCurdy (Age 62)................ 1997 President and Chief Executive Officer (since March 7,
1997); former Executive Vice President-Operations,
Cooper Industries, Inc. (automotive products
manufacturer) (1994-1997); former President and Chief
Executive Officer, Moog Automotive, Inc. (automotive
products manufacturer) (1985-1994); Director, Breed
Technologies, Inc. (automotive safety systems
manufacturer), Lear Corporation (automotive interiors
manufacturer), Mohawk Industries Inc. (broadloom
carpet manufacturer).
William P. Nusbaum (Age 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 (Age 64)................ 1991 President, Global Technology and Business
Development, Inc. (technology and manufacturing
consultants) (1988 to present); former Vice President
and Group Executive, Bendix Electronics division of
Allied-Signal Inc., (1986-1988); member of the
Scientific Advisory Committee of the Board.
</TABLE>
Executive Officers of Echlin Inc.
<TABLE>
<CAPTION>
Name Age Business Activities since September 1, 1992
---- --- -------------------------------------------
<S> <C> <C>
Larry W. McCurdy............................ 62 President and Chief Executive Officer since 1997;
President and Chief Executive Officer Executive Vice President - Operations, Cooper Industries,
Inc. from 1994-1997; President and Chief Executive
Officer, Moog Automotive, Inc. from 1985-1994
Jon P. Leckerling........................... 49 Executive Vice President, General Counsel and Company
Executive Vice President, General Counsel Secretary since 1997; Vice President, General Counsel
and Corporate Secretary and Corporate Secretary from 1990-1997
Joseph A. Onorato........................... 48 Senior Vice President and Chief Financial Officer since
Senior Vice President and Chief Financial 1997; Vice President and Treasurer from 1994-1997;
Officer Treasurer from 1990-1994
Kenneth T. Flynn Jr......................... 48 Vice President and Corporate Controller since 1997;
Vice President and Corporate Controller Assistant Corporate Controller from 1985-1997
Milton J. Makoski........................... 51 Senior Vice President, Human Resources, since 1997;
Senior Vice President-Human Resources Vice President - Human Resources since 1986
Paul R. Ryder............................... 47 Vice President, Investor Relations, since 1997; Director -
Vice President-Investor Relations Investor Relations from 1984-1997.
Edward C. Shalagan.......................... 45 Treasurer since 1997; Assistant Treasurer from 1988-1997
Treasurer
Robert F. Tobey............................. 52 Senior Vice President - Corporate Development, since
Senior Vice President-Corporate 1997; Various managerial positions within Echlin's
Development International Group from 1991 to 1997
Edward D. Toole Jr.......................... 67 Vice President, Associate General Counsel and Assistant
Vice President, Associate General Counsel Secretary since 1997; Associate General Counsel and
and Assistant Secretary Assistant Secretary since 1990
Thomas P. Marchese.......................... 54 Assistant Vice President - Corporate Development, since
Assistant Vice President-Corporate 1994; Director Business Development U.S. from 1991-
Development 1994
Charles W. O'Connor......................... 67 Assistant General Counsel and Assistant Secretary since
Assistant General Counsel and Assistant 1990
Secretary
Stephen D. Vivier........................... 45 Assistant Treasurer, Tax, since 1997; Director Taxes from
Assistant Treasurer-Tax 1990-1997
</TABLE>
Other Representatives
Officers of Subsidiaries of Echlin Inc.
Name Present Principal Occupation or Employment
---- ------------------------------------------
Allen Cameron President, Echlin Automotive Group
Robert Daley President Echlin Engine Systems Group
SCHEDULE B
TRANSACTIONS OF PARTICIPANTS IN THE COMPANY'S SHARES
SINCE FEBRUARY 17, 1996
Set forth in the table below are the transactions engaged in by
participants with respect to the Company's shares.
Name Transaction date Number of shares Acquired (A) or Sold(S)
---- ---------------- ----------------------------------------
-- NONE --
