ARVIN INDUSTRIES, INC.
NOTICE
of
Annual Meeting of Shareholders To Be Held April 17, 1997
To the Shareholders of
ARVIN INDUSTRIES, INC.
The Annual Meeting of Shareholders of Arvin Industries, Inc., an
Indiana corporation, will be held at the Holiday Inn Conference
Center, 2480 Jonathan Moore Pike (Highway 46 West), Columbus,
Indiana on Thursday, April 17, 1997, at 10:30 a.m., for the
following purposes:
(1) To elect four directors for a term of three years;
(2) To elect one director for a term of one year;
(3) To ratify the Board of Directors' appointment of Price
Waterhouse as Arvin's independent certified public accountants
for the current year; and
(4) To transact such other business as may properly come
before the Annual Meeting and any adjournment thereof.
Shareholders of record at the close of business on February 21,
1997 are entitled to notice of and to vote at the Annual Meeting.
Arvin's Annual Report for fiscal year 1996 is enclosed.
IMPORTANT! TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY
CARD IN THE ENVELOPE PROVIDED.
No postage is required if the proxy is mailed in the United
States. If you attend the Annual Meeting, you may vote your
shares in person even if you have previously submitted a proxy.
Ronald R. Snyder
Secretary
Columbus, Indiana
March 14, 1997
ARVIN INDUSTRIES, INC.
One Noblitt Plaza, Box 3000, Columbus, Indiana 47202-3000
__________________________________________
Proxy Statement For Annual Meeting of Shareholders
To Be Held April 17, 1997
This proxy statement and the enclosed proxy are being
furnished in connection with the solicitation of proxies by the
Board of Directors of Arvin Industries, Inc. ("Arvin") from
holders of Arvin's common shares, par value $2.50 per share
("Common Shares"), for use at the Annual Meeting of Shareholders
to be held April 17, 1997, and at any adjournment or postponement
thereof, for the purposes set forth in the accompanying Notice
(the "Annual Meeting"). Arvin will bear all costs relating to the
solicitation of proxies from its shareholders. In addition to
soliciting proxies by mail, Arvin's officers and employees,
without receiving additional compensation therefor, may solicit
proxies by telephone, by facsimile or in person. Arrangements
also will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation materials to the
beneficial owners of Common Shares held of record by such
persons, and Arvin will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket
expenses incurred by them in that connection. In addition, Arvin
has retained Hill and Knowlton, Inc. to assist in soliciting
proxies from shareholders, including brokers' accounts, at a fee
of $6,250 plus reasonable out-of-pocket expenses.
This proxy statement is first being sent to shareholders on or
about March 14, 1997.
VOTING AT THE MEETING
The record date for the determination of shareholders entitled
to vote at the Annual Meeting is the close of business on
February 21, 1997, at which time Arvin had issued and outstanding
24,470,692 Common Shares. Each shareholder will be entitled to
one vote for each Common Share held with respect to all matters
which may be properly submitted to a vote of shareholders at the
Annual Meeting.
All proxies that are properly signed and received by Arvin
prior to the Annual Meeting will be voted in accordance with the
instructions on such proxies unless they have been revoked. If no
instruction is indicated, the shares will be voted FOR the
election of the five nominees for director listed in this proxy
statement, FOR ratification of the appointment of independent
public accountants, and in the discretion of the persons named in
the proxy on such other matters as may properly come before the
Annual Meeting. Any shareholder who has given a proxy may revoke
such proxy at any time before it is voted at the Annual Meeting
by delivering to the Secretary of Arvin written notice of
revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
A quorum of shareholders is necessary to take action at the
Annual Meeting. A majority of the outstanding Common Shares,
represented in person or by proxy, will constitute a quorum of
shareholders at the Annual Meeting. The inspectors of election
appointed for the Annual Meeting will determine whether a quorum
is present. Under certain circumstances, a broker or other
nominee may have discretionary authority to vote certain Common
Shares if instructions have not been received from the beneficial
owner or other person entitled to vote. The inspectors of
election will treat abstentions and broker non-votes (which occur
when a broker or other nominee holding shares for a beneficial
owner does not vote on a particular proposal, because such broker
or other nominee does not have discretionary voting power with
respect to that item and has not received instructions from the
beneficial owner) as present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of
business at the Annual Meeting.
A plurality of the Common Shares voted in person or by proxy
is required to elect a director. The ratification of the
appointment of the independent public accountants will be
approved if the votes cast favoring such action exceeds the votes
cast opposing such action. Votes cast by proxy or in person at
the meeting will be tabulated by the inspectors of election
appointed for the Annual Meeting. For purposes of determining
ratification of the appointment of the accountants, abstentions
will not be considered. Broker non-votes, because they are not
considered votes cast, are not counted in the vote totals.
PROPOSAL 1 - ELECTION OF DIRECTORS
Arvin's Restated Articles of Incorporation, as amended,
provide that its By-Laws may divide the Board of Directors into
classes, with the terms of office of directors in each class
being more than one year. The By-Laws provide that the Board of
Directors shall be divided into three classes, each class being
as nearly equal in number as possible, and that at each Annual
Meeting of Shareholders the successors to the directors whose
terms expire that year shall be elected for a term of three
years.
At the Annual Meeting, four incumbent directors will be
nominated for a three-year term. Mr. Baker, an incumbent director
whose term expires at the 1997 meeting, has been reassigned to
the class of 1998 and will be nominated for a one-year term as he
will be retiring as of the 1998 Annual Meeting of Shareholders.
Mr. Smith, whose current term expires in 1999, is nominated for a
three-year term in order to maintain the number of directors in
each class as nearly equal as possible.
Unless otherwise directed, proxies will be voted for the
election of the five nominees listed below who have been
designated by the Board of Directors. If, on account of death or
other unforeseen contingencies, any of these persons is
unavailable for election, the proxies will be voted for a
substitute nominee designated by the Board of Directors.
The following sets forth certain information with respect to
the nominees and continuing directors of Arvin:
Number of Common
Shares Beneficially
Owned as of
January 1, 1997(1)
Nominees for Three-Year Terms:
Ivan W. Gorr, Former Chairman of the Board and Chief
Executive Officer of Cooper Tire & Rubber Company 1,500
Mr. Gorr, 67, is a graduate of the University of
Toledo and is a certified public accountant. Mr.
Gorr began his career with Cooper Tire in 1972 as
corporate controller and, after having served as
executive vice president, treasurer and chief
financial officer, was elected president and chief
operating officer in 1982 and Chairman and Chief
Executive Officer in 1989 serving in those
capacities until 1994. Cooper Tire, located in
Findlay, Ohio, specializes in the manufacture and
marketing of rubber products for consumers and
industrial users. Mr. Gorr was elected a director
of Arvin in 1994. He also serves as a director of
Amcast Industrial Corporation, Fifth Third Bancorp,
OHM Corporation, Borg-Warner Automotive, Inc. and
Cooper Tire & Rubber Company.
Richard W. Hanselman, Former Chairman and Chief Executive
Officer of Genesco, Inc. 1,200
Mr. Hanselman, 69, is a graduate of Dartmouth
College. He joined Genesco in 1980 and was named
Chief Executive Officer in 1981, serving in that
capacity and as its Chairman until 1986. Genesco is
a diversified manufacturer of footwear and apparel
located in Nashville, Tennessee. Mr. Hanselman was
first elected to Arvin's Board of Directors in 1983.
He is also a director of Becton, Dickinson & Co.,
BEC Group, Inc., Bradford Funds, Inc., Foundation
Health Corporation, Gryphon Holdings, Inc. and IMCO
Recycling Inc.
Don. J. Kacek, Chairman, President and Chief Executive
Officer of Advanced Automation Technologies, Inc. 1,000(2)
Mr. Kacek, 60, holds a Bachelor of Science degree
from Illinois Institute of Technology. He became
President and Chief Executive Officer of Ransburg
Corporation in 1977 and was elected Chairman of its
Board of Directors in 1978, in which capacities he
served until 1988. In 1989, Mr. Kacek became a
director of Advanced Automation Technologies, Inc.
and since 1990 has been its Chairman, President and
Chief Executive Officer. Advanced Automation
Technologies is a manufacturer of factory automation
equipment located in Indianapolis, Indiana. He was
first elected to Arvin's Board of Directors in 1982.
Richard A. Smith, Vice President-Finance and Chief
Financial Officer of Arvin 67,636(2)(3)(4)
Mr. Smith, 51, graduated from the University of
Illinois at Chicago, was awarded a Master of
Business Administration by Northwestern University
and earned a Doctor of Jurisprudence degree from St.
Louis University. Mr. Smith has been Vice President-
Finance and a member of Arvin's Board of Directors
since 1990.
Nominee for One-Year Term:
James K. Baker, Vice Chairman of the Board of Directors
of Arvin 294,823(3)(4)(5)
Mr. Baker, 65, graduated from DePauw University and
holds a Master of Business Administration degree
from Harvard University. Associated with Arvin since
1955, he was elected a member of the Board of
Directors in 1968, elected President and appointed
Chief Executive Officer in 1981, and elected
Chairman of the Board in 1986. He stepped down to
the position of Vice Chairman in 1996. Mr. Baker is
also a director of Amcast Industrial Corporation,
Geon Company, First Chicago NBD Corporation,
CINergy, Inc., Calspan SRL Corporation, and Tokheim
Corp., and is a former Chairman of the United States
Chamber of Commerce and the Chairman of the NASA
Commercial Programs Advisory Committee. He also
serves as Chairman of the Board of Trustees of
DePauw University and is on the Executive Committee
of the Business Higher Education Forum.
Continuing Directors:
Joseph P. Allen, President and Chief Executive
Officer, Calspan SRL Corporation (previously Space
Industries International, Inc.) 3,790
Dr. Allen, 59, is a graduate of DePauw University
with a Bachelor of Arts degree and attended
Christian Albrechts Universitaet in Kiel, Germany as
a Fulbright Scholar. He also earned Master of
Science and Doctor of Philosophy degrees from Yale
University. Dr. Allen was an astronaut with NASA from
1967 to 1985, when he became Executive Vice
President of Space Industries, Inc., a designer of
space facilities located in Webster, Texas. Dr.
Allen was elected President of Space Industries,
Inc. in 1988 and Chief Executive Officer in 1991.
Dr. Allen was first elected to Arvin's Board of
Directors in 1985, and his current term expires in
1998. He is also a director of Calspan SRL
Corporation.
Steven C. Beering, President of Purdue University 1,300(2)
Dr. Beering, 64, holds Bachelor of Science and
Doctor of Medicine degrees from the University of
Pittsburgh. He was named President of Purdue
University and the Purdue University Foundations in
1983. He is also a director of Eli Lilly and
Company, NIPSCO Industries, Inc., American United
Life Insurance Co. and Calspan SRL Corporation. He
was first elected to Arvin's Board of Directors in
1983, and his current term expires in 1998.
Joseph P. Flannery, Chairman, President and Chief
Executive Officer of Uniroyal Holdings, Inc. 1,500
Mr. Flannery, 64, holds a Bachelor of Science degree
from the University of Lowell and a Masters of
Business Administration degree from Harvard
University. He joined Uniroyal, Inc. in 1959 and,
after holding a number of positions with Uniroyal,
Inc. and its Uniroyal Chemical Division, was elected
a director and President and Chief Operating Officer
of Uniroyal, Inc. in 1977 and its Chief Executive
Officer in 1980. Since 1987 Mr. Flannery has been
Chairman of the Board, President and Chief Executive
Officer of Uniroyal Holdings, Inc. He was first
elected an Arvin director in 1991, and his current
term expires in 1998. Mr. Flannery also serves on
the boards of directors of APS Holding Corporation,
Ingersoll-Rand Company, Kmart Corp., Newmont Mining
Corporation, Newmont Gold Company and The Scotts
Company.
William D. George, Retired President and Chief Executive
Officer of S.C. Johnson & Son Inc. 3,000
Mr. George, 64, received a Bachelor of Arts degree
from DePauw University and a Masters of Business
Administration degree from Harvard University. In
1981, he joined S.C Johnson Wax, a manufacturer of
chemical specialty products headquartered in Racine,
Wisconsin, and, after holding a number of positions,
became Executive Vice President and Chief Operating
Officer, Worldwide Consumer Products in 1988. He was
elected President in 1990, Chief Executive Officer
and a member of the Board in 1993 and he retired in
1996. Mr. George was first elected to the Arvin
Board of Directors in 1994, and his current term
expires in 1999. He also serves on the board of
directors of Ralcorp Holdings and is a member of the
Board of Trustees of Carthage College.
V. William Hunt, President and Chief Operating Officer
of Arvin 96,894(3)(4)
Mr. Hunt, 52, holds Bachelor of Arts and Doctor of
Jurisprudence degrees from Indiana University. Mr.
Hunt joined Arvin in 1976 and was elected Vice
President-Administration in 1980, Secretary in 1982,
Executive Vice President in 1990, and President &
COO in 1996. He was first elected to the Board of
Directors in 1983, and his current term expires in
1998.
Frederick R. Meyer, Chairman, President and Chief
Executive Officer of Aladdin Industries, Inc. 13,100
Mr. Meyer, 69, graduated from Purdue University and
holds a Master of Business Administration degree
from Harvard University. In 1985, Mr. Meyer became
Chairman of the Board of Aladdin Industries, Inc., a
diversified company principally engaged in the
manufacture of children's lunch kits, thermosware,
insulated food delivery systems and related products
located in Nashville, Tennessee. Mr. Meyer served as
President and Chief Executive Officer of Aladdin
Industries, Inc. from 1987 through September 1994
and was re-elected to that position in October 1995.
Mr. Meyer was first elected to Arvin's Board of
Directors in 1980, and his current term expires in
1999. He also serves as a director of Tyler
Corporation, Southwest Securities Group, Inc. and
Palm Harbor Homes, Inc.
Byron O. Pond, Chairman and Chief Executive Officer
of Arvin 228,862(3)(4)
Mr. Pond, 60, is a graduate of Wayne State
University with a Bachelor of Science degree in
Business Administration. Mr. Pond was first employed
by Maremont Corporation as a Director of Field Sales
Planning in 1968. After serving successively as Vice
President, General Manager, Senior Vice President
and Executive Vice President, he became President of
Maremont Corporation in 1979 and Chief Executive
Officer in 1981. Mr. Pond became an Executive Vice
President and director of Arvin in 1990, President
in 1991, Chief Executive Officer in 1993, and was
elected Chairman of the Board of Directors in
February 1996 and his current term expires in 1999.
Arthur R. Velasquez, President and Chief Executive
Officer of Azteca Foods, Inc. 1,575
Mr. Velasquez, 58, is a graduate of the University
of Notre Dame with a Bachelor of Science degree in
Electrical Engineering and holds a Masters of
Business Administration from the University of
Chicago. He was a founder of Azteca Corn Products
Corporation in 1970, now Azteca Foods, Inc. Azteca
is a manufacturer of Mexican foods located in
Chicago, Illinois. Mr. Velasquez was first elected
an Arvin director in 1994, and his current term
expires in 1999. He also serves on the boards of
directors of Peoples Energy Corporation, LaSalle
National Bank, Chicago Metro Board of Junior
Achievement, the Maryville City of Youth, and serves
on the Board of Trustees of the University of Notre
Dame.
[FN]
(1) Except as otherwise noted, each person exercises sole
voting and investment power over the shares beneficially owned
by him. Other than Mr. Baker, who beneficially owns
approximately 1.12% of the outstanding Common Shares, no
nominee or director is individually the beneficial owner of
more than 1.0% of Arvin's outstanding Common Shares.
(2) Shared voting and investment power, as follows: Mr. Kacek
- 1,000 shares, Mr. Smith - 14,500 shares and Dr. Beering -
1,000 shares.
(3) Includes Common Shares subject to options which may be
exercised within 60 days after January 1, 1997, as follows:
Mr. Smith - 50,950 shares, Mr. Baker - 120,500 shares, Mr.
Hunt - 81,250 shares and Mr. Pond - 194,000 shares.
(4) Includes Common Shares held in such participant's
accounts under certain Arvin employee benefit plans, as
follows: Arvin Savings Plan: Mr. Smith - 2,186 shares, Mr.
Baker - 19,161 shares, Mr. Hunt - 7,143 shares and Mr. Pond -
1,362 shares; and Arvin Equity Account Plan: Mr. Baker -
27,058 shares and Mr. Hunt - 1,422 shares. Common Shares held
in the Arvin Savings Plan and the Arvin Equity Account Plan
are voted at the direction of the participant.
(5) Includes Common Shares owned of record by members of
Mr. Baker's immediate family. Mr. Baker has disclaimed any
beneficial interest in 33,648 of those Common Shares.
Compensation of Directors
During 1996, Mr. Baker and non-employee members of the Board
of Directors were compensated for their service as directors as
follows: an annual fee of $26,000; a fee of $1,500 for membership
on any regular committee of the Board; and attendance fees of
$1,500 and $1,000, respectively, for each Board and committee
meeting. Mr. Baker and non-employee Board members were also paid
fees of $1,000 for each telephonic meeting.
Mr. Allen serves as President and Chief Executive Officer of
Calspan SRL Corporation ("Calspan"). On September 29, 1995, Arvin
sold its interest in Space Industries International, Inc.
("SIII") to a new company formed by management of SIII, Calspan.
In conjunction with the sale, Arvin guaranteed approximately
$22.9 million of the debt of Calspan. The guarantee amount, which
was $18 million at December 29, 1996, is scheduled to decline
quarterly over a four year period before expiring on September
30, 1999.
Meetings of Directors and Committees
The Board of Directors met six times in 1996.
There are three standing committees of the Board of Directors.
The Audit Committee, the current members of which are Messrs.
Velasquez (Chairman), Meyer and Hanselman, has the responsibility
to assess and oversee the adequacy of internal controls and the
integrity of Arvin's financial statements. Its functions include:
recommending outside auditors; assessing the plan and scope of
the audit; reviewing the results of the annual audit and
financial statements before release (including disclosure
requirements); evaluating auditors' fees; overseeing the
effectiveness of the internal audit function; directing and
supervising any investigation into matters within the scope of
the foregoing duties (including compliance with the Foreign
Corrupt Practices Act); and performing such other related
functions as the Board of Directors may, from time to time,
delegate to the Audit Committee. The Audit Committee met four
times in 1996.
The Compensation Committee, which met three times during 1996,
is currently comprised of Messrs. Beering (Chairman), Flannery
and Allen. The Compensation Committee is responsible for
establishing and administering the compensation policies of
Arvin. See "Report of the Compensation Committee on Executive
Compensation."
The Committee on Directors makes recommendations to the Board
of Directors as to nominees for election as directors. This
committee will consider nominees recommended by Arvin
shareholders; any such recommendations may be submitted in
writing to the Chairman of the Committee on Directors, in care of
Arvin's executive offices in Columbus, Indiana. The current
members of the Committee on Directors, which met four times in
1996, are Messrs. George (Chairman), Gorr and Kacek.
EXECUTIVE COMPENSATION
Summary
The following table summarizes the annual and long-term
compensation for services to Arvin and its subsidiaries for
fiscal years 1996, 1995, and 1994 awarded or paid to or earned by
the persons who served as chief executive officer of Arvin during
1996 and to each of the four other most highly compensated
executive officers of Arvin and its subsidiaries (the "Named
Officers") during 1996.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------- -----------------------------------
Awards Payouts
Other ------------------------- --------
Annual Restricted Securities LTIP All Other
Salary Bonus Compensation Stock Underlying Payouts Compensation
Name and Principal Position Year ($) ($) ($)(1) Awards($) Options(#) ($)(2) ($)(3)
- ----------------------- ---- ------- ------- ------- -------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Byron O. Pond (4) 1996 $500,000 $216,125 (5) $14,972 $966,124 (6) 32,609 0 $5,850
Chief Executive Officer and 1995 500,000 216,650 10,656 0 30,000 0 5,850
Chairman of the Board 1994 500,000 225,000 10,145 0 30,000 0 4,500
V. William Hunt (4) 1996 371,115 625,988 (7) 5,050 162,094 (8) 25,000 0 5,293
President and Chief 1995 301,500 130,640 5,181 0 18,000 0 5,850
Operating Officer 1994 288,615 129,877 4,677 0 13,000 0 4,500
Bernard Kievit 1996 261,978 336,956 1,583 0 10,000 0 0
Vice President 1995 275,207 307,572 1,638 0 14,000 0 0
1994 242,679 255,979 1,414 0 11,000 0 0
Richard A. Smith 1996 252,581 315,726 5,148 0 14,000 0 5,850
Vice President Finance and 1995 242,846 105,225 5,512 0 14,200 0 5,850
Chief Financial Officer 1994 232,800 104,760 4,003 0 11,000 0 4,500
E. Leon Viars 1996 228,062 285,077 4,550 0 12,000 $72,252 5,850
Executive Vice President 1995 212,485 92,070 3,323 0 6,600 64,063 5,850
1994 205,615 46,989 2,501 0 10,000 46,989 4,500
<FN>
__________________________
(1) The compensation reported is the amount reimbursed or paid by Arvin
for certain taxes.
(2) Amounts for Mr. Viars represent payouts for awards for the 1986
through 1990 performance periods under the Maremont Corporation Senior
Management Deferred Compensation Plan, which was terminated on January
1, 1991.
(3) The compensation reported represents Arvin matching contributions
to the Arvin Savings Plan.
(4) Prior to February 8, 1996, Mr. Pond served as President and Chief
Executive Officer and Mr. Hunt served as Executive Vice President.
(5) Represents the value (as of February 13, 1997) of 9,100 performance
shares distributed to Mr. Pond.
(6) Includes 30,303 Common Shares restricted for a five-year period
that Mr. Pond elected to receive in lieu of his 1996 cash bonus of
$625,000. Also includes 9,100 performance shares distributed to Mr. Pond
as restricted Common Shares. Dividends will be paid on all Common Shares
distributed to Mr. Pond during the restricted period. The value of Mr.
Pond's restricted share holdings earned in 1996 was $0 as of the Arvin
fiscal year-end.
(7) Includes $463,894 paid under the annual cash bonus plan and the
value (as of February 13, 1997) of 6,825 performance shares distributed
to Mr. Hunt.
(8) Includes 6,825 performance shares distributed to Mr. Hunt as
restricted Common Shares. Dividends will be paid on all Common Shares
distributed to Mr. Hunt during the restricted period. The value of Mr.
Hunt's restricted share holdings earned in 1996 was $0 as of the Arvin
fiscal year-end.
</TABLE>
Options Granted in 1996
The following table sets forth certain information as to options to
purchase Common Shares of Arvin granted to each of the Named Officers under
the 1988 Stock Benefit Plan during the fiscal year ended December 29, 1996
and the potential realizable value, assuming certain annual rates of
appreciation.
<TABLE>
Option Grants In Last Fiscal Year
<CAPTION>
Potential realizable value at
assumed annual rates of stock;
Individual Grants price appreciation for option term(3)
- ----------------------------------------------------------------- ------------------------------------
Number of Percent of
securities total options
underlying granted to Exercise
options employees in price ($ Expiration
Name granted(#)(1) fiscal year per Share)(2) date 5% ($) 10% ($)
- ------------- ------- ------ -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Byron O. Pond 32,609 8.1% $20.3750 7/17/2006 $ 417,913 $ 1,059,067
V. William Hunt 25,000 6.2 20.3750 7/17/2006 320,397 811,944
Bernard Kievit 10,000 2.5 20.3750 7/17/2006 128,159 324,778
Richard A. Smith 14,000 3.5 20.3750 7/17/2006 179,422 454,688
E. Leon Viars 12,000 3.0 20.3750 7/17/2006 153,791 389,733
All Optionees 401,609 100.0% 20.3947 7/17/2006 5,151,947 13,055,968
<FN>_____________________
(1) All options granted to the Named Officers were granted on July 17,
1996 and will first become exercisable July 17, 1997. Vesting may be
accelerated as a result of certain changes in control of Arvin.
(2) All options were granted at market value (the average of the high
and low prices of the Arvin Common Shares) on the date of grant.
(3) The potential realizable value illustrates the value that might be
recognized upon the exercise of the options immediately prior to the
expiration of their term, assuming the specified compounded rates of
stock price appreciation over the ten-year term of the option. Potential
realizable value is presented net of the option exercise price, but
before taxes associated with the exercise. Actual gains, if any, on
stock option exercises and Common Share holdings are dependent on the
future performance of the Common Shares and overall market conditions as
well as the option holders' continued employment through the ten-year
term of the option. There can be no assurance that the amounts reflected
in this table will be achieved.
</TABLE>
Option Exercises in 1996
The table below sets forth certain information concerning the exercise
of options to purchase Common Shares under the 1988 Stock Benefit Plan and
the 1978 Stock Option Plan during fiscal year 1996 by each of the Named
Officers and the value of unexercised options held by each of the Named
Officers as of December 29, 1996.
<TABLE>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option Values
<CAPTION>
Shares Number of
acquired Value securities underlying Value of unexercised
on Realized unexercised options in-the-money options
Name exercise(#) ($)(1) at fiscal year-end (#) at fiscal year-end ($)(2)
- ------------------ ----------- ------ ----------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Byron O. Pond 0 0 194,000 132,609 $343,031 $142,664
V. William Hunt 0 0 81,250 25,000 156,953 109,375
Bernard Kievit 0 0 55,600 10,000 135,094 43,750
Richard A. Smith 5,000 28,625 50,950 14,000 97,941 61,250
E. Leon Viars 6,100 44,400 53,200 12,000 200,887 52,500
<FN>
_______________________
(1) Represents the difference between the closing price of the Arvin
Common Shares on the New York Stock Exchange on the business day
preceding the date of exercise and the option exercise price.
(2) Represents the difference between $24.75, the closing price of the
Arvin Common Shares on the New York Stock Exchange on December 29, 1996,
and the option exercise price.
</TABLE>
Employment Agreement with Byron O. Pond
An employment agreement between Arvin and Mr. Pond, effective June 17,
1993, provides, among other things, for his full time employment until
June 16, 1996, with automatic one-year extensions commencing June 17, 1994,
and continuing each June 17 thereafter, unless terminated by Arvin or Mr.
Pond, at an annual salary of not less than $500,000. The agreement also
provides that it will be binding upon a successor corporation in the event
that Arvin is merged into any other corporation or that any other
corporation acquires substantially all of the assets of Arvin. In the event
Mr. Pond's change of control agreement (discussed below) is triggered, it
will supersede his employment agreement
Change of Control Agreements
Arvin has entered into Change of Control Employment Agreements (the
"Agreements") with certain Company officers, including each member of the
Arvin Policy Committee and the Named Officers, which provide severance
payments and benefits in the event of the termination of employment of the
officer under certain circumstances within the three year period following
a change in control. Under the Agreements, each officer would be entitled
to severance payments and benefits in the event that his or her employment
is terminated during the three year period following a change in control
without "cause" by Arvin, or for "good reason" by the officer, each as is
defined in the Agreement. In such case, the officer would be entitled to a
severance payment equal to three times his current annual salary and his
highest bonus during the preceding three years. During such three-year
period, the officer would be entitled to participate in all incentive,
retirement and welfare plans of Arvin. Additional benefits would include
the right to receive a pension supplement, fringe benefits and paid
vacation. In the event that any payments made in connection with the change-
in-control would be subject to the excise tax imposed under Section 4999 of
the Internal Revenue Code as a result of the aggregate compensation
payments and benefits made to the individual, under the Agreement or
otherwise, in connection with a change-in-control, Arvin is obligated to
make whole the individual with respect to such excise tax. Each officer
would also be entitled to receive the foregoing severance payments and
benefits of the Agreement if employment is terminated for any reason by the
officer during a limited period of time following a change of control.
Retirement Plan
The table below shows the estimated annual benefits payable upon
retirement to persons, including the Named Officers, other than Mr. Kievit,
covered under Arvin's Retirement Plan for Exempt Salaried Employees (the
"Retirement Plan") and Arvin's Supplemental Retirement Plan (the
"Supplemental Retirement Plan") (based on the benefit formulas in effect
and calculated on a straight life annuity basis, as described below), in
the specified compensation and years of service classifications. The table
assumes that the last five years of service occur after October 1, 1991.
The amounts reflected in the table are not subject to any deduction for
Social Security benefits or other offset amounts except for the Arvin
Equity Account described below.
Annual Compensation
(Average of 5 Highest
Consecutive Years in Annual Life Income With Years of Service
Last 10) at Age 65 (Single Life Annuity)
- ---------------- -----------------------------------------------------------
15 20 25 30 35 40
-- -- -- -- -- --
$ 250,000 $ 40,100 $ 52,600 $ 65,100 $ 77,600 $ 90,100 $ 102,600
$ 350,000 56,350 73,850 91,350 108,850 126,350 143,850
$ 450,000 72,600 95,100 117,600 140,100 162,600 185,100
$ 550,000 88,850 116,350 143,850 171,350 198,850 226,350
$ 650,000 105,100 137,600 170,100 202,600 235,100 267,600
$ 750,000 121,350 158,850 196,350 233,850 271,350 308,850
$ 850,000 137,600 180,100 222,600 265,100 307,600 350,100
$ 950,000 153,850 201,350 248,850 296,350 343,850 391,350
$1,050,000 170,100 222,600 275,100 327,600 380,100 432,600
$1,150,000 186,350 243,850 301,350 358,850 416,350 473,850
$1,250,000 202,600 265,100 327,600 390,100 452,600 515,100
The Retirement Plan is a defined benefit plan, based on total years of
service, which provides a life annuity determined by the average of the
five highest consecutive years' annual earnings in the last ten years of
service. For credited service earned prior to October 1, 1991, the benefit
is calculated by multiplying 1% for each year of credited service times the
average annual earnings figure. Effective October 1, 1991 the Retirement
Plan and certain other defined benefit pension plans covering domestic
salaried employees of Arvin and its subsidiaries (including the Maremont
Corporation Pension Plan for Salaried Employees (the "Maremont Plan") which
was merged into the Retirement Plan effective November 1, 1988) adopted a
new unified benefit formula for service credited after that date. With
respect to credited service earned on or after October 1, 1991, the benefit
is calculated by (i) multiplying 1% for each year of credited service times
the average annual earnings figure and (ii) adding to that amount an amount
determined by multiplying 0.25% for each year of credited service (up to a
maximum of 35 years) times the amount by which the average annual earnings
figure exceeds a portion of the social security wage base (for 1996,
$42,000). Five years of service are required for vesting under the Plan.
Employees may qualify for full benefits at age sixty-five, subject to
certain exceptions under the Employee Retirement Income Security Act of
1974, though provisions are made within the Plan for early retirement at
reduced benefits and for disability retirement. The compensation covered by
the Plan includes salaries, bonuses and compensation deferred at the option
of the employees resulting from contributions to the Arvin Savings Plan.
For the calendar year ended December 31, 1996, credited years of service
for the Named Officers (other than Mr. Kievit) are as follows: Mr. Pond - 5
years (for determination of benefits; 28 years for vesting purposes); Mr.
Hunt - 20 years; Mr. Smith - 7 years; and Mr. Viars - 5 years (for
determination of benefits; 27 years for vesting purposes). With respect to
the period prior to October 1, 1991, Mr. Pond, and other Arvin employees
who previously participated in the Maremont Plan, will have their benefits
determined under the Maremont Plan discussed below.
In 1983, the master trust governing the Retirement Plan was amended to
allow investment of Plan funds in Common Shares. As of September 1, 1985,
the Retirement Plan was further amended to transfer to the Arvin Equity
Account of the Arvin Savings Plan assets and liabilities for the accrued
benefits of active Retirement Plan participants, and a provision was added
which credits the benefit payable under the Arvin Equity Account against
the benefit payable under the Retirement Plan. The 1985 amendment also
added provisions prohibiting termination of the Retirement Plan and
recovery of any excess assets ("overfunding") in the Plan unless approved
by a majority of the "Continuing Directors" (as defined in the Retirement
Plan) and providing that, in the event of a change of control of Arvin
without Continuing Director approval, the percentage for each year of
credited service used in the Retirement Plan's benefit formula would be
increased as necessary so that all Plan assets would be needed to provide
benefits to participants and any overfunding would be eliminated.
Annual benefits payable upon retirement under the Retirement Plan are
subject to limitation imposed by law in prescribed circumstances. To the
extent that an individual employee's retirement benefit would exceed such
limit, the pension benefit payable upon retirement set forth in the above
table will be paid pursuant to the Supplemental Retirement Plan.
As noted above, prior to October, 1991 Mr. Pond was President and Chief
Executive Officer of Maremont Corporation. Mr. Pond became a participant in
the Retirement Plan effective October 1, 1991, and his pension under the
Retirement Plan for the period prior to that date will be determined in
accordance with the formula in effect under the Maremont Plan immediately
prior to its merger into the Retirement Plan. The Maremont Plan formula
applicable for pre-October, 1991 service provides a benefit calculated by
multiplying 1.5% for each year of credited service times the average annual
earnings figure and is reduced by a portion of expected primary Social
Security payments. The compensation covered by the Maremont Plan includes
salaries, bonuses and employee contributions to the Maremont Thrift Plan.
As of October 1, 1991, Mr. Pond was credited with 22 3/4 years of service
under the Maremont Plan. The estimated annual benefits payable to Mr. Pond
upon his retirement under the Maremont Plan, assuming continued employment
until age 65, would be $49,500 for every $100,000 of annual compensation,
or $246,084 (based on the average of his five highest consecutive years of
compensation in his last fifteen years of service with Maremont), and in
each case is subject to reduction to reflect Social Security benefits. To
the extent that the retirement benefit under the Maremont Plan formula for
the period before October 1, 1991 exceeds certain limitations imposed by
law, the excess will be paid pursuant to a Supplemental Retirement Plan
similar to the one maintained by Arvin.
In addition, upon retirement at age 65, Mr. Pond will be entitled to
receive $30,000 per year under a Maremont insurance-funded retirement
program for a period of ten (10) years. In the event of Mr. Pond's death
prior to retirement or during the ten (10) years following retirement, such
annual benefits will be paid to his beneficiary.
Mr. Kievit participates in Dutch national pension schemes to which Arvin
Exhaust Europe makes contributions. Neither Arvin nor Arvin Exhaust Europe
sponsor a retirement program for Dutch employees.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Board of Directors (the "Compensation
Committee") establishes the general compensation policies of Arvin, makes
recommendations to the Board of Directors with respect to the specific
compensation levels for the Chairman and the President, reviews and
approves the annual cash bonus incentive plan for executives, including the
Named Officers, who are members of the Arvin Policy Committee, administers
the 1988 Stock Benefit Plan, reviews the remuneration of other officers and
considers and recommends the adoption of compensation plans for officers
and directors.
Arvin's compensation philosophy is to provide a total compensation
program which will attract and retain qualified executives and motivate
superior performance. The Compensation Committee and management of Arvin
are committed to the principle that pay should be commensurate with
performance and attainment of predetermined financial and strategic
objectives. As a consequence, pay is more heavily influenced by company
performance.
The compensation program consists of three components: base salary,
annual cash incentive opportunities and long-term stock-based incentive
opportunities. The compensation philosophy for base salary is to set
executive base salaries slightly below industry norms, with the proportion
of total cash compensation that can be earned based on variable incentive
compensation above industry norms. Industry norms used in establishing base
salaries for the CEO and each of the Named Officers in 1996 were determined
by gathering competitive compensation information from the companies
comprising the Dow Jones Auto Parts and Equipment Index as well as from
other manufacturing companies selected on the basis of similar sales
volume, level of employment and international scope.
The Arvin philosophy for variable cash bonus incentive compensation is
to provide rewards when financial objectives are achieved. In 1996, these
objectives, designed to increase shareholder value, were earnings per
share, return on net producing assets and debt-to-capital ratio. The
relative weights assigned to these objectives were as follows: earnings per
share was weighted by a multiple of two, return on net producing assets was
weighted by a factor of 1.167 and debt-to-capital ratio was weighted by a
factor of one. Maximum bonuses that could be earned with respect to each of
these objectives are set as a percentage of the executive's base salary.
The maximum aggregate bonus that could be earned if all of the objectives
were attained was 125% of the executive's base salary. Minimum achievement
levels against each of the financial objectives were required before the
portion of the bonus relating to that objective could be earned. The CEO
and each of the Named Officers participated in the 1996 cash bonus
incentive plan.
In 1995, the CEO, certain Named Officers and certain other officers of
Arvin were authorized by the Compensation Committee to elect to receive a
portion of their 1996 cash bonus incentive compensation, if any, in the
form of restricted Common Shares of Arvin. The number of restricted Common
Shares so awarded was determined by dividing a designated portion of the
recipient's bonus by the closing price of Arvin Common Shares on the New
York Stock Exchange on the final trading day of calendar 1996. A condition
of each such award provides that the recipient elect to hold his restricted
Common Shares for a period of three years, or five years, in which instance
he is entitled to receive an increase of 10%, or 20%, respectively, in the
number of restricted Common Shares so awarded. The Compensation Committee
believes that the availability of this discretionary alternative to cash
bonuses further encourages employee investment in the long-term future of
Arvin.
Long-term incentives are currently provided through the grant of stock
options to the Named Officers and the CEO and the award of performance
shares to the CEO and COO. Stock options and performance shares are an
important component of the Compensation Committee's long-term performance-
based compensation philosophy. The number of options granted is determined
subjectively by considering the executive's ability to influence Arvin's
long-term growth and profitability. Options are granted at the current
market price and are exercisable commencing one year after the date of
grant. Since the value of an option is directly related to Arvin's stock
price, it provides an incentive to create value for shareholders.
Performance shares are awarded to the CEO and COO to provide an incentive
to enhance Arvin's earnings growth. In 1996, performance share awards could
be earned upon attainment of performance goals, which were based upon the
percentages by which Arvin's 1996 earnings from continuing operations
exceeded Arvin's 1995 earnings from continuing operations. If earned,
performance shares are paid in a combination of Arvin Common Shares and
cash. Fifty percent of the Arvin Common Shares earned must be held for a
period of three years. In 1996, the maximum number of performance shares
that the CEO could earn was 18,200, 14,000 of which were payable in Arvin
Common Shares and 4,200 of which were payable in cash.
Mr. Pond's employment agreement (see "Executive Compensation-Employment
Agreement") did not impact the determination of his compensation for 1996
except insofar as it addresses minimum annual base salary. Mr. Pond's cash
incentive bonus was determined in accordance with the 1996 cash bonus
incentive plan. In 1996, the objectives relating to earnings per share,
return on net producing assets and debt-to-capital ratio were fully
achieved. As a result, the bonus awarded to Mr. Pond, as CEO for 1996, was
$625,000 which Mr. Pond elected to receive in restricted Common Shares. Mr.
Pond was granted performance shares which could be earned based upon
attainment of 1996 earnings performance goals. The earnings goals were
fully achieved in 1996, resulting in Mr. Pond earning the maximum number of
performance shares. The stock options granted to Mr. Pond during 1996 are
consistent with the design and philosophy of the overall program and are
shown above in the Summary Compensation Table.
The Compensation Committee believes this compensation philosophy and
practice encourages outstanding individuals to achieve levels of
performance that otherwise would not have been reached and to maintain
their employment and personal commitment to Arvin. Arvin shareholders and
customers are also beneficiaries.
Compensation subject to the one million dollar limitation on
deductibility under Section 162(m) of the Internal Revenue Code was not
paid in 1996 to any of the Named Officers. The Committee is evaluating the
need to adopt a policy relating to such compensation.
This report is submitted on behalf of the Compensation Committee:
Steven C. Beering, Chairman
Joseph P. Flannery
Joseph P. Allen
COMMON SHARE PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return of the Arvin Common
Shares with the S&P 500 Index and the Dow Jones Auto Parts and Equipment
Index during the years 1992 through 1996, assuming the investment of $100
on December 31, 1991 and the reinvestment of dividends.
Comparison of Five-Year cumulative Total Return
Among Arvin Industries, Inc., The S & P 500 Index
and The Dow Jones Auto Parts & Equipment Index
Graphic Table - Line-graph presented using the following data:
Cumulative Total Return
12/91 12/92 12/93 12/94 12/95 12/96
----- ----- ----- ----- ----- -----
Arvin Industries, Inc. 100 145 155 116 85 132
S & P 500 100 108 118 120 165 203
Dow Jones Auto Parts
and Equipment 100 129 160 136 170 192
CERTAIN BENEFICIAL OWNERS
As of February 21, 1997, the only persons or groups known to Arvin to be
the beneficial owners of more than 5% of the Common Shares were:
Name and address Amount and nature of Percent
of beneficial owner beneficial ownership of class
- ------------------------------ -------------------- --------
First Union Corporation 1,510,231 6.17%
One First Union Center
Charlotte, North Carolina 28288
Arvin Industries, Inc. 1,800,000(1) 7.36
Employee Stock Benefit Trust
c/o The Northern Trust Company
50 South LaSalle Street
Chicago, Illinois 60676
John Hancock Mutual Life Insurance 1,594,256 6.51
Company and Subsidiaries
John Hancock Place
P.O. Box 111
Boston, Massachusetts 02117
(1) As reported on a Statement on Schedule 13G filed with the
Securities and Exchange Commission by the Arvin Industries, Inc.
Employee Stock Benefit Trust Plan (the "Trust"). The Northern Trust
Company (the "Trustee") and the Trust expressly disclaim beneficial
ownership of the Common Shares reported above. The Trust was created to
satisfy future obligations under existing Arvin benefit plans, including
stock option plans, 401(k) plans and other employee benefit plans as
designated by Arvin and to foster employee ownership in Arvin. The trust
agreement provides that the Trustee shall follow the directions of the
trustee of the trust established under the Arvin Savings Plan (or any
successor plan thereto) as to the manner in which shares of Common
Shares held by the Trust are to be voted. The trust agreement further
provides that the directions of the Arvin Savings Plan trustee shall
reflect each participant's voting direction to the trustee of the
Savings Plan with respect to the Common Shares allocated to his account
in the plan from the Trust. Any Common Shares which remain undirected
pursuant to the foregoing shall be voted for, against or to abstain in
the same proportions as the Common Shares for which the Trustee is
directed.
As of January 1, 1997, Mr. Viars beneficially owned 60,616 Arvin Common
Shares, which includes 53,200 Common Shares subject to options which may be
exercised within 60 days after January 1, 1997 and 1,316 Common Shares in
the Arvin Savings Plan. As of January 1, 1997, Mr. Kievit beneficially
owned 64,200 Arvin Common Shares, which includes 55,600 Common Shares
subject to options which may be exercised within 60 days after January 1,
1997.
As of January 1, 1997, all directors and executive officers as a group
(15 persons) beneficially owned 840,996 Arvin Common Shares, or 3.44% of
the outstanding Common Shares. In addition, on that date, the number of
Arvin Common Shares held in the Arvin pension plans, the Arvin Savings Plan
and the Arvin Equity Account were, respectively, 865,666, 811,961 and
415,754.
COMPLIANCE WITH FORMS 3, 4 AND 5 REPORTING REQUIREMENTS
Based solely upon its review of Reports on Forms 3, 4 or 5 and any
amendments thereto furnished to Arvin pursuant to Section 16 of the
Securities Exchange Act of 1934, as amended, and written representations
from the executive officers and directors that no other reports were
required, Arvin believes that all of such Forms were filed on a timely
basis by reporting persons during 1996, with the exception of the
following: Mr. Blair filed his report on Form 3 late and filed one report
on Form 4 reporting one transaction late and Mr. Kievit filed one report on
Form 5 reporting one transaction that should have been reported on Form 4.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
Based upon the recommendation of the Audit Committee, at its February
1997 meeting, the Board of Directors approved the engagement of the
accounting firm of Price Waterhouse as Arvin's independent certified public
accountants for the fiscal year beginning December 30, 1996.
Representatives from Price Waterhouse will be present at the Annual
Meeting and will be afforded the opportunity to make a statement if they so
desire and to respond to appropriate shareholder questions.
Although not required to do so, the Board of Directors is submitting its
appointment of auditors for shareholder ratification. In the event the
appointment of Price Waterhouse is not ratified by the shareholders, it
will be reconsidered by the Board of Directors. The Board recommends that
its appointment of Price Waterhouse be ratified by the shareholders.
SHAREHOLDER NOMINATIONS AND PROPOSALS
Pursuant to the rules under the Securities Exchange Act of 1934, as
amended, proposals of shareholders intended to be presented at the 1998
Annual Meeting must be received at Arvin's executive offices no later than
November 14, 1997 to be considered for inclusion in next year's proxy
materials.
Further, Arvin's By-Laws set forth certain additional procedures
regarding shareholder nominations of persons for election to the Board of
Directors and shareholder proposals of business to be considered at
meetings of the shareholders. Pursuant to these provisions, written notice
of any shareholder nominations or proposals relating to the 1998 Annual
Meeting of Shareholders must be received by the Secretary of Arvin at its
executive offices in Columbus, Indiana no earlier than January 18, 1998 and
no later than February 17, 1998.
BUSINESS TO BE TRANSACTED
At the date of this statement, the Board of Directors does not know of
any business to be brought before the Annual Meeting other than the matters
described in this proxy statement. In the event that any other matters
properly shall come before the meeting, it is the intention of the persons
named in the accompanying proxy to vote in accordance with their judgment
on such matters.
By the order of the Board of Directors.
/s/ Ronald R. Snyder
---------------------
Ronald R. Snyder
Secretary of
Columbus, Indiana ARVIN INDUSTRIES, INC.
March 14, 1997
COMMON STOCK ARVIN INDUSTRIES, INC. PROXY
This Proxy is Solicited on Behalf of the Board of Directors for
The Annual meeting to be held April 17, 1997.
The undersigned hereby appoints Byron O. Pond and Ronald R.
Snyder, or either of them, the true and lawful proxies of the
undersigned, with full power of substitution, for and on behalf
of the undersigned to vote the shares of ARVIN INDUSTRIES, INC.
registered in the name of the undersigned, or with respect to
which the undersigned may be entitled to vote, at the Annual
Meeting of Shareholders to be held at Holiday Inn Conference
Center, 2480 Jonathan Moore Pike (Highway 46 West), Columbus,
Indiana, on April 17, 1997, at 10:30 A.M., and at any adjournment
thereof, upon the matters set forth on the reverse side hereof.
The Board of Directors recommends a vote "FOR" proposals 1, 2 &
3.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
(Continued and TO BE SIGNED on reverse side.)
ARVIN INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK
ONLY. ( o )
This proxy, as properly executed, will be voted in the manner
directed herein by the undersigned shareholder(s). If no
direction is given this proxy will be voted "FOR" proposals 1, 2
& 3.
For Withheld FOR ALL Except
All All Nominee(s)
Written below
1. Election of Directors for
terms of 3 years- Nominees:
Ivan W. Gorr,
Richard W. Hanselman,
Don J. Kacek and
Richard A. Smith. ( ) ( ) ---------------
For Withheld
2. Election of Director for
term of 1 year- Nominee:
James K. Baker. ( ) ( )
For Against Abstain
3. Ratification of appointment
of Price Waterhouse as
independent auditors. ( ) ( ) ( )
4. In their discretion on such other business as may properly
come before the meeting.
Dated: __________________, 1997
Signature(s):____________________
____________________
The shareholder's signature below should correspond with the name
of the shareholder as it appears here. A proxy executed by a
corporation should be signed in its name by a duly authorized
officer. If the proxy is to be signed by an attorney, executor,
administrator, trustee, guardian or in any other representative
capacity, the title of the person signing should be given in
full. When shares are held by joint tenants, both should sign.
