<PAGE> 1
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 (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 Rule 14a-11(c) or Rule 14a-12
FEDERAL MOGUL CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(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)(1) 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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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<PAGE> 2
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[FEDERAL MOGUL LOGO]
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26555 Northwestern Highway, Southfield, Michigan 48034
March 22, 1999
To Our Shareholders:
You are invited to attend the 1999 Annual Meeting of Shareholders. The meeting
will be held at Federal-Mogul's World Headquarters, 26555 Northwestern Highway,
Southfield, Michigan on Wednesday, April 21, 1999, beginning at 10:30 a.m.,
local time.
In addition to the matters described in the attached Proxy Statement, I will
report on the business and progress of Federal-Mogul during 1998 and
Federal-Mogul's future as we enter the new millennium. Federal-Mogul's
performance is also discussed in the enclosed 1998 Annual Report to
Shareholders.
Please read this material so that you will know what we plan to do at the Annual
Meeting. Also, please sign and return the accompanying proxy card in the
postage-paid envelope. This way, your shares will be voted as you direct at the
Annual Meeting.
I hope you will attend the Annual Meeting and look forward to seeing you there.
RICHARD A. SNELL
Richard A. Snell
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
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[FEDERAL MOGUL LOGO]
26555 Northwestern Highway, Southfield, MI 48034
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 22, 1999
The Annual Meeting of Shareholders of Federal-Mogul Corporation will be held at
the World Headquarters of the Corporation, 26555 Northwestern Highway (southwest
corner of Northwestern Highway and Lahser Road), Southfield, Michigan, on
Wednesday, April 21, 1999, at 10:30 a.m., local time, for the following
purposes:
1. to elect eight directors of the Corporation to hold office until the next
Annual Meeting of Shareholders or until their successors are elected and
qualified;
2. to approve the appointment of Ernst & Young LLP as independent public
accountants for 1999;
3. to approve the Federal-Mogul Economic Value Added (EVA(R)) Incentive
Compensation Plan; and
4. to transact any other business that is properly presented at the meeting.
The record date for the Annual Meeting is February 26, 1999. Only shareholders
of record at the close of business on that date will be entitled to vote at the
meeting.
Whether or not you plan to attend in person, we ask that you carefully review
the material on the following pages and vote your shares on matters that will
come before the meeting. You may vote your shares by marking your votes on the
enclosed proxy card, signing and dating it, and promptly returning it in the
enclosed envelope. If you attend the meeting and vote by ballot, your proxy will
be revoked, and only your ballot voted at the meeting will be counted.
JAMES J. ZAMOYSKI
James J. Zamoyski
Senior Vice President, General Counsel
and Secretary
<PAGE> 4
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[FEDERAL MOGUL LOGO]
26555 Northwestern Highway, Southfield, Michigan 48034
March 22, 1999
PROXY STATEMENT
The Board of Directors of Federal-Mogul Corporation is soliciting proxies to be
voted at the Annual Meeting of Shareholders, to be held on Wednesday, April 21,
1999, at the World Headquarters of the Corporation, 26555 Northwestern Highway,
Southfield, Michigan, beginning at 10:30 a.m., local time.
This Proxy Statement and the enclosed proxy card are being mailed to
Shareholders on or about March 23, 1999.
Only Shareholders of record of the Company's Common Stock and Series C ESOP
Convertible Preferred Stock ("Series C Stock") at the close of business on
February 26, 1999 will be entitled to vote. On that date, approximately
70,494,095 shares of Common Stock and 721,759 shares of Series C ESOP
Convertible Preferred Stock were outstanding. Each issued and outstanding share
of Common Stock is entitled to one vote, and each issued and outstanding share
of Series C Stock is entitled to two votes.
The presence, in person or by proxy, of the holders of a majority of the Stock
and Series C Stock outstanding on February 26, 1999 will constitute a quorum to
conduct business.
A Shareholder may, with respect to the election of directors, (i) vote for all
eight nominees, (ii) withhold authority to vote for such nominees or, (iii) vote
for all nominees other than any nominee with respect to whom the Shareholder
withholds authority to vote. Shareholders do not have the right to cumulate
votes in the election of directors. Directors will be elected by a plurality of
the votes cast at the Annual Meeting, and the nominees receiving the highest
number of votes cast for the number of positions to be filled will be elected. A
Shareholder may, with respect to the ratification of the selection of Ernst &
Young LLP as independent public accountants and the adoption of the EVA
Incentive Compensation Plan (i) vote for, (ii) vote against, or (iii) abstain
from voting. The affirmative vote of a majority of the votes cast on these
matters is required for approval of these matters.
Abstentions will be treated as shares present for the purpose of determining the
presence of a quorum. Proxies relating to street name shares that are voted by
brokers on some but not all of the matters to be considered at the Annual
Meeting will be treated as present for purposes of determining a quorum but will
not be entitled to vote on any matter as to which the broker does not have
discretionary voting power and has not received instructions from the beneficial
owner ("broker non-votes"). In tabulating the votes, abstentions and brokers
non-votes will be treated as votes not cast.
<PAGE> 5
ITEM I. ELECTION OF DIRECTORS
Eight directors will be elected at this year's Annual Meeting. All directors are
elected annually and serve a one-year term until the next Annual Meeting. If any
director is unable to stand for re-election, the Board of Directors may provide
for a lesser number of directors or designate a substitute. If a substitute is
designated, proxies voting on the original director candidate will be cast for
the substituted candidate.
Each of the nominees for director is now a member of the Board of Directors.
PHOTO RICHARD A. SNELL Director since 1996
Age 57
Mr. Snell is Chairman of the Board and Chief Executive Officer
of the Corporation, a position he has held since November 1996.
He was also President of the Corporation from November 1996
until February 1999. Mr. Snell was previously employed by
Tenneco, Inc., from November 1987 to November 1996, most
recently having served as President and Chief Executive Officer
of Tenneco Automotive from September 1993 until he was employed
by the Corporation. Mr. Snell is also a director of Schneider
National, Inc.
PHOTO JOHN J. FANNON Director since 1986
Age 65
Mr. Fannon retired in 1997 as Vice Chairman of Simpson Paper
Company, a privately held global forest products company with
annual sales exceeding $1 billion, a position he held since
1993. Mr. Fannon is also a business consultant. From 1980 until
he became Vice Chairman of Simpson Paper, Mr. Fannon served as
its President. Previously, he was Vice President of Marketing
for Simpson Paper. Mr. Fannon is also a director of Simpson
Paper and Seton Medical Center.
PHOTO RODERICK M. HILLS Director since 1977
Age 68
Mr. Hills is the Chairman and former President of Hills
Enterprises, Ltd. (formerly the Manchester Group). Mr. Hills is
also a partner in Hills and Sterns. From May 1989 to June 1995,
he was a partner and/or consultant to the law firms of Donovan
Leisure Rogovin Huge & Schiller, Shea & Gould, and Mudge Rose
Guthrie Alexander & Ferndon. Mr. Hills is also a director of
Medaphis Corporation, Oak Industries, Inc. and Waste
Management, Inc.
PHOTO PAUL SCOTT LEWIS Director since 1998
Age 62
Mr. Lewis became Chairman of Terranova Foods plc on that
company's demerger from Hillsdown Holdings plc in October 1998.
Mr. Lewis joined Tate & Lyle as Group Finance Director in June
1988 and served as its Deputy Chairman from March 1993 through
February 1998. Mr. Lewis served on the Listing Policy Committee
of the London Stock Exchange until 1996 and is a Governor of
Stratford School, East London and a member of the Finance
Committee of London First. Mr. Lewis is a former non-executive
director of T&N plc and is a non-executive director of Dairy
Crest Group.
2
<PAGE> 6
PHOTO ANTONIO MADERO Director since 1994
Age 61
Mr. Madero founded SANLUIS Corporacion S.A. de C.V. and has
served as its Chairman of the Board and Chief Executive Officer
since 1979. SANLUIS is a Mexican holding company with interests
in gold, silver, mining and automotive parts. Mr. Madero is
also a director of Grupo Financiero Banamex Accival, S.A. de
C.V., Deere and Company, G. Accion S.A., SANLUIS Corporacion,
S.A. de C.V., Alfa, S.A. de C.V., Grupo Industrial Saltillo,
S.A. de C.V., Seguros Comercial America, S.A., Grupo Posadas,
S.A. de C.V., Ferromex S.A. de C.V., Banca Chase (Mexico) S.A.,
member of the International Advisory Committee of The Chase
Manhattan Bank, Grupo Ferroviario Mexicano, S.A. de C.V., and
Group Financiero Inverlat, S.A. de C.V.
PHOTO ROBERT S. MILLER, JR. Director since 1993
Age 57
Mr. Miller was elected Chairman of the Board of Waste
Management, Inc. in July 1998 and served as its Chief Executive
Officer from October 1997 until July 1998. Mr. Miller joined
Moore Mill and Lumber Company, a privately held timber business
in Oregon, in 1993 as Vice President and Treasurer. In 1995, he
was named Chairman of the Board of Directors of Morrison
Knudsen Corporation, a position he held until September 1996
when he became its Vice Chairman. Mr. Miller is also a director
of Pope & Talbot, Inc., Moore Mill and Lumber Company and
Symantec Corp.
PHOTO JOHN C. POPE Director since 1987
Age 50
Mr. Pope is Chairman of the Board of MotivePower Industries,
Inc., a position he has held since 1995. Mr. Pope was
President, Chief Operating Officer and a Director of UAL
Corporation and United Airlines from May 1992 until July 1994.
Mr. Pope is also a director of Dollar Thrifty Automotive Group,
Inc., Lamalie Associates, Inc., Medaphis Corporation, Wallace
Computer Services, Inc. and Waste Management Inc.
PHOTO SIR GEOFFREY WHALEN C.B.E Director since 1998
Age 63
Sir Geoffrey retired in 1997 as Managing Director and Deputy
Chairman of Peugeot Motor Company plc (now known as Peugeot
plc), positions he had held since 1984 and 1990, respectively.
Sir Geoffrey also served as President of the Society of Motor
Manufacturers & Traders, the Trade Association representing
vehicle and component makers in the United Kingdom from
1988-1990 and 1993-1994. Sir Geoffrey is also a director of
Peugeot plc; Coventry Building Society; Hills Precision
Components Ltd.; Camden Motors Ltd.; Caradon plc;and Hall
Engineering (Holdings) plc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES.
3
<PAGE> 7
BOARD COMMITTEES
<TABLE>
<CAPTION>
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GOVERNANCE AND
BOARD MEMBER AUDIT NOMINATING COMPENSATION PENSION
<S> <C> <C> <C> <C>
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Richard A. Snell
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John J. Fannon X* X
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Roderick M. Hills X X* X
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Paul Scott Lewis X X
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Antonio Madero X X X
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Robert S. Miller, Jr. X X X*
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John C. Pope X* X X
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Sir Geoffrey Whalen X X
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</TABLE>
* Chairman
During 1998, there were ten meetings of the Board of Directors. Each of the
current directors attended 75% or more of the aggregate number of meetings of
the Board of Directors and the standing committees on which he served.
The Board of Directors has four committees, the duties of which are described
below:
AUDIT COMMITTEE. The Audit Committee met three times in 1998. The Committee
assists the Board in fulfilling its responsibility for the Corporation's
accounting and financial reporting practices and provides a channel of
communication between the Board and the Corporation's independent accountants.
This Committee reviews the scope and contents of the independent accountants'
audits, management letters and fees and the annual plans and work product of the
internal auditing staff.
GOVERNANCE AND NOMINATING COMMITTEE. The Governance and Nominating Committee met
one time during 1998. This Committee makes recommendations on the size and
compensation of the Board, and assures that a regular evaluation is conducted of
the performance, independence, qualifications and integrity of both the Board of
Directors and the executive officers of the Corporation.
COMPENSATION COMMITTEE. The Compensation Committee met five times during 1998.
The Committee determines compensation for the Corporation's executive officers
and makes recommendations to the Board concerning compensation for the Chairman
of the Board and Chief Executive Officer. It also exercises the authority of the
Board relating to the Corporation's employee benefit plans.
PENSION COMMITTEE. The Pension Committee met twice during 1998. This Committee
conducts meetings with and reviews the performance of the investment managers,
trustees, and the Retirement Program Committee and plan administrators. This
Committee also recommends pension funding levels to the Board of Directors after
consultation with the Corporation's Retirement Program Committee, trustee
actuaries, investment managers and other consultants retained by the Committee.
4
<PAGE> 8
COMPENSATION OF DIRECTORS. Employee directors receive no additional compensation
for serving on the Board or its committees. Non-employee directors receive
retainers of $8,750 for each calendar quarter and $1,000 for each Board meeting
they attend. In addition, they are paid $1,000 for each Committee meeting they
attend, and chairmen of Committees receive an additional annual retainer of
$5,000, except chairmen of the Compensation and Audit Committees who receive an
annual retainer of $10,000. A plan permitting directors to defer compensation is
available to all non-employee directors of the Corporation.
In addition to the cash portion of the annual retainer, for the 5-year period
that began on January 1, 1996, the Corporation credited to each non-employee
director a lump sum deposit of $25,000 into a Directors' Deferred Compensation
Plan, representing an annual increase in the director's retainer fee of $5,000
over the succeeding 5-year period. The amount is valued as though invested in
the Corporation's Common Stock and vests over five years in one-fifth increments
for each year of service beginning on January 1, 1996. Directors who joined the
Board in 1998 received a lump sum deposit of $15,000, which vests over three
years in one-third increments.
DIRECTORS' DEFERRED COMPENSATION: Under the Corporation's Directors' Deferred
Compensation Plan, directors may elect to defer all or a part of their cash
compensation. Deferred amounts are hypothetically invested in either an interest
bearing account or a Federal-Mogul Common Stock account, or a combination of
both. Amounts deferred in the interest bearing account earn interest at a rate
equal to the rate on 10-year Treasury Notes, plus 1% per year. Amounts deferred
in the Common Stock account are credited in the form of hypothetical shares of
the Corporation's Common Stock based on the market price of the stock at the
time of the deferral. Hypothetical dividends are reinvested into additional
shares based on the market price of the Common Stock at the time of the
deferral. The shares credited to all non-employee directors' deferred stock
accounts are included in the Share Ownership Table on page 15. At the director's
election, upon retirement or resignation from the Board, the deferred
compensation account will be paid in a lump sum or in annual or monthly
installments for up to 10 years.
Under the Corporation's Non-Employee Director Stock Award Plan, upon joining the
Board, directors receive a one-time grant of 1,000 shares of Common Stock, which
vest in one-fifth increments over five years. Each non-employee director also
receives an annual grant of 3,000 non-qualified stock options in the
Corporation's Common Stock, which vest 100% after six months. These stock
options expire ten years after the date of grant and are subject to certain
transfer restrictions. This annual stock option grant replaced the Director's
Retirement Income Plan, which was eliminated for then current directors as of
December 31, 1997.
ITEM II. APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors recommends that the shareholders approve the Board's
appointment of Ernst & Young LLP as independent accountants to audit the
financial statements of the Corporation and its consolidated subsidiaries for
the year 1999. The firm has conducted the audits for the Corporation for many
years. If the appointment is not approved, the Board of Directors will appoint
another independent accounting firm to audit the financial statements of the
Corporation and its consolidated subsidiaries for the year 1999 without further
action by the shareholders.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will be available to respond to appropriate questions of
shareholders. Such representatives may make a statement at the Annual Meeting if
they so desire.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS FOR THE YEAR 1999.
5
<PAGE> 9
ITEM III. ECONOMIC VALUE ADDED INCENTIVE COMPENSATION PLAN
The Board of Directors believes that Economic Value Added (EVA(R)) is the best
operating performance measure of shareowner returns in excess of the cost of
capital, and that bonus compensation should be tied to the Corporation's EVA.
On the recommendation of its Compensation Committee, the Board of Directors is
proposing for shareholder approval certain terms of the Federal-Mogul Economic
Value Added (EVA) Incentive Compensation Plan (the "Bonus Plan"). Section 162(m)
of the Internal Revenue Code of 1986, as amended, precludes public companies
from deducting, for tax purposes, compensation in excess of $1,000,000 per year
paid to chief executives and certain other executive officers. As applied to the
Corporation, Section 162(m) places this limit on the Named Executive Officers.
Under Section 162(m), however, the $1,000,000 limitation does not apply to
certain categories of performance-based compensation grants that meet the
applicable statutory requirements, including obtaining shareholder approval of
the material terms of the grants.
DESCRIPTION OF THE MATERIAL TERMS OF THE BONUS PLAN. The material terms of the
Bonus Plan are: (i) the individuals eligible to receive compensation, (ii) the
business criteria on which annual performance incentives are based and (iii) the
formula by which the awards will be determined under the Bonus Plan.
ELIGIBLE PARTICIPANTS. The eligible participants consist of executive officers
and key management employees of the Corporation (currently less than 100
persons) who are nominated by the Chief Executive Officer and designated by the
Board of Directors prior to the beginning of each plan year (i.e., the fiscal
year of the Corporation).
BUSINESS CRITERIA AND FORMULA FOR AWARDS. The Board of Directors believes the
primary objective of management is the creation of shareholder value. The Board
believes the proposed Bonus Plan is designed to encourage and reward sustained
value creation together with achievement of annual objectives and employee
retention. Under the Bonus Plan, the Board will grant annual performance-based
bonus awards to eligible executive officers and other key management employees,
pursuant to which a participant's receipt of a bonus payment is dependent on the
achievement of performance goals established by the Compensation Committee.
A participant's bonus for a plan year will be equal to a target bonus of between
10% and 125% of the participant's base salary, as prescribed by the Compensation
Committee prior to the beginning of the plan year, multiplied by a Bonus
Multiple. The Bonus Multiple generally will be based on the extent to which
preestablished EVA improvement targets are achieved. EVA represents the net
operating profit after taxes of the Corporation and certain operating units
after deducting a charge for capital employed. Specifically, the Bonus Multiple
will be calculated under the following formula:
Bonus Multiple = 1 + (EVA Improvement - Expected Improvement)
----------------------------------------
EVA Interval
6
<PAGE> 10
The EVA Improvement is the actual increase in EVA for the plan year, compared to
the prior year. The Expected Improvement is the expected increase in EVA
prescribed by the Compensation Committee for the plan year. The EVA Interval is
a leveraging factor determined by the Compensation Committee, and represents the
amount by which the EVA Improvement must exceed the Expected Improvement for a
participant's bonus to be greater than one times his or her target bonus. For
example, under this formula, if the Corporation achieves the Expected
Improvement in EVA, the Bonus Multiple will be one, and the participant's bonus
will equal the target bonus. If the Corporation exceeds the Expected Improvement
by an amount equal to the EVA Interval, the participant's declared bonus will
equal two times his or her target bonus.
When the Bonus Plan becomes effective, the Compensation Committee will determine
the Expected Improvement and EVA Interval for a period of at least three years,
and will change these factors prior to a plan year during such period only in
the event of extraordinary circumstances, such as a significant acquisition,
divestiture or other major event. In no event may a participant's bonus for any
plan year exceed $5 million.
Once a participant's declared bonus for a plan year is determined, it will be
credited to an account maintained on behalf of the participant. A payment will
be made to the participant from such account within two months after the end of
the plan year in the amount of the bonus earned in that plan year, but not in
excess of the target bonus, plus one-third of any remaining balance in the
account. Any additional amount will remain in the account. If EVA Improvement is
less than the Expected Improvement by an amount greater than the EVA Interval,
the bonus amount will be negative and will reduce the balance in a participant's
account. The balance in a participant's account may be negative.
If a participant's employment with the Corporation terminates by reason of
death, disability, or an involuntary termination by the Corporation without
cause, the participant or his or her estate will be entitled to full payment of
the participant's account, adjusted by a prorated bonus (whether positive or
negative) for the year in which the participant's employment terminates. A
participant who retires from the Corporation is entitled to full payment of his
or her account, plus his or her positive prorated bonus, if any, for the year in
which the retirement occurs. A participant who voluntarily terminates employment
or is terminated for cause will forfeit both his or her account balance and any
bonus for the year in which the termination occurs.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ECONOMIC VALUE
ADDED INCENTIVE COMPENSATION PLAN.
7
<PAGE> 11
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows, for the years ended December 31,
1998, 1997 and 1996, the Compensation paid to the Chairman of the Board and
Chief Executive Officer and the four next most highly compensated executive
officers of the Corporation. These five individuals are referred to as the
"Named Executive Officers" throughout this Proxy Statement.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION(b)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(a) ($) (NO.) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
R. A. Snell(c,d) 1998 850,008 2,564,088 98,047 -- 144,506 13,162
Chairman of the Board 1997 600,000 675,000 284,073 -- 140,400 14,133
and Chief Executive 1996 100,000 -- -- 2,601,875(e) 300,000 992,610(f)
Officer
- ---------------------------------------------------------------------------------------------------------------------------------
A. C. Johnson(c) 1998 325,008 770,828 -- -- 33,015 60,509
Executive Vice President 1997 300,000 441,000 -- -- 35,950 30,239
Powertrain Systems 1996 261,600 75,000 -- -- -- 26,113
- ---------------------------------------------------------------------------------------------------------------------------------
T. W. Ryan(c,d) 1998 320,004 667,585 -- -- 29,761 42,224
Executive Vice President 1997 220,820 351,000 -- 501,260(g) 43,000 4,858
and Chief Financial Officer
- ---------------------------------------------------------------------------------------------------------------------------------
W. A. Schmelzer(c) 1998 300,000 653,851 -- -- 40,087 43,371
Executive Vice President 1997 237,000 231,000 -- -- 23,800 30,257
Sealing Systems 1996 212,280 66,000 -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
R. P. Randazzo(c,d) 1998 300,003 500,220 -- -- 22,159 39,874
Senior Vice President 1997 250,000 219,000 -- 352,500(h) 13,000 3,733
Human Resources
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Compensation shown for R.A. Snell includes for 1998: $59,488 for
transportation, and $36,745 for taxes; and for 1997: $95,377 for membership dues
and $85,088 for taxes.
(b) Compensation paid in 1998 consists of (i) contributions made by the
Corporation to the Salaried Employees Investment Program and Match Reinstatement
Plan as follows: R.A. Snell--$11,800; A.C. Johnson--$11,800; T.W. Ryan--$10,559;
W.A. Schmelzer--$9.480; R.P. Randazzo--$9,999; (ii) contributions made by the
Corporation under the Supplemental Executive Retirement Plan as follows: A.C.
Johnson--$38,750; T.W. Ryan--$31,625; W.A. Schmelzer--$22,150; and R.P.
Randazzo--$29,875; and (iii) contributions for executive life insurance policies
as follows: R.A. Snell--$1,362; A.C. Johnson--$9,959; and W.A.
Schmelzer--$11,741.
(c) Aggregate restricted stock holdings at December 31, 1998, and the market
value of such holdings at such date, based upon a closing price of $59.5 per
share are as follows: R. A. Snell--34,500 shares/$2,052,750; A. C.
Johnson--6,000 shares/$357,000; T. W. Ryan--4,000 shares/$238,000; R. P.
Randazzo--4,000 shares/$238,000; W. A. Schmelzer--1,200 shares/$71,400.
(d) R. A. Snell, T. W. Ryan and R. P. Randazzo first became executive officers
of the Corporation in November 1996, February 1997 and January 1997,
respectively.
(e) Consists of 115,000 restricted shares of Common Stock awarded on November 1,
1996 valued at the closing price on such date of $22.625, 57,500 of which are
subject to time-based vesting and 57,500 of which vested on July 9, 1997 based
on performance-based vesting.
(f) Includes compensation for certain losses incurred by R. A. Snell, including
a loss of $350,000 in bonus compensation that he would have received had he
remained with his former employer, and an advance of $600,000 against losses
under certain compensation plans of his former employer as a result of his
having terminated his employment with his former employer.
(g) Consists of 20,000 restricted shares of Common Stock awarded on March 4,
1997 valued at the closing price on such date of $25.063, 5,000 of which vest at
the rate of 20% per year over five years and 15,000 of which vested on July 9,
1997 based on performance-based vesting.
(h) Consists of 15,000 restricted shares of Common Stock awarded on February 5,
1997 valued at the closing price on such date of $23.50, 5,000 of which vest at
the rate of 20% per year over the five years and 10,000 of which vested on July
9, 1997 based on performance-based vesting.
8
<PAGE> 12
OPTION GRANT TABLE
STOCK OPTIONS/STOCK APPRECIATION RIGHTS. The following table provides additional
information concerning the option awards to purchase the Corporation's Common
Stock shown in the Summary Compensation Table for fiscal year 1998. All options
were granted without Stock Appreciation Rights ("SARs").
OPTION/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION
NUMBER OF OPTIONS/SARS EXERCISE FOR OPTION TERM
SECURITIES UNDERLYING GRANTED TO OR BASE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR ($/SH)(a) DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
R. A. Snell 18,685(b) 1.7 70.688 7/14/03 364,912 806,359
28,821(c) 2.6 70.688 7/14/03 562,864 1,243,783
97,000(d) 8.7 57.344 12/02/03 1,536,773 3,395,866
- ------------------------------------------------------------------------------------------------------------------
A. C. Johnson 5,119(b) 0.7 70.688 7/14/03 154,206 340,755
7,896(c) 0.5 70.688 7/14/03 99,972 220,913
20,000(d) 1.8 57.344 12/02/03 316,860 700,179
- ------------------------------------------------------------------------------------------------------------------
T. W. Ryan 3,839(b) 0.3 70.688 7/14/03 74,974 165,674
5,922(c) 0.5 70.688 7/14/03 115,655 255,566
20,000(d) 1.8 57.344 12/02/03 316,860 700,179
- ------------------------------------------------------------------------------------------------------------------
W. A. Schmelzer 10,000(d) 0.9 45.313 2/03/03 125,190 276,637
3,967(b) 0.4 70.688 7/14/03 77,474 171,198
6,120(c) 0.5 70.688 7/14/03 119,521 264,111
20,000(d) 1.8 57.344 12/02/03 316,860 700,179
- ------------------------------------------------------------------------------------------------------------------
R. P. Randazzo 2,816(b) 0.3 70.688 7/14/03 54,996 121,526
4,343(c) 0.4 70.688 7/14/03 84,817 187,424
15,000(d) 1.3 57.344 12/02/03 237,645 525,134
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Each option was awarded with an exercise price equal to the fair market
value of a share of the Corporation's Common Stock on the date of grant.
(b) Options vested on December 31, 1998.
(c) Options will vest on December 31, 1999.
(d) Options vest 50% two years from the date of grant and 100% three years from
the date of grant, but vest immediately upon a change in control of the
Corporation and upon the retirement or death of the option holder.
In 1998, the Corporation granted options to approximately 450 salaried employees
throughout the world.
9
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES
AND YEAR-END VALUES
The following table shows information for the Named Executive Officers
concerning the amount and values of unexercised stock options as of December 31,
1998. No options were exercised by the Named Executive Officers during 1998. The
values shown are hypothetical and depend on the future performance of the
Corporation's Common Stock. No stock appreciation rights are outstanding.
AGGREGATED OPTION/SAR EXERCISES IN 1998
AND YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
YEAR END (#) FISCAL YEAR-END ($)
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
R.A. Snell 261,385/323,521 8,914,819/6,065,381
- ----------------------------------------------------------------------------------------------------------
A.C. Johnson 33,094/ 54,871 1,007,042/ 692,480
- ----------------------------------------------------------------------------------------------------------
T.W. Ryan 7,816/ 37,343 179,063/ 448,250
- ----------------------------------------------------------------------------------------------------------
W.A. Schmelzer 16,339/ 56,422 430,469/ 801,531
- ----------------------------------------------------------------------------------------------------------
R.P. Randazzo 13,556/ 53,020 342,230/ 614,294
- ----------------------------------------------------------------------------------------------------------
</TABLE>
RETIREMENT PLANS
Under the Corporation's Personal Retirement Account Plan (the "PRA"), benefits
are payable upon retirement to salaried employees in the form of a lump-sum or
annuity at the employee's election. The PRA is a defined benefit pension plan.
Accrued pension benefits for participants are expressed as an account balance.
Annual credits of 2.0, 2.5, 3.0, 4.0, 5.0, 6.0, 7.0, 8.0 or 9.0% of earnings are
made to employee's accounts based on the employee's age. Earnings are defined as
an employee's base pay plus overtime, commissions, incentive compensation,
gainsharing, bonuses and other variable compensation. Benefits vest based on a
graded five-year schedule.
Estimated annual retirement benefits that may be provided by the PRA upon
retirement at age 65, which is the mandatory retirement age for officers,
assuming the employee converts the combined account balances into a single
monthly life annuity, are as follows: R.A. Snell--$25,216; A.C. Johnson--
$107,791; T.W. Ryan--$55,075; W.A. Schmelzer--$62,970; and R.P.
Randazzo--$33,858.
10
<PAGE> 14
EMPLOYMENT AND SEVERANCE AGREEMENTS
EMPLOYMENT AGREEMENT. The terms of R. A. Snell's employment as Chairman of the
Board and Chief Executive Officer of the Corporation are set forth in a
five-year employment agreement dated as of December 1, 1996. Mr. Snell's base
salary for 1999 is $1,000,000, subject to increase in future years by the Board.
His 1999 bonus compensation, set by the Board will be based upon the
Corporation's EVA performance and additional Corporate performance measures
established by the Board. He is generally eligible for the plans and benefits
provided to the Corporation's senior executives, though he is not eligible to
participate in the Corporation's Supplemental Retirement Program ("SERP") and
instead receives the retirement benefits described below.
The Corporation agreed to pay Mr. Snell, following his separation from the
Corporation, supplemental retirement benefits equal to the difference between
(i) the retirement benefits that he would have received under two plans
maintained by his former employer if he had remained employed by the former
employer until his separation from the Corporation (under the former employer's
plans as in effect on December 1, 1996 and based on his combined employment and
salary history with the former employer and the Corporation), and (ii) the sum
of the amounts that he is entitled to receive under the former employer's plans
and the Corporation's PRA. Similar protections from potential loss caused by Mr.
Snell's change of employment were provided with respect to death and disability
benefits.
SEVERANCE COMPENSATION. The Corporation is a party to executive severance
agreements with the Named Executive Officers and certain other key management
personnel. Severance benefits will be payable only if an actual or constructive
termination of employment occurs within 36 months following a change in control
of the Corporation. The benefits will consist of amounts up to 2.999 times
annualized reported taxable income during the 5-year period preceding the change
in control for those years in which services were performed by such individuals
for the Corporation.
CERTAIN RELATED TRANSACTIONS
LOANS. As of December 31, 1998, A.C. Johnson owed the Corporation $149,028.87
under the Corporation's Loan Program (the "Loan Program"). The purpose of the
Loan Program is to encourage executives to retain ownership of the Corporation's
Common Stock and stock options by providing loans, evidenced by promissory
notes, which are secured by an assignment of proceeds from the sale of shares of
the Corporation's Common Stock acquired upon the exercise of employee stock
options or the sale of restricted share grants. The maximum term of the loans is
5 years. The Loan Program also provides that interest on the outstanding
principal balance of the loans is variable and is reset quarterly based on
current broker margin account rates. At December 31, 1998, the average interest
rate applicable to outstanding principal loan balances was 6% per annum.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pursuant to rules adopted by the Securities and Exchange Commission, the
Compensation Committee of the Corporation's Board of Directors has furnished the
following report on executive compensation:
ROLE OF COMPENSATION COMMITTEE. The Compensation Committee is composed entirely
of independent, non-employee directors of the Corporation. The Compensation
Committee has supervised the development and implementation of the Corporation's
compensation programs and as appropriate, with the assistance of independent
compensation consultants, initiated new compensation policies designed to
closely align the rewards to senior managers with an increase in the value of
the Corporation's stock.
The Compensation Committee makes recommendations to the Board on compensation
actions involving the Corporation's executive officers and selected senior
management. The Compensation Committee meets at least three times each year and
recommends its compensation decisions to the Board, which has final authority on
such matters. In determining compensation, the Committee considers the
recommendations of the Chief Executive Officer, except with respect to his own
compensation.
11
<PAGE> 15
COMPENSATION PHILOSOPHY. Total compensation plans for senior managers are
designed to (1) provide a strong incentive to maximize the Corporation's
shareowner value and (2) attract and retain proven management talents.
These goals are achieved by:
- Direct linkage of cash compensation awards to growth in Economic Value
Added (EVA(R)), which the Compensation Committee believes to be the best
operating performance measure of shareowner value.
- Federal-Mogul Common Stock ownership requirements, supported by equity
based incentive plans, which promote alignment of senior management with
shareowners.
- Straightforward, definitive plan design that balances risk and reward and
visibly ties management rewards to growth in shareowner value.
FACTORS CONSIDERED IN DETERMINING COMPENSATION. The Compensation Committee wants
the compensation of senior management to be competitive with other companies of
comparable size in the United States. As a result of the Corporation's rapid
growth in 1998, in order to establish appropriate compensation levels for the
Corporation's senior management, the Compensation Committee commissioned an
executive compensation study to assess the level of competitiveness of the
Corporation's executive compensation programs for the top 15
most-highly-compensated executives. The study reviewed base compensation, bonus
compensation, long-term incentives and other executive benefits. The consultant
developed and presented to the Compensation Committee compensation data using
information from three compensation studies. One study contained the
compensation information for the automotive parts companies of comparable size
and stature that constitute the Peer Group 1 companies listed in the footnote to
the stock performance graph on page 14. A second study was based on the
compensation information of 38 metal/fabricating companies nationwide, and a
third study was based on a proxy analysis of 18 selected industrial companies
similar to the Corporation in revenue size and revenue mix.
The Committee used the data to benchmark, or reset as appropriate, executive
compensation to ensure it is within the range of comparative pay of other
companies in the study. In 1998, the Corporation's executive salaries and
long-term incentive awards generally were at the median compensation figures for
the comparable companies in the surveys.
Annual cash compensation set for 1998 consisted of two components, base salary
and a bonus.
BASE SALARY. The base salaries of senior management are determined with
reference to corporate and individual performance for the previous year,
internal relativity and market conditions, including pay at the companies
surveyed by the outside consultant. Performance appraisals are conducted on an
annual basis for all senior managers. Assessment of individual performance
includes consideration of a person's impact on financial performance as well as
judgment, creativity, effectiveness in developing subordinates in a diverse
organization, and contributions to improvements in the quality of the
Corporation's products, customer service and operations. As noted above, the
Compensation Committee uses the survey conducted by the consultant to benchmark
for reasonableness and competitiveness of base salaries.
ANNUAL BONUSES. Annual bonuses are paid to senior management in accordance with
the EVA Incentive Compensation Plan described previously in this Proxy
Statement. In 1998, the Corporation's actual EVA was 120% of its target EVA for
the year. The EVA Incentive Compensation Plan rewards senior managers who
increase shareholder value by most effectively deploying the capital contributed
by the shareholders. The EVA Incentive Compensation Plan places bonuses "at
risk" in that if the Corporation fails to achieve the targeted EVA, the bonuses
earned can be reduced or even be negative, resulting in a reduction of future
years' bonuses. The senior management determines the participants and sets the
target bonus levels prior to the beginning of the year. As to the senior
management of the Corporation, the Compensation Committee's intent is to ensure
target bonuses are set within the median range of the companies surveyed in the
consultant's compensation study.
12
<PAGE> 16
LONG-TERM INCENTIVE COMPENSATION. Stock options are an important part of the
Corporation's performance-based compensation. The Compensation Committee
believes that the awarding of stock options ensures that employees are oriented
to growth over the long term and not simply focused on the Corporation's
short-term profits. In addition, the awarding of stock options encourages
employee retention because they carry a three-year vesting period, and if not
exercised, may be forfeited if the employee leaves the Corporation before
retiring. Options granted in 1998, under the 1997 Long Term Incentive Plan,
expire five years after the date of grant and are granted at the median market
price on the date of grant. The grants made to senior management in 1998 were
based primarily on the recipient's level of responsibility and were benchmarked
against the results of the consultant's compensation survey.
For 1998, the Corporation also paid additional compensation to senior management
under the 1997 Long-Term Incentive Plan. This Plan contains a performance unit
program feature pursuant to which performance units were awarded to senior
management in early 1997 to provide them with financial incentives to enhance
shareholder value. Under the Plan, performance units vest and are paid out in
two segments. The first portion of the units vested in December 1998, and the
payment to senior management, based on the value of the Corporation's Common
Stock on December 31, 1998, was made in early 1999. The second portion will vest
on December 31, 1999, and will be valued based on the closing price of the
Corporation's Common Stock on that date.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation of Mr. Snell, Chairman of
the Board and Chief Executive Officer, consists of the same components as for
other senior management, namely base salary, bonus and stock options.
Mr. Snell's base salary in 1998 was $850,008. This salary was within the median
range of the salaries of other chief executive officers in the companies
contained in the executive compensation report provided to the Compensation
Committee by the consultant. Mr. Snell's bonus for 1998 was $2,564,088,
comprised of an EVA component under the EVA Incentive Compensation Plan and the
payment of the vested portion under the 1997 Long-Term Incentive Plan
Performance Unit Plan, described above. In determining Mr. Snell's 1998 bonus,
the Compensation Committee noted that the Corporation exceeded its financial
goals for the year, achieving $13 million in operating EVA, generating $167
million in cash flow from operations after capital expenditures and achieving
$51 million in synergy savings from acquisitions. In addition, the share price
of the Corporation's stock outperformed each of the Corporation's Peer Group
competitors for the year.
In view of Mr. Snell's strong leadership role in the rapid growth of the
Corporation in 1998 into a $6.6 billion supplier of automotive systems and
modules and the financial performance of the Corporation in 1998, the
Compensation Committee determined it was appropriate to set Mr. Snell's 1999
base compensation at $1 million.
In 1998, the Compensation Committee also granted Mr. Snell, as part of his
long-term incentive compensation, options to purchase 97,000 shares of the
Corporation's Common Stock at $57.34 per share, the median market price on the
date of the grant. In determining the size of the grant, the Compensation
Committee considered Mr. Snell's strong leadership during the year. The
Compensation Committee also took note of the number of option shares previously
granted to Mr. Snell and believes that the award is consistent with award grants
provided to chief executive officers of similarly sized companies.
COMPENSATION COMMITTEE
J.J. Fannon, Chairman J.C. Pope
A. Madero G. Whalen
13
<PAGE> 17
STOCK PERFORMANCE CHART
The following performance graph compares the cumulative total shareholder return
on the Corporation's Common Stock for the last five fiscal years with the
cumulative total return of the S&P 500 Index and the S&P Midcap 400 Index as
well as the Corporation's Peer Group for the years 1994 through 1998.
The graph is constructed on the assumption that $100 was invested on December
31, 1993 (with quarterly reinvestment of dividends) in each of the Corporation,
the S&P 500 Index, the S&P Midcap 400 Index and the common stock of Peer Group 1
and Peer Group 2*. The Corporation switched its equity index and Peer Group
comparison from that used in 1997 to compare the Corporation's performance with
companies that have a more comparable market capitalization.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
FISCAL YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
Company Name/Index 1993 1994 1995 1996 1997 1998
------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Federal-Mogul Corp......................... 100 70.63 70.58 81.14 151.67 223.40
S&P 500.................................... 100 101.32 139.40 171.40 228.59 293.91
S&P Midcap 400............................. 100 96.42 126.25 150.49 199.03 237.05
Peer Group 1............................... 100 88.60 108.52 131.28 149.19 147.40
Peer Group 2............................... 100 82.36 96.77 116.39 148.04 140.34
</TABLE>
- -------------------------
* Peer Group 1 has been constructed by the Corporation as the industry index for
purposes of the performance graph and is composed of ten companies used by the
Corporation in 1998 to benchmark compensation of its executive officers. Peer
Group 1 consist of: Borg Warner Automotive, Breed Technologies, Inc., Dana
Corp., Hayes Lemmerz International, Inc., Johnson Controls, Inc., Lear Corp.,
Magna International, Tenneco, Inc., Tower Automotive, Inc., and TRW, Inc. Peer
Group 2 consists of the following companies used by the Corporation in 1997
for comparison purposes: Borg Warner Automotive, Breed Technologies, Inc.,
Cooper Industries, Inc., Dana Corp., Echlin, Inc., Hayes Lemmerz
International, Inc., Lear Corp., Magna International, SPX Corporation and
Tower Automotive, Inc.
14
<PAGE> 18
INFORMATION ON SECURITIES
Only holders of the Corporation's Common Stock and of its Series C ESOP
Convertible Preferred Stock ("Series C ESOP Stock") of record at the close of
business on February 26, 1999 will be entitled to vote at the Annual Meeting. On
that date there were outstanding 70,494,095 shares of Common Stock and 721,759
shares of Series C ESOP Stock, which constitute all of the outstanding voting
securities of the Corporation. The Common Stock and the Series C ESOP Stock will
vote together as a single class on all matters to be voted upon at the Annual
Meeting. The holders of shares of Common Stock are entitled to cast one vote per
share on all matters to be acted upon, and the holders of shares of Series C
ESOP Stock are entitled to cast two votes per share on each such matter.
Accordingly, there will be 71,937,613 votes eligible to be cast upon each matter
to be voted upon at the Annual Meeting.
DIRECTORS' AND OFFICERS' OWNERSHIP OF STOCK
The following table shows how much Common Stock each Director and Named
Executive Officer owned as of February 1, 1999. No Director or Named Executive
Officer beneficially owns more than 1% of the Common Stock or Series C ESOP
Stock and directors and executive officers as a group beneficially own
approximately 1% of the Common Stock.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
COMMON SHARE
SHARES OF COMMON EQUIVALENTS
STOCK DIRECTORS' DEFERRED OF SERIES C
BENEFICIALLY COMPENSATION STOCK ESOP
NAME OWNED(A) UNITS BALANCE(B) STOCK(C) TOTAL
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Directors
R.A. Snell(d) 340,486 358 340,844
J.J. Fannon(e) 19,187 8,267 27,454
R.M. Hills(e,f) 54,468 39,337 93,805
P.S. Lewis 6,000 237 6,237
A. Madero(e) 10,191 4,644 14,835
R.S. Miller, Jr.(e,f) 9,802 1,321 11,123
J.C. Pope(e,f) 13,656 8,705 22,361
G. Whalen 6,000 625 6,625
Named Executive Officers
A.C. Johnson(d,f) 65,901 2,839 68,740
T.W. Ryan(d) 29,713 356 30,069
W.A. Schmelzer(d) 27,095 1,969 29,064
R.P. Randazzo(d) 35,193 336 35,529
All directors and
executive officers as
a group (20 persons
including those named
above) 907,325 63,136 13,912 984,373
</TABLE>
(a) This column includes Common Stock held by directors and officers or by
certain members of their families (for which the directors and officers have
sole or shared voting or investment power), shares of Common Stock they hold in
the Salaried Employees' Investment Program (SEIP) and Common Stock directors and
officers have the right to acquire as a result of the exercise of stock options
within sixty days of the date of this Proxy Statement.
(b) Under a plan adopted by the Board of Directors, non-employee directors may
elect to defer all or a portion of their compensation by converting amounts
deferred into units valued as though invested in Common Stock. The units do not
have voting rights.
15
<PAGE> 19
(c) Shares allocated to personal accounts under the SEIP of the Corporation.
Participants share dispositive power over such shares with the Trustee for the
Program. Such shares are voted (at the rate of two votes per share) by the
Trustee in accordance with instructions from participants. Only directors who
are employees of the Corporation are eligible to receive Series C ESOP Stock.
(d) The amounts shown include shares of Common Stock the following persons have
the right to acquire as a result of the exercise of stock options within sixty
days of the date of this Proxy Statement and the number of restricted shares
granted under one of the Corporation's Performance Incentive Stock Plans:
<TABLE>
<S> <C> <C> <C> <C>
R. A. Snell............................... 261,385 Shares 34,500 Restricted Shares
A. C. Johnson............................. 33,094 Shares 6,000 Restricted Shares
T. W. Ryan................................ 16,339 Shares 4,000 Restricted Shares
W. A. Schmelzer........................... 13,556 Shares 1,200 Restricted Shares
R. P. Randazzo............................ 7,816 Shares 4,000 Restricted Shares
</TABLE>
(e) The amounts shown include shares of Common Stock the following directors
have the right to acquire as a result of the exercise of stock options granted
to replace each person's account in the Director's Retirement Income Plan, which
was terminated in 1997:
<TABLE>
<S> <C> <C>
J.J. Fannon........................ 17,903 Shares
R.M. Hills......................... 33,928 Shares
A. Madero.......................... 9,126 Shares
R.S. Miller Jr..................... 7,802 Shares
J.C. Pope.......................... 7,556 Shares
</TABLE>
(f) R.M. Hills has voting power with respect to 15,140 shares held in a Family
Partnership; R.S. Miller, Jr. shares voting power with respect to 1,000 shares;
J.C. Pope shares voting power with respect to 400 shares; and A.C. Johnson
shares voting power with respect to 15,299 shares.
OWNERSHIP OF STOCK BY PRINCIPAL OWNERS
The following table sets forth information as of February 15, 1999 regarding
beneficial owners of five percent or more of the Corporation's Common Stock.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS(A)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Tiger Management Corporation 11,350,000 16.86%
101 Park Avenue
New York, NY 10178
- ------------------------------------------------------------------------------------------------------------
The Capital Group Companies, Inc.(b) 7,215,000 10.72%
333 South Hope Street
Los Angeles, CA 90071
- ------------------------------------------------------------------------------------------------------------
Janus Capital Corporation 6,150,000 9.13%
100 Fillmore Street
Denver, CO 80206
- ------------------------------------------------------------------------------------------------------------
Massachusetts Financial Services 4,250,000 6.31%
500 Boylston Street
Boston, MA 02116
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Percentages are calculated based on outstanding shares of Common Stock as of
February 15, 1999, of 67,360,350 shares.
(b) As of February 15, 1999, The Capital Group Companies, Inc., had beneficial
ownership of 7,215,000 shares of the Corporation's Common Stock as follows:
Capital Research and Management Company, a registered investment adviser and one
of its operating subsidiaries, beneficially owned 3,550,000 of said shares, and
the remaining shares were reported as being beneficially owned by other
subsidiaries of The Capital Group Companies, Inc., none of which by itself owned
5% or more of the outstanding Common Stock of the Corporation.
16
<PAGE> 20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Based on the
Corporation's records and other information, the Corporation believes that all
reporting requirements of Section 16(a) of the Securities Exchange Act
applicable to its directors, officers and beneficial owners of ten percent or
more of the Corporations Common Stock were complied with in 1998.
OTHER INFORMATION
A proxy may be revoked at any time before its exercise upon written notice to
the Secretary of the Corporation. Unless revoked, the shares represented by the
proxy will be voted in accordance with the specifications made. If no
specifications are made, such shares will be voted for the election of directors
as proposed in this Proxy Statement, in favor of the approval of the appointment
of Ernst & Young LLP as independent accountants and in favor of the EVA
Incentive Compensation Plan.
As of the date of this Proxy Statement, the management of the Company does not
know of any matters to be presented for consideration at the Annual Meeting
other than those described in this Proxy Statement. If any other matters
properly come before the meeting, the accompanying proxy card confers
discretionary authority with respect to those matters to the proxy holders named
on the proxy card. It is the intention of such proxy holders to vote the Proxy
in accordance with their best judgment.
The Corporation will pay all expenses in connection with the solicitation of
proxies. The Corporation will reimburse brokers, custodians, nominees and
fiduciaries for their expenses in mailing proxy materials. In addition to
solicitation by mail, officers and other employees of the Corporation may also
solicit proxies in person or by telephone. Also, the Corporation has engaged the
firm of D.F. King & Co. Inc., to solicit proxies. The Corporation estimates that
the fees paid to D. F. King & Co. Inc. will be approximately $7,500, plus
reasonable costs and expenses.
SHAREHOLDER PROPOSALS. In order for a shareholder proposal or nomination to be
properly presented at the Corporation's 2000 Annual Meeting of Shareholders (the
"2000 Annual Meeting"), the shareholder proponent must comply with the relevant
notice requirements contained in the Corporation's By-laws. These requirements
relate to both the timing and content of the notice. To be timely, a shareholder
proposal or nomination intended to be brought before the 2000 Annual Meeting
must be received by the Corporation during the period on or after January 12,
2000 and on or prior to February 6, 2000. All proposals and nominations should
be directed to the Secretary of the Corporation, 26555 Northwestern Highway,
Southfield, Michigan 48034.
In addition, any shareholder proposal that is intended to be included in the
Corporation's Proxy Statement for the 2000 Annual Meeting must comply with
certain rules and regulations of the Securities and Exchange Commission. The
deadline for submitting any such proposal to the Corporation for inclusion in
its Proxy Statement for the 2000 Annual Meeting is November 24, 1999.
By Order of the Board of Directors,
JAMES J. ZAMOYSKI
James J. Zamoyski
Senior Vice President, General Counsel
and Secretary
17
<PAGE> 21
Federal-Mogul Corporation
WORLD HEADQUARTERS
26555 Northwestern Highway
Southfield, Michigan 48034
[RECYCLED PAPER LOGO]
Printed on Recycled Paper
[FEDERAL MOGUL LOGO]
<PAGE> 22
<TABLE>
<S><C>
[FEDERAL MOGUL LOGO]
PLEASE DETACH PROXY CARD HERE, SIGN, AND RETURN IN ENCLOSED ENVELOPE
- -----------------------------------------------------------------------------------------------------------------------------------
______
|______|
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
1. ELECTION OF DIRECTORS FOR all nominees / / WITHHOLD AUTHORITY to vote / / *EXCEPTIONS / /
listed below for all nominees listed below
Nominees: R. A. SNELL, J. J. FANNON, R. M. HILLS, P. S. LEWIS, A. MADERO, R. S. MILLER, JR., J. C. POPE, AND G. WHALEN
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S
NAME IN THE SPACE PROVIDED BELOW.)
*EXCEPTIONS ________________________________________________________________________________________________________________________
2. APPROVE APPOINTMENT OF ERNST & 3. APPROVE THE FEDERAL-MOGUL EVA
YOUNG LLP AS INDEPENDENT ACCOUNTANTS. INCENTIVE COMPENSATION PLAN.
FOR / / AGAINST / / ABSTAIN / / FOR / / AGAINST / / ABSTAIN / /
Address Change and
or Comments Mark Here / /
PLEASE SIGN EXACTLY AS NAME APPEARS AT LEFT. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
Dated , 1999
-----------------------------
----------------------------------------
Signature
----------------------------------------
Signature, If held jointly
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK. /X/
PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
\/ BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE \/
- -----------------------------------------------------------------------------------------------------------------------------------
PLEASE MARK WITH AN "X", SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
</TABLE>
<PAGE> 23
[FEDERAL MOGUL LOGO]
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 21, 1999
The signer(s) hereby appoints R. A. SNELL, R. M. HILLS, and J. J. FANNON
and each or any of them, as Proxies for the signer(s), with full power of
substitution, to represent and to vote with the same force and effect as the
signer(s) at the Annual Meeting of Shareholders of Federal-Mogul Corporation to
be held on April 21, 1999, and at any adjournment or adjournments thereof, as
specified on the reverse side hereof with respect to the matters there
indicated. In their discretion the Proxies are authorized to vote upon such
other business as may properly come before the meeting. Receipt is acknowledged
of the Notice of Meeting and Proxy Statement dated March 22, 1999 and the 1998
Annual Report to Shareholders.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER(S) ON THE REVERSE SIDE HEREOF. IF NO DIRECTION IS INDICATED, SUCH
SHARES WILL BE VOTED FOR THE ELECTION OF DIRECTORS NAMED IN THE PROXY STATEMENT
DATED MARCH 22, 1999, FOR THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
ACCOUNTANTS, AND FOR THE FEDERAL-MOGUL EVA INCENTIVE COMPENSATION PLAN.
(Continued and to be dated and signed on the reverse side)
FEDERAL MOGUL CORPORATION
P.O. BOX 11019
NEW YORK, N.Y. 10203-0019
