<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
THE MONARCH MACHINE TOOL COMPANY
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
THE MONARCH MACHINE TOOL COMPANY
2600 KETTERING TOWER
DAYTON, OHIO 45423
[MONARCH MACHINE TOOL COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
The Annual Meeting of Shareholders of THE MONARCH MACHINE TOOL COMPANY, an
Ohio corporation, will be held at the Kettering Tower, 12th Floor, Second and
Main Streets, Dayton, Ohio, on Tuesday, May 5, 1998, at 1:00 o'clock p.m.,
Eastern Daylight Savings Time, for the following purposes:
1. To elect three Directors to serve for a term expiring in 2001; and
2. To act upon such other matters as may properly come before the meeting.
The close of business on March 17, 1998, has been fixed by the Board of
Directors as the record date for determining shareholders entitled to notice of
the meeting and to vote.
By Order of the Board of Directors
RICHARD E. CLEMENS
President and
Chief Executive Officer
March 31, 1998
IMPORTANT
YOUR PROXY IS ENCLOSED, PLEASE SIGN AND RETURN YOUR PROXY NOW.
THE ENCLOSED RETURN ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 3
THE MONARCH MACHINE TOOL COMPANY
2600 KETTERING TOWER
DAYTON, OHIO 45423
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 5, 1998
SOLICITATION OF PROXY
The accompanying Proxy is being solicited by the Board of Directors, and
the persons named in the Proxy as nominees for election as directors of the
Company have been selected by the Board. Solicitation is to be made through the
mails; the cost of preparing, assembling, and mailing the form of Proxy and
material used in the solicitation is to be paid by the Company. The shares
represented by Proxies in the accompanying form that are duly executed and
received by the Board of Directors before 1:00 o'clock p.m., on May 5, 1998,
will be voted in accordance with the shareholder's directions specified on the
Proxy. If no directions have been specified by marking the appropriate squares
on the accompanying Proxy, the shares will be voted in accordance with the Board
of Directors' recommendations. This Notice and Proxy Statement were first mailed
to shareholders on or about March 31, 1998.
REVOCATION OF PROXY
A shareholder may revoke a proxy at anytime prior to its exercise by
delivering to the Company a later dated Proxy or by giving notice to the Company
in writing or in open meeting.
VOTING SECURITIES
In accordance with the Regulations of the Company, the Board of Directors
has designated the close of business on March 17, 1998, as the record date for
the determination of shareholders entitled to notice of and to vote at the
meeting. As of that date, an aggregate of 3,783,724 voting shares, comprised of
3,768,967 Common Shares and 14,757 Series A Preferred Shares, were outstanding
and entitled to one vote each.
The holders of voting shares represented, in person or by proxy, at the
Annual Meeting constitute a quorum for the election of directors; but for any
other purpose, the holders of a majority of the outstanding voting shares of the
Company must be represented at the meeting, in person or by proxy.
Shares represented by proxies received by the Company will be counted as
present at the Annual Meeting for the purpose of determining the existence of a
quorum, regardless of how or
<PAGE> 4
whether such shares are voted on a specific proposal. Abstentions will be
treated as votes cast on a particular proposal as well as shares present at the
Annual Meeting. Where nominee shareholders are not permitted to vote on a
specific issue because they did not receive specific instructions on the
specific issue from the beneficial owners of the shares ("Broker Nonvotes"),
such Broker Nonvotes will be treated as not present at the meeting for purposes
of calculating the results of the vote on the specific issue. Accordingly,
abstentions and Broker Nonvotes have the effect of a negative vote on any
proposal where the vote required to pass the proposal is a percentage of the
outstanding shares, but only abstentions have the effect of a negative vote when
the vote required to pass a proposal is a percentage of the shares present at
the Annual Meeting.
Under Ohio General Corporation Law, the nominees for election as Directors
receiving the most votes are elected. Ohio law also provides that, if notice in
writing is given by any shareholder to the President, a Vice President, or the
Secretary of the Company not less than 48 hours before the time fixed for the
holding of the meeting that he desires that the voting for the election of
Directors be cumulative, and, if an announcement of the giving of the notice is
made upon the convening of the meeting, each shareholder shall have the right to
cumulate such voting power as he possesses in the election of Directors and to
give one candidate as many votes as the number of Directors to be elected
multiplied by the number of his votes equals, or to distribute his votes on the
same principle among two or more candidates, as he sees fit.
In the event that Directors are elected by cumulative voting and the
cumulated votes represented by Proxies given to the Board of Directors are
insufficient to elect all the nominees of the Board, then the Board's proxy
agents will vote such proxies cumulatively for the election of as many of the
nominees named below as possible, and in such order as the proxy agents may
determine. The order in which proxies may be cumulated by the proxy agents will
depend on a number of factors, including the number of directors that can be
elected based upon the shares voted for the Board's nominees and the manner in
which shareholders cumulate their votes in favor of particular candidates.
BOARD OF DIRECTORS
The Company's Board of Directors is divided into three classes, with three
directors in each class. One class of directors is elected at each Annual
Meeting of Shareholders for a term of three years.
At the 1998 Annual Meeting, shareholders will elect three directors who
will hold office until the Annual Meeting of Shareholders in 2001. The three
persons who have been nominated by the Board of Directors are Richard E.
Clemens, Gerald L. Connelly and Joseph M. Rigot, all of whom are currently
directors of the Company. In case any of these nominees is, for any reason, not
a candidate at the Annual Meeting, the Proxy to that extent will be voted for
such person or persons as the Board of Directors may recommend. The Board,
however, knows of no reason to anticipate that this will occur.
2
<PAGE> 5
Gerald L. Connelly was appointed a director of the Company, effective June
24, 1997, to fill a vacancy in the Board of Directors.
The nominees for election to the class of Directors whose term of office
will expire in 2001, and the other Directors whose terms of office continue
after the meeting, with information as to each of them, as of March 17, 1998,
are as follows:
<TABLE>
<CAPTION>
EXPIRATION
OF PRESENT
TERM OR
NAME, AGE, YEAR FIRST TERM FOR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, ELECTED A WHICH
AND OTHER DIRECTORSHIPS DIRECTOR NOMINATED
------------------------------------------ ----------- -----------
<S> <C> <C>
RICHARD E. CLEMENS (age 48), President and Chief Executive 1997 2001
Officer of the Company since March 10, 1997; Vice
President and General Manager of the Frick Company, a
manufacturer of compressors, heat exchangers, and process
refrigeration equipment (a subsidiary of York
International) from July 1995 to February 1997; President
and Chief Executive Officer of Clark Material Handling
Company, a manufacturer of lift trucks, from March 1994 to
July 1995; President of the BMY Combat Systems, a division
of Harsco Corporation, from 1992 to 1994 and various other
management positions with the division from July 1985 to
1992. (2)
GERALD L. CONNELLY (age 56), Executive Vice President and 1997 2001
Chief Operating Officer of Robbins & Myers, Inc., a
manufacturer of fluids management equipment for the
process industries, since April 1997; Vice President of
Robbins & Myers, Inc. and President of its Process
Industries Group, from June 1994 to April 1997. (1) (3)
JOSEPH M. RIGOT (age 54), Partner-in-Charge, Thompson Hine & 1994 2001
Flory LLP, Dayton, Ohio office (attorneys) since May 1993
and a partner in such firm for more than five years. (2)
(4) (5)
WILLIAM A. ENOUEN (age 69), Retired on December 1, 1993 as 1990 2000
Senior Vice President and Chief Financial Officer, The
Mead Corporation, Dayton, Ohio, a forest products company;
Director of Morris Bean & Co. (1) (2) (3) (4)
DAVID E. LUNDEEN (age 69), Acting President and Chief 1970 2000
Executive Officer of the Company from May 1996 to March
1997; retired in November 1994 as Vice President of the
Company and General Manager, Monarch Cortland, a position
he had held for more than five years. (3)
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
EXPIRATION
OF PRESENT
TERM OR
NAME, AGE, YEAR FIRST TERM FOR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE, ELECTED A WHICH
AND OTHER DIRECTORSHIPS DIRECTOR NOMINATED
------------------------------------------ ----------- -----------
<S> <C> <C>
JOHN M. RICHARDSON (age 77), Retired on December 31,1982 as 1979 2000
Senior Vice President, A. O. Smith Corporation,
diversified manufacturer of automobile and truck frames,
water heaters, agricultural equipment, and electric
motors. (2) (3) (4)
JOHN A. BERTRAND (age 59), President of A. O. Smith 1993 1999
Electrical Products Company, a manufacturer of electric
motors (a division of A. O. Smith Corporation), for more
than five years. (1) (2) (3) (4)
WALDEMAR M. GOULET (age 62), Professor of Finance at Wright 1991 1999
State University for more than five years and former Dean
of the College of Business and Administration at Wright
State University. (1)
KENNETH H. HOPKINS (age 69), Chairman of the Board of Field 1993 1999
Abrasive Incorporated, a manufacturer of abrasive
specialties, for more than five years. (1)
</TABLE>
- ---------------
(1) Member of the Audit Committee, which met twice during 1997 for the purpose
of reviewing with the independent auditors of the Company the scope and
thoroughness of the auditors' examination, considering recommendations of
the independent auditors, reviewing the adequacy of the Company's systems of
internal accounting controls with the independent auditors and management,
and recommending to the Board of Directors the selection of independent
auditors for the year.
(2) Member of the Executive Committee, which met twice in 1997. The Executive
Committee has responsibility for acting on various matters between meetings
of the Board of Directors.
(3) Member of the Compensation Committee, which met once during 1997.
(4) Member of the Nominating Committee, which met once in 1997. The Nominating
Committee is willing to consider any shareholder recommendations respecting
possible candidates for positions on the Board of Directors, and a
shareholder desiring to submit a recommendation to the Committee may do so
by sending the candidate's resume to the Secretary of the Company.
(5) The law firm of Thompson Hine & Flory LLP performed legal services for the
Company last year and is performing legal services for the Company during
the current year.
During 1997, there were eight meetings of the Board of Directors, in
addition to meetings of Board committees. No Director attended fewer than 75
percent of the total number of Board
4
<PAGE> 7
meetings and meetings held by the Committees of the Board on which he served. A
member of the Board of Directors who is not an officer of the Company is
compensated for services as a Director at the annual rate of $10,000 and also
receives $800 per meeting for attendance at Board meetings. In addition, a
non-officer Director who serves on a Board Committee is compensated for services
on the basis of $600 per meeting for attendance at Committee meetings, or $800
per meeting if he is Chairman of the Committee.
OWNERSHIP OF SHARES
The following table sets forth, as of March 17, 1998 unless otherwise
indicated, the number and percent of the Company's Common Shares beneficially
owned by each Director or nominee for election as a Director of the Company, by
each Named Officer, by each person known to the Company to be the beneficial
owner of more than five percent of the Company's Common Shares, and by all of
the Company's Directors and executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF COMMON
NAME OF INDIVIDUAL OR SHARES PERCENT
GROUP BENEFICIALLY OWNED(1) OF CLASS
--------------------- --------------------- ---------
<S> <C> <C>
John A. Bertrand.......................... 730 (2)
Richard E. Clemens........................ 24,000 (2)
Gerald L. Connelly........................ -0- -0-
William A. Enouen......................... 1,000 (2)
Waldemar M. Goulet........................ 500 (2)
Kenneth H. Hopkins........................ 1,000 (2)
David E. Lundeen.......................... 12,600 (2)
John M. Richardson........................ 100 (2)
Joseph M. Rigot........................... 2,100 (2)
Robert J. Kindt........................... 3,100 (2)
Paul J. Maloney........................... 600 (2)
Robert A. Skodzinsky...................... 4,250 (2)
17 Directors and executive officers as a
group, including those listed above..... 70,807 1.9%
Dimensional Fund Advisors, Inc............ 258,461(3)(8) 6.9%
Foyston, Gordon & Payne, Inc.............. 194,550(4)(8) 5.2%
Franklin Advisory Services, Inc........... 351,000(5)(8) 9.3%
Greenway Group............................ 327,600(6)(8) 8.7%
Tweedy, Browne Company L.P., TBK
Partners, L.P. and Vanderbilt
Partners, L.P........................... 280,024(7)(8) 7.4%
</TABLE>
5
<PAGE> 8
- ---------------
(1) Shares are treated as "beneficially owned" if a person has or shares voting
or dispositive power with respect to the shares or has a right to acquire
the shares within 60 days of March 17, 1998. Unless otherwise indicated,
total voting power and total dispositive power are exercised by each
individual and/or a member of his household. The number of shares included
in the table which a listed person or group has a right to acquire within 60
days of March 17, 1998 are: Mr. Kindt -- 3,000; Mr. Maloney -- 600; and Mr.
Skodzinsky -- 1,750; and directors and executive officers as a
group -- 9,725.
(2) Less than 1%.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), 1299 Ocean Avenue, Santa
Monica, CA 90401, a registered investment advisor, is deemed to own
beneficially 258,461 Common Shares as of December 31, 1997. Dimensional has
sole dispositive power with respect to all of the listed shares and sole
voting power with respect to 174,600 shares. These shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open - end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all of these shares.
(4) Foyston, Gordon & Payne Inc., a registered investment counsel, is located at
151 Yonge Street, Suite 1208, Toronto, Ontario M5C 2W7.
(5) Franklin Advisory Services, Inc., an investment adviser, located at One
Parker Plaza, Sixteenth Floor, Fort Lee, New Jersey 07024, has sole voting
power and sole dispositive power with respect to the listed shares.
(6) A Schedule 13D was filed with the Securities and Exchange Commission on
September 16, 1996 by the following persons or entities in which it was
affirmed they were filing as members of a group (where shares are held
directly by a member of the Group, it is so indicated in parenthesis):
Greenway Partners, L.P. (100,500 shares), Greentree Partners, L.P. (42,100
shares), Greenhouse Partners, L.P., Greenhut, L.L.C., Greenbelt Corp.
(150,000 shares), Greensea Offshore, L.P. (35,000 shares), Greenhut
Overseas, L.L.C., Alfred D. Kingsley, and Gary K. Duberstein (the "Greenway
Group"). Messrs. Kingsley and Duberstein have shared voting and shared
dispositive power by virtue of various offices they hold with respect to all
of the 327,600 shares owned by the Greenway Group. The address of the
Greenway Group is 27 Park Avenue, New York, NY 10017.
(7) Tweedy, Browne Company L.P. ("TBC"), TBK Partners, L.P. ("TBK"), and
Vanderbilt Partners, L.P. ("Vanderbilt") have an address at 52 Vanderbilt
Avenue, New York, NY 10017. TBC is engaged primarily in the business of a
securities broker-dealer and investment advisor. TBK and Vanderbilt are
private investment partnerships engaged in the business of investing in
securities for their own accounts. TBC, TBK, and Vanderbilt may be deemed to
own beneficially 259,524, 15,000, and 5,500 Common Shares, respectively, and
may also be
6
<PAGE> 9
deemed a group under the Securities Exchange Act of 1934. TBC, TBK, and
Vanderbilt make no admission that they are members of a group, and they
disclaim beneficial ownership of all of these shares.
(8) Information is based on ownership reports filed by the named entities with
the Securities and Exchange Commission.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers of the Company and owners of more than 10% of the Company's
common shares to file an initial ownership report with the Securities and
Exchange Commission and a monthly or annual report listing any subsequent change
in their ownership of common shares. The Company believes, based on information
provided to the Company by the persons required to file such reports, that all
filing requirements applicable to such persons during the period from January 1,
1997 through December 31, 1997 were met.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Compensation Committee of the Board of Directors establishes
the Company's compensation policies for executive officers, sets the
compensation of executive officers, and administers the Company's 1994 Stock
Option Plan and 1984 Stock Incentive Plan. The Committee also reviews, and makes
recommendations with respect to, the design and implementation of employee
compensation plans and programs. Only directors who are not employed by the
Company are eligible to serve on the Committee.
EMPLOYMENT AND COMPENSATION OF CHIEF EXECUTIVE OFFICER. The Company's
nine-month search for a new Chief Executive Officer was successfully concluded
with the employment of Richard E. Clemens as President and Chief Executive
Officer on March 10, 1997. Members of the Committee, in consultation with the
executive search firm of Korn/Ferry International, designed a compensation
package that would attract the interest of proven executives, with strong
personal leadership skills, who were qualified to restructure the Company's
operations on a profitable basis and whose primary incentive and compensation
rewards would be tied directly to the enhancement of shareholder value.
The Company employed Mr. Clemens at a salary of $215,000, with a bonus of
$100,000 available after one year of employment. He was granted options to
purchase 75,000 common shares of the Company, with a ten-year term, at an option
exercise price of $8.438 per share. See "Fiscal 1997 Stock Option Grants." In
addition, Mr. Clemens was issued 17,000 restricted common shares, 8,500 of which
vest on each of March 1, 1998 and 1999 if he is employed by the Company on such
dates.
7
<PAGE> 10
The Committee awarded Mr. Clemens 7,000 restricted shares in February 1998,
which vest in three, equal annual installments provided Mr. Clemens is employed
by the Company on the vesting date. This award was made based on the Committee's
evaluation of his performance to date as chief executive officer. The Committee
believes he has successfully restructured the Company's operations, effectively
redeployed assets to enhance the financial resources of the Company, motivated
existing employees and attracted new key executives who are committed to the
enhancement of shareholder value.
OTHER NAMED EXECUTIVES. Minor adjustments to the salaries of the persons
listed in the Summary Compensation Table, excluding Mr. Clemens (the "Named
Executives"), were made in 1997, primarily to reflect inflation. No options were
granted in 1997, or bonuses awarded for 1997, to the Named Executives.
1998 POLICIES. The Committee considered 1997 as a year of transition for
the Company. Since December 31, 1997, the Company has employed four new
executive officers and restructured its executive ranks. In February 1998, the
Committee adopted a cash bonus plan tied to achievement of the Company's plan
for 1998, awarded options to key executives, and implemented a long-term
restricted share plan with performance goals based on growth in earnings per
share and appreciation in the Company's stock price.
The Committee believes that it has for 1998 and beyond implemented new
compensation policies for executive officers, including the chief executive
officer, which effectively relate the level of executive compensation to the
Company's performance and appreciation in the Company's stock price.
Compensation Committee
John A. Bertrand
Gerald L. Connelly
William A. Enouen
David E. Lundeen
8
<PAGE> 11
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for services to the
Company for the years ended December 31, 1997, 1996, and 1995, for the persons
who served as chief executive officer of the Company in 1997 and the only other
executive officers of the Company who earned in excess of $100,000 in salary and
bonus for the year ended December 31, 1997 (the "Named Officers").
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------------ -----------------------
NUMBER
OF SHARES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY OTHER STOCK OPTIONS COMPENSATION
- --------------------------- ---- -------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard E. Clemens 1997 $179,170 $50,000(2) $197,250(3) 75,000(4) 0
President & CEO(1) 1996 0 0 0 0 0
1995 0 0 0 0 0
Robert J. Kindt 1997 $149,583 0 0 0 $449(5)
Vice President, 1996 144,583 0 0 0 434
European Operations 1995 133,500 0 0 0 401
Robert A. Skodzinsky 1997 $129,375 0 0 0 $950(5)
President, Machine 1996 124,375 0 0 0 950
Tool Division 1995 119,375 0 0 0 924
Paul J. Maloney 1997 $117,334 0 0 0 $950(5)
V.P. & General 1996 110,004 0 0 0 950
Manager 1995 78,927 0 0 0 474
David E. Lundeen 1997 $ 45,538 0 0 0 0
Former Acting President 1996 114,793 0 0 0 0
& CEO(1) 1995 0 0 0 0 0
</TABLE>
- ---------------
(1) Mr. Clemens was appointed President and Chief Executive Officer of the
Company on March 10, 1997. At the request of the Board, Mr. Lundeen, a
member of the Board, served as Acting President and Chief Executive Officer
of the Company during the interim period from May 13, 1996, when Robert J.
Siewert resigned as President and Chief Executive Officer of the Company,
until the appointment of Mr. Clemens.
(2) Relocation allowance in connection with Mr. Clemens' employment.
(3) Represents 17,000 shares awarded at the time of his employment in March
1997, which vest in equal annual installments over two years, with a value
of $134,937 at December 31, 1997, and 7,000 shares awarded on February 10,
1998, which vest in equal installments over three years. Dividends are paid
on the restricted shares.
(4) Options granted to Mr. Clemens at the time of his employment. See "Board
Compensation Report on Executive Compensation-Employment and Compensation of
Chief Executive Officer."
(5) Represents the Company's contribution under its Retirement Savings Plan.
9
<PAGE> 12
FISCAL 1997 STOCK OPTION GRANTS
No options were granted by the Company in 1997, except for the grant to Mr.
Clemens at the time of his employment on March 10, 1997 of options to purchase
75,000 common shares at an option exercise price of $8.438 per share. Such
options become exercisable as follows: 25,000 shares if the market price of the
common shares is $15 per share or higher for a 10-day period; an additional
25,000 shares if the market price is $18 per share or higher for a 10-day
period; and an additional 25,000 shares if the market price is $20 per share or
higher for a ten-day period. All such options, to the extent they did not
otherwise become exercisable, become exercisable on the earlier of March 1, 2003
or the occurrence of a change of control.
The potential realizable value that could accrue from such options to
purchase 75,000 shares, calculated at assumed annual rates of Company share
price appreciation of 0%, 5%, and 10% over the ten-year term of the options,
with annual compounding, would be $-0-, $397,996, and $1,008,600, respectively.
This information is required to be presented by rules of the Securities and
Exchange Commission and is not intended to forecast possible appreciation, if
any, in the Company's share price.
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to unexercised
options to purchase the Company's common shares granted under the Company's
employee stock option plans to the Named Officers and held by them at December
31, 1997. None of the Named Officers exercised stock options during 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT 12/31/97 AT 12/31/97(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard E. Clemens............. 0 75,000 $0 $0
Robert J. Kindt................ 3,000 500 0 0
Robert A. Skodzinsky........... 1,750 250 0 0
Paul J. Maloney................ 600 200 0 0
David E. Lundeen............... 0 0 0 0
</TABLE>
- ---------------
(1) The exercise price of outstanding options exceeded the market value of a
common share at December 31, 1997.
RETIREMENT BENEFITS
The Company provides retirement benefits for its salaried employees. The
Company's Pension Plan A provides for benefits based on the average of the
aggregate compensation during the five consecutive years of employment in the
ten consecutive years of employment preceding
10
<PAGE> 13
retirement that yield the highest average. Compensation covered by the Plan
includes salary paid for service rendered while an employee but excludes
bonuses.
The following table sets forth the estimated annual benefits payable at
normal retirement (age 65) under the Company's Pension Plan A to an employee,
including the Named Officers, with indicated final average base compensation, as
defined in the Plan, and periods of service. The benefit amounts are based upon
years of benefit service (not in excess of 35) multiplied by 1.25% of the final
average base compensation. The amounts shown in the table below have been
prepared on the straight life equivalent basis.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFIT
FINAL AVERAGE (ASSUMING RETIREMENT ON JANUARY 1, 1998)
ANNUAL BASE ----------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $25,711 $34,281 $42,852 $51,422 $59,992
150,000 30,853 41,138 51,422 61,706 71,991
175,000 30,853 41,138 51,422 61,706 71,991
200,000 30,853 41,138 51,422 61,706 71,991
225,000 30,853 41,138 51,422 61,706 71,991
</TABLE>
The applicable years of benefit service as of January 1, 1998, for the
named Officers are Mr. Clemens-.8 years, Mr. Kindt-8 years, Mr. Skodzinsky-4
years, and Mr. Maloney-6 years. Mr. Clemens, in accordance with the terms under
which he was employed, was granted, effective March 1, 1998, five years of
service credit for purposes of calculating his retirement benefits under the
plan.
CERTAIN TRANSACTION
In connection with Mr. Clemens' employment and move to the Dayton, Ohio
area, the Company loaned him $275,000. This loan bore interest at 7.0% and was
paid in full on March 3, 1998.
11
<PAGE> 14
COMMON SHARE PERFORMANCE GRAPH
The following Common Share Performance Graph compares the five-year
cumulative return, assuming dividend reinvestment, from investing $100 on
December 31, 1992, in each of the Company's Common Shares, the S&P 500 Index of
companies, and a peer group of various machine tool companies (the "Peer Group")
consisting of the following companies: Cincinnati Milacron, Inc., Gleason
Corporation, Hurco Companies Inc., Met-Coil Systems Corporation, The Monarch
Machine Tool Company, and Newcor Inc.
<TABLE>
<CAPTION>
Measurement Period Monarch
(Fiscal Year Covered) Machine Tool Peer Group S&P 500
<S> <C> <C> <C>
12/31/92 100 100 100
12/31/93 95 119 110
12/31/94 87 127 112
12/31/95 111 154 153
12/31/96 75 135 189
12/31/97 74 172 252
</TABLE>
INDEPENDENT AUDITORS
Coopers & Lybrand has been appointed as the Company's independent auditors
for the fiscal year ending December 31, 1998, pursuant to the recommendation of
the Company's Audit Committee. Coopers & Lybrand has served as independent
auditors for the Company for more than 50 years.
12
<PAGE> 15
A representative of Coopers & Lybrand is expected to be present at the
Annual Meeting with an opportunity to make a statement if he desires to do so,
and to respond to appropriate questions, with respect to that firm's examination
of the Company's financial statements for the fiscal year ended December 31,
1997.
OTHER MATTERS
The Board of Directors has no knowledge of any other matters to be
presented at the meeting. In the event other matters do properly come before the
meeting, the persons named in the Proxy will vote in accordance with their best
judgment on the particular matters.
1999 ANNUAL MEETING
The 1999 Annual Meeting of Shareholders is currently scheduled to be held
on May 4, 1999. The deadline for shareholders to submit proposals to be
considered for inclusion in the proxy statement for that meeting is December 1,
1998.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1997, was
mailed on March 31, 1998, to each shareholder of record on March 17, 1998.
THE MONARCH MACHINE TOOL COMPANY
RICHARD E. CLEMENS
President and
Chief Executive Officer
March 31, 1998
13
<PAGE> 16
FORM 10-K ANNUAL REPORT
Copies of The Monarch Machine Tool Company's 1997 Annual Report on Form
10-K, filed with the Securities and Exchange Commission, are available without
charge (other than for exhibits) to shareholders upon written request sent to:
Attention: Corporate Secretary
The Monarch Machine Tool Company
2600 Kettering Tower
Dayton, Ohio 45423
====================================================
NOTICE
OF
ANNUAL MEETING
OF SHAREHOLDERS
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
MONARCH LOGO
MONARCH LOGO
- --------------------------------------------------------------------------------
IMPORTANT
Each shareholder is requested to date, fill in, sign, and promptly return the
enclosed Proxy in the envelope provided.
A shareholder wishing to attend the meeting may withdraw his Proxy if he has
previously sent in his Proxy and votes in person.
ANNUAL MEETING
OF
SHAREHOLDERS
May 5, 1998
====================================================
<PAGE> 17
THE MONARCH MACHINE TOOL COMPANY
P R O X Y
ANNUAL MEETING OF SHAREHOLDERS, MAY 5, 1998
ROBERT B. RIETHMAN and EARL J. HULL, and each of
them, are hereby authorized to represent me at the Annual
Meeting of Shareholders of the Company to be held on
May 5, 1998, and at any adjournment, and at the meeting
to vote my shares on the following:
1. Election of Directors.
[ ] FOR all nominees of the Board of Directors,
namely Richard E. Clemens, Gerald L. Connelly, and
Joseph M. Rigot (except as marked to the contrary
below), including authority to cumulate votes
selectively among such nominees.
[ ] WITHHOLD AUTHORITY to vote for all nominees
listed below.
(INSTRUCTIONS: To withhold authority to vote for
any individual nominee, write that
nominee's name on the line provided
below.)
--------------------------------------------------
2. Upon any other business that may properly come
before the meeting.
(Continued, and to be signed, on the reverse side.)
(Continued from the reverse side.)
IT IS UNDERSTOOD THAT THIS PROXY WILL BE VOTED AS
SPECIFIED ON THE REVERSE SIDE, AND, WHERE NO CHOICE
IS SPECIFIED BY THE SHAREHOLDER, THE PROXY WILL BE
VOTED FOR THE NOMINEES LISTED ON THE REVERSE SIDE.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS.
Dated , 1998
----------------------
---------------------------------
---------------------------------
Please sign your name as
imprinted hereon, and, in the
case of multiple or joint
ownership, all should sign.
Proxy Card
